Shopify $SHOP 1Q22 Earnings 💪🏻

- Rev $1.2b +22% ↗️
- Gross Profit $638m +14% ↗️ margin 53% -354 bps ↘️
- NG EBIT $32m -85% ↘️ margin 3% -1867 bps ↘️
- NG Net Income $25m -90% ↘️ margin 2% -2362 bps ↘️
- OCF -$53m ↘️ margin -4% -1809 bps ↘️
Business Metrics

- GMV $43.2b +16% ↗️
- Subscription Rev $345m +8% ↗️
- Merchant Rev $856m +29% (payments, capital & markets) ↗️
- Payments GPV $22b +27% ↗️
- Payments Penetration (GPV/GMV) 51% +500bps 📈✅
- Shopify Capital $347m +12% ↗️
- MRR $105m +17% ↗️
Management Guide

- FY22 Revenue growth - Lower in H1, Highest in Q4
- FY22 Subscription Solutions Revenue growth similar to FY21
- FY22 Merchant Solutions 2X faster 💪🏻
1 | Not overly concerned with “slower” revenue growth
- Toughest comps in 1Q21
- 1Q21 Rev $989m +110% 🚀
- 1Q22 Rev $1.2b +22% ↗️

“Q1 not being the easiest start to the year…22% revenue growth…on top of a 110% growth last year during lockdowns and boosted by stimulus.”
2 | Will have easier comps going forward from 2Q22 onwards, especially 4Q22.

“For 2022, we expect revenue growth to be lower in the first half and highest in the fourth quarter of 2022.”
3 | Making fulfilment even easier.

“Right now, merchants have to fumble through this maze of freight providers, 3PLs, middle- and last-mile carriers…

And so what SFN handles is sort of that post-order phase of the merchant supply chain.”
4 | Acquiring Fulfilment Tech Provider Deliverr 👍🏻

- For $2.1b, 80% cash, 20% stock

- “gains visibility and control of movements along the supply chain”

- “perfect fit for Shopify is that it's software first…asset-light, means that we can manage our CapEx”
5 | Shopify No. 2 in US Retail Commerce after $AMZN
6 | Revenues are still growing.
7 | Cohort Growth still Strong
8 | MRR still rising - 38% CAGR
9 | Subscriptions Revenue growth largely due to Shopify Plus
- $32m (30% of MRR +400bps)
- Growing larger merchants faster
10 | Long-Term Operating Leverage, Near-Term spending more especially on R&D +600bps and S&M +600bps decreasing EBIT margins
11 | Gross Margins will continue to decline due to increased mix of lower margins Merchant Solutions (payments
12 | Priorities and Focus.
13 | Shopify POS (Offline)

“Shopify has been developing the world's best point-of-sale retail software for years, and it's now at the point where all merchants who came to Shopify during the pandemic can leverage it. No need to go back to their old, dilapidated POS systems.”
13 | cont’d

“…knows how much stronger the Shopify point-of-sale value proposition is relative to stand-alone offerings.”

“As POS Pro added more merchants, locations and geographies in Q1, we grew offline GMV by nearly 80% YOY as we continue to gain share.
14 | Beyond Online, the commerce platform of choice for both online and offline.

“…GMV, including offline, grew even faster at a 57% CAGR since 1Q20…opportunity…is beyond just online. It's to be the commerce platform of choice in any environment and on any surface.”
15 | Benefiting from both Online & Offline.

“…offline stores are reopening…now migrating over to our point of sell product.

…becoming the most important piece of software they use isn't necessarily just online or offline, it's all of those merchant solutions as well.”
16 | Now blending software for logistics/fulfilment

“That's why we're creating the world's most merchant-obsessed, end-to-end software and logistics platform, fully integrated into the Shopify ecosystem.”
17 | Warehouse Mgmt System to start by end 2Q22

“Our proprietary warehouse management system we've been developing is now running in our key warehouse locations and will handle all SFN order volume by the end of Q2 2022.”
18 | Agnostic and happy to integrate Amazon extending Prime offering to Merchant’s owned sites

“thrilled…and want to share this broadly with small merchants across the Internet.”

“happy to integrate this into Shopify”
19 | Helping Customers Solve Problems.

“People come to Shopify to solve a single problem. And then once they come in, they realize we can solve more of their problems.”
20 | Proposed Founder Shares

“the Board thinks this is a better governance structure for the future. And so that's why it's included.”

And all about Tobi Lutke.
➡️ Final Thoughts: Shopify $SHOP

A rare combination of high growth, large market opportunity, supported by multiple growth vectors, optionalities and pillars, improving profitability with a global platform, scale & operating leverage, run by mission-driven management.
High growth tempered near-term by 1Q21 tough comps, to improve into 2H22. Acquisition to strengthen logistics offering and with POS build for offline builds foundation to become the dominant provider of essential internet infrastructure for commerce (both online & offline).
You can follow @EugeneNg_VCap.
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