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Shopify (SHOP - Free Report) reported second-quarter 2024 adjusted earnings of 26 cents per share, comfortably beating the Zacks Consensus Estimate by 30%. The figure jumped 85.7% year over year.
Total revenues jumped 20.7% year over year to $2.05 billion, which beat the Zacks Consensus Estimate by 2.03%. After adjusting for the sale of the logistics business, revenues jumped 25% year over year.
Quarter in Detail
Subscription Solutions revenues increased 26.8% year over year to $563 million, primarily due to more merchants joining the platform, as well as pricing changes for existing merchants on its Standard and Plus subscription plans.
Merchant Solutions revenues improved 18.6% year over year to $1.48 billion, driven by robust Gross Merchandise Volume (GMV), which improved 22% year over year to $67.2 billion.
GMV growth was driven by strong same-store sales growth in Shopify’s existing merchants, continued growth in the global merchant base, 32% year-over-year growth in Europe (both strong same-sales growth and new merchant acquisition) and growth in offline business.
Offline GMV grew 27% in the second quarter of 2024.
International merchant base grew 30% year over year in the reported quarter. More than 50% of this merchant base came from outside the core English-speaking markets.
In the reported quarter, $41 billion of GMV was processed on Shopify Payments in the second quarter, 30% higher year over year. The penetration rate of Shopify Payments, as a percentage of GMV, was 61% compared with 58% in the year-ago quarter.
In the reported quarter, Shopify launched a Point of Sale (POS) terminal to eight additional countries that contributed a 2.4 times increase in GMV through its POS terminal on a sequential basis.
As of Jun 30, 2024, Monthly Recurring Revenues (MRR) were $169 million, up 25% from the year-ago quarter.
In the reported quarter, Shop Pay increased 45%, processing $16 billion of GMV and accounted for 39% of Shopify’s Gross Payments Volume (GPV).
GPV grew to $41.1 billion, constituting 61% of GMV processed in the second quarter compared with $31.7 billion (58% of GMV) in the year-ago quarter.
Operating Details
Non-GAAP gross profit increased 24.6% year over year to $1.05 billion. The gross margin expanded 160 basis points (bps) year over year to 51.4%.
Subscription gross margin expanded 190 bps year over year to 82.8%. Merchant Solutions gross margin expanded 100 bps on a year-over-year basis to 39.1%.
Adjusted sales and marketing expenses, as a percentage of revenues, increased 30 bps year over year to 16.8%.
Adjusted general and administrative expenses decreased 110 bps to 4.5%. Adjusted research and development expenses, as a percentage of revenues, declined 390 bps year over year to 13.5%.
Non-GAAP operating expenses increased 7.9% year over year to $753 million. Operating expenses, as a percentage of revenues, were 36.8% compared with the year-ago quarter’s 41.2%.
Shopify’s adjusted operating income was $299 million against the year-ago quarter’s income of $146 million.
Balance Sheet
As of Jun 30, 2024, Shopify had cash, cash equivalents and marketable securities balance of $5.02 billion compared with $5.2 billion as of Mar 31, 2024.
The free cash flow was $333 million in the second quarter of 2024 compared with $232 million in the previous quarter.
Free cash flow margin more than doubled on a year-over-year basis to 16%.
Guidance
For the third quarter of 2024, Shopify expects revenue growth in the low-to-mid-twenties on a year-over-year basis.
The gross margin is expected to increase 50 bps sequentially.
Operating expenses, as a percentage of revenues, are expected between 41% and 42%.
The free cash flow margin is expected to remain unchanged sequentially. Shopify continues to expect to deliver a double-digit free cash flow margin for the rest of the year.
Zacks Rank & Stocks to Consider
Shopify currently carries a Zacks Rank #3 (Hold).
Shopify shares have declined 18.5% year to date, underperforming the Zacks Computer & Technology sector’s growth of 11.6%.
Image: Bigstock
Shopify (SHOP) Q2 Earnings Beat Estimates, Revenues Rise Y/Y
Shopify (SHOP - Free Report) reported second-quarter 2024 adjusted earnings of 26 cents per share, comfortably beating the Zacks Consensus Estimate by 30%. The figure jumped 85.7% year over year.
Total revenues jumped 20.7% year over year to $2.05 billion, which beat the Zacks Consensus Estimate by 2.03%. After adjusting for the sale of the logistics business, revenues jumped 25% year over year.
Quarter in Detail
Subscription Solutions revenues increased 26.8% year over year to $563 million, primarily due to more merchants joining the platform, as well as pricing changes for existing merchants on its Standard and Plus subscription plans.
Merchant Solutions revenues improved 18.6% year over year to $1.48 billion, driven by robust Gross Merchandise Volume (GMV), which improved 22% year over year to $67.2 billion.
Shopify Inc. Price, Consensus and EPS Surprise
Shopify Inc. price-consensus-eps-surprise-chart | Shopify Inc. Quote
GMV growth was driven by strong same-store sales growth in Shopify’s existing merchants, continued growth in the global merchant base, 32% year-over-year growth in Europe (both strong same-sales growth and new merchant acquisition) and growth in offline business.
Offline GMV grew 27% in the second quarter of 2024.
International merchant base grew 30% year over year in the reported quarter. More than 50% of this merchant base came from outside the core English-speaking markets.
In the reported quarter, $41 billion of GMV was processed on Shopify Payments in the second quarter, 30% higher year over year. The penetration rate of Shopify Payments, as a percentage of GMV, was 61% compared with 58% in the year-ago quarter.
In the reported quarter, Shopify launched a Point of Sale (POS) terminal to eight additional countries that contributed a 2.4 times increase in GMV through its POS terminal on a sequential basis.
As of Jun 30, 2024, Monthly Recurring Revenues (MRR) were $169 million, up 25% from the year-ago quarter.
In the reported quarter, Shop Pay increased 45%, processing $16 billion of GMV and accounted for 39% of Shopify’s Gross Payments Volume (GPV).
GPV grew to $41.1 billion, constituting 61% of GMV processed in the second quarter compared with $31.7 billion (58% of GMV) in the year-ago quarter.
Operating Details
Non-GAAP gross profit increased 24.6% year over year to $1.05 billion. The gross margin expanded 160 basis points (bps) year over year to 51.4%.
Subscription gross margin expanded 190 bps year over year to 82.8%. Merchant Solutions gross margin expanded 100 bps on a year-over-year basis to 39.1%.
Adjusted sales and marketing expenses, as a percentage of revenues, increased 30 bps year over year to 16.8%.
Adjusted general and administrative expenses decreased 110 bps to 4.5%. Adjusted research and development expenses, as a percentage of revenues, declined 390 bps year over year to 13.5%.
Non-GAAP operating expenses increased 7.9% year over year to $753 million. Operating expenses, as a percentage of revenues, were 36.8% compared with the year-ago quarter’s 41.2%.
Shopify’s adjusted operating income was $299 million against the year-ago quarter’s income of $146 million.
Balance Sheet
As of Jun 30, 2024, Shopify had cash, cash equivalents and marketable securities balance of $5.02 billion compared with $5.2 billion as of Mar 31, 2024.
The free cash flow was $333 million in the second quarter of 2024 compared with $232 million in the previous quarter.
Free cash flow margin more than doubled on a year-over-year basis to 16%.
Guidance
For the third quarter of 2024, Shopify expects revenue growth in the low-to-mid-twenties on a year-over-year basis.
The gross margin is expected to increase 50 bps sequentially.
Operating expenses, as a percentage of revenues, are expected between 41% and 42%.
The free cash flow margin is expected to remain unchanged sequentially. Shopify continues to expect to deliver a double-digit free cash flow margin for the rest of the year.
Zacks Rank & Stocks to Consider
Shopify currently carries a Zacks Rank #3 (Hold).
Shopify shares have declined 18.5% year to date, underperforming the Zacks Computer & Technology sector’s growth of 11.6%.
Bilibili (BILI - Free Report) , Cisco Systems (CSCO - Free Report) and Applied Materials (AMAT - Free Report) are some better-ranked stocks that investors can consider in the broader sector, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Bilibili shares have gained 23% in the year-to-date period. BILI is set to report its second-quarter 2024 results on Aug 22.
Cisco Systems shares have lost 10.7% year to date. CSCO is set to report its fourth-quarter fiscal 2024 results on Aug 14.
Applied Materials shares have gained 10.2% year to date. AMAT is set to report its third-quarter fiscal 2024 results on Aug 15.