Q1 2022 Global-E Online Ltd Earnings Call
Greetings and welcome to the global E prescribed or 2022 earnings call.
This call is being simultaneously webcast on the company's website in the investors section under news and events for opening remarks, and introduction I'll now turn the call over to Erica Mannion at Sapphire Investor Relations. Please go ahead.
Thank you and good afternoon with me today from global ear.
E. Excuse me are a mere slug, it co founder and Chief Executive Officer, Ofer, Koren, Chief Financial Officer, and near Debbie Co founder and President Amir I'll begin with a brief review of the business results for the first quarter ended March 31 2022.
Oh for who will then review the financial results for the first quarter, followed by the company's outlook for the second quarter and full year of 2022, well then open the call for questions certain statements. We make today may constitute forward looking statements and information within the meaning of section 27, a of the Securities Act of 1933.
Section 21 E 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 and 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 results may differ materially from information can change 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.
Just filed with the SEC on September 13, 2021, and other documents filed with 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.
Yep just required by applicable law, we undertake 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 the statements are made or to reflect the occurrence of unanticipated events. Please refer to our press release dated May 16.
<unk> 2022 for additional information.
In addition, certain metrics, we will discuss today are non-GAAP metrics. The presentation of this final financial information is not intended to be considered in isolation or as a substitute for or superior to financial information prepared and presented in accordance with GAAP.
We use these non-GAAP financial measures for financial and operational decision, making as in 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.
See with respect to key metrics used by management in its financial and operation operational decision, making.
For more information on the non-GAAP financial measures. Please see the reconciliation tables provided in our press release dated May 16 2022.
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 May 16, 2022, now I will turn the call over to Amir co founder and CEO .
Thank you Erica and welcome everyone.
The strong results in Q1 of 2022, all fourth quarter as a public company, which we will be reporting to you today reflect our continued strong execution capabilities in spite of certain macro headwinds we.
We will also take this opportunity to update you on our current outlook for Q2 and for the full year of 2022.
Before I turn to our results I would first like to take this opportunity and cents on behalf of the entire global team all regards and best wishes to our Dear Ukrainian colleagues and their families who have been undergoing tremendous hardship for the past few months ever since Russia invaded their country.
We did and continue to do whatever is in our bar to help our colleagues.
I'm happy to report that all of them are safe and sound and together with them. We very much hope that this war will come to an end soon.
Turning to our Q1 results.
We continue to experience best group.
<unk> revenues came in very close to the top of the ultimate Grinch at $455 million and $76 $3 million, respectively, representing 71% year on year growth in G M B and 65% growth in revenues.
At 39, 1% adjusted gross profitability was well above the 33, 3%, which we achieved in Q1 of 2021 and stable compared to the previous quarter.
As such our adjusted gross profit grew 90, 794% I'm, sorry year on year outpacing our strong top line growth.
As always we continue to prioritize growth, while ensuring that we achieve such growth in a healthy and sustainable way keeping a positive adjusted EBITDA.
Adjusted EBITDA for the quarter came in at $3 $3 million well above the top of the outlook range, which was $1 $7 million.
However, it was slightly down from the $5 $2 million in the same quarter of last year, mainly due to the impact of the flow acquisition as well as the incremental costs associated with being a public company.
Demand for our services continues to rise and during the quarter. We continued to capitalize on the huge market opportunity that lies ahead of us.
All throughout the quarter, we continued launching with many great brands.
First and foremost I am excited to share with you that we went live with Adidas one of the world's biggest and most prominent global consumer Mega brands.
Some of you may know last year, the leadership team of Adidas laid out a new multi year growth strategy with online direct to consumer or D to C being one of its strategic Centerpieces.
We are proud and deeply honored to have been selected by Adidas to take part in their global online DTC journey.
Utilizing the benefits of our platform and capabilities.
As part of these partnership 16 markets are already live and trading including markets that are operated using our advanced multi local offering.
Additional markets are planned to be rolled out gradually over the coming quarters.
In addition to Adidas, we launched with many more exciting brands across all the geographies and verticals we operate it.
When it comes to high Street brands, We went live in Q1 with several leading U S brands, including Brooks Brothers, Ralph Lauren are we in beauty by Rihanna Grande and rare beauty by Selena Gomez as.
Well as we've prominent UK brands, including space, and Kate and Dover Street market to name just a few.
In France, we went live with leading fashion brand sits on.
We also went live with our first ever Belgian Brad Weston there.
Finally, as our APAC footprint continues to expand we went live this quarter was the famous brand is split sending out of Hong Kong.
All in all new merchant launches are running at full steam ahead as year to date, we have launched nearly twice the number of merchants. We have launched in the same period last year.
Besides new merchants launches during Q1, we also expanded our relationships with multiple existing merchants, who opened new markets during the quarter, such as saline or the health care apparel and lifestyle brand and fix as well as food beauty brands, which added 20 additional markets and the French retailer now they do which added several.
Key European markets.
During the quarter. We also continued to strengthen our strategic relationship with the luxury group L. P. M. H three newman's own signing up to our services all of whom are expected to go live during 2022.
Switching gears I would like to take this opportunity to give you an update on several aspects of our strategic partnership with shell before.
On the direct solution front I'm happy to report that as planned and thanks to our deep collaboration with Shopify, its commercial and technical teams, our new native integration emerge out of pilot phase last month and became generally available for all shopify advanced and Shopify plus merchants.
We are already seeing promising initial traction with a double digit number of new merchants, who are an exit of integration using this new technology.
In parallel the development of the white label merchant of record or a more solution based on the technologies, we acquired as part of the flow Commerce transaction remains on track.
On Shopify, the first channel to utilize the senior service candidates for the first few alpha phase pilots have already been identified.
We are expecting to start to live testing in several weeks time, and we are planning to commence a more elaborate beta testing phase before the end of the year.
While on the subject of the flow acquisition I will also add that the post merger integration process is nearing its completion.
With most former flow team already fully integrated into the corresponding globally ones and with many of the planned synergies and scale efficiency efforts already beginning to be realized.
We flow platform now part of globally and benefiting from our scale and Knowhow. We are able to provide an unparalleled range of solutions for all sizes of merchants from emerging Smbs, all the way up to the world's largest mega brands.
Finally during the quarter, we continued to invest in further strengthening our growing ecosystem of strategic partners.
We rolled out a partnership with the Australian post group extending our support for Australia and brands. In addition, we expanded our highly successful partnership with Florida to also cover Canada, a key market for both of our companies together with Canada clauses buy now pay later options are no offered on the globally check out in <unk>.
<unk> markets.
In summary, and to reiterate what I opened with we were pleased with the very strong results of the first quarter of 2022.
As we remain on track both financially and strategically in line with our long term targets.
Looking into the future our conviction in the market potential is as strong as ever.
We have a fully back high quality pipeline and a record number of prospect deals of more than $10 million in G. M. B each with the business firing on all cylinders going live with new merchants at a record pace.
Nevertheless in the short term, we are faced with somewhat heightened levels of uncertainty in the macro environment impacting the year on year growth of our existing merchant base, mainly in Europe .
In terms of the direct effects of the Russian and Ukraine War, when our levels of activity.
Shortly after the fighting broke out we had to discontinue our service to Russia due to the sanctions imposed by an international community as well as to Ukraine, given the logistical challenges as a result of the fighting.
In total, Russia, and Ukraine account for less than 2% of our G. M D.
In addition, as I mentioned, some of our colleagues residing Ukraine, but as a matter of fact to date most of them have been able to continue working with only limited impact on productivity.
In terms of indirect impact.
During the first few weeks of the war, we have seen a significant reduction in sales to several central and eastern European markets, such as Poland, and the Czech Republic.
Demand from this region somewhat picked up later, but many of these markets our steel trading significantly below normal levels.
We see markets typically represent 4% to 5% of our GMB.
The more we see some impact of the macro environment on consumer sentiment also in additional countries mainly in western Europe .
Our guidance for Q2 G M D.
<unk> strong year on year growth of 53% at the midpoint and takes into account such macro headwinds as well as the fact that Q2 last year was strongly positively affected by COVID-19.
Our guidance for Q2 growth is lower than our full year expectations due to typical in your seasonality tilted towards the second half of the year as well as the fact that the majority of the large merchant launches that are planned to take place are at or after the middle of the year.
We have taken these factors into consideration also in our updated full year top line guidance for 2022, which at the midpoint reflects fast growth of 61% and G M B and 60% in revenues a slight reduction from the previous guidance power.
However, we reiterate our previously established 2022, adjusted EBITDA guidance of $40 million at the midpoint, given the resilience and agility of our business model.
We have high conviction in our ability to maintain a high growth space, while uploading up holding adjusted EBITDA and cash generation.
And with that I will hand, it over to offer our CFO to go over our financial results in more detail and provide more additional color regarding our outlook for Q2 and the full year of 2022.
Thank you Amir and good afternoon, everyone. We continue to grow fast and demonstrates strong execution on all fronts, the demand for and acceptance of our direct to consumer cross border offering by merchants is stronger than ever with new signings and onboarding of new merchants continuing at a record.
Pace, while consumer sentiment, particularly in Europe is impacted by the war in Ukraine, and the shifting macro environment.
Our rapid growth in Gmg continued in Q1, as we generated $455 million of DMV and increase of 71% year over year, while growth of the overall E. Commerce market is soft and the shift of merchants toward direct to consumer is accelerating and the cros.
Order opportunity remains massive.
In Q1, we generated total revenues of $76 $3 million up 65% year over year service fee revenues were $31 9 million up 87% and fulfillment services revenues were up 53% to $44 4 million.
Higher growth in service fees revenues compared to fulfillment services revenue was driven by the continued growth of our multi local service and the revenue mix of flow.
We have continued to experience rapid growth in our U S. Outbound revenue as our strong momentum in the U S continues in Q1 U S. Outbound revenue was up 111% year over year, driven by strong growth on the global it platform coupled with the high share of U S. Outbound.
The flow platform.
Our non-GAAP gross profit continues to outpace topline growth in Q1, our non-GAAP gross profit was $29 $9 million up 94% year over year, representing a margin of 39, 1% compared to 33, 3% in the same period last year.
Driven by the continuous leveraging of our scale and the higher share of service fee revenue I would like to take this opportunity to draw your attention to the fact that this quarter. We are starting to report a new metric of adjusted gross profit, which suggests the gross profit for amortization of acquired intangibles and it's Paul.
I'm on both the acquisition GAAP gross profit in the first quarter of 2022 with $27 million.
Moving onto operational expenses before we dive in it's important to note the impact of the consolidation of flow, which is driving an increase in operational expenses as a percentage of revenue as flow is still at a low at a lower scale.
We continue to invest in the development and enhancement of our platform to further broaden and strengthen our platform capabilities.
R&D expense in Q1, excluding stock based compensation was $12 $5 million or 16, 4% of revenue compared to $5 $2 million or 11 three.
<unk> percent in the same period last year.
Total R&D spend in Q1 was $17 $7 million the increase of R&D expense as a percentage of revenue is mainly driven by the flow acquisition.
We also continue to invest in sales and marketing and generate a very healthy and expanding pipeline while maintaining efficiencies.
Sales and marketing expense, excluding shopify warrants related amortization expenses amortization of acquired intangibles and stock based compensation was $8 $2 million or 10, 7% of revenue compared to $2 $9 million was six 2% of revenue in the same period last year.
Shopify warrants related amortization expense was $36 $7 million, increasing due to the flow related warrant total sales and marketing expenses for the quarter, including shopify warrants and related amortization expenses were $49 $6 million.
General and administrative expenses, excluding stock based compensation and acquisition related contingent consideration were $6 $6 million or eight six.
Percent of revenue compared to $2 1 million or four 6% of revenue in the same period last year. The contingent consideration expense reflects the portion of the flow transaction consideration, which is held back for the founders and contingent upon a certain employment period and expensed over.
Time total G&A spend in Q1 was 11 $5 million.
Adjusted EBITDA totaled $3 3 million, representing a four three adjusted EBITDA margin decreasing from $5 $2 million in the same period last year, reflecting the impact of flow as well as incremental costs associated with being a public company as we've mentioned on prior earnings call.
<unk>, we expect flow to weigh on our adjusted EBITDA for the next two to three quarters as flows adjusted EBITDA is not yet positive.
During Q1, we have started to realize operational synergies improving the cost structure of flow and we will continue with additional initiatives in the coming months.
Turning to the balance sheet and cash flow statements. We ended the quarter with $278 million in cash and cash equivalents, including short term deposits and marketable securities net operating cash flow used in Q1 was $6 $9 million compared to net operating cash flow use of <unk>.
$96 million in the same quarter a year ago.
Moving to our financial outlook and guidance for the second quarter and full year 2020 tool as a mere described.
For Q2, 2022 were expecting <unk> to be in the range of $495 million to $505 million at the midpoint of the range. This represents a growth rate of 53% versus Q2 of 2021.
We expect Q2 revenue to be in the range of 82, 5% to 84 $5 million at the midpoint of the range. This represents a growth rate of 46% versus Q2 of 2021 for adjusted EBITDA, We're expecting a profit in the range of two 8% to $3 8 million.
For the full year of 2022, we anticipate <unk> to be in the range of 228 to $2 $41 billion, representing a 61% annual growth at the midpoint of the range.
Revenue is expected to be in the range of 383 million to $403 million, representing a growth rate of 60% at the midpoint of the range for adjusted EBITDA as Emil mentioned, we are reiterating our previous guidance of $38 million to $42 million.
In conclusion, we believe that while there are macro headwinds our execution remains strong on all fronts as we continue to tap on the massive opportunity ahead of US we will continue to drive strong topline growth, while leveraging economies of scale and continuing to generate cash we continue to create.
Great value to our merchants and then a build there to develop and grow their direct to consumer cross border business.
And with that EMEA near and I are happy to take any other questions operator.
Okay.
Thank you we will now begin the question and answer session. We would like to request all questioners to ask one question with one follow up only.
To join the question queue you May Press Star then one on your telephone keypad.
He with Cowen acknowledging your request, if you're using a speaker phone. Please pick up your handset before pressing any key.
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The first question is from will Nance with Goldman Sachs. Please go ahead.
Hey, guys. Good afternoon. Thanks for taking the question I wanted to start off on some of the macro headwinds that you guys called out and.
Maybe first of all if we could get kind of more of a housekeeping item.
A lot of investors have been focused on the outbound exposure that.
You guys talk about the combined exposure to Europe I was wondering if you could talk a little bit more about the inbound exposure into Europe , just to get a sense for what the exposure is to kind of direct consumer demand within Europe , and then related likely to take a step back when you look at the revised guidance for the year could you talk a little bit about the degree of conservative.
Included in that guide and how to think about risk to the downside or to the upside for the remainder of the year.
As it relates to uncertainty in Europe .
Good afternoon, and well thank you Neil.
In terms of inbound propulsion or fuel for globally, we're trading Q1 at.
<unk>, 30% a bit shy of 30% of our business is inbound into Europe .
Within that our CE Gen is off I mentioned is around four 5% and the Russia and Ukraine together. All these was bio to shutting it down a bit sub 2% so total around 30%.
In Russia, and Ukraine are completely shut down see suffered a significant reduction in AR, which.
Which we consider temporarily in conversion rates and the rest of Europe , and we do see some some decline geopolitical and also consumer sentiment combined for.
For the second part of your question are.
Related to our guidance I would at least hold it also.
Thank you and then I will just add regarding.
Regarding Europe .
Although there are some similar trends between different markets in Europe . They do not all behave the same. So for example, as we have seen.
Some decrease in Spain, Italy, and France, but the U K.
On the other hand has been increasing in volume. So theres always also diversification there between the different countries.
Regarding the guidance.
You know we try to stay realistic with the guidance. We do believe that there is a certain probability that.
We may hit the previous numbers however.
We think that the current guidance reflects our.
Our are realistic.
Target and we believe that taking into account the current macro environment.
These are the numbers that we think we can achieve.
Got it that's very helpful. Thank you and then maybe as a follow up just on the shop side going to general available availability could you talk about any of the progress that has gone live and maybe what you guys are expecting for contribution from that channel for the remainder of the year.
Yes so.
Basically shopify general availability.
We are already are in integration with a few thousands of merchants.
Going to a to use they say integration within the within the next quarter and we expect this to continue and ramp up is as we are deepening.
Deepen our relationship with Shopify training.
And as our sales team on the on the product as part of the general availability.
We do have additional developments that were phased out.
Into the next quarter or the quarter following it but we do believe we will see a continued momentum coming out of shopify.
So we did see growth with shopify after findings exclusivity.
Last year it was on our classic integration and we do and we do expect I expect it to continue and grow now that we went into general availability.
On the native solution itself.
Got it I appreciate you taking all my questions.
Thanks, a lot.
The next question is from James Faucette with Morgan Stanley . Please go ahead.
Great. Thank you very much I wanted to ask really quickly just building on the last questions can you give us a little bit of input as to Azure.
As you are trying to be conservative, especially on Europe , what you've actually seen versus what you anticipate could happen there and and I guess are you anticipating a similar type impact essentially even.
The U S channels.
Basically.
As near as said we have seen.
A decrease across the board in CE countries, and we have seen a general trend of.
Decrease in Continental Europe .
And basically.
We haven't seen any impact in other large large markets the lights of the U S, Australia, Canada, and some of the others trading we havent been trading well into those con.
Countries.
Looking forward and this is what is baked into our guidance. We are taking into account that the micro environment will not be great. In the next few months to say, the least and we that is baked into our.
Our guidance.
And basically that's it we're looking at a euro we don't anticipate a Europe .
To pick up significantly we did see some some are good.
Good signs in early May, but we don't know if that's something that will stay with us.
And.
We are.
Conservative regarding other markets. However, we didn't bake into the guidance a decrease in other significant markets.
Got it and then as far as the mix goes it looks like at least versus our estimates that in service revenue was.
Was certainly better than we thought whereas fulfillment was little bit less and obviously there is a margin benefit.
You are describing there, but how should we think about that going forward.
With service benefiting from flow that makes sense and making sure that gets incorporated but are there additional.
Levers that you should expect or could contribute incrementally to service versus.
Can you describe a little bit what's happening on fulfillment and how we should be thinking about that as a contributor this year.
Hum.
Yes. Thank you for this question, Dave So I think that.
This is Ed.
The answer is very similar to what you have been hearing from us in previous calls.
We have been developing the multi local solution and we are happy that there is engagement for from Mega brands, such as Adidas that we have just launched.
Recently, and we have a multiyear plan with them and we hope and believe that is.
Is the account.
<unk> built a lot in the future and basically with the multi multi local as you know.
It is service fee based we typically don't do the fulfillment.
Minor cases in which we also.
Supply the fulfillment, but in most cases, it's only service fee driven so we expect that over time.
We'll see.
Higher share of services, however, it will be a gradual pick.
Pick up as you have seen in previous quarters.
Okay. Thanks for that color.
The next question is from Samad Samana with Jefferies. Please go ahead.
Hi, good afternoon, Thanks for taking my questions maybe just.
The on the guidance side I am curious are you what are you assuming for net revenue retention.
From existing merchants and maybe how does that trend and is that what is the.
The bigger part of the guidance reduction or are you seeing a delay in go live activity as well, maybe maybe help us think about the guidance in that context.
[noise] iPhone nine thank you it's Neil.
On the net dollar retention.
We still see a very healthy a trend.
In line with all the with all I would say historic numbers and historic averages and also with our long term target.
So.
Above the 130% on net dollar retention in terms of the gross dollar retention, we do see a I would say the.
Same trend as we see <unk> seen before and which is a considerably sub 2% in terms of churn, which is a very strong.
I would say performance as well.
I'm looking into.
Launches of new merchants I think we see a super positive trend as our Q1 bookings of new business, New GNC is virtually are more than double what we did in Q1 last deal and overall by our internal budgeting for the quarter.
So we do see a tremendous interest from clients.
Integrate to go D to C and this does not it does not it does not stop because of I would say COVID-19 relief or because of the macro environment and even the other way around we see some acceleration, though in terms of launches we don't see deal.
Lays adult caused by our latest situation.
We did as Amin mentioned earlier in the call we.
Launched a double the number of merchant than what we did the same period last year.
So we do see.
This was a continuous trend of more clients signing in and more clients going live each and every quarter. So all in all on the customer front in the underlying business and long term.
Rosa engines, we do feel very comfortable.
Great and then a fair maybe one for you just you know globally.
High flow closed almost right at the beginning of the quarter, how much did that contribute to both G. M V and revenue in the quarter.
Well as we.
Communicate that.
You know around the closing of the signing of the deal and as we expected flow contributed about 5% to the top line <unk> and revenue.
Great and then if I could just squeeze one quick one in the company has had a history of generating positive free cash flow I'm, just curious maybe given the shopify warrant amortization and public company costs, just how should we think that maybe free cash flow for 2022. Thank you again for taking my questions.
Yeah. So.
Free cash flow generally speaking should be similar to <unk>.
Two our adjusted EBITDA should be very close there could be some fluctuations between quarters period, ending and so on but generally speaking it should be closely tied we did have one a one off investment as we move to new office. This so there is a.
I would say an investment.
I think it would be approximately anywhere between five.
$5 million to $8 million.
But we don't expect any additional significant investments. So all in all if you put that aside it should be pretty close to adjusted EBITDA.
Great. Thank you.
The next question is from Koji Ikeda with Bank of America. Please go ahead.
Hey, guys. Thanks for taking my questions just another one here here on the guidance just wanted to make sure.
I heard this properly so.
And your answer to one of the previous questions. You mentioned I think you mentioned you didn't bake any guidance a decrease from the other significant markets out there just kind of curious did I hear that correctly and maybe what are you seeing in those other significant markets. What are you hearing from the demand environment from our customers.
It's giving you the confidence that those markets are going to remain healthy for the rest of the year.
Thank you for the question itself.
Basically.
What the way we looked at the macro impact.
And the way it's reflected in the guidance, we took into account that it will be a challenging environment.
At least until the end of the year and that is baked into the guidance and reflected in the different markets.
Some of them.
The impact is more significant as we mentioned like in Europe .
Europe and in others, it's less significant however.
The fact that we will have a bumpy macro.
At the end of the year is reflected in the guidance.
Got it got it I did want to switch.
The topic of conversation away from guidance for a bit here and ask you about the ddos.
Obviously, a big win for you guys huge brand many different global websites I think in the pressure as you mentioned 16 market slide now.
No that Adidas is and a lot more markets they sell into right now all over the world. So just just curious could you talk a little bit about the sales process with Adidas and maybe what was what was the key key value prop that was instrumental to winning that deal. Thanks guys.
I think that.
Basically what we have seen and I don't want to speak specifically about Adidas, but they'll powered ourselves. So we've seen very large global brands.
Looking to our strengthens our D to C are cross border.
All multi local but the the global strategy is going to see and going deep C commerce and it.
It was accelerated in Covid.
But it's an underlying trend that started before and is now just moving at a faster pace and not slowing down because it's so those shoppers are moving much more in line and it allows the brands to have a direct connection.
To those shoppers wherever they are in the world.
They want as a brand to own that relationship.
To present, the brand as they wish to present, the brand and enjoys a data.
Of the consumer as they need to transact with them directly and this is well globally fits in especially with our multi local offering.
We can allow the brand to transact domestically a global brand like Adidas has presence virtually almost everywhere in the world, but we allow them to transact.
Domestically former local inventory, but used globally as a merchant of record to simplify the process of taking over the direct connection to the client while enjoying the ownership of the client and the ownership of data in order to better serve the clients and better allowance is her needs and this is with <unk>.
It is a trend we see many more large brands in the pipeline.
Which will mature in the coming quarter. So where is this is a trend we expect to continuously.
Just wanted to add on that.
I think what Adidas in other brands like them sees that they can by working with us. They can enjoy basically the best of both worlds. They can on the one hand enjoy a solid field proven.
Platform like ours with all the different services and components and on the upper hand.
Highly configurable and we're able to tailor the specific characteristics and configurations and behaviors on a per market basis and contributors from our Knowhow and best practices.
Our local trading in each markets that that is very synergetic.
For them the combination of a solid yet highly configurable product.
Yeah.
The next question is from Brad Brazilin with Piper Sandler. Please go ahead.
Thank you for taking the question here good good evening I guess early morning, I wanted to circle back on multi local.
Obviously, great to see Adidas embrace the platform.
But little surprised that that.
Did that that brand and that size is going with what is really a relatively new product for the company. It begs the question how much broader interest is there and multi local and so can you just answer this how many customers are using multiple a local today and as you look out.
Over the next three years is this a niche product or do you think this could be a mainstream product.
A large portion of new and existing customers could use.
Hi, Bryan Thank you for the question.
I think we need to look at it on a two fold on the one hand, if you look at the number of clients.
We don't expect to see a large number of clients using multi local because in essence. This offering is full of very large brands that has presence in multiple geographies and regions.
And it's much more geared towards the larger global brands as well as consumer electronics brands that are multi local and so in terms of number of clients. We don't expect it to be a significant portion of the number of clients in terms of the size of the client.
And the portion of <unk>, we do expect it to grow considerably as we expect to onboard very large clients into that offering so where we.
We reported in the previous quarters about jabra electing to use the solution about Zen highs both from consumer electronics.
Do have other clients from their parents that are using it Adidas now has joined them.
Do have a couple more very large brands in pipeline is expected to to use it in the in the next quarter or two.
So we do see it picking pace.
In terms of <unk> and we do expect it to take a more significant portion and out of our <unk> not just as a just as an issue.
Got it so think of multi local is really a new product for the largest mega brands out there very clear Ofer wanted to just follow up on the guidance and part of the question here is.
Inbounds, we're getting from investors as we think about the revised guide here youre going from a midpoint of 70% Gms growth for the full year to 61, which is <unk>.
Still have a pretty ambitious kind of growth rate. So I guess as we kind of break that out.
What's driving the optimism is it just the doubling of merchants you know is it is it the expectation that shopify really starts to kick in in the second half.
Is it the pipeline opportunity of some large may.
Mega merchants, that's giving you the optimism.
Just trying to understand if you've put in a conservative enough.
Assumption relative to kind of same store sales versus these other offense offsets. Thanks.
Yes.
Thank you for the question Brian .
I think that.
The way we look at it is that.
The merchant demand side remains very very strong even it's not even strengthening over time, we see a very strong demand for our merchants again, we mentioned that data. That's one example, but.
Merchants are going direct to consumer and merchants are growing cross border and basically we are supporting them on that journey and this is continuing so on the execution front. We are seeing very good results in terms of sales in terms of Onboarding.
Everything is working very well and the numbers look great. The softness is in the consumer sentiment in some markets. Some of them are larger market as we mentioned in Europe and this is actually what is affecting us. So we do feel.
Very confident in the execution in the relationship that we have with existing merchants and the potential of new merchants coming on board based on the multi local shopify and all the other.
N. Gen that we currently have and we are developing and.
The reduction in the guidance is driven by the consumer sentiment and the macro environment.
Yeah, just to add to that brand I think.
<unk> reduction we are looking at the as you stated a very high growth planned for the year at around 60 plus percent.
<unk>.
A lot of it is based on the very large merchants.
<unk> already signed and midsized merchants that are already signed and we expect towards them out.
In the coming in the coming quarter and in a lot of them into a supporting into our peak trading which are which gives us I would say are I would say is in the benefit of enjoying.
The holiday season with him on board.
As we mentioned previously we more than doubled our signing in Q1, and we expect that also to translate into launches within the second half of the year as well. So the combination of what we already have signed and the robust pipeline. We do believe that this will translate into a very strong.
And part of the year, which will allow us to meet all our to meet our budget.
Yeah.
The next question is from Pat Walraven from JMP Securities. Please go ahead.
Oh, great. Thank you.
Oh for maybe to start if I'm doing my math wrong you were right.
I have my math right you reduced full.
Full year, GSV and revenue by 4% on the low end of 7% on the high end.
And Russia, and Ukraine is less than 2%. So, let's just say it's 2%.
At least 2% to 5% from the other things how would you bucket the other things.
No I think the overall reduction is approximately 5% just a bit over 5%.
Approximately less a bit less than 2% of it is.
Directly driven by our.
The fact that we stopped servicing Russia and Ukraine.
And the remaining.
3% is driven by by other markets, the macro environment and other markets, mainly euro, but also general softness in the market.
Okay, Great and then Amir.
Amir for you.
With all this uncertainty what are what are your top sort of one or two priorities for the rest of the year. What are the things that you you have to make sure that you get right for the rest of this year.
Yeah, I've had I think.
The things we are focusing on are the things. We are always focused on is on execution on or.
On all fronts and servicing our existing merchants, especially in these times of uncertainty and softness in demand from our consumers our merchants need us at our best they need us the most and so executing on that and supporting them.
To the best of our abilities as a is a very clear priority for us.
As is.
As we mentioned a few times on the call continuing the rapid pace of Onboarding, new merchants because that is what's going on.
Determine our results in the second half of the year and definitely looking into 2023 onwards.
And in parallel to that.
As we have mentioned we are managing our <unk>.
Expenses and managing adjusted EBITDA.
A very tightly to make sure that.
We continue this fast growth pace Im sorry.
And in a responsible way and make sure that on an annual basis. So we continue to generate cash. We believe this is the the healthy way to build the business towards the future.
Yeah.
The next question is from Scott Berg with Needham. Please go ahead.
Hi, everyone. Thanks for taking my questions.
I guess just one for me I've had a lot of money asked already but wanted to talk about the pipeline I think Mary you had spoken about record number of greater than $10 million <unk> deals.
In the pipeline currently.
Wanted to try to understand if you can comment on that maybe from a geographic location and then are those deals in the pipeline more from new customers or existing customers that are expanding just trying to understand if there's been maybe a change in what the composition looks like thank you.
Yes.
Yeah.
Hi, Thank you for the question.
In terms of the pipeline, yes, we do see a substantial growth in the pipeline a lot of it is driven by larger deals the over 10% G M B deals.
I think it comes from.
Partly from our partnership with Shopify, and where we see more direct to consumer brand celebrity brands.
Is it all coming in.
With nice sales volumes, we had in the past schemes of Kim Kardashian.
We have a dru house of just can be bell youll see it with our with others that are coming in or that launched recently with us all the animal fat Liana Grande and little beauty of setting a goal missile so part of it related to celebrities.
Our direct to consumer brands that are fast growing.
Some of it relates to more traditional brands that are giving much more focused.
<unk> such as <unk>, such as Adidas, we spoke about it such as a as in Hyattsville.
They decided to do much more with us such as soon toe for example.
And that is.
He is expected to open in New Orleans with us it all worth it.
A lot and so it's a I would say mainly driven by new business that is coming in with new clients New logos. However, we do see some growth as mentioned soon though.
It is expected to open many more lanes, but we see it also with others.
It should also I would say give us another push.
We work with large volumes format single brands.
So all I had thank you for taking my question.
Thanks Al.
Once again, if you have a question. Please press Star then one the next question is from Brian Peterson with Raymond James. Please go ahead.
Hi, Thanks for taking the question just one for me. So I'm curious just on the linearity, particularly in Western Europe .
Would just love to get an update on maybe how that trended through the first quarter and what you've seen so far in the second quarter and the over I think you mentioned that there were some green shoots in May I realized it's kind of an uncertain macro right now, but I'd love to see can you elaborate maybe on what you saw in May they cannot meet your metrics that got it thanks guys.
Yes.
Alright, Thank you Brian .
We have basically a January traded well.
And since the conflict in Ukraine.
Ukraine started the war in Ukraine, and and in parallel.
All the.
Macro date inflation and so on peaked.
Basically we have seen a reduction so it started.
In March.
In Europe as we mentioned.
And April was very similar to March in terms of trends.
And again in May as you mentioned, it's still early we're just in the middle of the month and.
We don't know if.
Just a few good days or.
Or a trend, but we have seen better numbers in in May.
Okay.
Thank you.
The next question is from Josh Beck with Keybanc. Please go ahead.
Thank you for taking the question I wanted to ask a little bit about opex.
Flexibility.
Nearly you've cut the topline between 5% to 6% and you've been able to to hold in EBITDA. So certainly that that shows discipline.
As we start to think about.
'twenty three and perhaps.
Softer sustained consumer scenario is there a level where.
Youre not going to be able to maybe absorb.
The topline softness you'd have to kind of reduce the profitability assumptions. Its just just.
Curious, how youre thinking about that balance.
We do maintain a very agile approach and also agility within the organization and basically for 2022, we do think that based on the synergies that we are already realizing with flow.
And we will continue to realize in the in the next few months.
The continuous a leveraging of the economies of scale that we can sustain that and also I.
I would say that we had a ramp up in.
H two of our.
2021.
And now we're sort of also.
Starting to enjoy.
The people that have joined us so we slowed down a bit without any.
<unk> connection to the macro environment, we just wanted to sort of absorb and start.
Enjoying.
The people that have joined us in the last few months.
So this is a regarding 2022 going forward, we do keep an agile approach and we can we believe that we can sustain.
Sustained up to a certain level and we will.
Plan R R.
Our expenses accordingly, but we will.
Maintain.
And we will continue to prioritize healthy growth. So we will continue to invest in any resource that can.
Bush growth as long as it's healthy.
Yeah.
Okay very helpful. And then maybe just a follow up I realize.
This is reading tea leaves in some ways.
Across your business and customer base have you seen any.
Notable impacts from some of the supply chain disruptions that are that have taken place.
Maybe separate from inflation, just what's happening with reopening and more folks traveling.
So I think there is a you know.
From there I would say mid 2021, there is an impact of reopening but that was already baked into our guidance. So.
We do see an impact but this was part of our planning so all in all.
We see a net neutral effect.
Compared to our planning.
But obviously people are traveling in the world has reopened and it does have impact generally on e-commerce.
But this was already planned.
In terms of in terms of supply chain, maybe oh for I'll take this one in terms of supply chain.
Still as we are I think we discussed it.
The previous school and the same holds now we don't see any impact on us either direct or indirect are from the logistical holdups and supply chains around the world for the fact that first of all for US everything flies and are most of the.
Holdups and bottlenecks in the supply chain has happened in terms of sea freight.
So that has a.
Minimal effect on us if any directly indirectly.
Some of our merchants, obviously may be impacted by shortages of inventory et cetera, but since the the world has talked about supply chain challenges for a while everybody.
Basically prepared for that and we've seen merchants that have rolled forward.
Inventory orders and made them well in advance before the season and even if they encounter some levels.
Of limited inventory typically there is no impact on our activity because the merchants tend to prioritize the direct to consumer channels. When there is shortage in inventory versus all of our channels like.
Wholesale or marketplaces. So so again, because we serve their direct to consumer channel, which is the most important for them.
We.
Do not see any impact of that to date.
Yeah.
This concludes our question and answer session I would like to turn the conference back over to Amir for any closing remarks.
Thank you.
On behalf of <unk>.
<unk> near myself and the entire global team I would like to thank you all for joining today and for your continued support and interest in globally.
As always I would like to take this opportunity to thank our loyal merchants for their continued trust and partnership and to congratulate all my fellow team members here at globally on yet another quarter of great execution as we continue to pursue our ambitious long term goals with bio keep safe and we very much look forward to seeing you again on a few.
<unk> earnings calls.
This concludes today's conference call you may disconnect your line.
Thank you for participating and have a pleasant day.
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