Shopify's Torrid Growth Continues

After a strong third quarter, CFO Amy Shapero expects the e-commerce star to finish the year strong and enter 2019 with "excellent momentum."

Joe Tenebruso
Joe Tenebruso
Oct 26, 2018 at 4:41PM
Technology and Telecom

Shopify (NYSE:SHOP) reported third-quarter results on Oct. 25. The multichannel commerce company's sales once again rose at a greater than 50% clip, as businesses continue to flock to its platform.

Shopify results: The raw numbers

 

Q3 2018

Q3 2017

Year-Over-Year Change

Revenue

$270.06 million

$171.46 million

58%

Net loss

($23.18 million)

($9.38 million)

N/A

Net loss per share

($0.22)

($0.09)

N/A

Data source: Shopify Q3 2018 earnings press release. 

What happened with Shopify this quarter? 

Gross merchandise volume (GMV) is a key metric for investors to watch as it represents the total value of sales made by all the merchants on Shopify's platform and therefore can be viewed as a measure of the overall health of its businesses. Shopify's GMV surged 55% year over year to $10 billion. "We relentlessly shipped new products and features to prepare our merchants for their biggest selling season of the year, merchants' GMV expansion was well ahead of e-commerce growth overall, and our merchant base continues to expand at a healthy clip," CFO Amy Shapero said in a press release.

In turn, Shopify's subscription revenue jumped 46%, to $120.5 million, including a 41% increase in monthly recurring revenue (the number of merchants times the average subscription fee), to $37.9 million.

Additionally, Shopify's merchant solutions revenue climbed 68%, to $149.5 million, boosted by the continued strong growth of Shopify Payments, Shopify Capital, and Shopify Shipping.

A compass pointing towards the word growth

Shopify delivered impressive revenue growth in the third quarter. Image source: Getty Images.

Shopify also delivered an unexpected adjusted profit -- excluding stock-based compensation expense -- of $4.5 million. Management had previously guided for a loss. 

However, Shopify remains unprofitable on a GAAP basis. The company generated a net loss of $23.2 million, or $0.22 per share in the third quarter compared to a loss of $9.4 million, or $0.9 per share, in the year-ago period.

Looking forward

Shopify's strong sales results prompted it to lift its full-year financial forecast, which now includes:

  • Revenue of $1.045 billion to $1.055 billion -- up from a previous estimate of $1.015 billion to $1.025 billion -- representing 56% year-over-year growth.
  • A GAAP operating loss of $95 million to $97 million, down from $105 million to $110 million.
  • Adjusted operating profit of $8 million to $10 million versus $0 to $5 million.

Better still, management expects to finish the year on a high note. "We're well positioned to close 2018 and enter 2019 with excellent momentum," Shapero said.