And looking at new customers, we are assuming that the sales cycle, including implementation and ramp-up times will also remain relatively stable versus what we saw over the second half of 2023. And then on margins, we will continue to control our costs and expenses, and therefore, our operating leverage should lead our non-GAAP operating income and free cash flow margins to reach mid-to-high single digits. Finally, we always talk about our guidance in FX neutral. And we mentioned the implied US dollar revenue based on certain FX assumptions. So on this part, for 2024 we are assuming the January average FX for the full year, which is also aligned with the year-end FX consensus. In the case of Argentina, as already mentioned in our Q3 earnings Q&A session, the 50%-plus devaluation of last December should result in a mid-single-digit percentage point headwind in our 2024 US dollar growth and a more moderate impact in FX neutral as economic activity and retail may get impacted by the macroeconomic adjustment of the country.
It’s also important to mention that the devaluation in Argentina should have a low to mid-single-digit operating margin impact for VTEX in 2024, which was already accounted for in our 2024 margin guidance. Having said that, although with some GMV volatility, we are happy with how we are starting the year and we consider our guidance well balanced given the macro uncertainty that we see in the market. And then I think question one was our overall performance on the GMV side versus the market. So I’ll pass this over to Geraldo.
Geraldo Thomaz Jr.: Thank you to Ricardo. The — thank you for this question. In fact, you’re right, like the global e-commerce grew according to market here around 9% globally and 14% in Latin America last year. And this is one statistic. There are other statistics, especially for Brazil. They see that eventually e-commerce was flattish or even negative in Brazil for some statistics. And we consistently outpaced the market. Our GMV growth for the whole company was 25% FX-neutral, 30% US dollars and even bigger growth in Q4 of last year, 38% in GMV growth for US dollars and 30% in FX-neutral. This growth is caused by new customers. We added in revenue, $28 million with new customers last year, which is notable like we grew the customer logo.
But our current customer, they seem to be — we always notice that and last year was not different. Our customers are resilient customer trough prices. Our same-store sales reached 19% in USD and 15% growth in FX-neutral. And I think our healthy same-store sales performance can be attributed to the time integration of physical stores into the digital commerce experience. I think we did the lot of this last year that was relevant customers that started to deliver from store and use the store for the digital commerce experience. And this is resulting in higher conversion rate expanded inventories turn inventories breakages, faster deleverages among other advantages. So I think in summary, our value proposition resonate here. We’re empowering customers to achieve sustainable, profitable growth by reducing their total cost of ownership and simplifying their e-commerce architecture.
And this aligns seamlessly with the evolving demand of the market, enabling them to design strategy that outperform the market. I think you saw right. And again, we were able — our customers were able to outperform the market.
Leonardo Olmos: Perfect. Super clear. Thank you, Geraldo. Thank you, Ricardo.
Operator: We’ll move to our next question from Marcelo Santos at JPMorgan.
Marcelo Santos: Hi, good evening. Thanks for taking my questions. I have two. The first, I just wanted to go again to the guidance. Sorry about that. I wanted to understand a bit better if the existing customers will have same-store sales and net revenue retention kind of around current levels and the sales cycle remains stable. Should you kind of have similar growth than you had in 2023? Just wanted to do in losing what I’m missing here, but it seems you’re keeping stable the same assumption. So, why isn’t the growth the same? The second question is more conceptual. The new stores increased 100, right, versus last year. And in the past, you used to increase much more. Is it because you are adding larger and larger stores? I mean how are you keeping growth, but adding fewer stores? What’s the change in profile and how should this move forward? Thank you.
Ricardo Camatta Sodré: Hi Marcelo, thanks for both questions. I’ll start here and then others could chime in. So, on the guidance, right? As I mentioned, the same-store sales, we are assuming to be in a relatively same level. And the new stores, we are assuming also that will continue in a similar sales cycle. Now, you have to rewind the tape to think about the effects on the growth, because we saw innovation of the sales cycle in 2022 that pushed some revenue further out. And then in 2023, we saw the sales cycle stabilize and getting slightly better that pull some revenue forward, right? So we don’t have that pull-forward effect in 2024 that we saw in 2023. And maybe explaining a bit more on the overall what we are seeing here is that, as we mentioned, we see a good level of uncertainty in the market, which is expressed to us by our customers’ GMV volatility.
And looking at Q4, we saw stronger months and last strong months. And we continue to see that volatility going into 2024. And despite starting the year in a better position than the previous one, our ability to predict short-term outcomes is more reliable than making predictions for the entire year. Nevertheless, we maintain optimism about our capability to surpass market growth and achieve our profitability targets, and we reinforce our commitment to excellence in execution, regardless of the external circumstances. We are gaining market share, managing costs and expenses and expanding internationally. By staying focused on delivering outstanding results, we can emerge from this macro uncertainty as a stronger and more resilient company. So hopefully, this answers the first question.
On the second question, on number of customers. Although the number of customers stayed relatively flat this year versus last year on 2,600 customers, our number of stores increased by 4% to 3,500 stores. And most importantly, the number of customers that pay us more than $250,000 per year increased by 34% to 126 customers. These larger customers with more than $250,000 in revenue to us per year are the ones that moved the needle. They are the customers that are receiving most of our commercial efforts. And in 2023, they represented roughly half of our subscription revenue, and this customer group was responsible for roughly two-thirds of our subscription revenue growth. It’s also important to note that more than one-third of the increase in this customer group count came from net new customers.
And it’s also nice to see a meaningful number of customers growing and up tiering to now join this group. And finally, although with some volatility from year-to-year, we continue to see our annual revenue churn in the mid-single-digit percentages, an attractive rate for e-commerce, enterprise software-as-a-service solution.
Marcelo Santos: Very comprehensive. Thank you.
Operator: We’ll go to our next question from Clarke Jeffries of Piper Sandler.
Clarke Jeffries: Hello. Thank you for taking the question. Two for Riccardo, great to see that the operating margin from the existing store front, I think that’s a pretty impressive number in terms of expansion year-over-year. I think we’ve talked before about a longer-term ambition of being a Rule of 40 company. I would expect that, that existing store margin would continue to trend higher. But any way to think about the shape of the curve for further improvement from here? I mean, would it may not be right to assume that it will be as pronounced in 2024 in terms of the margin improvement, but we’ll be steadily moving to an accretive margin to the corporate number from existing stores? And then one follow-up.
Ricardo Camatta Sodré: Yes. Hi, Clarke. Great question. On the existing store margin, we update this every year, right? So you can see that in 2023, we reached roughly 35% operating income margin for the existing stores coming from low 20s in 2022. So a meaningful improvement there. And then if you think about that P&L and the rule of 40 of that P&L, right, the net limitation is the growth of that P&L, right? And it was 107, so 7% growth. So on a rule of 40 basis, the existing stores, it was like 42%, right, for the year. So it’s nice to see that. Now as I said in the prepared remarks, we adjusted the company for the level of the demand that we are seeing and also for the project that we are working on and the G&A expenses.
So we see this company as well adjusted on the existing store side. So improvements from here, it’s more on the operational level, operational leverage type of movement than any significant movement that we saw year-over-year from 2022 to 2023. So nothing as meaningful that we are indicating for now on this. But it’s nice to see this at a good level as it shows the potential for the company down the road, right? Hopefully, that answers the question.
Clarke Jeffries: Yes. That makes a lot of sense. And then just in terms of the composition of growth this year, it seems like you were able to have above 20% FX-neutral growth in all of Latam accretive to that and rest of world. In the coming year, would you say it’s fair to say that you would have expected 20% plus FX neutral growth in the coming year in Latam, if it wasn’t for the devaluation currency effects? Or any way to think about the sort of sustainable growth threshold for LatAm as a 90% mix of the business? Thank you.
Ricardo Camatta Sodré: So Latin America continues to be a region with incredible potential for VTEX. While we are — we hold a leadership position in the region, it is still different from the stronghold we have in Brazil. So furthermore, we still see an opportunity to advance the ecosystem maturity towards the level we currently see in Brazil to the entire region of Latam. We remain committed to executing our nurturing strategy and reinforcing our regional ecosystem in the whole region. So countries as Mexico are in a less advanced stage comparing to Brazil, comparing to Colombia, as it was one of the last markets we entered in Latin America. So we see great opportunity to enhance our network in Mexico. However, it is experiencing healthy growth as we are excited about the opportunity.
It represents for VTEX. There are many volatility in Latam as well. So we are cautious, optimistic with the Latam expansion. We see great opportunities in B2B, great opportunities in the penetration of e-commerce, but we need to be cautiously optimistic about it. We already have notable success histories in Mexico, for example, Elektra, Chedraui, Nadro, and we persist to acquiring more half reference cases as we speak. As you can see, our results in 2023, Brazil and Latam grew in a similar basis. So Brazil is supported by strong ecosystem and high win rates and attention supported by large opportunity with big market shares still to be developed. So the foundations, if I can summary my answer, the foundations for growth in LatAm will come from the e-commerce penetration and our positioning as the leader in the region and also the B2B demand that is increasing consistently in the region, creating a growth opportunity as well.
It is also increasing in US and Europe. So B2B is summing up on the foundations for the future growth.
Clarke Jeffries: Perfect. Thank you very much.
Operator: And we’ll move next to Matt Schrage at KeyBank Capital Markets.
Maddie Schrage: Hey, guys, and thanks for taking my question. My first one is, we saw a healthy step-up in NRR this year. Just wondering if you have kind of like a long-term sustainable NRR rate that may be targeted? And then my second question is on the pricing environment. Wondering if you’ve seen any changes in pricing in LatAm, but also as you’re entering the US market, we saw Shopify take up pricing. I’m just wondering if that might create some opportunity for you guys as well? Thanks.
Ricardo Camatta Sodré: Yeah. Hi. Hi Maddie thanks for the question. I can start with the first one on the net revenue retention, and then I’ll pass it over to Mariano on pricing. So the mental model for our net revenue retention is basically going back to our revenue model, roughly one-third of our revenue comes from a Fixed Fee and should turn from a Take Rate. So roughly two-thirds of our same-store sales growth turns into revenue growth for us. And then if you take out the churn, you kind of get to the net revenue retention. Now if you do this math with the 2023 numbers, you get to slightly below to the net revenue retention that we had for the year. And that’s because, as I mentioned in the prepared remarks, we had the inflation adjustment on our fixed fee portion of the revenue.
And two, and most importantly, we have sold some of our existing customers with sales Pick and Pack expansions hub, integrating the physical stores into the VTEX platform and so on, so they can do the fulfillment from the store and that helped slightly on our net revenue retention performance. Now, thinking further out, it depends on the overall e-commerce growth and our potential overperformance versus the overall market growth as historically we have overperformed, as Geraldo mentioned, but it’s hard for us to pinpoint a specific number here, given that it depends on how this will evolve going forward. Now, if we look historically, we have been at 105 for the past two years, and then last year, 107. Pre-pandemic, this was more in the 110 type of range as e-commerce was still in the initial phases of penetration.
Now, we still see a good potential of growth in the penetration of e-commerce. Latin America is roughly in the 10%, 11%, 12% penetration, depending on the source and then the U.S. is 18% to 20%, depending on the source. So, we still see a good level of potential incremental penetration to happen and e-commerce growth once the macro uncertainty stabilizes, So I think that’s it on the net revenue retention and then on pricing, I’ll pass it over to you, Mariano.
Geraldo Thomaz Jr.: I can take it. This is Geraldo speaking. Thank you for the question. Let me — I will do a quick recap about our pricing strategy. And we are here to have long-term relationships with our customers. We want predictable pricing with our customers to do a business model on top of our price and we tend to be healthy using us with no total cost of ownership. And this is the org of us having a price that is a take rate. I think this is very fair. And we note this pricing so that the customer pays less take rate as they grow. This is a pricing strategy that we use since 2012, very stable price. Ecosystem knows about the price already and people trust us because of this price structure and the stability of our pricing.
So our price in general — and our price in general like every other eCommerce platform, are kind of the same across the globe because other platforms also charged almost the same, we charge mostly the same as well. You mentioned that Shopify is charging more for the US customers. I would say we saw that. We saw this happening. Shopify deals with the different kind of customers than we did — than we do. We deal with more enterprise customers to Shopify change in pricing, and doesn’t affect our positioning and competitiveness that much. Naturally, if they increase their pricing, it gives us some room to eventually in the low-term future increase hours as well. But we do believe that the stability in the price is important for us. But we also do some upselling.
Most of the upselling that we do naturally is on the take rate. We have big incentives to make our customers grow their GMV, and if they grow, we will upsell them. But recently, we also — because of our R&D effort, we are developing other kind of add-ons to the platform, so that add-on a new product so that we can upsell our customers. The biggest one of them is B2B. We can upsell our customers for the B2B scenario. And this is a very good upsell with them that affects — it doesn’t affect the NRR because it’s a different store usually, but we do also have the live shopping. We charge a little bit of fixed rate when they are delivering from store. We charge when they’re using the pick-and-pack app. We usually charge an extra fee when our customer use a feature that is not broadly available among other e-commerce platforms.
So, this is — and this is how we will also contribute to a better NRR in the medium and long-term, selling other products that we develop using our R&D investments. But most of our NRR will continue to come from us helping growing the GMV of our customers.
Maddie Schrage: Thank you for the thorough response, guys. Appreciate it.
Operator: And there are no further questions at this time. I would like to turn the conference over to Geraldo for closing remarks.
Geraldo Thomaz Jr.: Look ahead to 2024, our dedication to drive innovation remains stronger than ever. The tax remains steadfast in supporting our customer strategic commerce investments, fostering growth and boosting profitability. We’re thrilled to serve as the backbone for connected commerce dedicated to empowering our customers in achieving their growth ambition. Latin America’s Internet penetration continues to offer a promising growth opportunity. We will be focused on strengthening our regional leadership and expanding our presence in the US and Europe and unlocking further growth for detect. We’re thrilled by the progress we’ve made in our global expansion this year, but this journey is far follower. We’re truly optimistic about the promising opportunities ahead.
This year, March just the beginning of what we envision as a transformative journey for VTEX. Thank you very much for being part of this ongoing journey with us. We look forward to keep you updated at our next earnings call. Have a wonderful week.
Operator: And this concludes today’s conference call. Thank you for your participation. You may now disconnect.
