EX-99.1 2 pressreleaseq32017.htm EXHIBIT 99.1 Exhibit


EXHIBIT 99.1
logo.jpg

Shopify Announces Third-Quarter Financial Results

Third-Quarter Revenue Grows 72% Year on Year

Third-Quarter Gross Profit Grows 86% Year on Year

Achieves Adjusted Operating Profitability Earlier Than Expected and for First Time as a Public Company

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

Ottawa, Canada - October 31, 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 September 30, 2017.

“In today’s fast-changing retail environment, merchants large and small are hungry to leverage all that technology can do for them,” stated Russ Jones, Shopify’s CFO. “This is why our platform is so valuable to merchants and why they keep coming to Shopify. Our results underscore this, with another record quarter for merchant adds, along with a record number of store launches on Shopify Plus in the third quarter. On the strength of these results and our underlying business model, we are raising our forecasts for the fourth quarter and full year 2017.”

Third-Quarter Financial Highlights

•
Total revenue in the third quarter was $171.5 million, a 72% increase from the comparable quarter in 2016. Within this, Subscription Solutions revenue grew 65% to $82.4 million. This acceleration 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 79% to $89.0 million, driven primarily by the growth of Gross Merchandise Volume2 (“GMV”).

•
MRR as of September 30, 2017 was $26.8 million, up 65% compared with $16.3 million as of September 30, 2016. Shopify Plus contributed $5.3 million, or 20%, of MRR compared with 15% of MRR as of September 30, 2016.

•
GMV for the third quarter was $6.4 billion, an increase of $2.6 billion, or 69% over the third quarter of 2016. Gross Payments Volume3 (“GPV”) grew to $2.4 billion, which accounted for 37% of GMV processed in the quarter, versus $1.5 billion, or 39%, for the third quarter of 2016.

•
Gross profit grew 86% to $100.0 million as compared with the $53.8 million recorded for the third quarter of 2016.

•
Operating loss for the third quarter of 2017 was $12.7 million, or 7.4% of revenue, versus $9.5 million, or 9.5% of revenue, for the comparable period a year ago.

•
Adjusted operating income4 for the third quarter of 2017 was $1.7 million, or 1.0% of revenue; adjusted operating loss for the third quarter of 2016 was $2.2 million, or 2.2% of revenue.



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.





•
Net loss for the third quarter of 2017 was $9.4 million, or $0.09 per share, compared with $9.1 million or $0.11 per share, for the third quarter of 2016.

•
Adjusted net income4 for the third quarter of 2017 was $5.0 million, or $0.05 per share, compared with an adjusted net loss of $1.8 million, or $0.02 per share, for the third quarter of 2016.

•
At September 30, 2017, Shopify had $926.6 million in cash, cash equivalents and marketable securities, compared with $392.4 million on December 31, 2016.

Business Highlights

•
Shopify’s pace of innovation to keep merchants on the cutting edge of a rapidly evolving retail environment continues, with numerous launches over the past few months to help merchants sell and ship more products, more often, to more places.

•
Shopify’s Instagram channel was made available in a limited release to tens of thousands of merchants earlier this month. Merchants in categories like fashion, jewelry, beauty, furniture, and home decor, can start tagging their posts with products in Instagram’s apps to showcase to their over 800 million monthly active users.

•
Shopify recently announced the addition of Lyst as a channel for merchants. As the largest global fashion search engine, Lyst leveraged Shopify’s Sales Channel SDK to develop their channel for Shopify and enable merchants selling fashion in the U.S., U.K., Germany, Sweden, Finland, and Austria to reach new audiences they may not have been able to capture before.

•
In September, Shopify expanded shipping capabilities beyond single label printing, adding bulk label printing to Shopify Shipping; and earlier this month Shopify integrated DHL Express as an international shipping option at discounted rates for merchants based in the U.S.

•
Shopify built an in-app Augmented Reality feature for Magnolia, the home and lifestyle brand of Chip and Joanna Gaines from HGTV’s Fixer Upper. Built using the Shopify Mobile Buy SDK and Apple’s ARKit, users’ phones can now help showcase how housewares and homegoods will look in their real-life surroundings before buying. This is the first product of its kind for a Shopify merchant.

•
Shopify announced the addition of a second Waterloo office, and with it, plans to expand hiring by 300 to 500 new jobs over the next 2 to 3 years. Shopify expects to open the new space, which is steps away from its existing Waterloo location, in the first quarter of 2018.

•
Mobile traffic to merchants’ stores continued to grow, reaching 74% of traffic and 62% of orders for the three months ended September 30, versus 72% and 60%, respectively, for the second quarter of 2017.

•
Shopify Capital issued $44.1 million in merchant cash advances in the third quarter of 2017, nearly five times the $9.2 million issued in the third quarter of last year. Shopify Capital has grown to over $130 million in cumulative cash advanced since its launch in April 2016.

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


2

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 $656 million to $658 million

•
GAAP operating loss in the range of $55.5 million to $57.5 million

•
Adjusted operating loss4 in the range of $1.5 million to $3.5 million, which excludes stock-based compensation expenses and related payroll taxes of $54 million


For the fourth quarter of 2017, Shopify currently expects:

•
Revenues in the range of $206 million to $208 million

•
GAAP operating loss in the range of $12.5 million to $14.5 million

•
Adjusted operating income4 in the range of $2 million to $4 million, which excludes stock-based compensation expenses and related payroll taxes of $16.5 million

Quarterly Conference Call

Shopify’s management team will hold a conference call to discuss its third-quarter results today, October 31, 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 Third-Quarter 2017 Interim Unaudited Condensed Consolidated Financial Statements and Notes and its Third-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, 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. Headquartered in Ottawa, Canada, Shopify currently powers over 500,000 businesses in approximately 175 countries and is trusted by brands such as Red Bull, Nestle, Rebecca Minkoff, Kylie Cosmetics, and many more.

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 income (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.


3

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 plans to grow its Waterloo-based workforce and open a new office space and Shopify's financial outlook and future financial performance. Words such as “expects”, “anticipates”, “will”, 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.


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
 
 



4


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
 
Nine months ended
 
September 30, 2017
 
September 30, 2016
 
September 30, 2017
 
September 30, 2016
 
$
 
$
 
$
 
$
Revenues
 
 
 
 
 
 
 
Subscription solutions
82,435

 
49,839

 
216,113

 
132,219

Merchant solutions
89,021

 
49,739

 
234,377

 
126,728

 
171,456

 
99,578

 
450,490

 
258,947

Cost of revenues
 
 
 
 
 
 
 
Subscription solutions
15,458

 
10,555

 
41,400

 
27,885

Merchant solutions
55,971

 
35,271

 
149,982

 
89,702

 
71,429

 
45,826

 
191,382

 
117,587

Gross profit
100,027

 
53,752

 
259,108

 
141,360

Operating expenses
 
 
 
 
 
 
 
Sales and marketing
58,314

 
32,777

 
158,520

 
90,198

Research and development
36,350

 
19,462

 
95,658

 
49,864

General and administrative
18,039

 
11,002

 
47,974

 
29,158

Total operating expenses
112,703

 
63,241

 
302,152

 
169,220

Loss from operations
(12,676
)
 
(9,489
)
 
(43,044)

 
(27,860)

 
 
 
 
 
 
 
 
Other income
3,296

 
369

 
6,036

 
1,372

Net loss
(9,380
)
 
(9,120
)
 
(37,008)

 
(26,488)

Other comprehensive income (loss), net of tax
2,604

 
(617
)
 
8,672

 
(476
)
Comprehensive loss
(6,776
)
 
(9,737
)
 
(28,336)

 
(26,964)

Basic and diluted net loss per share attributable to shareholders
(0.09
)
 
(0.11
)
 
(0.39
)
 
(0.32
)
Weighted average shares used to compute basic and diluted net loss per share attributable to shareholders
98,777,975

 
84,912,757

 
94,502,097

 
82,259,884



5


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



 
As at 
 
September 30, 2017
 
December 31, 2016
 
$
 
$
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
119,849

 
84,013

Marketable securities
806,710

 
308,401

Trade and other receivables
17,789

 
9,599

Merchant cash advances receivable, net
50,276

 
11,896

Other current assets
20,302

 
8,989

 
1,014,926

 
422,898

Long-term assets
 
 
 
Property and equipment, net
48,605

 
45,719

Intangible assets, net
17,560

 
6,437

Goodwill
20,317

 
15,504

 
86,482

 
67,660

Total assets
1,101,408

 
490,558

Liabilities and shareholders’ equity
 
 
 
Current liabilities
 
 
 
Accounts payable and accrued liabilities
65,246

 
45,057

Current portion of deferred revenue
28,730

 
20,164

Current portion of lease incentives
1,434

 
1,311

 
95,410

 
66,532

Long-term liabilities
 
 
 
Deferred revenue
1,218

 
922

Lease incentives
15,317

 
12,628

Deferred tax liability
1,541

 
—

 
18,076

 
13,550

Shareholders’ equity
 
 
 
Common stock, unlimited Class A subordinate voting shares authorized, 86,169,575 and 77,030,952 issued and outstanding; unlimited Class B multiple voting shares authorized, 13,102,735 and 12,374,528 issued and outstanding
1,064,214

 
468,494

Additional paid-in capital
37,071

 
27,009

Accumulated other comprehensive income (loss)
6,854

 
(1,818
)
Accumulated deficit
(120,217
)
 
(83,209
)
Total shareholders’ equity
987,922

 
410,476

Total liabilities and shareholders’ equity
1,101,408

 
490,558



6


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



 
Nine months ended
 
September 30, 2017
 
September 30, 2016
 
$
 
$
Cash flows from operating activities
 
 
 
Net loss for the period
(37,008)

 
(26,488)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
Amortization and depreciation
15,624

 
9,527

Stock-based compensation
34,185

 
14,834

Provision for uncollectible receivables related to merchant cash advances
2,473

 
918

Vesting of restricted shares
—

 
202

Unrealized foreign exchange gain
(1,502)

 
(1,087)

Changes in operating assets and liabilities:
 
 
 
Trade and other receivables
(8,701)

 
(688)

Merchant cash advances receivable
(40,853)

 
(10,017)

Other current assets
(2,179)

 
(4,098)

Accounts payable and accrued liabilities
15,193

 
16,416

Deferred revenue
8,862

 
5,781

Lease incentives
2,812

 
2,002

Net cash provided by (used in) operating activities
(11,094)

 
7,302

Cash flows from investing activities
 
 
 
Purchase of marketable securities
(949,202)

 
(223,650)

Maturity of marketable securities
451,509

 
90,083

Acquisitions of property and equipment
(9,258)

 
(15,286)

Acquisitions of intangible assets
(2,882)

 
(2,004)

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

 
(7,969)

Net cash used in investing activities
(525,551)

 
(158,826)

Cash flows from financing activities
 
 
 
Proceeds from the exercise of stock options
10,500

 
3,230

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

 
224,423

Net cash provided by financing activities
570,557

 
227,653

Effect of foreign exchange on cash and cash equivalents
1,924

 
1,161

Net increase in cash and cash equivalents
35,836

 
77,290

Cash and cash equivalents – Beginning of Period
84,013

 
110,070

Cash and cash equivalents – End of Period
119,849

 
187,360



7

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


 
Three months ended
 
Nine months ended
 
September 30, 2017
 
September 30, 2016
 
September 30, 2017
 
September 30, 2016
 
$
 
$
 
$
 
$
GAAP Gross profit
100,027

 
53,752

 
259,108

 
141,360

% of Revenue
58
%
 
54
%
 
58
%
 
55
%
add: stock-based compensation
318

 
188

 
794

 
423

add: payroll taxes related to stock-based compensation
37

 
46

 
117

 
79

Non-GAAP Gross profit
100,382

 
53,986

 
260,019

 
141,862

% of Revenue
59
%
 
54
%
 
58
%
 
55
%
 
 
 
 
 
 
 
 
GAAP Sales and marketing
58,314

 
32,777

 
158,520

 
90,198

% of Revenue
34
%
 
33
%
 
35
%
 
35
%
less: stock-based compensation
2,565

 
1,145

 
6,050

 
2,651

less: payroll taxes related to stock-based compensation
164

 
245

 
644

 
369

Non-GAAP Sales and marketing
55,585

 
31,387

 
151,826

 
87,178

% of Revenue
32
%
 
32
%
 
34
%
 
34
%
 
 
 
 
 
 
 
 
GAAP Research and development
36,350

 
19,462

 
95,658

 
49,864

% of Revenue
21
%
 
20
%
 
21
%
 
19
%
less: stock-based compensation
8,595

 
4,019

 
21,681

 
9,086

less: payroll taxes related to stock-based compensation
729

 
339

 
2,036

 
816

Non-GAAP Research and development
27,026

 
15,104

 
71,941

 
39,962

% of Revenue
16
%
 
15
%
 
16
%
 
15
%
 
 
 
 
 
 
 
 
GAAP General and administrative
18,039

 
11,002

 
47,974

 
29,158

% of Revenue
11
%
 
11
%
 
11
%
 
11
%
less: stock-based compensation
1,898

 
1,135

 
5,659

 
2,876

less: payroll taxes related to stock-based compensation
83

 
166

 
524

 
223

Non-GAAP General and administrative
16,058

 
9,701

 
41,791

 
26,059

% of Revenue
9
%
 
10
%
 
9
%
 
10
%
 
 
 
 
 
 
 
 
GAAP Operating expenses
112,703

 
63,241

 
302,152

 
169,220

% of Revenue
66
%
 
64
%
 
67
%
 
65
%
less: stock-based compensation
13,058

 
6,299

 
33,390

 
14,613

less: payroll taxes related to stock-based compensation
976

 
750

 
3,204

 
1,408

Non-GAAP Operating Expenses
98,669

 
56,192

 
265,558

 
153,199

% of Revenue
58
%
 
56
%
 
59
%
 
59
%




8

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
 
Nine months ended
 
September 30, 2017
 
September 30, 2016
 
September 30, 2017
 
September 30, 2016
 
$
 
$
 
$
 
$
GAAP Operating loss
(12,676
)
 
(9,489
)
 
(43,044
)
 
(27,860
)
% of Revenue
(7
)%
 
(10
)%
 
(10
)%
 
(11
)%
add: stock-based compensation
13,376

 
6,487

 
34,184

 
15,036

add: payroll taxes related to stock-based compensation
1,013

 
796

 
3,321

 
1,487

Adjusted Operating Income (Loss)
1,713

 
(2,206
)
 
(5,539
)
 
(11,337
)
% of Revenue
1
 %
 
(2
)%
 
(1
)%

(4
)%
 
 
 
 
 
 
 
 
GAAP Net loss
(9,380
)
 
(9,120
)
 
(37,008
)
 
(26,488
)
% of Revenue
(5
)%
 
(9
)%
 
(8
)%
 
(10
)%
add: stock-based compensation
13,376

 
6,487

 
34,184

 
15,036

add: payroll taxes related to stock-based compensation
1,013

 
796

 
3,321

 
1,487

Adjusted Net Income (Loss)
5,009

 
(1,837
)
 
497

 
(9,965
)
% of Revenue
3
 %
 
(2
)%
 
—
 %
 
(4
)%
 
 
 
 
 
 
 
 
GAAP net loss per share attributable to shareholders
(0.09
)
 
(0.11
)
 
(0.39
)
 
(0.32
)
add: stock-based compensation
0.14

 
0.08

 
0.36

 
0.18

add: payroll taxes related to stock-based compensation
0.01

 
0.01

 
0.04

 
0.02

Adjusted net income (loss) per share attributable to shareholders(1)
0.05

 
(0.02
)
 
0.01

 
(0.12
)
Weighted average shares used to compute GAAP and non-GAAP net income (loss) per share attributable to shareholders
98,777,975

 
84,912,757

 
94,502,097

 
82,259,884


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




9