After a sluggish financial start to 2022, Shopify has a positive outlook for future quarters as the company grows its market share in e-commerce and bricks and mortar. The e-commerce giant made the prediction while announcing its third-quarter results for 2022.
“Looking ahead, the flexibility of our platform, breadth of solutions, pace of innovation, and disciplined investment approach position Shopify well to realize the enormous opportunity ahead,” declared Amy Shapero, Shopify’s CFO.
Shopify shareholders will undoubtedly welcome its third quarter of 2022 financial results after the roller-coaster first half of the year in which the company’s growth slowed while a downturn in the economy led to layoffs.
Shopify announced that in the third quarter its total revenue increased 22 percent year over year to $1.4 billion compared to $1.12 billion from the same period in the previous year. Shopify reports all figures in United States (US) dollars.
In comparison, Shopify posted a 21 percent year-over-year increase in Q1 2022, and a 16 percent year-over-year increase in Q2 2022. Its revenue was higher for this quarter, but close to on par with the two previous quarters, which drew in $1.2 billion and $1.3 billion, respectively.
The company noted this year’s increase in revenues followed a two percent drop in revenues in the previous year because of what Shopify cited as a “significant” strengthening of the US dollar against foreign currencies in the third quarter of 2021.
Despite the gains in revenue, Shopify continued to post significant losses in the third quarter. The company reported an adjusted operating loss of $45.1 million compared to adjusted operating income of $140.2 million in the third quarter of 2021.
Shopify said the adjusted operating loss reflected increases in the number of staff at the company, including from the acquisition of Deliverr, which the company acquired in May, adding 400 staff to its payroll. This comes despite Shopify laying off some 1,000 employees in July and reportedly another 70 in August.
At the same time the company also attributed its adjusted operating loss to one-time charges related to the July layoffs, as well as to two accruals for pending litigation cases, which Shopify did not identify.
The company’s new compensation framework also impacted revenues to “a lesser extent,” according to Shopify.
While Shopify is betting that its reemphasis on bricks-and-mortar will set the company up for a better fourth quarter, the company nonetheless warned investors that it will likely post similar losses to the third quarter.
In its forecast, Shopify predicted that its gross merchandise volume (GMV) growth will outperform the broader US retail market in the fourth quarter, aided by the company’s “omnichannel capabilities.”
The company also expects an increase in merchant solutions revenue growth, and forecast that both GMV and total revenue in 2022 will be more evenly distributed across the four quarters of 2022 following the next quarter.
Based on its updated outlook, Shopify said it expects an adjusted operating amount loss comparable to the one it posted in the third quarter.
The company noted that its revised financial outlook takes into account the expected impact of its acquisition of Deliverr, Shopify’s new employee compensation system, and currency headwinds from a stronger US dollar. Shopify said that it “assumes higher inflation and rising inflation rates will continue to negatively affect the consumer’s purchasing power of discretionary goods and services.”
Shopify president Harley Finkelstein told CNBC that everyone is missing Shopify’s “reopening story.” He said the company is taking a lot of market share away from traditional point-of-sale, physical commerce platforms. “I think our job now is to explain to the world, to investors, to everyone that Shopify is the future of commerce wherever that happens,” Finkelstein said.
The market reacted positively to Shopify’s latest earnings report, with shares rising $6.91 as of presstime to $46.37. The 52-week low for Shopify shares stands at $33, while the 52-week high remains at $222.87 on the Toronto Stock Exchange.
The 2022 third quarter earnings report gave Shapero a relatively high note for her exit from the company. Shopify announced in September that Shapero, the company’s CFO of five years, would step down following Shopify’s third quarter 2022 earnings announcement. Jeff Hoffmeister, an executive from Morgan Stanley, is taking over as CFO.
Third quarter highlights included launching Collabs, a new tool the company hopes will make it “the creator’s commerce platform of choice” as it furthers its social commerce strategy; and the release of POS Go, which the company described as an all-in-one, POS mobile selling device.
Just before its earnings report, Shopify announced an investment in Hong Kong SaaS startup WATI’s $23 million USD Series B round. The Series B round marks Shopify’s first venture investment in a startup operating in the Southeast Asia region.