Shopify Reports Double-Digit Revenue Growth for Fourth Quarter

Shopify Reports Double-Digit Revenue Growth for Fourth Quarter

Though Shopify reported a 41% increase in earnings, they also reported a $(371.3)M net loss.

Ecommerce platform Shopify reported total revenue of $1.38 billion for the fourth quarter of 2021, a 41% increase compared to the prior year period. This growth was driven by Subscription Solutions revenue of $351.2 million, a 26% increase year-over-year, as more merchants selected the platform as their preferred ecommerce solution. Merchant Solutions saw even higher growth with revenue of $1.03 billion, a 47% increase year-over-year, driven by Gross Merchandise Volume (GMV) which exceeded $1 billion for the first time in a single quarter.

“The last two years have been extraordinary,” said Harley Finkelstein, Shopify president, in the company’s February 16, 2022 earnings release. “We nearly tripled revenue, more than doubled GMV and the Shopify team, and the number of merchants using Shopify is nearly twice as big as 2019 levels.”

“We are emerging from the sprint of these last two years even stronger and more ambitious, since the accelerated leap into digital commerce means we can go farther faster for merchants and buyers alike. As the commerce engine for independent brands who want to build a direct connection with their customers and to sell everywhere, whether it’s on mobile, on Main Street, or to buyers in cities you’ve never heard of, we head into 2022 energized by what we can build with the unique combination of merchants, ecosystem and top talent we have today,” Finkelstein added.

Fourth-quarter highlights

Shopify shared the following financial and operational highlights for the quarter ended December 31, 2021:

  • Monthly Recurring Revenue (MRR) was $102.0 million, a 23% increase year-over-year, compared to $82.6 million for Q4 2020.
  • MRR exceeded $100 million for the first time in a single quarter.
  • MRR growth was driven by more merchants joining the platform and an increase in the number of retail locations using POS Pro.
  • Shopify Plus represented $29.8 million, or 29%, of MRR.
  • GMV for the quarter was $54.1 billion, a $12.9 billion, or 31%, increase year-over-year.
  • Gross profit increased 37% to $692.7 million, compared to $504.4 in Q4 2020.
  • Net loss for the quarter was $(371.3) million, or $(2.95) per basic and diluted share, compared to net income of $123.9 million, or $0.99 per diluted share in the prior year period.
  • Adjusted net income was $172.8 million, or $1.36 per diluted share, compared to $198.8 million, or $1.53 per diluted share, for Q4 2020.
  • As of December 31, 2021, Shopify had $7.77 billion in cash, cash equivalents and marketable securities, an increase compared to $6.39 billion as of December 31, 2020.
  • From Black Friday through Cyber Monday, Shopify sales totaled more than $6.3 billion.
  • Shopify merchants in the U.S., Canada and the U.K. received $323.7 million in merchant cash advances and loans from Shopify Capital in the fourth quarter, an increase of 43% year-over-year.

Full-year 2021 highlights

Shopify shared the following financial highlights for the full year 2021:

  • Total revenue for the full year was $4.6 billion, a 57% increase over 2020.
  • Subscription Solutions revenue for 2021 was $1.3 billion, a 48% increase year-over-year.
  • Merchant Solutions revenue was $3.3 billion, a 62% increase year-over-year.
  • GMV for the year was $175.4 billion, a 47% increase over 2020.
  • Gross profit increased 61% to $2.5 million.
  • Net income for the year was $2.9 billion, or $22.90 per diluted share, compared to $319.5 million, or $2.59 per diluted share the prior year.
  • Adjusted net income for 2021 was $814.4 million, or $6.41 per diluted share

2021 business highlights

Shopify also mentioned a number of notable additions and features to their products and services, expanding the ways they support their merchants. Here are a few highlights:

  • The company added TikTok Shopping so merchants can add a link directly to their online store.
  • Shopify launched a Spotify channel so creators can connect their Spotify for Artists accounts with their online stores.
  • The company rolled out Shop Pay Installments to U.S. merchants as an alternative to other buy-now-pay-later vendors.
  • Shopify launched Shopify Balance, a money management product, to U.S. merchants to offer a broader portfolio of financial services.
  • The company is directing investments from their Sustainability Fund to help fight climate change.

2022 guidance

In 2022, Shopify plans to focus on building buyer relationships, supporting merchants and customers around the world, helping merchants along their journey, and making fulfillment easier.

Financially, Shopify provided the following guidance:

  • Year-over-year revenue growth will be lower in the first quarter of 2022 and highest in the fourth quarter.
  • Revenue from Subscription Solutions will continue to grow as new merchants join the platform.
  • Merchant Solutions revenue will grow at more than twice the pace of Subscription Solutions revenue.
  • The company estimates capital expenditures of $200 million.

“The value of Shopify lies in its simplicity for merchants to easily start and scale their business, so much so that merchants fall in love with our solutions and never want to leave, no matter how big they get. They understand that as they grow and confront new challenges, Shopify and our partners will solve their problem so they can take their business to the next level. That is the power of Shopify’s flywheel. We at Shopify are energized to tackle the opportunities that this new phase of commerce brings for making commerce better for everyone,” said Amy Spapero, Shopify CFO, on the earnings call.

Insider Take

Though Shopify has ambitious plans and many good things on the horizon, investors were not impressed with the earnings report. On February 15, the day before earnings were reported, Shopify stock was valued at $889.50 per share. As of 7:58 PM Eastern yesterday, it had dropped to $660.00, a significant drop and just barely above the company’s 52-week low of $655.00 per share.

Source: Google

Another important item to note is that Shopify did not mention a lawsuit filed by five major publishers – Macmillan Learning, Cengage Learning, Elsevier, McGraw Hill and Pearson Education – for allegedly violating copyright laws. According to the lawsuit filed in the U.S. District Court for the Eastern District of Virginia, between 2017 and 2021, the publishers’ legal team provided more than 32,000 unique URLs showing where copyright violations have been made.

The lawsuit seeks $150,000 per copyright infringement due to Shopify’s willful violations of the Copyright Act or actual damages and Shopify’s profits from the infringement in an amount to be determined at a jury trial. They also request statutory damages up to the maximum allowed which is $2 million per counterfeited trademark, for Shopify to be prohibited from future copyright violations, the destruction of all textbooks, test banks and ISMs and related products, and reasonable attorneys’ fees and costs. This could potentially be very damaging to Shopify financially and to its reputation, even if they settle the case out of court. There’s been no word on the status of the case.

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