As I’ve posted before, I got into Global-e within the first minute of its IPO last May, convinced by the enthusiasm of Brian Feroldi for their S-1 at TMF. I panic sold it for a good profit, along with everything else related to e-commerce or social-commerce when SNAP took a dive last October. But when I saw it so beaten down this year, I got back in and it is now a 5.4% position for me (and growing organically today!).
As you know, I rely on others like TMF analysts and those here to pick through the numbers. But if those have a green light, my overlay is the quality of management, ESG, and both the need and quality of the product/service. As an Israeli company, management is hard to assess apart from their execution and any interviews (including conference calls) I can find, and is therefore backward looking.
So my thesis for Global-e has been anchored on the fact that I can’t imagine how any merchant does business in the 21st century without what they offer. And what they offer is so complex and such a headache for merchants, I also can’t imagine even wanting to do it in-house. Add in that they just acquired their only real competition in the space (Flow), and it seems like blue skies to me unless there are management issues hiding under the hood.
I was pleased by the conference call last night and note that, like with Upstart, they could explain a complex product clearly, even though none of them are native English speakers. That checks a management box for me that others (cough…Spencer Skates…cough) don’t.
And the clearest articulation of my thesis for them came in the Q&A, which is in bold in the question I’ve copied below.
John Godin – Needham and Company – Analyst
Great. And next, just wondering if you could talk about Europe specifically a little bit, highlight maybe any of the demand trends you’re seeing there. I’m curious if you’re seeing some kind of an additional migration of companies who previously were not operating in Europe on your platform now migrating on given the VAT changes. Thank you.
Nir Debbi – Co-Founder and President
Yes. We do continue to see an increased demand for our services. As the complexity of trading cross-border in general continues to increase, it’s not only the change in Europe with the IOSS. Regime now applies also to cross-border sales, not only the distance selling within Europe.
But – and I can say it because we just did a summary for our clients recently. There were more than 30 changes in regulation cross-border only in the last 12 months across different markets. So this, over time, convinces merchants that the time it takes to adjust the investment and the know-how of how to do it efficiently does not make sense doing it in-house, and we see more interest coming our way out of that. In Europe, specifically, based on the IOSS, we do see more interest from cross-border retailers looking into how they can leverage globally and avoid the need for registration as well as enjoy additional capabilities related to international duty drawbacks and other, I would say, more complicated processes that Global-e enables.
More than 30 changes in cross-border regulation just in the past 12 months! Global-e handles that for you. Only merchant masochists would opt to deal with that level of change themselves.
Further, they pointed out that one of the pandemic tailwinds that helped them in the past year was the move to selling direct to consumer. That trend, they said, was here to stay and they see no slowdown in that at all. Here is that exchange:
Koji Ikeda – Bank of America Merrill Lynch – Analyst
Great. Hi Amir, Hi Nir. Thanks for taking my question. I had a question on guidance here.
So over the past few days, we’ve recently heard some other e-commerce companies where maybe the outlook was a little bit less certain. And here you are with confidence giving '22 guidance, not only confidence giving it but really a nice number here at 70%. So wanted to dig in a little bit on what you’re seeing out there, hearing out there from your customers that is giving you all that confidence to give a '22 guide right now.
Nir Debbi – Co-Founder and President
Yes. So thank you for the question. This is Nir. Basically, we have seen with our clients, giving priority into investment in direct-to-consumer cross-border.
And we’ve seen it with multiple of our clients, opening more lanes and investing more in penetration into new geographies, which expected to continue going into 2023. In parallel, 2021 was a record year for us in finding new business and new logos in, and a lot of this effect would come into play only in 2022 and would contribute to this accelerated growth. We do see, as we spoke about in previous calls, a lot of the effects of COVID that are here to stay. So the need for brands and the desire to go direct to consumer was accelerated through the pandemic, and this state does not change.
There might be certain relief with shops being open. However, the trend of brands, especially larger brands, moving into a direct-to-consumer on a global basis is not stopping, and we see it in our pipeline. And this gives us, I would say, quite a lot of confidence building our planning into 2022 and onwards.
I might add a bit–it’s not quite at the allocation I had before my panic sell and it’s still well off it’s ATH, but I need to see gross margins continuing to improve and have another quarter or two to add substantially.
JR