Vtex (VTEX) Q2 2021 Earnings Report, Transcript and Summary

Thanks, Julia. Welcome, everyone, and thanks for joining us today for our 2021 second quarter earnings results, our first earnings call ever. Before jumping into our quarterly performance, I would like to address 2 topics. First, I want to thank all VTEXers for their hard work and commitment which enabled us to complete our initial public offering; our customers who trust us every day to deliver their mission-critical commerce infrastructure; our ecosystem of partners, who build new solutions every day, adding value to our customers to the VTEX platform; and to both our long time and our new investors and partners that share our vision. This was an important milestone for VTEX, but it is just the beginning of what we believe will be a transformational journey ahead of us. Second, as it's the first time I'm doing this and some of you may not know us that well, I would like to take this opportunity to give you a quick overview on what we do, why we do it and where we are going. Last year, society was disrupted by a pandemic that challenged us on a personal and professional level. COVID-19 impacted everyone's lives in so many ways, and one thing that the pandemic demonstrated is that the way of doing business needed to change to accommodate transacting online as well as in person. The digital economy is here to stay and all players need to develop a strong and integrated online presence in order to capture the new possibilities technology enables. Consumers now expect brands to make shopping experiences as convenient and seamless as possible, from product discovery to purchasing, across all channels. As such, retailers need a scalable and flexible platform that lets them test multiple strategies to better serve their consumers. Brands need to be relevant to the consumers. And for that, they must leverage technology and industry-expert partners so they can focus on their brand differentiation. Our customers are the protagonists of their digital transformation. We are here to accelerate them. VTEX is where commerce happens. Our platform is designed to be the operating system for the commerce ecosystem, enabling enterprise brands and retailers to orchestrate their complex network of consumers, business partners, suppliers and fulfillment providers. We are building the global digital commerce infrastructure for enterprises to be relevant for the modern, convenience-driven consumer. We were born as software as a service for enterprises. Our solution is designed to deliver both speed to market and customization, something quite unique in the market. We enable enterprise brands and retailers to have a quick time to revenue thanks to our extensive out-of-the-box capabilities that combine distributed order management solutions with traditional core commerce, native marketplace capability and a developer-first, serverless extensibility layer. This allows our customers to start fast, leveraging our homogeneous, multi-tenant platform, while also freeing their talent to focus on their business needs instead of infrastructure. Our customers leverage our composable development platform to quickly test new ways to reach consumers, both by building out their own features or scalably tapping into the knowledge of our ecosystem of digital commerce experts, all a click away through our app store. We believe this approach is core to our value proposition and tough to replicate. The age of stand-alone software has ended. In this new era, fully integrated software is as valuable as the network it powers. We envision VTEX being at the center of a vast network that natively connect every part of the global digital commerce ecosystem as the single control panel to manage all aspects of brands and retailers' sales life cycle, resulting in what we believe to be a future-proof platform that makes collaboration scalable. Our ambition is to help our customers to stay ahead of the curve and to go beyond what commerce looks like today. In order to become the one-stop shop for the convenience-driven consumer, we allow brands to easily set up commerce relationships to sell products from third-party sellers, enabling their assortment without having to manage all the incremental inventory themselves. This collaborative commerce concept enable them to receive orders from various sales channel while seamlessly tapping into inventory across multiple fulfillment channels. In summary, beyond building out their own e-commerce strategy, we also provide them with the native tools not only to list their product in marketplaces, but also to become a marketplace themselves. We're not building a platform for what our customers asked for. We're building a platform for what they need today and in the future. We enable enterprise brands and retailers to develop a full omnichannel strategy with a global scope. We will continue to execute our strategy to pursue that opportunity with a clear vision to become the backbone for global commerce by focusing on these 4 foundations: zero friction customer onboarding; zero friction collaboration, both internally among tech teams and customers as well externally among marketplace, sellers, fulfillment operations, et cetera; single control panel for every order; and the development platform of choice for digital commerce. We're committed to these foundations and believe that they will generate a virtuous cycle that can accelerate the digital commerce ecosystem and create a powerful network effect around VTEX. Having said that, let me talk about our second quarter performance. Our robust performance despite the gradual reopening of physical stores showcase the size of the opportunity of digitalization in the emerging markets. As anticipated in Q2 flash numbers in our F-1, our GMV reached $2.4 billion, representing a 25% year-over-year growth on an FX-neutral basis. This represents a sequential growth deceleration as we are lapping the pandemic transformational effect on the retail model, which particularly in the second quarter of 2020 migrated to online only due to the lockdown implemented in most countries where we have operations. When analyzing the universe of our customers with more than $25,000 annual recurring revenue, they grew at a faster pace than the overall company GMV growth. Also, if we deep dive on those customers, the ones without relevant physical stores operations increased their GMV year-over-year by 50% on an FX-neutral basis, while customers with relevant physical stores operation increased their GMV by 20% on an FX-neutral basis, as e-commerce is currently not the only sales channel available for these customers today. We benefit from having a massive addressable market, expected to continue growing double digits CAGR for years by industry experts. With a market of over $4 trillion in size in 2020, we have a lot of runway to continue expanding. According to eMarketer, Latin America is expected to be 6 years behind the global e-commerce penetration curve. We believe we know the opportunity ahead of us as we have observed similar market dynamics in developed economies. This is just the beginning of what we consider will be a remarkable journey for VTEX and moreover, for the region. VTEX is leading e-commerce enablement in Latin America. We are well positioned to capture this massive opportunity. Our world-class products and locally developed ecosystems are enabling us to continue attracting more brands to our platform. Not only are we gaining market share, we are also creating the market, as roughly half of our new customer additions are greenfield opportunities. VTEX is a material driving force in enabling commerce in Latin America. Some brands that launched with us this quarter that didn't have online presence in the region before were Walmart in Central America, including Costa Rica and 4 other countries in the region, Asics in Brazil, Picpay in Brazil. During the quarter, we also added customers that migrated from other platforms, including Diners Club in Peru, Carrefour in Argentina and Killstore in Chile. We've also been able to build entrenched, sticky relationships with premier brands and retailers as we never stop innovating and enhancing our value proposition. We understand that being ahead of the curve is not an option, it's a must. A customer that showcase this is Whirlpool, who started operating with us in Brazil with one online store and now has more than 5 stores in Brazil to serve the many brands that they have in their portfolio, including Brastemp, Consul, KitchenAid and so on. In addition, we are expanding our relationship with Whirlpool outside of Brazil. We now have online stores in over 5 countries in Latin America and 4 online stores in Europe, including 2 in Italy, 1 each in Russia and France. We continue to see momentum in growing our customer base, largely driven by the compounding effect of our ecosystem with over 1,000 integrated solutions, 200 SIs, 100 marketplaces and 80 payment solutions. This ecosystem ultimately helps our customers to evolve and drive incremental sales volumes. But we are just in the beginning. We continue to increase our efforts in order to scale VTEX global growth in a fast and efficient way, both in current and new geographies. We aim to support the growth of our customers around the world by delivering a world-class platform and by expanding our regional capabilities. Given our strong brand awareness and market position in Brazil, we are focusing most of our energy and capital to expand to other countries within Latin America, which we believe will bring most of our growth in the short to medium term. Additionally, the ecosystem that we have around VTEX is one of our most relevant moats, and the ecosystem needs to be built locally, country by country. We have built it in Brazil, and we are now building country by country in Latin America. We believe our platform is competitive globally. Industry experts, including IDC and Gartner, also validate this view. Over time, we expect to build an ecosystem around our platform to compete successfully and sustainably all around the world. This will take time as we have a long sales cycle and we're currently focusing in Latin America, but we are planting the seeds already for our operations across United States and Europe. We intend to expand our capabilities by increasing our investments in our core platform. Our main goal is to enable our customers to be one step ahead of the evolving needs of their consumers, powered by cutting-edge technologies and capabilities, plus a strong and extensive network of partners and peers that they will leverage. For this purpose, at the beginning of each quarter, VTEXers commit to milestones to go beyond the delivery of new functionalities with a customer-centric approach, focusing on system success and quality. We all commit to the same goal: bringing brands and consumers closer. During the second quarter of 2021, we've been able to launch several functionalities in order to build, together with our customers, the commerce of tomorrow. VTEX launched enhancements to the core commerce capabilities by further differentiating its value proposition. VTEX Intelligent Search now can leverage VTEX OMS and inventory intelligence to regionalize search results, adapting to our customers' local operations and increasing conversion. VTEX OMS also launched a new feature allowing customers to manage their capacity for scheduled deliveries, aiming to improve the precision of promised SLAs to consumers and the percentage of SLAs kept on scheduled deliveries. VTEX launched selected features to improve local differentiation in some strategic markets. In Brazil, new payment parameters were added to native integrations to our customers to comply with the new marketplace regulation. In Argentina, checkout geolocation precision was enhanced to improve conversion. In the U.S., OMS reports added local tax business rules. The new VTEX Admin with a new consistent user interface and a new sales dashboard is being rolled out and was launched to all the U.S. customers. Furthermore, VTEX continued to evolve its products in a way that removes usability friction for enterprise users and enhanced user experience to manage inventory, create promotions and for marketplace operators to evaluate and catalog the new offers from the sellers. The pace of execution VTEX has sustained, mainly attributable to our hyperfocus on fostering our culture of integrity, authenticity, commitment and responsibility. We are now 1,486 VTEXers, 80% more than in the same quarter of last year. Our leading position in Latin America market allow us to attract and retain the best talent in our markets. As we grow, we will benefit from continuously evolving our culture, a very important competitive advantage of ours. Diversity is key to our success. Having different perspectives enable us to change the status quo to reach out-of-the-box solutions that we should never have thought of. Recapping before I leave the floor to Ricardo. The expectations of the 21st century consumer are higher every day, and this is raising the bar for brands and retailers. Consumers want to interact seamlessly through multiple channels, find everything they want in a single place and receive products in record time. We know there is a transformative future ahead where retailers will need to incrementally shift more volume to their online channels, brand manufacturers will want to go direct-to-consumer, and both brands and retailers may benefit from setting up their own marketplaces to serve consumers in a single place. VTEX will empower them to build their digital transformation with speed to market and flexibility for customization without extra burden. We envision VTEX being the operating system that will empower brands and retailers to stay relevant to the convenience-driven consumer, consolidating our leadership position in Latin America through strong execution and focus. This is just the beginning. We are here to accelerate it. Now I will turn the call to Ricardo, who can cover our financial progress report for the quarter.

Thank you, Geraldo. Hello, everyone. It's a pleasure to be here updating you on our financial performance for the second quarter of 2021. Before moving to the quarterly update, I would like to take a couple of minutes to refresh you all on our revenue model as well as recap our recent performance. Our revenue model is very simple, we charge our customers a mix of fixed fee and variable take rate for full access to our digital commerce platform. The variable take rate component represents approximately 2/3 of our revenue and is charged as a percentage of our customers' GMV. So as our customers grow their GMV, we grow our revenue with them. This model creates strong alignment between us and our customers. It is important to note that we don't sell modules. Our customers pay to receive broad access to the VTEX platform in an all-you-can-eat model. We upsell by helping our customers through their digital evolution, for instance, from a plain vanilla e-commerce website, to an omnichannel operation, to setting up their own marketplace. We upsell by helping our customers increase their GMV, clearly aligning our incentives with our customers. To finalize on our revenue model, we have a tiered pricing model and the fixed versus variable fee is mostly a risk allocation decision made by our customers. If they feel confident in the GMV they will generate, they can choose to pay a higher fixed fee and lower take rate. If they are earlier in their digital journey, they can take less risk by paying a lower fixed fee and higher take rate. Naturally, as our current customers grow and gain confidence in their digital strategy, they tend to take more risk by paying a higher fixed fee and lower take rate. As our customers grow, they are uptiered, meaning that they pay a slightly lower take rate yet still a higher total dollar amount to VTEX. Now quickly recapping our performance in 2020 and in the beginning of 2021. 2020 was an outstanding year for VTEX. We helped fuel and benefited from the e-commerce acceleration, growing with our existing customers' GMV, a key driver of our net revenue retention. We also added new online stores for these same customers, added new customers to our base and continue our geographical expansion, all key drivers for our medium and long-term growth. The first quarter of 2021 was also a highlight of our historical performance with GMV growing at triple digits and revenue at high double digits. During the first 3 months of the year, we continue to experience the benefits of the incremental e-commerce penetration in the countries where we operate. In Q2, we are now starting to lap the increase in digital commerce penetration, resulting in a tougher comp this quarter. With that intro, let's dive into the second quarter of 2021 numbers. Revenue increased to $30.9 million, a year-over-year increase of 22.1% in U.S. dollars and 18.2% on an FX-neutral basis. Subscription revenues represented 96% of our total revenue and grew 20.0% year-over-year on an FX-neutral basis. We continue to see strong sales momentum by our sales and marketing team and go-live of new online stores, increasing our new stores contribution as a percentage of total revenues to 16.2% in the second quarter of 2021 from 12.2% from the second quarter of 2020. As we are starting to lap the pandemic effect this quarter, it is important to put the numbers in context by analyzing them on a 2-year CAGR basis. From that perspective, our total revenue 2-year CAGR for the second quarter of 2021 was 60.7% on an FX-neutral basis, similar to the total revenue 2-year CAGR for the first quarter of 2021 of 60.6% on an FX-neutral basis. This demonstrates how healthy and sustainable our revenue growth has been. Before moving down the P&L, I would like to remind the audience that from a business perspective, we think about our P&L as a combination of 2 P&Ls, our existing stores' P&L and our new stores' P&L. Our existing stores' P&L represents around 80% to 85% of VTEX revenues excluding SMBs, has a high operating margin and grows at our net revenue retention rate. We don't have any significant sales and marketing expenses to serve our existing stores. We only have support costs, which are already included in our subscription costs. These existing stores' P&L grows with our net revenue retention, which is mainly driven by the GMV growth of our existing stores, our variable revenue as a percentage of our total revenue and our annual revenue churn. Our new stores' P&L represents around 15% to 20% of VTEX revenue excluding SMBs, has a negative operating margin, but it brings new stores to our base with attractive unit economics. Targeting new stores is the key focus of our sales and marketing team, so this P&L includes almost all those expenses. Now given that our unit economics measured by our LTV to CAC has been above 6x in the last 2 years, we believe that deploying capital in this P&L is a sound investment. Considering that, one, we are playing in an underpenetrated Latin America market with only 6% penetration; two, we have attractive unit economics above 6x LTV to CAC; and three, we develop sticky relationships with our customers with only mid-single-digit annual revenue churn; we plan to continue investing in adding new stores as long as financially accretive for the long-term growth of VTEX, even if that has some short-term impacts to our margins. With that said, let's continue and move down our P&L. Subscription gross profit was $20.2 million compared to $15.9 million in the first quarter of 2021. Subscription gross margin improved to 68.1% in the second quarter of 2021 from 64.7% in the first quarter of 2021. The quarter-over-quarter improvement reflects operational hosting cost efficiencies. We continue to be encouraged by the digital commerce opportunity in Latin America. Penetration continues to increase even with the gradual reopening of brick-and-mortar retail stores throughout the region. Digital transformation and digital commerce has become a C-level and Board subject. Therefore, we have decided to accelerate our investments to capture these market opportunities. As a result, our non-GAAP loss from operations was $10.4 million during the second quarter of 2021 compared to a non-GAAP income from operations of $6.7 million in the same quarter of 2020. As of the 3 months ended June 30, 2021, VTEX had a negative $14.7 million free cash flow, primarily driven by our non-GAAP loss from operations, which is mostly explained by the expansion of our workforce, especially our sales and marketing team. Talking about our outlook, we expect to continue seeing strong new stores growth. It is important to note that in Q3 our existing stores will face tougher comps as lockdowns started in the region in mid-April of last year, and brands took some time to shift their volumes to online channels. Although Q3 comps will be tougher than Q2, during the fourth quarter of 2020, brick-and-mortar stores started to gradually reopen, so comps should ease from Q4 onwards. With this in mind, we are targeting revenue in the $31 million to $31.5 million range for the third quarter of 2021, implying a similar 2-year revenue CAGR compared to Q1 and Q2. For 2021, we are targeting $124 million to $126 million range. This outlook assumes that current period FX rates remain constant for the remainder of the year. Wrapping up today's call, we want to reinforce that it is clear to us that the world has changed. The e-commerce acceleration is here to stay. We are focused on speeding up our investment to capture this opportunity, and we are seeing strong momentum in contracts for new stores. We believe there is an attractive opportunity in front of us, and we feel increasingly confident in our ability to capitalize on it. Thanks, everyone, for joining this conference call. We look forward to keeping you updated on our progress. With that, let's open it up for questions now. Thank you.

I want to take this opportunity to thank you all again for joining our first earnings conference call ever.

Apologies for my interruption. [Operator Instructions] The first question comes from the line of Sterling Auty with JPMorgan.

Welcome to the public markets. And to get us started, I want to ask on one of the last comments, you talked about the strength of the pipeline for additional new stores. I'm wondering if you can give us a sense of the mix of how many of those stores or what percentage of those stores do you expect to come from brand-new brands that you haven't worked before versus existing customers.

Sterling, Ricardo Sodre here from VTEX. Thanks a lot for the question and joining the call. Before going to your question, I think it's important to explain also to everyone that we see a very interesting mix of new stores between greenfield e-commerce operations and migrations from other e-commerce platforms, right? It's roughly half and half. And our current customers, they can have more than one store, as you know, right? And as Geraldo mentioned on the prepared remarks, we have customers like Whirlpool or Motorola that are opening stores in various geographies and even adding more stores in the same country to serve the brands that they have in their portfolio. So this is an interesting trend. And it's not just cherry-picking a few customers. If we look at our top 100 customers, we can see that they increased a lot their number of stores per customer, right? So it's an interesting trend. Now this is very much in the early innings. Only 8% of our customers have 2 or more stores with us. So it's not a huge driver of new stores overall. But it's an interesting trend to see. So I would say answering your question now, the vast majority of the new stores that we are seeing and the revenue coming from these new stores are driven by net new customers and either greenfield or migrations and it's only early innings for the same customers opening more stores, but it's an attractive and interesting trend that we are seeing already.

No. That's great. And that makes a lot of sense. Maybe one quick follow-up. How are your existing customers now that the economies are starting to open up and we're seeing more in-store shopping, what are they doing in terms of their marketing and advertising to continue to drive their e-commerce efforts?

Yes. Sterling, great question. So our existing customers, we have to segment them by the ones that have relevant physical operations, physical store operations and the ones that are more digitally native, right? And as mentioned by Geraldo in the prepared remarks, the ones that are, they don't have relevant physical store operations are growing roughly 50% their GMV on a year-over-year basis. And it's life as usual for them, right, because they're mostly a digital commerce, right? So the reopening of the stores is not impacting them materially. Now the customers that have relevant physical stores operations, now these stores are open, and they are bringing customers back to the stores. Now the interesting thing is that a lot of them started omnichannel operations during the pandemic or invested a lot in their digital channel during the pandemic. And now that they have these already done and working, they are doing more ship from store or buy online pickup in store. So we are seeing this trend picking up now that they invested in the digital transformation, right? So they are bringing customers back to their stores, but they are also attracted in investing in their omnichannel operations. And even facing the tough comps where most of these customers had their physical stores closed last year, so almost all their volume was online, our GMV with these customers is still growing, right? I mean, even looking at the existing stores, so removing the net new stores, just existing stores, it's still positive, right? So that tells you how they are investing in their digital transformation and in the acceleration of their digital commerce.

The next question comes from the line of Josh Beck with KeyBanc.

And my congratulations as well as the new life, at least in the public markets. I wanted to ask a little bit about that question around Q4 seasonality. Obviously, we in prior years pre-COVID, there was certainly some cadence and some normalcy to the seasonality. Obviously, this year with varying paces of reopening and shifting consumer habits, it's probably a little perhaps different. So just curious about what you baked in with respect to Q4 and how we should be thinking about that seasonality.

Yes. Great. Josh, great to connect with you here. No, great question. So I think it's important to mention to everyone that, as we mentioned, right, roughly 2/3 of our revenue is driven by GMV. We have a take rate on the GMV of our customers. So we have a seasonality that's aligned with the retail seasonality in Latin America. And as you all know, Q4 is a very strong quarter for the retail industry. And we are taking that into consideration in our projections in our guidance. And I think if we look at 2020 because of the pandemic, that impacted the seasonality of the year. So it's not a great year to look at seasonality between quarters, among quarters. But 2019 is a good year for you guys to have a sense of the seasonality of each quarter. So 2021 should be more aligned with the historical seasonality. And 2019, I believe, is a good proxy for this seasonality.

Very helpful. And then maybe just a follow-up product question. You obviously have a number of really quality enhancements that you walked through relative to Intelligent Search, some local differentiation, market features. Just curious what is the reception to these types of enhancements from the customer conversations that you've been having?

Josh, this is Geraldo speaking. Thank you for the question. The heuristic for us to define where we're going to do enhancements in our product is very aligned with our customers. This is us having the strategical milestones about where we're going to get the product to, and this is about us being the single control panel for every order, being the developer platform of choice for commerce and also allowing zero friction collaboration between the ecosystem and its peers. So this is the milestone, strategical milestone. But actually, the day-to-day improvements that we do to our product is the request that our main customers do on that direction. So all these capabilities that we announced here and all the capabilities that we do to our software, all the improvement that we do to our software are related to direct request from the leaders of the industry. And you might feel that this is not usual, but let's remember, we work for enterprise companies. They're strategical. They have strong areas. They have strategical views of where the product should go. So most of the time, it has a lot of traction because we're so close to them. Ricardo wants to do some adds to that. Ricardo?

Yes. Yes. No, Geraldo. And I think an important point on the Intelligent Search and some of the updates that we announced to the market in this quarter that we believe a lot of these commerce capabilities they are local, right? And the ecosystem is also very local. So some of the developments announced, development should help the local commerce capabilities for our customers to will help them differentiate in the marketplace. So that's, I think, an important point to mention as well.

The next question comes from the line of Daniel Bartus with Bank of America.

I wanted to ask about what you see for 3Q a little bit. Clearly, with revenue growth of roughly 13%, you talked about some headwinds in there and some tough comps. Maybe you can just walk a little bit country-by-country where you're seeing the most reopening headwinds or risk in 3Q?

Yes. Dan, thanks for the question. So I think Latin America had a later impact and a later reopening of the market given the COVID vaccinations and all that, right? And 94% of our revenue comes from Latin America. So I would say the dynamics of the reopening is very similar in Brazil and Lat Am excluding Brazil, right? Obviously, the U.S. and Europe have experienced reopening sooner, but it's only 6% of the overall revenue. So it's not a relevant impact for the overall business. Now between the geographies, right, I mean, obviously, as announced in the F-1, we are seeing Brazil growing slower than Lat Am excluding Brazil and the rest of the world given the stage of development of the country. But still in Q2, Brazil grew double digits, right, in revenue. So it's still attractive growth even with the tough comps. Now for Q3, we expect a similar type of dynamics, right? It's a tougher comp quarter as we mentioned in the prepared remarks. But among geographies, there shouldn't be a huge difference. It's more about the stage of development of each country or each region than a more reopening type of dynamics, I would say.

This is Andre Spolidoro. Just to complete that, and if you look at last year in the second quarter, we had April. April was the first month of the quarter. And the shutdown of the stores started in April. And it was starting from April to May. Because of that the comps from the second quarter does not affect third quarter. That explain the mix of the company.

Okay. Okay. Got it. And just a follow-up. It's a bit of a clarification. I was wondering if you guys could just talk a little bit about marketplaces and how you guys work with them. And theoretically, if one of your customers sells through like MercadoLibre, I'm curious if you can talk about how much value you guys would get from that and if that would be potentially counted in your GMV as well?

Perfect. So this is how us connecting to marketplaces is aligned with the goal of being the single control panel for every order for our customers, right? We want to be the point of contact of the relationship between our customers, the brand and its consumers. So yes, the marketplace orders and traffic should be routed to our platform as well. That's our vision. And we are making consistent and strong steps towards that direction. We currently have not most of the revenue coming from orders that are generated from marketplace but like to digital orders like more than 10%, less than 20%. This is something that we believe we need to provide to our customers for them to have this single control panel. And we provide first-party integrations for this strategy connecting big marketplaces. And we provide connections for a third party or for the marketplace to integrate to our system as well. I think you talked about the revenue that we get from that. We still get a take rate that is a little bit smaller than the take rate that we get when we are providing orders from the first-party proprietary sales channel of our customers. We are going to get more value there. And yes, and it's also aggregating to our GMV. And as I said, it's something between 10% to 20% of our aggregated GMV today.

The next question comes from the line of Diego Aragão with Goldman Sachs. Diego Aragão: My question is regarding the development of this ecosystem in each country where VTEX operates. I understand that even though this ecosystem is not mandatory for you to grow your business abroad, having an ecosystem in place makes your platform be in a much better, let's say, competitive position, right, and improves the value proposition for your customers as well. So that being said, I'm just curious to understand what can you do to promote this ecosystem in a new market? And how long it should take for a new country, let's say, to be on the same position as of Brazil?

Thank you, Diego. Yes. When we get to a country and there's no ecosystem, we're just a very good software, right? As you know, like from IDC and Gartner, they think highly of us as a product. But this is not the endgame for us. I repeat that a lot. The era of stand-alone software is gone. A software is as solid as the network it empowers. So we do need a ecosystem in place for us to exercise the full power of our value proposition. And this is done in different ways depending on the phase that we are in the country. When we're starting the country, nobody wants to look at us. Nobody cares about us. And they only care about us if we are with customers, with referable customers. So when we get into a country, the only thing that we can do to be successful there is to get referable customers to our platform. As we get them, we create cases, then we start to get the attention of the customers, of the ecosystem around us in the country. So for us to get the first customers, we usually call some local ecosystem players and provide the help of the ecosystem player, the system integrators. There are other countries that we are already mature. So they help. They transmit knowledge. They kind of accelerate the system integrator knowledge about our platform. Eventually, we create some cases, eventually got some attention, and then we start the flywheel. It takes a while, especially to get the referable customers. And it's a very dynamic market. It's changing a lot, as you know, like the e-commerce market. But I can give you some data points, right? When we started in Brazil, we were like, maybe there was no ecosystem available in Brazil before. So it was difficult to create an ecosystem, but we had the first-mover advantage. When we moved to Argentina, it was halfway. It's like we have some penetration of Magento at that time, a lot of agencies that knew Magento a lot, which is a barrier, but at the same time a leverage because there are agencies. People already have the business model. They know how to get money from installing and building integrations with e-commerce. So in Argentina, I would say that for us to get a predictable pipeline, that's the next, I would say, milestone for us, get referable customers, then get predictable pipeline of sales. It took us, I would say, 4 to 5 years. In every other country of Latin America, Colombia, Peru, Chile, it took roughly the same amount of money from the referable customers to the predictable pipeline. For us to get the first referable customer, it varies a lot here. It varies a lot. It took 2 or 3 years to get one in Argentina. It took 2 years to get one in Chile. It varies. So roughly, let's say, it can take 5, maybe 6 years for us to get a predictable pipeline with a strong ecosystem in a country after we start to invest in that. So now, I think our time is over. I'm very happy to have this first earnings call. I'm very happy to be here with you. We are all at VTEX very excited with the future ahead of us being a public company. This will bring benefits for our companies, for our team, for the ecosystem. And we're very excited with the new phase. This is a very important milestone for us, this first earnings call. I'd like to thank a lot for the ones that give us the privilege of listening and for the ones that are our investors or intend to be our investors, thank you very much as well for your business. I consider VTEX to be a very special company with thousands of very special people working towards the same goal. We're disrupting commerce and rethinking how things are done in this landscape. We are only at the beginning of the digital commerce journey and VTEX is here to accelerate it. So thank you very much to you all. I hope we can meet each other again in the next quarter. Thank you.

That concludes the conference call. Thank you for your participation and enjoy the rest of your day.