A Promising Early Stage E-Commerce Company

I recently wrote an article on Seeking Alpha about a young up and coming company in ecommerce called Global-e Online. I am not sure how much this has been discussed on these boards because I know much of the discussion on these boards bends toward SaaS companies and Global-e Online is not technically a SaaS.

Global-e Online makes its money from service fees in a very similar way to Shopify. One of the things that attracted my eyes to the company is that it has no natural competitors and is high growth.

When I first heard the description of what it does, I thought Global-e Online would be a competitor to companies like Shopify, or the commercial operations of companies’ like Salesforce, Adobe’s Magento, BigCommerce, Facebook and other e-commerce platforms. However, Global-e has integrated and has partnered on some level with all of those above companies. Global-e Online is in the business of enhancing the existing store of a merchant, no matter what platform it is on.

What specifically does Global Online do?

Global-e Online helps merchants engage in cross-border e-commerce by helping merchants with such services as foreign currency exchange, product returns, local payment methods, fraud management, local market know-how and more. While it might seem like Shopify already does such things, they really don’t. Shopify specializes more in domestic ecommerce, meaning Shopify is helpful for US merchants selling to US consumers or even German merchants selling to German consumers BUT Shopify doesn’t specialize in a small German merchant doing direct sales to US or Canadian customers. In fact, Shopify has actually deeply integrated with Global-e and does a take-rate split on GMV with their common customers. Shopify also owns around 5% of Global-e and has bought a lot of warrants to buy more of Global-e Online in the future.

Back to my example of German merchants…Now German merchants could still make sales through Amazon to places like the US or Canada which would take care of many of the high barriers to international sales BUT these would not be D2C sales but sales via Amazon and Amazon would control the relationship with the customer, unlike D2C sales, in which the German merchant would control the customer relationship. For a variety of reasons many merchants might not want to use Amazon (Amazon will often compete with their third party merchants if they see a popular item selling) and that is where Global-e Online comes in.

Global-e Online helps smaller foreign companies without the resources of a large enterprise like Walmart to make D2C (Direct to Consumer) cross-border sales.

Cross-border D2C sales is a huge greenfield opportunity. There is really no other company doing what Global-e is doing currently, so this is a greenfield opportunity.

I essentially say this in my article:

Investors that are interested in getting into e-commerce but feel companies like Shopify (NYSE: SHOP) or Amazon (NASDAQ: AMZN) have already largely passed them by, can still get a chance to “buy-in early” in e-commerce by purchasing this relatively early-stage high growth company named Global-e Online.

Cross-border ecommerce is already bigger than faster than domestic e-commerce. The company doesn’t come without risk, however, and I consider it somewhat speculative as a recent IPO but some investors might want to look into it.

I wouldn’t be surprised if the company gets recommended on one of the Fool’s paid services inside of a year or two, if it keeps up its recent performance. The company already had its first earnings report which I go over some in the article.

From my Seeking Alpha article:

Summary

Global-e Online is a recent IPO that is an emerging e-commerce play.

Currently, the company doesn’t really have any natural competitors to what it does, which is essentially just enhancing the basic e-commerce store that a merchant already has.

The company is attacking a greenfield opportunity in cross-border e-commerce, which is now growing faster than domestic e-commerce, primarily caused by the rise of social media.

Investors that failed to buy Amazon or Shopify during their early growth days get a new chance to “Buy in early” in a new emerging e-commerce opportunity.

Global-e Online is a buy for investors willing to speculate on a relatively early-stage e-commerce company.

Read More: https://seekingalpha.com/article/4454513-global-e-online-pro…

Starrob

84 Likes

Starrib,

While I do not see quarter over quarter growth and recurring revenue numbers, these would be required and have to be in the > 50 percent range to even get on a watch list, the idea is appealing.

More than once I have found and item I needed on Alibaba or in a general search and been unable to purchase it. So far these item would not fit the profile for an Amazon type purchase.

I.E. Styer motors marine hybrid diesel engines, or high capacity li-ion battery systems.

However, I am confident there are many products made in small quantities everywhere that would market well. The wealth creation of increasing trade has history to recommend it.

Still, I have have lost a great deal of money on general ideas and am like that guy from the movie.

“Show me the
money”

Cheers
Qazulight

5 Likes

Starrob,

Global-e Online (GLBE) was brought to the board shortly after it’s May 12 IPO by Rubenslash. That write-up is here: https://discussion.fool.com/global-e-online-34835116.aspx?sort=w….

I got in on day 1 and it has grown to be my second-largest position (behind UPST).

JR

9 Likes

I usually pay zero attention to these block sales, especially since they aren’t dilutive (at least that is my understanding, since it seems the shares are just being sold from existing shareholders – it isn’t new shares being issued).

The 9/7 offering announcement: https://investors.global-e.com/news-releases/news-release-de…

The 9/10 pricing announcement: https://investors.global-e.com/news-releases/news-release-de…

But this one was interesting in that it caused the stock to fall from 74.28 (where it closed on 9/7) to below $64.50 at the close on 9/9, which is why (I think) it was priced at $64 on 9/10. My thought: is this just irrationality by the market? This wasn’t dilutive, right? Not sure why it would even matter to shareholders. Early investors are cashing out – big whoop. Interestingly it was up 4%+ yesterday (the secondary pricing was announced yesterday morning before market open).

Other than that, this company does look interesting. Definitely seems like they are onto something, because growth is off the charts:


Revenue by quarter (in millions)
2019  12.5  12.7  16.1  24.5
2020  19.7  29.8  33.3  53.6
2021  46.2  57.3  __*65.9?*__

or percentage-wise YoY:
2020   58  135  107  119
2021  135   92   __*98?*__

Next quarter they guided for 56.3m (LOL, sandbag much?) but they beat guidance by 17% (!!!) this quarter so another 17% beat puts them at 65.9m in Q3. Obviously don’t bank on that…I’m just pointing out that growth isn’t necessarily slowing down a lot.

GMV progress backs up revenue progress:


GMV by quarter (in millions)
2019   68.8   75.2   94.5  143.3
2020  114.4  167.0  188.8  303.6
2021  266.6  326.2  __*385?*__

or percentage-wise YoY:
2020   66  122  100  112
2021  133   95  __*104?*__

An aside from a board manager: this format or something close to it is extremely helpful for getting folks interested in discussing a company you follow!

The only negative I can see is that gross margins are not what we usually look for – 36.0% this quarter up from 33.3% last quarter. But 70-80% margins (or even 60%) would not be expected for an e-commerce platform, and the acceleration is very nice. Not sure if they can get to 50%, or if I even care as long as they are growing like this. With the market for e-commerce (globally), I think Starrob’s comment here makes sense:

Investors that are interested in getting into e-commerce but feel companies like Shopify (NYSE: SHOP) or Amazon (NASDAQ: AMZN) have already largely passed them by, can still get a chance to “buy-in early” in e-commerce by purchasing this relatively early-stage high growth company named Global-e Online.

Global-e is around a $10b market cap, and if they’re destined to 5x or 10x, they will probably do so much faster than Shopify will go from $200b to $1 trillion or $2 trillion.

Anyway, definitely one worth watching. I think I’m going to go listen to their conference calls for Q1 and Q2, and who knows, if I continue to like what I see between now and Monday morning, I might even take a small position. Thanks Starrob and Rubenslash for bringing it to the board!

Bear

82 Likes

This is my first posting to this board. I’m extremely thankful to Saul and everybody else for creating and maintaining this great forum.

I’m following Global-e Online (GLBE) since it was brought up by Rubenslash in mid-May. Now after their second earnings as a public company and especially the recent discussions in this board I plan to start a small position this coming Monday.

Just to add my two cents to the discussion: The Co-founder of this company and its CEO - Amir Schlachet was the commander of “Talpiot” program in the Israeli Air Force: https://en.wikipedia.org/wiki/Talpiot_program

This by itself tell us a lot about the quality of management and its abilities. Many famous founders of Israeli technology companies came out of this elite project during the last decades.

https://investors.global-e.com/corporate-governance/manageme…

“Amir has an extensive technology background, having served for 11 years in various elite technological units of the Israeli Defense Forces, including as the commander of the “Talpiot“ elite technological military-academy program (ranked Major).”

The other co-founders and the rest of the management seems to be top-notch and with a lot of experience as well.

Maurice the Fool

20 Likes

The only negative I can see is that gross margins are not what we usually look for – 36.0% this quarter up from 33.3% last quarter. But 70-80% margins (or even 60%) would not be expected for an e-commerce platform, and the acceleration is very nice. Not sure if they can get to 50%, or if I even care as long as they are growing like this. With the market for e-commerce (globally), I think Starrob’s comment here makes sense:

Ok I have belaboured this point before on the board but in exchange for a relatively low gross margin their take rate of core GMV is literally off the charts at ~20%. Effectively by the time you get to the bottom line the financials are excellent, do not stop reading at the GM line.

Investors that are interested in getting into e-commerce but feel companies like Shopify (NYSE: SHOP) or Amazon (NASDAQ: AMZN) have already largely passed them by, can still get a chance to “buy-in early” in e-commerce by purchasing this relatively early-stage high growth company named Global-e Online.

Global-e is around a $10b market cap, and if they’re destined to 5x or 10x, they will probably do so much faster than Shopify will go from $200b to $1 trillion or $2 trillion.

If you want to see what could happen too Global-e “much faster than Shopify” then take a look at Affirm. It took them 9 months from agreement announcement, 6 months from beginning of integration and 3 months from end of integration to their results announcement concerning their native integration with Shopify to feed through into a monumental leap in their revenues. (Go see Affirm’s latest ER).

Global-e have basically said that their native integration of their cross border solutions within Shopify will happen over the coming 2 quarters. Whilst we are enjoying a 98% growth rate we should expect an Affirm like boost within 6 months. I am positioning accordingly.

Ant

53 Likes

First posting here. For what it’s worth, my good friend works in digital marketing for a small online retail company that sells luxury goods across the globe. They recently subscribed to Global-E because they had issues with pricing and selling in different countries with different currencies. One example she gave is that they were offering $200 off their goods for a referral, but this would end up being a very odd number in China or Singapore once converted. Their Shopify rep suggested they use Global E. They looked into Global E and other services and eventually subscribed to Global E partially because no other companies were offering the same services and since locking in sees no way around using Global E for her company or other smaller retail companies.

I took a small position based on what she told me as soon as I realized they had partnered with Shopify. Glad to see that others have become interested and I will continue to follow.

28 Likes

h20man04,

Your story is exactly my thesis for Global-e. They handle currency shifts, language translation, taxes, shipping, even help navigating local culture. I don’t see how those services aren’t necessary for any and every merchant who wants to sell outside of their home country. And for small retail businesses like your friend works for, selling cross-border would be a nightmare on their own.

GLBE’s numbers, as well as the Shopify investment and exclusive partnership, tell me they can execute on their mission to make e-commerce “border-agnostic.” I’ve not heard of any other company focused on these things; and I can’t imagine any business owner waking up and thinking, “Gee, please let me deal with currency conversion, tax issues, and language barriers in 100 countries myself.”

I’ve been long GLBE since literally the first minute of their IPO. It seems absolutely necessary to every seller.

JabbokRiver

19 Likes

I liked GLBE enough that the day after their earnings report last month that I bought in.

Not to be redundant to all to the great info posted here already. But the numbers really do look good, for non-SaaS.
Using YoY due to the nature of seasonality in their business and numbers in table are in millions:


              Q1-19  Q2-19  Q3-19  Q4-19    Q1-20    Q2-20    Q3-20    Q4-20    Q1-21    Q2-21
GMV           68.78  75.17  94.55  143.29  114.44   167.02   188.75   303.65    266.56   326.23
GMV YoY%                                   66.38%   122.18%  99.63%   111.92%   132.92%  95.34%
Revenue       12.5   12.69  16.15  24.5     19.7     29.79    33.33   53.55     46.15    57.23
Rev YoY%                                   **57.37%   134.73%  106.36%  118.65%   134.4%   92.32%**
Gross Profit  2.94   2.94   4.7    8.09    5.78     9.67     10.06    17.97     15.37    20.6
GP YoY%                                    **96.7%    228.6%   114.05%  122.2%    165.8%   113.14%**
Gross Margin% 23.5%  23.2%  29.1%  33%     29.4%    32.4%    30.2%    33.5%     33.3%    35.96%

As bolded above, gross profit is consistently growing even faster than topline. Gross margins are improving as they continue to scale.

Here’s from their earnings call:

Analyst: “So a nice bump up in the gross margin. I am looking at 36% this quarter from 33% last quarter. How should we think about Q3? And then just how should we think about the expansion over time, but Q3 first.”

Ofer Koren: "So the increased share of service fee revenues contributed to the gross margin expansion, as well as the continued leveraging of our economies of scale and price optimization. We believe that the gross margin expansion is structural and basically, we expect the same trend to continue into the future, not in every quarter we will increase the gross profit that as much as we did this quarter, but we certainly expect the trend to continue.

Something else to note from the call:
“During Q2, we launched our first APAC (Asia Pacific)-based merchant, Theory Hong Kong, which is part of the best retailing group. Last quarter we also open a new office in Tokyo.”

"Yes, we do see great opportunity in APAC and we do intend to invest much more. But as you stated, we do plan to enhance our partnership and channel partners in order to support it. Yes, we do have channel partners that are global in nature, that would be DHL or Facebook or a partnership with Shopify. But we are building also APAC specific partnership. This is in process and we are hoping, we will have good news within Q3 or Q4 to announce about the partnership to support that growth as well. And on the back of it, we expect much more contribution coming out of APAC into our pipeline and into our numbers and I would say from the second quarter and third quarter of 2022.

Other things to note:
The largest merchant represented 12% of total GMV and 16% of revenues in 6 months ended June 30, 2021.
This has decreased (in the year ended Dec 2020 it had 15% of GMV, 18% of revenues).

Top ten merchants represented 44% and 37% of total revenues for the years ended December 31, 2019 and 2020, respectively, and 37% of total revenues for the six months ended June 30, 2021.

“We do not plan to disclose quarterly net dollar retention metrics, but I am happy to share that our NDRR to the first half of 2021 continue to track well”

“For the six months ended June 30, 2021, we continued to observe a high Net Dollar Retention Rate ahead of our typically observed rate of over 140% since 2018.”


                             2018  2019  2020
**Net Dollar Retention Rate    153%  134%  172%**

“Our Gross Dollar Retention Rate has typically been over 98% since 2018.”

[Definitions of NDRR, GDRR:
We calculate Net Dollar Retention Rate for a given period as the GMV in that period divided by the GMV in the comparable period in the prior year, in each case, from merchants that processed transactions on our platform in the earlier of the two periods. Our Net Dollar Retention Rate therefore includes the effect on GMV of any merchant renewals, expansion, contraction and churn but excludes the effect of revenue from merchants that contributed to our GMV in the current period but not in the earlier period. A Net Dollar Retention Rate greater than 100% for a given period implies overall growth in GMV from merchants that were already processing transactions on our platform prior to that period.

Gross Dollar Retention Rate measures revenue lost from merchants that discontinue their use of our platform, but does not reflect the benefit of customer expansion, contraction or additions. Gross Dollar Retention Rate may therefore never exceed 100%.]

Final thing to note: JabbokRiver, what do you think of Rapyd? In my research on GLBE last month I came across this privately held company that seems to be focused on Cross border commerce too. But seems like they’re only about the payments aspect? GLBE helps merchants with shipping/returns/customer service, seems like Rapyd doesn’t.

https://techcrunch.com/2021/08/03/rapyd-raises-300m-on-8-75b…

https://f.hubspotusercontent00.net/hubfs/5246303/Rapyd_Roadm…

It’s a greenfield opportunity right now but Rapyd might be an indirect? competitor. They have a lot of merchants too.

34 Likes

I too listened to the latest earnings call yesterday and have been doing some research on Global-e. I bought a small, about 2% starter position this morning.

A few takeaways from the earnings call that resonated with me:

-The gains in gross margin improvement, which have been pretty significant in recent quarters already, is a trend that “should continue into the future” as they scale

-We should expect two deals (I assume some kind of M&A, potentially using the proceeds of the offering $ raise they did this month) “by Christmas”

-Lots of downplay of Q3 and Q4 with several mentions of Q1 and Q2 of next year seeing particuar strenth, at least somewhat related to getting further ingrained with Shopify (I’m not sure the tempered expectations for the next six months is necessarily a good or bad thing, tho it may lead to buying opportunities in coming quarters if there is a negative reaction to Q3/Q4 with high expectations for next fiscal year)

and in addition, the ownership, by Shopify, is a big positive for me. I think it’s been mentioned before, but I won’t be suprised to see Shopify buy GLBE at some point in the future, hopefully not before current shareholders get to share in the growth for a while longer.

I wish I had paid closer attention to this one in May when Rubenslash first wrote it up. Thanks both Rubenslash and to Starrob for re-raising it here.

-mekong

11 Likes

I listened to this 20 minute discussion between Piper Sandler analyst Brent Bracelin and Global-E CEO Amir Schlachet and CFO Ofer Koren. https://investors.global-e.com/events/event-details/piper-sa…

It is only 20 minutes, so not all questions are answered. Many complex topics are touched upon.

Most of their business to date has been UK outbound; they launched there. In the US-outbound market, with new, exclusive relationship with Shopify, Global-E is just scratching the surface. The world “exclusive” is a bit of a challenge to understand–though both Schlachet and Koren repeat it in the context of Shopify (example min 18:00). I think it will take more digging to understand what that really means. But on the surface is you are a Shopify brand “big enough” to justify using Global-E (“upper tier” of Shopify’s merchants), and the transaction is x-border, Global-E would be the Merchant of Record. The consumer deals directly with the brands website to do it’s shopping, but when it checks out, and their goal is “naked checkout,” they are in Global-E’s hands. I don’t know if “naked” means Global-E is invisible to the consumer, or it means the cross-board issues (forex, duty, taxes, shipping …) are hidden.

This “upper tier” of Shopify merchants is 15,000 to 20,000 merchants.

The term of the Shopify partnership is 3 years, with auto-renewal thereafter. Shopify received warrants as part of the deal, so they have, or will have, equity in Global-E.

TAM. Cross-border GMV growing at double the rate of domestic GMV growth. PS Bracelin estimates that Global-E has $2B of the estimated $240B GMV TAM.

Some of their existing D2C brands: Marks & Spencer, Hugo Boss, Sephora, Tag Heurer (min 2:50)

Partnership with DHL for shipping.

Biggest risk: maintaining their Reputation (min: 19:00) Need to be trustworthy like a bank. Which reminds me that very early on in webinar, Schlachet says they looked to start a x-border fintech in an unregulated space, so they have to work to keep that trust without the help of regulators. (Meeting SLAs etc. as they expand to new markets and their business scales.)

regards,
Bill

PS. I started with the question: is Avalara (sales tax and VAT globally) a partner or competitor to Global-E. I couldn’t find any evidence that they are partners. From Global-E’s point of view, it seems pretty clear that they don’t really see much competition right now because to be a cross-border Merchant of Record, you have to handle the complete transaction, not just calculate the taxes and duties that vary per jurisdiction.

I was left with the impression that this would be a target company for Shopify to acquire, but in this whole space, so many companies have so much on their plates they need to pick and choose their fights. The opportunity runway, as Schlachet said is long, and getting longer, every day.

16 Likes

I don’t know if “naked” means Global-E is invisible to the consumer, or it means the cross-board issues (forex, duty, taxes, shipping …) are hidden.

I ordered some shoes from a European company (I am in the US) and the tracking number began with GE, for GlobalE. There was also a Global-E order ID. There was also a logo at the bottom of the e-mail saying “Powered by GlobalE Smart Cross Border”). So, it’s not invisible, but it did feel seamless.

14 Likes

JonWayne,

Thanks for the heads up on Rapyd. I had not run into them.

They call themselves a FinTech-as-a-Service company. It is founder led and based in London. They have stellar Glassdoor reviews, but from a very small number of reviewers.

Rapyd has made two recent acquisitions:

July, 2020: Korta, a PoS payment card services provider in Iceland with reach into Europe. https://www.rapyd.net/company/news/press-releases/rapyd-comp…

July, 2021: Valitor, another payments solution company, also in Iceland with what appears to be a stronger focus in Europe. This acquisition (spun off from a bank) was just announced and has yet to get regulatory approval.
https://www.prnewswire.com/news-releases/rapyd-to-acquire-va….

So at least at the moment, they seem to have no active plans to do more than FinTech.

The second announcement has a couple of interesting things in it.

Following Rapyd’s recent financing round, the company is actively pursuing acquisition opportunities, targeting strong payments companies and enhancing their capabilities by connecting them to the Rapyd Global Payments Network.

  1. This won’t be the last acquisition.
  2. They’re looking within the FinTech space.

Quoting the CEO:
<“Iceland has long distinguished itself as a cashless nation and an innovation hub, with extraordinary levels of talent and a developed payments ecosystem. We plan to continue to grow and invest in Iceland, making it our European Hub, and will support local merchants while increasing our reach across Europe so that we can provide payment solutions to any business committed to pursuing global success.”

  1. They really like Iceland. Both of the recent acquisitions have been Icelandic companies and that will be their European hub.
  2. I really like Iceland, too. But it’s an interesting choice since so much business fled there after the 2008 financial crisis and basically the bankruptcy of the country. Rapyd may have gotten a great deal on both acquisitions and maybe a lease agreement for the European hub, if they’re trying to lure foreign investment back.

Rapyd is the fastest way to power local payments anywhere in the world, enabling companies across the globe to access markets quicker than ever before. By utilizing Rapyd’s unparalleled payments network and Fintech-as-a-Service platform, businesses and consumers can engage in local and cross-border transactions in any market. The Rapyd platform is unifying fragmented payment systems worldwide by bringing together 900-plus payment methods in over 100 countries. Rapyd’s investors include Stripe, General Catalyst, Oak HC/FT, Tiger Global, Durable Capital, Target Global, and Tal Capital.

  1. I would have assumed Stripe to be a competitor rather than an investor. So I found that tidbit interesting.
  2. From the first sentence (and the company name), it seems that what they are claiming as their superpower is speed in making financial transactions.
  3. If Rapyd is as rapid as they claim, will Stripe acquire them?

Just looking around their website, they are integrating fraud prevention and some regulatory provisions into their platform, as GLBE also does. They also are expanding into markets outside of Europe. The list Mexico, Singapore, Tokyo, Thailand, and Indonesia among others.

As they try to expand in Southeast Asia, they will bump into Sea Limited (SE), which is itself going to be bumping into an IPO I’m watching for in the e-commerce space: GoTo.

The latter is the result of the merger of two large Indonesian companies (Gojek and Tokopedia) that mark the nation’s largest merger ever. Here’s a Fool write up on GoTo: https://www.fool.com/investing/2021/06/23/the-amazon-of-indo….

Rapyd has integrations with Shopify; but it was Global-e that got the exclusive partnership with, and investment by, SHOP. (https://www.fool.com/investing/2021/05/07/shopify-takes-193-…)

And while it looks like Rapyd does some of the things GLBE does, it doesn’t look like they deal with language translation (in browsing as well as in checkout), logistics (including returns and customs), or the marketing and research in local regions for over 200 countries that Global-e offers.

Bottom line is that even if Rapyd eats the world in terms of transaction speed, if I were a business owner, I would find it hard to justify sacrificing those additional benefits with GLBE. I think Global-e Online is extremely sticky. This short video does a pretty good job of summing up the kinds of obstacles GLBE helps merchants to overcome: https://www.youtube.com/watch?v=IoEIyq3ih7o&t=6s.

JR

22 Likes

Penzargent67,

That’s consistent with the process that CEO (“just call me Amir”) described near minute 12:30 of this webcast.

He uses Marks & Spencer as the example. The M&S site sits on Salesforce commerce cloud platform. Commerce cloud identifies consumer’s US IP address, and uses Global-E to set up US local feel to the transaction (long before the consumer is ready to click “pay”). Amir goes through his options for converting pricing from UK sterling to US $, and indicates options Marks & Spencer has … also payment methods that a US customer expects to see, shipping options that are priced right and competitive for a US transaction, etc. And finally, as you said, at checkout you’re really on a Global-E iframe embedded in the M&S site, and you can see the evidence of that with the order # etc.

Webcast (44 minutes) here from June 17 GS conference: https://kvgo.com/digital-economy-conference-2021/global-e-ju…

Other notes:

  • as Merchant of Record, buy and resell the product. (note-to-self to follow-up: hold cost of inventory? DSO risk?
  • provide local customer service options, insurance
  • they “guarantee” the taxes and duties (note-to-self how does this risk appear on balance sheet?)
  • these existing big brands like Marks & Spencer or Hugo Boss can see (in their google analytics) all the international traffic they get (30%) and how little of it is converted to a sale (5 to 10%). so this is revenue already lying on the floor for them to just pick up if they have a seamless x-border solution
  • Global-E revenue is mostly per transaction, no risk to client. (discussion: min 16:00) They do have a minimum fee for year 1, but they rarely charge it, because merchant hits volumes pretty easily
  • <2% churn / year for last 2 years (min: 18:50)
  • since they are x-border, D2C, they focus on consumer verticals like fashion/luxury/cosmetics. Also coincidentally these verticals travel well, not a lot of shipping or receiving restrictions (min: 24:00) weight, size … (perfumes are difficult … contain regulated alcohol/acetone). if a consumer wants to avoid fraud / counterfeit, they will be more likely to buy direct from the brand.
  • consumer electronics a future vertical (overcome power, safety regulations)
  • the new, digital brands like Kim Kardashian, digital and global from day 1 (min 27:30)
  • around min 32:00, talks about land & expand sales, using M&S again as an example. the cost to M&S of maintaining duplicate D2C e-commerce site for each of their biggest international markets was more than the cost of having Global-E takes those markets over
  • min 34:00 success story on how they enabled brands into/out-of UK during Brexit transition
  • potential competitors: borderfree, asendia, flow.io
  • min 36:00 Shopify relationship, and more on “exclusivity”. had their plugin to shopify for a long time. exclusivity means Global-E is the only third party provider allowed on their site to do these x-border services. Shopify will continue to develop in house some of these capabilities. Amir argues that for the larger brands, they’ll always need the more comprehensive Global-E solution.

I’ve taken 2 small positions.

I still want to learn about their secret sauce, moat … They talk about data-driven platform, but they don’t mention AI/ML. So do they just have a lot of beaver & ants & coders working, or do they have something else?

rgds, Bill

14 Likes

Notes from today’s Jeffries software conference
https://wsw.com/webcast/jeff195/glbe/1826916

Mostly same as GS and PS webcasts with a few tidbits:

  • on out-bound side, pick & pack operations, Global-E makes the order paperwork, etc., appear to the retail brand’s warehouse & shipping operation as a normal domestic order (min 12:20)
  • on in-bound side, they collect taxes and duties and remit them to relevant agencies
  • back to secret sauce: still elusive to me. Amir talked about the dataset, and gave a example from France on delivery to consumer (min 13:30)–the local knowledge that French consumers will pay extra for delivery to a local convenience store rather than their home address. Amir argues that even if the retail brand new that about France, the headache to operationalize that would be too costly.
  • Shopify (min 20:00) hinted at a SaaS-like capability they are developing together that makes x-border check out more seamless
  • BNPL partnerships & activity (min 23:00). Working to add relevant players as payment options in each market. Also joint marketing events. Nothing newsworthy.

rgds,
Bill

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The only negative I can see is that gross margins are not what we usually look for – 36.0% this quarter up from 33.3% last quarter. But 70-80% margins (or even 60%) would not be expected for an e-commerce platform, and the acceleration is very nice.
-Bear


Bear,
I like this one a lot. Their recent ER was first public conf call, and they seemed to provide a lot of extra detail as a result. Sort of a primer on what they do and how mgmt looks at the oppty in front of them. Highly recommend you check out the CC transcript to anyone interested in GLBE.

Here were my takeaways that I posted on an August thread after their ER. My comments are ones not in parenthesis.

from their CC transcript
https://www.fool.com/earnings/call-transcripts/2021/08/17/gl…

Gross Profit/Margin - growing and should continue to do so:

"Now, let’s review the income statement in more detail. Gross profit continues to grow even faster than our topline as we continue to improve gross margins based on our economies of scale and improve efficiencies.

In Q2, gross profit was $20.6 million, up 113% year-over-year and representing a gross margin of 36%, compared to 32.4% in the same period last year. We believe that gross margin expansion to be structural and sustainable, as it results mainly from increased economies of scale, improved operational processes and pricing optimization."

Efficient. They used the word “Efficient” or “Efficiently” 5 times, all to describe their operational approach. They have lower expenses and are able to show a profit due to this efficiency. But they aren’t doing it to the detriment of growth. This reminds me a lot of TTD.

“13.3% adjusted EBITDA margin”

“Our gross profit grew even faster by 113% year-on-year to $20.6 million, driven by gross profitability margin expansion to 36% in Q2, up from 32.4% in the same quarter last year. Thanks to our growing economies of scale and increased efficiency. We continue to operate on the basis of a very efficient operating model, yielding an adjusted EBITDA for the quarter of $7.6 million, representing 145% growth year-on-year.”

The Revenue Mix:
Service fees grew 104% y/y
Fulfillment fees grew 86% y/y.
Service fees are the higher margin of the two, and that trend is expected to continue.

TAM aka What is the Opportunity they solve for:
"D2C enables merchants to strengthen their relationships with shoppers worldwide, enhance their brand, think valuable data and enjoy higher margin. As a result of a combination of these and other market factors, cross-border ecommerce transactions are expected to continue to grow outpacing the growth in domestic e-commerce by a factor of 2. Forster expects that by 2023, the cross-border e-commerce market will reach $736 billion.

This creates a huge opportunity for brands to sell Global-e, as we typically see around 30% of e-commerce traffic being international. But this is where the music stops for many of the merchants. When you look at their actual sales figures, typically no more than 5% to 10% come from international shoppers.

In other words, many merchants are not able to convert this enormous international traffic into actual sales, leaving a lot of money on the floor. This is because of the many structural barriers that stand between them and their international shoppers, who rightfully expect a seamless and localized shopping experience.

By localizing the – but localizing the experience for even a single market is painful and difficult. A merchant needs to support the local language, present attractive prices in local currency, support the local payment methods that are prevalent in that market, offer a compelling shipping and delivery experience, guarantee a full landed costs including all relevant import duties and taxes and more.

Now multiply these challenges by 50 or 100 markets, it becomes nearly impossible to overcome. There is no one size fits all solution, as shoppers from each market have their own different expectations with regard to the localized shopping experience. Hence merchants of all sizes, find a do it yourself cross-border strategy to be complex, expensive, time insensitive, inflexible and highly difficult to scale and maintain.

This is where Global-e comes in."

How do they do cross-border ecommerce:
"We support localized marketing messaging in over 25 languages. We use a proprietary built localized pricing engine to present prices in more than 100 currencies and support different pricing structures based on the shoppers’ location, local market conventions and the merchants pricing strategy.

We enable shoppers to checkout in their native language and to choose their favorite means of payment out of over 150 payment methods we already support. We pre-calculate import duties and taxes, and can either embed them into product price or collect them at checkout, thereby simplifying the customs clearance process and allowing for a fully guaranteed landed cost goods for both the shopper and the merchant.

We hone an extensive network of more than 20 shipping carriers, including market specific methods, such as cash on delivery or delivery to drop-off points, offering multiple shipping modes at attractive rates. And we even provide local after sales support and returns management by a multilingual shopper services and multiple returns options, including prepaid and local returns in relevant markets.

For the merchant, we make selling internationally as seamless and effective as selling domestically. The greatly improved localized shopper experience increase the sales conversion, enabling merchants to better capitalize on their valuable international shopper traffic by generating a considerable uplift in international traffic conversion also exceeding 60% after they begin to use our platform.

We provide our merchants with the flexibility to rapidly and efficiently expand internationally and grow to new markets where and when they want to, with little to no upfront investment, using their existing storefronts and maintaining their own brand experience in direct relationship with their shoppers.

Furthermore, we enable our merchant to offload complexities and risks, which are otherwise presented by transacting cross-border, making the selling and fulfilling process for international orders as simple as that of domestic sales.

We provide all these capabilities by means of our comprehensive end-to-end cloud delivered technology platform, built on top of a highly scalable, multi-layer tech stack, integrated and coupled with a diverse ecosystem of technology and service partners via dozens of open APIs."

Any partners we have heard of?
"From leading ecommerce platforms such as Shopify, Salesforce, Magento, BigCommerce, and others through the payment providers like Radiant [ph], World Beat, Klarna, and others, through the shipping carriers such as DHL, broad management providers, such as Porter and many of our partners providing value-added services, such as translation, online marketing and more.

With several of these, including Facebook, Shopify and DHL, we have already struck broader strategic partnerships, including mutual client referrals, given the significant value we generate for all players in the ecosystem."

Forecast? 66%-68% growth, likely sandbagged.
"For Q3, we are expecting GMV to be in the range of $328 million to $338 million. At the midpoint of the range, this represents a growth rate of 76% versus Q3 of 2020. We expect Q3 revenue to be in the range of $54.3 million to $56.3 million. This represents a growth rate of 66% at the midpoint of the range versus Q3 of 2020.

For adjusted EBITDA we are expecting a profit in the range of $2.million 8 to $3.8 million. For the full year of 2021, we are raising our guidance significantly. We anticipate GMV to be in the range of $1.35 billion to $1.37 billion, representing nearly 76% annual growth at the midpoint of the range.

Revenue is expected to be in the range of $227 million to $231 million, representing a growth rate of 68% at the midpoint of the range. For adjusted EBITDA, we’re expecting a profit of $22 million to $24 million."

Growth - where will it come from, and does your Shopify partnership bring in all your revenue today?
"Now referring specifically to Shopify, we are seeing already an increase in the – in our pipelines and the sign ups of especially on the SMB front, kind of the smaller size merchant.

We do expect, as we guided before that we will see more movement on the pipeline with larger brand probably towards next year, in the beginning of next year as we complete the new integration that we mentioned in our comments. In terms of financial impact, as such, we do expect, as we guided before the main impact to kick in only next year towards the second half of the year. "

Translation - all this is before we really start seeing the benefits of the Shopify exclusive partnership.

Further digging in, do they expect share-of-wallet expansion from existing accounts, or is growth guidance coming from new accounts?
"Analyst - how much embedded in the guidance relies on new brands ramping or how much of that’s based on the existing portfolio? And then I have a follow-up question.

Nir Debbi

Hi Samad, it’s Nir. Thank you for your question. A lot of our guidance is based on clients already integrated in live on our platform, so most of the contribution for the second part of the year is already from live clients.

There will be some contribution and a growing contribution towards late Q3 of more merchants going live on the platform that are already signed in and to use our services and currently in integration, but we expect most of the effect of the growing pipeline is to sign clients to affect our Q1 and Q2 results next year and even more so in the second part of 2022."

This means their guidance is predicated mainly on expansion of existing clients, and not even factoring in new clients.

How do they grow revenue from existing clients? Apparently the largest merchants tend to start smaller, in terms of target markets. A typical land-and-expand approach here.
"However, the large merchants, specifically the super large merchants are the ones that are deploying batches of markets with us and we then, basically there is a significant opportunity still ahead of us. They are only a 10% or 20% of the brands, but they hold a significant portion of our GMV and the growth opportunity with them is huge.

We’ve seen that this year with Hugo Boss giving us 12 more market, we’ve seen it with Versace giving us additional market this year. We’ve seen it with Marks & Spencer that added 47 more markets, which is the sixth consecutive years which we open more markets with them, so with the large ones, we do see quite a lot of opportunities still ahead of us."

Are they looking to M&A to acquire capabilities or reach?
"Analyst - Can you give us a little more detail in terms of like the timing, should we expect acquisitions to contribute at least some inorganic growth or they likely to be purely technology? Just trying to get a little bit of color of kind of what you’re thinking in terms of investment potential and impact? Thanks.

Amir Schlachet

Sure. So we’re actually looking at both types of acquisition both growth in activity as well as additional capabilities and as you said, we are definitely gearing up for that in the – looking at the potential space. I would say in terms of timing, you should hopefully, expect to see us do, I would say at least one or maybe two transactions this side of Christmas."

What is the Shopify partnership all about - how will that work?
"it’s making our services, kind of the same services that you know are just built in straight into the Shopify checkout itself.

So making it a seamless transition, I would say for the merchants as they switch globally on, it will just become part of their existing Shopify checkout as well as a deeper integration into the Shopify system or back-end as well, which should enable once the – although it’s a multi-phase project, so once the final phases are in, it will enable an even seamless – an even more seamless integration and kind of going live process for these merchants and hopefully making it almost as easy as flipping a switch.

So that is the intent, I would say on the things that we still need to get done on the technical integration front. In terms of the impact as we guided, this is what we’re seeing, we’re on track. We are seeing already initial kind of traction, now additional traction in our pipeline is growing, including more and more SMB merchants, Shopify based merchants that are going live with us, so we already see an increase in that, but I would say financially, we’ll probably see more of the impact towards kind of the first and second quarters of next year and certainly onwards on the second half of next year, once we have done the new integration kind of laid this year, which would enable us to bring also it to the bigger size, kind of enterprise size merchants that are on Shopify. "

*Shopify took a $193m pre-IPO stake in GLBE, it should be noted.

We saw great results from Sea Limited in APAC, is GLBE growing in APAC, too?
"Yes, we do see great opportunity in APAC and we do intend to invest much more. But as you stated, we do plan to enhance our partnership and channel partners in order to support it. Yes, we do have channel partners that are global in nature, that would be the life of the DHL or Facebook or a partnership with Shopify. But we are building also APAC specific partnership.

This is in process and we are hoping, we will have good news within Q3 or Q4 to announce about the partnership to support that growth as well. And on the back of it, we expect much more contribution coming out of APAC into our pipeline and into our numbers and I would say from the second quarter and third quarter of 2022."

Will be interesting to see if this is China-based partnership or something like Asia-not-China via Sea Limited or something similar.

Obviously I like this stock. It is pricey now, thanks to a huge runup.
The runup in price is unfortunate mainly because it came before this first public ER, so you had to take a leap of faith a bit. We have seen other companies debut and runup early after IPO, such as DDOG, ZM, etc… They won’t all pan out, but I think this one will, and I don’t expect a ton of upside in last 4 months of 2021, so I view it as a time to accumulate on dips or drawdowns, and believe this could be a big winner starting in 2022.

I would end it with this summary from Q&A where mgmt explains why their results are so good, and why it should continue:

"Brian Peterson

Hi. Thanks for taking the question and congrats on a really strong results. So first question for me, just kind of high level. We don’t typically see 90% plus revenue growth and GMV growth of this scale, if we’re thinking longer term, what are kind of key swing factors on growth and how do we think about the sales and marketing investments – is that right level of sales and marketing investments to drive that?

Ofer Koren

Yes. I think to answer the first part of your question. We’re very effective in our sales and marketing approach. Over the years, historically we’ve been less than 10% spend on sales and marketing out of our revenue and the reason we were able to do it is because we had historically, on the one hand huge NDR with over 140% quite stable that supported our growth with existing merchants that continue to grow and enjoy the benefits our platform, it brings to merchants wanting to scale up international.

And in parallel to that and we have really good win ratio on merchants stepping into a tailwind of a very aggressively growing market with merchants trying to scale cross border. So it’s a combination of both together with the fact that we basically have a pool with no leaks in it.

Our GDR numbers are sub 2% historically here on an annual average, so we don’t actually lose business we have, we win, much more business coming in and we grow the business that we already have in and the combination of it allows us to grow very fast even at the scale, we already have.

We do expect to continue this high growth rates going forward. And so where high two-digit numbers is something we expect to continue with us going into the foreseeable future as we do have quite a lot of levers, we continue to push. In terms of sales and marketing, we do spend a lot.

You can see in our Q2 numbers, we grew more than 100% in reinvestment, in sales and marketing, still doing it very, very efficiently as a percent based out of our revenue, but we do scale up. We scale up in the current markets where we are already present across the Continental Europe, across North America as well in new regions, we established our operations in Japan with the first two employees in Japan.

We are intending to roll out additional markets in APAC late Q3 and early Q4. So, we do intend to invest much more within sales and marketing in different aspect, as well as building our channel partners to continue to do it efficiently and at scale."

Dreamer

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Now GLBE has a real competitor, and it is from their partner Shopify:

SHOPIFY ROLLS OUT NEW SOLUTION MEANT TO HELP MERCHANTS MANAGE GLOBAL COMMERCE, CROSS-BORDER SHOPPING
https://betakit.com/shopify-rolls-out-new-solution-meant-to-…

Shopify Markets is available in early access globally as of September 14, and will roll out to all merchants in the coming months.

“We are now global by default,” Shopify president Harley Finkelstein told CNN in an interview, referring to cross-border, world-wide sales. “What we’re trying to do is make it that a merchant, again, no matter what size, doesn’t have to think about things like taxes or duties or languages or currencies and the best part is all of these cross-border tools are available to merchants right out of the box.”

Shopify product manager clarified in twitter that this is not power by GLBE:
Shopify Markets is separate from our partnership with Global-e, which is a great solution for a subset of merchants looking for high-touch service to meet more complex cross-border needs. Shopify Markets will work for brands of all sizes looking to act on their global aspirations
https://twitter.com/amishrarohit/status/1437846028418523143?..

In Q2 CC, on Q3 and full year forecast, the CFO didn’t mention anything about Shopify integrations and not sure how much of it has been put into the guidance. Since GLBE is still very small with only 500 merchants, there shall be plenty of room for GLBE to grow on Shopify platform even they unveiled a generic default option as an in-house competitor.

This might cause a FUD event in the short term. Still long GLBE.

Zoro

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Great notes, Dreamer. I think my favorite was:

We do expect as we guided before that we will see more movement on the pipeline with larger brand probably toward next year and the beginning of next year as we complete the new integration that we mentioned in our comments. In terms of financial impact, as such, we do expect, as we guided before, the main impact to kick in on the next year toward the second half of the year.

I agree with your comment, Dreamer: Translation - all [the growth we’re seeing now] is before we really start seeing the benefits of the Shopify exclusive partnership.

I took a small position in Global-E, but I must admit that I’ve been scratching my head at what Zoro posted this morning: https://discussion.fool.com/now-glbe-has-a-real-competitor-and-i…, especially the tweet from a shopify product lead that said:

Shopify Markets is separate from our partnership with Global-e, which is a great solution for a subset of merchants looking for high-touch service to meet more complex cross-border needs. Shopify Markets will work for brands of all sizes looking to act on their global aspirations

Really? That’s kind of reductive language to use about a partner that SHOP has even bought millions of shares of. Really made me wonder what the status of the relationship is now. Maybe that’s paranoia, but with a concentrated portfolio where I look to build my small positions, I’m not adding a single share to this one until I figure out what’s going on.

Bear

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It seems that the market is not perceiving this as a bad news to GLBE as there has been no big price movements both yesterday (when the news was announced) and today after market open.

I just sent an email to GLBE IR about this and let’s see whether I will get a response or not.

Zoro

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I got the reply from GLBE IR only 20 mins after sending my email - the responsiveness is very impressive!

Here are the detailed comments given by the IR and it basically cleared all my doubts (GLBE is a much much superior solution) and I will definitely hold all my shares (already 10%) and hope it can also help Bear increase his position:) :

Dear Zoro,

We are aware of the ‘Shopify Markets’ solution and the offering is consistent with our original understanding with Shopify that they will continue to develop their native solution targeting the wide base of small merchants. ‘Shopify Markets’ is a repackaging of Shopify’s current native solution tools (Payments, currencies) with a new add-on of a tax estimation calculator. The target audience for this solution is the small merchants of Shopify, for which the self-service limited solution may serve well, not the larger more sophisticated merchants that our solution targets. Few examples for the difference:
- Taxes are based on estimations only, no guarantee for merchants for differences based on classification or rate difference
- No hedging of currencies for returns
- No local registration on behalf of merchant for tax in markets that require it
- No returns solution
- No tailored guidance to merchant for optimized best practice (it is based of a generic setup)
- Limited local payments
- Etc

This solution is geared towards the very wide base of small merchants that either don’t trade cross-border currently or trade at very low level.

Global-e is the exclusive 3rd party end-to-end cross border solution on the Shopify platform, including tailored to merchant services and optimization, risk mitigation (hedge and taxes) and fulfillment. Our solution, as we and Shopify view it, is geared towards the larger more sophisticated Shopify merchants [15-20K] which represent a large share of the cross-border e-com potential.

Since this structure was pre-agreed and the solutions target different audiences, we do not expect any significant impact the partnership

Hope this is helpful,

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