Shopify reports strong Q2 as more merchants join its platform, adopt more services

Shopify reported strong second quarter results as revenue surged 57% from a year ago with subscriptions up 70% from a year ago.

The e-commerce platform company reported second quarter revenue of $1.12 billion with net income of $879.1 billion, or $6.90 a share. Net income for the second quarter included a $778 million unrealized net gain on equity investments.

Non-GAAP earnings for the second quarter were $284.6 million, or $2.24 a share.

Wall Street was expecting Shopify to report second quarter revenue of $1.04 billion with non-GAAP earnings of 97 cents a share.

Shopify surged during the COVID-19 pandemic as small businesses ramped up digital commerce operations. Shopify has also expanded its platform. The bet has paid off as Shopify ended the quarter with $7.76 billion in cash, cash equivalents and marketable securities and increasingly serves as a counterweight to Amazon.

Developments in the quarter include:

• Shopify expands Shop Pay to non-Shopify merchants on Facebook, Google
• Shopify debuts Online Store 2.0, a major rebuild of its Liquid template language
• Google Cloud expands partnership with Shopify, forms merchant integration with Square
• Shopify joins the Open Invention Network Linux patent protection group

Amy Shapero, CFO of Shopify, said the company executed well. She said:

As consumer spending remained strong, our merchants thrived and extracted more value from our platform, contributing to our rapid growth.

Second quarter highlights include:

• Subscription solutions revenue was $334.2 million, up 70% from a year ago, as more merchants joined the platform.
• Merchant solutions revenue was $785.2 million, up 52% from a year ago.
• Monthly recurring revenue was $95.1 million as of June 30. That tally is up from $57 million in the same quarter a year ago.

On a conference call, Shopify President Michael Finkelstein said retail point-of-sale is back to pre-COVID levels and customers are using upgraded hardware and software.

As physical stores reopen and merchants are better equipped with their upgraded hardware and software, they're going to sell more. We did roll out an all-new Shopify Point-of-sale with new hardware and integrated payments in places in new geographies like places like Australia, and we're making great progress in places like U.K. and Ireland as well. So we're trying to enable merchants in these regions to seamlessly bridge their online business and their offline commerce.

Finkelstein added that Shopify's social commerce efforts are faring well.

Shopify said its outlook for the rest of 2021 is consistent with its assumptions from February. The company expects consumer spending to rotate back to services and offline retail with ecommerce growth more normalized. Shopify also sees strong growth for 2021, but at a lower rate than 2020.

Other items in the outlook include that growth rates for subscriptions and merchant solutions will be more similar than they have been. Customers are likely to adopt more merchant solutions including Shopify Payments, Shopify Shipping and Shopify Capital.

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The company added:

We continue to expect rapid growth in gross profit dollars in 2021 and plan to continue reinvesting back into our business as aggressively as we can, with the year-over-year growth in operating expenses accelerating in Q3 and again in Q4. Due to the sustained momentum of digital commerce trends in the first half of 2021 combined with the U.S. stimulus distributed in March and April of 2021, Shopify generated higher-than-anticipated revenue while incurring lower-than-planned operating expenses as a percent of revenue in the first half of 2021. As a result, we now expect full-year 2021 adjusted operating income to be above the level we achieved in 2020.