Shopify initially rose after releasing better-than-expected earnings on Tuesday. The stock then turned lower later in the morning morning and were last down 6 percent as traders reacted to lukewarm guidance and a new offering of stock and other securities for up to $5 billion.
The company said third quarter revenue would be between $253 million and $257 million. Analysts expect revenue of $253.2 million.
“While Q2 results were another beat, this somewhat muted guidance may temper near term upside,” said Nikhil Thadani of Mackie Research in a note.
The company said after the bell Monday in a separate filing it would be offering $5 billion in mixed securities over the next 25 months.
“Long-term thinking is behind the preliminary short form-based shelf perspective we filed yesterday evening,” said a company executive on its conference call Tuesday, according to a FactSet transcript. “Our original shelf expires this quarter. By filing this shelf we retain financial flexibility over the next two years.
“To be clear, we consider this to be ordinary course of business given the pending expiry of the current shelf and we have no current intention to undertake an offer in,” the executive added.
The shares began their significant move lower during the earnings call Tuesday morning.
The drop also came as the company posted a corrected earnings release. Shopify’s corrected second-quarter earnings release is below.
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
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 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 Payments, 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 Pay in Japan, bringing the total number of countries where Shopify Pay 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
This is a developing story. Check back for updates.
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