Global-E Online Ltd.

Q4 2021 Earnings Conference Call

2/16/2022

spk09: Greetings and welcome to the Global EVE fourth quarter and year-end 2021 earnings call. This call is being simultaneously webcast on the company's website in the Investors section under News and Events. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during a conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded For opening remarks and introductions, I'd now like to turn the conference over to Erica Mannion at Sapphire Investor Relations. Please go ahead.
spk00: Thank you, and good afternoon. With me today from GlobalE are Amir Shloket, Co-Founder and Chief Executive Officer, Ofer Karan, Chief Financial Officer, and Nir Devi, Co-Founder and President. Amir will begin with a brief review of the business results for the fourth quarter and year ended December 31, 2021. GoFundMe will then review the financial results for the fourth quarter and year ended December 31, 2021, followed by the company's outlook for the first quarter and full year of 2022. We will then open the call for questions. Certain statements we make today may constitute forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Safe Harbor Provisions of the U.S. Private Securities Litigation Reform Act of 1995 that relate to the current expectations and views of future events. These forward-looking statements are subject to risks, uncertainties, and assumptions, some of which are beyond our control. In addition, these forward-looking statements reflect our current views with respect to future events and are not a guarantee of future performance. Actual outcomes may differ materially from the information contained in the forward-looking statements as a result of a number of factors, including those set forth in the section titled Risk Factors in our prospectus files with the SEC on September 13, 2021, and other documents filed with or furnished to the SEC. These statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this call. You should not put undue reliance on any forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance, and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Except as required by applicable law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, after the date on which these statements are made, or to reflect the occurrence of unanticipated events. Please refer to our press release dated February 16, 2022 for additional information. Certain metrics we will discuss today are non-GAAP metrics. The presentation of these financial information is not intended to be considered in isolation or as a substitute for or superior to financial information prepared and presented in accordance with GAAP. We use these non-GAAP financial measures for financial and operating decision making as a means to evaluate period-to-period comparisons. We believe that these measures provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making. For more information on the non-GAAP financial measures, please see the reconciliation tables provided in our press release dated February 16, 2022. Throughout this call, We provide a number of key performance indicators used by our management and often used by competitors in our industry. These and other key performance indicators are discussed in more detail in our press release dated February 16, 2022. I will now turn the call over to Amir, co-founder and CEO.
spk03: Thank you, Erica, and welcome, everyone. Today marks our third quarter as a public company and our first Q4 reported one. This is an exciting chance to reflect on what an unbelievable year we've had. We finished the year with the strongest quarter in the company's history, continuing our consistent trend of delivering growth and strong execution against our ambitious targets. During today's call, we will review our Q4 and full 2021 results, update you on the exciting developments going on in the business, and provide guidance towards what we expect to see in 2022. Starting with Q4 results, I could not be prouder of the Globally team for producing yet another record quarter, despite the tough year-on-year comp as we lapped last year's COVID-impacted holiday period. For the first time in our company's history, we surpassed half a billion dollars in quarterly GMV, with $505 million generated in the quarter. Together with our strong execution in the previous three quarters, annual GMV summed up to $1.45 billion in 2021, delivering more than 87% growth versus 2020 GMV. Revenues followed a similar trend with $82.7 million of revenues in Q4 and $245.3 million for the full year, delivering roughly 80% year-on-year growth in 2021. Thanks to our growing economies of scale and our continued focus on operational excellence, we managed to continue improving our gross profitability margin, which in Q4 reached 39.5%. As a result of the top line growth, coupled with the scale average, we more than doubled our gross profit in 2021, reaching $91.4 million compared to $43.5 million last year, delivering 110% year-on-year gross profit expansion. We continue to reinvest across our business as we rapidly scale up, but as always, we do it in a thoughtful and highly efficient manner, maintaining our cash generating model with an adjusted EBITDA margin of 14.3% for Q4 compared to 13.5% in Q4 of last year, and 13.2% for the full year of 2021, up from 9.2% in 2020. We continue to witness an immense and growing market opportunity ahead of us across all regions and market segments we operate in. Interest in our services remains as strong, if not stronger than ever. and we believe the effects of the COVID pandemic on merchants' priorities and decision-making processes is largely permanent. As we mentioned in the past, we do expect the gradual normalization of e-commerce growth rate to continue over the coming quarters as the impact of the pandemic wears off and shoppers around the world increase the percentage of their spend in physical stores. It is also worthwhile mentioning that given our scale and the strategic relationships we have with a variety of logistics service providers, coupled with the fact that merchants tend to prioritize direct-to-consumer over other channels, to date we have not witnessed any meaningful impact from supply chain challenges or merchant inventory shortages. Over the last quarter, we continued launching with many more incredible brands and continued expanding our relationships with prominent retail groups. During the fourth quarter, we launched with yet more brands from the LVMH group, this time Fenty Beauty and Fenty Skin, Rihanna's cosmetics brands. Yeezy Gap, Kanye West's much-discussed fashion corporation with Gap, also launched with us during Q4, as did the fast-growing sports clothing brand Navigation. During the quarter, we also expanded our relationship with several of our merchants, serving more and more lanes for them. Among these, we can mention Cartier, Stussy, Suunto, the French brand DeCouples, and the Spanish food tour brand Camper, all of which added additional key lanes to be operated by Globally. In addition, the German audio equipment brand Sennheiser added the U.S., one of its largest destination markets, to be operated by Globally, continuing our growth in the exciting new vertical of consumer electronics. Besides our strong momentum in the markets we already operate in, namely North America, the UK, and continental Europe, we also continue pursuing our geographical expansion efforts. We expanded our team on the ground in Tokyo, established a partnership agreement with the Japanese global digital transformation leader, Transcosmos, and now also have our first team member on the ground in Melbourne, Australia, with the first reputable Aussie merchant already signed. On the strategic partnerships front, our joint efforts together with Shopify to deliver the new native integration remain on track. We recently met additional important milestones in the technical development roadmap and are gearing up towards general availability of the new integration once we complete the pilot phase. All the while, we continue to onboard new Shopify-based merchants of various sizes on the existing third-party integrations. As a matter of fact, some of the new brand launches I mentioned earlier, such as Fenty Beauty, Easy Gap, and Navigation, are all Shopify-based, as is the remarkable direct-to-consumer healthcare apparel and lifestyle brand FIGS, which is the latest Shopify-based enterprise merchant to launch with us just a couple of weeks ago. I'm also happy to let the fans of the UK-based Formula One racing team McLaren know that you can now order your favorite merch. regardless of where you are in the world, as McLaren recently implemented Globally's offering on their headless Shopify-based online store. Finally, I would like to give you the latest update on the strategic acquisition of Flow Commerce we signed in Q4. We closed the transaction early in Q1 this year, welcomed the team into the Globally family, and immediately went full steam ahead with integrating Flow's team and capabilities into Globally. The motivation for the acquisition was our strategic wish to better support emerging brands as well as be able to provide our solutions to channels in white label form. As such, and based on Flow's technology, we recently established a new channels and emerging brands division. The division's first priority is to complete and launch the first channel partnership agreement, which is already signed with Shopify. and on which work is well underway by the former FlowTech and product organization, augmented now by personnel and know-how from GlobalEase teams. In addition to pursuing various other white-label channel opportunities, the new division is now in the midst of formulating its new go-to-market strategy and productizing additional aspects of our branded offering, taking into account GlobalEase know-how, scale, and expertise in order to ensure we deliver the best experience for the world's emerging brands. We expect this strategic work to continue over the next couple of quarters as we gear up to launch this exciting new offering towards the end of the year. In parallel to our strong push into the channels and emerging brand space on the back of our flow commerce acquisition, looking ahead to 2022, We first and foremost plan to continue leveraging our clear market-leading position to continue our accelerated growth across North America, the UK, and continental Europe, in all of which the market is still very much greenfield. As in the past, this will include signing up new merchants, expanding our relationships within brand groups, and operating additional lanes for existing merchants, leveraging both our ultra-efficient direct sales channels and our growing list of strategic partnerships with the likes of THL, Shopify, Klarna, Facebook and others. In addition, we plan to continue investing into building our offering and presence in the APAC region, both directly and through local strategic partners such as the Australian Post Group. While we expect our existing markets to continue exhibiting fast growth well into the future, Given the large untapped potential in the region, we do expect APAC to start gaining a meaningful part in our activity mix in the coming years. On the product side, over the last quarters, we welcome many new members to our expanding global R&D team as we continue to reinvest into product innovation and the building of new capabilities as future growth levers. Over the course of the coming year, We plan to continue adding more localization capabilities to the platform, with emphasis on further developing the granularity of our multi-local support features. Furthermore, we expect some of the value-added services we are piloting with, such as demand generation, for example, to move towards full-scale deployment throughout the few next quarters, providing merchants of all sizes with yet another layer of differentiated services and support for the growth of their cross-border business. During 2022, we also plan to begin a few additional pilots of our new managed services offering towards a full launch next year. 2022 started well, both in terms of activity and in terms of new business coming in, and we are optimistic regarding what this coming year has in stock for cross-border D2C in general and for us in particular. As Ofer will describe in more details in just a few minutes time, we are guiding for strong GMV and revenue growth of 70% in 2022 at the midpoint of the range, representing our strong market leadership position and the vast and long runway that lies ahead of us. With the conclusion of our first decade of operations already in sight next year, we believe we are literally just at the beginning of this exciting journey. As we continue our relentless focus on flawless execution, on operational excellence, and above all, on delivering exceptional, consistent, and long-term value to all our loyal merchants, the future looks bright, with tremendous opportunities for long-term growth ahead of us. And we very much plan to continue seizing them, effectively and efficiently, as we have done to date. And with that, I will hand it over to Ofer, our CFO, to go over our financial results in more depth, as well as provide more details regarding our outlook towards 2022.
spk02: Thank you, Amir, and thanks again, everybody, for joining us today for our quarterly earnings call. We are very pleased that we ended 2021 with another strong quarter of fast growth as we continue to execute well on all fronts, I'd like to point out again that in addition to our GAAP results, I'll also be discussing certain non-GAAP results. Our GAAP financial results, along with the reconciliation between GAAP and non-GAAP results, can be found in our earnings release. As Amir mentioned, our rapid growth in GMV continued in Q4 as we generated $505 million of GMV, an increase of 66% year over year. While growth of the overall e-commerce market is showing signs of normalization, we continue to benefit from the large and fast-growing direct-to-consumer cross-border e-commerce market opportunity. In Q4, we generated total revenues of $82.7 million, up 54% year-over-year. Service fees revenues were $35.5 million, up 73%, and fulfillment services revenue were up 43% to $47.2 million. The higher growth in service fee revenues compared to fulfillment services revenues was driven by the continuing growth of our multi-local offering and the mix of merchant volumes generated on our platform in Q4. Throughout 2021, our existing merchant base continued to stay and grow with us. as reflected in our annual NDR rate of 152% and GDR rate of over 98%. At the same time, we continue to see significant contribution of GMV and revenue from the new merchants that have launched with us during 2021. We have continued to experience higher-paced growth in our U.S. outbound revenue as our strong momentum in the U.S. continues. In 2021, US outbound revenue was up 108% year over year. As Amir mentioned, our gross profit continues to outpace top line growth as we continue to improve gross margins, leveraging our scale and improving efficiencies. In Q4, gross profit was $32.7 million, up 82% year over year. representing a gross margin of 39.5% compared to 33.5% in the same period last year, also affected by the higher share of service fees revenue. We continue to put efforts in leveraging our scale as we strive to further improve our efficiencies. Moving on to operational expenses, we are committed to continue investing in the development and enhancement of our platform. to further strengthen our current offering and support the new initiatives Amir has mentioned. R&D expense in Q4, excluding stock-based compensation, was $8.4 million, or 10.2% of revenue, compared to $4.6 million, or 8.7% in the same period last year. Total R&D spend in Q4 was $10.3 million. We also continue to invest in sales and marketing and cultivate a very healthy and growing pipeline while maintaining high levels of efficiency. Sales and marketing expense, excluding the amortization expenses related to the Shopify warrants and stock-based compensation, was $6.7 million or 8.1% of revenue compared to $3.6 million or 6.8% of revenue in the same period last year. Shopify warrants related amortization expense was $29.4 million, including these expenses and marketing expenses for the quarter totaled $36.7 million. General and administrative expense, excluding stock-based compensation and one-off flow transaction related expenses, was $5.8 million, or 7% of revenue. compared to $2.6 million or 4.8% of revenue in the same period last year. This expense reflects the impact of additional expenses related to being a public company, including our D&O insurance policy costs. Total G&A spend in Q4 was $7.8 million. Adjusted EBITDA totaled $11.8 million, representing a 14.3% adjusted EBITDA margin, increasing from $7.2 million or 13.4% margin in the same period last year. Net loss was $22.5 million compared to a net income of $4.3 million in the year-ago period, a direct outcome of the amortization expense related to the Shopify warrants. Net profit excluding the amortization expense related to the Shopify warrants was $6.9 million. Switching gears and turning to the balance sheet and cash flow statements, we ended 2022 with $509 million in cash and cash equivalents, including short-term deposits and marketable securities prior to the closing of the flow transaction. We continue to generate cash with operating cash flow in the quarter at $24 million compared to an operating cash flow of $33 million a year ago. Moving to our financial outlook and guidance for 2022, as you will see, the guidance reflects the strength and the continued momentum of the business. For Q1 2022, we are expecting GMV to be in the range of $446 to $456 million, At the midpoint of the range, this represents a growth rate of 69% versus Q2 of 2021. We expect Q1 revenue to be in the range of $74.5 to $76.5 million. At the midpoint of the range, this represents a growth rate of 64% versus Q1 of 2021. For adjusted EBITDA, we're expecting a profit in the range of 0.7 to 1.7%. For the full year of 2022, we anticipate GMV to be in the range of $2.45 to $2.5 billion, representing nearly 70% annual growth at the midpoint of the range. Revenue is expected to be in the range of $411 million to $421 million, representing a growth rate of 70% at the midpoint of the range. For adjusted EBITDA, we're expecting a profit of $38 to $42 million. Our outlook for 2022 reflects the impact of the flow acquisition, which in 2022 is still expected to generate negative adjusted EBITDA, as well as additional investment in personnel-related costs, sales and marketing, and product development. In conclusion, we believe that the opportunity ahead of us remains massive and that we are well positioned to capture it. We will continue to execute on all fronts to drive strong top line growth while leveraging economies of scale and continuing to generate cash. We are gearing ourselves up in order to continue to create value to our merchants and to accelerate our business momentum. And with that, Amir, Nir, and I are happy to take any of your questions. Operator?
spk09: Thank you very much. At this time, we will be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. As a reminder, we ask that you limit to one question and one follow-up. One moment, please, while we poll for questions. Our first question comes from the lineup with Goldman Sachs. Please go ahead.
spk05: Hey, guys. Good afternoon. Congrats on a nice quarter. I was hoping I could ask a question about how you're thinking about the opportunity with Shopify over the longer term. I'm wondering about how you're thinking about what's the lowest hanging fruit once the full integration gets off the ground and the partnership really starts ramping. When we look at Shopify volumes today, there's a significant amount of cross-border volume on their platform already. So I guess when you look at that opportunity, are you more excited to penetrate the existing cross-border activity that's already on the platform, or is it the merchants with no cross-border footprint that you guys are excited to actually start for the first time and enable cross-border? And I'm sure the answer is both, but I guess we're just curious on how you think about the opportunity for the two different opportunities. Thanks.
spk08: Thank you for the question. It's near Debbie. First of all, we're very excited, looking forward to the general availability of our native integration for the enterprise product on Shopify platform. For this product, we are aiming and focusing our efforts on merchants that currently have cross-border activities, most of them, as typically this would be larger merchants already trading well and trading cross-border as part of it. Looking further into the future, as part of our enhanced, I would say, partnership with Shopify related to also to the flow acquisition, we do expect to support many more smaller merchants. Many of them would be new into cross-border activities.
spk05: Got it. That's helpful. I appreciate it. And just maybe one on margins. I wanted to ask about the fulfillment side of the business. I guess the implied take rate on fulfillment came down again, and I assume that's largely a function of the multi-local offering that you discussed, I think, this quarter and last quarter. And a lot of the outperformance this quarter came from the services side of the business. So I was wondering if you could maybe talk about expectations for fulfillment revenue growth relative to services revenue growth and related how to think about gross margins as we trajectory the year.
spk02: So, hi, thank you for the question. As you said, service fee take rate has increased to over 7%, while the decrease in overall take rate was a result of the decrease in fulfillment take rate. And as you mentioned, one of the main drivers for that is the expansion of our multi-local offering for which we typically do not provide fulfillment services as the model is largely based on local shipping. However, the mix in Q4 also affected the take rate as it was biased towards higher average order value merchants. We expect going forward for the multi-local offering to continue to expand. However, we don't expect the same mixed effect in the coming quarters, and I think that is reflected in our guidance, which reflects an overall take rate of approximately 16.7%. Got it.
spk05: Appreciate you taking all my questions, guys. Thank you.
spk09: Thanks, Will. Thank you. We have next question from the lineup. James Fawcett with Morgan Stanley. Please go ahead.
spk01: Thanks. I want to talk about acquisitions and, you know, I guess within acquisitions, how much are you contemplating flow will contribute this year and how should we think about its impact on the overall P&L, including profitability? And as part of that what are you looking at for incremental acquisitions? Are there opportunities? And then I have a follow-up.
spk02: Hi. I will start regarding the guidance and the financials it offers. Basically, flow is integrated into our guidance and They do represent over 5% of the top line. However, they are weighing on our adjusted EBITDA, mainly in the next two, three quarters. This flow of adjusted EBITDA is not positive yet. We expect that to improve over time. as we leverage our scale and efficiencies, but basically that's the impact on the next few quarters. Regarding the higher-level question, I will pass it to Nir.
spk08: Thank you, James. Basically, looking into the future, we do expect that in the next quarter we will be focused on integrating flow as part of the globally offering, building, I would say, the bridge of flow into the emerging brands, native support of Shopify, as well as enhancing their capabilities towards better support for SMBs. We expect this to, I would say, yield growth and momentum looking forward as of 2023 onwards. So we do have high expectations for the acquisition. However, it will take us a few months to, I would say, align it in terms of the R&D investment needed to get the platform geared for, I would say, high-paced growth.
spk01: Great. And then, you know, separately, you announced here on the call at least incremental brands from LVMH, Sennheiser kind of taking over their operations in the U.S., et cetera. You know, when you think about the growth algorithm for this year and the next year, How much should we be thinking about waiting between new geographies, new, uh, brands, um, and then, uh, just incremental services and capabilities that you're looking to roll out.
spk08: Oh, as you've seen from the number that, uh, offers spoke about, uh, we've seen, uh, in 2021, uh, more than 150% net dollar retention. which means our merchants actually staying with us and growing with us. We expect that to continue going into 2022. So a considerable component of our growth would come out of existing merchants continuing to grow with us. Some of it is the organic growth. Some of it is opening more lanes, as you mentioned in the examples now. but I would say the majority of the growth from, I would say, new GMV would come out of signing new merchants. We have a very, very robust pipeline which continues to develop. We see it across our operations in USA, continental Europe, UK, and now also building up nicely in Asia Pacific, and we expect In terms of new GMV, a lot of it will come from new bookings.
spk03: And, James, this is Amir. I would just add on the back of that that, as we mentioned earlier, we see very much of the opportunity in those markets that Nir mentioned, the U.S., continental Europe, and the U.K., to be still very much a green field. So although, as we've already mentioned, we are investing a lot of – efforts and attention into growing into the APAC region, we do expect the majority of the activity over the coming years to still come from our existing territories as they continue to grow very fast.
spk01: That's great. Thanks, Samir. Thanks, Neha.
spk09: Thank you. We have next question from the line of Samad Samana with Jefferies. Please go ahead.
spk07: Hi, great to see the strong finish to 2021. I wanted to ask the flow question slightly differently. I guess I know you guys give a specific revenue level when you announce the acquisition. So I was hoping for a more specific amount that you're assuming for 2022. And then could you tell us if flow was growing at the same rate, better or slower than globally on a standalone basis?
spk08: Going into 2022, as we advised in the acquisition, we expect flow to contribute to the growth, I would say, in line with GE internal growth. I think with some of the focusing and building and focus on the R&D, the internal growth of flow should be a bit lower than globally itself, but not materially different. So this is our expectation for 2022 onwards. We expect that to accelerate as a division once everything is deployed, I would say later this year and especially looking into 2023 onwards.
spk07: Great. And then maybe a fair just, you know, we're about halfway through the calendar quarter and I definitely appreciate that the company gives guidance. Could you help us maybe understand what you're seeing in terms of GMV seasonality for brands that have been with you for a while? Just are we seeing kind of normal seasonal GMV trends for established merchants? Just any color you can give halfway through the first quarter from a seasonality perspective.
spk02: I think in terms of seasonality, we're seeing a standard quarter if you compare it to previous quarters, to the previous two or three quarters. However, as we mentioned, and I think this is very obvious, there is some normalization in the overall growth of e-commerce, and that is also evident. Since we are able to, you know, to add a lot of new logos to our platform and also execute on land and expand, basically we are able to generate very high growth rates, but the overall market is normalizing as physical stores are reopening and there is, you know,
spk12: going back to to you know the the traditional balance great thanks for taking my questions thank you thank you we have next question from the line of brian peterson with raymond james please go ahead uh hi gentlemen i'll echo my congrats on the strong close to 2021 so i wanted to hit on some of the sales investments it looks like sales and marketing doubled year over year in 2021. I know that's going to be an incremental investment area going forward. Maybe help us understand, you know, stack rank. Where are those two or three incremental investments going? And how much are, how productive are those today in terms of driving new merchant growth? Or is that going to be more felt in 2022 and 2023? Sure.
spk08: Thank you. Hi, Brian. It's Neil. And thank you for the question. Yes, we did invest quite a lot in sales and marketing versus what we did the previous year. However, we're still below the 10% mark in terms of spend on sales and marketing out of revenues. However, the growth that we've seen have gone towards, I would say, two main focuses. One of them is establishing spearheads into new territories We have people on ground in Tokyo, Japan, building the pipeline and cultivating our relationship with a strategic partner on the ground, Transcosmos, as well as investment already in Australia. In parallel to it, we've seen the market opportunity and the ability to capture higher growth, as we've seen in the States, which is growing more than 100% for us So we are doubling up our teams in order to enjoy the momentum. So it's an expansion across our current gravity center as well as establishing spearheads in different locations in the world where we define the high opportunity markets. We intend to continue and invest in that going forward, but at a pace that will not be dramatically different in terms of the spend on sales and marketing out of revenues.
spk12: Maybe just to follow up on that, if I think about the investments that you're making in Australia or Japan, how do we think about the ramp? I know it's early days, so maybe this is an unfair question, but just thinking about when those markets could make material revenue contributions. Thanks, guys.
spk08: Sure. I think that we would see GMV ramping up considerably in Asia-Pacific as of 2023. But we do expect to see already GMV this year. So we have the first man on the ground in Melbourne, and on the back of it we have the first reputable brand out of Australia already signed and expected to contribute already as of late Q2. And we expect more to come within that year and launch within that year. Most of the effect would come only in 2023 because they will launch later in the year. So most of the effect will come later in the year. However, we do see a lot of the investment already bearing fruits as our bookings went considerably up. for 2021 versus 2020, and this is part of the push and momentum we have into 2022 planning and results, as a lot of the growth would come from clients already signed with Globally.
spk03: Yeah, and I would add on that, Brian, that we're coming in kind of strong into these markets, not just with our teams on the ground, but also with... a couple of strategic partnerships that we've already signed and are already operating. So we expect that to also be a force multiplier and our ability to ramp up quite quickly in these regions.
spk12: Great to hear. Thank you.
spk09: Thanks, Brian. Thank you. We have next question from the line of Koji Ikeda with Bank of America. Please go ahead.
spk04: Great. Hey, Amir. Hey, Ofer. Thanks for taking the questions. I had a question on guidance here. So, you know, 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, you know, with confidence giving 22 guidance, not only confidence giving it, but really a nice number here at 70%. So I wanted to dig in a little bit on what you're seeing out there, hearing out there from your customers that is that is giving you all that confidence to give a 22-week guide right now?
spk08: Yeah, 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 it. 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 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 onward.
spk04: Got it, got it. Thanks for that commentary. And I wanted to ask you a question on net revenue retention. you know, 152% here in the fourth quarter or for the full year for 21. And that's really off the back of a very strong pandemic, 172%. So I guess, you know, looking for some commentary, you know, you don't have to give the exact numbers, but how should we be thinking about net revenue retention driven by customer cohorts pre-2020 versus customers that were maybe brought onto the platform more recently in 2021 and later 2020?
spk02: I think that generally speaking, we see the newer cohorts coming in a bit stronger compared to the previous cohorts. However, when you take a bird's-eye view at it, as we previously said, we don't expect the pandemic figures to be the stable figures for the future. We do believe that if you look at our pre-COVID averages, we will be able to achieve that. So we don't think that we will hit 170 or 160 or 150 every year. However, we are confident that we will have strong NDR numbers moving forward.
spk09: Thank you. We have next question from the line-up. Brent Breslin with Piper Sandler. Please go ahead.
spk11: Thank you. Good afternoon. I should say good evening team here. I wanted to go back to the optimism around GMV growth here. You're guiding to a billion dollars of incremental GMV. Even if I assume 5% of that is tied to flow, It looks like organic GMV growth could be well north of 60% again. And so just as we think about the levers to growth, how much of this is just the luxury channel you're addressing that is really strong versus it sounds like there's some new logos that are driving the optimism. Could you double click a little bit more into the optimism here? Maybe is there a big chunk of of contribution coming from Shopify, or do you think this is largely, you know, going to be kind of organic as you think about the construct of that GMV optimism you're guiding to here? Thanks.
spk08: Thank you, Brent. This is Neil. Basically, our optimism is based on, I would say, the robust pipeline of new logos. We see on the one side, which brings with it very large brands wanting to do cross-border and use also our multi-local offering across multiple geographies. And in parallel to it, we have a great pipeline of lend and expand. We have ongoing and advanced discussions with large brands already operating on our platform, looking to expand their operations with us. And add to it the organic growth of our clients that even from, as Ofer mentioned, from previous year's cohort, still growing very nicely. And the combination of all three levers actually bring us to a point where we do believe that even organically, as you mentioned, the 60% mark is a reasonable target for 2022.
spk11: The demand is there for sure. Go ahead, Amir.
spk03: Yeah, no, I just wanted to add that I think in addition to that, we put a lot of effort and attention into also keeping the GDR high. So if you couple the growth of the existing NU cohorts with the fact that churn rates remain sub 2% consistently over quite a few years now, that is the other side of the growth algorithm, making sure that our merchants remain very happy with the results that they're seeing and stay with us for the long term.
spk11: Great to hear there. And then my last follow-up here, we do have some new mechanics as we think about the take rate Shopify flow should we assume a these newer partnerships should be slightly lower take rates same take rate higher take rate just trying to think through the take rate assumptions as we start to ramp up some of these the flow contribution and Shopify contribution and and The wildcard there would be the mix of multi-local, but just trying to understand the take rate and assumptions for those two channels going forward.
spk02: Thanks. Thank you for the question. Basically, starting from the bottom line, I think that we are expecting in 2022 solid take rates at around 16.7%. And we don't expect the mix to change significantly. The current Shopify business or the Shopify partnership that we already had before the flow acquisition, this tends to be at a very similar take rates to our overall average. And again, putting aside the multi-local, which we mentioned a few times, we don't expect any additional impact on the take rate in 2022. Going forward into the future, once the flow offering will develop and start gaining traction, that will have some impact, and we do expect lower take rates on that offering. But it will still take a few quarters until we see the impact of that.
spk11: Very helpful, Keller, there. And thanks again for the call. Thank you.
spk09: Thank you. We have next question from the line of Scott Berg with Needham. Please go ahead.
spk13: Hey, guys. This is John Godin for Scott Berg. Thanks for taking my questions. First, just on the Flow platform, just curious if you guys could kind of frame up the opportunity over the next couple years between expanding Flow's reach more internationally compared to kind of the increased go-to-market capability and accelerating penetration that can help you drive in the U.S.
spk08: Thank you for the question. It's Neil. Basically, we expect that Flow would first deepen our partnership with Shopify as part of the acquisition. We signed, as we announced, an additional extension of our partnership, allow us basically through the Flow platform to support additional elements of the Shopify native cross-border solution. And we expect that to give us access to many more smaller emerging brands and a new segment we're not really focused on with our current solution. And this will also enable us to accelerate our smaller merchants solution with, I would say, a quicker deployment time and ability for a more productized approach than the globally current enterprise platform. So overall, we expected to, as I said, increase our footprint into additional companies Additional verticals, a lot of it would come, as you stated, out of the States, but we believe that we are going to roll it out over the next couple of years on a global scale.
spk13: Great. 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. Previously, we're not... operating in Europe on your platform now migrating on given the VAT changes. Thank you.
spk08: 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, A 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 us merchants, 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 globally enables.
spk13: Great. Thanks, guys.
spk09: Thank you. We have next question from the line of Josh Beck with KeyBank. Please go ahead.
spk10: Thank you for taking the question. Maybe I'll just ask a product-focused one. It certainly seems like multi-local has progressed really nicely. You talked about expanding some of the localization capabilities. So maybe just stepping back, can you give us some sense of how widely adopted the product is today and maybe over a multi-year time frame? how to frame up where it could head.
spk08: Yeah, so the product is already well-developed in terms of multi-local, and it allows us to support already two very large brands, Jabra and Sennheiser, and not only allows us to support them, allows us to also increase, I would say, and take additional chunk and substantial chunk of their business. such as the US recently being allocated to us from Sennheiser. However, we do plan and we continue to invest highly in making it available in additional markets. So we continue to roll out additional legal entities, additional operational and logistic setup in different markets. We are launching... Next month, our first merchant out of the GCC region working out of UAE with support out of the free trade zone as well as support from mainland Dubai. And we continue this with men on the ground now in Singapore, as well as other locations in the world. So we do invest heavily and continue to deploy it. On the back of it, we had additional local couriers, ability to support localized return in additional parts of the world, as well as local payment methods and services for those specific domains. I would say the product itself is developed. However, the rollout for it has much more local specifics than the regular cross-border approach, and we are, based on the demand we see from clients, rolling out additional services and geographies.
spk09: Thank you. We take the last question from the line of Pat Valderbens with GMP Securities. Please go ahead.
spk14: Oh, great. Thank you, and congratulations. Hey, Amir, can we very briefly recap the conversation we had over breakfast in Tel Aviv about the durability of this model? in particular like large brands can't just roll out in every market with you at one time, right? They have to do it over a period of years. Can you just talk about why that is?
spk03: Thanks, Pat. Um, it's not that they can't, uh, theoretically, theoretically they can. And to be honest, some of them do. It's, uh, it's more a question of, um, uh, choice and, and in, in many cases kind of their, uh, internal setup. So, uh, As we discussed when we met in Tel Aviv, Typically, the kind of small and medium-sized brands will basically roll out the entire world in one go. The bigger brands typically do put in place kind of a gradual rollout plan, and sometimes it's because they have – local representatives or local distributors in certain markets. where they want to run these contracts off before they internalize these lanes. In other cases, they have local setups on the ground of their own, and they first want to start with the markets where they don't have such setups, and later on, as they progress, roll out these markets as well. But there are always exceptions, and I think on the previous call, In the previous quarter, we mentioned Alo Yoga, which went live with us, which is a big enterprise merchant, and they went live with all markets in one go. So it's really – there's nothing inhibiting them structurally from doing that. It's more a matter of choice and strategy on a per-merchant basis.
spk14: Yeah, and I'll bet a lot of people in Israel celebrated when you did that with Alo Yoga. Thank you very much. Absolutely. Thanks, Pat.
spk09: Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. And I'd now like to turn the call back to Amir Shloket for closing remarks. Over to you, sir.
spk03: Thank you. And on behalf of Ofer, Nir, and myself and the entire GlobalE team, I would like to thank you all for joining today and for your continued support and interest in GlobalE. As the year 2021 comes to its conclusion, I would also like to take this opportunity and thank our merchants all around the globe for entrusting us with their business. And as always, none of this would have been possible without the unbelievable professional abilities and dedication of our teams around the world who put their hearts and minds day in and day out to make sure we deliver the best of Globally. So kudos to all of you. Goodbye all, keep safe, and we very much look forward to seeing you again on our future earnings calls.
spk09: Thank you very much. This concludes today's conference. You may now disconnect your lines at this time. Thank you for your participation.
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