Shopify reported its second quarter financials on Tuesday, and while they posted some impressive growth, they are still suffering big losses. In its second quarter of 2017, Shopify (NYSE: SHOP)(TSX: SHOP) reports total revenue of $151.7 million, a 75 percent increase year-over-year. Of this total, $71.6 million came from Subscription Solutions, representing a 64 percent increase. Shopify attributes this revenue growth to growth in Monthly Recurring Revenue (MRR) as a record number of merchants joined the Shopify platform during the second quarter. Merchant Solutions revenue was $80.1 million, representing growth of 86 percent, driven by growth in Gross Merchandise Volume (GMV).

Other highlights for the second quarter of 2017 include:

• Second quarter gross profit grew 83 percent to $86.8 million, compared to $47.5 million for the same period last year.
• Monthly Recurring Revenue was $23.7 million, a 64 percent increase year-over-year.
• Shopify Plus accounted for $4.3 million, or 18 percent, of total MRR, compared to 13 percent year-over-year.
• GMV was $5.8 billion, a 74 percent increase year-over-year.
• Gross Payments Volume was $2.2 billion, compared to $1.3 billion year-over-year.
• Net loss for the quarter was $14.0 million, or $0.15 per share, compared to a net loss of $8.4 million, or $0.10 per share, for the second quarter of 2016.
• Adjusted net loss was $1.1 million, or $0.01 per share, compared to an adjusted net loss of $3.0 million, or $0.04 per share, for the second quarter last year.
• Shopify had $932.4 million in cash, cash equivalents and marketing securities, compared to $392.4 million at year end.

Note: Though based in Canada, Shopify reports in financials in U.S. dollars.

“The fundamental shift in retail toward multi-channel and mobile, the ongoing adoption of Shopify by larger brands, and our continued focus on building out the market-leading platform for sellers all contributed to the strength of our results this past quarter,” said Shopify CFO Russ Jones in a statement.

“As we have been able to predict and capitalize on these shifts, and continue to innovate so entrepreneurs of all sizes can take advantage of them, we feel we are exceptionally well-positioned for the next several years,” Jones added.

Operational highlights include:

• Shopify now serves more than 500,000 merchants in 175 countries.
• In the second quarter, merchant growth was 56 percent in North America, 82 percent in Asia, 168 percent in South America, and 70 percent in Africa.
• In June, Shopify announced the integration of Buzzfeed as a new sales channel, creating a new way for media and publishers to earn affiliate revenue.
• In July (third quarter), Shopify announced a partnership with eBay, allowing Shopify merchants to sell on eBay from within the Shopify dashboard.
• In July, Shopify began shipping pre-orders of its Chip and Swipe reader to merchants for point-of-sale purchases.
• Shopify Pay went live in Q2 for merchants who use Shopify Payments.
• Shopify Payments was made available in New Zealand.
• Mobile traffic grew, representing 72 percent of traffic and 60 percent of orders, compared to 69 percent and 59 percent, respectively, in the first quarter.
• CFO Russ Jones announced his plan to retire in 2018 after a successor is found.

Shopify offered the following outlook for the third quarter of 2017:

• Revenues are estimated to be between $164 million and $166 million.
• GAAP operating loss is estimated to range between $17 million and $19 million.
• Adjusted operating loss will be between $2 million and $4 million, excluding stock-based compensation expenses and related payroll taxes of $15 million.

Shopify offered the following guidance for the full year 2017:

• Revenues are estimated to be between $642 million and $648 million.
• GAAP operating loss will be between $62 million to $66 million.
• Adjusted operating loss will range between $7 million to $11 million, excluding stock-based compensation expenses and related payroll taxes of $55 million.

Shopify’s stock (NYSE) surged and then dropped as a result. On August 1, the day the earnings report came out, Shopify stock was valued at $104.08 per share. In after-hours trading yesterday, Shopify stock had dropped to $97.16 per share. While this was a noticeable dip, Shopify stock is still remarkably more valuable than it was this time last year. On August 4, 2016, Shopify stock was $36.85 per share. In an August 1 report, Bloomberg called Shopify a “stock market darling that can seemingly do no wrong.”

Insider Take:

As we noted after the first quarter financials came out, Shopify continues to operate in the red, sustaining big losses, but the company is in growth mode. It has posted growth in virtually every category, and it continues to innovate with technology and solutions for merchants. Now with more than 500,000 merchants and partnerships with companies like BuzzFeed and eBay, these solutions are resonating with business owners. Shopify can’t operate in the red indefinitely though. At some point, it needs to either reduce its cost of revenues or operating expenses, the biggest portion of which is sales and marketing, to get itself in the black. In the meantime, investors don’t seem to be turned off by the direction Shopify is going.