Wednesday, May 08, 2024 8:32:44 AM
Shopify Q1 results eclipsed by GAAP loss, margin shrinkage in Q2
Shopify (NYSE:SHOP) shares are limping into Wednesday’s open as much as 17% in the red after the company’s latest quarterly results were overshadowed by a GAAP loss and expectations for a 50 basis point decline in its gross margin.
“You’re seeing the strongest version of Shopify in our history,” CEO Harley Finkelstein said.
But underneath the better-than-expected adjusted profit and above consensus revenue, investors are zeroing in on the $0.21 loss per share in net income compared to a profit of $0.05 in the same quarter last year, attributed to higher costs for subscription services and merchant solutions along with increased marketing expense. This missed analysts estimates for a profit of $0.08 per share. Additionally, gross margin is expected to shrink 50 basis point in Q2. However, this could likely be an adjustment to Q1 in which gross margin had expanded to 51.4% from 47.5% due to the lack of dilutive impact of the logistics business and changes in pricing from standard plans.
The other projections for Q2 include revenue growth of high-teens percentage rate, translating into year-over-year growth rate in the low-to-mid-twenties when adjusted for the 300-400 basis point impact from the sale of the logistics unit.
GAAP operating expense dollars in Q2 are expected to be up at a low-to-mid-single digit percentage rate which should result in operating expenses as a percentage of revenue of around 45% to 46%. Free cash flow margin should remain in the double digits.
Shares are expected to open at their lowest level since November.
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Shopify (NYSE:SHOP) shares are limping into Wednesday’s open as much as 17% in the red after the company’s latest quarterly results were overshadowed by a GAAP loss and expectations for a 50 basis point decline in its gross margin.
“You’re seeing the strongest version of Shopify in our history,” CEO Harley Finkelstein said.
But underneath the better-than-expected adjusted profit and above consensus revenue, investors are zeroing in on the $0.21 loss per share in net income compared to a profit of $0.05 in the same quarter last year, attributed to higher costs for subscription services and merchant solutions along with increased marketing expense. This missed analysts estimates for a profit of $0.08 per share. Additionally, gross margin is expected to shrink 50 basis point in Q2. However, this could likely be an adjustment to Q1 in which gross margin had expanded to 51.4% from 47.5% due to the lack of dilutive impact of the logistics business and changes in pricing from standard plans.
The other projections for Q2 include revenue growth of high-teens percentage rate, translating into year-over-year growth rate in the low-to-mid-twenties when adjusted for the 300-400 basis point impact from the sale of the logistics unit.
GAAP operating expense dollars in Q2 are expected to be up at a low-to-mid-single digit percentage rate which should result in operating expenses as a percentage of revenue of around 45% to 46%. Free cash flow margin should remain in the double digits.
Shares are expected to open at their lowest level since November.
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