VTEX Form 6-K Summary
Reporting period: Unaudited interim consolidated financial statements for the three and nine months ended September 30, 2021, compared with the corresponding 2020 periods. The report was furnished in November 2021 and was signed November 17, 2021. Amounts are in thousands of U.S. dollars unless otherwise indicated.
Business Context
VTEX provides a software-as-a-service digital commerce platform for enterprise brands and retailers, including online-store, order-management, marketplace, and related collaborative-commerce functionality. Approximately 80% of gross merchandise value came from large, blue-chip customers. Subscription revenue represented 93.0% of third-quarter 2021 revenue.
Financial Performance and Position
| Metric | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 |
|---|---|---|---|---|
| Total revenue | $31.9 million | $27.7 million | $88.7 million | $69.6 million |
| Revenue growth | 15.2% | — | 27.4% | — |
| Gross profit | $19.1 million | $18.9 million | $52.8 million | $46.6 million |
| Gross margin | 59.9% | 68.3% | 59.6% | 66.9% |
| Operating income (loss) | $(24.4) million | $5.5 million | $(52.8) million | $8.6 million |
| Net income (loss) | $(22.0) million | $3.0 million | $(49.9) million | $3.4 million |
| Operating cash flow | Not provided for the quarter | Not provided for the quarter | $(31.8) million | $8.3 million |
- Third-quarter gross merchandise value was $2.285 billion, up 7.2% in U.S. dollars and 4.2% on an FX-neutral basis. Nine-month GMV was $6.760 billion, up 36.4% in U.S. dollars and 37.0% on an FX-neutral basis.
- Sales and marketing expense increased 268.2% year over year in the third quarter and 181.6% for the nine-month period. Research and development expense increased 214.3% and 172.4%, respectively. General and administrative expense increased 198.2% and 182.5%, respectively.
- Cash and cash equivalents were $321.6 million at September 30, 2021, versus $58.6 million at December 31, 2020. Marketable securities were reallocated into cash and cash equivalents.
- Total debt, excluding lease liabilities, was $3.9 million at September 30, 2021, compared with $6.4 million at year-end 2020. Lease liabilities totaled $5.8 million.
- Total assets were $426.1 million and shareholders’ equity was $335.1 million at September 30, 2021.
- The July 2021 initial public offering generated $296.3 million of net proceeds and was the principal driver of financing cash inflows.
Material Changes Versus Prior Period
- Revenue grew, but cost of revenue increased faster, primarily because of higher hosting and information-technology costs. Consequently, gross margin declined by approximately 8.4 percentage points in the third quarter and 7.3 percentage points for the nine-month period.
- Operating expenses expanded substantially as VTEX increased its global workforce and invested in sales, marketing, and product development. These investments drove a shift from profitability in the 2020 comparable periods to significant operating and net losses in 2021.
- Operating cash flow changed from $8.3 million provided in the first nine months of 2020 to $31.8 million used in the first nine months of 2021, reflecting the net loss, increased trade receivables, and higher operating costs.
- Cash increased by $264.2 million during the first nine months of 2021, largely from the IPO, despite negative operating cash flow.
- VTEX acquired WorkArea in the first quarter and Suiteshare in the second quarter of 2021, contributing to higher intangible assets and goodwill. The company also acquired certain non-controlling interests.
- Share-based compensation expense, including taxes and social charges, increased to $17.4 million for the first nine months of 2021 from $1.3 million in the comparable period.
Guidance, Outlook, Risks and Unusual Items
- Management expects revenue to grow in the remaining quarter of 2021 and expects historical fourth-quarter seasonality to continue.
- Management cautions that growth rates may moderate as the extraordinary ecommerce acceleration associated with the COVID-19 pandemic normalizes. The filing states that future GMV and revenue growth are not expected to match prior pandemic-period growth.
- VTEX expects to continue investing in sales and marketing, research and development, and expansion into new regions. The filing does not provide quantified financial guidance.
- Key risks include foreign-exchange volatility in Latin American markets, variable interest rates, customer credit risk, liquidity risk, hosting and infrastructure-cost pressures, continued operating losses, and the ability to scale internationally.
- The company uses derivatives for foreign-exchange hedging and not for speculation. A December 2021 non-deliverable forward had a notional value of $4.6 million.
- Probable legal contingencies totaled $82 thousand at September 30, 2021; possible contingencies, for which no provision was recorded, totaled $245 thousand.
- Share-based compensation and IPO-related expenses were material unusual items affecting comparability. Non-GAAP operating loss was $13.3 million in the third quarter of 2021, compared with reported operating loss of $24.4 million.
- The filing states that VTEX had no off-balance-sheet arrangements as of September 30, 2021.
Investor Verification Points
- Verify whether revenue growth and GMV growth continue after the pandemic-related ecommerce acceleration fades.
- Monitor gross-margin trends, particularly hosting and infrastructure costs relative to revenue.
- Assess the pace and return on investment of sales, marketing, and research-and-development spending.
- Reconcile cash consumption from operations with the IPO-funded liquidity position and expected path to profitability.
- Review the effect of share-based compensation, related payroll taxes, dilution, and remaining unamortized awards.
- Evaluate acquisition integration, earn-out obligations, and the contribution of WorkArea and Suiteshare.
- Assess exposure to foreign-currency movements, inflation in Argentina, and the effectiveness of hedging activities.