Global-E Online Ltd. (GLBE) Q2 2026 Earnings Call Transcript

Welcome to the Global Ease second quarter 2026 earnings announcement conference call. This call is being simultaneously webcast on the company's website and the investors section under news and events. For opening remarks and introductions, I will now turn the call over to Alan Katz, Global Ease Head of Investor Relations. Please go ahead. Thank you and good morning, everyone.

With me on the call today are Amir Slakat, co-founder and chief executive officer, Ofra Koran, Chief Financial Officer, and Nir Devi, Co-Founder and President. Amir will begin with a review of the operations and the business results for the second quarter of 2026. Ofra will then review the financial results of the second quarter in more detail, followed by the company's updated outlook for the full year as well as the Q3 outlook. We will then open the call for questions. Before I read the forward-looking statement's disclaimer, I'll note that as in previous quarters, we have posted an Excel-based metrics file on our IR website. This provides historical data for both financial information and KPIs that may be helpful as investors are researching the company. We have also published slides that highlight our results as well as some of the key themes that we will discuss in today's call. Please feel free to let us know if you have any feedback on either of these documents. Moving on, certain statements we make today constitute forward-looking statements. All statements other than statements of historical fact are forward-looking statements, including statements regarding our guidance, growth strategy, long-term targets, competitive positioning, product and platform initiatives, partnerships, and share or purchases. These forward-looking statements reflect our current views with respect to future events and are not a guarantee of future performance. Actual outcomes may differ materially from the information contained in the forward-looking statements as a result of a number of factors, including those set forth in our 2025 annual report filed with the SEC. Please refer to our press release issued today, August 12, 2026, for additional information. In addition, certain metrics we will discuss today are non-GAAP metrics. We believe that these measures provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making. For more information on these non-GAAP financial measures, including reconciliations to the most directly comparable GAAP measures, please see our press release issued today. Throughout this call, we will also discuss a number of key performance indicators used by our management team. These and other KPIs are discussed in more detail in our press release issued today. I will now turn the call over to Amir, our co-founder and CEO. Amir, please go ahead.

The momentum that we saw during the start of the year continued through Q2, resulting in another very strong quarter all around and reinforcing our confidence in our ability to continue to strongly perform against our long-term growth targets. We beat the high end of the range across all of our guidance metrics and are now raising our outlook for GMV, revenue, and adjusted EBITDA for the remainder of the year. Operationally, during the quarter, we had some great achievements against our multi-year strategic plan, including continued growth with our existing merchants, launching with exciting new brands, and the expansion of our work with our strategic partners. We also announced and closed on the acquisition of Passport, a global asset-light logistics solution. Passport brings with it strategic logistics capabilities to further create value for our merchants, while also broadening our offering to serve verticals beyond our traditional merchant of record model, thereby expanding our TAM. We continue to make progress on Managed Markets v2 and on driving adoption of our value-added services. Lastly, we expanded our internal use of AI, leveraging this groundbreaking technology to improve our service to merchants and our ability to leverage our unique data assets as well as to lower our cost to serve. The utilization of Generative AI allows us to move faster, provide better service and consultancy to our merchants, and further leverage we continue to perform in targets we presented last year at our investor day, both in our high growth momentum and in the continued adjusted EBITDA margin expansion. The outlook for the year helped to illustrate our market leadership position, our growing competitive modes and our ongoing commitment to continue to drive the business. Before we go in more depth with some of the items that I just mentioned, let's first go over the key elements. Compared with Q2 2025, GMV increased by 44% to almost $2.1 billion. dollars making q2 the first time we reach more than 2 billion dollars in gmv in a non-peak quarter revenues grew by 39 to 299 million dollars with q2 being the second quarter in a row in which our last 12 months revenues total more than 1 billion dollars news came in considerably higher than our respective guidance this continued strong execution drives our upwards revised full year 2026 revenue guidance to a 32% year-on-year growth before accounting for Passport, which represents further acceleration from 2025's fast revenue growth, which stood at 28%. In other words, we have managed to meaningfully accelerate our growth rates compared to last year's trajectory. We believe this is a strong testament to the value our services generate for our merchants, to our market leadership position and to the immense untapped potential we see in this exciting and growing market. But growth alone is only one part of the story. In parallel to this growth in revenues, we continued our steady trajectory of adjusted EBITDA margin expansion over time. We finished Q2 of 2026 with $62.4 million of adjusted EBITDA, up 62% year-on-year, to a margin of almost 21%. This is more than a 300 basis point increase compared to the same quarter last year. Not just generating durable, high top-line growth, we're also generating strong and profitable bottom-line growth. Trading activity, same-store sales growth came in above historical trends once again. And mid-sized merchants continue to be a significant factor, driven by continued global consumer resilience, as well as stronger consumer response to recurring annual promotional activity. During Q2, the seasonal sales days peaked at more than 25% higher than the increase they saw in last year's Q2 promotions. Besides planned sales promotions, I would be remiss if I didn't congratulate a few of our soccer clubs that we proudly count as globally merchants on their fantastic achievements this past season. To name just a few, Arsenal won the Premier League Championship and were also runner-ups for the Champions League. Barcelona retained their title as La Liga champions. Bayern Munchen won the league title again. And Manchester United secured their return to the Champions League. Fans buying jerseys around the FIFA World Cup led to an increase in volumes within our sports. As I mentioned earlier, our growth is both durable and profitable. Just like in past years, on an annual basis, we expect our free cash flow margin to reduce our adjusted EBITDA margin. We continue to generate growing amounts of cash every year. We plan to continue to use this cash to create long-term value for merchants. I'll discuss our acquisition of Passport in a moment, access cash to shareholders via our share repurchase program. As of the end of the quarter, we have completed our 2025 plan of $200 million. In June 2026, the board approved a new $500 million plan, which we intend to start executing upon as well. We will continue to repurchase shares as long as we believe the market is undervaluing the financial and operational strength of our business, as well as the market opportunity that we have ahead of us. Let's now spend some time on our strategic and operational progress. As already mentioned, we announced and closed on the acquisition of Passport. The team did an incredible job on this deal, which is especially exciting, as this is a company that we've been watching for some time. We were happy to welcome Alex and the entire Passport team on board last month, and believe this acquisition to be an especially strategic addition to our suite of logistics solutions. While the introduction of a non-MOR option to our suite of service offerings enables us to serve merchant categories we haven't been able to or wanted to address in the past, owning deep, best-in-class standard shipping capabilities and know-how, broadens our suite of logistics solutions, both outbound and inbound, thereby allowing us in service levels of standard logistics around the world. This will also allow us to leverage our scale to build dedicated services, including consolidated returns, direct injections, and further proprietary duty drawback capabilities. The post-merger integration effort is already well underway, and we are quickly advancing towards completing phase one, which is to enable Passport as a shipping service on the globally carrier stack. We have kicked off multiple work streams aimed at building additional services and offerings across multiple geographic regions. which we expect to materialize over the coming quarters, thereby greatly enriching our suite of logistics. Passport is currently on track to generate over $100 million in revenues this year, growing slightly ahead of our overall growth rate. Passport has recently turned adjusted EBITDA and cash flow positive, and we expect its margins and cash flow to further improve as they grow, and as we realize integration synergies with our existing scale and framework, Shopify Managed Markets version 2 remains on track. In Q2, we officially expanded the geographical footprint of the managed markets offering, making it available for the first time to merchants outside of the U.S., namely in Canada and in the U.K. We expect to bring this offering to additional countries down the line. We're starting to see both trading volumes and the onboarding of new merchants on managed markets pick up steam and continue to see the significant long-term potential of this innovative new offering beginning to materialize. We migrated many of the merchants that were on version 1 to version 2 already towards the beginning of the second quarter, with the remaining merchants migrating during the quarter. The process went smoothly, and initial feedback from the group of merchants has been very positive, further strengthening our belief that version 2 indeed solves many of the issues that impeded version 1 from being more widely adopted. We continued to work side-by-side with Shopify's teams to deliver additional features and capabilities, all aimed at driving both conversion and adoption higher and higher. During Q2, we also made further progress on driving adoption of another one of our key value-added services, that of duty drawback. As a reminder, this service is designed to enable merchants to potentially reclaim import duties on goods that are exported outside of their home base, as well as reclaim certain tariffs paid on return goods. During the second quarter, we had several merchants that started utilizing the U.S. import drawback capability. We expect to see this service growing as more merchants will provide the necessary documentation to support the process. As I already mentioned, we believe that our acquisition of Passport will further expand our capabilities in this field of duty drawback in the future. Spend it again this quarter. Traffic into the BorderFree.com continues to rise, crossing 10 million unique visits in the last 12 months. The number of merchant sales attributable to the BorderFree.com channel is now 6.5% for merchants that are utilizing the platform. This offering is still in its early innings, but we remain pleased with the progress to date and are excited to see its continued adoption. We are continuing on our path to implement AI across the organization. on our AI-first enhancements and boost efficiency levels all around. We have built AI into many of the processes across R&D, implementation, merchant operations, and customer service, as well as our corporate and back office functions. We are empowering our teams to improve the onboarding and development processes for merchants, launch new AI-led processes for research and support, and roll out tools to solvency and optimization for the benefit of our merchants around Let's now move on to some of the exciting new brands that have joined the platform and went live. First off is Europe, the legendary Italian consumer brands in the world. A terrific new logo win for launches of Manebi, the espadral specialist that turned this Mediterranean summer staple into a year-round luxury item. And Liviana Conti, the first brand to launch with us out of the Italian fashion group Abram Industries. In Germany, we launched 6PM, the Berlin-based contemporary streetwear label, as well as the influencer-founded fashion brand Mikuta. Sweden saw several brand launches across a diverse set of verticals, including Malina, the fashion house from Stockton and lifestyle brand for men founded by professional skier and entrepreneur John Olson, Sinsam, one of the Nordic's largest optical retail chains, and even Rimgard, an innovative Swedish engineering brand behind a patented high-end wheel security lock. Out of the LVMH group, we have Officine Universal Boulis, the Parisian luxury brand famed for its artisanal fragrances since 1803. We also launched with another French brand that has a rich history, J.M. Weston, the French master shoemaker, which was founded in Limoges back in 1891. In the UK, we launched with Naked Wolf, the London-born sneaker brand known for its chunky statement footwear and heavy social media presence. We've NPO, the historic Burlington Arcade cashmere house, famously worn on screen by James Bond. And with Montyrex, a Liverpool-born technical activewear. We launched with many prominent brands, growing wellness and supplements companies. Buffbunny, the popular fitness and activewear brand by fitness influencer and entrepreneur Heidi Summers, who bootstrapped this brand in 2016 from her living room in San Antonio, Texas. Dolce Vita, the LA-based contemporary footwear brand from the Steve Madden family, the fast-growing paddle brand riding on the global pickleball boom, recently launched a highly anticipated brand of last but not least. In APAC, we launched with a second brand out of the Universal Music Japan Group, continuing our relationship with the label following their Q1 launch, with All Things Golden, the successful Australian boutique label, and with other... These are just a few of the exciting brands that have gone live with us over the... I want to take this opportunity to give credit to our professional services and onboarding teams, launching more and more brands to new merchant launches. Q2 also saw the expansion of our business with a number of prominent brands. FIGs continue to expand with us, opening up new countries across APAC. They remain one of the fastest-growing and most engaged brands on our platform. Other notable brands with which we expanded to additional lanes in Q2 are Fresh, the LVMH-owned skincare brand that launched with us back in Q1, Pokemon, where we expanded this quarter to take on significantly more volume related to their highly anticipated and viral drops, As well as Peter Miller and GeForce, the Richemont golfwear brands that launched last quarter, Camper, the Spanish footwear brand, and Isabel Marant, the French luxury fashion house, just to name a few, of 2026. And we expect continued strong growth and profit expansion in the back half of the year, as is reflected in our updated full year. From what we see today, we believe we are well positioned to exit 2026, which is the second year in our long-term strategic plan, our commitment to take us through the quarterly numbers in more depth and lay out our Q3 and updated 2026.

Thank you, Amir, and thanks everyone for joining us today. As Amir just highlighted, Q2 was another quarter of very strong growth for globally, with results again significantly above the rule of 50, as we continue to execute and deliver against our strategic plan to drive long-term and profitable growth across the business. Before I go into details of the quarter, I'd like to remind everyone again that in addition to our GAAP results, I'll also be discussing certain non-GAAP financial measures. Definitions of these measures and reconciliation to the most directly comparable GAAP measures can be found in our earnings release. Q2 was $2.089 billion, up 44% year-over-year. Trading volumes were strong same-store sales, as we continue to see robust consumption patterns at destination regions. Performance was further accelerated by highly impactful Q2 merchant promotions, which, despite being annual events, generated strong. In addition, we continue to benefit from the positive impact of the merchant cohort that launched in the second half of 2025, see positive contributions from merchants launched in 2026 and benefit from some FF of $299 million, up 39% at $139.4 million, $159.6 million year-over-year. The service feed take rate of the core business remains fairly stable. Time decrease in the service feed base market's V1 merchants to V2, to accounting treatment, marketing expense. It is important to note that as we continue to expand our suite of solutions with business models such as mostly non-MOR, we believe takeaway trends are becoming a less indicative metric of the state of the business, have modestly declined, our adjusted EBITDA margins have meaningfully expanded by more than 320 basis points. Progressing through the income statement, non-GAAP gross profit was $135.4 million, up 36% year-over-year, representing a non-GAAP gross margin of 45.3% compared to the 46-point period last year. Gross margin was primarily affected from a gap between the time in which carriers update their fuel surcharges and the time we pass those updates on. While we have a mechanism to adjust for fuel price changes, which we have utilized in recent months, in view of the high fuel prices volatility, reduce the level of uncertainty and volatility for the merchants, and not to update price $9 million, representing a margin of $4 million. Moving on to operational expenses, R&D expense in Q2, excluding stock-based compensation, was $30.4 million or to $26.2 million or 12.2% in the same period last year. We continued to benefit from both operating leverage and the utilization of AI tools and agents to drive efficiency into the business during the quarter. Despite the continued investment in the enhancement of our platform to further expand our offering and add value to our merchants, R&D, excluding stock-based compensation, increased only 16% to the continued growth in GMV of over $40,000,000,000. We also continue to invest in sales and marketing to drive our future growth, including in our go-to-market and quota-carrying team, the marketing of borderfree.com, and investment in building our brand reputation in both new and existing markets. It says that marketing expense, excluding stock-based compensation and acquisition-related intangible amortization, was $31.8 million, or 10.6% of revenue, compared to $27.2 million or 12.7% of revenue in the same period last year. The decrease in sales and marketing expense as a percentage of revenue is partially driven by the migration of managed market merchants from V1 to V2. Sales and marketing expenses for the quarter were $35.8 million. General and administrative expense and session acquisition-related contingent consideration were $11.7 million, or 3.9% of $8 million, or 4.1% of revenue in the same period last year. Total G&A spend in Q2 was 16.5%. We are happy to see our acquisition-related intangible amortization at under 25% of revenue, driven by scale leverage and operational efficiencies. This was one of the financial targets with 29%. continued to grow even faster than our top line. Adjusted EBITDA for the quarter was $62.4 million, representing a 20.9% adjusted EBITDA margin, an increase of 62% from the $38.5 million or 17.9% margin in the same period last year. Profit for the quarter was $64.9 million compared to $37.9 million in the same period last year. Non-GAAP net profit for the quarter was $47.7 million compared to a net profit of $10.5 million last year, and fully diluted GAAP EPS was $0.27. Turning to the balance sheet and cash flow statement, we ended Q2 with $530 million in cash and cash equivalents, including short-term deposits and marketable securities. Free cash flow in the quarter was $73.2 million. This compares with $63.5 million of free cash flow in Q2 of 2025. Net cash from operating activities was $73.6 million compared to $65 million dollars a year ago. As Amir mentioned, in Q2 we continue to execute on our share repurchase program and completed the remaining capacity under the $200 million 2025 plan. We repurchased approximately $68 million in stock in the quarter and have now repurchased 5.7 million shares in total since the $100 million share repurchase plan, which we expect to begin executing on moving and guidance for Q3 and our updated outlook for the full year 2026. We continue to see 2026 as another year of very strong top and bottom line growth for global E. We have raised again both the top and bottom line outlook for the year. In addition, we have included in the guidance the expected contribution of Passport. For Q3-2026, we are expecting GMV to be in the range of $1.995 billion to $2.045 billion. At the midpoint of the range, this represents a growth rate of 34% versus Q3 of 2025. Out of that, we contribute approximately $20 million from its merchant of record to be in the range of $308.5 to $315.5 million, representing a growth rate of over 41 percent versus Q3 of 2025. Of that, we expect Passport to contribute $24 to $26 million. Lastly, for adjusted EBITDA, we are expecting a range of $58.5 to $62.5 million, or a 19.4% margin at the midpoint of the range, a contribution of less than $1 million. For the full year of 2026, we now anticipate GMV to be in the range of $8.81 to $9.11 billion, representing an annual growth rate of 36.4% at the midpoint of the range. Of that, Passport is expected to contribute approximately $60 million in the back half of 2026 from its merchant of record service. Revenue for the full year is now expected to be in the range of $1.305 to $1.355 billion, representing a year-over-year growth of the range. Of that, Passport is expected $59 million. Lastly, we expect adjusted EBITDA and adjusted EBITDA margins to continue to expand, supported by operating leverage and utilization of AI. We now expect to achieve 2026 adjusted EBITDA in the range of $278 to $300 million, representing a 46% growth at the midpoint and a 21-point margin. Discussed at the time of the acquisition, Passport is growing slightly ahead of our overall growth rate and is generating in 2027 as the business continues. In conclusion, we had a very continuing to support our merchants on their international journey. We are the clear leader in a fast-growing and exciting market and are continuing to execute well upon our multi-year plan. With our strong momentum, we believe we are well positioned to deliver another year of results well above the rule. And with that, Amir, Nir, Alan, and I are happy to answer any questions you may have.

Ladies and gentlemen, we will now begin the question and answer session.

If you have a question, please press star followed by the number one on your touchtone phone. You will hear your prompt that your hand has been raised. If you would like to withdraw from the polling process, please press star, then the number two. In an effort to allow all analysts to ask questions, we will be taking one question per participant. Please rejoin the Q&A queue for follow-up questions. If you're using a speakerphone, please make sure to lift your handset before you press any keys. Your first question comes from the line of Andrew Bach from BMO. Please go ahead.

Hey, great quarter, guys. It's good to see the acceleration, especially against a tougher comp. I want to ask you about managed markets. You know, you made the conversion from 1.0 to 2.0 this quarter. I was wondering if you could share any additional data points on what you're seeing around things like conversion or attach, and what kind of growth are you contemplating for managed markets this year?

Because we understand growth in that business was largely on pause last year. in adoption, following the rollout of V2. We are also excited with the opening of general availability on managed markets in Canada and UK, which is positively impacting their interest level outside the U.S. and overall. And lastly, we have seen positive feedback from merchants that migrated from V1 to V2. on the merchant experience and on the overall conversion. Also, the continuous development we made around managed pricing together with Shopify have yielded good results in terms of its contribution to participating merchants in the conversion. So all in all, we are tracking the right direction and we see continuous increase in adoption. um managed market uh is a long longer term play uh we do believe uh it will continue to grow over time and continue to accelerate in its contribution uh to globally and to show this thank you your next question comes from the line of billy fitz simmons from piper sandler please go ahead hey guys good to see the results and guidance it seems like first same store sales growth continues to outpace expectations.

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

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

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

Hi, guys. Can you hear me?

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

So most of these promotions are annual promotions. A lot of the merchants and some of our larger merchants have sort of a biannual approach to promotions, so they have large promotions in Q4. And then they also have some large promotions in Q2. It's the same promotions every year, so we've seen that in 2025, in 2024, and even earlier. So nothing out of the ordinary here. The interesting thing is that the consumer reaction in 2026, in Q2 2026, was very strong. To the same promotions that they run every year, we've seen very strong results. results for those promotions, and that has contributed to Q2 results. In general, I can say that over the last two or three years, we are seeing over time a better reaction to promotions. We see consumers planning their shopping, at least some of the consumers. I think it's evident in our last two years Q4 results. So we'll continue to see this in the future.

Okay, thanks a lot.

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

Please go ahead.

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

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

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

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

Our next question comes from the line of James Fawcett from Morgan Stanley. Please go ahead.

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

So in terms of we are very happy with the results, we have been able to expand just the EBITDA margins as we planned. This was part of the long-term plan that we've done. And this is mentioned, they are growing further. The synergies that we are able to achieve, we can get to similar levels of profitability. In addition to that, we believe that over time, too globally, we believe that we will be able to offer a much more complete shipping proposition to the merchants. We believe that we can increase also revenue through that.

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

Please go ahead.

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

Hi, it's Neil.

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

And to answer your question on passport seasonality, it's a pretty similar pattern to globally, so you can pretty much assume sort of a similar seasonality between the...

Thank you.

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

Please go ahead. hey thanks for taking the question um i wanted to maybe push you guys a little bit on the take rate commentary i know it's big focus for investors uh when i look at the long-term targets i think there is a three to five point gap between revenue and gmv and so you know just i think the baseline expectation is for modest take rate compression over time uh but you're talking a lot about some of these value-added services border-free duty drawbacks the marketing services so you know maybe you could talk in the context of some of these value-added services how you think about how this could impact uh the top line trend relative to gmv and whether you see an

opportunity to you know mitigate some of that take rate compression just you know acknowledging the fact that you guys are are growing well ahead of the medium term outlook that you provided at the end yesterday thanks for taking the question thanks with you know when we mentioned that our focus is on providing the best combination of platform and service for merchants and in turn to grow our top and bottom line so over time we have expanded as you know that the scope of solutions that we provide to merchants and these solutions by nature they carry different take rates all are accretive to our top line growth and bottom line so we believe that all of these solutions are great solutions for the merchants and also create value for for global e and by offering these different models that are catering different merchant needs this enables us to drive consistently fast and profitable growth suite of solutions we believe that take rate has become and will continue to be less indicative of how our business is trending. For example, if you take the passport edition into the portfolio, it actually increases our take rate, but we don't see that as a positive nor as a negative. It's just a different sort of financial profile of the company. So we believe that we need to look at GMV, but we believe that the take rates are less important. And in terms of value-added services, we are very excited about those, and I'll leave it to Nir to elaborate on that.

Sure. And we are very happy with the development we've seen on the adoption of our value-added services. Duty drawback, in general, is growing significantly in its utilization across our merchants worldwide. And in particular, if we speak about import duty drawback in the U.S., we have seen the first few merchants' claims being approved. We have seen the process starting to roll. We see more and more clients being able to construct and extract the data they need in order to provide us with the ability to claim on their behalf, and we believe this will become a significant business over time. In terms of borderfree.com as well, we continue to see the increase in adoption. It grew to become 6.5% of GMV for participating brands. We continue to see an increase in the direct-to-checkout from borderfree.com, yielding our affiliation fee. So all in all, quite positive development across our value-added service that over time we believe with our take rates, as also indicated, has become much more a result and not something we manage for due to the mix of different business models that we have, from multi-local to our regular model, to the passport non-MOR model, to digital goods versus physical goods, et cetera. However, we do plan and we do expect it to stabilize due to the value-added services kicking in at a larger scale.

Yeah, for 2026, as reflected in the guidance, excluding passport, we expect...

Thanks for all the helpful caller there. Appreciate you taking the question. Your next question comes from Mark Zgatowicz from Benchmark.

Please go ahead.

Thank you. Good morning, guys. Just a couple quick ones on GMV and specifically 3Q and 4Q implied GMV. Just curious if there's any plus or minus variables to consider that impacts growth in these periods. That's different than the normal seasonality you typically witness. And then separately, given a number of newly announced luxury wins, just curious how you compare your GMV exposure to this segment today versus a year ago.

Thank you for that, Mark. In terms of luxury, we did have some nice wins, and we are really excited about being able to have some land and expand motion within the large luxury group. However, in terms of percentage overall, I don't think luxury has increased in the last few quarters, and we don't expect luxury share to increase going forward. In terms of seasonality, we do not expect any unordinary trends. We see sort of the normal cadence. So Q3 is typically a bit, you know, less promotions and a lighter quarter.

Okay, thanks, Over.

Your next question comes from the line of Brian Peterson from Rima James.

Please go ahead. hey guys thanks for taking the question and congrats on the strong quarter so just one for me you know as you're thinking about the top of the funnel i know we're maybe a year removed from some really vulnerable times as it relates to terrace i'd love to understand the velocity of customers potentially coming to you and i think you mentioned newer customers kind of ramping a bit bigger is that just from a gmv size as they're coming on or are they potentially buying more products. Thanks guys.

Hi Brian. In general about our pipeline, our new merchant launches for 2026 continue to progress very well and as we planned. As Amir mentioned in his talk, we had a very busy first half of 2026 with some amazing brands that have launched with us and we're currently onboarding a significant amount of brands into our second half of the year. In terms of the sales funnels, we are very happy with what we see across the funnel and the leads that are coming in. So far, 2026 is shaping to be stronger than what we have seen in 2025. Some of it is supported by the AI discovery tool that we deployed late 2025, early 2026. So we have seen an increase at the top of the funnel. And some of it is increase in conversion throughout the funnel. As you mentioned, also contributed by the changes of duties, not only in the U.S. So now in Europe, in July, the minimus was removed also in the European Union. So a lot of merchants are looking for stronger solutions to streamline their global trade. And in this, this is doing good for us.

The next question comes from the line of Chris Zhang from UBS Financial. Please go ahead.

Thank you for taking my question. And again, congrats on the quarter and also appreciate the new slide back. My question is also on managed markets and just a quick one. Just wanted to think about the opportunity, the size of the opportunities in Canada and UK. I appreciate those are important markets for Shopify and if we look at specifically from your revenue mix in terms of merchant outbound region, UK is particularly sizable. I just want to see if that's a good way to think about the potential size of the managed markets as well um in those in uk and canada or any other way to think about that kind of commensurate with their overall person outcome mix thank you yeah thanks chris uh in terms of the uh potential uh we as uh as we already mentioned we continue to see uh an immense potential in this uh offering and shopify has a of merchants uh that are rich markets

across these geographies. And as Nir mentioned, we're continuing to develop together with them features and capabilities that will make it even easier for these merchants to onboard and therefore over time accelerate the pace in which they are joining the platform. In terms of the outbound regions, it's probably better to look at the outbound market or the merchant distribution on Shopify's side. Our distribution is probably not very indicative for that because it's driven by our enterprise business that has other dynamics. But for Shopify, obviously, the U.S. is the largest market. That's why we started together with supporting U.S. merchants and then markets such as Canada and the U.K. and others in descending order.

All right. Thank you very much.

Your next question comes from the line of Patrick Qualavans from Citizens. Please go ahead.

Oh, great. And congratulations on the acceleration, you guys. It's really impressive.

Maybe, Amir, can you talk a little bit about what actually are some of those features and capabilities that will make it even easier to onboard?

What are some of those things that you're working on for managed markets?

There are some key developments that we work together. with Shopify to deploy. Some of them are related to the ability to basically offer it almost out of the box for any new merchant on Shopify to enjoy the benefits of being global by default. So a lot of work is being done around that, and we are very excited about what's to come In terms of the trading on the site itself, we are building with Shopify more capabilities to get the leverage understandings and best practices we have on the enterprise side into getting to work by default for managed markets as well. Some of it was already rolled out with the managed pricing capability on Shopify's side that allowed merchants to enjoy better conversion because it's giving much more local feeling to their international shoppers. It's going to continue into managed pricing also on the shipping side, so a much more complete offering and multiple other projects we are working behind with Shopify. So very exciting things in the oven, and we are very excited about the potential growth.

And maybe I'll just add, Pat, it's a mirror. Another example that will maybe give you a sense is that in initial versions or initial iterations of managed markets, there was kind of an onboarding process or a qualification process where the merchant needed to first submit an application, then it would be reviewed. Later on, we managed to accelerate that review to be within 24 hours. Now it's the same session. Essentially, for the vast majority of merchants, as soon as they click that they're interested in managed markets, the process is done almost instantaneously, and they can go live within a very, very short time span. So that's another type of effort that we put in in order to make it seamless.

Great. Thank you. And just to be clear, so what you're just talking about, Amir, that's done, right?

That's live now? As soon as they click, it's done almost instantly?

This is how it works now. Thanks, Pat.

Our next question comes from the line of Matt Code from Truist. Please go ahead.

Hey, guys. Thanks for taking the question. Quick one for me.

It sounded like you're more optimistic about the Passport integration and synergy opportunity here compared to the last time that we talked to you guys.

Could you provide a little bit more color on that now that the acquisition is closed? Thank you.

Basically, we are very excited with the add-on of Passport. We have an excellent management team and seasoned professionals around building strategic standard solutions. And we believe that with our scale and expertise, we will be able to give great offering to all our clients and passport clients and win more business in the market with smart returns, with more direct injection capabilities, etc. Add to it the non-MOR and the ability of Global Inout to actually go to additional segments and verticals that are not best fit for MOR, we are excited about the potential in-time expansion as well. In terms of the synergies itself, now that we are much more into the weeds, we are much more optimistic on what can be reached within the coming quarters in getting a passport to become much closer to globally in terms of its bottom line contribution.

Your last question comes from the line of Matt Bullock from Bank of America. Please go ahead.

Great. Hey, guys. Good morning. I had a quick one on duty drawback. It sounds like you made a lot of nice progress during the quarter. I understand it takes some merchants time to prepare the documentation to be onboarded and that the revenue contribution can be pretty lumpy as those merchants try to reclaim import duties for multiple years back. So the question is, how does the pipeline look for customers you know are actively preparing that documentation for the back half of this year?

Thanks for the question. So indeed, there is a pipeline of merchants. This is a very valuable offering for U.S. merchants. There's a lot of money that they could potentially reclaim that otherwise would be impossible for them. We have a strong pipeline of those. There's a very good adoption rate of this offering. However, it is taking time, as you indicated, and we are not pushing the merchants because the only chance to reclaim back for a few years is on the first submission. Afterwards, in subsequent submission, you can only reclaim on the ongoing sales. So we have an interest, just like the merchants have, to give them the time to prepare all the documents that they can and gather all the information that they can backwards. Also, of course, it trains them in what needs to be gathered and retained going forward, so it will make the submission process going forward much easier and smoother. But due to that shared interest, we are working with them and we're giving them all the time they need in order to make that first submission as comprehensive as possible.

Thank you. All right, everyone. I think that's the end of our Q&A session.

Thank you, everyone, for joining the call today. We look forward to speaking with many of you during the quarter and providing our next update on our Q3 call in November.

Have a great day, everyone.

Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.