/cloudfront-us-east-1.images.arcpublishing.com/tgam/ULL6O2RZJNLZZM7BY4WMA3647M.jpg)
Shopify Inc. overwhelmed investor expectations Thursday with third-quarter results that beat the financial forecasts of analysts by a wide margin and included its largest quarterly profit to date.
The Ottawa-based commerce software provider, which has beaten analyst estimates consistently since going public in May 2015, said it generated US$767.4-million in revenue in the quarter ended Sept 30, more than US$110-million above consensus analyst expectations. The company, which rarely earns a bottom line profit, posted net income of US$191-million, up from a loss of US$72.8-million in the same period a year earlier.
Financial analysts pay closer attention to Shopify’s adjusted net income. That too far exceeded their average estimates in the 49 cent-per-share range, as Shopify earned US$140.8-million, or US$1.13 per share.
“While we were expecting a strong quarter the results came in even better than our bullish expectations,” said National Bank Financial analyst Richard Tse, who had expected Shopify to earn US$688-million in the quarter and post adjusted earnings per share of US57 cents.
Shopify stock was up by 4 per cent in pre-market trading on the New York Stock Exchange.
Shopify, which provides a software platform enabling merchants to sell their wares and manage their businesses over the internet, has seen its stock soar by close to 150 per cent this year. It has become Canada’s most valuable company due to a surge in e-commerce business as consumers lived more of their lives at home during the pandemic, and entrepreneurs turned to the internet to make a living.
In particular, the company said monthly subscription revenue that shop owners pay to use its software increased by 48 per cent over the third quarter last year, to US$245.3-million, while gross merchandise volume, or the sum of goods and services purchased through Shopify-enabled stores, more than doubled to $30.9-billion.
“The accelerated shift to digital commerce triggered by COVID-19 is continuing, as more consumers shop online and entrepreneurs step up to meet demand,” Shopify president Harley Finkelstein said in a statement.
Most analysts had expected GMV to subside from the second-quarter level, but instead it surpassed it by three percent. Mr. Tse said “by contrast, we’ve seen similar companies reporter quarter-over-quarter declines in GMV anywhere from eight to 10 per cent.”
But the company, which withdrew and stopped giving financial guidance early in the pandemic, continued to caution investors that the pandemic has created distorting effects on the economy that may not continue to benefit Shopify. “Near-term demand for our subscription and merchant solutions depends on several external factors that are particularly fluid at present,” the company stated in its earnings release. “These include unemployment, fiscal stimulus, and the magnitude and duration of the COVID-19 pandemic, all of which may impact new shop creation on our platform and consumer spending.”
The company has taken advantage of its soaring stock price by issuing stock twice this year. Its war chest of cash, cash equivalents and marketable securities stood at US$6.1-billion at the end of the quarter.
Shopify also continued to expand its partnerships with popular social media platforms this week, announcing a TikTok channel that will allow merchants to advertise on the popular short video site.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.
