Shopify's (SHOP -1.16%) fourth-quarter earnings results came in above expectations, continuing its flawless streak of earnings beats since going public. The company posted revenue of $130.4 million and breakeven earnings per share. Analysts were expecting a $0.02 loss per share on $121.7 million in sales.
Here's a breakdown of Shopify's results in 15 graphs.
Shopify reported a big increase in merchants on its platform. It passed the 325,000 milestone at some point in the third quarter, and it ended the year with 377,500. The company seemingly added more merchants in the fourth quarter this year than last year when it showed a 43,000 increase from the milestone it reached in the previous quarter. Timing of crossing that milestone obfuscates exact sequential growth numbers, but overall, Shopify had another very strong fourth quarter.
Shopify's revenue growth remains strong despite an increasingly large base. Last quarter, revenue was mostly driven by merchant services. The seasonal increase in shopping led to more use of Shopify Payments and Shopify Shipping. Some merchants tapped Shopify Capital, the company's new cash-advance platform, in order to boost inventory for the season.
Growth of Shopify's gross merchandise volume (GMV) slowed slightly last quarter, but it still grew a whopping 94% year over year. The continued strength in GMV growth led to an increase in merchant services revenue, as Shopify takes a cut.
Additionally, Shopify showed a marked increase in GMV per merchant, reaching about $14,600 last quarter. That's the result of Shopify onboarding more larger merchants through its Shopify Plus platform, as well as increasing the average age of its accounts. Larger merchants are generally less likely to leave the platform than smaller, struggling merchants. Seeing this number continue to climb is encouraging.
Shopify Payments as a percentage of GMV continued to climb last quarter, reaching 39%. As more merchants adopt Shopify Payments, as well as its other services, the company's merchant services revenue will continue to outpace growth in GMV.
Shopify's recurring revenue comes from its standard monthly subscription offerings. After finishing the year with $18.5 million in monthly recurring revenue, it's quarterly run rate for subscription services is nearly the company's entire total from the fourth quarter. That indicates we'll see continued growth in the first quarter.
More importantly, recurring revenue per merchant increased year over year, indicating Shopify is successfully upselling more merchants to higher subscription levels. It's also benefiting from the growth of Shopify Plus, which is aimed at larger enterprises.
Shopify's overall gross margin declined sequentially, but improved year over year. What's more important to note is that both subscription services' and merchant services' gross margin increased substantially. The decline in overall gross margin is due to sales mix, not any competitive pressures.
Shopify's operating margin continues to trend in the right direction, but still remains below 0%. The company continues to invest in marketing and research and development in order to attract new merchants and expand its product lineup. It's showing some operating leverage, however, as margin is improving.
Shopify remains unprofitable, but it nearly made it to breakeven last quarter on an adjusted basis. That should give investors confidence in management's plans to achieve non-GAAP profitability in the fourth quarter this year. We may continue to see a large spike in net loss in the first half of the year, however, as management aims to continue investing in its product and marketing.
Overall, a very impressive quarter for the growth company.