Global-E Online Ltd. (GLBE) Earnings Call Transcript & Summary

Welcome to the Global-e Second Quarter 2026 Earnings Announcement Conference Call. This call is being simultaneously webcast on the company's website in the Investors section under News and Events. For opening remarks and introductions, I will now turn the call over to Alan Katz, Global-e's Head of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. With me on the call today are 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 operations and the business results for the second quarter of 2026. Ofer will then review the financial results of the second quarter in more detail, followed by the company's updated outlook for the full year as well as the Q3 outlook. We will then open the call for questions. Before I read the forward-looking statements disclaimer, I'll note that as in previous quarters, we have posted an Excel-based metrics file on our IR website. This provides historical data for both financial information and KPIs that may be helpful as investors are researching the company. We have also published slides that highlight our results as well as some of the key themes that we will discuss in today's call. Please feel free to let us know if you have any feedback on either of these documents. Moving on. Certain statements we make today constitute forward-looking statements. All statements other than statements of historical facts are forward-looking statements, including statements regarding our guidance, growth strategy, long-term targets, competitive positioning, product and platform initiatives, partnerships and share repurchases. These 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 our 2025 annual report filed with the SEC. Please refer to our press release issued today, August 12, 2026, for additional information. In addition, certain metrics we will discuss today are non-GAAP metrics. 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 operational decision-making. For more information on these non-GAAP financial measures, including reconciliations to the most directly comparable GAAP measures, please see our press release issued today. Throughout this call, we will also discuss a number of key performance indicators used by our management team. These and other KPIs are discussed in more detail in our press release issued today. I will now turn the call over to Amir, our Co-Founder and CEO. Amir, please go ahead.

Thanks, Alan, and welcome, everyone, to our second quarter earnings call. The momentum that we saw during the start of the year continued through Q2, resulting in another very strong quarter all around and reinforcing our confidence in our ability to continue to strongly perform against our long-term growth targets. We beat the high end of the range across all of our guidance metrics and are now raising our outlook for GMV, revenue and adjusted EBITDA for the remainder of the year. Operationally, during the quarter, we had some great achievements against our multiyear strategic plan, including continued growth with our existing merchants, launching with exciting new brands and the expansion of our work with our strategic partners. We also announced and closed on the acquisition of Passport, a global asset-light logistics solution. Passport brings with its strategic logistics capabilities to further create value for our merchants, while also broadening our offering to serve verticals beyond our traditional merchant of record model, thereby expanding our TAM. We continue to make progress on Managed Markets V2 and on driving adoption of our value-added services. Lastly, we expanded our internal use of AI, leveraging this groundbreaking technology to improve our service to merchants and our ability to leverage our unique data assets as well as to lower our cost to serve. The utilization of generative AI allows us to move faster, provide better service and consultancy to our merchants and further leverage our economies of scale. From a financial perspective, we continue to perform ahead of the long-term plan and targets we presented last year at our Investor Day, both in our high-growth momentum and in the continued adjusted EBITDA margin expansion. Once again, our strong quarterly results and solid outlook for the year helped to illustrate our market leadership position, our growing competitive moats and our ongoing commitment to continue to drive the business towards our long-term targets. Before we go in more depth to some of the items that I just mentioned, let's first go over the key elements of our quarterly results. Compared with Q2 2025, GMV increased by 44% to almost $2.1 billion, making Q2 the first time we reached more than $2 billion in GMV in a non-peak quarter. Revenues grew by 39% to $299 million, with Q2 being the second quarter in a row in which our last 12 months revenues totaled more than $1 billion. Both GMV and revenues came in considerably higher than our respective guidance. This continued strong execution drives our upwards revised full year 2026 revenue guidance to a 32% year-on-year growth before accounting for Passport, which represents further acceleration from 2025's fast revenue growth, which stood at 28%. In other words, we have managed to meaningfully accelerate our growth rates compared to last year's trajectory. We believe this is a strong testament to the value our services generate for our merchants, to our market leadership position and to the immense untapped potential we see in this exciting and growing market. But growth alone is only one part of the story. In parallel to this growth in revenues, we continued our steady trajectory of adjusted EBITDA margin expansion over time. We finished Q2 of 2026 with $62.4 million of adjusted EBITDA, up 62% year-on-year to a margin of almost 21%. This is more than a 300 basis point increase compared to the same quarter last year. Simply put, we are not just generating durable high top line growth, we're also generating strong and profitable bottom line growth. In terms of trading activity, same-store sales growth came in above historical trends once again. Volume growth with both larger and midsized merchants continue to be a significant factor, driven by continued global consumer resilience as well as stronger consumer response to recurring annual promotional activities. For perspective, during Q2, some of our larger brands saw the increase in volumes from the seasonal sales days peak at more than 25% higher than the increase they saw in last year's Q2 promotions. Besides planned sales promotions, I would be remiss if I didn't congratulate a few of our soccer clubs that we proudly count as Global-e merchants on their fantastic achievements this past season. To name just a few, Arsenal won the Premier League Championship and were also runner ups for the Champions League. Barcelona retained their title as La Liga champions. Bayern Munich won the League title again. And Manchester United came in third in the Premier League and secured their return to the Champions League. This, along with more fans buying jerseys around the FIFA World Cup, led to an increase in volumes within our sports club's score. Moving on, as I mentioned earlier, our growth is both durable and profitable. Just like in past years, on an annual basis, we expect our free cash flow margin to remain at or higher than our adjusted EBITDA margin. In other words, we continue to generate growing amounts of cash every year. We plan to continue to use this cash to create long-term value for merchants and for our shareholders. I'll discuss our acquisition of Passport in a moment, but we are also focused on returning excess cash to shareholders via our share repurchase program. As of the end of the quarter, we have completed our 2025 plan of $200 million. In June 2026, the Board approved a new $500 million plan, which we intend to start executing upon as well. We will continue to repurchase shares as long as we believe the market is undervaluing the financial and operational strength of our business as well as the market opportunity that we have ahead of us. Let's now spend some time on our strategic and operational progress. First, as I already mentioned, we announced and closed on the acquisition of Passport. The team did an incredible job on this deal, which is especially exciting as this is a company that we've been watching for some time. We were happy to welcome Alex and the entire Passport team on board last month and believe this acquisition to be an especially strategic addition to our suite of logistics solutions, while the introduction of a non-MoR option to our suite of service offerings enables us to serve merchant categories we haven't been able to or wanted to address in the past with our MoR solution. Owning deep best-in-class standard shipping capabilities and know-how broadens our suite of logistics solutions, both outbound and inbound, thereby allowing us to further optimize costs and service levels of standard logistics around the world. This will also allow us to leverage our scale to build dedicated services, including consolidated returns, direct injections and further proprietary duty drawback capabilities. The post-merger integration effort is already well underway, and we are quickly advancing towards completing Phase 1, which is to enable Passport as a shipping service on the Global-e carrier stack. In parallel, we have kicked off multiple work streams aimed at building additional services and offerings across multiple geographic regions, which we expect to materialize over the coming quarters, thereby greatly enriching our suite of logistics and global trade solutions. Passport is currently on track to generate over $100 million in revenues this year, growing slightly ahead of our overall growth rate. Passport has recently turned adjusted EBITDA and cash flow positive, and we expect its margins and cash flow to further improve as they grow and as we realize integration synergies with our existing scale and framework over the next several quarters. Moving on, the launch of Shopify Managed Markets version 2 remains on track. In Q2, we officially expanded the geographical footprint of the Managed Markets offering, making it available for the first time to merchants outside of the U.S., namely in Canada and in the U.K. We expect to bring this offering to additional countries down the line. We're starting to see both trading volumes and the onboarding of new merchants on Managed Markets pick up steam and continue to see the significant long-term potential of this innovative new offering beginning to materialize. We migrated many of the merchants that were on version 1 to version 2 already towards the beginning of the second quarter, with the remaining merchants migrating during the quarter. The process went smoothly and initial feedback from the group of merchants has been very positive, further strengthening our belief that version 2 indeed solves many of the issues that impeded version 1 from being more widely adopted. We continue to work side-by-side with Shopify's team to deliver additional features and capabilities, all aimed at driving both conversion and adoption higher and higher. During Q2, we also made further progress on driving adoption of another one of our key value-added services, that of duty drawback. As a reminder, this service is designed to enable merchants to potentially reclaim import duties on goods that are exported outside of their home base as well as reclaim certain tariffs paid on return goods depending on the sale parameters. During the second quarter, we had several merchants that started utilizing the U.S. import drawback capabilities, and we expect to see this service growing as more merchants will provide the necessary documentation to support the process. Furthermore, as I already mentioned, we believe that our acquisition of Passport will further expand our capabilities in this field of duty drawback in the future. Next, Borderfree.com expanded again this quarter. Global traffic into the Borderfree.com brand discovery portal continues to rise, crossing 10 million unique visits in the last 12 months. The share of merchant sales attributable to the Borderfree.com channel is now 6.5% for merchants that are utilizing the platform. This offering is still in its early innings, but we remain pleased with the progress to date and are excited to see its continued adoption. Lastly, we are continuing on our path to implement AI across the organization as we lean heavily on our AI-first approach to drive service level enhancements and boost efficiency levels all around. By now, we have built AI into many of the processes across R&D, implementation, merchant operations and customer service as well as our corporate and back-office functions. We're empowering our teams to improve the onboarding and development processes for merchants, launch new AI-led processes for research and support and roll out tools to further enhance our level of consultancy and optimization for the benefit of our merchants around the world. Let's now move on to some of the exciting new brands that have joined the platform and went live across our various geographies during Q2. First off is Europe, where we were thrilled to launch with Ferrari, the legendary Italian supercar maker and one of the most iconic consumer brands in the world, a terrific new logo win for Global-e. Italy also saw the launches of Manebi, the espadrille specialist that turned its Mediterranean summer staple into a year-round luxury item and Liviana Conti, the first brand to launch with us out of the Italian fashion group, Abraham Industries. In Germany, we launched 6PM, the Berlin-based contemporary streetwear label as well as the influencer-founded fashion brand, Mikuta. Sweden saw several brand launches across a diverse set of verticals, including Malina, the fashion house in Stockholm; C'est Normal, a fashion and lifestyle brand for men founded by professional skier and entrepreneur, Jon Olsson; Synsam, one of the Nordic's largest optical retail chains and even Rimgard, an innovative Swedish engineering brand behind a patented high-end wheel security lock. In France, we launched with another maison out of the LVMH Group. This time, with Officine Universelle Buly, the Parisian luxury brand fame for its artisanal fragrances since 1803. We also launched with another French brand that has a rich history, J.M. Weston, the French master shoemaker, which was founded in Limoges back in 1891. In the U.K., we launched with Naked Wolfe, a London-born sneaker brand known for its chunky statement footwear and heavy social media presence, with N.Peal, the historic Burlington Arcade cashmere house, famously worn on screen by James Bond and with Montirex, a Liverpool-born technical activewear label. In North America, we launched with many prominent brands, such as The ROOT Brands, the fast-growing wellness and supplements company; Buffbunny, the popular fitness and activewear brand by fitness influencer and entrepreneur, Heidi Somers, who bootstrapped this brand in 2016 from a living room in San Antonio, Texas; Dolce Vita, the L.A.-based contemporary footwear brand from the Steve Madden family; Six Zero Pickleball, the fast-growing paddle brand riding on the global pickleball boom; and McLaren Golf, the recently launched and highly anticipated brand of golf gear from the well-known McLaren racing team. Last but not least, in APAC, we launched with a second brand out of the Universal Music Japan Group, continuing our relationship with the label following their Q1 launch; with All Things Golden, a successful Australian boutique label; and with ADERERROR and The Loeil, 2 of Korea's most talked about fashion labels. These are just a few of the exciting brands that have gone live with us over the second quarter. I want to take this opportunity to give credit to our professional services and onboarding teams who have done a tremendous job this year, launching more and more brands onto our platform. In addition to new merchant launches, Q2 also saw the expansion of our business with a number of prominent brands. FIGS continued to expand with us, opening up new countries across APAC. They remain one of the fastest-growing and most engaged brands on our platform. Other notable brands with which we expanded to additional lanes in Q2 are Fresh, the LVMH-owned skin care brand that launched with us back in Q1; Pokemon, where we expanded this quarter to take on significantly more volume related to their highly anticipated and viral drops; as well as Peter Millar and G/FORE, the Richemont golf-wear brands that launched last quarter; Camper, the Spanish footwear brand; and Isabel Marant, the French luxury fashion house, just to name a few. To summarize, we have had a great first half of 2026, and we expect continued strong growth and profit expansion in the back half of the year as is reflected in our updated full year guidance. Based on what we see today, we believe we are well positioned to exit 2026, which is the second year in our long-term strategic plan ahead of targets, further solidifying our commitment to durable growth and value creation. I will now hand it over to Ofer to take us through the quarterly numbers in more depth and lay out our Q3 and updated 2026 full year guidance.

Thank you, Amir, and thanks, everyone, for joining us today for our earnings call. As Amir just highlighted, Q2 was another quarter of very strong growth for Global-e with results again significantly above the Rule of 50 as we continue to execute and deliver against our strategic plan to drive long-term and profitable growth across the business. Before I go into details of the quarter, I'd like to remind everyone again that in addition to our GAAP results, I'll also be discussing certain non-GAAP financial measures. Definitions of these measures and reconciliation to the most directly comparable GAAP measures can be found in our earnings release. GMV in Q2 was $2.089 billion, up 44% year-over-year. Trading volumes were strong, driven by very strong same-store sales as we continue to see robust consumption patterns across most destination regions. Performance was further accelerated by highly impactful Q2 merchant promotions, which despite being annual events, generated stronger consumer response this year. In addition, we continue to benefit from the positive impact of the merchant cohort that launched in the second half of 2025, see positive contribution from merchants launched in 2026 and benefit from some FX tailwinds as expected. In Q2, we generated total revenue of $299 million, up 39% year-over-year. Service fee revenue for the quarter was $139.4 million, up 36% year-over-year and fulfillment services revenue for the quarter was $159.6 million, up 42% year-over-year. The service fee take rate of the core business remains fairly stable. And as expected, we saw a onetime decrease in the service fees baseline, driven by the shift of Managed Markets V1 merchants to V2 in the quarter, which due to the V2 accounting treatment reduced revenue, and at the same time, also reduced sales and marketing expenses. I believe it is important to note that as we continue to expand our suite of solutions with business models such as multi-local, Managed Markets and following the Passport acquisition, which is also mostly non-MoR, we believe take rate trends are becoming a less indicative metric of the state of the business. Since 2024, while take rates have modestly declined, our adjusted EBITDA margins have meaningfully expanded by more than 320 basis points. Progressing through the income statement. Non-GAAP gross profit was $135.4 million, up 36% year-over-year, representing a non-GAAP gross margin of 45.3% compared to 46.5% in the same period last year. Gross margin was primarily affected by increased fuel costs, resulting from a gap between the time in which carriers update their fuel surcharges and the time we pass those updates on to merchants. While we have a mechanism to adjust for fuel price changes, which we have utilized in recent months, in view of the high fuel prices volatility, at present time, we chose to reduce the level of uncertainty and volatility for the merchants and not to update pricing very frequently. GAAP gross profit was $131.9 million, representing a margin of 44.1%. Moving on to operational expenses. R&D expense in Q2, excluding stock-based compensation, was $30.4 million or 10.2% of revenue compared to $26.2 million or 12.2% in the same period last year. We continued to benefit from both operating leverage and the utilization of AI tools and agents to drive efficiency into the business during the quarter. Despite the continued investment in the enhancement of our platform to further expand our offering and add value to our merchants, R&D, excluding stock-based compensation, increased only 16% this quarter despite the continued growth in GMV of over 40%. Total R&D spend in Q2 was $35 million. We also continued to invest in sales and marketing to drive our future growth, including in our go-to-market and quota-carrying team, the marketing of Borderfree.com and investment in building our brand reputation in both new and existing markets. Sales and marketing expense, excluding stock-based compensation and acquisition-related intangible amortization was $31.8 million or 10.6% of revenue compared to $27.2 million or 12.7% of revenue in the same period last year. The decrease in sales and marketing expense as a percentage of revenue is partially driven by the migration of Managed Markets merchants from V1 to V2. Total sales and marketing expenses for the quarter were $35.8 million. General and administrative expenses, excluding stock-based compensation and acquisition-related contingent consideration, were $11.7 million or 3.9% of revenue compared to $8.8 million or 4.1% of revenue in the same period last year. Total G&A spend in Q2 was $16.4 million. We are happy to see our OpEx, excluding stock-based compensation and acquisition-related intangible amortization at under 25% of revenue, driven by scale leverage and operational efficiencies. This was one of the financial targets we set pre-IPO, and we are very proud to achieve this milestone. Total OpEx as a percentage of revenue was 29%. Our bottom line continued to grow even faster than our top line. Adjusted EBITDA for the quarter was $62.4 million, representing a 20.9% adjusted EBITDA margin, an increase of 62% from the $38.5 million or 17.9% margin in the same period last year. Non-GAAP net profit for the quarter was $64.9 million compared to $37.9 million in the same period last year. Non-GAAP net profit per share was $0.37 on a fully diluted basis compared to $0.22 in the same period last year. GAAP net profit for the quarter was $47.7 million compared to a net profit of $10.5 million last year and fully diluted GAAP EPS was $0.27. Turning to the balance sheet and cash flow statement. We ended Q2 with $530 million in cash and cash equivalents, including short-term deposits and marketable securities. Free cash flow in the quarter was $73.2 million. This compares with $63.5 million of free cash flow in Q2 of 2025. Net cash from operating activities was $73.6 million compared to $65 million a year ago. As Amir mentioned, in Q2, we continued to execute on our share repurchase program and completed the remaining capacity under the $200 million 2025 plan. We repurchased approximately $68 million in stock in the quarter and have now repurchased 5.7 million shares in total since the start of the program. As said, during the quarter, the Board approved a new $500 million share repurchase plan, which we expect to begin executing on moving forward. Turning to our financial outlook and guidance for Q3 and our updated outlook for the full year 2026. We continue to see 2026 as another year of very strong top and bottom line growth for Global-e. We have raised again both the top and bottom line outlook for the year. In addition, we have included in the guidance the expected contribution of Passport. For Q3 2026, we are expecting GMV to be in the range of $1.995 billion to $2.045 billion. At the midpoint of the range, this represents a growth rate of 34% versus Q3 of 2025. Out of that, we expect Passport to contribute approximately $20 million from its Merchant of Record service. We expect Q3 revenue to be in the range of $308.5 million to $315.5 million, representing a growth rate of over 41% versus Q3 of 2025. Of that, we expect Passport to contribute $24 million to $26 million. Lastly, for adjusted EBITDA, we are expecting a range of $58.5 million to $62.5 million or 19.4% margin at the midpoint of the range. Of that, Passport is expected to have a contribution of less than $1 million. For the full year of 2026, we now anticipate GMV to be in the range of $8.81 billion to $9.11 billion, representing an annual growth rate of 36.4% at the midpoint of the range. Of that, Passport is expected to contribute approximately $60 million in the back half of 2026 from its Merchant of Record service. Revenue for the full year is now expected to be in the range of $1.305 billion to $1.355 billion, representing a year-over-year growth of 38% at the midpoint of the range. Of that, Passport is expected to contribute $55 million to $59 million in the back half of 2026. Lastly, we expect adjusted EBITDA and adjusted EBITDA margins to continue to expand supported by operating leverage and utilization of AI. We now expect to achieve 2026 adjusted EBITDA in the range of $278 million to $300 million, representing a 46% growth at the midpoint and a 21.7% margin. Of that, Passport is expected to contribute $3 million to $4 million in the back half of 2026. As discussed at the time of the acquisition, Passport is growing slightly ahead of our overall growth rate and is generating a mid-30s gross margin. We expect the Passport margins and cash flow to improve further in 2027 as the business continues to grow and as we realize integration synergies with our existing scale. In conclusion, we had a very strong first half, and we look forward to continuing to support our merchants on their international journey. We are the clear leader in a fast-growing and exciting market and are continuing to execute well upon our multiyear plan. With our strong momentum, we believe we are well positioned to deliver another year of results well above the Rule of 50. And with that, Amir, Nir, Alan and I are happy to answer any questions you may have. Operator?

[Operator Instructions] Your first question comes from the line of Andrew Bauch from BMO.

Great quarter, guys. Good to see the acceleration, especially against a tougher comp. I want to ask you about Managed Markets. You made the conversion from 1.0 to 2.0 this quarter. I was wondering if you could share any additional data points on what you're seeing around things like conversion or attach? And what kind of growth are you contemplating for Managed Markets this year because we understand growth in that business was largely on pause last year.

We are seeing an increase in adoption following the rollout of V2. We are also excited with the opening of the general availability on Managed Markets in Canada and U.K., which is positively impacting the interest level outside the U.S. and overall. And lastly, we have seen positive feedback from merchants that migrated from V1 to V2 on the merchant experience and on the overall conversion. Also the continued development we made around managed pricing together with Shopify have yielded good results in terms of its contribution to participating merchants in the conversion. So all in all, we are tracking in the right direction and we see continuous increase in adoption. Managed Markets is a longer-term play. We do believe it will continue to grow over time and continue to accelerate in its contribution to Global-e and to Shopify.

Your next question comes from the line of Billy Fitzsimmons from Piper Sandler.

Good to see the results and guidance. It seems like, first, same-store sales growth continues to outpace expectations. And then second, newly launched merchants, including those that joined Global-e maybe in the back half of 2025, are ramping faster on the platform. Can you guys please contextualize those trends for us a little further? Are newer customers ramping faster because of better onboarding processes within Global-e? Are international trends better because marketing tools in the industry are getting more precise and allowing them to grow faster? Is it macro? And then given the strong backdrop, what are you expecting around same-store sales trends in the back half?

So first of all, we are excited with what we've seen in the first half of 2026 and even further acceleration we have witnessed in Q2. The performance of merchants that launched with us in the back half of 2025 is exceptionally good. We have seen the conversion rates going up, those sales going up even further than our expectation, and this continues to contribute highly in the first half, but also we see the contribution it will yield also to the back half. In terms of same-store sales, we are trading above the historical level. So consumer demand looks good and resilient across virtually almost all markets around the world. In terms of the backdrop, we do have some normalization baked in as we guided also in previous quarters into the same-store sales. Some of it relates to tailwinds of FX that we had mainly in Q1 and some of it also in Q2 that will no longer expected to be in the back half of the year. And some of that is related to easier comps on the first half of the year due to the duties that were -- duties noise that started in the first part of 2025 and normalized over the year. But in general, we do see strong growth continues, and it's reflected in our guidance that now sees a stronger back half of the year than what we anticipated a quarter ago.

Your next question comes from the line of Rob Wildhack from Autonomous Research.

Okay, good. So you called out some larger promotions by your top merchants in the second quarter. And I was curious if you could add some more context to the effect that those might have had on GMV growth. Are they worth like a couple of percentage points or something like that? And then looking forward, can you remind us on the cadence of that promotional activity through the rest of the year and how that might affect the volume growth that you're guiding to?

Sure. So this -- most of these promotions are annual promotions, a lot of the merchants and some of our larger merchants have sort of a biannual approach to promotions. So they have large promotions in Q4. And then they also have some large promotions in Q2. It's the same promotions every year. So we've seen that in '25, in '24 and even earlier. So nothing out of the ordinary here. The interesting thing is that the consumer reaction in 2026, in Q2 2026 was very strong to those -- to the same promotions that they run every year. We've seen very strong results for those promotions, and that has contributed to Q2 results. In general, I can say that over the last 2 or 3 years, we are seeing over time a better reaction to promotions. We see consumers planning their shopping, at least some of the consumers. I think it's evident in our last 2 years' Q4 results. So it is a trend. And we believe that we will continue to see this in the future.

Your next question comes from the line of Scott Berg from Needham.

Really nice quarter here. I guess I got a couple. I'm not sure if this is for Amir or Nir. But as you think about the Managed Markets 2.0 traction, what type of KPIs or milestones should we all be looking for? Obviously, GMV commentary is key, but whether it's customers moving from version 1 or what you're seeing from initial adoption of 2.0? It'd just be great to hear if there's any other items you think are worth us paying attention to.

Scott, it's Nir. So basically, we are tracking adoption and tracking GMV on Managed Markets, and this would be our main factors. In terms of the migration itself, it was completely done. It wasn't a long-term phased approach. It was done in a few batches, but it was completed. So we shouldn't expect any more changes in terms of contribution between revenue and cost or expense recorded going forward. It was completed. So now it's just to focus on the business and the growth of it. We, together with Shopify, are fully engaged and behind the product, we continue to develop elements that we believe would get more merchants to trade on it, easier to trade on it with better results. And we do see early indications of increased adoption and better trading. So we are optimistic on the longer-term trend and the continued growth of Managed Markets.

Very helpful, Nir. And then Ofer, you talked about gross margins in the quarter being down in Q1, partially because of the Managed Markets conversions because of the new commercial agreements or the difference in commercial agreements on the Managed Markets 2.0. Is the second quarter gross margin we saw, is this kind of the right baseline start working our models around going forward? Or with the last remaining conversions, would there be another slight step down? Of course, understanding just the EBITDA margin impact is pretty negligible overall.

Yes. So gross margins have been pretty stable in the last few quarters. And in Q2, we've seen a certain decrease. As I mentioned on the prepared remarks, it was mainly driven by fuel prices. Basically, fuel prices were on the increase and also very volatile. And carriers were updating these prices much more frequently than in the past. And our business decision was not to sort of create that volatility on the merchant side. And while we have updated the pricing, we are not doing it as frequently as the carriers, and we decided to absorb some of the cost temporarily. So that was the main impact in Q2. In terms of Managed Markets, as Nir mentioned, the migration from V1 to V2 is completed. It happened -- some of it happened late Q1, towards the end of Q1, last days of Q1 and the remaining merchants moved within the quarter. So it's behind us. And I think that in that sense, Q2 results reflect most of the impact from the V1 to V2 migration.

Your next question comes from the line of James Faucette from Morgan Stanley.

I want to follow-up with a margin question. And just wondering if you can outline for us how you're thinking about where margins can get. Passport, obviously, is a little below corporate average, but it sounds like those are improving. Can that be ultimately in line with the overall corporate level? And just looking at cross-sell opportunities for Passport into the broader Global-e solution, how should we think about that and that potential to drive both revenue and margin expansion?

Yes. So in terms of our bottom line, we are very happy with the results. We have been able to gradually expand adjusted EBITDA margins as we planned. This was part of our -- of the long-term plan that we've presented in our Investor Day, and we are able to gradually improve, and this is driven by the growth and the operational leverage that we are able to achieve. And we believe that going forward, we will continue to improve over time. In terms of Passport, we are very excited about this acquisition. Looking at the financials, as we've mentioned, they are growing fast. And they are over the sort of the tipping point as they are adjusted EBITDA positive and also positive in cash flow. We believe that based on Passport growth and the integration to Global-e and the synergies that we are able to achieve, we can get to similar levels of profitability with Passport. In addition to that, we believe that over time, Passport could also contribute, again, from a sort of a synergy side to Global-e as we believe that we will be able to offer a much more complete shipping proposition to the merchants. We believe that we can increase also revenue through that.

Your next question comes from the line of Craig Maurer from FT Partners.

I wanted to ask a couple of questions on Managed Markets. First, did you see the expected acceleration or uplift from the mention in summer additions? And Shopify has built out some extensive AI offerings for its merchants, including Sidekick. And do you know to what degree Managed Markets is being promoted through those channels or being pushed on merchants through those channels? And secondly, in terms of Passport, is there any seasonality that we should know that might be different from your own over the next 4 quarters, so we understand how to model for the back half of the year and into next year?

It's Nir. I'll take the Managed Markets part. So in general, following additions, we see more interest coming into Managed Markets. We have seen more adoptions and this, together with the switch from V1 to V2 that makes it easier to adopt Managed Markets is creating more interest. We have seen adoptions and trading going up. It's continuously going up, but it is a long-term play. So we are excited with what we see. Shopify is backing the plan. They are pushing it in different channels, including their console. So it is going well, and we continue to work through additional parts of the offering that we think would get the adoption to be quicker and also the trading to be even further efficient and better conversion than what we were able to achieve so far. So we are excited about the long-term possibility, and we already see indications of the growth in adoption. So quite a positive development on the Managed Markets front.

And then to answer your question on Passport seasonality, it's a pretty similar pattern to Global-e. So you can pretty much assume sort of a similar seasonality between the quarters.

Your next question comes from the line of Will Nance from Goldman Sachs.

I wanted to maybe push you guys a little bit on the take rate commentary. I know it's a big focus for investors. When I look at the long-term targets, I think there is a 3- to 5-point gap between revenue and GMV. And so I think the baseline expectation is for modest take rate compression over time. But you're talking a lot about some of these value-added services, Borderfree, duty drawbacks, the marketing services. So maybe you could talk in the context of some of these value-added services, how you think about how this could impact the top line trend relative to GMV and whether you see an opportunity to mitigate some of that take rate compression, just acknowledging the fact that you guys are growing well ahead of the medium-term outlook that you provided at the Investor Day.