Table of Contents
Other Recent Earnings Reviews Sent:
a. Demand
Missed Gross Merchandise Value (GMV) estimate by 0.8%.
GMV grew by 30% on a constant currency (CC) basis.
Missed Gross Payments Volume (GPV) estimate by about 0.7%.
Shop
Slightly missed revenue estimate by 0.2% & met low-30% growth guide.
Beat 31.5% constant currency (CC) growth guidance with 32% CC growth.
Subscription solutions revenue missed estimates by 1.7%.
Met monthly recurring revenue (MRR) estimates.
Merchant solutions revenue slightly beat estimates.
b. Profits
Met GPM estimate & met mid-to-high 20% gross profit growth guide.
Beat 38.2% merchant solutions GPM estimate by 30 basis points (bps; 1 basis point = 0.01%).
Missed 80.1% subscription solutions GPM estimate by 100 bps.
Beat EBIT estimate by 5.7%. Beat $0.46 EPS estimate by $0.03.
OpEx was 32% of revenue vs. 37% Y/Y.
Beat FCF estimate by 10% & met FCF margin guide.
Of the 400 bps of Y/Y margin expansion, 150 was from “structural operating discipline” and the rest was from temporary help via marketing timing, tax receivables timing and a merchant cash advance accounting change.
For merchant solutions GPM, the Y/Y and Q/Q expansion was tied to Shopify Payments scale enabling more bargaining power as well as strength across its higher-margin foreign exchange (FX) service and advertising business. For subscription solutions GPM, AI costs tied to Sidekick and other tools as they built out capacity ahead of the holiday season had an impact on things. They did improve the margin drag from Sidekick compared to last quarter (really positive step) but still not on a Y/Y basis. That’s coming.
c. Balance
$4.7B cash & marketable securities.
$6B total investments.
No debt.
Diluted share count fell 1.7% Y/Y.
d. Guidance & Valuation
Low 30% revenue growth beat 30% growth estimate.
High 20% gross profit growth met 28% growth estimate.
Roughly 19.5% FCF margin guide missed 20.5% FCF margin estimate. If we assume low 30% revenue growth means 31% growth, FCF dollar guidance was in line with expectations. This is being held back by some marketing shifting from Q3 to Q4 as already discussed in the profit section. Again… Q3 just borrowed some FCF from Q4. Nothing concerning here.
Shopify trades for 65x forward FCF. FCF is expected to grow by 43% this year, 26% next year and 36% the year after.
e. Call & Presentation Highlights
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