OTTAWA — Shopify and its merchants brought in more sales in the second quarter, helping the commerce company pick up speed even though its recent big strategic moves—abandoning its logistics business and cutting its workforce—temporarily weighed on its bottom line.
The Ottawa-headquartered firm reported US$1.69 billion in revenue between April and June, up 30.8 per cent from the same period in 2022, and slightly ahead of analysts’ consensus estimate as compiled by FactSet. Shopify posted a net loss of US$1.31 billion in the quarter, although one-time costs associated with its logistics and workforce changes accounted for all the red ink. The company’s stock dropped slightly in after-market trading on the New York Stock Exchange, after closing down 7.44 per cent Wednesday.
Here what you need to know:
Talking Points
- Shopify made US$1.69 billion in revenue in the second quarter, up 30.8 per cent year over year
- The commerce company’s growth outpaced that of its merchants, as it signed up more clients and sold them more services
The key numbers: Retailers and brands using Shopify’s technology received US$55 billion in orders in the quarter, a 17.4 per cent year-over-year bump in gross merchandise volume (GMV), the total value of merchant sales across its systems. That’s better than the overall numbers for shopping in the U.S.—by far the firm’s largest market—president Harley Finkelstein said on an earnings call Wednesday after markets closed.
Shopify’s GMV grew in part because the firm simply had more clients selling via its platform, CFO Jeff Hoffmeister said. Its existing merchants—particularly those in Europe—also sold more. And the company’s revenues tied to merchant transaction volumes increased even faster.
Shopify’s merchant solutions business made US$1.25 billion, 34.6 per cent year over year, from fees for services like payment processing, cash advances to its merchants and buy-now, pay-later options for their customers. Its take rate—the share of an order the firm earns—was 2.27 per cent in the second quarter, continuing its steady annual tick upward. “Merchants continued to buy more and more solutions,” said Hoffmeister.
Finkelstein touted the work of the firm’s sales team in signing up new clients and getting them to pay for more services. But he also emphasized the efficiency of Shopify’s approach; the firm’s sales and marketing expenses were essentially flat year over year, although R&D costs rose substantially.
Last time on …: In May, Shopify announced it would unload its logistics network to San Francisco-based Flexport and cut 20 per cent of its staff via the divestiture and layoffs. Last week, the firm unveiled some of what it’s focusing on instead of delivery.
New features include an AI merchant assistant dubbed Sidekick, as well as a small-business credit card to add to its bank account and debit services. Investors didn’t immediately jump at the new offerings, unlike past product announcements like fulfilment. Finkelstein opened Wednesday’s earnings call with a tour of the company’s recent launches, pointing out features that help merchants scale their businesses, find buyers and sell across borders.
As is now canon, the firm was founded to offer direct-to-consumer brands and other small businesses tools to sell to online shoppers. “Shopify was initially built in a world where merchants were simply looking for a homepage for their business,” CEO Tobi Lütke wrote in its April 2015 IPO prospectus.
But the company has grown well beyond those origins, targeting ever-larger customers with new offerings. On Wednesday, Finkelstein—Lütke skipped the earnings call for a second consecutive quarter—gave voice to that broader ambition. “Whether [it’s] online or in person, [small- and medium-sized business] or enterprise, direct to consumer or wholesale, domestic or global, we are positioning ourselves to capture it all,” he said.
What comes next: Shopify stopped issuing numerical forecasts during the pandemic, but on Wednesday Hoffmeister got a little more precise than has been the company’s recent custom. It is projecting “a low twenties percentage rate” of year-over-year growth in the third quarter, and expects to boost its margins slightly.
Monetary policymakers are backing off from their predictions of a recession, but Shopify executives declined to draw any conclusions from their merchants’ rosy quarter. “We all see the same economic data that you’re watching,” Hoffmeister said in response to an analyst question, noting both European and North American clients did well. Even as they feel the pinch, “consumers are voting with their wallets to buy from their favourite brands,” Finkelstein said—Shopify just needs to keep signing them up.