Revenue Grows 75% Year on Year
Second-Quarter Gross Profit Grows 83% Year
on Year
Shopify reports in U.S. dollars and in accordance with U.S.
GAAP
Shopify Inc. (NYSE:SHOP)(TSX:SHOP), the leading cloud-based,
multi-channel commerce platform designed for small and medium-sized
businesses, today announced strong financial results for the
quarter ended June 30, 2017.
“The fundamental shift in retail toward multi-channel and
mobile, the ongoing adoption of Shopify by larger brands, and our
continued focus on building out the market-leading platform for
sellers all contributed to the strength of our results this past
quarter,” stated Russ Jones, Shopify’s CFO. “As we have been able
to predict and capitalize on these shifts, and continue to innovate
so entrepreneurs of all sizes can take advantage of them, we feel
we are exceptionally well-positioned for the next several
years.”
Second-Quarter Financial Highlights
- Total revenue in the second quarter was
$151.7 million, a 75% increase from the comparable quarter in 2016.
Within this, Subscription Solutions revenue grew 64% to $71.6
million. The acceleration in Subscription Solutions revenue growth
was driven by the continued rapid growth in Monthly Recurring
Revenue1 (“MRR”) as another record number of merchants joined the
platform in the period. Merchant Solutions revenue grew 86% to
$80.1 million, driven primarily by the growth of Gross Merchandise
Volume2 (“GMV”).
- MRR as of June 30, 2017 was $23.7
million, up 64% compared with $14.4 million as of June 30,
2016. Shopify Plus contributed $4.3 million, or 18%, of MRR
compared with 13% of MRR as of June 30, 2016.
- GMV for the second quarter was $5.8
billion, an increase of $2.5 billion, or 74% over the second
quarter of 2016. Gross Payments Volume3 (“GPV”) grew to $2.2
billion, which accounted for 38% of GMV processed in the quarter,
versus $1.3 billion, or 38%, for the second quarter of 2016.
- Gross profit dollars grew 83% to $86.8
million as compared with the $47.5 million recorded for the second
quarter of 2016.
- Operating loss for the second quarter
of 2017 was $15.9 million, or 10% of revenue, versus $8.7 million,
or 10% of revenue, for the comparable period a year ago.
- Adjusted operating loss4 for the second
quarter of 2017 was 1.9% of revenue, or $2.9 million; adjusted
operating loss for the second quarter of 2016 was 3.7% of revenue,
or $3.2 million.
- Net loss for the second quarter of 2017
was $14.0 million, or $0.15 per share, compared with $8.4 million,
or $0.10 per share, for the second quarter of 2016.
- Adjusted net loss4 for the second
quarter of 2017 was $1.1 million, or $0.01 per share, compared with
an adjusted net loss of $3.0 million, or $0.04 per share, for the
second quarter of 2016.
- At June 30, 2017, Shopify had
$932.4 million in cash, cash equivalents and marketable securities,
compared with $392.4 million on December 31, 2016. The
increase reflects the $560 million in net proceeds from Shopify’s
offering of Class A subordinate voting shares in the second
quarter.
Business Highlights
- Shopify continues to deliver on its
strategy of providing multiple sales channels for merchants:
- In July, Shopify began shipping
pre-orders of its Chip and Swipe Reader to merchants, enhancing its
point-of-sale channel, which is its second-largest channel for GMV.
Today, we are announcing that it is now generally available and
free to new and existing merchants already on a Shopify
subscription who have not redeemed a free reader before.
- Also in July, Shopify announced the
integration of eBay as a channel for merchants. The integration
will enable Shopify merchants to surface their brand and products
to more than 169 million active eBay buyers, while managing eBay
orders, inventory and messages from within Shopify.
- In June, Shopify announced the
integration of Buzzfeed as a channel for merchants, paving a new
way for media and publishers to drive affiliate revenue. The new
channel allows merchants to easily tag products for BuzzFeed
editors to search, find, and feature in its campaigns, product
lists and onsite content for its audience of more than 200
million.
- Shopify continues to optimize features
that maximize merchants’ opportunity for success on the platform,
with several notable initiatives in the second quarter:
- Shopify Pay, a feature designed to
increase conversion at checkout by streamlining the checkout
process, especially on mobile devices, went live to all merchants
using Shopify Payments.
- Shopify Payments went live in New
Zealand, bringing the total number of countries where Shopify
Payments is available to six, including U.S., Canada, U.K,
Australia and Ireland.
- Shopify made Kit free to all merchants,
which more than doubled the number of merchants actively using the
virtual assistant to help automate online marketing.
- Mobile traffic to merchants’ stores
continued to grow, reaching 72% of traffic and 60% of orders for
the three months ended June 30, versus 69% and 59%, respectively,
exiting the first quarter of this year.
- In the second quarter, Shopify Capital
issued $37.2 million in merchant cash advances, nearly twice the
amount issued in the first quarter. Since its launch in April 2016,
Shopify Capital has grown to $86 million in cumulative cash
advanced by June 30, 2017. This figure climbed to more than $95
million by July 31, 2017.
CFO Retirement
Shopify’s Chief Financial Officer Russ Jones has informed the
Company and its Board of Directors of his decision to
retire in 2018. Russ, who joined Shopify in 2011, intends to
continue to serve as CFO until his successor is found and has
transitioned into the role, a process that is now underway and that
Shopify expects will be completed within the next 12 months.
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 2017, Shopify currently expects:
- Revenues in the range of $642 million
to $648 million
- GAAP operating loss in the range of $62
million to $66 million
- Adjusted operating loss4 in the range
of $7 million to $11 million, which excludes stock-based
compensation expenses and related payroll taxes of $55 million
For the third quarter of 2017, Shopify currently expects:
- Revenues in the range of $164 million
to $166 million
- GAAP operating loss in the range of $17
million to $19 million
- Adjusted operating loss4 in the range
of $2 million to $4 million, which excludes stock-based
compensation expenses and related payroll taxes of $15 million
Quarterly Conference Call
Shopify’s management team will hold a conference call to discuss
its second-quarter results today, August 1, 2017, 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 2017 Interim Unaudited Condensed
Consolidated Financial Statements and Notes and its Second-Quarter
2017 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 designed for small and medium-sized businesses. Merchants
can use the software to design, set up, and manage their stores
across multiple sales channels, including web, mobile, social
media, marketplaces and physical retail locations. 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. Shopify currently powers half a million
businesses in approximately 175 countries and is trusted by brands
such as Tesla, Nestle, GE, Red Bull, 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, non-GAAP operating expenses, adjusted
net loss and adjusted net loss 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. Words such as “expects”, “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.
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 Six Months
Ended June 30, 2017 June 30, 2016
June 30, 2017 June 30, 2016 $
$ $ $ Revenues Subscription solutions
71,598 43,674 133,678 82,380 Merchant solutions 80,057
42,973 145,356 76,989 151,655 86,647 279,034
159,369
Cost of revenues Subscription solutions 13,688 9,098
25,942 17,330 Merchant solutions 51,127 30,026
94,011 54,431 64,815 39,124 119,953 71,761
Gross
profit 86,840 47,523 159,081 87,608
Operating
expenses Sales and marketing 54,872 29,413 100,206 57,421
Research and development 32,714 16,732 59,308 30,402 General and
administrative 15,161 10,037 29,935 18,156 Total
operating expenses 102,747 56,182 189,449 105,979
Loss from operations (15,907 ) (8,659 ) (30,368) (18,371)
Other income 1,877 220
2,740 1,003
Net loss (14,030 ) (8,439 ) (27,628)
(17,368)
Other comprehensive income (loss), net
oftax
4,631 (80 ) 6,068
141
Comprehensive loss (9,399 ) (8,519 ) (21,560) (17,227)
Basic and diluted net loss per
shareattributable to shareholders
(0.15 ) (0.10 ) (0.30 )
(0.21)
Weighted average shares used to
computebasic and diluted net loss per shareattributable to
shareholders
94,290,538 81,349,248 92,277,895 80,918,872
Shopify Inc.Condensed Consolidated
Balance Sheets(Expressed in US $000’s, except share and per
share amounts, unaudited)
As at June 30, 2017 December 31,
2016 $ $ Assets Current assets Cash
and cash equivalents 199,397 84,013 Marketable securities 733,020
308,401 Trade and other receivables 12,599 9,599 Merchant cash
advances receivable, net 32,839 11,896 Other current assets 16,382
8,989 994,237 422,898
Long-term
assets Property and equipment, net 44,235 45,719 Intangible
assets, net 18,444 6,437 Goodwill 20,317 15,504
82,996 67,660
Total assets 1,077,233
490,558
Liabilities and shareholders’ equity
Current liabilities Accounts payable and accrued liabilities
57,118 45,057 Current portion of deferred revenue 25,771 20,164
Current portion of lease incentives 1,354 1,311
84,243 66,532
Long-term liabilities Deferred
revenue 1,125 922 Lease incentives 12,728 12,628 Deferred tax
liability 1,693 — 15,546 13,550
Shareholders’ equity
Common stock, unlimited Class A
subordinate voting sharesauthorized, 85,404,395 and 77,030,952
issued and outstanding;unlimited Class B multiple voting shares
authorized, 13,122,943and 12,374,528 issued and outstanding
1,051,490 468,494 Additional paid-in capital 32,541 27,009
Accumulated other comprehensive income (loss) 4,250 (1,818 )
Accumulated deficit (110,837 ) (83,209 )
Total shareholders’
equity 977,444 410,476
Total liabilities and
shareholders’ equity 1,077,233 490,558
Shopify Inc.Condensed Consolidated
Statements of Cash Flows(Expressed in US $000’s, except share
and per share amounts, unaudited)
Six Months Ended June 30, 2017 June
30, 2016 $ $ Cash flows from operating
activities Net loss for the period (27,628) (17,368)
Adjustments to reconcile net loss to net cash provided by operating
activities: Amortization and depreciation 9,887 5,834 Stock-based
compensation 20,808 8,375 Provision for uncollectible receivables
related to merchant cash advances 1,922 441 Vesting of restricted
shares — 172 Unrealized foreign exchange gain (901) (1,161) Changes
in operating assets and liabilities: Trade and other receivables
(2,978) 1,779 Merchant cash advances receivable (22,865) (4,494)
Other current assets 348 (787) Accounts payable and accrued
liabilities 10,595 8,020 Deferred revenue 5,810 3,913 Lease
incentives 143 1,481 Net cash provided by (used in) operating
activities (4,859) 6,205
Cash flows from investing
activities Purchase of marketable securities (638,212) (81,393)
Maturity of marketable securities 213,609 49,457 Acquisitions of
property and equipment (5,290) (10,057) Acquisitions of intangible
assets (2,024) (1,256) Acquisition of businesses, net of cash
acquired (15,718) (7,969) Net cash provided by (used in) investing
activities (447,635) (51,218)
Cash flows from financing
activities Proceeds from the exercise of stock options 6,932
1,832 Proceeds from public offering, net of issuance costs 560,057
— Net cash provided by financing activities 566,989
1,832 Effect of foreign exchange on cash and cash equivalents 889
1,251
Net increase (decrease) in cash and cash equivalents
115,384 (41,930)
Cash and cash equivalents – Beginning of
Period 84,013 110,070
Cash and cash equivalents – End of
Period 199,397 68,140
Shopify Inc.Reconciliation from GAAP
to Non-GAAP Results(Expressed in US $000’s, except share and
per share amounts, unaudited)
Three months ended Six Months
Ended June 30, 2017 June 30, 2016
June 30, 2017 June 30, 2016 $
$ $ $ GAAP Gross profit 86,840 47,523 159,081
87,608 % of Revenue 57 % 55 % 57 % 55 % add: stock-based
compensation 261 129 475 234
add: payroll taxes related to
stock-basedcompensation
46 23 81 33 Non-GAAP Gross profit
87,147 47,675 159,637 87,875 % of
Revenue 57 % 55 % 57 % 55 % GAAP Sales and marketing 54,872
29,413 100,206 57,421 % of Revenue 36 % 34 % 36 % 36 % less:
stock-based compensation 2,004 942 3,485 1,506
less: payroll taxes related to
stock-basedcompensation
301 83 480 124 Non-GAAP Sales and
marketing 52,567 28,388 96,241 55,791 %
of Revenue 35 % 33 % 34 % 35 % GAAP Research and development
32,714 16,732 59,308 30,402 % of Revenue 22 % 19 % 21 % 19 % less:
stock-based compensation 7,255 3,035 13,088 5,066
less: payroll taxes related to
stock-basedcompensation
820 220 1,305 480 Non-GAAP Research and
development 24,639 13,477 44,915 24,856
% of Revenue 16 % 16 % 16 % 16 % GAAP General and
administrative 15,161 10,037 29,935 18,156 % of Revenue 10 % 12 %
11 % 11 % less: stock-based compensation 2,081 980 3,760 1,741
less: payroll taxes related to
stock-basedcompensation
201 36 442 56 Non-GAAP General and
administrative 12,879 9,021 25,733 16,359
% of Revenue 8 % 10 % 9 % 10 % GAAP Operating
expenses 102,747 56,182 189,449 105,979 % of Revenue 68 % 65 % 68 %
66 % less: stock-based compensation 11,340 4,957 20,333 8,313
less: payroll taxes related to
stock-basedcompensation
1,322 339 2,227 660 Non-GAAP Operating
Expenses 90,085 50,886 166,889 97,006 %
of Revenue 59 % 59 % 60 % 61 %
Shopify Inc.Reconciliation from GAAP
to Non-GAAP Results (continued)(Expressed in US $000’s, except
share and per share amounts, unaudited)
Three months ended Six Months
Ended June 30, 2017 June 30, 2016
June 30, 2017 June 30, 2016 $
$ $ $ GAAP Operating loss (15,907 ) (8,659 )
(30,368 ) (18,371 ) % of Revenue (10 )% (10 )% (11 )% (12 )% add:
stock-based compensation 11,601 5,086 20,808 8,547
add: payroll taxes related to
stock-basedcompensation
1,368 362 2,308 693 Adjusted Operating
loss (2,938 ) (3,211 ) (7,252 ) (9,131 ) % of Revenue (2 )% (4 )%
(3 )% (6 )% GAAP Net loss (14,030 ) (8,439 ) (27,628 )
(17,368 ) % of Revenue (9 )% (10 )% (10 )% (11 )% add: stock-based
compensation 11,601 5,086 20,808 8,547 add: payroll taxes related
to stock-based compensation 1,368 362 2,308
693 Adjusted Net loss and comprehensive loss (1,061 ) (2,991
) (4,512 ) (8,128 ) % of Revenue (1 )% (3 )% (2 )% (5 )%
GAAP net loss per share attributable to shareholders (0.15 ) (0.10
) (0.30 ) (0.21 ) add: stock-based compensation 0.12 0.06 0.23 0.11
add: payroll taxes related to stock-based compensation 0.01
— 0.03 0.01 Adjusted net loss per share
attributable to shareholders(1) (0.01 ) (0.04 ) (0.05 ) (0.10 )
Weighted average shares used to compute
GAAPand non-GAAP net loss per share attributable toshareholders
94,290,538 81,349,248 92,277,895 80,918,872
(1) Totals may not foot due to rounding differences.
1. 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.2. 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.3. Gross
Payments Volume, or GPV, is the amount of GMV processed through
Shopify Payments.4. Please refer to "Non-GAAP Financial Measures"
in this press release.
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ShopifyINVESTORS:Katie Keita, 613-241-2828 x 1024Director,
Investor RelationsIR@shopify.comorMEDIA:Sheryl So, 416-238-6705 x
302Public Relations Managerpress@shopify.com
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