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Shopify is a public company. You don't need to speculate on their revenue or expenses, you can just look it up. They earned $99.6 million in Q3. They expect

Shopify is a public company. You don't need to speculate on their revenue or expenses, you can just look it up. They earned $99.6 million in Q3. They expect revenues in the range of $379 million to $381 million for 2016. And they are still losing money, although getting close to break even. Their market cap is 3.86B, so 10 times revenue, so the market is expecting them to continue to grow rapidly. https://investors.shopify.com/events/Events-Presentations/default.aspx#section_news https://investors.shopify.com/events/Events-Presentations/de...

justin_vanw 10y ago
Hey, you're right! https://www.google.com/finance?q=NYSE%3ASHOP&fstype=ii&ei=IEI5WOmYJMb9sAHUo7SQBA https://www.google.com/finance?q=NYSE%3ASHOP&fstype=ii&ei=IE... Revenue growth with corresponding increases in costs and expenses. NOT getting closer to profitability, in fact operating losses are increasing in proportion to revenue (almost a linear relationship in every quarter and year in the reports). Again, this is a failing business. 12 years in and no profit, profit not within reach, costs growing in lockstep with revenues. EDIT: So I was curious how they had such high revenues when clearly subscription fees can't account for it. Found this in the financial statement: "We principally generate merchant solutions revenues from payment processing fees from Shopify Payments. Shopify Payments is a fully integrated payment processing service that allows our merchants to accept and process payment cards online and offline. As a result of the launch of Shopify Payments in August 2013, we have seen significant growth in the revenues generated from our merchant solutions. In addition to payment processing fees from Shopify Payments, we also generate merchant solutions revenue from transaction fees, Shopify Shipping, Shopify Capital, referral fees from partners, and sales of point-of-sale ("POS") hardware. Our merchant solutions revenues are directionally correlated with the level of GMV that our merchants process through our platform. Merchant solutions revenues increased from $34.5 million in the six months ended June 30, 2015 , to $77.0 million in the six months ended June 30, 2016 , representing an increase of 123.4%" So they are counting CC processing fees towards revenues. I suspect that CC payment processing fees shopify pays are approximately equal to what they are charging, so this is just a revenue game where they charge 3% to customers, pay almost 3% to the CC companies, and book revenue that can never be profitable. EDIT2: So found the cashflow in the statement. They charged $76M for these fees, and paid out $56M. Not bad actually! However, that $20M in net is still much lower than the costs to generate the business, $56M just in marketing.
- slgeorge 10y ago
  > So they are counting CC processing fees towards revenues. I suspect that CC payment processing fees shopify pays are approximately equal to what they are charging, so this is just a revenue game where they charge 3% to customers, pay almost 3% to the CC companies, and book revenue that can never be profitable. You don't understand the meaning of the word revenue.
  - justin_vanw 10y ago
    Maybe, I think I know what it means but I'm not an accountant. I know that revenue is often quoted as some kind of measure of the success of a business, when in reality it's extremely easy to run up revenues if you are running at a loss. In the most trivial case, you can pay $1.10 for $1 bills, for example. Ok, so shopify isn't doing that, but it's hardly different, just a more complex situation. They pay $50 for advertising to get $75 in revenue, which they immediately pay $55 for. That's $105 paid out to buy $75 in revenue. It would certainly be cheaper to just pay $1.10 for each $1 in revenue. I'm sure the folks at shopify don't think of it this way, and I'm sure they genuinely believe that they will someday change the economics of this and become profitable. However, the balance sheet doesn't support that belief, for me at least, and it sure looks like every customer they maintain leads to more money they are losing. Perhaps they can become profitable with enough economies of scale. Again, I would question how much larger they would have to get to hit the inflection point, which they haven't done, at least in the financials reported, so far losses are scaling up linearly with revenues (which is to say operating margins are a steady negative % against increasing revenues). Since they have been around for a long time (12 years) and those same 12 years have seen an absolutely huge increase in ecommerce, it seems like they have failed to hit the required scale despite the most favorable conditions you might hope for. That doesn't make me very optimistic.
    - j1vms 10y ago
      Assuming you based this off their financial statements, then everything you are saying is pretty much 100% on the ball with regard to interpreting their cash flow. > That doesn't make me very optimistic. I would say that the market is "on your side" at least for now, as people on here have been starting to compare them to Amazon which is, in terms of market cap, 100x higher valued than Shopify and really not a fair comparison. However, let's not forget that the reason Shopify is a 3.5bil company (and not worth say "only" 500mil) is because they have eyeballs on them right now, and quite a few at that. The market isn't sure how they plan to use those eyeballs, but there's enough visibility to give them a chance at being a strong market player in the future. Also yes, despite being publicly traded, most investors would consider them still to be startup based on where they are at with their business model.

justin_vanw 10y ago

Hey, you're right! https://www.google.com/finance?q=NYSE%3ASHOP&fstype=ii&ei=IEI5WOmYJMb9sAHUo7SQBA https://www.google.com/finance?q=NYSE%3ASHOP&fstype=ii&ei=IE... Revenue growth with corresponding increases in costs and expenses. NOT getting closer to profitability, in fact operating losses are increasing in proportion to revenue (almost a linear relationship in every quarter and year in the reports). Again, this is a failing business. 12 years in and no profit, profit not within reach, costs growing in lockstep with revenues. EDIT: So I was curious how they had such high revenues when clearly subscription fees can't account for it. Found this in the financial statement: "We principally generate merchant solutions revenues from payment processing fees from Shopify Payments. Shopify Payments is a fully integrated payment processing service that allows our merchants to accept and process payment cards online and offline. As a result of the launch of Shopify Payments in August 2013, we have seen significant growth in the revenues generated from our merchant solutions. In addition to payment processing fees from Shopify Payments, we also generate merchant solutions revenue from transaction fees, Shopify Shipping, Shopify Capital, referral fees from partners, and sales of point-of-sale ("POS") hardware. Our merchant solutions revenues are directionally correlated with the level of GMV that our merchants process through our platform. Merchant solutions revenues increased from $34.5 million in the six months ended June 30, 2015 , to $77.0 million in the six months ended June 30, 2016 , representing an increase of 123.4%" So they are counting CC processing fees towards revenues. I suspect that CC payment processing fees shopify pays are approximately equal to what they are charging, so this is just a revenue game where they charge 3% to customers, pay almost 3% to the CC companies, and book revenue that can never be profitable. EDIT2: So found the cashflow in the statement. They charged $76M for these fees, and paid out $56M. Not bad actually! However, that $20M in net is still much lower than the costs to generate the business, $56M just in marketing.

slgeorge 10y ago
> So they are counting CC processing fees towards revenues. I suspect that CC payment processing fees shopify pays are approximately equal to what they are charging, so this is just a revenue game where they charge 3% to customers, pay almost 3% to the CC companies, and book revenue that can never be profitable. You don't understand the meaning of the word revenue.
- justin_vanw 10y ago
  Maybe, I think I know what it means but I'm not an accountant. I know that revenue is often quoted as some kind of measure of the success of a business, when in reality it's extremely easy to run up revenues if you are running at a loss. In the most trivial case, you can pay $1.10 for $1 bills, for example. Ok, so shopify isn't doing that, but it's hardly different, just a more complex situation. They pay $50 for advertising to get $75 in revenue, which they immediately pay $55 for. That's $105 paid out to buy $75 in revenue. It would certainly be cheaper to just pay $1.10 for each $1 in revenue. I'm sure the folks at shopify don't think of it this way, and I'm sure they genuinely believe that they will someday change the economics of this and become profitable. However, the balance sheet doesn't support that belief, for me at least, and it sure looks like every customer they maintain leads to more money they are losing. Perhaps they can become profitable with enough economies of scale. Again, I would question how much larger they would have to get to hit the inflection point, which they haven't done, at least in the financials reported, so far losses are scaling up linearly with revenues (which is to say operating margins are a steady negative % against increasing revenues). Since they have been around for a long time (12 years) and those same 12 years have seen an absolutely huge increase in ecommerce, it seems like they have failed to hit the required scale despite the most favorable conditions you might hope for. That doesn't make me very optimistic.
  - j1vms 10y ago
    Assuming you based this off their financial statements, then everything you are saying is pretty much 100% on the ball with regard to interpreting their cash flow. > That doesn't make me very optimistic. I would say that the market is "on your side" at least for now, as people on here have been starting to compare them to Amazon which is, in terms of market cap, 100x higher valued than Shopify and really not a fair comparison. However, let's not forget that the reason Shopify is a 3.5bil company (and not worth say "only" 500mil) is because they have eyeballs on them right now, and quite a few at that. The market isn't sure how they plan to use those eyeballs, but there's enough visibility to give them a chance at being a strong market player in the future. Also yes, despite being publicly traded, most investors would consider them still to be startup based on where they are at with their business model.