IPO Update: Global-E Online Finalizes $360 Million U.S. IPO
Summary
- Global-E Online has filed to raise $360 million in a U.S. IPO.
- The firm provides an online ecommerce platform for businesses seeking cross-border expansion opportunities.
- GLBE has grown revenue and gross profit rapidly, is profitable and generating free cash flow and is operating in a growing industry segment, so the IPO is worth consideration.
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Quick Take
Global-E Online (NASDAQ:GLBE) has filed to raise $360 million from the sale of its common stock in an IPO, according to an amended registration statement.
The company provides an e-commerce platform for merchants seeking to expand their offerings outside their home country.
GLBE is growing revenue quickly, is profitable and is operating in a growing industry, so the IPO is worth a close look.
Company & Technology
Petah Tikva, Israel-based Global-E was founded to develop a cross-border e-commerce platform that makes it easier for merchants to sell their products internationally.
Management is headed by co-founder and CEO Amir Schlachet, who was previously SVP and strategic advisor to Bank Hapoalim.
Below is a brief overview video of the firm:
Source: Global-e
The company's primary offerings include:
Localized languages
Support for over 100 currencies
150 Payment methods
Pre-calculate & remit duties
20 shipping carriers
Multi-lingual after-sale support & returns
Global-E has received at least $120 million from investors including Red Dot Capital, Deutsche Post Beteiligungen, Goor Holdco and Cross Ship.
Customer Acquisition
The firm seeks customer relationships through direct sales, inbound prospect leads and through channel partnerships.
A typical sales cycle can take from three weeks to six months and implementation can require up to 16 weeks for large merchants or 3 - 6 weeks for smaller businesses.
Sales and Marketing expenses as a percentage of total revenue have remained stable as revenues have increased sharply, as the figures below indicate:
Sales & Marketing | Expenses vs. Revenue |
Period | Percentage |
2020 | 7.1% |
2019 | 7.0% |
(Source)
The Sales and Marketing efficiency rate, defined as how many dollars of additional new revenue are generated by each dollar of Sales and Marketing spend, was a strong 7.3x in the most recent reporting period.
GLBE has produced a net dollar retention rate of 172% for the calendar year 2020, an extremely high rate. It indicates high product market fit, growing revenue from its existing cohort of customers, and efficient sales and marketing efforts.
Market & Competition
According to a 2020 market research report by Grand View Research, the global e-commerce market was an estimated $9.1 trillion in 2019 and is expected to reach $27 trillion by 2027.
This represents a forecast CAGR of 14.7% from 2020 to 2027.
The main drivers for this expected growth are an increasing acceptance of technology as a means to purchase all manner of goods and a growing middle-class population worldwide.
Also, the chart below shows the 2019 e-commerce market share by model type:
(Source)
Major competitive or other industry participants include:
In-House D2C online stores
Alternative platforms
Legacy Players
Local Distributors
Non-D2C online channels
Financial Performance
Global-E's recent financial results can be summarized as follows:
Sharply growing topline revenue
Increasing gross profit and gross margin
A swing to operating profit and net income
A strong increase in cash flow from operations
Below are relevant financial results derived from the firm's registration statement:
Total Revenue | ||
Period | Total Revenue | % Variance vs. Prior |
2020 | $ 136,375,000 | 107.1% |
2019 | $ 65,852,000 | |
Gross Profit (Loss) | ||
Period | Gross Profit (Loss) | % Variance vs. Prior |
2020 | $ 43,473,000 | 132.9% |
2019 | $ 18,664,000 | |
Gross Margin | ||
Period | Gross Margin | |
2020 | 31.88% | |
2019 | 28.34% | |
Operating Profit (Loss) | ||
Period | Operating Profit (Loss) | Operating Margin |
2020 | $ 9,023,000 | 6.6% |
2019 | $ (4,951,000) | -7.5% |
Net Income (Loss) | ||
Period | Net Income (Loss) | |
2020 | $ 7,891,000 | |
2019 | $ (7,544,000) | |
Cash Flow From Operations | ||
Period | Cash Flow From Operations | |
2020 | $ 29,350,000 | |
2019 | $ 7,028,000 | |
Source: Company registration statement
As of December 31, 2020, Global-E had $68.6 million in cash and $89.9 million in total liabilities.
Free cash flow during the twelve months ended December 31, 2020, was $29 million.
IPO Details
GLBE intends to sell 15 million shares of common stock at a proposed midpoint price of $24.00 per share for gross proceeds of approximately $360 million, not including the sale of customary underwriter options.
Funds affiliated with Dragoneer Investment Group have indicated an interest to purchase up to 2 million shares ($48 million) in the aggregate. The interest is non-binding.
Assuming a successful IPO at the midpoint of the proposed price range, the company's enterprise value at IPO (ex- underwriter options) would approximate $3 billion.
Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 10.55%.
Per the firm's most recent regulatory filing, it plans to use the net proceeds as follows:
We intend to use the net proceeds from this offering for general corporate purposes, including advertising and marketing, technology development, working capital, operating expenses and capital expenditures. (Source)
Management's presentation of the company roadshow is available here.
Listed underwriters of the IPO are Goldman Sachs, Morgan Stanley, Jefferies, Piper Sandler, JMP Securities, KeyBanc Capital Markets and Raymond James.
Valuation Metrics
Below is a table of the firm's relevant capitalization and valuation metrics at IPO, excluding the effects of underwriter options:
Measure [TTM] | Amount |
Market Capitalization at IPO | $3,413,685,912 |
Enterprise Value | $3,013,244,912 |
Price / Sales | 25.03 |
EV / Revenue | 22.10 |
EV / EBITDA | 333.95 |
Earnings Per Share | $0.05 |
Float To Outstanding Shares Ratio | 10.55% |
Proposed IPO Midpoint Price per Share | $24.00 |
Net Free Cash Flow | $28,894,000 |
Free Cash Flow Yield Per Share | 0.85% |
Revenue Growth Rate | 107.09% |
Source: Company Prospectus
Commentary
GLBE is seeking public market investment capital for its general corporate expansion initiatives.
The firm's financials show very strong topline revenue and gross profit growth, a swing to operating and net profit and an increase in operating cash flow.
Free cash flow for 2020 was an impressive $29 million.
Sales and Marketing expenses as a percentage of total revenue were essentially unchanged as revenues grew markedly and its Sales and Marketing efficiency rate was a very high 7.3x in 2020.
The market opportunity for providing e-commerce localization capabilities to businesses is large and likely received a further boost by the COVID-19 pandemic, as businesses seek to expand their online channels and diversify their geographic coverage.
Goldman Sachs is the lead left underwriter and IPOs led by the firm over the last 12-month period have generated an average return of 44.9% since their IPO. This is a mid-tier performance for all major underwriters during the period.
The primary risk to the company's outlook would be numerous competitors from large e-commerce players as well as companies building their own in-house operations.
As for valuation, management is asking IPO investors to pay an Enterprise Value / Revenue multiple of 22.1x.
A compilation of Software (Internet) public company EV/Sales figures by the NYU Stern School indicated a multiple of 15.67x in January 2021, so the IPO would be comparatively higher priced.
However, GLBE is growing topline revenue at a very high rate of growth, is profitable and generating impressive free cash flow.
While the IPO isn't cheap, the firm's growth trajectory, industry prospects, profitability and additional investor interest are compelling, so the IPO is worth a close look.
Expected IPO Pricing Date: May 11, 2021.
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This article was written by
Donovan Jones is a research specialist with 15 years of experience identifying opportunities for IPOs and software companies.
He also leads the investing group
which offers: actionable information on growth stocks through first look S-1 filings, previews on upcoming IPOs, an IPO calendar for tracking what’s on the horizon, a database of U.S. IPOs, and a guide to IPO investing to walk you through the entire IPO lifecycle - from filing to listing to quiet period and lockup expiration dates.
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Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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