Shopify (SHOP) Q3 Earnings Beat Estimates, Revenues Up Y/Y
Shopify SHOP reported third-quarter 2023 adjusted earnings of 24 cents per share, comfortably beating the Zacks Consensus Estimate of 15 cents. The company had reported a loss of 2 cents per share in the year-ago quarter.
Total revenues jumped 25.5% year over year to $1.71 billion, which beat the Zacks Consensus Estimate by 2.94%.
Shopify shares have gained 79.9% year to date, outperforming the Zacks Computer & Technology sector’s growth of 42.8%.
Quarter in Detail
Subscription Solutions revenues increased 28.9% year over year to $486 million, primarily due to more merchants joining the platform, as well as pricing changes for existing merchants on its Standard subscription plans.
Merchant Solutions revenues improved 24.2% year over year to $1.23 billion, driven by robust Gross Merchandise Volume (GMV), which improved 22% year over year to $56.2 billion.
Shopify Inc. Price, Consensus and EPS Surprise
Shopify Inc. price-consensus-eps-surprise-chart | Shopify Inc. Quote
As of Sep 30, 2023, Monthly Recurring Revenues (MRR) were $141 million, up 32% from the year-ago quarter. Shopify Plus revenues were $44 million, representing 31% of MRR compared with 33% in the year-ago quarter.
Gross Payments Volume grew to $32.8 billion, constituting 58% of GMV processed in the third quarter compared with $25 billion (54% of GMV) in the year-ago quarter.
Operating Details
Non-GAAP gross profit increased 32.9% year over year to $905 million. However, the gross margin expanded 290 basis points (bps) year over year to 52.8%.
Adjusted sales and marketing expenses, as a percentage of revenues, declined 370 bps year over year to 16.2%. Adjusted general & administrative expenses decreased 420 bps to 4.6%.
Moreover, adjusted research & development expenses, as a percentage of revenues, decreased 750 bps year over year to 14.2%.
Non-GAAP operating expenses decreased 12.9% year over year to $634 million. Operating expenses, as a percentage of revenues, were 37% compared with the year-ago quarter’s figure of 53.3%.
Shopify’s adjusted operating income was $271 million against the year-ago quarter’s operating loss of $47 million.
Balance Sheet
As of Sep 30, 2023, Shopify had cash, cash equivalents and marketable securities balance of $4.92 billion compared with $4.8 billion as of Jun 30, 2023.
Free Cash Flow was $276 million compared with free cash flow of $97 million in the year-ago quarter.
Guidance
For the fourth quarter of 2023, Shopify expects revenue growth in the high teens on a year-over-year basis. Adjusting for a 400-500 bps headwind related to the divestiture of the logistics business, revenues are expected to grow in the low-to-mid-twenties on a year-over-year basis.
The gross margin is expected to be 46%, up 300 to 400 bps year over year. Gross margin is also expected to decline sequentially.
Operating expense is expected to decline low-single-digit sequentially.
For 2023, Shopify expects revenues to grow at a mid-twenties percentage rate on a year-over-year basis. Capital expenditure is expected to be roughly $45 million.
Zacks Rank & Stocks to Consider
Shopify currently carries a Zacks Rank #3 (Hold).
NetEase NTES, NVIDIA NVDA and Model N MODN are some better-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NetEase shares have gained 51.1% year to date. NTES is set to report its third-quarter 2023 results on Nov 16.
NVIDIA shares have returned 197.5% year to date. NVDA is set to report its third-quarter fiscal 2024 results on Nov 21.
Model N shares have declined 39.2% year to date. MODN is set to report its fourth-quarter fiscal 2023 results on Nov 9.
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