VTEX 2022 Form 20-F Summary
Business context and reporting period
VTEX filed its annual report on Form 20-F on March 2, 2023, covering the fiscal year ended December 31, 2022, with quarterly information through the fourth quarter of 2022. VTEX is a Cayman Islands holding company listed on the NYSE under “VTEX” and reports under IFRS as issued by the IASB, in U.S. dollars.
VTEX provides a cloud-based SaaS digital commerce platform for enterprise brands and retailers, combining commerce, marketplace and order-management functionality. It served more than 2,600 customers and over 3,400 active online stores in 38 countries. Approximately 84% of GMV came from large, blue-chip customers.
Key financial metrics
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Total revenue | US$157.6 million | US$125.8 million | +25.3%; +22.3% FX-neutral |
| Subscription revenue | US$148.5 million | US$118.5 million | +25.3% |
| Services revenue | US$9.1 million | US$7.3 million | +24.7% |
| GMV | US$12.7 billion | US$9.7 billion | +31.3%; +26.8% FX-neutral |
| Gross profit | US$104.8 million | US$76.2 million | +37.5% |
| Gross margin | 66.5% | 60.6% | +5.9 percentage points |
| Loss from operations | US$49.9 million | US$65.9 million | Loss reduced 24.3% |
| Net loss | US$52.4 million | US$60.5 million | Loss reduced 13.4% |
| Basic and diluted loss per share | US$0.275 loss | US$0.333 loss | Improved |
| Net cash used in operating activities | US$29.2 million | US$53.0 million | Use reduced |
| Free cash flow | US$29.5 million negative | US$54.8 million negative | Cash use reduced |
Fourth-quarter 2022 revenue was US$45.5 million, compared with US$37.1 million in fourth-quarter 2021. Fourth-quarter gross profit was US$30.9 million, or 67.9% of revenue, and net loss was approximately US$0.3 million, compared with a US$10.6 million loss in fourth-quarter 2021. The fourth quarter benefited from normal ecommerce seasonality, including Black November.
- 2022 gross profit improvement reflected hosting-cost efficiencies, partly offset by incremental cybersecurity, privacy and compliance spending.
- Sales and marketing expense increased 6.8% to US$67.8 million, while research and development expense increased 26.5% to US$57.2 million. General and administrative expense decreased 11.3% to US$28.3 million.
- Financial result was a net expense of US$7.6 million, compared with US$4.6 million in 2021. Financial expense included US$13.8 million of losses on marketable securities and short-term investments, US$8.5 million of foreign-exchange losses and US$5.2 million of Argentina hyperinflation adjustment.
- Net revenue retention was 105.3% in 2022 versus 105.1% in 2021, and same-store sales increased 17.2% on an FX-neutral basis.
Balance sheet, liquidity and debt
| Metric at December 31 | 2022 | 2021 |
|---|---|---|
| Cash and cash equivalents | US$24.4 million | US$121.0 million |
| Marketable securities and short-term investments | US$214.2 million | US$177.2 million |
| Total assets | US$357.7 million | US$415.0 million |
| Total shareholders’ equity | US$274.7 million | US$327.2 million |
| Loans and financing | US$1.2 million | US$3.3 million |
Cash decreased primarily because of operating cash use, investments in short-term instruments, share repurchases and debt repayments. Management stated that existing cash, investments and other funding sources should meet anticipated cash needs for at least the next 12 months, but cautioned that assumptions could prove incorrect and additional financing may be required.
Adjusted net cash, defined by the company as cash, marketable securities and short-term investments less loans, lease liabilities and acquisition payables, was approximately US$231.5 million at year-end 2022. Capital expenditures were US$0.3 million, or 0.2% of revenue. The company had no off-balance-sheet arrangements.
Debt consisted primarily of US$0.2 million owed to BNDES and US$1.0 million owed to Itaú. All reported debt was current at year-end. VTEX was in compliance with its net debt-to-EBITDA covenant. The BNDES facility was scheduled to mature in March 2023 and the Itaú facility in May 2023.
Material changes versus the prior comparable period
- Revenue and GMV continued to grow, but growth moderated from 2021 as ecommerce trends normalized after the pandemic-driven acceleration. Management reported longer sales cycles, slower customer implementation and slower GMV ramp-up for recently launched stores.
- Gross margin expanded substantially as revenue grew faster than hosting and support costs.
- Operating loss and net loss narrowed despite continued investment in product development, international expansion and sales capabilities.
- Operating cash use improved by US$23.8 million, but the company remained cash-flow negative.
- Cash and cash equivalents declined by US$96.6 million, while marketable securities and short-term investments increased by US$37.0 million.
- VTEX repurchased 3.29 million Class A shares for approximately US$12.7 million, at an average price of US$3.87 per share. The repurchase authorization permits up to US$30.0 million and was scheduled to expire August 8, 2023.
- The company reduced sales and marketing and R&D headcount during the second half of 2022 as part of an efficiency-focused restructuring, while continuing targeted investment.
- Previously reported internal-control weaknesses related to the control environment, period-end reporting and data flow were remediated; a material weakness related to restricted-access management and segregation of duties remained at December 31, 2022.
Guidance, outlook, risks and unusual items
- Management expects 2023 same-store sales and net revenue retention to be broadly in line with the performance seen in the second half of 2022.
- Management expects operating expenses to leverage gradually over time and capital expenditures as a percentage of revenue to remain broadly in line with 2022.
- Growth priorities include expanding the customer base, increasing GMV from existing customers, developing B2B and omnichannel capabilities, expanding internationally and growing the partner ecosystem.
- Management does not expect pandemic-era ecommerce growth rates to continue and expects near-term revenue fluctuations as ecommerce growth normalizes.
- VTEX has recorded net losses since 2019 and states that it may remain unprofitable for the foreseeable future.
- Major risks include customer churn or lower usage, intense competition, long and unpredictable sales cycles, macroeconomic weakness, inflation, foreign-exchange volatility, political instability in Latin America, Argentina hyperinflation, cybersecurity incidents, service interruptions, data-privacy regulation, reliance on AWS and other partners, and difficulty retaining qualified personnel.
- The company disclosed a ransomware incident affecting its Ciashop subsidiary in 2021 and a 2021 third-party data exposure involving approximately 3,500 consumer records; management stated that its core platform was not affected in the ransomware incident and that unauthorized access was not confirmed in the data exposure.
- A material legal proceeding brought by Mirakl alleges misappropriation or retention of confidential information. Discovery was ongoing, damages were unspecified and the outcome could not be predicted.
- Probable civil, labor and tax contingencies totaled US$0.2 million at year-end; possible contingencies totaled approximately US$1.0 million, excluding the Mirakl matter because its potential cash outflow could not be estimated.
- Subsequent to year-end, VTEX canceled 815,065 Class A shares, including 81,024 treasury shares, and repurchased 734,041 additional shares under the buyback program.
Most important facts for investors to verify
- Whether revenue growth, GMV growth, net revenue retention and same-store sales remain resilient as pandemic-related ecommerce benefits normalize.
- Whether VTEX can achieve sustained positive operating cash flow and reduce its recurring net losses without additional equity or debt financing.
- The composition, liquidity and investment risk of the US$214.2 million in marketable securities and short-term investments, particularly following the 2022 mark-to-market losses.
- The maturity and refinancing status of the BNDES and Itaú facilities and continued compliance with debt covenants.
- Remediation and independent testing of the remaining material weakness in restricted-access management and segregation of duties.
- Potential exposure from the Mirakl litigation, privacy incidents, cybersecurity events and data-protection enforcement.
- The effect of foreign-exchange movements, Argentina’s hyperinflation and Latin American macroeconomic conditions on reported U.S.-dollar results.
- Dilution from outstanding options, RSUs and the annual 1.8% share-plan reserve renewal, as well as the effect of future share repurchases.
- The governance implications of the dual-class structure: Class B shares carry ten votes per share, and the founders controlled approximately 61.2% of total voting power at year-end.