Shopify sees Q4'20 earnings beat but warns of slowing growth in 2021

Shopify Inc. on Feb. 17 reported fourth-quarter 2020 net income and revenue that beat analysts' expectations as the Canadian firm benefited from growing demand for online shopping during the pandemic and new merchants joining the company's cloud-based e-commerce platform.

However, the Ottawa-based firm expects revenue to grow at a slower rate in 2021 than 2020.

Shopify reported fourth-quarter net income of $123.9 million, or 99 cents per share, compared with net income of $771,000, or 1 cent per share, for the fourth quarter of 2019. Adjusted net income for the fourth quarter of 2020 was $198.8 million, or $1.58 per share. The figure surpassed analysts' estimates for normalized EPS of $1.21, according to S&P Capital IQ consensus estimates.

The company reported fourth-quarter revenue of $977.7 million, up nearly 94% from $505.2 million in the year-ago period, and beating analysts' expectations of $913.3 million.

Shopify's fourth-quarter gross merchandise volume reached $41.1 billion, an increase of $20.5 billion, or 99% over the fourth quarter of 2019. GMV growth in the fourth quarter was driven by a greater share of retail spend going to online purchases, as well as an extended Black Friday and Cyber Monday shopping season, said Amy Shapero, Shopify CFO, in a fourth-quarter conference call with analysts.

The company also saw numerous merchants join the company's e-commerce platform, with the company powering more than 1.7 million merchants by the end of 2020. Meanwhile, approximately 3,000 merchants joined Shopify Plus, the company's platform for larger and more complex merchants, bringing the total number of Plus merchants to more than 10,000 at year-end.

New Shopify Plus merchants as of the fourth quarter 2020 include skincare brand Dermalogica, fashion designer Elie Tahari, Japanese motorcycle brand Yamaha and greeting card company Hallmark.

Shopify President Harley Finkelstein said Shopify expects more merchants to turn to Shopify's platform in 2021, calling the pandemic a "catalyst" for people to supplement their income or start a business when they lost their job. Finkelstein said "we do not think this trend is going away."

Shapero said Shopify continues to benefit from strong e-commerce tailwinds and increased interest in its platform but expects the first quarter to "likely contribute the smallest share of full year revenue" and the fourth quarter to contribute the largest as the vaccine rolls out.

'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," she said.

Shopify's revenue for 2020 reached $2.93 billion, up from $1.58 billion in 2019, and beating analysts' expectations for full-year revenue of $2.86 billion.