Shopify says it will spend more to grow ahead of holiday season, posts Q2 loss

By David Friend, The Canadian Press

Shopify Inc. expects to increase spending in the final half of the year as the e-commerce software maker prepares for a surge of business leading up to Christmas shopping season.

The Ottawa-based technology company, which made its debut as a publicly traded company in May, delivered its second quarter results on Thursday which showed a loss of US$3.3 million on higher costs as revenue nearly doubled.

The company, which keeps its books in U.S. dollars, said the loss amounted to six cents per share for the quarter ended June 30 compared with a loss of $6.9 million or 18 cents per share a year ago.

Revenue improved to $44.9 million from $23.7 million.

Shares of the company jumped 11 per cent to close at $49.50 on the Toronto Stock Exchange as investors responded positively to the results.

Shopify (TSX:SH), which helps connect businesses to the online shopping world with its software platforms, said its customer base has grown by 13,000 members since it went public two months ago. Overall, it had about 175,000 businesses using its service at the end of the quarter.

Total operating expenses jumped 34 per cent to $28.7 million, as the company spent about $3.5 million more on sales and marketing over the same time last year, while general and administrative expenses grew by $1.7 million.

Chief financial officer Russ Jones told analysts on the company’s financial results conference call that more investments would be made during the third quarter as it builds sales and support resources.

“As growth accelerates our plan is to keep reinvesting,” he said. “The opportunity in front of us is so large that it clearly makes sense.”

Shopify expects the cost of its larger workforce will be seen in the third-quarter results, while it projects revenue to come in between $47 million to $48 million. It projects operating losses for that period in the range of $6.5 million to $7.5 million.

For the year, revenues are anticipated in the range of $181 million to $183 million with an operating loss in the range of $21 million to $23 million.

Shopify is launching a variety of new features which help customers link their e-commerce stores to blogs and websites.

It is also rolling out ShopifyPlus, a premium service for high volume merchants, as a way to attract larger clients away from competing services.

Chief platform officer Harley Finkelstein said ShopifyPlus is not yet a material portion of the company’s revenue, but that it offers plenty of potential.

“We hope to make shopping a Shopify store as fun as watching HBO,” he said.

— Follow @dj_friend on Twitter.

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