Q2 2024 Global-E Online Ltd Earnings Call
Speaker Change: Welcome to the Global-E 2nd Quarter 2024 Earnings Announcement Conference Call.
Operator: This call is being simultaneously webcast on the company's website in the Investor Relations 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.
Erica Mannion: Thank you, and good morning. With me today from Global-E are our Amir Schlachet, co-founder and chief executive officer, Ofer Koren, chief financial officer, and Nir Debbi, co-founder and president. Amir will begin with a review of the business results for the second quarter of 2024. Ofer will then review the financial results for the second quarter of 2024, followed by the company's outlook for the third quarter and full year of 2024. We will then open the call for questions.
Erica Mannion: Certain statements we make today may constitute forward-looking statements and information within the meaning of Section 24A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the safe harbor provisions of the U.S.
Speaker Change: Certain statements we make today may constitute forward looking statements and information within the meaning of section 24 E 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 19 nineties.
Speaker Change: Thought that relate to our current expectations and views of future events.
Ofer Koren: Private Securities Litigation Reform Act of 1995 that relate to our current expectations and views of future events. These four statements are subject to risks, uncertainties, and assumptions, some of which are beyond our control. In addition, these four forward-looking statements 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 contained in the forward-looking statements as a result of a number of factors, including those set forth in the section titled risk factors and our prospectus filed with the SEC on September 13, 2021, and other documents filed with or furnished to the SEC.
Speaker Change: These forward looking statements are subject to risks uncertainties and assumptions some of which are beyond our control.
Speaker Change: In addition, these forward looking statements reflect our current views with respect to future events and are not a guarantee of future performance.
Speaker Change: Actual outcomes may differ materially from the information contained in the forward looking statements as a result of a number of doctors, 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.
Ofer Koren: 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 rely 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. Unless 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.
Speaker Change: These statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this call.
Speaker Change: You should not put undue reliance on any forward looking statements.
Speaker Change: 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.
Speaker Change: Sept 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 cause reflect the occurrence of unanticipated events.
Ofer Koren: Please refer to our press release dated August 14, 2024 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.
Speaker Change: Please refer to our press release dated August 14th 2024 for additional information.
Speaker Change: In addition, certain metrics, we will discuss today are non-GAAP metrics. The presentation of these financial 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.
Ofer Koren: We use these non-GAAP financial measures for financial and operating decision-making, as well as as a means to evaluate period-to-period comparisons. We believe that these measures provide useful information about operating results and enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to key metrics used by management in its financial and operating decision making. For more information on the non-GAAP financial measures, please see the Reconciliation Tables provided in our press release dated August 14, 2024.
Speaker Change: We use these non-GAAP financial measures for financial and operating decision, making as well as a means to evaluate period to period comparisons.
Speaker Change: 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 in its financial and operating decision making.
Speaker Change: For more information on the non-GAAP financial measures. Please see the reconciliation reconciliation tables provided in our press release dated August 14th 2024.
Ofer Koren: Throughout this call, we will 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 14, 2024. I will now turn the call over to Amir, co-founder and CEO. Thank you, Erica, and welcome, everyone.
Speaker Change: 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 14th 2024.
Speaker Change: Now I'll turn the call over to Amir co founder and CEO.
Speaker Change: Yeah.
Amir: Thank you Erica and welcome everyone.
Amir Schlachet: Our second quarter of financial results, all of which are at the top end or above our guidance, demonstrate a continuation of our strong business momentum and growth trajectory, as well as our execution towards our long-term strategic objective, in terms of GMB. Q2 marks yet another historical landmark, representing our first ever non-peak order above a billion dollars, with quarterly GMV accounting for $1.08 billion dollars, representing 31% year-on-year growth. Our revenues grew by 26%... reaching $168 million in the. Our Adjusted Gross Profit Margin continues to expand, from 43.3% in Q2 of last year to a record 47.8% in Q2 of 2020. Enabling Adjusted Gross Profit growth to outpace that of our revenue. Finally, our adjusted EBITDA for the quarter came in at $31 million, representing nearly 50% growth over the same period last year.
Amir: Our second quarter financial results all of which are that's all been were above our guidance range demonstrated a continuation of our strong business momentum and growth trajectory.
Amir: As well as our execution towards our long term strategic targets.
Speaker Change: In terms of GMP Q2 marked yet another a historical landmark for us representing our first ever non peak quarter above a $1 billion with quarterly GMB accounting one thing your acreage in dollars, representing 31% year on year growth.
Speaker Change: Our revenues grew by 26%, reaching a $168 million in the quarter.
Speaker Change: Our adjusted gross profit margin continued to expand from 43, 3% in Q2 of last year to a record 47, 8% in Q2 of this year.
Speaker Change: Enabling adjusted gross profit growth to outpace that of our revenue.
Speaker Change: Finally, our adjusted EBITDA for the quarter came in at $31 million, representing nearly 50% growth over the same period last year.
Amir Schlachet: This is testament to our growing economies of scale, our team's continued efficient execution across all elements of the business, and our proven effectiveness in controlling. Looking ahead at the rest of the year and beyond, we remain confident in the re-acceleration of the economy, which we'll discuss later in the call. We expect 34% growth in GMB and 30% in revenues in the second half of 2020, with significant contributions from large new merchants who are already or about to go live, as well as the anticipated continued growth of managed markets.
Speaker Change: Estimate to our growing economies of scale, our teams continued efficient execution across all elements of the business.
Speaker Change: Our proven effectiveness and controlling costs.
Speaker Change: Looking ahead at the rest of the year and beyond we remain confident in the reacceleration of the business.
Speaker Change: Alfred will discuss later in the call, we expect 34% growth in G M B and 30% in revenues in the second half of 2024 with.
Alfred: With significant contribution from large new merchants, who are already or about to go live as.
Alfred: As well as the anticipated continued growth of managed markets on shop before.
Alfred: The strong expected growth is especially noteworthy as it comes despite some mixed macro sites and the former slight softness in consumer sentiment, we encountered dream late July and yogurt as.
Amir Schlachet: This strong expected growth is especially noteworthy, as it comes despite some mixed macro signs in the form of slight softness in consumer sentiment we encountered during late July and early August, as well as the unfortunate and unexpected churn of one of our largest merchants, Ted Baker's UK and Europe franchisee, which went bankrupt and took its online store off the air earlier.
Alfred: It's rather the unfortunate and unexpected churn of one of our largest merchants Ted Baker, UK and Europe for JV, which went bankrupt and took its online store up year earlier this month.
Alfred: Moreover, given our strong integrations pipeline, including additional large merger with integration projects are currently on track and given our year to date, new bookings, which stand at a record high.
Amir Schlachet: Moreover, given our strong integration pipeline, including additional large merchants whose integration projects are currently on track, and given our year-to-date new bookings, which stand at a record high, we remain highly confident in our ability to continue delivering strong and durable top-line growth levels of 30% and above, also beyond the second half of 2020. Yuselung, When I hand the call to Ofer, he will describe in more detail our quarterly financial results, as well as our updated guidance for the third quarter and for the full fiscal year.
Alfred: We remain highly confident in our ability to continue delivering strong and durable top line growth levels of 30% and above also beyond the second half of 2024.
Alfred: As usual.
Alfred: I now hand, the call to Ofer, you will describe in more detail our quarterly financial results as well as our updated guidance for the third quarter and for the full fiscal year.
Amir Schlachet: However, I would first like to walk you through some key updates regarding our As in every quarter, during the last period, we continued to see strong demand for our service, with the onboarding of many new merchants located all around the globe and trading in various different markets. In North America, we went live with the Innovative Customizable Glasses brand, Pair Eyewars, Curator of the parallel and former brand, Tucker- L.A.B., Street Tour Brand, Minimal, and Luxury Lifestyle and Artbook Publisher Up.
Ofer: However, I would first like to walk you through some key updates regarding our business.
Ofer: I think every quarter during the last period, we continued to see strong demand for our services with the Onboarding of many new merchants located all around the globe and trading in various different verticals.
Ofer: In North America, we went live with the innovative customizable licensed brand per hour curated apparel and footwear brand Tucker Nook led based streetwear brand minimal and luxury lifestyle and art book publisher Awesome work.
Amir Schlachet: In the UK, the iconic British country clothing brand Cordings, the renowned footwear brand Clarks, Germaine Street shirt maker House and Curtis, cosmetics brand Revolution Beauty, and fashion brand Weird Fish all went live on our website. In France, we launched several high-street fashion brands, including Amie Ferry and Isabelle Marant. But across other parts of continental Europe, we went live with our renowned brand. Clothes in Juppen, Germany, and Pinkling.
Ofer: In the U K.
Ofer: British country clothing brand. According to announce footwear brand Clark's remain street Chipmaker has occurred it cosmetics brand Revolution beauty and fashion brand Greenfish bulwark lives on our platform.
Ofer: And front, we launched several high street fashion brands, including <unk> and ease of MRO.
Ofer: But across other parts of Continental Europe, We went live with renowned brands such as closed in <unk>, Germany and <unk>.
Amir Schlachet: We also went live with a fast-growing Swedish brand, I am RUNBOX, that creates backpacks designed specifically for runners. And we have our first-ever Polish store, the online store of Polish fashion designer Madhukar. In addition, our growing presence in AIPAC received a big boost during the last... with many Japanese brands going live, including the Japanese pop culture merch stores, Geek Jack, and the Ghana Market. Curated sessions are fascinating. Cycle Absence Watch Brand Orient Store and Matcha Tea Provider Matcha
Speaker Change: We also went live with a fast growing Swedish brand I'm run book that creates backpacks designed specifically for runners and.
Speaker Change: And we have our first ever Polish brands, the online store fully expression designer marketable.
Speaker Change: In addition, our growing presence in APAC receive a big boost during the last quarter with many Japanese brands growing lives, including the Japanese pop culture merged stores skipjack and the go to market.
Speaker Change: Shire discussion site fascinate.
Speaker Change: Tycho absence of widespread or in store and much of deep provider much of direct.
Speaker Change: We also went live with Australian Dressmakers, Soma jewelry, and fast fashion brand outlets clothing, with Hong Kong based consumer electronics brand heavy which creates headphones designed for heavy metal enthusiasm.
Amir Schlachet: We also went live with Australian dressmaker Shanna Joy and fast fashion brand Alka's clothing, Hong Kong-based consumer electronics brand Heavy, which creates headphones designed for heavy metal enthusiasts, and with the fast-growing Korean sunglasses brand Gentle. As part of our commitment to growth at AIPAC, we continue to expand our local presence in our main regional offices in Tokyo and Melbourne and establish a new office in Korea, welcoming on board three new colleagues in Seoul to support our growing We also completed an integration onto the Singaporean-based e-commerce platform Shop.
Speaker Change: And with the fast growing Korean sunglasses brand gentle monster.
Speaker Change: It's part of our commitment to growth in APAC, we continue to expand our local presence and our main regional offices in Tokyo in Melbourne, and establish a new office in Korea. Welcome you onboard three new colleagues at zero to support our growing business there.
Speaker Change: We also completed an integration onto the Singaporean based e-commerce platform <unk> with everything five pounds, a longstanding UK merchant of ours being the first to launch on this annuity supportive partner.
Amir Schlachet: With everything £5, a long-standing UK merchant of, being the first to launch on this newly supported platform, In terms of verticals, we continue to expand our portfolio of sports. Adding the famous Panic soccer club FC Barcelona, also known as Bauch, as well as the UK Premier League Club, Newcastle United, to the growing list of sports clubs that use Global-E to sell their brands and merchandise directly to their loyal fans all around the world. We have also added several merchants to our growing list of celebrities. S3 EP by Sarah Jessica Parker and House Labs by Lady Gaga being the latest to go live on Global-E.
Speaker Change: In terms of verticals, we continue to expand our portfolio of sports team.
Speaker Change: Adding the famous Spanish Soccer Club FC Barcelona, also known as Basel as well as the U K Premier League clubs, Newcastle United to the growing list or sports clubs that used globally to sell their branded merchandize directly to their loyal fans all around the world.
Speaker Change: We also added several merchants through our growing list of celebrity brands with SVP by Sarah Jessica Parker and health Labs by Lady Gaga being the latest to go live on the globally platform.
Speaker Change: But the biggest news on the merchant front is undoubtedly the recent launch of Victoria Secret. The first of the large enterprise merchants, we were expecting to launch during the second half of 2024.
Amir Schlachet: But the biggest news on the merchants' front is undoubtedly the recent launch of Victoria's Secret. As the first of the large enterprise merchants we were expecting to launch during the second half, [inaudible] Being one of the most iconic and recognizable lingerie brands in the world, we are excited to welcome Victoria's Secret onto Global-E's best-in-class global platform. Besides launching new merchandise... During the quarter, we also continued to expand the scope of our work with existing brands and brand groups.
Speaker Change: Being one of the most iconic and recognizable under our brands in the World. We are excited to welcome Victoria secrets onto globally best in class Global Commerce platform.
Speaker Change: Besides launching new merchants during the quarter. We also continued to expand the scope of our work with existing brands and brand groups as part of our land and expand strategy.
Amir Schlachet: It's part of our Atlanta operation. In the U.S., we launched with both Eskada and Club Monaco, which are part of the NCO group that also includes LaSenza, and we call Angus Olperis, another brand from Judi- Well, in the UK, we launched with Phase 8, which is part of the TPG group that also includes Hobbes and Walsh.
Speaker Change: While in the U K, we launched with PV, which is part of the TPG group of brands that also includes hubs and whistles.
Speaker Change: In addition, several of our merchants expanded the list of names for which they use globally, most notably Michael of course, Karl Lagerfeld bundled Olson and Covid guidance.
Amir Schlachet: In addition, several of our merchants expanded the list of names for which they use Global-E, most notably Michael Kors, Karl Langefeld, Banged Olson, and Koji. As I already mentioned earlier, the business is firing on all cylinders, signing up a record volume of new GMVs. Given our clear market leadership, and with the immense market opportunity that continues to lie ahead of us... We are confident in our ability to continue our strong momentum of growth in both the volume and the variety of brands using the Global-E platform in the coming years. Now, before handing the call over to Ofer...
Speaker Change: As I've already mentioned earlier the business is firing on all cylinders signing up a record volume of new <unk> year to date.
Speaker Change: As such given our clear market leadership position and we'd be immense market opportunity that continues to lie ahead of us.
Speaker Change: We are confident in our ability to continue our strong momentum of growth in both the volume and the variety of brands using the globally platform in the coming years.
Speaker Change: Now before handing the call over to Ofer I would just like to update you regarding the various components of our strategic partnership with Shelby for it.
Amir Schlachet: I would just like to update you regarding the various components of our strategic partnership, on the 3P for direct integration. The migration of our historical merchant base onto the new native integration is practically, where the remaining merchants plan to migrate. In addition, during the quarter, we managed to achieve considerable progress in the process of transitioning our Shopify merchants on to checkout. More than 75% of our Shopify-based merchants are now using Global-E over checkout, with the majority of the remaining ones already in the process of... Once done, this will conclude a monumental migration undertaking by our R&D and professional, Over the last aimed at ensuring that our Shopify-based merchants enjoy the best possible combination of Shopify's and Global-E's capabilities for a best-in-class internet, as the migration processes are nearing completion.
On the <unk> or the RFP integration side the migration.
Speaker Change: Our historical merchant base onto the new native integration is practically complete with the remaining merchants plan to migrate imminent.
Speaker Change: In addition, during the quarter, we managed to achieve considerable progress in the process of transitioning our shopify merchants onto checkup extensibility.
Speaker Change: More than 75% of our Shelby five based merchants are now using globally over checkup extensibility with the majority of the remaining ones already in process of transitioning.
Speaker Change: Once done this will conclude a monumental migration undertaking by our R&D and professional services teams over the last few quarters aimed at ensuring that our shopify based merchants enjoy the best possible combination of shopify and globally capability for our best in class International solution.
Speaker Change: As the migration processes are nearing completion, the team's focus has already shifted to working on additional functionality and new features enhancing performance for <unk>.
Amir Schlachet: The team's focus has already shifted to working on additional functionality and new features, enhancing performance, on the 1P or Managed Markets. Merchants continue to sign up and go live on this innovative platform, enjoying quick and effortless onboarding and growth in international conversion rates. In parallel, the teams on both sides continue to work on developing and integrating additional capabilities to further enhance the solution's effectiveness, such as support for additional shipping services, the ability to include taxes and duties in the product price, to align with local best practices, and enhanced visibility for merchants into their catalog, which match markets applies automatically to help merchants trade internationally in a complex given the large mark of potential on the Shopify platform.
Speaker Change: On the <unk> or managed market size merchants continue to sign up and go live on this innovative solution and joined quick and effortless Onboarding and growth in international conversion rates and sales.
Speaker Change: In parallel the teams on both sides continue to work on developing and integrating additional capabilities to further enhance the solutions effectiveness and reach.
Speaker Change: Support for additional stripping services the ability to include taxes and duties and the product price to align with local best practices.
Speaker Change: Has visibility for merchants into their catalog restrictions, which we added market supplies automatically to help merchants trade internationally compliant manner.
Given the large market potential on the shopify platform.
Ofer Koren: And the adoption of this innovative managed market solution continues to steadily rise. We continue to believe in our ability, in close partnership with Shopify, to capture a meaningful part of this massive market opportunity over the coming years. I will now hand it over to Ofer, our CFO, to take you through the quarterly numbers in more depth, as well as present our updated guidance for Produce Free. Thank you, Amir, and thank everyone for joining us today to discuss our earnings.
Speaker Change: And the adoption of this innovative manage market solution continues to Saturday rise, we continue to believe in our ability in close partnership with shopify to capture a meaningful part of this massive market opportunity over the coming years.
Speaker Change: I will now hand, it over to offer our CFO to take you through the quarterly numbers in more depth as well as presents our updated guidance for Q3 and the full year.
Offer: Thank you Amir and thanks, everyone for joining us today on our earnings quarter.
Ofer Koren: Q2 was another quarter of strong growth and expanding margins as we continue to address the market opportunity in front of us and remain committed to delivering value to merchants in their international growth. 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 the reconciliation between GAAP and non-GAAP results, can be found in our earnings... As Amir mentioned, GMV continued to grow quickly in Q2, as we generated 10.1% 0.8. [inaudible] Billion of GMV, an increase of 31% year over year, and 3.5% over the midpoint of our guidance for Q2. In Q2, we generated total revenue of $168 million, up 26% year-over-year.
Amir: Q2 was another quarter of strong growth and expanding margins as we continue to address the market opportunity in front of us and remain committed to deliver to delivering value to merchants in their international growth.
Speaker Change: 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.
Tom: Tom You mentioned <unk> continued to grow quickly in Q2 as we generated 101.
Speaker Change: The <unk> 8 billion of DMV and increase of 31% year over year, three 5% over the midpoint of our guidance for Q2.
Speaker Change: In Q2, we generated total revenue of $168 million up 26% year over year.
Ofer Koren: Service fee revenue was 82.2 million, up 38 percent, and fulfillment services revenue was up 16 percent to 85.8 million dollars. The higher growth of service fees revenue compared to fulfillment fees revenue was mainly driven by increasing average order value, which results in lower fulfillment volumes for a given GMB. It is worth noting that we continue to see higher average order values, which are expected to have a negative impact on our fulfillment take rates also in H2, but at the same time, have a positive impact on our gross margins and overall limited impact on our adjusted EBITDA.
Speaker Change: Service fee revenue were $82 2 million up 38% and fulfillment services revenue were up 16% to 85 $8 million.
Speaker Change: The higher growth of service fee revenue compared to fulfillment fees revenue.
Speaker Change: Was mainly driven by increasing average order value, which results in lower fulfillment volumes for a given GMP.
Speaker Change: It is worth noting that we continue to see higher average order values, which are expected to have a negative impact on our fulfillment take rates also in H two but at the same time have a positive impact on our gross margins and overall limited impact on our adjusted EBITDA.
Speaker Change: Okay.
Ofer Koren: Non-Gap Gross Profit Continues to Outpace Revenue Growth In Q2, non-gap growth profit was $80.2 million, up 39% year-over-year, representing a record non-gap growth margin of 47.8% compared to 43.3% in the same period last year, driven by a higher share of service fee revenue, operational efficiencies, and a favorable. Gap gross profit was $77.4 million, representing Moving on to operational expenses, we continue to invest in the enhancement of our plan. R&D expense in Q2, excluding stock-based compensation, was $21.2 million, or 12.6% of revenue, compared to $18 million, or 13.5% in the same period last year.
Speaker Change: non-GAAP gross profit continues to outpace revenue growth.
Speaker Change: In Q2, non-GAAP gross profit was $82 million up 39% year over year, representing a record non-GAAP gross margin of 47, 8% compared to 43, 3% in the same period last year.
Speaker Change: Driven by the higher share of service fee revenue operational efficiencies and a favorable mix.
Speaker Change: GAAP gross profit was 77 $4 million, representing a margin of 46, 1%.
Speaker Change: Moving on to operational expenses, we continue to invest in the enhancement of our platforms R&D.
Speaker Change: R&D expense in Q2, excluding stock based compensation was $21 $2 million or 12, 6% of revenue compared to $18 million or 13, 5% in the same period last year total R&D spend in Q2 was $26 $7 million.
Ofer Koren: Total R&D spend in Q2 was $26.7 million. We also continue to invest in Susan Marks, and we currently see our strongest ever pipeline ahead. [inaudible] Sales and Marketing Expense, excluding Shopify-related amortization expenses, stock-based compensation, and acquisition-related intangibles amortization, was $18.9 million, or 11.3% of revenue, compared to $12 million or 9% of revenue in the same period last year. Shopify warrant related amortization expense was $37.4 million.
Speaker Change: We also continued to invest in sales and marketing and we currently see our strongest ever pipeline in front of us.
Speaker Change: Sales and marketing expense, excluding shopify related amortization expenses stock based compensation and acquisition related intangibles amortization was $18 $9 million or 11, 3% of revenue compared to $12 million or 9% of revenue in the same.
Sharpie: Period last year Sharpie.
Sharpie: Shopify warrants related amortization expense was $37 $4 million total sales and marketing expenses for the quarter were $61 million.
Ofer Koren: Total sales and marketing expenses for the quarter were $60.1 million. General Administrative Expenses, excluding start-based compensation, acquisition-related expenses, and acquisition-related contingent consideration, were $9.4 or $5.6 of revenue, compared to $7.3 million or 5.5% of revenue in the same period last year. The total GNA spend in Q2 was $13.5 million. Adjusted EBITDA continues to grow rapidly and totals $31.3 million, representing an 18.7% adjusted EBITDA margin and increasing by 49% from $21 million or $15.7% margin in the same period last year. The net loss was $22.4 million, compared to a net loss of $35.5 million in the year-ago period.
Sharpie: General and administrative expenses, excluding stock based compensation acquisition related expense expenses and acquisition related contingent consideration was nine four.
Sharpie: Or five six <unk> of revenue.
Sharpie: Compared to $7 3 million or five 5% of revenue in the same period last year.
Sharpie: G&A spend in Q2 was $13 $5 million.
Sharpie: Adjusted EBITDA continues to grow rapidly and totaled $31 3 million, representing an 18, 7% adjusted EBITDA margin.
Sharpie: And increasing by 49% from $21 million or 15, 7% margin in the same period last year.
Sharpie: Net loss was 22 $4 million compared to a net loss of $35 5 million in the year ago period, driven mainly by the amortization expenses related to the shopify warranted by the transaction related intangibles.
Ofer Koren: We were mainly affected by the modernization expenses related to the Shopify warrants and by the transaction related intent. Switching gears and turning to the balance sheet and cash flow statements, we ended the quarter with $341 million in cash and cash equivalents, including short-term deposits and marketable securities. Very strong cash flow generated by operating activities of $64.1 million compared to $17.6 million a year ago. Moving on to our financial outlook and guidance for Q3 and our updated 2024 full-year guidance.
Speaker Change: Switching gears and turning to the balance sheet and cash flow statement, we ended the quarter with $341 million in cash and cash equivalents, including short term deposits and marketable securities very strong cash flow generated by operating activities of $64 1 million.
Speaker Change: Compared to $17 6 million a year ago.
Speaker Change: Moving on to our financial outlook and guidance for Q3, and our updated $2024 40 guidance.
Ofer Koren: I would first like to explain the underlying dynamics we are seeing as we look towards the end of the fiscal year. As Amir already mentioned, we recently experienced an out-of-the-ordinary churn at the Ted Baker's UK and Europe franchisees which we served when they went bankrupt and went off the air earlier in August. Ted Baker represented over 3% of our revenue, and the loss of its business will impact our ability to resume. Besides the obvious loss of GMV, the main negative impact will be on our top line.
Speaker Change: I would first like to explain the underlying dynamics, we are seeing as we look towards the end of the fiscal year.
Speaker Change: As already mentioned, we recently experienced an out of the ordinary churn.
The Baker to U K and Europe franchisees with reserve went bankrupt and went off the air earlier in August.
Speaker Change: Baker represented over 3% of our revenue and the last of its business will impact our <unk> results.
Speaker Change: Besides the obvious loss of DMV. The main negative impact will be on our topline as Ted Baker was a high take rate merchant to which we supply. The in addition to our standard services also a high volume of demand generation services. However, this churn we would have a positive impact on our gross margin and overall.
Ofer Koren: Steadbaker was a high-take-rate merchant to which we supplied, in addition to our standard services, also a high volume of demand generation services. However, this churn will have a positive impact on our gross margin and overall limited impact on our bottom line. Besides the out-of-the-ordinary churn of Ted Baker, additional factors that are expected to negatively impact our top line in H2 and for the full year are the significant rise in average order values, negatively impacting our fulfillment revenues, coupled with the slight signs of potential softness in consumer sentiment we have seen over the last few. At the same time, gross margins are positively affected and expected to be significantly higher than previously projected.
Speaker Change: Limited impact on our bottom line.
Speaker Change: Yes.
Speaker Change: Besides the out of the ordinary churn of Ted Baker additional factors that are expected to negatively impact our topline and H two and the full year are the significant rise in average order values negatively impacting our fulfillment revenues.
Coupled with the slight signs of potential softness in.
Speaker Change: In consumer sentiment, we have seen over the last few weeks.
Speaker Change: At the same time gross margins are positively affected and expect it to be significantly higher than previously projected.
Ofer Koren: In conclusion, the above factors are leading us to cautiously lower our full-year top-line guidance, but nevertheless, the higher gross margin profile, in addition to strong control of operational expenses, is leading us to raise our full-year adjusted EBITDA guidance. As for the guidance itself, for Q3 2024, we are expecting GMV to be in the range of $1.07 to $1.11 billion. At the midpoint of the range, this represents a growth rate of 30% versus Q3 of 2020.
Speaker Change: In conclusion that Bob factors are leading us to cautiously lower our full year top line guidance, but nevertheless, the higher gross margin profile. In addition to strong control of operational expenses is leading us to raise our full year adjusted EBITDA guidance.
Speaker Change: As for the guidance itself for Q3 2024, we are expecting <unk> to be in the range of 1.17 to one point $11 billion at.
Speaker Change: At the midpoint of the range. This represents a growth rate of 30% versus Q3 of 2023.
Ofer Koren: We expect Q3 revenue to be in the range of 165.7 to 171.7 million dollars. At the midpoint of the range, this represents a growth rate of 26% versus Q3 of 2020. For adjusted Ibeda, we are expecting a profit in the range of 27 to 31 million dollars.
Speaker Change: We expect Q3 revenue to be in the range of 165, seven to $171 $7 million.
Speaker Change: At the midpoint of the range. This represents a growth rate of 26% versus Q3 of 2023.
Speaker Change: For adjusted EBITDA, we're expecting a profit in the range of $27 million to $31 million.
Ofer Koren: For the full year of 2024, we are updating our guidance and now anticipate GMV to be in the range of 4.605 to 4.845 billion dollars, representing a 33% annual growth at the midpoint of the race. Revenue is now expected to be in the range of $710 to $750 million, representing a growth rate of 28% at the midpoint of the race. For Adjusted EBITDA, we're now expecting a profit of $127 to $143 million, above our previous guide.
Speaker Change: For the full year of 2024, we are updating our guidance and now anticipate <unk> to be in the range of four point 605, 2.4, 0.84 $5 billion, representing a 33% annual growth at the midpoint of the range.
Speaker Change: Venue is now expected to be in the range of $710 million to $750 million, representing a growth rate of 28% at the midpoint of the range.
Speaker Change: For adjusted EBITDA, we are now expecting a profit $127 million to $143 million above our previous guidance.
Operator: This call is being simultaneously webcast on the company's website in the Investor Relations section under news and events.
Speaker Change: Despite the negative impact expected the H two revenues. We've mentioned we continue to believe growth will accelerate going into Q4 and that the pace of growth will continue into 2025, driven by the large buy large merchant launches we tell on track anticipated.
Ofer Koren: Despite the negative impact expected on H2 revenues we've mentioned, we continue to believe growth will accelerate going into Q4 and that the pace of growth will continue into 2025, driven by large merchant launches, which are on track, anticipated elevated volume contribution from managed markets on Shopify, which is growing as expected, and a lower impact from border-free on year-on-year comparisons. As is evident from our updated guidance, we expect the lower top-line estimation to be offset by a significantly higher gross margin and result in a minimal impact on gross profit, while we believe our adjusted EBITDA and cash flow generation will be higher compared to our previous expectations.
Erica Mannion: 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.
Erica Mannion: With me today from Global-E, our Amir Schlachet, co-founder and Chief Executive Officer, Ofer Koren, Chief Financial Officer, and Nir Debbi, co-founder and president. Amir will begin with a review of the business results for the second quarter of 2024. Ofer will then review the financial results for the second quarter of 2024, followed by the company's outlook for the third quarter and full year of 2024.
Speaker Change: The volume contribution from managed markets on Shopify, which is growing as expected and a lower impact from border for you on a year on year comparison.
Speaker Change: As is evident from our updated guidance, we expect the lower topline estimation to be offset by a significantly higher gross margin.
Operator: We will then open the call for questions. Certain statements we make today may constitute four-looking statements and information within the meeting of Section 24A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Safe Harbor Provisions of the U.S. Private Security's litigation reform act of 1995 that relate to our current expectations and views of future events. These four-looking statements are subject to risks, uncertainties and assumptions, some of which are beyond our control.
Speaker Change: And result in minimal impact on gross profit, while we believe our adjusted EBITDA and cash flow generation will be higher compared to our previous expectation.
Speaker Change: In conclusion, the opportunity in front of US remains massive and we continue our journey to support merchants worldwide in expanding the direct to consumer business.
Ofer Koren: In conclusion, the opportunity in front of us remains massive, and we continue our journey to support merchants worldwide in expanding their direct to consumer business. We focus on execution and believe we can continue to grow rapidly while further expanding revenue generation in the coming years. And with that, Amir Nir and I are happy to answer questions you might have. Operator.
Speaker Change: We focus on execution and believe we can continue to grow rapidly while further expanding cash generation in the coming years and with that Amelia and I are happy to answer questions you might have operator.
Operator: In addition, these four-looking statements reflect our current views with respect to future events and are not a guarantee of future performance. Actual outcomes made different materially from the information contained in the four-looking statements as a result of a number of factors including those set forth in the section titled Risk Factors in our Perspectives filed with the SEC on September 13, 2021 and other documents filed with or furnished 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.
Speaker Change: Right.
Operator: Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star followed by the number on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number on your touchtone phone. If you are using a speakerphone, please lift the handset before pressing any.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your Touchtone phone, you'll hear a prompt that your hand has been raised should you wish to decline from the polling process. Please press star followed by the Q. If you are using a speaker phone. Please lift the handset before pressing any Keith please limit yourself to one.
Speaker Change: Question and one follow up one moment. Please for your first question.
Operator: Please limit yourself to one question and one follow-up. One moment, please, for your first question. Your first question comes from Will Nance with Goldman Sachs. Your line is now open. Good morning.
Speaker Change: Your first question comes from will Nance with Goldman Sachs. Your line is now open.
Operator: You should not put undue reliance on any four-looking statements. Although we believe that the expectations reflect in the four-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance, and events and circumstances reflect in the four-looking statements will be achieved or will occur. Acceptors required by applicable law, we make no obligation to update or revise publicly any four-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.
Will Nance: Good morning, I. Appreciate you taking the question I wanted to just make sure we understand the moving pieces in the guidance that was very helpful too.
Will Nance: I appreciate you taking the question. I wanted to just make sure we understand the moving pieces in the guidance that was very helpful to quantify the churned merchants. So if I heard you correctly, it's something like 3% of revenue from the churned merchants. And that explains a good chunk of the guide that came in at, I believe, a low gross margin but a high take rate. If I heard it, I'd love to understand what kind of driver that is.
Speaker Change: Quantify the churn merchants, so if I heard you correct.
Speaker Change: Something like 3% of revenue from the churned merchants.
Speaker Change: That explains a good chunk of the guide that came in at I believe low gross margin, but high take rate if I heard I'd love to understand what kind of drives that that's very helpful.
Will Nance: That's very helpful. Second, AOVs coming in lower, neutral to gross profit. That brings down the fulfillment take rate on GMV. And then the third one you're kind of attributing to macro.
Speaker Change: Second was a O V is coming in lower neutral gross profit that brings down the fulfillment take rate on GNP and then the third one you are kind of attributing to macro I guess, maybe excluding the first two how big was the macro impact relative to your prior expectations.
Operator: Please refer to our press release dated August 14, 2024, for additional information. In addition, certain metrics we will discuss today are non-GAP metrics. The presentation of this financial information is not intended to be considered an isolation or as a substitute for or as a period to financial information prepared and presented in accordance with GAP. We use these non-GAP financial measures for financial and operating decision making as well as a means to evaluate period to period comparisons.
Will Nance: I guess maybe, excluding the first two, how big was the macro impact relative to your prior expectations? If we hadn't seen the churned merchant dynamics, would the guidance be kind of relatively in the same place? I'm just trying to get a sense for how much your expectations for the underlying run rate of the business have actually changed. So, thank you, Will, for that. I think that we've mentioned the drivers in order according to their order of magnitude.
Speaker Change: If we hadn't seen the churn merchant dynamics I could be.
Speaker Change: Would the guidance be kind of relatively in the same place I'm just trying to get a sense for how.
Speaker Change: How much your expectations for the underlying run rate of the business that actually changed.
Speaker Change: Yes.
Speaker Change: Yeah. So thank you will for that.
Ofer Koren: So obviously, losing a merchant-like state baker, which is something that has never happened to us before, and unfortunately, they went bankrupt. It has a lot of impact in the short term in terms of the top line, and the rising AOV translates to lower fulfillment activity, and that also has a significant impact. In terms of the macro-conditions, we have seen mixed signals out of the market, and we have seen some softness in the last few weeks, but I think that the first two drivers carry more weight in terms of the update of our guide. Yeah, that's helpful.
Operator: 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 in its financial and operating decision making. For more information on the non-GAP financial measures, please see the Reconciliation Tables provided in our press release did August 14, 2024. 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 14, 2024.
Speaker Change: I think that.
Speaker Change: We've mentioned the drivers seen sort of in the order.
Speaker Change: According to the order of magnitude.
Speaker Change: So obviously.
Speaker Change: Closing merchant like Dave Baker, which is something that.
Speaker Change: Never happened to us before and unfortunately, they went bankrupt.
Speaker Change: Has.
Speaker Change: A lot of.
Speaker Change: Impacting the short term in terms of topline.
Speaker Change: And.
The rising <unk> translates.
Speaker Change: Two lower fulfillment.
Speaker Change: And that also.
Speaker Change: <unk> has significant impact in terms of.
Amir Schlachet: I will now turn the call over to Amir, co-founder and CEO. Thank you, Erica, and welcome everyone. Our second quarter financial results, all of which are the top end or above our guidance range. Demonstrated continuation of our strong business momentum and growth trajectory, as well as our execution towards a long-term strategic target. In terms of GMV, Q2 marked yet another historical landmark for us, representing our first ever non-P quarter above a billion dollars, with quarterly GMV accounting to $1.08 billion, representing 31% year and year growth.
Speaker Change: The macro conditions, we have seen mixed signals out of the market and we have seen.
Speaker Change: Some softness in the last.
Speaker Change: A few weeks.
Speaker Change: Right.
Speaker Change: I think the first two drivers are.
Speaker Change: Carry more weight in.
Speaker Change: In terms of.
Speaker Change: The update of our guidance.
Speaker Change: Yes.
Nir Debbi: And then I just wanted to follow up on some of the comments and the prepared remarks. I think, you know, you commented that you've got, I think, record pipelines this year, you went live with one of the two large merchants, and I think you said the other one is launching kind of shortly or something along those lines. And then I thought I heard something about feeling good about the business remaining on kind of a 30 plus trajectory beyond the second half of the year.
Speaker Change: Helpful. And then I just wanted to follow up on some of the comments in the prepared remarks I think you commented you've got I think record pipelines this year.
Speaker Change: With one of the two large merchants I think you said the other one is launching shortly or something along those lines.
Speaker Change: And then I thought I heard something about feeling good about the business remaining on kind of like 30, plus trajectory beyond the second half of the year. So.
Amir Schlachet: Our revenues grew by 26%, reaching $168 million in the quarter. Our adjusted gross profit margin continued to expand from 43.3% in Q2 of last year to a record 47.8% in Q2 of this year, enabling adjusted gross profit growth to outpace that of our revenues. Finally, our adjusted EBITDA for the quarter came in at $31 million, representing nearly 50% growth over the same period last year. At testament to our growing economies of scale, our teams continued efficient execution across all elements of the business, and our proven effectiveness in controlling costs.
Nir Debbi: So, I was wondering if maybe you could talk through some kind of momentum into next year, you know, how pipelines are looking, in a way to kind of dimensionalize the new customer additions that you have been working on this year. Thanks. Ariel, thanks for taking the question. It's Neil.
Speaker Change: Just wondering if maybe you could talk through what kind of momentum into next year. How pipelines are looking if there is any way to kind of dimensionalize. The new customer additions that you have been working on this year. Thanks.
Speaker Change: Okay, well, thanks for taking the question Neil.
Nir Debbi: Yes, we do see a very strong pipeline coming out of our enterprise business. We have, as we previously stated, a record deal for signing new merchants. However, due to the significance of two, almost, let's say, two and a half very large clients, one of them that just launched, Victoria's Secret, we do see some shifts to the back end of the year with the launches. Victoria is the first one live.
Speaker Change: Yes, we do see a very strong pipeline coming out of our enterprise business.
Speaker Change: We have as we are.
Speaker Change: As we have previously stated Eric viewing signing new merchants.
Speaker Change: However, due to the significant <unk>.
Amir Schlachet: Looking ahead at the rest of the year and beyond, we remain confident in the reacceleration of the business. As offer will discuss later in the call, we expect 34% growth in GMV and 30% in revenues in the second half of 2024, which significant contributions from large new merchants who are already or about to go live, as well as the anticipated continued growth of managed markets on Shopify. This strong expected growth is especially noteworthy, as it comes despite some mixed macro signs in the form of slight softness in consumer sentiment we encountered during late July and early August, as well as the unfortunate and unexpected churn of one of our largest merchants, Ted Bakers, UK, and Europe for HIV, which went bankrupt and took its online store off the air earlier this month.
Speaker Change: Two almost let's say two and a half very large clients one of them that just launched Victoria secret.
Speaker Change: We do see some shifts towards the backend of the yield.
Speaker Change: With.
Speaker Change: The launches.
Speaker Change: Victoria is the first one lie we expect it to others that are currently on track the already deep into the testing stage of the project.
Nir Debbi: We expected two others that are currently on track. They are already deep into the testing stage of the project. We expect them both to be live early Q4.
Speaker Change: The books both to be alive.
Speaker Change: Early Q4.
Nir Debbi: And on the back of it, we will get a push coming into Q4. On the back of it, we have multiple mid-sized merchants on the enterprise platform planning to go live pre-peak as well. And this will give us a boost into the following quarter, when they launched only most of the add-on spikes that we see launched only in late Q3, early Q4. It will be net growth when you look at the coming quarters in 2025 for most of the year.
Speaker Change: And on the back of it we will get a push coming into Q4 on the back of it we have multiple <unk>.
Speaker Change: <unk> merchant.
Speaker Change: On the enterprise platform planning to go live pre peak as well and this will give us the boost into the following quarter that they launched only.
Speaker Change: Most of the most of the add on a spikes that we see launched only in launching only late Q3 early Q4, it will be it will be a net growth. When you look at the coming quarters in 2025 for most of the U S.
Amir Schlachet: Moreover, given our strong integrations pipeline, including additional large merchants, whose integration projects are currently on track, and given our year-to-date new bookings, which stand at a record high. We remain highly confident in our ability to continue delivering strong and durable supply and growth levels of 30% and above, also beyond the second half of 2024.
Nir Debbi: In parallel to that, we have, and we see significant growth coming out of the managed market business, where we see a trajectory in line with what we expected for the year and even slightly above, so we're quite optimistic on the overall trajectory going forward. That has allowed us to state that we believe that we have visibility into a growth rate of over 30% in the coming quarter. That's great.
Speaker Change: In parallel it suite we have.
Speaker Change: Significant.
Speaker Change: Rose.
Speaker Change: Coming out of the managed market business.
Amir Schlachet: As usual, when I hand the call to offer, we will describe in more detail our quarterly financial results, as well as our updated guidance for the third quarter and for the full fiscal year, here. However, I would first like to walk you through some key updates regarding our business. Ethnic every quarter, during the last period, we continued to see strong demand for our services, with the onboarding of many new merchants located all around the globe and trading in various different verticals.
Speaker Change: Will we see a trajectory in line with what we expected for the yield.
Speaker Change: And even slightly above so we're quite optimistic with the overall trajectory going forward.
Speaker Change: Allowed us to.
Speaker Change: As stated we believe that we have.
Speaker Change: Visibility into our growth rate of over 30%.
Speaker Change: In the coming quarters.
Speaker Change: That's great I appreciate all the detail this morning.
Speaker Change: Alright, thanks for taking the questions.
Operator: I appreciate all the details this morning. Thanks for taking the question. Your next question comes from Samad Samana with Jeffreys. Your line is now open.
Speaker Change: Your next question comes from Samad Samana with Jefferies. Your line is now open.
Amir Schlachet: In North America, we went live with the innovative, customizable classes brand Pair Eyeword, to Rated Apparel and Homer Brand, Tucker Nuck, L.A.B., Street Tour Brand, Minimal, and Luxury Lifestyle and Artbook Publisher, also. In the UK, the iconic British country clothing brand courtings, the renowned Food Tour Brand clerks, remained street churn maker, Housen Curtis, cosmetics brand revolution beauty, and fashion brand rear fish all went live on our platform. In front, we launched several high street fashion brands, including Amif Ali and Zabel Moran, but across other parts of continent of Europe, we went live with hovering down brands, such as Closon, Jürgen, Germany, and Pinkouin Italy.
Speaker Change: Okay.
Samad Samana: Hi, good morning, and thanks for taking my questions. I guess first, just as I think about, as I think about it, you mentioned the macro part being maybe the lowest piece of the assumption change, but I want to dig into that. Ofer, are you changing the back half NRR assumptions, or is that more you just letting us know that that's something that we should think about, but have you changed any of your underlying assumptions in the guidance, and how are you thinking about NRR for the fourth quarter and the back half of the year, especially as you think about that steep ramp implied in the 4Q guidance? Thank you for that, Samad.
Samad Samana: Hi, good morning, and thanks for taking my questions I guess first just as I think about.
As I think about you mentioned the macro part being maybe the lowest piece of the central change, but I wanted to dig into that a fair are you changing the back half.
Speaker Change: Our our assumptions or is that more you just letting us know that thats something that we should think about but have you changed any of your underlying assumptions in the guidance and how are you thinking you're at R. R.
For the fourth quarter or for the back half of the year, especially as you think about that steep ramp implied in <unk> guidance.
Speaker Change: Yeah.
Ofer Koren: We have slightly changed our same-store sales assumptions for the back half of the year. As we mentioned, we've seen mixed signals, but more, I would say, towards softness, more signals towards some softness, and we've seen slower same-store sales in the last few weeks. So we did slightly adjust our assumptions, but as I mentioned and you mentioned, that was only the third driver that impacts the top line in H2 2021.
Speaker Change: Thank you for that.
Amir Schlachet: We also went live with the fast-growing Swedish brand I'm Runboth, that creates backpacks designed specifically for runners, and with our first ever Polish brand, the online store of Polish fashion designer Mavida Bouton. In addition, our growing presence in A-Pack received a big boost during the last quarter, with many Japanese brands going live, including the Japanese pop culture merch store, ski jack, and a gun market, to Rated Fashions like Fascinate, Cycle Absence, Watch Brand, Oriental Storm, and much a T-provider, much a direct.
Speaker Change: Have changed slightly changed.
Speaker Change: Same store sales assumptions for the back half of the year.
Speaker Change: We've mentioned, we've seen mixed signals, but more.
Speaker Change: I would say.
Speaker Change: You know towards softness more signal stored some softness and we've seen slower same store sales in the last few weeks. So we did slightly adjust our assumptions but.
Speaker Change: As I mentioned and you mentioned that was only the third driver.
Amir Schlachet: We also went live with Australian dressmaker Shona Joy and fast fashion brand Alta's clothing, with Hong Kong-based consumer electronics brand Heavy's, which creates headphones designed for heavy metal enthusiasts, and with the fast-growing Korean sunglasses brand Gentle Monster. As part of our commitment to growth in A-Pack, we continued to expand our local presence in our main regional offices in Tokyo and Melbourne, and establish a new office in Korea, welcoming on board three new colleagues in Seoul to support our growing business there.
Speaker Change: That impact.
Speaker Change: The top line in <unk> to 2024.
Speaker Change: Understood and then.
Nir Debbi: And then I know that, Nir, you mentioned that Shopify, the Managed Markets product, formerly Markets Pro, was coming in at expectations, maybe even slightly better, I think were the words you used. Can you maybe just help us understand what that means in numerical terms, what the growth rate there looks like, and is your confidence more or less the same as you think about heading toward the back half of the year and then into 2025? Show, then thank you for the questions, Samad.
Speaker Change: I know that near you mentioned that.
Speaker Change: But the managed markets products, formerly markets grow.
Speaker Change: What's coming in at expectations, maybe even slightly better I think where the word you used can you maybe just help us understand.
Speaker Change: What that means in numerical terms, how the growth rates there looks like.
Amir Schlachet: We also completed an integration onto the Singaporean-based e-commerce platform Shopline, with everything five pounds, alongside the UK merchant of ours, being the first to launch on this newly supported platform. In terms of verticals, we continued to expand our portfolio of sports teams, adding the famous Spanish soccer club FC Barcelona, also known as Baza, as well as the UK Premier League club Newcastle United, to the growing list of sports clubs that used globally to sell their brand and merchandise directly to their loyal fans all around the world.
Speaker Change: Is your confidence more or less the same as you think about adding towards the back half of the year and then into 2025.
Speaker Change: Sure.
Nir Debbi: We do see growth in the managed markets coming slightly above our plans. And when we see it, the final building up, and it's a rate of onboarding, we do expect it to continue to the end of the year. As we are expected to launch many more features into managed markets in the coming quarters, we do expect the continuous onboarding of merchants, and even large ones like Amazon, to come on board. Yes, we do expect it to accelerate going into 2025 in dollars.
Speaker Change: Thank you for all the questions.
Speaker Change: We do see growth.
In the managed markets coming.
Speaker Change: Slightly even above our plan.
Speaker Change: And we are.
Speaker Change: When we see it the funnel building up and at the rate of on boarding.
Speaker Change: We do expect it to continue.
Speaker Change: The end of the year.
Speaker Change: As we all expected to launch many more features.
Amir Schlachet: We also added several merchants to our growing list of celebrity brands, with SDP by Syrogesica Parker and house labs by Lady Gaga being the latest to grow live on the globally platform. But the biggest news on the merchant's front is undoubtedly the recent launch of Victoria's Secret, the first of the large enterprise merchants we were expecting to launch during the second half of 2024. Being one of the most iconic and recognizable lingerer brands in the world, we are excited to welcome Victoria's Secret onto globally's best-in-class global.
Speaker Change: In two minutes markets.
In the coming quarters, we do expect it to.
Speaker Change: The continuous.
Speaker Change: Onboarding of merchants and even larger size merchant.
Come on both we yes, we do expect it to accelerate going into 2025% in dollar terms.
Speaker Change: Great. Thanks for taking my questions.
Operator: Great, thanks for taking my question. Your next question comes from James Faucette with Morgan Stanley. Your line is now open.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Your next question comes from James Fawcett with Morgan Stanley. Your line is now open.
Amir Schlachet: Commerce Platform. Besides launching new merchants, during the quarter, we also continue to expand the scope of our work with existing brands and brand groups, as part of our land and expand strategy. In the U.S., we launched with both Eskada and Club Monaco, which are part of the MCO group that also includes LaSenza, and we call Angus Olperis another brand from the G3 group. While in the U.K., we launched with Phase 8, which is part of the TPG group of brands that also includes hops and whistles.
James Fawcett: Great. Thank you very much and just a couple of follow ups there can.
James Faucette: Just a couple of follow-ups there. Can you give us a sense as to what your churn has been, maybe ex-Ted Baker, and if you have any sense of what that could be or has been, both voluntary and involuntary, and if you're making any other churn-related assumption changes for the second half of this year and into next year beyond just the highlighted Ted Baker? Yeah, James, thank you for the question. In terms of churn, putting aside Ted Baker, which is really out of the ordinary, we have seen similar rates to the previous year, so no... No significant change there. We're not expecting anything different in the next few months.
James Fawcett: Can you give us a sense as to what your churn has been maybe ex Ted Baker.
Speaker Change: Any sense of what that could be or has been.
Speaker Change: Both voluntary and involuntary and if you're making any other.
Speaker Change: Hey, good assumption changes for the second half of this year and into next year beyond just the highlights at Baker.
Amir Schlachet: In addition, several of our merchants expanded the list of lanes for which they use globally, most notably Michael Kors, Karl Langefield, Bungard Olson, and Kurt Geiger. As I already mentioned earlier, the business is firing on all cylinders, signing up a record volume of new GMV here today. As such, given our clear market leadership position, and with the immense market opportunity that continues to lie ahead of us, we are confident in our ability to continue our strong momentum of growth in both the volume and the variety of brands using the globally platform in the coming years.
Speaker Change: Yeah, Jamie Thank you for the question.
Speaker Change: In terms of churn putting aside.
Ted Baker: Ted Baker.
Speaker Change: Which is a really out of the ordinary we've seen similar rates to the previous year.
Speaker Change: So no.
Speaker Change: No significant change there.
Speaker Change: We're not expecting anything Dave.
Speaker Change: Different in the next few months.
Ofer Koren: As we previously mentioned, you know, once the border-free platform is shut off, we might see some turn-off of the last border-free merchant remaining. However, we have been successful in migrating two of the larger border-free merchants lately, so hopefully we can get some more of those going forward.
Speaker Change: As we previously mentioned.
Speaker Change: Once.
Speaker Change: The border free.
Platform is shut off we might see some churn of.
Amir Schlachet: Now before handing the call over to Ofer, I would just like to update you regarding the various components of our strategic partnership with Shopify. On the 3P or direct integration side, the migration of our historical merchant base onto the new native integration is practically complete with the remaining merchants planned to migrate imminently. In addition, during the quarter, we managed to achieve considerable progress in the process of transitioning our Shopify merchants onto check-out extensibility.
The last board of free.
Speaker Change: Merchant remaining however, we have been.
Speaker Change: Successful in migrating.
Speaker Change: Two of the larger a border free merchants lately. So hopefully we can get some <unk>.
More of those going forward.
Speaker Change: Got it and then on the Shopify relationship.
Amir Schlachet: And then on the Shopify relationship and kind of, you know, how well that's trending. Can you give us an update on, operationally, some of the functions that you had intended to launch during the course of this year? Have those launched? How much of an impact is that having on engagement with merchants, etc., and how you're thinking about further improvements in the product? Hi Jens.
Speaker Change: Kind of.
Amir Schlachet: More than 75% of our Shopify-based merchants are now using globally over check-out extensibility, with the majority of the remaining ones already in process of transitioning. Once done, this will conclude a monumental migration undertaking via R&D and professional services teams over the last few quarters aimed at ensuring that our Shopify-based merchants enjoy the best possible combinations of Shopify's and globally's capability for a besting class international solution. As the migration processes are nearing completion, the team's focus has already shifted to working on additional functionality and new features enhancing performance for our merchant.
Speaker Change: How well that's trending can you give us an update on.
Speaker Change: Operationally.
Speaker Change: Some of the functions that you had intended to launch during the course of this year have those launched how much of an impact is that having on.
Speaker Change: Engagement with merchants et cetera, and how youre thinking about further improvements in the product.
James Fawcett: Hi, James.
Amir Schlachet: This is Amir. Thanks for the question. So we mentioned some of the features already in the repair remarks. And these were highly anticipated features like additional standard shipping options that we've added, like the ability to include taxes into the product price, which is important for, I would say, being able for merchants to be able to sell in a way that is very localized in many markets. This is a capability we've had for a long time, obviously, on all our platforms, and we recently added that to manage markets.
Amir: As Amir thanks for.
Speaker Change: The question. So we mentioned some of the New Jersey <unk>.
Amir: Okay.
Speaker Change: Our remarks, and these were a highly anticipated features like conditional.
Speaker Change: Standard shipping options.
Amir Schlachet: On the 1P or manage market side, merchants continue to sign up and go live on this innovative solution and join quick and effortless onboarding and growth in international conversion rates and sales. In parallel, the teams on both sides continue to work on developing and integrating additional capabilities to further enhance the solution's effectiveness and reach, such as support for additional shipping services. The ability to include taxes and units in the product price to align with local best practices and enhance visibility for merchants into their catalog restrictions, which manage market supplies automatically to help merchants trade internationally in a compliant manner.
Speaker Change: We've added like the ability to include the duties into the product price, which is highly important for us.
Speaker Change: Four.
I would say being able for the merchants to be able to sell.
Speaker Change: That is very localized in many markets. This is a capability we've had for a long time, obviously on.
Amir Schlachet: And there are also additional capabilities and visibility that the merchants now get into product restrictions, which was very important for a lot of our merchants. So there are a lot of features; there are more that have been rolled out and more that are in the pipeline for the remainder of the year and for 2025. So, as the product becomes more feature-rich and more advanced, it obviously increases its appeal and its applicability to many more merchants.
Speaker Change: On all our passenger and recently added that to manage markets.
Speaker Change: And.
There were also additional.
Speaker Change: <unk> capabilities and visibility that the merchants now gets into product restrictions, which was very important for a lot of our merchants. So it's a lot of.
Amir Schlachet: Given the large market potential on the Shopify platform and the adoption of this innovative managed market solution continues to salary rise, we continue to believe in our ability in close partnership with Shopify to capture a meaningful part of this massive market opportunity over the Common Years.
Speaker Change: Features there are more that were rolled out in more that are in the pipeline.
Speaker Change: For the remainder of the year and for 2025, so it's hard to pinpoint exactly the effect of each such feature obviously, but in general as the products.
Ofer Koren: I will now hand it over to Ofer, our CFO, to take you through the quarterly numbers in more depth, as well as present our updated guidance for excuse free and the full year. Thank you, Amir and thanks everyone for joining us today on our earnings quarter. Q2 was another quarter of strong growth and expanding margins as we continue to address the market opportunity in front of us and remain committed to delivering value to merchants in their international growth.
Speaker Change: Becomes more feature reach and more advanced.
Speaker Change: Obviously increases.
Amir Schlachet: So we continue to be hard at work, both our teams and Shopify teams working in collaboration to continue along the planned roadmap and continue releasing these features in the next report. Okay, great. Thank you. Your next question comes from Brian Peterson with Raymond. Your line is now open.
Speaker Change: Appeal and it's applicable it'd be too many more merchants that we are we continue to be hard at work with our teams and choppy bodies teams working in collaboration to continue along the.
Speaker Change: The plan.
Speaker Change: The roadmap and continue releasing these features.
Speaker Change: In the next few quarters.
Speaker Change: Okay, great. Thank you.
Speaker Change: Your next question comes from Brian Peterson with Raymond James Your line is now open.
Ofer Koren: I'd like to point out again that in addition to our gap results, I'll also be discussing certain non-gap results. Our gap financial results, along with the reconciliation between gap and non-gap results, can be found in our earnings release. As Amir mentioned, GMV continued to grow quickly in Q2, as we generated 1.8 billion of GMV, an increase of 31% year over year, 3.5% over the midpoint of our guidance for Q2. In Q2, we generated a total revenue of $168 million, up 26% year over year.
Brian Peterson: Hi, thanks for taking the question. So Ofer, I wanted to hit on fulfillment take rates a bit. We've heard from others in the ecosystem that there's been more of a preference for slower or less expensive shipping rates. Can you comment on how that mix may have been versus your expectations and any help on how we should be modeling the fulfillment take rates in the back half of the year? Thank you for that, Brian.
Brian Peterson: Hi, Thanks for taking the question. So overall I wanted to hit on fulfillment take rates a bit we've heard from others in the ecosystem that there has been more of a preference for slower less expensive shipping rates can you comment on how that mix may have been versus your expectations and any help on how we should be modeling the fulfillment take rates in the back half of the year.
Brian Peterson: Sure. Thank you for that Brian.
We've seen in the beginning of the year, we've seen some.
Brian Peterson: In the beginning of the year, we saw some shift to standard, but in the last few months, it has been pretty stable. The main change that we have seen is higher order values, which is partially driven by optimization of both merchants and consumers, so basically getting a higher ticket on the same cost of shipping.
Speaker Change: Some shift.
Speaker Change: To standard but.
Speaker Change: In the last few months it has been pretty stable.
Speaker Change: The main change that we have seen.
Speaker Change: Is high yield.
Ofer Koren: Service fee revenue were 82.2 million, up 38%, and fulfillment services revenue were up 16% to 85.8 million dollars. The higher growth of service fees revenue compared to fulfillment fees revenue was mainly driven by increase in average order value, which results in lower fulfillment volumes for a given GMV. It is worth noting that we continue to see higher average order values, which are expected to have a negative impact on our fulfillment rate, also in H2.
Speaker Change: The value of which.
Speaker Change: Uh huh.
Speaker Change: Also is driven is partially driven by optimization of both merchants and.
Speaker Change: And consumers so basically.
Speaker Change: Getting high yield.
Speaker Change: On the same.
Speaker Change: Cost of shipping.
Speaker Change: So we have seen.
Ofer Koren: So we have seen a trend of that growing, the average order value, over the last few months, specifically in Q2, and that has a significant impact on our fulfillment take rates. We haven't seen a significant shift from express to standard in the last few weeks or two, three months. As we think about modeling that figure going forward, any kind of guideposts or what we should look at from second quarter levels? Thanks, guys. Sorry, can you repeat that, Brian, please?
Speaker Change: The trend of that growing the average order value over the last.
Speaker Change: Few months specifically.
Speaker Change: In Q2 and that has a.
Speaker Change: Significant impact on our fulfillment take rates.
Ofer Koren: But at the same time, have a positive impact on our growth margins and overall limited impact on our adjusted EBDA. Non-gap growth profit continues to outpace revenue growth. In Q2, non-gap growth profit was 80.2 million dollars, up 39% year over year, representing a record non-gap growth margin of 47.8%, compared to 43.3% in the same period last year, driven by the higher share of service fee revenue, operational efficiencies, and a favorable mix.
We haven't seen.
Speaker Change: Significant shifts.
Speaker Change: Uh huh.
Speaker Change: From.
Speaker Change: To stand.
Speaker Change: From express to standard in the last.
Speaker Change: Few weeks or three months.
Speaker Change: As we think about modeling that that figure going forward any kind of guideposts or where we should look at it from a from second quarter levels. Thanks, guys.
Speaker Change: Sorry can you repeat that Brian please.
Brian Peterson: Yeah, I'm just looking to kind of understand how we should be modeling the fulfillment take rate in the back half of the year and going forward. Previously, we expected the fulfillment take rate to increase in the back half of the year due to more joint merchants that are onboarding the platform and using or utilizing our shipping services, and we do see that coming in, but due to the fact that AOV has increased significantly, we do see a decrease.
Brian Peterson: Yes, I'm just I'm, just looking to kind of understand how we should be modeling the fulfillment take rate in the back half of the year and going forward.
Brian Peterson: Yes.
Ofer Koren: Gap growth profit was 77.4 million dollars, representing a margin of 46.1%. Moving on to operational expenses, we continue to invest in the enhancement of our platforms. R&D expense in Q2, excluding stock-based compensation, was 21.2 million dollars, or 12.6% of revenue, compared to 18 million dollars or 13.5% in the same period last year. Total R&D spending in Q2 was 26.7 million dollars. We also continue to invest in sales and marketing, and we currently see our strongest ever pipeline in front of us.
Speaker Change: Well previously we expected.
Speaker Change: The fulfillment take rate to increase in the back half of the year.
Speaker Change: Due to more merchants.
Speaker Change: Joining merchants that are on boarding that platform and using or utilizing our shipping services and we do see that coming in but due to the fact that pay off.
Speaker Change: Has increased significantly.
Speaker Change: We do see.
Speaker Change: Decrease most of that of the change that you see.
Brian Peterson: Most of the change that you see, the intake rates in our guidance, is driven by fulfillment. Not all of it, because, as we've mentioned, Ted Baker was also a high take-rate merchant to which we provided demand generation services, and this will be reflected in the service fee take rate, but most of the take rate reduction is on the fulfillment side. Your next question comes from Andrew Bauch with Wealth Fargo. Your line is now open.
Speaker Change: In take rates.
Speaker Change: In our guidance is driven by fulfillment not all of it because as we've mentioned.
Ofer Koren: Sales and marketing expense, excluding Shopify-related amortization expenses, stock-based compensation, and acquisition-related intangible amortization, was 18.9 million dollars, or 11.3% of revenue. Compared to 12 million dollars, or 9% of revenue in the same period last year. Shopify-warrant-related amortization expense was 37.4 million dollars. Total sales and marketing expenses for the quarter were 60.1 million dollars. General administrative expenses, excluding stock-based compensation, acquisition-related expenses and acquisition-related contingent consideration, was 9.4 dollars or 5.6 of revenue, compared to 7.3 million or 5.5% of revenue in the same period last year.
Speaker Change: <unk> also was a high.
Speaker Change: Take rate lurch and to which we provide the demand generation services it will be reflected.
Speaker Change: In the in the service fee take rate, but most of the take rate reduction is on the fulfillment side.
Speaker Change: Your next question comes from Andrew Bock with Wells Fargo. Your line is now open.
Andrew Bock: Hey, Thanks for taking the question just wanted to speak to the range of outcomes here and the revenue guide still it seems pretty wide from I think seven points from the low end to the high end.
Andrew Bauch: Hey, thanks for taking the question. I just wanted to speak to the range of outcomes here in the Revenue Guide. Still, it seems pretty wide, from, I think, seven points from the low end to the high end.
Ofer Koren: Just now that we're halfway through the year, maybe you can help us understand, you know, what gets you to the low end versus what needs to happen in order for you to achieve the high end, setting macro aside. Yeah, I think that when you look into our guidance for the rest of the year, we took macro first. Of course, the reduction in fulfillment acreage that we've seen due to the lower AOV is due to some changes in the mix between merchants, as well as the higher basket.
Speaker Change #101: Just now that we're halfway through the year, maybe if you can help us understand what gets you to the low end versus what what needs to happen in order for you to achieve the high end setting macro side.
Ofer Koren: Total GNA spending Q2 was 13.5 million dollars. Adjusted EBIDA continues to go rapidly and total $31.3 million, representing an 18.7% adjusted EBIDA margin, and increasing by 49% from 21 million dollars or 15.7% margin in the same period last year. Net loss was 22.4 million dollars, compared to a net loss of 35.5 million in the year-go period, driven mainly by damalization expenses related to the Shopify warrants and by the transaction-related intangibles. Switching gears and turning to the balance sheet and cash flow statements, we ended the quarter with 341 million dollars in cash and cash equivalent, including short-term deposits and marketable securities. Very strong cash flow generated by operating activities of $64.1 million, compared to 17.6 million a year ago.
Speaker Change #101: Yes.
Speaker Change #102: I think that.
Speaker Change #103: When you're looking at guidance for the rest of the CEO.
Speaker Change #104: We took into account first.
Speaker Change #105: Of course, the reduction in fulfillment acreage that we've seen due to the lower <unk> due to some changes in mix.
Speaker Change #105: Between merchants.
Speaker Change #105: As well as well as.
Speaker Change #105: The higher basket.
Speaker Change #105: The second thing that we took into account and we need to account for.
Ofer Koren: The second thing that we took into account and we need to account for is the changes in consumer sentiment. We have witnessed it, and also mentioned it, especially in the last six to eight weeks. We did bake in some of it into our guidance, allowing for a larger spread towards the end of the year. This is built in there as well.
Speaker Change #105: Is it changes in consumer sentiment, we have witnessed it also mentioned it.
Speaker Change #105: Especially in the last six to eight weeks.
Speaker Change #105: So we did bake in some.
Some of it into our guidance, allowing for a larger spread towards the end of the yield.
Speaker Change #105: And so this is built in there as well and.
And.
Andrew Bauch: And if this changes, and this is, of course, affected by macro, then we might, we might use it with that, but we do believe it's a So we took a conservative approach here. Got it. Understand. And then.
Speaker Change #105: Yeah.
Speaker Change #106: These changes and this is it.
Speaker Change #106: Of course, the macro then.
Ofer Koren: Moving on to our financial outlook and guidance for Q3 and our updated 2024 fully new guidance. I would first like to explain the underlying dynamics we are seeing as we looked towards the end of the fiscal year. As Amir already mentioned, we recently experienced an out-of-the-ordinary turn as the Ted Baker's UK and Europe franchisees which we served went bankrupt and went off the air earlier in August. Ted Baker represented over 3% of our revenue and the loss of its business will impact our age to results.
Speaker Change #106: We might we might just with us, but we do believe it is.
Speaker Change #107: So we took a conservative approach here.
Speaker Change #108: Got it understand and then.
Amir Schlachet: Moving to Shopify, thinking about the three-piece size, you know, you highlighted 75% of the base now on Check Out Accensibility. Did that ramp to 75% go according to your original plans? And maybe you could help us understand the economic implications on your business model of those merchants being on Check Out Accensibility. [inaudible] Hi, it's Amir.
Speaker Change #109: Moving to Shopify thinking about the <unk> side, you highlighted the 75% of the base now on checkout sensibility did that ramped to the 75% go according to your original plans.
Speaker Change #110: Maybe if you could help us understand the economic implications to your business model by those merchants being on checkout extensibility.
Speaker Change #110: Hi, its samir so yes, it did ramp up.
Amir Schlachet: So yes, it did ramp up fairly quickly over the last couple of quarters. It's, it's been unlike the previous migration or the initial migration from the original kind of classic integration we had onto the new Native integration, which was, I would say, more working-sensitive. I'm sorry, working-sensitive. The migration to C1 is, from a process perspective, easier per merchant. And our teens, over the last couple quarters, have really mastered the ability to make these transitions.
Fairly quickly.
Ofer Koren: Besides the obvious loss of GMV, the main negative impact will be on our top line. Ted Baker was a high-take rate merchant to which we supplied in addition to our standard services, also a high volume of demand generation services. However, this turn will have positive impact on our growth margin and overall limited impact on our bottom line. Besides the out-of-the-ordinary turn of Ted Baker, additional factors that are expected to negatively impact our top line in age two and the full year are the significant rise in average order values, negatively impacting our fulfillment revenues, coupled with the slight signs of potential softness in consumer sentiment we have seen over the last few weeks. At the same time, growth margins are positively affected and expected to be significantly higher than previously projected.
Speaker Change #110: Over the last couple of quarters.
Speaker Change #111: It's been unlike the.
Speaker Change #112: Let's see.
Speaker Change #112: The previous migration or the initial migration from the.
Speaker Change #112: Original kind of classic integration we had.
Speaker Change #112: Onto the new native integration, which was I would say more.
Speaker Change #112: Working sensitive im sorry, working sensitive.
Speaker Change #112: The migration to see one is from that would do from a process perspective per merchant is.
Speaker Change #112: It's easier.
Amir Schlachet: So that happens fairly quickly, and we anticipate that it's not going to take us too long to complete the entire migration. In terms of the economy, there is no direct economic impact expected. It's more of a general impact on merchants being able to use the kind of latest and the greatest features and tech on both the Shopify and the Global East side. So hopefully, over the next quarters and years, this will provide our merchants, and therefore us, with performance benefits.
Speaker Change #112: Our teams over the last couple of quarters of <unk>.
Speaker Change #113: Mustard the ability to make these.
Speaker Change #112: Transitions, so that happens fairly quickly and we anticipate it.
Speaker Change #112: It's not going to take us.
Speaker Change #112: Too long growth to complete the entire migration.
Speaker Change #112: In terms of the economic there is no direct economic.
Ofer Koren: In conclusion, the above factors are leading us to cautiously lower our full year top line guidance, but nevertheless, the higher growth margin profile in addition to strong control of operational expenses is leading us to raise our full year-adjusted EBIDA guide. As for the guidance itself, for Q3 2024, we are expecting GMV to be in the range of 1.07 to 1.11 billion dollars. At the midpoint of the range, this represents a growth rate of 30% versus Q3 of 2023.
Speaker Change #112: Impact expected.
Speaker Change #114: More of that.
Speaker Change #114: I would say a general impact from the merchants being able to use.
Speaker Change #114: Kind of latest and greatest.
Speaker Change #115: Features and Jack.
Speaker Change #115: On both the shopify and globally sites.
Speaker Change #115: Hopefully.
Speaker Change #115: Over the next.
Speaker Change #115: Quarters in years, this will provide our merchants and therefore us with.
Speaker Change #115: Performance benefits, but I would say for the time being it's more of a.
Speaker Change #115: Kind of technological transition rather than any any immediate change in the economics of our model.
Ofer Koren: We expect Q3 revenue to be in the range of 165.7 to 171.7 million dollars. At the midpoint of the range, this represents a growth rate of 26% versus Q3 of 2023. For adjusted Ibida, we are expecting a profit in the range of 27 to 31 million dollars. For the full year of 2024, we are updating our guidance and now anticipate GMV to be in the range of 4.605 to 4.845 billion dollars, representing a 33% annual growth at the midpoint of the range.
Speaker Change #116: Your next question comes from Code you got Kita with Bank of America. Your line is now open.
Amir Schlachet: But I would say for the time being, it's more of a kind of technological transition rather than any immediate change in economics. Your next question comes from Koji Ikeda with Bank of America. Your line is now open.
Koji Ikeda: Yes. Hey guys, thanks for taking the questions. I wanted to ask about the Victoria Secret Launch. You know, congratulations on getting that live.
Speaker Change #117: Yes, Hey, guys. Thanks for taking the questions I wanted to ask about the Victoria's secret launch congratulations on getting that lives.
Cody Kita: Want to ask on the timing of that launch was it to plan was it a bit earlier or later than anticipated and then I think you mentioned in the prepared remarks, there's two more of these types of size of launches to come.
Speaker Change #119: But those are taken a little bit longer and so the question. There is what is the risk that those launches get pushed.
Two after the 2020 for holiday season.
Speaker Change #120: Alright. Thanks.
Koji Ikeda: I wanted to ask about the timing of that launch, you know, was it on plan? Was it a bit earlier or a bit later than anticipated? And then, as you mentioned in the prepared remarks, there are two more of these types or sizes of launches to come. You know, how are the, but those are taken a little bit longer. And so the question there is, what is the risk that those launches get pushed to after? Or the 2024 holiday? Hi Koji.
Speaker Change #121: Thanks for the question so actually it's the same.
Ofer Koren: Revenue is now expected to be in the range of 710 to 750 million dollars, representing a growth rate of 28% at the midpoint of the range. For adjusted Ibida, we are now expecting a profit of 127 to 143 million dollars above our previous guidance. Despite the negative impact expected on H2 revenues we've mentioned, we continue to believe growth will accelerate going into Q4 and that the pace of growth will continue into 2025.
Speaker Change #121: <unk> answer for so all of these.
Speaker Change #121: These big launches.
Speaker Change #121: But we're looking at more.
Amir Schlachet: Thanks for the question. Actually, it's the same answer for all of these big launches that we're looking at. They're more or less on schedule. You know how it works with these large projects. There are sometimes some shifts in schedule a week here or there, but generally speaking, the Victoria's Secret launch was as planned and on schedule, and it's also gradual, as many of our, I would say, large merchant launches are.
Speaker Change #121: More or less on plan.
Speaker Change #121: It works with these large projects there are some times.
Speaker Change #121: Some shifting schedule a week here or there, but generally speaking the Victoria's secret launch was as planned and on schedule and it's.
Speaker Change #121: It's also a gradual as many of our I would say large merchant launches.
Amir Schlachet: It's a phased launch, and we're already progressing very nicely through the phases, and that too is on schedule, so not just the initial kind of launch, but also the subsequent rollout of the additional markets. Actually, the majority of them are already live at this point.
Speaker Change #121: It's a phased launch and we're advancing already very nicely through the phases in our.
Ofer Koren: Driven by large merchant launches, which are on track, anticipated elevated volume contribution from managed markets on Shopify, which is growing as expected, and a lower impact on border free on a year of comparison. As is evident from our updated guidance, we expect the lower top line estimation to be offset by significantly higher growth margin, and result in minimal impact on growth profit, while we believe our adjusted Ibida and casual generation will be higher compared to our previous expectations.
Speaker Change #121: That too is on schedule. So not just the initial kind of launch but also the subsequent rollout of additional markets, though actually the majority of them are already live.
Speaker Change #121: At this point.
Amir Schlachet: And in terms of the additional large launches, again, as we mentioned, they're currently on schedule. We believe that there are, I would say, sufficient project buffers there to ensure that they go live in time before peak, each with its respective launch date, and we hope that this will remain the case. Currently, we don't have any reason to believe that they will be delayed, and we expect them to go live early Q4, I would say, in time for the peak season.
Speaker Change #121: And in terms of the additional large launches again as we mentioned or they are currently on schedule. We believe that there are I would say sufficient projects buffers are there to ensure that the.
Speaker Change #121: Go live.
Speaker Change #121: In time.
Speaker Change #121: Before before peak each with its respective launch dates.
Ofer Koren: In conclusion, the opportunity in front of us remains massive and we continue our journey to support merchants worldwide in expanding their direct to consumer business. We focus on execution and believe we can continue to grow rapidly while further expanding catch generation in the coming years.
Speaker Change #121: And we hope we hope that this will remain the case currency, we don't we don't have.
Speaker Change #121: Any reason to believe that it will be.
Speaker Change #121: Right.
Speaker Change #121: And we expect them to go live early in Q4, I would say in time for the peak season, I think Nir mentioned they are already in active testing now. So these are the very advanced.
Amir Schlachet: As I think Nir mentioned, they're already in active testing now, so these are the very advanced phases of the launch. Your next question comes from Scott Berg with Needham. Your line is now open. Hi, everyone.
Amir Schlachet: And with that, Amir and I are happy to answer questions you may have. Operator? Thank you, ladies and gentlemen.
Nir: Phases of the launch projects.
Nir: Your next question comes from Scott Berg with Needham. Your line is now open.
Operator: We will now begin the question and answer session. Should you have a question, please press star followed by the one on your touch-tone phone. You will hear prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speaker phone, please let the hand set before pressing any key. Please limit yourself to one question and one follow-up.
Scott Berg: Hi, everyone nice quarter, thanks for taking my questions.
Scott Berg: Nice quarter of things for taking my questions. I guess we got a couple. Mir, you made some comments about opening a new office in Korea. I just wanted to get some comments on Your Business, Your Business Activities in Asia Pack. I believe I had to reach out. You all tend to have it.
Scott Berg: I guess I've got a couple mirror you'd made some comments about opening a new office in Korea, just wanted to get some comments maybe on.
Speaker Change #124: On your business new business activities in Asia Pac because it's typically not a region that you all tend to highlight.
Operator: One moment, please three first question.
Will Nance: Your first question comes from Will Nance with Goldman Sachs. Your line is now open. Good morning. I appreciate you taking the question. I wanted to just make sure we understand the moving pieces in the guidance that was very helpful to quantify the term merchant. So if I heard you correct, it's something like 3% of revenue from the churned merchant. It was AOVs coming in lower, neutral gross profit, but it brings down the fulfillment take rate on GNV. And then the third one, you're kind of attributing to macro. I guess maybe excluding the first two. How big was the macro impact relative to your prior expectations?
Speaker Change #124: Sure.
Nir Debbi: Sure. Thank you for the call. It's Neil. We are very optimistic about the rollout into APAC. We started the journey in APAC around two years ago, and since then, we've seen a very strong uptick coming out of Australia, Hong Kong, Singapore, and Japan, with a key market currently outbound, where we have established HQs in Australia and Japan. In Korea, we've seen a lot of interest coming from on the back of it. We signed a few deals, and we even launched the first large merchant that Amir mentioned. Gentle Monster
Speaker Change #124: Thank you for the call it's Neal.
Speaker Change #124: We are very optimistic about.
Speaker Change #124: The rollout into APAC.
Speaker Change #125: We started the journey.
Speaker Change #126: Eight Buck.
Speaker Change #126: Two years ago.
Speaker Change #126: And since then we've seen.
It's very strong uptake.
Speaker Change #126: <unk> sales trailing a Hong Kong, Singapore, with Japan, with a key market <unk> loans, where we have.
Speaker Change #126: 78 Skus.
Trading in Japan.
Speaker Change #126: In Korea, we have seen a lot of interest coming from on the back of it.
Speaker Change #126: We signed a few deals and we've been launched.
Speaker Change #126: The first large merchants.
Speaker Change #127: Hey, just amongst though.
Nir Debbi: All in all, Korea adds to an additional, I would say, growth in the APAC region that came from virtually nothing in global sales to hitting a two-digit year-to-date. Already, the percentage of the new book is excellent. Very helpful, Nir.
Amir Schlachet: If we hadn't seen the churned merchant dynamics, would guidance be kind of relatively in the same place and just trying to get a sense for how much your expectations for the underlying run rate of the business have actually changed? Yes, so thank you, Will, for that. I think that we've mentioned the drivers in the order according to the order of magnitude. And the rising AOV translates to lower fulfillment activity and that also has significant impact.
Speaker Change #127: All in all <unk>.
<unk>.
Speaker Change #127: <unk> two <unk> and.
Speaker Change #127: And Additionally, I would say.
Speaker Change #127: Growth into the APAC regions that in total.
Speaker Change #127: Phone virtually nothing in globally.
Speaker Change #127: Sales into it.
Speaker Change #127: Into eating.
Speaker Change #128: Two digits.
Speaker Change #128: To date.
Speaker Change #128: Already.
Speaker Change #128: The percentage of new bookings.
Speaker Change #128: Okay.
Speaker Change #129: Excellent very helpful. There and then ofer wanted to get your thoughts maybe on.
Ofer Koren: And then, Ofer, I wanted to get your thoughts maybe on an intermediate or a longer term Margin Structure in the Business. I think if you look at both gross margins and adjusted even margins, you had a record high this quarter. Gross margins are approaching. Discuss some of the dynamics and why that might be higher, at least in the short term here. But how do we think about that margin structure, maybe three to five years out versus your prior assumptions? Because I believe you're getting pretty close to...
Speaker Change #130: Intermediate or longer term margins.
Speaker Change #131: The margin structure of the business I think if you look at both.
Speaker Change #132: Both gross margins and adjusted EBITDA margins, you had a record high this quarter gross margins are approaching 50% and you discussed some of the dynamics and why that might be higher at least in the short term here, but how do we think about that margin structure, maybe three to five years out versus your prior assumptions because I believe you're getting pretty close to at least what your prior communicated kind of inner.
Ofer Koren: It's what your prior communicated intermediate term model. [inaudible] Yeah, thank you for that. So, first of all, as you mentioned, we had some negative impact on our top line with Baker churning, and AOV increasing, but at the same time, those drivers, in addition to larger efficiencies we've been able to achieve, enable us to get much higher gross margins than we initially expected this year. And we do expect, at least for the next coming quarters, gross margins to remain high.
Speaker Change #132: Immediate term model looks like.
Speaker Change #134: Yes, thank you for that.
Amir Schlachet: In terms of the macro conditions, we have seen mixed signals out of the market and we have seen some softness in the last few weeks. But I think that the first two drivers are carry more weight in terms of the update of our guidance. Yeah, that's wonderful. And then I just wanted to follow up some of the comments and the prepared remarks. I think you commented you've got I think record pipelines this year.
Speaker Change #134: So.
Speaker Change #135: First of all as you mentioned.
Speaker Change #135: We had.
Speaker Change #135: Some negative impact on our top line, we said Baker churning.
Speaker Change #135: Increasing but at the same time.
Speaker Change #136: Uh huh.
Those drivers in the ditch.
In addition to larger efficiencies, we've been able to achieve.
Speaker Change #136: Enable us.
Speaker Change #136: To get to.
Speaker Change #136: Much higher gross margins than we initially expected this year.
Amir Schlachet: You went alive with one of the two large merchants. I think you said the other one is launching kind of shortly or something along those lines. And then I thought I heard something about, you know, feeling good about the business remaining on kind of like 30 plus trajectory beyond the second half of the year. So just wondering if maybe you can talk through a kind of momentum into next year, you know, how pipelines are looking is in a way to kind of dimensionize the new customer additions that you have been working on this year.
Speaker Change #136: And we do expect at least for the next coming quarters for gross margins to remain high may be not as high this quarter, because we had some mix impact as well but.
Ofer Koren: Maybe not as high as this quarter because we had some mixed impact as well, but in the neighborhood of what you have seen this quarter. And in addition to that, as we have tight cost control, it translates into slightly higher adjusted EBITDA in U.S. dollars and higher adjusted EBITDA margin as well. So we expect to see that continuing in the next few quarters. Regarding the longer term, I think it's a great question.
Speaker Change #136: In the neighborhood of.
Speaker Change #136: What you have seen this quarter.
Speaker Change #137: Uh huh.
Speaker Change #137: In addition to that as we have.
Speaker Change #137: Right.
Speaker Change #138: Cost control.
Speaker Change #138: And slate into slightly higher.
Amir Schlachet: Thanks. Hey, real thanks for taking the question. It's new. Yes, we do see a very strong pipeline coming out of our enterprise business. We have as we as we are previously stated a record during signing new merchant a weather due to the significance of two almost let's say two and a half very large clients, one of them that just launched Victoria Secret. We do see some shifts to the back end of the year with the launches.
Speaker Change #138: Adjusted EBITDA.
Speaker Change #138: In U S dollars and higher adjusted EBITDA.
Speaker Change #138: Margin as well.
Speaker Change #138: So we expect to see that continuing.
Speaker Change #138: In the next.
Speaker Change #138: Few quarters regarding the longer term I think it's a great.
Speaker Change #138: Question, we haven't disclosed any long term targets, yet any new long term targets, but we are.
Ofer Koren: We haven't disclosed any long-term targets yet, any new long-term targets. But we are working on that, and we hope that we can introduce long-term targets in the coming months. Your next question comes from Patrick Walravens with Citizens Jam. Your line is now open. Oh, great, thank you. I'd like to dig into Ted Baker some more if I can.
Speaker Change #138: Working on that and we hope that we can.
Speaker Change #138: Introduce.
Amir Schlachet: Victoria is the first one live we expected to other is that our currently on track already tipped into the testing stage of the of the project. We expect them both to be live early Q4. And on the back of it, we will get push coming into a Q4 on the back of it. We have multiple mid size merchant on the enterprise platform planning to go live pretty big as well. And this will give us a boost into the following quarter that they launched only most of the most of the add on a spike that we see launched only and launching only late Q3 early Q4.
Speaker Change #138: Our long term targets in the coming months.
Speaker Change #139: Your next question comes from Patrick Wall Ravens with deep.
Patrick Walravens: I mean... Amir, the bankruptcy filing was on April 24th, right, so, before you guys reported last quarter. Shouldn't you have known? Actually, hi Pat, it's Amir.
Speaker Change #140: Citizens JMP your line is now open.
Speaker Change #141: Oh, great. Thank you.
Speaker Change #142: I'd like to dig into Ted Baker, some more if I can.
Speaker Change #142: <unk>.
Speaker Change #143: I mean.
Speaker Change #144: The mirror the bankruptcy filing was done.
Speaker Change #144: On April 24th.
Alright so.
Speaker Change #145: Before you guys reported last quarter since you have known.
Amir Schlachet: Actually, no, because this is not the first time that a merchant has filed for bankruptcy or administration, as it's called in the UK. It doesn't mean that they will stop trading. As a matter of fact, we've had a number of cases in the past where it actually drove the online business higher because, in a lot of cases, with brands that have physical stores, the intent of the administration is not to shut down the operation completely but actually to streamline it.
Brad: Hi, Brad.
Amir: It's amir.
Amir: Yeah.
Speaker Change #147: No because this is not.
Amir Schlachet: It will be it will be a net growth when you look at the coming quarters in 2025 for most of the year in parallel to it. And we see significant growth coming out of the managed market business where we see trajectory in line with what we expected for the year and even slightly above. So we're quite optimistic on the overall trajectory going forward that allowed us to state that we believe that we have a visibility into a growth rate of over 30% in the coming quarter. Thanks. That's great. Appreciate all the details this morning.
Speaker Change #147: It's not the first time that.
Speaker Change #147: Our merchants.
Speaker Change #147: Bankruptcy or administration as it's called in the UK. It doesn't mean that they will start trading act as a matter of fact.
Will Nance: Thanks for taking the questions.
Speaker Change #147: We've had.
Speaker Change #147: A number of cases in the past.
Actually drove the online business higher because in a lot of cases.
Speaker Change #147: With brands.
Operator: Thank you.
Speaker Change #147: Stores the intent of the administration is not to shut down the operation completely but actually to streamline it.
Amir Schlachet: And typically, the outcome is that the physical assets or the stores are reduced, and the focus goes into the online business. So we've even had cases in the past where the bankruptcy or administration did well for our business, from our perspective.
Speaker Change #147: And typically the.
Speaker Change #147: The outcome is that the.
Speaker Change #147: Physical assets of the stores are.
Speaker Change #147: Reduced and the focus goes into the online business. So we even had cases in the past where it would be the bankruptcy or administration.
Samad Samana: Your next question comes from Samad. Samana would Jeffries, your line is now open. Hi, good morning and thanks again my questions. I guess first, just as I think about, as I think about, you mentioned the macro part being, maybe the lowest piece of the assumption change. But I want to dig into that, Ofer, are you changing the back half NRR assumptions? Or is that more you just letting us know that that's something that we should think about?
Speaker Change #148: Good for our business from our perspective.
Amir Schlachet: So there were, the filing was done a long time ago, but we didn't have any signals, or we couldn't have anticipated the fact that, in this case, unexpectedly, it would actually result in them stopping all online trading. That took us by surprise, and- If I may, two more quick follow-ups on that. How much money do they owe you, and are you gonna have to write that off?
Speaker Change #147: So.
Speaker Change #148: There were.
Speaker Change #148: The filing was.
Speaker Change #148: We've done a long time ago, but.
We didn't have any any signals or we couldnt have anticipated. The fact that in this case unexpectedly it would actually result in and then stopping or online trading.
Ofer Koren: But have you changed any of your underlying assumptions in the guidance and how are you thinking about NRR for the fourth quarter, or for the back half of the year, especially as you think about that steep ramp implied in the 4Q guidance? Thank you for that Samad. We have slightly changed our same store sales assumptions for the back half of the year. As we mentioned, we've seen mixed signals, but more, I would say, towards softness, more signals towards some softness, and we've seen slower, same store sales in the last few weeks. So we did slightly adjust our assumptions, but as I mentioned, the new mentioned, that was only the third driver that impacts the top line in H2 2024.
Speaker Change #148: That was.
Speaker Change #150: I would say took us by surprise.
Speaker Change #150: Okay and.
Speaker Change #151: If I may two more quick follow ups on that how much money do they owe you and are you going to have to write that off.
Amir Schlachet: They don't owe us any money at this point in time, so no ride off, fuck that. Your next question comes from Brent Bracelin with Piper Sandler. Your line is now open. Thank you for taking the question here. I wanted to go back to the macro.
Speaker Change #152: They don't OS.
Speaker Change #153: In the Montney at this point in time, so no write off expected.
Speaker Change #154: Your next question comes from Brent Christy Lean with Piper Sandler Your line is now open.
Speaker Change #155: Thank you for taking the question here.
Brent Bracelin: I noticed the third factor contributing to the guide here, but you did talk about some weakness in the last six to eight weeks. Was that isolated to luxury or broad-based? Any additional color on maybe where you're seeing a little softness would be helpful and have one follow.
Speaker Change #156: Wanted to go back to the macro you did.
Speaker Change #157: The third factor contributing to the guide here, but you did talk about some weakness in the last six to eight weeks.
Speaker Change #158: That isolated to luxury more broad based any additional color on maybe where youre seeing a little softness would be helpful and I have one follow up.
Nir Debbi: Understood. And then I know that near you mentioned that the shop by the managed markets products, the formerly markets pro was coming in at expectations, maybe even slightly better, I think, where the words you used, can you maybe just help us understand what that means in numerical terms, how the growth rate there looks like and is your confidence more or less the same? As you think about heading towards the back half of the year and then in 2025?
Speaker Change #159: Sure. Thank you for that brand.
Ofer Koren: Sure, thank you for that, Brent. Nothing specific to call out in terms of verticals. It was broad-based, so... I think that the main weakness for luxury brands is in China currently, and we're not exposed to China. We don't trade into China that much, so it has a smaller impact on us from that angle. Tuttle Color there, and then just double-clicking into Border-Free.
Speaker Change #160: Nothing specific.
Speaker Change #161: To call out in terms of <unk> It was broad based.
Speaker Change #161: So.
I think that the main.
Speaker Change #161: Weakness for laboratory.
Speaker Change #161: Brands was is in China currently and we're not.
Speaker Change #162: Exposed to China, we don't trade into China that much so.
Nir Debbi: Sure, then thank you for the questions for Mark. We do see growth in the managed markets coming slightly than above our plans. And when we see at the final building up and at the rate of onboarding, we do expect it to continue to the end of the year. As we are expected to launch many more features into managed markets in the coming quarters, we do expect the continuous onboarding of merchants and even a large of five merchants to come onboard. So yes, we do expect it to accelerate going into 2025 in dollar terms. Great.
Speaker Change #162: Less impact on us from from that angle.
Operator: Thanks for taking my questions.
Broad based.
Speaker Change #163: Helpful color, there and then just double clicking into border free.
Nir Debbi: You did talk about shutting down the legacy platform. What's the timing there for turning that legacy platform off? And then if you could just maybe frame the volume that you still have on the legacy platform, that would be helpful just as we try to assess the risk there of when the shutdown occurs and potentially what volume would potentially be at risk. Hi, Brent. It's Nir.
Speaker Change #163: You did talk about shutting down the legacy platform, what's the <unk>.
Speaker Change #164: Timing there of turning that legacy platform off and then if you could just maybe frame the volume that you still have on the legacy platform.
That would be helpful. Just simply trying to assess the risks there.
Speaker Change #165: When the shutdown occurs and potentially what volume.
Speaker Change #166: Maybe at risk thanks.
Brian Peterson: Hi, Brian.
Nir Debbi: Thanks for the question. We are in the process of, and will continue with the process of, migrating merchants into the Global-E platform. However, and I think we stated it also in our Q1 discussion, the process is going slower than expected. The last year and this year are, I would say, complex or difficult years for many of our merchants handling, I would say, restructuring in the physical stores, etc. So, in order to give them some time to put the re-platform project into their base, we extended the timeline a bit.
Brian Peterson: Question.
We all are.
Speaker Change #167: In the process and continuing with the process of migrating our merchants.
Speaker Change #167: Into the into the globally platform.
James Faucette: Your next question comes from James Fawcett with Morgan Stanley. Your line is now open. Great. Thank you very much. Just a couple of follow-ups there. Can you give us a sense as to what your turn has been, maybe X-Ted Baker, and if you any sense of what that could be or has been both voluntary and involuntary. And if you're making any other turn-related assumption changes for the second half of the year and into next year beyond just the highlighted Ted Baker.
Speaker Change #167: And I think we stated it also in Q1 discussion.
Speaker Change #167: Process is going slower than expected.
Speaker Change #167: The last year and this year.
Speaker Change #167:
Speaker Change #168: I would say complex or difficult to useful in many of our merchants.
Speaker Change #168: Handling would say restructuring and you'll see the coke stores et cetera.
Speaker Change #168: Well.
Speaker Change #168: In order to let them some time.
Speaker Change #168: To put in there is a re platform or jumped into zero there.
April's database, we extended.
Speaker Change #168: We extended the timeline a bit.
Ofer Koren: James, thank you for the question. In terms of churn, putting aside Ted Baker, which is really out of the ordinary, we have seen similar rates to the previous year, so no significant change there. We're not expecting anything different in the next few months. As we previously mentioned, once the border-free platform is shut off, we might see some turn of the last border-free merchant remaining. However, we have been successful in migrating two of the larger border-free merchants lately, so hopefully we can get some more of those going forward.
Speaker Change #168: The cost of funding as a platform by itself.
Speaker Change #168: We managed to control it and made it more efficient for the time being so we gave we did give extension into 2025.
Speaker Change #168: However, the overall.
Speaker Change #168: Volume remaining today on border free platform is.
Speaker Change #168: Circa 2% of our business, where the majority is already off the border Street platform.
Speaker Change #168: A few a.
Speaker Change #168: A couple of significant and merchants still on the platform that we do expect.
That would move that would only happen.
Speaker Change #168: Timing in the first half of 2025 and following it.
Speaker Change #168: We expect to shutdowns of muscle.
Mark <unk>: Your next question comes from Mark <unk> with Benchmark Company. Your line is now open.
Nir Debbi: The cost of running the platform by itself, we managed to control it and made it more efficient for the time being, so we did give extensions into 2025. However, the overall volume remaining today on the border-free platform is circa 2% of our business, so the majority is already off the border-free platform. There are a couple of significant merchants still on the platform that we do expect that will move, but this would only happen sometime in the first half of 2025, and following that, we expect to shut down the platform. Your next question comes from Mark Zgutowicz with Benchmark Company. Your line is now open.
Mark <unk>: Thank you I was just hoping to get some more clarity on the implied <unk> assumptions, if I look at the midpoint of your <unk>.
Mark Zgutowicz: Thank you. I was just hoping to get some more clarity on the implied 4Q assumptions. If I look at the midpoint of your GMV and Take Rate, [inaudible] We're still looking at declines in take rate. I'm just curious if that's all tied to Ted Baker, or if there's some further multi-local dilution built in there or anything else, and then just in terms of your GMB assumptions for 4Q, in the softer consumer.
Nir Debbi: Got it, and then on the Shopify relationship and kind of how well that's trending, can you give us an update on operationally, some of the functions that you'd intended to launch during the course of this year, have those launched? How much of an impact is that having on engagement with merchants, etc., and how you're thinking about further improvements in the product?
Speaker Change #170: Take rate.
Speaker Change #171: We're looking at.
Speaker Change #172: Still declines in.
Speaker Change #173: Take rate I'm, just curious if that's all tied to Ted Baker.
Speaker Change #174: Or if there's some multi local further multi local dilution built in there or anything else and then just in terms of the.
Speaker Change #175: Your <unk> assumptions for <unk>.
Speaker Change #175: And the softer consumer and <unk>.
Nir Debbi: Hi, James. This is amazing. We mentioned some of the features already on the repair remarks. These were highly anticipated features like additional standard shipping options that we've added, like the ability to include the duties into the product price, which is highly important for, I would say, being able for the merchants to be able to sell in a way that is very localized in many markets. This is a capability we've had for a long time, obviously, on all our platforms, and recently added that to manage markets.
Ofer Koren: [inaudible] Source Sentiment, just relative to 3Q, like what are your implied assumptions? Assumptions in terms of the trajectory of that software consumer's in-store assignment. And then I had a quick follow-up. So in terms of consumer sentiment, we have similar assumptions for Q3 and Q4. I expect the same sources to be a bit lower than what we previously expected, but the same for Q3 and Q4. In terms of the take rate in Q4, as we've mentioned, it's a combination of higher average order values leading to a lower fulfillment take rate. Also, the impact of Ted Baker, which was a high take rate merchant, and, in addition, we do have...
Speaker Change #176: Sentiment just relative to <unk>.
Speaker Change #176: Are your implied.
Speaker Change #177: Assumptions in terms of the trajectory of that softer consumer and store assignment and then I had a quick follow up.
Speaker Change #178: Yes, so in terms of the consumer sentiment.
Speaker Change #179: Similar assumptions for Q3 and Q4.
Speaker Change #179: We expect same store sales to be.
Speaker Change #179: Bit lower than what we previously expected but.
Speaker Change #179: Same for Q3 and Q4 in terms of the take rate.
Speaker Change #179: In Q4, as we've mentioned, it's a combination of.
Nir Debbi: And there are also additional capabilities and visibility that the merchants now get into product restrictions, which was very important for a lot of our merchants. So it's a lot of features. There are more that were rolled out and more that are in the pipeline for the remainder of the year and for 2025. So it's hard to pinpoint exactly the effect of each such feature, obviously, but in general, as the product becomes more feature-reaching, more advanced, it obviously increases its appeal and its applicability to many more merchants. So we continue to be hard at work, both our teams and Shopify teams working in collaboration to continue along the planned roadmap and continue releasing these features in the next few days.
Speaker Change #180: Hi, or average order value leading to lower fulfillment take rate.
Speaker Change #180: Also the impact of that Baker, which was a high take rate.
Speaker Change #181: Our merchant and in addition.
Operator: Okay, great. Thank you.
Speaker Change #181: We do have slight seasonality in terms of.
Speaker Change #181: Take rate in Q4 as we have.
Speaker Change #182: This knee which is biased.
Speaker Change #182: Towards Q4 vary by Us and is a multi local.
Speaker Change #182: Merchant so we do expect some more.
Speaker Change #182: Multi local JV in Q4.
Oliver <unk>: Your next question comes from Oliver <unk> with <unk>. Your line is now open.
Ofer Koren: Lights is a nullity in terms of take rate in Q4, as we have Disney, which is biased towards Q4, very biased, and is a multi-local merchant, so we do expect some more multi-local GMV. Your next question comes from Oliver Luchter with Arik. Your line is now open. Hi, thank you for taking my question. I just wanted to follow up on Victoria's Secret, which is one of your main competitors and biggest merchants. Can you just give a little bit more detail on what specifically led them to switch to you? And you kind of mentioned that it would be a slow migration.
Oliver <unk>: Hi, Thank you for taking my question.
Oliver <unk>: Wanted to follow up on Victoria's secret.
Oliver <unk>: No.
Speaker Change #184: Main competitors biggest margins can you just giving a bit more detail on what.
Speaker Change #185: Specifically it was that kind of let them to switch to you.
Brian Peterson: Your next question comes from Brian Peterson with Raymond James. Your line is now open. Thanks for taking the question. So, Ofer, I wanted to hit on fulfillment take rates a bit. We've heard from others in the ecosystem that there's been more of a preference for slower or less expensive shipping rates. Can you comment on how that mix may have been versus your expectations and any help on how we should be modeling the fulfillment take rates in the back half of the year?
Speaker Change #186: You kind of mentioned that it would be a slow migration.
Speaker Change #187: How long do you expect it to be until that's fully migrated off.
Speaker Change #188: Thank you.
Speaker Change #188: Yes.
Oliver Luchter: How long do you expect it to be until they're fully migrated off ESW? Thank you. Yes, and thank you very much for the question. It's Neil.
Speaker Change #188: Thank you very much for the question Neil.
Speaker Change #189: We are very happy that.
Speaker Change #190: Victoria's secret.
Nir Debbi: We are very happy that Victoria's Secret decided to switch to the Global-E platform and partner with us. We're very proud of it, and we expect to grow and continue growing our partnership with Victoria Secret in the coming years. In terms of the launch plan, we started the rollout with the initial market late July, mid-July, and we're already, I would say, over half the way, And we expect to finish the entire rollout within Q3.
Brian Peterson: Sure, thank you for that, Brian. We've seen in the beginning of the year we've seen some shift to standard but in the last few months it has been pretty stable. The main change that we have seen is higher order value which also is partially driven by optimization of both merchants and consumers. So basically getting a higher ticket on the same cost of shipping. So we have seen a trend of that growing the average order value over the last few months specifically in Q2 and that has a significant impact on our fulfillment take rates.
Speaker Change #191: <unk> decided to switch to the globally platform and partner with us.
Speaker Change #191: <unk> of it and we expect to.
Speaker Change #191: Grow in.
Speaker Change #191: With our initial markets.
Speaker Change #191: In late.
Speaker Change #191: Late July mid July and were already I would say over the half and we expect to finish the entire rollout.
Speaker Change #191: Within the within Q3.
Speaker Change #191: So all in all everything to date is moving according to our to the project plan.
Nir Debbi: So all in all, everything to date is moving according to the project plan. And the reason they selected Global-E, I think it is evident also in Global-E being the market leader in anything related to global commerce and for the multi-local capabilities we have developed to cross-border all the capabilities we have developed around, local shipping returns, duty management, duty drawbacks, and the data and demand generation capabilities.
Speaker Change #192: The reasons. They selected globally I think is evident also in globally being the market leader in anything related to global Commerce.
Speaker Change #193: A multi local capabilities, we developed a cross border.
Brian Peterson: We haven't seen significant shift from to standard, from express to standard in the last few weeks or two or three months. As we think about modeling that figure going forward in kind of guide poster where we should look at from second quarter levels, thanks. Can you repeat that Brian, please? Yeah, I'm just looking to understand how we should be modeling the fulfillment take rate in the back half of the year and going forward.
Speaker Change #194: What are the capabilities we developed around.
Speaker Change #195: No cause shipping returns duty management duty drawbacks.
Speaker Change #195: And the data and demand generation capabilities, a lot of the things we developed a unique so globally and I think it's been appreciated in the market. So we're certainly proud and happy to have Victoria's secret joining us.
Nir Debbi: A lot of the things we developed are unique globally, and I think they've been appreciated in the market, so we're so proud and happy to have Victoria Syka join us. Now, for the questions, that this time, I will now turn the call over to Amir for closing remarks. Thanks a lot.
Speaker Change #196: There are no further questions at this time I will now turn the call over 10 year for closing remark.
10 year: Thanks, a lot 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.
Amir Schlachet: 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. So until next time, goodbye to you all, and thank you for watching. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. (inaudible)
Brian Peterson: Well, previously we expected the fulfillment take rate to increase in the back half of the year due to more merchants joining merchants that are onboarding the platform and using or utilizing our shipping services. And we do see that coming in, but due to the fact that AOV has increased significantly, we do see decrease most of the change that you see in take rates in our guidance is driven by fulfillment not all of it.
10 year: Your next time Goodbye to you all and take care.
Speaker Change #198: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.
Speaker Change #198: Yeah.
Speaker Change #198: Yeah.
Speaker Change #198: [music].
Brian Peterson: Because as we mentioned, the Baker also was a high take rate merchant with which we provide the demand generation services and this will be reflected in the service fee take rate. But most of the take rate reduction is on the fulfillment side.
Andrew Bauch: Your next question comes from Andrew Bach with Wells Fargo. Your line is now open. Hey, thanks for taking the question. Just wanted to speak to the range of outcomes here in the revenue guide. Still, it seems pretty wide from, I think, seven points from the low end to the high end.
Ofer Koren: Just now that we're halfway through the year, maybe we can help us understand what gets you to the low end versus what needs to happen in order for you to achieve the high end, you know, setting macro aside. Yeah, I think that when you're looking to our guidance over the rest of the year, we took into account first, of course, a reduction in fulfillment acreage that we've seen due to the lower A or V due to some changes in mix between merchants as well as the high or basket.
Ofer Koren: And the second thing that we took into account and we need to account for is the changes in consumer sentiment. We have witnessed it, also mentioned it, especially in the last six to eight weeks. So we did bake in some of it into our guidance, allowing for a larger spread towards the end of the year. So this is built in there as well. And this changes, and this is, of course, affected by macro than we might use with Earth, but we do believe it's, we took a conservative approach.
Amir Schlachet: Got it, understands. And then moving to Shopify, thinking about the three P side, you know, you highlighted a 75% of the base now on checkout of sensibility. Did that ramp to the 75% go according to your original plans? And maybe you could help us understand the economic implications to your business model by those merchants being on checkout of sensibility.
Koji Ikeda: Hi, it's Amir. So, yes, did it ramp up fairly quickly over the last couple of quarters? It's been, unlike the previous migration or the initial migration from the original kind of classic integration we had on to the new native integration, which was, I would say, more working-sensitive, sorry, working-tensive. The migration to C1 is from a process perspective, per merchant is easier. And our teams over the last couple of quarters have really mastered the ability to make these transitions.
Koji Ikeda: So that happens fairly quickly. And we anticipate that it's not going to take us too long to complete the entire migration. In terms of the economic, there is no direct economic impact expected. It's more of a, I would say, a general impact on the merchants being able to use the kind of latest and the greatest features and tech on both the Shopify and the global east side. So hopefully over the next quarters and years, this will provide our merchants and therefore us with performance benefits. But I would say for the time being, it's more of a kind of technological transition rather than any immediate change in economics.
Operator: Consumer Model.
Scott Berg: Your next question comes from Koji Ikeda with Bank of America. Your line is now open. Yes, hey guys, thanks for taking the questions.
Koji Ikeda: I wanted to ask about the Victoria Secret launch, you know, congratulations on getting that live. I wanted to ask on the timing of that launch, you know, was it to plan? Was it a bit earlier or a bit later than anticipated? And then I think you mentioned in the prepared remarks, there's two more of these types or size of launches to come, you know, how is the, and but those are taken a little bit longer. And so the question there is, what is the risk that those launches get pushed to after the 2024 holiday season?
Nir Debbi: Hi, Koji, thanks for the question. So actually it's the same, it's the same answer for all of these big launches that we're looking at. There are more or less on plan, you know, how it works with these large projects or sometimes some shifts in schedule a week here or there, but generally speaking, the Victoria Secret launch was as planned and on schedule and it's also a gradual as many of our, I would say large merchant launches are, it's a saved launch and we're advancing already very nicely through the phases and it's, that too is on schedule, so not just the initial kind of launch but also the subsequent rollout of the additional markets, actually the majority of them are already live at this point.
Nir Debbi: And in terms of the additional large launches, again, as we mentioned, they're currently on schedule. We believe that there are, I would say, sufficient project buffers there to ensure that they go live in time before, before peak, each with its respective launch date. And we hope that this will remain the case currently. We don't have any reason to believe that they will be delayed and we expected them to go live early Q4, I would say in time for the peak season, as I think Near mentioned, they're already in active testing now, so these are the very advanced phases of the launch projects.
Scott Berg: Your next question comes from Scott Bergwith Medium. Your line is now open. Hi everyone, nice quarter of things for taking my questions. I guess we have a couple. Meer, you'd made some comments about opening a new office in Korea. Just wanted to get some comments maybe on, on your business, your business activities in Asia back, because it's typically not a region that you all tend to highlight.
Nir Debbi: Sure. Thank you for the call, it's meer. We are very optimistic about the rollout into APOC. We started the journey in APOC around two years ago. And since then, we've seen a very strong uptick coming out of Australia, Hong Kong, Singapore, Japan, with the key market currently outbound, where we established HQs Australia and Japan. In Korea, we've seen a lot of interest coming from on the back of it. We signed a few deals and we even launched the first large merchant that Amir mentioned, Gentle Monster.
Nir Debbi: All in all, Korea adds to an additional, I would say, growth into the APOC regions that in total came from virtually nothing globally, sales into hitting two digits yield to date, already the percentage of the new book.
Nir Debbi: Thanks. Excellent, very helpful, Nir.
Ofer Koren: And then, Ofer, wanted to get your thoughts maybe on intermediate or longer-term margin structure in the business. I think if you look at both gross margins and adjust even margins, you had a record high this quarter, gross margins are approaching 50 percent and you'd discuss some of the dynamics on why that might be higher, at least in the short term here. But how do we think about that margin structure? Maybe three to five years out versus your prior assumptions?
Ofer Koren: Because I believe you're getting pretty close to at least what your prior communicated kind of intermediate-term model would like. Yeah, thank you for that. So, first of all, as you mentioned, you know, if we had some negative impact on our top line with the Baker-Turning AOV increasing, but at the same time, those drivers in addition to larger efficiencies we've been able to achieve, enable us to get too much higher gross margins than we initially expected this year.
Ofer Koren: And we do expect at least for the next coming quarters for gross margins to remain high, maybe not as high as this quarter because we had some mixed impacts as well, but in the neighborhood of what you've seen this quarter. And in addition to that, as we have tight cost control, it translates into slightly higher-adjusted EBDA in your dollars and higher-adjusted EBDA margin as well. So we expect to see that continuing in the next few quarters.
Ofer Koren: Regarding the longer term, I think it's a great question.
Patrick Walravens: We haven't disclosed any long-term targets yet, any new long-term targets, but we are working on that, and we hope that we can introduce long-term targets in the coming months. Your next question comes from Patrick Wall Ravens with the citizens' JMP. Your line is now open. Oh, great. Thank you. I'd like to dig into Ted Baker some more if I can. I mean, Samir, the bankruptcy filing was on April 24th, right? So before you guys have recorded, last quarter, should you have known?
Patrick Walravens: Actually, hi, Pat. It's Samir. Actually, no, because this is not the first time that merchants filed for bankruptcy or administration as it's called in the UK. It doesn't mean that they will start trading. As a matter of fact, we've had a number of cases in the past where it actually drove the online business higher, because in a lot of cases with brands that have physical stores, the intent of the administration is not to shut down the operation completely, but actually to streamline it.
Patrick Walravens: And typically, the outcome is that the physical assets of the stores are reduced, and the focus goes into the online business. So we've even had cases in the past where the bankruptcy or administration did good for our business, from our perspective. The filing was done a long time ago, but we didn't have any signals, or we couldn't have anticipated the fact that in this case, unexpectedly, it would actually result in them stopping or online trading.
Patrick Walravens: That was, I would say, took us by surprise. Okay, and if I made two more quick follow-ups on that, how much money do they owe you and are you going to have to write that off? They don't owe us any money at this point in time, so no write-off expected. Thank you for taking the question here.
Brent Bracelin: I wanted to go back to the macro. You did, I know the third factor contributing to the guide here, but you did talk about some weakness in the last six to eight weeks. Was that isolated to luxury, more broad-based, any additional color on maybe where you're seeing a little softness would be helpful and have one follow-up? Sure, thank you for that Brent. Nothing specific to call out in terms of verticals. It was a broad-based.
Brent Bracelin: I think that the main weakness for luxury brands was in China currently and we're not exposed to China, we don't trade into China that much, so a less impact on us from that angle, broad-based. It's a helpful color there, and then just double-clicking into border-free, you did talk about shutting down the legacy platform, what's the timing there of turning that legacy platform off, and then if you could just maybe frame the volume that you still have on the legacy platform, that would be helpful just as we try to assess the risk there of when the shutdown occurs.
Brent Bracelin: And potentially what volume would potentially be at risk, thanks. Hi, Brent. It's Near. Thanks for the question. We are in the process and continue with a process of migrating merchants into the globally platform. However, and I think we stated it also in our key one discussion. A process is going slower than expected. The last year and this year, I would say complex or difficult years for many of our merchants, handling, I would say, restructuring in the physical stores, et cetera.
Brent Bracelin: So in order to let them some time to put in the re-platform project into their base, we extended the timeline a bit. The cost of running the platform by itself, we managed to control it and made it more efficient for the time being, so we did give extensions into 2025. However, the overall volume remaining today on border-free platform is still got 2% of our business or the majority is already off the border-free platform.
Brent Bracelin: And there are a few significant, a couple of significant merchants still on the platform that we do expect that would move, but this would only happen some time in the in the first half of 2025 and following it, we expect to shut down the class.
Nir Debbi: Council.
Mark Zgutowicz: Your next question comes from Mark Gutowicz with Benchmark Company. Your line is now open. Thank you.
Ofer Koren: I was just hoping to get some more clarity on the implied 4Q assumptions. If I look at the midpoint of your GMV and take rate, we're looking at still declines in take rate. I'm just curious if that's all tied to Ted Baker, or if there's some multi-local delusion built in there or anything else, and then just in terms of your GMV assumptions for 4Q in the softer consumer and store sentiment, just relative to 3Q.
Ofer Koren: What are your implied assumptions in terms of the trajectory of that softer consumer and store sentiment? In terms of the consumer sentiment, we have similar assumptions for Q3 and Q4. We expect same sources to be a bit lower than what we previously expected, but same for Q3 and Q4. In terms of the take rate in Q4, as we mentioned, it's a combination of higher average order value leading to lower fulfillment take rate, also the impact of Ted Baker, which was a high take rate merchant.
Ofer Koren: In addition, we do have slights in the nullity in terms of take rate in Q4. As we have Disney, which is biased towards Q4, very biased, and is a multi-local merchant. We do expect some more multi-local GMV in Q4.
Oliver Lefter: Your next question comes from Oliver Lefter with a reach. Your line is now open. Hi, thank you for taking my question. I just wanted to follow up on Victoria's secret, which is one of your main competitors biggest merchants. Can you just give a little bit more detail on what specifically it was that let them to switch to you? You kind of mentioned that it would be a slow migration. How long did expect that to be until they're slowly migrated off ESW? Thank you. Yes, and thank you very much for the question. It's Neil.
Nir Debbi: We are very happy that Victoria's secret decided to switch to the globally platform and partner with us. We're very proud of it, and we expect to grow and continue growing our partnership with Victoria's secret in the coming years. In terms of the launch plan, we started the rollout with the initial market, the late July, mid-July. We already, I would say, over the past, and we expect to finish the entire rollout within Q3.
Nir Debbi: All in all, everything to date is moving according to the project plan. The reason they selected the globally, I think, is evident also in globally being the market leader in anything related to global commerce, for multi-local capabilities we developed across border, to all the capabilities we developed around local shipping returns, duty management, duty drawbacks, and the data and demand generation capabilities. A lot of the things we developed are unique for globally and I think it's been appreciated in the market, so we're proud and happy to have Victoria Sikka joining us.
Amir Schlachet: Daniel, for the questions at the time, I will now turn the call over to Amir for closing remarks. Thanks a lot and thank you everyone for joining us on this call today. We appreciate our own going support and very much support to updating you again on our future earnings schools.
Operator: So until next time, goodbye to you all and take care.
Operator: Ladies and gentlemen, this concludes the conference call for today. We thank you for participating in ASAP.
Operator: Please disconnect your lines.