Shopify quarterly revenue growth slows as company hits million merchants

Shopify has released its Q3 2019 financial results, which ended September 30, 2019. The company is reporting total revenues of $390.6 million (all numbers USD), and while this represents a 45 percent year-over-year (YOY) increase from the same quarter last year, the increase marks the slowest growth rate in four years for the e-commerce company.

“More than a million merchants are now building their businesses on Shopify.”
– Tobi Lütke, Shopify’s CEO
 

The total revenue for the quarter still beats forecasts, however, with expectations that Q3 would be in the range of $377 million to $382 million. The numbers were heralded in by a 37 percent increase in Shopify’s subscription revenue, which jumped to $165.6 million thanks to an increase in monthly recurring revenue (MRR), largely due to Shopify surpassing one million merchants on its platform, worldwide. Revenues were also bolstered by 50 percent growth in Shopify’s merchant services, to $225 million.

“Our strong results in the quarter were driven in part by the success of our international expansion, which is just one of the many ways we are investing in the platform,” said Amy Shapero, Shopify’s CFO. “By carefully balancing these multiple opportunities that have different investment time horizons, we can keep investing in the innovations that will power merchants in the future while helping them grow rapidly today.”

As part of its international expansion focus, Shopify announced the availability for merchants in a number of US states to begin selling hemp or hemp-derived cannabidiol (CBD) products, both online and through brick-and-mortar locations. The Ottawa-based company also launched native language capabilities in Turkish and expanded the availability of Shopify Payments to Italy.

The acquisition of Waltham, Massachusetts-based 6 River Systems was completed in Q3, for $450 million. 6 River Systems, which operates warehouse fulfillment solutions in over 20 facilities in the US, Canada, and Europe, is helping Shopify expand its new fulfillment network.

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The quarter also represented high net losses for Shopify, with net losses of $72.8 million, or $0.64 per share, compared with $23.2 million, or $0.22 per share, for the third quarter of 2018. Shopify attributed this to a $48.3 million tax provision, which was due to a “one-time capital gain” from the transfer of regional relationship and territory rights from Shopify’s Canadian entity to regional headquarters. While Shopify did not disclose, which regional headquarters, it claimed that the transfer allowed the company to maintain merchant and commercial operations in their respective regions – part of its international expansion plans.

Despite the losses and slower quarterly growth, Shopify is predicting Q4 2019 revenue growth in the range of $472 million to $482 million. The company also increased its full year predictions to the range of $1.545 billion to $1.555 billion, up from the $1.51 billion to $1.53 billion that was predicted in Q2 2019.

“More than a million merchants are now building their businesses on Shopify, as more entrepreneurs around the world reach for independence,” stated Tobi Lütke, Shopify’s CEO. “These merchants chose Shopify because we’re making entrepreneurship easier, and we will continue to level the playing field to help merchants everywhere succeed.”

In Q3 2019, Shopify also launched its Sustainability Fund, committing $5 million ($6.6 million CAD) annually to make environmental-focused investments globally. Shopify noted that purchases from merchant stores’ mobile devices increased in the quarter compared to purchases from desktops. Mobile device purchases accounted for 81 percent of traffic and 71 percent of orders in Q3 2019, versus 77 percent and 67 percent, respectively, in Q3 2018, pointing to a growing interest in the competitive and developing mobile POS market.

Meagan Simpson

Meagan Simpson

Meagan is the Associate Editor for BetaKit. A tech writer that is super proud to showcase the Canadian tech scene. Background in almost every type of journalism from sports to politics. Podcast and Harry Potter nerd, photographer and crazy cat lady.