Third-Quarter Revenue Grows 45% Year on Year
Shopify Now Powers Over One Million Merchants Worldwide
Shopify reports in U.S. dollars and in
accordance with U.S. GAAP
Shopify Inc. (NYSE:SHOP)(TSX:SHOP), a leading global commerce
company, today announced strong financial results for the quarter
ended September 30, 2019.
“More than a million merchants are now building their businesses
on Shopify, as more entrepreneurs around the world reach for
independence,” said Tobi Lütke, Shopify’s CEO. “These merchants
chose Shopify because we’re making entrepreneurship easier, and we
will continue to level the playing field to help merchants
everywhere succeed.”
“Our strong results in the quarter were driven in part by the
success of our international expansion, which is just one of the
many ways we are investing in the platform,” said Amy Shapero,
Shopify’s CFO. “By carefully balancing these multiple opportunities
that have different investment time horizons, we can keep investing
in the innovations that will power merchants in the future while
helping them grow rapidly today.”
Third-Quarter Financial Highlights
- Total revenue in the third quarter was $390.6 million, a 45%
increase from the comparable quarter in 2018.
- Subscription Solutions revenue grew 37% to $165.6 million. This
increase was driven primarily by growth in Monthly Recurring
Revenue1 ("MRR"), largely due to an increase in the number of
merchants joining the Shopify platform.
- Merchant Solutions revenue grew 50%, to $225.0 million, driven
primarily by the growth of Gross Merchandise Volume2 ("GMV").
- MRR as of September 30, 2019 was $50.7 million, up 34% compared
with $37.9 million as of September 30, 2018. Shopify Plus
contributed $13.5 million, or 27%, of MRR compared with 24% of MRR
as of September 30, 2018.
- GMV for the third quarter was $14.8 billion, an increase of
$4.8 billion, or 48%, over the third quarter of 2018. Gross
Payments Volume3 ("GPV") grew to $6.2 billion, which accounted for
42% of GMV processed in the quarter, versus $4.1 billion, or 41%,
for the third quarter of 2018.
- Gross profit dollars grew 45%, to $216.7 million, compared with
$149.7 million recorded for the third quarter of 2018.
- Operating loss for the third quarter of 2019 was $35.7 million,
or 9% of revenue, versus a loss of $31.4 million, or 12% of
revenue, for the comparable period a year ago.
- Adjusted operating income4 for the third quarter of 2019 was 3%
of revenue, or $10.5 million; adjusted operating loss for the third
quarter of 2018 was 1% of revenue, or $2.4 million.
- Net loss for the third quarter of 2019 was $72.8 million, or
$0.64 per share, compared with $23.2 million, or $0.22 per share,
for the third quarter of 2018. Net loss for the third quarter of
2019 includes a tax provision of $48.3 million. This provision is
primarily due to a one-time capital gain triggered by the transfer
of regional relationship and territory rights from our Canadian
entity to regional headquarters, which allows us to develop and
maintain merchant and commercial operations in their respective
regions as we expand internationally.
- Adjusted net loss4 for the third quarter of 2019 was $33.6
million, or $0.29 per share, compared with adjusted net income of
$5.8 million, or $0.05 per share, for the third quarter of
2018.
- At September 30, 2019, Shopify had $2.67 billion in cash, cash
equivalents and marketable securities, compared with $1.97 billion
on December 31, 2018. The increase reflects $688.0 million of net
proceeds from Shopify’s offering of Class A subordinate voting
shares in the third quarter of 2019.
Third-Quarter Business Highlights
In the third quarter, Shopify continued to build for the long
term by lowering the barriers to entry for entrepreneurship,
extending the functionality of the platform for merchants, and
enriching our offering as a global commerce operating system:
- Shopify surpassed one million merchants worldwide on our
platform, hitting a major milestone and reflecting the continued
expansion of Shopify’s global community of entrepreneurs.
- Shopify Fulfillment Network continued to lay the foundation for
timely and affordable direct-to-consumer fulfillment for merchants
that value their brands and customer experience. With strong
interest from merchants, we will continue to add select merchants
and partners as we focus on high performance and optimize for the
merchant experience.
- Shopify announced availability for merchants in most U.S.
states to start selling hemp or hemp-derived cannabidiol (CBD)
products on our platform, both online or in brick-and-mortar retail
locations.
- Shopify launched the Shopify Sustainability Fund, which commits
at least $5 million annually to invest in areas like carbon
sequestration, neutralizing our carbon footprint, sustainable
packaging, and enabling our merchants and their buyers to
participate.
- Shopify launched Shopify Chat, our first native chat function
that allows merchants to have real-time conversations with
customers visiting their stores and provide a better shopping
experience.
- Shopify launched native language capabilities in Turkish,
bringing the total number of languages in which the Shopify Admin
is available to 19.
- Shopify launched Shopify Payments in Italy, expanding the
availability of Shopify Payments to 14 countries.
- Shopify Shipping adoption continued to expand, with
approximately 44% of eligible merchants in the United States and
Canada using Shopify Shipping in the quarter.
- Purchases from merchants’ stores coming from mobile devices
versus desktop continued to climb in the quarter, accounting for
nearly 81% of traffic and 71% of orders for the three months ended
September 30, 2019, versus 77% and 67%, respectively, for the third
quarter of 2018.
- Shopify Capital issued $141.0 million in merchant cash advances
and loans in the third quarter of 2019, an increase of 85% versus
the $76.4 million issued in the third quarter of last year. Shopify
Capital has grown to approximately $768.9 million in cumulative
cash advanced since its launch in April 2016 through the third
quarter of 2019, approximately $166 million of which was
outstanding on September 30, 2019.
Subsequent to the close of our third quarter, Shopify completed
the acquisition of 6 River Systems, Inc., a leading provider of
collaborative warehouse fulfillment solutions.
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 2019, Shopify currently expects:
- Revenues in the range of $1.545 billion to $1.555 billion
- GAAP operating loss in the range of $158 million to $168
million
- Adjusted operating income4 in the range of $27 million to $37
million, which excludes stock-based compensation expenses and
related payroll taxes of $180 million, and amortization of acquired
intangibles of $15 million
For the fourth quarter of 2019, Shopify currently expects:
- Revenues in the range of $472 million to $482 million
- GAAP operating loss in the range of $47 million to $57
million
- Adjusted operating income4 in the range of $10 million to $20
million, which excludes stock-based compensation expenses and
related payroll taxes of $57 million, and amortization of acquired
intangibles of $10 million
- Monthly Recurring Revenue, or MRR, is calculated by multiplying
the number of merchants by the average monthly subscription plan
fee in effect on the last day of that period and is used by
management as a directional indicator of subscription solutions
revenue going forward assuming merchants maintain their
subscription plan the following month.
- Gross Merchandise Volume, or GMV, represents the total dollar
value of orders processed on the Shopify platform in the period,
net of refunds, and inclusive of shipping and handling, duty and
value-added taxes.
- Gross Payments Volume, or GPV, is the amount of GMV processed
through Shopify Payments.
- Non-GAAP financial measures exclude the effect of stock-based
compensation expenses and related payroll taxes as well as
amortization of acquired intangibles and related taxes. Please
refer to "Non-GAAP Financial Measures" in this press release for
more information.
Quarterly Conference Call
Shopify’s management team will hold a conference call to discuss
our third-quarter results today, October 29, 2019, 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 Third-Quarter 2019 Interim Unaudited Condensed
Consolidated Financial Statements and Notes and its Third-Quarter
2019 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 a leading global commerce company, providing trusted
tools to start, grow, market, and manage a retail business of any
size. Shopify makes commerce better for everyone with a platform
and services that are engineered for reliability, while delivering
a better shopping experience for consumers everywhere.
Headquartered in Ottawa, Canada, Shopify powers over one million
businesses in more than 175 countries and is trusted by brands such
as Allbirds, Gymshark, PepsiCo, Staples, and many more. For more
information, visit www.shopify.com.
Non-GAAP Financial Measures
To supplement our 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 our financial and
operating performance.
Adjusted operating income (loss), non-GAAP operating expenses,
adjusted net income (loss) and adjusted net income (loss) per share
are non-GAAP financial measures that exclude the effect of
stock-based compensation expenses and related payroll taxes and
amortization of acquired intangibles and related 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. Words such as "expects", "continue", "keep",
"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) the security of personal
information we store relating to merchants and their customers, and
consumers with whom we have a direct relationship; (x) evolving
privacy laws and regulations, cross-border data transfer
restrictions, data localization requirements and other domestic or
foreign regulations; (xi) our potential inability to hire, retain
and motivate qualified personnel; (xii) international sales and the
use of our platform in various countries; 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.
Shopify Inc.
Condensed Consolidated
Statements of Operations and Comprehensive Loss
(Expressed in US $000’s, except
share and per share amounts, unaudited)
Three months ended
Nine months ended
September 30, 2019
September 30, 2018
September 30, 2019
September 30, 2018
$
$
$
$
Revenues
Subscription solutions
165,577
120,517
459,075
331,436
Merchant solutions
224,975
149,547
613,938
397,931
390,552
270,064
1,073,013
729,367
Cost of revenues
Subscription solutions
33,263
26,600
90,786
74,284
Merchant solutions
140,593
93,737
380,475
244,559
173,856
120,337
471,261
318,843
Gross profit
216,696
149,727
601,752
410,524
Operating expenses
Sales and marketing
116,546
91,635
340,778
254,906
Research and development
90,387
61,629
252,262
163,650
General and administrative
45,421
27,831
119,780
74,430
Total operating expenses
252,354
181,095
712,820
492,986
Loss from operations
(35,658
)
(31,368
)
(111,068
)
(82,462)
Other income
11,212
8,184
33,793
19,423
Loss before income taxes
(24,446
)
(23,184
)
(77,275
)
(63,039)
Provision for income taxes
48,338
—
48,338
—
Net loss
(72,784
)
(23,184
)
(125,613)
(63,039)
Other comprehensive income
(loss)
(6,097
)
6,101
9,923
(5,131)
Comprehensive loss
(78,881
)
(17,083
)
(115,690
)
(68,170)
Basic and diluted net loss per share
attributable to shareholders
(0.64
)
(0.22
)
(1.12
)
(0.60)
Weighted average shares used to compute
basic and diluted net loss per share attributable to
shareholders
113,086,997
106,647,222
112,015,160
104,976,730
Shopify Inc.
Condensed Consolidated Balance
Sheets
(Expressed in US $000’s except
share amounts, unaudited)
As at
September 30, 2019
December 31, 2018
$
$
Assets
Current assets
Cash and cash equivalents
1,124,529
410,683
Marketable securities
1,542,653
1,558,987
Trade and other receivables, net
46,691
41,347
Merchant cash advances and loans
receivable, net
165,775
91,873
Other current assets
31,184
26,192
2,910,832
2,129,082
Long-term assets
Property and equipment, net
92,141
61,612
Intangible assets, net
24,759
26,072
Right-of-use assets
96,788
—
Deferred tax assets
16,040
—
Goodwill
48,375
38,019
278,103
125,703
Total assets
3,188,935
2,254,785
Liabilities and shareholders’
equity
Current liabilities
Accounts payable and accrued
liabilities
139,330
96,956
Income taxes payable
66,617
—
Deferred revenue
48,368
39,180
Lease liabilities
5,426
2,552
259,741
138,688
Long-term liabilities
Deferred revenue
2,115
1,881
Lease liabilities
105,595
22,316
Deferred tax liability
1,425
1,132
109,135
25,329
Commitments and contingencies
Shareholders’ equity
Common stock, unlimited Class A
subordinate voting shares authorized, 103,106,023 and 98,081,889
issued and outstanding; unlimited Class B multiple voting shares
authorized, 12,237,278 and 12,310,800 issued and outstanding
3,042,555
2,215,936
Additional paid-in capital
84,792
74,805
Accumulated other comprehensive income
(loss)
(2,293
)
(12,216
)
Accumulated deficit
(304,995
)
(187,757
)
Total shareholders’ equity
2,820,059
2,090,768
Total liabilities and shareholders’
equity
3,188,935
2,254,785
Shopify Inc.
Condensed Consolidated
Statements of Cash Flows
(Expressed in US $000’s,
unaudited)
Nine months ended
September 30, 2019
September 30, 2018
$
$
Cash flows from operating
activities
Net loss for the period
(125,613)
(63,039)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Amortization and depreciation
22,950
21,204
Stock-based compensation
110,464
68,301
Provision for uncollectible receivables
related to merchant cash advances and loans receivable
10,967
5,043
Deferred income taxes
(15,295)
—
Unrealized foreign exchange loss
2,404
637
Changes in operating assets and
liabilities:
Trade and other receivables
(25,153)
(22,524)
Merchant cash advances and loans
receivable
(84,869)
(57,460)
Other current assets
(3,139)
(8,255)
Accounts payable and accrued
liabilities
53,885
44,203
Income tax assets and liabilities
61,485
—
Deferred revenue
9,029
6,685
Lease assets and liabilities
612
5,272
Net cash provided by operating
activities
17,727
67
Cash flows from investing
activities
Purchase of marketable securities
(2,003,102)
(1,689,553)
Maturity of marketable securities
2,034,933
1,160,003
Acquisitions of property and equipment
(43,357)
(20,432)
Acquisitions of intangible assets
(5,484)
(12,328)
Acquisition of businesses, net of cash
acquired
(12,476)
(3,718
)
Net cash used by investing activities
(29,486)
(566,028)
Cash flows from financing
activities
Proceeds from the exercise of stock
options
37,301
22,273
Proceeds from public offering, net of
issuance costs
688,014
646,984
Net cash provided by financing
activities
725,315
669,257
Effect of foreign exchange on cash and
cash equivalents
290
(1,552)
Net increase in cash and cash
equivalents
713,846
101,744
Cash and cash equivalents – Beginning
of Period
410,683
141,677
Cash and cash equivalents – End of
Period
1,124,529
243,421
Shopify Inc.Reconciliation from GAAP to Non-GAAP
Results(Expressed in US $000’s, except share and per share
amounts, unaudited)
Three months ended Nine months
ended September 30, 2019 September 30, 2018
September 30, 2019 September 30, 2018
$
$
$
$
GAAP Gross profit
216,696
149,727
601,752
410,524
% of Revenue
55
%
55
%
56
%
56
%
add: stock-based compensation
928
618
2,536
1,628
add: payroll taxes related to stock-based compensation
113
37
345
153
Non-GAAP Gross profit (before adjustment for amortization of
acquired intangibles)
217,737
150,382
604,633
412,305
% of Revenue
56
%
56
%
56
%
57
%
add: amortization of acquired intangibles
1,707
1,241
4,978
3,467
Non-GAAP Gross profit (adjusted for amortization of acquired
intangibles)
219,444
151,623
609,611
415,772
% of Revenue
56
%
56
%
57
%
57
%
GAAP Sales and marketing
116,546
91,635
340,778
254,906
% of Revenue
30
%
34
%
32
%
35
%
less: stock-based compensation
8,707
6,015
23,951
15,775
less: payroll taxes related to stock-based compensation
985
382
2,897
1,640
Non-GAAP Sales and marketing
106,854
85,238
313,930
237,491
% of Revenue
27
%
32
%
29
%
33
%
GAAP Research and development
90,387
61,629
252,262
163,650
% of Revenue
23
%
23
%
24
%
22
%
less: stock-based compensation
23,136
14,719
64,234
39,223
less: payroll taxes related to stock-based compensation
2,777
950
8,050
3,583
Non-GAAP Research and development
64,474
45,960
179,978
120,844
% of Revenue
17
%
17
%
17
%
17
%
GAAP General and administrative
45,421
27,831
119,780
74,430
% of Revenue
12
%
10
%
11
%
10
%
less: stock-based compensation
7,261
4,833
19,743
11,675
less: payroll taxes related to stock-based compensation
592
174
1,585
659
Non-GAAP General and administrative
37,568
22,824
98,452
62,096
% of Revenue
10
%
8
%
9
%
9
%
GAAP Operating expenses
252,354
181,095
712,820
492,986
% of Revenue
65
%
67
%
66
%
68
%
less: stock-based compensation
39,104
25,567
107,928
66,673
less: payroll taxes related to stock-based compensation
4,354
1,506
12,532
5,882
Non-GAAP Operating expenses
208,896
154,022
592,360
420,431
% of Revenue
53
%
57
%
55
%
58
%
GAAP Operating loss
(35,658
)
(31,368
)
(111,068
)
(82,462
)
% of Revenue
(9
)%
(12
)%
(10
)%
(11
)%
add: stock-based compensation
40,032
26,185
110,464
68,301
add: payroll taxes related to stock-based compensation
4,467
1,543
12,877
6,035
Adjusted Operating income (loss) (before adjustment for
amortization of acquired intangibles)
8,841
(3,640
)
12,273
(8,126
)
% of Revenue
2
%
(1
)%
1
%
(1
)%
add: amortization of acquired intangibles
1,707
1,241
4,978
3,467
Adjusted Operating income (loss) (adjusted for amortization of
acquired intangibles)
10,548
(2,399
)
17,251
(4,659
)
% of Revenue
3
%
(1
)%
2
%
(1
)%
GAAP Net loss
(72,784
)
(23,184
)
(125,613
)
(63,039
)
% of Revenue
(19
)%
(9
)%
(12
)%
(9
)%
add: stock-based compensation
40,032
26,185
110,464
68,301
add: payroll taxes related to stock-based compensation
4,467
1,543
12,877
6,035
Adjusted Net income (loss) (before adjustments for amortization of
acquired intangibles and provision for income tax effects)
(28,285
)
4,544
(2,272
)
11,297
% of Revenue
(7
)%
2
%
(0
)%
2
%
add: amortization of acquired intangibles
1,707
1,241
4,978
3,467
add: provision for income tax effects related to non-GAAP
adjustments
(7,018
)
-
(18,471
)
-
Adjusted Net income (loss) (adjusted for amortization of acquired
intangibles and provision for income tax effects)
(33,596
)
5,785
(15,765
)
14,764
% of Revenue
(9
)%
2
%
(1
)%
2
%
GAAP net loss per share attributable to shareholders
(0.64
)
(0.22
)
(1.12
)
(0.60
)
add: stock-based compensation
0.35
0.25
0.99
0.65
add: payroll taxes related to stock-based compensation
0.04
0.01
0.11
0.06
Adjusted net income (loss) per share attributable to shareholders
(before adjustments for amortization of acquired intangibles and
provision for income tax effects)
(0.25
)
0.04
(0.02
)
0.11
add: amortization of acquired intangibles
0.02
0.01
0.04
0.03
add: provision for income tax effects related to non-GAAP
adjustments
(0.06
)
—
(0.16
)
— Adjusted net income (loss) per share attributable to shareholders
(adjusted for amortization of acquired intangibles and provision
for income tax effects)
(0.29
)
0.05
(0.14
)
0.14
Weighted average shares used to compute GAAP and non-GAAP net
income (loss) per share attributable to shareholders
113,086,997
106,647,222
112,015,160
104,976,730
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191029005378/en/
INVESTORS: Katie Keita Senior Director, Investor Relations
613-241-2828 x 1024 IR@shopify.com
MEDIA: Julie Nicholson Director of Communications 416-238-6705 x
302 press@shopify.com
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