August 3, 2016 / 11:13 AM / a year ago

Shopify posts lower-than-expected loss as it adds more merchants

Canadian e-commerce company Shopify Inc logo is shown on a computer screen in the illustration photo in Encinitas, California May 3, 2016. REUTERS/Mike Blake - RTX2CP3F

(Reuters) - Canadian e-commerce software maker Shopify Inc SH.TO (SHOP.N) reported a smaller-than-expected quarterly loss as more small and medium-sized merchants used its platform, and the company said it now expected a smaller operating loss for the year.

However, the company’s net loss widened in the second quarter ended June 30, as operating expenses nearly doubled.

Merchants use Shopify’s software to design, set up and manage their stores across sales channels including the web, mobile devices, social media and brick-and-mortar outlets.

Shopify, which went public in May last year, said it now expected a full-year operating loss of $37 million-$41 million, compared with its previous forecast of $41 million-$47 million.

The Ottawa-based company raised its full-year revenue forecast to $361 million-$367 million, from $337 million-$347 million.

Shopify’s U.S.-listed shares were up 4.4 percent at $35 in premarket trading on Wednesday.

The company’s revenue rose 93 percent to $86.6 million in the second quarter, beating the average analysts’ estimate of $80.6 million, according Thomson Reuters I/B/E/S.

Revenue from Shopify’s merchant solution business more than doubled to roughly $43 million. The company gets a bulk of its merchant solutions revenue from fees that it charges its clients, or merchants, when their customer orders are processed through Shopify’s payment system.

The business also earns revenue from shipping, other transaction services and referral fees, as well as the sale of point-of-sale hardware.

Revenue in the company’s subscription business, which makes money from the fees Shopify’s clients pay to use the company’s platform, rose 71.5 percent to $43.7 million.

Net loss widened to $8.4 million or 10 cents per share, from $3.3 million or 6 cents per share, a year earlier.

Operating expenses rose 91 percent to $54.8 million, while cost of revenue more than doubled to $40.5 million.

Excluding items, Shopify reported a loss of 4 cents per share, smaller than the average analysts’ estimate of 8 cents.

Reporting by Anet Josline Pinto and Amrutha Gayathri in Bengaluru; Editing by Sayantani Ghosh; Editing by Shounak Dasgupta

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