Third-Quarter Revenue Grows 72% Year on
Year
Third-Quarter Gross Profit Grows 86% Year on
Year
Achieves Adjusted Operating Profitability
Earlier Than Expected and for First Time as a Public Company
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 September 30, 2017.
“In today’s fast-changing retail environment, merchants large
and small are hungry to leverage all that technology can do for
them,” stated Russ Jones, Shopify’s CFO. “This is why our platform
is so valuable to merchants and why they keep coming to Shopify.
Our results underscore this, with another record quarter for
merchant adds, along with a record number of store launches on
Shopify Plus in the third quarter. On the strength of these results
and our underlying business model, we are raising our forecasts for
the fourth quarter and full year 2017.”
Third-Quarter Financial Highlights
- Total revenue in the third quarter was
$171.5 million, a 72% increase from the comparable quarter in 2016.
Within this, Subscription Solutions revenue grew 65% to $82.4
million. This acceleration 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 79% to $89.0 million, driven primarily by the growth
of Gross Merchandise Volume2 (“GMV”).
- MRR as of September 30, 2017 was
$26.8 million, up 65% compared with $16.3 million as of
September 30, 2016. Shopify Plus contributed $5.3 million, or
20%, of MRR compared with 15% of MRR as of September 30,
2016.
- GMV for the third quarter was $6.4
billion, an increase of $2.6 billion, or 69% over the third quarter
of 2016. Gross Payments Volume3 (“GPV”) grew to $2.4 billion, which
accounted for 37% of GMV processed in the quarter, versus $1.5
billion, or 39%, for the third quarter of 2016.
- Gross profit grew 86% to $100.0 million
as compared with the $53.8 million recorded for the third quarter
of 2016.
- Operating loss for the third quarter of
2017 was $12.7 million, or 7.4% of revenue, versus $9.5 million, or
9.5% of revenue, for the comparable period a year ago.
- Adjusted operating income4 for the
third quarter of 2017 was $1.7 million, or 1.0% of revenue;
adjusted operating loss for the third quarter of 2016 was $2.2
million, or 2.2% of revenue
- Net loss for the third quarter of 2017
was $9.4 million, or $0.09 per share, compared with $9.1 million or
$0.11 per share, for the third quarter of 2016.
- Adjusted net income4 for the third
quarter of 2017 was $5.0 million, or $0.05 per share, compared with
an adjusted net loss of $1.8 million, or $0.02 per share, for the
third quarter of 2016.
- At September 30, 2017, Shopify had
$926.6 million in cash, cash equivalents and marketable securities,
compared with $392.4 million on December 31, 2016.
Business Highlights
- Shopify’s pace of innovation to keep
merchants on the cutting edge of a rapidly evolving retail
environment continues, with numerous launches over the past few
months to help merchants sell and ship more products, more often,
to more places.
- Shopify’s Instagram channel was made
available in a limited release to tens of thousands of merchants
earlier this month. Merchants in categories like fashion, jewelry,
beauty, furniture, and home decor, can start tagging their posts
with products in Instagram’s apps to showcase to their over 800
million monthly active users.
- Shopify recently announced the addition
of Lyst as a channel for merchants. As the largest global fashion
search engine, Lyst leveraged Shopify’s Sales Channel SDK to
develop their channel for Shopify and enable merchants selling
fashion in the U.S., U.K., Germany, Sweden, Finland, and Austria to
reach new audiences they may not have been able to capture
before.
- In September, Shopify expanded shipping
capabilities beyond single label printing, adding bulk label
printing to Shopify Shipping; and earlier this month Shopify
integrated DHL Express as an international shipping option at
discounted rates for merchants based in the U.S.
- Shopify built an in-app Augmented
Reality feature for Magnolia, the home and lifestyle brand of Chip
and Joanna Gaines from HGTV’s Fixer Upper. Built using the Shopify
Mobile Buy SDK and Apple’s ARKit, users’ phones can now help
showcase how housewares and homegoods will look in their real-life
surroundings before buying. This is the first product of its kind
for a Shopify merchant.
- Shopify announced the addition of a
second Waterloo office, and with it, plans to expand hiring by 300
to 500 new jobs over the next 2 to 3 years. Shopify expects to open
the new space, which is steps away from its existing Waterloo
location, in the first quarter of 2018.
- Mobile traffic to merchants’ stores
continued to grow, reaching 74% of traffic and 62% of orders for
the three months ended September 30, versus 72% and 60%,
respectively, for the second quarter of 2017.
- Shopify Capital issued $44.1 million in
merchant cash advances in the third quarter of 2017, nearly five
times the $9.2 million issued in the third quarter of last year.
Shopify Capital has grown to over $130 million in cumulative cash
advanced since its launch in April 2016.
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 $656 million
to $658 million
- GAAP operating loss in the range of
$55.5 million to $57.5 million
- Adjusted operating loss4 in the range
of $1.5 million to $3.5 million, which excludes stock-based
compensation expenses and related payroll taxes of $54 million
For the fourth quarter of 2017, Shopify currently expects:
- Revenues in the range of $206 million
to $208 million
- GAAP operating loss in the range of
$12.5 million to $14.5 million
- Adjusted operating income4 in the range
of $2 million to $4 million, which excludes stock-based
compensation expenses and related payroll taxes of $16.5
million
Quarterly Conference Call
Shopify’s management team will hold a conference call to discuss
its third-quarter results today, October 31, 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 Third-Quarter 2017 Interim Unaudited Condensed
Consolidated Financial Statements and Notes and its Third-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, 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 500,000 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 income (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 plans to grow its Waterloo-based
workforce and open a new office space and Shopify's financial
outlook and future financial performance. Words such as “expects”,
“anticipates”, “will”, 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.
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.
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 30,2017
September 30,2016
September 30,2017
September 30,2016
$ $ $ $ Revenues Subscription
solutions 82,435 49,839 216,113 132,219 Merchant solutions 89,021
49,739 234,377 126,728 171,456
99,578 450,490 258,947
Cost of
revenues Subscription solutions 15,458 10,555 41,400 27,885
Merchant solutions 55,971 35,271 149,982
89,702 71,429 45,826 191,382
117,587
Gross profit 100,027 53,752
259,108 141,360
Operating expenses Sales and
marketing 58,314 32,777 158,520 90,198 Research and development
36,350 19,462 95,658 49,864 General and administrative 18,039
11,002 47,974 29,158 Total operating
expenses 112,703 63,241 302,152 169,220
Loss from operations (12,676 ) (9,489 ) (43,044 ) (27,860 )
Other income 3,296 369
6,036 1,372
Net loss (9,380 ) (9,120 )
(37,008 ) (26,488 )
Other comprehensive income (loss), net of
tax 2,604 (617 ) 8,672 (476 )
Comprehensive
loss (6,776 ) (9,737 ) (28,336 ) (26,964 )
Basic and diluted net loss
attributable to shareholders
(0.09 ) (0.11 )
(0.39
)
(0.32 )
Weighted average shares used to
compute
basic and diluted net loss per share
attributable to shareholders
98,777,975 84,912,757 94,502,097 82,259,884
Shopify Inc.Condensed
Consolidated Balance Sheets(Expressed in US $000’s, except
share and per share amounts, unaudited)
As at September 30, 2017 December
31, 2016 $ $ Assets Current assets
Cash and cash equivalents 119,849 84,013 Marketable securities
806,710 308,401 Trade and other receivables 17,789 9,599 Merchant
cash advances receivable, net 50,276 11,896 Other current assets
20,302 8,989 1,014,926 422,898
Long-term assets Property and equipment, net 48,605 45,719
Intangible assets, net 17,560 6,437 Goodwill 20,317 15,504
86,482 67,660
Total assets 1,101,408
490,558
Liabilities and shareholders’ equity
Current liabilities Accounts payable and accrued liabilities
65,246 45,057 Current portion of deferred revenue 28,730 20,164
Current portion of lease incentives 1,434 1,311
95,410 66,532
Long-term liabilities Deferred
revenue 1,218 922 Lease incentives 15,317 12,628 Deferred tax
liability 1,541 — 18,076 13,550
Shareholders’ equity
Common stock, unlimited Class A
subordinate voting shares
authorized, 86,169,575 and 77,030,952
issued and outstanding;
unlimited Class B multiple voting shares
authorized, 13,102,735
and 12,374,528 issued and outstanding
1,064,214 468,494 Additional paid-in capital 37,071 27,009
Accumulated other comprehensive income (loss) 6,854 (1,818 )
Accumulated deficit (120,217 ) (83,209 )
Total shareholders’
equity 987,922 410,476
Total liabilities and
shareholders’ equity 1,101,408 490,558
Shopify Inc.Condensed
Consolidated Statements of Cash Flows(Expressed in US $000’s,
except share and per share amounts, unaudited)
Nine months ended
September 30,2017
September 30,2016
$ $ Cash flows from operating activities Net
loss for the period (37,008 ) (26,488 ) Adjustments to reconcile
net loss to net cash provided by (used in) operating activities:
Amortization and depreciation 15,624 9,527 Stock-based compensation
34,185 14,834 Provision for uncollectible receivables related to
merchant cash advances 2,473 918 Vesting of restricted shares — 202
Unrealized foreign exchange gain (1,502 ) (1,087 ) Changes in
operating assets and liabilities: Trade and other receivables
(8,701 ) (688 ) Merchant cash advances receivable (40,853 ) (10,017
) Other current assets (2,179 ) (4,098 ) Accounts payable and
accrued liabilities 15,193 16,416 Deferred revenue 8,862 5,781
Lease incentives 2,812 2,002 Net cash provided by
(used in) operating activities (11,094 ) 7,302
Cash flows
from investing activities Purchase of marketable securities
(949,202 ) (223,650 ) Maturity of marketable securities 451,509
90,083 Acquisitions of property and equipment (9,258 ) (15,286 )
Acquisitions of intangible assets (2,882 ) (2,004 ) Acquisition of
businesses, net of cash acquired (15,718 ) (7,969 ) Net cash used
in investing activities (525,551 ) (158,826 )
Cash flows from
financing activities Proceeds from the exercise of stock
options 10,500 3,230 Proceeds from public offering, net of issuance
costs 560,057 224,423 Net cash provided by financing
activities 570,557 227,653 Effect of foreign exchange
on cash and cash equivalents 1,924 1,161
Net
increase in cash and cash equivalents 35,836 77,290
Cash and
cash equivalents – Beginning of Period 84,013 110,070
Cash and cash equivalents – End of Period 119,849
187,360
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 30,2017
September 30,2016
September 30,2017
September 30,2016
$ $ $ $ GAAP Gross profit 100,027
53,752 259,108 141,360 % of Revenue 58 % 54 % 58 % 55 % add:
stock-based compensation 318 188 794 423 add: payroll taxes related
to stock-based compensation 37 46 117 79
Non-GAAP Gross profit 100,382 53,986 260,019
141,862 % of Revenue 59 % 54 % 58 % 55 % GAAP
Sales and marketing 58,314 32,777 158,520 90,198 % of Revenue 34 %
33 % 35 % 35 % less: stock-based compensation 2,565 1,145 6,050
2,651 less: payroll taxes related to stock-based compensation 164
245 644 369 Non-GAAP Sales and
marketing 55,585 31,387 151,826 87,178
% of Revenue 32 % 32 % 34 % 34 % GAAP Research and
development 36,350 19,462 95,658 49,864 % of Revenue 21 % 20 % 21 %
19 % less: stock-based compensation 8,595 4,019 21,681 9,086 less:
payroll taxes related to stock-based compensation 729 339
2,036 816 Non-GAAP Research and development
27,026 15,104 71,941 39,962 % of
Revenue 16 % 15 % 16 % 15 % GAAP General and administrative
18,039 11,002 47,974 29,158 % of Revenue 11 % 11 % 11 % 11 % less:
stock-based compensation 1,898 1,135 5,659 2,876 less: payroll
taxes related to stock-based compensation 83 166 524
223 Non-GAAP General and administrative 16,058
9,701 41,791 26,059 % of Revenue 9 % 10 % 9 %
10 % GAAP Operating expenses 112,703 63,241 302,152 169,220
% of Revenue 66 % 64 % 67 % 65 % less: stock-based compensation
13,058 6,299 33,390 14,613 less: payroll taxes related to
stock-based compensation 976 750 3,204 1,408
Non-GAAP Operating Expenses 98,669 56,192
265,558 153,199 % of Revenue 58 % 56 % 59 % 59 %
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 Nine months ended
September 30,2017
September 30,2016
September 30,2017
September 30,2016
$ $ $ $ GAAP Operating loss (12,676 )
(9,489 ) (43,044 ) (27,860 ) % of Revenue (7 )% (10 )% (10 )% (11
)% add: stock-based compensation 13,376 6,487 34,184 15,036 add:
payroll taxes related to stock-based compensation 1,013 796
3,321 1,487 Adjusted Operating Income (Loss)
1,713 (2,206 ) (5,539 ) (11,337 ) % of Revenue 1 % (2 )% (1
)% (4 )% GAAP Net loss (9,380 ) (9,120 ) (37,008 ) (26,488 )
% of Revenue (5 )% (9 )% (8 )% (10 )% add: stock-based compensation
13,376 6,487 34,184 15,036 add: payroll taxes related to
stock-based compensation 1,013 796 3,321 1,487
Adjusted Net Income (Loss) 5,009 (1,837 ) 497
(9,965 ) % of Revenue 3 % (2 )% — % (4 )% GAAP net loss per
share attributable to shareholders (0.09 ) (0.11 ) (0.39 ) (0.32 )
add: stock-based compensation 0.14 0.08 0.36 0.18 add: payroll
taxes related to stock-based compensation 0.01 0.01
0.04 0.02
Adjusted net income (loss) per share
attributable to
shareholders(1)
0.05 (0.02 ) 0.01 (0.12 )
Weighted average shares used to compute
GAAP
and non-GAAP net income (loss) per
share
attributable to shareholders
98,777,975 84,912,757 94,502,097 82,259,884
(1) Totals may not foot due to rounding
differences.
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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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