Vtex (VTEX) Q4 2022 Earnings Report, Transcript and Summary

Good afternoon. Thank you for attending today's VTEX 2022 Financial Results Conference Call. My name is Megan, and I'll be your moderator for today's call. [Operator Instructions] I would now like to pass the conference over to Julia Fernanderz with VTEX.

Lipase, everyone, and welcome to the VTEX Earnings Conference Call for the quarter ended December 31, 2022; I'm Julia Fernandez, Investor Relations Director for Vtex. Our senior executives presenting today are Geraldo do Carmo Thomaz, Founder and Co-CEO; and Ricardo Sodre, Chief Financial Officer. Additionally, Mariano Gomide de Faria, Founder and Co-CEO; and Andres Polit, Chief Strategy Officer, will be available during today's Q&A session. I would like to remind you that management may make forward-looking statements related to such matters as continued growth prospects of the company, industry trends and product and technology initiatives. These statements are based on currently available information and our current assumptions, expectations and projections about future events. While we believe that our assumptions, expectations and projections are reasonable in view of the current available information, you are cautioned not to place undue reliance on these forward-looking statements. Certain risks and uncertainties are described in the risk factors and forward-looking statement sections of the Bite Form 20-F of the year ended December 31, 2022, and other Vtex filings within the U.S. Securities and Exchange Commission, which are available on our Investor Relations website. Finally, I would like to remind you that during the course of this conference call, we may discuss some non-GAAP measures. A reconciliation of those measures to the nearest comparable GAAP measures can be found in our fourth quarter 2020 earnings press release available on our Investor Relations website. Now let me turn the call over to Geraldo. Geraldo, the floor is yours.

Thank you, Julia. Welcome, everyone, and thanks for joining our fourth quarter 2022 earnings conference call. 2022 was a near full with uncertainty and volatility for the industry. So despite the challenges our customers' performance and business model demonstrated resiliency and the ability to navigate the ever-changing environment smoothly. In 2022, e-commerce in Latin America grew single digits while our GMV growth reached 31%, exceeding the market performance by more than 20%. VTEX same-store sales increased to 17% on an FX-neutral basis indicating that in addition to new customer adds, existing customers performed above the curve and contributed significantly to our outperformance versus the overall market. As we move forward, our focus for 2023 is clear. We aim to consistently drive growth above market performance improve our gross margin and optimize expenses to gain operational efficiencies as we scale. Our goal is to provide a reliable solution to our customers so they can solely focus on expanding their business while at the same time, we continue to strengthen our comprehensive range of a site sales products to enable our customers to grow their GMV. Our global expansion journey is evolving with solid steps made in the U.S. and Europe. We also announced that customers going to other countries such as India and South Africa this year. We expect to continue to deliver consistent and tangible results aiming to become the global backbone for common. Reflecting on the performance of the last quarter of 2022, we're delighted to report that our business has seen resilient growth, although GMV and revenue were below our expectations, we have solidified our position as a regional leader and expanded our reach beyond Latin America. Specifically, in Q4, our GMV increased by 34 percentage year-over-year in U.S. dollars and 29% on an FX-neutral basis, reaching almost the $4 billion mark in the quarter. That's more than our GMV for the entire year of 2019. It's worth noting that the retail industry faced challenges during the Q4 of 2022 due to lower-than-expected sales volumes around Black Friday and the holiday season. Despite being impacted by this trend, our business maintained strong performance with Q4 same-store sales improving quarter-over-quarter. This demonstrates our business strength, resiliency and ability to navigate challenging macroeconomic environments. Throughout our company's history, we have established solid and long-term relationship with our customers, as evidenced by the growing number of stores and countries per customer. In 2022, we were honored to have the trust of over 2,600 customers with a total of 3,400 stores across 38 countries. Our top 100 customers in 2022 averaged 5.9 stores per customer with operations in 34 countries, an improvement from 4.8 stores per customer in 2021. In the fourth quarter, we kept making significant commercial progress. We are proud to have attracted and on boarded several premier brands and retailers. In first quarter of 2022, we added several new customers who previously did not have an online presence in the countries they started operating with us. This includes Rebook in Argentina, Brazil, Chile, Colombia and Peru, Super [indiscernible] in Brazil, in [indiscernible] in Poland and day Mexico. We've also added customers that migrated from other platforms. This includes companies that went live in Q4, such as [indiscernible] These brands are well established in their respective markets, and we are excited to have them on board as they will help us expand our reach and strengthen our position in these regions. In addition to attracting new customers, we also focused on strengthening our relationship with existing customers by supporting their expansion efforts. During the fourth quarter, Tavera premier brands and retailers chose to expand their operation with us by opening new stores and further integrating with us. This includes Belcorp, who added stores in Mexico and Peru currently operating in 4 countries in Latin America. Electrolux, who added a store in Brazil currently operating in 6 countries in Latin America. Samsung, who added B2B in Brazil currently operating both B2C and B2B with us; and Carrefour, who integrated more than 150 physical stores into the omnichannel operations in Brazil. This brand's decision to expand their operations with us is a testament of our platform strength, relevant value proposition and the trust we provide to our customers. We are excited to continue supporting them and reaching consumers in new geographies and leveraging the physical store asset base. I would like to briefly mention a significant event this quarter, the Black Friday November. Vtex achieved a GMV of $1.75 billion, an increase of 32% in USD compared to November 2021 and 27% on an FX-neutral basis. We were particularly proud of the accomplishments during the hard season. The dependability of our network, which provides scalability, reliability and security while giving our customers piece of mind with 100% of time during Black Friday and Cyber Monday week. And the growth in volumes in countries such as Mexico and the United States, both of which joined the top 5 countries with the highest year-over-year GMV dollar increase among all detected countries demonstrating international expansion tangible results. 2022 was a year where we were excited to announce many outstanding partnerships such as the one with AV, AWS, e-banks, Facebook, Instagram, MercadoLibre, [indiscernible], PayPal, Stripe and TikTok. In Q4, we added deals with [indiscernible and Nova among others. We entered into a partnership agreement with Clear sale, a company specialized in digital anti-fraud solutions in Brazil and with global expansion ambitions. ClearSales plugin give us customers the peace of mind and trust to maintain approval rates and avoid false positive. According to clear sale, it increases average customers approval rate by more than 10%. With Nova, we entered into our global partnership that will provide greater flexibility and customization for retailers as Vtex expand deeper into Latin America, and new markets across Asia Pacific, North America and Europe. This new partnership is already available for Vtex customers around the globe, retailers and brands benefit from Nevadvanced acceptance rate optimization capability. teams on board and a fully customized approach to accelerate revenues. Shifting to our customer success story, I'm eager to share with you some examples that demonstrate the capability of our platform and how our customers have achieved exceptional results. A leading global kitchen and laundry appliance company through its global account has continued to expand its partnership with VTEX. Our global contracts signed by VTEX U.S. branch was a crucial factor in successfully launching the high-end home appliance brand in Europe. Our customer is now utilizing a composable approach in EMEA with Vtex new customized checkout solution which allow customers to have more flexibility in the checkout page by leveraging the tax APIs with all store framework components. The high-end home appliance brand fully adopted the headless approach in the front end with its new e-commerce website for [indiscernible] . With that, they can now select the tools they need to create a tailored user experience and quickly build content with shopping experiences without starting from scratch. Motorola leveraged its global contract to launch its online study in India. The localization provided by VTEX in that region was crucial for the successful implementation, particularly during the local regulatory compliance framework. On top of that, the easy integration of third parties helping Motorola to enable multiple 3PLs, third-party logistics. Motorola has also highlighted that the VTEX customer team was extremely helpful in addressing all technical challenges without needing third-party vendors. They went live with a new homepage layout, including different banners and actions that were extremely easy to customize for their non-packaging. As a result, Motorola has benefited from a first checkout process and an intuitive website navigation, which has increased its conversion rates. We continue to attract new customers in Europe, including onshore, one of the world's largest retailers with a relevant presence across Europe who went live with the text in Q4 to relaunch its online operations by introducing new features to enhance the customer experience in Romania. The new platform is more user-friendly and offers new integrated functionalities that can be accessed from any device, including fresh product delivery along with new delivery and pickup locations. Vtex is also helping us show with website page in loading speed and mobile adaptability. There are still more features for customers and user-generated content improvements to come onshore and to provide a first-class online shopping experience that complements what consumers already defined in their physical stores by leveraging our solution. The grocery industry is undergoing a digital transformation with e-commerce operations being the fastest-growing sales sector according to our report by Statista. Tax through its fast store platform has established itself as the go-to partner for retailers offering this type of services. It does this by leveraging its omnichannel capabilities and time-saving features for speed and flexibility increasing efficiency and boosting sales by integrating brick-and-mortar inventory and onboarding third-party sellers from a wider product selection with no added operational costs. Additionally, Vtex distributed order management system allows retailers and brands to handle complex fulfillment scenarios, leveraging multiple commerce channels to offer various delivery options while streamlining operations. This enable grocery e-commerce channels to provide fast in-store and curbside pickup by assembling orders from multiple inventory sources such as pickup locations, distribution centers and other brick-and-mortar stores resulting in optimal fulfillment. For example, can consume a large conglomerate with a range of products from grocery to home improvement, trust Vtex to [indiscernible] 14 brands operation. The company has been operating with us since 2016 with Vita's new speed delivery future capability, they increase their conversion rates, accelerating sales and customer satisfaction level. Vtex highly customized solution is helping them to sort different categories and factions, improving the search tools and models to show the best promotions and delivery time for the customer. Along these lines, Carrefour, a leading French multinational corporation specializing in retail, selected Vtex in 2020 to operate in Brazil. The second largest market worldwide, among other Latin American countries. Carrefour has a strong presence in Brazil with 817 stores, including 241 per markets and 41 supermarkets, offering both grocery and now grocery products. The company select us to significantly improve its performance in order management, marketplace and omnichannel service. This migration was made possible due to the scalability offered by VTEX, which allows for the seamless control of the vast number of SKUs in their catalog and the cheer volume of clients in the database. More recently, in Q4 of 2022, Carrefour integrated their physical stores with our OMS capability including the ability to orchestrate multiple omnichannel strategies, personalized search based on previous purchases Click & Collect options, improve home delivery services and an integrated POS system, among others. These enhancements will leverage Careful Physical stores asset base and undoubtedly lead to an improved customer experience and increase operational efficiency for Carrefour. Our live shopping feature a native live streaming application that enables brands and retailers to utilize Vtex comes platform to create engaging one to many or 1-to-1 live shopping experience is boosting engagement and conversion rates. Attracting more customers to our base. This feature is opening up new growth opportunities for our customers by streamlining the process of starting, planning, managing and monitoring the performance of live shopping events. This quarter, we had 302 events with a 21% increase quarter-over-quarter, and there were 912 events in 2022. To conclude the operational update I would like to express my gratitude to our 1,347 Vtex employees who are dedicated to making a declared future reality as well as to our customers, partners and investors. I will now hand the call over to Ricardo to discuss our financial performance for the quarter.

Thank you, Geraldo. Hi, everyone. It's a pleasure to be here to update you on our financial performance for the fourth quarter of 2022. As highlighted by Geraldo, our Q4 GMV performance reached 34% year-over-year in U.S. dollars and 29% in FX neutral. This quarter, our revenue increased to $45.5 million, a year-over-year increase of 23% in U.S. dollars and 20% in FX neutral. Subscription revenue reached $42.7 million in the fourth quarter of 2022 from $34.5 million in the same quarter last year, a year-over-year increase of 24% in U.S. dollars and 20% in FX neutral. This helped us achieve a revenue of $157.6 million for 2022. Showing a 25% growth in U.S. dollars and 22% on a tax-neutral basis. Although below our expectations, given weak market performance during Black Friday week and the cancellation of the tax free day in Colombia, our active performance versus the overall market give us confidence in our future growth projections. Our revenue from existing stores increased to $113.8 million in 2022, representing a net revenue retention of 105% on FX-neutral basis. When analyzing the number on an annual basis, we see a stable net revenue retention compared to last year. Although still volatile, given macro uncertainty, the exit net revenue retention pace for this year was higher than the annual average. This indicates that the net recitation is returning with historical rates of around 110%, driven by same-store sales approaching historical levels after many quarters of being impacted by tough COVID comps and physical stores reopening. On top of our existing store growth, we continue attracting new stores, adding $21.3 million in revenue to our base, representing 20% of our 2021 VTEX platform revenue. Our sales efficiency measured as new store revenues from the current year divided by the non-GAAP sales and marketing expenses from the prior year decreased this year as we anticipated last year [indiscernible] Although that resulted in lower unit economics, our LTV over CAC remained healthy and still over time. The decrease is due to the fact that we invested during 2021, a higher portion in regions where our sales efficiency is lower, such as the U.S. and Europe accounting for 35% of sales and marketing expenses. Additionally, and not part of our initial expectations, during 2022, we also experienced the elongations in our customers' implementation and ramp-up times, which also impacted this metric pushing revenues further out as mentioned in the previous quarters. With that said, towards the end of 2022, we have already made meaningful adjustments in our sales and marketing expenses to improve our sales efficiency ratio. Among new customers, we are excited to announce that we continue to gain traction in the high end of the market, a number of customers with revenue above $250,000 per year reached 94 from 76 in 2021. We in their number of stores reached 557 from 424 in 2021, representing a year-over-year increase of 24% and 31%, respectively. We have consistently demonstrated improvement in this metric, which we believe is the strongest validation of the suitability of our product for even the most demanding customers within this segment. We continue expanding our geographical reach with revenues outside of Brazil accounting for 45% of our total revenues. In a 3-year FX-neutral CAGR, Latin America, excluding Brazil, grew 57%, while the rest of the world grew 78%. Regarding our FX neutral year-over-year growth in 2022 and Brazil grew 24%. Latin America, excluding Brazil, grew 14%, and the rest of the world grew 47%. The growth in Latin America ex Brazil this year was influenced by a larger share of customers with relevant fiscal stores that were fully operational in 2022, which generated a rebalancing between their online and off-line operations. Additionally, although Argentina saw lower growth rates given its macro situation, countries like Mexico are experiencing significant growth and gaining a larger share in the mix. Latin America holds immense potential. 2022, growth rates do not fully reflect it, especially as Mexico continues to gain momentum and 2023 starts to have a cleaner year-over-year comps. Now moving down our P&L. Non-GAAP subscription gross profit was $31.4 million compared to $24.1 million in the fourth quarter of 2021. Non-GAAP subscription gross margin was 73.5% in the fourth quarter of 2022 compared to 69.9% in the same quarter of 2021. The 360 bps year-over-year margin expansion shows the commitment of our team to keep improving our margins. We also continue improving our services non-GAAP gross margin, resulting in an even higher non-GAAP gross margin expansion, 54 bps year-over-year. Our performance has remained steady compared to last quarter's 73.8% non-GAAP subscription gross margin, declining only 30 bps. This is mainly due to us scaling our infrastructure to handle increased sales during Black Friday week, in the GSA EVA event in Colombia, which did not materialize as expected. Despite this, we anticipate further improvements in 2023 as we continue to implement our migrations and quote optimization plans. Our non-GAAP total operating expenses decreased to $29.1 million in the fourth quarter of 2022 from $32.4 million in the prior quarter and $36.5 million in the same period last year. The current results reflect the organizational restructuring we implemented in the second quarter of 2022 and further margin optimizations following the third and fourth quarters of 2022. As a result of the better-than-expected gross margin improvements and control expenses with the top line showing resilience our non-GAAP operating income improved from a negative 29.3% margin in the same quarter last year to a positive 4.6% margin in the fourth quarter 2022. This represents a 33.9 percentage points improvement year-over-year. It's important to remember that the operational breakeven achieved in Q4 is not yet sustainable. As our industry experiences a positive seasonal trend during the fourth quarter, which has contributed to our current performance. With that in mind, we reaffirm that by the fourth quarter of 2023, we will be able to sustainably achieve positive non-GAAP operating income. As of the 3 months ended December 31, 2022, Vtex had a positive $2.5 million free cash flow compared to a negative free cash flow in the prior quarter and a negative $21.3 million free cash flow in the fourth quarter of 2021. Our strong cash generation result this quarter was primarily driven by our strong operational P&L performance. On the share repurchase program, we approved in August of 2022. As of December 31, 2022, the remaining balance available for share repurchases under this authorization is almost $70 million. We purchased slightly less than 3.3 million shares at an average price of $3.90 per share. We expect to continue executing our plan based on the evaluation of market conditions and applicable legal requirements. Before moving to our Q1 and full year 2023 outlook, I'd 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. You'll find this reference in Slide 28 of our fourth quarter earnings presentation. Vtex existing stores revenue, excluding our SMB platform represented almost 85% of total revenues. While our new stores revenue, also excluding our SMB platform represented approximately 15% of total revenues. Comparing our P&L breakdown for 2022 and 2021 I would like to make a couple of comments. This year, our gross margin reached 67%, approximately 600 bps higher than the overall gross margin from 2021. it's noteworthy that both existing and new stores had significant improvements in their gross margin profiles with existing stores showing 5 percentage points year-over-year improvement and new stores reaching 10 percentage points year-over-year improvement in gross margin. As previously discussed, we optimized our expenses in 2022. And even though we don't have yet a full year clean P&L, we can already see how operating margin for existing stores increased from 15% in 2021 and low 20s in 2022 as well as operational margin losses from new stores improved by 16 percentage points. As a result, we had an overall operational margin improvement of 11 percentage points year-over-year with more to come this year since we are exiting the year with our operational margin approaching a sustainable breakeven. As we move forward with our business outlook, it is important to note that the macroeconomic conditions remain uncertain. Compared to historical averages, we continue to see an allocated sales cycle related to an increase in the average time to implement the Vtex platform and longer ramp-up times from new customers. Despite these challenges, which mostly impact our new stores time to revenue, we remain confident in our ability to help our customers outperform the market and control our cost and expenses to deliver meaningful operational leverage. Considering the uncertain macro conditions, we are currently targeting revenue in the $41.0 million to $41.5 million range for the first quarter of 2023. Implying a year-over-year growth of 19% in U.S. dollars and on an FX-neutral basis in the middle of the range. Also, given the persistent macroeconomic volatility for the full year 2023, we target an FX neutral year-over-year revenue growth between 15% and 19%, implying a range of $183 million to $189 million based on February FX rates. With that, let's open it up for questions now.

[Operator Instructions] Our first question comes from the line of Marcelo Santos with JPMorgan.

My first question I wanted to explore a bit more the gap between GMV and revenue growth. I think in the previous quarter, there was already some gap that widened to, I think, more than 10 points in U.S. dollar. So just wanted to understand the moving parts here. And the second question is regarding the selling expense. I think that was maybe the most noteworthy line. It declined to, I think, around $11 million is its lowest level since the first quarter of 2020 -- 2021, sorry. Could you please describe a bit is just the results of the headcount cut to what else is there and is a sustainable level going forward?

Marcelo, thanks for the question. I'll take the first one. So as we mentioned in the Q&A from last quarter's earnings release, it is crucial to note that the company's revenue is derived from fixed fees and a take rate on our customers' GMV. 2/3 of the revenue comes from the take rate, while the remaining 1/3 comes from fixed fees. Considering that it is natural to have a lower implied take rates in Q4 because the seasonally strong GMV dilutes the fixed fee portion of our revenue. For instance, the implied take rate of the fourth quarter of 2022, although below the fourth quarter of 2021 was in line with the fourth quarter of 2020. These changes in implied take rate is simply a function of our revenue model and mostly driven by mix. It is important to mention that we are not seeing pricing pressure when comparing like-for-like figures. On this point, regarding mix, as mentioned in the prepared remarks, we are adding larger customers to the base who come with a lower variable take rate following our price table. Finally, it's worth noting as well that we are passing through inflation to the fixed fee component of our contracts in most countries. While this is more challenging to achieve in developed economies, we have managed to do so in Brazil and are beginning to implement in some countries in LatAm outside of Brazil as well. For the second question, I'll pass it over to Mariano.

So on the second question, we see a good momentum to do the adjustment from what we saw in the 2021 and 2022 so we keep seeing a strong pipeline in Brazil LatAm. And in rest of the world, we are -- you can expect good contracts and good kind of momentum coming from out of United States and Europe. The cuts that we did in the expenses do not expect to generate any write-off opportunity? In the opposite side. So we are seeing with a lean team, we can absorb more and more the opportunities of this uncertainty that we are seeing in the market. So we don't expect any decrease of our sales operations in terms of performance.

Our next question comes from the line of Fred Mendes with Bank of America Merrill Lynch.

I have two questions as well. I mean the first one, you just called your attention the second, let's say, reduction in head count. Obviously, the world is changing fast. But why -- just trying bit of the strategy and the impact on the team. And then the second one also on the strategy, it's very clear that Vtex is focusing more on becoming profitable. And obviously, the growth is not the same for a lot of reasons. Just wondering how is the discussion of the relationship with the ecosystem, especially the guys who do the implementation of the distribution when you're doing this shift towards increasing profitability

Fred. Thank you for the question. This is Geraldo getting the answer. How are you? So we are maintaining the disciplined operational model, and we are achieving -- to achieve our short-, medium- and long-term growth objectives and potential. We don't feel like we're missing opportunities given one adjustment made, like Mariano said, it's actually the opposite. We see that being lean and agile will enable us to quickly adapt and generate value in this uncertain times. The current growth rate is below naturally on our long-term growth potential considering the macroeconomic conditions. And although we adjusted the team to face the current demand, I would say that we see and we'll continue to be very strong in our investments for the long term. You see that our R&D team, they're very strong today, and we are continuing investing and eventually growing the team a little bit during the year. And as Mariano said, we're adjusting the sales team for the current demand. I think we're -- in the end, we are well positioned to continue winning market share and this will enable us to come out stronger once the market stabilize so we can deploy additional capture to capture the outstanding market opportunity that we have in front of us.

Perfect. Very clear Geraldo.

Our next question comes from the line of Clarke Jeffries with Piper Sandler.

First one is on guidance. Ricardo, is it safe to say that the most important factor contemplated in the revenue guidance, is this dynamic around deployment times, looking at the sort of trend lines of existing store contribution, new store contribution. Is that really the sort of meaning behind all of this? And then with reference to that exit rate being higher than the 105, do you expect 2023 to be a year where it's above 105?

Clark, thanks for your question. Yes, it's fair to say your assumption. As mentioned in the prepared remarks, we continue to see macro uncertainty. This is the environment of high interest rates and inflation may impact consumer consumption, which may impact our same-store sales and the revenue growth from our existing stores. But as also mentioned, the more relevant impact is that we continue to see a stable but longer than average implementation times and ramp-up times, which impacted our new store revenue growth during part of 2022 and we expect to impact the full year of 2023. These 2 factors contributed a combined result in a potentially lower growth in 2023, which we reflected in our guidance. Having said that, we believe we have made the necessary adjustments to come out stronger once this macro situation is resolved. We are capturing market share, as Geraldo mentioned, and we have a well-invested structure to support our long-term growth, which we believe is above the current growth rates that are impacted by the macro scenario.

Certainly. And then one follow-up. Great to see 20-plus percent margins on the existing store cohort, higher margins on the new cohort, especially considering that was a full year number, and I'm sure there's all said and done, the cost reduction initiatives in the second half mean that a higher rate if we were to annualize it. Do you expect those trends to continue in the next year? Would you expect existing stores to maintain that kind of 20% handle in terms of margins? And then any sense for dynamics in terms of margins on new store and all other revenue be that SMB and services?

Yes, Clark. No, that's a good question. So the disclosure that we are making on the P&L splitting between existing stores and new stores. It's an annual cut. So that's the 2022 full year margin. So this 22% margin, it reflects the full year. But as you mentioned, we are exiting as a higher margin because we made adjustments right in the middle of the year, right? We continue to see a good operational leverage in our model. So it would be expected in 2023 for the existing stores to have a higher margin than in 2022. So we'll continue to operate in a disciplined way, but given the operational leverage that should help us moving forward.

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

This is Maddie on for Josh. My first question for you is how are you guys thinking about LTV to CAC compared to maybe the historical average? And do you have a goal for that metric going forward? And do you think that we hit the bottom in terms of the headcount, where it's at?

Maddie, thanks for the question. Happy to take the first one. So regarding LTV over CAC as we mentioned in the prepared remarks, it continues to stay above 6x, and we believe this level is a healthy level for a company like ourselves. We also look at the internal rate of returns and the payback time of our customers since we have a pretty low churn. So we don't want to rely on cash flows that are coming from the customers that are far off in advance later in the future. But we do believe that the 6x LTV over CAC is a healthy metric for us to pursue. Sorry, on the second question, could you repeat, please?

Yes. I was just wondering if we've hit the bottom in terms of the headcount number or if there might be more reductions implied?

I can take that. Like for -- I would say that for R&D, we're very comfortable with the headcount that we have. And when we might slide is very increase a little bit depending on the talent that we find on the Street that wants to join Vtex. For the sales and marketing, I would say that it seems to me that, yes, we wish to a bottom, but its -- this is very variable with the actual demand that we find. Eventually, we didn't hit the bottom of the demand, eventually, we might adjust in the future again. But that's not what we are projecting right now.

Very helpful. And then for my follow-up, I was just wondering if you guys can give an update on how the AWS partnership is going? And then secondarily, if you could say if B2B trends are seeing the same sort of headwinds as B2C or if there's any difference there?

Okay, Mariano here. So AWS is one of the foundations partner of Vtex. And in the go-to-market of United States and Europe, they are helping us a lot. So we are part of the marketplace solution of AWS and AWS reps are kind of matching resources with Vtex reps in the field and offering B2B and B2C solution. We already signed some deals together and modules will come. They are an incredible penetrated company in the United States and Europe, and we are serving this incredible partnership on the second question on B2B, yes, we are seeing in the United States, particularly a solid trend on B2B signatures on our contracts. So we already released some public names on the B2B, and we are consistently seeing signatures quarter-over-quarter on the B2B market.

Our next question comes from the line of Andre Salles with UBS.

I have One question regarding competition here. We have seen some movements in Brazil from other platforms, which are more focused on smaller business trying to target larger customers here. Are you seeing substantial changes here in the compensation environment in Brazil, especially in your lower base clients? Or this is more a specific movement?

So thank you for the question, Mariano here, we, of course, saw kind of every year, we do have a new player trying to penetrate Latin America, and they can come from the high end or the low end. And we saw a Shopify penetrating in the Latin American market. But on our low SMB solution, LogIntegrada, we didn't see any kind of huge growth changes in what we expect. So we are on track of what we expect from the company. Yes, there are some kind of flipping from the other vendors to Shopify. But we continue to see a consistent growth from our SMB business.

Thank you. There are no additional questions waiting at this time. So I'll pass the conference back over to the management team for any closing remarks.

In conclusion, while 2022 may have presented some challenges we are optimistic about our ability to drive growth and overcome obstacles in 2023 despite the uncertain macroeconomic environment. We're committed to delivering exceptional service and support our customers and expanding our operations in key regions. We look forward to the opportunities and progress that the new year will bring. Thank you, everyone, for joining us today. I'm looking forward to update you about our progress in our next earnings call. Thank you.

That concludes the VTEX Fourth Quarter 2022 Financial Results Conference Call. Thank you for your participation. I hope you have a wonderful day.