OTTAWA — Shopify passed another financial milestone in the second quarter, reporting more than US$1 billion in revenue for the first time as shoppers continued to spend online and brick-and-mortar stores in some economies reopened.

With revenue totalling nearly US$1.12 billion, the Ottawa-based tech firm posted adjusted net income of US$284.6 million, or US$2.24 per share, well ahead of analysts’ consensus estimate of US$0.97, compiled by FactSet. Following a rocky start to the week, Shopify’s stock hovered around break-even in early trading on the New York Stock Exchange on Wednesday.

Here’s a breakdown of the numbers that matter in Shopify’s second-quarter earnings:

The big number: Shoppers used Shopify’s technology to buy US$42.2 billion worth of products and services between April and June, up 40.2 per cent year over year. That’s the highest quarter on record for gross merchandise volume (GMV), a measure of orders made via the platform. 

Why it matters: While GMV hit a new high, merchants’ collective sales growth slowed from the pandemic’s peak, having hovered around 100 per cent year over year for each of the last four quarters. The second-quarter figure was closer to pre-COVID-19 levels. 

Shopify’s merchant-solutions business line, which brings in the majority of revenue, is closely tied to GMV. It consists of fees from add-ons and services its clients use to operate their own businesses, like payment processing, point-of-sale (PoS) systems, fulfillment and cash advances. The company posted merchant solutions revenue of US$785.2 million in the second quarter, up 51.6 per cent year over year, closer to pre-pandemic rates than the COVID-19 bump. But Shopify’s take rate—its share of sellers’ transactions—grew to 1.86 per cent as it rolled out new features like buy now, pay later and upgraded offerings like its PoS. Meanwhile, the typically slower-growing software-subscriptions business rose 70.2 per cent over the same period last year, to US$334.2 million.

Where it’s coming from: Merchants’ online stores account for the largest share of GMV, with real-world shopping second, said CFO Amy Shapero on Shopify’s Wednesday earnings call. Direct sales on social apps and marketplaces—think Facebook and Google, with which Shopify has recently deepened its integrations, as well as Amazon—are a distant but growing third. Web-store GMV “has reset at a higher level and is now just growing at a more normalized level,” said Shapero. Sales through Shopify’s point-of-sale terminals are “nearly back to pre-COVID levels as a percentage of overall GMV, even on these higher GMV levels, as physical stores reopen,” said president Harley Finkelstein.

They told you so: Setting its intentions for this year, Shopify said in February that as vaccines became widely available, it expected “some consumer spending will likely rotate back to offline retail and services, and the ongoing shift to ecommerce, which accelerated in 2020, will likely resume a more normalized pace of growth.” As a result, “we do not expect the surge in GMV that drove merchant solutions in 2020 to repeat.” While the first quarter exceeded those expectations, this one was more in line with them.

The post-pandemic leading indicator: “We use the U.K. as an example of one of the economies that reopened first, and our U.K. GMV grew faster than our average,” Shapero said on Wednesday’s call.

A personal win: New clients that in the second quarter adopted Shopify Plus, the company’s package for its largest merchants, included Netflix, winery Robert Mondavi, and third-wave coffee icons Peet’s Coffee and Stumptown. But Finkelstein had a favourite. “I’ve been working on my favourite T-shirt retailer, James Perse, for about six years to migrate over to Shopify Plus, and now it was finally the right time for them to do it,” he revealed on the earnings call. That’s one long sales cycle.