Shopify reports in U.S. dollars and in accordance with U.S. GAAP
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 and full year ended December 31, 2017.
“That our merchants sold more in the fourth quarter than in all of 2015, achieving one billion dollars of this in just four days, speaks to how far we have come in the past few years,” stated Russ Jones, Shopify’s CFO. “Our leadership role in commerce, together with the scale we have achieved, position us well to invest in our next phase of growth: one marked by expansion of our capabilities upmarket and down, in retail, in our ecosystem, and internationally.”
Fourth-Quarter Financial Highlights
Fourth-Quarter Business Highlights
Full-Year Financial Highlights
2017 Business Highlights
Our rapid growth in 2017 allowed Shopify to grow its ranks by approximately 50%, ending the year with nearly 3,000 employees, and enabling us to offer more value to more merchants. In 2017, we:
With its easy-to-use platform, Shopify aims to flatten the learning curve and allow more entrepreneurs to participate in and help shape the future of commerce.
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 2018, Shopify currently expects:
For the first quarter of 2018, Shopify currently expects:
Quarterly Conference Call
Shopify’s management team will hold a conference call to discuss its fourth-quarter and full-year results today, February 15, 2018, 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 Audited Consolidated Financial Statements and accompanying Notes, Management’s Discussion and Analysis, and Annual Information Form for the year ended December 31, 2017 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. Shareholders may, upon request, receive a hard copy of the complete audited financial statements free of charge.
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, brick-and-mortar locations, and pop-up shops. 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 over 600,000 businesses in approximately 175 countries and is trusted by brands such as Nestle, Red Bull, Rebecca Minkoff, and Kylie Cosmetics.
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 investment plans, 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.
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.
Shopify Inc.
Consolidated Statements of Operations and
Comprehensive Loss
(Expressed in US $000’s, except share and
per share amounts, unaudited)
Three months ended | Years ended | |||||||||||
December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||||||
$ | $ | $ | $ | |||||||||
Revenues | ||||||||||||
Subscription solutions | 93,918 | 56,387 | 310,031 | 188,606 | ||||||||
Merchant solutions | 128,896 | 73,996 | 363,273 | 200,724 | ||||||||
222,814 | 130,383 | 673,304 | 389,330 | |||||||||
Cost of revenues | ||||||||||||
Subscription solutions | 19,867 | 11,593 | 61,267 | 39,478 | ||||||||
Merchant solutions | 81,802 | 50,655 | 231,784 | 140,357 | ||||||||
101,669 | 62,248 | 293,051 | 179,835 | |||||||||
Gross profit | 121,145 | 68,135 | 380,253 | 209,495 | ||||||||
Operating expenses | ||||||||||||
Sales and marketing | 67,174 | 39,016 | 225,694 | 129,214 | ||||||||
Research and development | 40,339 | 24,472 | 135,997 | 74,336 | ||||||||
General and administrative | 19,745 | 13,952 | 67,719 | 43,110 | ||||||||
Total operating expenses | 127,258 | 77,440 | 429,410 | 246,660 | ||||||||
Loss from operations | (6,113 | ) | (9,305 | ) | (49,157) | (37,165) | ||||||
Other income | 3,126 | 438 | 9,162 | 1,810 | ||||||||
Net loss | (2,987 | ) | (8,867 | ) | (39,995) | (35,355) | ||||||
Other comprehensive income (loss), net of tax | (3,419 | ) | (1,342 | ) | 5,253 | (1,818 | ) | |||||
Comprehensive loss | (6,406 | ) | (10,209 | ) | (34,742) | (37,173) | ||||||
Basic and diluted net loss per share attributable to shareholders | (0.03 | ) | (0.10 | ) | (0.42 | ) | (0.42 | ) | ||||
Weighted average shares used to compute basic and diluted net loss per share attributable to shareholders | 99,551,791 | 89,137,155 | 95,774,897 | 83,988,597 |
Shopify Inc.
Consolidated Balance Sheets
(Expressed
in US $000’s except share amounts, unaudited)
As at | ||||||
December 31, 2017 | December 31, 2016 | |||||
$ | $ | |||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | 141,677 | 84,013 | ||||
Marketable securities | 796,362 | 308,401 | ||||
Trade and other receivables | 21,939 | 9,599 | ||||
Merchant cash advances receivable, net | 47,101 | 11,896 | ||||
Other current assets | 18,598 | 8,989 | ||||
1,025,677 | 422,898 | |||||
Long-term assets | ||||||
Property and equipment, net | 50,360 | 45,719 | ||||
Intangible assets, net | 17,210 | 6,437 | ||||
Goodwill | 20,317 | 15,504 | ||||
87,887 | 67,660 | |||||
Total assets | 1,113,564 | 490,558 | ||||
Liabilities and shareholders’ equity | ||||||
Current liabilities | ||||||
Accounts payable and accrued liabilities | 62,576 | 45,057 | ||||
Current portion of deferred revenue | 30,694 | 20,164 | ||||
Current portion of lease incentives | 1,484 | 1,311 | ||||
94,754 | 66,532 | |||||
Long-term liabilities | ||||||
Deferred revenue | 1,352 | 922 | ||||
Lease incentives | 14,970 | 12,628 | ||||
Deferred tax liability | 1,388 | — | ||||
17,710 | 13,550 | |||||
Shareholders’ equity | ||||||
Common stock, unlimited Class A subordinate voting shares
authorized, 87,067,604 and 77,030,952 |
1,077,477 | 468,494 | ||||
Additional paid-in capital | 43,392 | 27,009 | ||||
Accumulated other comprehensive income (loss) | 3,435 | (1,818 | ) | |||
Accumulated deficit | (123,204 | ) | (83,209 | ) | ||
Total shareholders’ equity | 1,001,100 | 410,476 | ||||
Total liabilities and shareholders’ equity | 1,113,564 | 490,558 |
Shopify Inc.
Consolidated Statements of Cash Flows
(Expressed
in US $000’s, unaudited)
Years ended | |||||
December 31, 2017 | December 31, 2016 | ||||
$ | $ | ||||
Cash flows from operating activities | |||||
Net loss for the year | (39,995) | (35,355) | |||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||
Amortization and depreciation | 23,382 | 13,967 | |||
Stock-based compensation | 49,163 | 22,896 | |||
Provision for uncollectible receivables related to merchant cash advances | 2,606 | 1,028 | |||
Vesting of restricted shares | — | 202 | |||
Unrealized foreign exchange gain | (1,604) | (969) | |||
Changes in operating assets and liabilities: | |||||
Trade and other receivables | (13,037) | (2,356) | |||
Merchant cash advances receivable | (37,811) | (12,924) | |||
Other current assets | (3,706) | (2,604) | |||
Accounts payable and accrued liabilities | 15,428 | 19,813 | |||
Deferred revenue | 10,960 | 7,699 | |||
Lease incentives | 2,515 | 2,620 | |||
Net cash provided by operating activities | 7,901 | 14,017 | |||
Cash flows from investing activities | |||||
Purchase of marketable securities | (1,129,263) | (369,208) | |||
Maturity of marketable securities | 642,073 | 139,872 | |||
Acquisitions of property and equipment | (20,043) | (23,773) | |||
Acquisitions of intangible assets | (4,219) | (2,463) | |||
Acquisition of businesses, net of cash acquired | (15,718) | (14,114) | |||
Net cash used in investing activities | (527,170) | (269,686) | |||
Cash flows from financing activities | |||||
Proceeds from the exercise of stock options | 14,774 | 4,162 | |||
Proceeds from public offering, net of issuance costs | 560,057 | 224,423 | |||
Net cash provided by financing activities | 574,831 | 228,585 | |||
Effect of foreign exchange on cash and cash equivalents | 2,102 | 1,027 | |||
Net increase (decrease) in cash and cash equivalents | 57,664 | (26,057) | |||
Cash and cash equivalents – Beginning of Year | 84,013 | 110,070 | |||
Cash and cash equivalents – End of Year | 141,677 | 84,013 |
Shopify Inc.
Reconciliation from GAAP to Non-GAAP Results
(Expressed
in US $000’s, except share and per share amounts, unaudited)
Three months ended | Years ended | |||||||||||
December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||||||
$ | $ | $ | $ | |||||||||
GAAP Gross profit | 121,145 | 68,135 | 380,253 | 209,495 | ||||||||
% of Revenue | 54 | % | 52 | % | 56 | % | 54 | % | ||||
add: stock-based compensation | 309 | 206 | 1,102 | 629 | ||||||||
add: payroll taxes related to stock-based compensation | 61 | 10 | 179 | 89 | ||||||||
Non-GAAP Gross profit | 121,515 | 68,351 | 381,534 | 210,213 | ||||||||
% of Revenue | 55 | % | 52 | % | 57 | % | 54 | % | ||||
GAAP Sales and marketing | 67,174 | 39,016 | 225,694 | 129,214 | ||||||||
% of Revenue | 30 | % | 30 | % | 34 | % | 33 | % | ||||
less: stock-based compensation | 2,936 | 1,300 | 8,986 | 3,951 | ||||||||
less: payroll taxes related to stock-based compensation | 246 | 124 | 890 | 493 | ||||||||
Non-GAAP Sales and marketing | 63,992 | 37,592 | 215,818 | 124,770 | ||||||||
% of Revenue | 29 | % | 29 | % | 32 | % | 32 | % | ||||
GAAP Research and development | 40,339 | 24,472 | 135,997 | 74,336 | ||||||||
% of Revenue | 18 | % | 19 | % | 20 | % | 19 | % | ||||
less: stock-based compensation | 9,653 | 5,232 | 31,338 | 14,318 | ||||||||
less: payroll taxes related to stock-based compensation | 1,190 | 230 | 3,222 | 1,046 | ||||||||
Non-GAAP Research and development | 29,496 | 19,010 | 101,437 | 58,972 | ||||||||
% of Revenue | 13 | % | 15 | % | 15 | % | 15 | % | ||||
GAAP General and administrative | 19,745 | 13,952 | 67,719 | 43,110 | ||||||||
% of Revenue | 9 | % | 11 | % | 10 | % | 11 | % | ||||
less: stock-based compensation | 2,080 | 1,324 | 7,737 | 4,200 | ||||||||
less: payroll taxes related to stock-based compensation | 1,222 | 72 | 1,748 | 295 | ||||||||
Non-GAAP General and administrative | 16,443 | 12,556 | 58,234 | 38,615 | ||||||||
% of Revenue | 7 | % | 10 | % | 9 | % | 10 | % | ||||
GAAP Operating expenses | 127,258 | 77,440 | 429,410 | 246,660 | ||||||||
% of Revenue | 57 | % | 59 | % | 64 | % | 63 | % | ||||
less: stock-based compensation | 14,669 | 7,856 | 48,061 | 22,469 | ||||||||
less: payroll taxes related to stock-based compensation | 2,658 | 426 | 5,860 | 1,834 | ||||||||
Non-GAAP Operating Expenses | 109,931 | 69,158 | 375,489 | 222,357 | ||||||||
% of Revenue | 49 | % | 53 | % | 56 | % | 57 | % |
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 | Years ended | |||||||||||
December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||||||
$ | $ | $ | $ | |||||||||
GAAP Operating loss | (6,113 | ) | (9,305 | ) | (49,157 | ) | (37,165 | ) | ||||
% of Revenue | (3 | )% | (7 | )% | (7 | )% | (10 | )% | ||||
add: stock-based compensation | 14,978 | 8,062 | 49,163 | 23,098 | ||||||||
add: payroll taxes related to stock-based compensation | 2,719 | 436 | 6,039 | 1,923 | ||||||||
Adjusted Operating Income (Loss) | 11,584 | (807 | ) | 6,045 | (12,144 | ) | ||||||
% of Revenue | 5 | % | (1 | )% | 1 | % | (3 | )% | ||||
GAAP Net loss | (2,987 | ) | (8,867 | ) | (39,995 | ) | (35,355 | ) | ||||
% of Revenue | (1 | )% | (7 | )% | (6 | )% | (9 | )% | ||||
add: stock-based compensation | 14,978 | 8,062 | 49,163 | 23,098 | ||||||||
add: payroll taxes related to stock-based compensation | 2,719 | 436 | 6,039 | 1,923 | ||||||||
Adjusted Net Income (Loss) | 14,710 | (369 | ) | 15,207 | (10,334 | ) | ||||||
% of Revenue | 7 | % | — | % | 2 | % | (3 | )% | ||||
GAAP net loss per share attributable to shareholders | (0.03 | ) | (0.10 | ) | (0.42 | ) | (0.42 | ) | ||||
add: stock-based compensation | 0.15 | 0.09 | 0.51 | 0.28 | ||||||||
add: payroll taxes related to stock-based compensation | 0.03 | — | 0.06 | 0.02 | ||||||||
Adjusted net income (loss) per share attributable to shareholders(1) | 0.15 | — | 0.16 | (0.12 | ) | |||||||
Weighted average shares used to compute GAAP and non-GAAP net income (loss) per share attributable to shareholders | 99,551,791 | 89,137,155 | 95,774,897 | 83,988,597 |
(1) Totals may not foot due to rounding differences.
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