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Hello, everyone, and welcome to the VTEX Earnings Conference Call for the Quarter Ended June 13, 2023. I am Julia Vater Fernandez, Investor Relations Director for VTEX. Our senior executives presenting today are Geraldo Thomaz Jr., Founder and Co-CEO; and Ricardo Sodre, Chief Financial Officer. Additionally, Mariano Gomide de Faria, Founder and Co-CEO; and Andre Spolidoro, Chief Statutory 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 for 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 assumed expectations and projections are reasonable in view of the corporate 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 Statements sections of VTEX Form 20F for the year ended December 31, 2022, another bit 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 second quarter 2023 earnings press release available on our Investor Relations website. Now let me turn the call over to Geraldo, the floor to yours.
Thank you, Julia. Welcome, everyone, and thanks for joining our second quarter 2023 Earnings Conference Call. In the past few months, we have witnessed significant milestones and exciting events that have proper us forward. From the successful celebration of the Tax Day, our commercial events that gather over 20,000 attendees per day, and we announced the launch of 5 new products with excellent customer reception to our first time after Investor Day on the second anniversary of our IPO.
For those who didn't have the chance to connect to our Investor Day, I highly recommend you take a look at the audio recording available on our Investor Relations website. As we embark on this earnings call, I'm here to provide an update on our performance during the second quarter. I'm pleased to announce that our company has demonstrated remarkable resilience and achieved a strong performance in the second quarter. Our GMV experienced a significant 23.4% year-over-year growth. This growth is a testament of VTEX's strong value proposition that continues to attract new customers to our platform.
Moreover, despite the challenging macroeconomic scenario, our existing customers continue to outperform the market, with same-store sales remaining at the teens range, although slightly below historical levels. Additionally, not only have we exceeded our revenue projection, reaching almost $48 million this quarter, but we have also successfully maintained leverage across all our cost and expenses centers. Despite the demanding environment, our team's unwavering dedication and strategic decision-making has allowed us to drive and deliver exceptional results. Thanks to it. Every quarter, we feel closer to our goal of becoming the backbone of connected commerce, the platform that powers unified commerce experiences for businesses around the globe. Now let's delve into specifics.
In the second quarter, we added several new customers that migrated from other platforms, Springer Carrier and Privalia in Brazil; Riviera Bike and ProBeauty in Romania; Supermercados Internacionales HEB in Mexico; New Zealand Wine Cellars in New Zealand; and Kayser Roth in the U.S. In addition to attracting new customers, we are also focused on strengthening our relationship with existing customers by supporting their expansion efforts.
During the second quarter, several premier brands and retailers chose to expand their operations with us by opening new online stores and further integrating with us. These include Belcorp, who added a store in Panamá, currently operating in Latin America in countries such as Mexico, Colombia and Chile, among others; Tommy Hilfiger, who added a store in Costa Rica, currently operating in Latin America, in countries such as Brazil, Mexico, and Colombia, among others; and Whirlpool, who added stores in Mexico, Spain, and Sweden, now operating in Latin America, EMEA, and APAC, in countries such as Brazil, Italy, India, and Singapore, and more. The decision of these brands to expand their operations with VTEX serves as a testament to the strength of the platform and its compelling value proposition, which has forced a trust and loyalty among our customers.
We take immense pride in being the partner of choice for the ambitious growth plans. We're thrilled to offer unwavering support leveraging the assets of the physical stores and maximize their potential, upselling the right features and products is at the forefront of our strategy, empowering our customers to accelerate their growth and enhance operational efficiency. Our commitment lies in helping them surpass the overall market expectations, and we are dedicated on comparing them under a profitable growth journey every step of the way. We're proud to share that VTEX was awarded medals in all 24 categories of the 2023 paradigm B2B combined, enterprise, and mid-market issues.
We received gold mats in customer service and support, integrations, operations and infrastructure, marketplace and promotions management. Our standing point is that we were the sole vendor to achieve a gold medal for the marketplace product capability in both reports, certifying our acquisition as the top choice for enterprise B2B companies. On top of all the Investor Day customer cases, let me share some incremental success stories that demonstrate the capability of our platform and the remarkable outcome they have achieved.
My Geisha, the renowned beauty brand with a presence in 13 countries and over 58 stores, partnered with VTEX in Romania to propel its online sales growth. By leveraging our marketplace solution, My Geisha diversified its sales channels and expanded its reach by offering complimentary beauty products. Furthermore, we worked closely with them to customize the front end of its site, resulting in a staggering seven-fold increase in online sales. This collaboration accelerated its e-commerce success and solidified its brand's position in the competitive beauty industry.
Midea, a prominent Chinese electrical appliances manufacturer with a vast global footprint comprising 200 subsidiaries and over 60 overseas branches, turned to VTEX for scalable solutions and improved business performance in Brazil. Midea successfully implemented critical features such as catalog management, pricing optimization, and promotional tools through our out-of-the-box solutions. The results were impressive, with Midea achieving a remarkable 10% increase in overall conversion rates, a 40% boost in organic revenue, an 8% rise in mobile conversion rates, and a significant 13% reduction in bounce rates after their migration to VTEX. This partnership exemplifies how VTEX empowers businesses to unlock its potential and thrive in targeted markets.
Kopenhagen, a leading premium chocolate brand under the CRM Group in Brazil, harnessed the power of VTEX's omnichannel architecture to enhance its sales during the Easter season. Leveraging our platform, the CRM Group achieved a remarkable 20% increase in sales by seamlessly integrating its physical stores and franchisees into its e-commerce operations. This integration allowed for expedited delivery options and boosted customer satisfaction.
Additionally, Kopenhagen experienced a 50% surge in in-store pickups, a 55% growth in sales from loyal customers, and an influx of 2 million customer contacts via WhatsApp. VTEX's comprehensive solutions proved instrumental in driving Kopenhagen's growth and delivering an exceptional customer experience. A global sportswear giant and a key player in the local market, selected VTEX in Latin America to enhance customer experience and safeguard against reseller attacks. Utilizing VTEX's customizable checkout process, they integrated anti-fraud protocols to thoroughly assess orders across both the web and user interface channels, pre- and post-order creation. This proactive approach empowered our customers to manage potential attacks more effectively, enhancing security and customer satisfaction.
Through this collaboration, VTEX enabled them to protect its limited-edition SKUs and provide consumers an exceptional online shopping experience. Williamson Balfour Motors, a BMW dealer in Chile, partnered with VTEX to successfully transition its automotive e-commerce to cater to customers' needs through digital channels. By implementing platforms for BMW, MINI, and BMW Motorrad, they provided a tailored online shopping experience. Overcoming automation challenges, BMW utilized VTEX's user-friendly and comprehensive tools, allowing various business areas to participate.
Looking ahead, BMW plans to enhance its platform and offer customers an even more convenient experience, bringing the option of vehicle reservations closer to them. This transformation in the automotive industry enables customers to purchase cars from the comfort of their homes, thanks to advancements in digitalization and seamless communication with sales representatives.
Iguatemi 365, a luxury marketplace representing over 200 national and international brands from Brazil's renowned Iguatemi network of luxury malls, leveraged VTEX FastStore to optimize its website's performance. By implementing our solutions, Iguatemi 365 achieved impressive results in core performance metrics, including making the page much more stable with a remarkable 92% reduction in shifting content, ensuring smoother interactions with an 81% decrease in input delays, and making the overall loading experience faster with a 27% improvement in displaying the main content. These substantial improvements enhance user experience and solidify Iguatemi 365's position as a premier destination for luxury shopping in Brazil.
Metatools, a leading company in the DIY industry, partnered with VTEX in Germany, Italy, and Romania to launch the e-bricoshop.ro marketplace. With an estimated 50 major merchants and brands with a minimum of 100,000 SKUs listed expected in the first year, Metatools aims to promote Romanian companies and drive business growth. The marketplace will offer a wide range of products, including power tools, gardening equipment, cleaning supplies, and more. By partnering with VTEX, Metatools has built a user-friendly platform that allows for easy expansion and international scalability. The e-bricoshop.ro marketplace aims to cater to DIY enthusiasts and professionals, connecting them with quality products and fostering a sense of community.
In addition to the remarkable customer success cases, I am delighted to share with you that during our Investor Day, we had the privilege of hosting a panel with Hisham Faour, Principal of Transformation & Portfolio Operations at Carlyle Group, the controlling shareholder of Beauty Counter, our recently announced new customer in the U.S. We also had the pleasure to announce Casino in France and Hearst in the US as our new customers during our Investor Day. These esteemed brands have chosen VTEX as their trusted digital commerce platform. They are expected to go live progressively in the coming quarters. Their decision to partner with VTEX holds significant importance, and it is worth delving into the reasons behind their choice.
By selecting VTEX, these forward-thinking companies recognize our platform's unparalleled value and robust capabilities, including its scalability, flexibility, and ability to seamlessly support their expansion into new markets. We are excited to accompany Beauty Counter, Casino, and Hearst on their journey and we are confident that our partnership will yield exceptional results.
Our global expansion journey has been progressing, and these additions to our growing list of esteemed customers are a solid step in our journey. We take great pride in our efforts to provide cutting-edge solutions that empower businesses to embrace digital transformation, which industry leaders have also recognized. We believe that as we continue to onboard new customers such as Beauty Counter, Casino, and Hearst, we will pave the way across the globe to achieve our mission to become the backbone for connected commerce.
I now would like to express my gratitude to our 1,305 VTEX employees who are dedicated to making our declared future a reality and 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, I am pleased to share VTEX's Q2 2023 financial results with you. I'm excited to share that, once again, our company's top-line performance was robust. As highlighted by Geraldo, our Q2 GMV growth achieved 23.4% in USD and 21.2% on an FX-neutral basis. Our Q2 revenue exceeded expectations, surpassing the upper end of our guidance, reaching $47.9 million and reflecting a YoY increase of 23.7% in USD and 22.9% on an FX-neutral basis. This outcome demonstrates our ability to attract new customers to the VTEX platform and the resilience of our blue-chip customer base. We are reassured to observe that we are continuing to assist our customers in outperforming the market.
Double-clicking on our topline, our subscription revenue reached $44.8 million in the second quarter of 2023, from $36.6 million in the same quarter last year, a YoY increase of 22.2% in USD, and 21.4% on an FX-neutral basis. Our services revenue reached $3.1 million in the second quarter of 2023, from $2.1 million in the same quarter last year, a significant YoY increase given the new projects that are under implementation.
Our subscription gross margin also improved versus previous quarters'. Our non-GAAP subscription gross profit was $33.7 million, compared to $26.6 million in the second quarter of 2022. Non-GAAP subscription gross margin was 75.3% in the second quarter of 2023, compared to 73.9% last quarter and 72.5% in the same quarter of 2022. The 280 bps YoY margin expansion shows the commitment of our team to keep improving our margins. This margin improvement was driven mainly by migrating non-core services to more efficient hosting providers and the optimization and operational leverage of our support costs. We are proud of what we have achieved on this front and excited about what is to come.
We delivered a YoY improvement of more than 120 bps on our overall gross margin in Q2. We continue working on a few implementations in the US and Europe, such as the ones mentioned priorly, Beauty Counter, Casino and Hearst, where we are proactively investing in our services offering to ensure successful go-lives. By design, this impacted our service's gross margin and, therefore, our overall gross margin. Even though this quarter we've delivered an improvement in services gross margin versus last quarter, we anticipate this commercial decision to still have some impact on our gross margin in the short term as it will position us better in newer regions in the medium to long term, enabling us to implement new customers smoothly and successfully.
Our non-GAAP total operating expenses reached $34.1 million in the second quarter of 2023 from $31.9 million in the prior quarter and $43.3 million in the same period last year. The YoY improvement reflects the organizational restructuring we made over the past year. The QoQ increase in expenses is mainly attributed to the foreign exchange appreciation of the Brazilian Real, as most of our payroll in R&D and G&A is based in Brazil. Other drivers that also impacted our expenses, to a smaller extent, were the annual salary increase in the R&D team, and a minor impact from the VTEX DAY event, whose efficiency improved significantly compared to the previous year.
Thanks to our diligent expense management and strong revenue growth, our non-GAAP operating income showed significant improvement. In the second quarter of 2023, we achieved a negative 3.2% margin, a remarkable improvement from the negative 45.1% margin recorded in the same quarter last year. This represents an impressive YoY improvement of 42 percentage points. Furthermore, on a QoQ basis, we saw a 6.5 percentage point improvement in our non-GAAP operating income margin. These positive trends highlight our commitment to enhancing profitability and strengthening financial performance, while still delivering high revenue growth. As of the three months ended June 30, 2023, VTEX had a negative $3.3 million free cash flow, compared to negative $5.0 million in the prior quarter and negative $12.7 million free cash flow in the same quarter of the prior year. Also demonstrating operational efficiency from a cash flow perspective.
Before I move to the outlook for Q3 and FY2023, I would like to update you on the share repurchase program approved in August last year. As of June 30, 2023, the remaining balance under this authorization was nearly $3.5 million. We've purchased 6.7 million shares at an average price of $3.93 dollars per share. Today, we are pleased to inform our investors that VTEX's Board of Directors has approved another 1-year share repurchase program for VTEX's Class A Common Shares, up to $20.0 million. The decision on the timing and quantity of shares repurchased, if any, will be at the discretion of our management, taking into consideration market conditions and other relevant factors. This move reflects our confidence in the company's financial position and our commitment to delivering long-term value to our shareholders.
Looking ahead, we are excited by VTEX's adaptability and ability to thrive. Despite the uncertain macro, VTEX has consistently outperformed the market while also delivering robust long-term performance metrics. We are currently targeting revenue in the $48.2 million to $49.0 million range for the third quarter of 2023, implying a YoY growth of 19% on an FX-neutral basis in the middle of the range. For the full year 2023, considering the current performance of the company, we are increasing the bottom and the top of the range, now targeting the full year to end between 18% to 20% on an FX-neutral YoY basis, implying a range of $191 million to $195 million based on Q2 average FX rates.
As we continue executing on our strategy for profitable growth, we anticipate relevant YoY improvements in non-GAAP operating income margin in the second half of 2023. We are confident in VTEX's unique value proposition, centered around enabling our customers to achieve profitability and sustainable growth by reducing total cost of ownership and simplifying their commerce architecture. We will continue to execute the integration of e-commerce with physical stores, delivering omnichannel excellence that enables us to deliver the rapid growth and profitability that our customers seek. We remain focused on adapting to market conditions, providing innovative solutions, and capitalizing on emerging opportunities to drive sustained success for our valued customers, partners, employees and investors. We are excited about the opportunities ahead. With that, let's open it up for questions now. Thank you.
[Operator Instructions]. And our first question comes from the line of Marcelo Santos from JP Morgan.
I have 2 questions. The first is the P2 revenues versus management expectations came from more or less what source, could you please discuss a bit? I mean is this like more stores or more volume or the sales cycle was shorter? I just wanted more color on what came better than you expected. And the second question is regarding the further decline in headcount. Could you please just discuss what changes are you making now? Where is this change located?
Thanks for your question, Marcelo. It's great to have the opportunity to go deeper into the reasons behind VTEX's outstanding performance in the market and to address the sustainability of this achievement. So first and foremost, our overperformance can be attributed to the new customers coming and joining the VTEX platform, both on new ACV signed and on backlog projects going live. This demonstrates the attractiveness of our value proposition to our customers of achieving profitability and sustainable growth by reducing the total cost of ownership and simplifying their commerce architecture under the current market demands.
Additionally, as mentioned in our earnings press release, we have seen an encouraging stabilization of our sales cycle in the current quarter, which also had a positive impact on our results through the go-live of projects under implementation. Another factor that contributed to our resilient performance was our existing customer base. Although the same-store sales was slightly below expectations, our existing enterprise customer base GMV still grew in the teens levels in Q2, significantly above the market, and was a remarkable driving force behind our Q2 growth.
While we acknowledge that we are still navigating an uncertain macro scenario that may impact the same-store sale of existing customers and the sales cycle of new customers, our positioning remains strong. Our commitment to providing a composable and complete platform with a low TCO and our relentless focus on delivering value to our customers continue to set us apart. We have a pipeline of promising cases undergoing implementation, and we are seeing an encouraging stabilization of the sales cycle, further bolstering our confidence in maintaining our growth trajectory. Looking ahead, we remain grounded in our guidance and confident in our growth prospects. Our strategy is aligned with our execution, and we are confident in achieving our outline targets. And for the second question, I'll pass it over to Mariano to talk about the headcount.
So about the headcount, our headcount has remained pretty stable when compared to the previous quarter. We are confident that our current staffing levels align well with the demand we are experiencing, and we don't foresee any substantial changes in this regard. Our headcount will likely hover around these levels, possibly with a slight uptick, but we maintain rigorous hiring standards, which can casually result in a longer turnaround time for replacements, and do a natural attrition. So in some cases, we might choose to refrain from refilling acquisition in a sense. Simultaneously, new roles will be introduced based on our operational requirements. This dynamic might lead to minor fluctuations in headcount from quarter to quarter, but we are not anticipating any significant shifts.
Considering that personnel, in the first quarter of 2023, we have around 1,300, second quarter around 1,300, and we foresee that level. So we are not anticipating any changes on that. And considering that personnel costs make up a substantial portion of our expenses, the stabilization in headcount in conjunction with our projected revenue growth. It is a driving force behind our expectations of continued year-over-year operating income margin improvement for the second half of this year.
Operator
Our next question comes from Lucas Chaves from UBS.
From my side here. The first one is, you mentioned during your Investor Day and today also new products and solutions for customer engagement. So can you please comment on the reception by the clients of the new product launches? And how do you see it going forward? The second one is on competition. And are you seeing competitors more aggressive on pricing or take rate or general pricing?
Pleased to get this, Mariano. First on the competition. We don't see a brutal change on the market dynamics. We are seeing the market operating in the same kind of price. We also -- but although we see a change from a client perspective, the client is much more aware of the total cost of ownership of the platforms in the market. So although we don't see competitors kind of changing price strategy, but we are seeing a pricing momentum kind of big topics on the RFPs on the process that have been higher. So on this sense, as we are positioning as a low TCO sustainable platform, it's our bet that we can capture the movement of the market on these.
On the second question around the Product & Solutions for the engagement. We see the channels, the organic channels, as one of a highly profitable operations for our customers. So to sell more with their organic assets, it is one of our strategies to make our clients grow. So I can quote, for example, to extend the endless IO in physical stores and joining operations with the platform. So yes, VTEX launched it in VTEX Day, the VTEX pick-and-pack that combines with VTEX e-commerce gives the ability of any client of VTEX to have a seamless pick-and-pack solution that can put all the physical stores into the digital journey.
Another one is the live shopping. It's a new organic channel that it's a trending channel on the marketing and pretty big in Asia, not in the United States, not in Europe, but pretty big in Asia that also we announced in VTEX Day, live shopping with a personal shopper, so concierge, commerce. So we believe the missing link in between online and offline, also is the sales team, the team that is inside the stores. And for that, we launched the sales app, the in-store solution of VTEX that allows the sales team to participate in the journey. And we believe with the in-store sales app plus Commerce suite, we fulfill the necessity of our unified commerce, enhancing our position as a #1 solution of for unified commerce by Gartner. So let me know if I cover the 2 aspects of the question, please.
Operator
Our next question comes from Clark Jefferies from Piper Sandler.
Hello. First question is really around some of those North American merchants that you indicated are going through implementation or recent deals. How should we size those merchants? I mean, what’s the line of sight to being able to claim 100 million-plus GMV merchants in North America at this point? And then the second question is really around really run another share repurchase authorization today. Is this an opportunistic use of capital, given the sort of focus on leverage in the model right now? Or do you think even looking beyond this year, buybacks will continue to be attractive?
So Mariano here. I’m going to answer about the cases that we announced in the Investor Day. We are proud of the solid steps we are making on our international expansion. We are seeing that our positioning as a commerce specialist with a very technical approach and our positioning as a composable and complete solution is helping our message to resonate more and more with potential customers in the U.S. and Europe. At our recent Investor Day, we shared those contracts. We’ve renowned brands like Beauty Counter, Casino and Hearst, these companies have chosen VTEX as their preferred usual commerce platform and will progressively go live in the forthcoming quarters.
We also have additional customers who have already signed contracts that are under implementation and look forward to announcing once they are live. We are having a good consistent pipeline in the U.S. and Europe. So we have a lot of work ahead of us. And in the quarters to come. As always, we are announcing you’re going to see our clients’ lives being announced as well. It’s also interesting to remark the surge of B2B opportunities that are emerging. As I’ve mentioned in previous earnings calls, nearly half of the opportunities in the United States are B2B leads. Our value proposition is resonating with potential customers. We are consistently advancing to more mature stages on RFP processes and showing cases in the growing considera’Ion of our composable and complete platform each.
Let’s go quickly on 3 cases like the beauty counter that you mentioned. We will handle all online operations and transactions for them. The beauty consultants giving their MLM go-to-market strategy. We’re going to hold a digital direct-to-consumer channel and their physical stores also in the United States. And this rollout will be also progressive, and we will start to impact our operational metrics next year as well. So even though we will run almost the entire volume of uricounter just to align expectations. We will not run their wholesale channel. So just to make a disclaimer here.
On Casino, Casino will start the go-live phase inviting and family to experience the new web store. This limited introduction will take place in the single store with the next couple of months. Subsequently, we have mapped out our rollout strategy that we will fold progressively. We expect for the second half of 2024, fully rolling out Casino in France. As you know, achieving a seamless transition in optical optimal operational volumes required like a really disciplined execution. We typically translate into a 6 to a 1-year ramp-up time after the go live.
So on Hers Corporation, the U.S. announcement that we brought in the Investor Day, they are gearing up and adding more than 10 brands into VTEX platform. Each of these brands will work as a separate marketplace characterized by its own unique attributes and offerings. While the brands will share a common pool of sellers and a unified catalog, their autonomy will be cleared through product descriptions and presentations. To sum it up, we see a significant opportunity for VTEX in the U.S. and Europe. We are seeing more interest in our offering. The analyst of Gartner, IDC, and Forrester are increasing the levels of recognition of VTEX brand. We are tangibly reflecting into the customers that are pursuing organically VTX. So we are conservatively and consoles optimistic for the future that will come from U.S. and Europe.
Perfect, Mario. And on the second question, Clark for your question. Regarding the buyback, it’s more optimistic opportunity that we are seeing that we are approaching. So approving a buyback program for another year reflects our confidence in the company’s financial position and our commitment to delivering long-term value to our shareholders. And as a high-growth company, we constantly look for opportunities to invest our resources to accelerate growth. Now considering our strong cash position and the clarity we have in terms of the next year’s capital allocation, we view this buyback program as an attractive capital allocation opportunity for the next 1 year.
Finally, it is important to note that the current buyback program that we are announcing is relatively aligned with the current dilution from our share-based compensation that we are seeing. So hopefully, that answers the question.
Our next question comes from the line of [Luca Brendan] from Bank of America.
I have 2 here. First, if you could give us an outlook of how you're looking at the e-commerce market for the main regions you operate in? Has there been any improvement in the second quarter so far versus what we've seen in the first quarter? Or it does it remain difficult? And second, a follow-up on competition. We have seen many of the players that are focused on smaller clients saying that they are now focusing on entering the market of bigger clients. Have you seen any impact on that from your side? Have you seen any of your smaller clients maybe being targeted by those players? Have there been any major impacts?
Ricardo here. Happy to take the first question on market growth. I'll comment a little bit on the overall e-commerce market growth, and then we can talk about the regions. So while e-commerce continues to grow single digits, we continue to consistently outperform the market and perform on a GMV basis as strong as the top performers in the industry. Our ability to adapt and stay resilient has been crucial. Our dedication to customers and partners remains very strong, and we are continuously refining our offering to stay ahead of the game.
There are a few reasons that drove our overperformance versus the market in Q2. The first and most relevant one, as I mentioned to Marcelo's questions, was that we added new customers to tax, adding net new GMV to our platform. We believe we are being successful in attracting new customers because we are helping them achieve profitability and sustainable growth by reducing the total cost of ownership and simplifying their commerce architecture. The second one is that our large enterprise existing customer base continued to show resilient growth in the same-store sales in the teens range. And it's important to mention that our existing customers are performing the market by seamlessly integrating their physical stores into the digital shopping experience, as we mentioned in the previous quarters.
And this integration of the physical store with the digital shopping experience has led to an increase in conversion rates, expanded inventories, fee stockouts, and faster deliveries, among many other benefits. On the geographical breakdown, we give this disclosure on an annual basis, given the sales cycles that we have that are pretty long, right? So nothing too meaningful happens from quarter to quarter. And if you remember, the 2022 disclosure that we made in 2022, we grew like mid-20s percentage. Brazil was aligned with that, slightly below the average, while the rest of the world, so U.S. and Europe, grew in the 50% range or so, so way outgrowing the overall company.
And these type of trends we have been seeing for some time. And as I said, there is no big variations quarter-to-quarter, given the long sales cycle, and we would expect something like that to continue happening. So again, we give detailed disclosure on a yearly basis. So I think this is what we can explain on a qualitative basis here in the quarter. And for the second question about competition, I'll pass it over to Mariano.
So about competition, we are not seeing a different landscape for competition. And let's be more specific by region. We are not seeing any new names in Europe, in U.S., LatAm, and Brazil. They are all the same. As we are increasing our penetration in B2B, yes, we are seeing all names of B2B that now for us is the new competition in the B2B space, mainly in the United States. But no, the market stays with the same names. The only major kind of public notice was an Oracle kind of moving out of the commerce environment, but no further kind of a new competitor in the market.
And our next question comes from the line of Matti Schrage from KeyBanc.
I'm happy to hear that sales cycles have kind of come back to normalized levels. Just wondering if your guidance assumes this recovered level in your sales cycles. And then my second question is wondering if you guys could give some color on the ramp speeds of your new go-lives and wondering if that's seen some recovery, too? Or if we're still seeing merchants kind of pull back on sales and marketing spend?
Thanks for your question. So on the sales cycle, we mentioned both in the earnings release and in the prepared remarks that we have seen and encouraged stabilization of the sales cycle. They have not gone back to normal historical levels. They are still slightly above, but we are seeing an encouraged trend with disease stabilization, right? So that's what we are seeing.
Now the go-lives and ramp-ups, we are including that in the overall cycle, as we mentioned, right? So we are seeing a similar trend there as well. So this is encouraged to see. So on what's built into the guidance, right, both Q3 and 2023 guidance assume the same-store sale from existing customers in line with current levels as well as continued stabilization of the sales cycle from new customers, not yet going back to normal, but a continued stabilization. And if you look back at previous quarters, you will notice that our Q3 FX-neutral guidance was the same as Q1 and Q2, while we have increased the 2023 FX-neutral guidance from 15% to 19% to 16% to 19% last quarter and now to 18% to 20%.
Having said that, market conditions remain uncertain. For instance, given the holiday shopping events of Q4, it is hard to predict the promotional behavior and therefore, the GMV from our customers under the current retail market setup. And finally, I would say that we are confident that we are well-positioned to capture the digital market opportunity, although we have seen some volatility in same-store sales. Our existing customer base has continued to outperform the market, and we are seeing good new customer sales momentum that should continue supporting our growth going forward.
Thank you. And with no further questions, I'd like to turn the floor back over to our presenters for closing remarks.
The collective effort of our dedicated team, loyal customers, and partners have propelled us into a new hiking commerce transformation. Our customer base has consistently showcased remarkable resiliency serving as a testament to the strength and reliability of the VTEX platform. The consistent low annual revenue churn we have experienced highlights the unwavering trust our customers place in us.
This, in turn, has enabled us to foster our robust and sustainable business model, positioning us for continued growth. The macroeconomic environment poses a huge charge for enterprises and retailers to meet their operational and financial targets. This represents an opportunity for VTEX. Legacy players dominantly in the past are now considered out data providers, that enterprises and retailers actively seek to migrate away. On the other hand, emerging players aren't the best option either, as even though they offer great customization, it comes with complexity and high operating costs.
We stand out by offering a composable and complete platform that combines the best of both worlds, which with an offering that solves just about what enterprises and retailers are looking for. Together, we're shaping remarkable customer experiences and solidifying our position as leaders in the e-commerce industry. Thank you, everyone, for joining us today. We look forward to keeping you updated in our next earnings call. Have a wonderful week.
Thank you. And once again, ladies and gentlemen, that does conclude today's call. Thank you all for joining. You may now disconnect.