Q2 2023 Global-e Online Ltd Earnings Call
Welcome to the Global Inc. Second quarter 2023 earnings call.
This call is being simultaneously broadcast webcast on the company's website in the investors section under news and events for opening remarks, and introductions I will now turn the call over to Erica Mannion at Sapphire Investor Relations. Please go ahead.
Thank you and good morning with me today from globally are mere schlock It co founder and Chief Executive Officer, Ofer, Koren, Chief Financial Officer, and near Debbie Co founder and President.
Neil will begin with a review of the business results for the second quarter of 2023.
We will review the financial results for the second quarter of 2023, followed by the company's outlook for the third quarter and full year of 2023, 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 $19 34, and the Safe Harbor provisions of the US 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 our current views with respect to future events and are not a guarantee of future performance.
You'll outcomes may differ materially from the information contained 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 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 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.
Except as required by applicable law, we make 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 August eight two.
<unk> thousand 23 for additional information.
In addition, certain metrics, we will discuss 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 believe that these measures provide useful information about operating results enhance.
The overall understanding of past financial performance.
Or what's your prospects and allow for greater transparency with respect to key metrics used by management in 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 eight 2023.
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 eight 2023.
I will now turn the call over to Amir co founder and CEO .
Thank you Erica and welcome everyone to our Q2 earnings calls.
Our second quarter financial results all of them exceeding our guidance depict the continuation of a very strong business momentum and growth trajectory.
Quarterly GMB amounted to $825 million with 54% year on year growth.
Our revenues grew by 63%, reaching $133 million in the quarter.
Our adjusted gross profit margin continued to expand from 41, 9% in Q2 of last year to 43, 3% in Q2 of this year.
Thanks to our growing economies of scale and improved efficiencies.
Finally, our adjusted EBITDA for the quarter came in at $21 million nearly doubling that of the same period last year.
As usual offer will describe in more detail our quarterly financial results as well as our updated guidance for the next quarter and for the full 2023 fiscal year.
However, before I hand, the call over to Wolfgang I would like to walk you through some key updates regarding our business.
On the merchant front, we continue to onboard many new merchants located all around the globe and trading in various different verticals.
Just to name a few examples.
Recently went live with renowned fashion brands, such as LTE, Bennett, and Clobber, London, and the UK Monday, swimwear and pepper in the U S.
<unk> France.
The iconic denim insertion brand diesel in Italy.
We also went live with a UK based recycled gold and silver jewelry brand, new Soma with the innovative protective cases brand moves and many others in various product verticals.
From a geographical standpoint in parallel to our continued growth in our established markets across North America, the UK and Continental Europe . We continued a rapid expansion in the APAC region as well with several Australia and brands going live, including Venturi Rolling nation, the Hana and leaderboard with numerous Jeff.
And these brands growing lot, including hemophilia 45, or eight Nubian honest suite and we have to go live with our first ever Korean brand high ensue.
Moreover, during Q2, we went live with our first ever Swedish Brent the vegan cosmetics brand swati, bringing the count of our active outbound markets up to 29.
Equally important we continued our expansion efforts within existing merchant groups with notable examples this quarter being or Vita, which is the number of brands from the large beauty and fragrance group Coty and <unk> beauty, which is part of the <unk> group of brands.
Moving on to some additional elements on our strategic roadmap, we continue to consolidate and streamline our platform stack polestar two acquisitions of slow kind of border free.
In parallel we are also continuing their migration process of all of our legacy Shopify based enterprise merchants onto the new native App.
The SMB platform side, we continued our joint work with Shopify on the necessary preparations for the release of Shopify markets, Peru into general availability in the U S, which is expected to happen later in the year.
Based on the results and feedback from the first live batches of early access merchants, we continue to be optimistic regarding the potential future impact of this innovative new offering once it is released and scales up.
Given all these developments as well as many product features being constantly developed and rolled out we continue to expand both our technological teams and our commercial teams around the globe.
But at the same time.
As committed as ever to doing so in a responsible and sustainable way.
As is evident from the healthy growth in our adjusted EBITDA, a good proxy for our free cash flow, which is outpacing the growth in revenues.
And with that I will now hand, it over to offer to take you through the quarterly figures in more depth as well as present, our updated guidance.
Thank you Amir and thanks again, everyone for joining us today for our quarterly earnings call. We are very pleased with our business performance and progress in the first half of 2023.
Two was another strong quarter of fast growth coupled with improved margins as we continue to support merchants with direct to consumer cross border growth through our journey and exploit the massive market opportunity.
I'd like to point out again that in addition to our GAAP results I'll also be discussing certain non-GAAP results, our GAAP financial results along with a reconciliation between GAAP and non-GAAP results can be found in our earnings release.
As Amir mentioned, our rapid growth in <unk> continued in Q2 with $825 million of GMP generated on our platform an increase of 54% year over year. The growth was supported by the continued growth of the direct to consumer cross border segment. Despite the ongoing.
Macro uncertainty.
We also still benefited this quarter from inorganic growth from border free.
In Q2, we generated total revenues of $133 $3 million up 53% year over year with both revenue streams continuing to grow rapidly.
Service fees revenue were up 59.
Were $59 $5 million up 51% year over year and fulfillment services revenue were up 54% to $73 8 million.
Fulfillment take rate has decreased compared to Q1, mainly driven by higher average order value, resulting in less shipments per dollar of GMB and also from the continued growth of our multi local services.
We have continued to experience higher base growth in our U S. Outbound revenue as our momentum in the U S continued driven also by the U S bias of the boarder free portfolio in.
In Q2, 2023 U S outbound revenue was up 99% year over year.
As Amir mentioned, we also continue our penetration into APAC and immediately.
While the <unk> share of this new outbound market is still only 3% revenue has grown over three times year on year.
non-GAAP gross profit continues to outpace revenue growth as we continue to leverage our scale and improve efficiencies in Q2, non-GAAP gross profit was $57 $7 million.
58% year over year, representing a gross margin of 43, 3% compared to 41, 9% in the same period last year.
The improved non-GAAP gross profit margin compared to Q1 were driven also by the higher share of service fee revenue in Q2.
GAAP gross profit was $54 $9 million, representing a margin of 41, 2%.
Moving on to operational expenses, we continue to invest in the development of our platform to enhance our offering with a significant effort around the development of the Shopify Marcus Pearl White label solution towards general availability in the U S.
R&D expense in Q2, excluding stock based compensation was $18 million or 13, 5% of revenue compared to $12 3 million or 14, 1% in the same period last year.
Total R&D spend in Q2 was $24 6 million.
We also continue to invest in sales and marketing to enhance our market presence and to build our pipeline, while maintaining efficiencies sales and marketing expense, excluding shopify related amortization expenses stock based compensation acquisition related intangibles amortization was 12 million.
<unk> or 9% of our revenue compared to $8 million or nine 2% of revenue in the same period last year Shopify warrants related amortization expense was $37 $4 million total sales and marketing expenses for the quarter was 52 $8 million.
<unk>.
General and administrative expenses, excluding stock based compensation acquisition related contingent consideration was $7 $3 million of five 5% of revenue compared to $5 5 million or six 3% of revenue in the same period last year total G&A.
<unk> spend in Q2 was $13 $9 million.
Adjusted EBITDA totaled $21 million growing 90% year over year, representing a 15, 7% adjusted EBITDA margin.
Compared to $11 $1 million or $12 seven margin in the same.
Period last year.
Net loss was $35 $5 million compared to a net loss of $48 8 million in the year ago period, driven mainly by the amortization expenses related to the shopify warrants and two transaction related intangibles.
Switching gears and turning to the balance sheet and cash flow statements. We ended Q2 2023 with $224 million in cash and cash equivalents, including short term deposits and marketable securities cash flow generated by operating activities was $17 $6 million compared to <unk> <unk>.
37, $8 million a year ago.
Moving on to our financial outlook and guidance for Q3, 2023, and our updated 2023 full year guidance, which reflects the resilience and the continued momentum of the business for Q3 2023, we're expecting <unk> to be in the range of $840.
$880 million at the midpoint of the range. This represents a growth rate of 38% compared to Q3 of 2022.
We expect Q3 revenue to be in the range of $136 million to $142 million at the midpoint of the range. This represents a growth rate of 32% compared to Q3 of 2022.
Border free is weighing on topline growth in H, two but we expect <unk> to contribute positively once our hands traffic generation offering is in place.
For adjusted EBITDA, we're expecting a profit in the range of $17 million to $21 million.
For the full year of 2023, we are raising our guidance, we anticipate <unk> to be in the range of $3 four 8% to $3 $64 billion, representing 45% annual growth at the midpoint of the range revenue is expected to be.
In the range of $570 million to $596 million.
Representing a growth rate of nearly 43% at the midpoint of the range for adjusted EBITDA, We're expecting a profit of $85 million to $93 million, a significant increase of 21% compared to our previous guidance at the midpoint of the range, reflecting our continued focus on.
Operational efficiencies.
In conclusion, we continue to focus on strong execution with emphasis on enhancing our platform and expanding our offering to create value for the merchants in their direct to consumer cross border expansion. We aim to continue our rapid growth, while improving efficiencies and generating cash.
And with that Amelia and I are happy to take any of your questions operator.
Ladies and gentlemen, if you would like to ask a question. Please press star followed by one on your Touchtone phone you will then hear a sweet home prompt acknowledging your request and if you would like to withdraw from the question queue. Please press star followed by two.
And as a consideration to other callers on the line. We ask that you. Please limit yourself to one question and one follow up.
Please go ahead with Starwood now if you have any questions.
And your first question will be from Brian Peterson of Raymond James. Please go ahead.
Alright, Thanks, gentlemen, and congrats on the strong quarter. So first I just wanted to hit on any trends that you'd call out in terms of GMB linearity, you're either by month or.
By region that was really strong.
Through July that would call up it may be different versus the second quarter.
Yes, so are we.
We did see.
Strong second half of the second quarter.
It was driven by some large merchants product launches and product promotions and we did continue also to see relative strength in Europe in Europe on the back of weak year in.
In 2022, so we have seen.
Growth in Europe .
More or less stable we've seen.
Some of the APAC markets performing not that well.
Europe has been a very very strong contributing to growth.
Okay.
Great I appreciate the color and maybe just on margins I know, we're coming at 15% EBITDA margins for the year I'd love to understand as those have ramped up how are you guys thinking about investing back in the platform investing in the growth versus driving further margin expansion. Thanks guys.
Hi, Brian It's Tom.
Thanks.
So we are continuing to reinvest all of its all I mean to the platform. We believe that we are truly at.
The early innings of capturing this immense market opportunity both in what we're already doing so far and in additional offerings additional avenues that we can.
Continue to develop on the back of it so with that kind of early innings approach and multiple avenues for it we are continuing to reinvest all the time and we are we remain committed to.
To continue to expand the EBITDA margin in the long term.
In terms of.
The shorter term and the midterm we.
We do make these investments wherever we believed it.
Are accretive to the to the long term value over <unk> of our business.
Okay.
Thanks, Nick.
Thank you next question will be from Brent price Lynn Piper Sandler. Please go ahead.
Thank you.
<unk>.
Wanted to double click into the markets grow on the year end and what have you learned so far I know, we're still very early.
Did have color there will be trials, what have you learned how is that going and any sort of key takeaways that.
Could lend some inside into how we think the adoption curve will look like going into next year. Thanks.
Yes, Thanks, Brian .
We've learned quite a lot as we've took out shopify we've.
Already done a number of <unk>.
Early outreach is too.
Two batches of.
Of merchants and on the back of that we've I can say, we've we've learned and improved collectively.
Even from from one batch of outreach to the other.
I would say some of the improvements are on.
On the offering and the product side itself, although to be honest it was.
Quite well performing even beforehand, most of the work and the lessons learned are kind of in the onboarding processes.
Kind of perfecting the.
The onboarding.
Our experience from a merchant perspective, automating all of the various aspects of.
Both the Onboarding and the day to day management of the merchants on the platform since as you know this is this is intended.
To be kind of a zero touch.
Highly products to ours.
Offering.
We expect large masses of merchants to onboard of this once this goes into general availability and ramps up so.
This has been Oh. This is what a lot of what we've been focusing on and with that we've seen.
Tremendous advances even through the course of this early access spirit, which we <unk>.
Plan to implement once this goes into general availability.
Encouraging to hear that software.
It's progressing well I guess my follow up here for <unk> is really a ramp fulfillment margins uptick a little bit this quarter I don't know if there was.
Audi in play there and how we should think about fulfillment margins going forward.
Is there a structural improvement or think about that as some.
Operational improvements by that this is sustainable.
Yes, thank you for that Brian .
Generally speaking.
Gross margin has improved.
This quarter.
On the back of.
Operational efficiencies and also the mix of revenue.
The higher share of service fee revenue.
We expect.
Debt to remain.
Relatively stable and we expect to spend to stay around the same numbers for the remaining of this year.
And we do see some upside potential gradual upside potential in the longer term.
This relates to the service fees fee piece and also to the fulfillment revenue as well.
Helpful color. Thank you.
Thank you next question will be from Samad Samana Jefferies. Please go ahead.
Hi, good morning, good to see the strong results. Maybe first question just thinking through border free now that you're lapping at your <unk>.
Past the acquisition, how should we think about how conversions of those customers are doing and can you maybe speak to what the NRI trends look like inside of that cohort of customers and maybe do you think they'll eventually get to where you are overall NRI it looks like the irregular wide customer base.
Hi.
Thanks for the question it's Neal.
In general we're very happy with the progress, we're making on the border for acquisition in multiple fronts on the one hand.
On the marketing front, we all.
We are building.
Is it capabilities and towards we'd be able to close.
They just took client base as well as the international portal in order to launch it across our entire platform.
And I would say sometime I would say maybe Ferrari access later in the year in general availability sometime in Q1 Q2 next year.
In Poland, and Sweden and.
We did start to utilize that enjoy.
<unk> capabilities of standard delivery.
<unk> into Canada, using pitney Bowes on deck.
Client on the client base itself we.
We do expect to see migration.
Towards the later part of the year.
Henry.
Mainly late Q4, and a significant I would say amount of clients already migrated.
By mid next year.
So once we see that migrating.
C C.
Significant growth coming out of the capabilities, we have on the global it platform that are not present on the on the on the Cowen border free platform.
Fix it within 2020 full will also we will already start to see some.
Some growth coming out of the out of the border free client.
Some of it would be only lately zeal, one and 2025.
Because the client would migrate on the only me deal.
In terms of the profile it is a different growth profile on the <unk> on the Cowen platform versus the versus globally, we still maintain.
Regular profile for <unk> client trading it.
I would say our historical levels of over 130%.
A border free.
<unk> is lower profile.
Do not grow as our clients on the platform.
We see it weighing a bit.
On our results.
The coming quarter, but we do expect it to change and want to like greater than contributed the same profile as globally clients.
Hopefully by mid next year.
Super helpful and maybe just a follow up for for the team.
Think about the <unk> guidance and then what that may be implied for the fourth quarter.
It actually implies things will get better and that makes sense with Chapman Margaret.
Are there initiatives I'm, just curious maybe how much confidence or visibility you have in that fourth quarter ramp as well that that's implied.
Is that more due to new customers that you've already booked or just the GMB trends youre seeing in the existing basis, maybe help us understand that.
That kind of implied for Keystone.
Thank you Phil.
Yes, we all are well, obviously, we have more visibility now into Q4 than we had a quarter ago.
So as we progress along the year, we get better visibility. However, it's also peak season, so you'll know it.
Yes.
Volatility to either side could have.
And the impact basically in our guidance.
All of the plan is based on clients that they've already signed the client that hasn't signed up till now we would probably not be live. This year. So it's all planned either online merchants or on site and merchant that are planned to go live pre peak.
And in addition, we do expect.
Some contribution from Shopify markets Pro win in Q4, and all of that is is MB.
Bad debt.
In the full year guidance that you see.
And going forward into 2024 hopefully.
Top five markets flow will have a significant contribution.
Great. Thanks, guys for taking my questions.
Thank you thanks Nick.
Question will be from James Faucette of Morgan Stanley . Please go ahead.
Thank you very much good morning, everybody. Thanks for the time.
Things seem to be progressing well here I wanted to follow up on.
The Shopify markets Pro can you talk a little bit about that cycle.
A view of the merchant.
If the merchant already has cross border activity in operations.
Would you expect them to move over relatively quickly to shopify markets pro or continue to operate with.
Current operations, but then perhaps add markets pro four for new markets can you talk a little bit about what you think.
The process from the point of view of the merchant is likely to be and how youre planning for that.
Hi, James Thanks for your question it's Neal.
Yes in terms of the client base, we do expect merchants that are currently idle.
Some kind of populations cross border.
All don't have it at all.
I would say the market is very appealing way.
Two.
To extend our international reach all to make it better.
It is a full suite of end to end capabilities that you can actually turn on very simply and we believe that it would.
It would.
It would be a promising for many merchants that are currently trading international with bits and bytes.
Build themselves.
I'll use shopify, allowing them a more holistic solution. So we do expect some to actually move towards a solution here.
Okay.
That's great and then.
I guess from.
Just following up there. So when you think about what is the.
What controls that pace of penetration and on boarding.
I mean is it.
I'm, just trying to get a better sense of that sales motion of like how much input.
Globally have into that process versus it sounds like it's designed to scale.
Self serve entirely so.
Is that something that that the merchants themselves can just do immediately in all of them can do simultaneous if you managed in an extreme scenario just trying to understand kind of what the limitations on adoption might be thank you very much.
Thank you James and then yes, I think there are limitations on adoption.
Coming one as you mentioned from the merchant wanting to adopt the product.
See this fit.
Pete.
Oh needs, but much more it depends on the rollout as we are going into a into general availability, we're not there yet.
In general availability, which will go into <unk>.
So I would say first.
Focusing on the U S U S merchant base and only then looking at extending into into different daily totally.
So it will be a gradual adoption according to.
Which product to fill in where do you where do you sell them from but.
I would say that I think it would be much more dependent on.
On the merchant choice.
Great I appreciate it thanks.
Thank you next question will be from Scott Berg of Needham. Please go ahead.
Hi, everyone. Good afternoon, thanks for taking my questions.
Good afternoon at least in Tel Aviv.
Yes.
Couple of things from me.
Your growth in the United States.
We'll continue to be really strong, especially after you've lapped flow, which brought you.
A really nice platform here for U S. Outbound can you help us understand maybe some of the drivers there I know, it's a smaller base, but is there expectation that we can see similar growth out of that solution.
Outbound U S outbound sales over the next maybe 12 to 18 months.
So Intel in terms of.
Geographic.
The Ocean <unk>.
<unk> is growing.
Morning.
For us it's coming out of both I would say is a focus of.
Policy flow on U S consumers, but I think that the.
No lessons that will even more its coming from.
A lot of our U S brands outpacing that growth.
Yeah.
The father of other merchants in Alberta utilities due to the mix of.
Yes.
Celebrity brands and <unk> brands.
I would say.
A growth profile that is high yields in the legacy the legacy brands.
And you tend to see more of them in shift in mix in the U S.
Other regions. So this would be this.
Would be the other the other main reason for this.
Growth in the U S in pound and we do see continued adoption of our solutions in the U S. By U S merchants, so they support it as well and we do believe this profile.
Would even be accelerated further.
With the with the general availability of Shopify markets fell.
<unk> the four U S merchants.
Got it helpful. And then from a follow up question for you gross margins continue to be above I think everyone's expectations certainly best ever in the quarter here I know you and I have discussed gross margins at scale, maybe getting to 50% plus or minus do you have an updated view on that.
Business scales here or is there some opportunities to maybe outperform that over time or is that really kind of the target level. We should continue to look for.
So.
We are very happy with the gross margin this quarter.
As I mentioned, it's driven by the revenue mix, but also.
By operational efficiencies are weak we continue.
Uh huh.
Focusing on leveraging our scale and improving over time, we do see.
Yes.
<unk>.
Upside potential in the future as I mentioned previously.
The remaining of this year, we expect it to stay.
At levels similar to what you have seen in Q2, but going forward. Yes. There is some additional potential we expect it to come in gradually we don't expect.
Gross margins to grow by 200 basis points every quarter.
But there is some additional potential upside.
Excellent. Thank you for taking my questions.
Thank you next question will be from Matt suites at Keybanc. Please go ahead.
Hey, guys. Thank you for taking my question I thought that the comment that you made about higher average order volume was really interesting and I was wondering if you could give any more commentary on if there is any specific reason for that higher cart size or if youre seeing any maybe tailwind from certain <unk>.
Nichols' thanks.
Yes so.
I think there are two.
The two drivers behind that.
First of all I think that.
And I would say, it's a consumer trend we have seen.
Over the last few years average baskets growing.
And then there was sort of a pause in Q1, and we've seen higher growth than previously in Q2, so it might.
I have been.
Sort of a blend between Q1 and now this is roll to higher average order value growth.
In Q2.
In terms of segments I think that as Neal mentioned, we see the digitally native brands over performing.
We have seen luxuries is solid.
Have seen.
Slower growth.
With Department stores, I would say those would be the.
Key observations for the last few months.
Great and just a follow up for you guys I think we've been hearing in general but.
Right.
I just have been a bit restrained this year versus last year are you seeing that play out in any of your demand gen or any changes in sales cycles that you're seeing on the enterprise side. Thanks.
So in terms of the forward.
Our new bookings.
Q2 was that was it.
Great quarter.
With a very strong growth and it brings us to our I would say for six months of the year that though I would say the strongest we had though.
In terms of booking <unk>.
We continue to roll out.
The new partnership we start to see new bookings coming from a new Legion.
When we went into.
Late last year.
Early this year that caused a park, where we see a strong demand coming in in the Nordics. We then Denmark.
When we launched our first client and we see and we see pipeline is being built as well as Italy and some other reasons caused the continental Europe . So all in all we're quite.
Optimistic.
Looking ahead.
The pipeline that is being built and very happy with the results in Q1.
In half one.
On your bookings supporting Galella midterm growth.
Thank you guys and congrats on the quarter.
Thanks Nathan.
Next question will be felt Matt Coad Autonomous research. Please go ahead.
Hi, Hey, guys. Thanks for taking the question.
Your service fee take rate declined on a year over year basis for the first time I believe since you came public could you just touch on kind of the driving factors, there and how youre thinking about the take rate moving forward.
Thank you for that itself.
<unk>.
Divided answer to in terms of our service fees take rate it has been a relative.
Relatively stable it is of somewhat volatile from quarter to quarter, but it has been.
Relatively stable.
And we expect it to stay stable for the back half of the year with some.
Upside potential going forward.
In <unk>.
Driven by value added services.
And in terms of fulfillment take rate, yes. This has been.
Lower this quarter.
As I mentioned, we had a we have seen.
Average order value, which translated to less shipment done by us.
And.
That was.
Obviously are driving the numbers.
In addition, as we mentioned in previous quarters.
Multi low cut it is gradually growing share. So it doesn't have a huge impact but that also has an impact on fulfillment take rates are in multi local we usually do not supply.
Fulfillment. So those were the drivers behind that and going forward I think that the.
Back half of the year, we expect it to stay relatively at the same level similar levels.
And then.
Going into.
24.
There might be some upside potential still remains to be seen.
The flip side of it is reflected in the gross margins as the share of our service.
Service fees is high.
That has a positive impact on gross margin so when it drops down.
The gross profit line.
Less impact.
Thanks, Ofer that was super helpful.
Then just for my follow up your free cash flow conversion ratio. So looking at free cash flow as a percentage of adjusted EBITDA.
A little bit worse to start this year compared to last I was just wondering if there's anything to call out in terms of say like a working capital build or some other factors.
Yes, it did.
<unk> started.
Slowing that due to timing and cost of a car.
Cut off.
So we're still lagging from.
Q1.
There werent any any specific.
Dynamic it's more around timing.
Still expect to see over time.
Adjusted EBITDA translating into.
Free cash flow, there will be fluctuations from quarter to quarter, a period to period, but over time, we do expect it to more or less converge.
Okay.
Thank you.
Thank you.
As a reminder, ladies and gentlemen, if you do have a question. Please press star followed by one on your Touchtone phone.
And the next question will be from Mark.
Benchmark. Please go ahead.
Thank you and good afternoon.
Just curious in terms of the level of conservatism you have built into the implied fourth quarter.
Our markets grow and how.
How we should think about.
Or how much visibility you have there just kind of following that last question, but short question here is what type of.
Conservatism would you say.
Built into the fourth quarter.
We have not changed our our general approach regarding guidance, we tried to stay very consistent.
Naturally as we approach the end.
Of the year.
Better visibility.
Visibility for the full year in general so and that is reflected in our increased guidance for the full year.
Regarding shopify markets.
Pro obviously it is still new we do see.
Some trends because we already Natalie access mode, and we see it growing over time. So we do have some indications when we take that plus.
The plan.
We have choppy.
Shopify has regarding this product.
So.
I think that we have.
Ability regarding that and in any case.
We do expect it to start contributing in Q4, however, it does not.
<unk> impact in Q4, we expect it to have a significant impact going into 2024.
Got it that's helpful. And then just in terms of your enterprise pipeline I was hoping you could maybe characterize.
The growth over the next 12 months coming from direct versus indirect channels. Thanks.
Yes.
Last.
Over the last two years, it's Neil fully over the last deals we have seen the growth of the indirect.
<unk>.
Sales leads coming from part is growing shale, we expect it to continue.
As we onboard more and more partners.
Into the globally into the globally network and ecosystem.
However, we do still rely significantly on our internal team.
Well on demand generation team in sales and sales teams continue to grow in parallel.
The network effect, we get from our from our ecosystem.
But as I said in shale, we do expected percentage base the share coming from indirect to continuing growth.
Excellent. Thank you very much.
Thank you next question is from Austin call.
<unk> Securities. Please go ahead.
Hey, there. Thanks for taking my question I, just wanted to drill in on the.
Yes.
Growth in the U S and I wanted to ask if there was anything you guys are thinking about just with some of the recent economic data that's coming out and what you guys are seeing just in larger trends.
In adding new merchants, there and how you feel about growth there in the out years. Thanks.
Okay.
Thank you it's Neal.
As stated before we did see a nice growth trajectory in the U S outpacing the.
Other regions and growing in scale some of it came from the concentration of.
Flow and border for acquisitions, as well I would say mainly or virtually almost all.
U S based.
Merchants.
Some of it coming out of the higher.
Growth profile of D to C brand of celebrity brands that are growing faster than legacy brands.
On top of it we do see a good a good pipeline.
And strong pipeline being built in the U S.
<unk> solid businesses are being opened and are growing and we see it reflecting in.
And the demand for those brands worldwide. So we do expect that to continue and grow noting the pace.
We've seen on the enterprise side for sure that we have seen forward. So we expect it to continue to grow gradually and mix it will be somewhat accelerated by the by the general availability in the U S. First of the of the Shopify markets froze it.
Say bye bye being released versus the U S would scale up I would say as a show of U S. Even further over time, we expect that to balance one additional regions would be open within 2024.
Great. Thanks, so much.
Thank you and at this time I would like to turn it over to EMEA for closing remarks.
Okay.
Thank you and thank you everyone for joining us on this call today. We appreciate your ongoing support and very much look forward to updating you again on our future earnings calls until next time Goodbye to you all and take care.
Thank you, Sir ladies and gentlemen, this does indeed.
Conclude.
Conference for today once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines.
[music].
Yes.
Okay.