Shopify Reports 2022 Operating Loss of $822.3M

Despite growth in total revenue, gross merchandise volume and monthly recurring revenue

Shopify took two steps forward and three steps back last year. The global commerce company reported growth in total revenue, gross merchandise volume and monthly recurring revenue, but they still had an operating loss of $822.3 million for the year compared to income of $286.6 million for 2021. This is a huge swing, dimming many of the company’s otherwise impressive highlights.

Shopify president Harley Finkelstein put a positive spin on the company’s financials in a February 15, 2023 news release.

 “Since the very beginning, Shopify’s mission has been to level the playing field for our merchants by lowering barriers, simplifying operations, and leveraging our scale to give them the superpowers they need to compete globally. The strength of our Q4 and full year performance in 2022 is a testament to the resilience of our merchants. Despite persistent macroeconomic challenges, they continued to succeed on Shopify, growing sales and using more of our mission-critical tools to run their businesses,” said Finkelstein

He also touted the benefits of their commerce solution over other platforms.

“Our platform and solutions enable our merchants to stay ahead of the dynamically changing commerce landscape. We know the commerce evolution is not relegated to just ecommerce or retail, it’s about commerce being everywhere, for everyone. Shopify launched several new key strategic products in 2022, and we are excited about the potential for them to help our merchants succeed. In 2023, we will continue to bring innovative modern commerce solutions to the millions of Shopify merchants and their buyers,” Finkelstein added.

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Fourth-quarter financial highlights

Shopify shared the following highlights for the fourth quarter of 2022:

  • Total revenue was $1.7 billion, a 26% increase year-over-year, including $1.3 billion in Merchant Solutions revenue and $400.3 million in Subscription Solutions revenue.
  • Monthly recurring revenue at year end was $109.5 million, a 7% increase.
  • Gross merchandise volume for the quarter was $61.0 billion, a 13% increase year-over-year.
  • Gross payments volume was $34.2 billion, a 51% increase year-over-year.
  • Gross profit was $798.5 million, a 15% increase, and gross margin was 46.0%, down from 50.2% in the fourth quarter of 2021.
  • Shopify reported an operating loss of $188.7 million, or 11% of revenue, compared to income of $14.4 million for the fourth quarter of 2021.
  • Adjusted operating income was $61.0 million, or 4.0% of revenue, down from $130.2 million, or 9.0% of revenue in the prior year period.

Full-year 2022 financial highlights

  • Total revenue was $5.6 billion, a 21% increase year-over-year, including $4.1 billion in Merchant Solutions revenue and $1.5 billion in Subscription Solutions revenue.
  • Gross merchandise volume for 2022 was $197.2 billion, a 16% increase year-over-year.
  • Gross payments volume was $106.1 billion, a 49% increase year-over-year.
  • Gross profit was $2.8 billion, compared to $25 billion for 2021, and gross margin was 49.2%, down from 53.8% in 2021.
  • Shopify reported an operating loss of $822.3 million, or 15% of revenue, compared to income of $286.6 million in 2021.
  • Adjusted operating income was $6.1 million, or 0.1% of revenue, compared to $718.0 million, or 16% of revenue in 2021.

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Operational highlights

Shopify noted a number of operational highlights for 2022 and looking ahead to 2023.

  • In January, the company announced price increases that went into effect for new members as of January 24. Pricing for existing merchants won’t increase until April 23.
  • Shopify launched a range of products to make the lives of all types of merchants easier: Shop Promise, Hydrogen, Oxygen, Shopify Tax, Shopify Functions, Shopify Markets, POS Go, Shopify Collabs, Shopify Editions, and more.
  • Shopify paid $393.2 million in cash advances to merchants in the U.S., Canada, Australia and the U.K. during the fourth quarter.

2023 Outlook

For 2023, Shopify projects the following results:

  • Revenue growth in the high-teen percentages, year-over-year
  • Gross margin slightly higher than Q4 2022
  • Capital expenditures similar to those of 2022

Insider Take

Like other technology and commerce companies, Shopify is feeling the pinch of economic downturn. They, too, scaled up to meet demand during the pandemic, and they rolled out new products, services and innovations quickly. While they have sustained some of that growth, it came with a cost, and the company’s financials are suffering. With the diminishing desire for brick-and-mortar stores, Shopify’s services and turnkey solutions will remain popular, but Shopify will likely have to scale their operations accordingly. Their price increase will help offset significant losses, but more layoffs may be coming. (Shopify laid off about 1,000 last July, according to Business Insider and two engineering VPs last month.)

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