VTEX Form 6-K Summary
Reporting period: Three and six months ended June 30, 2022, compared with the corresponding 2021 periods. Filed August 11, 2022. Financial statements are unaudited and prepared under IAS 34. VTEX provides a software-as-a-service digital commerce platform for enterprise brands and retailers.
Financial performance and condition
| Metric | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 |
|---|---|---|---|---|
| Total revenue | $38.7 million | $30.9 million | $73.4 million | $56.8 million |
| Subscription revenue | $36.6 million | $29.7 million | $69.2 million | $54.3 million |
| Services revenue | $2.1 million | $1.2 million | $4.2 million | $2.5 million |
| Gross profit | $25.7 million | $18.7 million | $47.8 million | $33.8 million |
| Gross margin | 66.4% | 60.4% | 65.1% | 59.4% |
| Loss from operations | $(18.9) million | $(16.4) million | $(35.6) million | $(28.4) million |
| Net loss | $(21.5) million | $(15.5) million | $(40.6) million | $(27.9) million |
| Net loss margin | (55.5)% | (50.1)% | (55.3)% | (49.2)% |
- GMV: Q2 GMV was $3.1 billion, up 27.6% in U.S. dollars and 21.0% on an FX-neutral basis. H1 GMV was $5.8 billion, up 30.2% in U.S. dollars and 24.1% on an FX-neutral basis, according to management.
- Operating expenses: Q2 sales and marketing expense increased 35.8% to $21.3 million, while research and development increased 44.4% to $15.4 million. H1 sales and marketing increased 46.7% to $39.2 million, and research and development increased 53.6% to $29.3 million.
- Financial result: Net financial expense was $5.4 million in Q2 and $10.1 million in H1, compared with $1.4 million and $2.7 million, respectively, in the prior-year periods. The increase primarily reflected losses on short-term investments and foreign-exchange losses.
- Cash flow: H1 net cash used in operating activities was $28.6 million, compared with $21.6 million in H1 2021. Investing cash outflow was $59.2 million, including $111.0 million of short-term investment purchases and $53.1 million of redemptions. Financing cash outflow was $3.2 million.
- Liquidity: At June 30, 2022, cash and cash equivalents were $29.7 million and marketable securities and short-term investments were $225.1 million, for total reported cash and investments of approximately $254.8 million. Current liabilities were $56.0 million.
- Debt and leases: Loans and financing totaled $2.4 million, all current, compared with $3.3 million at December 31, 2021. Lease liabilities totaled $6.4 million, including $1.5 million current.
- Balance sheet: Total assets were $371.0 million versus $415.0 million at December 31, 2021. Shareholders’ equity was $291.2 million, down from $327.2 million, primarily reflecting H1 net losses.
Material changes versus the prior comparable period
- Revenue increased 25.4% in Q2 and 29.2% in H1, driven by GMV growth, more active online stores and international expansion.
- Gross margin improved by approximately 6.0 percentage points in Q2 and 5.7 percentage points in H1, as revenue growth exceeded the increase in personnel-related costs.
- Despite stronger revenue and gross profit, operating and net losses widened because VTEX continued to invest heavily in sales, marketing and product development.
- H1 net cash used in operations increased by $7.0 million, while investing outflows increased substantially because of purchases of short-term investments.
- Cash and cash equivalents declined by $91.0 million during H1, from $121.0 million to $29.7 million. The decline was partly offset by the increase in short-term investments from $177.2 million to $225.1 million.
Outlook, commentary, risks and unusual items
- Management expects ecommerce growth to normalize as the COVID-19 surge is lapped and brick-and-mortar retail reopens. The filing states that structural ecommerce trends remain favorable but future growth may not match prior pandemic-affected periods.
- Management expects to continue increasing research and development spending and sales and marketing investment to support growth and product innovation.
- Capital expenditures were $0.2 million in H1 2022. VTEX budgeted approximately $2.0 million of capital expenditures for 2022 and expects to fund its needs for at least the next 12 months through operating cash generation and existing liquidity.
- No specific revenue, margin or profitability guidance is provided in the filing.
- Short-term investments recorded $9.1 million of losses in H1 2022, compared with a $0.1 million gain in H1 2021. At June 30, 2022, these investments had $7.6 million of gross unrealized losses.
- Deferred tax assets increased to $18.8 million from $12.6 million, primarily because of tax losses in Brazilian operations. Realization depends on future taxable income.
- Probable litigation contingencies totaled $0.1 million and possible, unprovided contingencies totaled $0.4 million at June 30, 2022. The filing identifies civil, labor and tax matters.
- VTEX is exposed to foreign-exchange risk, particularly involving the Brazilian real, Argentine peso, Colombian peso and Chilean peso. Derivatives are used for hedging and not for speculation.
- On August 8, 2022, the board authorized repurchases of up to $30.0 million of Class A common shares through August 8, 2023. Repurchases are discretionary and may be suspended or discontinued.
- Share-based compensation expense, including taxes and social charges, was $3.4 million in H1 2022. Remaining unamortized compensation costs were $18.3 million for VTEX plans and $1.0 million for the Loja Integrada plan.
Important facts for investors to verify
- Whether revenue growth and GMV growth remain durable as pandemic-related ecommerce acceleration normalizes.
- The pace at which sales, marketing and research and development spending translates into customer, GMV and revenue growth.
- Liquidity consumption, including the relationship between cash, short-term investments and continuing operating cash burn.
- The composition, duration, credit quality and unrealized-loss exposure of the $225.1 million short-term investment portfolio.
- Whether VTEX can improve operating leverage and reach profitability while pursuing international expansion.
- The recoverability of deferred tax assets and the effect of foreign-exchange movements on reported results.
- The timing and actual amount of any share repurchases under the newly authorized $30.0 million program.