Shopify Inc (TSX:SHOP) Inc reported second quarter earnings below expectations today, citing a miscalculation of the extent of pandemic-related online shopping, and forecasting further losses for the rest of the financial year.
Ottawa-based Shopify revenue rose to US$1.3 billion from a year earlier, but posted a loss of US$0.03 per share on an adjusted basis, not the expected profit of $0.30.
The company, which provides essential Internet infrastructure for commerce, laid off 10% of its workforce in recruiting, support, and sales roles on Tuesday, saying expected operating losses in the third and fourth quarters to exceed those of the second quarter, when it lost US$190 million on an operating basis.
“We now expect 2022 will end up being different, more of a transition year, in which e-commerce has largely reset to the pre-COVID trend line and is now pressured by persistent high inflation,” the company said in a statement Wednesday.
Shopify shares have lost about 77.1% since the beginning of the year versus the S&P 500's decline of 17.7%.
However, Shopify shares were trading at US$33, up 5.9% on Wednesday morning.
Shopify also noted that their financial outlook for the rest of 2022, “assumes that higher inflation will persist for the foreseeable future and, combined with rising interest rates, will pressure consumers’ wallets for purchases of goods.”
“The superpowers Shopify continued to build for our merchants in Q2 serve them well across virtually any channel and in any environment,” said Harley Finkelstein, Shopify’s president in the statement.
Total reported revenue growth year-over-year was negatively affected by approximately 1.5 percentage points given the significant strengthening of the US dollar relative to foreign currencies in the second quarter.
Subscription Solutions revenue was $366.4 million, up 10% year over year, primarily due to more merchants joining the platform. Gross profit dollars grew 6% to $655 million in the second quarter of 2022, compared with $620 million for the second quarter of 2021.
Net loss for the second quarter of 2022 was $1.2 billion, or $0.95 per basic and diluted share, compared with net income of $0.9 billion, or $0.69 per diluted share, for the second quarter of 2021.
As of June 30, 2022, Shopify had $6.95 billion in cash, cash equivalents and marketable securities, compared with $7.77 billion at December 31, 2021.
The number of new merchants joining the platform in the second half of 2022 is forecast to be higher than in the first half of 2022 as the company’s localized subscription prices and other commercial initiatives gain traction.
“While commerce through offline channels grew faster in Q2, where our exposure is lower but growing, we continued to see increased adoption of our solutions, enabling our merchants to remain agile against a challenging macro environment and highlighting the breadth and resilience of our business model,” said Amy Shapero, Shopify’s chief financial officer in the statement.