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Shopify stock drops despite upbeat results

E-commerce technology provider Shopify Inc. (SHOP) reported upbeat first-quarter results, helped by an increase in the number of merchants joining the company’s platform and growth in gross merchandise volumes. Meanwhile, despite raising revenue outlook for full-year 2018, shares of the company fell 1.88% in the premarket.

With revenue jumping 68% to $214.3 million, the Canada-based company’s loss widened to $15.9 million or $0.16 per share from $13.6 million or $0.15 per share last year. Adjusted EPS was $0.04 compared to a loss of $0.04 a year ago.

Revenue benefited from an increase in the number of merchants joining the Shopify platform. Continued rapid growth in monthly recurring revenue drove subscriptions solutions revenue higher by 61%.

Looking ahead into the full-year 2018, the company lifted its revenue outlook to range of $1-$1.01 billion from the previous estimate of $970-$990 million. Shopify widened its operating loss forecast to the range of $105-$110 million from the prior range of $95-$105 million. The company now expects adjusted operating profit of $0-$5 million compared to previous forecast range of $5 million loss and $5 million profit.

For the second quarter of 2018, the company predicts revenues in the range of $230-$235 million, operating loss of $32-$34 million and adjusted operating loss of $5-$7 million. The adjusted operating loss estimate excludes stock-based compensation expenses and related payroll taxes of $27 million.

Shopify first quarter earnings performance
Shopify Q1 earnings performance

 

Merchant Solutions revenue climbed 75% on the growth of gross merchandise volume, which includes revenue from payments processing, transaction fees, Shopify Capital, referral fees from partners and Shopify Shipping. Rising penetration of Shopify Capital and Shopify Shipping also contributed to the slight acceleration in the year-over-year growth rate of Merchant Solutions revenue.

Shopify got a new finance chief and marketing chief during the March quarter. The company sets up e-commerce websites for small businesses, and partners with others to handle digital payments and shipping. Merchants use the company’s software to support sales channels over mobile devices, the web, retail outlets and social media.

Shopify competes with Hubspot and other online stores, but most are not publicly traded. In March, shopping on Instagram was expanded beyond the US to the UK, Australia, Canada, Germany, France, Italy, Spain, and Brazil. Shopify launched an integration with Google Pay on Shopify stores in the same month. Shopify Shipping adoption continued to increase with a third of eligible merchants in the United States and Canada availing the service.

In the quarter, purchases from merchants’ stores coming from mobile devices continued to climb, accounting for 75% of traffic and 64% of orders for the first quarter, compared to 69% and 59% last year.

In the first quarter, Shopify Capital issued $60.4 million in merchant cash advances, more than three times over last year. Since its launch in April 2016, Shopify Capital has grown to over $230 million in cumulative cash advances, out of which $63.5 million was outstanding on March 31, 2018.

As on March 31, 2018, the company had $1.58 billion in cash, cash equivalents and marketable securities, compared to $938 million as on December 31, 2017. The increase reflects the proceeds from its offering of Class A subordinate voting shares in the first quarter.

Despite a decrease in other current assets, the company as of March 31, 2018, was able to increase trade and other receivables by 29% and merchant cash advances receivable by 35% from December 31, 2017. Concurrently, current liabilities have grown by 19.9% and long-term liabilities have risen by 7.7%. The company was able to compensate cash used by operating activities and by investing activities with proceeds from the public offering.

The company’s stock ended Monday’s regular trading session up 5.54% at $133.63. The stock had been trading between $73.15 and $154.82 for the past 52 weeks.

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