Shopify Declares First-Quarter 2023 Financial Results, Surpasses Wall Street Estimates

Shopify, on May 4, 2023, announced financial results for the first quarter which ended on March 31, 2023. Its first-quarter performance exceeded Wall Street expectations. Shopify recorded revenue of $1.51 billion, 25 percent higher than the last year. According to Refinitiv, Wall Street estimates were $1.43 billion. Shopify also reported earnings of $68 million, which means 5 cents per share. The company earned 1 cent per share excluding items, whereas analysts estimated a loss of 4 cents per share.

Shopify’s President, Harley Finkelstein said, “Shopify’s strong first quarter results demonstrate once again that we’re the go-to solution powering businesses of all sizes, on every surface where they sell. The changes we’re announcing today will ensure we keep pace with the high velocity of change before us, delivering the cutting-edge solutions our customers have come to expect from Shopify”.

First Quarter 2023: Shopify’s Business Highlights

In the first quarter of 2023, a lot of brands became a part of Shopify like Herschel Supply, Seiko, Keen and 7 for All Mankind among others. The major highlights from the first quarter across three primary merchant investment themes are listed below.

For the unversed, the three key merchant investment themes include empowering merchants from achieving their first sale to going full scale, expanding business globally and getting more buyers across multiple channels.

1. Shopify launched Commerce Components by Shopify to support enterprise retail. Commerce Components comprise open-source tools and libraries to create e-commerce experiences. There are features such as support for multiple payment gateways, customizable checkout flows and integration with various shipping and tax calculation services.
2. On January 23, 2023, Shopify updated the pricing of its Basic, Shopify and Advanced plans. New pricing came into effect on January 24, 2023, for new merchants. However, for existing merchants, the new pricing plan will be implemented from April 23, 2023.
3. Shopify rolled out a new AI shopping assistant on the Shop app. Powered by OpenAI’s ChatGPT API, it aims to offer a quick and more personalised experience for shoppers with relevant product recommendations.
4. Shopify collaborated with Intuit to help migrate new retailers who are looking for a Point-of-Sale solution, especially after Intuit decided to terminate its QuickBooks Desktop Point-Of-Sale product.
5. Shopify merchants can now use Pinterest as an advertising platform. They can now drive performance-paid advertising not only on Meta and Google but also Pinterest.
6. To speed up the adoption of Shopify Plus and CCS with bigger companies across the globe, Shopify partnered with system integrators like Cognizant and IBM Consulting.

First-Quarter 2023: Shopify’s Financial Highlights

1. The Gross Merchandise Volume of Shopify witnessed a rise of 15 percent to $49.6 billion. The figure is an increase of $6.4 billion over 2022’s first quarter. 18 percent rise on a constant currency basis.
2. The total revenue of Shopify recorded a rise of 25 percent to $1.5 billion as compared to the last year. It is up 27 percent on a constant currency basis.
3. Merchant Solutions revenue grew 31 percent to $1.1 billion as compared to 2022’s first quarter. On a constant currency basis, it is up by 33 percent.
4. The Gross Payments Volume of Shopify increased to $27.5 billion. It is 56 percent of GMV processed in the quarter as compared to 51% or $22.0 billion which was recorded for the first quarter of 2022.
5. Shopify’s Subscription Solutions revenue recorded a rise of 11 percent to $382 million compared to the first quarter of 2022. On a constant currency basis, it was up 11 percent basically due to the increasing number of merchants joining the platform along with higher variable platform fees and applications.
6. The Monthly Recurring Revenue of Shopify at the end of the first quarter, on March 31, 2023, recorded a rise of 10 percent to $116 million as compared to the last year.

MRR gains were due to merchants opting for full-priced Standard subscription plans from the trial experiments. An increasing number of merchants joining Shopify Plus merchants and the consistent growth of retail locations leveraging Point-of-Sale Pro solutions were also the reasons. Shopify Plus contributed 34 percent of MRR or $39 million compared with March 31, 2022’s MRR of 30 percent.

7. The gross profit dollars of Shopify increased 12 percent to $717 million, compared to the first quarter of 2022. The gross margin for the same period was recorded at 47.5 percent as compared to 53 percent the last year.

8. Operating loss of Shopify was reported at 13 percent of revenue or $193 million compared to last year’s $98 million or 8 percent of revenue.

9. Adjusted operating loss was recorded at two percent of revenue or $31 million. In 2022, adjusted operating income was $32 million or 3 percent of revenue.
10. Shopify’s capital expenditures were reported at $14 million. In the first quarter of 2022, capital expenditures were $16 million.
11. The free Cash Flow of Shopify was recorded at six percent of revenues or $86 million. Last year, in the first quarter, there was a negative free cash flow of three percent of revenues or $41 million.
12. As of March 31, 2023, Shopify had a net cash position of $3.9 billion after consideration of the outstanding convertible notes. The company also had cash and marketable securities of $4.9 billion.
13. In the first quarter of 2023, Shopify Capital extended $477 million in merchant cash advances and loans. As of March 31, 2023, Shopify had approximately $629 million outstanding.

Along with 2023’s first-quarter financial results, Shopify also announced the sacking of 20 percent of its workforce and selling out Deliverr to Flexport. The terms of the deal were not disclosed. “On May 3, 2023, Shopify entered into a definitive agreement to sell the majority of our logistics business, including the people, technology, and services related to these operations, to Flexport, a leading tech-driven global logistics platform,” read a Shopify blog on its official website.

In a memo, Shopify CEO Tobi Lutke wrote, “There are a number of consequences to this, and I don’t want to bury the lede: after today Shopify will be smaller by about 20% and Flexport will buy Shopify Logistics; this means some of you will leave Shopify today. I recognize the crushing impact this decision has on some of you, and did not make this decision lightly”.