Lede

Global-e (GLBE) reported earnings on 8-14-2024, and we shared the earnings review that day here:

Global-e (GLBE) Q2 2024 – Very Strong; Large Merchant Goes Bankrupt

We spoke with the CEO afterward and share that transcription below.

As a reminder, all our CEO and CFO interviews for all companies are available on the Interviews Tab.

 

One-on-One with the CEO of Global-e (GLBE)

Ophir Gottlieb:
First of all, congratulations on surpassing 1 billion in GMV in a non-peak quarter. I’m glad also that after the earnings print, most analysts, including myself, immediately came to the defense of the quarter because of the arithmetic to factor out Ted Baker.

It was actually not very difficult arithmetic and the market had a heart attack and I just told almost every investor I was on the phone with, I said, “Give it three days, it’ll be higher.”

Amir Schlachet (CEO, GLBE):
I think obviously the way we saw it is that if you disregard Ted Baker, which I think you should, we truly believe it’s a one-off, then actually we would’ve raised our guidance.

So obviously we think it’s the right way to view it. I’m happy to see the market concurring with that.

OG:
Yeah, I agree. Okay.

So other than Ted Baker’s European e-commerce business, it seems like Global-e was not hit by a recession in Europe broadly or even in luxury, which I was personally very happy to hear.

I was surprised on the earnings call how little talk there was of a macro headwind.

I’m going to ask about record pipeline record, record new GMV signups and new highs in bookings year to date.

But before that, what can you say about the state of the markets you serve broadly?

I think we both agree on the opportunity long term, but I’m actually curious about the state of affairs as you see it with respect to consumer behavior because you have really a perfect window into it.

AS:
Yeah, I think we do see some headwinds. I think we commented on that, on our public call as well.

We did see some softness over the last few weeks, which is part of what was baked into our updated guidance.

So we took that into account because it’s more than a few days. It’s even more than just the two weeks of the Olympics.

Some people that we talked to asked about the Olympics effect, and I know that in some parts of retail, especially in Europe and even in the US there was some talk about shopper attention being drawn to the Olympics.

So there might be, I don’t know, it’s hard to separate, so there might be some Olympics effect into it, but we saw it before the Olympics, so it’s already a few weeks old.

So we wanted to be cautious and not take an unfounded assumption that this is just going to surprisingly end soon.

So yes, we do see some softness and it appears to be pretty broad based, so there’s nothing very specific to call out, neither a specific segment or specific vertical nor a specific geography of set of geographies.

It seems to be pretty broad based in terms of the softness in consumer sentiment.

So it’s hard to tell where it comes from or what to attribute it to, but we do see some signs of that.

OG:
Interesting. I’m further away from it. I’m just surprised there isn’t just a total collapse of goods purchasing in parts of Western Europe, but there isn’t… It’s not good, but it’s not… I keep waiting for the, “Uh oh.” And not yet.

AS:
Consumers in general have shown more resilience across sectors in recent years. I think we can draw parallels potentially to last year where around, not exactly this time of the year, but later in the year, we did see some softness and back then we and some other people attributed to it to a late winter coming to Europe.

So higher temperatures which delayed winter shopping for a lot of people.

It’s always easier in hindsight. In hindsight, we think that attribution was justified.

We did see volumes pick back up when the weather changed, but it’s always hard to put your finger on exactly what’s happening.

OG:
Okay. All right, let’s focus on Global-e.

So strongest growth pipeline ever, signing up a record volume of new GMV year to date, first ever non-peak quarter over a billion dollars in GMV, year to date bookings at an all time high, ability to deliver strong top line growth of over 30% goes beyond just the second half of 2024.

So in an odd question, Amir, what is happening?

Is this essentially Global-e realizing the beginnings of the long-term opportunity that you and I talk about pretty often?

It’s my job to pose the bad side.

Is it like a new-found urgency from some brands to turn on cross-border as quickly as possible because it’s an inexpensive way to increase revenue because they see bad things coming?

I don’t know. I’m basically surprised at how well Global-e is doing in the face of what I hear is a pretty difficult macro environment.

AS:
Yeah, honestly, I think it’s both.

I think, well first and foremost, I think it’s maybe not starting but continuing to realize the long-term potential because we see that it’s obviously coming from not just a larger number of these but also bigger and bigger merchants that are coming through the door.

Because I would say the broader and the more effective and capable our service and the larger our dataset, the better our insights and our data-driven ability to consult these brands on exactly what to do in order to optimize their international e-commerce – the more eligible we become for these larger and larger merchants, and the more interesting it becomes for them to take a bigger and bigger proportion of their activity and switch to doing it through Global-e.

So I think the most interesting part of the explanation is that – just the continuous improvement and sharpening of our capabilities and our know-how that is driving that positive flywheel effect and bringing more and more of these merchants and more of these big names to work with us.

I think on the back of that, there is some effect, I think, of merchants that are looking at a higher interest rate environment and some maybe clouds forming in the horizon.

They’re still looking for growth for themselves. It’s just becoming tougher in such an environment.

It’s a tougher decision now to commit a lot of resources, to commit a lot of capital, to commit a lot of operational expenses and grow the headcount in order to try and leverage the international, say potential that they have.

But at the same time, they understand that they have this potential and they need to tap into it.

They just need to do it in an asset light way and it’s something that gives them both the short time to market and the flexibility to do it, I would say even better than what they could do by themselves, thanks to the knowhow that working with someone like us can bring to the table.

So I think in such an environment, and we’ve seen that also in our conversations with merchants, so three or four years ago, almost our entire conversation with merchant would be about growth, growth, growth, and how we can help them to supercharge their international sales.

Now we still talk about it, obviously that’s a key element, but it’s also about how we can help them to streamline their operations and save on operational costs, save on shipping costs, save on head count in terms of how many people they need to manage that international operation.

So we see more of the merchants being interested in that as well, not just in the prospect of growth.

That’s another maybe viewpoint on the same outcome of brands choosing to work with us as a strategic decision for their growth in the years to come.

OG:
That’s great color too about just the development and maturity of the Global-e offering that it’s just simply more appealing to more companies now, larger companies. That’s great.

All right, let’s talk about Shopify.

Global-e noted on the call that it was… No specific numbers, but outperforming your internal targets for Shopify, which is a great statement.

Which targets just generally, are you referring to?

Is that the number of firms signing up for cross border or is that those that have signed up, they’re scaling more quickly than anticipated or they’re more successful than anticipated or a combination?

AS:
It’s a combination because when we look at that, because of the way our model works, first of all we were referring mostly to Managed Markets, what used to be Markets Pro, now it’s Managed Markets, and we’re referring to the GMV growth because at the end of the day, it’s a GMV based model.

So we do track, obviously, the number of merchants. We track that on the enterprise side as well, definitely on the Managed Markets side.

But at the end of the day it’s the aggregate GMV that is of interest to us because especially on Managed Markets, the effort that is necessary to switch on a merchant is virtually zero.

It’s not just the effort for the merchant but also the effort for us, it’s nearly zero.

So we’re mostly interested in the ongoing development of the aggregate GMV.

It’s true by the way in the enterprise side because on the enterprise side there is some effort involved, again the payback period is so rapid that we also just look at the long-term GMV growth.

So that was where we’re referring to and we are seeing a very steady pace of merchants joining the platform and enjoying the benefits of it.

And as we commented, it’s even slightly ahead of where we thought we would be at this point in time.

OG:
Which also points to, not only the strength of Global-e, but the consumer in general.

It’s just very, very good news in a time when I would not have guessed there was good news.

It’s really good. Congratulations.

Okay, so this is still, even with great progress, the question I have asked you most often.

Let’s talk about the progress of the marketing services to enterprise clients.

So how is that broader service progressing and talk about getting to full-blown GA offering, and then maybe a follow-up to that, whenever that is, will it be available to Shopify merchants as a sort of click here for ad generated traffic?

I know that would be years down the line, but just trying to get a feel for it.

AS:
So it is progressing, we didn’t emphasize that this time around because there was no big news to bring forth, but it is progressing.

We are progressing both on the technical side of things, because it’s not just a pure business offering, it also has technological and product related features and capabilities that we are gradually finishing and rolling out that will support this effort.

But in parallel, we are continuing to develop, I would say, the business side of it or the marketing side of it and starting to approach merchants and start to get them interested in participating in what we are building.

Very much seems to be on track.

We talked back in the past, about a Q4 at least initial launch of the initial set of capabilities.

I will carefully say that we seem to be on track.

It’s still not going to be the entire full-blown list of features and capabilities, but we think that by some time in Q4, we should be able to go public with the first set of capabilities and develop it from there.

In terms of the demand generation offering, it’s platform-agnostic, so it will be for different merchants.

In terms of, “Click here for automatic demand generation” that’s maybe down the line, it’s still not something to expect very soon.

But I think even without that, we have high conviction in it being a very interesting offering for our merchant base and for new merchants that we will sign up.

I think it’s beyond just a tool for existing merchants to grow their business, which is super important. I think it’s also going to be an important addition to our sales war chest.

And I think that, again, that’s not immediate, but if you look maybe not on 2025, but 2026 onwards, I think assuming all goes according to plan, it could also start to be accretive to actual financial results because it’s inherently a high margin service.

OG:
Yeah, that’s awesome. It’s a very exciting time.

I think this, but maybe I just hope it so I have to check my cognitive bias here.

I think that 2025, as long as we avoid a recession, which is we’re on a razor’s edge, but we’re about to face a moderating Fed finally could be just a very, very good year.

I know demand gen, you’re still looking more like 2026, but it will be available.

I mean, you’ll be able to talk about it more with numbers and that’s really exciting.

AS:
And also, by the way, on our “regular business,” you quoted me or Ofer (CFO), but on the growth going into the first half of ’25, again, with all the positive developments that we have in the business with the big new merchants that are coming online with the general growth in levels of activity in the new signups and the pipeline, I think we’re already building a very strong base for growth also beyond the end of this year.

OG:
I’ve told a couple CEOs, not everyone I talked to that I think 2025, if we can avoid a recession, will be better than they think.

I’ll just say that.

So actually for the first time, Amir, I had investors ask me this, has there been any impact from the war and basically what’s happening in the Middle East on Global-e’s business?

Obviously it’s affecting human beings that work in Israel, but investors are starting to ask about the Global-e business.

How should we look at that? How should I answer that question?

AS:
First of all, in the business itself, there’s no real impact.

I would say even if you look at Israel as an outbound market is insignificant in our activity.

And Israel as an inbound market, again, it’s not a very big market and there’s no real, even throughout the war, there’s no real interruption in the flow of goods to Israel apart for a very short time span.

So no real direct business impact.

Obviously as we said at the beginning of the war, there was some limited impact on the human being side, frankly just because we had some people that were drafted to military reserve service.

But since less than half of our team is actually located in Israel and also the teams on the R&D side, and on all other fronts are international by nature, then it was very easy, I would say, for us to accommodate for those that were drafted.

It’s been a long time now since those people that were drafted came back to work.

So even on that, obviously some people needed to work harder, but even at the peak of it, we had less than 5% of our overall personnel that were drafted.

So on that too, there was a benefit to us being a truly global organization with many centers of excellence around R&D, around client work, around operations spread around the world.

So it was relatively easy just to shift workload from one place to the other. So no real impact.

OG:
All right. So same question I always ask to finish, Amir, is there anything I didn’t ask that I should have asked or something that you wanted to say but I didn’t give you a chance to say because I didn’t ask the right questions?

AS:
No, I would then probably say the same thing as usual, you focus on the important things and the right things in my view.
So I think we covered all of the key and interesting points.

Nothing that I can think of and nothing that came up in all our callbacks to date that we haven’t spoken about.

OG:
Okay.

AS:
I think we’re good on that.

Conclusion

The author is long GLBE at the time of this writing. 

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