All right. Well, good morning, everybody. Thanks for joining us for this session of the Morgan Stanley Fintech Conference. Very pleased to have both the CEO and Co-Founder, as well as CFO of Global-e. Here we have Amir, CEO and Co-Founder, and Ofer, CFO. Before we get started, I do have an important disclosure to read. Please see the Morgan Stanley Research Disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales rep. You know, Amir, we were just talking before we even walked up here, is that a lot of people aren't familiar with the Global-e story. I mean, it seems like me and my team, we spend a lot of time talking about the company and kind of your differentiation. As a result, we're always surprised when people are like: "Well, I have no idea what Global-e does.
Yeah.
Maybe for the benefit of everybody, can you give us an overview of the business and the value prop you're providing to merchants?
Absolutely. First of all, thank you for coming, and thank you for having us, James, and it's always great to be back. You're right. We have seen, I would say, maybe even more so over the last kind of couple of quarters, more and more kind of new interests. I agree, it's. We have a fairly unique business model, and it takes.
Mm.
time and effort to understand it. I think once you, once you dive in as an investor, you probably realize the strengths of it and the future potential. Just as a quick overview for the sake of those that are new to the story, in a nutshell, what we do at Global-e is provide a full end-to-end service to brands and merchants in general from all around the world, that helps them to sell internationally, direct-to-consumer, cross-border. We do that by providing essentially four layers of service. One is just a full set of capabilities that integrate straight into their existing website, into their domestic website.
Think of it as a plugin to the website that all of a sudden makes the experience, fully localized for shoppers, irrespective of where they're coming from. We translate the currency, the payment, we provide all the payment methods, shipping options, duties and taxes, guarantee for a full landed cost, and so on and so forth. It becomes a highly localized experience, for all shoppers from all markets around the world. The second layer is the operational piece, because we don't just localize the transaction for the shopper, we also localize it for the merchant. We take care of the cross-border delivery, we guarantee the duties and taxes, we collect the taxes, we remit them to the authorities around the world as needed. We take care of frauds.
Fraud is a guaranteed no fraud for the merchant, and so on and so forth. We localize it to the merchant in the sense that it's as easy and as risk-free to operate as a domestic transaction. The third piece is actually a data-driven piece, which is kind of optimizing the offering or helping the merchants to optimize the offering to all these markets, because we have a very big and diverse and unique data asset that comes out of transacting with more than 1,000 merchants across all geographies in the world, all different verticals, price points, et cetera.
That gives us unparalleled data that enables us to help these merchants, we don't just tell them what they can do with all this vast set of capabilities, but we tell them what they should do in order to optimize the conversion rates from each and every market that they focus on. Maybe the last piece, which is currently just starting, but we are putting a lot of effort into building, is the demand generation piece.
Mm.
Which is kind of the next frontier, which is helping them to generate more traffic or high-quality traffic from international shoppers, and then convert them, rather than our current offering, which is just taking their existing traffic and helping them to convert that on a much grander scale.
You know, it's interesting, and I, like, I remember having gone through the, my own thought process on this as well. You know, when you look at all the pieces that you're providing in terms of like, whether it be the website localization, or with everything that goes along with that, whether it be taxes, duties, et cetera.
Mm-hmm
... or tying into and helping provide logistics support and for delivery and the customer support component, or even just as you're saying, the making the merchant aware of like: "Hey, here are some suggestions as to like, the types of offers that you want to pursue, et cetera." As you said, looking forward to demand generation.
Mm.
You know, we often get the question, and I remember having this question myself, which was: Okay, you're doing a lot of things, but what really matters? How do you really win? I remember, you know, talking to you, and you saying: "Well, actually, you can't really not do any of them. Like, you have to.
Right
... do all of them well." Maybe you can talk through like, that cycle or what you're providing to the merchants and the like, why you can't just focus on one thing.
Sure. I'll answer that from two different directions that at the end, converge. One is that, of course, there are different weights or different levels of importance for each of the elements that we provide, let it be the payments or the currencies, or the logistics, the duties and taxes, et cetera. That's, I think, one of the most important pieces, those relative weights differ tremendously from market to market. Again, it's easiest to use an example. If you look at a European merchant that wants to sell to the U.S., let's say.
Mm-hmm.
Here in the U.S., you know, if we offer the shoppers, you know, obviously, it's always nice if we offer kind of, you know, Apple Pay and Amazon Pay, but these are honestly not entirely important. If you can just offer, you know, Visa, Mastercard, American Express, and PayPal, and do it in a kind of in a local way, local acquiring, you'll probably do fine. There's no.
Right. Right.
... not any real marginal impact to adding even more payment methods. It's not critical. All these will help conversion, but at the margin. Having said that, you need a very, very good low price and quick shipping offering because you're competing with domestic merchants that are gonna ship, you know, overnight, and probably for free. You need to price it correctly in U.S. dollars and make the prices look, you know, marketing-friendly. You need to be able to calculate sales tax correctly, because if you don't show the sales tax separately at checkout, you're gonna give an uneasy feeling to the shoppers here.
Right. Right, right
in the U.S. These are the elements that are critical. If on the other side, you're looking at a, the same European merchant, or let's say, a U.S. merchant that wants to sell to a, you know, pick a market in Europe, let's say, the Netherlands, you're gonna need. Honestly, their shipping, of course, it's always important, but the Dutch are okay with waiting a few days for their package and maybe even paying a few euros.
Mm-hmm
to get it if they wanna get it in a speedy delivery. What you really have to make sure is that you account for VAT.
Right
... Percentage of VAT and do it as part of the product price in the browsing phase.
Right.
Unlike here in the U.S., if you add VAT at the checkout, you're both not really compliant with local regulations, and you're giving it a terrible experience to the.
Right. Right.
... Obviously, you're surprising them with a cost that they would never think would come up at checkout in a domestic site. You have to support iDEAL and Klarna, which together, just these two payment methods, command more than 2/3 of the consumer payment.
Yep. Yep. Yep.
You know, every market, especially the more exotic markets, if you want, will have a different set of priorities. That is key to remember. The other element you have to remember is that it's a conversion game at the end of the day, 'cause the shopper has already entered the site.
Right. Right.
They have an intent, an inherent intent to buy the product. Now, it's a matter of giving them a great experience across all these different domains, and it's, you know, at the end of the day, it's a compounded game. If you take all these, let's say, there, even for the sake of simplicity, there are only five or six major elements that you need to get right across, you know, payments and shipping, et cetera. Even if you do each one of them 80% right for that market, you're still gonna get very bad, almost 0 conversion, 'cause it's gonna be 4.8 to the power of 6.
Got it. Got it.
You need to get each and every one of these elements, you know, 99% right if you wanna get an overall conversion rate, which is, I would say, comparable to what you get in a domestic sense.
Got it. Got it, got it. I think building on that, from our perspective, Global-e helps brands generate volume growth and international conversion, albeit a lot of times at a higher final price point, giving shipping and Global-e's take rates, et cetera. With that being the case, can you talk about how your merchant partners typically think about collaborating or working with Global-e, especially in the current market environment? Has there been any change in usage or interest on the part of the merchants? And, you know, what's the priority for them right now?
I would say, no, there hasn't been any notable change in interest levels that we see from merchants. They were high, and they remain high. I think the main difference that we've seen over the last few quarters, with the kind of, I would say, more economic pressures, more macroeconomic inflationary pressures, et cetera, that not only consumers are seeing, but also merchants are seeing around the world. What we have seen is, maybe a bit of a shift in the focus and honestly, we've even changed our, the focus of our sales pitch a little bit because, you know, if two years ago, three years ago, most of our discussions with the merchants were around growth and their ability to.
Mm-hmm. Mm-hmm.
... generate more business internationally through the use of our service and leveraging their existing international traffic. Nowadays, we put more weight, I would say, in the discussion around also the cost savings that can generate for them. It's still obviously the main goal for them, for most, if not all of them, is to continue growing their revenues and growing their business without making any significant CapEx investments. We are also, you know, helping them more and more to build a business case of also how this can generate cost savings from them. This can be direct cost savings in many cases.
Right. Right
... especially if it's a small or mid-sized brand. They will save actual $ per shipment because we work at such high scale with these, with the different carriers. We have a network of more than 30 different carriers. With most of them, we are major clients of theirs. Just as an example, we are today, one of DHL Express's top 3 B2C customers worldwide.
Right. Right. Right.
We are able to secure shipping prices that are very hard to compete with. Even though we put a margin on them, still, even with that margin for many of these merchants, definitely the small and mid-sized ones, we can generate real, say, real dollar savings on their shipping, plus a higher, in combination with a higher level of performance and service to their end consumers. Indirectly, because we streamline all of their international activity, they don't need to manage that, they don't need to manage fraud, they don't need to manage the logistics part, et cetera. We make it, as I said earlier, as easy to manage as a domestic transaction. They can typically also save headcount on the operational side and kind of streamline their own operations.
Your answer there leads me to, you know, kind of one of the conundrum questions that we even ask ourselves. When we think about, you know, your customers or the merchants and kind of as they go through the decision process, what's the biggest reason not to use Global-e at point of sale? I mean, I guess, why aren't all merchants, especially those that are looking to pursue international, you know, signing up with you? Because to us, the value proposition is a slam dunk. What are the impediments that you typically run into as you're selling?
First of all, we need more time.
Right
we need to cover more of the market. I agree. At the end of the day, not all of the merchants. We need to be realistic because, first of all, there are not many, but there are a few verticals that are less relevant for this model.
What would be examples of verticals where it's not?
An example maybe would be, take the vertical of, food supplements
Right
which domestically works quite well, when it comes to online. It is a little harder, I would say, from a compliance point of view, when it comes to importing, food supplements.
Yeah, yeah.
... to different markets in the world. There are severe regulations in some of the markets. Now, as a merchant, you can decide that you're willing to take that compliance risk. Because we operate as the merchant of record, as part of our service, in order to provide all these, all the, these services in a, in a seamless way for these merchants, we actually become the merchant of record. Technically, it is us selling the goods to the end consumers throughout the world. We obviously need to and want to comply with all these requirements around the world. Some of the verticals, which are a little bit more problematic, we will refrain, or we actually do serve some food supplements merchants, but only those that are, you know, 100% kosher, so to speak.
There are a few verticals that we need to rule out. You need to take into account that when we talk about, I've repeatedly made the distinction between kind of small and mid-sized merchants to large ones.
Okay.
One of the other kind of angles in which they are distinct is that when it comes to very large merchants, the global mega brands, kind of historical brands, the Adidases of the world.
Mm-hmm, mm-hmm
... the Zegna of the world, Hugo Boss, et cetera. Obviously, we serve these as well, and all of the ones that I mentioned and many more are clients. These brands typically already have some infrastructure set up.
Yeah
... in specific markets. They may have their top kind of, you know, two, three, maybe even five markets that are so big for international markets, I mean, that are so big for them that they almost serve as, you know, a second and a third and a fourth home market, where they already have the full setup. They have the local website; they have the local payments method-
Yeah, yeah.
Even sometimes local inventory. They don't really need us to help them with that. We take the rest of the-
Right, right.
Yeah, if you want. I would put it this way, to answer your question directly. We almost never get a no as an answer. Nobody in his right mind says, "Nah, this is not interesting for us." We will sometimes hear a "Not now," answer.
Mm-hmm
which may come from strategic priorities. It may come from the merchant understanding the value, but saying, "Okay, we first need to re-platform because we are, you know, we want to move to a different, more modern platform than the one we're on. We'll integrate you guys." It can be that they have, they're moving it to a new ERP system, and all their tech resources are attending that. There are timing issues with that. Obviously, as always, you know, this is a complicated kind of consultative sale. We do change the way they do business internationally.
Right, right.
A lot of stakeholders in the organization need to be aligned and need to be on board, and that too, sometimes takes time. We have cases even of merchants where we've approached them. They said, "Okay, you know, we're not sure. This is not the right time. Maybe we'll check out a different way." 3 years later, we revisit them. Maybe it's a new, you know, a new team in place. There's a new refocusing of the business on growing international and growing direct-to-consumer, and then it's the right timing for us to come in.
Got it.
we think in general, that there's still a huge potential. This is a market that is in its early innings in terms of penetration, and we are, I think, more and more in the leading position to lead the charge. we do believe we have, I would say, a very long runway of high growth ahead of us for quite a few years.
Let's talk about more immediate demand trends. We saw U.S. outbound revenue growth of around 100% year-over-year in the most recent quarter, and it seems like the European inbound consumer demand is recovering quite well. Is there anything you can, or incremental color you can give out in terms of demand trends across different geographies? Where has been better or where has been more muted?
Sure. We have seen a certain recovery in Europe. Europe is not doing great, but it has been doing better than feared.
Mm-hmm.
Last year, in 2022, we had the war, which is still ongoing, unfortunately.
Right.
People got used to it. We had bad macro, and we also had a lot of concerns around energy prices and if they can even go through the winter. A lot of this has been moved away, and we have seen an upward trend in consumption in Europe. This has contributed, and I think it's not only us, I think it's a common theme. While the U.S. has been sort of at the same level, similar level to previous years, and most of the markets are doing okay. I think that what we have been witnessing since the beginning of the year is a certain level of normality in terms of the long-term trends. The last three years have been a little crazy with COVID, and then the reopening of physical retail and sort of the rebalancing there.
This year, we see what we would expect to see in a normal year. E-commerce is outgrowing brick and mortar, and within that, we have seen cross-border and direct-to-consumer taking share and outgrowing other channels or segments. That has been very positive for us.
Got it. Got it. You know, can you talk a little bit about how same-store sales has been progressing and how that fits within your broader growth algorithm, especially if we're thinking about where you have merchants and geos that are relatively mature?
Yes, that's a good question, especially as a follow-up to the previous one. The trends that I've described are exactly sort of impacting same-store sales. There is a positive impact after the reopening of physical retail in 2022, and we are seeing better same-store sales. Generally speaking, when we look at our NDR, which was approximately 130% last year, and we've communicated that we expect to see a similar rate this year, it's compounded out of three different components. The first one is same-store sales, which, again, up till now, has been very solid this year. The second one is the land and expand motion.
Mm-hmm.
Those are the large merchants that Amir has mentioned, that over time tend to add additional markets, once they gain confidence. The third one is the uplift with new merchants in the first few months. All of these are contributing. Going forward, we think that, you know, this could continue at a similar pace or similar cadence.
Got it. Got it. Let's talk about Shopify, We get a lot of questions around the relationship between Global-e and Shopify. You know, I think for a lot of people, particularly just they're first becoming familiar with Global-e, they look at Shopify as a big, potentially nasty competitor, without really realizing that you g`uys are actually partnered for
Right
... for much of at least their international potential commerce. How should we think about new merchant additions in 2024 post the expected Shopify Markets Pro launch later this summer? Like, what's that relationship look like, and how do you think that's gonna change your growth trajectory?
Yeah, I think it's gonna change it. Whenever we think about our relationship with Shopify, it's always important to kind of understand that we've had a strategic relationship with Shopify for more than two years now.
Mm-hmm.
Even before we went public, we already had an exclusivity agreement with them that concentrated more on the enterprise side of things.
Right. Right, right.
'Cause it was for our third-party integration that is more relevant for enterprise merchants with the full end-to-end service that I previously described at the beginning. That has been going on for a couple of years now, and it has contributed to our continued and even accelerated growth with Shopify-based merchants. As part of our acquisition of Flow Commerce at the beginning of last year, that was really intended to serve the, I would say, the other half.
Right. Right, right
are about half of the cross-border GMV on Shopify. The other half is with true kind of SMBs. We knew that we needed a different offering, a different type of platform, in order to really tap into that. Much more of a self-serve, productized platform than our kind of enterprise, our customizable enterprise one. And that's what you rightly referred to as now it's called Shopify Markets Pro, but it's basically a white label solution that we provide behind the scenes to support an offering by Shopify that is currently in early access mode. Even this early access mode is still, which we've been in over the last few months, is. We've already onboarded a few hundred merchants, so it is progressing.
Obviously, and, and to get to the kind of the gist of your question, we do believe that once the Shopify Markets Pro goes general availability, which is expected in this summer, we think that there is a good potential for this to grow quite rapidly. So, it's gonna have still minimal impact, even if it's highly successful, as we hope it will be. It will have minimal impact on 2023 because it's, well, I mean, obviously, it's gonna be open to any Shopify-based merchants. Even large ones can opt-
Right, right.
... to select it. It is safe to assume that these will be the relatively smaller merchants on average, it will take time to ramp up the number of merchants. We believe that this could already have a meaningful impact on 2024 onwards.
How should we think about the potential with Shopify in the long run? I mean, is this something where you could envision it getting to be a multi-billion dollar opportunity down the line? I mean, that's clearly years away, but, like, how do you think about that opportunity set?
Yeah, I mean, in terms of GMV, I would say even just on the enterprise side, we think over the next few years, we can win. It can be a multi-billion-dollar business. Definitely if, again, touch wood, all goes well with Shopify Markets Pro, we think that can compound that growth and grow into an overall highly interesting business on the Shopify platform. I think another way to look at it is to also see that Shopify themselves are putting this pretty high up on their agenda.
If any of you are following kind of Shopify's own earnings releases and priorities, you can see that this gets a prominent place in their, I'm sorry, in their communications. You know, we feel that in a partnership with them, they're amazing partners to have. There's great collaboration on all levels, from the kind of top down, also on the technical side. This has been a major kind of collaboration effort over the last couple of years. It continues to be a very kind of close and productive relationship.
We have reason to believe that this is of strategic importance for them as well, and hence, you know, could be, could have a large, kind of, potential to be realized over the next few years.
Got it. Got it. Just have about 5 minutes left here. I want to talk about profitability and, you know, it's interesting because you guys are obviously growing very rapidly. Right now, we have. For this year, we have revenue growth forecast to be in the kind of the mid-forties, for, in our estimates. And you are profitable already, but you've set out a target, a long-term target of 20% plus adjusted EBITDA margins. You know, what's the right timeframe and cadence to get to that level, and what are the primary drivers to really drive that margin structure to where you've targeted?
Yes, we have communicated that this is our long-term target. To be honest, it's not a very long-term target. We expect to achieve that, you know, within the next three to five years.
Okay.
Basically, if you look at the trends in the previous years, we have been able to improve our gross margin significantly.
Mm-hmm.
We had some operational leverage. I think that going forward, it will be the other way around. We still have some leverage on the gross margin side, but we don't expect it to improve at the same pace that we've seen previously. However, on the operational leverage, in the last 12 months, we have 1 sort of integrated the acquired companies, which weighed a bit on us, and we have been able to realize many synergies. 2, we have been investing in Shopify Markets Pro, and we had significant efforts around the Shopify native integration. Going forward, we expect to see nice operational leverage, you know, that should enable us to get there within the timeframe that I have mentioned.
I can just tie that into my, one of my previous answers. We do think there's a huge potential ahead of us. We will continue to prioritize kind of growth and additional opportunities and additional segments and additional value-added services. We're not targeting, you know, cash generation per se.
Right.
On the other side, we believe as a philosophy, and we, by the way, we've believed in that even before being a public company, that the right way to build the foundations of a long-standing, successful company is to start generating cash at some point.
Right.
We've done that, even from as early as late 2019, way before it was considered cool. We just believe that this is the right way to build a sustainable business and be able to provide to our merchants the right level of service that they deserve. We intend to continue emphasizing that in parallel to seizing the potential growth.
I wanna follow up just in the last minute or two here on one of those potential drivers, is that, you know, I know for us, we were pleased to hear about the potential for further take rate improvement, specifically in services and associated gross margin expansion, due to the integration of Borderfree's demand generation solutions. You talked about that earlier. How should we be thinking about that in terms of magnitude? Is this something where, you know, the incremental could be 50-100 basis points?
Yeah.
Is it more to 200-300 basis points? Like, how do we think about that potential and what you're ultimately targeting in terms of uplift there?
I think it is a bit early to say.
Okay
... because we have been putting many efforts since the acquisition of Borderfree. Of one, integrating the Borderfree capabilities into the Global-e platform, also we're building the right organizational infrastructure and starting to think of the right initiatives to enhance those capabilities that we've acquired. It is still early days. We expect to see some contribution already in 2024, it's hard for me to estimate what exactly would be the cadence of the take rate expansion.
You do think you can start to see some contribution next year?
Yes.
Got it.
Yes, it is gonna be a ramp-up as well because we are at the beginning. Our goal would be not necessarily to just realize all the additional take rate uplift, but more to get the ball rolling, if you want.
Right. Right, right
... merchants on board and prove what we believe is gonna be a great benefit to these merchants. Once this snowball effect or flywheel, whatever metaphor you want to use, will get in, it will get rolling. Then we believe we can leverage more and more also to generate additional take rate.
Great. Amir, Over, that's all the time we have. Thanks to everybody for joining us here to chat about Global-e.
Thanks.
Appreciate it.
Pleasure.
Thank you.
Yep. Thank you very much.