Shopify, a subscription-based ecommerce platform for small and medium-sized businesses, announced its 2015 results: revenue, volume and subscriptions are up, but profits are nonexistent. Shopify (NYSE: SHOP)(TSX: SH) posted an operating loss of $6.3 million for the fourth quarter, and a net loss of $18.8 million for the full year. [Editor’s note: Shopify is based in Canada, but reports in U.S. dollars.]

Shopify allows any sized company to easily sell online at a retail location, online and everywhere in between. It offers a professional online storefront, a payment solution to accept credit cards, and the Shopify POS application to power retail sales.

Fourth quarter highlights include:

• Total revenue for Q4 was $70.2 million, a 99% increase, year over year
  • Subscription Solutions, a portion of total revenue, grew 70% to $34.6 million, driven by an increasing number of merchants using the platform
  • Merchant Solutions, a portion of total revenue, grew 140% to $35.6 million, driven by an increase in revenue from Shopify Payments
• Gross merchandise volume for Q4 was $2.8 billion, a 109% increase, year over year
• Gross profit grew 81% to $35.5 million for Q4, compared to $19.6 million, year over year
• Net loss for Q4 was $6.3 million, compared to $4.8 million, year over year
• Adjusted net loss for Q4 was $1.1 million, the same adjusted net loss period reported for Q4 2014

Full year 2015 highlights include:

• Total revenue for 2015 was $205.2 million, a 95% increase, year over year
  • Subscription Solutions, a portion of total revenue grew 68% to $112 million
  • Merchant Solutions, a portion of total revenue, grew 143% to $93.3 million
• Monthly billings retention rate exceeded 100%.
• Gross merchandise volume for 2015 was $7.7 billion, a 105% increase
• Gross profit grew 80% to $111.1 million for 2015, compared to $61.8 million for 2014.
• Net loss for 2015 was $18.8 million, compared to $22.3 million in 2014.
• Adjusted net loss for 2015 was $7.7 million, compared to $15.7 million for 2014.

Shopify execs are spinning the news in a positive light.

“We are coming off not only a tremendous quarter for Shopify, but also for the hundreds of thousands of merchants that trust the Shopify platform to power their businesses. Over the holiday season, our merchants collectively sold almost $3 billion worth of products, a huge increase from the year before. We are also seeing our merchants use Shopify to sell on multiple new sales channels like mobile and social. We believe that multichannel, cloud commerce is an industry-wide shift that is still in its infancy,” said Shopify founder and CEO Tobi Lutke.

Shopify CFO Russ Jones concurred, “Our strong fourth-quarter performance highlights the strength of our business model, one where we win when our merchants win. Many of our efforts in 2015 – such as adding multiple new sales channels to a single integrated back office – were driven by our simple goal of helping merchants become more successful. We added a record number of new merchants in the fourth quarter and are proud that over half of the more than 1,000 merchants now using Shopify Plus are upgrades from merchants who have grown their businesses on Shopify. We’re entering 2016 with excellent momentum and expect to close this year even better positioned than we are today.”

Business highlights for the year include:

• Shopify currently powers 243,000 businesses in 150 countries, including Tesla Motors, Budweiser, Red Bull, the New York Stock Exchange and the L.A. Lakers.
• A successful Black Friday weekend, where gross merchandise volume and order volume more than doubled.
• Shopify was also among the first to give its merchants the ability to sell on social media platforms like Facebook, Pinterest and Twitter.
• While total sales on social media remain low, more than 25% of Shopify merchants have added that option for their customers. Shopify merchants who sell in-person can now offer chip-and-pin EMV readers and ApplePay to their list of payment options.

In 2016, Shopify expects revenues to range between $320 million and $330 million and an adjusted operating loss between $16 million and $22 million. Russ Jones predicts the company will break even by the end of 2017.

Insider Take:

With 243,000 active Shopify stores racking up $14 billion in sales annually, Shopify is achieving its original goal of making ecommerce easier for everyone. The company started as a solo store in 2006 and has grown to a staff of 500 working in four offices across Canada, providing back office solutions for hundreds of thousands of companies.

We love what Shopify is doing, particularly the many options they offer, including everything from Shopify Lite at $9 a month to the tailor-made enterprise solutions. They offer an ecommerce solution for every size business, and they make it very clear what features are included at each price point. There is a 14-day free trial and no set up fee, making it easy for merchants to try it without a commitment.

Given its stellar growth in 2015 and its innovative ecommerce solutions, Shopify is looking to break even. The company has good potential, provided it starts earning money soon. Given the players on the board and their investors, we suspect Shopify is playing a market share game, willing to lose money for now as they perfect their revenue model and scale.

No company can continue to operate in the red for sustained periods of time without a major overhaul (think Angie’s List). Hopefully, Shopify is on the right path.