Shopify posts surprise quarterly loss despite booming revenues

By

Robin Driver

Published
Oct 30, 2019

As the number of merchants using its platform surpassed 1 million worldwide, Ottawa-based global e-commerce company Shopify Inc. saw its revenues soar up 45% in the third quarter, but surprised analysts with a net loss.

For the third quarter ended September 30, 2019, Shopify’s total revenues were $390.6 million, up from $270.1 million in the prior-year period, with the company’s CFO, Amy Shapero, attributing this impressive rise to the platform’s successful international expansion.
 
Subscription solutions revenue for the quarter grew 37% year over year to $165.6 million, driven by the accelerated rate at which new merchants joined the platform, while merchant solutions revenue skyrocketed 50% to $225.0 million.

Despite this impressive progress, Shopify posted a quarterly net loss of $72.8 million, or $0.64 per share, compared to the loss of $23.2 million, or $0.22 per share, reported by the company for the third quarter of 2018.
 
Shopify attributed the dip to a tax provision of $48.3 million related to a one-time capital gain resulting from the transfer of regional relationship and territory rights from the platform’s Canadian headquarters to regional HQs, a move that the company believes will facilitate its continued international expansion in the future.
 
The platform has also been investing heavily in its fulfillment capabilities recently, having revealed plans to pour more than $1 billion into setting up more fulfillment centers in order to compete with rivals like Amazon in June.
 
“By carefully balancing […] multiple opportunities that have different investment time horizons, we can keep investing in the innovations that will power merchants in the future while helping them grow rapidly today,” said Shapero in a release, highlighting Shopify’s plans for sustainable long-term growth.
 
The company further pointed out a range of other achievements driven by its investments in Q3, including the launch of the platform’s first native chat function, Shopify Chat, the introduction of Shopify Payments in Italy, and the debut of native language capabilities in Turkish on the Shopify Admin.
 
Since the close of the quarter, Shopify has also completed its acquisition of collaborative warehouse fulfillment solutions provider 6 River Systems.
 
These explanations and achievements were evidently not enough to soothe the markets, though, as the company’s stock dropped around 4% on Tuesday.
 
Year to date, Shopify’s revenues totaled $1.1 billion, up from $729.4 million in the same period in the previous year, while the company’s net loss came to $125.6 million, or $1.12 per share, compared to a loss of $68.2 million, or $0.60 per share, in the first nine months of 2018.
 
Looking to the future, the company currently expects full-year revenues to total between $1.545 billion and $1.555 billion, with operating loss expected to be in the range of $158 million to $168 million.
 
In the fourth quarter, Shopify forecasts revenues in the range of $472 million to $482 million, and an operating income of between $47 million and $57 million.