Shopify Announces First-Quarter 2023 Financial Results;
Agrees to Sell Shopify Logistics to Flexport
Shopify sharpens its focus on building and scaling the future of commerce
Internet, Everywhere - May 4, 2023 - Shopify Inc. (NYSE, TSX: SHOP), a provider of essential internet
infrastructure for commerce, announced today financial results for the quarter ended March 31, 2023.
“Shopify’s strong first quarter results demonstrate once again that we’re the go-to solution powering businesses of
all sizes, on every surface where they sell. The changes we’re announcing today will ensure we keep pace with the
high velocity of change before us, delivering the cutting-edge solutions our customers have come to expect from
Shopify,” said Shopify’s President, Harley Finkelstein.
Please see a letter from our Founder and CEO, Tobias Lütke addressing the team changes we announced today at
https://news.shopify.com/important-team-and-business-changes.
First Quarter 2023 Business Highlights
Shopify welcomed more brands on our platform in our first quarter of 2023, including consumer favorites like Keen,
7 for All Mankind, Seiko, and Herschel Supply. The following are notable highlights from our first quarter across
our three key merchant investment themes, which are helping merchants expand from first sale to full scale, go
global and attract more consumers through more channels.
• Launched Commerce Components by Shopify (“CCS”), the modern, composable stack for enterprise retail.
CCS combines access to Shopify’s foundational, high-performing components along with flexible APIs to
build dynamic customer experiences that integrate seamlessly with a retailer’s preferred back office
services.
• Announced updated pricing for Basic, Shopify, and Advanced plans on January 23, 2023. New pricing
went into effect for new merchants on January 24, 2023 and for existing merchants prior to January 24,
2023 on April 23, 2023.
• Powered by OpenAI’s ChatGPT API, Shopify launched a new AI shopping assistant on our Shop app,
creating a fast and more personalized shopping experience for consumers that serves up more relevant
product recommendations across Shop’s millions of products.
• Partnered with Intuit to become their preferred partner to migrate new retailers in need of a Point-of-Sale
solution after Intuit made the decision to sunset its QuickBooks Desktop Point-Of-Sale product.
• Launched Pinterest as an advertising channel for Shopify Audiences. Shopify Audiences is now driving
performance-paid advertising on Meta, Google, and Pinterest.
• Signed partnership agreements with systems integrators IBM Consulting and Cognizant to accelerate the
adoption of CCS and Shopify Plus with larger brands and in more geographies.
First-Quarter Financial Highlights
• Gross Merchandise Volume1 ("GMV") increased 15% to $49.6 billion, an increase of $6.4 billion over the
first quarter of 2022, up 18% on a constant currency basis.
• Total revenue increased 25% to $1.5 billion compared to the prior year, up 27% on a constant currency
basis.
• Merchant Solutions revenue increased 31% to $1.1 billion compared to the prior year, up 33% on a
constant currency basis, driven primarily by the growth of GMV and continued penetration of Shopify
Payments.
• Gross Payments Volume2 ("GPV") grew to $27.5 billion, representing 56% of GMV processed in the
quarter, versus $22.0 billion, or 51%, for the first quarter of 2022.
• Subscription Solutions revenue increased 11% to $382 million compared to the prior year, up 11% on a
constant currency basis, primarily due to more merchants joining the platform as well as higher variable
platform fees and apps.
• Monthly Recurring Revenue3 ("MRR") as of March 31, 2023 increased 10% to $116 million compared to
the prior year. MRR gains were driven by more merchants converting to full-priced Standard subscription
plans from our trial experiments as well as continued growth in the number of Shopify Plus merchants and
retail locations utilizing our Point-of-Sale Pro solution. Shopify Plus contributed $39 million, or 34%, of
MRR compared with 30% of MRR as of March 31, 2022.
• Gross profit dollars grew 12% to $717 million, compared to the prior year. Gross margin for the quarter
was 47.5% compared to 53.0% in the first quarter of 2022, driven primarily by a higher mix of revenue
from our lower margin Merchant Solutions segment, primarily from the lower margin revenue
contributions from Deliverr and Shopify Payments.
• Operating loss was $193 million, or 13% of revenue, versus $98 million, or 8% of revenue, for the
comparable period a year ago.
• Adjusted operating loss4 was $31 million, or 2% of revenue, compared with adjusted operating income of
$32 million or 3% of revenue in the first quarter of 2022. The difference primarily reflects lower gross
margin percentage compared to the same period last year and increases in operating expenses related to
higher compensation, including Deliverr.
1. Gross Merchandise Volume, or GMV, represents the total dollar value of orders facilitated through the Shopify platform including certain apps and channels for which a revenue-sharing arrangement is
in place in the period, net of refunds, and inclusive of shipping and handling, duty and value-added taxes.
2. Gross Payments Volume, or GPV, is the amount of GMV processed through Shopify Payments.
3. Monthly Recurring Revenue, or MRR, is calculated by multiplying the number of merchants by the average monthly subscription plan fee in effect on the last day of that period and is used by
management as a directional indicator of subscription solutions revenue going forward assuming merchants maintain their subscription plan the following month.
4. Non-GAAP financial measures exclude the effect of stock-based compensation expenses and related payroll taxes, amortization of acquired intangibles, unrealized and realized gains and losses on
equity and other investments, and tax effects related to non-GAAP adjustments. Please refer to "Non-GAAP Financial Measures" in this press release for more information.
• Capital expenditures5 were $14 million compared to $16 million in the first quarter of 2022.
• Free Cash Flow6 was $86 million or 6% of revenues, compared with negative free cash flow of $41
million or 3% of revenues in the first quarter of last year.
• Shopify had cash and marketable securities of $4.9 billion as of March 31, 2023, and a net cash position of
$3.9 billion after consideration of the outstanding convertible notes.
• Shopify Capital extended $477 million in merchant cash advances and loans in the first quarter of 2023,
and had approximately $629 million outstanding on March 31, 2023.
Subsequent to the First-Quarter 2023
On May 4, 2023, Shopify took steps to change the shape of its business. These changes allow Shopify to sharpen our
focus on our mission, so we can have the highest impact on merchants. The changes impact headcount across the
company, including significant changes to Shopify’s logistics business.
Shopify Sells Logistics Assets to Flexport
On May 3, 2023, Shopify entered into a definitive agreement to sell the majority of our logistics business, including
the people, technology, and services related to these operations, to Flexport, a leading tech-driven global logistics
platform. Shopify has been building a world-class logistics solution that is port to porch – giving merchants speed,
flexibility and affordability, all with a simple, seamless integration into the Shopify tools they already know and rely
on every day. This transaction will take the logistics solution Shopify has been building and place it in the hands of a
trusted and mission-aligned partner Flexport.
The transition of Shopify logistics assets to Flexport will be led by Harish Abbott, Co-founder and CEO of Deliverr,
under the guidance of Flexport CEO Dave Clark. Under the terms of the agreement, Shopify will receive stock
representing a 13% equity interest in Flexport, on top of its existing equity interest. In connection with the closing of
the sale, Shopify is entitled to name a director to Flexport’s board. Flexport will become the official logistics partner
for Shopify and the preferred provider for Shop Promise. This transaction is expected to close in the second quarter
of 2023, subject to certain conditions and regulatory approval, as applicable.
2023 Outlook
The outlook that follows supersedes all prior financial outlook statements made by Shopify, constitutes forward-
looking information within the meaning of applicable securities laws, and is based on a number of assumptions and
subject to a number of risks. Actual results could vary materially as a result of numerous factors, including certain
risk factors, many of which are beyond Shopify’s control. Please see "Forward-looking Statements" below for more
information. Our financial outlook includes the pricing changes to our subscription plans and assumptions related to
the planned sale of our logistics businesses and workforce reduction.
5. Capital expenditures is equivalent to the amount included in "acquisition of property and equipment" on our Condensed Consolidated Statement of Cash Flows for the reported period.
6. Free Cash Flow is defined as cash flow from operations less capital expenditures. Please refer to “Non-GAAP Financial Measures” in this press release for more information.
For the second quarter of 2023, we expect:
• Revenue to grow at a similar rate to the first quarter growth rate on a year-over-year basis;
• Gross margin percentage to be similar to the first quarter 2023 gross margin percentage;
• Operating expense dollars, when excluding one-time items related to the planned sale of our logistics
businesses and severance, to decrease by a mid-single digit percentage compared to operating expenses in
the first quarter 2023; and,
• Stock-based compensation to be approximately $110 million, excluding one-time charges related to the sale
of our logistics businesses.
Additionally, we expect to achieve free cash flow profitability for each quarter of 2023 and capital expenditures of
approximately $100 million for the full year. We also estimate that we will incur a severance charge in the range of
$140 to $150 million in the second quarter of 2023 related to the workforce reduction.
Quarterly Conference Call
Shopify’s management team will hold a conference call to discuss our first-quarter results today, May 4, 2023, at
8:30 a.m. ET. The conference call will be webcast on the investor relations section of Shopify’s website at https://
investors.shopify.com/news-and-events/. An archived replay of the webcast will be available following the
conclusion of the call.
Shopify’s First Quarter 2023 Interim Unaudited Condensed Consolidated Financial Statements and Notes and its
First Quarter 2023 Management's Discussion and Analysis will be available on Shopify’s website at
www.shopify.com and will be filed on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
About Shopify
Shopify is the leading global commerce company that provides essential internet infrastructure for commerce,
offering trusted tools to start, scale, market, and run a retail business of any size. Shopify makes commerce better for
everyone with a platform and services that are engineered for speed, customization, reliability, and security, while
delivering a better shopping experience for consumers online, in store and everywhere in between. Shopify powers
millions of businesses in more than 175 countries and is trusted by brands such as Mattel, Gymshark, Heinz, FTD,
Netflix, Kylie Cosmetics, SKIMS, Supreme, and many more. For more information, visit www.shopify.com.
Forward-looking Statements
This press release including our CEO’s message to Shopify employees contains certain forward-looking statements
within the meaning of applicable securities laws, including statements related to Shopify’s planned business
initiatives and operations and outlook, the sale of the majority of Shopify’s logistics business in the second quarter
of 2023, the performance of Shopify's merchants, expected changes to the shape of Shopify’s business and related
headcount impact and associated charges, the impact of Shopify's business on its merchants and other entrepreneurs,
and economic activity and consumer spending. Words such as "continue", "will", “plan”, “intend”, "enable",
“believe” and "expect" or similar expressions are intended to identify forward-looking statements.
These forward-looking statements are based on Shopify’s current projections and expectations about future events
and financial trends that management believes might affect its financial condition, results of operations, business
strategy and financial needs, and on certain assumptions and analysis made by Shopify in light of the experience and
perception of historical trends, current conditions and expected future developments and other factors management
believes are appropriate. These projections, expectations, assumptions and analyses are subject to known and
unknown risks, uncertainties, assumptions and other factors that could cause actual results, performance, events and
achievements to differ materially from those anticipated in these forward-looking statements. Although Shopify
believes that the assumptions underlying these forward-looking statements are reasonable, they may prove to be
incorrect, and readers cannot be assured that actual results will be consistent with these forward-looking statements.
Actual results could differ materially from those projected in the forward-looking statements as a result of numerous
factors, including certain risk factors, many of which are beyond Shopify’s control, including but not limited to:
sustaining our rapid growth; managing our growth; our potential inability to compete successfully against current
and future competitors; the security of personal information we store relating to merchants and their buyers, as well
as consumers with whom we have a direct relationship including users of our apps; our ability to successfully scale,
optimize and operate Shopify logistic services if the proposed sale to Flexport is not completed for any reason; that
the relevant conditions precedent for the sale of Shopify’s logistics businesses will not be satisfied, that such
transactions will not close or proceed as anticipated and that the impact of such transactions may differ materially
from management’s current expectations; a denial of service attack or security breach; our ability to innovate; our
limited operating history in new and developing markets and geographic regions; international sales and operations
and the use of our platform in various countries; our current reliance on two suppliers to provide the technology we
offer through Shopify Payments; the reliance of our growth in part on the success of our strategic relationships with
third parties; our potential inability to hire, retain and motivate qualified personnel; our use of third-party cloud
providers to deliver our platform services; complex and changing laws and regulations worldwide; our dependence
on the continued services of our senior management and other key employees; the COVID-19 pandemic and its
impact on our business, financial condition and results of operations including the impact of measures taken to
contain the virus and the impact on the global economy and consumer spending on our merchants' and partners'
ecosystem; payments processed through Shopify Payments, Shop Pay Installments, or payments processed or funds
managed through Shopify Balance; our potential failure to effectively maintain, promote and enhance our brand; our
history of losses and our ability to maintain profitability; serious errors or defects in our software or hardware; our
potential inability to achieve or maintain data transmission capacity; activities of merchants or partners or the
content of merchants' shops and our ability to detect and address unauthorized activity on our platform; evolving
privacy laws and regulations, cross-border data transfer restrictions, data localization requirements and other
domestic or foreign regulations that may limit the use and adoption of our services; the impact of acquisitions,
divestitures, investments, or other significant transactions; risks associated with Shopify Capital, and offering
financing to merchants; potential claims by third parties of intellectual property infringement or other third party or
governmental claims, litigation, disputes, or other proceedings; our reliance on computer hardware, purchased or
leased, software licensed from and services rendered by third parties, in order to provide our solutions and run our
business, sometimes by a single-source supplier; the impact of worldwide economic conditions, such as economic
impacts due to the Russian invasion of Ukraine, including the resulting effect on spending by small and medium-
sized businesses or their customers; manufacturing and supply chain risks; unanticipated changes in tax laws or
adverse outcomes resulting from examination of our income or other tax returns; being required to collect federal,
state, provincial or local business taxes, sales and use taxes or other indirect taxes in additional jurisdictions on
transactions by our merchants; the interoperability of our platform with mobile devices and operating systems;
changes to technologies used in our platform or new versions or upgrades of operating systems and internet
browsers; our potential inability to obtain, maintain and protect our intellectual property rights and proprietary
information or prevent third parties from making unauthorized use of our technology; our pricing decisions for our
solutions, including localized pricing for different markets; our use of open source software; seasonal fluctuations;
exchange rate fluctuations that may negatively affect our results of operations; our dependence upon consumers’ and
merchants’ access to, and willingness to use, the internet for commerce; provisions of our financial instruments
including our notes; our potential inability to raise additional funds as may be needed to pursue our growth strategy
or continue our operations, on favorable terms or at all; our tax loss carryforwards; the ownership of our shares; our
sensitivity to interest rate fluctuations; our concentration of credit risk, and the ability to mitigate that risk using third
parties, periodic variability in how compensation expense is allocated between cash and stock-based compensation
due to compensation allocations by our employees under our new compensation system, Flex Comp; industry or
macroeconomic trends or developments, including inflation; and other events and factors disclosed previously and
from time to time in Shopify’s filings with the U.S. Securities and Exchange Commission and the securities
commissions or similar securities regulatory authorities in each of the provinces or territories of Canada. The
forward-looking statements contained in this news release, including our CEO’s message to employees incorporated
herein, represent Shopify’s expectations as of the date of this news release, or as of the date they are otherwise stated
to be made, and subsequent events may cause these expectations to change. Shopify undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a result of new information, future events or
otherwise, except as may be required by law.
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