Q2 2022 Global-E Online Ltd Earnings Call
Greetings and welcome to the global E second quarter 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 introductions I'll now turn the call over to Erica Mannion of Sapphire.
Investor Relations. Please go ahead.
Thank you and good day with me today from globally are near Debbie co founder and President.
And Ofer Koren Chief Financial Officer.
We will begin with a brief review of the business results for the second quarter ended June 32022.
Oh sure will then review the financial results for the second quarter ended June 32000, sorry, excuse me June 32022, followed by the company's outlook for the third quarter and full year of 2022.
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 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 uncertainties and assumptions some of which are beyond our control. In addition, these forward looking statements reflect reflect our current views with respect to future events and are not a guarantee of future performance.
Actual outcomes may differ materially from the 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 prospectus filed with the SEC on September 13, 2021, and other documents 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 in events and circumstances reflected in the forward looking statements will be achieved or will occur.
Except as 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 these statements are made or to reflect the occurrence of unanticipated events.
Please refer to our press release dated August 16, 2022 for additional information.
In addition, certain metrics will be discussed today are non-GAAP metrics. The presentation of this 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 and as a means to evaluate period to period comparisons we.
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 with respect to key metrics used by management and its financial and operational decision making.
For more information on the non-GAAP financial measures. Please see the reconciliation tables provided in our press release dated August 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 August 16 2022.
I will now I'll turn the call over junior co founder and President.
Thank you Erica and welcome everyone.
Unfortunately could not join the call today due to the passing of his father and I would like to start by sending deepest condolences to Amir and his family on behalf of the entire globally team.
But that can meet me when we discuss our Q1 results and forward outlook, we mentioned the heightened uncertainty towards Q2 at.
These voting from Macquarie just factors in the war in Ukraine.
However, today I'm happy to report to you that the initial signs of improvement. We saw in early may turned out to be indeed, the precursors to further improvement in the second half of the quarter.
The Russia, and Ukrainian and Belarusian market, which in total represent less than 2% before activity.
So he made clothes for the time being given as an unfortunate continuation of the war in the region.
However activity in other regions in Europe moderates he picked up back for me onward, despite macro concerns.
Coupled with our team's continued strong execution. This resulted in our strongest quarter I, though.
Quarterly GMP amounted to 534 million in quarterly revenues amounted to 87.3 million.
Both above the top of our outlook range.
Furthermore, it's also will elaborate on later in the call while there remains somewhat heightened uncertainty and the condition in the condition of the global the global macro environment. We are increasing our previously stated guidance for the remainder of seal to reflect the stronger performance in Q2.
And the border free acquisition.
But first going back to our Q2 results. We continued to experience fast growth during the second quarter of <unk> with GMP growing 64%, you O'neill and revenues growing 52% you O'neil.
Our adjusted gross profitability continued.
Continued to strongly improve coming in at 41, 8% our adjusted gross profit.
Mounted to 36.5 million growing at 77%, even with you again outpacing our strong topline growth.
It was a result of our growing efficiencies of scale leverage.
Continued realization of Cogs synergies with flow and a more favorable mix of revenue.
In terms of a full operational expenses, we continued to reinvest in growing the business and building the infrastructure required to see the huge market opportunity that lies ahead of us.
However, at the same time and given the various macro headwinds we fall so its the beginning of steel.
We continue to exert strict cost control for all its a quarter to ensure our ability to continue delivering healthy and sustainable growth while remaining cash positive.
In addition, we haven't been able to realize synergies from our recent acquisition of local mirth faster than expected.
By lowering the drag on our bottom line.
These factors coupled with our festivals and planned top line growth resulted in a very strong adjusted EBITDA of 11.1 billion.
Well above our outlook range.
Representing an adjusted EBITDA margin of 12.7%.
Yeah.
Switching gears I would like to update you on some of the many positive developments in our business over the past quarter.
On the merchant activity front demand for services continues to remain strong.
As more and more brands around the world put direct to consumer and cross border sales, it's across chairs of the growth strategy is.
As such during the quarter, we continued launching with many new brands and expanding our activity with existing ones.
Q2, so the launches of many new brands on our platform, including leading fashion brands right and bone and so they can vote shale is the Spanish cosmetics brand freshly cosmetics, there's all officials tennis merchandise store of Wimbledon and the luxury watch other brands in it which is part of the N V and age group.
We also continue to add celebrity brands and other fast growing digitally native brands, such as just couldn't be birth fashion brand drew house.
The highly successful training a part of the brain noble as.
As well as skin and other brands like Kim Kardashian, augmenting our successful partnership with Cuba clothing brand schemes.
Furthermore, our entry into the APAC region continued to gain strong momentum.
The launches of triangles swimwear out of Hong Kong and ride the World Our first live Australian merchant.
As well as the signing of our first ever Japanese merchant.
During Q2, we also extended our activity with brands such as Adidas and soon to.
All of which added additional length to be operated by globally.
Last but not least I'm proud to announce that during Q2, we went live with one of the worlds, most well known and respected consumer brands Disney.
As part of the push to expand the direct to consumer sales Disney chose globally to power its cross border sales across several markets in the APAC region.
Leveraging both our extensive capabilities and expertise as well as where our unique multi local infrastructure.
It'll be full we remain highly optimistic regarding our ability to continue growing this portfolio of friends as our new booking forward looking pipeline of Brent is stronger than ever.
On the strategic partnership front, we have continued to deepen our collaboration with a growing ecosystem of partners around the world, including for example, our first and highly attended client event in Tokyo, Japan.
Held in partnership with our local Port Neal plants Cosmos.
Our partnership with Shopify continues to develop on track.
On the direct solution side dozens of merchants of different sizes are already live on a new native integration into the shopify platform.
And dozens more in various stages of planning and integration.
In addition, and as planned during the quarter, we have already booked our first live order as part of the beta trials of the new White label merchant of record solution on Shopify built.
Built upon the flow Commerce technology.
Well on this innovative solution for listen these continuous full steam ahead towards a phased rollout later in the year.
Corporate work on the full post merger integration of flow commerce into globally is now all but complete and as I have already mentioned, we have been able to realize many of the planned synergies earlier than expected.
Our corporate development team is now focused primarily on the integration of border free.
Which we acquired out of Pitney Bowes.
This was our second acquisition that was closed at the beginning of Q3.
With a talented team of 12 store engineers and other professionals formed border free.
Highly passionate about cross border now becoming part of their respective teams had globally around the globe.
Besides the lease the small P U S. Brent who work with border free and will now have access to globally advance localization platform.
We expect the merger of border free into globally provides several key benefits and see no genetic values.
First we expected it it will enable us to expedite our planned expansion of both range and the quality of online marketing and demand generation services, we provide to our merchants.
Over the years border. If he has developed a set of unique capabilities and assets in the field of cross border demand generation, which we expect we will be able to fulfill to a much broader audience merchant.
On our own platform.
Second as part of this acquisition, we were also able to strike strategic mutually beneficial partnership with Pitney Bowes.
Providing us with access to some of Britney's advanced logistical solution as well as providing clients with access to globally best in class Cross border enablement solution.
And finally, some of the proprietary cross border software components and architectural elements built by a highly skilled engineering team head border free will be combined over the coming quarters into the globally codebase, yielding a best of breed set of services and considerably short.
He was a time to market of various elements, which will all our technical holding it.
And it also will elaborate on later, we do expect a border free acquisition to somewhat weigh on oncology.
During the next few quarters.
Given the differences in financial profiles inefficiencies.
But as we the slow acquisition, we should be able to utilize both our scale and our expertise in order to gradually realized relevant synergies and potentially improve the financial margins over the coming quarters.
There are many more exciting developments happening across the business.
While we continue to leverage our position as the world's leading cross border enabler to capture more and more of the men and growing market opportunity that lies ahead of us and to help our fast growing list of merchant to realize our international sales potential.
But in the interest of time I will pause here and just say in summary is that we are very pleased with our strong results in the second quarter of 2022.
And we remain very much on track, both strategically and financially to achieve our 2022 and long term goals and with that I will hand, it over to also our CFO to go over the financial results in more detail and provide some additional color regarding.
Our outlook for Q3 ended at 41 of 'twenty 'twenty.
Yeah.
Thank you and the air and good morning, everyone. This has been a record quarter on all fronts. As we continue to demonstrate fast growth and strong execution, coupled with cash generation amid the macro environment, which continues to be volatile the demand for and acceptance of our direct to.
Humor cross border offering by merchants continues to be very strong with signings of new merchants continuing at a record pace erupted.
Our rapid growth continued in Q2, as we generated $534 million of G. M V an increase of 64% year over year.
After experiencing weaker consumer demand through March and April in central and Eastern Europe and in some of the Western European markets impacted by the war in Ukraine, and the macro environment, we have seen significant recovery through May and June .
While the overall e-commerce market growth in the first half of 'twenty 'twenty. Two has been softer merchants are continuing to prioritize and accelerate the shift towards direct to consumer and the cross border opportunity remains massive.
In Q2, we generated total revenue of $87.3 million up.
52% year over year service fee revenue were $39 $3 million up 86% and fulfillment services revenue were up 33% to $48 million service fee revenue continued to grow faster compared to fulfillment service.
This revenue driven by the growth of our multi local offering merchant revenue mix in the quarter and the revenue mix of flow, which is characterized by a higher share of service fees.
From a geographical standpoint U S outbound revenue continued to grow rapidly.
In Q2 U S revenue was up 104% year over year, driven by strong growth on the global E platforms U S outbound business, coupled with the high share of U S. Outbound on the floor platform.
In addition, our penetration efforts into new markets are starting to show initial positive results, while still relatively small and sure APAC and the middle East outbound revenue have grown 213% year over year.
Our non-GAAP gross profit growth, yet again outpaced top line growth.
In Q2, non-GAAP gross profit was $36 $5 million up 77% year over year, representing a margin of 41, 8% compared to 36% in the same period last year.
As Aaron mentioned this was primarily driven by the higher share of service fee revenue the realization of flow cost of goods sold casino juice and our increased scale leverage.
I would like to remind you that as of Q1, we are reporting adjusted gross profit, which adjust the gross profit for amortization of acquired intangibles.
He's come on post acquisition GAAP gross profit was $34 $3 million, we expect BARDA free to weigh on our gross margin in the next six to 12 months until we are able to realize the available cost of goods sold synergies.
Moving on to operational expenses throughout the quarter, we continued to invest in the development and enhancement of our platforms to further broaden and deepen the globally enterprise platform capabilities and to develop the new SMB offering on the flow platform.
R&D expense in Q2, excluding stock based compensation was $12 $3 million or 14, 1% of revenue compared to $5 $5 million or nine 6% in the same period last year.
Total R&D spend in Q2 was $17 $6 million the increase of R&D expense as a percentage of revenue is mainly driven by the consolidation of flow.
Alongside R&D, we continued to invest in sales and marketing, enabling us to generate a strong and diversified pipeline, while maintaining efficiencies sales and marketing expense, excluding shopify warrants related amortization expenses amortization of acquired intangibles.
And stock based compensation was $8 million or nine 2% of revenue compared to $4 $3 million or seven 5% of revenue in the same period last year.
<unk> five warrants related amortization expense was $37 $4 million.
Total sales and marketing expense for the quarter were $51 million.
General and administrative expenses, excluding stock based compensation acquisition related contingent consideration were $6 $3 million or seven 2% of revenue compared to $3.3 million or five 7% of revenue in the same period last year as I.
Minder the contingent consideration expense reflects the portion of the flow transaction consideration, which is held back for the founders contingent upon a certain employment period and expensed over time.
Total G&A spend in Q2 was $15 $1 million.
Adjusted EBITDA has increased significantly compared to the previous quarter, driven by higher than expected topline growth faster than planned synergies realization with flow and additional focus on cost management discipline due to the macro volatility adjusted EBITDA.
Totaled $11 $1 million, representing a 12, 7% adjusted EBITDA margin increasing from seven $6 million in the same period last year, we have realized synergies that have driven a significant improvement in flows adjusted EBITDA and we now expect flow to reach breakeven by the <unk>.
End of this year.
Turning to the balance sheet and cash flow statements. We ended the quarter with $285 million in cash and cash equivalents, including short term deposits and marketable securities.
Net operating cash flow generated in Q2 was $31 $9 million compared to a net operating cash flow of $6 $9 million in the same quarter a year ago.
Moving on to our financial outlook and guidance for the third quarter and full year 2022.
We expect Q3 <unk> to be in the range of $600 million to $614 million.
At the midpoint of the range. This represents a growth rate of 72, 4% versus Q3 of 2021.
These border free is expected to contribute $50 million to $54 million of GMP.
We expect Q3 revenue to be in the range of $99.5 million to $102.5 million at the midpoint of the range. This represents a growth rate of 79% versus Q3 of 2021.
Adjusted EBITDA is expected to be in the range of eight five to $11 $5 million.
Please note that borders freeze take rate in Q3 is expected to be similar to global east take rate what border freeze adjusted EBITDA is slightly negative.
As Nir mentioned earlier, we are increasing our previously stated outlook for the remainder of the year to reflect the stronger performance in Q2 and the border free acquisition.
For the full year of 2022, we now anticipate <unk> to be in the range of $2 45 to $2 $55 billion, representing 72, 5% annual growth at the midpoint of the range of these border free is expected to contribute 100.
$25 million to $135 million of GMP.
Excluding BARDA for you we are raising our full year GMP guidance to $2 32 to $2 $42 billion.
Revenue for the full year is expected to be in the range of $406 million to $426 million, representing a growth rate of 69, 6% at the midpoint of the range.
We are also increasing our full year adjusted EBITDA guidance, which was previously at $38 million to $42 million and now we expect it to be in the range of $41 million to $46 million. Despite a slightly negative contribution from border free.
In conclusion, while macro headwinds continue our execution remained strong on all fronts as we continue to tap into the massive opportunity ahead of US we will continue along with our partners to further enhance our offering to enable merchants to grow their direct to consumer across border.
Mrs effectively and efficiently. We believe this will enable us to continue demonstrating faster topline growth, while leveraging our scale to further improve efficiency.
And we used that near and I are happy to take any of your questions operator.
Thank you if you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question. Kim You May press star two if you'd like to remove your question from me Kim for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
To allow for as many questions as possible, we ask that you each keep to one question and one follow up thank you.
Our first question comes from the line of wellness with Goldman Sachs. Please proceed with your question.
Hey, guys good morning.
Condolences to Amir sorry to hear about that.
I wanted to ask a question on the recovery on some of your markets and in early may that seem to have continued throughout the quarter. I'm wondering if you can talk about some of the trends that you guys have seen more recently or that you may be expecting in the back half of the year and maybe tie that together with the guide you know I assume that there's some incremental FX headwinds that you're having to absorb.
What the updated guidance as well so maybe you know when we just think about the guidance ex border free for the remainder of the year.
How do you think about the puts and takes of macro FX versus some of the strength that you guys have seen more recently in the second quarter.
Yes.
Hi, Hi, where they saw for thank you for the question.
Hum.
As we've communicated are they this year has been a quite volatile.
After we've seen a weaker March and April we did see business pick up and are in May and June .
Partially due to the fact that our we've seen some of the markets coming back are mainly in our in central Eastern Europe , and some of the European markets that were affected a from the war in the macro environment. So not everything came 100% back, but we did see.
I think speaking up and then we have seen a lot of merchant activity are putting a lot of focus on direct to consumer both existing merchants that have been pushing our business forward and we've seen a lot of new product launches and marketing active.
During our May and June and as we continuously communicate Oh, we have a very strong pipeline. So we've seen our merchants are launching are there new activities with us and all of that is accumulated into a strong.
May and June are and then when we looked at the guidance on the one hand.
Oh, we incorporated our the Q2 results obviously, that's already history.
And on the other hand, we did take into account that one there is still high volatility in the market and some macro uncertainty there may be some ethics are headwinds, but are some of it has been a bit is in there.
The last a few weeks. So you know it remains to be seen what will happen.
And and basically that's what we baked into into the updated guidance, which reflects the better than expected Q2, and the addition of border free.
Got it that's helpful. And then maybe if I could follow up on just a question about how you're thinking about demand for cross border E. Com given all the commentary so far this earning season about the return of cross border travel of that it seems like the expectation is that we'll continue to be strong and recover nicely over the next call it now but they're.
During the year. How are you guys are thinking about the interplay of people traveling cross border more frequently.
And how that would impact the demand for kind of online cross border E Commerce.
Yeah, I think that when we went into our into our Q1 already and in the in the guidance. We gave for 2020 tool. We bake we baked in some some COVID-19 relief as we assume that people will go back to traveling in 2022 and so this was already included in the numbers we expected some.
Yeah.
Some of these Asian deal. However, we do believe that the longer longer term trends that started I would say more than a decade ago and still continues of E Commerce, especially cross border e-commerce growing much faster than physical commerce and growing in shale.
Over the entire retail sales will continue and we do see this trend of growth in.
Global ecommerce is still growing.
Even within our coffee tea leaves that the growth in economy still is still positive on a global scale. So we are quite optimistic about that.
When we take it into our into our new bookings and looking into our into merchant interesting to D to C and here, we see a substantial increase and this and this trend continues and.
And it's reflected in the in the growth that we see new bookings are coming in and with large I would say brands and enterprises that are partnering with us to support our future.
The rollout of global E D to C.
Got it understood I appreciate you taking my questions Nice results. This morning.
Thank you very much.
Thank you. Our next question comes from the line of Josh Beck with Keybanc capital markets. Please proceed with your question.
Thank you team and my condolences as well you know I wanted to ask about a broader trend that we've seen in <unk>.
E Commerce I think the message from a lot of these companies this quarter has been somewhat of a normalization.
Towards 2019 levels when we think.
The case of e-commerce penetration gains within the broader market, obviously you have.
New customers, which are certainly helping to.
Drive growth new core doors as well when you think about just broader macro trend across.
That Oh schwarzenberg.
How are you trying to contemplate that into into the guidance and it also just thinking about it.
Algorithm into future years as well.
Okay.
Yeah, Josh. Thank you for that itself for I think that are obviously all the trends that you mentioned are out there and we have seen a softer e-commerce environment.
The reopening is there then you have mentioned and so on and there are some uncertainties regarding the macro environment. However, I think that what differentiates US is the fact that our direct to consumer channel.
He is in the focus of the merchants and is gaining share over other channels. So this channel is definitely growing and growing.
In a nice pace and we believe that this is a secular trend that we stay for us.
For a long time.
As as merchants.
Prioritize this channel for a reason they won the close relationship with the consumer they want to have the data and they want to enjoy the margins at the end of the day I think this is a what a differentiates our direct to consumer across.
Florida from that sort of general E Commerce market.
That's very helpful. Maybe just a follow up on.
One of the board of free synergy for us.
And demand.
You shouldn't.
Could you help us maybe understand how applicable you see this these types of capabilities.
Across your merchant base, something they've they've really been requested and also anything you can share on.
On the revenue model you I assume that this gets bucket did under the services business, but would be curious to learn more there.
Yeah.
Hi, Jonas this isn't there.
Well when we made the acquisition of border free we what we look for and what certain synergies as well as our capabilities are that we bought it. So one you mentioned demand generation.
Is something that over the last couple of years, we started to work to develop based on demand for small merchants.
As we have a much wider will head merchant base that are have grown very fast and with us and over time became I would say very local in many many markets. They are looking to hey, how can they accelerate even more and the other is a growth.
And for that dimension.
Is important and to do it efficiently in a time well at demand generation become I would say more problematic.
Due to a different privacy and regulation are.
Related to privacy.
We believe that there is a place for us to take I would say a more proactive.
Approaches.
And what border if he has developed over the years. He is a unique asset related to our demand generation is that we believe that we can build on as a base.
To offer it to all our broader merchant our base and to build on in order to fuel the zelle and I will cooling to co install itself. So we do see a very high potential sale is the other thing we looked at.
The acquisition will the partnership with Pitney Bowes a lie.
Allowing us access also to our I would say sophisticated logistical services into a into certain markets, especially into our into Canada with it which is a key market for.
USA brand.
Where does the partnership on a on the on the merchant side, giving border free giving.
Giving our pitney bowes larger.
Client base.
Access to a globally advanced logistical advanced our localization services.
We also believe that we will be able as we did with flow.
Realized synergies coming out of our expertise and scale.
And enjoying a I would say a better profile on the financial side as well hopefully that answers your question.
Perfect.
And no for example.
Thank you. Our next question comes from the line of Samad Samana with Jefferies. Please proceed with your question.
Hi, good morning, Thanks for.
For taking my questions and congrats on the strong results maybe first just a you know what are the strong rebound that you've seen in terms of demand can you help us maybe understand a fair and what you're thinking in terms of <unk>.
Yeah, the net retention number for your existing customers like what's assumed in India revised guidance, especially the export or for your guidance for the year.
I somehow so you know as you know we are not.
Not disclosing that number on a quarterly basis, however, as we communicated in the previous.
Quarter, we do believe that the NDA would be around our historical levels not the numbers, we have seen in 'twenty.
2021 and 'twenty 'twenty, but.
Something around the average of the previous years and our this is what our our plan. These is based upon.
And so far I think we've been you know after revising the guidance in the previous quarter.
Have been on track to get there.
Great and near maybe one for you have you seen any change either an acceleration or pull forward or maybe.
A little more hesitant in terms of what customers are doing and go live times or the.
Length of sales cycles.
Just in either direction have you seen any change in and merchant behavior.
It informs your outlook for the rest of the year.
Sure then that then basically are to be honest, we've seen the other way around a we've seen a much more interest coming in and a lot of it from larger brands is it a I would say stayed on defense before related to a to go direct to consumer on a global scale.
I would say as a recent example, we just launched squeezes that Disney and.
And where we're going to support our merchandising stall it out of our out of APAC, a few markets in APAC and in this phase.
But we've seen many others that are doing the same.
Our new bookings are over the quarter is significantly higher than last year and significantly higher than what we had I think it was a record quarter for us in new bookings. So it gives us I would say.
Some confidence are related to our outlook into the rest of the deal and in front, a little down for them, though hopefully it answered your question.
Definitely thanks, again and great to see the strong results.
Thank you.
Thank you. Our next question comes from the line of Koji Ikeda with Bank of America. Please proceed with your question.
Hey, everyone. Please please give me or my best near enough for a couple of questions for me. So just kind of asking on the guidance I know on the prior call you really called out in the prepared remarks today, you called out, Russia, Ukraine, Belarus central and eastern.
European softness that was really kind of the premise of the guide down in the <unk> last quarter, but it really sounds like central and Eastern European has improved. So just curious you know it really kind of want to hammer down from a geographical perspective.
Are the assumptions.
Kind of from the previous guide from a geographic impact perspective are those assumptions the same within the updated guidance today or are there any other regions to call out.
Yes.
Thank you for the question. It's also I think that ER.
Regarding the geographical effect are in the guidance.
I would say that our we have seen are the markets that were directly impacted from the war with also some additional impact from market from macro conditions, those have improved not necessarily to 100%, but but improved very much.
During Q2, and basically we expect them to.
To continue at the same or similar pace throughout the year. Unfortunately people get used to everything including war. So Oh, we think we saw a drop than we've seen a partial a nice comeback not to have 100% and basically this.
Is oh, what are we're taking into account in our guidance other than that we have seen some strengths and weaknesses in different geographies, but nothing out of the ordinary I mean, there is always some dynamic during the years.
We need to take into account that all high uncertainties in the macro environment and in this way. We also took into account into our guidance.
Got it got it. Thank you and then just one follow up for me.
I wanted to ask a question on Disney clearly a fantastic win with a global Mega brand. So I was wondering if you could walk us through how this win.
Disney came about was this a Disney Asia Division win or maybe it was this something more HQ driven.
With Asia being the first target market with maybe more to come thanks guys.
Okay.
Uh huh.
<unk> Asia.
Is indeed, I would say as we see it and also the Disney.
A part of it.
Larger I would say our approach with the phase one deployment into certain markets and epoch.
On the back of our success.
Oh those markets, we do expect a rollout into additional geographies and not only within that within a box where it's a it's a it's a discussion that's been going on.
For quite a while as you can assume that Disney is a reputable brand are the level of project management and requirements are to go live. It was extensive and we do believe that our overtime as we did with many although our merchants large merchants, we launch with AR as well as well.
What is lethal groups. It we would see a land and expand also with Disney.
Got it thanks, guys. Thanks for taking the questions.
Thank you very much.
Yeah.
Thank you. Our next question comes from the line of James Faucette with Morgan Stanley . Please proceed with your question.
Thanks, This is sandy BD on for James.
I wanted to quickly follow up APAC, obviously, a point of strength for you guys can you just talk about the demand drivers there, particularly from a merchant perspective, just in terms of outbound how youre thinking about the potential of the region. You had these larger brands that are potentially moving over them, obviously more organic wins as well can you just provide a little bit.
More color there.
Yes, so well.
We always say initial stages of penetration into APAC, but we all are very very confident.
And looking at the future.
As we see the pipeline of new bookings new bookings being are being are being I would say going from strength to strength over the quarters.
I recently visited the tuck in Japan for the event, we had dealt with all thoughts on France call Smalls and we've seen extensive interest from amazing Japanese brands looking to go do to see we've.
We've seen tremendous success in all our in building apply pipeline in Australia.
Fueled by our partnership with Australia post and ER and the DHL team in Australia.
So we do believe that over time, we would see a buck taking I would say that a significant chunk is a mix of of call. It all set of outbound sales phone so well today I would say much more balanced than we used to be.
Years ago, mainly maybe it won't be an outbound today, we're much more balanced with U S and taking a significant chunk of our activities. It we assume that that overtime with the momentum we see in APAC APAC would take the true.
Got it. Thank you and then just one on gross margin looked particularly strong this quarter.
Can you just walk us through some of the upside drivers there just between multi local mix shift scale, obviously, and how youre thinking about trajectory on a longer term basis, particularly as you integrate these new acquisitions.
Yes, so our I think you already mentioned that the three drivers are behind that.
The strong gross margin this quarter, but maybe I can add some color on that.
One we we had Uh huh.
Good makes in terms of.
Service fees and fulfillment services.
So this obviously has an impact on our gross margin.
Two and this is.
Important we have been.
April and I think we've mentioned it a few times to realize.
Cost of goods sold synergies are with flow faster than we originally anticipated. So I think towards the end of Q1 and the beginning of Q2, we already implemented some changes we needed to wait and see that everything works well.
And we are seeing very good results on that.
And so we we significantly improved our flows are.
Gross margins over the last quarter.
And we also had a you know as you mentioned we continuously.
Invest to.
To gain efficiencies based on leveraging our scale. This is something we do on a continuous basis. So I think those are the three main drivers behind the number in.
In terms of going forward, we will have a board of free weighing a bit on our gross margin is currently are the gross margin of water freeze.
Is lower than ours, we think that over the next.
Three four quarters, we can improve that.
We did a with flow.
And putting aside border free I think we we expect to see the same dynamics, we don't expect to have an improvement of.
200 basis points every quarter. However over time, we do expect to be able to gradually improve our gross margins.
Perfect. Thank you for taking my questions.
Thank you. Our next question comes from the line of Alex Sklar with Raymond James. Please proceed with your question.
So following up on earlier answers questions.
Questions on the macro what can you tell us in terms of growth of merchants in your pipeline or demo activity or some other metrics that you're tracking to help put some quantification behind that that pipeline strength commentary.
Yeah.
Sure. It's Neil Thank you for the question.
Well basically in terms of the growth in pipeline.
Yeah.
It it started former would say I would tell you the demo bookings that we've seen a substantial two digit increase and go through all the final input into the into the signings.
A few merchant and I can tell you is that you over real well at our over 100% growth.
Mm for the entire half one.
2022, and this momentum is an end in Q2 is even higher than Q1 as in Q1 on that so it's a substantial increase in new bookings I would say that supports a I will I would say our increased guidance into our into the second part of the year and also.
Total long term goals.
Hopefully that helps.
Yeah, No that's great color. Thank you and I guess, maybe just kind of goes hand in hand, but just following up on the Shopify partnership.
The native integration launched I think earlier in the quarter, but what can you tell us in terms of how that played out versus expectations once you're at that native integration up and running.
So so well very happy with our with the adoption of it and I think we see a tremendous a tremendous acceptance of friends requesting to go into native once a native shopify integration.
And we're very very optimistic looking into the future as a partnership.
And with Shopify evolves and strengthens our I think we can say, we're very appreciative of the product and engineering team. That's what are the commercial teams and shopify is as being on the being built with an embedded within there they'll checkout.
Acquired a lot of much closer cooperation than we had in the past and they are giving it and the other a true partner and we're very happy about it as a way as this evolves.
We do expect next year to have I would say hundreds of merchants, new and existing that would go live on this native integration some of them as I said out of I'll call. It classic integration some of them on you, but we do expect it to scale up.
And improve our well lunchtime on shopify as well as the overall merchant and customer experience.
Okay, great. Thank you very much.
Okay.
Thank you. Our next question comes from the line of Scott Berg with Needham <unk> Company. Please proceed with your question.
Hi, everyone. Congrats on a great quarter and thanks for taking my questions here I guess offer I just wanted to start off with your EBITDA guidance for the full year you had a strong.
Second quarter, obviously results with the cost controls and the synergies that you mentioned, but I see that you did not carry through the entire second quarter outperformance into the second half how should we think about your growth investments here it looks like you're continuing to invest.
To invest aggressively in the business, but is there anything new that you've identified maybe in the last quarter or two that would be interesting to note in terms of what the opportunities out there look like.
Yes, I think that are the main factors that we should add to this discussion is as border free border free is us.
And adjusted EBITDA negative not a large number but.
But still has a negative impact on the overall result, and this is a baked into the guidance on top of that as you mentioned we were in in Q1 Q2.
We were controlling our costs.
We do have some agility in our model and we did discuss that in the previous quarter. If you remember we did.
<unk> update our guidance, but.
But we didn't change the adjusted EBITDA number for the year. So Ah now after the second quarter, which was a much better than.
Expected, we're still controlling costs, but we are as you said also investing so we can support next year or two.
Our growth and of course.
Our growth in the future as well.
So those would be a I think the main points are impacting our adjusted EBITDA guidance.
Great helpful and then from a follow up perspective.
Nir I know you all have discussed a lot of on a slow commerce and border free year to date, but as you think about the border free benefits that you listed out before especially some of the services from Pitney Bowes.
<unk>.
Those benefits starting to impact your sales cycles for your core.
You know for your core global type of customer or the.
Except to realize maybe I guess into next year.
Yeah, Yeah. Thank you for the question I assume we would see a most of the benefit only next year, but it requires a technical integrations and setup. We are in the process of building the processes as well as the tech side of the integration.
Following it.
I would expect it to benefit both our winning of new clients with the additional service capabilities, but.
But more than that it will enable us to fulfill yeah I would say there is some additional services to core and client base are I would say, giving a better customer service to our tour to the owner consumers in different areas, So where it would come both ways, but most of it we would see only in Oh.
I assume early Q1 or Q2 2023.
Yeah.
Congrats on the strong quarter again, and thanks for taking my questions.
I appreciate that thank you.
Yeah.
Thank you. Our next question comes from the line of Brent <unk> with Piper Sandler. Please proceed with your question.
Hello. This is Clarke on for Brent first question is you know.
Over the course of the past eight months, it's between 22 could you tell me about.
What you've seen in the different segments or product categories within GMT.
Whether that was luxury or fashion or or or cosmetics or are there any segments or product categories that you've seen more stabilization on more improvement.
Sequentially in Q2 from Q1.
Yeah.
Hey, Thank you for the question.
I think that generally speaking we have seen similar trends are within the different segments. However, if I can point out. Some are some differences you have seen a slight decrease in our sporting goods since.
Sporting Ware.
As it relates to <unk>.
So they're opening up and people are going back to work.
So that that would be one observation I think its second observation would be that we have seen the digitally native brands and the New York brands growing a bit faster.
And then the other so I think those are the two main observations.
Yeah.
Alright, Great and then second.
A lot of questions on the border free capabilities being applied to the globally platform, but I wanted to ask about the the inverse.
Wondering if you could talk about what you're most excited about or where you see the most opportunity in terms of offering globally capabilities steam border free customer base.
Sure and I think that the.
Hmm.
It's Neil speaking given our global he's more than he says he's almost more than 10 times, our I would say the size of border free we have a much more data.
And know how to optimize the merchant proposition as well as additional capabilities that were not required at the size of border free and and and and once we can brings those into the globally climbed into the border for client base.
I I I I would expect to see a nice I would say impact on positive conversion rates.
Turning to our international traffic into more sales than what they had in the past so where I think we can bring our capabilities that would boost.
Co into merchant sales on border free we do of course already and started the journey we analyze it.
Where we can do a I would say quick changes with a with a with the border free engineers, and ER and ER and account management team and overtime and we wouldnt be able with some additional deals that we're currently doing do much more for the full to Brian So well.
We're very excited about.
Thank you very much.
Thank you.
Thank you ladies and gentlemen, our final question comes from the line of Pat Walsh with JMP Securities. Please proceed with your question.
Oh, great. Thank you and let me add my thoughts and prayers for Amir and his family.
So near with.
With border free.
Yeah.
Be more M&A and if so what kinds of things are out there.
That would be interesting and then maybe also let me let me just add on that are you finding that some of the smaller.
Companies that might have interesting technologies are running out of cash and are more available than they used to be.
Thank you pets, so I would start with the later if we see more interest of companies at all I would say oh, either running out of cash or or don't see a very bright license ahead of them, reaching out to us either direct or full at par.
And looking at if we were interested in and making a additional transaction.
So yes, there is interest.
However, when we look at it from the <unk> side, we are focusing.
Currently on I would say realizing the potential out of our out of the flu commerce acquisition, especially as a build of AR.
I would say as a white label solution into into Shopify, and we have a lot of farhan.
Realizing the benefits.
And from the border free acquisition.
But we are looking ahead and then we might look at I would say for some tactical.
Acquisition and not on a large scale if the if we see that we can I would say complement.
Additional capabilities in area of interest we spoke a lot demand generation, Italy out, but if we can see something in a in an area of interest for globally and we look at the time to build it and the investment versus maybe acquiring it I would say new capabilities and maybe the skills with it at a faster pace we might.
Consider that.
Great. Thank you and congratulations on such a great quarter guys.
Thank you thanks Pat.
Thank you ladies and gentlemen. This concludes our question and answer session I will turn the floor back to Mr. Debbie for any final comments.
Thank you.
On behalf of also myself and the entire global it team I would like to thank you all for joining today and for your ongoing support as we continue on our exciting and ambitious journey.
With yet another great quarter, we very much look forward to seeing you again on our future, earning calls goodbye and take home.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.