Ricardo Camatta Sodre: Thanks, Luca, thanks for bringing that up. I’ll start with gross margin and then I’ll pass it over to Mariano regarding services revenue. So in Q1 we achieved a non-GAAP gross margin of 72%, marking a year-over-year expansion of over 600 basis points and despite the seasonal effects typical to Q1 as you mentioned, this brings us closer to our Investor Day target of 75% for our overall gross margin and it’s 80% for the subscription gross margin right? And we also achieved 77% on the subscription gross margin. So always also getting closer — closer there as well. And approximately two-thirds of our subscription costs are related to hosting and we have significantly enhanced our cloud efficiency. These efforts include migrating systems to Linux, optimizing CPU usage and reducing cost through caching and outscaling and all while maintaining or improving performance right.
So that has been helping a lot our subscription gross margin. Regarding the services gross margin side, although some volatility has been observed, the improvement is primarily attributed to our strategic adjustment, away from the hypercare modes for key new customers in the US and Europe as they go-live. So we remain focused on the opportunity to enhance our subscription gross margin and the overall gross margin while some services gross margin volatility is inherent in our business, we anticipate further improvement in this area in the future and we’re moving towards our goal that was disclosed in the last Investor Day of 80% subscription gross margin and 75% overall gross margin and that’s a medium term goal for the next like three years to five years.
It’s not a terminal model growth. We don’t have the visibility yet for the terminal model, but for these next three years to five years, that’s what we are going after. With that, let me pass it over to Mariano to talk about services revenue.
Mariano Gomide de Faria: Yeah, clarifying a little bit more on the service margin our service revenue, which includes our solution architect offering during major customer implementations, naturally experienced some volatility as accounts goes live and the stage of development of new geos are expanding. So it’s expected by design to have some volatility. This time last year, we had a few accounts in implementation phase, like for example OBI, that we just announced in a hypercare model. That said, we would expand a little bit more on hypercare so that volatility is expected. But while there are no significant changes in the model and design of the services to report, aside from what I already mentioned, that’s expected volatility, we will continue to execute.
We remain optimistic on service as we are increasing our system integrator reach and the system integrators are becoming more and more mature. So broader and more mature ecosystem will bring the volatility on the service revenue and service expenses of VTEX a little bit down. So we will be able to scale the deliveries with less direct service of VTEX and that’s by design, the ultimate goal for a platform like us.
Luca Brendon: Perfect. Very clear. Thank you for the answers.
Operator: That concludes our question-and-answer session. I will now turn the call back over to Geraldo for some final closing remarks.
Geraldo do Carmo Thomaz Junior: In conclusion, it’s evident that in today’s high interest rate environment, retailers and brands urgently need effective tools to enhance margins and optimize organic sales channels. VTEX is fully committed to providing actionable strategies for B2B and B2C enterprise to maximize ROI and elevated e-commerce platforms. By integrating cutting edge innovations, we’re ready to unveil fresh audiences and insights, empowering our customers to achieve even more impactful consumer engagement. Our unwavering dedication to customer centricity and innovation-driven solutions is not merely shaping the future of commerce, it is redefining it. We are excited about the results of the first quarter, our gross margin and operating margin expansion was remarkable and sets a strong foundation for our sustainable, profitable growth.
At VTEX, we stand stronger and more robustly positioned than ever before. We focus on growth and margins underpinned by a remarkably strong business model. This is our time and we are ready to seize it. Thank you everyone for being part of this exciting journey. We look forward to keeping you updated at our next earnings call. Have a wonderful week.
Operator: This concludes today’s teleconference. Thank you for your participation. You may now disconnect.
