Global-E Online Ltd.

Greetings and welcome to the Global E first quarter 2022 earnings call. This call is being simultaneously webcast on the company's website in the investor section under news and events. For opening remarks and introductions, I'll now turn the call over to Erica Mannion at Safar Investor Relations. Please go ahead.

Thank you and good afternoon. With me today from Global E, excuse me, are Amir Shluket, Co-Founder and Chief Executive Officer, Ofer Karin, Chief Financial Officer, and Nir Devi, Co-Founder and President. Amir will begin with a brief review of the business results for the first quarter ended March 31st, 2022. Ofer will then review the financial results for the first quarter, followed by the company's outlook for the second quarter and full year of 2022. 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 our current expectations and views of future events. These forward-looking statements are subject to risks and uncertainties and assumptions, some of which are beyond our control. In addition, these forward-looking statements reflect our current views with respect to our future events and are not a guarantee of future performance. Actual results may differ materially from 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 filed 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 the statements are made or to reflect the occurrence of unanticipated events. Please refer to our press release dated May 16, 2022 for additional information. In addition, certain metrics we will discuss today are non-GAAP metrics. The presentation of this 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 operational decision making and 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 May 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 May 16, 2022. Now, I will turn the call over to Amir, co-founder and CEO.

Thank you, Erica, and welcome, everyone.

The strong results in Q1 of 2022, our fourth quarter as a public company, which we will be reporting to you today, reflect our continued strong execution capabilities in spite of certain macro headwinds. We will also take this opportunity to update you on our current outlook for Q2 and for the full year of 2022. But before I turn to our results, I would first like to take this opportunity and send, on behalf of the entire Global E team, Our regards and best wishes to our dear Ukrainian colleagues and their families who have been undergoing tremendous hardship for the past few months ever since Russia invaded our country. We did and continue to do whatever is in our power to help our colleagues. I'm happy to report that all of them are safe and sound, and together with them, we very much hope that this war will come to an end soon. Turning to our Q1 results, we continue to experience fast growth. GMV and revenues came in very close to the top of the outlook range at $455 million and $76.3 million respectively, representing 71% year-on-year growth in GMV and 65% growth in revenues. At 39.1%, adjusted gross profitability was well above the 33.3% which we achieved in Q1 of 2021 and stable compared to the previous quarter. As such, our adjusted gross profit grew 94% year-on-year, outpacing our strong top-line growth. As always, we continue to prioritize growth while ensuring that we achieve such growth in a healthy and sustainable way, keeping a positive adjusted EBITDA. Adjusted EBITDA for the quarter came in at $3.3 million, well above the top of the outlook range, which was $1.7 million. However, it was slightly down from the $5.2 million in the same quarter of last year, mainly due to the impact of the flow acquisition, as well as the incremental costs associated with being a public company. Demand for our services continues to rise, and during the quarter, we continue to capitalize on the huge market opportunity that lies ahead of us. All throughout the quarter, we continued launching with many great brands. First and foremost, I am excited to share with you that we went live with Adidas, one of the world's biggest and most prominent global consumer mega brands. As some of you may know, last year, the leadership team of Adidas laid out a new multi-year growth strategy with online direct-to-consumer, or D2C, being one of its strategic centerpieces. We are proud and deeply honored to have been selected by Adidas to take part in their global online DTC journey, utilizing the benefits of our platform and capabilities. As part of this partnership, 16 markets are already live and trading, including markets that are operated using our advanced multi-local offering. Additional markets are planned to be rolled out gradually over the coming quarters. In addition to Adidas, we launched with many more exciting brands across all the geographies and verticals we operate in. When it comes to high street brands, we went live in Q1 with several leading US brands, including Brooks Brothers, Ralph Lauren, REM Beauty by Ariana Grande, and Rare Beauty by Selena Gomez, as well as with prominent UK brands, including Space NK and Dover Street Market, to name just a few. In France, we went live with leading fashion brand Cezanne, and we also went live with our first ever Belgian brand, Boissonneur. Finally, as our APAC footprint continues to expand, we went live this quarter with the famous brand Esprit, selling out of Hong Kong. All in all, new merchant launches are running at full steam ahead. As year to date, we have launched nearly twice the number of merchants we had launched in the same period last year. Besides new merchant launches, during Q1, we also expanded our relationships with multiple existing merchants who opened new markets during the quarter, such as Celine, or the healthcare apparel and lifestyle brand FIGS, as well as Food Beauty Brands, which added 20 additional markets, and the French retailer La Redoute, which added several key European markets. During the quarter, we also continued to strengthen our strategic relationship with the luxury group LVMH, with three new maisons signing up to our services, all of whom are expected to go live during 2022. Switching gears, I would like to take this opportunity to give you an update on several aspects of our strategic partnership with Shopify. On the direct solution front, I'm happy to report that as planned, and thanks to our deep collaboration with Shopify's commercial and technical teams, our new native integration emerged out of pilot phase last month and became generally available for all Shopify Advanced and Shopify Plus merchants. We are already seeing promising initial traction with a double-digit number of new merchants who are in active integration using this new technology. In parallel, the development of the White Label Merchant of Record or MOR solution based on the technologies we acquired as part of the Flow Commerce transaction remains on track. On Shopify, the first channel to utilize this new service candidates for the first few alpha phase pilots have already been identified. We are expecting to start live testing in several weeks' time, and we are planning to commence a more elaborate beta testing phase before the end of the year. While on the subject of the flow acquisition, I will also add that the post-merger integration process is nearing its completion, with most former flow teams already fully integrated into the corresponding globally ones. and with many of the planned synergies and scale efficiency efforts already beginning to be realized. With Flow's platform now part of Globally and benefiting from our scale and know-how, we are able to provide an unparalleled range of solutions for all sizes of merchants, from emerging SMBs all the way up to the world's largest mega brands. Finally, during the quarter, we continue to invest in further strengthening our growing ecosystem of strategic partners. We rolled out our partnership with the Australian Post Group, extending our support for Australian brands. In addition, we expanded our highly successful partnership with Klarna to also cover Canada, a key market for both our companies. Together with Canada, Klarna's buy now, pay later options are now offered on the globally checkout in 15 markets. In summary, and to reiterate what I opened with, we are pleased with the very strong results of the first quarter of 2022. as we remain on track both financially and strategically in line with our long-term targets. Looking into the future, our conviction in the market potential is as strong as ever. We have a fully packed, high quality pipeline and a record number of prospect deals of more than $10 million in GMB each, with the business firing on all cylinders, going live with new merchants at record pace. Nevertheless, In the short term, we are faced with somewhat heightened levels of uncertainty in the macro environment, impacting the year-on-year growth of our existing merchant base, mainly in Europe. In terms of the direct effects of the Russian-Ukraine war on our levels of activity, shortly after the fighting broke out, we had to discontinue our service to Russia due to the sanctions imposed by an international community, as well as to Ukraine given the logistical challenges as a result of the fighting. In total, Russia and Ukraine account for less than 2% of our GMB. In addition, as I mentioned, some of our colleagues reside in Ukraine, but as a matter of fact, to date, most of them have been able to continue working with only limited impact on productivity. In terms of indirect impact, during the first few weeks of the war, we have seen a significant reduction in sales to several Central and Eastern European markets, such as Poland and the Czech Republic. Demand from this region somewhat picked up later, but many of these markets are still trading significantly below normal levels. These CAE markets typically represent 4 to 5% of our GMV. Furthermore, we see some impact of the macro environment on consumer sentiment also in additional countries, mainly in Western Europe. Our guidance for Q2 GMV presents strong year-on-year growth of 53% at the midpoint. and takes into account such macro headwinds, as well as the fact that Q2 last year was strongly positively affected by COVID-19. Our guidance for Q2 growth is lower than our full year expectations due to typical in-year seasonality tilted towards the second half of the year, as well as the fact that the majority of the large merchant launches that are planned to take place are at or after the middle of the year. We have taken these factors into consideration also in our updated full-year top-line guidance for 2022, which at the midpoint reflects fast growth of 61% in GMB and 60% in revenues, a slight reduction from the previous guidance. However, we reiterate our previously established 2022 adjusted EBITDA guidance of $40 million at the midpoint, given the resilience and agility of our business model. We have high conviction in our ability to maintain a high growth pace while upholding adjusted EBITDA levels and cash generation. And with that, I will hand it over to Ofer, our CFO, to go over our financial results in more detail and provide more additional color regarding our outlook for Q2 and the full year of 2022.

Thank you, Amir, and good afternoon, everyone. We continue to grow fast and demonstrate strong execution on all fronts. The demand for an acceptance of our direct-to-consumer cross-border offering by merchants is stronger than ever, with new signings and onboarding of new merchants continuing at a record pace. While consumer sentiment, particularly in Europe, is impacted by the war in Ukraine and the shifting macro environment. Our rapid growth in GMV continued in Q1, as we generated $455 million of GMV, an increase of 71% year over year. While growth of the overall e-commerce market has softened, the shift of merchants toward direct-to-consumer is accelerating, and the cross-border opportunity remains massive. In Q1, we generated total revenues of $76.3 million, up 65% year-over-year. Service fees revenues were $31.9 million, up 87%, and fulfillment services revenues were up 53% to $44.4 million. The higher growth in service fees revenues compared to fulfillment services revenue was driven by the continued growth of our multi-local service and the revenue mix of flow. We have continued to experience rapid growth in our U.S. outbound revenue, as our strong momentum in the U.S. continues. In Q1, U.S. outbound revenue was up 111% year-over-year, driven by strong growth on the Global E platform, coupled with a high share of U.S. outbound on the Flow platform. Our non-GAAP gross profit continues to outpace top-line growth. In Q1, our non-GAAP gross profit was $29.9 million, up 94% year-over-year, representing a margin of 39.1% compared to 33.3% in the same period last year, driven by the continuous leveraging of our scale and the higher share of service fees revenue. I would like to take this opportunity to draw your attention to the fact that this quarter we are starting to report a new metric of adjusted gross profit, which adjusts the gross profit for amortization of acquired intangibles, as is common post-acquisition. GAAP gross profit in the first quarter of 2022 was $27.2 million. Moving on to operational expenses. Before we dive in, it's important to note the impact of the consolidation of flow, which is driving an increase in operational expenses as a percentage of revenue, as flow is still at a lower scale. We continue to invest in the development and enhancement of our platform to further broaden and strengthen our platform's capabilities. R&D expense in Q1, excluding stock-based compensation, was $12.5 million or 16.4% of revenue compared to $5.2 million or 11.3% in the same period last year. Total R&D spend in Q1 was $17.7 million. The increase of R&D expense as percentage of revenue is mainly driven by the flow acquisition. We also continue to invest in sales and marketing and generate a very healthy and expanding pipeline while maintaining efficiencies. Sales and marketing expense excluding Shopify warrants related amortization expenses, amortization of acquired intangibles and stock-based compensation was $8.2 million or 10.7% of revenue compared to $2.9 million or 6.2% of revenue in the same period last year. Shopify warrants related amortization expense was $36.7 million, increasing due to the flow-related warrants. Total sales and marketing expenses for the quarter, including Shopify warrants and related amortization expenses, were $49.6 million. General and administrative expenses excluding stock-based compensation and acquisition-related contingent consideration were $6.6 million or 8.6% of revenue compared to $2.1 million or 4.6% of revenue in the same period last year. The contingent consideration expense reflects the portion of the flow transaction consideration which is held back for the founders and contingent upon a certain employment period and expensed over time. Total G&A spend in Q1 was $11.5 million. Adjusted EBITDA totaled $3.3 million, representing a 4.3 adjusted EBITDA margin, decreasing from $5.2 million in the same period last year reflecting the impact of flow as well as incremental costs associated with being a public company. As we've mentioned on prior earnings calls, we expect flow to weigh on our adjusted EBITDA for the next two, three quarters, as flow's adjusted EBITDA is not yet positive. During Q1, we have started to realize operational synergies, improving the cost structure of flow, and we will continue with additional initiatives in the coming months. Turning to the balance sheet and cash flow statements, we ended the quarter with $278 million in cash and cash equivalents, including short-term deposits and marketable securities. Net operating cash flow used in Q1 was $6.9 million compared to net operating cash flow used of $20.6 million in the same quarter a year ago. Moving to our financial outlook and guidance for the second quarter and full year 2022, as Amir described. For Q2 2022, we're expecting GMV to be in the range of $495 to $505 million. At the midpoint of the range, this represents a growth rate of 53% versus Q2 of 2021. We expect Q2 revenue to be in the range of $82.5 to $84.5 million. At the midpoint of the range, this represents a growth rate of 46% versus Q2 of 2021. For adjusted EBITDA, we're expecting a profit in the range of $2.8 to $3.8 million. For the full year of 2022, we anticipate GMV to be in the range of $2.28 to $2.40 billion, representing a 61% annual growth at the midpoint of the range. Revenue is expected to be in the range of $383 million to $403 million, representing a growth rate of 60% at the midpoint of the range. For adjusted EBITDA, as Amir mentioned, we are reiterating our previous guidance of $38 to $42 million. In conclusion, we believe that while there are macro headwinds, our execution remains strong on all fronts. as we continue to tap on the massive opportunity ahead of us. We will continue to drive strong top-line growth while leveraging economies of scale and continuing to generate cash. We continue to create great value to our merchants and enable them to develop and grow their direct-to-consumer cross-border business. And with that, Amir, Nir, and I are happy to take any of your questions. Operator?

Thank you. We will now begin the question and answer session. We would like to request all questioners to kindly ask one question with one follow-up only. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. The first question is from Will Nance with Goldman Sachs. Please go ahead.

Hey guys, good afternoon. Thanks for taking the questions. I wanted to start off on some of the macro headwinds that you guys called out. And maybe first of all, if we could get kind of more of a housekeeping item. I think a lot of investors have been focused on the outbound exposure that you guys talk about, the combined exposure to Europe. I was wondering if you could talk a little bit more about the inbound exposure into Europe, just to get a sense for what the exposure is to kind of direct consumer demand within Europe. And then related, like to take a step back, when you look at the revised guidance for the year, Could you talk a little bit about the degree of conservatism included in that guide and how to think about risks to the downside or to the upside for the remainder of the year as it relates to uncertainty in Europe?

Good afternoon, Will. Thank you. It's Neil. In terms of inbound proportion of Europe for globally, we're trading Q1 at approximately 30%, a bit shy of 30% of our business is inbound into Europe. Within it, CEE region, as Ofer mentioned, is around 4-5%, and Russia and Ukraine together was prior to shutting it down a bit sub 2%. So total around 30%. Russia and Ukraine are completely shut down. CE suffered a significant reduction in which we consider temporarily in conversion rates and the rest of Europe, we do see some decline geopolitical and also consumer sentiment combined. For the second part of your question related to our guidance, I would refer it to Ofer.

Thank you, Nir. I would just add regarding Europe that although there are some similar trends between different markets in Europe, they do not all behave the same. So, for example, as we have seen some decrease in Spain, Italy, and France, but the UK, on the other hand, has been increasing in volume, so there's also diversification between the different countries. Regarding the guidance, we try to stay realistic with the guidance. We do believe that there is a certain probability that we may hit the previous numbers, however, We think that the current guidance reflects our realistic targets and we believe that taking into account the current macro environment, these are the numbers that we think we can achieve.

Got it. That's very helpful. Thank you. And then maybe as a followup, just on the Shopify going to general available availability, could you talk about, you know, any of the progress as that's gone live and maybe what you guys are expecting for contribution from that channel for the remainder of the year?

Yes. Uh, so, uh, basically Shopify general availability, uh, We are already in integration with a few dozens of merchants that are going to use this integration within the next quarter. And we expect this to continue and ramp up as we deepen our relationship with Shopify, training the sales team on the product as part of the general availability. We do have additional developments that were phased out. into the next quarter and the quarter following it. But we do believe we will see a continued momentum coming out of Shopify. So we did see growth with Shopify after signing the exclusivity last year. It was on our classic integration. And we do expect it to continue and grow now that we went into general availability on the native solution itself.

Got it. Appreciate you guys taking all my questions. Thanks, Will.

The next question is from James Fawcett with Morgan Stanley. Please go ahead.

Great. Thank you very much. I wanted to ask really quickly, just building on the last questions, can you give us a little bit of input as to, you know, as you're trying to be conservative, especially on Europe, what you've actually seen versus what you anticipate could happen there? And I guess, are you anticipating a similar type impact potentially even to the U.S.

channels?

Basically, as Nir said, we have seen a decrease across the board in CEE countries. And we have seen a general trend of decrease in continental Europe. And basically, we haven't seen any impact in other large markets, the likes of the US, Australia, Canada, and some of the others. We have been trading well into those countries. And looking forward, and this is what is baked into our guidance, we are taking into account that the micro environment will not be great in the next few months, to say the least. And that is baked into our guidance. Basically, that's it. We are looking at Europe. We don't anticipate Europe to pick up significantly. We did see some good signs in early May, but we don't know if that's something that will stay with us. And we are conservative regarding other markets. However, we didn't bake into the guidance and decrease in other significant markets.

Got it. And then, as far as the mix goes, it looks like, at least versus our estimates, that service revenue was certainly better than we thought, whereas fulfillment was a little bit less. And obviously, there's a margin benefit that you're describing there. But how should we think about that going forward? You know, with service benefiting from flow, that makes sense, making sure that gets incorporated. But are there additional levers that you should expect or could contribute incrementally to service versus, can you describe a little bit what's happening on fulfillment and how we should be thinking about that as a contributor this year?

Yeah, thank you for this question, James.

I think that this is, the answer is very similar to what you have been hearing from us in previous calls. We have been developing the multi-local solution and we are happy that there is engagement from mega brands such as Adidas that we have just launched recently and we have a multi-year plan with them and we hope and believe that this account can contribute a lot in the future. Basically, with the multi-local, as you know, it is service fee-based. We typically don't do the fulfillment. There are some minor cases in which we also supply the fulfillment, but in most cases, it's only service fee-driven. We expect that over time, we will see a higher share of services. However, it will be a gradual pickup, as you have seen in previous quarters.

Okay. Thanks for that, Kala.

The next question is from Samad Samana with Jefferies. Please go ahead.

Hi, good afternoon. Thanks for taking my questions. Maybe just on the guidance side, I am curious, what are you assuming for net revenue retention from existing merchants? And maybe how is that trended? And is that what is the bigger part of the guidance reduction? Or are you seeing a delay in go-live activity as well? Maybe help us think about the guidance in that context.

Hi, Saman. Thank you. It's Neil. On the net dollar retention, we still see a very healthy trend in line with all, I would say, historic numbers and historic averages and also with our long-term target. So above the 130% on net dollar retention. In terms of the gross dollar retention, we do see, I would say, same trend as we've seen before, which is considerably sub 2% in terms of churn, which is a very strong, I would say, performance as well. Looking into launches and new merchants, I think we see a super positive trend. as our Q1 bookings of new business, new GMV, is virtually more than double what we did in Q1 last year, and overall internal budgeting for the quarter. So we do see a tremendous interest from clients to integrate, to go D2C, and this does not stop because of, I would say, a COVID relief or because of a macro environment, even the other way around, we see some acceleration there. In terms of launches, we don't see delays that are caused by the situation. We did, as Amir mentioned earlier in the call, we launched double the numbers of merchants than what we did same period last year. So we do see... This was a continuous trend of more clients signing in and more clients going live each and every quarter. So all in all, on the customer front and the underlying business and long-term growth engines, we do feel very comfortable.

Great. And then, Ofer, maybe one for you. Just globally, Flow closed almost right at the beginning of the quarter. How much did that contribute to both GMV and revenue in the quarter?

As we communicated around the closing or the signing of the deal, and as we expected, Flow contributed about 5% to the top line, GMV and revenue.

Great. And then if I could just squeeze a quick one in. The company's had a history of generating positive free cash flow. I'm just curious, maybe given the Shopify warrant amortization and public company costs, just how should we think about maybe free cash flow for 2022? Thank you again for taking my questions.

Free cash flow, generally speaking, should be similar to our adjusted EBITDA. It should be very close. There could be some fluctuations between quarters, period ending, and so on, but generally speaking, It should be closely tied. We did have a one-off investment as we moved to new offices. So there is, I would say, an investment that I think it would be approximately anywhere between $5 to $8 million, but we don't expect any additional significant investment. So all in all, if you put that aside, it should be pretty close to adjusted EBITDA.

Great. Thank you.

The next question is from Koji Ikeda with Bank of America. Please go ahead.

Hey, guys. Thanks for taking my questions. Just another one here on the guidance. Just wanted to make sure I heard this properly. So in your answer to one of the previous questions, you mentioned I think you mentioned you didn't bake any guidance, a decrease from the other significant markets out there. You know, just kind of curious, did I hear that correctly? And maybe, you know, what are you seeing in those other significant markets? You know, what are you hearing from the demand environment or from the customers that it's giving you the confidence that those markets are going to remain healthy for the rest of the year?

Thank you for the question.

It's so fair. Basically, The way we looked at the macro impact and the way it's reflected in the guidance, we took into account that it will be a challenging environment at least until the end of the year. And that is baked into the guidance and reflected in the different markets. Some of them, the impact is more significant, as we mentioned, like in Europe and in others, it's less significant. However, the fact that we will have a bumpy macro until the end of the year is reflected in the guidance.

Got it, got it. I did want to switch the topic of conversation away from guidance for a bit here and ask you about Adidas. You know, obviously a big win for you guys, huge brand, many different global websites. I think in the pressure, as you mentioned, 16 markets live now. I know that Adidas is in a lot more markets, you know, they sell into right now all over the world. So just curious, can you talk a little bit about the sales process with Adidas, you know, and maybe what was a key value prop that was instrumental to winning that deal? Thanks, guys.

Okay. I think that basically what we've seen, and I don't want to speak specifically about Adidas, but they are part of the answer. We've seen very large global brands looking to strengthen their D2C cross-border or multi-local, but their global strategy is going D2C and going D2C e-commerce. It was accelerated in COVID-19, But it's an underlying trend that started before and is now just moving at a faster pace and not slowing down because the shoppers are moving much more online and it allows the brands to have a direct connection to the shoppers wherever they are in the world. And if they want as a brand to own that relationship, to present the brand as they wish to present the brand and enjoy the data, of the consumers, they need to transact with them directly. And this is where Globally fits in, especially with our multi-local offering, where we can allow the brand to transact domestically. A global brand like Adidas has presence virtually almost everywhere in the world. But we allow them to transact domestically from a local inventory, but use Globally as a merchant of record to simplify the process of taking over the direct connection to the client while enjoying the ownership of the client and the ownership of data in order to better serve the client and better learn their needs. And we see it as a trend. We see many more large brands in the pipeline, which will mature in the coming quarters. So this is a trend we expect to continue and see.

Yeah, and I just want to add on that, that I think what Adidas and other brands like them see is that they can, by working with us, they can enjoy basically the best of both worlds. They can, on the one hand, enjoy a solid field proven platform like ours with all the different services and components. And on the other hand, it's highly configurable and we are able to tailor the specific characteristics and configurations and behaviors on a per market basis and contribute from our know-how and best practices on local trading in each market. So that is very synergetic for them, that combination of a solid yet highly configurable product.

The next question is from Brent Brasselin with Piper Sandler. Please go ahead.

Thank you for taking the question here. Good evening, I guess early morning. I wanted to circle back on multi-local. Obviously, you know, great to see Adidas embrace the platform, but a little surprised that that brand and that size is going with what is really a relatively new product for the company. It begs the question, how much broader interest is there in multi-local? And so can you just answer this. How many customers are using multi-local today? And as you look out over the next three years, is this a niche product or do you think this could be a mainstream product that a large portion of new and existing customers could use? Thanks.

Hi Brent, thank you for the question. I think we need to look at it on a twofold. On the one hand, if you look at the number of clients, we don't expect to see a large number of clients using multi-local because in essence this offering is for very large brands that has presence in multiple geographies and regions. It's much more geared towards the larger global brands as well as consumer electronics brands that are multi-local. So in terms of number of clients, we don't expect it to be a significant portion of the number of clients. In terms of the size of the client and the portion of GMV, we do expect it to grow considerably, as we expect to onboard very large clients into that offering. So we reported in the previous quarters about Jabra selecting to use this solution, about Sennheiser, both from Consumer Electronics. We do have other clients from the apparel that are using it. Adidas now has joined them. We do have a couple more very large brands in pipeline that are expected to use it in the next quarter or two. So we do see it picking pace in terms of GMV, and we do expect it to take a more significant portion out of our GMV, not just as an issue.

Got it. So think of multi-local as really a new product for the largest mega brands out there. Very clear. Ofer, I wanted to just follow up on the guidance. And part of the question here is, just inbounds we're getting from investors, as we think about the revised guide, you're going from a midpoint of 70% GMV growth for the full year to 61%, which is still a pretty ambitious kind of growth rate. So I guess as we kind of break that out, What's driving the optimism? Is it just the doubling of merchants? Is it the expectation that Shopify really starts to kick in in the second half? Is it the pipeline opportunity of some large mega merchants that's giving you the optimism? Just trying to understand if you've put in a conservative enough assumption relative to kind of the same store sales versus these other offsets. Thanks.

Yes, thank you for the question, Brent. I think that the way we look at it is that the merchant demand side remains very, very strong. It's even strengthening over time. We see a very strong demand for merchants. Again, we mentioned Adidas. That's one example. But merchants are going direct to consumer and merchants are going cross-border. And basically, we are supporting them on that journey. And this is continuing. So on the execution front, we are seeing very good results in terms of sales, in terms of onboarding. Everything is working very well. And the numbers look great. The softness is in the consumer sentiment in some markets. Some of them are larger markets, as we mentioned, in Europe. And this is actually... what is affecting us. So we do feel very confident in the execution, in the relationship that we have with existing merchants and the potential of new merchants coming on board based on the multi-local Shopify and all the other engines that we currently have and we are developing. And the reduction in the guidance is driven by the consumer sentiment and the macro environment.

Just to add to that, Brent, I think despite reduction, we are looking at, as you stated, a very high growth plan for the year at around 60 plus percent. for GMV, a lot of it is based on very large merchants already signed and mid-sized merchants that are already signed and we expect to hold them out in the coming quarter. And a lot of them supporting into our peak trading, which gives us, I would say, the benefit of enjoying the holiday season with them on board. As we mentioned previously, we more than doubled our signing in Q1, and we expect that also to translate into launches within the second half of the year as well. So the combination of what we already have signed and the robust pipeline, we do believe that this will translate into a very strong second part of the year, which will allow us to meet our budget.

The next question is from Pat Walravens with JMP Securities. Please go ahead.

Oh, great. Thank you. Ofer, maybe to start, if I'm doing my math right, you reduced full-year GMV and revenue by 4% on the low end to 7% on the high end. And Russian Ukraine is less than 2%. So let's just say it's 2%. that leaves 2% to 5% from the other things. How would you bucket the other things?

I think the overall reduction is approximately 5%, just a bit over 5%. Approximately a bit less than 2% of it is directly driven by the fact that we stopped servicing Russia and Ukraine. And the remaining 3% is driven by other markets, the macro environment in other markets, mainly euro, but also general softness in the market.

Okay, great. And then, Amir, for you, with all this uncertainty, what are your top sort of one or two priorities for the rest of the year? What are the things that you have to make sure that you get right for the rest of this year?

Yeah, Pat, I think the things we are focusing on are the things we have always focused on. It's on execution on all fronts, on servicing our existing merchants, especially in these times of uncertainty and softness in demand from consumers. Our merchants need us at our best. They need us the most. Executing on that and supporting them to the best of our abilities is a very clear priority for us. As we mentioned a few times on the call, continuing the rapid pace of onboarding new merchants because that is what's going to determine our results in the second half of the year and definitely looking into 2023 onwards. And in parallel to that, as we have mentioned, we are managing our expenses and managing adjusted EBITDA very tightly to make sure that we continue this fast growth pace in a responsible way and make sure that on an annual basis we continue to generate cash.

We believe this is the healthy way to build a business towards the future.

The next question is from Scott Burke with Needham. Please go ahead.

Hi, everyone. Thanks for taking my questions.

I guess just one for me. I've had a lot of mine asked already. I want to talk about the pipeline. I think, Amir, you had spoken about record number of greater than $10 million GMV deals in the pipeline currently. Wanted to try to understand if you can comment on that, maybe from a geographic location, and then are those deals in the pipeline more from new customers or existing customers that are expanding? Just trying to understand if there's been maybe a change in what that composition looks like.

Thank you.

Hi, thank you for the question. It's Nero. In terms of the pipeline, yes, we do see a substantial growth in the pipeline. A lot of it is driven by larger deals, the over 10% GMB deals. I think it comes partly from our partnership with Shopify, where we see more direct-to-consumer brands, celebrity brands, that are coming in with nice sales volumes. We had in the past schemes of Kim Kardashian. We have Drew House of Justin Bieber. You see it with others that are coming in or that launched recently with us as the REM of Ariana Grande and Rare Beauty of Selena Gomez. So part of it related to celebrities, direct-to-consumer brands that are fast-growing. Some of it relates to more traditional brands that are giving much more focus for the D2C, such as Adidas we spoke about, such as Sennheiser, that decided to do much more with us, such as Suunto, for example, that is expected to open new lanes with us that are worth quite a lot. So it's, I would say, mainly driven by new business that is coming in with new clients, new logos. However, we do see some growth, as mentioned, Suunto, that is expected to open many more lanes. But we see it also with others that should also, I would say, give us another push with large volumes from single brands.

That's all I have. Thank you for taking my question.

Once again, if you have a question, please press star then one. The next question is from Brian Peterson with Raymond James. Please go ahead.

Hi, thanks for taking the question. Just one for me. So I'm curious just on the linearity, particularly in Western Europe. I'd just love to get an update on maybe how that trended through the first quarter and what you've seen so far in the second quarter. And then, Oprah, I think you mentioned that there were some green shoots in May. I realize it's kind of an uncertain macro right now, but I'd love to – can you elaborate maybe on what you saw in May that kind of made you reference that comment? Thanks, guys.

Thank you, Brian. We have basically January traded well. And since the conflict in Ukraine started, the war in Ukraine, and in parallel, you know, all the new macro data, inflation and so on, peaked. Basically, we have seen a reduction. So it started in March in Europe, as we mentioned, and April was very similar to March in terms of trends. And again, May, as you mentioned, it's still early. We're just in the middle of the month, and we don't know if it's just a few good days or a trend, but we have seen better numbers in May.

Thank you.

The next question is from Josh Beck with KeyBank. Please go ahead.

Thank you for taking the question.

I wanted to ask a little bit about OpEx. flexibility, clearly you've cut the top line between 5% and 6%, and you've been able to hold an EBITDA, so certainly that shows discipline. As we start to think about 23 and perhaps a softer, sustained consumer scenario, is there a level where you're not going to be able to maybe absorb the top-line softness, and you'd have to kind of reduce the profitability assumptions.

Just curious how you're thinking about that balance.

We do maintain a very agile approach and also agility within the organization. And basically, for 2022, we do think that based on the synergies that we are already realizing with Flow, and we will continue to realize in the next few months, and the continuous leveraging of the economies of scale that we can sustain that. Also, I would say that we had a ramp up in H2 of 2021, And now we're sort of also starting to enjoy the people that have joined us. So we slowed down a bit without any connection to the macro environment. We just wanted to sort of absorb and start enjoying the people that have joined us in the last few months. So this is regarding 2022. Going forward, we do keep an agile approach and we believe that we can sustain up to a certain level. and we will plan our expenses accordingly, but we will maintain and we will continue to prioritize healthy growth. So we will continue to invest in any resource that can push growth as long as it's healthy.

Okay, very helpful. And then maybe just to follow up, I realize, you know, a lot of this is reading tea leaves in some ways, but you know, across your business and customer base, have you seen, you know, any notable impacts from some of the supply chain disruptions that have, that have taken place and, you know, maybe separate from inflation, just what's happening with reopening and more folks traveling.

So, I think there is, you know, from the, I would say, mid-2021, there is an impact of reopening, but that was already baked into our guidance. So we do see an impact, but this was part of our planning. So all in all, we see a net neutral effect compared to our planning. But obviously people are traveling and the world has reopened and it does have impact generally on e-commerce, but this was already planned.

In terms of supply chain, maybe I'll take this one. In terms of supply chain, still as we, I think we discussed it in the previous call and the same holds now, we don't see any impact. us neither direct or indirect from the logistical hold-ups in supply chains around the world for the fact that first of all for us everything flies in the air most of the hold-ups and bottlenecks in in supply chains happen in terms of sea freight so that that has minimal effect on us, if any, directly. Indirectly, some of our merchants obviously may be impacted by shortages of inventory, etc., but since the world has talked about supply chain challenges for a while, everybody basically prepared for that, and we've seen merchants that have rolled forward inventory orders and made them well in advance before the season. And even if they encounter some levels of limited inventory, typically there is no impact on our activity because the merchants tend to prioritize the direct-to-consumer channels when there is shortage in inventory versus other channels like wholesale or marketplaces. So again, because we serve their direct-to-consumer channel, which is the most important for them, we do not see any impact of that to date.

This concludes the question-and-answer session. I would like to turn the conference back over to Amir for any closing remarks.

Thank you. On behalf of all Farineer, myself and the entire Globally team, I would like to thank you all for joining today and for your continued support and interest in Globally. As always, I would like to take this opportunity to thank our loyal merchants for their continued trust and partnership and to congratulate all my fellow team members here at Globally on yet another quarter of great execution as we continue to pursue our ambitious long-term goals. Goodbye all, keep safe, and we very much look forward to seeing you again on our future earnings calls.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.