Ottawa's Shopify hits 1M merchant mark, boosts Q3 revenue 45%

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Shopify’s management believes the Ottawa-based commerce giant’s push to build its own fulfillment network will be a long-term boon for the firm even as the company’s third-quarter results show its losses continue to deepen.

The Ottawa-based commerce company, which keeps its books in U.S. dollars, said Tuesday that its $72.8-million loss for the quarter ended Sept. 30 amounted to 64 cents per share compared with a loss of $23.2 million or 22 cents per share a year ago.

The company's revenues rose 45 per cent to $390.6 million this past quarter as the total number of merchants on its platform hit over a million, a scale that company CEO Tobi Lütke said on a conference call he had never expected when he started the company 15 years ago.

“This is kind of blowing my mind right now," he said.

Shopify’s most rapid merchant growth is coming from users outside its “core geographies,” according to the firm’s chief financial officer, Amy Shapero. The company has made a concerted effort to take its platform global and now offers its store management software in 19 languages.

Merchants did $14.8 billion in sales on the platform in the quarter compared with $10 billion for the same quarter last year.

The company continues to work to establish a U.S. fulfillment network, with seven warehouses expected to be up and running by the first quarter of 2020. Chief operating officer Harley Finkelstein said on Tuesday’s call that these “nodes” are operated by third-party partners with extra space in their facilities, and the company has no plans to build any of its own warehouses to expand its network.

“We hope we don’t have to. If we do, it’ll likely be just to test,” Finkelstein said.

After the quarter’s close, Shopify also completed its roughly $450-million acquisition of 6 River Systems to bolster its fulfillment operations with software and robotics. Shapero said the company expects the 6 River acquisition to be “additive” to the firm’s bottom line “over time.”

Lütke reiterated that Shopify’s push into fulfillment is not an attempt to compete directly with Amazon. While the company is attempting to arm its merchants to best compete with the Seattle-based e-commerce juggernaut, Shopify itself is not looking to take down Amazon, he said.

An analyst did ask Lütke on the call whether Amazon’s push to guarantee one-day delivery will cause Shopify to make commitments beyond its current two-day delivery goals, but Lütke pushed back, saying that while Amazon’s orders warrant immediate shipment because they tend to be “needs,” Shopify’s merchants tend to deliver “wants.”

Lütke added that there are no plans right now to make more acquisitions in the warehousing and fulfillment space, but he didn’t rule out the possibility in the future.

“This is a brand new field for the company, and we’re trying to do it right.”

On an adjusted basis, Shopify said it lost $33.6 million, or 29 cents per share, in its latest quarter compared with an adjusted profit of $5.8 million, or a nickel per share, in the same quarter last year.

Analysts had expected adjusted earnings of $13.17 million, or 11 cents per share, according to financial markets data firm Refinitiv.

Shares of the company dropped as much as eight per cent in early trading, but were down by about one per cent as of about midday on the Toronto Stock Exchange.

In its outlook, Shopify raised its guidance for its full-year revenue to a range of $1.545 billion to $1.555 billion, compared with expectations put out in the first quarter of $1.48 billion and $1.51 billion.

– With files from Canadian Press