Shopify Q4 Earnings Summary

I think that any way you look at Shopify’s Q4, it was a solid quarter. YoY revenue growth was 93%, while QoQ growth was 27%. We know that Shopify’s business is highly seasonal, with the Q4 holiday season being especially important to SHOP’s business. This particular Q4, in my opinion, was a “seasonally normal” quarter for Shopify. I say this because Q4 2019 QoQ growth was 29%, 2018 it was 27%, and 2017 it was 30%. Adjusted net income continues to climb - it rose 41.4% QoQ to $198mm.

This is also the second “seaonally normal” quarter in a row. I see this as a good thing. I hope that SHOP has four more seasonally normal quarters next year. “Normal years” have produced excellent returns for Shopify, historically speaking. It was a great business before the pandemic and for sure will be a great business afterward.

On the negative side, I see two issues with this report. One, they announced “As a result, we expect that we will continue to grow revenue rapidly in 2021, albeit at a lower rate than in 2020.”. This was probably a pretty obvious statement - the pandemic was a huge boost to shopify that will (hopefully) not happen again any time soon.

Second, they are forgoing guidance from now on, which is an unfortunate and somewhat concerning shareholder unfriendly move. Companies should know that if they don’t provide guidance, we investors and analysts are forced to come up with our own guidance without any kind of floor provided from the company. Shopify is therefore giving away power and increasing volatility of their stock, because we have to start from scratch with our expectations.

We as investors value predictability. Cloudflare, Crowdstrike, and our other top stocks seem machine like in their ability to meet/exceed guidance. With plenty of other companies willing to provide guidance (even if they sandbag), why bother allocating lots of money to a company that gave up trying? I don’t know the answer to this question, and it is one I will continue to grapple with as my understanding evolves. Honestly, it makes me want to trim my position and add to a company that provides guidance. But we’ll see.

And now, the earnings summary:

At the end of 2020, we had more than 1.7 million merchants around the world reaching further economic independents with Shopify, with merchants from outside are core English-speaking geographies continuing to increase as part of our mix. Approximately, 3,000 merchants joined Shopify Plus, our subscription plan for larger and more complex merchants, bringing the total number of Plus merchants to more than 10,000 at year-end.

And our merchants generated approximately $120 billion in GMV, which nearly doubled year-over-year for three consecutive quarters in 2020.

Second, retailers are prioritizing buyer retention. We see large companies are pushing acquisition costs up in their bid to attract customers. So, we’re innovating some merchants can build strong and lasting relationships with buyers and keep them for years. The Shop experience is built for buyer retention with features like our accelerated checkout, Shop Pay; our buy-now-pay-later product, Shop Pay Installments, and real-time delivery tracking.
By the end of 2020, Shop had more than 100 million registered users, including both buyers that have opted into Shop Pay, as well as users of the app, of which more than 19 million were monthly active users at the start of this year. By the end of 2020, Shop Pay had facilitated close to $20 billion in cumulative GMV since its launch in 2017.

Third, on the list is the growing popularity of modern financial solutions. Products like Shopify Capital are increasingly sought out by entrepreneurs and small businesses that face unnecessary barriers to access from traditional banks. Merchant empathy runs deep at Shopify, when traditional institutions were turning away small businesses, because of perceived high risk, we financed a record number of merchants when they needed it most. And we also introduced Shopify Capital to Canada and to the UK in 2020 to expand or we can help merchants.

Shop Pay Installments, which we began rolling out to U.S. merchants in our third quarter lets merchants offer flexible payment options to their buyers. Buy-now-pay-later products especially resonate with young consumers, who since started at the pandemic have contributed to the significant shift in online spending.

Finally, the power of omnichannel. As e-commerce captures a greater share of retail, omnichannel commerce becomes even more critical for businesses. We continue to strengthen our multi-channel value proposition in 2020 adding more ways to help merchants get discovered by new buyers, including Facebook Shops, Walmart, Pinterest and TikTok. We are also making it faster and easier to checkout in other channels.

Earlier this month, Shop Pay was made available for the first-time off the Shopify platform to Shopify merchants on Instagram and we’ll roll out to Facebook in the coming weeks. Once fully implemented with Shopify Payments as the processor of all transactions with Shopify merchants on both the social services, not only will merchants have a conversion advantage of accelerated checkout through Shop Pay, but it will enable merchants to manage all of their Facebook and Instagram selling directly within Shopify.

And with the release of the Shopify all-new point of sale software combined with our tap-and-ship hardware, these retailers are enjoying the benefits of a unified back-office that allows for integrated view of business operations and various omnichannel functions. These include buy online pickup curbside, buy in-store ship to customer and local delivery, all of which increasing popularity with buyers during the pandemic as a convenient way to get their products.

Shopify Shipping offers merchants another simple and affordable way to get products to buyers. In Q4, adoption of Shopify Shipping by eligible merchants increased to 52%, up from 45% this time last year and we continue our work to democratize fulfillment for entrepreneurs through the Shopify Fulfillment Network, offering fast and affordable services to buyers.

With a record number of merchants subscribing to Shopify Plus in 2020, we saw a diverse fleet of notable brands launch in Q4, including international skincare brand, Dermalogica; fashion designer, Elie Tahari; Japanese motorcycle brand, Yamaha; California surfwear brand, O’Neill; International furniture company, Herman Miller; famous greeting card company, Hallmark; one of the world’s largest makers of wines and spirits, Diageo; ALDI mobile from discount grocery chain, ALDI; and popular dog food brands from Nestle’s Purina.

To shape their stores with the features that are important to them, merchants made heavy use of our incredibly rich portfolio of more than 6,000 apps with our app partners alone earning more than $230 million from Shopify in 2020. We are excited to continue expanding our partner ecosystem in 2021 outside our English-speaking geographies in particular


Revenue nearly doubled once again in our fourth quarter to $977.7 million, up 94% over the same period last year.

Subscription Solutions revenue of $279.4 million accelerated to 53% growth year-over-year, largely due to exceptional growth in monthly recurring revenue.

MRR growth also accelerated to 53% year-over-year to $82.6 million in Q4 as a high number of new merchants joined the platform in the quarter following record merchant adds in the third quarter. Q4 MRR also benefited from incremental new revenue from our Retail POS Pro subscription offering as subscription pricing came into effect in November 2020.

Shopify Plus contributed $21 million to MRR or 25% compared with 27% of MRR in Q4 of 2019 while Shopify Plus MRR grew significantly, non-Plus MRR grew faster, benefiting from a significantly higher number of merchants on standard plans joining the platform in 2020, as well as from our Retail POS Pro subscription beginning November 1.

Merchant solutions revenue grew 117% to $698.3 million in Q4 compared to the same period in 2019. This outstanding growth was driven primarily by merchant strong sales with GMV nearly doubling year-over-year to $41.1 billion in the fourth quarter alone. Strong Q4 GMV was the result of a greater share of retail spend going to online purchases and extended Black Friday, Cyber Monday shopping season and higher GMV per merchant. This strong growth in merchant sales combined with merchants’ increased adoption of Shopify Payments, Capital and Shipping drove revenue from these products higher.

$19.1 billion of GMV was processed on Shopify Payments in Q4, an increase of 116% versus the comparable quarter last year.
Payments penetration of GMV was 46% versus 43% in Q4 2019 and more than one percentage point over Q3 this year. The majority of new merchants coming on to Shopify opted to use Shopify Payments and Shopify Plus and international merchants expanded their share of GPV year-over-year.
Demand for Shopify Capital remained strong in Q4 with merchants receiving $226.9 million in funding across the U.S., the UK and Canada, up 96% versus the same period last year and the highest year-over-year increase in funding in 10 quarters. Our data algorithms and prudent risk management help keep loss ratios in line with historical periods.

Adjusted gross profit dollar growth accelerated to 89% over last year’s fourth quarter to $510.6 million, reflecting strong revenue growth despite the significantly greater mix of lower margin Merchant Solutions revenue versus last year and the ramp-up of investment in Shopify Fulfillment Network.
Adjusted operating income was $200 million in the fourth quarter compared to adjusted operating income of $28.5 million in the fourth quarter of 2019 as our strong revenue performance in the quarter greatly outweighed spending.
Adjusted net income for the quarter was $198.8 million, or $1.58 per diluted share, compared with adjusted net income of $50 million, or $0.43 per diluted share in last year’s fourth quarter.
Finally, our cash, cash equivalents and marketable securities balance was $6.39 billion on December 31

This year, we will continue our important work of building a global commerce operating system to arm independent merchants everywhere with the tools they need to build their own businesses and take advantage of the strong secular shift to online commerce

Three key areas of incremental investment in 2021 are Shopify Fulfillment Network, the Shop App and international expansion.

Starting with Shopify Fulfillment Network. We capped off a year of significant progress with the successful fourth quarter, advancing the development of our fulfillment service. In Q4, we continued to harden our systems, executed multiple flash sales and smoothly processed record volume through the peak holiday season. We also shipped our first self-service onboarding system, making it easier for merchants to access our network.
We announced Shopify Fulfillment Network 18 months ago to reduce the complexity of fulfillment for our merchants and our network is taking shape. In 2020, we opened an R&D warehouse in Ottawa to test fulfillment technology, built out a network of warehouse and transportation partners, enhanced our merchant-facing app to provide updates on inventory and orders and assembled a team of fulfillment success managers to simplify the merchant experience.

We also plan to continue to invest in the automated fulfillment technologies of 6 River Systems, which recorded strong revenues in our fourth quarter and exceeded 2020 bookings expectations. 6 River Systems technology has helped improve the productivity of Shopify Fulfillment Network and we believe will play an important role in supporting our scaling efforts.

Our Shop App is another area we plan to invest aggressively in 2021. We launched the Shop App just 10 months ago to help merchants strengthen their relationships with buyers with the ultimate goal of increasing customer lifetime value for our merchants. Since then we have placed the app into the pockets of millions of buyers, making it easier for them to rediscover and purchase from the merchants they love and introduced features to discover local shops and Black-owned businesses.

In 2021, we will continue to develop the Shop App into a must-have shopping companion that fosters buyer loyalty and retention. We plan to invest in building features that will further reduce friction for buyers that more points along the shopping journey from discovery to delivery, creating value for both our merchants and their buyers.

And third, international expansion. 2020 demonstrated just how big our addressable market is. Year-over-year GMV growth by our international merchants outpaced overall GMV growth and our international merchant base grew within the overall mix. We continue to localize the platform in several regions in 2020, making it easier to sell cross-border and from a mobile device

our platform also allows for extensibility and a focus in 2021 is on continuing to enhance developer tools for merchants who want to customize their experiences beyond what’s available out of the box.

In 2020, years of investment in our platform paid off as the future of retail was pulled forward, enabling Shopify to act fast to help our merchants adapt during the pandemic and encourage more entrepreneurs to begin their journey

Our outlook coming into 2021 assumes that as countries roll out vaccines in 2021 and populations are able to move about more freely, the overall economic environment will likely improve, some consumer spending will likely rotate back to offline retail and services and the ongoing shift to e-commerce, which accelerated in 2020, will likely resume a more normalized pace of growth. For the full year 2021, we expect Subscription Solutions revenue growth to be driven by more merchants around the world joining the platform in a number lower than the record in 2020 but higher than any year prior to 2020. The growth rates of Subscription Solutions and merchant solutionsrevenues are likely to be more similar than in the recent past, as we do not expect the surge in GMV that drove merchant solutionsin 2020 to repeat.

As a result, we expect that we will continue to grow revenue rapidly in 2021, albeit at a lower rate than in 2020.

With regard to seasonality, while we expect that Q1 will still likely contribute the smallest share of full year revenue and Q4 the largest, the revenue spread may be more evenly distributed across the four quarters than it has been historically to the degree the rollout of a vaccine shifts more spending to services and prompts more offline shopping toward the back half of the year. We expect rapid growth in gross profit dollars in 2021 and plan to deploy substantially all of these dollars effectively, investing back into our business as aggressively as we can.

we are replacing quarterly and annual numeric ranges with information on directional indicators, the primary levers driving our financials and the assumptions that guide our planning.
Spending more time discussing the inputs instead of trying to predict a specific financial output should build a greater understanding of the many moving parts at Shopify
ExponentialDave: Lol, no it will not…

Analyst Q & A: You will note this section is lighter than usual. That is because I genuinely didn’t think many of the questions or answers were that insightful this time, so I excluded many of them from this summary.

Siti Panigrahi – Mizuho Securities – Analyst
Thanks for taking my question. So in 2020, we saw this accelerated adoption of e-commerce, and you also talked about GMV growth, partly benefited from nondiscretionary items like food beverages and some trends like curbside pickups and order-online and pick-up-at-store like that. So could you give us some color on what percentage of that growth was driven by such kind of trends? Just to understand and what are you seeing these days in Q4 and as of today?
Amy Shapero – Chief Financial Officer
Yeah. The main phase for us have been apparel, accessories, cosmetics. Coming into 2020, what we saw during 2020 and as a result of COVID was more food, beverage, essentials, home office, home workout, gear and things like that increase in terms of mix, of our GMV. We’re continuing to see those sorts of trends.
We continue to see those trends in Q4 and believe that more merchants who sell those types of goods have found us over the course of 2020. And so many of those trends will continue into 2021.
ExponentialDave: It was a good question and I like how he wanted to know the percent of growth driven by trends such as order-online and pick up at store. The reason this is important is because some of this revenue is going to go away once enough people are vaccinated. Amy unfortunately completely dodges that part of the question though. In situations like this, I assume she either doesn’t know or doesn’t want to tell us because it sounds bad.

Matt Pfau – William Blair – Analyst
Hey. Thanks guys for taking my question. Just wanted to understand how you’re thinking about Shopify plus for 2021 as we get closer to the new normal. Do you anticipate seeing more or less established brands, either replacing their legacy e-commerce platform or moving online?
Harley Finkelstein – President
Yes. So as I mentioned in my opening remarks, we now have 10,000 merchants on plus. In fact, I think 10,000 is probably one of the largest enterprise e-commerce customer groups of any company on the planet. And certainly, plus GMV grew faster than non-Plus international, partially due to more Plus merchants and an increase of GMV from those merchants.
ExponentialDave: 10,000 “enterprise e-commerce customers” sounded incredibly impressive. But then I looked into what it actually means to be a Shopify plus customer. You just need to spend 2k/month, a far cry from what it takes to be considered an enterprise customer at our other SAAS favorites, such as ZM or Cloudflare.

Harley Finkelstein – President
…Certainly, as you heard in my opening remarks around some of the big brands that are using Shopify, a lot of those brands had direct-to-consumer already. They were just using legacy systems, and they were looking at some of the more modern retail brands, the DTC brands and wondering why they had better technology than they did considering they were these massive companies with large budgets.
ExponentialDave: I think this statement really speaks to some of the power of Shopify. Can you imagine if you are some luxury hundred billion dollar brand (like Diageo), and you see some little shopify start up with better tech than you? I would be willing to bet this situation arises more often than you think, and I would bet it will continue to be a large tailwind for Shopify.

Trevor Young – Barclays – Analyst
Thanks for taking the questin. Just looking at first quarter, how should we think about trends so far quarter to date? Has it been a continuation of the strength that you saw last quarter on top of the pretty difficult compares in January and February versus an easier compare in March? And are you seeing any of that spend shift back to off-line versus online?
Amy Shapero – Chief Financial Officer
Yeah. We continue in Q1 to see strong e-commerce tailwinds and strong interest in the Shopify platform.
ExponentialDave: Again, a good question. But Amy doesn’t give us any numbers here. “Strong tailwinds” and “strong interest” is a pretty vague statement.


“Second, they are forgoing guidance from now on, which is an unfortunate and somewhat concerning shareholder unfriendly move. Companies should know that if they don’t provide guidance, we investors and analysts are forced to come up with our own guidance without any kind of floor provided from the company. Shopify is therefore giving away power and increasing volatility of their stock, because we have to start from scratch with our expectations.”

Yesterday I was listening to Daniel Ek, CEO of Spotify (not Shopify), and his thoughts are exactly what you said. Here is the excerpt from the transcript:

“It’s very fashionable, for instance, in Silicon Valley, to not give guidance going forward, because you don’t care about the quarterly results.

I find it ironic because what it essentially says is that you don’t want to be part of the participation of the expectations that the market does on your company, but they’ll still have expectations. So the question is just if you want to participate in that expectation of setting or not. It’s not like you really have a choice that there won’t be an expectation. And so, after seeing those nuances, I realized that it was actually very important to me to be part of that expectation setting, because if I’m going to be beholden to something, I’d rather be beholden to something, which I was a part of informing them about rather than something that they just made up their mind all by themselves. And when you realize that, you realize that communication becomes super important as one of the skills.”

Full transcript here:


With plenty of other companies willing to provide guidance (even if they sandbag)…

I’m not sure I understand the value of “sandbagging” in terms of guidance. How is that more valuable than no guidance?

It’s easy to say they “sandbag” after the fact. Maybe they really have no idea about how well/poor a quarter or a year will be - I mean, read the risk statements. Lots of things can go wrong/right.

Once you get a reputation for “sandbagging”, it’s fair to say just “meeting” is going to disappoint a lot of investors who might have been led to believe there will always be a solid beat.

There are a lot of companies who don’t play the guidance game, I don’t think it impacts their business model at all.


Comprehensive writeup, thanks. I have been a shareholder for 5 years, so I am pretty committed, but a couple of things irritated me on the call.

The first is that Tobi wants to be part of the call, but is no longer part of the prepared remarks. He grabbed the first question. His reply was completely incomprehensible. It sounded like he had just woken up. I know he’s a smart guy, and I know that English is not his first language, but I am not sure this is the right forum for him.

The second issue was that the analyst section was started with a plea to only ask one question. Just like every other earnings call. Analysts always ignore this and ask a series of questions while pretending that they are somehow linked. It’s a game. On this occasion, the first analyst was slapped down after his two questions were answered. It felt pretty arrogant to me.

Great company, but I would like to see the right people involved on the calls, and a bit of humility.


“Second, they are forgoing guidance from now on, which is an unfortunate and somewhat concerning shareholder unfriendly move. Companies should know that if they don’t provide guidance, we investors and analysts are forced to come up with our own guidance without any kind of floor provided from the company. Shopify is therefore giving away power and increasing volatility of their stock, because we have to start from scratch with our expectations.”

Whilst I agree with the observations made on this thread that it represents a complete unwillingness participate and therefore inability to communicate in the expectation setting and management process and as a shareholder I am disappointed and unimpressed but that, what I would say though is that it isn’t foregoing guidance “from now on”. They suspended giving guidance a year ago as per the Q1 2020 announcement below:-

On April 1, 2020, Shopify suspended the financial expectations it had provided on February 12, 2020 for the full year 2020, as our financial results for the rest of the year are contingent on the duration and scope of the COVID-19 pandemic and the economic impact of actions taken in response, all of which are unknown.

So to be fair to Shopify they have not been giving guidance for a while now. That’s on top of reducing disclosure in key metrics such as numbers of Shopify Plus merchants which they do annually and in a rough casual manner at that.

To a degree whilst I sympathise that on the arrival of Covid a lot forecasting became difficult and no-one knew how this was going to play out, we have had a year of it now and our ability to understand the impact and forecast should be getting easier. Furthermore in one respect - forecasting how the long term new normal post covid business is going to perform is actually more important than forecasting the short term transitional effects.

So yes I am disappointed but this has been ongoing for a year now and not a new issue from the point of view of Shopify at least.



Please see the thread I started on shopify recently for more earnings context.

Whether companies should provide guidance or not is something that has been discussed around the Motley Fool for as long as I can remember. I believe the general consensus is that it would be better if nobody gave guidance. It is a game I would rather not have my companies bother with.

The only time guidance is helpful is when a company misses its own guidance, proving to us they don’t know what they’re doing, or comes in so low or high that it points to a major change that they could just share anyway. Because of this same fact, the numbers pretty much always have to be guided lower than reality. Now we’re left wondering what it means when I company beats their guidance by TOO much. Is it because they just don’t want to play the game (“sandbagging”) or because they were really surprised by how much better they did?

Guidance is a short-term game and still open to interpretation.