Global-e online

I want to bring a new company to the board that IPO’d recently and has been in hyper growth mode since the foundation in 2013: Global-e online.

Activity

Global-e has built a leading platform to enable and accelerate global, direct-to-consumer (“D2C”) cross-border e-commerce. The platform was purpose-built for international shoppers to buy seamlessly online and for merchants to sell from, and to, anywhere in the world. Global e-online increases the conversion of international traffic into sales by removing much of the complexity associated with international e-commerce. The vast capabilities of the end-to-end platform include interaction with shoppers in their native languages, market-adjusted pricing, payment options tailored to local market preferences, compliance with local consumer regulations and requirements such as customs duties and taxes, shipping services, after-sales support and returns management. These elements are unified under the Global-e platform to enhance the shopper experience and enable merchants to capture the cross-border opportunity.

The platform supports local messaging in over 25 languages, purchases in more than 100 currencies by over 150 payment methods and a multitude of competitively-priced shipping options. Shoppers enjoy a fully-guaranteed landed price quote, which includes shipping costs, import duties and tax charges, as well as post-sale services, including multi-lingual customer service and a managed returns service. The enhanced shopper experience they enable typically results in improved sales conversion of merchants’ international traffic, thereby increasing their cross-border revenues. They have seen merchants experience significant uplift (often exceeding 60%) in international traffic conversion after beginning to use the platform.

For merchants, the platform also removes much of the complexity that is associated with cross-border e-commerce. Sales are reconciled and paid for locally and in the currency of the merchant’s domicile. Global-e handle import duties calculation and collection, foreign sales tax remittance as well as tax recovery for returned goods in line with market regulations. They also displace certain fraud and foreign exchange risks that would otherwise be borne by merchants. They allow merchants to expand and scale their cross-border operations rapidly and efficiently, enabling a quick go-to-market with limited investment.

Business model

The company depends on the merchant’s success as revenue is closely tied to the merchant’s GMV. There is a clear alignment of interest between both parties and therefore, the gross dollar retention has been over 98% since 2018, while the Net Dollar retention rate has typically been over 140%.

Global-e has 442 merchants on the platform on 31 December 2020 (up from 283 in 2019 and 161 in 2018) across diversified verticals and ranging from small, emerging brands to globally-recognized retailers. It has been reported that well-known clothing brands such as Versace and Hugo Boss are among the customers. There is some customer concentration as the largest merchant represented 18% of revenue in 2020 (25% in 2019) and top ten represents 37% of total revenue in 2020 (44% in 2019). They also state a payback period of less than 6 months and thus very efficient merchant acquisition strategy.

They have a very attractive volume-based revenue model, driven by shopper order activity on the merchants’ websites. As a result, the revenues, which are generated from the fees charged for the use of the integrated platform solution and provision of fulfillment services, are directly correlated with the level of GMV that flows through the platform. Global-e offers a fully integrated platform solution to merchants, and derive revenues by charging fees that vary depending on the transaction volume processed, outbound countries and destination markets, level of customer service provided and shipping options, among other variables.

There are two main revenue streams:

Service fees revenue: Generated as a percentage of the GMV that flows through the platform
Fulfillment services revenue: Generated through their offerings of shipping and handling. These are optional for the merchant.

Global-e aims to sign contracts with merchants for a minimum term of 12 months and with a minimum committed monthly volume. The vast majority of their merchants choose to stay on their platform beyond the initial term and trade at larger volumes than the contractually agreed minimum.

The numbers

GMV has almost doubled (or more) since the start in 2014:
2014: 0
2015: 6m
2016: 46m (+666%)
2017: 109m (+137%)
2018: 211m (+94%)
2019: 382m (+81%)
2020: 774m (+103%) => Some tailwinds from COVID here

The revenue evolution:
2018: 38.6m
2019: 65.9m (+71%)
2020: 136.4m (+107%)

For Q1 2021, they guided to a revenue increase between 129% and 138%.

Gross margins are lower than a typical software company but trending upwards, from 22.2% in 2018 to 28.3% in 2019 and 31.9% in 2020.

The company also realized a net income of 3.9m in 2020. Adjusted EBITDA was -10m, -4.5m and +12.6m (9.2% of revenue) for 2018-2020 period.

Net dollar retention rates:
2018: 153%
2019: 134%
2020: 172%

In 2020, UK represented 59% of all revenues, North America 25% and the EU 16%. NA and EU are growing significantly faster than the UK revenue. They are also looking to expand into APAC and are considering M&A to establish a foothold there. In terms of destination markets from where the shoppers make purchases, the US is the biggest market with 16% of the total revenue in 2020.

Valuation

The current market cap is 3.8 billion with an enterprise value around 3.4 billion. This gives them a trailing EV/S of approx. 25 and forward EV/S in the teens (AFAIK, there’s no guidance yet for 2021 revenue).

Recent developments

Shopify recently invested 193m in the company prior to the IPO, giving them approx. 5.5% stake. Shopify also acquired warrants that entitle them to an additional 11.85m shares over the coming 2 years that could give them a stake over 10%. They also signed a deal making Global-e online the exclusive provider for these cross-border services on Shopify’s platform. Other strategic investors are shipping giant DHL.

Disclosure: No position yet, still researching the company.

Would be curious to hear if someone has any thoughts on the company.

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Could this company be considered to be a competitor to Adyen?

I wouldn’t call this a competitor as they likely work together with Adyen and other payment companies to deliver their services and localized payment options. I would assume that a significant part of the cost of revenue consists of these payment fees to companies such as Adyen.

From the S-1:

Gross Profit and Gross Margin

Our cost of revenue consists primarily of costs associated with payment acquiring fees, shipping and logistic costs, and operational merchant support expenses, such as customer service.

Rubenslash,

Thank you for your well-formatted, comprehensive presentation of Gobal-2 Online Ltd, headquartered in London, UK. It was a pleasure to read.

For those who, like I, use stock symbols rather than a company’s name, Global-e Online Ltd is listed as GLBE (NasdaqGS).

I. M.

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