Lucca Brendim

Lucca Brendim asked about the main risks and opportunities of AI for VTEX in both the short and long term. He also inquired about the company's capital allocation strategy, specifically regarding the new buyback program and future cash generation plans.

Answer

Geraldo Thomaz Jr., Founder and Co-CEO, described AI as a structural shift, positioning VTEX as the mission-critical orchestration layer for AI-driven commerce, leveraging its cloud-native architecture and proprietary data. Ricardo Camatta Sodré, CFO, outlined a capital allocation strategy prioritizing long-term value, supported by a strong cash position and consistent free cash flow, enabling the $50 million share repurchase program and strategic M&A for capability acceleration.

Lucca Brendim asked about the primary risks and opportunities VTEX foresees with AI, both in the short and long term, and how these dynamics are expected to evolve. He also questioned the company's capital allocation strategy, particularly regarding the new buyback program and future plans for cash generation.

Answer

Geraldo Thomaz Jr., Founder and Co-CEO, emphasized that AI is a structural shift, not just a feature, positioning VTEX as the mission-critical orchestration layer for AI-driven commerce. He highlighted that while AI lowers coding costs, it raises the bar for security and integration, areas where VTEX excels. He sees the risk as not embracing the revolution, but believes VTEX's cloud-native architecture and proprietary data provide a strong advantage. Ricardo Camatta Sodré, CFO, detailed the capital allocation strategy, prioritizing long-term value creation and flexibility. He noted the $200 million cash position and consistent free cash flow enabled the $50 million share repurchase program to mitigate dilution. He also mentioned strategic M&A, like the Weni and Newtail acquisitions, to accelerate product roadmap and platform differentiation.

Lucca Brendim of Bank of America asked if there were any delays in the go-live dates for large enterprise clients in the U.S. and Europe and if the mentioned contract cancellations were among these key accounts. He also questioned if VTEX was observing any changes in the competitive landscape.

Answer

Co-CEO Geraldo do Carmo Thomaz stated there are no significant changes to implementation cycles for large clients, noting that while enterprise deals have longer cycles, this is already factored into guidance. He confirmed the U.S. and Europe are growing twice as fast as the rest of the business, citing the KitchenAid go-live as a key validation. Thomaz asserted that VTEX's competitive position is strengthening, particularly in these strategic markets, and did not indicate the cancellations were related to major strategic projects.

Lucca Brendim asked for the reasons behind the significant increase in R&D expenses and requested an update on the company's expansion momentum in the United States.

Answer

Chief Financial Officer Ricardo Sodre stated that the R&D spending increase is a strategic investment in VTEX's core product, B2B capabilities, and the integration of AI into software development. Co-Founder and Co-CEO Mariano Gomide de Faria reported that the U.S. sales strategy is evolving as expected, focusing on high-value enterprise clients like the recently signed Manchester City Football Club, which signals growing market momentum.

Lucca Brendim asked about the potential P&L impact from the payroll tax changes in Brazil and sought to understand why the operating margin for new stores declined in 2024 while the margin for existing stores improved.

Answer

CFO Ricardo Sodre stated that the payroll tax impact would not be material and the company's mid-teens operating margin target for 2025 remains intact. Regarding store margins, he explained that gross margin and operational leverage gains from new stores were strategically reinvested into Sales & Marketing to capture growth, which is why operating margin slightly decreased for that cohort. He highlighted the strong LTV/CAC ratio of over 6x justifies this investment.

Lucca Brendim requested an update on the competitive landscape in Colombia and Chile, specifically addressing the impact of potential acquisitions and the financial challenges faced by some competitors on América Móvil's performance and future expectations in these markets.

Answer

Daniel Hajj, CEO, discussed the evolving competitive environment in Colombia, noting the potential network merger between Tigo and Telefónica and América Móvil's leading position in 5G and ongoing investments. He indicated that WOM's competitive pressure is diminishing due to its financial difficulties and clarified that Colombia's EBITDA growth was conservative due to extra fiscal and legal reserves. For Chile, Mr. Hajj highlighted extensive investments in network modernization, 5G deployment, customer service, and the successful Claro brand migration, which have more than doubled EBITDA despite intense competition and low prices. Oscar Von Hauske, COO, added that in Colombia, América Móvil is aggressively building fiber home passes and migrating existing cable customers to fiber, aiming for 60% fiber network coverage, and is performing strongly in the corporate segment with advanced solutions.

Lucca Brendim requested a breakdown of postpaid net adds in Brazil, specifically regarding machine-to-machine, and asked if results from the Nubank partnership are reported in postpaid. He also inquired about the expected growth trend for lease expenses.

Answer

CEO Daniel Hajj Aboumrad noted that while machine-to-machine is growing, the strong postpaid revenue growth of nearly 10% is primarily driven by traditional postpaid customers. He was uncertain how Nubank results were reported but offered a follow-up. CFO Carlos García Moreno Elizondo explained that lease expenses are often dollar-based, so currency appreciation can offset inflation adjustments, meaning significant changes shouldn't be expected if the currency remains strong.

Lucca Brendim requested a breakdown of postpaid net adds in Brazil, specifically regarding machine-to-machine (M2M) subscribers, and asked if Nu bank results were reported in postpaid. He also inquired about the growth trend for lease expenses.

Answer

CEO Daniel Hajj Aboumrad noted that while M2M is growing, the strong postpaid revenue growth of nearly 10% is driven by 'real postpaid' customers, not just M2M. He was unsure how Nu bank customers were reported but offered to follow up. CFO Carlos García Moreno Elizondo explained that lease expenses are often dollar-based or inflation-adjusted, so their growth can be impacted by currency appreciation against the U.S. dollar.

Lucca Brendim asked if recent M&A in Latin America has altered the competitive landscape and requested an update on the strategy for the Chilean operation, specifically the focus on profitability versus growth.

Answer

CEO Daniel Hajj Aboumrad commented that M&A brings consolidation, which is generally better for markets. For Chile, he clarified the strategy is to pursue both profitability and market share growth, as its share is still relatively small. He highlighted ongoing investments in the 5G and fiber networks, along with significant remaining synergies from the merger, as key drivers for future market share and EBITDA margin growth.

Lucca Brendim of Bank of America asked if Colombia's accelerated service revenue growth reflects a more rational market and inquired about the mobile pricing strategy in Brazil, specifically the balance between price hikes and upselling.

Answer

Executive Carlos Jose Garcia Moreno Elizondo confirmed that Colombia's recovery is broad, with mobile service revenue growth accelerating to 4.0% and fixed-line to 5.2%. Executive Daniel Hajj Aboumrad attributed this to their leading 5G network driving data usage. For Brazil, he clarified that the primary focus is on upselling customers by offering more data and migrating them from prepaid to postpaid, rather than implementing direct price increases.

Lucca Brendim followed up on the prepaid segment, asking about its future revenue trajectory and the potential for price hikes. He also inquired about pricing dynamics in the competitive broadband market.

Answer

Executive Christian Gebara indicated the prepaid revenue trend is not expected to worsen and that the strategy remains focused on migrating customers to hybrid plans and adding value through digital services. Regarding broadband, he described a segmented strategy centered on convergence with Vivo Total plans, upselling higher speeds, and enhancing Wi-Fi quality, rather than competing solely on front-book pricing.

Lucca Brendim from Bank of America asked for details on the composition and extraction costs of the 120,000 tons of recyclable cables and questioned plans for prepaid price increases to close the gap with postpaid plans.

Answer

Executive Christian Gebara stated that while specific details on copper content are not yet public, it represents significant value. On pricing, he acknowledged a prepaid price increase is needed and hopes it will happen soon. He noted that despite the current price gap, customer migration to higher-value plans remains strong due to Vivo's attractive value proposition.

Lucca Brendim inquired about the sustainability of strong mobile net additions in the market and asked about the potential for further EBITDA margin expansion and the long-term margin outlook.

Answer

Executive Christian Gebara attributed the strong mobile net adds to the successful market-wide trend of migrating prepaid customers to postpaid plans. Executive David Sanchez-Friera addressed margins, noting that while the reported EBITDA margin was affected by temporary volatility, the underlying margin improved. He emphasized focusing on the operating cash flow margin, which is at a high of 24% (LTM) and has room for further improvement as high-growth, no-CapEx digital services expand.

Lucca Brendim asked for more detail on two OpEx items: the reason for the year-over-year reduction in sales and marketing expenses, and the drivers behind the significant increase in network and interconnection costs.

Answer

CFO Andrea Viegas explained that the rise in network and interconnection costs was driven by content provider programs and the expansion of international roaming offerings in postpaid plans. She clarified that the Q1 decrease in sales and marketing was due to seasonality and that the company expects this expense line to increase for the full year to support advertising, funded by efficiency gains in other areas.

Lucca Brendim of Bank of America followed up on the competitive environment, asking about the potential for future price hikes. He also questioned whether other product lines might be discontinued in the coming quarters, similar to the Afizzionados channel.

Answer

Francisco Valim Filho, CEO of Cable and Sky, explained that the Afizzionados discontinuation was a specific case where the channel became loss-making and irrelevant after its sports rights moved to ViX. Regarding pricing, he indicated that while passing full inflation through price hikes is challenging, the strategy is to increase ARPU by upselling customers to higher speeds and adding more services, thereby enhancing value for both the customer and the company.