EX-99.1 2 pressreleaseq22017.htm EXHIBIT 99.1 Exhibit
EXHIBIT 99.1
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Shopify Announces Second-Quarter Financial Results

Revenue Grows 75% Year on Year

Second-Quarter Gross Profit Grows 83% Year on Year


Shopify reports in U.S. dollars and in accordance with U.S. GAAP

Ottawa, Canada – August 1, 2017 – Shopify Inc. (NYSE:SHOP)(TSX:SHOP), the leading cloud-based, multi-channel commerce platform designed for small and medium-sized businesses, today announced strong financial results for the quarter ended June 30, 2017.

“The fundamental shift in retail toward multi-channel and mobile, the ongoing adoption of Shopify by larger brands, and our continued focus on building out the market-leading platform for sellers all contributed to the strength of our results this past quarter,” stated Russ Jones, Shopify’s CFO. “As we have been able to predict and capitalize on these shifts, and continue to innovate so entrepreneurs of all sizes can take advantage of them, we feel we are exceptionally well-positioned for the next several years.”

Second-Quarter Financial Highlights

•
Total revenue in the second quarter was $151.7 million, a 75% increase from the comparable quarter in 2016. Within this, Subscription Solutions revenue grew 64% to $71.6 million. The acceleration in Subscription Solutions revenue growth was driven by the continued rapid growth in Monthly Recurring Revenue1 (“MRR”) as another record number of merchants joined the platform in the period. Merchant Solutions revenue grew 86% to $80.1 million, driven primarily by the growth of Gross Merchandise Volume2 (“GMV”).

•
MRR as of June 30, 2017 was $23.7 million, up 64% compared with $14.4 million as of June 30, 2016. Shopify Plus contributed $4.3 million, or 18%, of MRR compared with 13% of MRR as of June 30, 2016.

•
GMV for the second quarter was $5.8 billion, an increase of $2.5 billion, or 74% over the second quarter of 2016. Gross Payments Volume3 (“GPV”) grew to $2.2 billion, which accounted for 38% of GMV processed in the quarter, versus $1.3 billion, or 38%, for the second quarter of 2016.

•
Gross profit dollars grew 83% to $86.8 million as compared with the $47.5 million recorded for the second quarter of 2016.

•
Operating loss for the second quarter of 2017 was $15.9 million, or 10% of revenue, versus $8.7 million, or 10% of revenue, for the comparable period a year ago.

•
Adjusted operating loss4 for the second quarter of 2017 was 1.9% of revenue, or $2.9 million; adjusted operating loss for the second quarter of 2016 was 3.7% of revenue, or $3.2 million.

•
Net loss for the second quarter of 2017 was $14.0 million, or $0.15 per share, compared with $8.4 million, or $0.10 per share, for the second quarter of 2016.


1. Monthly Recurring Revenue, or MRR, is calculated by multiplying the number of merchants by the average monthly subscription plan fee in effect on the last day of that period and is used by management as a directional indicator of subscription solutions revenue going forward assuming merchants maintain their subscription plan the following month.
2. Gross Merchandise Volume, or GMV, represents the total dollar value of orders processed on the Shopify platform in the period, net of refunds, and inclusive of shipping and handling, duty and value-added taxes.
3. Gross Payments Volume, or GPV, is the amount of GMV processed through Shopify Payments.
4. Please refer to "Non-GAAP Financial Measures" in this press release.
1


•
Adjusted net loss4 for the second quarter of 2017 was $1.1 million, or $0.01 per share, compared with an adjusted net loss of $3.0 million, or $0.04 per share, for the second quarter of 2016.

•
At June 30, 2017, Shopify had $932.4 million in cash, cash equivalents and marketable securities, compared with $392.4 million on December 31, 2016. The increase reflects the $560 million in net proceeds from Shopify’s offering of Class A subordinate voting shares in the second quarter.


Business Highlights

•
Shopify continues to deliver on its strategy of providing multiple sales channels for merchants:

•
In July, Shopify began shipping pre-orders of its Chip and Swipe Reader to merchants, enhancing its point-of-sale channel, which is its second-largest channel for GMV. Today, we are announcing that it is now generally available and free to new and existing merchants already on a Shopify subscription who have not redeemed a free reader before.

•
Also in July, Shopify announced the integration of eBay as a channel for merchants. The integration will enable Shopify merchants to surface their brand and products to more than 169 million active eBay buyers, while managing eBay orders, inventory and messages from within Shopify.

•
In June, Shopify announced the integration of Buzzfeed as a channel for merchants, paving a new way for media and publishers to drive affiliate revenue. The new channel allows merchants to easily tag products for BuzzFeed editors to search, find, and feature in its campaigns, product lists and onsite content for its audience of more than 200 million.

•
Shopify continues to optimize features that maximize merchants’ opportunity for success on the platform, with several notable initiatives in the second quarter:

•
Shopify Pay, a feature designed to increase conversion at checkout by streamlining the checkout process, especially on mobile devices, went live to all merchants using Shopify Payments.

•
Shopify Payments went live in New Zealand, bringing the total number of countries where Shopify Payments is available to six, including U.S., Canada, U.K, Australia and Ireland.

•
Shopify made Kit free to all merchants, which more than doubled the number of merchants actively using the virtual assistant to help automate online marketing.

•
Mobile traffic to merchants’ stores continued to grow, reaching 72% of traffic and 60% of orders for the three months ended June 30, versus 69% and 59%, respectively, exiting the first quarter of this year.

•
In the second quarter, Shopify Capital issued $37.2 million in merchant cash advances, nearly twice the amount issued in the first quarter. Since its launch in April 2016, Shopify Capital has grown to $86 million in cumulative cash advanced by June 30, 2017. This figure climbed to more than $95 million by July 31, 2017.

CFO Retirement

Shopify’s Chief Financial Officer Russ Jones has informed the Company and its Board of Directors of his decision to retire in 2018.  Russ, who joined Shopify in 2011, intends to continue to serve as CFO until his successor is found and has transitioned into the role, a process that is now underway and that Shopify expects will be completed within the next 12 months.



2


Financial Outlook

The financial outlook that follows constitutes forward-looking information within the meaning of applicable securities laws and is based on a number of assumptions and subject to a number of risks. Actual results could vary materially as a result of numerous factors, including certain risk factors, many of which are beyond Shopify’s control. Please see “Forward-looking Statements” below.

In addition to the other assumptions and factors described in this press release, Shopify’s outlook assumes the continuation of growth trends in our industry, our ability to manage our growth effectively and the absence of material changes in our industry or the global economy. The following statements supersede all prior statements made by Shopify and are based on current expectations.  As these statements are forward-looking, actual results may differ materially. 
These statements do not give effect to the potential impact of mergers, acquisitions, divestitures or business combinations that may be announced or closed after the date hereof.  All numbers provided in this section are approximate.

For the full year 2017, Shopify currently expects:

•
Revenues in the range of $642 million to $648 million

•
GAAP operating loss in the range of $62 million to $66 million

•
Adjusted operating loss4 in the range of $7 million to $11 million, which excludes stock-based compensation expenses and related payroll taxes of $55 million


For the third quarter of 2017, Shopify currently expects:

•
Revenues in the range of $164 million to $166 million

•
GAAP operating loss in the range of $17 million to $19 million

•
Adjusted operating loss4 in the range of $2 million to $4 million, which excludes stock-based compensation expenses and related payroll taxes of $15 million


Quarterly Conference Call

Shopify’s management team will hold a conference call to discuss its second-quarter results today, August 1, 2017, at 8:30 a.m. ET. The conference call will be webcast on the investor relations section of Shopify’s website at https://investors.shopify.com/events/Events-Presentations/default.aspx. An archived replay of the webcast will be available following the conclusion of the call.

Shopify’s Second-Quarter 2017 Interim Unaudited Condensed Consolidated Financial Statements and Notes and its Second-Quarter 2017 Management’s Discussion and Analysis are available on Shopify’s website at www.shopify.com, and will be filed on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

About Shopify

Shopify is the leading cloud-based, multi-channel commerce platform designed for small and medium-sized businesses. Merchants can use the software to design, set up, and manage their stores across multiple sales channels, including web, mobile, social media, marketplaces and physical retail locations. The platform also provides merchants with a powerful back-office and a single view of their business. The Shopify platform was engineered for reliability and scale, making enterprise-level technology available to businesses of all sizes. Shopify currently powers half a million businesses in approximately 175 countries and is trusted by brands such as Tesla, Nestle, GE, Red Bull, Kylie Cosmetics, and many more.


3


Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with United States generally accepted accounting principles (GAAP), Shopify uses certain non-GAAP financial measures to provide additional information in order to assist investors in understanding its financial and operating performance.

Adjusted operating loss, non-GAAP operating expenses, adjusted net loss and adjusted net loss per share are non-GAAP financial measures that exclude the effect of share-based compensation expenses and related payroll taxes.

Management uses non-GAAP financial measures internally for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Shopify believes that these non-GAAP measures provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. Non-GAAP financial measures are not recognized measures for financial statement presentation under U.S. GAAP and do not have standardized meanings, and may not be comparable to similar measures presented by other public companies. Such non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. See the financial tables below for a reconciliation of the non-GAAP measures.

Forward-looking Statements

This press release contains certain forward-looking statements within the meaning of applicable securities laws, including statements regarding Shopify’s financial outlook and future financial performance. Words such as “expects”, “anticipates” and “intends” or similar expressions are intended to identify forward-looking statements.

These forward-looking statements are based on Shopify’s current projections and expectations about future events and financial trends that management believes might affect its financial condition, results of operations, business strategy and financial needs, and on certain assumptions and analysis made by Shopify in light of the experience and perception of historical trends, current conditions and expected future developments and other factors management believes are appropriate. These projections, expectations, assumptions and analyses are subject to known and unknown risks, uncertainties, assumptions and other factors that could cause actual results, performance, events and achievements to differ materially from those anticipated in these forward-looking statements. Although Shopify believes that the assumptions underlying these forward-looking statements are reasonable, they may prove to be incorrect, and readers cannot be assured that actual results will be consistent with these forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements as a result of numerous factors, including certain risk factors, many of which are beyond Shopify’s control, including but not limited to: (i) merchant acquisition and retention; (ii) managing our growth; (iii) our history of losses; (iv) our limited operating history; (v) our ability to innovate; (vi) a disruption of service or security breach; (vii) payments processed through Shopify Payments; (viii) our reliance on a single supplier to provide the technology we offer through Shopify Payments; (ix) a breach involving personally identifiable information; (x) serious software errors or defects; (xi) exchange rate fluctuations; (xii) achieving or maintaining data transmission capacity; and (xiii) other one-time events and other important factors disclosed previously and from time to time in Shopify’s filings with the U.S. Securities and Exchange Commission and the securities commissions or similar securities regulatory authorities in each of the provinces or territories of Canada. The forward-looking statements contained in this news release represent Shopify’s expectations as of the date of this news release, or as of the date they are otherwise stated to be made, and subsequent events may cause these expectations to change. Shopify undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.


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CONTACT:
 
 
INVESTORS:
 
MEDIA:
Katie Keita
 
Sheryl So
Director, Investor Relations
 
Public Relations Manager
613-241-2828 x 1024
 
416-238-6705 x 302
IR@shopify.com
 
press@shopify.com
SOURCE: Shopify
 
 



5


Shopify Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Expressed in US $000’s, except share and per share amounts, unaudited)


 
Three months ended
 
Six Months Ended
 
June 30, 2017
 
June 30, 2016
 
June 30, 2017
 
June 30, 2016
 
$
 
$
 
$
 
$
Revenues
 
 
 
 
 
 
 
Subscription solutions
71,598

 
43,674

 
133,678

 
82,380

Merchant solutions
80,057

 
42,973

 
145,356

 
76,989

 
151,655

 
86,647

 
279,034

 
159,369

Cost of revenues
 
 
 
 
 
 
 
Subscription solutions
13,688

 
9,098

 
25,942

 
17,330

Merchant solutions
51,127

 
30,026

 
94,011

 
54,431

 
64,815

 
39,124

 
119,953

 
71,761

Gross profit
86,840

 
47,523

 
159,081

 
87,608

Operating expenses
 
 
 
 
 
 
 
Sales and marketing
54,872

 
29,413

 
100,206

 
57,421

Research and development
32,714

 
16,732

 
59,308

 
30,402

General and administrative
15,161

 
10,037

 
29,935

 
18,156

Total operating expenses
102,747

 
56,182

 
189,449

 
105,979

Loss from operations
(15,907
)
 
(8,659
)
 
(30,368)

 
(18,371)

 
 
 
 
 
 
 
 
Other income
1,877

 
220

 
2,740

 
1,003

Net loss
(14,030
)
 
(8,439
)
 
(27,628)

 
(17,368)

Other comprehensive income (loss), net of tax
4,631

 
(80
)
 
6,068

 
141

Comprehensive loss
(9,399
)
 
(8,519
)
 
(21,560)

 
(17,227)

Basic and diluted net loss per share attributable to shareholders
(0.15
)
 
(0.10
)
 
(0.30
)
 
(0.21
)
Weighted average shares used to compute basic and diluted net loss per share attributable to shareholders
94,290,538

 
81,349,248

 
92,277,895

 
80,918,872


6


Shopify Inc.
Condensed Consolidated Balance Sheets
(Expressed in US $000’s, except share and per share amounts, unaudited)



 
As at 
 
June 30, 2017
 
December 31, 2016
 
$
 
$
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
199,397

 
84,013

Marketable securities
733,020

 
308,401

Trade and other receivables
12,599

 
9,599

Merchant cash advances receivable, net
32,839

 
11,896

Other current assets
16,382

 
8,989

 
994,237

 
422,898

Long-term assets
 
 
 
Property and equipment, net
44,235

 
45,719

Intangible assets, net
18,444

 
6,437

Goodwill
20,317

 
15,504

 
82,996

 
67,660

Total assets
1,077,233

 
490,558

Liabilities and shareholders’ equity
 
 
 
Current liabilities
 
 
 
Accounts payable and accrued liabilities
57,118

 
45,057

Current portion of deferred revenue
25,771

 
20,164

Current portion of lease incentives
1,354

 
1,311

 
84,243

 
66,532

Long-term liabilities
 
 
 
Deferred revenue
1,125

 
922

Lease incentives
12,728

 
12,628

Deferred tax liability
1,693

 
—

 
15,546

 
13,550

Shareholders’ equity
 
 
 
Common stock, unlimited Class A subordinate voting shares authorized, 85,404,395 and 77,030,952 issued and outstanding; unlimited Class B multiple voting shares authorized, 13,122,943 and 12,374,528 issued and outstanding
1,051,490

 
468,494

Additional paid-in capital
32,541

 
27,009

Accumulated other comprehensive income (loss)
4,250

 
(1,818
)
Accumulated deficit
(110,837
)
 
(83,209
)
Total shareholders’ equity
977,444

 
410,476

Total liabilities and shareholders’ equity
1,077,233

 
490,558


7


Shopify Inc.
Condensed Consolidated Statements of Cash Flows
(Expressed in US $000’s, except share and per share amounts, unaudited)



 
Six Months Ended
 
June 30, 2017
 
June 30, 2016
 
$
 
$
Cash flows from operating activities
 
 
 
Net loss for the period
(27,628)

 
(17,368)

Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Amortization and depreciation
9,887

 
5,834

Stock-based compensation
20,808

 
8,375

Provision for uncollectible receivables related to merchant cash advances
1,922

 
441

Vesting of restricted shares
—

 
172

Unrealized foreign exchange gain
(901)

 
(1,161)

Changes in operating assets and liabilities:
 
 
 
Trade and other receivables
(2,978)

 
1,779

Merchant cash advances receivable
(22,865)

 
(4,494)

Other current assets
348

 
(787)

Accounts payable and accrued liabilities
10,595

 
8,020

Deferred revenue
5,810

 
3,913

Lease incentives
143

 
1,481

Net cash provided by (used in) operating activities
(4,859)

 
6,205

Cash flows from investing activities
 
 
 
Purchase of marketable securities
(638,212)

 
(81,393)

Maturity of marketable securities
213,609

 
49,457

Acquisitions of property and equipment
(5,290)

 
(10,057)

Acquisitions of intangible assets
(2,024)

 
(1,256)

Acquisition of businesses, net of cash acquired
(15,718)

 
(7,969)

Net cash provided by (used in) investing activities
(447,635)

 
(51,218)

Cash flows from financing activities
 
 
 
Proceeds from the exercise of stock options
6,932

 
1,832

Proceeds from public offering, net of issuance costs
560,057

 
—

Net cash provided by financing activities
566,989

 
1,832

Effect of foreign exchange on cash and cash equivalents
889

 
1,251

Net increase (decrease) in cash and cash equivalents
115,384

 
(41,930)

Cash and cash equivalents – Beginning of Period
84,013

 
110,070

Cash and cash equivalents – End of Period
199,397

 
68,140


8

Shopify Inc.
Reconciliation from GAAP to Non-GAAP Results
(Expressed in US $000’s, except share and per share amounts, unaudited)


 
Three months ended
 
Six Months Ended
 
June 30, 2017
 
June 30, 2016
 
June 30, 2017
 
June 30, 2016
 
$
 
$
 
$
 
$
GAAP Gross profit
86,840

 
47,523

 
159,081

 
87,608

% of Revenue
57
%
 
55
%
 
57
%
 
55
%
add: stock-based compensation
261

 
129

 
475

 
234

add: payroll taxes related to stock-based compensation
46

 
23

 
81

 
33

Non-GAAP Gross profit
87,147

 
47,675

 
159,637

 
87,875

% of Revenue
57
%
 
55
%
 
57
%
 
55
%
 
 
 
 
 
 
 
 
GAAP Sales and marketing
54,872

 
29,413

 
100,206

 
57,421

% of Revenue
36
%
 
34
%
 
36
%
 
36
%
less: stock-based compensation
2,004

 
942

 
3,485

 
1,506

less: payroll taxes related to stock-based compensation
301

 
83

 
480

 
124

Non-GAAP Sales and marketing
52,567

 
28,388

 
96,241

 
55,791

% of Revenue
35
%
 
33
%
 
34
%
 
35
%
 
 
 
 
 
 
 
 
GAAP Research and development
32,714

 
16,732

 
59,308

 
30,402

% of Revenue
22
%
 
19
%
 
21
%
 
19
%
less: stock-based compensation
7,255

 
3,035

 
13,088

 
5,066

less: payroll taxes related to stock-based compensation
820

 
220

 
1,305

 
480

Non-GAAP Research and development
24,639

 
13,477

 
44,915

 
24,856

% of Revenue
16
%
 
16
%
 
16
%
 
16
%
 
 
 
 
 
 
 
 
GAAP General and administrative
15,161

 
10,037

 
29,935

 
18,156

% of Revenue
10
%
 
12
%
 
11
%
 
11
%
less: stock-based compensation
2,081

 
980

 
3,760

 
1,741

less: payroll taxes related to stock-based compensation
201

 
36

 
442

 
56

Non-GAAP General and administrative
12,879

 
9,021

 
25,733

 
16,359

% of Revenue
8
%
 
10
%
 
9
%
 
10
%
 
 
 
 
 
 
 
 
GAAP Operating expenses
102,747

 
56,182

 
189,449

 
105,979

% of Revenue
68
%
 
65
%
 
68
%
 
66
%
less: stock-based compensation
11,340

 
4,957

 
20,333

 
8,313

less: payroll taxes related to stock-based compensation
1,322

 
339

 
2,227

 
660

Non-GAAP Operating Expenses
90,085

 
50,886

 
166,889

 
97,006

% of Revenue
59
%
 
59
%
 
60
%
 
61
%



9

Shopify Inc.
Reconciliation from GAAP to Non-GAAP Results (continued)
(Expressed in US $000’s, except share and per share amounts, unaudited)


 
Three months ended
 
Six Months Ended
 
June 30, 2017
 
June 30, 2016
 
June 30, 2017
 
June 30, 2016
 
$
 
$
 
$
 
$
GAAP Operating loss
(15,907
)
 
(8,659
)
 
(30,368
)
 
(18,371
)
% of Revenue
(10
)%
 
(10
)%
 
(11
)%
 
(12
)%
add: stock-based compensation
11,601

 
5,086

 
20,808

 
8,547

add: payroll taxes related to stock-based compensation
1,368

 
362

 
2,308

 
693

Adjusted Operating loss
(2,938
)
 
(3,211
)
 
(7,252
)
 
(9,131
)
% of Revenue
(2
)%
 
(4
)%
 
(3
)%

(6
)%
 
 
 
 
 
 
 
 
GAAP Net loss
(14,030
)
 
(8,439
)
 
(27,628
)
 
(17,368
)
% of Revenue
(9
)%
 
(10
)%
 
(10
)%
 
(11
)%
add: stock-based compensation
11,601

 
5,086

 
20,808

 
8,547

add: payroll taxes related to stock-based compensation
1,368

 
362

 
2,308

 
693

Adjusted Net loss and comprehensive loss
(1,061
)
 
(2,991
)
 
(4,512
)
 
(8,128
)
% of Revenue
(1
)%
 
(3
)%
 
(2
)%
 
(5
)%
 
 
 
 
 
 
 
 
GAAP net loss per share attributable to shareholders
(0.15
)
 
(0.10
)
 
(0.30
)
 
(0.21
)
add: stock-based compensation
0.12

 
0.06

 
0.23

 
0.11

add: payroll taxes related to stock-based compensation
0.01

 
—

 
0.03

 
0.01

Adjusted net loss per share attributable to shareholders(1)
(0.01
)
 
(0.04
)
 
(0.05
)
 
(0.10
)
Weighted average shares used to compute GAAP and non-GAAP net loss per share attributable to shareholders
94,290,538

 
81,349,248

 
92,277,895

 
80,918,872


(1) Totals may not foot due to rounding differences.



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