Shopify Announces First-Quarter 2024 Financial Results
Shopify announced its first-quarter 2024 financial results, showing a 23% increase in revenue and a 33% increase in gross profit. The company's free cash flow margin doubled year over year to 12%, reflecting strong performance and commitment to growth and profitability. Gross Merchandise Volume increased to $60.9 billion, with revenue growth of 29% after adjusting for the sale of logistics businesses. Shopify remains focused on operational discipline and strong execution to drive future success.
Revenue increased by 23% in the first quarter of 2024, reaching $1.9 billion
Gross profit saw a significant increase of 33% compared to the previous year
Free cash flow margin doubled year over year to 12%
Gross Merchandise Volume increased by 23% to $60.9 billion
Subscription Solutions revenue increased by 34% to $511 million
- None.
Insights
Shopify's first-quarter 2024 financial results demonstrate a robust financial performance, with a particularly impressive 33% increase in gross profit and a significant doubling of the free cash flow margin. This margin expansion to 12% is a notable improvement, which reflects a more efficient capital management and operational leverage. Looking at the 23% revenue growth, which adjusts to 29% when factoring out the divested logistics businesses, we can infer that Shopify's core business segments are expanding steadily.
However, investors should monitor the sustainability of Shopify's Subscription Solutions revenue, which grew by 34%. While this is positive, it includes effects from recent pricing increases and it's critical to assess whether this growth can be maintained without adversely impacting merchant acquisition and retention. Additionally, the Gross Payments Volume (GPV) shows increased adoption of Shopify Payments, yet this segment's growth should be carefully watched for margin impact due to its lower profitability compared to subscription fees.
In terms of liquidity and financial health, Shopify's cash and marketable securities position of $5.2 billion provides a substantial cushion for future investments or economic downturns. The net cash position strength is further underscored by the substantial free cash flow generated, which could be deployed for enhanced shareholder value through buybacks, dividends, or reinvestment in growth opportunities. Overall, this performance suggests a stable and healthy financial outlook for Shopify in the short to medium term.
Shopify's reported growth in Gross Merchandise Volume (GMV) of 23% signifies a robust increase in platform usage and e-commerce sales, which is an indicator of strong merchant activity and consumer spending on their platform. A critical factor to consider is the continued growth and health of Shopify's merchant ecosystem, which is underscored by the increasing Monthly Recurring Revenue (MRR) that grew by 32%.
Moreover, the sustained percentage of MRR from Shopify Plus at 32% indicates a stable retention of higher-tier customers, which also contribute significantly to Shopify's revenue. As Shopify Plus merchants typically have higher GMVs, they could drive more revenue through Shopify Payments and other merchant solutions.
For investors, these figures are a testament to Shopify's platform stickiness and its ability to attract and retain merchants, which is critical for long-term success in the competitive e-commerce solutions market. It is also important for investors to watch for the saturation point in the market or changes in consumer spending that may affect GMV growth trajectories.
Revenue up
Gross Profit up
Free Cash Flow Margin Doubled Year Over Year to
Internet, Everywhere--(Newsfile Corp. - May 8, 2024) - Shopify Inc. (NYSE, TSX: SHOP), a provider of essential internet infrastructure for commerce, announced today financial results for the quarter ended March 31, 2024.
"You're seeing the strongest version of Shopify in our history. Our outstanding Q1 performance is clear proof of our dedication to the new shape of Shopify, our commitment to operating with a consistent team size, and our focus on building for the long-term to deliver both growth and profitability," said Harley Finkelstein, President of Shopify. "We are building a 100-year company, and we will continue to remain fiercely agile, capitalizing on every opportunity that accelerates the success of our merchants, enables us to continue to build world-class products, and enhances operational efficiency for better returns."
"Shopify had a strong start to the year, building on the performance of 2023, delivering year-over-year revenue growth for the quarter of
First-Quarter Financial Highlights
- Gross Merchandise Volume1 ("GMV") increased
23% to$60.9 billion , an increase of$11.3 billion over the first quarter of 2023 - Revenue increased
23% to$1.9 billion compared to the prior year, which translates into year-over-year growth of29% after adjusting for the sale of our logistics businesses - Merchant Solutions revenue increased
20% to$1.4 billion compared to the prior year, driven primarily by the growth of GMV and continued penetration of Shopify Payments - Gross Payments Volume2 ("GPV") grew to
$36.2 billion , representing60% of GMV processed in the quarter, versus$27.5 billion , or56% , for the first quarter of 2023 - Subscription Solutions revenue increased
34% to$511 million compared to the prior year, driven by the growth in the number of merchants and the pricing increases on our standard subscription plans - Monthly Recurring Revenue3 ("MRR") as of March 31, 2024 increased
32% to$151 million compared to the prior year, driven by continued growth across all of our subscription plans. Shopify Plus contributed$48 million , or32% , of MRR compared with33% of MRR as of March 31, 2023 - Gross profit dollars grew
33% to$957 million compared to the prior year. Gross margin for the quarter was51.4% compared to47.5% in the first quarter of 2023, driven primarily by the lack of the dilutive impact of the logistics businesses and changes in pricing from standard plans, partially offset by the continued growth of Shopify Payments - Free cash flow4 was
$232 million compared to free cash flow of$86 million in the prior year - Free cash flow margin4 for the quarter was
12% compared to free cash flow margin of6% in the first quarter of 2023 - Cash and marketable securities were
$5.2 billion as of March 31, 2024, and we had a net cash position of$4.3 billion after consideration of our outstanding convertible notes
2024 Outlook
The outlook that follows supersedes all prior financial outlook statements made by Shopify, 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 for more information.
Note that year-over-year comparability in our financial outlook will be impacted by the sales of our logistics businesses, which we expect will create a revenue growth headwind of approximately 300 to 400 basis points and a gross margin tailwind of approximately 200 to 300 basis points when compared to the second quarter of 2023.
For the second quarter of 2024, we expect:
- Revenue to grow at a high-teens percentage rate on a year-over-year basis, which translates into a year-over-year growth rate in the low-to-mid-twenties when adjusting for the 300 to 400 basis points impact from the sale of our logistics businesses;
- Gross margin for Q2 is expected to decrease by approximately 50 basis points compared to Q1 2024;
- GAAP operating expense dollars to be up at a low-to-mid-single digit percentage rate compared to Q1 2024, which translates into operating expenses as a percentage of revenue of approximately
45% to46% ; - Stock-based compensation to be
$120 million , and capital expenditures to be$5 million ; and - Free cash flow margin to be similar to Q1 2024 free cash flow margin. We have now delivered three consecutive quarters of double-digit free cash flow margin, with no expectation for this trend to change.
Quarterly Conference Call
Shopify's management team will hold a conference call to discuss our first-quarter results today, May 8, 2024, 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/. An archived replay of the webcast will be available following the conclusion of the call.
Shopify's First Quarter 2024 Interim Unaudited Condensed Consolidated Financial Statements and Notes and its First Quarter 2024 Management's Discussion and Analysis will be available on Shopify's website at website at www.shopify.com and will be filed on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov.
About Shopify
Shopify is the leading global commerce company that provides essential internet infrastructure for commerce, offering trusted tools to start, scale, market, and run a retail business of any size. Shopify makes commerce better for everyone with a platform and services that are engineered for speed, customization, reliability, and security, while delivering a better shopping experience for consumers online, in store and everywhere in between. Shopify powers millions of businesses in more than 175 countries and is trusted by brands such as Mattel, Gymshark, Heinz, FTD, Netflix, Kylie Cosmetics, SKIMS, Supreme, and many more. For more information, visit www.shopify.com.
Forward-looking Statements
This press release contains certain forward-looking statements within the meaning of applicable securities laws, including statements related to Shopify's planned business initiatives and operations and outlook, the performance of Shopify's merchants, and the impact of Shopify's business on its merchants and other entrepreneurs. Words such as "continue", "could", "will", "believe" 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: sustaining our rapid growth; managing our growth; our potential inability to compete successfully against current and future competitors; the security of personal information we store relating to merchants and their buyers, as well as consumers with whom we have a direct relationship including users of our apps; a cyberattack or security breach; our ability to innovate; the impact of worldwide economic conditions, particularly softening economic growth in key regions including Europe and the United States, including the resulting effect on spending by small and medium-sized businesses or their buyers; our current reliance on a few suppliers to provide the technology we offer through Shopify Payments; the reliance of our business, including the services we provide to merchants, in part on the success of our strategic relationships with third parties; our limited operating history in new and developing markets and new geographic regions; international sales and operations and the use of our platform in various countries; our potential inability to hire, retain and motivate qualified personnel, including key personnel; our reliance on third-party cloud providers to deliver our services; complex and changing laws and regulations worldwide; our dependence on the continued services and performance of our senior management and other key employees; payments processed through Shopify Payments, Shop Pay Installments, or payments processed or funds managed through Shopify Balance; our potential failure to effectively maintain, promote and enhance our brand; our history of losses and our efforts to maintain profitability; serious errors or defects in our software or hardware; evolving privacy laws and regulations, cross-border data transfer restrictions, data localization requirements and other domestic or foreign regulations that may limit the use and adoption of our services; acquisitions and investments, including strategic investments and fluctuations in our share of income and loss from equity method investment; risks associated with Shopify Capital, and offering financing to merchants; our potential inability to achieve or maintain data transmission capacity; potential claims by third parties of intellectual property infringement or other third party or governmental claims, litigation, disputes, or other proceedings; activities of merchants or partners or the content of merchants' shops and our ability to detect and address unauthorized activity on our platform; unanticipated changes in tax laws or adverse outcomes resulting from examination of our income or other tax returns; being required to collect federal, state, provincial or local business taxes, sales and use taxes or other indirect taxes in additional jurisdictions on transactions by our merchants; changes to technologies used in our platform or new versions or upgrades of operating systems and internet browsers; our potential inability to obtain, maintain and protect our intellectual property rights and proprietary information or prevent third parties from making unauthorized use of our technology; our pricing decisions and changes to our pricing models for our solutions; our use of open source software; seasonal fluctuations in our operating results; exchange rate fluctuations that may negatively affect our results of operations; our dependence upon buyers' and merchants' access to, and willingness to use, the internet for commerce; provisions of our financial instruments including our convertible notes; our potential inability to raise additional funds as may be needed to pursue our growth strategy or continue our operations, on favorable terms or at all; our tax loss carryforwards; the ownership of our shares; our ability to maintain an effective system of internal controls over financial reporting; the perceived impact of a return on investment without issuing a dividend; our status as a foreign private issuer and the laws applicable to us as a foreign private issuer; the impact of provisions of Canadian law applicable to us; provisions of our constating documents and charter documents; and other events and 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.
CONTACT:
INVESTORS:
Carrie Gillard
Director, Investor Relations
IR@shopify.com
MEDIA:
Alex Lyons
Senior Lead, External Communications
press@shopify.com
SOURCE: Shopify
Shopify Inc.
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income
(Expressed in US millions, except share and per share amounts)
| Three months ended | ||||||
| March 31, 2024 | March 31, 2023 | |||||
| | $ | $ | | |||
| Revenues | ||||||
| Subscription solutions | 511 | 382 | ||||
| Merchant solutions | 1,350 | 1,126 | ||||
| 1,861 | 1,508 | |||||
| Cost of revenues | ||||||
| Subscription solutions | 95 | 84 | ||||
| Merchant solutions | 809 | 707 | ||||
| 904 | 791 | |||||
| Gross profit | 957 | 717 | ||||
| Operating expenses | ||||||
| Sales and marketing | 361 | 287 | ||||
| Research and development | 335 | 458 | ||||
| General and administrative | 124 | 123 | ||||
| Transaction and loan losses | 51 | 42 | ||||
| Total operating expenses | 871 | 910 | ||||
| Income (loss) from operations | 86 | (193 | ) | |||
| Other (expense) income, net | (342 | ) | 269 | |||
| (Loss) income before income taxes | (256 | ) | 76 | |||
| Provision for income taxes | (17 | ) | (8 | ) | ||
| Net (loss) income | (273 | ) | 68 | |||
| Other comprehensive (loss) income | | (8 | ) | 9 | ||
| Comprehensive (loss) income | | (281 | ) | 77 | ||
| Net (loss) income per share attributable to shareholders: | ||||||
| Basic | $ | (0.21 | ) | $ | 0.05 | |
| Diluted | $ | (0.21 | ) | $ | 0.05 | |
| Weighted average shares used to compute net (loss) income per share attributable to shareholders: | ||||||
| Basic | 1,287,376,719 | 1,276,884,726 | ||||
| Diluted | 1,287,376,719 | 1,291,682,051 | ||||
Shopify Inc.
Condensed Consolidated Balance Sheets
(Expressed in US millions except share amounts)
| As of | ||||||
| March 31, 2024 | December 31, 2023 | |||||
| $ | $ | |||||
| Assets | ||||||
| Current assets | ||||||
| Cash and cash equivalents | 1,623 | 1,413 | ||||
| Marketable securities | 3,554 | 3,595 | ||||
| Trade and other receivables, net | 265 | 282 | ||||
| Loans and merchant cash advances, net | 815 | 816 | ||||
| Other current assets | | 183 | 169 | | ||
| | 6,440 | 6,275 | | |||
| Long-term assets | ||||||
| Property and equipment, net | 52 | 49 | ||||
| Operating lease right-of-use assets, net | 96 | 98 | ||||
| Intangible assets, net | 25 | 29 | ||||
| Deferred tax assets | 43 | 44 | ||||
| Equity and other investments ( | 3,294 | 3,597 | ||||
| Equity method investment | 735 | 780 | ||||
| Goodwill | 427 | 427 | ||||
| 4,672 | 5,024 | |||||
| Total assets | 11,112 | 11,299 | ||||
| Liabilities and shareholders' equity | ||||||
| Current liabilities | ||||||
| Accounts payable and accrued liabilities | 589 | 579 | ||||
| Deferred revenue | 296 | 302 | ||||
| Operating lease liabilities | 17 | 17 | ||||
| 902 | 898 | |||||
| Long-term liabilities | ||||||
| Deferred revenue | 183 | 196 | ||||
| Operating lease liabilities | 212 | 217 | ||||
| Convertible senior notes | 916 | 916 | ||||
| Deferred tax liabilities | 6 | 6 | ||||
| 1,317 | 1,335 | |||||
| Commitments and contingencies | ||||||
| Shareholders' equity | ||||||
| Common stock, unlimited Class A subordinate voting shares authorized, 1,208,869,243 | ||||||
| and 1,207,318,947, issued and outstanding; unlimited Class B restricted voting shares | ||||||
| authorized, 79,258,749 and 79,251,346 issued and outstanding; 1 Founder share | ||||||
| authorized, 1 and 1 issued and outstanding | 9,283 | 9,201 | ||||
| Additional paid-in capital | 277 | 251 | ||||
| Accumulated other comprehensive (loss) income | (4 | ) | 4 | |||
| Accumulated deficit | (663 | ) | (390 | ) | ||
| Total shareholders' equity | 8,893 | 9,066 | ||||
| Total liabilities and shareholders' equity | 11,112 | 11,299 | ||||
Shopify Inc.
Condensed Consolidated Statements of Cash Flows
(Expressed in US millions)
| Three months ended | ||||||
| March 31, 2024 | March 31, 2023 | |||||
| $ | $ | |||||
| Cash flows from operating activities | ||||||
| Net (loss) income for the period | (273 | ) | 68 | |||
| Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: | ||||||
| Amortization and depreciation | 10 | 30 | ||||
| Stock-based compensation | 105 | 135 | ||||
| Provision for transaction and loan losses | 28 | 28 | ||||
| Deferred income tax expense | 1 | 1 | ||||
| Revenue related to non-cash consideration | (35 | ) | (48 | ) | ||
| Net loss (gain) on equity and other investments | 373 | (215 | ) | |||
| Net loss on equity method investment | 44 | - | ||||
| Unrealized foreign exchange loss (gain) | 6 | (3 | ) | |||
| Changes in operating assets and liabilities | (21 | ) | 104 | |||
| Net cash provided by operating activities | 238 | 100 | ||||
| Cash flows from investing activities | ||||||
| Purchases of property and equipment | (6 | ) | (14 | ) | ||
| Purchases of marketable securities | (2,137 | ) | (1,098 | ) | ||
| Maturities of marketable securities | 2,147 | 1,397 | ||||
| Purchases and originations of loans |
Shopify Inc.
NYSE:SHOPSHOP RankingsSHOP Latest NewsSHOP Stock Data
142.36B
1.21B
0.18%
72.01%
1.32%
Software - Application
Technology
United States of America
Ottawa
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