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Shopify Management Talks About 3 Big Growth Drivers

By Danny Vena - Updated Aug 9, 2018 at 2:54PM

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The e-commerce platform provider's growth may be slowing, but it's far from over.

There was a lot to like when Shopify (SHOP 3.52%) reported its second-quarter financial results. The ecommerce company's revenue for the quarter grew 62% year over year to $245 million, topping both the high end of the company's forecast and analysts' consensus estimates. Adjusted earnings per share for the quarter came in at $0.02, better than the $0.01 loss per share in the prior-year quarter, while also exceeding expectations. 

While investors are always interested in the progress of the various financial metrics, investors can also learn a lot from the conference call discussing the results.

Some of Shopify's most informative commentary centered around three of the company's biggest growth initiatives. Shopify is investing significant resources in its platform, expanding capabilities in its international marketplaces, and offering ongoing opportunities with Shopify Plus.

The Shopify app on a tablet, with a scanner and receipt printer.

Image source: Shopify.

Head in the clouds

Over the past two years, Shopify has been transitioning its merchants from its own data centers to the cloud. In the conference call, the company announced that this migration is now complete. This was an incredibly costly and time-consuming endeavor, so what prompted the move? Amy Shapero, Shopify's chief financial officer, put the matter into perspective:

The cloud migration... was incredibly important for us in terms of growing into the future. It provides more flexibility as we grow internationally than if we had our own data centers. It allows us to introduce product faster, and there will be continued investments in the platform as we move forward.

Shopify believes that transitioning to the cloud sets the company on a stronger foundation and leaves it better positioned for future growth.

There's a whole big world out there

Although Shopify has long boasted more than 600,000 merchants in 175 countries, it doesn't tell the whole story. You might be surprised to learn that the majority of the company's business is still conducted in North America -- but Shopify is working to change that.

Over the past several months, the company has released an early beta version of Shopify in six languages: French, German, Japanese, Italian, Brazilian Portuguese, and Spanish. While that is a big step, it's just the beginning, as Harley Finkelstein, Shopify's chief operating officer, explained:

Again, it's not just about the language. It encompasses different cultural nuances of how people shop in those places. And we don't want to just go ahead and translate language and leave it at that. We actually want to make sure that we truly have product market fit in each geography that we enter into.

By moving slowly and deliberately, Shopify seeks to avoid making costly mistakes that might impede future business -- or worse, damage its reputation.

A woman looking thoughtfully at a laptop and holding a credit card.

Image source: Getty Images.

Big business

About four years ago, Shopify introduced Shopify Plus, expanding its capabilities to accommodate merchants that had started with the company but were outgrowing the platform. That humble beginning now hosts not only a number of high-growth, higher-volume merchants but also has become the home to an increasing number of established brands like Colgate-Palmolive, Nestlé, Ford, and SodaStream.

The company is doubling down on this winning strategy. Shopify announced it is adding "dozens of new features and capabilities" to Plus, like a "multi-currency feature... which will allow them to sell in multiple currencies and settle in their local currency."

Shopify's big bet is beginning to pay off. This quarter, the company "added more merchants than ever to Shopify Plus." Shopify Plus now accounts for 23% of the company's monthly recurring revenue.

Long-term thinking

It's refreshing to see a company that is approaching growth in a slow, deliberate fashion and thinking further ahead than the coming quarter.

By moving its business to the cloud, thoughtfully expanding its international capabilities, and increasing the functionality of its platform for enterprise-level businesses, Shopify is positioning itself -- and its investors -- for future success.

 

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