Global-E Online Ltd. ($GLBE)

[Audio Gap] But growth durability, 2025, the business grew 35%, you had 122% net dollar retention implying low double-digit contribution from net new GMV even in the year when you did not have as much contribution from massive enterprise merchants like you did in 2024, plus -- now the business accelerated incrementally in the first quarter, growing GMV 40% year-over-year. And for the full year, we're still looking for kind of low 30s. That's how we have you guys modeled and roughly 30% revenue growth to go with that. What is driving all that durability of growth? And how does that really confirm and speak to globally value prop as a key enabler for cross-border e-comm? Like it's a big question, but just like what's happening here?

First of all, thank you for having us, James. It's a pleasure, as always, and thank you for all of you for coming. I think actually the answer is in your question. It's -- thanks to the value proposition that globally brings to the table. I think -- when we look at our prospect for growth, we're -- first and foremost, we're looking at a massive TAM. Let's not waste time here doing kind of calculations. But the way we look at it, we don't mind the kind of $1 trillion, $2 trillion numbers that are floated out there by the Gartners of the world. We look at real kind of addressable TAM so we can probably spend a few hours debating on whether it's $200 billion or $300 million, but that's kind of the area code of the real kind of accessible TAM that can benefit from kind of a full end-to-end merchant of record solution like ours. Out of that, we've guided the market for just short of $9 billion this year. The next competitor in line as a 1/4 of that and then the one after does 1/4 of that. So the market is still heavily, heavily in the greenfield territory. I think the value proposition that we bring to the table, which is kind of a way for merchants to capitalize on that international opportunity in a way that is kind of risk-free and basically have globally record take care of all the headaches or the risk or the compliance issues and just let them concentrate on their main business, which is building a brand productizing marketing and so on and so forth. I think that our unique ability to do that based on the scale that we have, based on the data that we have. Based on our unique infrastructure and ecosystem of providers that we orchestrate to bring that to market that the only kind of sustainable strategic solution that these merchants can have if they want to capitalize on that international opportunity because it's to -- for any individual merchant they're either too small to even try and do something on their own. And even if they're big, they cannot systematically handle that because it's so fragmented. What you need to do in order to capture the opportunity in market A is completely different than what you need to do in order to capture in Market B. So the only durable way and strategically sound way to do that, is to utilize an expert like us that has, I would say, a platform that takes it as a platform approach and handle this for multiple merchants at scale with the expertise and the know-how that comes from the level in which we do that. So I think that is what stands behind our ability, and we are very much, as you know, we've put out there in our last Investor Day, some long-term targets that we very much stand behind. We're even slightly ahead of our plans to continue and to grow at kind of the high 20s, low 30s in GMV and not too far from that in terms of revenue. And while keeping high margins in the kind of low 20s and to mid-20s That, I think, is -- as I said, that's thanks to the very unique business model that we bring to the table that is fully aligned with the interest of our merchant.

Yes. I mean I think -- and it's interesting a lot of times when we talk to investors and they become very preoccupied with the addressable market. And to your point, like I think there's an important thing that we like to call out, which you mentioned, which is, a, you have a small portion of that Markets Day. But the second part is that it's worth reminding people is that cross-border e-commerce, cross-border commerce generally is a high friction transaction. And so with globally or the work that you do is you're reducing friction, which by definition, will grow that addressable market. And so I mean it kind of feeds on itself. So another key point or question that we often engage with investors on is take rate because we can start to forecast like what the volumes are and we can forecast what the -- like what those GMV growth rates could look like, but another part of the the equation is obviously take rate. And this is a key line of questioning that we continue to get from investors. And I think that uncertainty around that is probably creates volatility in the stock even when we see good results. And I think people are worried about the perception that take rates are under pressure. You had a lot of idiosyncratic and onetime issues that were almost entirely out of your control last year in 2025. But the multiyear trend in revenue take rates still has been somewhat down. There's an element where you're winning share with larger merchants. And so the pricing maybe is a little bit different, and it's dollar accretive, but it impacts the percentage. And one thing that I think is probably underappreciated in your business is that you look at the business on a gross profit take rate basis, with that metric really being pretty consistent. So help us think through and contextualize what the take rate narrative should be, what matters? And do you think -- how do you think about how you run the business vis-a-vis take rates?

So yes, while we definitely understand that take rate is an issue of interest to the investor community that not a main concern for us the way we look at the business. The way we look at it very simplistically is we need to create value for the merchants in order for them to stay with us, grow with us and to add new merchants to have them coming in. and generate volumes on the GMV side. And then we need to monetize on those volumes. So basically, we are looking at GMV growth, and we are looking at bottom line growth because in the middle, and I'll talk about take rates in a second. But in the middle, there are different sort of motions and different business models that come into play and sometimes the mix has an impact on take rates or other dimensions while we make sure that whatever business or sort of business model we have with the merchant the bottom line will be healthy. So we look at volumes and bottom line as sort of the main KPIs that we manage. Of course, revenue is extremely important. So we're not neglecting that. But basically, that's the way we approach it. And getting to take rates more specifically, I think there are 2 different stories, around take rates. On the service fee side, although there were some noise mainly related to the rise and fall of Ted Baker for us. I mean, we were working with the European franchisee of Ted Baker and they had quite a unique model where we also ran marketing or demand generation for them. So that contributed significantly to our take rate, but we also had costs associated with that. But once that went away, there was some noise a decrease. But since then, Things have been very stable. So for the last 6 quarters, we are around 6.8%, 6.9% in terms of service fee. And the way we view it, at least on the enterprise side, we expect service fees to continue and remain fairly stable because we don't see any significant change in market dynamics. We do see some other impacts, which, on the 1 hand, on average, we have larger merchants, and we do price based on volume. So that weighs a bit on take rates. But -- on the other side, we have value-added services that are gradually kicking in and sort of compensating for that. So to make a long story short, we expect to see to remain quite consistent in terms of enterprise service fee take rates, we might see a certain reduction not might. We will see a certain reduction in managed market service fees just due to the sort of the structure of the agreement that we struck with Shopify that basically impact the way we recognize revenue on that piece of the business. But other than that, things will remain stable. On the fulfillment take rate, it's a different story. First of all, it's not a direct take rate play. Because we provide merchants rate cards and we generate revenue based on those rate cards. So it's not a pure take rate play, and it's impacted by average order value and other parameters. But -- the main sort of dynamics around the fulfillment take rates were the introduction of multi-local services, basically multi-local is a service that we've introduced a few years ago and it enables us to serve merchants that carry inventory in different destination markets. But -- and it actually expands our TAM it's targeting mainly consumer electronics merchants but also very large legacy merchants that that typically have inventory in different destination markets and want to utilize or leverage that inventory in order to serve those markets, but they still want to do direct-to-consumer and leverage our services and basically multi-local enables that. The only thing is that once the inventory is already in market, either you have a very low fulfillment take rate or the merchant just choose us to sort of do the shipping themselves because now it's pretty straightforward. So by sort of definition, the multi-local piece has very low fulfillment take rates and that sort of has an impact on the average over time. So it's more a question of mix, but we view multi-local as a very a positive story because it expands our TAM. It enables us to work with very large merchants. And it has a very healthy bottom line associated with it.

So how should we think about -- so on that point, like how should we think about what the realistic pace of multi-local migration is? And you indicated that -- and correct me if I'm wrong, a lot of the multi-local adoption has actually been on consumer electronics. Are we going to see that be true for consumer electronics generally as you continue to expand that? And -- or should we -- and should we expect multi-local adoption in other categories?

So we see a multi-local adoption -- in consumer electronics, due to the nature of that segment because it's very difficult to do self importation in consumer electronics or you typically do B2B and also this type of merchants typically traditionally had distributors in end markets on the already in and that's the way they work. But in addition to that, there are some very large global brands, for example, someone like a Disney that carries inventory in different markets. So basically, these 2 segments. It's consumer electronics and large legacy brands would be the target segment. In recent years, actually, the sort of -- the share of multi-local out of our business has grown from zero to around 15%. So it outgrew the entire business and hence had an impact on fulfillment take rates. But at least in 2026, we see a more balanced growth. While multi-local is still growing very nicely, it's not outgrowing the business significantly. So we'll see less of an impact in '26, but we believe that going forward, multi-local still presents a large opportunity. So -- we might see a slightly higher -- or a gradual higher share of multi-local over time.

And then one question we also get, particularly in periods where fuel prices are very volatile, as -- how well are you able to protect gross profit dollars when carrier fuel or surcharge costs are moving around?

So that's part of our contracts with -- on the fulfillment side. We have the mechanisms in place to basically transfer these price hikes if it's the GPI as they call it, the annual indexing or we treat it as an increase because it doesn't ever index down. But also changes in fuel and other surcharges. So we have the ability, and we do pass them on to the merchants. It's not a kind of we don't do it one to one, because we do take into account kind of relationship considerations with [indiscernible] -- as an example, if a merchant just went live and got a rate card from us and 2 months later, there is an update to the surcharges or so we will discuss internally and take a decision kind of a case-by-case decision, whether we immediately pass it through. or typically, what we would do is we would wait kind of a quarter or something before we pass it through to them just from a kind of experience or relationship point of view. Because fundamentally, when they come to work with us, they are looking for both the increase in performance and the ability to to convert on that international traffic, but also on us simplifying and derisking the whole international experience for them, and that's part of it plus in addition, thanks to the scale that we work at with these carriers take [indiscernible] for example, we are a long-time strategic partner of or is there even a shareholder in globally historically. But even irrespective of that, we are one of DHL Express's top 5 clients in the world when it comes to[indiscernible] . So that means that even when they employ kind of rate hikes or surcharges, we have kind of preferential terms in many cases. And we are able to pass some of these benefits on to the merchants by them not having to incur the entire kind of market level cost hikes. So that's part of the value proposition for the merchants, which is why the -- on a long-term basis, yes, everything is transferred to the merchants. But there might be some timing delays, which we do for relationship purposes.

Got it. So let's go back to service fee take rates and that kind of thing. You mentioned the dilution from managed markets, but at the same time, for example, in the case of Ted Baker, even though they're really not a customer now, but you did indicate that you guys can benefit from things like demand generation, et cetera. Like -- how do we think about those 2 dynamics and what that should mean for service fee take rates?

Yes. So you're right. That's the 2 types of dynamics that we see around service take rate. On the 1 hand, we do price based on volumes. And as the merchants grow or the average size of a merchant grows, we see some sort of, on average, slightly lower service fees. We also have the impact of the sort of what we call the V2 of managed market so on. But on the other side, we have been seeing gradual contribution to service fee take rates from the different value-added services that we offer. Some of those or the ones that are worth noting are duty drawback, which is a service that enables us to actually pick money of the flow for merchants because basically, when products go into market, you pay the duties and taxes. But then on average in 10% of the cases, the product is returned. There's -- it varies a lot depending on the type of merchant and on the destination market. But on average, it's around 10%. And then you're not able to retrieve those duties and taxes, while your shopper expects to get the full amount refunded and a good experience in order to create a good experience with the shopper and get that shopper continue buying in the next time typically will pay the full price back. So you have a problem. Now you just 10% of the transactions, you got hit by approximately 20% to 25%. So you just lost on your P&L. And we are able to retrieve that in many cases. It's a destination country by destination country exercise -- but we have quite a decent coverage these days. And basically, we were able to bring that money back to merchants or at least part of it. and we take a certain cut out of it typically up to 20% of the refunded amount. We've also added another duty drawback service lately. It relates to U.S. merchants, which import goods into the U.S. from their manufacturers in Asia or any other location and pay. But then when the product is exported when it sold cross-border, they are actually -- they can get it robust for the importation duties, and we received authorization to do that for the merchant a few months ago. Now we are sort of processing the first application. So that's another piece on duty drawback. In addition to that, as you mentioned, we are also active on helping or supporting the merchants with the demand generation, mainly based on the Borderfree platform, and we have a few hundreds of merchants that joined this platform. And actually, on average, we are already able to contribute approximately 6% of sort of the traffic that is converted into sales. So it's not huge yet, but it's becoming significant. We didn't charge on this service because we wanted to sort of create a network effect. We want more merchants coming in. and more shoppers signing up for Borderfree.com, but we've recently started to charge for that. That's the significant contribution yet. But over time, we believe that that this could also add a bit to service take rate. And while Ted Baker is gone, we do see some opportunity to actually duplicate this model with additional merchants and just lady, we've sort of launched 1 of those smaller significantly smaller than [indiscernible] acre, but we see an opportunity with that as well.

Got it. I want to shift to demand. But before I leave takers, just make sure if there are any questions in the audience? One up here for Michael, please.

Is there any way to frame like how broad-based the demand is for duty drawback, like as I think about a U.S. merchant like why would they not want to be using this and what's reflected in your pipeline?

Yes. So generally speaking, you're right. As for kind of framed it. This is picking money off the floor. And I think for both types of duty drawback, we expect the kind of the attach rate to be very high in those cases where we can actually support it, and we are constantly enlarging that envelope. I think that the one thing maybe to call out is that on that part of the service for U.S. merchants that enables us to kind of back the original duties that were paid on the import when the products are exported, that is -- on that too, we expect very, very high attach rates. But this specific service, we expect it to take slightly longer to -- for the actual volumes to pick up for this -- the reason that unlike the kind of, call it, regular duty drawback where we export the goods and then the goods return, and we draw back the duties on the return. In those cases, we did both sides of the transaction. So we have full information, and we have everything we need essentially in order to make that submission to the authorities. When it comes to drawing back duties on kind of commercial imports, the original importation into the U.S. was done by the merchant sometimes a year ago, even more than that, and it's been sitting in inventory and they haven't really thought about actually collecting all the information that we need in order to make that submission. We need it from them. Now it's not rocket science, but they need to gather that information. And there is an incentive for them and for us for the -- specifically for the first submission to collect all the information they can because only on the first submission, you can actually submit years in arrears. You can collect back on 3 years' worth of imports or reexports. From the second submission onwards, it's just on the ongoing business. So we work with the merchants. We try to find ways to make it easier for them, but at the end, they need to open the draws in the archive and get those documents out and providing information for us. It's part of that. They also learn what they need to provide. So from the next submission onwards, we expect that to be fairly easy. But this specific offering for the initial submissions of all these merchants, we expect it to take a bit more time. That's the only kind of nuance, but overall, long term, we expect the attach rate across the board to be extremely high.

Got it. So the last few minutes here, I want to hit 3 key things. First, demand. Where are you seeing strength geographically in demand and Consumer demand. So actual GMV and volume, were you seeing consumer demand strong versus where is it weak or changing for better or worse?

Yes. So happily, in the last few months or even towards the end of '25 onwards, we've seen very healthy consumer demand almost across the board. I think that the type of consumers that are brands are targeting, which is typically sort of I would say, mid to high and sometimes even very affluent. Those are doing pretty well, and we've seen very, very healthy consumption patterns in the last few months. And as I mentioned, it's been across the board in most destination market. there was some interruption in the GCC in the Middle East region due to the Iran conflict. So for a few weeks, we have seen some some decrease or a significant decrease in specific markets in that region, but that came back as well. So all in all, we see good consumption patterns lately.

Got it. Got it. So let's talk about a key partnership that has been developing for years now, and that's with Shopify and what you're doing within managed markets. How should we be thinking about what you're seeing with respect to managed markets specifically? And how you built in a managed markets ramp within second half '26? And can that become -- can that accelerate in 2027?

Yes. So basically, as you know, we've -- 1 of the main rationales behind our kind of newer or the -- what we call it 1 or kind of managed markets part of our new strategic agreement that we saw in each of last year was around our understanding from the first iteration of the lessons learned from the first iteration of managed markets that, on the 1 hand, it kind of fortified our belief or joint belief as and Shopify in the massive opportunity that lies ahead in a service like managed markets. On the other hand, we realized that we needed an additional build. We weren't done, because we kind of simplistically saying we nailed the onboarding piece, we had to improve the ongoing experience. It wasn't good enough. We underestimated the effect of the changes that going on managed markets required from the day-to-day operations of these merchants. And because on average, merchants on managed markets tend to be on the smaller side of the scale, it turned out to be more difficult than expected for them to adapt to managing now a different kind of stream of business that is international. So we went ahead and we spent a lot of work on both sides, on our side and on the Shopify side and got to a place where managed markets is now fully integrated within Shopify payments and the operational processes, the money flows, all the reporting, all of that kind of the day-to-day of the store now works basically just the same as the merchants are used to when it comes to managing their domestic -- so that is kind of the essence plus a few other things around kind of application less onboarding and some additional features that were the basis of the new build of managed markets. Now in terms of the, I would say, what that translates to in terms of a ramp-up in volumes. So we're still in pretty early as because the new version went live kind of late last year in Q4. And -- but still, the -- were before they kind of marketing push, I would say, from Shopify. There's work continues, and we've recently launched managed markets in 2 additional markets in Canada and the U.K. for merchants in Canadian merchants and British merchants and work continues on additional features, but we do expect and Shopify is planning to start to more actively push it currently in general availability, but it's not being actively promoted. The plan is for them to start promoting as part of the next additions, the next Shopify additions, which has been pushed out to bid was originally supposed to be a spring additions. Now it's more of a summer edition. Its supposed to be at the end of this month. And on the back of it, start to more actively promote managed markets. That translates into our original assumptions that we're going to start to see a more meaning. We are already seeing a ramp-up because just the product is out there. It's doing well. We're getting good reviews in merchant forums, et cetera. So it is growing by itself. But we do expect to see an inflection point kind of in the second half of the year. And I would say we're currently solving for a good offering, a solid offering in growth in the run rate to kind of exit 2026, hopefully, in a much larger run rate, it will not have too much of an aggregate impact on 2026. But we're solving for already a meaningful impact on -- and contribution to our top and bottom line in 2027 onwards.

So last question, we're over time here, so we're going to keep it really short. But we've got asked the requisite AI question. You called out AI benefits across R&D, support, monitoring, compliance and prospecting. What is your -- the single case that you're most excited about where you're seeing AI returns and productivity gain.

I think -- I would say there are two. If I may go for two. One of them is on our ability to kind of harness and put into action the massive proprietary data asset that we have and that we continue to accelerate because we're already seeing with proprietary tools that we've built kind of that are AI-based -- that gives us a huge leverage that it doesn't just accelerate our kind of efficiency and effectiveness. It is also something that is -- that competitors cannot replicate because with [indiscernible] you need to feed it with relevant data and know-how in order to get the benefits. So I think that's one. The other one is on the R&D efficiencies. So there are efficiencies across the board that we can get. I think what we're seeing already in the use cases that we've already put into play is that there are massive R&D benefits to a point where when we look at our growth going forward, we think that we can become much more efficient all across the board using AI specifically on R&D, not only do we not see a reason to grow the head count in -- despite the growth that we expect in the coming years, we'll probably be able to scale it down by quite a bit and still be more effective in the total outcome of R&D.

Great. Well, Amir, Ofer, thank you so much. We'll leave it there. Thank you so much. Good day.