Analyzing Shopify’s $2.1B Deliverr Acquisition

I’m publishing this series to discuss a topic that I follow closely - cloud stocks, trends, strategy, acquisitions, and more. Please subscribe to my Cloud Stock Analysis series and never miss an article. I like fundamentals-focused business building, and teach the principles of fundamentals-focused business building at 1Mby1M.?Learn what to expect from 1Mby1M.

Earlier last month, Ontario-based Shopify (NYSE:SHOP) announced its quarterly results that failed to impress the market. But the company continues to surge forward in building a logistics solution for its vendors. Recently, it announced another acquisition to further this objective.

Shopify’s Financials

Shopify’s second quarter revenues grew 16% to $1.3 billion, falling short of the market estimates by 2.98%. Net loss was $1.2 billion, compared with a net income of $900 million a year ago. On an adjusted basis, loss was $0.03 per share, falling short of the market’s forecast by 200%.

By segment, subscription revenues grew 10% to $366.4 million, ahead of the estimates of $265 million. Merchant solutions revenue rose 18% to $928.6 million.

Among other metrics, gross merchandise volume (GMV) rose 11% to $46.9 billion in the quarter. Gross Payments Volume (GPV) grew to $24.9 billion.

Shopify did not provide a forecast for the quarter.

Shopify’s Deliverr Acquisition

Recently, Shopify announced the acquisition of San Francisco-based Deliverr for an estimated $2.1 billion. Deliverr was founded in 2017 by Michael Krakaris and Harish Abbott to provide shipping services for e-commerce businesses. Its products help online marketplace vendors to meet shipping standards, avoiding late shipment penalties for orders.

The acquisition will allow Shopify Fulfillment Network (SFN) to give millions of independent businesses, both on and off Shopify an end-to-end logistics platform to unlock fast and easy fulfillment. SFN will help merchants to better align the supply of their inventory with buyer demand. Additionally, the acquisition will allow SFN to use Deliverr’s software, talent, data, and scale to offer merchants a place for all of their logistics needs including initial receipt of inventory, smart distribution, fast delivery, and easy returns. For the customers, Shopify will leverage Deliverr’s technology to roll out a new feature called Shop Promise. The service will allow Shopify to offer reliable two-day and next-day delivery options across the U.S.

Shopify plans to integrate Deliverr with SFN’s direct-to-consumer fulfillment operations and 6 River Systems’ warehouse automation technology. It aims to create a full set of turnkey solutions that will connect through Deliverr’s network technology and Shopify’s embedded software and robotics inside both Shopify and partner-operated warehouses. When combined, it will help create a fast and reliable fulfillment offering. Prior to the acquisition, Deliverr had raised $490.9 million in seven rounds of funding led by Activant Capital, GLP, 8VC, Alumni Ventures, Tiger Global Management, Brookfield Growth, and Coatue. Its most recent round was held in November 2021 where it raised $250 million.

But all is not rosy with Shopify. The current macro conditions are hurting the company as well, as it announced a more cautious view on its GMV expectations in the coming quarters. During the current quarter, its GMV grew 11% over the year, missing the consensus expectations of 15%. Offline GMV growth of 47% significantly outpaced online GMV growth of 8% growth for the quarter. Shopify also announced a lay-off of nearly 10% of its workforce.

Its stock is trading at $32.61 with a market capitalization of $41.18 billion. It had touched a 52-week high of $176.29 in November last year and a 52-week low of $29.72 in June.

Disclosure:?All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article.

Looking For Some Hands-On Advice?

For entrepreneurs who want to discuss their specific businesses with me, I’m very happy to assess your situation during my free online?1Mby1M Roundtables, held almost every week. You can also check out our free?Bootstrapping Course, our?Udemy courses,?YouTube channel,?podcast interviews?with VCs and Founders, and, to?follow my writings, click Follow from?here.

Photo Credit:?Open Grid Scheduler / Grid Engine?from?Flickr.com