Shopify (SHOP) Q1 Earnings Beat Estimates, Revenues Rise Y/Y
Shopify SHOP reported first-quarter 2024 adjusted earnings of 20 cents per share, comfortably beating the Zacks Consensus Estimate by 25%. The company reported earnings of 1 cent per share in the year-ago quarter.
Total revenues jumped 23.4% year over year to $1.86 billion, which beat the Zacks Consensus Estimate by 1.36%.
Quarter in Detail
Subscription Solutions revenues increased 33.8% year over year to $511 million, primarily due to more merchants joining the platform, as well as pricing changes for existing merchants on its Standard subscription plans.
Merchant Solutions revenues improved 20% year over year to $1.35 billion, driven by robust Gross Merchandise Volume (GMV), which improved 23% year over year to $60.9 billion.
Shopify Inc. Price, Consensus and EPS Surprise
Shopify Inc. price-consensus-eps-surprise-chart | Shopify Inc. Quote
In the reported quarter, $36.2 billion of GMV was processed on Shopify Payments in the first quarter, 32% higher year over year. The penetration rate of Shopify Payments, as a percentage of GMV, was 60% compared with 56% in the year-ago quarter.
As of Mar 31, 2024, Monthly Recurring Revenues (MRR) were $151 million, up 32% from the year-ago quarter. Shopify Plus revenues were $48 million, representing 32% of MRR compared with 33% in the year-ago quarter.
In the reported quarter, Shop Pay increased 56%, processing $14 billion of GMV and accounted for 39% of Shopify’s Gross Payments Volume (GPV).
GPV grew to $36.2 billion, constituting 60% of GMV processed in the first quarter compared with $27.5 billion (56% of GMV) in the year-ago quarter.
Operating Details
Non-GAAP gross profit increased 30.4% year over year to $962 million. The gross margin expanded 280 basis points (bps) year over year to 51.7%.
Adjusted sales and marketing expenses, as a percentage of revenues, gained 80 bps year over year to 18.8%. Adjusted general and administrative expenses decreased 170 bps to 5.3%.
Moreover, adjusted research and development expenses, as a percentage of revenues, decreased 920 bps year over year to 14.1%.
Non-GAAP operating expenses decreased 1% year over year to $761 million. Operating expenses, as a percentage of revenues, were 40.9% compared with the year-ago quarter’s 51%.
Shopify’s adjusted operating income was $201 million against the year-ago quarter’s loss of $31 million.
Balance Sheet
As of Mar 31, 2024, Shopify had cash, cash equivalents and marketable securities balance of $5.2 billion compared with $5 billion as of Dec 31, 2023.
The free cash flow was $232 million compared with $446 million in the year-ago quarter.
Guidance
For the second quarter of 2024, Shopify expects revenue growth in the high teens on a year-over-year basis. Adjusting for a 300-400 bps headwind related to the divestiture of the logistics business, revenues are expected to grow in the low to mid-twenties on a year-over-year basis.
The gross margin is expected to decrease 50 bps sequentially.
Operating expenses, as a percentage of revenues, are expected between 45% and 46%.
Zacks Rank & Stocks to Consider
Shopify currently carries a Zacks Rank #3 (Hold).
Shopify shares have declined 19.5% year to date, underperforming the Zacks Computer & Technology sector’s growth of 12.1%.
Nutanix NTNX, NetApp NTAP and NVIDIA NVDA are some better-ranked stocks that investors can consider in the broader sector. While Nutanix sports Zacks Rank #1 (Strong Buy) at present, NetApp and NVIDIA carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Nutanix shares have gained 38.8% in the year-to-date period. NTNX is set to report its third-quarter fiscal 2024 results on May 29.
NetApp shares have gained 24.2% year to date. NTAP is set to report its fourth-quarter fiscal 2024 results on May 30.
NVIDIA shares have gained 82.5% year to date. NVDA is set to report its first-quarter fiscal 2025 results on May 22.
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