Shopify's cost surge clouds surprise profit, shares fall

(Reuters) - Canada's Shopify Inc reported a big jump in quarterly costs and slowing growth in gross merchandising volume (GMV) that overshadowed a surprise adjusted profit, sending its shares down about 10 percent in premarket trading.

Shopify, which helps companies build their online stores, said GMV, a widely watched figure for the e-commerce industry's performance, rose 56 percent in the second quarter, compared with a 74 percent jump a year earlier.

The Ottawa-based company has been spending heavily to attract big and small merchants, helping drive a 54.6 percent jump in subscription revenue in the reported quarter.

Shopify's client-base has been traditionally small and medium-size businesses, but the number of big brands using the company's products have been rising.

 

The company rivals seasoned software vendors such as Salesforce.com and Adobe Systems in the e-commerce solutions market.

Shopify Plus, its higher-margin enterprise product, contributed 23 percent to the company's monthly recurring revenue, compared with 18 percent a year earlier.

However, the investments pushed operating expenses up 63.2 percent to $167.7 million.

Total revenue rose 61.5 percent to $245.0 million.

The company's net loss widened to $24 million, or 23 cents per share, in the second quarter ended June 30, from $14 million, or 15 cents per share, a year earlier.

Excluding certain items, the company posted a profit per share of 2 cents, while analysts on average estimated a loss of 3 cents per share, according to Thomson Reuters I/B/E/S.

U.S.-listed shares were at $134.47 in premarket trading.The Toronto-listed shares closed at C$191.86 on Monday.

(Reporting by Akshara P in Bengaluru; Editing by Shounak Dasgupta and Sriraj Kalluvila)