Ecommerce software provider Shopify (NYSE: SHOP)(TSX: SH) reports double digit gains in subscription and total revenue and triple digit gains in gross merchandise volume and merchant solutions revenue, but a hefty net loss of more than $3 million. Financial highlights for the second quarter of 2016 include:

• Total revenue was $86.6 million, a 93 percent increase year-over-year.
• Subscription Solutions revenue was $43.7 million, a 72 percent increase, driven largely by the increase in merchants in using the Shopify e-commerce platform.
• Merchant Solutions revenue was $43.0 million, a 121 percent increase, driven by an increase in revenue from the use of Shopify Payments.
• Monthly Recurring Revenue was $14.4 million, a 70 percent increase year-over-year.
• Gross Merchandise Volume was $3.4 billion, a 106 percent increase year-over-year.
• Net loss was $8.4 million, or $0.10 per share, compared to $3.3 million, or $0.06 per share, year-over-year.

[Editor’s note: Shopify is based in Canada, but reports in U.S. dollars.]

“We are pleased to report our fourth consecutive quarter of year-on-year revenue growth of greater than 90%. We continued to excel on both layers of our business model in Q2. The strong growth in new merchant adds and even stronger growth of their sales indicate that the Shopify platform is meeting the growing demand for multi-channel retail in ways that no other software can,” said Shopify CFO Russ Jones.

Shopify’s operational highlights for the second quarter of 2016 include:

• Shopify announced that its merchants would be among the first to be able to accept Apple Pay and Android Pay for web orders on mobile devices later this year.
• Shopify’s first integrated marketplace channel, Amazon, is in controlled release testing now and on track to launch before the end of the year.
• Shopify launched the Shopify Plus Partner Program.
• Shopify Plus added large brands including Boeing, Bose, Hallmark and musicians Adele, Radiohead and Justin Bieber.

“Today’s entrepreneurs are tomorrow’s multi-million dollar businesses, and that many use Shopify to get there is the foundation of our business model,” said Shopify founder and CEO Tobi L tke in an August 3 press release. “Our mission is to add value for merchants, and it is clear the additions to the platform we have made over the past year are doing this. Merchant adoption continues to grow across all of them, including the rollout of new sales channels, Facebook Messenger, Shopify Shipping, and Shopify Capital.”

In the third quarter, Shopify estimates that total revenues will range between $93 million and $95 million, its GAAP operating loss will range between $9 million and $11 million, and its adjusted operating loss will fall between $2 million and $4 million, excluding stock-based compensation expenses and related payroll taxes of approximately $75 million.

Launched in 2006, Shopify is a subscription-based ecommerce platform for small and medium-sized businesses. Shopify currently serves more than 300,000 merchants in approximately 150 countries with total sales on Shopify of about $20 billion.

Insider Take:

Shopify had another stellar quarter if you look at sales volume and revenue, but a lousy quarter if you look at the net loss which is about two-and-a-half times the net loss for the second quarter of 2015. Since then, Shopify has added new features and offerings, and its subscription pricing makes it very affordable for a merchant to open an online store. In fact, a new store can start online for as little as $9 a month with Shopify Lite.

However, to remain viable long-term, Shopify needs to increase its gross profit, or reduce its operating expenses, particularly in the sales and marketing category which totaled $29.4 million for the quarter. As we explained in an earlier report on Shopify, we think Shopify has what it takes to succeed. It is willing to lose money for now as the company perfects its business model and scales the company to meet the needs of its growing customer base.