Shopify Announces Second-Quarter 2018 Financial Results

Second-Quarter Revenue Grows 62% Year on Year

Shopify reports in U.S. dollars and in accordance with U.S. GAAP

Ottawa, Canada – July 31, 2018 – Shopify Inc. (NYSE:SHOP)(TSX:SHOP), the leading multi-channel commerce platform, today announced strong financial results for the quarter ended June 30, 2018.

“The diversity of our revenue drivers and of our merchant base contributed to our strong revenue growth this past quarter,” stated Amy Shapero, Shopify’s CFO. “Our mission, our technology and our growth model position us, and our merchants, to thrive in the face of massive changes to retail. We built the Shopify platform to meet the many and varied needs of all types of merchants, whether they are makers or curators, entrepreneurs or household brands. This presents us with an expansive opportunity set that we will continue to invest in with a view to even greater success over the long term.”

Second-Quarter Financial Highlights

Total revenue in the second quarter was $245.0 million, a 62% increase from the comparable quarter in 2017.
Subscription Solutions revenue grew 55% to $110.7 million. This increase was driven primarily by growth in in Monthly Recurring Revenue1 (“MRR”), driven primarily by an increase in the number of merchants joining the Shopify platform.
Merchant Solutions revenue grew 68% to $134.2 million, driven primarily by the growth of Gross Merchandise Volume2 (“GMV”), as well as by strong growth in Shopify Capital and Shopify Shipping, each of which more than doubled revenue over last year’s second quarter.
MRR as of June 30, 2018 was $35.3 million, up 49% compared with $23.7 million as of June 30, 2017. Shopify Plus contributed $8.1 million, or 23%, of MRR compared with 18% of MRR as of June 30, 2017.
GMV for the second quarter was $9.1 billion, an increase of $3.3 billion, or 56% over the second quarter of 2017. Gross Payments Volume3 (“GPV”) grew to $3.6 billion, which accounted for 40% of GMV processed in the quarter, versus $2.2 billion, or 38%, for the second quarter of 2017.
Gross profit dollars grew 58% to $137.0 million as compared with the $86.8 million recorded for the second quarter of 2017.
Operating loss for the second quarter of 2018 was $30.8 million, or 12.6% of revenue, versus a loss of $15.9 million, or 10.5% of revenue, for the comparable period a year ago.
Adjusted operating loss4 for the second quarter of 2018 was 1.7% of revenue, or $4.3 million; adjusted operating loss for the second quarter of 2017 was 1.9% of revenue, or $2.9 million.
Net loss for the second quarter of 2018 was $24.0 million, or $0.23 per share, compared with $14.0 million, or $0.15 per share, for the second quarter of 2017.
Adjusted net income4 for the second quarter of 2018 was $2.5 million, or $0.02 per share, compared with an adjusted net loss of $1.1 million, or $0.01 per share, for the second quarter of 2017.
At June 30, 2018, Shopify had $1.57 billion in cash, cash equivalents and marketable securities, compared with $938 million on December 31, 2017.

Second-Quarter Business Highlights

Shopify hosted partners from around the world in Toronto at our annual Unite conference, where our announcements centred on helping merchants sell more, helping them work more efficiently, and making the most of the Shopify partner ecosystem, including:
- enhancements to our POS solution including a new premium Tap and Chip reader as well as upgrades enabling multi-channel returns and exchanges, in-store pickup, tipping options, a companion app for a customer-facing checkout experience, and a developer SDK.
- simplifications to merchants’ marketing processes, including a native marketing dashboard, easy-to-use BOGO and quantity discounts, and Dynamic Checkout, which surfaces the consumer’s preferred payment method directly on the product page and allows transactions to happen with a single tap using Shopify Pay, Apple Pay, and other wallets.
- back office workflow efficiencies like multi-location inventory management, Fraud Protect for protection from fraudulent chargebacks, Kit Skills app extensions, Shopify Ping to centralize business and marketing activities and conversations, and localization of the Shopify platform for native languages and payment methods.
Shopify launched Shopify Payments in Japan, bringing the total number of countries where Shopify Payments is available to eight.
Shopify Shipping adoption continued to increase with more than a third of eligible merchants in the United States and Canada using Shopify Shipping in the quarter.
Purchases from merchants’ stores coming from mobile devices continued to climb in the quarter, accounting for 76% of traffic and 66% of orders for the three months ended June 30, 2018, versus 72% and 60%, respectively, for the second quarter of 2017.
Shopify Capital issued $68.5 million in merchant cash advances in the second quarter of 2018, an increase of 84% versus the $37.2 million issued in the second quarter of last year. Shopify Capital has grown to nearly $300 million in cumulative cash advanced since its launch in April 2016, $80 million of which was outstanding on June 30, 2018.

Subsequent to the close of the second quarter, Shopify announced a partnership with Nest. Shopify merchants can now access camera footage via the newly released Store Cam for Shopify app and purchase Nest Cams and Google Wifi routers directly from the Shopify Hardware Store. Via the integration, a live-feed of footage captured from Nest Cams will be immediately available to access in a merchant’s dashboard via the Shopify app.

Financial Outlook

The financial outlook that follows constitutes forward-looking information within the meaning of applicable securities laws and is based on a number of assumptions and subject to a number of risks. Actual results could vary materially as a result of numerous factors, including certain risk factors, many of which are beyond Shopify’s control. Please see “Forward-looking Statements” below.

In addition to the other assumptions and factors described in this press release, Shopify’s outlook assumes the continuation of growth trends in our industry, our ability to manage our growth effectively and the absence of material changes in our industry or the global economy. The following statements supersede all prior statements made by Shopify and are based on current expectations. As these statements are forward-looking, actual results may differ materially.

These statements do not give effect to the potential impact of mergers, acquisitions, divestitures or business combinations that may be announced or closed after the date hereof. All numbers provided in this section are approximate.

For the full year 2018, Shopify currently expects:

Revenues in the range of $1.015 billion to $1.025 billion
GAAP operating loss in the range of $105 million to $110 million
Adjusted operating profit4 in the range of $0 to $5 million, which excludes stock-based compensation expenses and related payroll taxes of $110 million

For the third quarter of 2018, Shopify currently expects:

Revenues in the range of $253 million to $257 million
GAAP operating loss in the range of $40 million to $42 million
Adjusted operating loss4 in the range of $9 million to $11 million, which excludes stock-based compensation expenses and related payroll taxes of $31 million

Quarterly Conference Call

Shopify’s management team will hold a conference call to discuss its second-quarter results today, July 31, 2018, at 8:30 a.m. ET. The conference call will be webcast on the investor relations section of Shopify’s website at https://investors.shopify.com/events/Events-Presentations/default.aspx. An archived replay of the webcast will be available following the conclusion of the call.

Shopify’s Second-Quarter 2018 Interim Unaudited Condensed Consolidated Financial Statements and Notes and its Second-Quarter 2018 Management’s Discussion and Analysis are available on Shopify’s website at www.shopify.com, and will be filed on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

About Shopify

Shopify is the leading cloud-based, multi-channel commerce platform. Merchants can use the software to design, set up, and manage their stores across multiple sales channels, including web, mobile, social media, marketplaces, brick-and-mortar locations, and pop-up shops. The platform also provides merchants with a powerful back-office and a single view of their business. The Shopify platform was engineered for reliability and scale, making enterprise-level technology available to businesses of all sizes. Headquartered in Ottawa, Canada, Shopify currently powers over 600,000 businesses in approximately 175 countries and is trusted by brands such as Red Bull, Nestle, Rebecca Minkoff, Kylie Cosmetics, and many more.

Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with United States generally accepted accounting principles (GAAP), Shopify uses certain non-GAAP financial measures to provide additional information in order to assist investors in understanding its financial and operating performance.

Adjusted operating loss/profit, non-GAAP operating expenses, adjusted net loss/income and adjusted net loss/income per share are non-GAAP financial measures that exclude the effect of share-based compensation expenses and related payroll taxes.

Management uses non-GAAP financial measures internally for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Shopify believes that these non-GAAP 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. Non-GAAP financial measures are not recognized measures for financial statement presentation under U.S. GAAP and do not have standardized meanings, and may not be comparable to similar measures presented by other public companies. Such non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. See the financial tables below for a reconciliation of the non-GAAP measures.

Forward-looking Statements

This press release contains certain forward-looking statements within the meaning of applicable securities laws, including statements regarding Shopify’s financial outlook and future financial performance and any future investment in the Shopify platform. Words such as “expects”, “continue”, “will”, “anticipates” and “intends” or similar expressions are intended to identify forward-looking statements.

These forward-looking statements are based on Shopify’s current projections and expectations about future events and financial trends that management believes might affect its financial condition, results of operations, business strategy and financial needs, and on certain assumptions and analysis made by Shopify in light of the experience and perception of historical trends, current conditions and expected future developments and other factors management believes are appropriate. These projections, expectations, assumptions and analyses are subject to known and unknown risks, uncertainties, assumptions and other factors that could cause actual results, performance, events and achievements to differ materially from those anticipated in these forward-looking statements. Although Shopify believes that the assumptions underlying these forward-looking statements are reasonable, they may prove to be incorrect, and readers cannot be assured that actual results will be consistent with these forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements as a result of numerous factors, including certain risk factors, many of which are beyond Shopify’s control, including but not limited to: (i) merchant acquisition and retention; (ii) managing our growth; (iii) our history of losses; (iv) our limited operating history; (v) our ability to innovate; (vi) a disruption of service or security breach; (vii) payments processed through Shopify Payments; (viii) our reliance on a single supplier to provide the technology we offer through Shopify Payments; (ix) a breach involving personally identifiable information; (x) serious software errors or defects; (xi) exchange rate fluctuations; (xii) achieving or maintaining data transmission capacity; and (xiii) other one-time events and other important factors disclosed previously and from time to time in Shopify’s filings with the U.S. Securities and Exchange Commission and the securities commissions or similar securities regulatory authorities in each of the provinces or territories of Canada. The forward-looking statements contained in this news release represent Shopify’s expectations as of the date of this news release, or as of the date they are otherwise stated to be made, and subsequent events may cause these expectations to change. Shopify undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.

To view our detailed results with financial tables download this PDF or visit our investors site.

Source: Shopify