After Shopify (NYSE: SHOP) reported its third-quarter results, its leadership team shared some important information with investors during the subsequent conference call. Here are the key takeaways for long-term shareholders.
1. Shopify responds to Citron's attack
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Short-seller Andrew Left of Citron Research released a scathing report in early October describing Shopify as an "illegal get-rich-quick scheme" whose marketing practices ran afoul of Federal Trade Commission regulations. The stock was hit hard on the news and has yet to recover fully. Yet Lutke's response makes it clear that Shopify and its lawyers believe that Citron's claims are without merit.
2. Shopify wins when its customers succeed
To further counter Citron's accusations, Lutke highlighted the fact that a large portion of Shopify's revenue is tied to the sales generated by its users. The company simply could not produce the type of growth that it's been reporting unless the overall sales generated by its users were also growing rapidly. That doesn't mean that every business on its platform will succeed, and Shopify acknowledges this unfortunate fact. But it does mean that many of its users are finding success, and Shopify's growing suite of services is no doubt contributing to this.
3. Empowering the underdogs
In many industries, competitive dynamics such as network effects and scale advantages are helping large corporations grow increasingly dominant. This is making it difficult for smaller businesses to compete. Shopify wants to help even the odds for these underdogs. By providing a suite of high-quality e-commerce capabilities, Shopify supplies its customers with technology that is on par with -- and often even better than -- what their larger competitors are currently using.
4. Yet large enterprises are also flocking to its platform
With the tech advantages that Shopify is providing to its users, it's perhaps unsurprising that larger businesses are also beginning to take advantage of its offerings. Shopify Plus provides enterprise-grade solutions for high volume merchants and other large companies. It's an increasingly important part of Shopify's business, accounting for 20% of its monthly recurring revenue in the third quarter, up from 15% in the prior year period.
5. Fueling its customers' growth
Shopify's desire to meet its customers' needs extends beyond e-commerce. Through its Shopify Capital division, it helps to supply small businesses with the working capital they need to scale their operations. And judging by the rapid growth of this segment -- Shopify Capital issued $44.1 million in merchant cash advances in the third quarter, nearly five times the $9.2 million issued in Q3 2016 -- this is a need that's been largely unmet by traditional sources of business financing. That gives Shopify an additional way to add value for its customers -- and another powerful engine to fuel its own revenue and profit growth in the years ahead.
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