Shopify's first quarter results surged with revenue growth up 110% from a year ago and profits surged due to subscriptions as well as an investment in Affirm.
The company, which bills itself as an e-commerce operating system, said customers continued with their digital commerce efforts as the US economy opened up.
Shopify reported first quarter revenue of $988.6 million with subscription revenue growing 71% from a year ago and merchant solutions jumping 137%.
The company reported net income of $1.26 billion, or $9.94 a share, due to a $1.3 billion unrealized gain from Shopify's investment in Affirm, which recently went public. Non-GAAP earnings for the first quarter were $2.01 a share.
Wall Street was expecting Shopify to report first quarter revenue of $865.5 million with non-GAAP earnings of 73 cents a share.
Harley Finkelstein, Shopify's president, said merchant growth accelerated in the first quarter as digital investments paid off.
During the quarter, Shopify optimized its Shopify Fulfillment Network and developed its mobile shopping assistant called Shop.
Shop had more than 107 million registered users including buyers using Shop Pay and Shop App. Of those, 24 million were monthly active users.
On a conference call with analysts, Finkelstein said discovery and social marketing partnerships are becoming an increasing value prop for Shopify customers.
Discovery of new buyers is a top pain point for businesses. Multichannel selling, which is one of our core value propositions is becoming more critical as the cost of customer acquisition climbs and the lines blur between online and off-line commerce. Our sales and marketing channels help merchants to show up where future buyers are spending time. We are ushering in a new era of social commerce and helping more brands and consumers engage in the digital mainstreams. The number of shops actively selling on Facebook shops has more than quadrupled since Q1 a year ago as well as the GMV through Facebook.
While still small, the launch of Facebook Shops in May of last year is clearly starting to make a difference here. In Q1, we expanded our marketing partnership with TikTok internationally to an additional 14 countries in North America, EMEA and APAC. So far, we've seen good traction in the adoption of TikTok in the U.S. since we launched the integration last October, and we recently expanded our Pinterest channel into 27 additional markets, opening discoverability and sales opportunities worldwide.
As for the outlook, Shopify said the reopening of the economy and consumers increasing offline shopping will "likely resume a more normalized pace of growth." Shopify also said that stimulus check payments also boosted sales, but that effect ended in early April.
Overall, Shopify said it expects strong revenue growth in 2021, but at a lower rate than 2020. Growth of subscription and merchant solutions will be more similar to recent pre-COVID years. The company said:
2020 catapulted commerce into a period of incredibly rapid change, presenting Shopify with unprecedented opportunities in 2021 to accelerate innovation. We continue to expect rapid growth in gross profit dollars in 2021 and plan to reinvest back into our business as aggressively as we can, with the year-over-year growth in operating expenses accelerating each quarter throughout the rest of the year. As such, we expect full year 2021 adjusted operating income to be below the level we achieved in 2020.