Shopify Inc. (NYSE:SHOP)(TSX:SHOP), a leading global commerce company, announced today strong financial results for the first quarter ended March 31, 2020.
"The vast majority of people are employed by small businesses, and they struggle the most during a crisis," said Tobi Lütke, Shopify’s CEO. "The spread of COVID-19 is going to be a tough time for all entrepreneurs. We are working as fast as we can to support our merchants by re-tooling our products to help them adapt to this new reality. Our goal is that, because Shopify exists, more entrepreneurs and small businesses will get through this."
"Now more than ever, Shopify needs to be there for our merchants, so our focus during these challenging times is to help solve their immediate pain points," said Amy Shapero, Shopify’s CFO. "We are well positioned to help our merchants, particularly given the accelerated shift to online commerce. Our strong balance sheet provides us with the flexibility to continue investing in the right merchant-first initiatives, supporting our merchants’ success now and well into the future."
Impact of COVID-19
While the COVID-19 pandemic has subdued commerce globally and especially strained small and medium-sized businesses, it has accelerated the shift of purchase habits to ecommerce. Shopify is uniquely positioned to help businesses of all sizes during this time, helping entrepreneurs start online businesses, adapt to an evolving commerce landscape, and manage through a challenging macroeconomic environment. We introduced a number of initiatives to support our merchants and protect our stakeholders during the ongoing COVID-19 pandemic, including:
The following includes some key changes we have observed in the data patterns on Shopify’s platform, potential implications for Shopify’s business, and actions we are taking to manage risk and maintain strong liquidity:
First-Quarter Financial Highlights
First-Quarter Business Highlights
Subsequent to First Quarter 2020
Financial Outlook
On April 1, 2020, Shopify suspended the financial expectations it had provided on February 12, 2020 for the full year 2020, as our financial results for the rest of the year are contingent on the duration and scope of the COVID-19 pandemic and the economic impact of actions taken in response, all of which are unknown. Given the increased uncertainty in the macroeconomic environment, including the greater likelihood of an extended global recession, Shopify is closely monitoring the following external factors:
Shopify is leveraging our merchant-first business model and strong balance sheet to adjust our 2020 plans to address these changes. This includes redirecting spend from certain areas, such as brand and marketing, to product initiatives that directly support our merchants’ ability to adapt to an emerging environment, one where we believe multi-channel selling and direct-to-consumer fulfillment are more important than ever. Given our existing focus on these areas, the recent acceleration in the shift of retail spending toward ecommerce, and the central role our software plays in merchants’ businesses, which enables us to rapidly read and respond to trends on their behalf, we believe Shopify has a unique opportunity to improve the economic lives of merchants and their buyers in this difficult environment and position our company for the future of commerce.
Quarterly Conference Call
Shopify’s management team will hold a conference call to discuss our first-quarter results today, May 6, 2020, 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/news-and-events/default.aspx#upcoming-events. An archived replay of the webcast will be available following the conclusion of the call.
Shopify’s First-Quarter 2020 Interim Unaudited Condensed Consolidated Financial Statements and Notes and its First Quarter 2020 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 gross profit, adjusted operating (loss) income, 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. Adjusted net income (loss) and adjusted net income (loss) per share also exclude taxes related to non-GAAP adjustments.
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 planned business initiatives and operations and financial outlook, the performance of Shopify's merchants, the impact of Shopify's business on its merchants and other entrepreneurs, and economic activity and consumer spending. Words such as "continue", "will", "enable", "plans", "improve", "anticipate", "increase", "advance", "support", and "expect" 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) uncertainty around the duration and scope of the COVID-19 pandemic and the impact of the pandemic and actions taken in response on global and regional economies and economic activity; (ii) merchant acquisition and retention; (iii) managing our growth; (iv) our history of losses; (v) our limited operating history; (vi) our ability to innovate; (vii) the security of personal information we store relating to merchants and their customers and consumers with whom we have a direct relationship; (viii) a disruption of service or security breach; (ix) our potential inability to compete successfully against current and future competitors; (x) international sales and the use of our platform in various countries; (xi) the reliance of our growth in part on the success of our strategic relationships with third parties; (xii) our potential failure to effectively maintain, promote and enhance our brand; (xiii) our use of a single cloud-based platform to deliver our services; (xiv) our potential inability to achieve or maintain data transmission capacity; (xv) our reliance on a single supplier to provide the technology we offer through Shopify Payments; (xvi) payments processed through Shopify Payments; (xvii) our potential inability to hire, retain and motivate qualified personnel; (xviii) serious errors or defects in our software or hardware or issues with our hardware supply chain; (xix) evolving privacy laws and regulations, cross-border data transfer restrictions, data localization requirements and other domestic or foreign regulations may limit the use and adoption of our services; and (xx) 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 |
||||
|
March 31, 2020 |
|
March 31, 2019 |
||
|
$ |
|
$ |
||
Revenues |
|
|
|
||
Subscription solutions |
187,609 |
|
|
140,451 |
|
Merchant solutions |
282,392 |
|
|
180,031 |
|
|
470,001 |
|
|
320,482 |
|
Cost of revenues |
|
|
|
||
Subscription solutions |
37,712 |
|
|
27,985 |
|
Merchant solutions |
175,339 |
|
|
112,206 |
|
|
213,051 |
|
|
140,191 |
|
Gross profit |
256,950 |
|
|
180,291 |
|
Operating expenses |
|
|
|
||
Sales and marketing |
154,862 |
|
|
105,022 |
|
Research and development |
116,396 |
|
|
76,355 |
|
General and administrative |
44,842 |
|
|
30,303 |
|
Transaction and loan losses |
14,083 |
|
|
4,401 |
|
Total operating expenses |
330,183 |
|
|
216,081 |
|
Loss from operations |
(73,233 |
) |
|
(35,790 |
) |
|
|
|
|
||
Other income |
13,109 |
|
|
11,639 |
|
Loss before income taxes |
(60,124 |
) |
|
(24,151 |
) |
Recovery of income taxes |
28,695 |
|
|
— |
|
Net loss |
(31,429 |
) |
|
(24,151 |
) |
Other comprehensive income (loss) |
(16,633 |
) |
|
9,274 |
|
Comprehensive loss |
(48,062 |
) |
|
(14,877 |
) |
Basic and diluted net loss per share attributable to shareholders |
(0.27 |
) |
|
(0.22 |
) |
Weighted average shares used to compute basic and diluted net loss per share attributable to shareholders |
116,806,549 |
|
|
110,921,276 |
|
Shopify Inc. Condensed Consolidated Balance Sheets (Expressed in US $000’s except share amounts, unaudited) |
|||||
|
As at |
||||
|
March 31, 2020 |
|
December 31, 2019 |
||
|
$ |
|
$ |
||
Assets |
|
|
|
||
Current assets |
|
|
|
||
Cash and cash equivalents |
969,363 |
|
|
649,916 |
|
Marketable securities |
1,391,209 |
|
|
1,805,278 |
|
Trade and other receivables, net |
88,139 |
|
|
90,529 |
|
Merchant cash advances, loans and related receivables, net |
191,863 |
|
|
150,172 |
|
Income taxes receivable |
28,402 |
|
|
— |
|
Other current assets |
58,912 |
|
|
48,833 |
|
|
2,727,888 |
|
|
2,744,728 |
|
Long-term assets |
|
|
|
||
Property and equipment, net |
116,832 |
|
|
111,398 |
|
Intangible assets, net |
159,004 |
|
|
167,282 |
|
Right-of-use assets |
133,786 |
|
|
134,774 |
|
Deferred tax assets |
21,541 |
|
|
19,432 |
|
Goodwill |
311,865 |
|
|
311,865 |
|
|
743,028 |
|
|
744,751 |
|
Total assets |
3,470,916 |
|
|
3,489,479 |
|
Liabilities and shareholders’ equity |
|
|
|
||
Current liabilities |
|
|
|
||
Accounts payable and accrued liabilities |
214,431 |
|
|
181,193 |
|
Income taxes payable |
1,461 |
|
|
69,432 |
|
Deferred revenue |
62,884 |
|
|
56,691 |
|
Lease liabilities |
9,781 |
|
|
9,066 |
|
|
288,557 |
|
|
316,382 |
|
Long-term liabilities |
|
|
|
||
Deferred revenue |
5,580 |
|
|
5,969 |
|
Lease liabilities |
131,709 |
|
|
142,641 |
|
Deferred tax liabilities |
4,219 |
|
|
8,753 |
|
|
141,508 |
|
|
157,363 |
|
Commitments and contingencies |
|
|
|
||
Shareholders’ equity |
|
|
|
||
Common stock, unlimited Class A subordinate voting shares authorized, 105,327,498 and 104,518,173 issued and outstanding; unlimited Class B multiple voting shares authorized, 11,897,199 and 11,910,802 issued and outstanding |
3,333,407 |
|
|
3,256,284 |
|
Additional paid-in capital |
58,684 |
|
|
62,628 |
|
Accumulated other comprehensive income (loss) |
(15,587 |
) |
|
1,046 |
|
Accumulated deficit |
(335,653 |
) |
|
(304,224 |
) |
Total shareholders’ equity |
3,040,851 |
|
|
3,015,734 |
|
Total liabilities and shareholders’ equity |
3,470,916 |
|
|
3,489,479 |
|
Shopify Inc. Condensed Consolidated Statements of Cash Flows (Expressed in US $000’s, unaudited) |
|||
|
Three months ended |
||
|
March 31, 2020 |
|
March 31, 2019 |
|
$ |
|
$ |
Cash flows from operating activities |
|
|
|
Net loss for the period |
(31,429) |
|
(24,151) |
Adjustments to reconcile net loss to net cash (used) provided by operating activities: |
|
|
|
Amortization and depreciation |
14,366 |
|
6,832 |
Stock-based compensation |
53,752 |
|
31,164 |
Provision for transaction and loan losses |
6,103 |
|
2,747 |
Deferred income taxes |
(6,643) |
|
— |
Unrealized foreign exchange (gain) loss |
(3,779) |
|
60 |
Changes in operating assets and liabilities: |
|
|
|
Trade and other receivables |
(2,378) |
|
(10,551) |
Merchant cash advances, loans and related receivables |
(46,478) |
|
(18,117) |
Other current assets |
(15,349) |
|
(2,917) |
Accounts payable and accrued liabilities |
30,621 |
|
34,321 |
Income tax assets and liabilities |
(90,375) |
|
— |
Deferred revenue |
5,804 |
|
3,696 |
Lease assets and liabilities |
830 |
|
1,260 |
Net cash (used) provided by operating activities |
(84,955) |
|
24,344 |
Cash flows from investing activities |
|
|
|
Purchase of marketable securities |
(496,224) |
|
(700,052) |
Maturity of marketable securities |
913,178 |
|
679,467 |
Acquisitions of property and equipment |
(16,740) |
|
(9,552) |
Acquisitions of intangible assets |
(219) |
|
(1,440) |
Acquisition of businesses, net of cash acquired |
— |
|
(5,715) |
Net cash provided (used) by investing activities |
399,995 |
|
(37,292) |
Cash flows from financing activities |
|
|
|
Proceeds from the exercise of stock options |
19,427 |
|
12,056 |
Net cash provided by financing activities |
19,427 |
|
12,056 |
Effect of foreign exchange on cash and cash equivalents |
(15,020) |
|
655 |
Net increase (decrease) in cash and cash equivalents |
319,447 |
|
(237) |
Cash and cash equivalents – Beginning of Period |
649,916 |
|
410,683 |
Cash and cash equivalents – End of Period |
969,363 |
|
410,446 |
Shopify Inc. Reconciliation from GAAP to Non-GAAP Results (Expressed in US $000’s, except share and per share amounts, unaudited) |
|||||
|
Three months ended |
||||
|
March 31, 2020 |
|
March 31, 2019 |
||
|
$ |
|
$ |
||
GAAP Gross profit |
256,950 |
|
|
180,291 |
|
% of Revenue |
55 |
% |
|
56 |
% |
add: stock-based compensation |
1,148 |
|
|
714 |
|
add: payroll taxes related to stock-based compensation |
176 |
|
|
100 |
|
add: amortization of acquired intangibles |
5,569 |
|
|
1,625 |
|
Non-GAAP Gross profit |
263,843 |
|
|
182,730 |
|
% of Revenue |
56 |
% |
|
57 |
% |
|
|
|
|
||
GAAP Sales and marketing |
154,862 |
|
|
105,022 |
|
% of Revenue |
33 |
% |
|
33 |
% |
less: stock-based compensation |
11,207 |
|
|
6,835 |
|
less: payroll taxes related to stock-based compensation |
1,227 |
|
|
810 |
|
less: amortization of acquired intangibles |
388 |
|
|
— |
|
Non-GAAP Sales and marketing |
142,040 |
|
|
97,377 |
|
% of Revenue |
30 |
% |
|
30 |
% |
|
|
|
|
||
GAAP Research and development |
116,396 |
|
|
76,355 |
|
% of Revenue |
25 |
% |
|
24 |
% |
less: stock-based compensation |
32,604 |
|
|
18,115 |
|
less: payroll taxes related to stock-based compensation |
3,817 |
|
|
1,808 |
|
less: amortization of acquired intangibles |
58 |
|
|
58 |
|
Non-GAAP Research and development |
79,917 |
|
|
56,374 |
|
% of Revenue |
17 |
% |
|
18 |
% |
|
|
|
|
||
GAAP General and administrative |
44,842 |
|
|
30,303 |
|
% of Revenue |
10 |
% |
|
9 |
% |
less: stock-based compensation |
8,793 |
|
|
5,500 |
|
less: payroll taxes related to stock-based compensation |
974 |
|
|
531 |
|
Non-GAAP General and administrative |
35,075 |
|
|
24,272 |
|
% of Revenue |
7 |
% |
|
8 |
% |
|
|
|
|
||
GAAP Transaction and loan losses |
14,083 |
|
|
4,401 |
|
% of Revenue |
3 |
% |
|
1 |
% |
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 |
||||
|
March 31, 2020 |
|
March 31, 2019 |
||
|
$ |
|
$ |
||
GAAP Operating expenses |
330,183 |
|
|
216,081 |
|
% of Revenue |
70 |
% |
|
67 |
% |
less: stock-based compensation |
52,604 |
|
|
30,450 |
|
less: payroll taxes related to stock-based compensation |
6,018 |
|
|
3,149 |
|
less: amortization of acquired intangibles |
446 |
|
|
58 |
|
Non-GAAP Operating expenses |
271,115 |
|
|
182,424 |
|
% of Revenue |
58 |
% |
|
57 |
% |
|
|
|
|
||
GAAP Operating loss |
(73,233 |
) |
|
(35,790 |
) |
% of Revenue |
(16 |
)% |
|
(11 |
)% |
add: stock-based compensation |
53,752 |
|
|
31,164 |
|
add: payroll taxes related to stock-based compensation |
6,194 |
|
|
3,249 |
|
add: amortization of acquired intangibles |
6,015 |
|
|
1,683 |
|
Adjusted Operating (loss) income |
(7,272 |
) |
|
306 |
|
% of Revenue |
(2 |
)% |
|
— |
% |
|
|
|
|
||
GAAP Net loss |
(31,429 |
) |
|
(24,151 |
) |
% of Revenue |
(7 |
)% |
|
(8 |
)% |
add: stock-based compensation |
53,752 |
|
|
31,164 |
|
add: payroll taxes related to stock-based compensation |
6,194 |
|
|
3,249 |
|
add: amortization of acquired intangibles |
6,015 |
|
|
1,683 |
|
add: provision for income tax effects related to non-GAAP adjustments |
(12,200 |
) |
|
(4,844 |
) |
Adjusted Net income |
22,332 |
|
|
7,101 |
|
% of Revenue |
5 |
% |
|
2 |
% |
|
|
|
|
||
GAAP Net loss per share attributable to shareholders |
(0.27 |
) |
|
(0.22 |
) |
add: stock-based compensation |
0.46 |
|
|
0.28 |
|
add: payroll taxes related to stock-based compensation |
0.05 |
|
|
0.03 |
|
add: amortization of acquired intangibles |
0.05 |
|
|
0.01 |
|
add: provision for income tax effects related to non-GAAP adjustments |
(0.10 |
) |
|
(0.04 |
) |
Adjusted Net income per share attributable to shareholders |
0.19 |
|
|
0.06 |
|
Weighted average shares used to compute GAAP and non-GAAP net income (loss) per share attributable to shareholders |
116,806,549 |
|
|
110,921,276 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20200506005253/en/
INVESTORS:
Katie Keita
Senior Director, Investor Relations
613-241-2828 x 1024
[email protected]
MEDIA:
Sheryl So
Senior Communications Lead
416-238-6705 x 302
[email protected]