Trick-or-treat. Shopify (NYSE: SHOP)(TSX: SHOP) would probably say “treat,” but investors aren’t so sure. Yesterday the cloud-based, multi-channel e-commerce platform announced solid financials for the third quarter, including total revenue of $171.5 million, a 72 percent increase year-over-year. Subscription Solutions represented $82.4 million of the total revenue, a 65 percent increase year-over-year, and Merchant Solutions generated $89.0 million, a 79 percent increase year-over-year.

‘In today’s fast-changing retail environment, merchants large and small are hungry to leverage all that technology can do for them,’ stated Russ Jones, Shopify’s CFO, in a press release. ‘This is why our platform is so valuable to merchants and why they keep coming to Shopify. Our results underscore this, with another record quarter for merchant adds, along with a record number of store launches on Shopify Plus in the third quarter. On the strength of these results and our underlying business model, we are raising our forecasts for the fourth quarter and full year 2017.’

Other financial highlights for the quarter include:

• Monthly Recurring Revenue (MRR) was $26.8 million, a 65 percent increase year-over-year.
• Shopify Plus contributed $5.3 million, or 20 percent, of MRR, compared to 15 percent for the same period last year.
• Gross Merchandise Volume (GMV) was $6.4 billion, a 69 percent increase year-over-year.
• Gross Payments Volume (GPV) was $2.4 billion, or 37 percent of GMV.
• Total gross profit was $100.0 million, an 86 percent increase year-over-year.
• Net loss for Q3 was $9.4 million, or ($0.09) per share.
• Adjusted net income for Q3 was $5.0 million, or $0.05 per share.
• Total assets as of Sept. 30, 2017 were $1.101 billion, compared to $490.6 million as of Dec. 31, 2016.

Operational highlights for the third quarter include:

• Mobile traffic accounted for 74 percent of total traffic.
• Shopify Capital issued $44.1 million in merchant cash advances.
• Shopify’s Instagram channel was made available to tens of thousands of merchants, who can begin tagging posts with products in Instagram apps.
• Shopify added Lyst as a new channel for merchants.
• In September, Shopify added bulk label printing to Shopify Shipping options.
• Shopify built an in-app Augmented Reality feature for home and lifestyle brand Magnolia to help prospective buyers envision how Magnolia products will look in their home before they buy them.
• Shopify is adding a second office in Waterloo, and hopes to expand operations with 300 to 500 new jobs in the next two to three years.

Though Shopify did not note this in its third quarter financial report, the company launched revamped QR codes – Shopcodes – in September. In the new iOS 11 update, iPhone users can scan Shopcodes with their camera app. This makes shopping easier for customers, but for merchants, it provides more information about traffic and sales. Shopcodes can be used offline in product packaging for easy reordering, or at events, pop-up stores or retail stores, making shopping easier.

In its financial report, Shopify provided the following guidance for the fourth quarter:

• Revenue between $206 million and $208 million
• GAAP operating loss between $12.5 million and $14.5 million
• Adjusted operating income between $2 million and $4 million

Shopify provided the following full year guidance:

• Revenue between $656 million and $658 million
• GAAP operating loss between $55.5 million and $57.5 million
• Adjusting operating loss between $1.5 million and $3.5 million

Despite better-than-expected financials, investors weren’t particularly impressed with Shopify’s financials, despite the big numbers. The day before financials were released – Monday, October 30, 2017 – stock was valued at $109.36. At 7:57 PM Eastern yesterday, Shopify had dropped to $99.49, a $9.87 drop, on the New York Stock Exchange.

According to Reuters, the drop in stock price may have to do with a critical report issued in October by Andrew Left of Citron Research in which Left questioned some of Shopify’s business practices, specifically its payments to bloggers and other influencers. Left said the FTC should investigate. Reuters reports that Shopify founder and chief executive Tobi Lutke said that external counsel called Left’s claims ‘preposterous.’

Insider Take:

Shopify continues in growth mode, and while its net loss is cause for concern, the company has more than doubled its assets in the first nine months of the year, and the company continues to put up solid numbers in terms of revenue and gross profit. Potential action by the FTC could be cause for concern, but it is too soon to tell if claims made by Left are valid.