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Subject:  Re: GLBE - my next TTD? Date:  8/19/2021  4:49 PM
Author:  LifeOfDreamer Number:  12363 of 13546

I replied to a thread on Sauls board with my thoughts on CC...reposting them here:

from their CC transcript:

Gross Profit/Margin - growing and should continue to do so:

"Now, let’s review the income statement in more detail. Gross profit continues to grow even faster than our topline as we continue to improve gross margins based on our economies of scale and improve efficiencies.

In Q2, gross profit was $20.6 million, up 113% year-over-year and representing a gross margin of 36%, compared to 32.4% in the same period last year. We believe that gross margin expansion to be structural and sustainable, as it results mainly from increased economies of scale, improved operational processes and pricing optimization."

Efficient. They used the word "Efficient" or "Efficiently" 5 times, all to describe their operational approach. They have lower expenses and are able to show a profit due to this efficiency. But they aren't doing it to the detriment of growth. This reminds me a lot of TTD.

"13.3% adjusted EBITDA margin"

"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 efficiency. 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."

The Revenue Mix:
Service fees grew 104% y/y
Fulfillment fees grew 86% y/y.
Service fees are the higher margin of the two, and that trend is expected to continue.

TAM aka What is the Opportunity they solve for:
"D2C enables merchants to strengthen their relationships with shoppers worldwide, enhance their brand, think valuable data and enjoy higher margin. As a result of a combination of these and other market factors, cross-border ecommerce transactions are expected to continue to grow outpacing the growth in domestic e-commerce by a factor of 2. Forster expects that by 2023, the cross-border e-commerce market will reach $736 billion.

This creates a huge opportunity for brands to sell Global-e, as we 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.

By localizing the -- 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 currency, support the local payment methods that are prevalent in that market, offer a compelling shipping and delivery experience, guarantee a full landed costs 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 the localized shopping experience. Hence merchants of all sizes, find a do it yourself cross-border strategy to be complex, expensive, time insensitive, inflexible and highly difficult to scale and maintain.

This is where Global-e comes in."

How do they do cross-border ecommerce:
"We support localized marketing messaging in over 25 languages. We use a proprietary built localized pricing engine to present prices in more than 100 currencies and support different pricing structures based on the shoppers’ location, local market conventions and the merchants pricing strategy.

We enable shoppers to checkout in their native language and to choose their favorite means of payment out of over 150 payment methods we already support. We pre-calculate import duties and taxes, and can either embed them into product price or collect them at checkout, thereby simplifying the customs clearance process and allowing for a fully guaranteed landed cost goods for both the shopper and the merchant.

We hone an extensive network of more than 20 shipping carriers, including market specific methods, such as cash on delivery or delivery to drop-off points, offering multiple shipping modes at attractive rates. And we even provide local after sales support and returns management by a multilingual shopper services and multiple returns options, including prepaid and local returns in relevant markets.

For the merchant, we make selling internationally as seamless and effective as selling domestically. The greatly improved localized shopper experience increase the sales conversion, enabling merchants to better capitalize on their valuable international shopper traffic by generating a considerable uplift in international traffic conversion also exceeding 60% after they begin to use our platform.

We provide our merchants with the flexibility to rapidly and efficiently expand internationally and grow to new markets where and when they want to, with little to no upfront investment, using their existing storefronts and maintaining their own brand experience in direct relationship with their shoppers.

Furthermore, we enable our merchant to offload complexities and risks, which are otherwise presented by transacting cross-border, making the selling and fulfilling process for international orders as simple as that of domestic sales.

We provide all these capabilities by means of our comprehensive end-to-end cloud delivered technology platform, built on top of a highly scalable, multi-layer tech stack, integrated and coupled with a diverse ecosystem of technology and service partners via dozens of open APIs."

Any partners we have heard of?
"From leading ecommerce platforms such as Shopify, Salesforce, Magento, BigCommerce, and others through the payment providers like Radiant [ph], World Beat, Klarna, and others, through the shipping carriers such as DHL, broad management providers, such as Porter and many of our partners providing value-added services, such as translation, online marketing and more.

With several of these, including Facebook, Shopify and DHL, we have already struck broader strategic partnerships, including mutual client referrals, given the significant value we generate for all players in the ecosystem."

Forecast? 66%-68% growth, likely sandbagged.
"For Q3, we are expecting GMV to be in the range of $328 million to $338 million. At the midpoint of the range, this represents a growth rate of 76% versus Q3 of 2020. We expect Q3 revenue to be in the range of $54.3 million to $56.3 million. This represents a growth rate of 66% at the midpoint of the range versus Q3 of 2020.

For adjusted EBITDA we are expecting a profit in the range of $2.million 8 to $3.8 million. For the full year of 2021, we are raising our guidance significantly. We anticipate GMV to be in the range of $1.35 billion to $1.37 billion, representing nearly 76% annual growth at the midpoint of the range.

Revenue is expected to be in the range of $227 million to $231 million, representing a growth rate of 68% at the midpoint of the range. For adjusted EBITDA, we’re expecting a profit of $22 million to $24 million."

Growth - where will it come from, and does your Shopify partnership bring in all your revenue today?
"Now referring specifically to Shopify, we are seeing already an increase in the -- in our pipelines and the sign ups of especially on the SMB front, kind of the smaller size merchant.

We do expect, as we guided before that we will see more movement on the pipeline with larger brand probably towards next year, in the beginning of next year as we complete the new integration that we mentioned in our comments. In terms of financial impact, as such, we do expect, as we guided before the main impact to kick in only next year towards the second half of the year. "

Translation - all this is before we really start seeing the benefits of the Shopify exclusive partnership.

Further digging in, do they expect share-of-wallet expansion from existing accounts, or is growth guidance coming from new accounts?
"Analyst - how much embedded in the guidance relies on new brands ramping or how much of that’s based on the existing portfolio? And then I have a follow-up question.

Nir Debbi

Hi Samad, it’s Nir. Thank you for your question. A lot of our guidance is based on clients already integrated in live on our platform, so most of the contribution for the second part of the year is already from live clients.

There will be some contribution and a growing contribution towards late Q3 of more merchants going live on the platform that are already signed in and to use our services and currently in integration, but we expect most of the effect of the growing pipeline is to sign clients to affect our Q1 and Q2 results next year and even more so in the second part of 2022."

This means their guidance is predicated mainly on expansion of existing clients, and not even factoring in new clients.

How do they grow revenue from existing clients? Apparently the largest merchants tend to start smaller, in terms of target markets. A typical land-and-expand approach here.
"However, the large merchants, specifically the super large merchants are the ones that are deploying batches of markets with us and we then, basically there is a significant opportunity still ahead of us. They are only a 10% or 20% of the brands, but they hold a significant portion of our GMV and the growth opportunity with them is huge.

We’ve seen that this year with Hugo Boss giving us 12 more market, we’ve seen it with Versace giving us additional market this year. We’ve seen it with Marks & Spencer that added 47 more markets, which is the sixth consecutive years which we open more markets with them, so with the large ones, we do see quite a lot of opportunities still ahead of us."

Are they looking to M&A to acquire capabilities or reach?
"Analyst - Can you give us a little more detail in terms of like the timing, should we expect acquisitions to contribute at least some inorganic growth or they likely to be purely technology? Just trying to get a little bit of color of kind of what you’re thinking in terms of investment potential and impact? Thanks.

Amir Schlachet

Sure. So we’re actually looking at both types of acquisition both growth in activity as well as additional capabilities and as you said, we are definitely gearing up for that in the -- looking at the potential space. I would say in terms of timing, you should hopefully, expect to see us do, I would say at least one or maybe two transactions this side of Christmas."

What is the Shopify partnership all about - how will that work?
"it’s making our services, kind of the same services that you know are just built in straight into the Shopify checkout itself.

So making it a seamless transition, I would say for the merchants as they switch globally on, it will just become part of their existing Shopify checkout as well as a deeper integration into the Shopify system or back-end as well, which should enable once the -- although it’s a multi-phase project, so once the final phases are in, it will enable an even seamless -- an even more seamless integration and kind of going live process for these merchants and hopefully making it almost as easy as flipping a switch.

So that is the intent, I would say on the things that we still need to get done on the technical integration front. In terms of the impact as we guided, this is what we’re seeing, we’re on track. We are seeing already initial kind of traction, now additional traction in our pipeline is growing, including more and more SMB merchants, Shopify based merchants that are going live with us, so we already see an increase in that, but I would say financially, we’ll probably see more of the impact towards kind of the first and second quarters of next year and certainly onwards on the second half of next year, once we have done the new integration kind of laid this year, which would enable us to bring also it to the bigger size, kind of enterprise size merchants that are on Shopify. "

*Shopify took a $193m pre-IPO stake in GLBE, it should be noted.

We saw great results from Sea Limited in APAC, is GLBE growing in APAC, too?
"Yes, we do see great opportunity in APAC and we do intend to invest much more. But as you stated, we do plan to enhance our partnership and channel partners in order to support it. Yes, we do have channel partners that are global in nature, that would be the life of the DHL or Facebook or a partnership with Shopify. But we are building also APAC specific partnership.

This is in process and we are hoping, we will have good news within Q3 or Q4 to announce about the partnership to support that growth as well. And on the back of it, we expect much more contribution coming out of APAC into our pipeline and into our numbers and I would say from the second quarter and third quarter of 2022."

Will be interesting to see if this is China-based partnership or something like Asia-not-China via Sea Limited or something similar.

Obviously I like this stock. It is pricey now, thanks to a huge runup.
The runup in price is unfortunate mainly because it came before this first public ER, so you had to take a leap of faith a bit. We have seen other companies debut and runup early after IPO, such as DDOG, ZM, etc... They won't all pan out, but I think this one will, and I don't expect a ton of upside in last 4 months of 2021, so I view it as a time to accumulate on dips or drawdowns, and believe this could be a big winner starting in 2022.

I would end it with this summary from Q&A where mgmt explains why their results are so good, and why it should continue:

"Brian Peterson

Hi. Thanks for taking the question and congrats on a really strong results. So first question for me, just kind of high level. We don’t typically see 90% plus revenue growth and GMV growth of this scale, if we’re thinking longer term, what are kind of key swing factors on growth and how do we think about the sales and marketing investments -- is that right level of sales and marketing investments to drive that?

Ofer Koren

Yes. I think to answer the first part of your question. We’re very effective in our sales and marketing approach. Over the years, historically we’ve been less than 10% spend on sales and marketing out of our revenue and the reason we were able to do it is because we had historically, on the one hand huge NDR with over 140% quite stable that supported our growth with existing merchants that continue to grow and enjoy the benefits our platform, it brings to merchants wanting to scale up international.

And in parallel to that and we have really good win ratio on merchants stepping into a tailwind of a very aggressively growing market with merchants trying to scale cross border. So it’s a combination of both together with the fact that we basically have a pool with no leaks in it.

Our GDR numbers are sub 2% historically here on an annual average, so we don’t actually lose business we have, we win, much more business coming in and we grow the business that we already have in and the combination of it allows us to grow very fast even at the scale, we already have.

We do expect to continue this high growth rates going forward. And so where high two-digit numbers is something we expect to continue with us going into the foreseeable future as we do have quite a lot of levers, we continue to push. In terms of sales and marketing, we do spend a lot.

You can see in our Q2 numbers, we grew more than 100% in reinvestment, in sales and marketing, still doing it very, very efficiently as a percent based out of our revenue, but we do scale up. We scale up in the current markets where we are already present across the Continental Europe, across North America as well in new regions, we established our operations in Japan with the first two employees in Japan.

We are intending to roll out additional markets in APAC late Q3 and early Q4. So, we do intend to invest much more within sales and marketing in different aspect, as well as building our channel partners to continue to do it efficiently and at scale."

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