Shopify nearly doubled total revenue in the second quarter to $714.3 million, a 97 percent increase from the year-ago period, showing that the e-commerce giant has perhaps been one of the biggest beneficiaries of the combined global non-essential store closures and overall shift toward online spending.
Second-quarter gross merchandise volume (GMV) sold on the platform grew 119 percent to $30.1 billion, year-on-year GMV growth accelerating in April and May and decelerating in June and July to date.
In a Nutshell: GMV growth accelerated to its highest level since before the company’s 2015 IPO, driving Shopify’s cumulative GMV to over $200 billion. Stores selling on Shopify sold 1.5 times what they did in the fourth quarter of last year, the seasonally strongest quarter of the year, and that number of stores is growing all the time, according to Harley Finkelstein, chief operating officer of Shopify.
Retail merchants grew online store GMV by 73 percent in the quarter, while GMV within the point-of-sale (POS) channel declined by 29 percent since many merchants shuttered their in-store operations in April and May.
With more than 1 million merchants, as well as integrations and partnerships across many companies in the retail ecosystem, including Walmart, Shopify has turned itself into a media darling of sorts. Throughout the pandemic, the company opened applications to its Fulfillment Network to all Shopify merchants, introduced installment payments in partnership with Affirm and debuted a mobile app designed to give smaller sellers more online visibility, among other new features.
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The earnings report came a day after Shopify filed a $7.5 billion “mixed shelf” registration offering with the Securities and Exchange Commission (SEC), which would give the company the right to sell a variety of securities including shares in order to fund a potential capital expenditure such as an acquisition.
Adoption of Shopify Shipping continued to rise, with 49 percent of eligible merchants in the U.S. and Canada using Shopify Shipping in the second quarter of 2020, versus more than 42 percent in the second quarter of 2019.
New stores created on the Shopify platform grew 71 percent in the second quarter, driven by the shift of commerce to online during the pandemic as well as by the extension of the free trial period on standard plans from 14 days to 90 days. The 90-day free trial offer ended on May 31, 2020, with users that created stores in April and May expected to continue converting into paid merchants through the end of August 2020. New store creations are identified as those that have provided their billing information so they can start selling, but for which Shopify does not collect a subscription fee while on a free trial.
Shopify is not providing a financial outlook for Q3 2020 or for full year 2020 due to uncertainty related to COVID-19. The company says it is closely monitoring three external factors, including the impact rising unemployment has on new shop creation on the Shopify platform and consumer spending.
As of June 30, 2020, Shopify had $4 billion in cash, cash equivalents and marketable securities, compared with $2.46 billion on Dec. 31, 2019. The increase reflects $1.46 billion of net proceeds from Shopify’s mixed shelf offering of Class A subordinate voting shares.
Revenue: Total revenue in the second quarter was $714.3 million, a 97 percent increase from the comparable quarter in 2019.
The company divides revenue into three categories: subscription and merchant. Subscription revenue was $196.4 million, up 28 percent year over year, primarily due to more merchants joining the platform. Merchant solutions revenue growth accelerated for the third consecutive quarter, up 148 percent, to $517.9 million, driven primarily by the GMV growth.
Monthly Recurring Revenue (MRR), another metric calculated by multiplying the number of merchants by the average monthly subscription plan fee in effect, was $57 million, up 21 percent year-over-year compared with $47.1 million.
Net Earnings: Net income for the second quarter of 2020 was $36 million, or 29 cents per diluted share, compared with a net loss of $28.7 million, or 26 cents per basic and diluted share, for the second quarter of 2019.
Adjusted net income totaled $129.4 million, or $1.05 per diluted share, compared with adjusted net income of $10.7 million, or 10 cents per basic and diluted share for the year-ago quarter.
Gross profit grew 83 percent to $375 million in the quarter, compared with $204.8 million for the year-ago period. Adjusted gross profit, grew 84 percent to $381.4 million in the second quarter of 2020.
Operating income for the second quarter of 2020 was $300,000, versus a loss of $39.6 million, or 11 percent of revenue, for the comparable period a year ago.
CEO’s Take: “The world is changing fast,” said Shopify CEO Tobi Lütke. “With the rapid shift to online commerce, massive disruption to conventional employment, and growing conviction that opportunity needs to be more evenly distributed, entrepreneurship has never been more important. With all of these changes, our core principles remain the same: everything we ship is designed to lower barriers to entrepreneurship and reduce friction wherever we can.”