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Social Bulldog’s Newsletter — Shopify Q4 Earnings Recap

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On Wednesday morning, Shopify announced 2021 Earnings. We always pay close attention to Shopify announcements, as their ebbs and flows tend to be indicators of how the ecommerce industry is doing as a whole. Although some announcements during the call caused Shopify’s stock to tumble, there were a few tidbits Social Bulldog found exciting. 


To begin, Shopify expressed the belief that embedding commerce into apps is going to be absolutely critical, with sales from social channels expected to double by 2025. This has been reflected over the past few years, as they’ve worked with Meta to build out Instagram Shops and other features. Shopify discussed their recent introduction of TikTok Shopping, where creators can tag products that land on their TikTok Shop. More than 100,000 merchant creators have installed the TikTok Shopping channel to date. 


Perhaps the most exciting news to come out of the earnings call was their announcement of Shopify’s very own fulfillment network. We were nodding along as they said, “Fulfillment is only something that you think about when it’s not going well.” They are building a U.S. distribution network to store and ship products for their merchant customers. This investment will require huge capex dollars, which is a large reason why stock prices dipped post-call.  


Shopify hit record revenues in 2021. Their great numbers were a bit overshadowed by the fact that revenue growth decelerated for the third straight quarter in Q4. Their total revenue for the year was up 57% from 2021 at $4,611.9 million (and up 192% from 2019!).  


As for 2022, year-over-year revenue growth will be lower in the first quarter of 2022 and highest in the fourth quarter of 2022. Shopify warned that revenue growth will slow as COVID-19 restrictions continue to ease up and customers return to brick and mortar. They set expectations as they described a timeline that many businesses experienced in the past few years. One where COVID triggered a large acceleration in 2020 that continued into mid 2021. That acceleration has now decelerated and is continuing to do so. 


The earnings call had mixed reviews depending on the listener. For investors, there were red flags as revenue growth slows and expenses increase. For ecommerce businesses, there was excitement for the developments to come, as well as validation that the past three years have been an absolute rollercoaster. We personally can’t wait for that two-day fulfillment network and continued improvements to ecommerce in social channels.