Shopify Reports Successful Q4 & Drops 18% Stock Value…What?

In what is becoming a more and more common occurrence a large tech company, in this case, Shopify, has reported their Q4 2021 financial results which are a great success, and the market responds by wiping a double-digit percentage off of their stock value. In exactly the same way that happened to both PayPal and Amazon.

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The problem once again for the market analysts is the forecast for 2022. When these companies state the obvious that as the World returns to some sense of normalcy, the conditions of the pandemic that led to such huge boosts of eCommerce are simply not sustainable, the stock markets lose their mind.

So whilst the stock market may make it look like Shopify didn’t have a great Q4…the numbers say it a lot differently. For Q4, Shopify posted revenue of $1.38 billion, which surpassed estimates of $1.34 billion and adjusted earnings per share were $1.36, beating Wall Street’s expectations of $1.27 per share. Perhaps you now see the issue.

With that rant over let’s dig into the numbers a little more.

Shopify Q4 Financial Highlights

• Total revenue in the fourth quarter was $1,380.0 million, a 41% increase from the comparable quarter in 2020.
  
• Subscription Solutions revenue was $351.2 million, up 26% year over year, primarily due to more merchants joining the platform.
  
• Merchant Solutions revenue was $1,028.8 million, up 47% year over year, driven primarily by the growth of Gross Merchandise Volume (“GMV”), exceeding $1 billion of revenue for the first time in a single quarter.
  
• Monthly Recurring Revenue (“MRR”) as of December 31, 2021 was $102.0 million, surpassing $100 million for the first time. MRR increased 23% year over year, up from $82.6 million as of December 31, 2020 as more merchants joined the platform and the number of retail locations using POS Pro increased. Shopify Plus contributed $29.8 million, or 29%, of MRR compared with 25% of MRR as of December 31, 2020.
  
• GMV for the fourth quarter was $54.1 billion, an increase of $12.9 billion or 31% over the fourth quarter of 2020. Gross Payments Volume (“GPV”) grew to $27.7 billion, which accounted for 51% of GMV processed in the quarter, versus $19.1 billion, or 46%, for the fourth quarter of 2020.
  
• Gross profit dollars grew 37% to $692.7 million in the fourth quarter of 2021, compared with $504.4 million for the fourth quarter of 2020.
  
• Adjusted gross profit dollars grew 37% to $700.6 million in the fourth quarter of 2021, compared with $510.6 million for the fourth quarter of 2020.
  
• Operating income for the fourth quarter of 2021 was $14.4 million, or 1.0% of revenue, versus income of $112.5 million, or 12% of revenue, for the comparable period a year ago.
  
• Adjusted operating income for the fourth quarter of 2021 was $130.2 million, or 9% of revenue, compared with adjusted operating income of $200.0 million or 20% of revenue in the fourth quarter of 2020.
  
• Net loss for the fourth quarter of 2021 was $371.3 million, or $2.95 per basic and diluted share, compared with net income of $123.9 million, or $0.99 per diluted share, for the fourth quarter of 2020. Q4 2021 net income includes a $509.7 million net unrealized loss on our equity and other investments.
  
• Adjusted net income for the fourth quarter of 2021 was $172.8 million, or $1.36 per diluted share, compared with adjusted net income of $198.8 million, or $1.58 per diluted share, for the fourth quarter of 2020.
  
• At December 31, 2021, Shopify had $7.77 billion in cash, cash equivalents and marketable securities, compared with $6.39 billion at December 31, 2020. The increase reflects $1.5 billion of net proceeds from Shopify’s offering of Class A subordinate voting shares in the first quarter of 2021 and $0.5 billion of net cash provided by operating activities, partially offset by the purchase of equity and other investments during 2021.

“The last two years have been extraordinary…We nearly tripled revenue, more than doubled GMV and the Shopify team, and the number of merchants using Shopify is nearly twice as big as 2019 levels. We are emerging from the sprint of these last two years even stronger and more ambitious, since the accelerated leap into digital commerce means we can go farther faster for merchants and buyers alike.

As the commerce engine for independent brands who want to build a direct connection with their customers and to sell everywhere, whether it’s on mobile, on Main Street, or to buyers in cities you’ve never heard of, we head into 2022 energized by what we can build with the unique combination of merchants, ecosystem and top talent we have today.”

Harley Finkelstein, President, Shopify.

Q4 Business Highlights

• From the start of Black Friday in New Zealand, through the end of Cyber Monday in California, sales on Shopify’s platform reached more than $6.3 billion. This compares with more than $5.1 billion in GMV for the global Black Friday Cyber Monday period in 2020. Shopify purchased enough carbon removal to completely eliminate the impact of carbon emissions from shipping on every single order on our platform over the shopping weekend, resulting in nearly 60,000 tonnes of carbon emissions offset.
  
• Merchants in the U.S., Canada, and the U.K. received $323.7 million in merchant cash advances and loans from Shopify Capital in the fourth quarter of 2021, an increase of 43% versus the $226.9 million funded in the fourth quarter of last year. Shopify Capital has grown to $3.0 billion in cumulative capital funded since its launch in April 2016, approximately $470.7 million of which was outstanding on December 31, 2021.
  
• Shopify was named #1 on G2’s Crowd Grid for eCommerce Platforms in its Winter 2022 report, retaining this leading position for the seventh consecutive year.

“Our merchants had an incredible holiday selling season, which powered Shopify’s strong fourth-quarter results, with their collective sales growing significantly faster than the overall eCommerce industry over the Black Friday Cyber Monday weekend,”

“Our focus on building for the long term means that merchants have access to the most modern commerce technology, which gives them superpowers to compete globally while focusing on what matters most to them – their products and their customers. In 2022, we remain steadfast on making commerce easier for entrepreneurs by continuing to build high-performing infrastructure and innovative features, which combined yield a powerful and trusted commerce solution that future-proofs our merchants in the years to come and benefits Shopify over time.”

Amy Shapero, CFO, Shopify

What about Shopify Fulfillment?

Back in January, we covered the story of how the Shopify stock price took a hit due to several warehouses and fulfillment companies coming out saying that Shopify had canceled or refused to renew their contracts. In a statement made at the time, a Shopify Spokesperson said that more information would be made available when the financial results would be posted.

Well in their full announcement they do have a dedicated section regarding fulfillment under their investment section which you can see in full below.

“Simplifying fulfillment. We are leveraging our learnings to date to continue building simple and fast fulfillment. We are consolidating our network into larger facilities; we are shifting to operate more of them ourselves to better control quality and cost, and we are unifying the network by operationalizing our warehouse management system to highly integrate with Shopify’s back office and checkout so merchants can seamlessly offer and achieve delivery promises. In conjunction with our updated, more direct approach, our expectations for Shopify Fulfillment Network revenue, operating expenses and capital expenditures will be incorporated in our overall Shopify outlook, as they are for 2022.“

All in all, it sounds like 2021 and Q4 were incredibly successful for Shopify which is not surprising. If you would like to see the full release you can access it here.

Regardless of what the stock price says right now, it looks like Shopify has the plan to continue building on their success through 2022.