Global-e Online Ltd. (GLBE) Q2 2021 Earnings Call Transcript | The Motley Fool

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Global-e Online Ltd. (NASDAQ:GLBE)
Q2 2021 Earnings Call
Aug 16, 2021, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the Global-e second-quarter 2021 earnings call. This call is being simultaneously webcast on the company’s website in the investor section, under news and events. For opening remarks and introductions, I’ll now turn the call over to Erica Mannion at Sapphire Investor Relations. Please go ahead.

Erica MannionInvestor Relations

Thank you, and good afternoon. With me today from Global-e are Ami Luckett, co-founder and chief executive officer; Ofer Koren, chief financial officer; and Nir Debbi, co-founder and president. Amir will begin with a brief review of the business results for the second quarter ended June 30, 2021, and an overview of Global-e. Ofer will then review the financial results for the second quarter followed by the company’s outlook for the third quarter and full year of 2021.

We will then open the call for questions. Please note that this call will include forward-looking statements that are subject to risk and uncertainties that could cause actual results to differ materially from management’s current expectations. We encourage you to review the safe harbor statements contained in the press release from today. For a more complete description, any forward-looking statements that management will make on this call are based on assumptions as of today and the company undertakes no obligation to update these statements as a result of new information or future events.

All material contained in the webcast is the sole property and copyright of Global-e with all rights reserved. Please note, this presentation describes certain non-GAAP measures, including adjusted EBITDA and gross merchandise value, which are not measures prepared in accordance with U.S. GAAP. The non-GAAP measures are presented in this presentation as we believe that they provide investors with a means of evaluating and understanding how the company’s management evaluates the company’s operating performance.

These non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with U.S. GAAP. A reconciliation of GAAP to non-GAAP measures is included in our earnings press release from today. Listeners who do not have a copy of the quarter ended June 30, 2021, press release may obtain a copy by visiting the investor relations section of the company’s website.

Now, I would like to turn the call over to Amir.

Amir SchlachetCo-Founder and Chief Executive Officer

Thank you, Erika, and welcome, everyone. Thank you all for joining us on our first earnings call as a public company. We are proud and excited to have lifted publicly mid-May on NASDAQ under the ticker GLBE. As such, I would like to start by thanking our incredible and growing team of employees, already more than 400 around the globe with dozens who have joined us just this quarter.

This team’s hard work and unequivocal dedication has brought us to where we are and will drive our continued growth and success going forward. I would also like to thank our growing community of investors, both those who supported us in the past as a private company and those who have joined us more recently at and post the IPO. We are honored by the trust you have put in us and are excited to deliver on our mission to make global e-commerce border agnostic. And last but certainly not least, I would like to express our deep gratitude to our loyal merchant partners, already more than 500 of them across North America, the U.K., Europe, and Asia, who have put their trust enough to handle their cross-border online sales and deliver a seamless localized experience to their shoppers regardless of where they are around the globe.

Turning to the results, I am pleased to report that Q2 was another record quarter for us. GMV grew to $326 million, representing 95% growth year on year. Revenues amounted to $57 million or 92% year-on-year growth. Our gross profit grew even faster by 113% year on year to $20.6 million, driven by gross profitability margin expansion to 36% in Q2, up from 32.4% in the same quarter last year.

Thanks to our growing economies of scale and increased efficiencies. We continue to operate on the basis of a very efficient operating model, yielding an adjusted EBITDA for the quarter of $7.6 million, representing 145% growth year on year. During today’s call, we will provide details on our Q2 results, as well as Q3 and 2021 full-year guidance. But given that this is our first earnings call post the IPO, we will begin by spending a bit more time than we will in the future earnings calls covering the business, our strategy, and the opportunities ahead, for the benefit of many of you who may be new to the Global-e story.

Here at Global-e, we have purpose-built a global end-to-end e-commerce platform and service that enables merchants to transact with shoppers from anywhere in the world by localizing both merchants’ and shoppers’ experiences and seamlessly overcoming the many barriers of cross-border trade, making global e-commerce border agnostic. We operate within a huge market opportunity presented by cross-border business-to-consumer, or B2C, policies. For the past decades, the retail world has experienced an accelerated shift toward e-commerce, with growth in online sales outpacing that of traditional retail. This shift has seen great acceleration during the recent COVID-19 pandemic, but the trend has been strong well before the pandemic hit.

Concurrently, the rise in social media, which is global by nature, has dramatically changed the way consumers discover brands worldwide. Together, these two strong secular trends result in an ever-increasing growth in the share of direct-to-consumer, or D2C, sales as merchants put more and more strategic focus on this channel. D2C enables merchants to strengthen their relationships of shoppers worldwide, enhance their brands, attain valuable data, and enjoy higher margins. As a result of a combination of these and other market factors, cross-border e-commerce transactions are expected to continue to grow, outpacing the growth in domestic e-commerce by a factor of two.

Forrester expects that by 2023, the cross-border e-commerce markets will reach $736 billion. This creates a huge opportunity for brands to sell globally, as they typically see around 30% of e-commerce traffic being international. But this is where the music stops for many of the merchants. When you look at their actual sales figures, typically no more than 5% to 10% come from international shoppers.

In other words, many merchants are not able to convert this enormous international traffic into actual sales, leaving a lot of money on the floor. This is because of the many structural barriers that stand between them and their international shoppers, who rightfully expect a seamless and localized shopping experience. But localizing the experience for even a single market is painful and difficult. A merchant needs to support the local language, present attractive prices in local currencies, support the local payment methods that are prevalent in that market, offer a compelling shipping and delivery experience, guarantee a full landed cost, including all relevant import duties and taxes, and more.

Now multiply these challenges by 50 or 100 markets, it becomes nearly impossible to overcome. There is no one-size-fits-all solution as shoppers from each market have their own different expectations with regard to their localized shopping experience. Hence, merchants of all sizes find the do-it-yourself cross-border strategy to be complex, expensive, time-intensive, inflexible, and highly difficult to scale and maintain. This is where Global-e comes in.

Our software seamlessly connects to any e-commerce platform the merchant is using via plugins and client-side scripts with built and maintain. Once integrated onto the merchant site, we add a deep and rich level of localization to the e-commerce store experience. For the shoppers, we localize all aspects of the shopping journey right from the moment they enter the website. We support localized marketing messaging in over 25 languages.

We use our proprietary-built localized pricing engine to present pricing in more than 100…

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