The eCommerce platform Shopify posted better-than-expected fourth-quarter results on Wednesday (Feb. 17), but warned that the rate of growth triggered by the pandemic was not sustainable. Officially, the Ottawa-based eCommerce giant reported a four-fold increase in adjusted net income for the three months ending Dec. 31, earning $198.8 million versus $50 million in 2019. That works out to $1.58 per share, and was comfortably ahead of the $1.25-per-share average estimate of 28 analysts who cover the stock.
Shopify’s record Q4 revenues rose 94 percent to $977.7 million, and also easily topped expectations of $910 million. Other notable metrics included a 53 percent increase in subscription revenue as more merchants joined the platform, as well as a 99 percent increase in gross merchandise volume (GMV) to $41.4 billion. At the same time, Shopify said its payments volume more than doubled to $19.1 billion and accounted for 46 percent of processed orders in the quarter.
However, despite these outsized trailing results fueled by the once-in-a-lifetime dynamics of the coronavirus, investors did not take kindly to the company’s reminder that its growth rates would likely decline in the year ahead as post-pandemic life unfolds.
The 2021 Outlook
Shopify said its 2021 outlook assumes that as countries roll out vaccines and people are able to move about more freely, the overall economic environment will likely improve. However, the company said that “some consumer spending will likely rotate back to offline retail and services” and that the ongoing shift to eCommerce would likely “resume a more normalized pace of growth.”
Specifically, Shopify said its subscriptions revenue growth, which is driven by merchants joining the platform, would be lower than the record in 2020, but still higher than any other prior year. “We do not expect the surge in GMV that drove merchant solutions in 2020 to repeat,” the company said. “We expect that we will continue to grow revenue rapidly in 2021, albeit at a lower rate than in 2020.”
In addition, Shopify said that while the fourth and first quarters will continue to make the largest and smallest contributions respectively to its overall business, it is expecting the full-year revenue to be more evenly distributed across the four quarters than it has been historically, if the rollout of a vaccine shifts more spending to services and offline shopping toward the back half of the year.
Modern Financial Solutions
In the wake of Tuesday’s news of Amazon’s acquisition of Selz, an Australian company that builds easy-to-use tools for entrepreneurs, it’s clear that the battle to keep transactions seamless and fast is not going to taper off this year. In fact, in a call with investors, the Shopify chief cited “the growing popularity of modern financial solutions” — including buy now, pay later (BNPL) — as a key trend to watch this year.
“Modern financial solutions products like Shopify Capital are increasingly sought out by entrepreneurs and small businesses that face unnecessary barriers to access from traditional banks,” said Shopify President Harley Finkelstein. “Merchant empathy runs deep at Shopify. [Where] traditional institutions are turning away small businesses because of perceived high risk, we financed a record number of merchants when they needed it most.”
As it stands, Spotify’s mission of “making commerce better for everyone” via a platform that is engineered to be more reliable while delivering a better shopping experience appears to be working, as it now serves over 1.7 million businesses in more than 175 countries.
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