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Behind the Stock
Behind the Stock

20 Aug 2021

Investor Does Fundamental Analysis on Global E Online (GLBE) - Stock Analysis For Beginners

Transcript

00:00 About Global E Online

If you like online shopping as much as my wife, then you’ll love this company!

Hey guys, I’m Alex. Welcome to Behind The Stock where I dissect company information and annual report to discover and identify investment opportunities for you. We upload new episodes every Friday! Make sure to subscribe and turn on the notification bell!

Today, let’s talk about this company that provides e-commerce solutions, Global E Online!

This company’s IPO was only back in May this year. In just 3 months, share price has already shot up 155%! They offer end-to-end cross-border platform. Their platform connects shoppers and brands to make international transactions seamless for all parties.

With the direction that the world is heading, e-commerce is now essential for almost all retailers. Sellers who used to sell domestically can easily sell to anyone in the world if they can leverage on the right e-commerce strategy.

For us consumers, it’s common now when we’re online shopping to expect retailers to offer international shipping. And we don’t think much about it if the payment flow, currency conversion, and overall user experience are seamless.

However, on the backend, it can be extremely complicated. There are multiple challenges, including different currencies, payment methods, different taxation requirements, language barriers, difference in local preferences or behaviours, customer service, and delivery and return logistics.

That’s where Global E comes in.

The company’s eCommerce platform enables brands and retailers to sell directly to international online customers. Their platform supports messaging in local languages, local pricing in over 100 currencies, over 150 different payment methods, handles local taxes, and manages shipping and returns. Not only that, but they can also take the data on customers to provide valuable insights to merchants on a localized basis, which can increase sales. Merchants that use Global-e’s solution see a significantly higher conversion of international traffic to sales.

Amir Schlachet, Shahar Tamari, and Nir Debbi co-founded Global-e in 2013. In 2014, their first UK client went live. Eventually, they launched in Spain, then France, launched in the U.S., the Netherlands, Germany, Canada and Hong Kong, and finally IPO on Nasdaq in May 2021.

The three co-founders are still actively engaged in day-to-day operations. Amir Schlachet serves as the company’s CEO seat, Shahar Tamari as Chief Operating Officer, and Nir Debbi running as the Chief Revenue Officer.

02:43 Global E Online Business Overview

Let’s take a look at their business overview.

Global-e works with a few strategic partners. One of them is DHL International, which is Global-e’s exclusive international shipping partner. Also, before the company’s IPO, Global-e became an exclusive third-party provider of cross-border solutions with permission to access and integrate into Shopify’s platform checkout.

How Global-e makes money is through services fees and fulfilment services. In terms of service fees, it’s through the cross-border e-commerce platform that Global-e provides to merchants. They generated revenue by taking a percentage of the value of transactions that flow through that platform.

As for fulfilment services, it’s from the shipping, handling, and other global delivery services that they offer in order to deliver merchants’ goods to consumers. Global-e has around 442 merchants including well-known brands like Hugo Boss, Marc Jacobs, Versace, Forever 21, Sephora, and many more.

In 2020, Global-e saw 360 million visits to their platform. They handled 4.6 million product transactions with an underlying gross merchandise volume (or GMV for short) of USD 770 million.

03:55 Global E Online Growth

One similarity that you see with young, fast-growing companies or fresh off IPO is that typically, they’re still burning cash and pumping into growth and expansion. However, for Global-e, they are generating cashflow and free cashflow thanks to their efficient go-to-market strategy.

In terms of growth, Global-e’s opportunity, it is HUGE. The Cross-Border B2C E-Commerce Market was estimated at USD 780 Billion in 2019 and is expected to reach USD 4,820 Billion by 2026. As of Q2 2021, Global-E GMV is at USD 326 million and they reported 95% year over year growth! They’re just barely scratching the surface of their total addressable market. Assuming Global E able to capture just 0.1% of the total addressable market, that’s a GMV of USD 4.8 billion! This definitely benefits Global-E. 

Another growth aspect for Global-e is their new merchant acquisitions. They’re in a great position to capture significant potential merchants across the multiple existing geographies and brand segments.

Besides that, Global-e is also growing within their existing merchant base. They’re building their relationships with their merchants by improving their service. Brands and retailers using Global-e's e-commerce solutions can control their direct-to-consumer distribution model. They’re able to develop and maintain long-term relationships with shoppers, get full control over the brand experience, gain data-driven insights, and potentially achieve higher margin on sales. As merchants’ online sales grow, Global-e revenue grows as well.

Other than that, Global-e is also developing and expanding strategic partnerships. They’re strengthening their existing relationships with the recently-signed partnership with Shopify, a big player in the e-commerce world. They’re also build new strategic partnerships with other key players across the chain in the different markets in which they operate.

Lastly, scalability plays in favour to their growth. Global-e's customers are diversified by vertical, merchant sector, and end-market. Their wide-reaching scale enables them to provide a solution to merchants in any region of the world. Combined with strong brand recognition, this has allowed Global E to acquire some of the largest merchants in the world as customers. As we saw previously, they’ve been able to penetrate new markets basically every year since the company was founded. And now their emphasis is in Asia Pac. They recently opened a new office in Tokyo and launched its first APAC-based merchant, Theory Hong Kong which is part of the Fast Retailing group

In terms of Alex Meter, I rate Global-e's growth as great.

06:37 Global E Online Moat

Moving on to Global-e's strength or competitive advantage.

Since they’re still quite a young company, I would say they would need time to build up their competitive advantage to be stronger. However, there are a few factors that they can play to their advantage.

First is their differentiated data asset. With the data that they’re able to collect from their platform. It can help merchants to make better decisions and optimize how they conduct cross-border business on a market-by-market basis. This will create a powerful flywheel effect.

As the data helps merchant drive more sales and conversions, they can expand more, which creates more data, and the cycle continues. With each cycle, they get smarter, and continuously improve. Increased sales for merchants means more revenue for Global-e and also potential to attract new merchants to the platform.

Another competitive advantage for Global-e is their robust business model with sticky customers. The company recorded Net Dollar Retention Rate of 134% and 172% in 2019 and 2020 respectively. Gross Dollar Retention Rate has consistently been over 98% since 2018.

Here’s what these numbers tell us. Global-e’s clients are not only sticking to the platform but they're spending more with them as well. This is because Global-e's solutions are considered mission-critical to these clients. They rely on Global’s e-commerce solutions to sell to their consumers.

In terms of Alex Meter, I rate Global-e's competitive advantage as good.

08:07 Global E Online Risks

As for the risk for Global-e, it’s regulatory risk.

Global-e's long-term success depends on ability to operate internationally. So there are risks associated with cross-border sales and operations. They will need to localize solutions, including product customizations and adaptation for local practices and regulatory requirements.

There’s also ongoing compliance with local laws, legal standards, taxes, trade laws, and many other barriers. Restrictions on importation or shipping of prohibited items, importation quotas, data protection, and many more. Also, e-commerce is bound to increase exposure to fraud.

In terms of Alex Meter, I rate Global-e's risk as medium risk.

08:52 Global E Online Financial

Let’s check out the financial health of Global E Online. In terms of revenue, it is increasing. However, do note that they are currently in loss making because they are investing heavily into future growth. Also, interesting to note is that their gross profit margin has been increasing. In fact, recent Q2 reported their gross profit margin now is at 36%. Currently debt level is very low. They're able to generate strong operating and free cash flow.

In terms of Alex Meter, I rate Global-e's financial as good.

09:20 Likes & Dislikes about Global E Online

Here’s what I like about Global E Online.

What I like about Global-e is that their e-commerce solutions is mission critical to their clients. That’s why they’re able to lock in their customer, which can be seen from their high net dollar retention rate.

I also like their increasing gross margin. It shows that their pricing power is increasing and the business is showing signs of operating leverage.

Another thing I like is the strong growth opportunity for the business. They have been able to scale fast and at the same time been able to generate free cash flow.

So, after watching my analysis, would you add Global E Online into your watchlist?

Comment down below, do you think Global E is the next Shopify?

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Till then, I’m Alex and goodbye!