Shopify soars after beating estimates for ninth quarter

OTTAWA • second-quarter results handily beat consensus forecasts, triggering a string of superlatives during a Tuesday morning conference call.

Here are a few of the choice descriptions offered by independent analysts: “stunning”, “striking” “one of the cleanest, most impressive growth stories I’ve seen.”

This is what they liked: Ottawa-based Shopify reported second-quarter revenues climbed 75 per cent year-over-year to US$151.7 million compared to analysts’ estimates of US$143.6 million. The company also reported a US$15.9-million operating loss that came in below the company’s guidance of US$18 million to US$20 million.

Investors responded by bidding up the value of Shopify shares, which surged 13.5 per cent Tuesday, to close at $130.45 Canadian.

The tone of the conference call was also interesting for what it revealed about the confidence of Shopify’s executives in their company’s momentum.

“The best way to think about Shopify,” said chief executive Tobias Lutke, “is that we’ve put the train on the right track and now we’re going to pick up speed.”

By this, he meant that his team has spent more than a decade building a software platform that allows merchants to sell their goods and services online. Equally important, Shopify has embedded a multitude of applications in the platform to make e-commerce easier to do, and aligned itself with thousands of business partners. More than half-amillion customers rely on Shopify’s technology.

The e-commerce firm earns two main streams of revenue — one from subscription fees generated by the use of its platform, the second through customers’ use of the applications, which range from checkout software to inventory management and shipping services.

The second-quarter results confirmed strong growth on both fronts. Subscription revenues were up 64 per cent year-over-year while revenue generated through applications was up 86 per cent.

Analysts also liked the fact that Shopify, which traditionally targets small- to medium-sized businesses, is breaking into larger accounts such as Nestlé, GE, Red Bull and Canadian Tire.

Not surprisingly, Shopify upped its expectations for the year as a whole. It is now forecasting revenues for the year will be US$642 million to US$648 million compared to analysts’ consensus estimates of US$628.4 million.

Shopify chief financial officer Russell Jones attributed the better-than-expected results to the firm’s ability to anticipate the online retail industry’s shifts into multiple channels using mobile technology, along with the addition of larger customers.

“We feel we are exceptionally well-positioned for the next several years,” Jones said.

Thanks in large part to a pair of share offerings during the past year, Shopify now has nearly US$1-billion in cash on its books, giving the company a significantly stronger balance sheet.