Global-E Online Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 21, 2024

There are 18 speakers on the call.

Operator

Welcome to the Globalea 4th Quarter and Full Year 2023 Earnings Announcement Conference Call. This call is being simultaneously webcast on the company's website in the Investor Relations section under News and Events. For opening remarks and introductions, I will now turn the call over to Erica Mannion at Sapphire Investor Relations. Please go ahead.

Speaker 1

Thank you, and good morning. With me today from Global E are Amir Shloket, Co Founder and Chief Executive Officer Ofer Khorin, Chief Financial Officer and Nir Debi, Co Founder and President. Amir will begin with a review of the business results for the Q4 and full year of 2023. Ofa will then review the financial results for the Q4 and full year of 2023, followed by the company's outlook for the Q1 full year of 2024. We will then open the call for questions.

Speaker 1

Certain statements we make today may constitute forward looking statements and information within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Safe Harbor provisions of the U. S. Private Securities Litigation Reform Act of 1995 that relate expectations and views of future events. These forward looking statements are subject to risks, uncertainties and assumptions, some of which are beyond our control. In addition, these forward looking statements reflect our current views with respect to future events and are not a guarantee of future performance.

Speaker 1

Actual outcomes may differ materially from the information contained in the forward looking statements as a result of a number of factors, including those set forth in the section titled Risk Factors in our prospectus filed with the SEC on September 13, 2021, and other documents filed with or furnished to the SEC. These statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this call. You should not put undue reliance on any forward looking statements. Although we believe that the expectations reflected in the forward looking statements are reasonable, we cannot guarantee that future results, level of activity, performance and events and circumstances reflected in the forward looking statements will be achieved or will occur. Except as required by applicable law, we make no obligation to update or revise publicly any forward looking statements, whether as a result of new information, future events or otherwise after the date on which the statements are made or to reflect the occurrence of unanticipated events.

Speaker 1

Please refer to our press release dated February 21, 2024 for additional information. In addition, certain metrics we will discuss today are non GAAP metrics. The presentation of this financial information is not intended to be considered in isolation or as a substitute for or superior to financial information prepared presented in accordance with GAAP. We use these non GAAP financial measures for financial and operational decision making and as a means to evaluate period to period comparisons. We believe that these measures provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to key metrics used by management in its financial and operating decision making.

Speaker 1

For more information on the non GAAP financial measures, please see the reconciliation table provided in our press release dated February 21, 2024. Throughout this call, we provide a number of key performance indicators used by our management and often used by competitors in our industry. These and other key performance indicators are discussed in more detail in our press release dated February 21, 2024. I will now turn the call over to Amir, Co Founder and CEO.

Speaker 2

Thank you, Erica, and welcome everyone to our 4th quarter and full year 2023 earnings call. 2023 was a record breaking year for us here at Globally and it was brought to a great close by 4th quarter which was our strongest quarter ever, crossing for the first time a milestone of over $1,000,000,000 of GMV within a single quarter. We finished Q4 with a record $1,190,000,000 in GMV, up 42% year on year and record revenues of over $185,000,000 up 33% year on year, supported by the strong performance of our merchants over the holiday sales period, including Black Friday and Cyber Monday. The adjusted gross profit margin for Q4 was 42.7%, up 140 basis points from the same quarter of last year. And our adjusted EBITDA margin was 19% or $35,200,000 our highest ever in a single quarter, reflecting nearly 62% growth compared to the same quarter of last year.

Speaker 2

Such increased profitability yielded an accelerated cash generation with the business generating $93,500,000 in operational cash flows in Q4. Looking at the full year of 2023, GMV came in at close to $3,560,000,000 an increase of over 45% year on year and revenue for the full year came in at $570,000,000 an increase of over 39% year on year. Annual adjusted gross profit increased even faster growing by almost 46% from 2022 reaching roughly $245,000,000 and representing an adjusted gross profit margin of 42.9% for the full year, an increase of nearly 190 basis points year on year. Finally, adjusted EBITDA for the full year was $92,700,000 up more than 90% compared to $48,700,000 last year, representing our continued commitment to delivering durable yet profitable growth, thanks to the high efficiencies and tight cost controls. Last but not least, we finished the year with more than $300,000,000 of cash and cash equivalents on our balance sheet, providing a solid foundation for the continuation of our fast and profitable growth trajectory and for the realization of our strategic plans going forward.

Speaker 2

As we reflect on these strong annual financial results and the substantial growth we managed to generate, It is important to remember that these were achieved while we faced a challenging and at times volatile macroeconomic environment, further exuberated by the challenges presented by the ongoing war in Ukraine as well as the aftermath of the horrific Hamas terrorist attack on October 7. Our hearts go out to all those who were affected by these events and we continue to provide all possible support to our team members and their families in both Israel and Ukraine. As such, we could not be more proud of our incredible team members across all our offices and locations worldwide for having navigated all these challenges so successfully and could not be more thankful to the thousands of merchants who entrust us with their business every hour of every day. Beyond the strong financial growth and figures, 2023, I'm sorry, was also another pivotal year for us in terms of the substantial leaps we took forward along all our long term strategic pillars as we continue to enrich and develop our various offerings. 1st and foremost, we continue to onboard and add many new brands across the globe to the large portfolio of enterprise brands we work with, as global direct to consumer online trading continues to be a strategic priority for brands worldwide.

Speaker 2

We are not just the leader in global direct to consumer e commerce. We're also the only true global player in the market. We already support 31 different outbound markets. And last year alone, we actively shipped packages to 224 distinct destination countries and territories around the world. We quite literally enable our merchants to sell to anyone in nearly every place on earth.

Speaker 2

As an example of this continued expansion, just this last quarter, we launched with Glossier, 11 by Venus Williams and Perfect Moment in the U. S, with Phantom Wallet in Canada, with Whistles and the Harry Potter store by Warner Brothers in the UK, with Moulin L'Oreal brand, Jean Paul Gouthier and Ledger, a leading crypto wallet brand all in France with Etow and Modes in Italy with Louavis in the Netherlands with Jetset in Germany, with Ideal in Belgium, with Zennerobe in Australia, with Sault Murphy and Abeka Moore in Hong Kong and with Retouch in Japan, just to name a few of the many brands that went live with us in the last quarter of 2023. During Q4, we also went live with stellar equipment out of Sweden as well as with Gotze Queen, our first Polish merchant, further extending our geographic outreach. Besides adding new merchants, we also continue to expand the scope of our business with existing merchants and merchant groups. Just this last quarter, Adidas, Noble and the Kupos all extended the list of markets operated through globally.

Speaker 2

Triangle Swimwear went live with an additional brand called Casa Del Mar and Kylie Jenner went live with another of her brands, the fashion brand KHY. From a product perspective, looking back at 2023, we introduced many new features and key developments into our enterprise platform. Those included improved support for pre orders via tokenization, support for cryptocurrency payments via our new integration of crypto.com, support for orders which include items fulfilled from different countries as part of a single order, support for several new countries in our multi local offering, integrations into new platforms such as Wix.com and much more. Alongside these, we continue to work towards the launch of our enhanced demand generation offering based on the assets and capabilities we acquired as part of the Borderfree transaction and expect the 1st major parts of this exciting new offering to be released towards the second half of the year. Moreover, as we have discussed in earlier quarters, during 2023, we also invested considerable resources in harnessing the new and transformative technology of generative AI to enhance the quality and efficiency of various aspects of our business.

Speaker 2

The most recent example of such a successful implementation comes in the form of our shopper facing customer services. After several months of beta testing and before the recent peak trading season, we introduced into production our new automated customer service chatbot based on OpenAI's Chat GPT technology, which has been securely connected to our systems and databases, thereby enabling many of our shoppers to receive highly accurate answers to their support queries in real time without a need for human intervention. We believe this is a manifestation of the tremendous business value such technologies can unlock over the next few years. Another area in which we have made great progress during 2023 was our strategic relationship with Shopify, the agreement for which was renewed for another year during Q4. On the enterprise side, we have all by finalized the migration of all our legacy installed base onto the new native integration.

Speaker 2

In addition, our support for Shopify's new checkout extensibility feature has gone into general availability since January 2024. With a significant number of merchants already running on this new and improved checkout with globally cross border capabilities seamlessly embedded within it. On the Shopify Markets Pro side, which went into general availability in the U. S. In September, we continue to see an encouraging adoption rate with more and more merchants every week effortlessly switching it on and going global.

Speaker 2

Between these positive early signs and the exciting roadmap of new features and capabilities we are working on together with Shopify, we believe that the innovative Shopify Markets Pro offering has the potential to grow significantly over the next few years. In summary, we are extremely pleased with our achievements and results for 2023 and we are equally excited towards the many opportunities for growth that await us in 2024 onwards across all our strategic growth pillars. As Ofar will elaborate on when he presents our guidance for 2024, we expect our strong growth momentum to continue this year with around 32% of annual growth expected in both GMV and revenues. And with that, I will hand it over to Ofer to dive deeper into our quarterly and annual financial results as well as our outlook for Q1 and for the full year of 2024.

Speaker 3

Thank you, Amir, and thanks everyone for joining us today for our earnings call. As Amir stated, we are indeed very pleased with our Q4 and full year 2023 results. Q4 was a strong quarter of fast growth and robust cash generation as we continue to execute and push forward both top line growth and scale efficiencies. I'd like to point out again that in addition to our GAAP results, I'll also be discussing certain non GAAP results. Our GAAP financial results along with the reconciliation between GAAP and non GAAP results can be found in our earnings release.

Speaker 3

As Amir mentioned at the beginning of this call, we have experienced rapid growth of GMV in Q4 as we generated $1,190,000,000 of GMV, an increase of 42% year over year. We benefit from the secular trend of growth in e commerce, which continues to take share from brick and mortar retail and from the increased focus of merchants on their direct to consumer channels. However, it is important to note that due to the continued recessionary concerns and the sensitive macroeconomic and geopolitical situation in many of the world's largest economies, in the short term, there is still relatively high uncertainty regarding consumer demand, which remains volatile. In Q4, we generated total revenues of $185,400,000 up 33% year over year. Service fee revenues were $89,900,000 up 43% and fulfillment services revenue were up 24% to $95,500,000 The higher growth of service fee revenue compared to fulfillment services revenue was mainly driven by the higher share of our multi local service with high performance of the largest multi local merchants in Q4.

Speaker 3

Throughout 2023, our existing merchant base continued to stay and to grow with us as reflected in our annual NDR rate of 127% and GDR rate of over 97%. Note that our NDR in 2023 excludes border free volumes as border free merchants traded with us only for part of 2022. Moving down the P and L, growth in non GAAP gross profit continues to outpace revenue growth. In Q4, non GAAP gross profit was $79,100,000 up 37% year over year, representing a gross margin of 42.7% compared to 41.3% in the same period last year, driven by the higher share of service fee revenue. GAAP gross profit was $76,300,000 representing a margin of 41.2%.

Speaker 3

Moving on to operational expenses, we continue to invest in the development and enhancement of our platform to further strengthen our offering. R and D expense in Q4, excluding stock based compensation, was $18,200,000 or 9.8 percent of revenue compared to $17,800,000 or 12.8% in the same period last year. Total R and D spend in Q4 was $25,200,000 We also continue to invest in sales and marketing to enhance our pipeline while maintaining efficiencies. Sales and marketing expense excluding Shopify related amortization expenses, stock based compensation and acquisition related intangibles amortization was $17,800,000 or 9.6 percent of revenue compared to $9,900,000 or 7.1 percent of revenue in the same period last year. Shopify warrant related amortization expense was $37,400,000 Total sales and marketing expenses for the quarter was $58,800,000 General and administrative expenses excluding stock based compensation, acquisition related expenses and acquisition related contingent consideration was $8,600,000 or 4.6 percent of revenue compared to $8,900,000 or 6.4 percent of revenue in the same period last year.

Speaker 3

Total G and A spend in Q4 was $15,500,000 Adjusted EBITDA totaled $35,200,000 representing a 19% adjusted EBITDA margin increasing from $21,800,000 or 15.6 percent margin in the same period last year. Net loss was $22,100,000 compared to a net loss of $28,500,000 in the year ago period, driven mainly by the amortization expenses related to the Shopify warrants and to transaction related intangibles. Switching gears and turning to the balance sheet and cash flow statements, we ended 2023 with 3 $17,000,000 in cash and cash equivalents, including short term deposits and marketable securities. Cash generation has accelerated with operating cash flow in the quarter at $93,500,000 compared to an operating cash flow of $57,300,000 a year ago, driven mainly by adjusted EBITDA growth and working capital dynamics. Moving to our financial outlook and guidance for 2024, despite the prevailing macro related uncertainties, we expect 2024 to be another year of fast growth and improved adjusted EBITDA for globally.

Speaker 3

For Q1, twenty twenty four, we're expecting GMV to be in the range of $875,000,000 to $915,000,000 At the midpoint of the range this represents a growth rate of 27% versus Q1 of 2023. We expect Q1 revenue to be in the range of $138,500,000 to $145,000,000 at the midpoint of the range this represents a growth rate of 21% versus Q1 of 2023. For adjusted EBITDA, we're expecting a profit in the range of $16,000,000 to $20,000,000 For the full year of 2024, we anticipate GMV to be in the range of $4,590,000,000 to $4,830,000,000 representing over 32% annual growth at the midpoint of the range. Revenue is expected to be in the range of $731,000,000 to $771,000,000 representing a growth rate of nearly 32% at the midpoint of the range, as we expect overall take rates to stabilize throughout the year. For thanks to increased efficiencies and economies of scale.

Speaker 3

As reflected in the guidance, we expect our fast growth to continue in 2024 with around 32% top line growth alongside improved adjusted EBITDA margin. The slower top line growth we expect in Q1 is a result of a number of factors. 1st is the lower contribution for new merchants as large merchants we have signed are expected to launch only in the second half of the year. 2nd is the fact that we expect the trading that still exists on the legacy Borderfree platform to weigh on our growth in the first half of twenty twenty four as a high share of its remaining GMV generated by traditional retailers, especially department stores, which are facing challenges with many even experiencing declining sales trends. We believe we will see improvement once we migrate many of these merchants to the Globally platform.

Speaker 3

As well as some softness we observed in trading volumes of consumers around the globe during February. We expect our overall growth to accelerate in the remaining of the year, driven by a ramp in Shopify Markets Pro, planned launches of large merchants in the second half of the year and a lower impact from Borderfree on a year on year comparison. In conclusion, we continue to enhance our capabilities to support merchants worldwide in their direct to consumer journey. The opportunity in front of us is immense and we are well positioned to capture it. We believe this will enable us to combine durable top line growth and cash generation in the coming years.

Speaker 3

And with that, Amir, Nir and I are happy to take any of your

Operator

to limit themselves to one question with one follow-up. Our first question comes from Brian Peterson from Raymond James. Please proceed.

Speaker 4

Hi, guys. Thanks for taking the questions. Softening in February. Would love to understand maybe how things progressed from December to January. Is there any regional trends that you could

Speaker 3

Yes. So Brian, thank you for the question. It's Oscar. I think that as we mentioned, we have seen increased volatility in consumer demand in the past year and especially in the last few months. And as we already communicated in the previous quarter, we saw a drop in September October, a relatively steep drop in same store sales and a very nice recovery towards the end of October with a very, very strong peak and excellent results around Black Friday, Cyber Monday weekend.

Speaker 3

Then during December, this continued with a lighter end to the year. And as I just mentioned, things continue to be volatile and we do see a lot of shifts in consumer demand. And since the beginning of February, we have seen some softness in consumer sentiment again around the globe and weakness in some of the large economies. So this has been with us only for the last 2 or 3 weeks, but still important to note.

Speaker 4

I appreciate the perspective there. It's obviously that the market's growth and profit. Is there any way to give investors some help on how to think about the contribution in 2024 or any percentage of your investment share there? Thank you.

Speaker 2

It's Brian, it's a little choppy or your line is a little choppy. Could you repeat the contribution of what were you asking about exactly?

Speaker 4

Yes, sorry about that. Hopefully this is better. No, the revenue in Shopify Markets Pro is impressive so far, is there any perspective that you gave in terms of expectations in 2024?

Speaker 2

Yes. So as we mentioned, we're very happy with the progress that we've made in Shopify and Markets Pro both from a technical perspective, the developments we've deployed and that we're working on together with Shopify and also the rate of adoption. It is still in early days, but we believe that over the next quarters years, it can grow into a significant business.

Operator

Our next question comes from Will Nance from Goldman Sachs. Please proceed.

Speaker 5

Hey, guys. Appreciate you taking the questions. So just I guess another question on I think you mentioned volatile consumer trends over the past several months and maybe more recently in February. I guess could you maybe talk about the approach that you took to guidance? I mean, obviously, the color on 1Q is very helpful.

Speaker 5

It sounds like there is a ramp baked into the guidance for the remainder of the year. Some of that Shopify, just kind of color on what you're assuming for the remainder of the year as it relates to the macro? And then if we look back over the last couple of years, there's been several kind of exogenous events that have less outperformance than maybe you guys would have hoped. Just wondering if you could contextualize this guidance in terms of just how much kind of macro weakness over the course of the year the guidance can absorb given the continued levels of uncertainty?

Speaker 3

Sure, Will. Thank you for the question.

Speaker 6

So since there

Speaker 3

is a high level of uncertainty, we have not assumed an improvement in macro conditions throughout the year. However, we also haven't looked at the lowest point. As I mentioned, we saw some weakness since the beginning of February. So we sort of look at the average since the beginning of the year, not taking into account the lowest point, but also not taking into account any improvement in macro conditions as again the level of uncertainty is still high and we have no control of that.

Speaker 5

Got it. Makes sense. And then I think you called out Borderfree. Just wondering if you could just maybe help us size in terms of what's the contribution to numbers today? And maybe roughly what are you kind of baking in for the remainder of the year for that business?

Speaker 3

Yes. So in terms of volumes today, volume border free, sorry, is approximately 5% of the volumes. It's sort of a high level number. It is decreasing in share over time, 1, because we are not onboarding any new merchants onto Border Free. And 2, as we mentioned, the type of merchants that we see on Border Free legacy, mainly U.

Speaker 3

S. Legacy merchants, a lot of department stores. And since they are sort of facing their own challenges with their business model, it has an impact on their sales as well. So this is decreasing over

Speaker 5

time. Got it. That's helpful. Sorry, just the clarification on the expectations for the remainder of the year. Are you guys assuming that the same store sales there remain negative for the remainder of the year?

Speaker 3

Yes, yes, we do. However, I think we do think that mainly in the second half as we migrate those clients, we will see a one off increase that will stay with us, but due to the higher conversion rates that we typically see on the Global E platform. So we do foresee an improvement. However, it will be gradual as they would migrate 1 by 1 and since those are large legacy merchants take some time. So we do expect to see some improvement, but it will be gradual.

Speaker 5

Got it. Thanks for taking the questions guys.

Speaker 2

Thanks, Will.

Operator

Our next question comes from Samad Samana from Jefferies. Please proceed.

Speaker 7

Hey, good morning and thanks for taking my questions. Maybe first just Ofer, just on the what's embedded in the guidance around the net dollar retention, $127,000,000 was a strong year 2023. Just as I think about the low 30s growth guidance, what are you thinking net dollar retention will look like in 2024?

Speaker 3

So we think that net dollar retention in 2024 will be slightly lower compared to 2023. As we mentioned, we do see sort of uncertainty around macro conditions, consumer sentiment is very volatile. And on top of that, also Board of Free will come in and sort of weigh a bit on our NDR. So we do expect it to be slightly lower than what we have seen in 2023.

Speaker 7

Understood. And then maybe just on Shopify Markets Pro, this might be more for a year on year, but what are you seeing as far as in the initial customers that are using it? Now it's been, let's call it 4, 5 months, maybe average annual GMV of the typical Shopify Market Pro merchant that you're seeing. And then related au fare, should we think about that being like a $200,000,000 or $300,000,000 GMV contribution in 2024? Just anything that we kind of peg against?

Speaker 6

Hi, Samad, it's Neil. Thanks for the questions. We have seen initial positive signs for adoption post S and P general availability in the U. S, Coupled with continued development of the solution capabilities that is still ongoing, we expect the adoption rate to grow gradually throughout the year. At this stage, we don't guide specifically for Shopify Markets Pro.

Speaker 6

However, I don't think your numbers generally are far out.

Speaker 7

Great. Thanks again and talk soon.

Speaker 2

Thanks a lot.

Operator

Our next question comes from Andrew Bosch from Wells Fargo. Please proceed.

Speaker 8

Hey, thanks for taking the question. Just wanted to get a sense of your expectations for the gross margins as we progress through 2024. I mean with the fulfillment dynamics in the 4th quarter, it seems reasonable that gross profit could outpace revenue. So any thoughts around that would be helpful.

Speaker 3

So we are very pleased with our gross margin improvement over time as we surpassed our 40% target earlier than we expected. And moving forward, we expect relatively stable gross margins as we continue to prioritize growth over profitability. However, we do see operational leverage potential that will enable us to improve our adjusted EBITDA margins.

Speaker 9

Got it.

Speaker 8

Thanks. And then just looking back at the Q4, I mean, you had a really strong Black Friday, Cyber Monday press release of 53% versus the 44% for the full quarter. So maybe if you could just give us a sense on like what was about your platform that drove that outsized strength and maybe a better sense of the shape of trends throughout the quarter as we can understand it?

Speaker 3

Sure. So, yes, as you mentioned, we did experience a strong quarter generally and a very strong big trading season with the highest growth around Black Friday and Cyber Monday weekend. Some of it may be attributed to consumers preference to discount shopping. So this may had an impact. And I think that on top of that, there were there was very strong results for some of our large merchants.

Speaker 3

So that also contributed for them first, but for us as a derivative as well. Got it. Thank

Operator

you. Our next question comes from Kunal Badukar from UBS. Please proceed.

Speaker 10

Hi. Thanks for taking the questions. One on the revenue guide. So your revenue guide for 1Q implies a take rate decline. But then when we look at the full year guide for 2024, that kind of suggests that the take rate should improve in the back half.

Speaker 10

So how much of the improvement in the take rate are you baking in assumptions for growth from Shopify Markets Pro, which has probably had a higher take rate?

Speaker 3

Yes. So I thank you Kunal for the question. I think the answer the main part of the answer relies actually in 2023, because we started 2020 3 with a much higher fulfillment take rate. The overall take rate in Q1 last year was 16.7%. And over the year as the share of multi local and mainly our large multi local merchants grew because we have launched a few and expanded our activities with others.

Speaker 3

We've seen a reduction in overall take rate mainly not mainly just out of the fulfillment take rate. And basically as we mentioned in the previous quarter, we expect that to balance next year. So we expect to see a much more balanced year. We expect it to stabilize at around the overall take rate around 16% as we do not expect the share of those merchants to grow significantly because the merchants that we see currently in our pipeline, the large ones are not multi local

Speaker 2

merchants. So

Speaker 3

we expect to strike a balance.

Speaker 10

Thank you. And then you mentioned weakness in February. Can you talk about trends by like maybe vertical and geography like you did last time in terms of what's luxury doing versus what's apparel doing? And then last time you talked about weakness in Europe, inbound. So can you talk a bit about that, please?

Speaker 6

Yes. Thank you for your question. It's Neil. This I would say that in February, we don't see vertical that is down. However, on geographies, we do see slowdowns around different parts of the world.

Speaker 6

Our inbound into the U. S. Has slowed down a bit. Same store sales not growing as fast as they did in January or previous year. Same goes into the UK that officially went into recession just earlier this year.

Speaker 6

And same, we've seen some slowness in APAC. So it's kind of a global slowdown that we see. It's not specific to a certain territory or a vertical.

Speaker 10

Got it. Thank you so much.

Operator

Our next question comes from Scott Berg from Needham and Company. Please proceed.

Speaker 11

Hi, everyone. Nice quarter. Thanks for taking my questions here. I just wanted to touch on the guidance for 2024 a little bit. Your I think as you all noted, your service fee revenue has been growing meaningfully faster than your than the rest of the revenues, but even it's been growing even faster recently than historical trends.

Speaker 11

Do you still see the breakdown in growth between the 2 revenue segments kind of having that I guess growth difference there? Or as was just noted a moment ago with some of the larger merchants that you have in the pipelines, do you expect that to maybe moderate the growth rates more balanced between the

Speaker 9

two lines? Sure. Thank you

Speaker 3

for the question. We do expect to see a more balanced growth in 2024. As I mentioned, 2023 was characterized by strong multi local growth, which had an impact on the mix as we typically don't have any fulfillment revenue or very little fulfillment revenue in Multilocal. And we expect 24 to be much more balanced. As I mentioned, the larger merchants that we see that have signed or we see in the pipeline are not multi local merchants.

Speaker 3

And we also have a few new initiatives around fulfillment services. So we do expect this year to be much more balanced in terms of revenue pillars growth.

Speaker 11

Got it. Helpful. And then from a follow-up perspective, congrats on fulfilling into 200 countries. By my math, that probably means you're only not fulfilling in the Antarctica right now, maybe that's a future goal. But as I think about the investments required for you to expand your distribution capabilities, Given the number of countries that you're in that you're already in, are those investments largely kind of done at this point, do you think?

Speaker 11

And I guess the additional needs there are very more incremental based on volumes? Or will there be any sort of step up in investments maybe in the next couple of years to help you kind of penetrate some of those markets more?

Speaker 2

Hi. Antarctica is not does not have any citizens in it, so probably not going to ship there anytime soon, but who knows maybe. But to your question, in terms of the outbound in terms of the inbound markets, those don't require any specific investments from us. It's the outbound markets that sometimes require some investment in them. But I would say it's by now as we mentioned 31 different outbound markets, the marginal investment that is required from us for opening an additional market is already quite low.

Speaker 2

We are well trained and well seasoned in doing it. And just as a reminder, in any case, we're not talking about any capital investments. This is very capitalized and it mostly has to do with sometimes we need a local entity. It requires some local contracts, but it's not a lot more than that. So we don't expect any massive investments in terms of the additional Marigalba markets that we'll be opening in the future.

Speaker 4

Excellent. Thanks for taking my questions.

Speaker 2

Thanks, Tom.

Operator

Our next question comes from Koji Ikeda from Bank of America. Please proceed.

Speaker 12

Hey guys, thanks for taking the questions. I wanted to ask a question on the Q1 GMV, just digging into that a little bit more. Considering it's a much heavier sequential growth step down assumption this year versus last year, looks like it's about down 25% versus down 21% when first guiding of 1Q 'twenty three. So can you dig into a little bit about what's causing that higher level of GMV step down? That all uncertainty with the macro and the consumer?

Speaker 12

Are there any customers that you now have that have outsized 4Q holiday seasonality that is driving this outlook? I mean, any sort of color there would be fine. Amazing. Thank you.

Speaker 3

Sure. Thank you for the question. Well, I'll start from the top. The full year of 2024, we expect to see continued momentum of high growth of over 30% for both GMV revenue. And that is supported by our strong pipeline of large merchants that are expected to launch in the back half of the year as well as the ramp up of Shopify Markets Pro over the course of the year.

Speaker 3

Specifically for Q1, indeed the growth we expect is lower and that is there are a few drivers behind that. The first one is less contribution from new merchants. As the large merchants signed or the ones that are towards the end of the pipeline are expected to launch later in the year, mainly in the second half of the year. So we see we are expecting and planning very nice launches, but the large ones in clients mainly the department stores and we expect this to gradually improve once we complete the migration of these clients to the Global E platform. And 3, as we mentioned, we continue to see high volatility in consumer sentiment as we've seen between Q2 and Q3 last year and then Q3 and Q4.

Speaker 3

And now again in February, as we mentioned, we saw a decline in consumer demand. So this will impact Q1 as well. So those are the main drivers.

Operator

Our next question comes from Brent Bracelin from Piper Sandler. Please proceed.

Speaker 13

Good morning. Great to see a strong close to the year. Amir, 97% gross retention model here suggests the product remains sticky, low churn. I get you can't control consumer spending, that clearly is impacting the growth ad run this year. What are the growth levers that are in your control that you can kind of lean more into this year outside of the macro?

Speaker 2

Hi, Brent. So absolutely, as you mentioned, dynamics remain very positive, although as we mentioned, it is expected to be another year of high uncertainty and high volatility from a macro perspective. But we continue to push across all the field from growth in the existing territories where we already operate to opening additional markets and additional territories. Of course, Shopify Markets Pro, which we mentioned a few times already on the call, is also expected to ramp up along the year and contribute further to our growth. And we are also working on value added services, specifically demand generation, that's going to kick in as we mentioned towards the back end of the year.

Speaker 2

It's probably not going to be accretive day 1, but over the longer period, we expect that to have an additional contribution for accelerating our

Speaker 9

growth.

Operator

Our next question comes from James Faucette from Morgan Stanley. Please proceed.

Speaker 9

Hi, thanks for the question. I want to ask just in terms of customer acquisition and that kind of thing. Wondering how trends have been evolving with respect to your inbound interest and conversion new merchant ads outside of Shopify. Just trying to get a sense for how we should be thinking about the percentage of new ads that are shop related versus those that aren't in the profile of the merchant partners?

Speaker 6

Hi, James, it's Neil. Thanks for the question. We have seen record bookings in 2023 and we are excited about the strength of the pipeline that is going to support our growth throughout 2024 and into 2025. Within it, we have a couple of very large merchants that are expected to launch with us in the back half of the year. Both of them are non Shopify and we expect the weight of those larger merchants, I would say, to balance out the rapid growth we expect to see in Shopify Markets Pros.

Speaker 6

So overall, when we look at 2024, we expect the mix of merchants to remain quite balanced with what we've seen in 2023.

Speaker 9

Got it. Thank you for that. And then I want to take a look at the

Operator

next question. Our next question comes from Mark Zugowicz from Benchmark Company. Please proceed.

Speaker 14

Excuse me. Thank you. Just a question on luxury specifically and just given the sort of habitual interest in discounts that you mentioned, curious how luxury performed in 4th quarter relative to the prior year and how that sort of transitioned into 1Q just given that I think that vertical is roughly 25 percent of your GMV? And then I had a quick follow-up.

Speaker 3

So in terms of luxury, it hasn't been a great year for luxury. However, there was an improvement towards the last few months of the year. So has improved compared to Q3, which was the lowest point for Luxury. And I think it's hovering around the same level since. So it's better than it was in the lowest point.

Speaker 3

It's not doing great, but pretty stable for now.

Operator

Our next question comes from Patrick Walravens from Citizens JMP. Please proceed.

Speaker 7

Great. Thank you. Amir, so are you still excited about demand gen over the sort of mid to longer term? And what's the dream there?

Speaker 2

Yes. So absolutely excited. I think it's going to be, I'd say, a very unique offering and it's going to take time to build it, but we strongly believe in the potential to both benefit our existing merchants and also to serve as another great benefit for new merchants that are coming on board and therefore help to accelerate our sales pipeline even further. So definitely as excited if not more than before. And in terms of the dream is basically to be able to offer a platform, a unique platform for demand generation, which is unlike any other offering that these merchants can have from digital agencies or other outside providers, but something that is fully aligned with their growth interest and fully integrated with the Globally offering and with each part of it strengthening the other, we think it's something that can be a game changer for some of these brands.

Operator

Our next question comes from Maddie Shree from KeyBanc Capital Markets. Please proceed.

Speaker 15

Hey guys and thanks for taking my question. I was just wondering if you could talk about if there's any differences in the size of merchants coming onto the platform. There's obviously Shopify Markets Pro coming in. And obviously, you guys mentioned this last quarter too, but we also saw Wix announce the partnership. So just wondering if you're expecting maybe some of the smaller merchants to come on the platform versus previous years?

Speaker 15

Thanks.

Speaker 6

Yes. So I think that, as you mentioned, on the one hand, we continue our growth with our enterprise clients and we continue to onboard them as we did in previous years. In parallel to it, we have seen a great adoption of Shopify Markets Pro with thousands of merchants launching on the platform. However, it's significantly smaller size than our average enterprise client. We've seen initial traction launching Wix merchants on the platform as well with an average size also smaller than our regular enterprise.

Speaker 6

However, both from Wix and from Shopify, we expect to see large numbers of clients that would actually will give another edge to our growth with a different profile of merchants between those smaller merchants and our enterprise platform client.

Operator

Our next question comes from Matt O'Neill from Feet Partners. Please proceed.

Speaker 16

Yes. Hi. Thanks everybody for taking my question. Much has been asked and answered here, but maybe I'll just dig in a little bit on the cost of revenue quickly. It came out a little bit higher than expected.

Speaker 16

I was just curious if you could remind us the more volatile components of the cost of revenue. I imagine the payment side is a little bit more predictable. But are there instances where you'll have certain fulfillment costs agreed with a merchant and then underlying spot prices will increase and that will squeeze that margin a little bit here and there. If you could just remind us like what you guys are looking at with respect to things like container prices, oil prices, etcetera, that may drive the more volatile components there? Thanks so much.

Speaker 3

Yes, sure. Thank you for the question. We don't have well, most of our cost of goods sold are obviously variable, but at the same time, the margin or the cost margin is pretty stable. Don't have a lot of volatility. The main volatility is derived from merchant mix.

Speaker 3

So for example, in Q4, as we mentioned, we had a relatively high share of a few large merchants and those typically have pricing that reflect their size. So this is just an example, but this is a mix impact that may have a certain impact on gross margins. But generally speaking, we our pricing with carriers are relatively stable. They do change from time to time, but typically we can pass through the course and it's not volatile over the year. It changes once in a long while, in a relatively long while.

Operator

Our final question comes from Matt Code from Autonomous Research. Please proceed.

Speaker 17

Hey, good afternoon guys. Thanks for taking the question. Just wanted to ask one clarifying question. You talked about Shopify Markets Pro contribution earlier in the contribution earlier in the call. Is that included in your guidance?

Speaker 3

Yes. It is. Yes, part of the business and it is included in the guidance.

Operator

This concludes our question and answer session. I would like to turn the floor back over to Amir Shlakat for closing comments.

Speaker 2

As we conclude another successful year here at Globally, I would like to thank all of you for joining us today, for your interest and for your questions and for your ongoing support on our exciting journey to transform the world of global direct to consumer e commerce. We're incredibly eager and excited as we continue on our path to take advantage of the countless opportunities that lie ahead of us and we invite you to continue taking an active part in this quest together with us. As such, we very much look forward to seeing all of you again on our future earnings calls. Until then, goodbye and take care.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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Key Takeaways

  • Global-e delivered a record Q4 with $1.19 billion in GMV (up 42% YoY), $185 million in revenue (up 33%), a 42.7% gross profit margin, and $35.2 million in adjusted EBITDA (19% margin), generating $93.5 million in operating cash flow.
  • For the full year 2023, GMV grew over 45% to $3.56 billion and revenue rose 39% to $570 million, with adjusted EBITDA more than doubling to $92.7 million and over $300 million in year-end cash.
  • Global-e expanded its enterprise platform by onboarding new brands (including Glossier, Harry Potter Store and Ledger) across 31 outbound markets and shipping to 224 countries, while enhancing features like crypto payments, pre-order tokenization and AI-powered customer support.
  • The company’s partnership with Shopify accelerated as all legacy clients migrated to the native integration, Shopify’s checkout extensibility went GA, and Shopify Markets Pro adoption continues to ramp, positioning it as a significant growth driver.
  • Looking ahead to 2024, Global-e expects ~32% annual growth in both GMV and revenue alongside improved adjusted EBITDA margins, with Q1 growth of 21–27% hampered by macro volatility, legacy Borderfree volumes and new merchant ramps.
AI Generated. May Contain Errors.
Earnings Conference Call
Global-E Online Q4 2023
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