- Shopify (NYSE,TSX:SHOP) posted Q1 2024 results featuring significant increases in revenue, gross profit and free cash flow, with the company’s sights firmly set on long-term growth and profitability
- The company’s revenue and gross margin in Q2 2024 will be impacted by the sale of its logistics businesses, with shares down by more than 19 per cent in the NYSE pre-market in response
- Shopify is a global e-commerce company helping millions of merchants start, scale, market and run retail businesses of any size
- Shopify stock is down by 19.3 per cent in pre-market trading on the NYSE, trading at US$62.18 per share as of 9:17 am ET.
Shopify (NYSE,TSX:SHOP) posted Q1 2024 results featuring significant increases in revenue, gross profit and free cash flow, with the company’s sights firmly set on long-term growth and profitability.
Shopify’s Q1 2024 financial highlights
- Gross merchandise volume (GMV) added 23 per cent to US$60.9 billion, an increase of US$11.3 billion year-over-year.
- Revenue rose by 23 per cent year-over-year to US$1.9 billion, or 29 per cent after adjusting for the sale of Shopify’s logistics businesses.
- Merchant solutions revenue increased 20 per cent year-over-year to US$1.4 billion thanks to growth in GMV and continued growth from Shopify Payments.
- Gross payments volume added US$36.2 billion, representing 60 per cent of GMV for the quarter, up from US$27.5 billion or 56 per cent year-over-year.
- Subscription solutions revenue increased 34 per cent year-over-year to US$511 million driven by merchant growth and price increases for standard subscription plans.
- Monthly recurring revenue (MRR) added 32 per cent year-over-year to US$151 million propelled by growth across all subscription plans. Shopify Plus contributed US$48 million or 32 per cent of MRR compared with 33 per cent year-over-year.
- Gross profit grew by 33 per cent year-over-year to US$957 million, while gross margin was 51.4 per cent, up from 47.5 per cent in Q1 2023, because of minimal dilutive impact from the logistics divestiture, higher pricing for standard plans and the continued growth of Shopify Payments.
- Free cash flow reached US$232 million, up from US$86 million in Q1 2023.
- Free cash flow margin was 12 per cent, doubling from 6 per cent year-over-year.
- Cash and marketable securities stood at US$5.2 billion at quarter’s end, with a net cash position of US$4.3 billion after accounting for outstanding convertible notes.
These results, though positive in terms of cash generation, fit into Shopify’s recent history of intermittent profitability, which has included net losses in two out of the past five years (and two out of the past six quarters), amid 4.6x revenue growth and struggles to right-size its work force and streamline costs towards more reliable shareholder value creation.
Current and prospective investors can continue their due diligence by listening to Shopify’s Q1 2024 conference call on its official website.
Leadership insights
“You’re seeing the strongest version of Shopify in our history,” Harley Finkelstein, president of Shopify, said in a statement. “Our outstanding Q1 performance is clear proof of our dedication to the new shape of Shopify, our commitment to operating with a consistent team size, and our focus on building for the long term to deliver both growth and profitability. We are building a 100-year company, and we will continue to remain fiercely agile, capitalizing on every opportunity that accelerates the success of our merchants, enables us to continue to build world-class products, and enhances operational efficiency for better returns.”
Shopify’s Q2 2024 outlook
The company expects revenue in the second quarter of 2024 to grow in the high teens year-over-year, which yields a growth rate in the low- to mid-20s when accounting for an estimated 3 to 4 per cent impact from the sale of the company’s logistics businesses.
Gross margin is also expected to fall by about 0.5 per cent in Q2 2024 on a quarter-over-quarter basis, though free cash flow margin will be similar to Q1 2024, with Shopify having delivered three consecutive quarters of double-digit free cash flow margin with “no expectation for this trend to change,” according to Wednesday’s news release.
In terms of costs, GAAP operating expense dollars will rise to a low- to mid-single digit percentage compared with Q1 2024, translating into operating expenses as a percentage of revenue of about 45 to 46 per cent, while stock-based compensation and capital expenditures will be US$120 million and US$5 million, respectively.
About Shopify
Shopify is a global e-commerce company helping merchants start, scale, market and run retail businesses of any size. The company’s platform powers millions of businesses in more than 175 countries, including well-known brands Mattel, Gymshark, Heinz, FTD, Netflix, Kylie Cosmetics, SKIMS and Supreme, among many others.
Shopify stock (NYSE,TSX:SHOP) is down by 19.3 per cent in pre-market trading on the NYSE, trading at US$62.18 per share as of 9:17 am ET. The stock is flat year-over-year and up by about 150 per cent since 2019.
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