Shopify Inc. Sales Soar as Merchants Flock to Its Platform

By Markets Fool.com

Image source: Shopify.

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As Shopify reported in its fourth-quarter results on Feb. 17, the provider of cloud-based commerce solutions for small- and medium-sized businesses is enjoying accelerated growth in the number of merchants adopting its services and the amount of merchandise sold via its platform.

Shopify results: The raw numbers

Q4 2015

Q4 2014

Growth (YOY)

Revenue

$70.173 million

$35.182 million

99%

Net Loss

$6.307 million

$4.798 million

N/A

Earnings Per Share

($0.08)

($0.12)

N/A

Data source: Shopify Q4 2015 earnings press release.

What happened with Shopify this quarter?
Subscription revenue jumped 70% year over year to$34.6 million, with the number of merchants using Shopify's platform increasing to 243,000, up from 200,000 in Q3 and 175,000 in the second quarter.

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Sales for Shopify's merchant solutions segment -- which includes payments and shipping services -- increased an even more impressive 140% to$35.6 million, driven primarily by the strong growth of Shopify Payments.

Together, that helped total revenue surge 99% year over year to $70.2 million.

Monthly recurring revenue (the number of merchants with a subscription times the average subscription fee) as ofDec. 31, 2015, was$11.3 million, an increase of 72% from the prior year. And gross merchandise volume-- which represents the total dollar value of orders processed on Shopify'splatform -- rose 109% to$2.8 billion in the fourth quarter.

Helping to drive those results is the fact that Shopify is not only signing up new users, but also doing an excellent job of retaining its existing customers, as evidenced by a monthly billings retention rate that exceeded 100% in 2015.

Importantly, Shopify is excelling in the mobile commerce arena, with 61% of the traffic and 46% of orders on theShopifyplatform originating from mobile devices inDecember. The company is also seeing rapid adoption of its social media selling solutions, as more than 25% of Shopify'smerchants have already enabled these tools that allow them to utilize the new "buy button" features on major social media networks such as Facebook , Pinterest, and Twitter .

Still, Shopify remains unprofitable, with net loss increasing to $6.3 million from $4.8 million in the year-ago quarter.

What management had to say
"We are coming off not only a tremendous quarter forShopify, but also for the hundreds of thousands of merchants that trust theShopifyplatform to power their businesses," said founder and CEO Tobi Lutke in a press release. "We believe that multichannel, cloud commerce is an industrywide shift that is still in its infancy."

Looking forward
Shopifyexpects first-quarter revenue to be between $65 million and $67 million. Additionally, the company anticipates GAAP and adjusted operating losses in the ranges of$11 million to $12 million and$6.5 millionto$7.5 million, respectively.

Management also issued its outlook for 2016, including:

  • Revenue in the range of$320 million to $330 million.
  • GAAP operating loss between$36 million and $42 million.
  • Adjusted operating lossin the range of$16 million to $22 million.

"Our strong fourth-quarter performance highlights the strength of our business model, one where we win when our merchants win," saidCFO Russ Jones. "We're entering 2016 with excellent momentum and expect to close this year even better positioned than we are today."

The article Shopify Inc. Sales Soar as Merchants Flock to Its Platform originally appeared on Fool.com.

Joe Tenebruso has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Facebook and Twitter. The Motley Fool recommends Shopify. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.