Shopify's revenues grow, firm still not showing profit

Shopify says its revenue is growing by leaps and bounds but it's not yet profitable.

The Ottawa-based company (TSX:SH) made its debut as a publicly traded company in May and has continued to expand through partnerships with other e-commerce firms and conventional retailers.

"We continue to focus the company on making the Shopify platform better. This quarter we introduced many exciting product enhancements, like Shopify Shipping and integrations with Amazon, Facebook and Twitter," CEO Tobi Lütke said in a statement.  

"While these initiatives are still in their early stages, we see strong potential for all of them to contribute to our long-term growth. Multichannel commerce is the future of retail, and we're excited for Shopify to take a bigger and bigger role in determining it."

Revenue for the third quarter, reported in U.S. currency, was $52.8 million –up 93 per cent from $27.3 million a year earlier and above the estimate of $47.6 million. Monthly recurring revenue of $9.8 million was up 70 per cent from the same quarter last year.

Its net loss was $4.6 million, up nine per cent from $4.2 million in the third quarter of 2014, but on a per-share basis it fell to six cents from 11 cents because of a larger number of shares outstanding following the IPO.

Shopify's adjusted net loss was $2.4 million or three cents per share, which was less than the estimate of six cents per share, according to Thomson Reuters data.

Its operating loss was $4.3 million, up from $4.1 million a year earlier.

As of Sept. 30, the company had $191.5 million in cash, cash equivalents and marketable securities, up from $59.7 million one year ago.

The company says it expects revenue and operating losses in the current fourth quarter will be higher than in the third quarter. It's also adjusting its full-year guidance to reflect the third-quarter results and fourth-quarter estimates.

For the three months ending Dec. 31, Shopify estimates revenue will be from $59 million to $61 million. Its operating loss under U.S. accounting rules is estimated to be between $7 million and $8 million for the current quarter, up from $4.3 million in the third quarter of this year and $4.1 million in last year's third quarter.

For the full year ending Dec. 31, Shopify has raised its revenue estimate to between $194 million and $196 million and its operating loss to between $18.5 million and $19.5 million.

The previous estimate was for between $181 million and $183 million of revenue and an operating loss of between $21 million and $23 million.

Mr. Lütke told a conference call the company now has more than 200,000 merchants, something he called "a wonderful milestone.

"Everyone is really excited. Things are moving super fast. People are very focused and are hungry for what’s coming. This time of the year is always marked by releasing a lot of product, which is partly because we are now headed into the Black Friday, Cyber Monday part of the year," he said.

Shopify's CFO, Russ Jones, told the conference call that while there is no real fixed date, the company feels it can reach the break-even mark by the end of 2017.

"As you can see, we’re executing very well, our losses are relatively small, operating cash flow again in the quarter was positive. Our goal is really to keep investing, to basically take full advantage of these opportunities," he said. 

"We’re not moving that target. If it comes to 2017 and we still have some great investments that could even increase our long-term potential higher, then we’ll invest at that stage."

Shopify's shares were up 63 cents to $41.93 in mid-afternoon trading on the Toronto Stock Exchange.

- With files from the Canadian Press