As used in this Annual Report, except where the
context otherwise requires or where otherwise indicated, references to
“Global-e,” the
“Company,” “we,”
“us,” “our,” “our company” and similar references refer to Global-E Online Ltd., together with its
consolidated
subsidiaries as a consolidated entity.
All references in this Annual Report to “Israeli
currency” and “NIS” refer to New Israeli Shekels, the terms “dollar,” “USD” or “$”
refer to U.S. dollars and the terms “€” or “euro” refer to the currency introduced at the start of the third
stage of European economic and monetary union pursuant to the treaty establishing the European Community, as amended.
Our financial statements have been prepared in
accordance with generally accepted accounting principles in the United States (“GAAP”). We present our consolidated financial
statements in U.S. dollars.
Our fiscal year ends on December 31 of each year.
Our most recent fiscal year ended on
December 31, 2023.
Certain monetary amounts, percentages and other
figures included elsewhere in this Annual Report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain
tables or charts may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text
may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them.
Key Performance Indicators and Non-GAAP Financial
Measures Used in this Annual Report
Throughout this Annual Report, we provide a number
of key performance indicators and non-GAAP financial measures used by our management and often by others in our industry. These are discussed
in more detail in the section entitled “Operating and Financial Review and Prospects- Key
Performance Indicators and Other Operating Metrics” which also includes a reconciliation of our non-GAAP financial measures
to the most directly comparable U.S. GAAP metric. We define these key performance indicators and non-GAAP financial measures as follows:
• |
“Gross Merchandise Value” or “GMV” is defined
as the combined amount we collect from the shopper and the merchant for all components of a given transaction, including products, duties
and taxes and shipping; |
• |
“Adjusted EBITDA” is a non-GAAP financial measure and is
defined as operating profit (loss) adjusted for stock based compensation expenses, depreciation and amortization, commercial agreements
amortization, amortization of acquired intangibles, merger related contingent consideration, and acquisition related expenses and secondary
offering costs. Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by revenues; |
• |
“Non-GAAP Gross Profit” is a non-GAAP financial measure
and is defined as gross profit adjusted for amortization of acquired intangibles. “Non-GAAP gross margin” is calculated as
Non-GAAP gross profit divided by revenues; |
• |
“Net Dollar Retention Rate” for a given period is calculated
by dividing the GMV in that period by the GMV in the comparable period in the prior year, in each case, from merchants that processed
transactions on our platforms in the earlier of the two periods. Our Net Dollar Retention in 2023 excludes Borderfree Inc. and affiliated
companies ( “Borderfree”) that were acquired in 2022, as it is based on annual GMV figures, and Borderfree’s financials
were consolidated into the Company’s financials in July 2022; therefore, GMV was not recorded for the full year in 2022; and
|
• |
“Gross Dollar Retention Rate” is a key performance indicator
and in order to calculate it for a particular quarter, we first calculate the total seasonality adjusted annualized GMV for that quarter.
We then calculate the value of GMV from any merchants who discontinued their use of our platforms during that quarter, or churned, based
on their total GMV from the four quarters preceding such quarter, which we refer to as churned GMV. We then divide (a) the churned GMV
by (b) the total seasonality adjusted annualized GMV to calculate the percentage churn for that quarter. Gross Dollar Retention Rate for
a particular year is calculated by aggregating the percentage churn of the four quarters within that year and subtracting the result from
100%. |
The aforementioned key performance indicators
and non-GAAP financial measures are used by management and our board of directors to assess our performance, for financial and operational
decision-making, and as a means to evaluate period-to-period comparisons. These measures are frequently used by analysts, investors and
other interested parties to evaluate companies in our industry. We believe that these non-GAAP financial measures are appropriate measures
of operating performance because they remove the impact of certain items that we believe do not directly reflect our core operations,
and permit investors to view performance using the same tools that we use to budget, forecast, make operating and strategic decisions,
and evaluate historical performance.
Market and Industry Data
Unless otherwise indicated, information in this
Annual Report concerning economic conditions, our industry, our markets and our competitive position is based on a variety of sources,
including statistical, market and industry data and forecasts, that we obtained from publicly available information and independent industry
publications and reports that we believe to be reliable sources. These publicly available industry publications and reports generally
state that they obtain their information from sources that they believe to be reliable, but they do not guarantee the accuracy or completeness
of the information. Although we believe that these sources are reliable, we have not independently verified the information contained
in such publications. Certain estimates and forecasts involve uncertainties and risks and are subject to change based on various factors,
including those discussed under the headings “Cautionary Statement Regarding Forward-Looking Statements” and “Item 3.D.
Risk Factors” in this Annual Report.
Our estimates are derived from publicly available
information released by third-party sources, as well as data from our internal research, which we believe to be reasonable. None of the
independent industry publications used in this Annual Report were prepared on our behalf.
Certain estimates of market opportunity and forecasts
of market growth included in this Annual Report may prove to be inaccurate. The market for e-commerce solutions is relatively new and
will experience changes over time. E-commerce market estimates and growth forecasts, whether obtained from third-party sources or developed
internally, are uncertain and based on assumptions and estimates that may prove to be inaccurate. The estimates and forecasts in this
Annual Report relating to the size of our target market, market demand and adoption, capacity to address this demand and pricing may prove
to be inaccurate. The addressable market we estimate may not materialize for many years, if ever, and even if the markets in which we
compete meet the size estimates in this Annual Report, our business could fail to grow at similar rates, if at all.
Trademarks
We or our licensors have proprietary rights to
trademarks used in this Annual Report. Solely for convenience, trademarks and trade names referred to in this Annual Report may appear
without the “®” or “™” symbols, but such references are not intended to indicate, in any way, that
we will not assert, to the fullest extent possible under applicable law, our rights or the rights of the applicable licensor to these
trademarks and trade names. We do not intend our use or display of other companies’ trademarks, trade names or service marks to
imply a relationship with, or endorsement or sponsorship of us by, any other companies. Each trademark, trade name or service mark of
any other company appearing in this Annual Report is the property of its respective holder.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This Annual Report contains estimates and forward-looking
statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements
to be covered by the safe harbor provisions for forward-looking statements as contained in Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). All statements contained
in this Annual Report other than statements of historical fact, including, without limitation, statements regarding our future results
of operations and financial position, growth strategy and plans and objectives of management for future operations, including, among others,
expansion in new and existing markets, are forward-looking statements. as the words
“may,” “might,” “will,”
“could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,”
“target,” “seek,” “believe,” “estimate,” “predict,” “potential,”
“continue,” “contemplate,” “possible” or the negative of these terms or other similar expressions
are intended to identify forward-looking statements, though not all forward-looking statements use these words or expressions. These forward-looking
statements are contained principally in the sections entitled Item 3.D.
“Key Information-Risk Factors,” Item 4.
“Information
on the Company,” and Item 5.
“Operating and Financial Review and Prospects.”
Our estimates and forward-looking statements are
based on our current expectations and estimates of future events and trends which affect or may affect our business, operations and industry.
Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to numerous
risks and uncertainties including, but not limited to, the risks described in Item 3.D “Key Information-Risk Factors” and
elsewhere in this Annual Report.
You should not rely on forward-looking statements
as predictions of future events. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties
emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking
statements contained in this Annual Report. The results, events and circumstances reflected in the forward-looking statements may not
be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking
statements.
In addition, statements that “we believe”
and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to
us as of the date of this Annual Report. While we believe that information provides a reasonable basis for these statements, that information
may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review
of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
We may also provide information herein that is not necessarily “material” under the federal securities laws for SEC reporting
purposes, including information that is informed by various ESG standards and frameworks (including standards for the measurement of underlying
data), and the interests of various stakeholders. Much of this information is subject to assumptions, estimates or third-party information
that is still evolving and subject to change. For example, our disclosures based on any standards may change due to revisions in framework
requirements, availability of information, changes in our business or applicable government policies, or other factors, some of which
may be beyond our control.
The forward-looking statements made in this Annual
Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking
statements made in this Annual Report to reflect events or circumstances after the date of this Annual Report or to reflect new information
or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations
disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements.
SUMMARY OF RISK FACTORS
Our business is subject to numerous risks and
uncertainties, including those described in Item 3. “Key Information - D. Risk Factors.” You should carefully consider these
risks and uncertainties when investing in our ordinary shares. Principal risks and uncertainties affecting our business include the following:
• |
our rapid growth and growth rates in recent periods may not be indicative
of future growth; |
|
|
• |
our ability to retain existing, and attract new, merchants; |
|
|
• |
our business acquisitions and ability to effectively integrate acquired
businesses; |
|
|
• |
our ability to anticipate merchant needs or develop
or acquire new functionality or enhance our existing platforms to meet those needs; |
|
|
• |
our ability to implement and use artificial intelligence and machine
learning technologies successfully; |
|
|
• |
our ability to compete in our industry; |
|
|
• |
our reliance on third-parties, including our ability
to realize the benefits of any strategic alliances, joint ventures, or partnership arrangements and to integrate our platforms with third-party
platforms; |
|
|
• |
our ability to develop or maintain the functionality of our platforms,
including real or perceived errors, failures, vulnerabilities, or bugs in our platforms; |
|
|
• |
our history of net losses; |
• |
our ability to manage our growth and manage expansion into additional
markets; |
|
|
• |
increased attention to ESG matters and our ability
to manage such matters; |
|
|
• |
our ability to accommodate increased volumes during
peak seasons and events; |
|
|
• |
our ability to effectively expand our marketing and sales capabilities;
|
|
|
• |
our expectations regarding our revenue, expenses and operations;
|
|
|
• |
our ability to operate internationally; |
|
|
• |
our reliance on third-party services, including third-party providers
of cross-docking services and third-party data centers, in our platforms and services and harm to our reputation by our merchants’
or third-party service providers’ unethical business practices; |
|
|
• |
Our ability to adapt to changes in mobile devices, systems, applications,
or web browsers that may degrade the functionality of our platforms; |
|
|
• |
our operation as a merchant of record for sales conducted using our
platform; |
|
|
• |
regulatory requirements and additional fees related
to payment transactions through our e-commerce platforms could be costly and difficult to comply with; |
|
|
• |
compliance and third-party risks related to anti-money laundering,
anti-corruption, anti-bribery, regulations, economic sanctions and export control laws and import regulations and restrictions;
|
|
|
• |
our business’s reliance on the personal importation model;
|
|
|
• |
our ability to securely store personal information of merchants and
shoppers; |
|
|
• |
increases in shipping rates; |
|
|
• |
fluctuations in the exchange rate of foreign currencies has impacted
and could continue to impact our results of operations; |
|
|
• |
our ability to offer high quality support; |
|
|
• |
our ability to expand the number of merchants using our platforms and
increase our GMV and to enhance our reputation and awareness of our platforms; |
|
|
• |
our dependency on the continued use of the internet for commerce;
|
|
|
• |
our ability to adapt to emerging or evolving regulatory developments,
changing laws, regulations, standards and technological changes related to privacy, data protection, data security and machine learning
technology and generative artificial intelligence evolves; |
|
|
• |
the effect of the situation in Ukraine on our business, financial condition
and results of operations; |
|
|
• |
our role in the fulfilment chain of the merchants, which may cause
third parties to confuse us with the merchants; |
|
|
• |
our ability to establish and protect intellectual property rights;
and our use of open-source software which may pose particular risks to our proprietary software technologies; |
• |
our dependency on our executive officers and other key employees and
our ability to hire and retain skilled key personnel, including our ability to enforce non-compete agreements we enter into with our employees;
|
|
|
• |
litigation for a variety of claims which we may be subject to;
|
|
|
• |
the adoption by merchants of a D2C model; |
|
|
• |
our anticipated cash needs and our estimates regarding our capital
requirements and our needs for additional financing; |
|
|
• |
our ability to maintain our corporate culture; |
|
|
• |
our ability to maintain an effective system of disclosure controls
and internal control over financial reporting; |
|
|
• |
our ability to accurately estimate judgments relating to our critical
accounting policies; |
|
|
• |
changes in tax laws or regulations to which we are subject, including
the enactment of legislation implementing changes in taxation of international business activities and the adoption of other corporate
tax reform policies; |
|
|
• |
requirements to collect sales or other taxes relating to the use of
our platforms and services in jurisdictions where we have not historically done so; |
|
|
• |
global events such as war, health pandemics, climate change, macroeconomic
events and the recent economic slowdown; |
|
|
• |
risks relating to our ordinary shares, including our share price, the
concentration of our share ownership with insiders, our status as a foreign private issuer, provisions of Israeli law and our amended
and restated articles of association and actions of activist shareholders; |
|
|
• |
risks related to our incorporation and location in Israel, including
risks related to the ongoing war and related hostilities; and |
|
|
• |
other statements described in this Annual Report under “Risk
Factors,” “Operating and Financial Review and Prospects,” and “Business.” |
Item 1
. Identity
of Directors, Senior Management and Advisers
Not applicable.
Item 2
. Offer
Statistics and Expected Timetable
Not applicable.
B. |
Capitalization
and Indebtedness
|
C. |
Reasons for the Offer and Use of Proceeds
|
You
should carefully consider the risks and uncertainties described below and the other information in this Annual Report before making a
decision to invest in our ordinary shares. Our business, financial condition, results of operations, or strategic objectives could be
materially and adversely affected by any of these risks and uncertainties. The trading price and value of our ordinary shares could decline
due to any of these risks and uncertainties, and you may lose all or part of your investment. This Annual Report also contains forward-looking
statements that involve risks and uncertainties. See “Cautionary Statement Regarding Forward-Looking Statements.” Our actual
results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the
risks and uncertainties faced by us described below and elsewhere in this Annual Report.
Risks Relating to our Business
and Industry
We have experienced rapid growth
in recent periods and our recent growth rates may not be indicative of our future growth.
We have experienced rapid growth in recent periods.
Our revenue was $245.3 million, $409.0 million and $569.9 million for the years ended
December 31, 2021,
2022 and
2023, respectively,
representing an annual growth of 66.8% and 39.3% for the years ended
December 31, 2022 and
2023, respectively. GMV processed through our
platforms during the years ended
December 31, 2021,
2022 and
2023 was $1,449 million, $2,450 million and $3,557 million, respectively,
representing an annual growth of 69% and 45% for the years ended
December 31, 2022 and
2023 respectively. In future periods, we may not
be able to sustain revenue or GMV growth consistent with recent history, or at all.
We believe our revenue and GMV growth depends
on a number of factors, including, but not limited to, our ability to:
• |
increase the overall sales volume facilitated by our platforms;
|
|
|
• |
maintain merchant retention rates; |
|
|
• |
increase merchants’ e-commerce sales conversion rates;
|
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|
• |
successfully expand our merchants into new geographies; |
|
|
• |
attract new merchants to our platforms in existing and new geographies,
segments and verticals; |
|
|
•
|
successfully integrating or maintaining the technologies,
platforms and business propositions, modalities or offerings of business we have acquired, including successfully execute and grow the
Shopify Markets Pro offering and the technologies and e-commerce solutions of Borderfree, and other businesses we may acquire in the future,
into our existing platforms; |
|
|
• |
successfully realize all the benefits from our third party partnerships
and collaborations; |
|
|
• |
provide integration with our merchants’ online e-commerce web-stores;
|
• |
maintain the security, reliability and integrity of our platforms;
|
|
|
• |
maintain compliance with existing and comply with new applicable laws
and regulations, including new tax rates and tariffs; |
|
|
• |
price our platforms effectively so that we are able to attract and
retain merchants; |
|
|
• |
successfully compete against our current and future competition and
competing solutions; and |
|
|
• |
maintain service levels and consistent quality of our platforms.
|
We have also encountered in the past,
and expect to encounter in the future, risks and uncertainties frequently experienced by growing companies in rapidly evolving industries.
If our assumptions regarding these risks and uncertainties, which we use to plan and operate our business, are incorrect or change, or
if we do not address these risks successfully, our growth rates may slow and our business could suffer. Further, our rapid growth may
make it difficult to evaluate our future prospects. In addition, a portion of our growth in recent or past periods may be attributed to
trends and there is no assurance these trends will continue.
If we are unable to retain our
existing merchants, or the GMV generated by merchants on our platforms declines or does not increase, our business, operating results
and financial condition could be adversely affected.
Our revenues are closely correlated with the level of GMV that is processed through
our platforms and we expect our future revenue growth to be partially driven by increases to our existing merchants’ GMV.
We aim to sign
contracts with merchants for a minimum term of 12 months and with a minimum committed monthly volume, but our merchants
typically have the right to terminate their agreements for convenience by providing prior written notice, and have no obligation to renew
their agreements with us after their terms expire. Even if our agreements with the merchants are renewed or not terminated, they may not
be renewed on the same or as profitable terms, and may exclude utilization of our shipping services which may reduce our revenues, or
may reduce the markets in which we provide them our services (including by way of localizing their fulfilment and distribution model).
Although we typically maintain minimum fee arrangements with the merchants, we cannot guarantee that such minimum fees will commensurate
with revenues earned in previous periods. As a result, if existing merchants terminate their agreements with us, renew them on less favorable
terms, or otherwise reduce the scope of their activity through our platforms, our operating results and financial condition could suffer.
In addition, we may not be able achieve successful or full migration and transition of some merchants from one of our platforms to another.
For example, we may not be able to migrate merchants who have historically and currently been using the Borderfree platform to the Global-e
platform, or such migration may not be on the same or as profitable terms, or may exclude the utilization of our shipping services which
may reduce our revenues, or may reduce the number of markets in which we provide them our services, or even result in discontinuation
of all or parts of our services.
The growth of our business depends
on our ability to attract new merchants and increase the GMV processed on our platforms.
Our growth strategies include attracting new merchants
to our platforms and increasing the GMV processed through our platforms. There is no guarantee that we can sustain our historical merchant
acquisition rates and if we do, that such new merchants will lead to an increase of the GMV processed through our platforms or to an increase
in our revenues. Our ability to attract new merchants depends on the success of our platforms with existing merchants and the success
of our sales and marketing efforts, which may not be successful. Merchants who are not currently engaged in cross-border e-commerce may
not be familiar with our solutions and those currently engaged in cross-border e-commerce may use other products or services for their
cross-border e-commerce needs. In addition, merchants may develop their own solutions to address their cross-border e-commerce needs,
purchase competitive product offerings, or engage third-party providers of services and solutions that do not or will not enable the use
of our platforms and services. It may be difficult to engage and market to merchants who either do not currently have cross-border e-commerce
needs, are unfamiliar with our platforms and services, or utilize competing solutions and services for their e-commerce needs. This requires
us to spend substantial time, effort and resources assisting merchants in evaluating our platforms and services, including providing demonstrations,
conducting gap analyses and substantiating the value of our platforms and services. Furthermore, engaging and marketing to merchants in
segments, verticals or new regions where we do not have a presence or where we have only recently established our presence may also require
effort and resources and may not result in the acquisition of new merchants or in increase of GMV. If merchants do not perceive our offerings
to be of sufficiently high value and quality, we may not be able to attract new merchants or increase our GMV and our business, operating
results and financial condition could be adversely affected.
Additionally, even if we are successful in attracting
new merchants, they may not generate GMV or revenue at the same rate or scale as our current or historical merchants. If new merchants
that we acquire fail to use our platforms to the same extent that our existing merchants do, it would reduce the GMV processed on our
platforms and therefore our revenue, which could materially adversely affect our operating results and our growth.
We have acquired, and may acquire
in the future, other businesses. Acquisitions divert a substantial part of our resources and management attention and if we are unable
to effectively integrate acquired business, our operating results may materially suffer.
We have acquired and may in the future acquire
complementary solutions, functionalities, technologies or businesses. For example, we acquired Borderfree from Pitney Bowes in July 2022
(the “Borderfree Acquisition”). Seeking and negotiating potential acquisitions diverts our management’s attention from
other business concerns to a certain extent and is expensive and time-consuming. Acquisitions expose us and our business to unforeseen
liabilities or risks associated with the business or assets acquired or with entering new markets. Through the acquisition of Borderfree
we aim to enhance the value that our business brings to global brands by providing them with traffic generation services, thereby the
ability to attract international shoppers to their web store, by using both an e-mail based direct marketing offering and a portal-like
affiliation platform. If we are unable to successfully integrate Borderfree, or effectively integrate other acquired businesses, we may
not be successful in developing and marketing our offerings and our operating results will materially suffer and the potential benefits
of the Borderfree Acquisition or other potential acquisitions may not be realized to the full extent, in a timely fashion or at all. In
addition, if the integrated platforms and solutions we offer do not achieve acceptance by the marketplace, our operating results will
materially suffer.
If we fail to develop or acquire
new functionality (and if acquired, to integrate it) or enhance our platforms to meet the needs of our current and future merchants, or
if we fail to estimate the impact of developing and introducing new functionality or enhanced solutions in response to rapid market or
technological changes, our revenue could decline and our expenditures could increase significantly.
The e-commerce market is characterized by rapid
technological changes, evolving operational and omnichannel modalities, frequent new product and service introductions, evolving industry
standards and regulations and changing merchant and shopper preferences. To keep pace with technological and regulatory developments,
satisfy increasingly sophisticated merchant and shopper needs, achieve market acceptance and maintain the performance and security of
our platforms, we must continue to adapt, enhance, integrate and improve our platforms and existing services and we must also continue
to introduce new functionality to our platforms. Any new solutions or functionality we develop or acquire (and subsequently, integrate)
may not be introduced in a timely manner and may not achieve the broad market acceptance necessary to generate significant revenue. If
we are unable to successfully develop or acquire (and subsequently, integrate) new solutions or enhance our existing solutions, our business,
operating results and financial condition could be adversely affected.
We expect to incur significant expenses to develop,
integrate and implement additional solutions and functionalities and to integrate any acquired solutions or functionalities into our existing
platforms to maintain our competitive position. These efforts may not result in commercially viable solutions. We may experience difficulties
with software development, industry standards, threats to the security and integrity of our technological infrastructure, design, manufacturing
or marketing that could delay or prevent our development, introduction or implementation of new solutions and enhancements. If we do not
receive significant revenue from these investments, our business, operating results and financial condition could be adversely affected.
Merchants may require customized integrations, or features and functions that we do not yet offer or do not intend to offer, or which
we have yet fully integrated or implemented, any of which may cause them to choose a competing solution. If we fail to develop solutions
that satisfy merchant and shoppers’ preferences in a timely and cost-effective manner, our ability to renew our
contracts with existing
merchants and our ability to create or increase demand for our platforms could be harmed, and our business, operating results and financial
condition could be materially adversely affected. The integration of Borderfree and the migration of merchants who have historically and
currently been using the Borderfree platform to the Global-e platform, or the execution of Shopify Markets Pro, as well as any other future
acquisitions, may result in difficulties and delays, require additional investment and costs, and even if completed, may not achieve the
economic or market results in terms of revenue creation and improved technological solutions that we have expected or anticipated.
There is a risk that the technology we invest
in may not achieve the expected level of success or widespread market adoption. Market dynamics, competitive forces, regulatory changes,
or unforeseen challenges may impede the successful integration and acceptance of our new solutions. For example, in January 2022 we acquired
Flow (the “Flow Merger”), and entered into an Amended and Restated Master Services Agreement with Flow and Shopify Inc. and
its affiliates (“Shopify”) (the “2022 Shopify Agreement”), making our platform and services and the Flow platform
and services, respectively, available to certain Shopify merchants through Shopify’s e-commerce platform. As part of the 2022 Shopify
Agreement, in September 2023, Shopify launched “Shopify Markets Pro”, a white-label cross-border MoR offering, powered by
Global-e, currently available to Shopify US-based merchants. Shopify Markets Pro is based on the Flow platform, leveraging its API-based
technology, and enables merchants of diverse scales, encompassing small and emerging businesses, to extend their brand offerings globally
with streamlined integration efforts. The success of Shopify Markets Pro is contingent upon widespread acceptance and adoption in the
market. Factors such as evolving merchants' preferences, competitive landscape dynamics, and unforeseen market challenges may impact the
rate at which customers embrace Shopify Markets Pro. Such variations may lead to financial losses, a weakened competitive position, and
possible setbacks in achieving our strategic objectives.
Our implementation and use of
artificial intelligence and machine learning technologies may not be successful, which may impair our ability to compete effectively,
result in reputational harm and have an adverse effect on our business.
We use machine learning, artificial intelligence
and automated decision-making technologies (“AI Technologies”) throughout our business, and are making significant investments
to continuously improve our use of such technologies. For example, we use machine learning and artificial intelligence technologies to
support our merchant and customer service inquires and to assist in the research and development of our solutions. As with many technological
innovations, there are significant risks and challenges involved in developing, maintaining and deploying these technologies and there
can be no assurance that the usage of such technologies will always enhance our solutions or be beneficial to our business, including
our efficiency or profitability.
Further, changes and ongoing development in how
we use artificial intelligence and machine learning technologies and how we train our models, in particular if those artificial intelligence
or machine learning models are (i) incorrectly designed or implemented; (ii) trained or reliant on incomplete, inadequate, inaccurate,
biased or otherwise poor quality data; and/ or on data to which we do not have sufficient rights or in relation to which we and/or the
providers of such data have not implemented sufficient legal compliance measures; or (iii) are adversely impacted by unforeseen defects,
technical challenges, cybersecurity threats or material performance issues, the performance of our platforms and business, as well as
our reputation and the reputations of our merchants, suppliers and business partners could suffer or we could incur liability through
the violation of laws or
contracts to which we are a party or through civil claims.
The market for artificial intelligence and machine
learning technologies is rapidly evolving and remains unproven in many industries, including our own. We cannot be sure that the market
will continue to grow or that it will grow in ways we anticipate. We are in varying stages of development in relation to our products
or services which utilize proprietary artificial intelligence and machine learning technologies, and we may not be successful in our ongoing
development of these technologies in the face of novel and evolving technical, reputational and market factors. Our failure to successfully
develop and commercialize our platforms or services which utilize proprietary machine learning and artificial intelligence technologies
could depress the market price of our stock and impair our ability to (i) raise capital; (ii) expand our business; (iii) provide, improve
and diversify our product offerings; (iv) continue our operations and efficiently manage our operating expenses; and (v) respond effectively
to competitive developments.
The continuous development, maintenance and operation
of our artificial intelligence and machine learning technologies is expensive and complex, and may involve unforeseen difficulties including
material performance problems, undetected defects or errors. We may encounter technical obstacles, and it is possible that we may discover
additional problems that may prevent our proprietary technologies from operating properly, which could adversely affect our business,
relationships and reputation. In particular, we incorporate generative artificial intelligence technologies (i.e. artificial intelligence
models that can produce and output new content, software code, data and information) into our solutions and internal business practices.
There is a risk that generative artificial intelligence could produce inaccurate or misleading content or other discriminatory or unexpected
results or behaviors, such as hallucinatory behavior that can generate irrelevant, nonsensical, or factually incorrect results, all of
which could harm our reputation, business, or customer relationships. While we take measures designated to ensure the accuracy of such
artificial intelligence generated content, those measures may not always be successful, and in some cases, we may need to rely on end
users to report such inaccuracies. To the extent a third party is successful in a claim against one of our customers based on such inaccuracies,
we could also incur liability, and this could also affect our business, relationships and reputation. Generative AI technologies may also
be used to produce content that violates existing intellectual property laws and laws concerning rights of privacy and publicity and new
related laws and regulations are currently under consideration. The law is also uncertain across jurisdictions regarding the copyright
ownership of content that is produced in whole or in party by generative AI tools. Therefore, incorporating AI technologies from external
sources into our products could lead to allegations of bias, discrimination, legal and regulatory violations, or violating copyright or
other intellectual property rights and could require us to modify our solutions incorporating Generative AI technology or otherwise engage
in efforts to remain in compliance with the law and require us to incur additional expenditures.
Furthermore, we use artificial intelligence and
machine learning technologies licensed from third parties in our technologies and our ability to continue to use such technologies at
the scale we need may be dependent on access to specific third-party software and infrastructure. We cannot control the availability or
pricing of such third-party technologies, especially in a highly competitive environment, and we may be unable to negotiate favorable
economic terms with the applicable providers. If any such third-party technologies become incompatible with our solutions, become unavailable
for use, or the providers of such models unfavorably change the terms on which their technologies are offered or terminate their relationship
with us, our solutions may become less appealing to our customers and our business will be harmed. In addition, to the extent any third
party artificial intelligence or machine learning technologies are used as a hosted service, any disruption, outage, or loss of information
through such hosted services could disrupt our operations or solutions, damage our reputation, cause a loss of confidence in our solutions,
or result in legal claims or proceedings, for which we may be unable to recover damages from the affected provider.
We face competition from other companies in our industry in relation to the development
and deployment of artificial intelligence and machine learning technologies. Those other companies may develop artificial intelligence
technologies that are similar or superior to ours and/or are more cost-effective and/or quicker to develop and deploy. If we cannot develop,
offer or deploy new artificial intelligence or machine learning technologies as effectively, as quickly and/ or as cost-efficiently as
our competitors, we could experience a material adverse effect on our operating results of operation, customer relationships and growth.
We may not be able to successfully
compete against current and future competition or other competing solutions, and we may need to change our pricing and model to remain
competitive.
We face competition in the market of global e-commerce, and such competition and alternative
and competing solutions likely continue and could increase in the future. Competition could lead to a decrease in the GMV processed through
our platforms and could reduce our revenue or margins, any of which could negatively affect our business, financial condition and results
of operations. A number of competitive factors could cause merchants to cease using or decline to use our platforms and services, or could
reduce the transaction volume that they process through our platform, including, among others:
• |
merchants may choose to develop global e-commerce capabilities
internally or choose competing solutions; |
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• |
merchants may merge with or be acquired by companies using a competing
solution or an internally developed solution; |
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• |
competing solutions may be offered as part of a bundle of e-commerce
services; |
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•
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current or potential global or regional competition and competing solutions,
both in geographies where we already operate, and in geographies where we do not operate, may adopt more aggressive pricing policies,
offer more attractive sales terms, adapt more quickly to new technologies and changes in merchant requirements or devote greater resources
to the promotion and sale of their products and solutions than we can; and |
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current and potential competition may merge or establish cooperative
relationships among themselves or with third parties to enhance their products, solutions and expand their markets (or in new markets),
forming alliances that rapidly acquire significant market share. |
We cannot assure that we will be able to compete
successfully against current and future competition or competing solutions. If we cannot compete successfully against our current and
future competition or such competing solutions, our business, operating results and financial condition could be materially and negatively
impacted.
In addition, as new or existing competing solutions
may be offered in competitive prices, we may be unable to retain existing merchants or attract new merchants. Mid-market and large enterprise
merchants may demand substantial price discounts as part of the negotiation of
contracts. As a result, we could be required to choose
either to reduce our prices or otherwise change our pricing model, or both, which could adversely affect our business, operating results,
and financial condition.
We cannot be certain that we
will realize the benefits of strategic alliances, joint ventures or partnership arrangements, including with third-party e-commerce platforms.
Any failure to manage such strategic alliances, partnerships or joint ventures, or to integrate them with our existing or future business,
could have a material adverse effect on us.
We have entered into partnership arrangements,
and in the future may consider opportunities to enter into additional arrangements or strategic alliances that may be beneficial for our
operations and the growth of our platform. Our ability to grow through these types of partnerships is subject to a number of risks, including
unanticipated costs associated with strategic alliances, issues conforming to standards, procedures and contractual requirements, and
diversion of management’s attention from our existing business. For example, we have entered into a Services and Partnership Agreement
with Shopify, dated
April 12, 2021 (the
“2021 Shopify Agreement”), and concurrently with the Flow Merger, we entered into
the “2022 Shopify Agreement (together with the 2021 Shopify Agreement, the
“Shopify Agreements”), making our platform
and services and the Flow platform and services, respectively, available to certain Shopify merchants through Shopify’s e-commerce
platform.
Entering into such relationship with Shopify has
required and may continue to require us to incur certain charges, significantly increasing our near and long-term expenditures.
In addition, the 2021 Shopify Agreement requires us to pay Shopify fee equal to a percentage of the GMV for all transactions processed
through the respective platforms for applicable Shopify merchants, which has an impact on our margins. In connection with entering into
the Shopify Agreements, we issued securities to Shopify which diluted, and may continue to dilute, our shareholders. The potential benefits
of our relationship with Shopify are hard to estimate or quantify at this time, and we cannot be certain that our arrangement with Shopify
will provide the revenue or net income that justifies such transaction.
Each of the Shopify Agreements is terminable by
either party immediately upon notice of certain events, subject to applicable cure periods, or without cause upon prior notice. Any termination
of each of the Shopify Agreements could have a material adverse effect on our business, financial condition or results of operations.
These risks could apply to any similar arrangement we may enter into in the future, and any potential future collaborations may be similarly
terminable by our partners.
The success of our business
model is reliant on our ability to integrate our platforms with third-party e-commerce platforms, our ability to operate according to
such third parties’ terms of use and integration requirements, and our ability to maintain any partnership that we have entered
into or may enter into with such third parties. Inability or failure to do so would reduce the attractiveness of our solutions for use
by current and future merchants.
Merchants typically carry out e-commerce activity
through third-party e-commerce platforms, such as Salesforce Commerce Cloud, Shopify, BigCommerce, Adobe Magento, SAP/Hybris, WooCommerce,
PrestaShop, Workarea, Wshop, and others. Our ability to attract merchants that utilize such platforms to conduct their e-commerce activity
is contingent on our ability to integrate our solutions into the e-commerce platforms they use. Each of the companies that operates these
e-commerce platforms dictates the terms of use of its respective platform, including the manner and procedure by which we integrate to
its platform. To the extent any such operators offer or promote alternative products or solutions or would limit or prevent merchants
from utilizing our platform, our business, financial condition or results of operations could be materially and adversely affected.
Some of these companies also demand that certain
certification processes are satisfied prior to implementing an integration into the e-commerce platform they operate. Compliance with
such terms may subject us to waiting periods due to certification and onboarding processes and may require us to modify aspects of our
platforms’ functionality in order to fit applicable technical standards. While we exert substantial efforts to maintain compliance,
and although notice of changes and instructions are typically provided in advance, the terms of use and requirements may change unilaterally
at the discretion of the e-commerce platform, and none of our efforts as a result would be sufficient. If we fail to maintain certification
or compliance, the willingness of merchants to adopt or continue to use our solutions may be reduced.
In addition, in the event that our solutions do
not integrate optimally with third-party e-commerce platforms, leading to errors, defects, disruption or other performance problems, shoppers’
experience will be adversely affected, our reputation may be harmed and our ability to achieve and maintain growth among merchants on
the e-commerce platforms would be adversely affected.
For example, if we are unable to perform under
the Shopify Agreements, fail to maintain our relationship with Shopify, or the Shopify Agreements are otherwise terminated for any reason,
our business, financial condition and results of operation could be materially and adversely effected.
If we are not successful in
developing or maintaining the functionality of our platforms or if we experience real or perceived errors, failures, vulnerabilities,
or bugs in our platforms, our business, results of operations, and financial condition could be adversely affected.
Any errors, defects, or disruptions in
our platforms, or other performance problems with our platforms could harm our reputation and may damage the businesses of our merchants.
Our platforms could contain undetected errors, “bugs” or misconfigurations that could adversely affect their performance.
Additionally, we regularly update and enhance our platforms and introduce new versions of our platforms and service. These updates may
contain undetected errors when introduced or released, which may cause disruptions in our services and may reduce merchants and shoppers
satisfaction. Our continued growth depends in part on our ability to maintain the existing functionality of our platforms and services
(and implementing the functionality of our acquired platforms), meet our service levels, prevent down time and degradation of services
on our platforms for both merchants and shoppers. Failure to do so may result in damage to our reputation which may have an adverse effect
on our business and results of operation.
We have experienced in the past and may in the future experience, disruptions, data
loss, outages, and other performance problems with our infrastructure due to a variety of factors, including infrastructure changes, introductions
of new functionality, human or software errors, capacity constraints, denial-of-service attacks, ransomware attacks, or other security-related
incidents. In some instances, we may not be able to identify the cause or causes of these performance problems immediately or in short
order. We may not be able to maintain the level of service uptime and performance required by merchants, especially during peak usage
times as traffic and volumes increase. Since our merchants rely on our platforms to carry out
global
e-commerce on an ongoing basis, any outage on our platforms would have a direct adverse impact on our merchants business. Our merchants
may seek compensation from us for any losses they suffer or cease conducting business with us altogether. Further, a merchant could share
information about bad experiences, which could result in damage to our reputation and loss of current and future sales. There can be no
assurance that provisions typically included in our
contracts with our merchants that attempt to limit our exposure to claims would be
enforceable or adequate or would otherwise protect us from liabilities or damages with respect to any particular claim. Even if not successful,
a claim brought against us by any of our merchants would likely be time-consuming and costly to defend and could seriously damage our
reputation and harm our ability to attract new merchants to our platform
s.
We have a history of net losses,
we anticipate increasing operating expenses in the future, and we may not be able to achieve profitability.
We incurred significant net losses of $195.4 million and $133.8 million for the years
ended
December 31, 2022 and
2023, respectively. Because the market for our platform
s
and services is rapidly evolving, it is difficult for us to predict our future results of operations or the limits of our market opportunity.
As a result of our entry into the Shopify Agreements and the related issuance of warrants to purchase ordinary shares to Shopify, we recognize
commercial agreement assets which are recognized upon the vesting of the warrants, and are amortized over time. This results in increased
sales and marketing expenses and the reporting of a net loss for the year ended
December 31, 2023 and we expect this will continue to
result in increased sales and marketing expenses in future periods and the reporting of net losses for such periods. In addition, as a
result of the Flow Merger and the Borderfree Acquisition, we recognized, and will continue to recognize, an intangible assets amortization
expense over the next several years. We expect our operating expenses to continue to increase over the next several years as we hire additional
personnel, expand into new geographies or invest in expanding our operations in existing geographies, expand our partnerships, operations
and infrastructure, continue to enhance our platforms, develop and expand their features, integrations and capabilities, expand and improve
our service offering and increase our spending on sales and marketing. We intend to continue to build and enhance our platforms through
internal research and development and we may also selectively pursue acquisitions. In addition, as a public company, we will continue
to incur additional significant legal, accounting, and other expenses that we did not incur as a private company. If we are unable to
maintain revenues high enough to offset the expected increases in our operating expenses, we will not be profitable in future periods.
If we fail to manage our growth
effectively, we may be unable to execute our business plan or maintain high levels of service and merchant satisfaction.
We have experienced, and expect to continue to experience, rapid growth, which has
placed, and may continue to place, significant demands on our management and our technological, operational and financial resources. We
have established international offices, including offices in Israel, the U.S., the UK, Europe, Japan, Australia, Singapore and the United
Arab Emirates
, and we plan to continue to expand our
international operations into other countries in the future. We have also experienced significant growth in both the number of merchants
and the number of transactions facilitated by our platform
s. For example,
during the year ended
December 31, 2023, our platforms generated in the aggregate $3,557 million of GMV, representing an increase of 45%
relative to the GMV for the year ended
December 31, 2022. Additionally, our organizational structure is becoming more complex as we scale
our technological, operational, financial and management controls as well as our reporting systems and procedures.
To manage growth in our operations and personnel, we will need to continue to grow
and improve our operational, financial, and management controls and our reporting systems and procedures. We will require significant
capital expenditures and the allocation of valuable management resources to grow and adapt to our developing needs in these areas without
undermining our culture, which has been central to our growth so far. If we fail to manage our anticipated growth and change in a manner
that preserves the key aspects of our corporate culture, the quality of our platforms
and services may suffer, which could negatively affect merchants and shoppers and as a result our reputation.
The increasing focus and scrutiny
of, and evolving expectations regarding, environmental, social, governance and other sustainability practices could increase our costs,
harm our reputation or customer acquisition and retention, our access to capital and employee retention or otherwise adversely impact
our financial results.
There has been increasing focus by a variety of
stakeholders on companies’ environmental, social and governance, or ESG, and other sustainability matters. Expectations regarding
voluntary ESG initiatives and disclosures may result in increased costs (including but not limited to increased costs related to compliance,
stakeholder engagement, contracting and insurance), changes in demand for certain products, enhanced compliance or disclosure obligations,
or other adverse impacts to our business, financial condition, or results of operations.
While we may at times engage
in voluntary initiatives (such as voluntary disclosures, certifications, or goals, among others) to improve the ESG profile of
our company
or to respond to stakeholder expectations, such initiatives may be costly and may not have the desired effect. Expectations around companies’
management of ESG matters continues to evolve rapidly, in many instances due to factors that are out of our control. For example, we may
ultimately be unable to complete certain initiatives or targets, either on the timelines initially announced or at all, due to technological,
cost, or other constraints, which may be within or outside of our control. Moreover, actions or statements that we may take based on expectations,
assumptions, other methodological considerations, or third-party information that we currently believe to be reasonable may subsequently
be determined to be erroneous or be subject to misinterpretation.
It is possible that our ESG reporting may not satisfy stakeholders, or that our ESG
practices, including the timeline and manner of our initiatives or achieving
or goals, will be perceived to not be adopted at a sufficient pace. If our ESG practices, reporting and disclosures
do not meet the expectations of investors, customers, or employees, which continue to evolve, our brand, reputation, and customer retention
may be negatively impacted, and we may be subject to stakeholder engagement and/or litigation, even if such initiatives are currently
voluntary. If we are not effective in addressing ESG matters affecting our business, or setting and meeting relevant goals, our reputation
and financial results may suffer. For example, as mentioned above, the generative artificial intelligence technologies we incorporate
into our business may result in unanticipated environmental or social impacts, including discriminatory results, which could harm our
business or reputation. In addition, we may experience increased costs and devote additional resources in order to develop, monitor, report,
implement or maintain various ESG practices, controls or measures, and execute upon our goals and measure achievement of those goals,
which could have an adverse impact on our business and financial condition. If we are lagging or unsuccessful, or perceived to be lagging
or unsuccessful, in each case to meet the ESG standards or the expectations of our various stakeholders, it could negatively impact our
reputation, customer acquisition and retention, and access to capital and employees.
In addition, investors may focus on ESG business
practices and sustainability scores when making investments and may consider negative or low ESG or sustainability scores as a reputational
or other factor in making an investment decision. Investors may use such ESG scores to measure or benchmark
our company against our peers
and if we exhibit lower or inadequate rating, these investors may require us to improve our ESG performance and disclosure and may also
make investment or voting decisions on that basis. To the extent ESG matters negatively impact our reputation, it may also impede our
ability to compete as effectively to attract and retain employees, customers, or business partners, which may adversely impact our operations.
In addition, we expect there will likely be increasing levels of regulation, disclosure-related and otherwise, with respect to ESG matters.
For example, the SEC very recently adopted rules that will require companies to provide certain climate-related disclosures. While we
are still assessing the scope and impact of this rule given how recently it was adopted, we anticipate that this rule, as well as other
ESG and sustainability-related regulation and legislation, may require us to incur significant additional costs to comply, including the
implementation of significant additional internal controls, processes and procedures regarding matters that have not been subject to such
controls in the past, and impose increased oversight obligations on our management and board of directors. These and other stakeholder
expectations will likely lead to increased costs as well as scrutiny that could heighten all of the risks identified in this risk factor.
Additionally, many of our suppliers and business partners may be subject to similar expectations, which may augment or create additional
risks, including risks that may not be known to us.
Focus on long-term ESG performance
and meeting our goals and values may adversely affect our short-term performance.
ESG goals and performance could affect the way
we operate and require us to take certain actions, long-term initiatives or goals or implement and maintain certain processes. We may
therefore action in certain ways that we believe will benefit
our company, business and customers in the long-term or over a period of
time, even if such actions may not adhere to or maximize shorter-term operational or financial results. We may amend or adapt our policies
in ways that we believe will be beneficial to our customers, employees or investors in the long term even though the changes may be perceived
unfavorably in the shorter-term. Moreover, we may fail to meet longer-term goals or achieve benefits derived from such goals, or benefits
may not materialize as and when we expected or at all.
We are subject to a series of
risks regarding climate change.
There are inherent climate-related risks wherever
business is conducted. Certain of our facilities, as well as our and third-party infrastructure on which we rely, are or may be located
in areas that have experienced, and are projected to or may continue to experience, various meteorological phenomena (such as drought,
heatwaves, wildfire, storms, and flooding, among others) or other catastrophic events that may disrupt our or our merchant or vendors’
operations, require us to incur additional operating or capital expenditures including costs associated with energy and water, or otherwise
adversely impact our business, financial condition, or results of operations. Climate change may increase the frequency and/or intensity
of such events. Climate change may also contribute to various chronic changes in the physical environment, such as sea-level rise or changes
in ambient temperature or precipitation patterns, which may also adversely impact our or our suppliers’ operations. While we consider
and may take various actions to mitigate our business risks associated with climate change, this may require us to incur substantial costs
and may not be successful, due to, among other things, the uncertainty associated with the longer-term projections associated with managing
climate risk. For example, to the extent catastrophic events become more frequent, it may adversely impact the availability or cost of
insurance.
Additionally, we expect to be subject to risks
associated with societal efforts to mitigate or otherwise respond to climate change, including but not limited to increased regulations,
evolving stakeholder expectations, and changes in market demand. For more information, please see our risk factor titled “The increasing
focus and scrutiny of, and evolving expectations regarding, environmental, social, governance and other sustainability practices could
increase our costs, harm our reputation or customer acquisition and retention, our access to capital and employee retention or otherwise
adversely impact our financial results.” Changing market dynamics, global and domestic policy developments, and the increasing frequency
and impact of meteorological phenomena have the potential to disrupt our business, the business of our suppliers and/or customers, or
otherwise adversely impact our business, financial condition, or results of operations.
Our operations are subject to
seasonal fluctuations. If we fail to accommodate increased volumes during peak seasons and events, our results of operations may be adversely
affected.
Our business is seasonal in nature and the fourth
quarter is a significant period for our operating results. Our revenue is closely correlated with the level of GMV that our merchants
generate through our platform, and our merchants typically process additional GMV in the fourth quarter, which includes Black Friday,
Cyber Monday and the holiday season and other peak events included in the e-commerce calendar, such as Chinese Singles’ Day and
Thanksgiving. In the years ended
December 31, 2021,
2022 and
2023, fourth quarter GMV represented approximately 35%, 34% and 33%, respectively,
of our total GMV. As a result, GMV and accordingly our revenue has previously and we expect will continue to generally decline
in the first quarter of each year relative to the fourth quarter of the previous year.
Any disruption in our ability to process and ship
orders, especially during the fourth quarter, could have a negative effect on our quarterly and annual operating results. Surges in volumes
during peak periods may strain our technological infrastructure, logistics channels, shopper and merchant support activities as well as
our third-party service providers. Inability of any of these components to process increased volumes may prevent us from efficiently processing
and shipping orders, which may reduce our GMV and the attractiveness of our platform.
Any disruption to our operations or the operations
of our merchants, our shipping and logistics partners, or other service providers could lead to a material decrease in GMV or revenues
relative to our expectations for the fourth quarter which could result in a significant shortfall in revenue and operating cash flows
for the full year.
The recent growth of
our company
and macroeconomic events and their impact on consumer behavior make it difficult to forecast our revenue and evaluate our business and
future prospects.
We launched our operations in 2013 and our growth
has occurred primarily in recent periods. As a result of our limited operating history as a public company, our ability to forecast our
future results of operations and plan for and model future growth is limited and subject to a number of uncertainties. We have encountered
and expect to continue to encounter risks and uncertainties frequently experienced by growing companies in rapidly evolving industries,
such as the risks and uncertainties described herein.
Accordingly, we may be unable to prepare accurate
internal financial forecasts or replace anticipated revenue that we do not receive as a result of these factors. If we do not address
these risks successfully, our results of operations could differ materially from our estimates and forecasts or the expectations of investors,
causing our business to suffer and our ordinary share price to decline.
In addition, market-wide events including global
health crises and pandemics, increases in interest rates, inflation, political uncertainty or instability, regional and global conflicts
and military hostilities, any of which are outside of our control, could impact our revenue and operating results and makes it difficult
to forecast our revenue and evaluate our business and future prospects. For example, inflationary pressures and rising interest rates
in key markets have influenced and in the future may influence consumer sentiment and could have a negative effect on consumer spend.
Failure to effectively expand
our marketing and sales capabilities could harm our ability to increase our merchant base and achieve broader market acceptance of our
platform.
Our ability to increase our merchant base and
achieve broader market acceptance of our platforms will depend on our ability to expand our marketing and sales operations. We plan to
continue expanding our sales force and our reliance on strategic partners. We also plan to dedicate significant resources to sales and
marketing programs, including search engines and online advertising. Our business and operating results will be harmed if our sales and
marketing efforts do not generate a corresponding increase in GMV and revenue. We may not achieve anticipated GMV and revenue growth from
expanding our sales force if we are unable to hire, develop, and retain talented sales personnel, if our new sales personnel are unable
to achieve desired productivity levels in a reasonable period of time, or if our sales and marketing programs are not effective. Furthermore,
if the cost of marketing our platforms increases, our business and operating results could be adversely affected.
Lengthy sales cycles with enterprise
merchants make it difficult to predict our future revenue and cause variability in our operating results.
Our sales cycle can vary substantially from merchant
to merchant, but with enterprise merchants it typically requires 12 to 16 weeks on average. Our ability to accurately forecast revenue
is affected by our ability to forecast new merchant acquisition. Lengthy sales cycles make it difficult to predict the quarter in which
revenue from a new merchant may first be recognized. If we overestimate new merchant growth, our revenue will not grow as quickly as our
estimates, our costs and expenses may continue to exceed our revenue and our ability to become profitable will be harmed. In addition,
we plan our operating expenses, including sales and marketing expenses, and our hiring needs in part on our forecasts of new merchant
growth and future revenue. If new merchant growth or revenue for a particular period is lower than expected, we may not be able to proportionately
reduce our operating expenses for that period, which could harm our operating results for that period. Delays in our sales cycles could
cause significant variability in our revenue and operating results for any particular period.
Our long-term success depends
on our ability to operate internationally, making us susceptible to risks associated with global sales and operations.
We currently support global transactions of merchants
in multiple countries of origin to shoppers in over 200 destinations markets and territories and settle transactions in more than 100
currencies. Our services and platforms are available to merchants in over 30 countries, and we aim to expand our operations and workforce
to support more outbound countries, and reach new markets and geographies. Conducting international operations subjects us to risks and
burdens which include:
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the need to localize our solutions, including product customizations
and adaptation for local practices and regulatory requirements; |
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lack of familiarity and burdens of ongoing compliance with local laws,
legal standards, regulatory requirements, tariffs, local tax regimes and customs formalities and other barriers, including restrictions
on advertising practices, regulations governing online services, restrictions on importation or shipping of specified or proscribed items,
importation quotas, shopper protection laws, enforcement of intellectual property rights, laws dealing with shopper and data protection,
privacy, encryption, denied parties and sanctions, and restrictions on pricing or discounts; |
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heightened exposure to fraud; |
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legal uncertainty in foreign countries with less developed legal systems;
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potentially greater difficulty to execute and enforce contracts, including
our terms of service and other agreements despite our efforts to adjust our contracts and service terms to local laws and regulations;
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increasing scrutiny and disclosure requirements regarding ESG policies,
practices, measures and initiatives; |
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unexpected changes in regulatory requirements, taxes, trade laws, tariffs,
export quotas, custom duties or customs formalities, embargoes, exchange controls, government controls or other trade restrictions;
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differing technology standards; |
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difficulties in managing and staffing international operations and
differing employer/employee relationships; |
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fluctuations in exchange rates that may increase our foreign exchange
exposure; |
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potentially adverse tax consequences, including the complexities of
foreign tax laws (including with respect to value added taxes) and restrictions on the repatriation of earnings; |
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increased likelihood of potential or actual violations of domestic
and international anti-money laundering laws and anticorruption laws, such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery
Act; |
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uncertain political, national and economic climates in foreign markets;
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geo-political or national conflicts and situations, including the ongoing
Russia/Ukraine conflict and the recent attack by Hamas and Israel’s war against it, the military tension between Israel and the
Hezbollah organization on the northern border of Israel as well as other hostile forces in the region, and heightened rates of inflation
and recessionary pressures in various countries, that directly (e.g. by virtue of war zones not being serviceable at all) or indirectly
affect our operations, consumer sentiment or e-commerce activities in general; |
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rapidly rising inflation across the U.S. and global economy, driving
up the costs of goods and services; |
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managing and staffing operations over a broader geographic area with
varying cultural norms and customs; |
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varying levels of internet, e-commerce and mobile technology adoption
and infrastructure; |
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reduced or varied protection for intellectual property rights in some
countries; |
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new and different sources of competition; |
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costs and liabilities related to compliance with the numerous and ever-growing
landscape of international data privacy and cybersecurity regimes, many of which involve disparate standards and enforcement approaches;
and |
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data privacy and data protection laws which may require that merchant
and/or shopper data be processed and stored in a designated territory. |
These factors may require significant management
attention and financial resources. Any negative impact from our international business efforts could adversely affect our business, results
of operations and financial condition.
We rely on third-party services,
such as shipping partners and payment providers, in our platforms and services.
We rely on third parties, such as our shipping
partners, to deliver products from the merchants to the shoppers. Shortages of transportation vessels, transportation disruptions or other
adverse conditions in the transportation industry due to shortages of pilots and truck drivers, strikes, slowdowns, piracy, terrorism,
disruptions in rail service, closures of shipping routes, unavailability of ports and port service for other reasons, increases in fuel
prices and adverse weather conditions, or other adverse changes related to such third-party services, including as a result of pandemics
or the measures attempting to contain and mitigate the effects thereof, could increase our costs and disrupt our operations and our ability
to deliver products from the merchants to our shoppers on the timing they expect or at all. The failure of our shipping partners to provide
quality customer service when delivering products to shoppers would adversely affect the merchants and our relationships with the merchants
which in turn could negatively impact our business and operating results. Furthermore, we rely on third parties to process payments and
we cannot guarantee that such providers will perform adequately. Errors made by, or delays in service from, such third-party providers
could adversely affect our ability to process payments and process purchases by shoppers on our platforms in a timely manner or at all,
which could adversely affect our business, operating results and financial condition.
Our success will depend on our ability to build
and maintain relationships with these and other third-party service providers on commercially reasonable terms. If we are unable to build
and maintain such relationships on commercially reasonable terms, we may have to suspend or cease operations. Even if we are able to build
and maintain such relationships, if these third parties are unable to deliver their services on a timely basis, shoppers could become
dissatisfied and decline to make future purchases from the merchants, which would adversely affect our revenue. If the merchants become
dissatisfied with the services provided by these third parties, our reputation and our business could suffer.
Our
provision of shipping services is dependent on third-party providers of cross-docking services for which we have limited redundancy. To
the extent that we may be unable to secure comparable services in the
countries in which we operate, the ongoing operation of our business may be adversely affected.
In some countries in which we operate,
we rely on third-party providers of “cross-docking services” to collect, sort and prepare for cross-border shipping the products
sold by merchants through our platforms. We generally employ a single provider of cross-docking services in such outbound markets due
to a paucity of providers and minimum volume requirements imposed by such providers. Our ability to ship products in a timely manner is
dependent on our ability to secure cross-docking services and in the event that we cannot secure them in specific geographies, or are
unable to secure them at competitive prices or with adequate service reliability and availability, our operations may be adversely affected.
Moreover, if a cross-docking service provider fails to provide the service, our operations will be adversely affected until such time
that we are able to shift to an alternative provider.
Operating as merchant of record
for sales conducted using our platforms imposes certain obligations and subjects us to certain risks applicable to actors that make available
or place products in the market such as product liability, shipping compliance, and waste and packaging compliance.
Our business model and activities are predicated
upon our operating as the merchant of record (“MoR”) of the products sold through our platforms. As a result of us being identified
as a seller rather than the merchants, we could bear responsibility for the products and may be liable for product liability claims brought
by our shoppers or other third parties, and we may be subject to various regulatory compliance requirements, such as waste and packaging
compliance. Although we have policies in place crafted to ensure compliance and reduce risk of such liabilities, for example by avoiding
the sale of products that we determine to be “high risk” or by making proper disclosures in our ‘terms of sale’
and although our commercial arrangements with the merchants typically require the merchants to cover such liabilities, it is possible
that we may be subject to product liability or other compliance or similar regulations or litigation and may incur various related costs
which may or may not be fully covered by our contractual arrangements or insurance coverage. Furthermore, any actual or alleged non-compliance
on our part in a specific geography may not be treated by local authorities as an isolated event. Heightened scrutiny by local authorities
in a specific geography could impede our local activities irrespective of the product vertical or merchant from which the products originated.
As MoR, we could be adversely affected if the
packages provided by the merchants do not contain the correct articles ordered by the shopper, or if articles and the packages provided
by the merchants are not shipped in compliance with applicable rules or do not contain all requisite documentation for cross-border shipping.
Failure to ensure such compliance may result in shipping delays or diminished shopper satisfaction, result in confiscation or destruction
of articles and payment of additional costs, fines or assessments from our fulfillment partners and other third parties, which in turn
may adversely affect our results of operations.
While merchandise is in our possession, we bear
the risk of loss. While the majority of merchants are responsible for transporting the goods to our facilities, certain of our merchant
agreements require us to take possession of products for an extended period of time. To the extent that products are damaged, lost or
stolen during the period in which we bear the risk of loss, our business may be adversely affected.
Payment
transactions through our e-commerce platforms subject us to regulatory requirements, additional fees, and other risks that could be costly
and difficult to comply with or that could harm our business.
Our business depends on our ability to process
a wide range of payment methods, including credit and debit cards, as well as other alternative payment methods and this ability is facilitated
by the payment card and alternative payment networks. We do not directly acquire the payment card networks that enable our acceptance
of payment cards and alternative payment methods. As a result, we must rely on banks, acquiring processors and other third-party payment
processors to process transactions on our behalf. These third parties perform the card processing, currency exchange, identity verification
and fraud analysis services. These third parties may fail or refuse to process transactions adequately, may breach their agreements with
us, or may refuse to renegotiate or renew these agreements on terms that are favorable or commercially reasonable. They might also take
actions that degrade the functionality of our services, impose additional costs or requirements on us, or give preferential treatment
to competitive competing services, including their own services. If we are unsuccessful in establishing, renegotiating or maintaining
mutually beneficial relationships with these payment card networks, banks and acquiring processors, our business may be harmed.
We are required by our third-party payment processors to comply with payment card
network operating rules, including the Payment Card Industry Data Security Standard (“PCI DSS”), and we have agreed to reimburse
our payment processors for any fees or fines that they are assessed by payment card networks as a result of any rule violations by us
or our merchants. The payment card schemes have discretion to determine, change and interpret the card rules, and our third-party payment
processors are required to assess our compliance with the card scheme rules, and may make assessments or determinations that are unfavorable
to our business model. In past assessments of us operating as MoR, we demonstrated our compliance with MoR operating rules and demonstrated
that we should not be subject to compliance with other operating rules (e.g. such as those applicable to “payment facilitators”).
There is no assurance that the third-party payment processors or their payment card networks will not re-evaluate that conclusion, or
make a different determination in the future. If such third-party payment processors or their payment card networks were to determine
that we must comply with other operating rules, we may be subject to additional regulations, might incur higher compliance costs, and
may be required to modify certain aspects of our platforms and service
offering in order to maintain compliance, which may have an adverse impact on our business.
If we fail to comply with the payment card network
rules, we would be in breach of our contractual obligations to our third-party payment processors, financial institutions, partners and
merchants. Such failure to comply may subject us to fines, penalties, damages, higher transaction fees and civil liability, and could
eventually prevent us from processing or accepting payment methods or could lead to a loss of a third-party payment processor. Further,
there is no guarantee that, even if we are in compliance with such rules or requirements, such compliance will prevent illegal or improper
use of our payment systems or the theft, loss, or misuse of data pertaining to credit and debit cards, credit and debit card holders,
and credit and debit card transactions.
In addition, we face the risk that one or more
payment card networks or other third-party payment processors may, at any time, assess penalties against us or our merchants, or terminate
our ability to accept credit card payments or other forms of online payments from shoppers, which would have an adverse effect on our
business, financial condition and operating results.
We are subject to anti-money
laundering regulations and related compliance costs and third-party risks.
We are or may be subject to anti-money laundering
laws and regulations that prohibit, among other things, involvement in receiving and/or transferring the proceeds of criminal activities,
or doing business with, or rendering service to, certain individuals or organizations, and impose obligations on us to identify such persons
(or their ultimate beneficiaries) or users and request certain information and documentation that, in certain circumstances, must be shared
with third-party payment card networks or other third-party payment processors or by other third parties such as Shopify or other platforms,
or with government or regulators institutions. Because laws and regulations differ in each of the jurisdictions where we operate, and
because some requirements may be imposed by the card scheme or the payment processors in other countries, additional verification and
reporting requirements could apply. These regulations requirements, as well as any future regulation and any additional restrictions imposed
by credit card associations, could raise our costs significantly and reduce the attractiveness of our services or platform. Failure to
comply with anti-money laundering laws could result in significant criminal and civil lawsuits, penalties, and forfeiture of significant
assets.
We may be required by our third-party
payment card networks or other third-party payment processors or by other third parties such as Shopify or other platforms to check, confirm
and assure the identity of beneficial owners of our merchants, or to determine they are duly and legally organized, or perform other compliancy
assessments, generally known and referred to as ‘know your customer’ or ‘KYC’ or ‘know your business’
or ‘KYB’. Certain e-commerce platforms may offer qualifying merchants to operate a D2C e-commerce store on such platforms,
for example Shopify Markets Pro. Merchants using such platforms may onboard directly through the platform operator (e.g. Shopify), and
we may not collect the information required to perform KYC or KYB directly. While we have effected internal control processes to perform
compliancy assessments, if we are unable to collect the information required to properly perform KYC or KYB, or if we are unable to obtain
such collected information, or if we collect or obtain such KYC/KYB data and are unable to conduct a proper assessment and validation,
or if we have properly conducted an assessment but failed to take action as needed, we face the risk that one or more payment card networks
or other third-party payment processors may, at any time, assess penalties against us or our merchants, or terminate our ability to accept
credit card payments or other forms of online payments from shoppers, which would have an adverse effect on our business, financial condition
and operating results.
We are subject to governmental
sanctions and export controls that may subject us to liability if we are not in full compliance with applicable economic sanctions and
export control laws.
Our activities are subject to certain economic sanctions and export control laws and
regulations that prohibit or restrict transactions or dealings with certain countries, regions, governments and persons targeted by U.S.,
Israel, E.U. or other applicable jurisdictions’ embargoes or sanctions. As a result, we bear the responsibility for ensuring that
transactions processed through our platforms are conducted in compliance with such laws and regulations. U.S., Israel and E.U. sanctions
may change from time to time, and the countries, regions, governments and persons that are sanctioned by each jurisdiction may be different.
Ensuring compliance with applicable export control laws and regulations requires ongoing efforts and resources. Identifying commerce with,
or sales made to, sanctioned countries or denied parties and obtaining export licenses or other authorizations for a particular product
sale may be time-consuming and may result in the delay or loss of sales opportunities even if the export license ultimately may be granted.
We generally apply precautions to prevent sales to sanctioned countries and denied parties, such as screening against listed denied parties
and blocking sales at the point of checkout; however, we cannot guarantee that the precautions we take will prevent all violations of
applicable export control and sanctions laws. We are aware that certain sales of immaterial value and volume made by certain of our non-Israeli
merchants through our platforms, operated by one or more of our non-Israeli
subsidiaries, to a specific country (not sanctioned under
U.S. or E.U. laws), as to which country we apply the foregoing precautions, are not in compliance with certain Israeli export laws. Violations
of U.S., Israeli or E.U. sanctions or export control laws may result in penalties and significant fines and possible incarceration of
responsible employees and managers could be imposed for criminal violations of these laws.
If our carriers and brokers fail to file or obtain
appropriate import, export or re-export declarations, licenses or permits, we may also be adversely affected, through reputational harm
as well as other negative consequences, including government investigations and penalties. We presently incorporate export control compliance
requirements into our strategic partner agreements; however, no assurance can be given that our partners will comply with such requirements.
Trade Controls by the U.S. and other governments
enacted due to geopolitics or otherwise (for example, the war in Ukraine has prompted the U.S. and other governments to impose new Trade
Controls and sanctions on Russia, among other countries), and any counter-sanctions enacted in response, could continue to disrupt international
commerce and the global economy, and could restrict our ability to operate, generate or collect revenue in certain other countries, which
could adversely affect our business. While, we do not have operations or a material customer base in either Russia or Ukraine, an escalation
of the conflict or expansion of sanctions could further disrupt global supply chains, broaden inflationary costs, and have a material
adverse effect on our customers, vendors and financial markets.
We are subject to the import
regulations and restrictions of each country to which we ship merchandise and non-compliance with such regulations may subject us to liability
and may impede our ability to provide services in specific geographies in the future.
Import and export regulations and restrictions
vary by country, product and quantity and require costly resources in order to ensure compliance. While we take precautions in order to
avoid non-compliance with these restrictions, including focusing on products that carry lower inherent risk of being subject to import/export
restrictions and avoiding highly regulated industries, some of the products offered using our platforms may be subject to such restrictions.
For example, the United States Food and Drug Administration regulates the import of sunglasses as medical devices, and the Australian
Department of Agriculture regulates the import of timber, wood articles or bamboo related products. Non-compliance with the local import
rules and restrictions applicable to such products may cause our products to be detained, confiscated, or destroyed at the port of entry.
Additionally, there are increasing expectations
in various jurisdictions that companies monitor the environmental and social performance of their suppliers, including compliance with
a variety of labor practices, as well as consider a wider range of potential environmental and social matters, including ecolabelling
or the end of life considerations for products. Compliance can be costly, require us to establish or augment programs to diligence or
monitor certain third parties. Failure to comply with such regulations can result in fines, reputational damage, import ineligibility
for products, or otherwise adversely impact our business or the business of our merchants.
In addition, because we operate as MoR, in the
event that we are flagged by a specific country due to non-compliance with import restrictions applicable to a specific product or vertical
our ability to continue to import such product in the future may be impeded, regardless of the identity of the merchant from which the
product originates. If our service offerings are curtailed to exclude the import of whole verticals to specific countries, or if we are
barred from importing products of any vertical to specific countries, our GMV attributable to such destination markets may decrease, our
reputation will be harmed, and our platforms will become less attractive to our current and future merchants.
Our business relies on the personal
importation model and its applicability to the products provided to shoppers. Any modification of the rules, requirements or applicability
of this model may adversely affect our business.
The products provided by the merchants to shoppers are shipped to and imported by
the shopper for personal rather than commercial use. Each country determines its own rules and criteria for an import to qualify as importation
for personal use, and determines which, if any, licenses, certifications, registrations, fees, quantity limitations and obligations apply
to such an import. In the event that certain countries modify their personal importation rules, or impose additional compliance requirements
or limitations related to this form of import, it could have an adverse effect on the cross-border e-commerce market as a whole, and may
reduce the demand for cross-border e-commerce purchases. This in turn would reduce the demand for our platforms
and services and have an adverse effect on our business and result of operations.
Additionally, we are witnessing an evolving and developing regulatory trend whereby
the burden to adhere to certain legislations and regulatory requirements shifts to or is shared by the distributors, platform providers
and other parties involved in the fulfilment chain of products (in addition to manufacturers), even if such parties are not established
in the country of importation and where the import is carried out by the shopper as a personal-import. For example, the EU has recently
enacted a new Product Safety Regulation that will impose certain additional requirements on our merchants and on us. In the event that
such regulations would nonetheless apply to personal importation rules, it could have an adverse effect on the cross-border e-commerce
market as a whole, and may reduce the offering of cross-border e-commerce products to such regulated destinations. This in turn would
reduce the demand for our platforms and services and have an adverse effect
on our business and result of operations.
We store personal information
of merchants and shoppers. To the extent our security measures are compromised, our platforms may be perceived as not being secure. This
may result in merchants curtailing or ceasing their use of our platforms, our reputation being harmed, our incurring of significant regulatory
and monetary liabilities, and adverse effects on our results of operations and growth prospects.
Our operations involve the storage and transmission
of data, including personal information and other confidential information of our third-party providers, merchants and shoppers, on our
systems and the systems of third-party service providers we rely on. Third-party applications that we rely on for provision of certain
services, such as acquiring processors also store personal information, payment card information, and other confidential information.
We have experienced and expect to continue to experience actual and attempted cyber-attacks in varying degrees of our IT networks, such
as through phishing scams and ransomware. Although none of these actual or attempted cyber-attacks has had a material adverse impact on
our operations or financial condition, we cannot guarantee that such incidents will not have such an impact in the future. We face numerous
and evolving cybersecurity risks that threaten the confidentiality, integrity and availability of our systems and information. Cyberattacks
and other malicious internet-based activity continue to increase globally in frequency and magnitude, and cloud-based platform providers
of services are expected to continue to be targeted. Threats include traditional computer “hackers,” malicious code (such
as viruses, ransomware and worms), social engineering/phishing, employee malfeasance or misuse, human or technological error, as a result
of bugs, misconfigurations or exploited vulnerabilities in software or hardware and denial-of-service attacks. Sophisticated nation-states
and nation-state-supported actors now engage in such attacks, including advanced persistent threat intrusions. Although we do not store
payment card information, hackers and adverse third parties may mistake us for the merchants, causing them to target us in order to obtain
payment card information.
We have implemented a variety of security protocols,
network protection mechanisms and other security measures into our internal systems, networks and physical facilities designed to protect
confidentiality, integrity and availability of our systems and information. However, there is no assurance that such measures will be
adequate to prevent or detect service interruption, system failure, data loss or theft, or other material adverse consequences, directly
or through our vendors or that such measures will be fully implemented, complied with at all times. Despite efforts to create security
barriers to such threats, it is virtually impossible for us to entirely mitigate these risks. If our security measures are compromised
as a result of third-party action, human error, malfeasance, stolen or fraudulently obtained log-in credentials, technical malfunction
or otherwise, our reputation could be damaged, our business may be harmed, and we could incur significant liability (including, but not
limited to, fines imposed by data privacy authorities and costs related to litigation).
Because the techniques used to obtain unauthorized
access or sabotage systems change frequently and generally are not identified until they are launched against a target, we may be unable
to anticipate these techniques or to implement adequate preventative measures. Threat actors are also increasingly using sophisticated
tools – including artificial intelligence – designed to circumvent security controls, evade detection and remove forensic
evidence. Therefore, the measures we take or the controls, policies, procedures and personnel we have in place may not be enough to detect,
prevent, and overcome such attacks. Additionally, because we rely on third-party and public-cloud infrastructure, we are reliant in part
on third-party security measures to protect against unauthorized access, cyberattacks, and the mishandling of shopper and merchant data.
Even if such a data breach did not arise out of our action or inaction, or if it were to affect our competition rather than us, the resulting
concern could negatively affect merchants, shoppers and our business. Because our products and services are integrated with our merchants’
systems and processes, any circumvention or failure of our cybersecurity defenses or measures could compromise the confidentiality, integrity,
and availability of our merchants’ own systems and/or our merchants’ proprietary or other sensitive information. Concerns
regarding data privacy and security may cause some of our merchants to stop using our platforms and fail to renew their agreements with
us. In addition, failures to meet merchants’ or shoppers’ expectations with respect to security and confidentiality of their
data and information could damage our reputation and affect our ability to retain merchants, attract new merchants, and grow our business.
Furthermore, failure to comply with legal or contractual requirements around the security of personal information could lead to significant
fines and penalties, as well as claims by merchants and shoppers. Regardless of merit, these proceedings or violations could force us
to spend money in defense or settlement of these proceedings, result in the imposition of monetary liability or injunctive relief, divert
management’s time and attention, increase our costs of doing business, and materially adversely affect our reputation and the demand
for our platform.
A cybersecurity event could have significant costs
and adversely harm our business, including regulatory investigations and enforcement actions, litigation (including class action), litigation
indemnity obligations, remediation costs, including incident response, system restoration or remediation and future compliance costs,
network downtime, loss of existing and future customers, increases in insurance premiums, and reputational damage. We cannot guarantee
that any costs and liabilities incurred in relation to an attack or incident will be covered by our existing insurance policies or that
applicable insurance will be available to us in the future on economically reasonable terms or at all. If we experience, or are perceived
to experience in the future, security incidents that impair the performance of our platforms or create availability problems or the loss,
compromise or unauthorized disclosure of personal data or other sensitive information, or if we fail to respond appropriately to any security
incidents that we may experience, or are perceived to do so, merchants may become unwilling to provide us the information necessary to
set up an account with us. Existing merchants may also stop utilizing our platforms, and shoppers may decrease their purchases, or close
their accounts with us altogether. Any of these results could harm our growth prospects, our business, and our reputation for maintaining
a trusted e-commerce platform.
Interruptions or delays in the
services provided by third-party data centers or internet service providers could impair our platforms and our business could suffer.
We rely on the internet and, accordingly, depend
upon the continuous, reliable, and secure operation of internet servers, related hardware and software, and network infrastructure. Any
damage to, failure or delay of our systems would prevent us from operating our business.
We host our platforms using third-party data centers
and providers of cloud infrastructure services. We currently use one third-party provider for these data and cloud services. Our operations
depend on protecting the virtual cloud infrastructure hosted by this cloud services provider by maintaining its configuration, architecture,
and interconnection specifications, as well as the information stored in these virtual data centers and transmitted by third-party internet
service providers. Furthermore, we have no physical access to or control over the services provided by our cloud services provider. Although
we have disaster recovery plans that utilize multiple locations, the data centers that we use are vulnerable to damage or interruption
from human error, intentional bad acts, earthquakes, floods, fires, severe storms, war, terrorist attacks, power losses, hardware failures,
systems failures, telecommunications failures, and similar events, many of which are beyond our control, any of which could disrupt our
service, destroy our data, or prevent us from being able to continuously back up or record changes in our platforms. Certain of these
events may become more frequent or intense as a result of climate change. For more information, see our risk factor titled “We are
subject to a series of risks regarding climate change.” In the event of significant physical damage to one of these data centers,
it may take a significant period of time to achieve full resumption of our services, we may incur data loss during the service resumption
process and our disaster recovery planning may not account for all eventualities. Further, a prolonged service disruption to our cloud
services provider, affecting our platforms for any of the foregoing reasons could damage our reputation with current and potential organizations,
expose us to liability, cause us to lose merchants and shoppers, or otherwise harm our business. We may also incur significant costs for
using alternative equipment or taking other actions in preparation for, or in reaction to, events that damage the systems we use. Damage
or interruptions to these data centers could harm our business. Moreover, negative publicity arising from these types of disruptions could
damage our reputation and may adversely impact use of our solutions and platform. We may not carry sufficient business interruption insurance
to compensate us for losses that may occur as a result of any events that cause interruptions in our service. Further, the contractual
commitments that we provide to merchants on our platforms as well as our third-party providers with regard to data privacy and security
are limited by the commitments that our third-party cloud infrastructure services provider has provided us and these measures may not
fully address the risks associated with the third-party processing, storage and transmission of such information. Any violation of data
or security laws by our third party providers could adversely impact our business.
Our cloud services providers enable us to order
and reserve server capacity in varying amounts and sizes distributed across multiple regions. In addition, our cloud services providers
provide us with computing and storage capacity pursuant to terms of service that continue until terminated by either party. If we do not
accurately predict our infrastructure capacity requirements, merchants could experience service shortfalls which could interrupt the performance
of our platforms, which could adversely affect the perception of its reliability and our revenue and harm the sales and business of our
merchants. We may also be unable to effectively address capacity constraints, upgrade our systems as needed and continually develop our
technology and network architecture to accommodate actual and anticipated changes in technology.
Our platforms are utilized by a large number of
merchants, and as we continue to expand the number of merchants and shoppers, we may not be able to scale our technology to accommodate
the increased capacity requirements, which may result in interruptions or delays in service. Merchants often draw significant numbers
of shoppers over short periods of time (typically during events such as new product releases, holiday shopping season and flash sales).
In the event that merchants conduct a high volume of sales in a short period of time, we may not be capable of securing the then-necessary
capacity for such traffic which may cause a degradation in the quality of our platforms and services. Furthermore, if we are incapable
of anticipating high traffic levels and reserving server capacity accordingly, our platforms and services may be adversely affected. In
addition, the failure of our cloud services provider’s data centers or third-party internet service providers to meet our capacity
requirements could impede our ability to scale our operations. In some cases, our cloud services providers may terminate the agreement
upon 30 days’ notice. Termination of the agreement may harm our ability to access data centers we need to host our platforms or
to do so on terms as favorable as those we currently have in place. We currently rely exclusively on one cloud services provider for our
cloud infrastructures and therefore a transition to an alternative provider may take time, cause us to incur additional costs and reduce
the quality and functionality of our platforms.
Increases in shipping rates
could negatively impact our profits generated through shipping services.
Shipping rates and surcharges are volatile and subject
to market fluctuations. A portion of our revenues is generated through shipping services provided through our shipping and logistics partners.
Therefore, a substantial increase in shipping rates may reduce our margins from shipping services. Although some of such cost would be
borne by merchants and shoppers, significant increases of costs may diminish demand for cross-border e-commerce, reduce the attractiveness
of our service among merchants and adversely affect our results of operations.
Fluctuations in the exchange
rate of foreign currencies have adversely impacted and in the future could continue to impact our results of operations.
A majority of our purchase and sale transactions
are carried out in different currencies and we bear the risk of diminution in value of the shopper’s purchasing currency in the
interim periods between the transaction stages (e.g. placement/payment and returns/refund). We may incur additional costs and experience
losses resulting from fluctuations in exchange rates.
While our financial reporting currency is U.S.
Dollars, a significant share of our revenues is denominated in foreign currencies, including Pounds Sterling and Euros, and may in the
future have significant sales denominated in the currencies of additional countries, which may negatively impact our reported revenues
as a result of fluctuations in currency exchange rates vis-à-vis the U.S. Dollar. In addition, we incur a substantial portion of
our operating expenses in New Israeli Shekels, Pounds Sterling and U.S. Dollars, and to a lesser extent, other foreign currencies. We
may incur additional costs and experience losses resulting from fluctuations in exchange rates for revenues in foreign currencies or upon
translation of New Israeli Shekels expenses incurred in Israel, Euros expenses incurred in Europe or Pounds Sterling expenses incurred
in the United Kingdom, to U.S. Dollars which may negatively impact our operating results.
If we fail to offer high quality
support, our business and reputation could suffer.
Merchants rely on our personnel for support related
to our platforms and services. High-quality support is important for maintaining, renewing and expanding our agreements with existing
merchants and maintaining our reputation among merchants. As we expand our business and pursue engagements with new merchants, the importance
of high-quality support will increase, and we expect to incur additional support related costs in order to meet the requirements of our
new and future merchants. If we do not help merchants and shoppers quickly to resolve issues and provide effective ongoing support, our
ability to retain existing merchants and attract new merchants could suffer and our reputation could be harmed.
If we fail to enhance our reputation
and awareness of our platforms, our ability to expand the number of merchants using our platforms and increase our GMV will be impaired,
our reputation may be harmed, and our business, results of operations, and financial condition may suffer.
We believe that developing and maintaining awareness
and a favorable reputation is critical to achieving widespread acceptance of our platforms and services and is an important element in
attracting new merchants to our platforms, and retaining existing merchants. Furthermore, we believe that the importance of brand recognition
will increase as competition in our market increases. Our ability to increase awareness will depend largely on the effectiveness of our
marketing efforts, our ability to ensure that our platforms and services remain of high quality, reliable, and useful at competitive prices,
our ability to maintain our merchants’ trust, our ability to continue to develop new functionality and solutions, and our ability
to successfully differentiate our platforms.
Efforts to increase awareness may not yield increased
revenue, and even if they do, any increased revenue may not offset the expenses we incur. In addition, we may fail to successfully integrate
or retain the acquired personnel, operations and technologies or effectively manage the combined business following the completion of
acquisitions, such as the Flow Merger or Borderfree Acquisition, or fail to fully achieve the expected benefits of such acquisitions or
fail to retain merchants operating on such acquired platforms. If we fail to successfully promote our platforms, incur substantial expenses
in an unsuccessful attempt to promote our platforms, or fail to successfully transition, execute and grow the offerings derived from our
newly acquired platforms into our business (for example, the Shopify Markets Pro offering), we may fail to attract new merchants, retain
existing merchants or grow or maintain the volume of sales facilitated by our platforms to the extent necessary to realize a sufficient
return on our marketing efforts, and our business, results of operations, and financial condition could suffer.
Our reputation may be harmed
by our merchants’ or third-party service providers’ unethical business practices.
Our emphasis on our values makes our reputation
particularly sensitive to allegations of unethical business practices by our merchants or third-party service providers. Our policies
promote legal and ethical business practices. However, we do not control our merchants or third-party service providers or their business
practices and cannot ensure that they comply with our policies. If our merchants or third-party service providers engage in illegal or
unethical business practices or are perceived to do so, we may receive negative publicity and our reputation may be harmed.
Mobile devices are very commonly
used to conduct e-commerce transactions, and if our platforms and services do not operate as effectively when the merchants’ sites
and checkout pages are accessed through these devices, the merchants’ experience will be negatively impacted, reducing merchant
satisfaction with our platforms and services.
We are dependent on the interoperability of our
platforms with third-party mobile devices, merchants’ mobile applications and mobile operating systems as well as web browsers.
Changes in such devices, systems, applications or web browsers that degrade the functionality of our platforms could adversely affect
adoption and usage of our platforms and services. For example, we provide our merchants with development libraries which allow for easy
implementation of our platforms as well as bug and error fixes. Our merchants’ ability to timely utilize such libraries in order
to fix bugs and errors is contingent on application stores (such as Google Play and Apple App Store) approving our software development
kit and libraries. If such approval is not obtained in a timely manner, merchant may be delayed in fixing bugs and errors relating to
the use of our platforms and may forgo the use of our solutions until an applicable error or bug fix is available. Mobile e-commerce and
effective mobile functionality are integral both to our merchants and to our long-term growth strategy. If the functionality of our platforms
is inhibited when access to our merchants’ stores is done through mobile devices, our business and operating results could be adversely
affected.
We are dependent upon the continued
use of the internet for commerce.
Our success depends upon the general public’s
continued willingness to use the internet as a means to pay for purchases, communicate, access social media, research and conduct commercial
transactions, including through mobile devices. Federal, state, or foreign government bodies or agencies have in the past adopted, and
may in the future adopt, laws or regulations affecting the use of the internet as a commercial medium. The adoption of any laws or regulations
that could reduce the growth, popularity, or use of the internet, including laws or practices limiting internet neutrality, could decrease
the demand for, or the usage of, our platforms and services, increase our cost of doing business and harm our results of operations. Changes
in these laws or regulations could require us to modify our platform, or certain aspects of it, in order to comply with these changes.
In addition, government agencies or private organizations have imposed and may impose additional taxes, fees, or other charges for accessing
the internet or commerce conducted via the internet. These laws or charges could limit the growth of internet-related commerce or communications
generally, or result in reductions in the demand for internet-based platforms such as ours. In addition, the use of the internet could
be harmed due to delays in the development or adoption of new standards and protocols to handle increased demands of internet activity,
security, reliability, cost, ease-of-use, accessibility, and quality of service. Further, demand for our platforms depends on the quality
of shoppers’ access to the internet. Certain features of our platforms may require significant bandwidth and fidelity to work effectively.
Internet access is frequently provided by companies that have significant market power that could take actions that degrade, disrupt or
increase the cost of access to our platforms, which would negatively impact our business. The performance of the internet and its acceptance
as a commerce tool has been harmed by “viruses,” “worms” and similar malicious programs and the internet has experienced
a variety of outages and other delays as a result of damage to portions of its infrastructure. If the use of the internet is adversely
affected by these issues, demand for our platforms and services could decline. Additionally, if merchants or shoppers become unwilling
or less willing to use the internet for commerce for any other reason, including lack of access to high-speed communications equipment,
congestion of traffic on the internet, internet outages or delays, disruptions or other damage to merchants’ and shoppers computers,
increases in the cost of accessing the internet and security and privacy risks or the perception of such risks, our business could be
adversely affected. Finally, our success depends upon merchants continuing to pursue D2C sales as they seek to take advantage of e-commerce
trends and gain ownership and knowledge of their international customers. If merchants cease to pursue D2C sales for any reason, including
if such merchants prefer to sell their products on e-commerce marketplaces, our business could be adversely affected.
We are subject to stringent
and changing laws, regulations, standards, and contractual obligations related to privacy, data protection, and data security. Our actual
or perceived failure to comply with such obligations could harm our business.
We receive, collect, store, process, share, transfer,
disclose, and use personal data and other data relating to shoppers, customers, candidates, employees,
website users, contractors and
other persons. We are subject to numerous federal, state, local, and international laws, directives, and regulations regarding privacy,
data protection, and data security and the collection, storing, sharing, use, processing, transfer, disclosure, and protection of personal
data, the scope of which are changing, subject to differing interpretations, and may be inconsistent among jurisdictions or conflict with
other legal and regulatory requirements. For example, the Israeli Privacy Protection Law 5741-1981 and its regulations, or the PPL, the
EU’s General Data Protection Regulation, or the GDPR, the California Consumer Privacy Act, or the CCPA, as amended by the California
Privacy Rights Act, and the data protection and security laws of other states and countries impose additional requirements with respect
to disclosure and deletion of personal information of their residents, imposing penalties for violations and, in some cases, private right
of action for data breaches. These laws, and similar legislation in other states and countries that are developing or have been recently
enacted, impose transparency and other obligations with respect to personal data of their respective residents and provide residents with
similar rights for certain types of data breaches. We are also subject to certain contractual obligations related to privacy, data protection
and data security. We strive to comply with our policies and applicable laws, regulations, contractual obligations, and other legal obligations
relating to privacy, data protection, and data security to the extent possible. However, the regulatory framework for privacy, data protection
and data security worldwide is, and is likely to remain for the foreseeable future, uncertain and complex, and it is possible that these
or other actual or alleged obligations may be interpreted and applied in a manner that we do not anticipate or that is inconsistent from
one jurisdiction to another, including across the various jurisdictions in which we operate remotely and may conflict with our other legal
obligations or our practices. Further, any significant change to applicable laws, regulations or industry practices regarding the collection,
use, processing, storage, sharing, transferring, security or disclosure of data, or their interpretation, or any changes regarding the
manner in which the consent of shoppers or other data subjects for the collection, use, processing, storage, sharing, transferring, or
disclosure of such data must be obtained, could increase our costs and require us to modify our services and features, possibly in a material
manner, which we may be unable to complete, and may limit our ability to collect, use, process, store, share, transfer, or disclose shopper
data or develop new services and features.
Certain data privacy legislation restricts the
cross-border transfer of personal data and some countries introduced data localization into their laws. Specifically, regulations and
laws such as the GDPR and other European and UK data protection laws generally prohibit the transfer of personal data to third countries,
unless the transfer is to a country deemed to provide adequate protection (such as Israel, as the EU Commission has issued a decision
on the adequacy of the level of protection of personal data in Israel) or the parties to the transfer have implemented specific safeguards
to protect the transferred personal data. At the same time, European case law and guidance have imposed additional onerous requirements
in relation to data transfers. Other jurisdictions such as Israel and China impose their own requirements to transfer personal data internationally,
and regulators continue to propose new rules and guidance on the topic. We expect the existing legal complexity and uncertainty regarding
international personal data transfers to continue in Europe and globally. If we do not implement the relevant transfer mechanism to transfer
personal data or otherwise adequately comply with regulations and laws on international data transfers, we may violate or infringe data
privacy legislation requirements, and we may be exposed to regulatory proceedings or litigation and increased exposure to fines, penalties,
or commercial liabilities, as well as reputational damages.
Any failure or perceived failure by us to comply
with our posted privacy policies, our privacy-related obligations to merchants or other third parties, or any other legal obligations
or regulatory requirements relating to privacy, data protection, or data security, may result in governmental investigations or enforcement
actions, litigation, claims, or public statements against us by consumer advocacy groups or others and could result in significant liability,
cause our merchants to lose trust in us, and otherwise materially and adversely affect our reputation and business. Furthermore, the costs
of compliance with, and other burdens imposed by, the laws, regulations, other obligations, and policies that are applicable to the businesses
of our merchants may limit the adoption and use of, and reduce the overall demand for, our platform. In addition, if a breach of data
security were to occur or to be alleged to have occurred, if any violation of laws and regulations relating to privacy, data protection
or data security were to be alleged, or if we had any actual or alleged defect in our safeguards or practices relating to privacy, data
protection, or data security, our platforms and services may be perceived as less desirable and our business, prospects, financial condition,
and results of operations could be materially and adversely affected. Additionally, if third parties we work with violate applicable laws,
regulations or contractual obligations, such violations may put our data at risk, could result in governmental investigations or enforcement
actions, fines, litigation, claims, or public statements against us by consumer advocacy groups or others and could result in significant
liability, cause our merchants to lose trust in us, and otherwise materially and adversely affect our reputation and business. Lastly,
public scrutiny of, or complaints about, technology companies or their data handling or data protection practices, even if unrelated to
our business, industry or operations, may lead to increased scrutiny of technology companies, including us, and may cause government agencies
to enact additional regulatory requirements, or to modify their enforcement or investigation activities, which may increase our costs
and risks.
As the regulatory framework
for machine learning technology and generative artificial intelligence evolves, including with respect to unintentional bias and discrimination,
our business, financial condition, and results of operations may be adversely affected.
Our business increasingly relies on artificial intelligence,
machine learning and automated decision making. The regulatory framework for this technology is rapidly evolving, and we may not always
be able to anticipate how to respond to these laws or regulations. Many federal, state and foreign government bodies and agencies have
introduced or are currently considering additional laws and regulations governing the use of such technologies. There is also an increase
in litigation in a number of jurisdictions, including the United States, relating to the development, security and use of artificial intelligence.
In October 2023, President Biden issued the Executive Order on Safe, Secure and Trustworthy Artificial Intelligence (“The Order”)
with the goal of promoting the “safe, secure, and trustworthy development and use of artificial intelligence in the United States.”
The Order has established certain new standards for the training, testing and cybersecurity of sophisticated artificial intelligence models,
and the Order has also instructed other federal agencies to promulgate additional regulations within certain timeframes from the date
of the Order. Federal artificial intelligence legislation has also been introduced in the U.S. Senate. Such additional regulations may
impact our ability to develop, use and commercialize artificial intelligence and machine learning technologies in the future. Additionally,
in December 2023, new laws regulating artificial intelligence have been enacted in China, and the European Parliament and Council reached
a political agreement on the European Union's Artificial Intelligence Act (the “EU AI Act”), which seeks to create a comprehensive
legal framework for the regulation of artificial intelligence systems across the EU. The final text of the EU AI Act is expected to be
published in early 2024 with the majority of obligations expected to take effect by 2026, including requirements around transparency,
conformity assessments and monitoring, risk assessments, human oversight, security, accuracy, general purpose artificial intelligence
and foundation models, and fines for breach of up to 7% of worldwide annual turnover. Once fully applicable, the EU AI Act will have a
material impact on the way artificial intelligence is regulated in the EU, including requirements around transparency, conformity assessments
and monitoring, risk assessments, human oversight, security, accuracy, general purpose artificial intelligence and foundation models,
and fines for breach of up to 7% of worldwide annual turnover. In 2022 and 2023, China implemented a number of regulations to govern generative
artificial intelligence, algorithmic recommendation and deep synthesis technologies, namely the Interim Provisions on Management of Generative
Artificial Intelligence Services, Administrative Provisions on Algorithm Recommendation for Internet Information Services and Provisions
on Management of Deep Synthesis in Internet Information Service, respectively. Such regulations impose strict obligations on service providers,
among other entities, with respect to their provision and use of generative artificial intelligence, algorithmic recommendation and deep
synthesis technologies. For example, service providers must file the algorithms used and complete a security assessment with the local
CAC before the provision of the service. The regulatory framework in China is expected to have a material impact on the way artificial
intelligence is regulated in China, and together with developing guidance and/or decisions in this area, may affect our use of artificial
intelligence and our ability to provide and to improve our services, require additional compliance measures and changes to our operations
and processes, result in increased compliance costs and potential increases in civil claims against us, and could adversely affect our
business, operations and financial condition. It is possible that the EU AI Act and the US artificial intelligence framework, along with
the adoption of new laws and regulations in other jurisdictions, or the interpretation of existing laws and regulations, may affect the
operation of our e-commerce risk intelligence platform and the way in which we use artificial intelligence and machine learning technology,
including with respect to how we train our models, unintentional bias and discrimination. Failure to comply with such laws or regulations
could subject us to legal or regulatory liability. Further, the cost to comply with such laws or regulations could be significant and
would increase our operating expenses, which could adversely affect our business, financial condition and results of operations.
The situation in Ukraine could
materially adversely affect our business, financial condition and results of operations.
In late February 2022, Russian military forces launched
military action against Ukraine, and sustained conflict and disruption in the region is likely. The impact to Ukraine, as well as actions
taken by other countries, including new and stricter sanctions by Canada, the United Kingdom, the European Union, the U.S. and other countries
and organizations against officials, individuals, regions, and industries, and each potential response to such sanctions, tensions, and
military actions, could lead to disruption, instability and volatility in global markets and industries that could have a material adverse
effect on our operations. As a result of this situation, our services into Ukraine and Russia were suspended until further notice. While
our direct business exposure to Ukraine and Russia is immaterial (in a typical year less than 2% of our GMV is generated by Ukraine and
Russia combined), there may nevertheless be additional implications of such military conflict on macro-economics, consumer sentiment and
buying patterns in other markets, including Eastern and Western Europe (in which we have experienced certain reductions in purchases since
the commencement of the military conflict), which may have an adverse effect on our results.
In addition, some of our Research and Development
team members are located in several cities in Ukraine which have been disrupted by the outbreak of war. The conflict has impaired and
may continue to impair their ability to work, thereby adversely affecting our research and development and merchant support capacities.
Due to this disruption, the human cost to our employees as well as the potential for broader, adverse impacts of this war, including heightened
operating risks in Ukraine and Europe, additional sanctions or counter-sanctions, heightened inflation, cyber-attacks, higher energy costs
and higher supply chain costs, as well as broader impact on global and regional economies, is difficult to measure, and the ultimate impact
of such events on our business is difficult to predict. Any disruption in the businesses of our customers or partners could have a significant
adverse impact on our results. All of the aforementioned risks may be further increased if our disaster recovery plans or those of our
customers or partners prove to be inadequate.
We are subject to anti-corruption,
anti-bribery, anti-money laundering and similar laws, and non-compliance with such laws can subject us to criminal penalties or significant
fines and harm our business and reputation.
We are subject to anti-corruption and anti-bribery
and similar laws, such as the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, the U.S. domestic bribery statute contained
in 18 U.S.C. § 201, U.S. Travel Act, the USA PATRIOT Act, the U.K. Bribery Act 2010, the Proceeds of Crime Act 2002, Chapter 9 (sub-chapter
5) of the Israeli Penal Law, 57373-1977, the Israeli Prohibition on Money Laundering Law, 5760-2000 and other anti-corruption, anti-bribery
and anti-money laundering laws in countries in which we conduct activities. Anti-corruption and anti-bribery laws have been enforced aggressively
in recent years and are interpreted broadly and prohibit companies and their employees and agents from promising, authorizing, making,
or offering improper payments or other benefits to government officials and others in the private sector. As we increase our international
sales and business, our risks under these laws may increase.
In addition, we use, and may continue to use,
third parties to sell access to our platforms and conduct business on our behalf abroad, in particular carriers and other freight forwarders
who perform customs-clearance and related services and functions as our service providers, and in our own name and instructions. We or
such current and future third-party intermediaries may have direct or indirect interactions with officials and employees of government
agencies or state-owned or affiliated entities, and we can be held liable for the corrupt or other illegal activities of such third-party
intermediaries, and our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities.
We have implemented an anti-corruption compliance program but cannot assure you that all our employees and agents, as well as those companies
to which we outsource certain of our business operations, will not take actions in violation of our policies and applicable law, for which
we may be ultimately held responsible. Noncompliance with these laws could subject us to investigations, sanctions, settlements, prosecution,
other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, adverse
media coverage, and other consequences. Any investigations, actions or sanctions could harm our business, results of operations, and financial
condition.
We act as a service provider
and take certain part of the fulfilment chain of the merchants, and while our legal and functional roles are defined, third parties may
confuse us with the merchants resulting in claims and liabilities relating to the merchants’ activities.
We operate largely as a “white label”
solution which enables the merchants to offer their products through our platform, while maintaining their own brand experience. Due to
our nearly transparent integration with such merchants’ shopper experience, claims arising from the actions of the merchants may
be unduly addressed to us by virtue of our perceived affiliation with the merchants and our role in the shopper experience. To the extent
that we are not successful in demonstrating that we are distinct from such merchants, we may be subject to misdirected claims and associated
liabilities. Although we include indemnification provisions in the merchant agreements, such provisions may not be enforced in certain
circumstances, certain jurisdictions or may not be sufficient to fully cover potential liabilities arising from such claims.
If we fail to adequately maintain,
protect or enforce our intellectual property rights, our competitive position could be impaired and we may lose valuable assets, generate
reduced revenue, and incur costly litigation to protect our rights.
Our success is dependent, in part, upon protecting
our intellectual property rights, including those in our know-how and proprietary technology. We rely on a combination of copyrights,
trade secret and other intellectual property laws and contractual restrictions to establish and protect our intellectual property rights.
While it is our policy to protect and defend our rights to our intellectual property, we cannot predict whether steps taken by us will
be adequate to prevent infringement, misappropriation or other violation of our intellectual property rights.
Policing unauthorized use of our know-how, technology
and intellectual property is difficult and may not be effective. We will not be able to protect our intellectual property if we are unable
to enforce our rights or if we do not detect unauthorized use of our intellectual property. Despite our precautions, it may be possible
for unauthorized third parties to copy our platforms or technology and use information that we regard as proprietary to create products
or services that compete with our offerings. Some of the provisions of our service agreements that protect us against unauthorized use,
copying, transfer, and disclosure of our platforms, may be unenforceable under the laws of certain jurisdictions and foreign countries.
Further, the laws of some countries do not protect intellectual property to the same extent as the laws of the United States, and mechanisms
for enforcement of intellectual property rights in some foreign countries may be inadequate. To the extent we expand our international
activities, our exposure to unauthorized copying and use of our platforms and proprietary information may increase. Further, our competition,
foreign governments, foreign government-backed actors, criminals, or other third parties may gain unauthorized access to our confidential
information and technology. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating
our intellectual property rights. If we are unable to protect our intellectual property rights or prevent unauthorized use, infringement
or misappropriation thereof by third parties, the value of our intellectual property and intellectual property rights may be diminished,
and our competition may be able to more effectively mimic our offerings and service. In addition, our know-how is derived in part from
insights we obtain from the historical individual and aggregate transactions that take place on our platform. If the availability, security
or integrity of such data is lost or compromised due to a technology failure, cyberattack or similar event, our know-how could be lost
or diminished, and this could materially adversely affect our ability to serve our merchants. For more information, see “Risk
Factors-Risks Relating to our Business and Industry- We store personal information of merchants
and shoppers. To the extent our security measures are compromised, our platforms may be perceived as not being secure. This may result
in merchants curtailing or ceasing their use of our platform, our reputation being harmed, our incurring of significant regulatory and
monetary liabilities and adverse effects on our results of operations and growth prospects.”
While software and other of our proprietary works
may be protected under copyright law, we have not registered any copyrights in these works, and instead, primarily rely on protecting
our software as a trade secret. In order to bring a copyright infringement lawsuit in the United States, the copyright must be registered.
Accordingly, the remedies and damages available to us for unauthorized use of our software may be limited.
Although we attempt to protect our intellectual
property, technology and confidential information by entering into confidentiality and invention assignment agreements with our employees
and consultants and entering into confidentiality agreements with the parties with whom we have strategic relationships and business alliances,
these agreements may not effectively grant all necessary rights to any inventions that may have been developed by the employees or consultants
party thereto, and may not be effective in controlling access to and distribution of our platforms, technology and confidential information
or provide an adequate remedy in the event of unauthorized use of our platforms or technology or unauthorized access, use or disclosure
of our confidential information. Additionally, employees and consultants may choose to violate the terms of their confidentiality agreements.
Further, these agreements do not prevent our competitors
from independently developing technologies that are substantially equivalent or superior to ours. We cannot guarantee that others will
not independently develop technology with the same or similar functions to any proprietary technology we rely on to conduct our business
and differentiate ourselves from our competitors.
We may be required to spend significant resources
to monitor and protect our intellectual property rights, and we may or may not be able to detect infringement, misappropriation or other
violation of our intellectual property rights by third parties. Litigation may be necessary in the future to enforce our intellectual
property rights and to protect our trade secrets. Such litigation could be costly, time consuming, and distracting to management and could
result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property
rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property
rights. Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion
of our management’s attention and resources, could delay further sales or the implementation of our platforms, impair their functionality,
delay introductions of new features, integrations, and capabilities, result in our substituting inferior or more costly technologies into
our platforms, or injure our reputation. In addition, we may be required to license additional technology from third parties to develop
and market new features, integrations, and capabilities, and we cannot assure you that we could license that technology on commercially
reasonable terms or at all, and our inability to license this technology could harm our ability to compete. Any one or more of the foregoing
could harm our business, results of operations, and financial condition.
In addition, we may experience difficulties in
enforcing the intellectual property rights in output generated by generative artificial intelligence technologies. The United States Copyright
Office has previously denied copyright protection for content generated by artificial intelligence technologies, and the United States
Patent and Trademark Office has similarly stated that an artificial intelligence tool cannot be an “inventor” of a patent,
rendering it impossible to obtain patent protection for inventions created solely by artificial intelligence. The Supreme Court of the
United Kingdom has reached a similar conclusion, stating that artificial intelligence systems cannot be named as an “inventor”
for UK patent law purposes.
We may incur costs to defend
against, face liability for or be vulnerable to intellectual property infringement claims brought against us by others.
There is considerable intellectual property development
and enforcement activity in our industry. We expect that software developers in our industry will increasingly be subject to infringement
claims as the number of competing solutions grows and the functionality of platforms and services in different industries overlap. Our
future success depends in part on not infringing upon or misappropriating the intellectual property rights of others. There is a risk
that our operations, platforms and services may infringe or otherwise violate, or be alleged to infringe or otherwise violate, the intellectual
property rights of third parties. Other companies have claimed in the past, and may claim in the future, that we infringe upon or otherwise
violate their intellectual property rights. A claim may also be made relating to technology or intellectual property that we acquire or
license from third parties. If we were subject to a claim of infringement, regardless of the merit of the claim or our defenses, the claim
could:
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require costly litigation to resolve and the payment of substantial
royalty or license fees, lost profits or other damages; |
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require and divert significant management time; |
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cause us to enter into unfavorable royalty or license agreements;
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require us to discontinue some or all of the features, integrations,
and capabilities available on our platforms; |
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require us to indemnify our merchants or third-party service providers;
and/or |
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require us to expend additional development resources to redesign our
platforms. |
Any one or more of the above could harm our business,
results of operations, and financial condition.
We use open source software,
which may pose particular risks to our proprietary software, technologies, products and services in a manner that could negatively affect
our business.
We use open source software in our platforms and
expect to use more open source software in the future. From time to time, there have been claims challenging both the ownership of open
source software against companies that incorporate open source software into their products and whether such incorporation is permissible
under various open source licenses. There is a risk that these licenses could be construed in a way that could impose unanticipated conditions
or restrictions on our ability to commercialize our platforms. As a result, we could be subject to lawsuits by parties claiming ownership
of what we believe to be open source software, or breach of open source licenses. Litigation could be costly for us to defend, have a
negative effect on our business, results of operations, and financial condition, or require us to devote additional research and development
resources to change our platforms. In addition, if we were to combine our proprietary source code or software with open source software
in a certain manner, we could, under certain open source licenses, be required to release the source code of our proprietary software
to the public. This would allow our competition to create similar products with less development effort and time. If we inappropriately
use open source software, or if the license terms for open source software that we use change, we may be required to re-engineer our platforms,
or certain aspects of it, incur additional costs, discontinue the availability of certain features, or take other remedial actions.
In addition to risks related to license requirements,
usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally
do not provide warranties support, indemnification, assurance of title or controls on origin of the software or other contractual protections
regarding infringement claims or the quality of the code. In addition, many of the risks associated with usage of open source software,
such as the lack of warranties or assurances of title, cannot be eliminated, and could, if not properly addressed, negatively affect our
business. We have established processes to help alleviate these risks, but we cannot be sure that all of our use of open source software
is in a manner that is consistent with our current policies and procedures, or will not subject us to liability.
In addition, open source libraries incorporated
in our platforms must be constantly updated in order to avoid security vulnerabilities that may be present in an outdated version of the
software. Updating the open source libraries we use in a timely manner requires ongoing development efforts, and any delay relating to
this process may expose us to risk of security breach. To the extent that our platforms depend upon the successful operation of open source
software, any undetected errors or defects in this open source software could prevent the deployment or impair the functionality of our
platforms, delay new solutions introductions, result in a failure of our platforms, and injure our reputation. For example, undetected
errors or defects in open source software could render it vulnerable to breaches or security attacks, and, in conjunction, make our systems
more vulnerable to data breaches. In addition, the public availability of such software may make it easier for others to compromise our
platforms.
We depend on our executive officers
and other key employees, and the loss of one or more of these employees could harm our business.
Our success depends largely upon the continued
services of our executive officers and other key employees. From time to time, there may be changes in our executive management team resulting
from the hiring or departure of executives, which could disrupt our business. We do not have employment agreements with our executive
officers or other key personnel that require them to continue to work for us for any specified period and, therefore, they could terminate
their employment with us at any time subject only to the notice periods prescribed by their respective executive agreements. The loss
of one or more of our executive officers, or key employees could harm our business.
Inability to attract and retain
other highly skilled employees could harm our business.
To execute our growth plan, we must attract and
retain highly qualified personnel. Competition where we maintain offices is intense, especially for engineers experienced in designing
and developing software and experienced sales professionals. We have from time to time experienced, and we expect to continue to experience,
difficulty in hiring and retaining employees with appropriate qualifications. Many of the companies with which we compete for experienced
personnel have significant resources. In addition, certain domestic immigration laws restrict or limit our ability to recruit internationally.
Any changes to Israeli, United Kingdom, European, the U.S. or other immigration policies that restrain the flow of technical and professional
talent may inhibit our ability to recruit and retain highly qualified employees.
In addition, job candidates and existing employees
often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity awards
declines, it may harm our ability to recruit and retain highly skilled employees.
Volatility or lack of appreciation in the price
of our ordinary shares may also affect our ability to attract and retain our key employees. Many of our senior personnel and other key
employees have become, or will soon become, vested in a substantial number of equity awards such as options or restricted share units.
Employees may be more likely to leave us if the equity awards they own or the shares underlying their vested options or restricted share
units have significantly appreciated in value relative to the original purchase price of the shares or the exercise price of the options,
or conversely, if the exercise price of the options that they hold are significantly above the market price of our ordinary shares.
While we may not be able to
enforce non-compete agreements we enter into with our employees, our current and future competition may attempt to enforce similar agreements
with individuals we recruit or attempt to recruit.
We generally enter into agreements with our employees
which prohibit our employees, if they cease working for us, from competing directly with us or working for our current and future competition
for a limited period. However, we may be unable to enforce these agreements under the laws of the jurisdictions in which our employees
work, and it may be difficult for us to restrict our current and future competition from benefiting from the expertise our former employees
developed while working for us. For example, Israeli labor courts have required employers seeking to enforce non-compete undertakings
of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of material
interests of the employer that have been recognized by the courts, such as the protection of a company’s trade secrets or other
intellectual property.
If we hire employees from our current and future competition or other
companies, their former employers may attempt to assert that these employees or we have breached their legal obligations, resulting in
a diversion of our time and resources. In a similar manner, should our current and future competition succeed in hiring some of our employees
and executives, and should some of these employees or executives breach their legal obligations and divulge commercially sensitive information
to our current and future competition, our ability to successfully compete with our current and future competition may be hindered.
We may be subject to litigation
for a variety of claims, which could harm our reputation and adversely affect our business, results of operations, and financial condition.
In the ordinary course of business, we may be
involved in and subject to litigation for a variety of claims or disputes and receive regulatory inquiries. These claims, lawsuits, and
proceedings could include labor and employment, wage and hour, commercial, antitrust, alleged securities law violations or other investor
claims, and other matters. The number and significance of these potential claims and disputes may increase as our business expands. Further,
our general liability insurance may not cover all potential claims made against us or be sufficient to indemnify us for all liability
that may be imposed. Any claim against us, regardless of its merit, could be costly, divert management’s attention and operational
resources, and harm our reputation. As litigation is inherently unpredictable, we cannot assure you that any potential claims or disputes
will not have a material adverse effect on our business, results of operations, and financial condition.
Contractual arrangements between
merchants and local distributors, as well as merchants’ operating preferences, may impede the adoption by merchants of a D2C model
and diminish the adoption of our platforms and services as a result.
A significant segment of our merchants are international
brands with a strategic focus on transitioning to a D2C model through the use of e-commerce. Despite making this transition, some brands
maintain contractual relationships with distributors of their products such as wholesalers, local webstore operators, marketplaces and
franchises in various geographies which our platforms make accessible for D2C sales. Contractual arrangements between brands and their
local distributors that provide for exclusivity terms, volume restrictions on alternate distribution channels or most favored client pricing
may slow or restrict adoption of our platforms and services. Even absent such contractual obligations, local distributors may still petition
the brand to cease its operations through our platforms if the brand’s D2C sales adversely impact their local distributor sales.
Although we believe that our platforms and services provide functionality, tools and advantages that match or outweigh the local distributor
model and therefore justify their use on a standalone or supplemental basis, resistance on behalf of such distributors and the resulting
friction may slow or restrict adoption of our platforms and services by such brands in certain locations and diminish our growth in this
segment.
In addition, while we believe our platforms and
services provide flexible and cost-effective means for merchants to transact globally, as our merchants grow their international activity
through the use of our services, or as market trends change, they may decide that our platforms are too costly, or that they can utilize
other modalities or operational flows, and transition some, or even all of their activity, into one in which they transact directly with
shoppers, rather than through us, and therefore do not need to pay our service fees, e.g. by means or setting up and operating dedicated
localized web stores for certain geographies. Such transitions, should they occur, will negatively impact our financial condition and
results of operations.
Our failure to raise additional
capital or generate cash flows necessary to expand our operations and invest in new technologies in the future could reduce our ability
to compete successfully and harm our results of operations.
Historically, we have funded our operations and
capital expenditures primarily through equity issuances and cash generated from our operations. Although we believe that the aggregation
of our existing cash and cash equivalents, short-term bank deposits and investments in marketable securities, together with cash flow
from operations, will be sufficient to meet our business needs for at least the next 12 months, we may require additional financing, and
we may not be able to obtain debt or equity financing on favorable terms, if at all. If we raise equity financing to fund operations or
on an opportunistic basis, our shareholders may experience significant dilution of their ownership interests. If we need additional capital
and cannot raise it on acceptable terms, or at all, we may not be able to, among other things:
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develop new features, integrations, capabilities, and enhancements;
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continue to expand our product development, sales, and marketing organizations;
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respond to competitive pressures or unanticipated working capital requirements;
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pursue acquisition opportunities. |
Furthermore,
the Company maintains the majority
of its cash and cash equivalents in accounts with major and highly rated multi-national or local financial institutions, and our deposits
at certain of these institutions significantly exceed insured limits. Market conditions can impact the viability of these institutions.
In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance
that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds
could adversely affect our business and financial position.
Our corporate culture has contributed
to our success, and if we cannot maintain this culture as we grow, we could lose the innovative approach, creativity, and teamwork fostered
by our culture and our business could be harmed.
We believe that an important contributor to our
success has been our corporate culture, which we believe creates an environment that drives and perpetuates our strategy to create a better,
more productive way to work and focuses on driving success for our customers. As we continue to grow, including geographically, and continue
to develop the infrastructure of a public company, we may find it difficult to maintain our corporate culture. If we do not maintain and
continue to develop our corporate culture as we grow and evolve, it could harm our ability to foster the innovation, craftsmanship, teamwork,
curiosity, and diversity, we believe that we need to support our growth. Any failure to preserve our culture could also harm our ability
to retain and recruit personnel, innovate and operate effectively, and execute on our business strategy.
If we fail to maintain an effective
system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements
or comply with applicable regulations could be impaired, which may adversely affect our stock price and our business.
The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley
Act”) requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial
reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information
required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized, and reported within the
time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated
and communicated to our principal executive and financial officers as appropriate to allow timely decisions regarding required disclosure.
If we are unable to continue to maintain effective internal control, we may not have adequate, accurate or timely financial information,
and we may be unable to meet our reporting obligations as a publicly traded company or to comply with the requirements of the SEC or the
Sarbanes-Oxley Act. This could result in a restatement of our financial statements, the imposition of sanctions, or investigation by regulatory
authorities. Any such action or other negative results caused by our inability to meet our internal control and financial reporting requirements
or to comply with legal and regulatory requirements could adversely affect our business and the trading price of our common shares. Material
weaknesses in our internal control over financial reporting could also reduce our ability to obtain financing or could increase the cost
of any financing we obtain.
As part of our growth strategy, we may decide
to make additional acquisitions of privately held businesses. Prior to becoming part of our consolidated company, the acquired businesses
would not be required to implement or maintain the disclosure controls and procedures or internal control over financial reporting that
are required of public companies. We are required to integrate the acquired businesses into our consolidated company’s system of
disclosure controls and procedures and internal control over financial reporting, but we cannot provide assurance as to how long the integration
process may take.
In addition to our results determined in accordance
with GAAP, we believe certain non-GAAP measures and key metrics may be useful in evaluating our operating performance. We present certain
non-GAAP financial measures and key metrics in this Annual Report and intend to continue to present certain non-GAAP financial measures
and key metrics in future filings with the SEC and other public statements. Any failure to accurately report and present our non-GAAP
financial measures and key metrics could cause investors to lose confidence in our reported financial and other information, which could
have a negative effect on the trading price of our ordinary shares.
If our estimates
or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected.
The preparation of consolidated financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue
and expenses during the reporting periods. Significant items subject to such estimates and assumptions include, but are not limited to,
the allocation of transaction price among various performance obligations, the estimated customer life on deferred
contract acquisition
costs, the allowance for credit losses, the fair value of financial assets and liabilities; including accounting and fair value of derivatives,
the fair value of acquired intangible assets and goodwill, the useful lives of acquired intangible assets and property and equipment,
share-based compensation, until
the Company’s IPO including the determination of the fair value of
the Company’s Ordinary
Shares, and the valuation of deferred tax assets and uncertain tax positions.
The Company bases these estimates on historical and anticipated
results, trends and various other assumptions that it believes are reasonable under the circumstances, including assumptions as to future
events. Actual results could differ from those estimates.
Changes in tax laws or regulations
to which we are subject could have an adverse effect on us, our merchants or their shoppers and could increase the costs and reduce the
attractiveness of our platforms and harm our business.
New income, sales, use or other tax laws, regulations,
or ordinances could be enacted and new interpretations of existing tax laws, regulations or ordinances could be adopted at any time. Those
changes could adversely affect our domestic and international business operations, and our business, results of operations, and financial
condition. These events could require us, our merchants or the shoppers to pay additional tax amounts on a prospective or retroactive
basis, as well as require us, our merchants or the shoppers to pay fines and/or penalties and interest for past amounts deemed to be due.
If we are required to collect such additional tax amounts from either our merchants or the shoppers and are unsuccessful in collecting
such taxes due from our merchants or the shoppers, we could be held liable for such costs, thereby adversely affecting our results of
operations and harming our business. If we raise our prices to offset the costs of these changes, merchants may elect not to use our platforms
and services in the future. Additionally, new, changed, modified, or newly interpreted or applied tax laws could increase our merchants’,
our shoppers’ and our compliance, operating, and other costs. Further, these events could decrease the capital we have available
to operate our business. Any or all of these events could harm our business, results of operations, and financial condition. Compliance
with these new reporting requirements as well as the newly introduced VAT rules required and will continue to require significant resources
and we cannot be certain that we have fully complied with or applied the new requirements, and as a result we may face non-compliance
assessments, calculation or remittance gaps and other discrepancies. Further, governments, customs agencies and tax authorities may seek
heightened scrutiny and enforcement of the new regulations, which could result in delayed clearance, rejections of our tax submissions,
refusal to assess taxes in a timely manner and additional audits.
In addition, we are subject to taxation in several
jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain. The tax authorities in these
jurisdictions could review our tax returns and impose additional tax, interest, and penalties, assert that various withholding requirements
apply to us or our
subsidiaries or that benefits of tax treaties are not available to us or our
subsidiaries, any of which could harm
us and our results of operations.
Our results of operations may
be harmed if we are required to collect sales or other taxes relating to the use of our platforms and services in jurisdictions where
we have not historically done so.
States and local taxing jurisdictions may impose
sales and use taxes, including on services provided electronically or goods sold via the internet. The applicability of sales taxes related
to the use of our platforms in various jurisdictions is unclear. We collect and remit sales and value-added tax, or VAT or goods and services
tax, or GST, in a number of jurisdictions (including in the U.S.). It is possible, however, that we could face sales tax, VAT or GST audits
and that our liability for these taxes could exceed our estimates as state tax authorities could still assert that we are obligated to
collect additional tax amounts from merchants and remit those taxes to those tax authorities. Further, one or more U.S. state or non-U.S.
authorities could seek to impose additional sales, use or other tax collection and record-keeping obligations on us or may determine that
such taxes should have, but have not been, paid by us. We could also be subject to audits in U.S. states and non-U.S. jurisdictions for
which we have not accrued tax liabilities. A successful assertion that we should be collecting additional sales or other taxes on our
services and/or on goods sold in jurisdictions where we have not historically done so and do not accrue for sales taxes could result in
substantial tax liabilities for past sales (including substantial interest and penalties), discourage organizations from utilizing our
platforms and services, or otherwise harm our business, results of operations, and financial condition.
The enactment of legislation
implementing changes in taxation of international business activities, the adoption of other corporate tax reform policies, or changes
in tax legislation or policies could impact our future financial position and results of operations.
Corporate tax reform, base-erosion efforts and
tax transparency continue to be high priorities in many tax jurisdictions where we have business operations. As a result, policies regarding
corporate income and other taxes in numerous jurisdictions are under heightened scrutiny and tax reform legislation is being proposed
or enacted in a number of jurisdictions.
In 2022, the United States Inflation Reduction
Act, among other changes, introduced a 15% corporate minimum tax on certain United States corporations and a 1% excise tax on certain
stock redemptions by United States corporations, which the U.S. Treasury indicated may also apply to certain stock redemptions by a foreign
corporation funded by certain United States affiliates.
There can be no assurance that our effective
tax rate will not increase over time as a result of changes in corporate income tax rates or other changes in the tax laws in the jurisdictions
in which we operate. Any changes in tax laws could have an adverse impact on our financial results. Corporate tax reform, base-erosion
efforts and tax transparency continue to be high priorities in many tax jurisdictions where we have business operations. As a result,
policies regarding corporate income and other taxes in numerous jurisdictions are under heightened scrutiny, and tax reform legislation
is being proposed or enacted in a number of jurisdictions. For example, the recent Inflation Reduction Act enacted in the United States
introduced, among other changes, a 15% corporate minimum tax on certain United States corporations. In addition, there is growing pressure
in many jurisdictions and from multinational organizations such as the Organization for Economic Cooperation and Development (
“OECD”)
and the EU to amend existing international taxation rules in order to align the tax regimes with current global business practices. Specifically,
in October 2015, the OECD published its final package of measures for reform of the international tax rules as a product of its Base Erosion
and Profit Shifting (
“BEPS”) initiative, which was endorsed by the G20 finance ministers. Many of the initiatives in the BEPS
package required and resulted in specific amendments to the domestic tax legislation of various jurisdictions and to existing tax treaties.
We continuously monitor these developments. Although many of the BEPS measures have already been implemented or are currently being implemented
globally (including, in certain cases, through adoption of the OECD’s
“multilateral convention” (to which Israel is
also a party) to effect changes to tax treaties which entered into force on
July 1, 2018 and through the European Union’s
“Anti
Tax Avoidance” Directives), it is still difficult in some cases to assess to what extent these changes will have on our tax liabilities
in the jurisdictions in which we conduct our business or to what extent they may impact the way in which we conduct our business or our
effective tax rate due to the unpredictability and interdependency of these potential changes. In January 2019, the OECD announced further
work in continuation of the BEPS project, focusing on two
“pillars.” In October 2021, 137 countries approved a statement known
as the OECD BEPS Inclusive Framework, which builds upon the OECD’s continuation of the BEPS project. The first pillar is focused
on the allocation of taxing rights between countries for in-scope large multinational enterprises (with revenue in excess of €20
billion and profitability of at least 10%) that sell goods and services into countries with little or no local physical presence. We do
not expect to be within the scope of the first Pillar. Pillar Two legislation has been enacted or substantively enacted in certain
jurisdictions in which the Group operates. However, this legislation does not apply to the Group as its consolidated revenue is lower
than €750 million.
General Risks Affecting Our Business and Operations
Global pandemics and other health
crises, could materially adversely affect our business, financial condition and results of operations.
Global pandemics, as well as both future widespread
and localized outbreaks of infectious diseases and other health concerns, and the measures attempting to contain and mitigate their effects
and the resulting changes in consumer behaviors, could cause a material disruption to our normal operations and impact our employees,
suppliers, merchants and shoppers. A future outbreak of a highly infectious or contagious disease or other public health crisis could
have significant repercussions across domestic and global economies, including the retail sector within the U.S., and the financial markets.
An outbreak of a global pandemic in the future could significantly adversely impact and disrupt our business, financial performance and
condition, operating results and cash flows. Additional factors may negatively impact our ability to operate, for example, transitioning
employees across our offices to remote work-from-home arrangements and imposing travel and related restrictions. Although we have experienced
remote work in recent periods (as a matter of policy and in response to needs), remote work, lockdowns and travel restrictions may create
or add challenges and complexity to our operations and the operations of our shipping and logistics partners and any such restrictions
that inhibit the ordinary course of our operation of the operation of our shipping and logistics partners may have an adverse effect on
our business.
A global pandemic could limit merchants’
ability to continue to operate (limiting their abilities to obtain inventory, generate sales, ship and dispatch orders or make timely
payments to us). In addition, a global pandemic may also result in volatility or changing preferences in consumer spending and adverse
or uncertain economic conditions globally, which in turn may impact the GMV processed through our platform. See “-General Risks
Affecting Our Business and Operations-Unfavorable conditions in our industry, the global economy, or e-commerce in general, could limit
our ability to grow our business and negatively affect our results of operations.”
Unfavorable conditions in our
industry, the global economy, e-commerce or particular verticals within e-commerce, could limit our ability to grow our business and negatively
affect our results of operations.
Our results of operations may vary based on the
impact of changes in our industry or the global economy on us or our merchants or our shoppers. The revenue growth and potential profitability
of our business depend on demand for our platforms and services, as well as demand for the products offered by our merchants. Therefore,
current or future economic uncertainties or downturns could adversely affect our business and results of operations. Negative conditions
in the global economy or individual markets, including changes in gross domestic product growth, financial and credit market fluctuations,
political turmoil, trade route restrictions or challenges, natural catastrophes, warfare and terrorist attacks, could cause a decrease
in business investments, consumer spending, services availability or e-commerce generally and negatively affect our business. Some of
our merchants are luxury fashion brands, and the adverse impact to our business resulting from any of the foregoing factors could be magnified
to the extent that it disproportionately affects merchants in verticals from which our merchants derive a significant amount of their
GMV.
During recent periods these and other factors
have resulted in heightened inflation rates as well as recessionary pressures in various countries. If economic conditions further deteriorate,
shoppers may not have the financial means to make purchases from our merchants and may delay or reduce discretionary purchases, negatively
impacting our merchants and our results of operations. Other disruptions, for example, the situation in Ukraine, have caused and may continue
to cause other heightened uncertainty in the global economy.
Such uncertainties may also cause prospective
or existing merchants to defer investment in e-commerce. Our smaller merchants may be more susceptible to general economic conditions
than larger businesses, which may have greater liquidity and access to capital. Uncertain and adverse economic conditions also may lead
to increased refunds and chargebacks. Since the impact of such uncertainties is ongoing, the effect on the global economy may not be fully
reflected in our results of operations until future periods. Volatility in the capital markets has been heightened during recent months
and such volatility may continue, which may cause declines in the price of our ordinary shares.
To the extent our platforms are perceived by merchants
as costly, or too difficult to launch or migrate to, it would negatively affect our growth. Our revenue may be disproportionately affected
by delays or reductions in general IT spending and reduction in investments in cross-border expansion by merchants. Our competition may
respond to market conditions by lowering prices or otherwise bundling their competing solutions with other of their offerings which are
widely used by merchants in a way that may make it difficult to attract merchants to our platforms and services and may offer more competitive
prices (including by way of strategic partnerships, collaborations or otherwise), in order to lure away our merchants. We cannot predict
the timing, strength, or duration of any economic slowdown, instability or recovery, generally or within any particular industry. If the
economic conditions of the general economy or markets in which we operate worsen from present levels, our business, results of operations
and financial condition could be adversely affected.
Moreover, persistent economic downturns may require
us to undertake optimization and cost saving initiatives, including streamlining our organization and adjusting the size and structure
of our workforce. Any reduction in force may yield unintended consequences and costs, such as attrition beyond the intended reduction
in force, the distraction of employees and reduced employee morale, which could, in turn, adversely impact productivity, including through
a loss of continuity, loss of accumulated knowledge or inefficiency during transitional periods. Any of these impacts could also adversely
affect our reputation as an employer, make it more difficult for us to hire new employees in the future and increase the risk that we
may not achieve the anticipated benefits from the restructuring.
Actions of activist shareholders
may cause us to incur substantial costs, disrupt our operations, divert management’s attention, or have other material adverse effects
on us.
From time to time, activist investors may take
a position in our shares. These activist investors may disagree with decisions we have made or may believe that alternative strategies
or personnel, either at a management level or at a board level, would produce higher returns. Such activists may or may not be aligned
with the views of our other shareholders, may be focused on short-term outcomes, or may be focused on building their reputation in the
market. These activists may not have a full understanding of our business and markets and the alternative personnel they may propose may
also not have the qualifications or experience necessary to lead
the company.
Responding to advances or actions by activist
investors may be costly and time-consuming, may disrupt our operations, and may divert the attention of our board of directors, management
team, and employees from running our business and maximizing performance. Such activist activities could also interfere with our ability
to execute our strategic plan, disrupt the functioning of our board of directors, or negatively impact our ability to attract and retain
qualified executive leadership or board members, who may be unwilling to serve with activist personnel. Uncertainty as to the impact of
activist activities may also affect the market price and volatility of our shares.
Risks Relating to Our Ordinary Shares
Our share price has been and
may continue to be volatile.
The market price of our ordinary shares has been
and could continue to be highly volatile and may fluctuate substantially as a result of many factors, including:
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actual or anticipated fluctuations in our results of operations;
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variance in our financial performance from the expectations of market
analysts; |
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announcements by us or our direct or indirect competition of significant
business developments, changes in service provider relationships, acquisitions or expansion plans; |
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changes or proposed changes in laws or regulations or differing interpretations
or enforcement of laws or regulations affecting our business; |
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changes in our pricing model; |
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our involvement in litigation or regulatory actions; |
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our sale of ordinary shares or other securities in the future;
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market conditions in our industry; |
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changes in key personnel; |
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the trading volume of our ordinary shares; |
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publication of research reports or news stories about us, our competition
or our industry, or positive or negative recommendations or withdrawal of research coverage by securities analysts; |
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changes in the estimation of the future size and growth rate of our
markets; and |
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general economic and market conditions. |
In addition, the stock markets have experienced
extreme price and volume fluctuations. Broad market and industry factors may materially harm the market price of our ordinary shares,
regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities,
securities class action litigation has often been instituted against that company. If we were involved in any similar litigation we could
incur substantial costs and our management’s attention and resources could be diverted.
The concentration of our share
ownership with insiders may limit your ability to influence corporate matters, including the ability to influence the outcome of director
elections and other matters requiring shareholder approval.
Our executive officers, directors, beneficial
owners of greater than 5% of our ordinary shares and affiliated entities together beneficially owned approximately 59.16% of our ordinary
shares outstanding as of
December 31, 2023. Certain of such holders also have rights to acquire additional ordinary shares upon the exercise
of options and warrants in the future. As a result, these shareholders, acting together, will have control over most matters that require
approval by our shareholders, including the appointment and dismissal of directors, the terms of compensation of our directors and chief
executive officer, certain other related party transactions, capital increases, and amendments to our amended and restated articles of
association. Corporate action might be taken even if other shareholders oppose them. This concentration of ownership might also have the
effect of delaying or preventing a change of control of us that other shareholders may view as beneficial.
If we do not meet the expectations
of equity research analysts, if they do not publish research or reports about our business or if they issue unfavorable commentary or
downgrade our ordinary shares, the price of our ordinary shares could decline.
The trading market for our ordinary shares relies
in part on the research and reports that equity research analysts publish about us and our business. The analysts’ estimates are
based upon their own opinions and are often different from our estimates or expectations. If our results of operations are below the estimates
or expectations of public market analysts and investors, the price of our ordinary shares could decline. Moreover, the price of our ordinary
shares could decline if one or more securities analysts downgrade our ordinary shares or if those analysts issue other unfavorable commentary
or cease publishing reports about us or our business.
We are a foreign private issuer
and, as a result, we are not subject to U.S. proxy rules and are subject to Exchange Act reporting obligations that, to some extent, are
more lenient and less frequent than those of a U.S. domestic public company.
We report under the Exchange Act as a non-U.S.
company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from
certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (1) the sections of the Exchange
Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act, (2)
the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability
for insiders who profit from trades made in a short period of time and (3) the rules under the Exchange Act requiring the filing with
the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, although we are subject to Israeli
laws and regulations with regard to certain of these matters and intend to furnish comparable quarterly information on Form 6-K. In addition,
foreign private issuers are not required to file their annual report on Form 20-F until four months after the end of each fiscal year,
while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the
end of each fiscal year and U.S. domestic issuers that are large accelerated filers are required to file their annual report on Form 10-K
within 60 days after the end of each fiscal year. Foreign private issuers are also exempt from Regulation FD, which is intended to prevent
issuers from making selective disclosures of material information. As a result of all of the above, you may not have the same protections
afforded to shareholders of a company that is not a foreign private issuer.
We may lose our foreign private
issuer status in the future, which could result in significant additional costs and expenses.
As discussed above, we are a foreign private issuer,
and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act.
The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed
second fiscal quarter, and, accordingly, the next determination will be made with respect to us on
June 30, 2024. In the future, we would
lose our foreign private issuer status if more than 50% of our outstanding voting securities are owned by U.S. residents and any of the
following three circumstances applies: (1) the majority of our directors or executive officers are U.S. citizens or residents, (2) more
than 50% of our assets are located in the United States, or (3) our business is administered principally in the United States. If we lose
our foreign private issuer status, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic
issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily
comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing
profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions
from certain corporate governance rules of Nasdaq. As a U.S. listed public company that is not a foreign private issuer, we will incur
significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer.
As we are a “foreign private
issuer” and follow certain home country corporate governance practices, our shareholders may not have the same protections afforded
to shareholders of companies that are subject to all corporate governance rules of Nasdaq.
As a foreign private issuer, we have the option
to follow certain home country corporate governance practices rather than those of Nasdaq, provided that we disclose the requirements
we are not following and describe the home country practices we are following. We rely on this “foreign private issuer exemption”
with respect to Nasdaq rules for shareholder meeting quorums. We may in the future elect to follow home country practices with regard
to other matters. As a result, our shareholders may not have the same protections afforded to shareholders of companies that are subject
to all corporate governance rules of Nasdaq.
The
market price of our ordinary shares has been and could in the future be negatively affected by future issuances and sales of our ordinary
shares.
Sales by us or our shareholders of a substantial
number of ordinary shares in the public market, or the perception that these sales might occur, could cause the market price of our ordinary
shares to decline or could impair our ability to raise capital through a future sale of, or pay for acquisitions using, our equity securities.
As of
December 31, 2023,
we had 165,773,914 ordinary shares outstanding, and 9,718,714 ordinary shares are subject to outstanding awards such as options and restricted
share units granted to employees under our share incentive plans, of which 7,368,603 are ordinary shares issuable under currently exercisable
share options. Upon issuance, such shares may be freely sold in the public market, except for shares held by affiliates who have certain
restrictions on their ability to sell. Subject to compliance with applicable rules and regulations, we may issue ordinary shares or securities
convertible into ordinary shares from time to time in connection with a financing, acquisition, investment, our share incentive plans
or otherwise. Any such issuance could result in substantial dilution to our existing shareholders and cause the market price of our ordinary
shares to decline.
There can be no assurance that
we will not be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences
to United States Holders of our ordinary shares.
We would be classified as a passive foreign investment
company (
“PFIC”) for any taxable year if, after the application of certain look-through rules, either: (i) 75% or more of
our gross income for such year is
“passive income” (as defined in the relevant provisions of the Internal Revenue Code of
1986, as amended), or (ii) 50% or more of the value of our assets (generally determined on the basis of a quarterly average) during such
year is attributable to assets that produce or are held for the production of passive income. For these purposes, cash and other assets
readily convertible into cash or that do or could generate passive income are categorized as passive assets, and the value of goodwill
and other unbooked intangible assets is generally taken into account. Passive income generally includes, among other things, rents, dividends,
interest, royalties, gains from the disposition of passive assets and gains from commodities and securities transactions. For purposes
of this test, we will be treated as owning a proportionate share of the assets and earning a proportionate share of the income of any
other corporation of which we own, directly or indirectly, at least 25% (by value) of the stock. Based on our market capitalization and
the composition of our income, assets and operations, we believe that we were not a PFIC for the year ended
December 31, 2023 and do not
expect to be a PFIC for United States federal income tax purposes for the current taxable year or in the foreseeable future. However,
this is a factual determination that must be made annually after the close of each taxable year. Moreover, the value of our assets for
purposes of the PFIC determination may be determined by reference to the trading value of our ordinary shares, which could fluctuate significantly.
In addition, it is possible that the Internal Revenue Service may take a contrary position with respect to our determination in any particular
year, and therefore, there can be no assurance that we were not a PFIC for the year ended
December 31, 2023 or will not be classified
as a PFIC in the current taxable year or in the future. Certain adverse U.S. federal income tax consequences could apply to a United States
Holder (as defined in Item 10.E.
“Taxation-U.S. Federal Income Tax Consideration”) if we are treated as a PFIC for any taxable
year during which such United States Holder holds our ordinary shares. United States Holders should consult their tax advisors about the
potential application of the PFIC rules to their investment in our ordinary shares. For further discussion, see
“Taxation-U.S. Federal
Income Tax Consideration-Passive Foreign Investment Company” in Item 10.E. below.
If a United States person is
treated as owning at least 10% of our ordinary shares, such holder may be subject to adverse U.S. federal income tax consequences.
If a United States person is treated as owning
(directly, indirectly, or constructively) at least 10% of the value or voting power of our ordinary shares, such person may be treated
as a
“United States shareholder” with respect to each controlled foreign corporation (
“CFC”) in our group (if
any). Because our group includes a U.S. subsidiary, certain of our non-U.S.
subsidiaries will be treated as CFCs (regardless of whether
or not we are treated as a CFC). A United States shareholder of a CFC may be required to report annually and include in its U.S. taxable
income its pro rata share of
“Subpart F income,” “global intangible low-taxed income,” and investments in U.S.
property by CFCs, regardless of whether we make any distributions. An individual that is a United States shareholder with respect to a
CFC generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder
that is a U.S. corporation. Failure to comply with these reporting obligations may subject a United States shareholder to significant
monetary penalties and may prevent the statute of limitations with respect to such shareholder’s U.S. federal income tax return
for the year for which reporting was due from starting. We cannot provide any assurances that we will assist investors in determining
whether we are or any of our non-U.S.
subsidiaries is treated as CFC or whether any investor is treated as a United States shareholder
with respect to any such CFC or furnish to any United States shareholders information that may be necessary to comply with the aforementioned
reporting and tax paying obligations. The United States Internal Revenue Service has provided limited guidance on situations in which
investors may rely on publicly available information to comply with their reporting and tax paying obligations with respect to foreign-controlled
CFCs. A United States investor should consult its advisors regarding the potential application of these rules to an investment in our
ordinary shares.
Provisions of Israeli law and
our amended and restated
articles of association may delay, prevent or make undesirable an acquisition of all or a significant portion
of our shares or assets.
Provisions of Israeli law and our amended and
restated
articles of association could have the effect of delaying or preventing a change in control and may make it more difficult for
a third-party to acquire us or our shareholders to elect different individuals to our board of directors, even if doing so would be considered
to be beneficial by some of our shareholders, and may limit the price that investors may be willing to pay in the future for our ordinary
shares. Among other things:
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the Israeli Companies Law, 5759-1999 (the “Companies Law”)
regulates mergers and requires that a tender offer be effected when more than a specified percentage of shares in a company are purchased;
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the Companies Law requires special approvals for certain transactions
involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions;
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the Companies Law does not provide for shareholder action by written
consent for public companies, thereby requiring all shareholder actions to be taken at a general meeting of shareholders;
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our amended and restated articles of association divide our directors
into three classes, each of which is elected once every three years; |
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our amended and restated articles of association generally require
a vote of the holders of a majority of our outstanding ordinary shares entitled to vote present and voting on the matter at a general
meeting of shareholders (referred to as simple majority), and the amendment of a limited number of provisions, such as the provision dividing
our directors into three classes, requires a vote of the holders of at least 70% of our voting power; |
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our amended and restated articles of association restrict us, subject
to certain exceptions, from engaging in certain business combination transactions, with any shareholder who holds 20% or more of our voting
power. The transactions subject to such restrictions include mergers, consolidations and dispositions of our assets with a market value
of 10% or more of our assets or outstanding shares. Subject to certain exceptions, such restrictions will apply for a period of three
years following each time a shareholder became the holder of 20% or more of our voting power; |
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our amended and restated articles of association do not permit a director
to be removed except by a vote of the holders of at least 70% of our voting power; and |
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our amended and restated articles of association provide that director
vacancies may be filled by our board of directors. |
Further, Israeli tax considerations may make potential
transactions undesirable to us or to some of our shareholders whose country of residence does not have a tax treaty with Israel granting
tax relief to such shareholders from Israeli tax. For example, Israeli tax law does not recognize tax-free share exchanges to the same
extent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral
contingent on the fulfillment of numerous conditions, including a holding period of two years from the date of the transaction during
which certain sales and dispositions of shares of the participating companies are restricted. Moreover, with respect to certain share
swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no disposition of
the shares has occurred.
We do not expect to pay any
dividends in the foreseeable future.
We have never declared or paid any dividends on
our ordinary shares. We do not anticipate paying any dividends in the foreseeable future. We currently intend to retain future earnings,
if any, to finance operations and expand our business. Consequently, investors who purchase our ordinary shares may be unable to realize
a gain on their investment except by selling such shares after price appreciation, which may never occur.
Our board of directors has sole discretion whether
to pay dividends. If our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations
and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that our directors
may deem relevant. The Companies Law imposes restrictions on our ability to declare and pay dividends.
Payment of dividends may also be subject to Israeli
withholding taxes. See “Taxation” in Item 10.E below for additional information.
We will continue to incur increased
costs as a result of operating as a public company, and our management is required to devote substantial time to new compliance initiatives
and corporate governance practices.
As a public company we will continue to incur
significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act, the Dodd-Frank Wall
Street Reform and Consumer Protection Act, the listing requirements of Nasdaq and other applicable securities rules and regulations impose
various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate
governance practices. Our management and other personnel have and will continue to devote a substantial amount of time to these compliance
initiatives. Moreover, these rules and regulations will continue to increase our legal and financial compliance costs and will make some
activities more time-consuming and costly. For example, as a public company it is more difficult and more expensive for us to obtain director
and officer liability insurance, and it is more difficult for us to attract and retain qualified members of our board.
Furthermore, we are required to comply with the
SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which require management to certify financial and other
information in our annual reports and provide an annual management report on the effectiveness of control over financial reporting. We
are also required to disclose changes in internal control over financial reporting on an annual basis. Additionally, we are required to
include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.
To maintain compliance with Section 404, we continue
to engage in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In
this regard, we continue to dedicate internal resources and have engaged outside consultants and adopted a detailed work plan to continue
to assess and document the adequacy of our internal control over financial reporting, continue to undertake steps to improve control processes
as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement
process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to maintain effective
internal control over financial reporting as required by Section 404. If we identify one or more material weaknesses in our internal control,
it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.
Irrespective of compliance with Sections 404,
any failure of our internal control could have a material adverse effect on our stated results of operations and harm our reputation.
In order to implement changes to our internal control over financial reporting triggered by a failure of those controls, we could experience
higher than anticipated operating expenses, as well as higher independent auditor fees during and after the implementation of these changes.
Our amended and restated articles
of association provide that unless we consent to an alternate forum, the federal district courts of the United States shall be the exclusive
forum of resolution of any claims arising under the Securities Act which may impose additional litigation costs on our shareholders.
Our amended and restated
articles of association
provide that the federal district courts of the United States shall be the exclusive forum for the resolution of any claims arising under
the Securities Act, the Exchange Act or the rules and regulations promulgated pursuant to such statutes. Notwithstanding the foregoing,
we note that holders of our securities cannot waive compliance with the federal securities laws and the rules and regulations thereunder.
Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created
by the Exchange Act or the rules and regulations thereunder, and Section 22 of the Securities Act creates concurrent jurisdiction for
federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations
thereunder. As a result, the exclusive jurisdiction provision may not preclude or
contract the scope of exclusive federal or concurrent
jurisdiction for actions brought under the Securities Act or the Exchange Act, or the respective rules and regulations promulgated thereunder.
While the Federal Forum Provision does not restrict the ability of our shareholders to bring claims under the Securities Act, nor does
it affect the remedies available thereunder if such claims are successful, we recognize that it may limit shareholders ability to bring
a claim in the judicial forum that they find favorable and may increase certain litigation costs which may discourage the filing of claims
against
the Company, its directors and officers.
If we were deemed to be an investment
company under the Investment Company Act of 1940, as amended (the “1940 Act”), applicable restrictions could make it impractical
for us to continue our business as contemplated and could have a material adverse effect on our business, financial condition and results
of operations.
Under Sections 3(a)(1)(A) and (C) of the 1940
Act, a company generally will be deemed to be an “investment company” for purposes of the 1940 Act if (1) it is, or holds
itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities
or (2) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and it owns
or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government
securities and cash items) on an unconsolidated basis. We do not believe that we are an “investment company,” as such term
is defined in either of those sections of the 1940 Act.
Notwithstanding Sections 3(a)(1)(A) and (C) of
the 1940 Act, we are a research and development company and comply with the safe harbor requirements of Rule 3a-8 of the 1940 Act. We
intend to conduct our operations so that we will not be deemed an investment company. However, if we were to be deemed an investment company,
restrictions imposed by the 1940 Act, including limitations on our capital structure and our ability to transact with affiliates, could
make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business, financial
condition and results of operations.
Risks Relating to Our Incorporation and Location
in Israel
Conditions in Israel, including
the recent attack by Hamas and other terrorist organizations from the Gaza Strip and Israel’s war against them and the tension between
Israel and Hezbollah in the northern border of Israel, could materially and adversely affect our business.
We are incorporated under the laws of the State
of Israel and some of our employees, including certain management members operate from our offices that are located in Petah Tikva, Israel.
In addition, a number of our officers and directors are residents of Israel. Accordingly, political, economic, and military conditions
in Israel and the surrounding region may directly affect our business and operations.
In October 2023, Hamas terrorists launched an
attack on Israel, including infiltrating Israel’s southern border from the Gaza Strip, and launching extensive rocket attacks on
Israel, resulting in extensive deaths, injuries and kidnapping of civilians and soldiers. Following the attack, Israel declared war against
Hamas and a military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks.
In addition, since the commencement of these events, there have been continued hostilities along Israel’s northern border with Lebanon
(with the Hezbollah terror organization) and southern border (with the Houthi movement in Yemen, as described below). It is possible that
hostilities with Hezbollah in Lebanon will escalate, and that other terrorist organizations, including Palestinian military organizations
in the West Bank as well as other hostile countries, such as Iran, will join the hostilities. Such clashes may escalate in the future
into a greater regional conflict.
Furthermore, following Hamas’ attack on
Israel and Israel’s declaration of war against Hamas, the Houthi movement, which controls parts of Yemen, launched a number of attacks
on marine vessels traversing the Red Sea, which marine vessels were thought to either be in route towards Israel or to be partly owned
by Israeli businessmen. The Red Sea is a vital maritime route for international trade traveling to or from Israel.
The hostilities with Hamas, Hezbollah and other
organizations and countries have included and may include terror, missile and drone attacks. In the event that our facilities are damaged
as a result of hostile actions, or hostilities otherwise disrupt our ongoing operations, our ability to offer our platforms and solutions
to our merchants could be materially and adversely affected. Our commercial insurance does not cover losses that may occur as a result
of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct damages
that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or that it
will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our business.
Any armed conflicts or political instability in the region would likely negatively affect business conditions and could harm our results
of operations.
The intensity and duration of Israel’s current
war against Hamas is difficult to predict, as are such war’s economic implications on
the Company’s business and operations
and on Israel’s economy in general, that may involve a downgrade in Israel's credit rating by rating agencies (such as the recent
downgrade by Moody’s of its credit rating of Israel from A1 to A2, as well as the downgrade of its outlook rating from
“stable”
to
“negative”). These events may be intertwined with wider macroeconomic indications of a deterioration of Israel’s
economic standing, which may have a material adverse effect on
the Company and its ability to effectively conduct its operations.
Further, the State of Israel and Israeli companies
have been from time to time subjected to economic boycotts. Several countries still restrict business with the State of Israel and with
Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or the
expansion of our business. A campaign of boycotts, divestment and sanctions has been undertaken against Israel, which could also adversely
impact our business. In addition, there have been increased efforts by countries, activists and organizations to cause companies and consumers
to boycott Israeli goods and services. In addition, in January 2024 the International Court of Justice, or ICJ, issued an interim
ruling in a case filed by South Africa against Israel in December 2023, making allegations of genocide amid and in connection
with the war in Gaza, and ordered Israel, among other things, to take measures to prevent genocidal acts, prevent and punish incitement
to genocide, and take steps to provide basic services and humanitarian aid to civilians in Gaza. There are concerns that companies and
businesses will terminate, and may have already terminated, certain commercial relationships with Israeli companies following the ICJ
decision. The foregoing efforts by countries, activists and organizations, particularly if they become more widespread, as well as the
ICJ rulings and future rulings and orders of other tribunals against Israel (if handed), may materially and adversely impact our ability
to offer our platforms and solutions to our merchants.
Finally, political conditions within Israel may
affect our operations. Israel has held five general elections between 2019 and 2022, and prior to October 2023, the Israeli government
pursued extensive changes to Israel’s judicial system. In response to the foregoing developments, individuals, organizations and
institutions, both within and outside of Israel, voiced concerns that the proposed changes may negatively impact the business environment
in Israel including due to reluctance of foreign investors to invest or transact business in Israel as well as to increased currency fluctuations,
downgrades in credit rating, increased interest rates, increased volatility in security markets, and other changes in macroeconomic conditions.
To date, these initiatives have been substantially put on hold. If such changes to Israel’s judicial system are again pursued by
the government and approved by the parliament, this may have an adverse effect on our business, our results of operations and our ability
to raise additional funds, if deemed necessary by our management and board of directors.
Competition for skilled technical
and other personnel in Israel is intense, and as a result we may fail to attract, recruit, retain and develop qualified employees, which
could materially and adversely impact our business, financial condition and results of operations
We compete in a market marked by rapidly changing
technologies and an evolving competitive landscape. In order for us to successfully compete and grow, we must attract, recruit, retain
and develop personnel with requisite qualifications to provide expertise across the entire spectrum of our intellectual capital and business
needs.
Our principal research and development as well
as significant elements of our general and administrative activities are conducted at our headquarters in Israel, and we face significant
competition for suitably skilled employees in Israel. While there has been intense competition for qualified human resources in the Israeli
high-tech industry historically, the industry experienced record growth and activity in 2021, both at the earlier stages of venture capital
and growth equity financings, and at the exit stage of initial public offerings and mergers and acquisitions. This flurry of growth and
activity has caused a sharp increase in job openings in both Israeli high-tech companies and Israeli research and development centers
of foreign companies, and intensification of competition between these employers to attract qualified employees in Israel. As a result,
the high-tech industry in Israel has experienced levels of employee attrition and is currently facing shortage of skilled human capital,
including engineering, research and development, sales and customer support personnel. Many of the companies with which we compete for
qualified personnel have greater resources than we do, and we may not succeed in recruiting additional experienced or professional personnel,
retaining personnel or effectively replacing current personnel who may depart with qualified or effective successors. Failure to retain
or attract qualified personnel could have a material adverse effect on our business, financial condition and results of operations.
It may be difficult to enforce
a U.S. judgment against us, our officers and directors named in this Annual Report in Israel or the United States, or to assert U.S. securities
laws claims in Israel or serve process on our officers and directors.
Not all of our directors or officers are residents
of the United States and most of their and our assets are located outside the United States. Service of process upon us or our non-U.S.
resident directors and officers and enforcement of judgments obtained in the United States against us or our non-U.S. our directors and
executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may
be difficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil
liability provisions of U.S. federal securities laws. Israeli courts may refuse to hear a claim based on an alleged violation of U.S.
securities laws against us or our non-U.S. officers and directors reasoning that Israel is not the most appropriate forum to bring such
a claim. In Israeli courts, the content of applicable U.S. law must be proved as a fact by an expert witnesses, which can be a time-consuming
and costly process and certain matters of procedure may be governed by Israeli law. There is little binding case law in Israel addressing
the matters described above. Israeli courts might not enforce judgments rendered outside Israel, which may make it difficult to collect
on judgments rendered against us or our non-U.S. officers and directors.
Moreover, an Israeli court will not enforce a
non-Israeli judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject
to exceptional cases), if its enforcement is likely to prejudice the sovereignty or security of the State of Israel, if it was obtained
by fraud or in the absence of due process, if it is at variance with another valid judgment that was given in the same matter between
the same parties, or if a suit in the same matter between the same parties was pending before a court or tribunal in Israel at the time
the foreign action was brought.
Your rights and responsibilities
as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders
of U.S. corporations.
We are incorporated under Israeli law. The rights
and responsibilities of holders of our ordinary shares are governed by our amended and restated
articles of association and the Companies
Law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in typical U.S. corporations.
In particular, pursuant to the Companies Law each shareholder of an Israeli company has to act in good faith and in a customary manner
in exercising his, her or its rights and fulfilling his, her or its obligations toward
the Company and other shareholders and to refrain
from abusing his, her or its power in
the Company, including, among other things, in voting at the general meeting of shareholders, on
amendments to a company’s
articles of association, increases in a company’s authorized share capital, mergers and certain
transactions requiring shareholders’ approval under the Companies Law. In addition, a controlling shareholder of an Israeli company
or a shareholder who knows that it possesses the power to determine the outcome of a shareholder vote or who has the power to appoint
or prevent the appointment of a director or officer in
the Company, or has other powers toward
the Company has a duty of fairness toward
the Company. However, Israeli law does not define the substance of this duty of fairness. There is little case law available to assist
in understanding the implications of these provisions that govern shareholder behavior.
Our amended and restated articles
of association provide that unless
the Company consents otherwise, the competent courts of Tel Aviv, Israel shall be the sole and exclusive
forum for substantially all disputes between
the Company and its shareholders under the Companies Law and the Israeli Securities Law,
which could limit its shareholders ability to brings claims and proceedings against, as well as obtain favorable judicial forum for disputes
with
the Company, its directors, officers and other employees.
The competent courts of Tel Aviv, Israel shall
be the exclusive forum for (i) any derivative action or proceeding brought on behalf of
the Company, (ii) any action asserting a claim
of breach of fiduciary duty owed by any director, officer or other employee of
the Company to
the Company or
the Company’s shareholders,
or (iii) any action asserting a claim arising pursuant to any provision of the Companies Law or the Israeli Securities Law. This exclusive
forum provisions is intended to apply to claims arising under Israeli Law and would not apply to claims brought pursuant to the Securities
Act or the Exchange Act or any other claim for which federal courts would have exclusive jurisdiction. Such exclusive forum provision
in our amended and restated
articles of association will not relieve
the Company of its duties to comply with federal securities laws
and the rules and regulations thereunder, and shareholders of
the Company will not be deemed to have waived
the Company’s compliance
with these laws, rules and regulations. This exclusive forum provision may limit a shareholders ability to bring a claim in a judicial
forum of its choosing for disputes with
the Company or its directors or other employees which may discourage lawsuits against
the Company,
its directors, officers and employees.
Global-E Online Ltd. was incorporated in February
2013 under the Companies Law in the State of Israel and commenced operations at that time. Our commercial name is Global-e. Our principal
executive offices are located at 9 HaPsagot Street, Petah Tikva 4951041, Israel. Our
website address is
www.global-e.com and our telephone
number is +972-73-2605078. Information contained on, or that can be accessed through, our
website does not constitute a part of this Annual
Report and is not
incorporated by reference herein. We have included our
website address in this Annual Report solely for informational
purposes. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding
issuers, such as we, that file electronically, with the SEC at
www.sec.gov.
Our agent for service of process in the United States
is Global-e US Inc., which maintains its principal offices at 200 West 41
st.
Street, New York, NY. Its telephone number is +1
347-990-3857.
For a description of additional important events
in the development of
the Company’s business, see Item 5.
“Operating and Financial Review and Prospects.”
For a description of our principal capital expenditures
and divestitures, see Item 5. “Operating and Financial Review and Prospects.”
Overview
Our platforms were purpose-built for international
shoppers to buy seamlessly online and for merchants to sell from, and to, anywhere in the world - in short, to “go global”.
At the same time, to “be local” reflects the localization of the shopper’s experience and our effort to make international
transactions as seamless as domestic ones. We increase the conversion of international traffic into sales by removing much of the complexity
associated with international e-commerce. We provide a mission-critical, integrated solution that creates a localized and frictionless
shopper experience and our platforms are simple to manage, flexible to adjust and smart in the local market insights and best practices.
The vast capabilities of our end-to-end platforms include interaction with shoppers in their native languages, market-adjusted pricing,
payment options tailored to local market preferences, compliance with local consumer regulations and requirements such as customs duties
and taxes, shipping services, after-sales support and returns management. These elements are unified under our platforms and services
to enhance the shopper experience and enable merchants to capture the global e-commerce opportunity.
We operate at the forefront of global e-commerce,
which is being transformed by technology, internet adoption and the rise of social networks connecting the world. Shopper buying habits
are rapidly shifting online, as shoppers expect to be able to purchase any product online - from anywhere in the world. Trends and consumer
tastes are becoming increasingly global, driving the expansion of global e-commerce, but the preference remains for an intuitive online
shopping experience that feels local. In parallel, the rapid growth in e-commerce has created an opportunity for merchants to build and
strengthen a direct relationship with the shopper. Solutions that enable D2C sales have become a strategic priority for brands and retailers
as they seek to take advantage of these e-commerce trends, gaining ownership and knowledge of their international shoppers.
Our comprehensive platforms create differentiated
benefits for both shoppers and merchants. Shoppers seek competitive, localized and transparent pricing, a seamless and secure order and
delivery process, and a painless returns and refunding process. We address these needs through a fully localized experience that removes
many of the barriers shoppers face when purchasing from merchants internationally. We integrate with and enhance the online stores of
merchants and localize the shoppers’ experience based on the country from which they shop. We support local messaging in over 30
languages, purchases in more than 100 currencies by over 150 payment methods and a multitude of shipping options. Shoppers can enjoy a
fully guaranteed landed price quote, which includes shipping costs, import duties and tax charges, as well as post-sale services, such
as multi-lingual customer service and a managed returns service. The enhanced shopper experience we enable, typically results in improved
sales conversion of our merchants’ international traffic, thereby increasing their revenues from global shoppers. We have seen merchants
experience significant uplift in international traffic conversion after beginning to use our platform.
For merchants, our platforms also remove much
of the complexity that is associated with global e-commerce. Sales are reconciled and paid for locally and in the currency of the merchant’s
domicile. We handle import duties calculation and collection, foreign sales tax remittance as well as tax recovery for returned goods
in line with market regulations. We also displace certain fraud and foreign exchange risks that would otherwise be borne by merchants.
We allow merchants to expand and scale their global reach rapidly and efficiently, enabling a quick go-to-market with limited investment.
The scale and sophistication of our platforms
relies on the data and insights we’ve accumulated since our founding more than ten years ago. We refer to the application of our
data as “Smart Insights” - country-, price-point- and vertical-specific lessons learned about shopper behavior. These insights
are expanded every time a potential shopper enters a merchant’s online store - which occurs hundreds of millions of times each year
- allowing us to gather additional data points along the purchasing journey. We believe that by leveraging our Smart Insights, merchants
can provide highly optimized experiences for shoppers on a per-market, per-vertical and per-price point basis, driving increased sales
conversion and revenues. By providing a seamless shopper experience and empowering merchants to capture the global e-commerce opportunity,
we believe that we drive more transactions and thereby accumulate more data, which in turn increases the quality and depth of our Smart
Insights. This creates strong flywheel effect that further power our business and that of our merchants.
The merchants’ success is our success, and
we aspire to become their trusted partner for international sales. The better the outcomes for the merchants and the more revenue and
growth they achieve, the greater our own revenue and growth. We believe this alignment of interests with the merchants is core to our
long-term success.
In September 2023, Shopify launched “Shopify Markets Pro”, a white-label
cross-border MoR offering, powered by Global-e, currently available to Shopify US-based merchants. Shopify Markets Pro is based on the
Flow platform, leveraging its robust API-based technology and enables merchants of diverse scales, encompassing small and emerging businesses,
to seamlessly extend their brand offerings globally with streamlined integration
efforts. Moreover, Shopify Markets Pro boasts advanced self-service capabilities, further enhancing its appeal and functionality to merchants
seeking international market expansion.
Our business has experienced rapid growth over
the last years and generally since our inception. Our GMV amounted to $1,449 million, $2,450 million and $3,557 million in 2021, 2022
and 2023, respectively, representing an increase of 69% and 45% in the years ended
December 31, 2022 and
2023, respectively. Our revenues
were $245.3 million, $409.0 million and $569.9 million in the years ended
December 31, 2021,
2022 and
2023 respectively, representing
an increase of 66.8% and 39.3% in the years ended
December 31, 2022, and
2023 respectively. Our operating efficiency and growing economies
of scale have allowed our gross profit growth rates to outpace those of our revenue growth. Our gross profit increased by 73% and 48%
in the years ended
December 31, 2022 and
2023. Our gross margin has steadily improved from 37.3% in 2021 to 38.7% in 2022 and to 41.0%
in 2023. Our Non-GAAP gross profit has increased by 84% and 46% in the years ended
December 31, 2022 and
2023 and our Non-GAAP gross margin
has reached 42.9% in the year ended
December 31, 2023. Our operating loss has Increased from $65.7 million in 2021 to $189.3 million in
2022 and decreased to $137.1 million in the year ended
December 31, 2023. Our Adjusted EBITDA has grown from $32.4 million in 2021 to
$48.7 million in 2022 and to $92.7 million in the year ended
December 31, 2023.
Our Opportunity
We strive to make international sales as simple as domestic ones for our merchants,
while also ensuring that shoppers enjoy an intuitive and frictionless shopper journey, making both shoppers and merchants
“abroad-agnostic”.
We believe that our scalable platform
s enable our merchants to capture
the large and growing global e-commerce market. As of
December 31, 2023, we served 1,256 merchants on our enterprise platforms across
over 30 countries, mainly in the United States, the United Kingdom, other Western European markets and Asia Pacific (
“APAC”)
countries. In addition, we served thousands of US- based merchants through Shopify Markets Pro; overall, we sell to shoppers in over 200
destination markets worldwide. Forrester estimated that by 2023, the cross-border e-commerce market will reach $736 billion. For the year
ended
December 31, 2022 and
2023, our merchants’ transactions amounted to a GMV of $2,450 million and $3,557 million, respectively.
We believe we have the potential to become an industry-defining player that enables merchants to capture the global e-commerce opportunity.
Our Solutions
Global-e is a leader in global e-commerce enablement.
We offer full end-to-end platforms built on a highly scalable technology stack. Our comprehensive solutions provides merchants with mission-critical
tools that enable them to sell and scale globally.
We believe our offering is a result of a potent
combination of key components that will help further fuel the growth of global e-commerce by:
Offering an intuitive and frictionless
shopper journey and solving the merchants’ needs through our purpose-built end-to-end platforms
Through a combination of proprietary capabilities
and useful third-party integrations, Global-e is able to create a localized and efficient experience for shoppers regardless of the country
they are shopping from.
Our platforms include mission-critical tools,
from local pricing and payments capabilities to after-sales support. We also simplify the international order flow – regardless
of shopper and merchant origin, currency and payment method used, whether duties and taxes were pre-paid and which shipping option was
chosen – making it as simple to complete as if it was a domestic order.
Across our platforms, we are able to support:
• |
Languages
- localized marketing messaging and checkout in over 30 languages. |
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Pricing -
more than 100 currencies as well as a sophisticated pricing engine customizable according to the shopper’s location, local market
retail pricing conventions and the merchant’s pricing strategy. |
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• |
Payments -
over 150 payment methods, with new payment methods being continuously added. |
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•
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Duties and taxes –
the ability to accurately pre-calculate import duties and taxes and remit them in over 170 destination markets, simplifying the customs
clearance process and allowing for a guaranteed landed price quote for both the shopper and the merchant. We also ensure we are addressing
local market import restrictions. |
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Delivery -
an extensive network of more than 20 shipping carriers, offering multiple shipping modes at attractive rates, including specialized shipping
options such as Pick-Up & Drop-Off where applicable. We have found that shopper preferences for shipping modes and pricing vary significantly
among markets and are an important driver of conversion rates. |
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• |
After-sale support
and returns – multi-lingual shopper services and multiple returns options, including pre-paid and local returns in relevant
markets. |
The combination of these extensive international
capabilities embeds a highly-localized shopper journey into the framework of a merchant’s e-commerce store. This creates benefits
for shoppers, who enjoy an efficient and familiar experience, while gaining direct access to the merchant’s full and original e-commerce
website. Their positive experience allows us to significantly increase the conversion of our merchants’ international traffic and,
consequently, their revenue.
•
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Increased sales
conversion: we enable merchants to scale globally in a rapid, efficient manner. We ensure that the merchants are able to capitalize
on their valuable international shopper traffic and growth potential by eliminating friction to close the gap between international markets’
share of traffic and monetization. This enables the merchants to generate an uplift in sales from the conversion of their international
shopper conversion. We have seen merchants experience significant uplift in international traffic conversion after beginning to use our
platform. |
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•
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Enabling expansion
flexibility: Global-e presents merchants with flexibility to expand as they seek to capture the global e-commerce opportunity.
We transform what otherwise would have required significant time and financial investments in proprietary development and go-to-market
efforts into an efficient expansion solution managed by adjusting mere configurations on the Global-e platforms per market. |
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•
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Reducing merchant complexity:
Global-e assumes the role of merchant of record (“MoR”) vis-à-vis the shopper. We believe that taking on such
responsibility significantly reduces legal complexity for the merchants, as we report and forward relevant import taxes and handle import
compliance in the local market to where a sale is made, in line with specific market regulations. Our MoR status allows us to handle tax
recovery for returned goods, with no hassle to the merchant. We bear certain fraud and foreign exchange risks that would otherwise be
borne by the merchants and offer simple access to dozens of local payment methods, which further reduces potential frictions that could
deter both merchants and shoppers from engaging in global transactions. We also adapt our systems and operations on an ongoing basis to
address the evolving regulatory landscape and technical backdrop. Vis-à-vis the merchant, we streamline order processing by periodically
reconciling all international orders in bulk and in the merchant’s native currency. In short, we aim to provide an experience that
is akin to a domestic transaction. |
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•
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Emphasizing merchant
branding: maintaining the direct shopper relationships is of strategic importance to the merchants, and we are deeply committed
to preserving that connection. All throughout the process, the merchants preserve the integrity of the brand experience and enhance their
brand equity. We use minimal own branding - and only where required to do so - so shoppers primarily face the merchant’s existing
storefront and brand experience. |
Combining our access to data
and know-how to generate Smart Insights
We believe we are well-positioned to provide insights
to our merchants thanks to both the breadth and depth of the data we generate, on the basis of the significant international traffic on
our merchants’
websites and the millions of transactions we facilitate on a yearly basis. For the year ended
December 31, 2023,
there were approximately 1.3 billion visits across our merchants’ e-commerce sites, and we enabled approximately 18 million transactions
across over 30 origin countries and over 200 destination markets. We gather extensive data along the entire value chain and lifecycle
of an order - from the initial visit to the e-commerce store through the actual purchase, delivery and returns.
Our proprietary models use this wealth of information
to generate curated and actionable Smart Insights for our merchants, advising them on how certain changes to their online value proposition
would potentially affect shopper conversion rates. We also provide detailed business analytics on a market-per-market basis, leveraging
our know-how, tools and data. Such Smart Insights enable the merchants to optimize their offering to the shoppers by location, alleviating
the need for trial and error in order to assess customer preferences on a standalone basis.
Our holistic approach - coupling our localization
capabilities and market know-how with our data driven Smart Insights - enables the merchants to unlock their potential for global D2C
sales by means of a localized and optimized offering for each individual market, vertical and price segment.
Environmental, Social and Governance
(ESG) Practices
Global-e platforms and offerings are designed
to promote access and reduce borders and barriers in global e-commerce, where such access can potentially be offered while taking into
consideration and contributing to the Environmental, Social and Governance (ESG) goals of our stakeholders, including our merchants and
the shoppers. To that end, we have committed to develop our ESG strategy and workplan in alignment with our business strategy and the
expectations of our stakeholders, our partners within the value chain, our employees and our local communities.
We continue to gradually develop our ESG strategy.
The ultimate responsibility for our ESG strategy, goals, practices and the underlying workplan is vested with our Board of Directors,
and the powers and authority to monitor and oversight were delegated and vested to the Board’s Nominating, Governance and Sustainability
Committee (NGSC). The NGSC established an executive committee (consisting of c-level management) under its supervision and direction
to lead the development and execution of our ESG workplan, and such executive committee has been, and will continue to work closely with
various relevant departments and officers, including Facility Managers, Human Resources, Operations, Security and Tech Ops and Legal,
among others in designing, furthering and implementing our ESG work plan. In 2023, the Executive Committee held 10 meetings in which key
ESG strategy and workplan were discussed.
In 2023, we started to prioritize the enhancement
of awareness and understanding of our ESG workplans among the members of our management and Board of Directors. The objective of these
initiatives was to enable our leadership team to be adequately-equipped with the knowledge necessary for our ESG related decision-making
processes.
In the course of our ongoing Board of Directors
and NGSC meetings, we held sessions on ESG fundamentals and the relevance of ESG considerations to our business operations and our workplan
(including discussions related to the SEC climate disclosure rules). Special focus was given to cybersecurity. The sessions aimed to provide
our board members with an understanding how our ESG workplan fits our strategy, in accordance with the materiality assessment conducted
by
the company. In addition, as part of its ongoing meeting agenda, the Executive Committee underwent sessions that contributed to the
understanding of its members of certain functional areas related to
the company’s workplan. These sessions covered topics such as
integrating sustainability into business operations, stakeholder engagement, and measuring and reporting ESG performance.
We view ESG as an integral part of our corporate
strategy and we remain committed to fostering a culture that values sustainable, conscious and responsible business practices. We believe
that the sessions conducted during the past year mark the beginning of an ongoing commitment to ESG education within our organization,
and serve as a foundation for continued learning and application of ESG considerations in our business operations. We plan to gradually
include relevant managers and employees in certain session in the future, and provide relevant tools for encouraging creativity, and fostering
engagement, leading to sustainable value creation.
In 2023, we took the first steps to review climate
change impacts and addressing Diversity, Equity and Inclusion (DEI) gaps across the organization. We have started to develop a plan to
prioritize and promote efforts to manage key long-term non-financial parameters important to our business.
Following our 2022 engagement with the ESG advisory
team of Nasdaq Corporate Solutions, LLC, that conducted our first ESG materiality assessment based on what we believe were and still are
our stakeholders’ values and our internal leadership views and attitude on ESG, in light of our missions and business strategy,
our 2023 workplan was designed and prioritized in consideration with such materiality assessment.
Sustainability
In 2023 Global-e initiated preliminary steps towards
assessing and potentially reducing greenhouse gas (GHG) emissions associated with our operations. Recognizing the impact of our activities
on the environment, we have started exploring measures to reduce our carbon footprint.
We have always considered the importance of energy
efficiency within our office spaces. We have recently adopted facility management policy. We aspire to explore how we can reduce waste
generation in our offices, focusing on identifying opportunities to reduce use of paper (by setting a must-have only printing policy,
and have reduced significantly the use of disposables including paper cups in our largest office location in Israel), as well as taking
steps to implementing recycling practices (for example, in our London office, which is our second largest office facility). For example,
the policy requires us to donate unused electrical appliances to non-profit organizations and schools, and placed measures to using only
wired computer accessories to limit the use of battery.
We have initiated collaborative discussions with
our carriers to jointly assess the measuring of carbon footprint associated with transportation and logistics. These collaborative assessments
will inform future strategies for emissions reduction within our supply chain. We are pleased with our carrier network for having their
own programs and initiatives, and while we cannot directly influence the scope or success of such programs, we believe that having our
lion-share shipments carried through such network, has a meaningful contribution to any carbon-reduction goals.
In collaboration with some of our carriers, we
were able to pilot a proposed rate card that incorporates optional offsetting fees for GHG emissions. This initiative aims to encourage
and facilitate carbon-neutral shipping options for our merchants. We cannot control or impact our merchants’ choice or the actual
offering made by such carriers, but we remain committed to making such rate cards available as part of our proposition as long is the
carriers make it available on their end. We believe that such offering echoes the importance of emissions reduction along the supply chain.
In tandem with our efforts to address GHG emissions,
Global-e is considering initiatives related to circular economy. Global-e has commenced internal preliminary mapping of areas where circular
economy modalities could be applied. We are in the early stages of engaging with our carriers and other vendors to explore circular economy
initiatives collaboratively. We are committed to taking on these initial steps and further considering and integrating sustainability
considerations into our business practices and commercial offering. These efforts align with our commitment to responsible corporate citizenship
and addressing the environmental impact of our operations.
While the steps taken are in an early stage, Global-e
views sustainability as an ongoing journey, and we are dedicated to exploring and implementing initiatives that could positively contribute
to the environment and support sustainability.
Employee Recruitment, Retention
and Engagement
Our workforce has grown significantly in recent
periods, and that has, and continues to require us to seek to build and maintain a working environment that caters for employees motivation,
talent, wellbeing and safety, while promoting personal and professional development.
We consider the needs of our clients in our existing
and new markets for local culture and local business etiquette. In 2023, we continued to recruit relevant talent to strengthen our team
capabilities in our offices worldwide. As we continue to grow our workforce and to expand geographically, diversity will continue to be
important to who we are, allowing us to better serve our customers in a local culture fashion yet with a global expertise earned through
cross-organizational collaboration.
We remained committed to creating an inclusive
and diverse workplace where all employees feel valued and empowered. We acknowledge the importance of diversity, equity and inclusion
in driving innovation, fostering creativity, and promoting long-term sustainability. In 2023 we took some initial yet meaningful strides
in enhancing our commitment to DEI within the organization. We also take our legal responsibilities seriously, and our DEI efforts are
and will continue to be undertaken in a manner that is consistent with applicable law. As part of our workplan, we considered and undertook
various initiatives to measure and plan how to address DEI gaps and promote a culture of diversity and equality. The Executive Committee
is responsible for the governance of our DEI roadmap planning and execution, in consultation with its member, our VP of Human Resources.
We call out the following items for the past few periods:
1. DEI Gap Assessment: With the support of the
PWC Israel, Risk and Forensic Services, ESG group, we conducted preliminary assessment to identify areas of improvement and opportunities
for enhancing diversity and inclusion across various facets of the organization, including but not limited to hiring, promotion, and professional
development.
2. Policy Development: in tandem with the abovementioned
assessment, which was designed in accordance with our management’s guidelines and spirit, and in alignment with industry standards,
we initiated the development of DEI policies aimed at providing better guidelines for promoting diversity and equal opportunities within
the organization, initially aiming to serve as a guide to the Human Resources (HR) team.
3. Measurement and Analytics: With the support
and guidance of PWC Israel, ESG group, we built a matrix of available measurable data, based on industry standard metrics and parameters.
This includes the collection and analysis of relevant data to assess the representation of diverse groups in different departments and
levels of the organization, in a manner consistent with applicable data privacy laws. On the date of this Annual Report, we are still
in the process of analyzing the data we gathered.
While initial steps were made, it is important
to note that the DEI forward plan is still under development. We are committed to keep on building the foundation laid during the previous
financial year and continuing to prioritize diversity, equity, and inclusion in our long-term strategy, all based on measurable data and
in conformity to our management’s visions and spirit, aligned with industry best practices and recognized reporting standards. We
recognize that DEI is an ongoing journey, and we are committed to furthering such efforts. Among other things, we are likely to consider
initiatives associated with DEI data measuring, analysis and supporting policies, and training programs.
Human Capital Development, Compensation
and Evaluation
We value the uniqueness of each of our employees.
We appreciate the talent and the caring they put into their work in making us a better organization, which in turn defines our culture,
and eventually will make our business strategy, our solutions and our services better. We therefore always aim to encourage and promote
our employees’ talent, ambition and sense of devotion.
We seek to provide and constantly develop compensation
and equity incentive plans that will remain attractive and rewarding. As such, we offer both stock-based and cash-based compensation awards
(in each case subject to eligibility criteria) that are designed to commensurate individual performance and meeting objectives.
Our recruitment spans through students, junior
professionals through senior seasoned executives. None of our employees is represented by a labor organization or is a party to a collective
bargaining arrangement or expansion orders of such arrangements, with the exception of a small number of employees in France, Spain, Australia
and Israel who are covered by mandatory industry-wide collective bargaining agreements in accordance with local law.
We are extremely proud of our employees. In 2023,
more than 70 employees (approximately 7.5% of our global workforce) were promoted or assumed new roles within the organization. We believe
that such vote of confidence is the result of our culture.
During 2023 our hybrid remote work policies remained
in place, enabling our employees to work remotely for parts of the work-week, while still fully operating all our office facilities, and
maintaining health and safety measures.
We consider inclusive work culture to be an important
criterion in promoting collaboration and transparency among our employees, while still offering private spaces for personal and professional
needs. To that end, we strive to have an open workspace with optimized balance between team collaboration and private space.
We offer our employees opportunities to acquire
new skills, and to develop through exploration, experience and learning, by providing them learning and development programs. We have
a dedicated personnel within our Human Resources team, supervised by our executive leadership, who focus, and will continue to focus,
on developing learning, training and growth policies and plans, through internal and external platforms, to be made available for our
people worldwide. The Juno Journey platform, which was implemented in 2022, offered tens of thousands of external learning resources from
which each employee could choose for own personal and professional growth path. The use of Juno as part of our new-employee induction
and training program supported the onboarding of our new hires in 2023, where all new hires used Juno as part of their induction training.
Over 70% of our employees are actively using the platform. We have allocated each employee an annual budget allowing them to attend, on
average, 2-3 courses of their choice. We continued to create and develop in-house courses and professional sessions covering our products,
technology and offering.
In parallel, we started building our in-house
competence development program. The program is expected to focus mostly on spreading the knowledge about our solution across all verticals
in the organization.
In an effort to promote candid and effective dialog
between employees and their managers with a view to contribute to career development and personal accomplishments, we carried on with
our annual review processes for all employees across the world, making the process streamlined and efficient. In 2023, employees went
through their annual performance review, the vast majority of them within the first two months from the end of 2022, and complete salary
review withing the first quarter of 2023. Any annual performance and goals review is based on personal individual work and development
plan with specific objectives and, if applicable, resource requirements, always attempting to balance between business needs and personal
aspirations and targets.
Business Ethics
Our unique position as an e-commerce enabler comes
with great responsibility to the value chain stakeholders – our merchants (brands and retailers), our consumer shoppers and the
vendors we work with or collaborate when we perform our services. We aim to hold ourselves to the highest standard of business and professional
ethics, and expect our stakeholders to do the same. We are committed to making equal and unbiased selection of partners, honor our promises
and commitments, and stay accountable to our actions and choices towards our stakeholders.
Being a founder-led organization, operating under the oversight of our Board of Directors
and its committees, we are committed to the values and standards of behavior set forth in our Code of Conduct. We will keep our employees
appraised of the code by annual training and making it available to all, including by reference in our service
contracts with our merchants.
Our Board of Directors, with the support of our management, has recently conducted a review of the Code of Conduct to reaffirm our commitment
to maintaining the highest standards of integrity, transparency, and ethical behavior in all aspects of our operation
.
No material changes were made in the course of such recent review of the Code of Conduct.
Board Composition
We are privileged to have experienced industry-relevant
leaders as our members of the Board of Directors. The members of our Board of Directors bring years of leadership experience, making it
fit for overseeing our organization’s governance and compliance. We maintain a majority independent Board of Directors, with five
independent directors. We believe our Board of Directors demonstrates balanced perspectives of relatively newly appointed directors and
required industrial knowledge from the more tenured directors. Under the supervision of the NGSC, we previously conducted Board of Directors
and Committee evaluation to facilitate an assessment of the performance of the Board of Directors and its Committee and assessing its
strengths and weaknesses and laying a foundation for discussion and future improvement. 3 of our directors self-identify as women or non-binary,
and 2 self-identify as members of traditionally underrepresented racial/ethnic groups in their home jurisdiction.
Our Merchants
We serve a fast-growing and
diverse portfolio of merchants around the globe
As of
December 31, 2023, we had 1,256 merchants
using our enterprise platforms, up 21.2% from 1,036 merchants as of
December 31, 2022 and 91.2% from 657 merchants as of
December 31,
2021. In addition, as of
December 31, 2023, we had thousands of merchants already onboarded and using Shopify Markets Pro. During the
year ended
December 31, 2023, merchants using our platforms made transactions at a total GMV of $3,557 million, up 45% from $2,450 million
in the year ended
December 31, 2022. The merchants we serve are highly diverse across:
• |
Multiple origin
countries - we serve merchants from multiple locations including the United States, the United Kingdom, various European markets,
Japan, Australia, Hong Kong, Singapore, South Korea, the United Arab Emirates and other markets globally. |
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Multiple product
verticals - fashion and apparel, luxury, footwear, cosmetics, accessories, children’s fashion, watches and jewelry,
sporting equipment, consumer electronics, toys and hobbies, automotive spare parts, and others. |
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Multiple product
price points - ranging from everyday fashion retailers to ultra-high-end brands. |
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Multiple merchant
sizes - from multi-billion-dollar global high-street brands to emerging small and medium businesses. |
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Multiple merchant types -
from traditional bricks-and-mortar retailers who have been transitioning to the digital D2C realm to emerging digital-native brands.
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We believe that our large and highly diverse portfolio
of merchants presents several key advantages:
• |
A rich, diverse and fast-growing data asset of international transactions,
enabling us to produce Smart Insights. |
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• |
Vertical-level as well as geographical expertise, yielding a competitive
advantage when approaching prospective merchants as part of our sales process. |
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Strong network and word-of-mouth effects within specific verticals
and/or geographies. |
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High business resilience due to steadily decreasing merchant concentration.
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A certain level of built-in “natural currency hedge” as
a result of our business activity being conducted in a large number of different base currencies. |
We have a highly efficient sales
and go-to-market strategy
We establish partnerships with new merchants through
several sales channels:
• |
Direct sales -
We have a dedicated team of sales executives that use various data sources to screen, qualify, identify and directly approach prospective
merchants. |
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Inbound and word-of-mouth
- As our scale and the number of merchants we have in each individual market grows, so does our own brand equity. This leads to
more inbound prospects as well as stronger word-of-mouth-based sales, whereby existing Global-e merchants or e-commerce executives
recommend our solution to other players in the market. |
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Channel partnerships -
We have established mutually beneficial strategic partnerships with a range of third parties, including leading e-commerce and technology
platforms, shipping providers, third-party logistics providers, payment providers, system integrators and others. In the context of such
relationships, our partners pass on leads to our sales teams and provide us with access to merchants. |
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Shopify partnership - In 2021
we entered into the 2021 Shopify Agreement with Shopify to jointly cooperate in offering global e-commerce solutions to Shopify merchants.
In January 2022 we extended our partnership with Shopify and entered into the 2022 Shopify Agreement with Flow and Shopify, based on which,
in September 2023, Shopify Markets Pro, a white label cross border MoR offering, became generally available to US-based Shopify merchants.
Shopify Markets Pro is based on the Flow platform, leveraging its robust API-based technology and it enables merchants of all sizes, including
small and emerging merchants, to offer their products internationally with a streamlined integration process and advanced self-service
capabilities. |
Sale cycle length depends on several parameters,
such as merchant size, vertical, and type of technical integration but takes between three weeks and six months. Once the sales cycle
is completed, implementation periods vary, depending on technical complexity, level of granularity of the merchant’s intended international
marketing proposition and operational complexity. Implementation projects for large merchants take approximately
12-16 weeks on average
while implementation for small businesses take approximately three to six weeks depending on the client internal team engagement.
Our Competitive Advantages
We believe that we have built a leading combination
of platforms, services and data-driven insights and know-how all working in harmony to address merchants’ global e-commerce needs,
creating a competitive advantage for our business. We believe our combination of capabilities and expertise uniquely positions us to cater
to shoppers globally, driving significant uplifts in international sales conversion rates and revenue growth for our merchants, while
also removing much of the complexity and many of the costs inherent to global e-commerce.
Key elements of our competitive advantage include
the following:
Purpose-built, end-to-end platform
We understand the challenges and the strategic
objectives of our merchants engaging in global e-commerce. We provide merchants with the capabilities required for effective global D2C
trade, using a potent combination of our proprietary technology and third-party providers. Our solutions are easy to integrate, platform-agnostic,
scalable and able to support merchants of all sizes from small, emerging brands to the world’s largest retailers. We aspire to be
inclusive and far-reaching in scope. We thus enable our merchants to expand internationally effectively, and to do so much more efficiently
than previously possible.
True global e-commerce enabler
at scale
We believe we are uniquely positioned to capture the global e-commerce opportunity
as we are the only direct-to-consumer e-commerce enabler with truly global scale. We have an extensive footprint in North America, the
United Kingdom, across the EU, Japan, Australia, United Arab Emirates and other
APAC countries. We are diversified by vertical and end-market. Our wide-reaching scale enables us to provide a solution to merchants
across the globe. This scale, coupled with strong brand recognition gained since inception, has allowed us to acquire some of the largest
merchants in the world as customers.
Differentiated and growing data
asset driving flywheel effect
The Global-e platforms are
based on more than technical solutions and associated capabilities.
They are based on data-driven know-how. Data permeates every layer of
our platforms. Data drives how we make decisions, how we develop and improve
our offering, and how we make the shopper experience efficient and intuitive. We refer to this as “Smart Insights”, which
enjoy a strong flywheel effect as we continue to grow at pace driven by:
•
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“Economies of scale”
- Our platforms facilitate millions of international transactions each year across thousands of merchants, spread across multiple
geographies, product verticals, price levels, and shopper demographics. We thus accumulate a vast and rich data set and are able to benefit
from economies of scale. |
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•
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“Economies
of skill” - Our massive and fast-growing data is a key asset due to the “richness” of its content. Based
on this data, and coupled with our operational experience accumulated over years, we are able to generate what we call economies
of skill, which enable us to ensure that global sales are optimized for the merchants on a market-by-market basis.
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•
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Flywheel Effect - Our
rich data serves as the basis for a powerful flywheel effect: the uplift we generate for our merchants
drives more sales and the ability for them to expand into new geographies, which in turn creates more data, which is then fed back into
our systems in order to generate even better conversion rates and more uplift. This in turn drives increased sales for our merchants and
attracts new merchants to our platforms. Our data engine gets “smarter” with each new site visit, each merchant and each new
shopper. |
Partner network fueling our
differentiated go-to-market strategy
Our go-to-market strategy targets merchants that want to establish or expand their
global e-commerce business. The effectiveness, prominence and stickiness of our platforms have enabled us to acquire many of our merchants
organically, supplementing the efforts of our professional salesforce. Many of our new merchants are referrals from existing merchants
or e-commerce executives, which serve as brand ambassadors for Global-e. In addition, our commerce enabler, marketing, payments,
shipping and logistics, system integration and social media partners, which include global and regional players, act as a meaningful source
of referrals and lead generation. Our ability to leverage these relationships is an important source of inbound interest. This is further
complemented by our highly efficient sales and marketing efforts. Our salespeople and customer success managers build intimate relationships
with our merchant partners and are crucial in further expanding our merchant network.
Robust business model with sticky
customers
Global-e is a global e-commerce enabler covering the entire shopper journey. Our platforms
are deeply integrated within merchants’ existing technology stack providing the core tools to power their day-to- day global operations.
As a result, we retain significant “stickiness” within our customer base. Not only do we retain our merchants - our merchants
also grow with our platform, and we grow with them. Merchants process large and growing order volumes through our platforms as we become
increasingly integral to their daily business operations and as they realize the benefits of using our platforms. An important component
of our growth is our existing merchant base, which grows organically each year. Due to our consistently high retention rates, we have
strong visibility into the subsequent year’s revenue by looking to our current merchants, in a given period. Attracting new merchants
is also critical to the scale of our platforms. We have developed a highly
efficient sales model based on a direct sales force, channel partners and strong word of mouth, and we continue to build our capabilities
to further strengthen our model.
Founder-led management team
We are a founder-led management team with a strong
corporate culture. We are privileged to be led by our founders,
Amir Schlachet, Nir Debbi, and Shahar Tamari, who set the tone for our
people:
•
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Customer-Obsessed: We
are firm believers in putting our customers first in everything we do. This is a principal tenet of our business. We view the merchants
as long-term partners and hold their satisfaction as our guiding principle. Our customer success teams have invaluable tools and data
to support the merchants’ ongoing needs, as well as direct access to the senior leadership team, including our founders, to leverage
on behalf of our merchant partners. |
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•
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Initiative and
innovation driven: Our goal is to enable merchants to break geographic boundaries and become globally successful businesses.
As such, we invest millions in research and development each year, track trends in the e-commerce world across geographies and constantly
improve our product offering. Similarly, we encourage our employees to expand the scope of their defined roles, to take initiative, and
to elevate Global-e to the next level - every employee can, and does, make a difference. |
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•
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Team-Focused: We
are a team. We believe in collaboration and inclusion, from our founding team that has been working together since our inception to our
employees across all our offices worldwide. Our hiring decisions are based on attracting people whose values align with ours: creating
real, meaningful and sustainable value for our merchants. |
Our Growth Strategy
Grow within our existing portfolio
of merchants
The merchants’ success is our success. We
help merchants both grow revenues in their existing markets as well as expand into additional ones. As our merchants’ global sales
generated through our platforms grow, attributed either to improved conversion or by expanding their offering into additional geographies,
our revenues grow in tandem. Thus, we increase the “stickiness” of our solutions and become increasingly integral to our merchants’
daily businesses as they realize the benefits of using the Global-e platforms. We also have a strong track record of merchants acting
as ambassadors for Global-e, referring us to other portfolio brands, as applicable, and more generally, to other potential merchants.
We intend to continue deepening our relationships with existing merchants through service and performance of the highest quality, allowing
them to continue to serve as our brand ambassadors within and outside their organizations.
Acquire new merchants within
existing geographies and verticals
We have a significant opportunity to continue
acquiring new merchants over time. Furthermore, we have proven the ability to rapidly integrate potential merchants with implementation
cycles of 12 to 16 weeks on average, and as short as three weeks. We will continue to invest in our marketing and sales teams to enhance
awareness of our solutions and to drive lead generation with our strategic partners. We see significant opportunities across multiple
existing geographies and brand segments that we believe we are well-positioned to capture.
Expand into additional geographies,
verticals and brand segments
We will seek to further expand our geographic
footprint and boost our presence across merchant verticals, as well as brand segments. We believe that markets in the vicinity of regions
where we already have a strong presence, in particular Europe and North America, and newer markets, such as APAC, are highly relevant
for our business.
While historically we have held a strong position
in the mass market beauty and fashion segments, we have also achieved significant success with merchants in other segments, in particular,
within the luxury segment, that we believe we can continue to capitalize on. Additionally, we have extended our reach by engaging with
global consumer electronics brands. In order to provide the necessary level of support for these global brands, we have built and continued
to build new multi-local capabilities, allowing us to enable localized D2C sales for such brands while also enabling them to utilize their
existing local infrastructure, inventory and fulfilment capabilities in multiple destination markets. We are also making use of such multi-local
capabilities to better serve the needs of our large global merchants, enabling them to utilize their domestic presence and inventory in
chosen markets in order to serve their shoppers in such markets in local fashion, while at the same time serving adjacent markets through
our cross-border capabilities.
As we continue to grow and expand into new geographies,
through both new merchant acquisition and our existing portfolio of merchants expanding their offerings into additional geographies, we
have the ability to reach new audiences in terms of sizes and verticals. Our growing brand recognition and know-how across our trading
markets, enables us to acquire additional merchants more efficiently within current markets as well as new geographies.
Disaggregation
of Revenue
The following table summarizes
revenue by category:
|
|
|
|
|
|
|
|
|
2022 |
|
|
2023 |
|
|
|
Amount |
|
|
Percentage of Revenue
|
|
|
Amount |
|
|
Percentage of Revenue
|
|
|
Amount |
|
|
Percentage of Revenue
|
|
|
|
(in thousands, except percentages)
|
|
Service fees |
|
|
96,659 |
|
|
|
39 |
% |
|
|
181,887 |
|
|
|
44 |
% |
|
|
262,255 |
|
|
|
46 |
% |
Fulfillment services |
|
|
148,615 |
|
|
|
61 |
% |
|
|
227,162 |
|
|
|
56 |
% |
|
|
307,692 |
|
|
|
54 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$ |
245,274 |
|
|
|
100 |
% |
|
$ |
409,049 |
|
|
|
100 |
% |
|
$ |
569,946 |
|
|
|
100 |
% |
The Company's revenues from service fees provided
on a standalone basis were $8,366, $16,515 and $44,461 (in thousands) for the years ended December 31 2021, 2022 and 2023 respectively.
The following table summarizes revenue by merchant
outbound region:
|
|
|
|
|
|
|
|
|
2022 |
|
|
2023 |
|
|
|
Amount |
|
|
Percentage of Revenue
|
|
|
Amount |
|
|
Percentage of Revenue
|
|
|
Amount |
|
|
Percentage of Revenue
|
|
|
|
(in thousands, except percentages)
|
|
United States
|
|
|
71,095 |
|
|
|
29 |
% |
|
|
173,967 |
|
|
|
43 |
% |
|
|
285,619 |
|
|
|
50 |
% |
United Kingdom |
|
|
113,385 |
|
|
|
47 |
% |
|
|
146,562 |
|
|
|
36 |
% |
|
|
173,584 |
|
|
|
30 |
% |
European Union
|
|
|
58,177 |
|
|
|
23 |
% |
|
|
78,491 |
|
|
|
19 |
% |
|
|
92,566 |
|
|
|
16 |
% |
Israel
|
|
|
1,052 |
|
|
|
* |
|
|
|
1,357 |
|
|
|
* |
|
|
|
1,806 |
|
|
|
* |
|
Other
|
|
|
1,115 |
|
|
|
* |
|
|
|
8,672 |
|
|
|
2 |
|
|
|
16,371 |
|
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$ |
245,274 |
|
|
|
100 |
% |
|
$ |
409,049 |
|
|
|
100 |
% |
|
$ |
569,946 |
|
|
|
100 |
% |
* Less than 1%
Shopify
Markets Pro
In 2023, Shopify Markets Pro became generally available to US-based Shopify merchants,
enabling merchants of all sizes, including small and emerging merchants, to offer their products internationally via a streamlined
integration effort and advanced self-service capabilities. We believe that this offering will appeal to many merchants, due to
its streamlined integration process and advanced self-service capabilities. The streamlined integration process ensures a quick and hassle-free
onboarding experience for merchants, while the advanced self-service capabilities empower them to manage and customize their offerings
with ease. This combination not only enhances operational efficiency but also provides merchants with the flexibility and control needed
to navigate the complexities of international markets, making Shopify Markets Pro an attractive solution for a diverse range of merchants.
Drive continuous innovation
on our platforms
We plan to continue to invest in research and
development and operate with an agile approach to address our merchants’ and shoppers’ constantly evolving needs. We strive
to continue developing new capabilities and add-on offerings, as well as opportunistically look to complement existing platforms and offering
through merger and acquisition opportunities, to maintain Global-e’s position as a leading holistic platform for global e-commerce,
enabling efficient selling and purchasing processes for our stakeholders. In addition, we have developed the capabilities and infrastructure
to support merchants’ multi-local fulfillment offering whereby select markets are serviced from locally-existing inventory, thereby
giving the merchant better utilization of its stock and improving the customer offering. Our ability to provide preferred payment and
delivery methods in select geographies, contributes to higher conversion rates of shoppers from these geographies.
We also plan to continue enriching the suite of
value-added services we can provide to our merchants. For example, through the acquisition of Borderfree in 2022, we intend to enhance
the value that our business brings to global brands by providing them with traffic demand generation services, thereby the ability to
attract international shoppers to their web store. We are accomplishing this using both an e-mail based direct marketing and a portal-like
affiliation offerings, both building upon and augmenting assets (such as customer accounts) created by Borderfree.
We also believe that our differentiated data capabilities
and constantly-improving data models will allow us to stay at the forefront of e-commerce solutions. We believe our unique, big data-driven
Smart Insights enable us to help our merchants deliver more precise, targeted, localized shopper experiences driving conversion and revenues
and also manage their operations more efficiently through our superior ability to forecast and predict trends. We believe that data will
be a key driver of future optimization and shopper monetization.
Continue to develop and expand
our strategic partnerships
We have established mutually beneficial strategic
partnerships with a range of key players in the broader e-commerce ecosystem, including global technology groups, e-commerce platforms,
shipping providers, third-party logistics providers, payment providers and system integrators. Our channel partners have been an important
lead generation engine providing our sales team with a strong pipeline of prospective merchants. We intend to further strengthen our existing
relationships, such as our partnership with DHL or our partnership with Shopify, and build new strategic partnerships with other key players
across the value chain and in the different markets in which we operate.
Products and Technology
Our end-to-end platforms help merchants remove
global e-commerce complexities by empowering merchants with powerful and extensive localization capabilities embedded directly within
their
websites. Our technology creates a highly-localized shopper experience, which in turn drives increased sales conversion and revenue
growth.
Our platforms are built on a scalable tech stack
which is powered by a robust layer of application programming interfaces (“APIs”) and data models, powering the shopper journey
and allowing us to support a fast-growing and rapidly expanding merchant base.
Through a range of frictionless integration options, the merchants’
websites
can leverage the power of our platforms. The integration technology, either through pre-fabricated e-commerce platform plug- ins, through
the implementation of our API’s or through our generic script-based client-side integration, which we refer to as Global-e Module,
is based on a simple lightweight integration effort. Such integration effort ranges from a code snippet that is placed into a merchant’s
existing online platform enabling us to deploy and integrate with minimal friction, to installation of our plug-ins and/or the implementation
of a few of our API’s. After integration, shoppers continue to face the merchant’s existing storefront, and Global-e remains
as a
“white label” in the background. In the case of Shopify Markets Pro, a simple
“one-click” activation process
is all that is needed from the merchant’s side to enjoy the benefits of
that
platform.
Shopping experience features
•
|
Localized browsing -
We offer localized browsing features, such as a configurable welcome message or a top-line marketing banner that can be customized by
market and presented in the local language. Customization breeds familiarity, reducing bounce rates, increasing conversion and improving
shopper confidence through a local shopping experience. |
•
|
Localized checkout -
Embedded within the brand’s e-commerce store, the checkout experience supports over 30 different languages across our platforms,
enabling shoppers to switch the checkout language to their own native tongue for a more customized and local experience. Further, shoppers
checkout within the merchant website without being redirected to a third-party site. |
• |
Guaranteed landed
cost - We provide shoppers with a “no-surprises” and guaranteed fully-landed cost. We offer multiple options,
configurable by market, for handling import duties and taxes. For example, shoppers may select the option to prepay duties and/or taxes
at checkout. Alternatively, our platforms have the capability to already embed this cost into the product price within the browsing journey
(in full or partially), in order to facilitate an intuitive and frictionless smooth and user-friendly shopper journey. We believe this
feature and options are critical in achieving high conversion rates across markets and promoting repeat shoppers.
In addition to achieving shopper confidence, pre-collection of import
duties and taxes enables orders to be dispatched to shoppers under a “Delivery Duties Paid” scheme through relevant shipping
carriers. This serves to greatly simplify and streamline the process of releasing the goods from customs at the destination market, in
turn contributing to a quicker and simpler delivery experience for the shopper. |
•
|
Multiple shipping options -
Our platforms allow merchants to choose from a menu of shipping options, offering shoppers multiple delivery alternatives, depending on
the destination market: mail, express courier, Cash-on-Delivery, store delivery, drop point delivery and more. As part of each market-specific
value proposition, merchants can decide which shipping methods to offer and how to price them, based on Global-e’s competitive shipping
rates or through their own contracted shipping carriers. |
•
|
Localized alternative payment methods -
Preferred payment methods of shoppers differ from market to market. In some markets, such as the United States and United Kingdom, the
use of global cards (Visa, MasterCard, etc.) is the most common payment method used. In others, local cards, or universal alternative
payment methods, such as PayPal, prevail. There are markets, both in developed and developing countries, where alternative payment methods
are used more frequently than cards. In order to remove payment friction and ensure higher conversion rates, Global-e supports over 150
payment methods globally, granting shoppers in each market the ability to pay with their preferred local option. |
•
|
Real-time anti-fraud
screening - Each order is scanned in real-time for potential payment fraud. Global-e utilizes advanced third-party screening
services, coupled with proprietary algorithms and processes - all managed by a team of anti-fraud specialists. These capabilities enable
Global-e to achieve high payment acceptance rates and low chargeback rates across international markets. The authorization/rejection decision
is made in real time without the delays and costs associated with manual or semi-automatic transaction screening. This further contributes
to a streamlined and satisfying shopper experience. |
•
|
International
customer services - Global-e operates a branded self-service and multi-lingual online customer service portal, which contains
answers to many frequently-asked questions that are typically raised post-sale by international shoppers regarding their orders. In addition,
Global-e operates a manned contact center that serves to augment the brand’s own customer services team. Global-e’s contact
center can provide either “behind the scenes” support for the merchant’s customer services team, or it can be in touch
directly with the brand’s shoppers to handle their queries. In 2023, before the peak trading season, we have successfully tested,
piloted and introduced into production our new shopper-facing automated Customer Service Chatbot, based on Open-AI’s ChatGPT technology
which has been securely connected to our systems and databases, thereby enabling many of the shoppers to receive highly accurate answers
to their support queries in real-time, without a need for human intervention. We believe this is a manifestation of the tremendous business
value such technologies can unlock over the next few years and contribute to a more efficient customer support and improved customer satisfaction.
|
•
|
Returns process -
Global-e offers a comprehensive and efficient solution for product return management. Through Global-e’s proprietary branded and
multi-lingual returns portal, shoppers are presented with multiple return options, according to the various returns services that the
merchant enables for a given market. Returns options include self-postage, local return addresses, pre-paid postal labels and courier
pick-ups. In addition, merchants set for each option an associated cost. Global-e deducts the return cost from the amount refunded to
the shopper once merchants confirm successful receipt of the returned product. |
Packaging and pricing
We support merchants of all sizes, and at various
lifecycles, from small, emerging brands to the world’s globally recognized retailers and high-end brands. Our platforms offer a
range of differentiated service levels, enabling us to cater to the different - and constantly evolving - needs of the merchants we serve.
Technology, infrastructure and
operations
Our platforms were designed with enterprise-grade
security, reliability, and scalability as top priorities. Core contributors to our strengths in these areas include:
• |
Application architecture.
We operate proprietary and modern technology platforms, organically developed by our in-house R&D teams, leveraging leading third-party
software where applicable. |
|
|
• |
Infrastructure.
Our platforms are deployed via market standard cloud computing infrastructure, allowing us to easily scale our platforms globally while
maintaining optimal performance. |
|
|
• |
Disaster Recovery.
For our enterprise platform we maintain a secondary cloud-based data center, holding a full stack of updated applications, which is fully
tested at least once a year, with the aim of ensuring the highest reliability for our shoppers. |
|
|
•
|
Security. We employ a multi-layer
security approach utilizing both cloud infrastructure security and endpoint protection to enforce the highest degree of security. We operate
and design our systems in accordance with major security standards, including: PCI/DSS, SOC 2 and ISO 27001. We perform penetration tests
continuously throughout the year by external vendors to identify any vulnerabilities. Our hybrid office/remote work environment could
also negatively impact the security of our platforms and systems as well as our ability to prevent attacks or respond to them quickly,
and as such we have taken steps designed to ensure remote work can be performed both effectively and securely. |
|
|
• |
Uptime.
Our platforms maintains excellent service levels. Across all sites, our platforms achieved over 99.9% average uptime for the year ended
December 31, 2023. |
Competition
The market for cross-border e-commerce enablement
solutions is competitive, rapidly evolving, fragmented, and subject to changing regulation, technology, merchant preferences and shopper
demands. Our solution and platforms compete with other online and offline services, and other solutions. While among them exist several
direct competing solutions, many of these solutions and services only handle a specific section of the cross-border e-commerce value chain.
As such, we believe that our existing direct competition
fails to offer the same holistic solution based on our combination of global reach, end-to-end advanced feature set, number of merchant
partners, accumulated data and insights, quality-of-service and local expertise as embedded in our platforms. We are the chosen partner
of some globally recognized retailers and brands as well as some rapidly-growing emerging brands.
We consider the following categories of services
and solutions to be our primary and direct competition:
•
|
In-House D2C. Some merchants
have built and managed international stores and prefer to maintain these operations in-house supported by proprietary capabilities developed
by them, features and capabilities provided by the e-commerce platform they utilize, and/or third-party cross-border components. This
DIY approach is expensive and complex to maintain, while also lacking the flexibility and know-how of local preferences that a specialized
global provider, such as Global-e, can provide. We believe that with the growing importance to merchants of global D2C, coupled with market
awareness of the advantages of using reputable and experienced global third parties, such as Global-e, the trend of shifting towards a
third-party global enabler will accelerate - with Global-e as the distinguished front runner. |
|
|
•
|
Alternative, Cross-Border End-to-End
Platforms. There is a limited number of platforms offering solutions similar in nature and breadth to those offered by Global-e.
However, we believe that none of these providers have the combination of global reach, track record, variety of merchants, scale, feature
set and data, to match Global-e’s overall offering. The level of sophistication embedded in our platforms and solutions stemming
from executing millions of transactions annually, across merchants in over 200 destination markets, is what makes us a leader in the world
of global e-commerce. |
Though to a lesser extent, we believe our platforms
also indirectly compete with two primary categories of services and providers:
•
|
Legacy Players
and Local Distributors. Merchants expanding abroad may partner with local distributors, granting them licenses to operate
in a given market. Licenses typically include an arrangement to sell goods through bricks-and-mortar locations as well as digital rights
to the brand, effectively allowing the local licensee to manage the full client-facing relationship with international shoppers. This
may cause frustration among shoppers, as local selection may be limited to best-selling products, and interactions with the merchant are
routed through a middle-man. As merchants increasingly understand the value of their digital channels and leverage social media to interact
directly with shoppers, we believe wide-ranging agreements with local distributors will continue to become less common, especially for
digital D2C e-commerce. Nevertheless, some merchants are constrained by long-term, legacy agreements with distributors, preventing the
merchant from directly selling to and interacting with shoppers in select (or all) foreign markets, at least for a certain period of time.
|
|
|
•
|
Non-D2C Online
Channels. Non-D2C online channels, such as marketplaces, represent digital alternatives to the traditional distributor model.
Such online channels are varied, ranging from local, multi-local, regional and global platforms. They generate online traffic from shoppers
by marketing under the marketplace’s own brand and command a fee, or “take
rate” that may represent a meaningful percentage of the merchant’s revenue. To facilitate the transaction between shopper
and seller, online channels may provide complimentary services such as payment acquiring, fraud protection, order management, and access
to shipping providers. Merchants do not have direct access to shoppers; rather, they must list their products through the intermediary
- i.e., the marketplace - to gain exposure. As such, by selling through non-D2C online channels, merchants often expose their brand to
direct competition from other brands sold in parallel through such online channels (e.g. a common feature of marketplaces is “people
who bought this also bought this” lists which may include different brands).
For geographical and segmental revenue, see Note 2, reporting segments
and geographical information included within our consolidated financial statements elsewhere in this Annual Report. |
Seasonality
See Item 5. “Operating and Financial Review and Prospects.”
Intellectual Property
We consider our intellectual property rights,
including those in our know-how and the software code of our proprietary technology, to be, in the aggregate, material to our business.
We rely on a combination of contractual commitments and statutory and common law rights to protect our intellectual property rights in
our technology and know-how. We seek to control access to our trade secrets and other confidential information related to our proprietary
technology by entering into confidentiality agreements with our employees, consultants, merchants, vendors and business partners who have
access to our confidential information, and we maintain policies and procedures designed to control access to and distribution of our
confidential information.
Our know-how is an important element of our business.
The development and management of our platforms requires sophisticated coordination among many skilled and specialized employees. Despite
our efforts to protect our intellectual property rights in our technology and know-how, unauthorized parties may attempt to copy or obtain
and use our technology to develop products and services with the same functionality as our platform. Policing unauthorized access to and
use of our technology is difficult. Our competition could also independently develop technologies like ours, and our intellectual property
rights may not be broad enough for us to prevent our competition from selling products and services incorporating those technologies.
For more information, see “Risk Factors-Risks Relating to our Business and Industry-If we fail to adequately maintain, protect or
enforce our intellectual property rights, our competitive position could be impaired and we may lose valuable assets, generate reduced
revenue, and incur costly litigation to protect our rights.”
We own and use unregistered common law marks and
service marks on or in connection with our proprietary technology and related services. While most of the intellectual property we use
is owned by us, we have obtained rights to use intellectual property of third parties through licenses and services agreements. Although
we believe these licenses are sufficient for the operation of our business, these licenses typically limit our use of the third parties’
intellectual property to specific uses and for specific time periods.
From time to time, we may become involved in legal
proceedings relating to intellectual property arising in the ordinary course of our business, including challenges to the validity of
our intellectual property rights and claims of intellectual property infringement. For more information, see “Risk Factors-Risks
Relating to our Business and Industry-We may incur costs to defend against, face liability for or be vulnerable to intellectual property
infringement claims brought against us by others.” We are not presently and have never been a party to any such legal proceedings
that, in the opinion of our management, would individually or taken together have a material adverse effect on our business, financial
condition, results of operations or cash flows.
Government Regulation
As with any company operating on the internet, we grapple with a growing number of
local, national and international laws and regulations. These laws are often complex, sometimes contradict other laws, and are frequently
evolving. Laws may be interpreted and enforced in different ways in various locations around the world, posing a significant challenge
to our global business. This ambiguity includes laws and regulations possibly affecting our business, such as those related to data privacy
and security, pricing, taxation, content regulation, digital services and intermediatory regulations, intellectual property ownership
and infringement, anti-money laundering, anti-corruption, product liability, consumer protection, extended producer responsibility, product
safety and export control. Changes to such laws and regulations could
cause us or third-party partners on which we rely to incur additional costs and change our or their respective business practices in order
to comply.
Data Protection and Privacy
We are subject to laws across several jurisdictions
regarding privacy and protection of data, in particular, in Israel, the European Union, the United States and other jurisdictions. Data
protection, privacy, cybersecurity, consumer protection, content regulation, and other laws and regulations can be very stringent and
vary from jurisdiction to jurisdiction. These laws govern how companies collect, process, and share data, grant rights to data subjects,
and require that companies implement specific information security controls to protect certain types of information.
For example, we are subject
to the Israeli Privacy Protection Law 5741-1981 (“PPL”), and its regulations, including the Israeli Privacy Protection Regulations
(Data Security) 2017 (“Data Security Regulations”), which came into effect in Israel in May 2018 and impose obligations with
respect to the manner personal data is processed, maintained, transferred, disclosed, accessed and secured, as well as the guidelines
of the Israeli Privacy Protection Authority (“Authority”). In this respect, the Data Security Regulations may require us to
adjust our data protection and data security practices, information security measures, certain organizational procedures, applicable positions
(such as an information security manager) and other technical and organizational security measures. The regulations may require us to
adjust our data protection and data security practices, information security measures, certain organizational procedures, applicable positions
(such as an information security manager) and other technical and organizational security measures. In addition, to the extent that any
administrative supervision procedure is initiated by the Israeli Privacy Protection Authority that reveals certain irregularities with
respect to our compliance with the Privacy Protection Act, in addition to our exposure to administrative fines, civil claims (including
class actions) and in certain cases criminal liability, we may also need to take certain remedial actions to rectify such irregularities,
which may increase our costs.
For further information on the laws regarding
privacy and data protection which we are subject to, see “Risk Factors-Risks Relating to our Business and Industry-We are subject
to stringent and changing laws, regulations, standards and contractual obligations related to privacy, data protection, and data security.
Our actual or perceived failure to comply with such obligations could harm our business.”
While it is generally the laws of the jurisdiction
in which a business is located that apply, there is a risk that data protection regulators of other countries may seek jurisdiction over
our activities in locations in which we process data or serve merchants or shoppers but do not have an operating entity. Where the local
data protection and privacy laws of a jurisdiction apply, we may be required to register our operations in that jurisdiction or make changes
to our business so that shopper data is only collected and processed in accordance with applicable local law. In addition, because our
services are accessible worldwide, certain foreign jurisdictions may claim that we are required to comply with their privacy and data
protection laws, including in jurisdictions where we have no local entity, employees or infrastructure. In such cases, we may require
additional legal review and resources to ensure compliance with any applicable privacy or data protection laws and regulations. In addition,
in many jurisdictions there may in the future be new legislation that may affect our business and require additional legal review.
There is uncertainty in many of
the countries where we operate with respect to the liability of internet service providers or providers of digital services, the application
of existing regulations to our business as they relate to, or the enactment of new regulations relating to, issues such as e-commerce,
electronic or mobile payments, information requirements for internet, digital services providers or other intermediatory providers. Such
uncertainty could negatively affect our operations and use of our services, require us to change or adjust our platforms and could result
in changes to our operations or business model and may incur significant expenses should we have to change our model.
Anti-Corruption and Sanctions
We are subject to laws and regulations of the jurisdictions in which we operate, including
the United States, United Kingdom, EU and Israel, that govern or restrict our business and activities in certain countries and with certain
persons, including the economic sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control,
and the export control laws administered by the U.S. Commerce Department’s Bureau of Industry and Security and the U.S. State Department’s
Directorate of Defense Trade Controls. See “Risk Factors-Risks Relating to our Business and Industry-We are subject to governmental
sanctions and export controls that may subject us to liability if we are
not in full compliance with applicable economic sanctions and export control laws.”
We are subject to laws and regulations related
to payments which are complex and vary across different jurisdictions. We are also subject to payment card association operating rules,
certification requirements, and rules governing electronic funds transfers, including the PCI DSS, which could change or be reinterpreted
to make it more difficult for us to comply. Any failure to comply with these rules or requirements may subject us to higher transaction
fees, fines, penalties, damages, and civil liability, and may result in the loss of our ability to accept credit and debit card payments.
Depending on how our platforms evolve, we may be subject to additional laws in other jurisdictions across the world.
Additionally, we are subject to anti-corruption,
anti-bribery, anti-money laundering and similar laws, such as the FCPA, U.S. domestic bribery statute contained in 18 U.S.C. 201, U.S.
Travel Act, the USA PATRIOT Act, the U.K. Bribery Act 2010, Chapter 9 (sub-chapter 5) of the Israeli Penal Law, 1977, the Israeli Prohibition
on Money Laundering Law-2000 and other applicable laws in the jurisdictions in which we operate. Historically, technology companies have
been the target of FCPA and other anti-corruption investigations and penalties. See “Risk Factors-Risks Relating to our Business
and Industry-We are subject to anti-corruption, anti-bribery, anti-money laundering and similar laws, and non-compliance with such laws
can subject us to criminal penalties or significant fines and harm our business and reputation.”
Further, we are currently subject to a variety
of laws and regulations related specifically to payment processing, including those governing cross-border and domestic money transmission,
gift cards and other prepaid access instruments, electronic funds transfers, foreign exchange, counter-terrorist financing, banking and
import and export restrictions.
Concern about the use of e-commerce platforms
for illegal conduct, such as money laundering or to support terrorist activities, may in the future result in legislation or other governmental
action that could require changes to our platforms or impose additional compliance burdens and costs on us. See “Risk Factors-Risks
Related to our Business and Industry-Changes in laws and regulations related to the internet or changes in the internet infrastructure
itself may diminish the demand for our platforms and services, and could harm our business.”
Depending on how our platform evolves, we may
become subject to additional laws in the United States, the United Kingdom, the EU, Israel and elsewhere.
Environmental, Health, and Safety (EHS)
We are subject to laws and regulations regarding
protection of the environment as well as worker health and safety. Certain environmental laws may impose liability regardless of knowledge,
fault, or legality of the action at the time taken. There are also increasing expectations regarding product stewardship, including end-of-life
considerations, and we may become subject to such laws due to our role
as merchant of record.
Depending on how our platforms
evolve, we may become subject to additional laws on these or other matters in the United States, the United Kingdom, the EU, Israel and
elsewhere.
Product liability & product safety
Our business and operations will increasingly
be subject to laws and regulations regarding product liability and safety associated with placing goods in the market, notably in the
EU and United Kingdom. Recent and upcoming developments in such laws and regulations are likely to increase the compliance burden and
risks on our business, and to require us to make changes to the way in which we operate.
For example, a new EU Product Safety Regulation,
which will apply beginning as of
December 13, 2024, will extend the EU’s product safety regime to additional parties including providers
of certain platforms and fulfilment services, in addition to imposing greater compliance obligations including information provision requirements
and requirements to designate responsible persons and facilitate or implement corrective measures such as product recalls. Specific product
safety and liability laws and regulations also apply or will or are expected to take effect soon, in relation to certain types of products.
For example, the pending EU Toy Safety Regulation, is likely to result in more stringent guidelines for the manufacturing, labeling, and
distribution of toys including the introduction of digital product passports. In the UK, additional product safety regulatory developments
may lead to changes to the current product liability regime.
Depending on how such new laws and regulations are implemented, evolve, and are enforced
and interpreted, in particular with regards to their applicability over personal importation scenarios, we or the merchants may become
subject to additional requirements or limitations as well as the extent to which we are successful in adapting our business and operations
to comply with such laws and regulations, we could be subject to regulatory action such as investigations and penalties, actions from
consumers resulting in damages including by way of collective redress mechanisms, and other negative legal, regulatory and reputational
consequences.
C. |
Organizational Structure |
The following sets forth our key
subsidiaries
as of the date of this Annual Report. All ownership is 100%.
• |
Global-e online Pte Ltd (Singapore) |
|
|
• |
Globale UK Limited (England) |
|
|
• |
Crossborder Global Apparel and Equipment Trading L.L.C (UAE)
|
|
|
• |
Crossborder Global Apparel and Equipment Trading L.L.C (DMCC Branch)
(UAE) |
|
|
• |
Global-e Middle East FZCO Dubai Branch (UAE, Jebel Ali Free Zone)
|
|
|
• |
Global-e Middle East FZCO (DAFZA) (UAE, Dubai Airport Free Zone)
|
|
|
• |
E Commerce Globale Middle East FZCO (UAE, Dubai Commercity Free Zone)
|
|
|
• |
Global-e Canada e-commerce Ltd. (Canada) |
|
|
• |
Global-e CH AG (Switzerland) |
|
|
• |
Global-e NL B.V (Netherlands) |
|
|
• |
Global-e Japan KK (Japan) |
• |
Global-e France SAS (France) |
|
|
• |
Olami E-Commerce Solutions Ireland Limited (Ireland) |
|
|
• |
Global-e Australia Pty Ltd. (Australia) |
|
|
• |
Global-e Spain S.L (Spain) |
|
|
• |
Global-e HK Limited (Hong Kong) |
|
|
• |
Global-e (Beijing) Technology Co. Ltd. (China) |
|
|
• |
Global-e US Inc. (Delaware, USA). |
|
|
• |
Global-e Panama Inc. (Panama, Colon Free Zone) |
|
|
• |
Global-e Solutions Ltd. (Israel) |
|
|
• |
Global-e South Africa (PTY) Ltd. (South Africa) |
|
|
• |
Global-e Solutions Korea Ltd. (Korea) |
|
|
• |
Crossborder Solutions For E- Commerce Ltd. (Egypt)* |
|
|
• |
International E-commerce Solutions Morocco Ltd. (Morocco) |
|
|
• |
Flow Commerce Inc. (Delaware, USA) |
|
|
• |
Flow Commerce Limited (Ireland) |
|
|
• |
Flow Commerce Australia Pty Ltd. (Australia) |
|
|
• |
Flow Commerce Canada Inc. (Canada) |
|
|
• |
Flow Trading Shanghai Company Limited (China) |
|
|
• |
Flow Commerce UK LTD (England) |
|
|
• |
Borderfree Inc. (US) |
|
|
• |
Pitney Bowes Payco US Inc. (US) |
|
|
• |
Borderfree Research and Development (Israel) |
|
|
• |
Pitney Bowes PayCo Holdings Limited (Ireland) |
• |
Borderfree UK Limited (England) |
|
|
• |
Borderfree Payco Australia PTY Ltd. (Australia) |
|
|
• |
Borderfree PayCo Canada Ltd. (Canada) |
|
|
• |
Borderfree PayCo Japan KK (Japan) |
|
|
• |
Borderfree PayCo Singapore Pte. Ltd. (Singapore) |
|
|
• |
Borderfree PayCo Switzerland GmbH (Switzerland) |
|
|
• |
Pitney Bowes PayCo UK Limited (England) |
* Less than 1% of the ownership rights is held by a director, due to
local laws
D. |
Property, Plants and Equipment |
We are headquartered in Petah-Tikva, Israel, where we occupy approximately 83,312
square feet of office space pursuant to a lease that expires on
September 1, 2027 (with automatically renew for an additional 5 years).
We currently lease additional office space in Israel, the UK and the U.S., and we are party to agreements whereby we have access to and
the right to use certain office space in the U.S., France, Ireland Australia, Japan, Singapore and the United Arab Emirates. We do not
own any real property. We evaluate, based on our
growth, the
need to procure additional space as we continue to add employees, expand geographically and expand our work spaces. We believe
that our facilities are adequate to meet our needs for the immediate future, and that, should it be needed, suitable additional space
will be available to accommodate any such expansion of our operations.
Item 4A
. Unresolved
Staff Comments
None.
Item 5
. Operating
and Financial Review and Prospects
You should read the following
discussion together with “Selected Consolidated Financial Data” and the consolidated financial statements and related notes
included elsewhere in this Annual Report. This discussion contains forward-looking statements regarding industry outlook and our expectations
regarding our future performance, planned investments in our expansion into additional geographies and brands, research and development,
sales and marketing and general and administrative functions, liquidity and capital resources, as well as other non-historical statements.
These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties
described in “Risk Factors” and “Special Note Regarding Forward-Looking Statements.” Our actual results may differ
materially from those contained in or implied by any forward-looking statements.
Overview
Our platforms were purpose-built for international
shoppers to buy seamlessly online and for merchants to sell from, and to, anywhere in the world, while reflecting the localization of
the shopper’s experience to make international transactions as seamless as domestic ones.
We increase the conversion of international traffic into sales by removing much of
the complexity associated with international e-commerce. Our platforms provide mission-critical,
integrated solutions that create a localized and frictionless shopper
experience and are simple to manage, flexible to adjust and smart in local market insights and best practices. The vast capabilities of
our end-to-end platforms include interaction with shoppers in their native languages, market-adjusted pricing, payment options tailored
to local market preferences, compliance with local consumer regulations and requirements such as customs duties and taxes, shipping services,
after-sales support and returns management. These elements are unified under our platforms to enhance the shopper experience and enable
merchants to capture the global e-commerce opportunity.
We aspire to become the merchants’ trusted partner for international sales.
The better the outcomes for merchants and the more revenue and growth they achieve, the greater our own revenue and growth. We believe
this alignment of interests with merchants is core to our long-term success. This is evidenced by our Gross Dollar Retention Rate, which
was over 97% in 2023, and our Net Dollar Retention Rate, which was 127% during the same period.
Our Business Model
We have an attractive volume-based revenue model,
driven by shopper order activity on our merchants’
websites. As a result, our revenues, which are generated from the fees charged
for the use of our integrated platforms solution and provision of fulfillment services, are closely correlated with the level of GMV (as
defined under
“-Key Performance Indicators and Other Operating Metrics”) that flows through our platform. We offer a fully
integrated platform solution to merchants and derive revenues by charging fees that vary depending on the transaction volume processed,
outbound countries and destination markets, level of customer service provided and shipping options, among other variables.
Service fees revenue is generated as a percentage
of the transaction value that flows through our platform. Fulfillment services revenue is generated through our offerings of shipping
and handling. We mandatorily bundle components of our integrated platform solution that we believe are essential to achieving improved
sales conversion of our merchants’ international traffic. Our fulfillment services are offered on an optional basis, and thus merchants
may choose to utilize or cease utilizing our fulfillment services, either in whole or for select markets, at any time and from time to
time. Many merchants use our fulfillment services alongside our integrated platform solution due to convenience and competitive pricing
achieved based on our economies of scale, while some merchants choose to use our integrated platform solution on a standalone basis. Service
fees revenue generated from the use of our integrated platform solution on a standalone basis has increased over time, equaling $8.4 million
(or 8.7% of service fees revenue), $16.5 million (or 9.1% of service fees revenues) and $44.5 million (or 17% of service fees revenue)
for the years ended
December 31, 2021,
2022 and
2023, respectively. The increase in standalone basis revenues as a percentage of service
fees revenues is mainly attributed to the development of our multi-local offering for which we typically do not provide fulfillment services.
Over and above the revenues generated, we view
shopper traffic and GMV as critical to our success because they generate valuable data, further fueling our Smart Insights. These data-driven
insights are an integral part of the integrated solutions we provide to our merchants and a key driver in the growth of their global revenues.
During the year ended
December 31, 2023, shoppers that visited e-commerce
websites powered by our platforms generated approximately 18 million transactions which translated to $569.9 million of revenue.
An important component of our revenue growth is
the retention and expansion of our existing merchant base. Our revenue model is driven by the ability to retain and grow our business
with existing merchants and attract new merchants from new geographies,
segments and verticals. Revenue from our existing merchant base has grown significantly over time as our merchants’ global revenues
have grown, the volume of transactions that our merchants process through our platforms has increased and we have expanded to additional
geographic corridors. The revenue growth from our existing merchants that continue to process transactions on the Global-e platforms has
historically exceeded any lost revenue from merchants that discontinued their use of our platform. We measure the revenue growth from
our existing merchant base using Net Dollar Retention Rate, and we measure the lost revenue from merchants that discontinue their use
using Gross Dollar Retention Rate.
Our existing merchant base is critical to our
success, generating approximately 77% and 89% of our GMV in the year ended
December 31, 2022 and
2023, respectively. Our Net Dollar Retention
Rate for the years ended
December 31, 2022 and
2023 was 130% and 127%, respectively. Our high Net Dollar Retention Rate is driven both
by strong retention and by the growth of our merchants’ transaction volumes processed on our platforms. We believe this highlights
the mission-critical nature of our platforms for merchants that continue to grow with us over time.
As of
December 31, 2023, we had a diversified
base of 1,256 merchants using our enterprise platforms, which translates to an annual increase of 21.2% from 1,036 merchants and of 91.2%
from 657 merchants as of
December 31, 2022 and
December 31, 2021, respectively. These merchants range from globally recognized retailers
to small, emerging brands located across more than 30 countries. No single merchant represents more than 6% of total GMV for the years
ended
December 31, 2022 and
2023. In addition, thousands of merchants have onboarded and are using Shopify Markets Pro as of
December
31, 2023.
Our significant scale and growth mean we also
enjoy increasing geographic diversification in terms of both
“outbound” sales, which term refers to sales from the merchant’s
country of origin, and
“destination market” sales, which term refers to sales made to shoppers in various markets. The United
Kingdom has historically been our largest outbound market. However, over the last few years outbound sales from the United Kingdom as
a percentage of total revenue have been decreasing as we developed additional outbound markets, namely the United States and the EU. For
the year ended
December 31, 2023, the United States represented 50% of our revenues, with the United Kingdom, the EU, Israel, and other
territories (APAC and Middle East) representing 30%, 16%, 0.3%, and 3%, respectively. We expect to continue attracting new merchants in
diverse geographies, including countries in which we have existing operations as well as new markets. For example, we continued to develop
our presence in APAC, which we believe represents a significant opportunity. Of the 1,256 merchants served on our enterprise platforms
as of
December 31, 2023, 44% were located in North America, while 34% and 16% were located in the United Kingdom and Europe, respectively,
and 6% were located in other geographies. With regards to the destination markets from which shoppers make purchases, Canada, the US and
the UK represented 12%, 10% and 10% of our total revenue for the year ended
December 31, 2023, respectively, no other destination market
represented more than 10% of our total revenue for the year ended
December 31, 2023.
In addition to retaining and growing our existing
merchant base, we are able to efficiently acquire new merchants. We have developed an effective go-to-market strategy leveraging a dedicated
team of sales executives. We also plan to continue leveraging our mutually beneficial channel partnerships, which broaden our merchant
base and generate significant leads for our sales team. As our scale grows, so does our own brand equity, which leads to more inbound
prospects as well as stronger word-of-mouth-based sales whereby an existing Global-e merchant recommends our solution to other players
in the market. We view our ability to efficiently acquire merchants at scale as a differentiated competitive advantage.
Key Performance Indicators and Other Operating Metrics
Key Performance Indicators
We review the following indicators to measure
our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. Increases or decreases
in our key performance indicators may not correspond with increases or decreases in our revenue.
The following table summarizes the key performance
indicators that we use to evaluate our business for the years ended
December 31, 2021,
2022 and
2023.
|
|
Year Ended December 31,
|
|
($ in millions) |
|
2021 |
|
|
2022 |
|
|
2023 |
|
Gross Merchandise Value |
|
|
1,449 |
|
|
|
2,450 |
|
|
|
3,557 |
|
Net Dollar Retention Rate |
|
|
152 |
% |
|
|
130 |
% |
|
|
127 |
% |
Revenue |
|
|
245.3 |
|
|
|
409.0 |
|
|
|
569.9 |
|
Non-GAAP Gross Profit |
|
|
91.4 |
|
|
|
167.9 |
|
|
|
244.8 |
|
Non-GAAP Gross Margin |
|
|
37.3 |
% |
|
|
41.1 |
% |
|
|
42.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
32.4 |
|
|
|
48.7 |
|
|
|
92.7 |
|
Adjusted EBITDA Margin |
|
|
13.2 |
% |
|
|
11.9 |
% |
|
|
16.3 |
% |
Key Profit GAAP Figures
|
|
Year Ended December 31,
|
|
($ in millions) |
|
2021 |
|
|
2022 |
|
|
2023 |
|
Gross profit |
|
|
91.4 |
|
|
|
158.2 |
|
|
|
233.6 |
|
Operating profit (loss) |
|
|
(65.7 |
) |
|
|
(189.3 |
) |
|
|
(137.1 |
) |
Net profit (loss) |
|
|
(74.9 |
) |
|
|
(195.4 |
) |
|
|
(133.8 |
) |
Gross
Merchandise Value. We derive a substantial part of our revenue from fees we charge for the use of our integrated platforms solutions
and fulfillment services. These fees are generally correlated with the total value of transactions processed through our platforms. We
assess the growth in transaction volume using a metric we refer to as Gross Merchandise Value (“GMV”) which is defined as
the combined amount we collect from the shopper and the merchant for all components of a given transaction, including products, duties
and taxes and shipping. GMV does not represent revenue earned by us; however, the GMV processed through our platforms is an indicator
of the volume of transactions processed through our platforms by our merchants.
(GMV, USD in millions)
Net
Dollar Retention Rate. We assess our performance in retaining and expanding relationships with our existing merchant base using
a metric we refer to as Net Dollar Retention Rate, which compares our GMV from the same set of merchants across comparable periods. Net
Dollar Retention Rate for a given period is calculated by dividing the GMV in that period by the GMV in the comparable period in the prior
year, in each case, from merchants that processed transactions on our platforms in the earlier of the two periods. Our Net Dollar Retention
Rate therefore includes the effect on GMV of any merchant renewals, expansion, contraction and churn but excludes the effect of revenue
from merchants that contributed to our GMV in the current period but not in the earlier period. A Net Dollar Retention Rate greater than
100% for a given period implies overall growth in GMV from merchants that were already processing transactions on our platforms prior
to that period. Our Net Dollar Retention in 2023 excludes Borderfree Inc. and affiliated companies (
“Borderfree”) that were
acquired in 2022, as it is based on annual GMV figures, and Borderfree’s financials were consolidated into
the Company’s financials
in July 2022; therefore, GMV was not recorded for the full year in 2022.
Our Net Dollar Retention Rate has typically been
over 125% since 2018, and for the years ended
December 31, 2021,
2022 and
2023 was 152%, 130% and 127%, respectively. Our Net Dollar Retention
Rate may fluctuate in future periods due to a number of factors, including the expansion of our revenue base, the level of penetration
within our merchant base, enhancements made to our existing platforms and our ability to retain our existing merchant base.
Revenue.
We generate revenues by charging merchants fees for the use of our end-to-end global e-commerce solution. Our revenues are closely correlated
with the level of GMV that flows through our platforms. We have experienced rapid revenue growth in recent years, growing 66.8% and 39.3%
in the years ended
December 31, 2022 and
2023, respectively.
Non-GAAP
Gross Profit and Non-GAAP Gross Margin. Our cost of revenue consists primarily of costs associated with payment acquiring fees,
shipping and logistic costs, hosting, amortization of acquired intangibles, operational merchant support expenses, such as customer service
and allocated overhead. Our Non-GAAP gross profit is defined as gross profit adjusted for amortization of acquired intangibles. In recent
years, we have consistently increased our gross profit as a percentage of revenue, or our gross margin, mainly due to economies of scale
resulting from growth in GMV and revenue, as well as efficiencies stemming from our optimization. For the years ended
December 31, 2021,
2022 and
2023, our Non-GAAP gross margin, which is calculated as Non-GAAP gross profit divided by revenues, was 37.3%, 41.1% and 42.9%,
respectively. Our GAAP gross margin for the respective periods was 37.3%, 38.7% and 41.0%.
Adjusted
EBITDA. Adjusted EBITDA is a non-GAAP financial metric and defined as operating profit (loss) adjusted for depreciation and amortization,
stock-based compensation expenses, commercial agreements amortization, amortization of acquired intangibles, merger related contingent
consideration, acquisition related expenses and secondary offering costs. Our Adjusted EBITDA grew from $48.7 million for the year ended
December 31, 2022 to $92.7 million for the year ended
December 31, 2023. This increase was primarily driven by growth in revenues and
gross margin, as well as operating leverage.
Other Operating Metrics
Gross
Dollar Retention Rate. In addition to tracking our key performance indicators and Non-GAAP financial measures above, we also periodically
measure our Gross Dollar Retention Rate to further assess our performance in retaining our existing customer base. Gross Dollar Retention
Rate measures revenue lost from merchants that discontinue their use of our platform, but does not reflect the benefit of customer expansion,
contraction or additions. Gross Dollar Retention Rate may therefore never exceed 100%. We believe our high gross retention rates demonstrate
that we serve a vital role for our merchants, as the vast majority of our merchants continue to use our platform.
To calculate the Gross Dollar Retention Rate for
a particular quarter, we first calculate the total seasonality adjusted annualized GMV for that quarter. We then calculate the value of
GMV from any merchants who discontinued their use of our platform during that quarter, or churned, based on their total GMV from the four
quarters preceding such quarter, which we refer to as churned GMV. We then divide (a) the churned GMV by (b) the total seasonality adjusted
annualized GMV to calculate the percentage churn for that quarter. Gross Dollar Retention Rate for a particular year is calculated by
aggregating the percentage churn of the four quarters within that year and subtracting the result from 100%.
Our Gross Dollar Retention Rate was 97% in 2023.
Key Factors
Affecting Our Performance
We believe our future performance will continue
to depend on many factors, including the following:
•
|
Continued Growth
in Global E-commerce: We expect to benefit from the continuation of several long-term secular market trends, including growth
in global e-commerce over time, the continued rise in the influence of social media on shopper spending habits worldwide, the increasing
relevance of D2C, as well as increased cross-border e-commerce. The rise in complexity of global trade, stemming from constantly changing
regulations and technology, serves as an additional tailwind by driving merchant demand for third-party solutions with the relevant expertise
and infrastructure, such as Global-e. |
•
|
Existing Merchant Retention
and Expansion: We care deeply about the merchants we serve. Our commitment to their success, we believe, increases retention and
likelihood of expanding their activity on our platforms. Supporting our merchants begins with enhancing both the shopper and the merchant
experience; as such, we focus our efforts on developing products and functionality to ease the complexity they face when engaging in global
e-commerce. We provide customer support services to their shoppers, take full responsibility for processing duties and taxes, employ dedicated
teams to optimize their offering and increase their sales conversion and continue to take steps to boost retention. Our effectiveness
in retaining and expanding our existing merchants’ sales is a critical component of our revenue growth and operating results.
|
•
|
New Merchant Acquisition:
Our growth depends in part on our ability to attract new merchants and add their GMV to our platforms. Over the past years, we have experienced
substantial expansion in the number of merchants served by our enterprise platforms, which totaled 1,256 and 1,036 as of December 31,
2023 and December 31, 2022, respectively. In addition, thousands of merchants have already onboarded and are using Shopify Markets Pro
as of December 31, 2023. New merchant acquisition is a key to scaling our platform. We have historically achieved efficient payback periods
driven by a combination of direct sales, inbound inquiries, word-of-mouth referrals and channel partnerships. Continuing to add merchants
to our platforms in an efficient manner is a key component of our ability to grow our revenues. |
•
|
Successful Expansion
to Additional Geographies: We believe our platforms can compete successfully around the world, as they enable merchants, regardless
of geography, to expand their market footprint to more shoppers by selling globally. In order to successfully acquire merchants across
geographies, Global-e has local sales teams in the United States, the United Kingdom, the EU, Japan and Australia as part of our efforts
to expand our business within the APAC region. We plan to add local sales and additional required support in further select international
markets over time to support our growth. |
•
|
Investing to Scale
Our Platforms and Merchant Base: We have made, and will continue to make, significant investments in our platforms to retain
and scale our merchant base and enhance their experiences. In the years ended December 31, 2021, 2022 and 2023, excluding stock-based
compensation, we spent $25.6 million (or 10.4% of revenue), $59.2 million (or 14.5% of revenue) and $71.3 million (or 12.5% of revenue),
respectively, on research and development. These amounts represent year over year increases of 131.7% and 20.4% in the years ended December
31, 2022 and 2023, respectively. The decrease of research and development spend as a percentage of revenue in 2023 is attributed to operational
leverage post the assimilation of Flow and Borderfree. In the years ended December 31, 2021, 2022 and 2023, excluding the amortization
of the Shopify warrants related asset, amortization of acquired intangibles and stock-based compensation, we spent $19.1 million (or 7.8%
of revenue), $35.1 million (or 8.6% of revenue) and $53.1 million (or 9.3% of revenue), respectively, on sales and marketing. These amounts
represent year over year increases of 83.7% and 51.3% in the years ended December 31, 2022 and 2023, respectively. Overall research and
development expenses were $29.8 million, $81.2 million and $97.6 million, in the years ended December 31, 2021, 2022 and 2023, respectively.
Overall sales and marketing expenses were, $104.7 million, $206.1 million and $217.0 million in the years ended December 31, 2021, 2022
and 2023, respectively. We plan to continue to invest significantly in go-to-market and innovation to address the needs of merchants.
We also plan to increase our headcount. The resources we commit to, and the investments we make in, our platforms, are designed to retain
and expand the sales of our merchants, expand into new geographies and acquire new merchants, fuel our “Smart Insights” data
set, develop value added services and improve our operating results in the long term. |
•
|
Revenue Seasonality:
Our revenue is highly correlated with the level of GMV that our merchants generate through our platforms. Our merchants typically process
additional GMV each year in the fourth quarter, which includes Black Friday, Cyber Monday and the holiday season, driven by an uptick
in e-commerce sales. As a result, we historically have generated higher revenues in the fourth quarter than in other quarters. In the
years ended December 31, 2021, 2022 and 2023, fourth quarter GMV represented approximately 35%, 34% and 33%, respectively, of our total
GMV. We believe that similar seasonality trends will affect our future quarterly performance. |
•
|
Increased Efficiency
from Economies of Scale: As our GMV scales, we can achieve margin expansion due to operating leverage. In addition, our larger
size allows us to negotiate better terms with our suppliers allowing us to further optimize our cost base. As the number of merchants
on our platforms grows, we also generate increasing amounts of data which in turn enable smarter decisions and optimizations that further
increase efficiency. |
|
|
•
|
Global macro-economic:
We operate alongside continued recessionary concerns and a volatile macro-economic and geo-political situation in many of the world’s
largest economies. Inflationary pressures and rising interest rates in key markets may influence consumer sentiment and have a negative
effect on consumer spend. Currency exchange rate fluctuations may impact our revenues and expenses and hence, our operating results. Global
events have created extreme volatility in the global capital markets and is expected to have further global economic consequences, including
disruptions to the global supply chain and energy markets, which may adversely affect us or the third parties on whom we rely to conduct
our business and may also have a negative effect on consumer spend. |
Components of Our Results of Operations
Revenue. Our
revenue is comprised of service fees and fulfillment services fees.
Service fees revenue is generated as a percentage
of the transaction value that flows through our platforms. Fulfillment services revenue is generated through
the Company’s offerings
of shipping and handling services. Revenue is recognized at the time the related performance obligation is satisfied by transferring the
promised product or delivery of service. The amount of revenue recognized reflects the consideration that
the Company expects to receive
in exchange for these products or services.
Cost
of revenue. Cost of revenue primarily consists of payment acquiring fees, fulfillment costs, including shipping and logistic
costs, hosting, operational merchant support expenses, such as customer service, payroll, amortization of acquired intangibles and allocated
overhead. Overhead is allocated to cost of revenue based on applicable headcount. We expect cost of revenue to increase in absolute dollars
in future periods due to our expected expansion. The level and timing of all these items could fluctuate and affect our cost of revenue
in the future.
Gross
profit and gross margin. Our gross profit and gross margin may
fluctuate from period to period. Such fluctuations may be influenced by our revenue, including the seasonality of our revenues, revenues
mix, changes in cost of goods sold, our continued investments in our platforms, our expected expansion into additional geographies and
the growth of our merchant base.
Research
and development expenses. Research and development expenses include personnel-related expenses, including merger related contingent
consideration, associated with development personnel responsible for the design, development and testing of Company products, other development-related
expenses, including cost of development environments and tools, and allocated overhead. Research and development costs are expensed as
incurred. We expect these costs to increase as we continue to hire new employees in order to support the growing scale and feature set
of our platforms. We believe continued investments in research and development are important to attain our strategic objectives and maintain
our market leadership position. As such, we expect research and development costs to increase in absolute dollars, but this expense may
potentially decrease as a percentage of total revenue over time.
Sales
and marketing expenses. Sales and marketing expenses primarily consist of the amortization of the Shopify related commercial assets,
costs of our sales, marketing and merchant success personnel, sales commissions,
marketing activities, merchant acquisition costs, amortization of acquisition related intangible assets, channel partners fees and allocated
overhead. Overhead is allocated to sales and marketing based on applicable headcount. We intend to continue to invest in our sales and
marketing capabilities in the future to further increase our brand awareness and to grow our merchant base. We expect these costs to increase
as we grow our business. Sales and marketing expense in absolute dollars and as a percentage of total revenue may fluctuate from period-to-period
based on total revenue levels and the timing of our investments in our sales and marketing functions as these investments may vary in
scope and scale over future periods. As a result of our entry into the Shopify Agreements and the related issuance of warrants to purchase
ordinary shares to Shopify, we recognize a commercial agreement asset upon the vesting of the warrants, and we amortize such asset over
time.
General
and administrative expenses. General and administrative expenses primarily consist of costs of personnel-related expenses including
merger related contingent consideration, associated primarily with our finance, legal, human resources and other operational and administrative
functions, external professional services and allocated overhead. We expect that our general and administrative expenses will increase
in absolute dollars for the foreseeable future as we increase the size of our general and administrative function to support the growth
of our business.
Financial
expenses, net. Financial expenses, net primarily include interest income (expense), currency conversion and other bank-related
fees and income and gains (losses) from foreign exchange fluctuations.
Income
taxes. Income taxes consist primarily of deferred taxes and income taxes related to the jurisdictions in which we conduct
business. Our effective tax rate is affected by tax rates in jurisdictions and the relative amounts of income we earn in those jurisdictions,
changes in the valuation of our deferred tax assets and liabilities, applicability of any valuation allowances, and changes in tax laws
in jurisdictions in which we operate. Our net operating loss carry forwards for Israeli tax purposes amounted to approximately $301 million
as of
December 31, 2023.
We expect to realize net losses in 2024 as a result
of the significant increase in sales and marketing expenses in connection with the vesting of the warrants issued to Shopify.
The following tables set forth our results of
operations in U.S. dollars and as a percentage of revenue for the periods indicated:
|
|
|
|
|
|
|
|
|
2022 |
|
|
2023 |
|
(in thousands) |
|
|
|
|
|
|
|
|
|
Revenue |
|
|
245,274 |
|
|
|
409,049 |
|
|
|
569,946 |
|
Cost of revenue |
|
|
153,841 |
|
|
|
250,871 |
|
|
|
336,343 |
|
Gross profit |
|
|
91,433 |
|
|
|
158,178 |
|
|
|
233,603 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
29,761 |
|
|
|
81,206 |
|
|
|
97,568 |
|
Sales and marketing |
|
|
104,687 |
|
|
|
206,100 |
|
|
|
217,035 |
|
General and administrative |
|
|
22,643 |
|
|
|
60,196 |
|
|
|
56,059 |
|
Total operating expenses |
|
|
157,091 |
|
|
|
347,502 |
|
|
|
370,662 |
|
Operating profit (loss) |
|
|
(65,658 |
) |
|
|
(189,324 |
) |
|
|
(137,059 |
) |
Financial expenses (income), net |
|
|
8,570 |
|
|
|
12,093 |
|
|
|
(5,262 |
) |
Profit (loss) before income taxes |
|
|
(74,228 |
) |
|
|
(201,417 |
) |
|
|
(131,797 |
) |
Income taxes (benefit) expenses |
|
|
705 |
|
|
|
(6,012 |
) |
|
|
2008 |
|
Net profit (loss) |
|
|
(74,933 |
) |
|
|
(195,405 |
) |
|
|
(133,805 |
) |
|
|
|
|
|
|
|
|
|
2022 |
|
|
2023 |
|
(as a % of revenue) |
|
|
|
|
|
|
|
|
|
Revenue |
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
Cost of revenue |
|
|
62.7 |
|
|
|
61.3 |
|
|
|
59.0 |
|
Gross profit |
|
|
37.3 |
|
|
|
38.7 |
|
|
|
41.0 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
12.1 |
|
|
|
19.9 |
|
|
|
17.1 |
|
Sales and marketing |
|
|
42.7 |
|
|
|
50.4 |
|
|
|
38.1 |
|
General and administrative |
|
|
9.2 |
|
|
|
14.7 |
|
|
|
9.8 |
|
Total operating expenses |
|
|
64.0 |
|
|
|
85.0 |
|
|
|
65.0 |
|
Operating profit (loss) |
|
|
(26.8 |
) |
|
|
(46.3 |
) |
|
|
(24.0 |
) |
Financial expenses, net |
|
|
3.5 |
|
|
|
3.0 |
|
|
|
(0.9 |
) |
Profit (loss) before income taxes |
|
|
(30.3 |
) |
|
|
(49.2 |
) |
|
|
(23.1 |
) |
Income taxes |
|
|
0.3 |
|
|
|
(1.5 |
) |
|
|
0.4 |
|
Net profit (loss) |
|
|
(30.6 |
) |
|
|
(47.8 |
) |
|
|
(23.5 |
) |
Reconciliation to Non-GAAP Gross
Profit
|
|
|
|
|
|
|
|
|
2022 |
|
|
2023 |
|
Gross Profit |
|
|
91,433 |
|
|
|
158,178 |
|
|
|
233,603 |
|
Amortization of acquired intangibles included in cost of revenue
|
|
|
- |
|
|
|
9,743 |
|
|
|
11,183 |
|
Non-GAAP Gross Profit |
|
|
91,433 |
|
|
|
167,921 |
|
|
|
244,786 |
|
Revenues |
|
|
245,274 |
|
|
|
409,049 |
|
|
|
569,946 |
|
Non-GAAP Gross Margin |
|
|
37.3 |
% |
|
|
41.1 |
% |
|
|
42.9 |
% |
Reconciliation to Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
2023 |
|
|
|
|
|
Operating profit (loss) |
|
|
(65,658 |
)
|
|
|
(189,324 |
) |
|
|
(137,059 |
) |
1 Stock-based compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
85 |
|
|
|
262 |
|
|
|
639 |
|
Research and development |
|
|
4,192 |
|
|
|
21,970 |
|
|
|
26,266 |
|
Selling and marketing |
|
|
1,287 |
|
|
|
3,877 |
|
|
|
4,259 |
|
General and administrative |
|
|
6,437 |
|
|
|
12,800 |
|
|
|
13,796 |
|
Total stock-based compensation |
|
|
12,001 |
|
|
|
38,909 |
|
|
|
44,960 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 Depreciation and amortization |
|
|
331 |
|
|
|
1,585 |
|
|
|
1,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 Secondary offering costs |
|
|
879 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 Commercial agreement asset amortization |
|
|
84,298 |
|
|
|
149,047 |
|
|
|
150,451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 Amortization of acquired intangibles |
|
|
- |
|
|
|
27,833 |
|
|
|
20,434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 Merger related contingent consideration |
|
|
- |
|
|
|
12,161 |
|
|
|
12,161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7 Acquisition related expenses |
|
|
573 |
|
|
|
8,492 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
32,424 |
|
|
|
48,703 |
|
|
|
92,735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
245,274 |
|
|
|
409,049 |
|
|
|
569,946 |
|
Adjusted EBITDA Margin |
|
|
13.2 |
% |
|
|
11.9 |
% |
|
|
16.3 |
% |
Revenue. Revenue
increased by $160.9 million, or 39.3%, to $569.9 million for the year ended
December 31, 2023 from $409.0 million for the year ended
December
31, 2022, consisting of increases in service fees revenue of $80.4 million, or 44.2%, to $262.2 million from $181.9 million, and fulfillment
revenue of $80.5 million, or 35.5%, to $307.7 million from $227.2 million.
The increase in service fees revenue resulted
primarily from growth of GMV from $2,450 million in the year ended
December 31, 2022 to $3,557 million in the year ended
December 31,
2023. GMV generated from existing merchants increased by $704 million, primarily attributable to growth in global sales, an increase in
the use of our platform to support additional inbound markets and non-organic contribution from Borderfree, which in 2022, contributed
only as of July. In the year ended
December 31, 2023, new merchants, generated GMV of $403 million compared to $562 million. Organic GMV
generated by new merchants has increased in 2023, while overall GMV from new merchants has decreased due the significant contribution
of Flow and Borderfree acquisitions to new merchants GMV in 2022. The increase in fulfilment revenue resulted primarily from an increase
of transactions processed through our platforms from approximately 12 million in 2022 to approximately 18 million in 2023, certain price
adjustments, and was partially offset by an increase in the number of merchants using our platform services on a standalone basis.
Cost
of Revenue and Gross Profit Margin. Cost of revenue increased by $85.5 million, or 34.1%, to $336.3 million for the year ended
December 31, 2023 from $250.9 million for the year ended
December 31, 2022, consisting of increases in service fees costs of $30.6 million,
or 54.4%, to $87.0 million from $56.3 million, fulfillment costs of $53.4 million, or 28.9%, to $238.2 million from $184.8 million and
$1.4 million of amortization of intangible assets due to the Flow and Borderfree acquisitions. The increase in service fees costs was
primarily driven by the increased cost of serving the higher value of transactions processed through our platform and the GMV mix. The
increase in fulfilment costs was primarily driven by the growth in the volume of transactions processed through our platforms.
Research
and Development Expenses. Research and development expenses increased by $16.4 million, or 20.1%, to $97.6 million for the
year ended
December 31, 2023 from $81.2 million for the year ended
December 31, 2022. This increase was primarily attributable to an increase
of $
13.4 million in payroll, share-based compensation including merger-related
contingent consideration and sub-contractors fees. Headcount increased by 84 to support the further development of our platform capabilities.
In addition to the increased headcount we have also recorded merger-related contingent consideration expenses as part of our personnel
related expenses.
Sales
and Marketing Expenses. Sales and marketing expenses increased by $10.9 million, or 5.3%, to $217 million for the year ended
December 31, 2023 from $206.1 million for the year ended
December 31, 2022. This increase was primarily driven by an increase of fees
paid to our partners of $13.9 million, an increase in payroll and share based compensation of $4.0 million, offset by a decrease in amortization
of intangible assets expenses of $8.8 million. Total headcount within sales and marketing increased by 38 from
December 31, 2022 to
December
31, 2023.
General
and Administrative Expenses. General and administrative expenses decreased by $4.1 million, or 6.9%, to $56.1 million for
the year ended
December 31, 2023 from $60.2 million for the year ended
December 31, 2022. This decrease was primarily due to one-off transaction
costs in 2022 of $5.1 million incurred from the Flow and Borderfree transactions. Total headcount within general and administrative increased
by 14 from
December 31, 2022 to
December 31, 2023.
Financial
Expenses, Net. Financial expenses, net decreased by $17.4 million, or 143.5%, to a financial gain of $5.3 million for the
year ended
December 31, 2023 from $12.1 million of financial expenses for the year ended December 31,2022, primarily driven by revaluation
of financial assets and liabilities, as well as higher interest income derived from interest bearing assets.
Income
Taxes. Income taxes increased by $8 million to $2 million of expenses for the year ended
December 31, 2023 from $6.0 million
of gain for the year ended
December 31, 2022, primarily driven by realization of deferred tax liabilities.
B. |
Liquidity and Capital Resources
|
Overview
Since our inception, we have financed our operations
primarily through private placements of our equity securities. On
May 14, 2021, we completed our initial public offering in which we sold
17,250,000 ordinary shares, which included 2,250,000 ordinary shares sold pursuant to the exercise by the underwriters of an over-allotment
option to purchase additional shares, for proceeds of approximately $401.1 million, net of the underwriting discount and before deducting
offering expenses. Our cash and cash equivalents, including short-term deposits and marketable securities, were $317.4 million as of
December
31, 2023.
In September 2021, an underwritten secondary follow-on
offering of 12,000,000 of our ordinary shares held by certain selling shareholders was consummated and an additional 1,800,000 ordinary
shares were sold by such shareholders pursuant to the exercise of an option granted to the underwriters by the selling shareholders. We
did not receive any proceeds from the sale of our ordinary shares by the selling shareholders.
On
January 3, 2022, we completed the Flow Merger,
and acquired Flow through the statutory merger of Flow with Global-e NewCo Inc., for an aggregate purchase price of approximately $387
million (in a combination of cash and equity). The Flow Merger was consummated in order to strengthen our offering and capabilities, to
allow us access to additional addressable market of emerging brands not currently eligible to use our services. In September 2023, Shopify
launched
“Shopify Markets Pro”, a white-label cross-border MoR offering, currently available to Shopify US-based merchants.
Shopify Markets Pro is based on the Flow platform.
On
July 1, 2022, we completed the acquisition
of Borderfree, from Pitney Bowes and its
subsidiaries. The Borderfree Acquisition was consummated in order to strengthen our offerings
and solutions for merchants, by providing them with enhanced traffic demand generation offerings, and the ability to attract international
shoppers to their web store. In addition, we utilized the strategic partnership and commercial relationship with Pitney Bowes that commenced
in 2022 as part of the Borderfree acquisition, whereby Pitney Bowes is providing us and our clients with certain cross-border e-commerce
logistics services and, in turn, Pitney Bowes’ clients receive access to the cross-border solutions available on our platform.
Our primary requirement for liquidity and capital
resources is to finance working capital and capital expenditures, and for general corporate purposes. We believe that the aggregation
of our existing cash and cash equivalents, short-term bank deposits and investments in marketable securities, together with cash flow
from operations, will be sufficient to meet our business needs for at least the next 12 months. We maintain the majority of our cash and
cash equivalents in accounts with major highly rated multi-national and local financial institutions, and our deposits at these institutions
exceed insured limits. Market conditions can impact the viability of these institutions, and any inability to access or delay in accessing
these funds could adversely affect our business and financial position. Our future financing requirements will depend on many factors
including our growth rate, levels of revenue, the expansion of sales and marketing activities, market acceptance of our platform, and
the timing and extent of spending to support expansion of our platform. We may, in the future, enter into arrangements to acquire or invest
in complementary technologies, solutions or businesses. We may be required to seek additional equity or debt financing. In the event we
require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise
additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to
compete successfully, which would adversely affect our business, financial condition and results of operations.
The following table presents the summary consolidated
cash flow information for the periods presented.
|
|
Year ended December 31,
|
|
(in thousands) |
|
2021 |
|
|
2022 |
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities* |
|
|
18,151 |
|
|
|
89,328 |
|
|
|
108,222 |
|
Net cash used in investing activities |
|
|
(40,489 |
) |
|
|
(330,101 |
) |
|
|
(55,039 |
) |
Net cash provided by financing activities |
|
|
398,607 |
|
|
|
1,239 |
|
|
|
1,991 |
|
* See Note 2 to our audited consolidated financial
statements included elsewhere in this Annual Report for additional information.
Net cash provided by (used in)
operating activities
Net cash provided by operating activities was
$18.2 million for the year ended
December 31, 2021, and was primarily comprised of net loss of $74.9 million, commercial agreement asset
amortization of $84.3 million, funds payable to customers of $23.1 million, accrued expenses and other liabilities of 17.9 million, offset
by funds receivable of 29.3 million.
Net cash provided by operating activities was
$89.3 million for the year ended
December 31, 2022, and was primarily comprised of net loss of $195.4 million, commercial agreement asset
amortization of $149.0 million, share-based compensation expenses of $38.9 million, amortization of intangible assets of $27.8 million,
accrued expenses and other liabilities of $20.5 million, funds payable to customers of $17.7 million and funds receivable of $17.1 million.
Net cash provided by operating activities was
$108.2 million for the year ended
December 31, 2023, and was primarily comprised of net loss of $133.8 million, commercial agreement asset
amortization of $150.5 million, share-based compensation expenses of $45.0 million, amortization of intangible assets of $20.4 million,
accrued expenses and other liabilities of $30.6 million.
Net cash used in investing activities
Net cash used in investing activities was $40.5
million for the year ended
December 31, 2021, and was primarily comprised of short-term investments of $117.2 million, offset by proceeds
from short-term investments of $81.7 million.
Net cash used in investing activities was $330.1
million for the year ended
December 31, 2022, and was primarily comprised of $317.5 used for the acquisitions of Flow and Borderfree.
Net cash used in investing activities was $55
million for the year ended
December 31, 2023, and was primarily comprised of investments in short-term deposits and money market funds.
Net cash provided by financing
activities
Net cash provided by financing activities was
$398.6 million for the year ended
December 31, 2021, primarily comprised of proceeds from issuance of ordinary shares in connection with
our IPO of $396.5 million, net of issuance costs.
Net cash provided by financing activities was
$1.2 million for the year ended
December 31, 2022, and was primarily comprised of proceeds from exercise of share options.
Net cash provided by financing activities was
$2.0 million for the year ended
December 31, 2023, and was primarily comprised of proceeds from exercise of share options.
Material
Cash Requirements for Known Contractual and Other Obligations
Leases
We have various non-cancelable operating leases
for our corporate offices in Petah Tikva in Israel, in London in the UK, New York City and in Atlanta in the United States. The leases
for these facilities expire in 2032, 2029 and 2030, respectively and we have options to renew these leases. As of
December 31, 2023, we
had fixed future minimum lease payments of $26.7 million, of which $4.1 million is due in the next twelve months.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements
that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our audited consolidated
financial statements included elsewhere in this Annual Report.
On
June 30, 2022, following reassessment of the
Jumpstart Our Business Startups Act (
“JOBS Act”) provisions, management concluded that
the Company no longer qualified as
an emerging growth company. Accounting pronouncements applicable to public companies were adopted on
December 31, 2022 as of the beginning
of the fiscal year 2023.
C. |
Research and Development, Patents
and Licenses, Etc. |
Our research and development activities are primarily
located in Israel. Research and development expenses include personnel-related expenses associated with development personnel responsible
for the design, development and testing of Company products, other development-related expenses, including cost of development environments
and tools, and allocated overhead.
For the years ended
December 31, 2023,
2022, and
2021, research and development costs accounted for approximately 17.1%, 19.9% and 12.3% of our total revenue, respectively. Research and
development costs are expensed as incurred. We expect these costs to increase as we continue to hire new employees in order to support
the growing scale and feature set of our platform.
We believe continued investments in research and
development are important to attain our strategic objectives and maintain our market leadership position. As such, we expect research
and development costs to increase in absolute dollars, but this expense is expected to decrease as a percentage of total revenue.
A number of industry trends are reshaping the
business environment in which we operate, leading to what we believe is a unique opportunity. Key market dynamics include:
• |
Transformation
of retail to be online-focused - the retail market continues to undergo a shift towards e-commerce, with growth
in online sales overtime, outpacing that of brick and mortar retail. |
• |
Rise of cross-border
e-commerce - Cross-border e-commerce growth rates are outpacing domestic growth rates, propelled by the rise of social media
and global influencers, resulting in globalization of consumer tastes and increased cross-border demand. |
|
|
• |
Emphasis on D2C
sales - e-commerce enables to enhance D2C sales for traditional and new merchants, which paves a strategic route for merchants
to take ownership of shopper relationships worldwide. |
|
|
•
|
Challenges in
executing on a Do-It-Yourself (“DIY”) strategy - Managing a D2C cross-border network is capital-intensive, requires
deep local know-how, and a complex combination of features and capabilities to navigate across markets, further exacerbated by local on-going
regulatory changes. |
|
|
•
|
Supply chain
evolution and disruption - Supply chains and in particular cross border supply
chains are developing and enabling more efficient trade over time. Certain global conflicts have disrupted supply chains and weighed on
e-commerce trade, the impact was significantly less evident for us, as merchants prioritize D2C over other channels and as air freight
has not experienced significant disruptions. |
|
|
•
|
Global macro-economic -
Inflationary pressures and rising interest rates in key markets may influence consumer sentiment and may have a negative effect on consumer
spend. Exchange rate fluctuations may incur us additional costs and losses for revenues in foreign
currencies Military hostilities have created extreme volatility in the global capital markets and may cause disruptions to the global
supply chain and energy markets, which may adversely affect us or the third parties on whom we rely on and may also have a negative effect
on consumer spend. |
Other than as disclosed above and elsewhere in
this Annual Report, we are not aware of any other trends, uncertainties, demands, commitments or events since
December 31, 2023 that are
reasonably likely to have a material adverse effect on our revenues, income, profitability, liquidity or capital resources, or that would
cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
For additional trend information, see the Risk
Factors described in Item 3.D above, the
“Overview” and
“Operating Results” sections of this Item 5 -
“Operating
and Financial Review and Prospects” and Item 4 -
“Information on the Company” above.
E. |
Critical Accounting Estimates
|
We have provided a summary of our significant accounting
policies, estimates and judgments in our consolidated financial statements, which are included elsewhere in this Annual Report. The following
critical accounting discussion pertains to accounting policies management believes are most critical to the portrayal of our historical
financial condition and results of operations and that require significant, difficult, subjective or complex judgments. Other companies
in similar businesses may use different estimation policies and methodologies, which may impact the comparability of our financial condition,
results of operations and cash flows to those of other companies.
Our consolidated financial statements have been
prepared in accordance with US GAAP. The preparation of these financial statements requires us to make estimates and assumptions that
amounts reported in our consolidated financial statements and accompanying notes. Our estimates are based on our historical experience
and on various other factors that we believe are reasonable under the circumstances.
The Company is subject to uncertainties such as the
impact of future events, economic and political factors, and changes in
the Company’s business environment; therefore, actual results
could differ from these estimates. Accordingly, the accounting estimates used in the preparation of
the Company’s consolidated financial
statements will change as new events occur, as more experience is acquired, as additional information is obtained, and as
the Company’s
operating environment evolves.
Application of Critical Accounting Policies and
Estimates
Revenue Recognition
1. |
Service Fees - The Company provides merchants a global e-commerce platform
which enables the sale of their products to consumers worldwide. Revenue is generated as a percentage of the value of transactions that
flow through the Company’s platforms. |
2. |
Fulfillment services - The Company offers shipping, handling, and other
global delivery services in order to deliver merchants’ goods to consumers. |
We recognize revenues in accordance with ASC No.
606
“Revenue from Contracts with Customers.” As such, we identify a
contract with a customer, identify the performance obligations
in the
contract, determine the transaction price, allocate the transaction price to each performance obligation in the
contract and recognize
revenues when (or as) we satisfy a performance obligation. See Note 2 to our consolidated financial statements for further information.
Share-Based Compensation
We account for share-based compensation in accordance
with ASC No. 718, “Compensation - Stock Compensation” (“ASC No. 718”). ASC No. 718 requires companies to estimate
the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the award is recognized
as an expense over the requisite service periods, which is generally the vesting period of the respective award, on a straight-line basis
when the only condition to vesting is continued service. If vesting is subject to a performance condition, recognition is based on the
implicit service period of the award. Expense for awards with performance conditions is estimated and adjusted on a quarterly basis based
upon the assessment of the probability that the performance condition will be met.
We selected the Black-Scholes-Merton option-pricing
model as the most appropriate fair value method for our option awards. The fair value of Restricted Share Units (“RSUs”) without
market conditions, is based on the closing market value of the underlying shares at the date of grant.
The option-pricing models require a number of
assumptions, of which the most significant are the expected share price volatility and the expected option term. We recognize forfeitures
of equity-based awards as they occur.
As there was no public market for our ordinary
shares prior to the IPO, the fair value of our ordinary shares prior to the IPO was determined by our board of directors after considering
contemporaneous third-party valuations and input from management. The valuations of
the Company’s ordinary shares were determined
in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company
Equity Securities Issued as Compensation. In the absence of a public trading market,
the Company’s board of directors, with input
from management, exercised significant judgment and considered various objective and subjective factors to determine the fair value of
the Company’s ordinary shares as of the date of each option grant.
These estimates involve uncertainties and the
application of judgment. If circumstances are changed and different estimates are used, our expenses could materially differ in the future.
Business Combination
We account for business combinations in accordance
with ASC 805,
“Business Combinations”. ASC 805 requires recognition of assets acquired, liabilities assumed, and any non-controlling
interest at the acquisition date, measured at their fair values as of that date.
The Company determines the recognition of intangible
assets based on the following criteria: (i) the intangible asset arises from contractual or other rights; or (ii) the intangible asset
is separable or divisible from the acquired entity and capable of being sold, transferred, licensed, returned or exchanged.
The excess of the fair value of the purchase price
over the fair values of the identifiable assets and liabilities is recorded as goodwill. Determining the fair value of the identifiable
assets and liabilities requires management to use significant judgment and estimates including the forecasted revenue and revenues growth
rates, discount rates, customer
contract renewal rates and customer attrition rates.
The process of estimating the fair values requires
significant estimates, especially with respect to intangible assets. Critical estimates in valuing certain intangible assets include,
but are not limited to, future expected cash flows from customer relationships, merchant/network affiliate relationships, publisher relationships,
technology, tradenames, and discount rates.
The Company estimates fair value based upon assumptions that are believed to be reasonable,
but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.
Income Taxes
We calculate income tax provisions based on our
results in each jurisdiction in which we operate. The calculation is based on estimated tax consequences and on assumptions as to our
entitlement to various benefits under the applicable local tax laws.
Significant judgment is required in evaluating
our uncertain tax positions. We establish reserves for uncertain tax positions based on the evaluation of whether or not our uncertain
tax position is “more likely than not” to be sustained upon examination based on our technical merits. We record estimated
interest and penalties pertaining to our uncertain tax positions in the financial statements as income tax expense.
Deferred tax assets are recognized for unused
tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profits will
be available, against which they can be used. Deferred taxes for each jurisdiction are presented as a net asset or liability, net of any
valuation allowances. We estimate the need for any valuation allowance by applying significant judgment and considering all available
evidence including past results and future projections. We reassess our estimates periodically and record a partial or full valuation
allowance release if needed.
We cannot assure that future final tax outcomes
will not be different than our tax provisions and reserves for uncertain tax positions. To the extent that the final tax outcome of these
matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such
determination is made.
Commercial Agreement Asset
During the year ended December 2022 we recognized
an asset in connection with a commercial agreement with Shopify Inc., in which
the Company granted warrants in exchange for the benefit
of being an exclusive third-party provider of an end-to-end cross-border solution. This asset represents the probable future economic
benefit to be realized over a four-year expected benefit period and is valued based on the fair value of the vested warrants on the grant
date.
We record amortization expenses related to the
commercial agreement asset over a four-year period in
the Company’s consolidated statements of operations as a component of sales
and marketing.
Impact of Foreign Currency Fluctuation
See Item 3.D. “Risk Factors- We
are exposed to fluctuations in currency exchange rates, which could negatively affect our financial condition and results of operations.”
and Item 11. “Quantitative and Qualitative Disclosures About Market Risk-Foreign Currency Exchange Risk.”
Item 6.
Directors,
Senior Management and Employees
A. |
Directors and Senior Management
|
The following table sets forth the name and position
of each of our executive officers and directors as of
March 20, 2024:
Name |
|
Age |
|
Position |
Executive Officers |
|
|
|
|
|
|
47 |
|
Co-Founder, Chief Executive Officer, Director |
Shahar Tamari |
|
52 |
|
Co-Founder, Chief Operations Officer, Director |
Nir Debbi |
|
50 |
|
Co-Founder, President, Director |
Ofer Koren |
|
53 |
|
Chief Financial Officer |
Ran Fridman |
|
49 |
|
Chief Revenue Officer |
Yehiam Shinder |
|
43 |
|
Chief Technology Officer |
|
|
|
|
|
Non-Executive Directors |
|
|
|
|
Gen Tsuchikawa (2)(3)* |
|
62 |
|
Director |
Miguel Angel Parra * |
|
56 |
|
Director |
Tzvia Broida (1)* |
|
55 |
|
Director |
Anna Bakst (1)(2)(3)* |
|
62 |
|
Director |
Iris Epple-Righi (1)(2)(3)* |
|
58 |
|
Director |
(1) |
Serves as a member of our Audit Committee. |
(2) |
Serves as a member of our Compensation Committee. |
(3) |
Serves as a member of our Nominating, Governance & Sustainability Committee.
|
* |
Qualifies as independent under the NASDAQ listing standards. |
Executive Officers
Amir
Schlachet is our Co-Founder and has served as our Chief Executive Officer since
May 1, 2013. Mr. Schlachet has also served
as a member of our board of directors since
February 20, 2013. Prior to co-founding Global-e, Mr. Schlachet served as SVP and strategic
advisor to the chief executive officer of Bank Hapoalim, a banking institution, after serving several years as a management consultant
with McKinsey & Company, a financial service consulting company. Mr. Schlachet holds an M.B.A. from INSEAD, an M.Sc. in Electrical
Engineering from Tel-Aviv University and a B.Sc. in Mathematics, Physics and Computer Science from the Hebrew University of Jerusalem.
Shahar
Tamari is our Co-Founder and has served as our Chief Operations Officer since
May 1, 2013. Mr. Tamari has also served as a
member of our board of directors since
February 21, 2013. Mr. Tamari previously served as the VP and Head of e-payments for 888 Holdings,
a gaming brand and
website, from February 2009 until May 2013. Prior to that, he served as Head of e-Banking Business Development with
Bank Hapoalim, a banking institution, for seven years, from October 2001 until January 2009. Mr. Tamari received an M.Sc. in Technology
Management and Information Systems from Tel Aviv University, and a B.A. in Business Administration, from the College of Management Academic
Studies.
Nir
Debbi is our Co-Founder and has served as our President since
July 1, 2021 and previously served as our Chief Marketing Officer
from
May 1, 2013 to
July 1, 2021. Mr. Debbi has also served as member of our board of directors since
February 20, 2013. Prior to co-founding
Global-e, Mr. Debbi served as SVP and Head of Strategy and Business Development at Bank Hapoalim, a banking institution, following a term
as Head of Retail Strategy. Mr. Debbi holds an M.B.A and a B.Sc. in Economics, both from Tel-Aviv University.
Ofer
Koren has served as our Chief Financial Officer since
August 1, 2020. Prior to joining us, Mr. Koren served as chief financial
officer and deputy chief executive officer at Bank Hapoalim, a banking institution as well as in various strategy and business development
roles during the years 2013-2020. Prior to that, Mr. Koren was a partner with Deloitte-Monitor Management Consulting (previously Trigger-Foresight).
Mr. Koren holds an M.B.A. from Tel-Aviv University and a B.Sc. in Economics from Haifa University.
Ran
Fridman has served as our Chief Revenue Officer since
July 1, 2021. Prior to joining us, Mr. Fridman served as the global
VP sales of Allot Ltd., a telecommunications company, from May 2017 to July 2021. Prior to that, he served in multiple global sales positions,
including at Nokia, where he held numerous roles within senior global management, sales, and sales support.
Yehiam
Shinder has served as our Chief Technology Officer since
February 5, 2024, and previously served as our SVP Engineering from
April
1, 2023 to
February 5, 2024. Prior to joining us, Mr. Shinder served as the Chief Information Officer at Kaltura (NASDAQ:KLTR), a software
company, from 2011 until 2022. Prior to that, he held several technology leadership positions at 888 Holdings, a gaming brand and
website.
Non-Executive
Directors
Miguel
Angel Parra has served as a member of our board of directors since
January 1, 2020.
Mr.
Parra currently serves as the Chief Executive Officer of DHL Express Europe, a shipping and logistics company, since
January 1, 2024,
prior to which he served as the Chief Executive Officer of DHL Express Americas, since 20214, and prior to which he served in numerous
management positions, since 1997. Prior to that, from 1986 to 1997, Mr. Parra served as a general manager of TNT Express Worldwide. Mr.
Parra holds an associate’s degree in Business from Miami-Dade Community College and is a graduate of the Advanced Management Program
of Fuqua School of Business Duke University.
Tzvia
Broida has served as a member of our board of directors since
May 14, 2021. From 2013 to 2021, Ms. Broida has served on the
board of directors and as chairperson of the audit committee of Jacada Ltd. (JCDAF). Since 2021, Ms. Broida has also served as the Chief
Financial Officer of NeuroBlade Ltd. Before joining NeuroBlade, Ms. Broida served as the Chief Financial Officer of Sensible Medical Innovations
Ltd from 2011 to 2021. Prior to that, Ms. Broida served in various positions at Jacada Ltd, including as Chief Financial Officer from
2005 to 2009, and before that she worked as an accountant at several accounting office firms. Ms. Broida received a B.A. in Accounting
& Economics from the Hebrew University of Jerusalem.
Anna
Bakst has served as a member of our board of directors since
May 14, 2021. From 2018 to 2019, Ms. Bakst served as Brand President
and Chief Executive Officer of Kate Spade New York, a fashion retailer. Before that, Ms. Bakst served as Group President at Michael Kors
from 2003 to 2017. Prior to Michael Kors, Ms. Bakst served in various positions at Donna Karan International from 1990 to 2001. Ms. Bakst
received an M.B.A from Stanford University and a B.S. in Industrial Engineering from Purdue University.
Iris
Epple-Righi has served as a member of our board of directors since
May 14, 2021. Ms. Epple-Righi has served on the board of
directors and as a member of the working committee of Hugo Boss, a fashion retailer, since 2020. From 2016 to 2019, Ms. Epple-Righi served
as Chief Executive Officer of Escada SE. Before that, Ms. Epple-Righi served in various positions in Calvin Klein from 2013 to 2016 and
Tommy Hilfiger from 2003 to 2013. Ms. Epple-Righi received an M.B.A from the University of Tübingen.
Gen Tsuchikawa
has served as a member of our board of directors since
November 29, 2023. Mr. Tsuchikawa also serves as the
Chairman
at Sony Ventures Corporation since January 2024, prior to which he served as the CEO and Chief Investment Officer at Sony Ventures
Corporation since February 2022, where he directs the venture investment arm of Sony Group Corporation, known as the Sony Innovation Fund.
Mr. Tsuchikawa also serves as the Corporate Vice President of Sony Ventures Corporation since June 2011 and previously served in several
other executive roles at Sony since
2004. Prior to joining Sony Ventures
Corporation, Mr. Tsuchikawa spent 20 years in the finance industry at Merril Lynch and the Industrial Bank of Japan. Mr. Tsuchikawa received
a B.A. from Hitotsubashi University in Japan and an M.B.A. from Stanford Graduate School of Business.
Board Diversity Matrix (as of
the date of this Annual Report) |
Country of Principal Executive Offices: |
Israel |
Foreign Private Issuer |
Yes |
Disclosure Prohibited under Home Country Law |
No |
Total Number of Directors |
8 |
|
Female
|
Male
|
Non-
Binary
|
Did Not Disclose
Gender |
Part I: Gender Identity |
|
Directors |
3 |
5 |
- |
- |
Part II: Demographic Background |
|
Underrepresented Individual in Home Country Jurisdiction |
2 |
LGBTQ+ |
- |
Did Not Disclose Demographic Background |
- |
Compensation of Directors and Executive Officers
Directors
Under the Companies Law, the compensation of our
directors requires the approval of our compensation committee, the subsequent approval of the board of directors and, unless exempted
under regulations promulgated under the Companies Law, the approval of the shareholders at a general meeting. If the compensation of our
directors is inconsistent with our stated compensation policy, then those provisions that must be included in the compensation policy
according to the Companies Law must have been considered by the compensation committee and board of directors, and shareholder approval
will also be required, provided that:
• |
at least a majority of the shares held by all shareholders who are
not controlling shareholders and do not have a personal interest in such matter, present and voting at such meeting, are voted in favor
of the compensation package, excluding abstentions; or |
• |
the total number of shares of non-controlling shareholders and shareholders
who do not have a personal interest in such matter voting against the compensation package does not exceed two percent (2%) of the aggregate
voting rights in the Company. |
Executive Officers other than
the Chief Executive Officer
The Companies Law requires the approval of the
compensation of a public company’s executive officers (other than the chief executive officer) in the following order: (i) the compensation
committee, (ii)
the company’s board of directors, and (iii) if such compensation arrangement is inconsistent with
the company’s
stated compensation policy,
the company’s shareholders (by a special majority vote as discussed above with respect to the approval
of director compensation). However, if the shareholders of
the company decline to approve a compensation arrangement with an executive
officer that is inconsistent with
the company’s stated compensation policy, the compensation committee and board of directors may
override the shareholders’ decision if each of the compensation committee and the board of directors provide detailed reasons for
their decision.
An amendment to an existing arrangement with an
office holder (who is not a director) requires only the approval of the compensation committee, if the compensation committee determines
that the amendment is not material in comparison to the existing arrangement. However, according to regulations promulgated under the
Companies Law, an amendment to an existing arrangement with an office holder (who is not a director) who is subordinate to the chief executive
officer shall not require the approval of the compensation committee, if (i) the amendment is approved by the chief executive officer,
(ii)
the company’s compensation policy provides that a non-material amendment to the terms of service of an office holder (other
than the chief executive officer) may be approved by the chief executive officer and (iii) the engagement terms are consistent with the
company’s compensation policy.
Chief Executive Officer
Under the Companies Law, the compensation of a
public company’s chief executive officer is required to be approved by: (i)
the company’s compensation committee; (ii) the
company’s board of directors, and (iii)
the company’s shareholders (by a special majority vote as discussed above with respect
to the approval of director compensation). However, if the shareholders of
the company decline to approve the compensation arrangement
with the chief executive officer, the compensation committee and board of directors may override the shareholders’ decision if each
of the compensation committee and the board of directors provide a detailed report for their decision. The approval of each of the compensation
committee and the board of directors should be in accordance with
the company’s stated compensation policy; however, in special
circumstances, they may approve compensation terms of a chief executive officer that are inconsistent with such policy provided that they
have considered those provisions that must be included in the compensation policy according to the Companies Law and that shareholder
approval was obtained (by a special majority vote as discussed above with respect to the approval of director compensation). In addition,
the compensation committee may waive the shareholder approval requirement with regards to the approval of the engagement terms of a candidate
for the chief executive officer position, if they determine that the compensation arrangement is consistent with
the company’s stated
compensation policy and that the chief executive officer candidate did not have a prior business relationship with
the company or a controlling
shareholder of
the company and that subjecting the approval of the engagement to a shareholder vote would impede
the company’s ability
to employ the chief executive officer candidate. In the event that the chief executive officer candidate also serves as a member of the
board of directors, his or her compensation terms as chief executive officer will be approved in accordance with the rules applicable
to approval of compensation of directors.
Aggregate Compensation of Office Holders
The aggregate compensation, including share-based
compensation, paid by us and our
subsidiaries to our executive officers and directors for the year ended
December 31, 2023 was approximately
$13.9 million. This amount includes approximately $0.4 million set aside or accrued to provide pension, severance, retirement or similar
benefits or expenses, but does not include business travel, relocation, professional and business association dues and expenses reimbursed
to office holders, and other benefits commonly reimbursed or paid by companies in Israel. During the year ended
December 31, 2023, our
executive officers and directors were granted 382,273 restricted share units under our equity incentive plans. As of
December 31, 2023,
options to purchase 5,481,900 ordinary shares granted to our executive officers and directors under equity incentive plans, at a weighted
average exercise price of $2.88 and having expiration dates generally ten (10) years after the grant date, and 570,868 restricted share
units granted under our equity incentive plans, were outstanding.
We pay each of our non-employee directors, other
than individuals who served on our board of directors immediately prior to the consummation of our IPO, who serves on the board an annual
retainer of $35,000, with additional annual payment for service on board committees as follows: $10,000 (or $20,000 for the chairperson)
per membership of the audit committee, or $7,500 (or $15,000 for the chairperson) per membership of the compensation committee and $4,250
(or $8,500 for the chairperson) per membership of the nominating and governance committee. In addition, upon election, non-employee directors,
other than individuals who served on our board of directors immediately prior to the consummation of our IPO, are granted with restricted
share unit awards under our incentive plan at a value of $250,000 which vests on an annual basis over a period of three years. In addition,
each non-employee director, other than individuals who served on our board of directors immediately prior to the consummation of our IPO,
are granted annual restricted share unit awards under our incentive plan (provided the director is still in office) at a value of $150,000
which shall vest on the first anniversary of the grant date. Individuals who served on our board of directors immediately prior to the
consummation of our IPO do not receive additional compensation for their service on our board.
The following is a summary of the salary expenses
and social benefit costs of our five most highly compensated executive officers in 2023, or the
“Covered Executives”. All
amounts reported reflect the cost to
the Company as recognized in our financial statements for the year ended
December 31, 2023. U.S.
dollar amounts indicated for compensation of our Covered Executives are in thousands of dollars.
Name and Principal Position(2)
|
|
Base Salary ($) |
|
|
Benefits and Perquisites ($)(3)
|
|
|
Variable compensation ($)(4)
|
|
|
Equity-Based Compensation ($)(5)
|
|
|
Total ($) |
|
|
|
(in thousands, US dollars) (1)
|
|
|
|
|
306 |
|
|
|
55 |
|
|
|
145 |
|
|
|
2,587 |
|
|
|
3,093 |
|
Shahar Tamari, Co-Founder, Chief
Operations Officer, Director |
|
|
306 |
|
|
|
70 |
|
|
|
145 |
|
|
|
2,587 |
|
|
|
3,108 |
|
Nir Debbi, Co-Founder, President,
Director |
|
|
306 |
|
|
|
65 |
|
|
|
145 |
|
|
|
2,587 |
|
|
|
3,103 |
|
Ofer Koren, Chief Financial Officer
|
|
|
305 |
|
|
|
56 |
|
|
|
120 |
|
|
|
1,105 |
|
|
|
1,586 |
|
Ran Fridman,
Chief Revenue Officer |
|
|
305 |
|
|
|
64 |
|
|
|
151 |
|
|
|
1,026 |
|
|
|
1,545 |
|
(1) |
All amounts reported in the table are in terms of cost to us, as recorded
in our financial statements. |
(2) |
All Covered Executives listed in the table are our full-time employees.
Cash compensation amounts denominated in currencies other than the U.S. dollar were converted into U.S. dollars at the average conversion
rate for 2023. |
(3)
|
Amounts reported in this column include social benefits paid by us
on behalf of the Covered Executives, convalescence pay, contributions made by the company to an insurance policy or a pension fund, work
disability insurance, severance, educational fund and payments for social security. |
(4)
|
Amounts reported in this column refer to incentive and variable compensation
payments which were paid or accrued with respect to 2023. In accordance with the Company’s compensation policy, we also paid cash
bonuses to our Covered Executives upon compliance with predetermined performance parameters and an over achievement bonus as set by the
compensation committee and the board of directors. These amounts were provided for in our 2023 financial statements (but will be paid
during 2024). |
(5)
|
Amounts reported in this column represent the expense recorded in our
financial statements for the year ended December 31, 2023 with respect to equity-based compensation grants-- options and restricted share
units. The relevant amounts underlying the equity awards granted to our officers during 2023, will continue to be expensed in our financial
statements over a four-year period during the years 2023-2026 on account of the 2023 grants in similar annualized amounts. Assumptions
and key variables used in the calculation of such amounts are described in Note 9 to our audited consolidated financial statements included
in Item 18 of this Annual Report. All equity-based compensation grants to our Covered Executives were made in accordance with the parameters
of our Company’s compensation policy and were approved by our compensation committee and board of directors. |
Employment
and consulting agreements with executive officers and directors
We have entered into written employment agreements
with each of our executive officers. These agreements provide for notice periods of varying duration for termination of the agreement
by us or by the relevant executive officer, during which time the executive officer will continue to receive salary and benefits. These
agreements also contain customary provisions regarding non-competition, non-solicitation confidentiality of information and assignment
of inventions. However, the enforceability of the non-competition provisions may be limited under applicable law. We do not have any service
agreements with any of our non-employee directors providing for benefits upon termination of service.
Share Incentive Plans
2013
Share Option Plan.
The 2013 Share Incentive Plan, or the 2013 Plan,
was adopted by our board of directors on
May 13, 2013 and amended on
April 2, 2019. The 2013 Plan provides for the grant of equity-based
incentive awards to our employees, directors, office holders, service providers and consultants in order to incentivize them to increase
their efforts on behalf of
the Company and to promote the success of
the Company’s business.
We no longer grant any awards under the 2013 Plan
as it was superseded by the 2021 Plan, although previously granted awards remain outstanding. Ordinary shares subject to outstanding options
granted under the 2013 Plan that expire or become un-exercisable without having been exercised in full will become available again for
future grant under the 2021 Plan. Our board of directors, or a duly authorized committee of our board of directors, or the administrator,
administers the 2013 Plan.
2021 Employee Share Purchase
Plan
The 2021 Employee Share Purchase Plan (the
“ESPP”)
was adopted by our board of directors on
March 1, 2021. The ESPP is comprised of two distinct components: (1) the component intended to
qualify for favorable U.S. federal tax treatment under Section 423 of the Code (the
“Section 423 Component”) and (2) the component
not intended to be tax qualified under Section 423 of the Code to facilitate participation for employees who are not eligible to benefit
from favorable U.S. federal tax treatment and, to the extent applicable, to provide flexibility to comply with non U.S. law and other
considerations (the
“Non Section 423 Component”).
As of
December 31, 2023, a total of 2,500,000
of our ordinary shares was available for sale under our ESPP, subject to adjustment as provided for in the ESPP. In addition, on the first
day of each fiscal year beginning with our 2022 fiscal year and ending on and including the fiscal year of 2029, such pool of ordinary
shares shall be increased by that number of our ordinary shares equal to the lesser of (i) 0.5% of the outstanding ordinary shares as
of the last day of the immediately preceding fiscal year, determined on a fully diluted basis or (ii) such smaller amount as our
board of directors may determine. Our board of directors resolved not to increase the pool of ordinary shares available for sale under
the ESPP for the fiscal years 2022, 2023 and 2024.
In no event will more than 2,750,000 ordinary
shares be available for issuance under the Section 423 Component.
Unless otherwise determined by our board of directors,
the compensation committee of our board of directors, or the administrator, will administer the ESPP and will have the authority to interpret
the terms of the ESPP and determine eligibility under the ESPP, and otherwise exercise such powers and to perform such acts as the administrator
deems necessary in accordance with the terms of the ESPP and applicable law.
Eligible employees become participants in the
ESPP by enrolling to purchase our ordinary shares through contributions, in the form of payroll deductions, or otherwise, to the extent
permitted by the administrator. Amounts contributed and accumulated by the participant will be used to purchase shares at the end of each
offering period. The administrator may amend, suspend or terminate the ESPP at any time.
2021 Share Incentive Plan
The 2021 Share Incentive Plan, or the 2021 Plan,
was adopted by our board of directors on
March 1, 2021. The 2021 Plan provides for the grant of equity-based incentive awards to our employees,
directors, office holders, service providers and consultants in order to incentivize them to increase their efforts on behalf of
the Company
and to promote the success of
the Company’s business.
The maximum number ordinary shares available for
issuance under the 2021 Plan is equal to the sum of (i) 13,500,000 shares, (ii) any shares subject to awards under the 2013 Plan which
have expired, or were cancelled, terminated, forfeited or settled in cash in lieu of issuance of shares or became un-exercisable without
having been exercised, and (iii) an annual increase on the first day of each year beginning in 2022 and on January 1st of each calendar
year thereafter during the term of the Plan, equal to the lesser of (1) five percent (5%) of the outstanding ordinary shares of
the Company
on the last day of the immediately preceding calendar year and (2) such smaller amount as our board of directors may determine. No more
than 13,500,000 ordinary shares may be issued upon the exercise of incentive stock options, or ISOs. Our board of directors resolved not
to increase the pool of ordinary shares available for sale under the 2021 Plan for the fiscal years 2023 and 2024.
Our board of directors, or a duly authorized committee
of our board of directors, or the administrator, will administer the 2021 Plan. The administrator may interpret the terms of the 2021
Plan and any award agreements or awards granted thereunder, designate recipients of awards, determine and amend the terms of awards, and
take all other actions and make all other determinations necessary for the administration of the 2021 Plan, in accordance with the terms
of the 2021 Plan and applicable law.
The 2021 Plan provides for granting awards under
various tax regimes, including, without limitation, in compliance with Section 102 of the Israeli Income Tax Ordinance (New Version),
5721-1961 (the “Ordinance”), and Section 3(9) of the Ordinance and for awards granted to our United States employees or service
providers, including those who are deemed to be residents of the United States for tax purposes, Section 422 of the Code and Section 409A
of the Code.
Section 102 of the Ordinance allows employees,
directors and officers who are not controlling shareholders and are considered Israeli residents to receive favorable tax treatment for
compensation in the form of shares or options, subject to the terms and conditions set forth in the Ordinance. Our service providers and
controlling shareholders may only be granted options under section 3(9) of the Ordinance, which does not provide for similar tax benefits.
The 2021 Plan provides for the grant of stock
options (including incentive stock options and nonqualified stock options), ordinary shares, restricted shares, restricted share units,
stock appreciation rights and other share-based awards.
As of
December 31, 2023, a total of 7,761,657
options to purchase ordinary shares, with a weighted average exercise price of $2.56 per share and 1,957,057 restricted share units were
outstanding under our 2021 Plan and 2013 Plan. As of
December 31, 2023, 18,370,826 ordinary shares were available for future grant under
the 2021 Plan.
Corporate Governance Practices
As an Israeli company, we are subject to various
corporate governance requirements under the Companies Law. However, pursuant to regulations promulgated under the Companies Law, companies
with shares traded on certain U.S. stock exchanges, including Nasdaq, may, subject to certain conditions, “opt out” from the
Companies Law requirements to appoint external directors and related Companies Law rules concerning the composition of the audit committee
and compensation committee of the board of directors (other than the gender diversification rule under the Companies Law, which requires
the appointment of a director from the other gender if at the time a director is appointed all members of the board of directors are of
the same gender). In accordance with these regulations, we elected to “opt out” from such requirements of the Companies Law.
Under these regulations, the exemptions from such Companies Law requirements will continue to be available to us so long as: (i) we do
not have a “controlling shareholder” (as such term is defined under the Companies Law), (ii) our shares are traded on certain
U.S. stock exchanges, including Nasdaq, and (iii) we comply with the director independence requirements and the audit committee and compensation
committee composition requirements under U.S. laws (including applicable rules of Nasdaq) applicable to U.S. domestic issuers.
We are a “foreign private issuer”
(as such term is defined in Rule 3b-4 under the Exchange Act). As a foreign private issuer we are permitted to comply with Israeli corporate
governance practices instead of the corporate governance rules of Nasdaq, provided that we disclose which requirements we are not following
and the equivalent Israeli requirement. As a foreign private issuer, we are exempt under the Exchange Act from, among other things, the
rules prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from
the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required
under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose
securities are registered under the Exchange Act.
For more information regarding our corporate governance
practices and foreign private issuer status, see “Corporate Governance” in Item 16.G below.
Board of Directors
Under the Companies Law and our amended and restated
articles of association, our business and affairs are managed under the direction of our board of directors. Our board of directors may
exercise all powers and may take all actions that are not specifically granted to our shareholders or to executive management. Our Chief
Executive Officer (referred to as a
“general manager” under the Companies Law) is responsible for our day-to-day management.
Our Chief Executive Officer is appointed by, and serves at the discretion of, our board of directors, subject to the employment agreement
that we have entered into with him. All other executive officers are appointed by the Chief Executive Officer, subject to applicable corporate
approvals, and are subject to the terms of any applicable employment or consulting agreements that we may enter into with them.
Under our amended and restated
articles of association,
the number of directors on our board of directors is determined by our board of directors and will be no less than three and no more than
eleven directors divided into three classes with staggered three-year terms. Each class of directors consists, as nearly as possible,
of one-third of the total number of directors constituting the entire board of directors. At each annual general meeting of our shareholders,
the election or re-election of directors following the expiration of the term of office of the directors of that class of directors will
be for a term of office that expires on the third annual general meeting following such election or re-election, such that each year the
term of office of only one class of directors expires.
We comply with the rules of Nasdaq requiring that
a majority of our directors are independent. Our board of directors has determined that all of our directors, other than
Amir Schlachet,
Nir Debbi and Shahar Tamari, are independent under such rules. Our directors are divided among the three classes as follows:
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the Class I directors are Amir Schlachet, Miguel Angel Parra and Iris
Epple-Righi, and their terms will expire at our annual general meeting of shareholders to be held in 2025; |
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the Class II directors, are Nir Debbi and Anna Jain Bakst, and their
terms will expire at our annual meeting of shareholders to be held in 2026; and |
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The Class III directors are Shahar Tamari, Gen Tsuchikawa and Tzvia
Broida, and their terms will expire at our annual meeting of shareholders to be held in 2024. |
Our directors are appointed by a simple majority
vote of holders of our ordinary shares, participating and voting at an annual general meeting of our shareholders, provided that (i) in
the event of a contested election, the method of calculation of the votes and the manner in which the resolutions will be presented to
our shareholders at the general meeting shall be determined by our board of directors in its discretion, and (ii) in the event that our
board of directors does not or is unable to make a determination on such matter, then the directors will be elected by a plurality of
the voting power represented at the general meeting in person or by proxy and voting on the election of directors. Each director will
hold office until the annual general meeting of our shareholders for the year in which such director’s term expires, unless the
tenure of such director expires earlier pursuant to the Companies Law or unless such director is removed from office as described below.
Under our amended and restated
articles of association,
the approval of the holders of at least 70% of the total voting power of our shareholders is generally required to remove any of our directors
from office or amend the provision requiring the approval of at least 70% of the total voting power of our shareholders to remove any
of our directors from office, or certain other provisions regarding our staggered board, shareholder proposals, the size of our board
and plurality voting in contested elections. In addition, vacancies on our board of directors may be filled by a vote of a simple majority
of the directors then in office. A director so appointed will hold office until the next annual general meeting of our shareholders for
the election of the class of directors in respect of which the vacancy was created, or in the case of a vacancy due to the number of directors
being less than the maximum number of directors stated in our amended and restated
articles of association, until the next annual general
meeting of our shareholders for the election of the class of directors to which such director was assigned by our board of directors.
Chairperson of the Board
Our amended and restated
articles of association
provide that the Chairperson of the board of directors is appointed by the members of the board of directors from among them. Under the
Companies Law, the chief executive officer of a public company, or a relative of the chief executive officer, may not serve as the chairperson
of the board of directors of such public company, and the chairperson of the board of directors of a public company, or a relative of
the chairperson, may not be vested with authorities of the chief executive officer of such public company, without shareholder approval
consisting of a majority vote of the shares present and voting at a shareholders meeting, and in addition, either:
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at least a majority of the shares of non-controlling shareholders and
shareholders that do not have a personal interest in the approval voted at the meeting are voted in favor (disregarding abstentions);
or |
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the total number of shares of non-controlling shareholders and shareholders
who do not have a personal interest in such appointment that re voted against such appointment does not exceed two percent (2%) of the
aggregate voting rights in the company. |
In addition, a person who is subordinated, directly
or indirectly, to the chief executive officer may not serve as the chairperson of the board of directors, the chairperson of the board
of directors may not be vested with authorities that are granted to persons who are subordinated to the chief executive officer and the
chairperson of the board of directors may not serve in any other position in
the company or in a controlled subsidiary, but may serve
as a director or chairperson of a controlled subsidiary.
During a special and annual general meeting of
our shareholders held on
March 21, 2021, our shareholders approved the appointment of
Amir Schlachet as Chairperson of our board of directors
in addition to his role as our Chief Executive Officer. According to the Companies Law and the regulations promulgated thereunder, such
appointment is valid for an initial term of five years following the closing of our initial public offering. Following such initial term,
each renewal of the appointment of our Chief Executive Officer as Chairperson of the board of directors will be subject to the shareholder
approval described above and will be limited to a three-year term.
External Directors
Under the Companies Law, companies incorporated
under the laws of the State of Israel that are “public companies,” including companies with shares listed on Nasdaq, are required
to appoint at least two external directors. Pursuant to regulations promulgated under the Companies Law, companies with shares traded
on certain U.S. stock exchanges, including Nasdaq, which do not have a “controlling shareholder,” may, subject to certain
conditions, “opt out” from the Companies Law requirements to appoint external directors and related Companies Law rules concerning
the composition of the audit committee and compensation committee of the board of directors. In accordance with these regulations, we
have elected to “opt out” from the Companies Law requirement to appoint external directors and related Companies Law rules
concerning the composition of the audit committee and compensation committee of our board of directors.
Board Committees
Our board of directors has established an audit
committee, a compensation committee and a nominating, governance and sustainability committee.
Audit Committee
Companies
Law Requirements. Under the Companies Law, the board of directors of a public company must
appoint an audit committee. The audit committee must be comprised of at least three directors.
Listing
Requirements. Under the corporate governance rules of Nasdaq, we are required to maintain an
audit committee consisting of at least three independent directors, each of whom is financially literate and one of whom has accounting
or related financial management expertise.
Our audit committee consists
of Tzvia Broida, Anna Bakst and Iris Epple-Righi. Tzvia Broida serves as the chairperson of the audit committee. All members of our audit
committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the corporate governance
rules of Nasdaq. Our board of directors has determined that Tzvia Broida is an audit committee financial expert as defined by the SEC
rules and has the requisite financial experience as defined by the corporate governance rules of Nasdaq.
Our board of directors has
determined that each member of our audit committee is “independent” as such term is defined under the Nasdaq corporate governance
rules and under and Rule 10A-3(b)(1) under the Exchange Act, which is different from the general test for independence of board members.
Audit
Committee Role. Our board of directors has adopted an audit committee charter setting
forth the responsibilities of the audit committee, which are consistent with the Companies Law, the SEC rules and the corporate governance
rules of Nasdaq and include:
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retaining and terminating our independent auditors, subject to ratification
by the board of directors, and in the case of retention, to ratification by the shareholders; |
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pre-approving audit and non-audit services to be provided by the independent
auditors and related fees and terms; |
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overseeing the accounting and financial reporting processes of our
Company and audits of our financial statements, the effectiveness of our internal control over financial reporting and making such reports
as may be required of an audit committee under the rules and regulations promulgated under the Exchange Act; |
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reviewing with management and our independent auditor our annual and
quarterly financial statements prior to publication or filing (or submission, as the case may be) to the SEC; |
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recommending to the board of directors the retention and termination
of the internal auditor, and the internal auditor’s engagement fees and terms, in accordance with the Companies Law as well as approving
the yearly or periodic work plan proposed by the internal auditor and reviewing and discussing the results of internal auditor activities,
including significant findings and management’s responses to significant findings; |
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reviewing policies and procedures with respect to related party transactions
(other than transactions related to the compensation or terms of services) between the Company and officers and directors, or affiliates
of officers or directors, or transactions that are not in the ordinary course of the Company’s business and deciding whether to
approve such acts and transactions if so required under the Companies Law and the rules of Nasdaq; |
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reviewing policies with respect to assessment and risk management,
including the management of financial risks, cybersecurity, and information security risks and discuss with management the steps management
has taken to monitor and control these exposures; |
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periodically evaluating the committee’s performance; and
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establishing procedures for the handling of employees’ complaints
as to the management of our business and the protection to be provided to such employees. |
Compensation Committee
Companies
Law Requirements. Under the Companies Law, the board of directors of a public company must appoint
a compensation committee, which must be comprised of at least three directors.
Listing
Requirements. Under the corporate governance rules of Nasdaq, we are required to maintain
a compensation committee consisting of at least two independent directors.
Our compensation
committee consists of Anna Bakst, Iris Epple-Righi and Gen Tsuchikawa. Anna Bakst serves as chairperson of the committee. Our board of
directors has determined that each member of our compensation committee is independent under the corporate governance rules of Nasdaq,
including the additional independence requirements applicable to the members of a compensation committee.
Compensation
Committee Role
In accordance with the Companies Law, the roles
of the compensation committee are, among others, as follows:
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making recommendations to the board of directors with respect to the
approval of the compensation policy for office holders and, once every three years, regarding any extensions to a compensation policy
that was adopted for a period of more than three years;
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reviewing the implementation of the compensation policy and periodically
making recommendations to the board of directors with respect to any amendments or updates of the compensation policy;
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resolving whether or not to approve arrangements with respect to the
terms of office and employment of office holders; and
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exempting, under certain circumstances, a transaction with our Chief
Executive Officer from the approval of our shareholders. |
Our board of directors has adopted a compensation
committee charter setting forth the responsibilities of the committee, which are consistent with the Companies Law, the SEC rules and
the corporate governance rules of Nasdaq and include among others:
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overseeing the Company's succession planning for the Chief Executive
Officer and other office holders; |
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recommending to our board of directors for its approval a compensation
policy in accordance with the requirements of the Companies Law as well as other compensation policies, incentive-based compensation plans
and equity-based compensation plans, and overseeing the development and implementation of such policies and recommending to our board
of directors any amendments or modifications to such policies the committee deems appropriate, including as required under the Companies
Law; |
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reviewing and approving the granting of incentive awards to our Chief
Executive Officer and other executive officers, including reviewing and approving corporate goals and objectives relevant to the compensation
of our Chief Executive Officer and other executive officers; |
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approving and exempting certain transactions regarding office holders’
compensation pursuant to the Companies Law; |
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administering the Company's compliance with the compensation recovery
(clawback) policy required by applicable SEC and Nasdaq rules; |
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administering our equity-based compensation plans, including without
limitation, approving the adoption of such plans, amending and interpreting such plans and the awards and agreements issued pursuant thereto,
and making awards to eligible persons under the plans and determining the terms of such awards; |
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overseeing and periodically reviewing with management the Company's
strategies, policies and practices with respect to human capital management and talent development; and |
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periodically evaluating the committee’s performance. |
Compensation Policy under the
Companies Law
In general, under the Companies Law, a public
company must have a compensation policy approved by the board of directors after receiving and considering the recommendations of the
compensation committee. In addition, our compensation policy must be approved at least once every three years, first, by our board of
directors, upon recommendation of our compensation committee, and second, by a simple majority of the ordinary shares present, in person
or by proxy, and voting (excluding abstentions) at a general meeting of shareholders, provided that either:
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such majority includes at least a majority of the shares held by shareholders
who are not controlling shareholders and shareholders who do not have a personal interest in such compensation policy; or
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the total number of shares of non-controlling shareholders and shareholders
who do not have a personal interest in the compensation policy and who vote against the policy does not exceed two percent (2%) of the
aggregate voting rights in the Company. |
Under special circumstances, the board of directors
may approve the compensation policy despite the objection of the shareholders on the condition that the compensation committee and then
the board of directors decide, on the basis of detailed grounds and after discussing again the compensation policy, that approval of the
compensation policy, despite the objection of shareholders, is for the benefit of
the company.
If a company that initially offers its securities
to the public, like us, adopts a compensation policy in advance of its initial public offering, and describes it in its prospectus for
such offering, as we did, then such compensation policy shall be deemed a validly adopted policy in accordance with the Companies Law
requirements described above. Furthermore, if the compensation policy is established in accordance with the aforementioned relief, then
it will remain in effect for a term of five years from the date such company becomes a public company.
The compensation policy must be based on certain
considerations, include certain provisions and reference certain matters as set forth in the Companies Law. The compensation policy must
serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, including exculpation,
insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy
must be determined and later reevaluated according to certain factors, including: the advancement of
the company’s objectives, business
plan and long-term strategy; the creation of appropriate incentives for office holders, while considering, among other things,
the company’s
risk management policy; the size and the nature of
the company’s operations; and with respect to variable compensation, the contribution
of the office holder towards the achievement of
the company’s long-term goals and the maximization of its profits, all with a long-term
objective and according to the position of the office holder. The compensation policy must furthermore consider the following additional
factors:
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the education, skills, experience, expertise and accomplishments of
the relevant office holder; |
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the office holder’s position and responsibilities; |
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prior compensation agreements with the office holder; |
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the ratio between the cost of the terms of employment of an office
holder and the cost of the employment of other employees of the company, including employees employed through contractors who provide
services to the company, in particular the ratio between such cost to the average and median salary of such employees of the company,
as well as the impact of disparities between them on the work relationships in the company; |
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if the terms of employment include variable components - the possibility
of reducing variable components at the discretion of the board of directors and the possibility of setting a limit on the value of non-cash
variable equity-based components; and |
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if the terms of employment include severance compensation - the term
of employment or office of the office holder, the terms of the office holder’s compensation during such period, the company’s
performance during such period, the office holder’s individual contribution to the achievement of the company goals and the maximization
of its profits and the circumstances under which they are leaving the company. |
The compensation policy must also include, among other things:
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with regards to variable components: |
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with the exception of office holders who report to the chief executive
officer, a means of determining the variable components on the basis of long-term performance and measurable criteria; provided that the
company may determine that an immaterial part of the variable components of the compensation package of an office holder shall be awarded
based on non-measurable criteria, or if such amount is not higher than three months’ salary per annum, taking into account such
office holder’s contribution to the company; |
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the ratio between variable and fixed components, as well as the limit
of the values of variable components at the time of their payment, or in the case of equity-based compensation, at the time of grant;
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a condition under which the office holder will return to the company,
according to conditions to be set forth in the compensation policy, any amounts paid as part of the office holder’s terms of employment,
if such amounts were paid based on information later to be discovered to be wrong, and such information was restated in the company’s
financial statements; |
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the minimum holding or vesting period of variable equity-based components
to be set in the terms of office or employment, as applicable, while taking into consideration long-term incentives; and |
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a limit to retirement grants. |
Our compensation policy is designed to promote
retention and motivation of directors and executive officers, incentivize superior individual excellence, align the interests of our directors
and executive officers with our long-term performance and provide a risk management tool. To that end, a portion of our executive officer
compensation package is targeted to reflect our short and long-term goals, as well as the executive officer’s individual performance.
On the other hand, our compensation policy includes measures designed to reduce the executive officer’s incentives to take excessive
risks that may harm us in the long-term, such as limits on the value of cash bonuses and equity-based compensation, limitations on the
ratio between the variable and the total compensation of an executive officer and minimum vesting periods for equity-based compensation.
Our compensation policy also addresses our executive
officers’ individual characteristics (such as their respective position, education, scope of responsibilities and contribution to
the attainment of our goals) as the basis for compensation variation among our executive officers and considers the internal ratios between
compensation of our executive officers and directors and other employees. Pursuant to our compensation policy, the compensation that may
be granted to an executive officer may include: base salary, annual bonuses and other cash bonuses (such as a signing bonus and special
bonuses with respect to any special achievements, such as outstanding personal achievement, outstanding personal effort or outstanding
company performance), equity-based compensation, benefits and retirement and termination of service arrangements. All cash bonuses are
limited to a maximum amount linked to the executive officer’s base salary.
An annual cash bonus may be awarded to executive
officers upon the attainment of pre-set periodic objectives and individual targets. The annual cash bonus that may be granted to our executive
officers other than our Chief Executive Officer will be based on performance objectives and a discretionary evaluation of the executive
officer’s overall performance by our Chief Executive Officer and subject to minimum thresholds. The annual cash bonus that may be
granted to executive officers other than our Chief Executive Officer may alternatively be based entirely on a discretionary evaluation.
Furthermore, our Chief Executive Officer will be entitled to approve performance objectives for executive officers who report to him.
The measurable performance objectives of our Chief
Executive Officer will be determined annually by our compensation committee and board of directors. A non-material portion of the Chief
Executive Officer’s annual cash bonus, as provided in our compensation policy, may be based on a discretionary evaluation of the
Chief Executive Officer’s overall performance by the compensation committee and the board of directors.
The equity-based compensation under our compensation
policy for our executive officers (including members of our board of directors) is designed in a manner consistent with the underlying
objectives in determining the base salary and the annual cash bonus, with its main objectives being to enhance the alignment between the
executive officers’ interests with our long-term interests and those of our shareholders and to strengthen the retention and the
motivation of executive officers in the long term. Our compensation policy provides for executive officer compensation in the form of
share options or other equity-based awards, such as restricted shares and restricted share units, in accordance with our equity incentive
plan then in place. All equity-based incentives granted to executive officers shall be subject to vesting periods in order to promote
long-term retention of the awarded executive officers. The equity-based compensation shall be granted from time to time and be individually
determined and awarded according to the performance, educational background, prior business experience, qualifications, role and the personal
responsibilities of the executive officer.
In addition, our compensation policy contains
compensation recovery provisions which allow us under certain conditions to recover bonuses paid in excess, enable our Chief Executive
Officer to approve an immaterial change in the terms of employment of an executive officer who reports directly him (provided that the
changes of the terms of employment are in accordance with our compensation policy) and allow us to exculpate, indemnify and insure our
executive officers and directors to the maximum extent permitted by Israeli law subject to certain limitations set forth therein.
Our compensation policy also provides for compensation
to the members of our board of directors either (i) in accordance with the amounts provided in the Companies Regulations (Rules Regarding
the Compensation and Expenses of an External Director) of 2000, as amended by the Companies Regulations (Relief for Public Companies Traded
in Stock Exchange Outside of Israel) of 2000, as such regulations may be amended from time to time, or (ii) in accordance with the amounts
determined in our compensation policy.
Our compensation policy was approved by our board
of directors and shareholders and became effective immediately prior to the closing of our initial public offering and is filed as an
exhibit to this Annual Report.
Following the SEC approval of Nasdaq’s proposed
clawback listing standards, under Rule 10D-1, or the Clawback Listing Rules, which directed companies to adopt and comply with a written
clawback policy, to disclose and file the policy as an exhibit to its Annual Report, we have adopted effective
October 2, 2023, a clawback
policy as contemplated pursuant to the Clawback Listing Rules, as filed as an exhibit to this Annual Report as
Exhibit 97.1.
Nominating, Governance and Sustainability Committee
Our nominating, governance and sustainability
committee consists of Iris Epple-Righi, Anna Bakst and Gen Tsuchikawa. Iris Epple-Righi serves as chairperson of the committee. Our board
of directors has adopted a nominating, governance and sustainability committee charter setting forth the responsibilities of the committee,
which include:
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overseeing and assisting our board in reviewing and recommending nominees
for election as directors, including reviewing the board leadership structure to assess whether it is appropriate given the specific characteristics
and circumstances of the Company; |
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review the Board leadership structure to assess whether it is appropriate
given the specific characteristics and circumstances of the Company and recommend any proposed changes to the board. |
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assisting our board in its oversight relating to corporate responsibility
and environmental, social and governance matters; |
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overseeing periodic assessments of the performance of the members of
our board and its committees; and |
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establishing and maintaining effective corporate governance policies
and practices, including, but not limited to, developing and recommending to our board a set of corporate governance guidelines applicable
to our business. |
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periodically review, and provide oversight with respect to, the Company’s
strategy, initiatives and policies concerning environmental and social matters of significance to the Company (with the Company’s
compensation committee having primary responsibility for matters relating to human capital management and the audit committee having primary
responsibility for matters related to the incorporation of sustainability matters into the Company's risk management and assessment process,
which the committee may discuss with the compensation committee and the audit committee, as appropriate) and may make recommendations
to the board regarding environmental and social matters |
Code of Conduct
Our board of directors has adopted a written code
of conduct that applies to our directors, officers and employees, including our principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar functions. A current copy of the code is posted on the investor
section of our
website.
Internal Auditor
Under the Companies Law, the board of directors
of a public company must appoint an internal auditor based on the recommendation of the audit committee. The role of the internal auditor
is, among other things, to examine whether a company’s actions comply with applicable law and orderly business procedure. Under
the Companies Law, the internal auditor cannot be an interested party or an office holder or a relative of an interested party or an office
holder, nor may the internal auditor be
the company’s independent auditor or its representative. An
“interested party”
is defined in the Companies Law as (i) a holder of 5% or more of the issued share capital or voting power in a company, (ii) any person
or entity who has the right to designate one or more directors or to designate the chief executive officer of
the company or (iii) any
person who serves as a director or as chief executive officer of
the company. As of
December 31, 2023 and since
July 27, 2021, Ms. Sharon
Cohen, CPA from Brightman Almagor Zohar & Co., a firm in the Deloitte Global Network, is acting as our internal auditor.
Approval of Related Party Transactions under Israeli
Law
Fiduciary Duties of Directors
and Executive Officers
The Companies Law codifies the fiduciary duties
that office holders owe to a company. An office holder is defined in the Companies Law as a general manager, chief business manager, deputy
general manager, vice general manager, any other person assuming the responsibilities of any of these positions regardless of such person’s
title, a director and any other manager directly subordinate to the general manager. Each person listed in the table under “Directors
and Senior Management” is an office holder under the Companies Law.
An office holder’s fiduciary duties consist
of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care with which a reasonable
office holder in the same position would have acted under the same circumstances. The duty of care includes, among other things, a duty
to use reasonable means, in light of the circumstances, to obtain:
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information on the business advisability of a given action brought
for his, her or its approval or performed by virtue of his, her or its position; and |
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all other important information pertaining to such action. |
The duty of loyalty requires that an office holder
act in good faith and in the best interests of
the company, and includes, among other things, the duty to:
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refrain from any act involving a conflict of interest between the performance
of his, her or its duties in the company and his, her or its other duties or personal affairs; |
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refrain from any activity that is competitive with the business of
the company; |
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refrain from exploiting any business opportunity of the company for
the purpose of gaining a personal advantage for himself, herself or itself or others; and |
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disclose to the company any information or documents relating to the
company’s affairs which the office holder received as a result of his, her or its position as an office holder. |
Under the Companies Law, a company may approve
an act specified above which would otherwise constitute a breach of the office holder’s fiduciary duty, provided that the office
holder acted in good faith, neither the act nor its approval harms
the company and the office holder discloses his, her or its personal
interest a sufficient time before the approval of such act. Any such approval is subject to the terms of the Companies Law setting forth,
among other things, the appropriate bodies of
the company required to provide such approval and the methods of obtaining such approval.
Disclosure
of Personal Interests of an Office Holder and Approval of Certain Transactions.
The Companies Law requires that an office holder
promptly disclose to the board of directors any personal interest that such office holder may have and all related material information
known to such office holder concerning any existing or proposed transaction with
the company. A personal interest includes an interest
of any person in an act or transaction of a company, including a personal interest of one’s relative or of a corporate body in which
such person or a relative of such person is a 5% or greater shareholder, director or general manager or in which such person has the right
to appoint at least one director or the general manager, but excluding a personal interest stemming solely from one’s ownership
of shares in
the company. A personal interest includes the personal interest of a person for whom the office holder holds a voting proxy
or the personal interest of the office holder with respect to the officer holder’s vote on behalf of a person for whom they hold
a proxy even if such shareholder has no personal interest in the matter.
If it is determined that an office holder has
a personal interest in a non-extraordinary transaction, meaning any transaction that is in the ordinary course of business, on market
terms or that is not likely to have a material impact on
the company’s profitability, assets or liabilities, approval by the board
of directors is required for the transaction unless
the company’s
articles of association provide for a different method of approval.
Any such transaction that is adverse to
the company’s interests may not be approved by the board of directors.
Approval first by
the company’s audit committee
and subsequently by the board of directors is required for an extraordinary transaction (meaning any transaction that is not in the ordinary
course of business, not on market terms or that is likely to have a material impact on
the company’s profitability, assets or liabilities)
in which an office holder has a personal interest.
A director and any other office holder who has
a personal interest in a transaction which is considered at a meeting of the board of directors or the audit committee may generally (unless
it is with respect to a transaction which is not an extraordinary transaction) not be present at such a meeting or vote on that matter
unless a majority of the directors or members of the audit committee, as applicable, have a personal interest in the matter. If a majority
of the members of the audit committee or the board of directors have a personal interest in the matter, then all of the directors may
participate in deliberations of the audit committee or board of directors, as applicable, with respect to such transaction and vote on
the approval thereof and, in such case, shareholder approval is also required.
Certain disclosure and approval requirements apply
under Israeli law to certain transactions with controlling shareholders, certain transactions in which a controlling shareholder has a
personal interest and certain arrangements regarding the terms of service or employment of a controlling shareholder. For these purposes,
a controlling shareholder is any shareholder that has the ability to direct
the company’s actions, including any shareholder holding
25% or more of the voting rights if no other shareholder owns more than 50% of the voting rights in
the company. Two or more shareholders
with a personal interest in the approval of the same transaction are deemed to be one shareholder.
For a description of the approvals required under
Israeli law for compensation arrangements of officers and directors, see “Compensation of Directors and Executive Officers.”
Shareholder Duties
Pursuant to the Companies Law, a shareholder has
a duty to act in good faith and in a customary manner toward
the company and other shareholders and to refrain from abusing his or her
power with respect to
the company, including, among other things, in voting at a general meeting and at shareholder class meetings with
respect to the following matters:
• |
|
|
|
• |
|
|
|
• |
a merger; or |
|
|
• |
interested party transactions that require shareholder approval.
|
In addition, a shareholder has a general duty
to refrain from discriminating against other shareholders.
Certain shareholders also have a duty of fairness
toward
the company. These shareholders include any controlling shareholder, any shareholder who knows that it has the power to determine
the outcome of a shareholder vote and any shareholder who has the power to appoint or to prevent the appointment of an office holder of
the company or exercise any other rights available to it under
the company’s
articles of association with respect to
the company.
The Companies Law does not define the substance of this duty of fairness, except to state that the remedies generally available upon a
breach of
contract will also apply in the event of a breach of the duty of fairness.
Exculpation, Insurance and Indemnification of Office
Holders
Under the Companies Law, a company may not exculpate
an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an office holder in advance from
liability, in whole or in part, for damages caused as a result of a breach of duty of care but only if a provision authorizing such exculpation
is included in its
articles of association. Our amended and restated
articles of association include such a provision. An Israeli company
may not exculpate a director from liability arising out of a prohibited dividend or distribution to shareholders.
An Israeli company may indemnify an office holder
in respect of the following liabilities and expenses incurred for acts performed as an office holder, either in advance of an event or
following an event, provided a provision authorizing such indemnification is contained in its
articles of association:
•
|
a financial liability imposed on him or her in favor of another person
pursuant to a judgment, including a settlement or arbitrator’s award approved by a court. However, if an undertaking to indemnify
an office holder with respect to such liability is provided in advance, then such an undertaking must be limited to events which, in the
opinion of the board of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given,
and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking
shall detail the abovementioned events and amount or criteria; |
•
|
reasonable litigation expenses, including legal fees, incurred by the
office holder (1) as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such
investigation or proceeding, provided that (i) no indictment was filed against such
office holder as a result of such investigation or proceeding; and (ii) no financial liability, such as a criminal penalty, was imposed
upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability
was imposed, it was imposed with respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary
sanction; |
|
|
•
|
reasonable litigation expenses, including legal fees, incurred by the
office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf or by a third-party or
in connection with criminal proceedings in which the office holder was acquitted or as a result of a conviction for an offense that does
not require proof of criminal intent; and |
|
|
•
|
expenses, including reasonable litigation expenses and legal fees,
incurred by an office holder in relation to an administrative proceeding instituted against such office holder, or certain compensation
payments made to an injured party imposed on an office holder by an administrative proceeding, pursuant to certain provisions of the Israeli
Securities Law, 1968 (the “Israeli Securities Law”). |
An Israeli company may insure an office holder
against the following liabilities incurred for acts performed as an office holder if and to the extent provided in
the company’s
articles of association:
• |
a breach of the duty of loyalty to the company, to the extent that
the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;
|
|
|
• |
a breach of the duty of care to the company or to a third-party, including
a breach arising out of the negligent conduct of the office holder; |
|
|
• |
a financial liability imposed on the office holder in favor of a third-party;
|
|
|
• |
a financial liability imposed on the office holder in favor of a third-party
harmed by a breach in an administrative proceeding; and |
|
|
• |
expenses, including reasonable litigation expenses and legal fees,
incurred by the office holder as a result of an administrative proceeding instituted against him or her, pursuant to certain provisions
of the Israeli Securities Law. |
An Israeli company may not indemnify or insure
an office holder against any of the following:
• |
a breach of the duty of loyalty, except to the extent that the office
holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company; |
|
|
• |
a breach of the duty of care committed intentionally or recklessly,
excluding a breach arising out of the negligent conduct of the office holder; |
|
|
• |
an act or omission committed with intent to derive illegal personal
benefit; or |
|
|
• |
a fine, monetary sanction or forfeit levied against the office holder.
|
Under the Companies Law, exculpation, indemnification
and insurance of office holders must be approved by the compensation committee and the board of directors (and, with respect to directors
and the chief executive officer, by the shareholders). However, under regulations promulgated under the Companies Law, the insurance of
office holders does not require shareholder approval and may be approved by only the compensation committee, if the engagement terms are
determined in accordance with
the company’s compensation policy, which was approved by the shareholders by the same special majority
required to approve a compensation policy, provided that the insurance policy is on market terms and the insurance policy is not likely
to materially impact
the company’s profitability, assets or obligations.
Our amended and restated
articles of association
allow us to exculpate, indemnify and insure our office holders for any liability imposed on them as a consequence of an act (including
any omission) which was performed by virtue of being an office holder. Our office holders are currently covered by a directors and officers’
liability insurance policy.
We have entered into agreements with each of our
directors and executive officers exculpating them in advance, to the fullest extent permitted by law, from liability to us for damages
caused to us as a result of a breach of duty of care, and undertaking to indemnify them to the fullest extent permitted by law. This indemnification
is limited to events determined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria
determined by the board of directors as reasonable under the circumstances.
The maximum indemnification amount set forth in
such agreements is limited to an amount equal to the higher of $250,000,000, 25% of our total shareholders’ equity as reflected
in our most recent consolidated financial statements prior to the date on which the indemnity payment is made, and 10% of our total market
cap calculated based on the average closing prices of our ordinary shares over the 30 trading days prior to the actual payment, multiplied
by the total number of our issued and outstanding shares as of the date of the payment (other than indemnification for an offering of
securities to the public, including by a shareholder in a secondary offering, in which case the maximum indemnification amount is limited
to the gross proceeds raised by us and/or any selling shareholder in such public offering). The maximum amount set forth in such agreements
is in addition to any amount paid (if paid) under insurance and/or by a third-party pursuant to an indemnification arrangement.
In the opinion of the SEC, indemnification of
directors and office holders for liabilities arising under the Securities Act, however, is against public policy and therefore unenforceable.
There is no pending litigation or proceeding against
any of our office holders as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may
result in claims for indemnification by any office holder.
As of
December 31, 2023, we had 923 employees
worldwide, including 533 in research and development. Of our employees, 448 are in Israel and 475 are in our international locations.
None of our employees is represented by a labor organization or is a party to a collective bargaining arrangement or expansion orders
of such arrangements, with the exception of a small number of employees in France, Spain, Australia and Israel who are covered by mandatory
industry-wide collective bargaining agreements in accordance with local law.
In regard to our employees generally, applicable
labor and employment laws may govern the length of the workday, minimum wages for employees, procedures for hiring and dismissing employees,
determination of severance pay, annual leave, sick days, convalescence, advance notice of termination of employment, equal opportunity
and anti-discrimination laws and other terms and conditions of employment, as applicable.
Subject to certain exceptions, Israeli law generally
requires severance pay upon the retirement, death or dismissal of an employee, without due cause, and requires us and our employees to
make payments to the National Insurance Institute, which is similar to the U.S. Social Security Administration. Pursuant to Section 14
of the Israeli Severance Pay Law, 5723-1963 (“Section 14”), our executive officers and key employees in Israel are entitled
to monthly deposits, at a rate of 8.33% of their monthly salary, made in their name with insurance companies. Payments under Section 14
relieve us from any of the aforementioned future severance payment obligations with respect to those employees and, as such, we may only
utilize the insurance policies for the purpose of disbursement of severance pay. As a result, we do not recognize an asset nor liability
for these employees.
Extension orders issued by the Israeli Ministry
of Economy and Industry apply to us and affect matters such as cost of living adjustments to salaries, length of working hours and week,
recuperation pay, travel expenses and pension rights.
We have never experienced labor-related work stoppages
or strikes and believe that our relations with our employees are satisfactory.
For information regarding the share ownership
of directors and officers, see. “Major Shareholders” in Item 7.A below. For information as to our equity incentive plans,
see “Share Incentive Plans.” in Item 6.B above.
F. |
Disclosure of
a Registrant’s Action to Recover Erroneously Awarded Compensation |
None.
Item 7
. Major
Shareholders and Related Party Transactions
The following table sets forth information with respect to the beneficial ownership of our ordinary shares
as of
March 20, 2024 by:
• |
each person or group of affiliated persons known by us to own beneficially
more than 5% of our outstanding ordinary shares; |
|
|
• |
each of our directors and executive officers individually; and
|
|
|
• |
all of our executive officers and directors as a group. |
The beneficial ownership of ordinary shares is determined
in accordance with the SEC rules and generally includes any ordinary shares over which a person exercises sole or shared voting or investment
power.
For purposes of the table below, we deem ordinary
shares subject to options, RSUs or warrants that are exercisable (or settled, as the case may be) within 60 days of
March 20, 2024 to
be outstanding and to be beneficially owned by the person holding the options, RSUs or warrants for the purposes of computing the ownership
and percentage ownership of that person but we do not treat them as outstanding for the purpose of computing the ownership or percentage
ownership of any other person, except with respect to the ownership and percentage ownership of all executive officers and directors as
a group. The percentage of shares beneficially owned is based on 166,307,077 ordinary shares outstanding as of
March 20, 2024. Unless
otherwise noted below, the address of each shareholder listed below is 9 HaPsagot Street, Petah Tikva 4951041, Israel.
A description of any material relationship that
our principal shareholders have had with us or any of our affiliates within the past three years is included under “Related Party
Transactions”.
|
|
Number of Ordinary Shares
|
|
Name of Beneficial Owner |
|
Amount and Nature of Beneficial Ownership
|
|
|
Percentage of Outstanding shares
|
|
|
Percentage of Voting Power |
|
|
|
Principal Shareholders
|
|
|
|
|
|
|
|
|
|
Deutsche Post Beteiligungen Holding GmbH(1)
|
|
|
20,006,696 |
|
|
|
12.03 |
% |
|
|
12.03 |
% |
Shopify Inc. and its affiliate (2)
|
|
|
21,858,282 |
|
|
|
13.14 |
% |
|
|
13.14 |
% |
Morgan Stanley and its affiliate (3)
|
|
|
16,662,763 |
|
|
|
10.02 |
% |
|
|
10.02 |
% |
Abdiel Qualified Master Fund, LP and its affiliates (4)
|
|
|
11,243,934 |
|
|
|
6.76 |
% |
|
|
6.76 |
% |
Dragoneer Investment Group, LLC (5)
|
|
|
12,437,103 |
|
|
|
7.48 |
% |
|
|
7.48 |
% |
Directors, Director Nominees
and Executive Officers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,623,392 |
|
|
|
3.38 |
% |
|
|
3.38 |
% |
Shahar Tamari (7)
|
|
|
5,622,850 |
|
|
|
3.38 |
% |
|
|
3.38 |
% |
Nir Debbi (8)
|
|
|
5,898,700 |
|
|
|
3.55 |
% |
|
|
3.55 |
% |
Ofer Koren (9)
|
|
|
566,250 |
|
|
|
* |
|
|
|
* |
|
Ran Fridman (10)
|
|
|
39,573 |
|
|
|
* |
|
|
|
* |
|
Yehiam Shinder (11)
|
|
|
9,920 |
|
|
|
* |
|
|
|
* |
|
Miguel Angel Parra (12)
|
|
|
|
|
|
|
|
|
|
|
|
|
Tzvia Broida (13)
|
|
|
|
|
|
|
* |
|
|
|
* |
|
Anna J. Bakst (14)
|
|
|
16,354 |
|
|
|
* |
|
|
|
* |
|
Iris Epple-Righi (15)
|
|
|
16,354 |
|
|
|
* |
|
|
|
* |
|
Gen Tsuchikawa |
|
|
|
|
|
|
|
|
|
|
|
|
All
executive officers and directors as a group (11 persons) |
|
|
|
|
|
|
10.70 |
% |
|
|
10.70 |
% |
* |
Indicates ownership of less than 1.0%. |
|
|
(1)
|
This information is based on a Schedule 13G/A filed with the SEC on
February 2, 2024. Represents 20,006,696 ordinary shares held by Deutsche Post Beteiligungen Holding GmbH, a direct wholly owned subsidiary
of Deutsche Post AG and which is affiliated with DHL International GmbH. The address for the Deutsche Post Beteiligungen Holding GmbH
is Charles-de-Gaulle-Straße 20, 53113 Bonn. Federal Republic of Germany. |
(2)
|
This information is based on a Schedule 13G/A filed with the SEC on February 13, 2024 and
information made available to the Company by Shopify. Both Shopify Inc. and Shopify International Limited may be deemed to beneficially
own all of the reported ordinary shares consisting of: (i) 21,612,255 ordinary shares directly held by it and (ii) warrants issuable and
exercisable for an additional 246,027 Ordinary Shares that have vested in March 2024. Shopify Inc. has undertaken, on behalf of itself
and its affiliates, to not cast any votes with respect to Ordinary Shares which provide Shopify Inc. with voting power in excess of 9.7%
of the Company’s issued and outstanding equity. The principal business address of Shopify Inc. is 151 O’Connor Street, Ground
Floor, Ottawa, Ontario, Canada K2P 2L8.The principal business address of Shopify International Limited is 2nd Floor Victoria Buildings
1-2 Haddington Road, Dublin 4, D04 XN32, Ireland. |
(3)
|
This information is based on a Schedule 13G/A filed with the SEC on March 7, 2024. Morgan
Stanley has shared voting power over 15,598,951 ordinary shares and shared dipositive power over 16,662,763 ordinary shares and
Morgan Stanley Investment Management Inc. has shared voting power over 15,513,391 ordinary shares and a shared dipositive power over 16,563,956
ordinary shares. The securities being reported by Morgan Stanley as a parent holding company are owned, or may be deemed to be beneficially
owned, by Morgan Stanley Investment Management Inc., a wholly-owned subsidiary of Morgan Stanley. The address of Morgan Stanley and of
Morgan Stanley Investment Management Inc. is 1585 Broadway New York, NY 10036. |
(4)
|
This information is based on a Schedule 13G/A filed
with the SEC on February 14, 2024. Abdiel Qualified Master Fund, LP may be deemed to be the beneficial owner of 10,845,594 ordinary shares.
Abdiel Capital, LP, may be deemed to be the beneficial owner of 386,840 ordinary shares, Abdiel Partners, LLC may be deemed to be the
beneficial owner of 11,500 ordinary shares, Abdiel Capital Management, LLC, Abdiel Capital Advisors, LP and Colin T. Moran may be deemed
to be the beneficial owners of all reported shares. Abdiel Capital Management, LLC and Abdiel Capital Advisors, LP serve as the general
partner and the investment manager, respectively, of Abdiel Qualified Master Fund, LP and Abdiel Capital, LP. Abdiel Capital Advisors,
LP also serves as the investment manager of Abdiel Partners, LLC. Colin T. Moran serves as managing member of Abdiel Capital Management,
LLC and Abdiel Capital Partners, LLC, which serves as the general partner of Abdiel Capital Advisors, LP. and the managing member of Abdiel
Partners, LLC. Each of the reporting persons disclaims beneficial ownership of the shares reported herein except to the extent of its
or his pecuniary interest therein. The address for the reporting persons is 90 Park Avenue, 29th Floor, New York, NY 10016.
|
(5) |
This information is based on a Schedule 13G/A filed
with the SEC on February 14, 2024. Dragoneer Investment Group, LLC (the “Dragoneer Adviser”) is a registered investment adviser
under the Investment Advisers Act of 1940, as amended. As the managing member of Dragoneer Adviser, Cardinal DIG CC, LLC may also be deemed
to share voting and dispositive power with respect to the Ordinary Shares. Marc Stad is the sole member of Cardinal DIG CC, LLC. By virtue
of these relationships, each of these reporting persons may be deemed to share beneficial ownership of all of the reported ordinary shares.
The address for the reporting persons is One Letterman Dr., Bldg D, Ste M500, San Francisco, CA 94129. |
(6) |
Includes 3,992,472 ordinary shares that Mr. Schlachet holds directly,
144,120 restricted share units that will be settled within 60 days of March 20, 2024, and 1,486,800 ordinary shares underlying options
that were fully vested as at March 20, 2024. |
(7) |
Includes 3,991,930 ordinary shares that Mr. Tamari holds directly,
144,120 restricted share units that will be settled within 60 days of March 20, 2024, and 1,486,800 ordinary shares underlying options
that were fully vested as at March 20, 2024. |
(8) |
Includes 4,267,780 ordinary shares that Mr. Debbi holds directly, 144,120
restricted share units that will be settled within 60 days of March 20, 2024, and 1,486,800 ordinary shares underlying options that were
fully vested as at March 20, 2024. |
(9) |
Includes 566,250 ordinary shares underlying options that will be exercisable
within 60 days of March 20, 2024. |
(10) |
Includes 39,573 restricted share units that will be exercisable within
60 days of March 20, 2024. |
(11) |
Includes 9,920 restricted share units that will be exercisable within
60 days of March 20, 2024. |
(12) |
Mr. Parra holds no shares directly. Mr. Parra serves
as the Chief Executive Officer of DHL Express Europe which is affiliated with Deutsche Post Beteiligungen Holding GmbH.
|
(13) |
Includes 6,439 restricted share units
that will become exercisable within 60 days of March 20, 2024. |
(14) |
Includes 16,354 restricted share units that will become exercisable
within 60 days of March 20, 2024. |
(15) |
Includes 16,354 restricted share units that will become exercisable
within 60 days of March 20, 2024. |
Significant Changes in Ownership
To our knowledge, other than as disclosed in the
table above, our other filings with the SEC and this Annual Report, there has been no significant change in the percentage ownership held
by any major shareholder during the past three years.
Voting Rights
No major shareholders listed above had or have
voting rights with respect to their ordinary shares that are different from the voting rights of other holders of our ordinary shares.
See
“Voting Rights” in I
Exhibit 2.2 attached to this Annual Report.
Change in Control Arrangements
We are not aware of any arrangement that may at
a subsequent date, result in a change of control of
the Company.
Registered Holders
Based on a review of the information provided
to us by our transfer agent, as of
March 20, 2024, there were 29 registered holders of our ordinary shares, including Cede & Co.,
the nominee of The Depository Trust Company, 18 of which are United States registered holders, holding approximately 79% of our outstanding
ordinary shares. The number of record holders in the United States is not representative of the number of beneficial holders nor is it
representative of where such beneficial holders are resident since many of these ordinary shares were held by brokers or other nominees.
B. |
Related Party Transactions |
Our policy is to enter into transactions with
related parties on terms that, on the whole, are no more or less favorable than those available from unaffiliated third parties. Based
on our experience in the business sectors in which we operate and the terms of our transactions with unaffiliated third parties, we believe
that all of the transactions described below met this policy standard at the time they occurred.
The following is a description of related-party
transactions we have entered into since
January 1, 2021 with any of the members of the board of directors, executive officers or holders
of more than 5% of any class of our voting securities at the time of such transaction.
Agreements with Directors and Officers
Employment
Agreements. We have entered into written employment agreements with each of our executive officers. See “Employment
and Consulting Agreements with Executive Officers” in Item 6.B above.
Equity
Awards. Since our inception, we have granted to our executive officers and certain of our directors restricted share units
and options to purchase our ordinary shares. Such award agreements may contain acceleration provisions upon certain transactions. See
“Share Incentive Plans” in Item 6.B above.
Exculpation,
Indemnification and Insurance. Our amended and restated
articles of association permit us to exculpate, indemnify and insure
certain of our office holders to the fullest extent permitted by the Companies Law. We have entered into agreements with each of our directors
and executive officers, exculpating them in advance from a breach of their duty of care to the fullest extent permitted by law and undertaking
to indemnify them to the fullest extent permitted by law, subject to certain exceptions. See
“Exculpation, Insurance and Indemnification
of Office Holders.”
We entered into an
underwriting agreement, dated
September 9, 2021, with certain selling shareholders named therein, or the Selling Shareholders, and Goldman Sachs & Co. LLC, Morgan
Stanley & Co. LLC, and Jefferies LLC, as representatives of the several underwriters named therein, for the underwritten secondary
follow-on offering, by the underwriters, of 12,000,000 of our ordinary shares held by the Selling Shareholders, plus an additional 1,800,000
ordinary shares pursuant to a 30-day option granted to the underwriters by the Selling Shareholders that was exercised in full. We did
not receive any proceeds from the sale of our ordinary shares by the Selling Shareholders. We and the Selling Shareholders have agreed
to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act.
DHL Service Agreement and Commercial Letter
We are party to a Commercial Letter with DHL International
GmbH (
“DHL International”), dated
March 27, 2017 as amended on
December 7, 2020, pursuant to which we use DHL International
exclusively for the provision of express shipping services to our merchants, subject to certain exclusions described therein, and DHL
International has undertaken certain commitments relating to the prices under which its services are offered to us.
In addition, we are party to a services agreement
with DHL International (UK) Limited (
“DHL UK”), dated
May 21, 2019, under which DHL UK provides us with express shipping services
relating to the purchase and sale of our merchants’ products. The service agreement continues until terminated by either us or DHL
UK in accordance with its terms. The consideration paid by us to DHL UK pursuant to the service agreement is contingent upon the extent
of the shipping services provided. We have entered similar arrangements with other DHL affiliated entities in the Netherlands, the United
States, France and Spain. On
November 17, 2022, we extended this agreement with DHL UK to be in effect until 2025.
See Note 13 to our audited consolidated financial statements appearing
elsewhere in this Annual Report.
2021 Shopify Agreement
We are party to the 2021 Shopify Agreement with
Shopify, dated
April 12, 2021, pursuant to which we are an exclusive third-party provider of an end-to-end cross-border solution that
includes localization, merchant of record, duty and tax calculation and remittance, and shipping services for merchants in a single solution
with permissions to access and integrate into the Shopify platform checkout. Shopify however will be entitled to offer its own native,
white-label, or branded partnership merchant of record solution to any merchants without limitation. We will pay Shopify a fee equal to
a percentage of the GMV for all transactions processed through our platform for applicable Shopify merchants. Although payment of such
fee may initially negatively impact margins, we believe that our expanded partnership will afford us an enhanced market position, enabling
us to increase GMV, and positions us to realize efficiencies in winning and onboarding Shopify merchants as a result of our permissions
to access and exclusively integrate into the Shopify platform checkout.
The agreement has an initial three-year term ending
in April 2024, which automatically renews for additional and successive one-year terms unless either party provides the other party with
written notice of election to terminate the agreement at least 180 days prior to the end of any such term. The parties did not provide
prior notice of termination and accordingly the agreement will automatically be renewed for an additional one year term until April 2025.
Either party may immediately terminate the agreement without cause by providing at least 180 days’ prior written notice to the other
party. In addition, upon the occurrence of certain events, either party may terminate the agreement immediately upon notice to the other
party.
See Note 7 to our audited consolidated financial
statements appearing elsewhere in this Annual Report.
Warrant Agreement
On
April 12, 2021, we entered into a warrant agreement
(the
“Original Shopify Warrant”) with Shopify pursuant to which we issued warrants to purchase up to an aggregate of 19,604,239
of our ordinary shares at a price of $0.01 per share expiring upon the earlier of
April 12, 2031 and immediately prior to consummation
of a merger or acquisition. All of the shares issuable under the Original Shopify Warrant are vested and exercisable. On
April 21, 2021,
we issued Shopify a replacement warrant (the
“Shopify First Replacement Warrant”) to purchase up to an aggregate of 11,853,726
ordinary shares at a price of $0.01 per share on substantially similar terms as the Original Shopify Warrant. On
July 14, 2021, we issued
Shopify a replacement warrant (the
“Shopify Second Replacement Warrant”) to purchase up to an aggregate of 10,865,916 ordinary
shares at a price of $0.01 per share on substantially similar terms as the Shopify First Replacement Warrant. As of
March 20, 2024, Shopify
has exercised 19,604,239 ordinary shares at an exercise price of $0.01 per share.
The ordinary shares issuable to Shopify upon exercise
of the foregoing are entitled to certain registration rights under the Investors’
Rights Agreement as described in greater detail
below in the section titled
“Registration Rights” in Item 7.B below.
2022 Shopify Agreement
Concurrently with the acquisition of Flow, we
agreed to expand our existing partnership with Shopify and entered into the 2022 Shopify Agreement. Pursuant to the 2022 Shopify Agreement,
Flow or its affiliate, are the exclusive provider of certain natively integrated cross-border solutions for Shopify’s merchants,
including the ability for the merchants to sell their goods to Flow for sale to global customers on a one-to-one basis. The extended partnership
between the parties is intended to enhance the offering to select Shopify merchants, among other things, catering for small and emerging
brands and expand the capabilities and customer base in the segment.
The 2022 Shopify Agreement has an initial three-year
term, which automatically renews for additional and successive one-year terms unless either party provides the other party with written
notice of election to terminate the agreement at least 180 days prior to the end of any such term. Either party may immediately terminate
the agreement during the 12-month period commencing with the effective date, without cause by providing at least 180 days’ prior
written notice to the other party. In addition, upon the occurrence of certain events, either party may terminate the agreement immediately
upon notice to the other party.
In connection with the execution of the 2022
Shopify Agreement, we issued to Shopify warrants (the
“2022 Shopify Warrants”) to purchase (A) up to an aggregate of 1,289,064
of our ordinary shares for a purchase price of $0.01 per share which vested on the date of the 2022 Shopify Agreement (and were exercised
in full on
February 2, 2022), and (B) up to an aggregate of 738,081 of our ordinary shares for a purchase price of $0.01 per share which
vest upon certain performance milestones, of which 246,027 constituting the first milestone have vested and subsequently exercised on
January 16, 2023, and 246,027 constituting the second milestone have vested in March 2024.
Registration Rights
Our amended and restated investors’ rights
agreement entitles certain of our shareholders to certain registration rights, as set forth below. In accordance with this agreement,
and subject to conditions listed below, the following entities which as of the date of this Annual Report beneficially own more than 5%
of our ordinary shares are entitled to registration rights: entities affiliated with each of DHL, Cross Ship S.à r.l and Shopify
Inc.
Form
F-1 Demand Rights. The holders of at least 30% of the registrable securities then outstanding
may request that we register all or a portion of their shares. Such request for registration must cover securities the aggregate offering
price of which, after payment of the underwriting discount and commissions, would exceed $5,000,000. We will not be required to effect
more than two registrations on Form F-1 that have been declared effective. The company has the right to defer such registration under
certain circumstances.
Form
F-3 Demand Rights. The holders of at least 30% of the registrable securities then outstanding
can make a request that we register their shares on Form F-3 if we are qualified to file a registration statement on Form F-3 and if the
offering price, after payment of the underwriting discount and commissions, would equal or exceed $5,000,000. The company has the right
to defer such registration under certain circumstances.
Piggyback
Registration Rights. In the event that we propose to register any of our securities under the
Securities Act, either for our own account or for the account of other security holders, then certain holders of our ordinary shares will
be entitled, subject to any lock-up restrictions imposed by the underwriters in connection with our initial public offering (whether such
restrictions terminate by their terms or are waived by the underwriters), to certain piggyback registration rights with respect to such
offering, allowing such holders to include their shares in such registration, subject to certain marketing and other limitations. As a
result, whenever we propose to file a registration statement under the Securities Act, other than with respect to (i) a registration relating
solely to the sale of securities to participants in a company stock plan, (ii) a registration relating to a corporate reorganization or
other transaction listed in Rule 145 under the Securities Act and (iii) a registration on any form that does not include substantially
the same information as would be required to be included in a registration statement covering the sale of the registrable securities,
the holders of these shares are entitled to notice of the registration and have the right, subject to certain limitations, to include
their shares in the registration.
Related Party Transactions Policies and Procedures
Our board of directors has adopted a written related
party transaction policy setting forth the policies and procedures for the review and approval or ratification of related person transactions.
This policy covers any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships,
in which we were or are to be a participant, where the related person had or will have a direct or indirect material interest, including,
without limitation, purchases of goods or services by or from the related person or entities in which the related person has a material
interest, indebtedness, guarantees of indebtedness and employment by us of a related person.
C. |
Interests of Experts and Counsel
|
Not applicable.
Item 8
. Financial
Information
A. |
Consolidated Statements and Other
Financial Information |
Consolidated Financial Statements
See Item 18. “Financial Statements.”
Legal and Arbitration Proceedings
From time to time, we may become involved in legal
or regulatory proceedings arising in the ordinary course of our business. We are not currently a party to any material litigation or regulatory
proceeding and we are not aware of any pending or threatened material litigation or regulatory proceeding against us that could have a
material adverse effect on our business, operating results, financial condition or cash flows.
Dividend Policy
We have never declared or paid any dividends on
our ordinary shares. We do not anticipate paying any dividends in the foreseeable future. We currently intend to retain future earnings,
if any, to finance operations and expand our business. Our board of directors has sole discretion whether to pay dividends. If our board
of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements
and surplus, general financial condition, contractual restrictions and other factors that our directors may deem relevant. The Companies
Law imposes restrictions on our ability to declare and pay dividends. See “Dividend and Liquidation Rights” in Item 10.B below
for additional information.
Payment of dividends may be subject to Israeli
withholding taxes. See “Israeli Tax Considerations” in Item 10.E below for additional information.
None.
Item 9
. The
Offer and Listing
A. |
Offer and Listing Details
|
Our ordinary shares commenced trading on
the Nasdaq Global Select Market on
May 11, 2021, under the symbol
“GLBE”. Prior to this, no public market existed for our
ordinary shares.
Not applicable.
See “-Offer and Listing Details” above.
Not applicable.
Not applicable.
Not applicable.
Item 10.
Additional Information
Not applicable.
A copy of our amended and restated
articles of association
is filed as Exhibit 1.1 to this Annual Report. The information called for by this Item is set forth in
Exhibit 2.2 to this Annual Report.
We have not entered into any
material contracts
within the two years prior to the date of this annual report, other than
contracts entered into in the ordinary course of business, or
as otherwise described herein in Item 4.A
“History and Development of the Company”, Item 4.B
“Business Overview”,
Item 5.B
“Operating and Financial Review and Prospects-Liquidity and Capital Resources”, Item 6.C
“Board Practices”
and Item 7.B
“Related Party Transactions”.
There are currently no Israeli currency control
restrictions on remittances of dividends on our ordinary shares, proceeds from the sale of the ordinary shares or interest or other payments
to non-residents of Israel, except for shareholders who are subjects of countries that are, have been, or will be, in a state of war with
Israel.
The following description is not intended to constitute
a complete analysis of all tax consequences relating to the acquisition, ownership and disposition of our ordinary shares. You should
consult your own tax advisor concerning the tax consequences of your particular situation, as well as any tax consequences that may arise
under the laws of any state, local, foreign or other taxing jurisdiction.
Israeli Tax Considerations
The following is a brief summary of the material
Israeli tax laws applicable to us. This section also contains a discussion of material Israeli tax consequences concerning the ownership
and disposition of our ordinary shares purchased by investors. This summary does not discuss all the aspects of Israeli tax law that may
be relevant to a particular investor in light of his or her personal investment circumstances or to some types of investors subject to
special treatment under Israeli law. Examples of such investors include residents of Israel or traders in securities who are subject to
special tax regimes not covered in this discussion. To the extent that the discussion is based on new tax legislation that has not yet
been subject to judicial or administrative interpretation, we cannot assure you that the appropriate tax authorities or the courts will
accept the views expressed in this discussion. The discussion below is subject to change, including due to amendments under Israeli law
or changes to the applicable judicial or administrative interpretations of Israeli law, which change could affect the tax consequences
described below. The discussion should not be construed as legal or professional tax advice and does not cover all possible tax considerations.
General Corporate Tax Structure in Israel
Israeli companies are generally subject to corporate
tax on their taxable income. The current corporate tax rate is 23%. Capital gains derived by an Israeli company are generally subject
to the prevailing corporate tax rate.
Tax Benefits and Grants for Research and Development
Israeli tax law allows, under certain conditions,
a tax deduction for expenditures, including capital expenditures, related to scientific research and development for the year in which
they are incurred. Expenditures are deemed related to scientific research and development projects, if:
• |
the expenditures are approved by the relevant Israeli government ministry,
determined by the field of research;
|
• |
the research and development must be for the promotion of the company;
and
|
• |
the research and development are carried out by or on behalf of the
company seeking such tax deduction. |
The amount of such deductible expenses is reduced
by the sum of any funds received through government grants for the finance of such scientific research and development projects. Under
these research and development deduction rules, no deduction is allowed for any expense invested in an asset depreciable under the general
depreciation rules of the Israeli Income Tax Ordinance (New Version), 5721-1961, referred to as the Ordinance. Expenditures that do not
qualify for this special deduction are deductible in equal amounts over three years.
From time to time we may apply to the Israel Innovation
Authority (the “IIA”) for approval to allow a tax deduction for all research and development expenses during the year incurred.
There can be no assurance that such request will be granted.
Law for the Encouragement of Industry (Taxes), 1969
The Law for the Encouragement of Industry (Taxes),
1969, and the regulations promulgated thereunder, generally referred to as the Industry Encouragement Law, provides several tax benefits
for “Industry Companies.” We believe that we currently qualify as an Industrial Company within the meaning of the Industry
Encouragement Law.
The Industry Encouragement Law defines an “Industrial
Company” as an Israeli resident company incorporated in Israel, of which 90% or more of its income in a certain tax year, other
than income from government loans, is derived from an “Industrial Enterprise” owned by it and located in Israel or in the
“Area” in accordance with the definition under section 3A of the Ordinance. An “Industrial Enterprise” is defined
as an enterprise which is held by an Industrial Company whose principal activity in a given tax year is industrial production activity.
The following corporate tax benefits, among others,
are available to Industrial Companies:
Amortization of the cost of purchased patents
and rights to use a patent or know-how that were purchased in good faith and are used for the development or advancement of
the Industrial Enterprise, over an eight-year period, commencing on the year in which such rights were first exercised;
Under limited conditions, an election to file
consolidated tax returns with related Israeli Industrial Companies; and
Expenses related to a public offering are deductible
in equal amounts over a three-year period commencing on the year of the offering.
Eligibility for benefits under the Industry Encouragement
Law is not contingent upon the approval of any governmental authority. The Israel Tax Authority may determine that we do not qualify as
an Industrial Company, which could entail our loss of the benefits that relate to this status. There can be no assurance that we will
continue to qualify as an Industrial Company or that the benefits described above will be available in the future.
Taxation of Non-Israeli Resident Shareholders
Capital Gains Taxes
Israeli capital gains tax is imposed on the disposition
of capital assets by a non-Israeli resident if those assets (i) are located in Israel, (ii) are shares or a right
to shares in an Israeli resident corporation or (iii) represent, directly or indirectly, rights to assets located in Israel, unless
a tax treaty between Israel and the seller’s country of residence provides otherwise. The Israeli tax law distinguishes between
“Real Capital Gain” and “Inflationary Surplus.” Inflationary Surplus is a portion of the total capital gain which
is equivalent to the increase in the relevant asset’s price that is attributable to the increase in the Israeli Consumer Price Index
or, in certain circumstances, a foreign currency exchange rate, between the date of purchase and the date of disposition. Inflationary
Surplus is currently not subject to tax in Israel. Real Capital Gain is the excess of the total capital gain over the Inflationary Surplus.
Generally, Real Capital Gain accrued by individuals
on the sale of our ordinary shares will be taxed at the rate of 25%. However, if the individual shareholder claims deduction of interest
and linkage differences expenses in connection with the purchase and holding of such shares or is a “Substantial Shareholder”
at the time of sale or at any time during the preceding 12-month period, such gain will be taxed at the rate of 30%. A “Substantial
Shareholder” is generally a person who alone or together with such person’s relative or another person who collaborates with
such person on a permanent basis, holds, directly or indirectly, at least 10% of any of the “Means of Control” of the corporation.
“Means of Control” generally include the right to vote, receive profits, nominate a director or an executive officer, receive
assets upon liquidation, or order someone who holds any of the aforesaid rights how to act, regardless of the source of such right. Real
Capital Gain derived by corporations will be generally subject to a corporate tax rate of 23% (in 2023).
Generally, a non-Israeli resident (whether
an individual or a corporation) who derives capital gains from the sale of shares of an Israeli resident company that were purchased after
the company was listed for trading on a stock exchange outside of Israel will be exempt from Israeli capital gains tax so long as the
shares were not held through a permanent establishment that the non-Israeli resident maintains in Israel. However, non-Israeli corporations
will not be entitled to the foregoing exemption if Israeli residents (i) have a controlling interest of more than 25% in any of the
means of control of such non-Israeli corporation or (ii) are the beneficiaries of, or are entitled to, 25% or more of the
revenues or profits of such non-Israeli corporation, whether directly or indirectly.
In addition, such exemption is not applicable
to a person whose gains from selling or disposing the shares are deemed to be business income.
Additionally, a sale of securities by a non-Israeli resident
may be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty. For example, under the tax treaty between
the Government of the United States of America and the Government of the State of Israel with respect to Taxes on Income, as amended (the
“United States-Israel Tax Treaty”), the sale, exchange or other disposition
of shares by a shareholder who is a United States resident (for purposes of the United States-Israel Tax Treaty) holding the shares as
a capital asset and is entitled to claim the benefits afforded to such a resident by the United States-Israel Tax Treaty (a “Treaty
U.S. Resident”) is generally exempt from Israeli capital gains tax unless: (i) the capital gain arising from such sale,
exchange or disposition is attributed to real estate located in Israel; (ii) the capital gain arising from such sale, exchange or
disposition is attributed to royalties; (iii) the capital gain arising from the such sale, exchange or disposition is attributed
to a permanent establishment in Israel, under certain terms; (iv) such Treaty U.S. Resident holds, directly or indirectly, shares
representing 10% or more of the voting rights during any part of the 12-month period preceding the disposition, subject to certain
conditions; or (v) such Treaty U.S. Resident is an individual and was present in Israel for a period or periods aggregating to 183
days or more during the relevant taxable year. In any such case, the sale, exchange or disposition of such shares would be subject to
Israeli tax, to the extent applicable. However, under the United States-Israel Tax Treaty, a Treaty U.S. Resident may be permitted to
claim a credit for the Israeli tax against the U.S. federal income tax imposed with respect to the sale, exchange or disposition of the
shares, subject to the limitations under U.S. laws applicable to foreign tax credits. The United States-Israel Tax Treaty does not provide
such credit against any U.S. state or local taxes.
In some instances where our shareholders may be
liable for Israeli capital gains tax on the sale of our ordinary shares, the payment of the consideration for such sale may be subject
to withholding of Israeli tax at source and holders of our ordinary shares may be required to demonstrate that they are exempt from tax
on their capital gains in order to avoid withholding at source at the time of sale. Specifically, the Israel Tax Authority may require
from shareholders who are not liable for Israeli capital gains tax on such a sale to sign declarations in forms specified by the Israel
Tax Authority, provide documents (including, for example, a certificate of residency) or obtain a specific exemption from the Israel Tax
Authority to confirm their status as non-Israeli residents (and, in the absence of such declarations or exemptions, the Israel
Tax Authority may require the purchaser of the shares to withhold tax at source).
Taxation
on Receipt of Dividends.
Non-Israeli residents (whether individuals
or corporations) are generally subject to Israeli income tax on the receipt of dividends paid on our ordinary shares at the rate of 25%,
which tax will be withheld at source, unless relief is provided in an applicable tax treaty between Israel and the shareholder’s
country of residence (subject to the receipt in advance of a valid certificate from the Israel Tax Authority allowing for a reduced tax
rate). However, if the shareholder who is a “Substantial Shareholder” at the time of receiving the dividend or at any time
during the preceding 12-month period, the applicable tax rate will be 30%. Such dividends are generally subject to Israeli withholding
tax at a rate of 25% so long as the shares are registered with a nominee company (whether the recipient is a substantial shareholder or
not).
However, a reduced tax rate may be provided under
an applicable tax treaty. For example, under the United States-Israel Tax Treaty, the maximum rate of tax withheld at source in Israel
on dividends paid to a holder of our ordinary shares who is a Treaty U.S. Resident is 25%. However, generally, the maximum rate of withholding
tax on dividends that are paid to a United States corporation holding 10% or more of the outstanding voting rights throughout the tax
year in which the dividend is distributed as well as during the previous tax year, is 12.5%, provided that not more than 25% of our gross
income for such preceding year consists of certain types of dividends and interest. The aforementioned rates will not apply if the dividend
income was generated through a permanent establishment of the U.S. resident that is maintained in Israel.
U.S. residents who are subject to Israeli withholding
tax on a dividend may be entitled to a credit or deduction for United States federal income tax purposes in the amount of the taxes withheld,
subject to detailed rules contained in the Code.
A non-Israeli resident who receives dividends
from which tax was withheld is generally exempt from the obligation to file tax returns in Israel with respect to such income, provided
that (i) such income was not generated from business conducted in Israel by the taxpayer, (ii) the taxpayer has no other taxable sources
of income in Israel with respect to which a tax return is required to be filed, and (iii) the taxpayer is not obligated to pay surtax
(as further explained below).
Surtax.
Individuals who are subject to income tax in Israel
(whether any such individual is an Israeli resident or non-Israeli resident) are also subject to an additional tax at a rate
of 3% on annual taxable income (including, but not limited to, income derived from dividends, interest and capital gains) exceeding NIS
698,280 for 2023, which amount is linked to the annual change in the Israeli consumer price index.
Estate
and Gift Tax.
Israeli law presently does not impose estate or
gift taxes.
U.S. Federal Income Tax Consideration
The following summary describes certain United
States federal income tax considerations generally applicable to United States Holders (as defined below) of our ordinary shares. This
summary deals only with our ordinary shares held as capital assets within the meaning of Section 1221 of the Internal Revenue Code of
1986, as amended (“Internal Revenue Code”). This summary also does not address the tax consequences that may be relevant to
holders in special tax situations including, without limitation, dealers in securities, traders that elect to use a mark-to-market method
of accounting, holders that own our ordinary shares as part of a “straddle,” “hedge,” “conversion transaction,”
or other integrated investment, banks or other financial institutions, individual retirement accounts and other tax-deferred accounts,
insurance companies, tax-exempt organizations, United States expatriates, holders whose functional currency is not the U.S. dollar, holders
subject to any alternative minimum tax, holders that acquired our ordinary shares in a compensatory transaction, holders which are entities
or arrangements treated as partnerships for United States federal income tax purposes or holders that actually or constructively through
attribution own 10% or more of the total voting power or value of our outstanding ordinary shares.
This summary is based upon the Internal Revenue
Code, applicable United States Treasury regulations, administrative pronouncements and judicial decisions, in each case as in effect on
the date hereof, all of which are subject to change (possibly with retroactive effect). No ruling will be requested from the Internal
Revenue Service (“IRS”) regarding the tax consequences described herein, and there can be no assurance that the IRS will agree
with the discussion set out below. This summary does not address any United States federal tax consequences other than United States federal
income tax consequences (such as the estate and gift tax or the Medicare tax on net investment income).
As used herein, the term “United States
Holder” means a beneficial owner of our ordinary shares that is, for United States federal income tax purposes, (i) an individual
who is a citizen or resident of the United States, (ii) a corporation or other entity taxable as a corporation created or organized under
the laws of the United States or any state thereof or therein or the District of Columbia, (iii) an estate the income of which is subject
to United States federal income taxation regardless of its source, or (iv) a trust (a) that is subject to the supervision of a court within
the United States and the control of one or more United States persons as described in Internal Revenue Code Section 7701(a)(30), or (b)
that has a valid election in effect under applicable United States Treasury regulations to be treated as a “United States person.”
If an entity or arrangement treated as a partnership
for United States federal income tax purposes acquires our ordinary shares, the tax treatment of a partner in the partnership generally
will depend upon the status of the partner and the activities of the partnership. Such partner or partnership should consult its tax advisors
regarding the United States federal income tax consequences of acquiring, owning, and disposing of our ordinary shares.
THE SUMMARY OF UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES SET OUT BELOW IS FOR GENERAL INFORMATION ONLY. ALL PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR
TAX CONSEQUENCES TO THEM OF OWNING AND DISPOSING OF OUR ORDINARY SHARES, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND NON-U.S.
TAX LAWS AND POSSIBLE CHANGES IN TAX LAW.
Dividends
Although we do not anticipate paying any dividends
in the foreseeable future, as described in “Item 8.A. “Consolidated Statements and Other Financial Information-Dividend Policy”
above, if we do make any distributions, subject to the discussion below under “-Passive Foreign Investment Company,” the amount
of dividends paid to a United States Holder with respect to our ordinary shares before reduction for any Israeli taxes withheld therefrom
generally will be included in the United States Holder’s gross income as ordinary income from foreign sources to the extent paid
out of our current or accumulated earnings and profits (as determined for United States federal income tax purposes). Distributions in
excess of earnings and profits will be treated as a non-taxable return of capital to the extent of the United States Holder’s tax
basis in those ordinary shares and thereafter as capital gain. However, we do not intend to calculate our earnings and profits under United
States federal income tax principles. Therefore, United States Holders should expect to treat a distribution as a dividend even if that
distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above.
Foreign withholding tax (if any) paid on dividends
on our ordinary shares at the rate applicable to a United States Holder (taking into account any applicable income tax treaty) will, subject
to limitations and conditions, be treated as foreign income tax eligible for credit against such holder’s United States federal
income tax liability or, at such holder’s election, eligible for deduction in computing such holder’s United States federal
taxable income. Dividends paid on our ordinary shares generally will constitute “foreign source income” and “passive
category income” for purposes of the foreign tax credit. However, if we are a “United States-owned foreign corporation,”
solely for foreign tax credit purposes, a portion of the dividends allocable to our United States source earnings and profits may be re-characterized
as United States source. A “United States-owned foreign corporation” is any foreign corporation in which United States persons
own, directly or indirectly, 50% or more (by vote or by value) of the stock. In general, United States-owned foreign corporations with
less than 10% of earnings and profits attributable to sources within the United States are excepted from these rules. If we are treated
as a “United States-owned foreign corporation,” and if 10% or more of our earnings and profits are attributable to sources
within the United States, a portion of the dividends paid on the ordinary shares allocable to our United States source earnings and profits
will be treated as United States source, and, as such, the ability of a United States Holder to claim a foreign tax credit for any Israeli
withholding taxes payable in respect of our dividends may be limited. Pursuant to applicable United States Treasury regulations, however,
if a United States Holder is not eligible for the benefits of an applicable income tax treaty or does not elect to apply such treaty,
then such holder may not be able to claim a foreign tax credit arising from any foreign tax imposed on a distribution on our ordinary
shares, depending on the nature of such foreign tax, although the IRS has provided temporary relief from the application of certain aspects
of these regulations until new guidance or regulations are issued. The rules governing the treatment of foreign taxes imposed on a United
States Holder and foreign tax credits are complex, and United States Holders should consult their tax advisors about the impact of these
rules in their particular situations, including their eligibility for benefits under an applicable income tax treaty and the potential
impact of the applicable United States Treasury regulations and the temporary IRS relief.
Dividends received by certain non-corporate United
States Holders (including individuals) may be “qualified dividend income,” which is taxed at the lower capital gain rate,
provided that (i) either our ordinary shares are readily tradable on an established securities market in the United States or we are eligible
for benefits under a comprehensive United States income tax treaty that includes an exchange of information program and which the United
States Treasury Department has determined is satisfactory for these purposes, (ii) we are neither a PFIC (as discussed below) nor treated
as such with respect to the United States Holder for either the taxable year in which the dividend is paid or the preceding taxable year,
and (iii) the United States Holder satisfies certain holding period and other requirements. In this regard, shares generally are considered
to be readily tradable on an established securities market in the United States if they are listed on Nasdaq, as our ordinary shares are.
United States Holders should consult their tax advisors regarding the availability of the reduced tax rate on dividends paid with respect
to our ordinary shares. The dividends will not be eligible for the dividends received deduction available to United States Holders that
are corporations in respect of dividends received from other United States corporations.
Disposition of Ordinary Shares
Subject to the discussion below under “-Passive
Foreign Investment Company,” a United States Holder generally will recognize capital gain or loss for United States federal income
tax purposes on the sale or other taxable disposition of our ordinary shares equal to the difference, if any, between the amount realized
and the United States Holder’s tax basis in those ordinary shares. If any Israeli tax is imposed on the sale, exchange or other
disposition of our ordinary shares, a United States Holder’s amount realized will include the gross amount of the proceeds of the
disposition before deduction of the Israeli tax. In general, capital gains recognized by a non-corporate United States Holder, including
an individual, are subject to a lower rate under current law if such United States Holder held the ordinary shares for more than one year.
The deductibility of capital losses is subject to limitations. Any such gain or loss generally will be treated as United States source
income or loss for purposes of the foreign tax credit. A United States Holder’s tax basis in its ordinary shares generally will
equal the cost of such shares. Because gain for the sale or other taxable disposition of our ordinary shares will be treated as United
States source income, and a United States Holder may use foreign tax credits against only the portion of United States federal income
tax liability that is attributed to foreign source income in the same category, a United States Holder’s ability to utilize a foreign
tax credit with respect to the Israeli tax imposed on any such sale or other taxable disposition, if any, may be significantly limited.
In addition, if a United States Holder is eligible for the benefit of the income tax convention between the United States and the State
of Israel and pays Israeli tax in excess of the amount applicable to the United States Holder under such convention or if the Israeli
tax paid is refundable, the United States Holder will not be able to claim any foreign tax credit or deduction with respect to such excess
portion of the Israeli tax paid or the amount of Israeli tax refunded. In addition, pursuant to applicable United States Treasury
regulations, if a United States Holder is not eligible for the benefits of an applicable income tax treaty or does not elect to apply
such treaty, then such holder may not be able to claim a foreign tax credit arising from any foreign tax imposed on the disposition of
our ordinary shares, depending on the nature of such foreign tax, although the IRS has provided temporary relief from the application
of certain aspects of these regulations until new guidance or regulations are issued. The rules governing the treatment of foreign taxes
imposed on a United States Holder and foreign tax credits are complex, and United States Holders should consult their tax advisors as
to whether the Israeli tax on gains may be creditable or deductible in light of their particular circumstances, including their eligibility
for benefits under an applicable treaty and the potential impact of applicable United States Treasury regulations and the temporary IRS
relief.
Passive Foreign Investment Company
We would be a PFIC for any taxable year if, after
the application of certain look-through rules, either: (i) 75% or more of our gross income for such year is
“passive income”
(as defined in the relevant provisions of the Internal Revenue Code), or (ii) 50% or more of the value of our assets (generally determined
on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production of passive
income. For these purposes, cash and other assets readily convertible into cash or that do or could generate passive income are categorized
as passive assets, and the value of goodwill and other unbooked intangible assets is generally taken into account. Passive income generally
includes, among other things, rents, dividends, interest, royalties, gains from the disposition of passive assets and gains from commodities
and securities transactions. For purposes of this test, we will be treated as owning a proportionate share of the assets and earning a
proportionate share of the income of any other corporation of which we own, directly or indirectly, at least 25% (by value) of the stock.
Based on our market capitalization and the composition of our income, assets and operations, we believe that we were not a PFIC for the
year ended
December 31, 2023 and do not expect to be a PFIC for United States federal income tax purposes for the current taxable year
or in the foreseeable future. However, this is a factual determination that must be made annually after the close of each taxable year.
Moreover, the value of our assets for purposes of the PFIC determination may be determined by reference to the trading value of our ordinary
shares, which could fluctuate significantly. In addition, it is possible that the IRS may take a contrary position with respect to our
determination in any particular year, and therefore, there can be no assurance that we were not a PFIC for the year ended
December 31,
2023 or will not be classified as a PFIC for the current taxable year or in the future. Certain adverse United States federal income tax
consequences could apply to a United States Holder if we are treated as a PFIC for any taxable year during which such United States Holder
holds our ordinary shares. Under the PFIC rules, if we were considered a PFIC at any time that a United States Holder holds our ordinary
shares, we would continue to be treated as a PFIC with respect to such holder’s investment unless (i) we cease to be a PFIC, and
(ii) the United States Holder has made a
“deemed sale” election under the PFIC rules.
If we are a PFIC for any taxable year that a United
States Holder holds our ordinary shares, unless the United States Holder makes certain elections, any gain recognized by the United States
Holder on a sale or other disposition of our ordinary shares would be allocated pro-rata over the United States Holder’s holding
period for the ordinary shares. The amounts allocated to the taxable year of the sale or other disposition and to any year before we became
a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate
in effect for individuals or the highest rate in effect for corporations, as appropriate, for that taxable year, and an interest charge
would be imposed. Further, to the extent that any distribution received by a United States Holder on our ordinary shares exceeds 125%
of the average of the annual distributions on the ordinary shares received during the preceding three years or the United States Holder’s
holding period, whichever is shorter, that distribution would be subject to taxation in the same manner as gain on the sale or other disposition
of our ordinary shares if we were a PFIC, described above. If we are treated as a PFIC with respect to a United States Holder for any
taxable year, the United States Holder will be deemed to own equity in any of the entities in which we hold equity that also are PFICs.
Certain elections may be available that would result in alternative treatments (such as mark-to-market treatment) of the ordinary shares.
In addition, a timely election to treat us as a qualified electing fund under the Internal Revenue Code would result in an alternative
treatment. However, we do not intend to prepare or provide the information that would enable United States Holders to make a qualified
electing fund election. If we are considered a PFIC, a United States Holder also will be subject to annual information reporting requirements.
United States Holders should consult their tax advisors about the potential application of the PFIC rules to an investment in the ordinary
shares.
Information Reporting and Backup Withholding
Dividend payments and proceeds paid from the sale
or other taxable disposition of our ordinary shares may be subject to information reporting to the IRS. In addition, a United States Holder
(other than an exempt holder who establishes its exempt status if required) may be subject to backup withholding on dividend payments
and proceeds from the sale or other taxable disposition of our ordinary shares paid within the United States or through certain U.S.-related
financial intermediaries.
Backup withholding will not apply, however, to
a United States Holder who furnishes a correct taxpayer identification number, makes other required certification and otherwise complies
with the applicable requirements of the backup withholding rules. Backup withholding is not an additional tax. Rather, any amount withheld
under the backup withholding rules will be creditable or refundable against the United States Holder’s United States federal income
tax liability, provided the required information is timely furnished to the IRS.
Foreign Financial Asset Reporting
Certain United States Holders are required to
report their holdings of certain foreign financial assets, including equity of foreign entities, if the aggregate value of all of these
assets exceeds certain threshold amounts. Our ordinary shares are expected to constitute foreign financial assets subject to these requirements
unless the ordinary shares are held in an account at certain financial institutions. United States Holders should consult their tax advisors
regarding the application of these reporting requirements.
F. |
Dividends and Paying Agents
|
Not applicable.
Not applicable.
We are subject to the informational requirements
of the Exchange Act. Accordingly, we are required to file reports and other information with the SEC, including annual reports on Form
20-F and reports on Form 6-K. Our filings with the SEC are also available to the public through the SEC’s
website at http://www.sec.gov.
This site contains reports and other information about issuers, like us, that file electronically with the SEC. The address of that
website
is
www.sec.gov.
We maintain a corporate
website at
http://www.global-e.com.
Information contained on, or that can be accessed through our
website does not constitute a part of this Annual Report on Form 20-F. We
also make available on our
website’s investor relations page at
http://investors.global-e.com, free of charge, our Annual Report
and the text of our reports on Form 6-K, including any amendments to these reports, as well as certain other SEC filings, as soon as reasonably
practicable after they are electronically filed with or furnished to the SEC. The information contained on our
website is not incorporated
by reference in this Annual Report.
As a foreign private issuer, we are exempt under
the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and our officers, directors
and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange
Act. In addition, we will not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently
or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within four
months after the end of each subsequent fiscal year, or such applicable time as required by the SEC, an annual report on Form 20-F containing
financial statements audited by an independent registered public accounting firm. We also intend to furnish certain other material information
to the SEC under cover of Form 6-K.
I. |
Subsidiary Information
|
Not applicable.
J. |
Annual
Report to Security Holders |
Not applicable.
Item 11
. Quantitative
and Qualitative Disclosures about Market Risk
Interest rate risk
As of
December 31, 2023, we had $317.4 million
of cash and cash equivalent, bank deposits and marketable securities. Interest-earning instruments carry a degree of interest rate risk.
However, our historical interest income has not fluctuated significantly. A hypothetical 10% change in interest rates would not have had
a material impact on our financial results for the years ended
December 31, 2022 and
2023. We do not enter into investments for trading
or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.
Our investments are subject to market risk due
to changes in interest rates, which may affect our interest income and fair market value of our investments. To minimize this risk, we
maintain our portfolio in a variety of high-grade securities, including U.S. treasury bonds and government agencies. The primary objectives
of our investment activities are to support liquidity, preserve principal and to maximize income without significantly increasing risk.
Foreign currency exchange risk
A significant share of our purchase and sale
transactions are carried out in different currencies, including U.S. Dollar, Euro and Pounds Sterling, and we bear the risk of diminution
in value of the relevant shopper’s purchasing currency in the interim periods between the various transaction stages (e.g. placement/payment
and returns/refund). Additionally, we incur a substantial portion of our operating expenses in New Israeli Shekels, Pounds Sterling and
U.S. Dollars, and to a lesser extent, other foreign currencies. A decrease of 5% in the U.S. Dollar/NIS exchange rate would have increased
our cost of revenue and operating expenses by approximately 0.4% and 0.3% for the years ended
December 31, 2023 and
2022, respectively.
If the NIS fluctuates significantly against the U.S. dollar, it may have a negative impact on our results of operations. Our results of
operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates. However, we believe
we have a certain level of built-in
“natural currency hedge” provided by our bi-directional volume of sales and broad international
activity.
Despite this natural hedge, we may incur additional
costs and experience losses resulting from fluctuations in exchange rates for revenues in foreign currencies or upon translation of New
Israeli Shekels expenses incurred in Israel, or Pounds Sterling expenses incurred in the United Kingdom, to U.S. Dollars.
In addition, while our financial reporting currency
is U.S. Dollars, we currently have significant share of our revenues denominated in foreign currencies, including Pounds Sterling and
Euros, and may in the future have significant sales denominated in the currencies of additional countries, which may negatively impact
our reported revenues as a result of fluctuations in currency exchange rates vis-à-vis the U.S. Dollar.
During the year ended
December 31, 2023, we did
not hedge our foreign currency exchange risk.
Item 12
. Description
of Securities Other than Equity Securities
Not applicable.
Item 13
. Defaults,
Dividend Arrearages and Delinquencies
None.
Item 14
. Material
Modifications to the Rights of Security Holders and Use of Proceeds
None.
Item 15
. Controls
and Procedures
Evaluation of Disclosure Controls
and Procedures
We maintain disclosure controls and procedures (as
that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) that are designed to ensure
that information required to be disclosed in
the Company’s reports under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated
to our management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding
required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer,
has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of
December 31, 2023. Based upon
that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of
December 31, 2023, our disclosure controls
and procedures were effective to accomplish their objectives at the reasonable assurance level.
Management’s Annual Report
on Internal Control over Financial Reporting
Our management is responsible
for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f)
under the Exchange Act). Our management conducted an assessment of the effectiveness of our internal control over financial reporting
based on the criteria set forth in
“Internal Control - Integrated Framework (2013)” issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this assessment, our management concluded that, as of
December 31, 2023, our internal
control over financial reporting was effective.
Attestation Report of the Independent
Registered Public Accounting Firm
Our independent registered public accounting firm,
Kost Forer Gabbay & Kasierer, a member of EY Global, has audited the consolidated financial statements included in this annual report
on Form 20-F, and as part of its audit, has issued its attestation report regarding the effectiveness of our internal control over financial
reporting as of
December 31, 2023. The report of Kost Forer Gabbay & Kasierer is included with our consolidated financial statements
included elsewhere in this Annual Report and is
incorporated herein by reference.
Changes in Internal Control
over Financial Reporting
There were no changes in our internal control over
financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period
covered by this Annual Report that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
Item 16A.
Audit Committee Financial Expert
Our board of directors has determined that Ms. Tzvia
Broida is an audit committee financial expert as defined by the SEC rules and has the requisite financial experience as defined by the
corporate governance rules of Nasdaq.
Our board of directors has determined that each
member of our audit committee is “independent” as such term is defined in Rule 10A-3(b)(1) under the Exchange Act, which is
different from the general test for independence of board members under the rules of Nasdaq.
We have adopted a Code of Conduct that applies to
all our employees, officers and directors. Our Code of Conduct addresses, among other things, competition and fair dealing, gifts and
entertainment, conflicts of interest, international business laws, financial matters and external reporting, company assets, confidentiality
and corporate opportunity requirements and the process for reporting violations of the Code of Conduct. Our Code of Conduct is intended
to meet the definition of “code of ethics” under Item 16B of 20-F under the Exchange Act.
We granted no waivers under our Code of Conduct
in 2023.
Item 16C
.
Principal Accountant Fees and Services
The consolidated financial statements of Global-E
Online Ltd. at
December 31, 2022 and
2023, and for each of the two years in the period ended
December 31, 2023, appearing in this Annual
Report have been audited by Kost, Forer, Gabbay & Kasierer, a member of EY Global, independent registered public accounting firm,
as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority
of such firm as experts in accounting and auditing. The current address of Kost, Forer, Gabbay & Kasierer is 144 Menachem Begin Road,
Tel Aviv 6492102, Israel
.
The table below sets out the total amount of services
rendered to us by Kost, Forer, Gabbay & Kasierer, a member of EY Global, for services performed in the years ended
December 31, 2022
and
2023, and breaks down these amounts by category of service:
|
|
2022 |
|
|
2023 |
|
|
|
(in thousands) |
|
Audit Fees |
|
$ |
760 |
|
|
$ |
880 |
|
Audit Related Fees |
|
$ |
218 |
|
|
$ |
- |
|
Tax Fees |
|
$ |
97 |
|
|
$ |
66 |
|
All Other Fees |
|
|
- |
|
|
|
40 |
|
Total |
|
$ |
1,075 |
|
|
$ |
986 |
|
Audit Fees
Audit fees for the years ended
December 31, 2022
and
2023 include fees for the audit of our annual financial statements. This category also includes services that the independent accountant
generally provides, such as consents and assistance with and review of documents filed with the SEC.
Audit Related Fees
Audit related fees for the year ended
December 31, 2022 related to
services in connection with the Flow Merger and Borderfree acquisition. There were no audit related fees for the year ended
December
31, 2023.
Tax Fees
Tax fees for the years ended
December 31, 2022 and
2023 related to ongoing tax advisory, tax compliance and tax planning services.
All Other Fees
All other fees in the years ended
December 31, 2022
and
2023 related to services in connection with non-audit compliance and review work.
Pre-Approval Policies and Procedures
The advance approval of the Audit Committee or members
thereof, to whom approval authority has been delegated, is required for all audit and non-audit services provided by our auditors.
All services provided by our auditors are approved
in advance by either the Audit Committee or members thereof, to whom authority has been delegated, in accordance with the Audit Committee’s
pre-approval policy.
Item 16D
.
Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E
.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Not applicable.
Item 16F
.
Change in Registrant’s Certifying Accountant
None.
Item 16G
.
Corporate Governance
As an Israeli company, we are subject to various
corporate governance requirements under the Companies Law. However, pursuant to regulations promulgated under the Companies Law, companies
with shares traded on certain U.S. stock exchanges, including Nasdaq, may, subject to certain conditions, “opt out” from the
Companies Law requirements to appoint external directors and related Companies Law rules concerning the composition of the audit committee
and compensation committee of the board of directors (other than the gender diversification rule under the Companies Law, which requires
the appointment of a director from the other gender if at the time a director is appointed all members of the board of directors are of
the same gender). In accordance with these regulations, we elected to “opt out” from such requirements of the Companies Law.
Under these regulations, the exemptions from such Companies Law requirements will continue to be available to us so long as: (i) we do
not have a “controlling shareholder” (as such term is defined under the Companies Law), (ii) our shares are traded on certain
U.S. stock exchanges, including Nasdaq, and (iii) we comply with the director independence requirements and the audit committee and compensation
committee composition requirements under U.S. laws (including applicable rules of Nasdaq) applicable to U.S. domestic issuers.
We are a “foreign private issuer”
(as such term is defined in Rule 3b-4 under the Exchange Act). As a foreign private issuer we are permitted to comply with Israeli corporate
governance practices instead of the corporate governance rules of Nasdaq, provided that we disclose which requirements we are not following
and the equivalent Israeli requirement.
We rely on this
“foreign private issuer
exemption” with respect to the quorum requirement for shareholder meetings. Whereas under the corporate governance rules of Nasdaq,
a quorum requires the presence, in person or by proxy, of holders of at least 331/3% of the total issued outstanding voting power of our
shares at each general meeting of shareholders, pursuant to our amended and restated
articles of association, and as permitted under the
Companies Law, the quorum required for a general meeting of shareholders consists of at least two shareholders present in person or by
proxy in accordance with the Companies Law, who hold or represent at least 331/3% of the total voting power of our shares, except if (i)
any such general meeting of shareholders was initiated by and convened pursuant to a resolution adopted by the board of directors and
(ii) at the time of such general meeting, we qualify as a
“foreign private issuer,” in which case the requisite quorum will
consist of two or more shareholders present in person or by proxy who hold or represent at least 25% of the total voting power of our
shares (and if the meeting is adjourned for a lack of quorum, the quorum for such adjourned meeting will be, subject to certain exceptions,
any number of shareholders). We otherwise comply with and intend to continue to comply with the rules generally applicable to U.S. domestic
companies listed on Nasdaq. We may, however, in the future decide to use the
“foreign private issuer exemption” and opt out
of some or all of the other corporate governance rules. Following our home country governance practices may provide less protection than
is accorded to investors under the corporate governance rules of the Nasdaq applicable to domestic issuers.
We intend to take all actions necessary for us to
maintain compliance as a foreign private issuer under the applicable corporate governance requirements of the Sarbanes-Oxley Act of 2002,
the rules adopted by the SEC and Nasdaq corporate governance rules.
Item 16H
.
Mine Safety Disclosure
Not applicable.
Item 16I
.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
Item 16J
.
Insider Trading Policies
Not applicable.
Cybersecurity Risk Management
and Strategy
We have developed and implemented a cybersecurity
risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information.
Our cybersecurity risk management program is based on various cybersecurity standards in which we are certified, including ISO 27001,
SOC 2 Type 2 and SOC 3. We have also obtained and maintain PCI-DSS (level 1) certification. While we may not always meet every technical
standard, specification and requirement specified in these frameworks at all times, we use these frameworks to help us identify, assess,
and manage cybersecurity risks relevant to our business.
Our cybersecurity risk management program shares
common principles, oversight, reporting channels and governance processes with our general risk management processes.
Primarily, our cybersecurity risk management approach,
include, but are not limited to:
• |
risk assessments designed to help identify material cybersecurity risks
to our critical systems, information, products, services, and our broader enterprise IT environment; |
|
|
• |
a security team principally responsible for managing (a) our cybersecurity
risk assessment processes, (b) our security controls, and (c) our response to cybersecurity incidents; |
|
|
• |
physical and technical security measures, including encryption, authentication,
and access controls; |
|
|
• |
cybersecurity awareness training and internal cybersecurity resources
for our employees; |
|
|
• |
the use of external service providers, where appropriate, to assess,
test or otherwise assist with aspects of our security processes; and a cybersecurity incident response plan that includes procedures for
responding to cybersecurity incidents; and |
|
|
• |
a third-party risk management process for service providers, suppliers,
and vendors based on their criticality and risk profile. |
We have not identified risks from known cybersecurity
threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business
strategy, results of operations, or financial condition. We face risks from cybersecurity threats that, if realized, are reasonably likely
to materially affect us, including our operations, business strategy, results of operations, or financial condition. See Part I, Item
3.D. “Risk Factors—We store personal information of merchants and shoppers. To the extent our security measures are compromised,
our platform may be perceived as not being secure. This may result in merchants curtailing or ceasing their use of our platform, our reputation
being harmed, our incurring of significant regulatory and monetary liabilities, and adverse effects on our results of operations and growth
prospects.”
Cybersecurity Governance
Our board of directors considers cybersecurity
risk as part of its risk oversight function and has delegated to the audit committee overall risk management, including oversight of cybersecurity
and other information technology risks. The audit committee members receive periodic briefings from management on our cybersecurity risks,
and our management updates our audit committee members, as necessary, regarding any significant cybersecurity incidents. Our audit committee
members also receive briefings from management on our cyber risk management program. Our board of directors is periodically briefed regarding
management’s activities, including those related to cybersecurity.
Our management team, including our CTO and CISO, along with our Data Protection Officer
(DPO), have primary responsibility for assessing and managing our material risks from cybersecurity threats. The team has primary responsibility
for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external
cybersecurity consultants. Our CTO and CISO have a combined
experience of over three decades of experience in executive leadership across multiple industries (banking, SaaS and other
online services) in the areas of production systems, data integrity and information security.
Our management team oversees efforts to prevent,
detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from our CISO and
other security personnel and external consultants; threat intelligence and other information obtained from governmental, public or private
sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment.
Item 17
. Financial
Statements
We have provided financial statements pursuant to
Item 18.
Item 18
. Financial
Statements
The audited consolidated financial statements as
required under Item 18 are attached hereto starting on page F-1 of this Annual Report. The audit report of Kost Forer Gabbay & Kasierer
(a member of EY Global), an independent registered public accounting firm, is included herein preceding the audited consolidated financial
statements.
|
|
|
|
|
|
Incorporation by Reference
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Filed / |
Exhibit No. |
|
Description |
|
Form |
|
File No. |
|
Exhibit No. |
|
Filing Date |
|
Furnished |
|
|
|
|
F-1 |
|
|
|
3.1 |
|
|
|
|
|
|
|
|
F-1 |
|
|
|
4.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
|
|
|
F-1 |
|
|
|
10.1 |
|
|
|
|
|
|
|
|
F-1 |
|
|
|
10.2 |
|
|
|
|
|
|
|
|
F-1 |
|
|
|
10.3 |
|
|
|
|
|
|
|
|
F-1 |
|
|
|
10.7 |
|
|
|
|
|
|
|
|
F-1 |
|
|
|
10.6 |
|
|
|
|
|
|
|
|
20-F |
|
|
|
4.6 |
|
|
|
|
|
|
|
|
F-1 |
|
|
|
10.5 |
|
|
|
|
|
|
|
|
F-1 |
|
|
|
10.8 |
|
|
|
|
|
|
|
|
F-1 |
|
|
|
10.9 |
|
|
|
|
|
|
|
|
20-F |
|
|
|
4.10 |
|
|
|
|
|
|
|
|
20-F |
|
|
|
4.11 |
|
|
|
|
|
|
|
|
20-F |
|
|
|
4.12 |
|
|
|
|
|
|
|
|
F-1 |
|
|
|
4.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
|
|
|
|
|
|
|
|
* |
|
|
|
|
|
|
|
|
|
* |
|
|
|
|
|
|
|
|
|
** |
|
|
|
|
|
|
|
|
|
** |
|
|
|
|
|
|
|
|
|
* |
97.1 |
|
|
|
|
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document. |
|
|
|
|
|
|
* |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document. |
|
|
|
|
|
|
* |
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
|
|
|
* |
101.DEF |
|
Inline XBRL Taxonomy Definition Linkbase Document. |
|
|
|
|
|
|
* |
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document. |
|
|
|
|
|
|
* |
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
* |
104 |
|
Inline XBRL for the cover page of this Annual Report on Form 20-F,
included in the Exhibit 101 Inline XBRL Document Set. |
|
|
|
|
|
|
* |
* |
|
|
|
** |
Furnished herewith. |
|
|
†
|
Portions of this exhibit have been redacted pursuant to Item 4 of the
“Instructions As To Exhibits” of Form 20-F because the Company customarily and actually treats the redacted information as
private or confidential and the omitted information is not material. The Company hereby agrees to furnish an unredacted copy of the exhibit
to the Commission upon request. |
|
|
# |
Indicates management contract or compensatory plan or arrangement.
|
Certain agreements filed as exhibits to this Annual Report contain
representations and warranties that the parties thereto made to each other. These representations and warranties have been made solely
for the benefit of the other parties to such agreements and may have been qualified by certain information that has been disclosed to
the other parties to such agreements and that may not be reflected in such agreements. In addition, these representations and warranties
may be intended as a way of allocating risks among parties if the statements contained therein prove to be incorrect, rather than as actual
statements of fact. Accordingly, there can be no reliance on any such representations and warranties as characterizations of the actual
state of facts. Moreover, information concerning the subject matter of any such representations and warranties may have changed since
the date of such agreements.
The registrant hereby certifies that it meets all
of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its
behalf.
|
GLOBAL-E ONLINE
LTD. |
|
By: |
|
|
Name: |
|
|
Title: |
Chief Executive Officer |