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Global-e Online(NASDAQ: GLBE)
Q4 2023 Earnings Call
Feb 21, 2024, 8:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Welcome to the Global-e fourth-quarter and full-year 2023 earnings announcement conference call. This call is being simultaneously webcast on the company's website in the Investors Relations section under News and Events. For opening remarks and introductions, I will now turn the call over to Erica Mannion at Sapphire Investor Relations. Please go ahead.
Erica Mannion -- Investor Relations
Thank you, and good morning. With me today from Global-e are Amir Schlachet, co-founder and chief executive officer; Ofer Koren, chief financial officer; and Nir Debbi, co-founder and president. Amir will begin with a review of the business results for the fourth quarter and full year of 2023. Ofer will then review the financial results for the fourth quarter and full year of 2023, followed by the company's outlook for the first quarter and full year of 2024.
We will then open the call for questions. Certain statements we make today may constitute forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 that relate to expectations and views of future events. These forward-looking statements are subject to risks, uncertainties, and assumptions, some of which are beyond our control.
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In addition, 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 the section titled Risk Factors in our prospectus filed with the SEC on September 13, 2021 and other documents filed or furnished to the SEC. These statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this call. You should not put undue reliance on any forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, level of activity, performance, and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Except as required by applicable law, we make no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, after the date on which these statements are made or to reflect the occurrence of unanticipated events. Please refer to our press release dated February 21, 2024 for additional information. In addition, certain metrics we will discuss today are non-GAAP metrics.
The presentation of this financial information is not intended to be considered in isolation or as a substitute for or superior to the financial information prepared and presented in accordance with GAAP. We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. 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 operating decision-making. For more information on the non-GAAP financial measures, please see the reconciliation table provided in our press release dated February 21, 2024.
Throughout this call, we provide a number of key performance indicators used by our management and often used by competitors in our industry. These and other key performance indicators are discussed in more detail in our press release dated February 21, 2024. I will now turn the call over to Amir, co-founder and CEO.
Amir Schlachet -- Co-Founder and Chief Executive Officer
Thank you, Erica, and welcome, everyone, to our fourth-quarter and full-year 2023 earnings call. 2023 was a record breaking year for us here at Global-e, and it was brought to a great close by fourth quarter, which was our strongest quarter ever, crossing for the first time a milestone of over $1 billion of GMV within a single quarter. We finished Q4 with a record $1.19 billion in GMV, up 42% year on year and record revenues of over $185 million, up 33% year on year, supported by the strong performance of our merchants over the holiday sales period, including Black Friday and Cyber Monday. The adjusted gross profit margin for Q4 was 42.7%, up 140 basis points from the same quarter of last year.
And our adjusted EBITDA margin was 19% or $35.2 million, our highest ever in a single quarter, reflecting nearly 62% growth compared to the same quarter of last year. Such increased profitability yielded and accelerated cash generation with the business generating $93.5 million in operational cash flows in Q4. Looking at the full year of 2023, GMV came in at close to $3.56 billion, an increase of over 45% year on year, and revenue for the full year came in at $570 million, an increase of over 39% year on year. Annual adjusted gross profit increased even faster growing by almost 46% from 2022, reaching roughly $245 million and representing an adjusted gross profit margin of 42.9% for the full year, an increase of nearly 190 basis points year on year.
Finally, adjusted EBITDA for the full year was $92.7 million, up more than 90%, compared to $48.7 million last year, representing our continued commitment to delivering durable yet profitable growth, thanks to the high efficiencies and tight cost controls. Last but not least, we finished the year with more than $300 million of cash and cash equivalents on our balance sheet, providing a solid foundation for the continuation of our fast and profitable growth trajectory and for the realization of our strategic plans going forward. As we reflect on these strong annual financial results and the substantial growth we managed to generate, it is important to remember that these were achieved while we faced a challenging and, at times, volatile macroeconomic environment, further exuberated by the challenges presented by the ongoing war in Ukraine, as well as the aftermath of the horrific Hamas terrorist attack on October 7th. Our hearts go out to all those who were affected by these events, and we continue to provide all possible support to our team members and their families in both Israel and Ukraine.
As such, we could not be more proud of our incredible team members across all our offices and locations worldwide for having navigated all these challenges so successfully and could not be more thankful to the thousands of merchants who entrust us with their business every hour of every day. Beyond the strong financial growth and figures, 2023 was also another pivotal year for us in terms of the substantial leaps we took forward along all our long-term strategic pillars as we continue to enrich and develop our various offerings. First and foremost, we continue to onboard and add many new brands across the globe to the large portfolio of enterprise brands we work with as global direct to consumer online trading continues to be a strategic priority for brands worldwide. We are not just the leader in global direct to consumer e-commerce.
We are also the only true global player in the market. We already support 31 different outbound markets. And last year alone, we actively shipped packages to 224 distinct destination countries and territories around the world. We quite literally enable our merchants to sell to anyone in nearly every place on Earth.
As an example of this continued expansion, just this last quarter, we launched with Glossier, EleVen by Venus Williams, and Perfect Moment in the U.S.; with Phantom Wallet in Canada; with Whistles and the Harry Potter store by Warner Brothers in the U.K.; with Mugler, a L'Oreal brand; Jean-Paul Gaultier; and Ledger, a leading crypto wallet brand in France; with [Inaudible] in Italy with LOAVIES in the Netherlands; with JET SET in Germany; with [Inaudible] in Belgium; with Zanerobe in Australia; with Salt Murphy and Avec Amour in Hong Kong; and with Retouch in Japan, just to name a few of the many brands that went live with us in the last quarter of 2023. During Q4, we also went live with Stellar Equipment out of Sweden, as well as with God Save Queens, our first Polish merchant, further extending our geographic outreach. Besides adding new merchants, we also continue to expand the scope of our business with existing merchants and merchant groups. Just this last quarter, adidas, Nobull, and The Kooples all extended the list of markets operated through Global-e.
Triangl Swimwear went live with an additional brand called Casa del March And Kylie Jenner went live with another of our brands, the fashion brand KHY. From a product perspective, looking back at 2023, we introduced many new features and key developments into our enterprise platform. Those included improved support for preorders via tokenization; support for cryptocurrency payments via our new integration with Crypto.com; support for orders, which include items fulfilled from different countries as part of a single order; support for several new countries in our multi-local offering; integrations into new platforms such as Wix.com and much more.
Alongside these, we continue to work toward the launch of our enhanced demand generation offering based on the assets and capabilities we acquired as part of the border-free transaction and expect the first major parts of this exciting new offering to be released toward the second half of the year. Moreover, as we have discussed in earlier quarters, during 2023, we also invested considerable resources in harnessing the new and transformative technology of generative AI to enhance the quality and efficiency of various aspects of our business. The most recent example of such a successful implementation comes in the form of our shopper-facing customer services. After several months of beta testing and before the recent peak trading season, we introduced into production our new automated customer service, Chatbot, based on OpenAI's ChatGPT technology, which has been securely connected to our systems and databases, thereby enabling many of our shoppers to receive highly accurate answers to their support queries in real time without the need for human intervention.
We believe this is a manifestation of the tremendous business value such technologies can unlock over the next few years. Another area in which we have made great progress during 2023 was our strategic relationship with Shopify. The agreement for which was renewed for another year during Q4. On the enterprise side, we have all finalized the migration of all our legacy install base onto the new native integration.
In addition, our support for Shopify's new checkout extensibility feature has gone into general availability since January 2024 with a significant number of merchants already running on this new and improved checkout with Global-e's cross-border capabilities seamlessly embedded within it. On the Shopify Markets Pro side, which went into general availability in the U.S. in September, we continue to see an encouraging adoption rate with more and more merchants every week effortlessly switching it on and going global. Between these positive early signs and the exciting roadmap of new features and capabilities we are working on together with Shopify, we believe that the innovative Shopify Markets Pro offering has the potential to grow significantly over the next few years.
In summary, we are extremely pleased with our achievements and results for 2023. And we are equally excited toward the many opportunities for growth that await us in 2024 onwards across all our strategic growth pillars. As Ofer will elaborate on when he presents our guidance for 2024, we expect our strong growth momentum to continue this year with around 32% of annual growth expected in both GMV and revenues. And with that, I will hand it over to Ofer to dive deeper into our quarterly and annual financial results as well as our outlook for Q1 and for the full year of 2024.
Ofer Koren -- Chief Financial Officer
Thank you, Amir, and thanks, everyone, for joining us today for our earnings call. As Amir stated, we are indeed very pleased with our Q4 and full-year 2023 results. Q4 was a strong quarter of fast growth and robust cash generation as we continue to execute and push forward both top-line growth and scale efficiencies. I'd like to point out again that in addition to our GAAP results, I'll also be discussing certain non-GAAP results.
Our GAAP financial results, along with the reconciliation between GAAP and non-GAAP results, can be found in our earnings release. As Amir mentioned at the beginning of this call, we have experienced rapid growth of GMV in Q4 as we generated 1.19 billion of GMV, an increase of 42% year over year. We benefit from the secular trend of growth in e-commerce, which continues to take share from brick-and-mortar retail and from the increased focus of merchants on their direct-to-consumer channels. However, it is important to note that due to the continued recessionary concerns and the sensitive macroeconomic and geopolitical situation in many of the world's largest economies, in the short term, there is still relatively high uncertainty regarding consumer demand, which remains volatile.
In Q4, we generated total revenues of $185.4 million, up 33% year over year. Service fee revenues were $89.9 million, up 43%. And fulfillment services revenue were up 24% to $95.5 million. The higher growth of service fee revenues compared to fulfillment services revenue was mainly driven by the higher share of our multi-local service with high performance of the largest multi-local merchants in Q4.
Throughout 2023, our existing merchant base continued to stay and to grow with us as reflected in our annual NDR rate of 127% and GDR rate of over 97%. Note that our NDR in 2023 excludes border-free volumes as border-free merchants traded with us only for part of 2022. Moving down the P&L, growth in non-GAAP gross profit continues to outpace revenue growth. In Q4, non-GAAP gross profit was $79.1 million, up 37% year over year, representing a gross margin of 42.7%, compared to 41.3% in the same period last year, driven by the higher share of service fee revenue.
GAAP gross profit was $76.3 million, representing a margin of 41.2%. Moving on to operational expenses, we continue to invest in the development and enhancement of our platform to further strengthen our offering. R&D expense in Q4, excluding stock based compensation, was $18.2 million or 9.8% of revenue, compared to $17.8 million or 12.8% in the same period last year. Total R&D spend in Q4 was $25.2 million.
We also continue to invest in sales and marketing to enhance our pipeline while maintaining efficiencies. Sales and marketing expense, excluding Shopify-related amortization expenses, stock based compensation, and acquisition related intangibles amortization, was $17.8 million or 9.6% of revenue, compared to $9.9 million or 7.1% of revenue in the same period last year. Shopify warrant-related amortization expense was $37.4 million. Total sales and marketing expenses for the quarter was $58.8 million.
General and administrative expenses, excluding stock based compensation, acquisition related expenses, and acquisition related contingent consideration, was $8.6 million or 4.6% of revenue, compared to $8.9 million or 6.4% of revenue in the same period last year. Total G&A spend in Q4 was $15.5 million. Adjusted EBITDA totaled $35.2 million, representing a 19% adjusted EBITDA margin, increasing from $21.8 million or 15.6% margin in the same period last year. Net loss was $22.1 million, compared to a net loss of $28.5 million in the year-ago period, driven mainly by the amortization expenses related to the Shopify warrants and the transaction-related intangibles.
Switching gears and turning to the balance sheet and cash flow statements. We ended 2023 with $317 million in cash and cash equivalents, including short-term deposits and marketable securities. Cash generation has accelerated with operating cash flow in the quarter at $93.5 million, compared to an operating cash flow of $57.3 million a year ago, driven mainly by adjusted EBITDA growth and working capital dynamics. Moving to our financial outlook and guidance for 2024.
Despite the prevailing macro-related uncertainties, we expect 2024 to be another year of fast growth and improved adjusted EBITDA for Global-e. For Q1 2024, we are expecting GMV to be in the range of $875 million to $915 million. At the midpoint of the range, this represents a growth rate of 27% versus Q1 of 2023. We expect Q1 revenue to be in the range of $138.5 million to $145 million.
At the midpoint of the range, this represents a growth rate of 21% versus Q1 of 2023. For adjusted EBITDA, we are expecting a profit in the range of $16 million to $20 million. For the full year of 2024, we anticipate GMV to be in the range of $4.59 billion to $4.83 billion, representing over 32% annual growth at the midpoint of the range. Revenue is expected to be in the range of $731 million to $771 million, representing a growth rate of nearly 32% at the midpoint of the range as we expect overall take rates to stabilize throughout the year.
For adjusted EBITDA, we're expecting a profit of $121 million to $137 million, representing over 39% growth at the midpoint of the range, thanks to increased efficiencies and economies of scale. As reflected in the guidance, we expect our fast growth to continue in 2024 with around 32% top-line growth alongside improved adjusted EBITDA margin. The slower top-line growth we expect in Q1 is a result of a number of factors. First is the lower contribution for new merchants as large merchants we have signed are expected to launch only in the second half of the year.
Second is the fact that we expect the trading that still exists on the legacy border-free platform to weigh on our growth in the first half of 2024 as a high share of its remaining GMV is generated by traditional retailers, especially department stores which are facing challenges, with many even experiencing declining sales trends. We believe we will see improvement once we migrate many of these merchants to the Global-e platform. Third is the continued volatility in consumer demand in the short term in light of weakness in some of the largest economies, as well as some softness we observed in trading volumes of consumers around the globe during February. We expect our overall growth to accelerate in the remaining of the year, driven by a ramp in Shopify Markets Pro, planned launches of large merchants in the second half of the year, and a lower impact from border free on a year-on-year comparison.
In conclusion, we continue to enhance our capabilities to support merchants worldwide in their direct-to-consumer journey. The opportunity in front of us is immense, and we are well positioned to capture it. We believe this will enable us to combine durable top-line growth and cash generation in the coming years. And with that, Amir, Nir, and I are happy to take any of your questions.
Operator?
Questions & Answers:
Operator
Thank you. We will now be conducting a question-and-answer session. To provide enough time to address requests, we ask participants to limit themselves to one question with one follow-up. [Operator instructions] One moment, please, while we poll for questions.
Our first question comes from Brian Peterson from Raymond James. Please proceed.
Brian Peterson
Hey, guys. Thanks for taking the questions. Ofer, [Inaudible] I appreciate the commentary that December [Inaudible] was pretty strong. [Inaudible] in February.
We'd love to understand maybe how things progressed from December to January. [Inaudible] and any regional trends that you [Inaudible]
Ofer Koren -- Chief Financial Officer
Yeah. So, Brian, thank you for the question. Its Ofer. I think that -- as we mentioned, we have seen increased volatility in consumer demand in the past year and especially in the last few months.
And as we already communicated in the previous quarter, we saw a drop in September and October, a relatively steep drop in same-store sales and a very nice recovery toward the end of October with a very, very strong peak and excellent results around the Black Friday, Cyber Monday weekend. Then during December, this continued with a lighter end to the year. And as I just mentioned, things continue to be volatile, and we do see a lot of shifts in consumer demand. And since the beginning of February, we have seen some softness in consumer sentiment, again, around the globe and weakness in some of the large economies.
So, this has been with us only for the last two or three weeks but still important to note.
Brian Peterson
I appreciate the perspective there. [Inaudible] have been impressive. Is there any way to give investors some help and how to think about that contribution in 2024 or any [Inaudible] share there? Thank you.
Amir Schlachet -- Co-Founder and Chief Executive Officer
Brian, it's a little choppy. Or your line is a little choppy. Could you repeat the contribution of what were you asking about exactly?
Brian Peterson
Yes, sorry. Hopefully this is better. No, the [Inaudible] Shopify Markets Pro is awesome so far. Is there any perspective that you can give in terms of expectations in 2024?
Amir Schlachet -- Co-Founder and Chief Executive Officer
Yeah. So, as we mentioned, we're very happy with the progress that we've made in Shopify Markets Pro, both from a technical perspective, the developments we've deployed and that we're working on together with Shopify and also the rate of adoption. It is still in early days, but we believe that over the next quarters and years, it can grow into a significant business. Thanks, Brian.
Operator
Our next question comes from Will Nance from Goldman Sachs. Please proceed.
Will Nance -- Goldman Sachs -- Analyst
Hey, guys. Appreciate you taking the questions. So, just -- I guess, another question on -- I think you mentioned volatile consumer trends over the past several months and maybe more recently in February. I guess, could you maybe talk about the approach that you took to guidance? I mean, obviously, the color on 1Q is very helpful.
It sounds like there is a ramp based -- baked into the guidance for the remainder of the year. Some of that Shopify -- just kind of color on what you're assuming for the remainder of the year as it relates to the macro. And then if we look back over the last couple of years, there's been several kind of exogenous events that have impacted the numbers and resulted in kind of less outperformance than than maybe you guys would have hoped. Just wondering if you could contextualize this guidance in terms of just how much kind of macro weakness over the course of the year the guidance can absorb given the continued levels of uncertainty?
Ofer Koren -- Chief Financial Officer
Sure, Will. Thank you for the question. So, since there is a high level of uncertainty, we have not assumed an improvement in macro conditions throughout the year. However, we also haven't looked at the lowest point.
As I mentioned, we saw some weakness since the beginning of February. So, we sort of look at the average since the beginning of the year, not taking into account the lowest point, but also not taking into account any improvement in macro conditions as, again, the level of uncertainty is still high, and we have no control of that.
Will Nance -- Goldman Sachs -- Analyst
Got it. Makes sense. And then I think you called out border free. Just wondering if you could just maybe help us size in terms of what's the contribution to numbers today, and maybe roughly, what are you kind of baking in for the remainder of the year for that business?
Ofer Koren -- Chief Financial Officer
So, in terms of volumes today -- volume border free story is approximately 5% of the volumes. That's sort of a high-level number. It is decreasing in share over time. One, because we are not onboarding any new merchants onto border free, and two, as we mentioned, the type of merchants that we see on border free legacy, mainly U.S.
legacy merchants, a lot of department stores. And since they are sort of facing their own challenges with their business model, it has an impact on their sales as well. So this is decreasing over time.
Will Nance -- Goldman Sachs -- Analyst
Got it. That's helpful. Sorry, just the clarification on the expectations for the remainder of the year. Are you guys assuming that the same-store sales there remain negative for the remainder of the year?
Ofer Koren -- Chief Financial Officer
Yes, yes, we do. However, I think -- we do think that mainly in the second half, as we migrate those clients, we will see a one-off increase but will stay with us. But due to the higher conversion rates that we typically see on the Global-e platform. So, we do foresee an improvement.
However, it will be gradual as they would migrate one by one. And since those are large legacy merchants, take some time. So, we do expect to see some improvement, but it will be gradual.
Will Nance -- Goldman Sachs -- Analyst
Got it. Thanks for taking the questions, guys.
Amir Schlachet -- Co-Founder and Chief Executive Officer
Thanks, Will.
Operator
Our next question comes from Samad Samana from Jefferies. Please proceed.
Samad Samana -- Jefferies -- Analyst
Hey, good morning, and thanks for taking my questions. Maybe first just, Ofer, just on the -- on what's embedded in the guidance around the net dollar retention, 127 was a strong year for '23. Just as I think about the low 30 growth guidance, what are you thinking net dollar retention will look like in 2024?
Ofer Koren -- Chief Financial Officer
So, we think that net dollar retention in '24 will be slightly lower compared to '23. As we mentioned, we do see a sort of uncertainty around macro conditions. Consumer sentiment is very volatile. And on top of that, also border free will come in and sort of weigh a bit on our NDR.
So, we do expect -- we do expect it to be slightly lower than what we have seen in 2023.
Samad Samana -- Jefferies -- Analyst
Understood. And maybe just on Shopify Markets Pro, this might be more for Amir or Nir, but what are you seeing as far as in the initial customers that are using it? Now, it's been let's call it four or five months, maybe average annual GMV of the typical Shopify Market Pro merchant that you're seeing. And then related affair, should we think about that being like a $200 million or $300 million GMV contribution in '24? Just anything that we can kind of kind of peg against.
Nir Debbi -- Co-Founder and President
Hi, Samad. It's Nir. Thanks for the questions. We have seen initial positive signs for adoption post-SMP general availability in the U.S.
Coupled with continued development of the solution capabilities that is still ongoing, we expect the adoption rate to grow gradually throughout the year. At this stage, we don't guide specifically for Shopify Markets Pro. However, I don't think your number is generally off.
Samad Samana -- Jefferies -- Analyst
Great. Thanks again, and talk soon.
Amir Schlachet -- Co-Founder and Chief Executive Officer
Thanks, Samad.
Operator
Our next question comes from Andrew Bauch from Wells Fargo. Please proceed.
Andrew Bauch -- Wells Fargo Securities -- Analyst
Hey. Thanks for taking the question. I just want to get a sense of your expectations for the gross margins as we progress through 2024. I mean, with the fulfillment dynamics in the fourth quarter, it seems reasonable that gross profit could outpace revenue.
So, any thoughts around that would be helpful.
Ofer Koren -- Chief Financial Officer
So, we are very, very pleased with our gross margin improvement over time as we surpassed our 40% target earlier than we expected. And moving forward, we expect relatively stable gross margins as we continue to prioritize growth over profitability. However, we do we do see operational leverage potential that will enable us to improve our adjusted EBITDA margins.
Andrew Bauch -- Wells Fargo Securities -- Analyst
Got it. Thanks. And then just looking back at the fourth quarter, I mean, you had a really strong Black Friday, Cyber Monday press release of 53% versus the 44 for the full quarter. So, maybe if you just give this a sense of like what was about your platform that drove that outsized strength and maybe a better sense of the shape of trends throughout the course we can understand it.
Ofer Koren -- Chief Financial Officer
Sure. So, yeah. As you mentioned, we did experience a strong quarter generally and a very strong peak trading season with the highest growth around Black Friday and Cyber Monday weekend. Some of it may be attributed to consumers' preference to discount shopping.
So, this may had an an impact. And I think that on top of that, there were -- there was very strong results for some of our large merchants, so that also contributed for them first but, for us, as a derivative as well.
Andrew Bauch -- Wells Fargo Securities -- Analyst
Got it. Thank you.
Operator
Our next question comes from Kunal Madhukar from UBS. Please proceed.
Kunal Madhukar -- UBS -- Analyst
Hi. Thank you for taking the questions. One on the revenue guide. So, your revenue guide for 1Q implies a take rate decline.
But then, when we look at the full-year guide for 2024, that kind of suggests that the take rate should improve in the back half. So, how much of the improvement in the take rate are you baking in assumptions for growth from Shopify Markets Pro, which is probably at a higher take rate?
Ofer Koren -- Chief Financial Officer
Yeah. So, thank you, Kunal, for the question. I think that the answer -- the main part of the answer lies actually in 2023 because we started 2023 with a much higher fulfillment take rate. The overall take rate in Q1 last year was 16.7%.
And over the year, as the share of multi-local and mainly our large multi-local merchants grew because we have launched a few and expanded our activities with others. We've seen a reduction in overall take rate, mainly -- not mainly, just out of the fulfillment take rate. And basically, as we mentioned in the previous quarter, we expect that to balance next year. So, we expect to see a much more balanced year.
We expect it to stabilize at around -- the overall take rate around 16% as we do not expect the share of those merchants to grow significantly because the merchant that we see currently in our pipeline, the large ones, are not multi-local merchants. So, we expect to strike a balance.
Kunal Madhukar -- UBS -- Analyst
Thank you. And then you mentioned weakness in February. Can you talk about trends like maybe vertical and geography like you did last time in terms of what's luxury doing versus what's apparel doing? And then last time, you talked about weakness in Europe, inbound. So, can you talk a bit about that, please?
Nir Debbi -- Co-Founder and President
Yeah. Thank you for your question. It's Nir. This -- I would say is that in February, we don't see a specific vertical that is down.
However, on geographies, we do see slowdowns around different parts of the world. Our inbound into the U.S. has slowed down a bit, same-store sales not growing as fast as they did in January or previous year. Same goes into the U.K.
that officially went into recession just earlier this year. And same we've seen some slowness in APAC. So, it's kind of a global slowdown that we see. It's not specific to a certain territorial or vertical.
Kunal Madhukar -- UBS -- Analyst
Got it. Thank you so much.
Operator
Our next question comes from Scott Berg from Needham and Company. Please proceed.
Scott Berg -- Needham and Company -- Analyst
Hi, everyone. Nice quarter. Thanks for taking my questions here. I just wanted to touch on the guidance for '24 a little bit.
Your -- I think as you all noted, your service fee revenue has been growing meaningfully faster than your -- than the rest of the revenues, but even it's been growing even faster recently than historical trends. Do you still see the breakdown in growth between the two revenue segments kind of having that I guess growth difference there. Or as was just noted a moment ago with some of the larger merchants that you have in the pipelines, do you expect that to maybe moderate the growth rates more balanced between the two lines?
Ofer Koren -- Chief Financial Officer
Sure. Thank you for the question. We do expect to see a more balanced growth in 2024. As I mentioned, 2023 was characterized by strong multi-local growth, which had an impact on the mix as we, you know, typically don't have any fulfillment revenue or very little fulfillment revenue with multi-local.
And we expect '24 to be much more balanced. As I mentioned, the larger merchants that we see in -- that have signed or we see in the pipeline are not multi-local merchants. And we also have a few new initiatives around fulfillment services. So, we do expect this year to be much more balanced in terms of revenue pillars growth.
Scott Berg -- Needham and Company -- Analyst
Got it. Helpful. And then from a follow-up perspective, congrats on fulfilling in into 200 countries. By my math, that probably means you're only not fulfilling in Antarctica right now.
Maybe that's a future goal. But as I think about the investments required for you to expand your distribution capabilities, given the number of countries that you're already in, are those investments largely kind of done at this point you think in the -- I guess the additional needs there are very more incremental based on volumes? Or will there be any sort of step up invest in investments maybe in the next couple of years to help you kind of penetrate some of those markets more?
Amir Schlachet -- Co-Founder and Chief Executive Officer
Yeah. Antarctica is not -- does not have any citizens in it, so probably not going to ship there anytime soon. But who knows? Maybe. But to your question, in terms of the outbound -- in terms of the inbound markets, those doesn't -- those don't require any any specific investments from us.
It's the outbound markets that sometimes require some investment in them. But I would say it's, by now, as we mentioned, 31 different outbound markets. The marginal investment that is required from us for opening an additional market is already quite low. We are well trained and well seasoned in doing it.
And it -- as a reminder, in any case, we're not talking about any capital investments. This is very capitalized and it mostly has to do with -- sometimes we need a local entity. It requires some local contracts, but it's not a lot more than that. So, we don't expect any massive investments in terms of the additional outbound markets that will be opening in the future.
Scott Berg -- Needham and Company -- Analyst
Excellent. Thanks for taking my question.
Operator
Our next question comes from Koji Ikeda from Bank of America. Please proceed.
Koji Ikeda -- Bank of America Merrill Lynch -- Analyst
Hey, guys. Thanks for taking the questions. I wanted to ask the question on the first-quarter GMV. Just digging in that into that a little bit more, considering it's a much heavier sequential growth stepdown assumption this year versus last year, looks like it's about down 25% versus down 21% when first guiding the 1Q '23.
So, can you dig into a little bit about what's causing that higher level of GMV stepdown? Is that all uncertainty with the macro and the consumer? Are there any customers that you now have that have outsized 4Q holiday seasonality that is driving this outlook? I mean, any sort of color there would be fine. Amazing. Thank you.
Ofer Koren -- Chief Financial Officer
Sure. Thank you for the question. Well, I'll start from the top. For the full year of 2024, we expect to see continued momentum of high growth of over 30% for both GMV and revenue.
And that is supported by our strong pipeline of large merchants that are expected to launch in the back half of the year, as well as the ramp up of Shopify Markets Pro over the course of the year. Specifically for Q1, indeed, the growth we expect is lower, and that is -- there are a few drivers behind that. The first one is less contribution from new merchants as the large merchants signed or the ones that are toward the end of the pipeline are expected to launch later in the year, mainly in the second half of the year. So, we see -- we are expecting and planning very nice launches, but the large ones in the second half of the year.
As we mentioned, we see some adverse effect from some border-free legacy retail clients, mainly the department stores. And we expect this to gradually improve once we complete the migration of these clients to the Global-e platform. And three, as we mentioned, we continued to see high volatility in consumer sentiment. As we've seen between Q2 and Q3 last year and then Q3 and Q4 and now again in February, as we mentioned, we saw decline in consumer demand, so this will impact Q1 as well.
So, those are the main drivers.
Operator
Our next question comes from Brent Bracelin from Piper Sandler. Please proceed.
Brent Bracelin -- Piper Sandler -- Analyst
Good morning. Great to see a strong close to the year. Amir, 97% gross retention model here suggest the product remains sticky, low churn. I get you can't control consumer spending.
That clearly is impacting the growth algorithm this year. What are the growth levers that are in your control that you can kind of lean more into this year outside of the macro?
Amir Schlachet -- Co-Founder and Chief Executive Officer
Hi, Brent. So, absolutely, as you mentioned, dynamics remain very positive. Although, as we mentioned, it is expected to be another year of high uncertainty and high volatility from a macro perspective. But we continue to push across all the field from growth in the existing territories, where we already operate, to opening additional markets and additional territories.
Of course, Shopify Markets Pro, which we have mentioned a few times already on the call, is also expected to ramp up along the year and contribute further to our growth. And we are also working on value added services, specifically demand generation. That's going to kick in, as we mentioned, toward the back end of the year. It's probably not going to be accretive day one.
But over the longer period, we expect that to have an additional contribution for accelerating our growth.
Operator
Our next question comes from James Faucette from Morgan Stanley. Please proceed.
James Faucette -- Morgan Stanley -- Analyst
Hi. Thanks for the question. I want to ask just in terms of customer acquisition and that kind of thing. I'm wondering how trends have been evolving with respect to your inbound interest in conversion for new merchant ads outside of Shopify.
Just trying to get a sense for how we should be thinking about the percentage of new ads that are shop related versus those that aren't and the profile of the merchant partners.
Nir Debbi -- Co-Founder and President
Hi, James. It's Nir. Thanks for the question. We have seen record bookings in 2023, and we are excited about the strength of the pipeline that is going to support our growth throughout 2024 and into 2025.
Within it, we have a couple of very large merchants that are expected to launch with us in the back half of the year. Both of them are non-Shopify, and we expect the weight of those larger merchants, I would say, to balance out the rapid growth we expect to see in Shopify Markets Pro. So, overall, when we look at 2024, we expect it -- the mix of merchants to remain quite balanced with what we've seen in 2023.
James Faucette -- Morgan Stanley -- Analyst
Got it. Thank you for that. And then I want --
Operator
Our next question comes from Mark Zgutowicz from Benchmark Company. Please proceed.
Mark Zgutowicz -- The Benchmark Company -- Analyst
Excuse me, thank you. But just a question on luxury specifically and just given the sort of habitual interest in discounts that you mentioned, curious how luxury performed in fourth quarter relative to the prior year and how that sort of transitioned into 1Q just given that I think that vertical is roughly 25% of your GMV. And then I had a quick follow-up.
Ofer Koren -- Chief Financial Officer
And so, in terms of luxury, it hasn't been a great year for luxury. However, there was an improvement toward the last few months of the year. So, it has improved compared to Q3, which was the lowest point for luxury. And I think it's hovering around the same level since.
So, it's better than it was in the lowest point. It's not doing great but pretty stable for now.
Operator
Our next question comes from Pat Walravens from Citizens JMP. Please proceed.
Pat Walravens -- JMP Securities -- Analyst
Great. Thank you. Amir, so, are you still excited about demand gen over the sort of mid to longer term? And what's the dream there?
Amir Schlachet -- Co-Founder and Chief Executive Officer
Yes. So, absolutely excited. I think it's going to be a very unique offering. And it's going to take time to build it, but we strongly believe in the potential to both benefit our existing merchants and also to serve as another great benefit for new merchants that are coming on board and, therefore, help to accelerate our sales pipeline even further.
So, definitely as excited, if not more than before. And in terms of the dream, is basically to be able to offer a platform -- a unique platform for demand generation, which is unlike any other offering that these merchants can have from digital agencies or other outside providers, but something that is fully aligned with their growth interests and fully integrated with the Global-e offering. And with each part of it strengthening the other, we think it's something that can be a game changer for some of these brands.
Operator
Our next question comes from Maddie Schrage from KeyBanc Capital Markets. Please proceed.
Maddie Schrage -- KeyBanc Capital Markets -- Analyst
Hey, guys. And thanks for taking my question. I was just wondering if you could talk about if there's any differences in the size of merchants coming onto the platform. There's, obviously, Shopify Markets Pro coming in and, obviously, you guys mentioned this last quarter too, but we also saw Wix announce the partnership.
So, I'm just wondering if you're expecting maybe some of the smaller merchants to come onto the platform versus previous years. Thanks.
Nir Debbi -- Co-Founder and President
Yeah. So, I think that, as you mentioned, on the one hand, we continue our growth with our enterprise clients, and we continue to onboard them as we did in previous years. In parallel to it, we have seen a great adoption of Shopify Markets Pro with thousands of merchants launching on the platform. However, it's significantly a smaller size than our average enterprise clients.
We've seen initial traction launching Wix merchants on the platform as well with an average size also smaller than our regular enterprise. However, both from Wix and from Shopify, we expect to see large numbers of of clients that would actually will give another edge to our growth with a different profile of merchants between those smaller merchants and our enterprise platform client.
Operator
Our next question comes from Matt O'Neill from FTX partners. Please proceed.
Matt O'Neill -- Financial Technology Partners -- Analyst
Yeah, hi. Thanks, everybody, for taking my question. Much has been asked and answered here, but maybe I'll just -- digging a little bit on the cost of revenue quickly. Came out a little bit higher than expected.
I was just curious if you could remind us the more volatile components of the cost of revenue. I imagine the payment side is a little bit more predictable, but are there instances where you'll have certain fulfillment costs agreed with a merchant and then underlying spot prices will increase, and that'll squeeze that margin a little bit here and there? If you just remind us like what you guys are looking at with respect to things like container prices, oil prices, etc. that may drive the more volatile components there. Thanks so much.
Ofer Koren -- Chief Financial Officer
Yeah, sure. Thank you for the question. We don't have -- well, most of our cost of goods sold are obviously variable. But at the same time, the margin or the cost margin is pretty stable.
We don't have a lot of volatility. The main volatility is derived from merchant mix. So, for example, in Q4, as we mentioned, we had a relatively high share of a few large merchants, and those typically have pricing that reflect their size. So, this is just an example, but this is a mixed impact that may have a certain impact on gross margins.
But generally speaking, we -- our pricing with carriers is -- are relatively stable. They do change from time to time. But typically, we can pass through the cost, and it's not volatile over the year. It changes once in a long while, in a relatively long while.
Operator
Our final question comes from Matt Coad from Autonomous Research. Please proceed.
Matt Coad -- Autonomous Research -- Analyst
Hey, good afternoon, guys. Thanks for taking the question. Just wanted to ask one clarifying question. You talked about Shopify Markets Pro contribution earlier in the call.
Is that included in your guidance?
Ofer Koren -- Chief Financial Officer
Yes, it is. Yeah. It's part of the business, and it is included in the guidance.
Operator
This concludes our question-and-answer session. I would like to turn the floor back over to Amir Schlachet for closing comments.
Amir Schlachet -- Co-Founder and Chief Executive Officer
As we conclude another successful year here at Global-e, I would like to thank all of you for joining us today for your interest and for your questions and for your ongoing support on our exciting journey to transform the world of global direct-to-consumer e-commerce. We're incredibly eager and excited as we continue on our path to take advantage of the countless opportunities that lie ahead of us. And we invite you to continue taking an active part in this quest together with us. As such, we very much look forward to seeing all of you again on our future earnings calls.
Until then, goodbye and take care.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
Erica Mannion -- Investor Relations
Amir Schlachet -- Co-Founder and Chief Executive Officer
Ofer Koren -- Chief Financial Officer
Brian Peterson
Will Nance -- Goldman Sachs -- Analyst
Samad Samana -- Jefferies -- Analyst
Nir Debbi -- Co-Founder and President
Andrew Bauch -- Wells Fargo Securities -- Analyst
Kunal Madhukar -- UBS -- Analyst
Scott Berg -- Needham and Company -- Analyst
Koji Ikeda -- Bank of America Merrill Lynch -- Analyst
Brent Bracelin -- Piper Sandler -- Analyst
James Faucette -- Morgan Stanley -- Analyst
Mark Zgutowicz -- The Benchmark Company -- Analyst
Pat Walravens -- JMP Securities -- Analyst
Maddie Schrage -- KeyBanc Capital Markets -- Analyst
Matt O'Neill -- Financial Technology Partners -- Analyst
Matt Coad -- Autonomous Research -- Analyst
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