GLBE Earnings - Possible Overreaction

[laneylawyer]

Good morning, Everyone - I wanted to start a post on GLBE’s earnings this morning, which were not received well by the market (down about 25% right now). The earnings call transcript has not been posted yet so my references to the cc are just from my memory after listening to it. You can listen to the full call yourself here: https://edge.media-server.com/mmc/p/b6jsyb43/

The bad part: the numbers. GLBE’s revenue of $133.61 M (+26.6 y/y) missed by $7.36M. GLBE also lowered its full year revenue guide to $563M - 571M from $570M - 596M. The good news in the numbers was a small ($.03) beat in EPS estimates.

The reason for the miss and lowered guidance was explained on the cc as slower than expected consumer purchases in Europe - especially in relation to luxury goods. Management explained the slowness seemed temporary, happening mostly in September and early October. GLBE saw an uptick to normal levels in late October and early November.

The most important thing for me on the cc was the continued re-iteration by the CEO and CFO that they see their growth accelerating from here both next quarter and next year. They probably mentioned that four or five times. Drivers for the acceleration were discussed as the Shopify partnership, which just started ramping up in the last few weeks of this just reported q so it did not have a meaningful contribution. They also talked about having a strong pipeline and a new partnership ramping up with Wix.com.

My take is that this morning’s reaction is overdone. If management feels so strongly that re-acceleration is coming, I see this q as the trough for GLBE’s performance.

I am new to this name so this is my first earnings call. I’d love to hear from others that have listened to prior calls to see if they have gained a trust in what management has to say.

Thanks for reading and hang in there.

Best,
@laneylawyer

Long GLBE

Not investment advice, just musings.

[MajorFool20]

@laneylawyer

The most important thing for me on the cc was the continued re-iteration by the CEO and CFO that they see their growth accelerating from here both next quarter and next year.

I’d love to hear from others that have listened to prior calls to see if they have gained a trust in what management has to say.

I haven’t ever owned GLBE so take my thoughts with a big pinch of salt but I do know this company has struggled to make good on their promises/guidance in the past. I am shamelessly going to steal from Bear’s post from back in February -

@PaulWBryant

It’s a little hard to take their guidance seriously as they had to LOWER their full-year GMV and revenue guides twice each last year.

Revenue:
initial FY guide: 411 - 421m
Q1 update: 383 - 403m
Q2 update: 406 - 426m
Q3 update: 404.7 - 410.7m

They ended the year with 409m. Not exactly under-promising and over-delivering.

This history of lowering guidance, coupled with this quarter’s mishap of missing revenue + lowering guidance yet again makes me very wary of management. I have a hard time believing they can accurately forecast next year when they are consistently lowering the current year guidance. Add to the fact that Shopify reported a big quarter and it looks even more suspect.

Again, I haven’t ever owned GLBE so I am not the best person to speak to this but I have been watching it and this type of inconsistent performance has always kept me away.

That said, I hope management proves me wrong and does well for you and other shareholders on the board.

Rex

[wsm007]

I had a small position in GLBE. I’ve been following them for a couple of years and have really delved into the whole gamut in the past. I like the leadership, the mission and the TAM/problem area.

I sold it all based on the following numbers:

• Revenue was $133.6m vs consensus of $141m and guidance of $136-$142m which equated to zero sequential growth (never happened in a Q3 before in 5 years) and the yoy growth rate dropping from 57% last q to 27% now. This is the lowest yoy growth that I have on record for this company and my numbers go back to when they had just $12m of quarterly revenue. Sure, it’s off a big compare, but if they had hit the top end of their guide (and I was rooting for a beat) then it would have been 34% up.
• GMV was $839m vs $880m expected which was the lowest q2->q3 increase in GMV in 5 years
• the only positive for me was that margins held: adjusted GM% came in at 44.4% and they managed a slight beat and improvement on adj EBITDA to 16.5%.

When I saw these numbers, Bear’s commentary in the post above haunted me; they again missed their own goal. Which is an own goal…

I didn’t even feel like listening to the conference call. Growth dropping off a cliff like that in absolute terms, and worse, being much worse than management expected just isn’t what I’m interested in. The classic miss and lower is not what I want in a company. This was a growth story with a potential accelerant from Shopify on the horizon. In stead, it has now turned into a turnaround story where they need the Shopify product to save them imo.

Perhaps I’m being too harsh, but another Israeli company, MNDY, had a very different quarter with a beat and a raise - even in this environment. If you contrast the two companies the one is executing extremely well; the other isn’t. Either that or they are just too cyclically tied to the economies that they serve (or worse, they serve the luxury end of purchases in those economies) - many of which are probably entering recession.

-wsm.

[intjudo]

I don’t have an opinion whether the reaction was “overdone” but imo $GLBE is a good bet at this entry point.

…especially since (…as you’ve noted) Shopify Markets Pro is just getting traction.

I bumped my small position up by 50%; might add some more in the next week or so.

[FoolishJeff]

I agree with @wsm007. I had a 5% position going into earnings, which turned out to be a disaster. Europe appears to be in a shallow recession - I find it hard to buy that the “slowdown” was only for 6 weeks or so and now everything is fine. The numbers don’t add up.

I haven’t owned this company for very long but given the history of missed targets and guides, I have lost faith in management.

Simply put, there are better growth stories and better management than what Global-E appears to be offering.

[JabbokRiver42]

This one has been hard for me. I picked it up literally in the first minute of its IPO in May 2021. It went straight up for a long time. I panic-sold it in early 2022 when the downturn started to hit e-commerce, but still at a fair profit, since it had run up so much.

It got pummeled like everything else in 2022 and I picked it up again last fall for just over its IPO price. And it grew and grew again. By this July, it was up over 60% for me and I began trimming it to fund other things.

I got worried when the war broke out, since it’s an Israeli company, and I wasn’t sure if it would affect them. I trimmed more.

Their biggest story has always been tied to SHOP, and when Shopify had great earnings earlier this month, I had high hopes that the partnership would have paid off for GLBE, too. It was up over 50% for me yesterday, so I don’t think I was the only one who thought so.

But the fullness of that partnership always seems to be in the future, and when it took a dive this morning, I got out while I could still have gains.

The biggest unknown for me here has been management. They are a black box. No Glassdoor ratings or reviews to go by. No videos I could find. They communicate virtually nothing in-between earnings reports.

30% of their revenue comes from European transactions, and two wars now threaten the region. They said this morning that they were starting to see the Shopify Markets Pro partnership take hold. Next quarter should be good with the holidays, but they guided down.

I can’t complain. It’s one of the few companies that has reliably made me money. They offer an invaluable service. The Shopify partnership should pay off. But Europe appears to be more vulnerable to a recession, I don’t find the new Wix partnership all that compelling, and I have no way to evaluate management. I’m comfortable with my exit, but won’t rule out getting back into it, should it get beaten back down to its IPO again.

JabbokRiver

[anthonyms]

@wsm007

• Revenue was $133.6m vs consensus of $141m and guidance of $136-$142m which equated to zero sequential growth (never happened in a Q3 before in 5 years) and the yoy growth rate dropping from 57% last q to 27% now. This is the lowest yoy growth that I have on record for this company and my numbers go back to when they had just $12m of quarterly revenue. Sure, it’s off a big compare, but if they had hit the top end of their guide (and I was rooting for a beat) then it would have been 34% up.
• GMV was $839m vs $880m expected which was the lowest q2->q3 increase in GMV in 5 years

I understand the frustration here but I guess 3 points to qualify this…

1. The Borderfree acquisition closed on July 1st 2022 so that meant there was a 10% headwind in compares as it lapped that previous growth rate right there. (As well as another 5% headwind from the dropping out of compares from the Flow acquisition in January 2022).

2. I think that they were budgeting for an earlier general availability launch date than what transpired to be the very end of the quarter with Shopify Markets Pro (in September) which we knew would be a pivotal event.

3. Their Service revenues did actually grow 31% so closer to their plan but the Fulfilment revenues (the lower margin element) came in light at 23% growth. Service revenues did grow QoQ sequentially from $59.5m to $62.4m (4.9% growth). This also fits the picture of the improvement in margin that we saw.

Ant

[PaulWBryant]

@JabbokRiver42

The biggest unknown for me here has been management. They are a black box. No Glassdoor ratings or reviews to go by. No videos I could find. They communicate virtually nothing in-between earnings reports.

Black box is the perfect way to put it. I don’t think they give customer count, enterprise customer count, or really many other key performance indicators. You kind of have to have blind faith to own this one…faith in a mgmt team that keeps missing their own guides.

Bear

[Iamnzane]

It does seem like the selloff was overdone. I have a small position and am considering an add. My hesitancy is my take on the weakening EU macro economy is personally pretty weak. The Shopify Market Pro is starting to kick now in just Q4, but remember these are only localization service fees not typical full GLBE enterprise services. So there is less of a revenue take per transaction but a lot of Shopify customers probably signing on. These promising strategic moves and customer growth are the honey. They feel enthusiastic on the business acceleration. Here is the CEO quote from the earnings call and it about sums it up.

Blockquote

So while the short fall in GMV in Q3, combined with the prevailing macro-related uncertainty levels around consumer spending have forced us to revise our annual guidance slightly downwards. We nevertheless believe that these early positive indications over the past few weeks, to together with the continued strength of our many growth engines and our new bookings will enable our growth rates to accelerate going forward and into 2024.

Blockquote

-zane

[ChangHsieh]

Hi Bear
the info you want in their annual report

2021

2022

2018:161
2019:283
2020:442
2021:657
2022:1036

[Oforfive]

Merchant growth is compounding at 59% to 60%. The only thing is, “merchant” has no special definition–as far as I see in the Annual Reports. All merchants are not of equal value to GBLE. Some more color would be helpful.

I doubled my position, now 1.8%. I aim for 20 positions, so just a partial position for now. I like GLBE for the next few years for all the positive reasons stated in this and previous threads. Don’t expect a smooth ride.

KC

[ChangHsieh]

@JabbokRiver42

Their biggest story has always been tied to SHOP, and when Shopify had great earnings earlier this month, I had high hopes that the partnership would have paid off for GLBE, too. It was up over 50% for me yesterday, so I don’t think I was the only one who thought so.
But the fullness of that partnership always seems to be in the future.

30% of their revenue comes from European transactions, and two wars now threaten the region. They said this morning that they were starting to see the Shopify Markets Pro partnership take hold. Next quarter should be good with the holidays, but they guided down.

For me, about the shop market pro, I remember the CEO always said 2023 would not have a good effect, so I no need to expect this year.
why do they down-guide the whole year because they didn’t know Sep and Oct sudden slowdown, it’s not about management’s ability.
We can read Kering report and will know, the first paragraph says “Beyond the challenging macroeconomic conditions and softening demand across the luxury industry”.
So I think the story of GLBE no changed, they still keep going, but I don’t expect next quarter will do well because the consumption is cooling down.

Kering third quarter report

[othalan]

I have had serious doubt about Global-E because they are highly susceptible to macroeconomic woes which I do not expect to improve in the near future. However, this extreme selloff after earnings convinced me to start up a small position. I understand the market’s dissatisfaction but believe it to be a significant overreaction. Customer growth and NRR are both strong. The integration with Shopify Markets Pro could still be a significant boon.

I still have my doubts but I also believe that in the short term there is comparatively little downside risk at this entry point compared to the potential gain.