Shopify & MercadoLibre results & CV-19 insights

Both companies reported in the last 24 hours and both have set all time highs.

More to the point both have offered the most up to date, data driven insights into Covid-19 impact.

Mercadolibre (the Amazon or Ali Baba of South America) put results out yesterday with some enlightening commentary on the impact of Covid-19:…
Net Revenues of $652.1 million, up 70.5% year-over-year on an FX neutral basis
$8.1 billion Total Payment Volume, up 82.2% year-over-year on an FX neutral basis
$3.4 billion Gross Merchandise Volume, up 34.2% year-over-year on an FX neutral basis

Recent COVID-19 related key trends
Government-imposed total or partial lockdowns instituted throughout Latin America in late March impacted geographic segments and business lines differently. Additionally, the magnitude of negative impact was greater in the initial weeks following government mandated lockdowns, with gradual improvements as time elapsed.

The marketplace KPI’s hit a low point during the week of the 18th to the 24th of March. Year-over-year growth for items sold during that week troughed at 3.3%, with Fx Neutral GMV declining by 1.4%. From then onwards, we have seen a strong rebound, with growth rates accelerating in April to 75.8% year-over-year in Items Sold and 72.6% Fx Neutral year-over-year in GMV for the full month.
Initially, consumers seem to have pulled back on expenditures on non-essential items. This led to a mix shift in sales. Categories such as health, consumer packaged goods and toys and games showed strength, with volume growth in those categories exceeding 100% year-over-year on an FX neutral basis in some markets. Conversely, certain higher ticket, non-essential categories such as auto parts and consumer electronics saw marked declines in growth rates.
Managed logistics network continued operating normally, guaranteeing timely deliveries for orders shipped through it. Warehouses remain with no significant disruptions, rapidly approaching having half of our shipments already running on our own logistics network, not only improving average cost per order and shipping times but also service levels.

The fintech business also experienced an initial slowdown during the third week of March, followed by sequential weekly improvements through the last week of March and into April. Off marketplace TPV growth during the second half of March was 95.4% year-over-year on an FX Neutral basis, and TPN was 87.3% year-over-year. By April these growth rates had accelerated to 155.6% and 119.8% respectively. Deceleration in number and volume of payments processed was a consequence primarily of lower foot traffic in physical retail, which had a direct impact on lower mobile point of sale and QR total payment volume growth partially offset by the relative strength in Merchant Services.
By the end of the quarter, the non performing loan ratios had not shown a deterioration due to the COVID-19 crisis.

Nonetheless, to manage our exposure to merchant and consumer credits amidst a global pandemic, we slowed credit originations to both cohorts.
In terms of liquidity and cash management for the fintech business, all relevant funding sources remained available, drawing on credit facilities to maximize liquidity at a local subsidiary level. The consolidated Balance Sheet currently holds approximately $2.3 billion dollars in cash, cash equivalents and liquid securities.

Shopify (NYSE:SHOP) reports revenue growth of 47% in Q1.

Subscription Solutions revenue grew 34% to $187.6M, driven primarily by growth in Monthly Recurring Revenue, largely as a result of an increase in the number of merchants joining the Shopify platform, strong app growth and Shopify Plus variable platform fee revenue growth.

Merchant Solutions revenue expanded 57% to $282.4M, driven primarily by the growth of GMV.

GMV increased 46% to $17.4B for the quarter.The company suspended previously announced FY2020 guidance.…

Covid-19 commentary:-
The following includes some key changes we have observed in the data patterns on Shopify’s platform, potential implications for Shopify’s business, and actions we are taking to manage risk and maintain strong liquidity:

New stores created on the Shopify platform grew 62% between March 13, 2020 and April 24, 2020 compared to the prior six weeks, driven by the shift of commerce to online as well as by the extension of the free trial period on standard plans from 14 days to 90 days. While this increase includes both first-time entrepreneurs as well as established sellers, it is unclear how many in this cohort will sustainably generate sales, which is the primary determinant of merchant longevity on our platform. New store creations represents merchants who have provided billing information, which also allows them to start selling.

While year-over-year Gross Merchandise Volume1 (“GMV”) growth accelerated in April compared with the first quarter of 2020, and this growth was distributed over a broader base of merchants, it is unclear how sustainable consumer spending levels will be in this uncertain economic environment. For now, the shift of consumer spending toward online is apparent: the number of consumers estimated to have made a purchase for the first time from any Shopify merchant grew 8% between March 13, 2020 and April 24, 2020, compared to the six-week period immediately prior. Over the same period, the number of consumers estimated to have purchased from Shopify merchants they’d never shopped at before grew by 45% compared to the six-week period immediately prior.

While GMV through the point-of-sale (POS) channel declined by 71% between March 13, 2020 and April 24, 2020 relative to the comparable six-week period immediately prior to March 13, as most of Shopify’s Retail merchants suspended their in-store operations, Retail merchants managed to replace 94% of lost POS GMV with online sales over the same period. Retail merchants are adapting quickly to social-distance selling, as 26% of our brick-and-mortar merchants in our English-speaking geographies are now using some form of local in-store/curbside pickup and delivery solution, compared to 2% at the end of February.
While new types of merchants, such as food stores, are migrating to Shopify Plus, March and April also saw more merchants downgrade from Shopify Plus to lower-priced plans than in January and February.
Certain categories of GMV grew faster between March 13, 2020 and April 24, 2020, including Food, Beverages, and Tobacco, which doubled during this period relative to the 6-weeks immediately prior to March 13. Apparel and accessories, a historically larger contributor to Shopify’s GMV, experienced a softening in GMV in mid-March, followed by a recovery at the end of March, which continued into April.
Shops are seeing more local customers: in the six-week period since March 13, 2020, in English-speaking geographies, the percentage of customers per shop coming from within 25 kilometres of the shop’s registered address had increased, as had the number of shops with at least one local customer, while local orders in these geographies more than doubled.

More merchants are making greater use of Shopify Capital, with $192 million of advances and loans outstanding at March 31, 2020, compared with $150 million at December 31, 2019. And, we announced we have committed an additional $200 million above the March 31, 2020 level for the remainder of 2020, to increase funding of Shopify Capital in the United States and expand Shopify Capital to the United Kingdom and Canada, working with partners who will share in the revenue and risk. We anticipate a portion of this funding to go toward business continuity instead of growth activities, as we saw merchants downgrading subscription plans and decreasing their spend on apps in March and into April. We increased our allowance for losses on Shopify Capital as well as on Shopify Payments at March 31, 2020 to account for a potential increase in losses, though the actual loss percentages in March and April were consistent with pre-COVID levels over the past year.

etc etc…