Shopify Got The Wall Street Memo: Grow Cash Flow Faster Than Revenue
One of the RMW Commerce fundamental tenets is that the “smart money” has moved on, not only from revenue growth but also from profitability.
Profitability is not enough anymore - it ensures only survival, not efficient growth. Necessary but not sufficient. Amazon and Shopify successful got the memo that the growth of free cash flow is paramount these days.
Q1 Results
* GMV and revenue both up 23% year over year, continued best-in-class growth. (29% ex-logistics)
* 36% growth in Gross payment volume, similar trajectory. I expect this could accelerate.
* Subscription solutions revenue grew 36% (lower base) and merchant solutions 20%
* Shop Pay $14B GMV in Q1 and > 150M buyers — 56% growth y/y.
Similar to Amazon, mic-drop moment was free cash flow was $232 million compared to free cash flow of $86 million in the prior year.
Highlights and Thoughts
* At some point, they will have to stop reporting GPV as a % of GMV, since they will not own all the GMV — particularly with Shop Pay standalone.
* Shopify POS growing GMV 32% y/y. This will be one of their most important priorities in the future I feel. 52% location increase.
* Overstock launch in 90 days - question: is this for the long-term?
* Not going to build a retail media network. Why oh why. (hint: Shop App will force them to eventually)
* New Shopify Plus pricing beginning. Will impact in Q2 for those who did not sign up for contracts.
* Attach-rate mostly flat, increased 2 bps to 3.06%
* Commited to growing free cash flow and keeping operating expenses level.
In short, more of everything. See no evil, hear no evil. It’s hard to argue with the strategy, it is producing the results they hoped. I still have open questions about B2B, not seeing the full playbook yet. Also, whither components? A little buried in the mix outside of Shop Pay.
I'm on a plane, so I will do some more followup this week too -- cheers all :-)
