Global-E Online Ltd.

Welcome to the Global E's third quarter 2023 earnings call. This call is being simultaneously webcast on the company's website in the investor section under news and incentives. 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 Karen, chief financial officer, and Nir Debbie, co-founder and president. Amir will begin with a review of the business results for the third quarter of 2023. Ofra will then review the financial results for the third quarter of 23, followed by the company's outlook for the fourth 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 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 make 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 November 15, 2023 for additional information. In addition, certain metrics will be discussed 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 the 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 operating decision making. For more information on the non-GAAP financial measures, please see the reconciliation tables provided in our press release dated November 15, 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 November 15, 2023. I will now turn the call over to Amir, co-founder and CEO.

Thank you, Erica, and welcome everyone to our Q3 Earnings School. We delivered a strong third quarter with 35% of growth in GMB and 76% growth in adjusted EBITDA on the back of improved profitability margins, and strict cost control. In addition, during the quarter, we made major advances along all our strategic vectors. Despite the continued strong growth, for a combination of macro-driven reasons, GMV and revenues for the quarter fell slightly short of our guidance range, which also leads us to a slight downwards revision of our annual GMV and revenue forecasts. But at the same time, our adjusted EBITDA came in above the guidance range, And we are also raising our adjusted EBITDA forecast for the year, a testament to the strength and durability of our business model as we continue on our path towards reaching our long-term adjusted EBITDA margin target while sustaining high and durable growth. Before we dive in deeper into the results, I would first like to express my personal wholehearted thank you to the many of you who have reached out to us through various channels over the past few weeks. in the wake of the unimaginably barbaric attack by Hamas terrorists on Israeli civilians that took place on October 7. Your compassion, support, and generosity are heartwarming and gave us rays of light during these dark times. The atrocities of October 7 and the inevitable subsequent military conflict have impacted a lot of Israeli families. Ever since the attack took place, we have taken many actions to both ensure the safety and well-being of our team members and their families, and to extend our support to the broad communities that have been impacted. From a business operations perspective, while some of our Israeli colleagues have been called for active reserve duty, there has been no impact on our ongoing activities, and our business continues to operate as usual. As you know, and as our company name suggests, Globally is truly a global organization. working natively in diverse teams spread across more than 20 locations around the world. We've only about half of the workforce located in Israel. Through the resilience of our incredible global team, the business continuity plans we have in place, and the fact that all our infrastructure is cloud-based, we expect no impact on our business even as the war continues. In any case, I'm certain you will all join me in wishing for better and more peaceful times to come soon. Switching to our quarterly business results and outlook, and starting off with GMV. On the one hand, our business continued to fire on all cylinders during Q3, without any slowdown in the pace in which new merchants signed up and went live. But on the other hand, we did encounter stronger than expected macroeconomic headwinds during September and parts of October, which negatively impacted same-store sales growth, reversing the trend we have seen during Q1 and Q2. The main impact came in the form of softening consumer demand in European markets, as well as overall weaker demand in the luxury fashion segment. In total, our GMV for the quarter amounted to $839 million, representing a high-paced growth rate of 35% year on year. Total revenues for the quarter also came in below our guidance, totaling $133.6 million, up 27% year-on-year. Apart from the GMV shortfall caused by the macroeconomic headwinds I just mentioned, revenue growth was further affected by a lower blended take rate in the quarter. Before I continue, I would like to mention that while we are still not in a position to provide concrete guidance for fiscal year 2024, starting late October and over the past few weeks, we have seen positive signs. indicating a possible recovery in consumer spending towards the peak trading season, with same-store sales figures bouncing back. We also have reason to believe that the overall take rate we are seeing in the second half of this year will remain relatively stable into next year. So while the shortfall in GMV in Q3, combined with the prevailing macro-related uncertainty levels around consumer spending, have forced us to revise our annual guidance slightly downwards, we nevertheless believe that these early positive indications over the past few weeks, together with the continued strength of our many growth engines and our new bookings, will enable our growth rates to accelerate going forward and into 2024. Moving forward further down the P&L, our non-GAAP gross profitability margin continues to expand, coming in at 44.4% versus 41.5% in Q3 of 2022, driven in part by the favorable revenue mix as well as our continued efforts to drive efficiencies and optimizations thanks to our growing economies of scale. This, in conjunction with our continued tight cost control and best-in-class operational efficiency, yielded an adjusted EBITDA margin of 16.5% for the quarter, compared to 11.9% in the same quarter last year. In dollar terms, Adjusted EBITDA in the quarter amounts to $22.1 million, a staggering 76% growth year-on-year, beating the top of the forecasted range and representing the strength of our business model and its ability to sustainably generate durable, fast-paced, and profitable growth. As you will see when NOFA provides our detailed full-year guidance, in 2023, we expect to make a large stride towards achieving our long-term profitability adjusted EBITDA target. As in the span of the year, we moved from 11.9% in 2022 to over 16% forecasted for 2023. Given the immense market opportunity ahead of us, our clear market leadership position, and the top-notch execution abilities of our global teams, we firmly believe in our ability to continue on this durable and profitable growth trajectory well into the future. Beyond the financial metrics, I would also like to give you a few updates on our strategic posture and main initiatives. As I mentioned earlier, during the third quarter, we continue to onboard many new merchants across all different markets and verticals. In Europe, we launched with many new brands during Q3, including the iconic UK fashion brand Ted Baker, the French fashion icon Lacoste in its cooperation with Underwater 3, as well as with the French racing watches brand Depenseur, eco-friendly clothing brand Balzac Paris, the Spanish brand Pauline & Moi, and the iconic Italian luxury brand Paul & Shark, and many more. In the U.S., we went live, among others, with the American fashion house Tory Burch, the jewelry brand Moon Magic, the online watches store of Guess, the sustainable footwear and bags brand Rothy's, the leading women-owned and women-led fashion brand Frank & Eileen, as well as the known Californian denim brand, AG Jeans. We also continued our expansion to additional verticals, such as consumer electronics, with the recent launch of the iconic audio brand, Fung & Olsen. In terms of our expansion into APAC, Q3 saw many advances as well, as we continue to strengthen our presence in this fast-growth region. In Australia, we launched with many new brands this quarter, including Kotomi Swimwear, plus-size fashion brand Taking Shape, emerging high-end fashion brand Set Agni, kids clothing brand Chloe & Amelie, and the popular fast fashion brand Hello Molly. Japan saw some exciting new launches as well, including the world-famous diary and stationery brand Hobonichi, the innovative sneaker brands of One & Only and Grounds, lingerie brand Amorphio, and others. Further in the region, We also launched with an additional Korean fashion brand called PSABI, as well as with the Hong Kong-based organic newborn clothing brand, The Wee Bean. During the quarter, we also continued to expand our activity with existing merchant groups, as we went live with three new maisons from the LVMH group, jewelry brand Repossy, and the fashion brands Emilio Pucci and Patu. We also went live with the UK luxury brand Pour Des, which is part of the Richemont group. These are just a few select examples, as we are once again headed towards a record year in terms of new bookings. And with a growing pipeline of new opportunities across different verticals and dozens of geographies, we firmly believe that we are just at the beginning of capturing the massive and growing opportunity in cross-border e-commerce. Moving on to additional elements of our strategic roadmap, we have continued to expand our strong partnership with Shopify across all domains. On the third-party side, our partnership agreement with Shopify has been renewed for another year, and we are nearing completion of the migration of all our Shopify-based merchants into the new native solution. We have also launched the first phase of our integration into Shopify's new state-of-the-art checkout extensibility feature in close collaboration with Shopify engineering teams, and expect to complete the rollout of this exciting new capability by the end of 2023. But the bigger news this quarter came on the first party side for Shopify Markets Pro, which was successfully launched into general availability for US merchants in September. Markets Pro has been well received by the Shopify merchant community, and we believe it will be the primary driver for merchants who want to expand their reach to consumers worldwide. This innovative solution enables merchants to create a highly localized international consumer experience across all markets. without worrying about the complexities of international duties and taxes compliance, international payment fraud, international shipping, and so on. This comprehensive offering is addressing a clear and business-centric need for countless merchants. And as such, we expect it to continue growing rapidly over many years to come. Besides supporting the launch, our teams continue to work closely together with Shopify's teams to further enhance the set of capabilities available to these merchants. and to enable Shopify Markets Pro for merchants based in additional markets outside the U.S. next year. In terms of our overall technology stack, as always, we continue to invest in building new features and extending the functionality and interoperability of our platform for the benefit of both our existing and our prospect merchants. A few notable examples would be our new integration with the payment gateway crypto.com, which will allow relevant merchants to accept cryptocurrencies as payment methods in the checkout. Other notable examples would be our improved support for long-term product pre-orders via payment card tokenization, and our recently added capability to support orders which contain products that are shipped from multiple hubs located in different countries as part of a unified shopping basket, enabling global merchants to optimize the delivery experience based on their global inventory footprint. In parallel, we continue to expand our addressable market via integrations to additional platforms. The latest outcome of this ongoing effort is our first pilot merchant on the Wix platform, which is now in live testing, onboarded by means of our newly developed, easy-to-use plugin for Wix-based merchants, ensuring a simple integration process into this popular platform. In light of all these developments and others, as well as many exciting opportunities we are eager to pursue. We continue to expand both our technological teams and our commercial teams around the globe. But as always, we remain committed to doing so in a durable and sustainable way, as is evident from our consistent cash generation and adjusted EBITDA hypergrowth. 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.