Welcome to Global-E Third Quarter 2024 Earnings Announcement Conference Call. This call is being simultaneously webcast on the company's website in the Investor Relations 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 Schlachet, Co-Founder and Chief Executive Officer; Ofer Koren, Chief Financial Officer; and Nir Debbi, Co-Founder and President. Amir will begin with a review of the business results for the third quarter of 2024. Ofer will then review the financial results for the third quarter of 2024, followed by the company's outlook for the fourth quarter of 2024 and full-year of 2024. 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 our future events and not -- and are not a guarantee of future performance. Actual outcomes may differ materially from the information contained in the forward-looking statements as a result of a number of factors, including those set forth in the section titled Risk Factors in our prospectus filed with the SEC on September 13, 2021, and other documents filed with or furnished to this 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…

Thank you, Erica, and welcome everyone to our Q3 earnings call. We delivered a very strong third quarter, thanks to the growing contribution of new merchant launches within the quarter, as well as the growth of our existing merchants. As such, Q3 saw both GMV and revenue growth accelerating to 35% and 32%, respectively, both well above the top range of our guidance. This strong top-line growth was accompanied by our continued efficiency measures and cost control, yielding an adjusted EBITDA growth rate of almost 41%, more than 7% above the midpoint of our guidance range. Given the successful launches of new merchants, which are trading well, and a more positive consumer sentiment as of September, we expect growth to continue accelerating in Q4 to a rate of 39% year-over-year and are raising our full year guidance accordingly. We now expect annual GMV for the full year of 2024 to grow 35%, revenues to grow at 30%, and adjusted EBITDA to grow almost 50% year-over-year. Moreover, this strong performance across the Board, combined with our 2024 new merchant bookings, which are at an all-time high, further strengthen our conviction in our ability to hit the 30% mark in GMV growth again in 2025. Beyond the financial metrics, I would also like to give you a few updates on our strategic posture and main initiatives. As you know, Global-e's mission is to power better global e-commerce. We are the clear leader in global e-commerce as a service, but nevertheless, we invest in adding new features and new functionalities all the time as we continuously transform the way merchants and shoppers across the world engage with one another. For example, during Q3, we went live with a new click-and-collect option of BOPIS, or Buy Online and Pickup in Store, enabling relevant merchants…

Thank you, Amir, and thanks all of you for joining us today on our earnings call. We are pleased with our performance in the third quarter. In Q3, we experienced accelerated growth combined with healthy margins. The strong growth was driven both by the contribution of new merchants that successfully on-boarded and launched as planned and an improvement in consumer sentiment as of September. I'd like to point out that in addition to our GAAP results, I'll also be discussing certain non-GAAP results. Our GAAP financial results, along with the reconciliation between GAAP and non-GAAP results, can be found in our earnings release. GMV continued to grow rapidly in Q3, as we generated $1.134 billion of GMV, an increase of 35% year-over-year, 4% over the midpoint of our guidance for the quarter. Our strong GMV growth was fueled by positive consumer sentiment as of September and trading volumes generated by new merchants launched, which were on the upper side of our expectations. In Q3, we generated total revenue of $176 million, up 32% year-over-year. Service fee revenue were $82.6 million, up 32% and fulfillment services revenue were up 31% to $93.4 million. This quarter was characterized by balanced growth. Services fee take rate slightly decreased from Q2, due to the loss of the Ted Baker account which we had provided demand generation services with a high service fee take rate. Fulfillment services take rate increased compared to Q2, driven by a favorable mix. Non-GAAP gross profit once again outpaced top-line growth. In Q3, non-GAAP gross profit was $82.3 million, up 39% year-over-year, representing a non-GAAP gross margin of 46.8% compared to 44.4% in the same period last year, driven by operational efficiencies. GAAP gross profit was $80.1 million, representing a margin of 45.5%. Moving on to operational expenses. We continue…

Thank you. Ladies and gentlemen, we will now begin the question and answer session. [Operator Instructions] Your first question comes from William Nance with Goldman Sachs. Your line is now open.

Hey, guys, nice results this morning. I appreciate you taking the question. It was great to hear the commentary on just the profitability outlook. And I was wondering just on that note, EBITDA margin coming in very strong. I was wondering if you could talk around the outlook for free cash flow and the conversion of EBITDA. I think historically, you've had some very elevated free cash flow conversion in the fourth quarter and then it dips in the first quarter. Just wondering if you could speak to that seasonality and if there's still something we should expect. Thank you.

Sure. Thank you, Will. It's Ofer. Yes, as you mentioned, we do have seasonality in cash flow and in free cash flow, in particular. Typically, Q2 and Q3 are quite standard, but due to the peak season in Q4 and the positive working capital that we typically have around that, Q4 is a very strong quarter. Q1 is the other way around. It's typically the slowest quarter in terms of cash flow. Generally speaking, when we look at the full-year and put aside the seasonality, free cash flow tends to be slightly above adjusted EBITDA levels, and we do expect very strong Q4 in terms of free cash flow.

Great. That's great to hear on the full-year numbers. It's very helpful. And you announced some product enhancements, the buy online pickup in store, so that's very kind of operationally intensive to get that product rolled out. I'm just wondering if you could talk to kind of the client reception and just with all the product enhancements, how you're thinking about pricing and pricing power over the next couple of years. Thank you.

Hi, Will, it's Nir. Thank you for the question. So we continue to invest in our product and enhance our solutions. And Amir mentioned a few of them from the BOPIS that we've seen great traction with the first large enterprise client. We rolled it out in those shop in Canada, in those shops in Canada. We are aiming to provide the service to many more of our enterprise clients that have global network of physical retail in order to enable them to do global multichannel, it's a great customer experience, and we do it also in other fields. We do a lot of product enhancement to optimize the cost for trade for our merchants such as duty drawbacks and the Global duty drawbacks program. We just recently released to the market and we intend to continue with that. Some of it, as we build more capabilities, inherently, we can increase slightly the take rate. For example, duty drawback, it's a new service. Merchants adopted. Basically, there is no out-of-pocket money for them. They save money because we can now reclaim duty expenses on returns. However, we take a cut out of it. So yes, we are able to increase our take rates. However, our merchants does not see it as an increase in fee. On the contrary, it saves cost and create efficiency for them. So on such places, we are happy to enjoy the extra margin. In general, we don't expect at the foreseeable future to increase our prices. We understand that our merchants are going out of a difficult time, the interest rates as a cost of media buying for them, et cetera. So we are trying to make it more efficient for them to trade, not trying to do it or utilizing pricing power.

That's great to hear about pricing for value. Appreciate you taking the questions.

Thanks a lot.

Your next question comes from Andrew Bauch with Wells Fargo. Your line is now open.

Hey, guys. Thanks for taking the question. Just wanted to hit on the demand gen platform. The 100s of merchants that you said are in the pipeline there. Can you give us a sense on how big these merchants are? What you anticipate their activity levels would be? And if you could reconfirm, I believe that you've mentioned in the past that demand gen would be a gross margin uplift. So maybe we could just kind of put some way to dollar frame that opportunity there.

Hi, Andrew, thank you. It's Nir. And as you mentioned, yes, we've recently launched borderfree.com as a cornerstone for demand generation, an initiative for our partner brands. While still it's -- in its -- sorry, still in its early innings, we are very excited of the long-term potential contribution to our brands in the coming years. And as it grows and they start to adopt it, we believe that in the coming years, it will affect, it will have an effect also on our ability to generate additional take-out of it. I think that -- at the short term, in the coming quarter, our focus would be about the penetration of the product and making sure we create value for our brands. We are seeing the increase in traffic. We have more than a couple of hundreds of brands that came in already and registered as -- on the midsize most of them, there are a few largest -- that joined already. I think that as we gain traction and are able to demonstrate. More and more the value we can bring out of it to our merchants, we will see more and more of our clients coming in. At this stage, I don't think it will have any impact on our take rates or top-line. I believe that, once we're building it into the coming quarters. And we will see the adoption rate and the value we create, we might start to see some traction there.

Great. And then on my follow-up. I would just want to talk about Managed Markets. Last time we spoke, I believe you mentioned that it was tracking ahead of plan. But I guess the -- as we kind of think about '25 from a product perspective, is that also tracking ahead of plan. And what do you think that could mean as far -- as further adoption for Managed Markets in the year ahead?

Yes. Hi. It's Amir. It's -- as you said, Managed Markets is indeed tracking well and the same goes for adding new features and new capabilities. And thanks to that, it's continuing to gain traction within the Shopify merchant base and we expect that trend to continue into next year as the product gradually improves. So we expect the merchant adoption curve to improve as well.

Great. Thank you, Amir.

Thanks, Andrew.

Your next question comes from Koji Ikeda with Bank of America. Your line is now open.

Yes, hey guys, thanks for taking the questions. I wanted to ask a question on the GMV guide for the fourth quarter. Just kind of looking at the midpoint of the guide, that implies GMV is adding about $516 million sequentially. That's a pretty big absolute number. It's up 47% year-over-year. When I do look at 4Q last year, the sequential net add-in GMV was up 60% to $350 million. So I know that growth was there before. So I just wanted to kind of dig in a little bit more here, but, definitely, hear you on all the launches and all the good news there. But what are you seeing in the transaction trends quarter-to-date that's giving you the confidence in that guide?

Yes. Thank you for that, Koji. It's Ofer. Basically, what we have seen -- there are two drivers behind that, that basically build our confidence around the Q4 guide. The first one is, as you mentioned, is the merchants, the successful merchant launches that we had throughout the second-half of the year, we did obviously, call out many names, including some of the larger ones, Victoria's Secret, Harrods, and Manchester United and some of the others. So basically, those have launched on plan. And as we mentioned, they're trading well. They're trading on the higher side of our expectations. So this is definitely one strong driver. The second one is the improved consumer sentiment. The first -- unlike the first-half, which was surprisingly stable, the second half continues to be very volatile in terms of consumer sentiment. We saw -- as we mentioned in the previous quarter, softness in July and the deep-going into August. However, in September, it picked up very nicely and that continued through October and the beginning of November. So as we know, this is out of our control and it may be -- it may continue to be volatile. We haven't incorporated the highest numbers that we have seen in the past month or two, but we are also much more encouraged, compared to what we saw in August, and that also is driving some of the growth.

Your next question comes from Scott Berg with Needham. Your line is now open.

Hi, everyone. Really nice quarter here. I guess, two for me. We'll start with your bookings and revenue growth year-to-date. I don't know if it's going to be for mere or near. But as you think about the composition of what your bookings have looked like year-to-date and I know we get net revenue retention on the fourth quarter number. But has that shifted at all? You landed a really large company last year, and I know that launch went well, but that launch was larger than typical. Just to know, if you're seeing more customers this year try to land really big with 10, 20, 30 markets versus the historical cadence that might be land a little bit small, but have strong expansion activity over time.

Yes. Hi, Scott, it's Nir. So we are very, very happy with the year-to-date results on bookings. We are at a record level of bookings. We have seen great momentum in the market with large enterprise and -- enterprises signing in and going live. Victoria's Secret, which actually gave us most of the global e-commerce outside a few specific distribution markets, local distribution markets. Single for Harrods, where we took over not only all of the global markets, but also the domestic market there in the U.K. as part of our multi-local strategy. We have seen the same also with Manchester United, where we've taken not only the global expansion but also the local market as part of the multi-local strategy. So we do see positive effects of large merchants, actually launching with virtually almost everything that they have to give on global e-commerce, and even though domestic e-commerce as part of it. I think that we do see a robust pipeline also looking into 2025. We are very optimistic with the advanced stages in the funnel. We see conversion of leads into deals staying strong. So we're quite optimistic this is going to continue also going into 2025.

Very helpful. Thank you. And then, Ofer, you kind of noted that G&A expenses were down quarter-over-quarter, but they were down on a seasonal nature much more than what we've seen historically. Anything led to that. I'm really just trying to think about modeling for Q4 and into next year if that might be a lower rate more sustainably going forward?

Yes. We had some one-off expenses, some of it related just to timing, some really one-offs in Q2. So basically, if you look at Q3 and/or maybe something in the middle between the two quarters. This should be the representing pace going forward. Obviously, as we are growing, we expect this expense to grow over time. But as a base, I think you can look at the midpoint between the quarters.

Your next question comes from Samad Samana with Jefferies. Your line is now open.

Hi. Good morning and thanks for taking my questions. Maybe first, just going back to borderfree.com, I guess, how should we think about what you're embedding into 4Q expectations from that launch, if anything? And how should we think about maybe, what the take rate implications there are that you're thinking through the fourth quarter and into next year?

Hi, Samad. Thanks for the question. It's Ofer. In Q4, we are embedding mainly expenses related to boderfree.com. We have launched the product. There are some expenses associated with that. We don't expect to see any revenue yet. As Nir mentioned, currently, our main objective is to create value for the merchants and create their confidence in this service. So I would say, that in the short term and again going into the -- at least the first-half of next year, nothing significant on the top line. We do have some expenses related with -- to the service, it's already embedded in the Q4 guide.

Great. And then, I know you mentioned bookings in the prior question as well. But I guess, I just -- the comment that Harrods the last major launch of this year, does that imply that there are other large merchants that you've booked, but at this point, we'll wait to go live in 2025? And I guess if that is the case and how should we think about maybe seasonality that you're thinking about 2025 based go-lives, is it looking like it should be similar in the first-half as it was in 2024?

Yeah. So as you understood, we do have a robust pipeline. Some of it is already signed, not only in advanced stages. So those are projects in motion. They would not launch this year. And I don't think we would see material change in the timing of it versus what we've seen in 2024 and -- but we do expect, I would say, a couple of decent-merchants to launch in the first half. I don't think that Q1, we would see any significant contribution as we haven't this year for new merchants, but I think that as of Q2, we would start to see it rise.

Your next question comes from James Faucette with Morgan Stanley. Your line is now open.

Great. Thank you very much. I wanted to ask quickly on take rates, a little bit of clarification there. You mentioned Ted Baker as one of the drivers of service fee take rate decel. But when you strip them out, would service fees have been stable to maybe slightly up versus last quarter? And then, similarly on fulfillment, you had alluded to a broad-based AOV increase last quarter, which was compressing fulfillment take rates. Was that not a factor this quarter? And how should we think about the trajectory of both over the near to medium term?

Hi, James. It's Ofer. Thank you for the question. In terms of the service fee take rate, yes, as we mentioned, the main impact is from the Ted Baker account. And basically, when you put that aside, we were quite stable this quarter. And we expect to see stability on that side going forward. In terms of fulfillment take rates, as always, it's much more volatile than service fee because there are different parameters impacting it. It's AOV, it's the mix, multi-local and so on and so forth. This quarter, we had a positive mix. So that had a positive impact. It was actually expected, but it was -- our expectations met reality or reality met our expectations. In terms of - - and AOV actually slightly decreased in Q3, so we haven't seen the trend from Q2 continuing. When we look forward and try to think what the fulfillment take rates would be? I think that Q4 take rates, which are a bit lower as embedded in our guidance would be a good base for next year. This quarter is slightly higher than what we see as the ongoing take rate there.

Your next question comes from Chris Zhang with UBS. Your line is now open.

Hey, good morning. Thanks for taking our question. So I had a question on what's embedded in your Q4 guidance in terms of merchant launches. So you told -- you've talked about completing the last merchant launch for this year, but then you also have a number of smaller merchants, midsized merchants, and I assume those you have better visibility for. But the other part is, for top five managed markets, I just wondered what's the ramp-up pattern throughout the fourth quarter of last year? And since it's more of a turnkey solution, based on our understanding, it's a lot easier to turn it on. Do you expect continued onboarding of new Shopify-managed market merchants throughout the rest of the fourth quarter, even during the holiday shopping season?

Yes. So thank you for the question. It's Ofer. I think that generally speaking, as in every year, we see the less significant launches on the calendar, typically around October. Sometimes you see a few going into November. We do have some smaller merchants also onboarding or launching after that. But generally speaking, the larger merchants or decent-sized merchants wouldn't go after October because everybody is preparing for the peak season. And then once the peak is behind us, typically everybody goes into the holiday season. So you see a few launches in December, but nothing significant that would impact the results. And then typically, we start seeing again merchants getting back to work and sort of prioritizing this project as of mid-January, beginning of February. So typically, you see additional launches coming in towards the end of Q1 and Q2. So that would be the standard cadence and this is what we are seeing now as well.

Your next question comes from Brian Peterson with Raymond James. Your line is now open.

Hi. Thanks for taking the question. This is [John] (ph) on for Brian. I wanted to ask on the sales cycles for enterprise customers. I realize that each customer journey is going to be different here and there's certainly seasonality with the holidays. I was wondering if you could speak to the timing of sales cycles, how those have trended versus earlier in the year. And as you attracted larger and larger brands to the platform, is that maybe helping with the pace of sales cycles? And then I have a quick follow-up.

Hi. It's, Nir. Thank you for the question. So with enterprise clients, I think over the last two years or three years, we did see an improvement in the sales cycle timing. It comes from multiple factors. It's us gaining much more experience onboarding and launching enterprise merchants. It's getting the, I would say, all the clarifications on the financial stability, et cetera, much quicker due to our positioning as a publicly traded company, as a stable company that generates cash every quarter and going into multiple other factors that we sharpened over the years. We do see additional potential for improvement. I don't think it will be a materially different. It takes to sell an enterprise, a large enterprise client, the sales cycle typically runs around six months and the launching of it would be in the realms of three months, four months, depending on the phases, depending on the complexity of their ask. So most of the clients -- enterprise clients, we would launch in 2025 and will 2025 are already in the sales funnel. Some of them, as I said earlier, are already signed, some of them are in early to advanced stages. And on the back of it, we will see them converting and launching throughout the year.

Great. Thanks. That's really good color there. And then maybe just a follow-up on the earlier commentary on Managed Markets. I was wondering if you could share any update there on as you've added more features. How you're seeing maybe merchant size changing there? And also any color on the pace of merchandise for managed markets? Thank you.

Yes, sure. This is Amir. Yes, as expected, we do see a gradual increase in the pace and somewhat also the size or the number of slightly larger merchants that are joining, but these are very gradual processes because it's dependent on a collection of various features and how applicable they are to various merchants. So we don't expect any kind of major step-ups, just a continuous gradual improvement as we roll out more and more features.

Your next question comes from Patrick Walravens with Citizens JMP. Your line is now open.

Great. Thank you and congratulations. Yeah, Amir, how do we think about what the possible impact would be on your business if we end up getting higher tariffs and potential universal tariffs in the United States?

Yes. Hi, Pat. It's a good question. I think it has two sides to it from our position. On the one hand, obviously, higher tariffs make it harder for U.S. shoppers to buy or for out of the U.S. merchants to sell. We believe that as long as they are not extremely high unreasonable tariffs, the impact will probably be there on the grander scale, but it should not be that detrimental for the -- let's say, the type of goods and price points that we mainly deal with. On the other hand, it is important to remember that we're in the business of helping merchants to overcome trade barriers. So in a way, additional trade barriers in this case, in the form of tariffs actually make our offering more valuable for merchants that want to serve the U.S. as the biggest e-commerce markets in the world. So if we take prior examples like the introduction of Brexit rules into the market, historically, we've seen that a change like Brexit was good for our business. Yes, U.K. merchants took a hit. But on the other hand, it's made our service so much more valuable for them and for European merchants that were selling into the U.K., because now everyone had to overcome additional export or import challenges depending on which side you look at it from. So in general, that's our assumption going forward.

Awesome. Thank you.

[Operator Instructions]. Your next question comes from Maddie Schrage with KeyBanc Capital Markets. Your line is now open.

Hey, guys. I just wanted to go back to the demand generation portion again. Wondering if the expenses that you guys are incurring right now are going to be recurring expenses or if these are kind of onetime expenses baked into guidance? And then my second question for you, any geo callouts. Obviously, the U.S. seems strong, but are there goals to do additional geo penetration? Thanks.

Hi, Maddie, it's Ofer. Thanks for the question. Regarding the expenses related to demand gen. They're not one-time expenses obviously, there is higher expense around the launch, but there will be ongoing expenses. We are promoting this product traffic to borderfree.com, so there will be expenses going forward. In terms of your second question.

Yes. Just to be clear, we do expect going forward, the rate of investment in demand generation, will not create any material difference in the level of spend on sales and marketing from what you see today.

And regarding the second part of the question, as I mentioned, we have seen a better consumer sentiment around the globe. But I can call out Europe as the continent that the highest rise. But at the same time, I would mention that it was really down year-to-year. When you look at Ladenburg, the base was pretty low. So we have seen a very good trade in Europe, the destination market. It's not only the low base. Europe is at least currently doing well in terms of trade.

Great, thanks for the question.

Your next question comes from Mark Zgutowicz with Benchmark. Your line is now open.

Thank you, and apologies if this was asked. I'm just jumping from another earnings call. But in terms of Shopify managed markets, I'm just curious, you had a target of roughly $200 million to $300 million for the year. Just curious if the GMV contribution is coming in at the lower versus higher end of that range. And maybe if you can just talk about the related GMV pickup that you expect to see perhaps into next year as perhaps there's more co-promotion between your Shopify and yourself?

Yes. So thank you for the question. I think that looking at this year, we are not at the top range and not the broad range, but we are within the range I mentioned. And so as we already mentioned in the call, it's going pretty well as planned. This is regarding 2024, going forward, we do expect to see continuous adds of merchants coming in. We don't expect to see any step change, but we do expect this offering to continue and grow.

There are no further questions at this time. I will now turn the call over to Amir for closing remarks.

Thank you, everyone, for joining us on this call today. Before we conclude, I would just like to take this opportunity and thank all of our amazing Global-E staff members, who have worked tirelessly over the past months to onboard new merchants to support our existing merchants and to make all the necessary preparations to ensure that all of them will be fully ready to serve their global clients during the all-important peak trading period. I would also like to thank you all for your ongoing support and your shared belief and our vision to transform the world of global direct-to-consumer e-commerce. As we head into the holiday period and on behalf of all of us here at Global-E, I would like to wish you a happy and successful holiday season, and we very much look forward to updating you again on our calls as we continue our exciting and rapid path to capture the immense opportunity that lies ahead of us. Until next time, goodbye to you all and take care.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.