Global-E Online Ltd.

Welcome to the Global E second quarter 2023 earnings call. This call is being simultaneously broadcast on the company's website in the investors section under news and events. For opening remarks and introductions, I will now turn the call over to Erica Mannion at Sapphire Investor Relations. Please go ahead.

Thank you and good morning. With me today from Global E are Amir Shloket, co-founder and chief executive officer, Ofra Karim, chief financial officer, and Nir Devi, co-founder and president. Amir will begin with a review of the business results for the second quarter of 2023. Ofra will review the financial results for the second quarter of 2023, followed by the company's outlook for the third quarter and full year of 2023. 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 our 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 and 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 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 make no obligations 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 August 8, 2023 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 August 8th, 2023. 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 August 8th, 2023. I will now turn the call over to Amir, co-founder and CEO.

Thank you, Erika, and welcome everyone to our Q2 Earnings School. Our second quarter financial results, all of them exceeding our guidance, depict the continuation of a very strong business momentum and growth trajectory. Our quarterly GMV amounted to $825 million, or 54% year-on-year growth, and our revenues grew by 53%, reaching $133 million in the quarter. Our adjusted gross profit margin continued to expand, from 41.9% in Q2 of last year to 43.3% in Q2 of this year, thanks to our growing economies of scale and improved efficiencies. Finally, our adjusted EBITDA for the quarter came in at $21 million, nearly doubling that of the same period last year. As usual, Ofra will describe in more detail our quarterly financial results, as well as our updated guidance for the next quarter and for the full 2023 fiscal year. However, before I hand the call over to Ofra, I would like to walk you through some key updates regarding our business. On the merchant's front, we continue to onboard many new merchants located all around the globe and trading in various different verticals. Just to name a few examples, we recently went live with renowned fashion brands such as LK Bennett and Club de London in the UK, Monday Swimmer and Pepper in the US, Tara Jarmone in France, and the iconic denim and fashion brand Diesel in Italy. We also went live with the UK-based recycled gold and silver jewelry brand Misoma, with the innovative protective cases brand Moose, and many others in various product verticals. From a geographical standpoint, in parallel to our continued growth in our established markets across North America, the UK, and continental Europe, we continued our rapid expansion in the APAC region as well, with several Australian brands going live including Venroy, Rolly Nation, Lahana, and Lilibod, with numerous Japanese brands going live, including Hinoya, 45R, Etude, Nubian, and Anasui, and with the go-live of our first-ever Korean brand, High End Sale. Moreover, during Q2, we went live with our first-ever Swedish brand, the vegan cosmetics brand Swati, bringing the count of our active outbound markets up to 29. Equally important, we continued our expansion efforts within existing merchant groups, with notable examples this quarter being Orveda, which is another brand from the large beauty and fragrance group Coty, and Givenchy Beauty, which is part of the LVMH group of brands. Moving on to some additional elements on our strategic roadmap, we continue to consolidate and streamline our platform stack post our two acquisitions of Flow and of Borderfree. In parallel, we are also continuing the migration process of all our legacy Shopify-based enterprise merchants onto the new native app. On the SMB platform side, we continued our joint work with Shopify on the necessary preparations for the release of Shopify Markets Pro into general availability in the US, which is expected to happen later in the year. Based on the results and feedback from the first live batches of early access merchants, we continue to be optimistic regarding the potential future impact of this innovative new offering once it is released and scales up. Given all these developments, as well as many product features being constantly developed and rolled out, we continue to expand both our technological teams and our commercial teams around the globe. But at the same time, we remain as committed as ever to doing so in a responsible and sustainable way, as is evident from the healthy growth in our adjusted EBITDA, a good proxy for our free cash flow, which is outpacing the growth in revenues. And with that, I will now hand it over to Ofer to take you through the quarterly figures in more depth, as well as present our updated guidance.

Thank you, Amir, and thanks again, everyone, for joining us today for our quarterly earnings call. We are very pleased with our business performance and progress in the first half of 2023. Q2 was another strong quarter of fast growth coupled with improved margins as we continue to support merchants with a direct-to-consumer cross-border growth journey and exploit the massive market opportunity. I'd like to point out again that in addition to our gap results, I'll also be discussing certain non-gap 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 Q2, with $825 million of GMV generated on our platforms, an increase of 54% year-over-year. The growth was supported by the continued growth of the direct-to-consumer cross-border segment, despite the ongoing macro uncertainty. We also still benefited this quarter from inorganic growth from border free. In Q2, we generated total revenues of $133.3 million, up 53% year-over-year, with both revenue streams continuing to grow rapidly. Service fees revenue were up $59.5 million, up 51% year-over-year, and fulfillment services revenue were up 54% to $73.8 million. Fulfillment take rate has decreased compared to Q1, mainly driven by higher average order value resulting in less shipments per dollar of GMV, and also from the continued growth of our multi-local services. We have continued to experience higher pace growth in our U.S. outbound revenue as our momentum in the U.S. continued, driven also by the U.S. bias of the border-free portfolio. In Q2 2023, U.S. outbound revenue was up 99% year-over-year. As Amir mentioned, we also continue our penetration into APEC and the Middle East. While the GMV share of this new outbound market is still only 3%, revenue has grown over three times year-on-year. Non-GAAP gross profit continues to outpace revenue growth as we continue to leverage our scale and improve efficiencies. In Q2, non-GAAP gross profit was $57.7 million, up 58% year-over-year, representing a gross margin of 43.3% compared to 41.9% in the same period last year. The improved non-GAAP gross profit margin compared to Q1 was driven also by the higher share of service fee revenue in Q2. GAAP gross profit was $54.9 million, representing a margin of 41.2%. Moving on to operational expenses, we continue to invest in the development of our platform to enhance our offering with a significant effort around the development of the Shopify Markets Pro white label solution towards general availability in the U.S. R&D expense in Q2, excluding stock-based compensation, was $18 million, or 13.5% of revenue, compared to $12.3 million, or 14.1% in the same period last year. Total R&D spend in Q2 was $24.6 million. We also continue to invest in sales and marketing to enhance our market presence and to build our pipeline while maintaining efficiencies. Sales and marketing expense, excluding Shopify-related amortization expenses, stock-based compensation, and acquisition-related intangibles amortization was $12 million, or 9% of our revenue. compared to $8 million or 9.2% of revenue in the same period last year. Shopify warrants related amortization expense was $37.4 million. Total sales and marketing expenses for the quarter was $52.8 million. General and administrative expenses, excluding stock-based compensation and acquisition-related contingent consideration, was $7.3 million, or 5.5% of revenue, compared to $5.5 million, or 6.3% of revenue in the same period last year. Total G&A spend in Q2 was $13.9 million. Adjusted EBITDA totaled $21 million, growing 90% year over year, representing a 15.7% adjusted EBITDA margin, compared to $11.1 million or $12.7 million margin in the same period last year. Net loss was $35.5 million compared to a net loss of $48.8 million in the year-ago period, driven mainly by the amortization expenses related to the Shopify warrants and to transaction-related intangibles. Switching gears and turning to the balance sheet and cash flow statements, we ended Q2 2023 with $224 million in cash and cash equivalents, including short-term deposits and marketable securities. Cash flow generated by operating activities was $17.6 million compared to $37.8 million a year ago. Moving on to our financial outlook and guidance for Q3 2023, and our updated 2023 full-year guidance, which reflects the resilience and the continued momentum of the business. For Q3 2023, we're expecting GMV to be in the range of $840 to $880 million. At the midpoint of the range, this represents a growth rate of 38% compared to Q3 of 2022. We expect Q3 revenue to be in the range of $136 to $142 million. At the midpoint of the range, this represents a growth rate of 32% compared to Q3 of 2022. Border free is weighing on top line growth in H2, but we expect border free to contribute positively once our enhanced traffic generation offering is in place. For adjusted EBITDA, we're expecting a profit in the range of $17 to $21 million. For the full year of 2023, we are raising our guidance. We anticipate GMV to be in the range of $3.48 to $3.64 billion, representing 45% annual growth at the midpoint of the range. Revenue is expected to be in the range of $570 to $596 million, representing a growth rate of nearly 43% at the midpoint of the range. For adjusted EBITDA, we are expecting a profit of $85 to $93 million, a significant increase of 21% compared to our previous guidance at the midpoint of the range, reflecting our continued focus on operational efficiencies. In conclusion, we continue to focus on strong execution with emphasis on enhancing our platform and expanding our offering to create value for the merchants in their direct-to-consumer cross-border expansion. We aim to continue our rapid growth while improving efficiencies and generating cash. And with that, Amir, Nir, and I are happy to take any of your questions. Operator?

Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star followed by 1 on your touch-tone phone. You will then hear a three-tone prompt acknowledging your request. And if you would like to withdraw from the question queue, please press star followed by 2. And as a consideration to other callers on the line, we ask that you please limit yourself to one question and one follow-up. Please go ahead and press star 1 now if you have any questions. And your first question will be from Brian Peterson at Raymond James. Please go ahead.

Thanks, gentlemen, and congrats on the strong quarter. So first, I just wanted to hit on any trends that you'd call out in terms of GMB linearity, either by month or by region that was really strong, and anything through July that would call out that's maybe different versus the second quarter.

Yes, so we did see a strong second half of the second quarter. It was driven by some large merchants, product launches and product promotions. And we did continue also to see relative strength in Europe on the back of a weak year in 2022. So we have seen growth in Europe. U.S., more or less stable. We've seen some of the APAC markets performing not that well, but Europe has been very strong, contributing to growth.

Great. I appreciate the color and maybe just on, on margins. I know, I know we're coming at 15% EBITDA margins for the year. You know, I'd love to understand, you know, as those have ramped up, how are you guys thinking about investing back in the platform, investing in the growth versus driving further margin expansion? Thanks guys.

Hi Brian. It's a, it's a Mary. Thanks. Um, so we are, uh, continuing to reinvest all the time into the platform. We believe that we are truly, uh, at the early innings of capturing this immense market opportunity, both in what we're already doing so far and in additional offerings, additional avenues that we can continue to develop on the back of it. So with that kind of early innings approach and multiple avenues forward, we are continuing to reinvest all the time and we are We remain committed to continuing to expand the EBITDA margin in the long term, but in terms of the shorter term and the midterm, we do make these investments wherever we believe that they are accretive to the long-term value of our business.

Thanks, Amir.

Thank you. Next question will be from Brent Priceland at Piper Sandler. Please go ahead.

Thank you, and good morning. I wanted to double-click into the markets pro, Amir, and what do you learn so far? I know we're still very early innings, but you did have kind of early trials. What have you learned? How is that going? And any sort of key takeaways that could lend some insight into how we think this option could look like going into next year? Thanks.

Yeah, thanks, Brent. Indeed, we've learned quite a lot together with Shopify. We've already done a number of early outreaches to batches of merchants. And on the back of that, I can say we've learned and improved collectively, even from one batch of outreach to the other. I would say some of the improvements are on the offering and the product size itself, although, to be honest, it was – quite well performing even beforehand. Most of the work and the The lessons learned are kind of in the onboarding processes, kind of perfecting the onboarding experience from a merchant perspective, automating all the various aspects of both the onboarding and the day-to-day management of the merchants on the platform, since, as you know, this is intended to be kind of a zero-touch, highly productized experience. offering, as we expect, large masses of merchants to onboard of this once this goes into general availability and ramps up. So this is a lot of what we've been focusing on. And with that, we've seen tremendous advances, even through the course of this early access period, which we plan to implement once this goes into general availability.

Encouraging to hear the self-serve is progressing well. I guess my follow-up here, Phil Ferrer, is really around fulfillment margins. It upticked a little bit this quarter. Don't know if there was some seasonality in play there and how we should think about fulfillment margins going forward. Is there a structural improvement or think about that as some operational improvement that might not be sustainable?

Yeah, thank you for that, Brent. Generally speaking, gross margin has improved this quarter on the back of operational efficiencies and also the mix of revenue, the higher share of service fee revenue. We expect that to remain relatively stable. We expect to stay stable. around the same numbers for the remaining of this year. And we do see some upside potential, gradual upside potential in the longer term. This relates to the service fees piece and also to the fulfillment revenue as well.

Thank you. Thank you.

Next question will be from Saman Samana at Jefferies. Please go ahead.

Hi, good morning. Good to see the strong results. Maybe first question, just thinking through border-free, now that you're lapping it, you're a year past the acquisition, how should we think about how conversions of those customers are doing? And could you maybe speak to what the NRR trends look like inside of that cohort of customers? And maybe do you think they'll eventually get to where your overall NRR looks like for your regular web customer base.

Hi, Samad. Thanks for the question. It's Neil. In general, we're very happy with the progress we're making on the board of free acquisition in multiple fronts. On the one hand, on the marketing front, we are building the capabilities and tools we build across registered client base, as well as the international portal in order to launch it across our entire platform. I would say sometime, I would say maybe for early access later in the year and general availability sometime Q1, Q2 next year. In parallel to it, we did start to utilize and enjoy the logistics capabilities of standard delivery into Canada using Pitney Bowes. On the client base itself, we do expect to see migrations starting for the later part of the year, mainly late Q4, and a significant amount of the clients already migrated by mid-next year. Once we see them migrating, we do expect to see a significant growth coming out of the capabilities we have on the globally platforms that are not present on the current border-free platform. So we expect that within 2024, we will already start to see some growth coming out of border-free clients. Some of it would be only later in the year or in 2025 because the clients would migrate only mid-year. In terms of the profile, it is a different growth profile on the current platform versus globally. We still maintain our regular profile for GLB clients trading at, I would say, our historical levels of over 130% NDR. Border-free is lower profile. The clients do not grow as our clients on the platform. We see it weighing a bit on our results in the coming quarter, but we do expect it to change once we're migrated and contribute the same profile as global clients, hopefully by mid-next year.

Super helpful. And maybe just a follow-up for the team. If I think about the 3Q GMB guidance and then what that maybe implies for the fourth quarter It actually implies that things will get better and it makes sense with Shopify Markets Pro and some of your other initiatives. I'm just curious maybe how much confidence or visibility you have in that fourth quarter ramp as well, if that's implied. And is that more due to new customers that you've already booked or just the GMV trends you're seeing in the existing basis? Maybe help us understand that kind of implied 4Q strength.

Samad, thank you. It's all fair. We are... Well, obviously, we have more visibility now into Q4 than we had a quarter ago. So, you know, as we progress along the year, we get better visibility. However, it's also peak season, so, you know, any volatility to either side could have... And impact, basically, in our guidance, all of the plan is based on clients that have already signed. The client that hasn't signed up till now will probably not be live this year. So it's all planned either on live merchants or on signed merchants that are planned to go live pre-peak. And in addition, we do expect... some contribution from Shopify Markets Pro in Q4. And all of that is embedded in the full year guidance that you see. And going forward into 2024, hopefully Shopify Markets Pro will have a significant contribution.

Great. Thanks, guys, for taking my questions.

Thank you. Next question will be from James Fawcett at Morgan Stanley. Please go ahead.

Thank you very much. Good morning, everybody. Thanks for the time. And things seem to be progressing well here. Wanted to follow up on the Shopify Markets Pro. Can you talk a little bit about that cycle from the point of view of the merchant? If the merchant already has cross-border activity and operations, Would you expect them to move over relatively quickly to Shopify Markets Pro or continue to operate with their current operations, but then perhaps add Markets Pro for new markets? Can you talk a little bit about what you think the process from the point of view of the merchant is likely to be and how you're planning for that?

Hi, James. Thanks for your questions. It's Neil. Yes, in terms of the client base, we do expect merchants that currently either have some kind of operations cross-border or don't have it at all to see, I would say, the MarketPro is a very appealing way to extend their international reach or to make it better. It has a full suite of end-to-end capabilities that you can actually turn on very simply And we believe that it would be promising for many merchants that are currently trading international with bits and bytes that they either build themselves or use from Shopify, allowing them a more holistic solution. So we do expect some to actually move towards that solution, yeah.

That's great. And then, you know, I guess from... just following up there. So, when you think about that, what is the, what controls that pace of penetration and onboarding? I mean, is it, I'm just trying to get a better sense of that sales motion of, like, how much input does Globally have into that process versus, you know, it sounds like it's designed to scale and self-serve entirely. So, You know, is that something that the merchants themselves can just do immediately and all of them can do simultaneously if you manage in an extreme scenario? Just trying to understand kind of what the limitations on adoption might be. Thank you very much.

Thank you, James. And yes, I think the limitations on adoptions are coming. One, as you mentioned, from the merchant wanting to adopt the product as it fits to his own needs, but much more it depends on the rollout. As we are going into general availability, we're not there yet. Even general availability will go into... I would say first focusing on the U.S. merchant base and only then looking at extending into different territories. So it will be a gradual adoption according to which products you sell and where you sell them from. But outside that, I think it will be much more dependent on the merchant choice.

Great. I appreciate you.

Thanks. Thank you. Next question will be from Scott Berg at Needham. Please go ahead.

Hi, everyone. Good afternoon. Thanks for taking my questions this afternoon, at least in Tel Aviv. A couple things for me. Your growth in the United States is still continuing to be really strong, especially after you've lapped flow, which brought you a really nice platform here for U.S. outbound. Can you help us understand maybe some of the drivers there? I know it's a smaller base, but is there expectations that we can see similar growth out of that solution of your outbound, US outbound sales over the next maybe 12 to 18 months?

So in terms of our geographic distribution, US is growing fast for us. It's coming out of both, I would say, the focus of border free flow on US consumer, but I think that no less than that or even more, it's coming from a lot of our US brands outpacing the growth of other merchants in other territories due to the mix of celebrity brands and B2C first brands that have, I would say, a growth profile that is higher than the legacy brands. And you tend to see more of them in mix in the U.S. versus other regions. So this would be the other main reason for this growth in the U.S. In parallel, we do see continued adoption of our solutions in the U.S. by U.S. merchants. So this supports it as well. And we do believe this profile would even be accelerated further with the general availability of Shopify Markets Pro fail to fall for U.S. merchants.

Got it. Helpful. And then from a follow-up question, Ofer, your growth margins continue to be above, I think, everyone's expectations, certainly best ever in the quarter here. I know you and I have discussed growth margins at scale maybe getting to 50% plus or minus. Do you have an updated view on that as the business scales here? Is there some opportunities to maybe outperform that over time, or is that really kind of the target level we should continue to look for?

Yeah, we are very happy with the gross margin this quarter. As I mentioned, it's driven by the revenue mix, but also by operational efficiency. We continue... on focusing on leveraging our scale and improving over time. We do see some additional upside potential in the future. As I mentioned previously, for the remaining of this year, we expected to stay at levels similar to what you have seen in Q2, but going forward, Yes, there is some additional potential. We expect it to come in gradually. We don't expect gross margins to grow by 200 basis points every quarter, but there is some additional potential upside.

Excellent. Thank you for taking my questions.

Thank you. Next question will be from Maddy Strange at KeyBank. Please go ahead.

Hey guys, thank you for taking my question. You know, I thought that the comment that you made about higher average order volume was really interesting. And I was wondering if you could give any more commentary on if there's any specific reason for that higher cart size or if you're seeing any maybe tailwinds in certain verticals. Thanks.

Yes, so I think there are two drivers behind that. First of all, I think that it's a consumer trend. We have seen over the last few years average baskets growing. And then there was sort of a pause in Q1 and we've seen higher growth than previously in Q2. So it might have been sort of a blimp in Q1 and now this has rolled to higher average order value growth in Q2. In terms of segments, I think that as Nir mentioned, we see the digital native brands overperforming. We have seen luxury is solid. We have seen slower growth with department stores. I would say those would be the key observations for the last few months.

Great. And just to follow up for you guys, I think we've been hearing in general that the enterprise IT budgets have been a bit restrained this year versus last year. Are you seeing that play out in any of your demand, Jen, or any changes in sales cycles that you're seeing on the enterprise side? Thanks.

So in terms of our new bookings, Q2 was a great quarter with a very strong growth and it brings us to, I would say, first six months of the year that are, I would say, the strongest we had ever in terms of booking new GMV. We continue to roll out, I would say, new partnerships. We start to see new bookings coming from a new region We went into late last year, early this year, across APAC, where we see a strong demand coming in. In the Nordics, Sweden, Denmark, where we launched our first client and we see pipelines being built, as well as Italy and some other regions across continental Europe. So all in all, we're quite optimistic looking ahead. It's a pipeline that is being built and very happy with the results in Q1. In half one, on our new booking, supporting our midterm growth.

Thank you, guys, and congrats on the quarter.

Thank you.

Next question will be for Matt Code at Autonomous Research. Please go ahead.

Hi. Hey, guys. Thanks for taking the question. your service fee take rate declined on a year-over-year basis for the first time, I believe, since you came public. Could you just touch on kind of the driving factors there and how you're thinking about the take rate moving forward?

Yes, thank you for that. I would divide the answer to two. In terms of service fee take rate, it has been... relatively stable. It is somewhat more volatile from quarter to quarter, but it has been relatively stable and we expect it to stay stable for the back half of the year with some upside potential going forward driven by value-added services. And in terms of fulfillment take rate, yes, this has been lower this quarter. As I mentioned, we have seen a higher average order value, which translated to less shipment done by us. And that was obviously driving the numbers. In addition, as we mentioned in previous quarters, multi-local is gradually growing in share, so it doesn't have a huge impact, but that also has an impact on fulfillment take rates. In multi-local, we usually do not supply the fulfillment. Those were the drivers behind that. Going forward, I think that in the back half of the year, we expect it to stay relatively at similar levels. And then going into 2024, there might be some upside potential still remains to be seen. The flip side of it is reflected in the gross margins as the share of a service fee is higher, that has a positive impact on gross margin. So when it drops down to the gross profit line, there's less impact.

Thanks, Ofer. That was super helpful. And then just for my follow-up, your free cash flow conversion ratio, so looking at free cash flow as a percentage of adjusted EBITDA, It's been a little bit worse to start this year compared to last. I was just wondering if there's anything to call out in terms of, say, like a working capital build or some other factors.

Yeah, the year started slow in that sense due to timing and cutoffs. So we're still lagging from Q1. There weren't any specific dynamics. It's more around timing. We still expect to see over time adjusted EBITDA translating into free cash flow. There will be fluctuations from quarter to quarter or period to period, but over time we do expect it to more or less converge. Thank you.

Thank you. As a reminder, ladies and gentlemen, if you do have a question, please press star followed by one on your touch-tone phone. And the next question will be from Mark Zutkowitz at Benchmark. Please go ahead.

Thank you, and good afternoon. Just curious in terms of the level of conservatism you have built into the implied fourth quarter for MarketsPro and how... how we should think about or how much visibility you have there. Just kind of following that last question, but a short question here is what type of conservatism would you say you've built into the fourth quarter? Thanks.

We have not changed our general approach regarding guidance. We try to stay very consistent. Naturally, as we approach the end of the year, We have better visibility for the full year in general, and that is reflected in our increased guidance for the full year. Regarding Shopify Markets Pro, obviously it is still new. We do see some trends because we are in early access mode and we see it growing over time, so we do have some indications when we take that, plus the plans that we have, that Shopify has regarding this product. So I think that we have ability regarding that. And in any case, we do expect it to start contributing in Q4. However, it does not have a huge impact in Q4. We expect it to have a a significant impact going into 2024.

Got it. That's helpful. And then just in terms of your enterprise pipeline, I was hoping you could maybe characterize the growth over the next 12 months coming from direct versus indirect channels. Thanks.

Yeah, over the last year, it's new, sorry. Over the last years, we have seen the growth of indirect sales leads coming from partners growing share. We expect it to continue as we onboard more and more partners into the globally network and ecosystem. However, we do still rely significantly on our internal teams our own demand generation team and sales teams continue to grow in parallel to the network effect we get from our ecosystem. But as I said, in share, we do expect in percentage-based the share coming from indirect to continue and grow.

Excellent. Thank you very much.

Thank you. Next question is from Austin Cole at JMP Securities. Please go ahead.

Hey there, thanks for taking my question. I just wanted to drill in on the growth in the US and I wanted to ask if there's anything you guys are thinking about just with some of the recent economic data that's coming out and what you guys are seeing just in larger trends in adding new merchants there and how you feel about growth there in the out years. Thanks.

Thank you, it's Neil. As stated before, we did see nice growth trajectory in the U.S., outpacing other regions and growing in its share. Some of it came from the concentration of flow and border-free acquisitions that were, I would say, mainly or virtually almost all U.S.-based merchants. Some of it coming out of the higher growth profile of d2c brands or celebrity brands that are growing faster than legacy brands on top of it we do see a good a good pipeline and strong pipeline being built in the us uh economy solid businesses are being open and are growing and we see it reflecting in uh in the demand for those brands worldwide so we do expect it to continue and grow not in the pace we've seen on the enterprise side for sure that we've seen forward. So we expect it to continue to grow gradually in mix. It will be somewhat accelerated by the general availability in the U.S. first of the Shopify markets pro that I would say by being released first in the U.S. would scale up, I would say, the share of U.S. even further. But over time, we expect it to balance once additional regions would be open within 2024.

Great. Thanks so much.

Thank you. And at this time, I would like to turn it over to Amir for closing remarks.

Thank you, and thank you, everyone, for joining us on this call today. We appreciate your ongoing support and very much look forward to updating you again on our future earning schools. Until next time, goodbye to you all, and take care.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your Once again, thank you for attending. And at this time, we do ask that you please disconnect your line.