Shopify (SHOP) Tops Q2 EPS by $1.04, Revenue Surge 97%

Shopify (NYSE: SHOP) reported Q2 EPS of $1.05, $1.04 better than the analyst estimate of $0.01. Revenue for the quarter came in at $714.3 million versus the consensus estimate of $510.84 million.

• Total revenue in the second quarter was $714.3 million, a 97% increase from the comparable quarter in 2019.
• Subscription Solutions revenue was $196.4 million, up 28% year over year, primarily due to more merchants joining the platform.
• Merchant Solutions revenue growth accelerated for the third consecutive quarter, up 148%, to $517.9 million, driven primarily by the growth of GMV.
• Monthly Recurring Revenue2 ("MRR") as of June 30, 2020 was $57.0 million, up 21% compared with $47.1 million as of June 30, 2019. Shopify Plus contributed $16.6 million, or 29%, of MRR compared with 26% of MRR as of June 30, 2019. While growth in the quarter was impacted by the 90-day free trial on standard plans offered from March 21 through May 31, MRR ended the quarter higher than on March 31, benefiting from strong merchant adds in June, driven by the highest-ever number of merchants joining Shopify Plus in a single month, and standard merchants converting in the latter half of June from the 90-day extended free trial March cohorts and regular 14-day free trial June cohorts.
• GMV for the second quarter was $30.1 billion, an increase of $16.3 billion, or 119%, over the second quarter of 2019. Gross Payments Volume3 ("GPV") grew to $13.4 billion, which accounted for 45% of GMV processed in the quarter, versus $5.8 billion, or 42%, for the second quarter of 2019.
• Gross profit dollars grew 83% to $375.0 million in the second quarter of 2020, compared with $204.8 million for the second quarter of 2019.
• Adjusted gross profit4 grew 84% to $381.4 million in the second quarter of 2020, compared with $207.3 million for the second quarter of 2019.
• Operating income for the second quarter of 2020 was $0.3 million, or 0% of revenue, versus a loss of $39.6 million, or 11% of revenue, for the comparable period a year ago.
• Adjusted operating income4 for the second quarter of 2020 was $113.7 million, or 16% of revenue, compared with adjusted operating income of $6.4 million or 2% of revenue in the second quarter of 2019. Adjusted operating income excludes an impairment charge of $31.6 million dollars resulting from our decision, announced in May 2020, to work remotely permanently. We believe the near-term costs of reducing our leased footprint and transitioning remaining space from offices to workspace for office hoteling and events will yield longer-term benefits, including leveling the playing field for employees who already work from home, helping our employees stay healthy and safe, opening a diverse global talent pool, eliminating unnecessary commutes and fast-tracking new and better ways to work together that are more productive and rewarding.
• Net income for the second quarter of 2020 was $36.0 million, or $0.29 per diluted share, compared with a net loss of $28.7 million, or $0.26 per basic and diluted share, for the second quarter of 2019.
• Adjusted net income4 for the second quarter of 2020 was $129.4 million, or $1.05 per diluted share, compared with adjusted net income of $10.7 million, or $0.10 per basic and diluted share, for the second quarter of 2019.
• At June 30, 2020, Shopify had $4.00 billion in cash, cash equivalents and marketable securities, compared with $2.46 billion on December 31, 2019. The increase reflects $1.46 billion of net proceeds from Shopify’s offering of Class A subordinate voting shares in the second quarter of 2020.

Financial Outlook:
The COVID-19 pandemic has accelerated the growth of ecommerce, shifting a larger share of retail spending to online commerce, a trend we believe will persist. While COVID-19 has significantly influenced online store creation and consumer spending behaviour, the magnitude and duration of its future impact remain uncertain in view of the greater likelihood of an extended global recession. As a result, Shopify is not providing a financial outlook for Q3 2020 or for full year 2020.

Shopify expects entrepreneurs to continue to recognize the importance of multi-channel selling and direct-to-consumer fulfillment, and for consumer concerns about COVID-19 to drive further adoption of digital commerce while reinforcing the behaviour of buyers already shopping online. We are therefore closely monitoring the following external factors:

• The impact rising unemployment has on new shop creation on our platform and consumer spending.
• Consumer spending habits and trends for both discretionary and non-discretionary goods as shelter-in-place directives remain in a state of flux.
• The rate at which brick-and-mortar merchants adopt and retain a multichannel sales approach.

Shopify remains uniquely positioned to level the playing field for entrepreneurs during this period of rapid change in the retail landscape. Our merchant-first business model and strong balance sheet enable us to continue building a leading global commerce operating system that allows merchants to act nimbly and adapt their businesses to this new reality.

For earnings history and earnings-related data on Shopify (SHOP) click here.

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