Shopify saw continued acceleration in Shop Pay and faster checkout, and growth in its merchant base as a strong holiday shopping season drove results.
But investors fled the stock Tuesday morning on the heels of guidance that pointed to rising operating costs. They sent the stock lower by as much as 8% at the opening of trading on Tuesday (Feb. 13).
Drilling down into the numbers, gross merchandise volume (GMV) was up 23% to $875.2 billion. Merchant Solutions revenue increased 21% to $1.6 billion, which management said was driven in part by the increased penetration of Shopify Payments. Gross payments volumes were 60% of GMV, up from the 56% tally seen a year ago.
Monthly recurring revenues were up 35% to $149 million, driven by growth in the company’s subscription plans.
The earnings materials noted that Shopify Plus contributed 31% of the monthly recurring revenues in the quarter.
During the conference call with analysts, Harley Finkelstein, president, said that the latest quarter showed a merchant base that had 35% more enterprises in place from outside the U.S. than had been seen in 2020. He said, too, that the “mere presence of Shop Pay” has helped boost conversion by 5% and by more than 50% vs. guest checkouts. He said 150 million buyers signed up for the feature, which was tied to $18 billion of GMV, up 58% year on year.
Shop Pay, Finkelstein said, “continues to be the ‘go to’ choice for consumers looking to buy quickly, securely and with as little friction as possible.”
He added that Shop Cash, which had been launched over the summer, will this year be part of a broader product suite to be known as Shop Campaigns.
Offline revenues, according to management commentary on the call, were $441 million, five time greater than had been seen four years ago, and up 28% year on year. B2B represents a significant opportunity with B2B GMV doubling in 2023, and up 150% in the fourth quarter.
CFO Jeff Hoffmeister said on the call that there was particular strength in the EMEA region, which was up 40%. He said that growth in offline sales, as noted above, was driven by larger merchants.
“Subscription solutions revenues were $525 million, up 31% over the fourth quarter of 2022, primarily driven by the growth in the number of merchants,” said Hoffmeister.
In providing the outlook for the year ahead, Hoffmeister said that “we expect the same resiliency from our merchants and their buyers that we experienced in 2023.” With a nod to typical seasonality, the company expects to see Q1 revenue growth in the low 20% range, tied to generally accepted accounting principles. Operating expense dollars, on the same basis, will be up on a low teens percentage rate, spurred by marketing and employee related expenses.
At a macro level, said Finkelstein, when asked by analysts about consumer spending and merchant growth, “We think that entrepreneurship remains strong. We see that the consumer remains very resilient, but more importantly, you’re seeing this intentionality to purchase from brands that consumers really have a connection to.”
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