Katie Keita - IR Tobi Lutke - CEO Harley Finkelstein - COO Russ Jones - CFO

Jesse Hulsing - Goldman Sachs Deepak Mathivanan - Barclays Colin Sebastian - Robert Baird Richard Tse - National Bank Financial Terry Tillman - Raymond James Michael Nemeroff - Credit Suisse Darren Aftahi - Roth Capital Partners Monika Garg - Pacific Crest Securities Gus Papageorgiou - Macquarie Research Tom Forte - Maxim Group Nikhil Thadani - Mackie Research Capital Ross MacMillan - RBC Capital Markets James Cakmak - Monness Crespi Hardt Jonathan Kees - Summit Redstone Partners Richard Davis - Canaccord Todd Coupland - CIBC Eyal Ofir - Eight Capital Kevin Krishnaratne - Paradigm Capital

Good morning. My name is Chris and I will be your conference operator today. At this time, I would like to welcome everyone to the Shopify Q1 2017 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Ms. Katie Keita, Director of Investor Relations you may begin your conference.

Thank you. Good morning everyone. We are glad you can join us for Shopify’s first quarter earnings call. We are joined this morning by Tobi Lutke, Shopify’s CEO; Harley Finkelstein, our Chief Operating Officer; and Russ Jones, our esteemed CFO. After prepared remarks from Harley and Russ we will open it up for your questions. Once again we will make forward-looking statements on the call today. These are based on current assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those projected. We undertake no obligation to update these statements except as required by law. Information about these risks and uncertainties is included in our press release this morning as well as in our filings with Canada and the US securities regulators. Also our commentary today will include adjusted financial measures, which are non-GAAP measures. These should be considered as a supplement to not as substitute for GAAP financial measures. Reconciliations between the two can be found in our earnings press release, which is available on our website. And finally, note that because we report in US dollars, all amounts discussed are in US dollars unless otherwise indicated. And with that, I will turn the call over to Harley.

Thanks Katie, and good morning everyone. Over the first few months of 2017, we continued our steady progress towards our goal of making Shopify the platform of choice for sellers. While much of our work in the quarter was under the radar, quietly improving Shopify for developers both inside and outside the company, we also achieved a record number of new merchant ads, brought some great new brands on to Shopify Plus and held a hugely successful partner conference a couple of weeks ago in San Francisco. Our sold-out Unite conference for Shopify partners brought together more than 1,000 app developers and web designers to talk shop, as we introduced our new APIs and platform functionality that now leverage to build new commerce experiences for our merchants. It was incredible to see the level of support and engagement from our partners, and witness their commitment to helping us build a platform that flattens the learning curve for entrepreneurs. Together with our partners, we are combining our passion for entrepreneurship with our passion for technology to make starting and growing a retail operation as easy as possible. Notable announcements at Unite this year included our point-of-sale card reader, Shopify Pay, and our new wholesale channel for Shopify Plus. Let me touch on each of those in turn. Our EMV card reader will be available in June to US based merchants. This is our first hardware product designed by Shopify and branded with our logo. We designed it as a free-standing reader so we it can easily be used anywhere and will be free to all merchants new to Shopify Point-of-Sale. This card reader further demonstrates our commitment to the Point-of-Sale channel. Shopify Pay accelerates the checkout flow and provides another opportunity to help merchants reduce friction and increase conversion. Merchants can offer consumers, the option saving their payment and shipping information at checkout time. Doing so speeds up the checkout process on not only that merchant store, but on any Shopify Pay enabled. It is worth noting that this will be the first time that the Shopify brand is actively presented to consumers which we expect will improve name recognition and recall in our drive to inspire entrepreneurship. Finally, the Shopify wholesale channel addresses a long standing need for merchants to seamlessly tap in to their wholesale market. With Shopify Wholesale, we will help make wholesale business a business commerce just as simple, approachable and extensible as Shopify makes business to consumer commerce today. Merchants can us the channel to present password storefronts that grant their commercial buyers access to an array of other wholesale pricing options. Other announcements at Unite, all of which are either live now or coming soon include new channels such as those created by BuzzFeed and Wish, new APIs that further expand our platform for developers for orders, reporting, storefronts and marketing app extensibility, and software development kits including the Shopify Buy SDKs for custom store fronts using iOS, Android, Javascript and now Unity, which delivers in-game transaction functionality for video games using the Unity game engine. Our commitment to supporting our developers technologically is part of the reason our partner community continues to expand, and with these announcements, there’s never been more opportunity for our partners to build on top of Shopify’s platform. More than 12,000 partners from over 110 countries have referred merchants to us in the past 12 months. The Shopify Plus partner community was also very well represented at Unite including several partners, who traditionally had worked exclusively on other platforms. They are looking to expand their knowledge and capabilities on Shopify for their high growth and high volume clients. Shopify Plus clients that have launched in the past few months includes fashion brands like Fossil Group, [scotch] and watches; Iowa retailer, Harley Quinn; event producer, Live Nation; Sears’ new Canadian discount chain. Health and beauty brands like Borghese; Tyra Banks’ cosmetic line called Tyra; and Miranda Kerr’s Kora Organics. We also launched a variety of other sellers such as Seismic audio speakers, undies.com, and Splendor. The percentage of our merchants using Shopify Shipping continues to grow as well, with nearly one in four merchants with orders originating in the US now on board. Canada’s penetration rates are smaller, but also growing steadily. The adoption of cash advances by merchants eligible for Shopify Capital also continues to grow. Cash advances to merchants grew to $49 million by the end of the first quarter, comparing with $30 million in cumulative advances just three months ago. It’s also interesting to note that today just one month later that number stands at more than $60 million. We hit a major milestone in mid-March where our machine learning algorithms, fully automate are offers to merchants for these advances. This means offers are now personalized based on individual merchant performance, rather than the more general criteria had merchants in to groups. This helps us better understand and mitigate risks as we expand our merchant pool. It also means that because offers are personalized with terms that are more individually appropriate, acceptance rates are likely to go higher. All of these things that I just talked about, the new channels, APIs, SDKs, partners, merchant solutions, all of them exist to flatten the learning curve for merchants our guiding principle, as we extend our leadership position as a platform of choice for developers, partners and of course for merchants. And with that I’ll turn it over to Russ.

Thanks Harley. Thanks everyone. 2017 is off to an excellent start thanks to our focus, execution and the continued shift in retail towards multi-channels. In Q1 we grew revenue 75% year-over-year to 127.4 million as we saw continued strong growth in both subscription solutions and merchant solutions revenue. Subscription solutions revenue grew 60% to 62.1 million driven by growth of a monthly recurring revenue of 62% to 20.7 million. Shopify Plus accounted for 3.5 million or 17% of this MRR compared with 11% of MRR for Q1 of 2016. Merchants solutions revenue grew 92% to 65.3 million mainly driven by continued strong growth in gross merchandize volume and the expanded adoption of Shopify Payment, Shipping and Capital. This contributed to an increase in our merchant solutions take rate to 1.35% of GMV from 1.27% of GMV in Q1 of last year. GMV grew 81% to 4.8 billion as we continue to track merchants to the Shopify platform and make it easier than ever for merchants to capitalize on the shift to multi-channel commerce to grow their sales. 1.8 billion of the GMV in the quarter or 38% was processed on Shopify payments. This compares with 1 billion or 37% in Q1 of 2016. Gross margin dollars once again grew faster than revenue in the quarter, with operational skill improvements in both subscription solutions and merchant solutions more than offsetting the higher rating of merchant solutions as compared to Q1 of last year. Merchant solutions also benefited from the impact of the higher margin revenue stream from shipping and capital. Our adjusted operating loss in Q1 was 4.3 million or 3% of revenue, compared with 5.9 million or 8% of revenue in the first quarter of 2016. Our adjusted net loss for the quarter was 3.5 million or $0.04 per share compared with 5.1 million or $0.06 per share for the first quarter of 2016. Finally, our cash, cash equivalents and marketable securities balance grew slightly from year-end to $395.7 million. Harley talked about how we’re reaping the benefits from our data and the growth in performance of Shopify Capital, but that is only the beginning. In Q1 we added another 12 billion interactions with the Shopify platform which together with the tens of billions we have massed over the past 10 plus years can help us guide merchants on key decisions like pricing and channels, discounting, order fraud and shipping optimization. These massive datasets also allow for behind-the-scenes improvements but translate to greater efficiencies and better conversion, from lead to customers for us and from browser to buyers for our merchants. As we look to the rest of the year, we now expect 2017 revenue in the range of $615 million to $630 million, and an adjusted operating loss in the range of 14 million to 18 million. For the second quarter, we expect revenue in the range of 142 million to 144 million, and adjusted operating loss in the range of 6 million to 8 million. Please note that the Unite was held in Q1 last year, but in Q2 of this year and it was nearly twice as large. We continue to expect stock based compensation to amount to 55 million for the full year, with about 12 million of this in the second quarter. Q1 marked our 8th successful quarter as a public company and in these past two years retailers continued to shift in a very favorable towards our business model and our strategic vision at the time of the IPO. One of the most rewarding aspects of our relentless focus on inspiring entrepreneurship and small business growth has been the ballooning number of Shopify users in the general population. Merchant staff accounts on the Shopify platform are rapidly approaching the one million mark. Having a growing role in the shift within retail, a role that disruptively creates economic value and employment simultaneously gives us confidence in our aspiration to become the commerce platform for sellers. With that I’ll turn it back over to Katie to start the Q&A.

Chris, can we turn the call over to our participants for their questions please.

[Operator Instructions] Your first question comes from Jesse Hulsing of Goldman Sachs. Your line is open.

Frist question probably for Harley, it looks like Shopify Plus is up about 150% year-over-year on an MRR basis. First, can you give us a sense of what you’re seeing in that business at the start of the year, particularly when you look at migrations from Magento? And second, how much of a contributor was price increases to that MRR growth?

Thanks for the question, Harley here. In terms of Q1 growth in Plus, specific to your Magento question, we did do a campaign in Q4 which targeted Magento merchants as you know and as well as Magento partners. So we certainly are reaping some of those benefits in Q1 even though we didn’t do another campaign in that quarter. There is obviously some seasonality in terms of the cycles of sales that these larger companies look after. So unlike some of the small businesses that can make a decision very quickly, these larger brands and merchants do take some more time. But generally, we are happy with where things are going with Plus and now in terms of the price change that sort of roll back we had expected. So in that respect it was good.

Quick follow-up for Russ, it looks like gross payment volumes as a percentage of EMV was down slightly quarter-over-quarter. Can you walk us through why that would be?

Yes, two reasons for that. We always get a little bit of fluctuation depending on sort of primarily Plus merchants some of which do have Shopify Payments and some don’t. In addition to that I think the larger factor is our GMV outside of our core payments market continues to grow. And so as that continues, you’ll see that penetration rate fluctuate slightly.

Your next question comes from Deepak Mathivanan of Barclays. Your line is open.

Two question from me, so first one, can you talk a little bit about the merchant growth this quarter or perhaps more color on the Plus merchant which is the SMB merchants. I guess the delta between GMV growth and the MRR growth was kind of declining, so wanted to understand the dynamics there. And then two on the B2B solution, is there any difference in the go-to-market strategy for that or should we think about it very similar to how we do it for Shopify Plus.

I’ll take the first part of that, in terms of the MRR Q4 versus Q1 relatively flat versus Q1 of last year it was up again in the quarter. On the GMV as you would expect because of the fourth quarter holiday period, the GMV per merchant typically is lower in Q1 and then kind of builds throughout the year.

Deepak I’ll take the wholesale question, Harley here. So on the wholesale one, we’ve had merchants on our platform that do sell B2C that have asked us to have functionality to sell B2B, and so there’s obviously some pent-up demand there. But we feel the product of wholesale continues to rollout, we can go after merchants that are excessively doing B2B which is something previously we weren’t really seeing too much of. Additionally, there are some partners that have approached us that excessively work with B2B type merchants and with a new product like this we feel like we can start going after those partners as well.

Your next question comes from Colin Sebastian of Robert Baird. Your line is open.

A couple of questions from me, first off on gross margins as a follow-up, it was a nice step-up there particularly on the merchant solutions segment. Russ you cited the mix of shipping and capital as benefits, but I was curious that there were any changes in margin or pricing on the payment solution side of that that might have also contributed to growth? And I have a follow-up.

Yeah, we did see also improvements on the payment side. As we’ve seen in the past, our payments business outside of North America has higher margins, so that continues to grow, there’s a positive element there. In addition to that we’re just seeing some good operational improvements on sort of the core payments business as we hit higher milestones in terms of our billing as well as we’ve been able to take advantage of some operational improvements there.

And then secondly, as a follow-up on the question around payment volumes, beyond the factors you mentioned, where do you see this mix moving long term as part of the overall GMV?

In terms of payment volume, it continues to grow. There’s a number of things happening there as part of the new Plus pricing. There’s an incentive for merchants new to the platform to also adopt Shopify Payments. And in terms of capital we’re now seeing merchants who want to access the Shopify Capital which requires Shopify Payment moving over to payment as well. So I think all of those trends bode nicely for its future.

Do you guys see any benefit from reduced churn from merchants that are using and adopting the Shopify point-of-sale system and perhaps some of the other related services you announced that you know.

Yeah, typically merchants that also use the Shopify Payments and our point-of-sale are generally more established merchants and anyone who has more sales channels typically does better. So, that definitely helps.

Your next question comes from the line of Richard Tse of National Bank Financial. Your line is open.

Russ, one of may be comment on what do you think the reasonable upside limit would be on the take rate here going forward here in the next few years?

We think take rate will continue to move up modestly. It’s going to come with the success with the adoption of payments as we move payments to other geographies which is part of the longer term plan. That will help, and as shipping and capital continue to rollout, all of that will help on that take rate. But it’s not going to be a drastic increase. It will be sort of slow and steady improvement.

Your next question comes from the line of Terry Tillman of Raymond James. Your line is open.

Russ, the first quarter just relates to, if we look at the updated guidance, 15 million to 50 million. As we look at the old range and the new range it’s actually a range of 15 million to 50 million in terms of the low-end to the upper-end in terms of what’s changed here. And I guess with the significant increase in the guidance, is it more on the merchant solutions and take rate and attach rates of those solutions or soon to be released merchant solutions or is it more on the software side, just some more help on this big increase for the guide.

So Q1 as we pointed in the press release was a record quarter of new merchant additions. And just based on that momentum and the traction we see both from a market point of view and a competitive point of view, we expect to see growth. Obviously the more merchants we have, the more volume they do, and that’s where sort of the strength of our business model really comes in to play that we benefit on that side as well. So we see good growth as we increase that guidance on both fronts.

Your next question comes from Michael Nemeroff of Credit Suisse. Your line is open.

Russ a very nice question and thanks for taking my question, it was actually around Plus. Your business kind of reminds of salesforce.com when it was around your size, as it started initially as an SMB focused product and then they really quickly turn their business towards the large enterprise like you’re doing with Plus. So my questions are on Plus, how many sellers moved up to Plus in the quarter and now that it seems that Plus is close to or above 10% of total revenue, could you tell us what the average GMV is for a Plus merchant, and also maybe give us an insight in to how you plan to further monetize that customer base overtime, aside from the higher subscription fees.

Michael its Harley. So, we’ve mentioned this before, but look at the average GMV for Plus actually isn’t really helpful, but really more helpful is the fact that more than 50% of the GMV on the platform come from both the advance plan as well as the Plus plan, just to give you a sort of a sense of GMV there. In terms of, as we said when we introduced plus a couple of years ago, we really wanted to provide a place that merchants can grow up on and Shopify never have to leave the platform. And obviously we continue to see upgrades there. That being said in Q1 it was weighted towards net new merchants on the platform which were quite excited about because it introduces established brands to Shopify. But we will continue to see upgrades going forward, but there will certainly be a focus on net new. The other thing to note is that we no longer provide preferential pricing on upgrades the same as the coming net new and so I think you will see that mix to wait on the side of net new merchants going forward.

Your next question comes from Darren Aftahi of Roth. Your line is open.

On Plus what was kind of the mix roughly speaking of percentages of net new ads between sort of organic home grown versus newly acquired. And then can you give the composition of percentage basis of what the merchant growth was in shipping. I think you’d said a quarter domestically, but what was the comparable number you [wanted] to hear.

It’s Harley, I’ll take that first question. So as I mentioned in the last question it was weighted on the side of net new for the first quarter rather than upgrades. So again that’s partially because there is no preferential pricing on upgrades, but also because Plus has been around now for a couple of years, and so the obviously merchants on our platform that should upgrade to Plus, many have already done that before. And I’ll pass it over to Russ on the shipping question.

On the shipping side as Harley mentioned about a quarter of the US merchants shipping product use Shopify Shipping in the quarter. That was a couple of percentage points up from the previous quarter.

Your next question comes from Monika Garg of Pacific Crest Securities. Your line is open.

Your merchant solutions revenue is more than 50% of total revenue, but at least 85% to 90% currently is coming from payments, and you are paying close to 70% to 75% of that revenue to Stripe. So question is, given that there are other backend gateway providers also, could you first of all either negotiate a better rate specially since this business is ramping very fast or maybe at some time would you like to do backing yourself?

So I’ll take the first part and since Toby is here, I’ll give him the product side of it. So in terms of that first part, because we are the merchant acquirer we have complete flexibility on who we use for the processing side. In our current agreement it’s based on cumulative volumes so we already get a huge benefit as that volume increases that again we see falling to that both gross margin dollars and gross margin percentage side of it. So again we have that flexibility, but to do something like that wouldn’t result in a significant improvement in the cost structure. The largest piece on the payment side is the interchange, and so if we could find a way to reduce the charges from Visa and Am Ex that would have the bigger impact for us. And I’ll turn it over to Toby.

Shopify supports more than 80 different payment gateways which we all can use, Shopify Payments is one of them. So on a purely transactional basis it’s very easy for us to go and use a different provider, but more importantly like the partnership between Stripe and Shopify is very, very deep. Like we are culturally very similar companies, we are equally ambitious and we sort of work on the assumption that Shopify is going to be the company which is going to figure this space of getting more entrepreneurs on the internet, how to mix off with its skills throughout market at all sizes, where Stripe is taking the entire complexity of moving money around and solving this in a very future safe way right now with credit cards, and you know this is going to evolve over in the future. This is a really good demarcation point for us, because we could go and build a payment gateway. There would be a mass opportunity costing this and I think the best you can do is build something that’s what Stripe is doing. So I think this is one of those partnerships that is just fairly rare in technology, but its deep, we compare notes with each other and so on and I think that’s one of those things that we’re celebrating.

Just as a follow-up on Shopify Capital as that keeps ramping, would you be looking to sign partnership with other financial institutions to extend credit?

The current level that we are at it’s still well within our capacity of funding it from or balance sheet. But we continue to look at other options there because it is growing at a pretty strong pace. We’ve already done more advances this year than all of last year, so definitely something worth thinking about.

Your next question is from Gus Papageorgiou from Macquarie Research.

Just on capital, so just based on what you said. In the month of April that you extended $11 million worth of loan is that correct?

That’s correct.

And what kind of payment period are you seeing that how quickly are these loans being paid back?

Typically, because it’s an advance you don’t think about it in terms of periods of time. But typically what we see is the full remittance happens in sort of seven to nine months period. The other thing that I should mention on capital side of it, we now have more and more merchants on sort of second, third and fourth advances and so it’s really becoming an important piece of them growing their business.

If you look at your subscriber out of your merchant solutions gross margins, they are at multi-quarter highs. If you could characterize the improvement between payments, capital and shipping which other three had the biggest influence?

All of three had it. I would say that shipping and capital were relatively equal in terms of their contribution, but payments we saw good improvement there as well.

And then the final question just on customer additions. So you didn’t give a number but you said you had a record quarter. So is it fair to assume that Q1 of this year you added more customers than Q4 of last year?

That is correct.

Your next question is from Ken Wong of Citigroup. Your line is open. Your next question comes from Tom Forte of Maxim Group. Your line is open.

Wanted to talk about your sales force Shopify Plus, what’s the current size of the sales force, how’s the turnover been to-date and what are your future growth plans as far as rate of growth for that sales force?

It’s Harley, I’ll take that question. So in terms of the sales rep or we call sales hackers that continues to grow. Our count of sales hackers is certainly higher than where we were in Q4 last year. But keep in mind that our sales force is not just or sales hackers, we also have a massive network of partners that continues to grow. We’re bringing partners on from other platforms that traditionally didn’t work with us, who are now starting to work with us on the Plus side of things. So generally things are growing well and as expected and we’re quite happy with where that’s at.

Your next question is from Nikhil Thadani of Mackie Research Capital. Your line is open.

Two quick questions from me. Russ I just wanted to go back to the gross margin for merchant solutions for a bit here. Is it fair to sort of think about that gross margin in the low to mid 30% range going forward or did Q1 have any sort of special seasonal one-times?

No seasonal one-time. We expect merchant solutions to continue to improve throughout the year. In terms of the overall merchants, as we’ve seen in the past and as we expect again this year the waiting will move towards merchant solutions as you progress through the year. And so the overall percentage will come down, but merchant solutions we continue to see improvements there and expect that on a go-forward basis. We also saw good bump in subscription solutions, typically what we see on that side is the infrastructure that we put in place for kind of the Black Friday, every Monday Q4 holiday period. Results in that merchant coming down in the second half of the year. So we saw some operational improvements that helped in Q1 plus the infrastructure that we needed for Q4 was sufficient for the Q1 volume. So just so you have that color as well.

And just one last before I pass the line here. What was the biggest takeaway from Shopify Unite that you walked away from in terms of the product roadmap. I know you can’t get too much of a details of your future roadmap, but just in terms of big themes was there something over -arching that you left San Francisco with.

It’s probably not the time to talk about what we walked off from this one, but maybe it’s sort of just talking about like this only has been the second Unite. The one we did last year was our first event with our community of partners outside of just forums and (inaudible). So, initially this was planned to be just sort of a series of product announcements by us where we just share what we’ve been working on. But it actually had really a profound effect on the company on Shopify. Like we walked away from the conference, we flew back to Canada, and we did change our roadmap significantly, and there are things that came back this year were significantly influenced by all the stories we heard and obviously that we’ve forgotten. But it was very, very honest. The partners really did tell us a lot about their own stories, but also something things we need to hear about the particular quality of something that maybe on (inaudible) because they’ve worked for certain group of partners and so on. So it’s interesting because these events you go in for a particular reason but usually you learn so much more about the business because everyone is currently engaged in saying out how to build the correct software for this market, because again like I said in previous calls, I still think Shopify is now getting for the first time close to something like a product market fit in our markets and the previous sort of solutions in these market where sort of all hit and sort of missed the mark before. So we were very encouraged with reactions to just us going a little bit more in to hardware where we’ve seen some of those propends like this was sort of a thing we hurt the year before. Yes we had card readers but if you actually watched a merchant sell a product that’s a card reader that’s connected to a headphone jack and trying to align the card and spend a couple of minutes trying to get everything right, you realize that someone actually needs to be build half of it that makes those things easy. Shopify Pay and so on, like all these things based on the feedback we’ve gotten and I think this is a cycle we are now on.

Your next question comes from Ross MacMillan of RBC Capital Markets. Your line is open.

Two questions if I could. Thank you for the disclosure on the Plus merchant MRR. Ross as you go forward, when we think about the new pricing model for Plus, how are you going to present that in the P&L. So where will the GMB based pricing fall and where will the transaction the 15 basis point transaction fee fall?

In terms of the fee for merchants that are not using Shopify Payment, that will be roll up to merchants solutions. In terms of the price to use the platform itself, so the 25 basis points with the minimum of 2000 and the maximum of 40,000 they’ve been completely decided on that yet. As a minimum the 2000 will hit subscription solutions, the variable piece on top of that up to 40 may also be in subscription solutions or may hit merchant solutions, we haven’t completely determined that yet.

And one follow-up, if we look to your filing and we see that your SEM, you internet spend, your SEM, SEO is been tracking at about 60% of annual increase in sales and marketing spend. This quarter it seemed the growth is a little bit more skewed to the increases due to non-SEM, SEO. Just curious as to how we should think about that internet spend as a percentage of sales and marketing growth going forward and would you expect it to decline within the next or stay around that consistent level.

It’s something that we look at on a quarterly basis. In Q1 in terms of our spend on Google ad words versus Facebook, we saw some really stellar results on the Google Ad word and so allocated more of the paid spend and in fact increased the amount overall just to capture that. So it’s something that we really look out on a weekly, daily basis before making that decision. But overall we don’t see any sort of fundamental changes there.

Your next question is from James Cakmak from Monness Crespi Hardt.

Harley, you talked about building the brands in the eyes of the consumers. Historically you’ve been the back engine for all these businesses on the payment side. Can you just talk about how you see the brand evolving for consumers and then benefits of that as we look down the road?

James, this is Tobi, I’m going to take this. Some opinions we had, this is really important thing for like anyone who is trying to make it through startup period. So one of the most strong opinions that Shopify had is that we are not in this to make our-self look good, we are in this to make other people look good, like specifically the merchants and the partners. We try to give them a fantastic product which they can use so that their buyers and their customers can be delighted by the experience of - like the interaction they have, and we are just going to be providers and the people who are sort of having a long [list]. So this one of the reasons why, for example, we didn’t even have the conference, like we were very happy being up here in Canada that’s hidden and you have our software hidden in our brand (inaudible). So what we is we visit these divisions and this one we’ve only reluctantly changed, but one of those kind of feedback coming from our partners at Unite, who said, that’s good that you guys are trying do all this and not (inaudible) Shopify will cost everything. You know what, like you guys are a brand and need to realize that there’s less value of that. So this sort of encouraged us to do Shopify Pay, because we are trying to play the long game here. Like the thing that we are really trying to accomplish and then I’m just going to spend a second talking about - the thing that we’re really trying to do here is, we’re concept of someone like finding a new store or finding product we love, adding it to our shopping cart and then spending five minutes with our thumbs entering address is ridiculous. So we’re trying to make this go away, and no one should be allowed to checkout ever again ideally. So first step was lets’ go to the platform owners, Apple, Apple Pay, Android Pay, these kind of things. Get something to Chrome, just let’s get to all the people who’re actually on the software through which people consume the internet and get transactions built in to this. We are part of (inaudible), we get this done forever. We are just too slow, like we’ve now accomplished these goals and we realize we’re still going to take a couple of years on where people have to thumb in their addresses. So, we realize, okay, that’s over 1,000 stores now, that’s a significant percentage of the online stores that people shop on. We can actually say Shopify Pay all sort of things, we can get you through the checkout really, really fast and that’s going to be a really good solution until we get this properly done by moving all the credit cards into CQ elements on the devices and really upgrade the way the internet move money around. So this is sort of our thinking, and the first time we come and say this is us powering this and therefore first and foray in to being a brand even to those people who buy on Shopify stores.

Your next question is from Jonathan Kees of Summit Redstone Partners. Your line is open.

I just wanted to see if we can get a little color here on couple of your marquee names. Amazon, they at point they had their own solutions and they chose as your partner and now you are one of their premiere partner in terms of what they do. And you added Amazon marketplace back in December, just curious how is that been trending, how much of - if you could even talk in terms of contribution there, and also with Facebook in terms of the channel there. Thanks.

It’s Harley, I’ll take that question. So whether its Amazon or Facebook or it’s any of the other channels, the concept is that we want our merchants to sell wherever the customers are hanging out. And some of those customers are hanging out in a marketplace like Amazon and others are hanging out in social media platforms like Facebook, and so enabling our merchants to have a wide variety of options to find new customers online is something really important to us. To your question on Amazon, there was a couple of different pieces to the partnership. One was the fact that they were shutting down their web store product and we became their migration partner for that. But there also were some other benefits to it like enabling check on the Amazon, summon the Amazon, which allow our merchants to use those products and obviously the most recent one is allowing our merchants and enabling them to cross-sell on Amazons market place where there are hundreds of millions of people looking for products. So in general where it’s any channel in particular, the whole concept is to make our merchants successful and allow them to sell more and that’s you’re seeing more and more of these announcements for our new channels.

Your next question is from Richard Davis from Canaccord. Your line is open.

Do you see yourself overtime as Mike Nemeroff kind of touched on moving up market, and in to higher end firms like build demand wherever there’s sales force now. And if that’s the playbook going forward, when you think about this more broadly, what changes in your go-to-market strategy and/or technology platform would you mean to accomplish some of the (inaudible) and how do you think about that and that’s the direction you’re going.

So I can’t specifically say but it’s not our playbook. And this is actually fairly easy to prove because that’s an easy playbook like its actually trivial to like (inaudible) can’t stop writing book about this topic. Like you go in to the bottom of a market and then you slowly go upmarket and that’s how you disrupt things. So this is play that’s available to us and it would be very successful to do this specifically short term. And it’s really something much harder, which his we are going in to a market from the bottom as we have and then we stick to the bottom and then we create a single product that stretches all the way through the market. I’m struggling finding an instance of where this has been done successfully. So if there’s someone who was suppose be the future (inaudible) [Christensen] listening then maybe you write a book about this particular thing. I mean hopefully it’s going to work. But we do not want to be (inaudible) to sales force because we don’t want people to have an expectation that it’s only going to be Fortune 50 soon on Shopify. And this is good business obviously otherwise maybe I could even be talked out of this. The business reasons are this market isn’t as big as it needs to be or should be. Even like 10 years ago when I first ran to (inaudible) Road to try to raise money, people were telling me, well there’s only like 60,000 online stores. May be this market isn’t so big, but it’s crazy, because once it look like market for people - like what’s the word on market or demand for websites that make more money than they cost. Clearly we can all agree that there’s a lot of people who want both. So what’s the reason why there are so and why they are so few, well really bad software, especially for new entrepreneurs, but that’s long term play that we can play is to be massively focused on the first couple of hours of these businesses. Not what happens after they signup, how do we help them, can we help them be successful. This is because, this is how the entire market grows, and as you can see like up until very recently, half of our even plus accounts have come from these sort of homegrown success stories and this is kind of the strategy playing out. Our customers’ growing up, like there’s now a bunch of people who get a very high revenue stream. Certainly there’s a bunch of customers who are as big as the top of the demand of their customer base now, and so their requirements are now requirements that we have to address because this is sort of contract on behalf of our customer base. Like if they need something and if it’s something that’s most different in that particular situation would need most of the time then it’s something that’s going to be added to our platform. And if it is something that some people need some of the time then it’s something we are going to our partner ecosystem of this and apps are going to be built and we find that as a better long term solution for our market in terms of software and I think the fact that we are so committed to entrepreneurs should be (inaudible) from watching the night talks, but also its really very important ingredient in sort of understanding what we are going for here as a company.

That’s very helpful. I guess the only version one analogy might be like paychecks. But good luck and sounds like you’re doing a good job.

Your next question is from Todd Coupland of CIBC.

I just wanted to clarify the answer on the merchant count, and then I had a question. So you said you added more than you had in the last quarter in Q1, so that would actually put the number well above 400,000. Am I interpreting that statement clearly?

What we’ve done and we will provide an annual update of that merchant count, so it’s not that we’re abandoning it completely. What we really believe and how we sort of manage the company is, when you have pricing plans that start at $29 and now go up all the way to 40,000 that the MRR is a much better metric to really monitor the business. And so what we’re really done is stop talking about quarterly milestones which in some respects were causing confusion versus adding value to the people trying to understand Shopify.

And then my question on the data monetization, how are you thinking about monetizing all the interactions on the website or in the platform in 2017. Is that something that merchants will just benefit within Plus or are there specific ideas around monetizing that? Any color would be helpful?

So the nice thing about all of this data that we have, particularly even more relevant to small merchants, we can help them progress faster and be more successful in their journey. So it’s going to be available to everyone. There are some additional capabilities that are more relevant to merchants doing higher volume, and at that stage there’s an opportunity to monetize a portion of that just because a lot of these merchants are spending money, in fact more money on sort of third party tools to get the same sort of end state, and so we just think we’re in a good position there.

Your next question comes from Eyal Ofir of Eight Capital. Your line is open.

Just two questions from me, first up, you talked about how the partnered network is continually being merchandized, do you guys have any metrics around how much is coming through the channel partnerships either at this corner and then comparing that to last quarter and last year.

The way we get merchants really hasn’t changed over the life of Shopify, organic is the largest source of new merchants. After if you sort of rank order these, it would be the paid advertising that we do and then that partner ecosystem just kind of third on the list but still contributed a large sum. I think as Harley said over 12,000 partners referred one or more merchants to us in over the last 12 months. So again a very important piece of what we do.

So you don’t have any percentages in terms of ads within the channel versus the direct?

Attribution is always a bit of a challenge. Most people like to come to the Shopify platform have touched us in more than one different way before they get on to the platform, so exact numbers are somewhat difficult to specific. I will say though generally that people have gone to a partner are more established or certainly more serious about getting their business up and running and so I would say if you look at our quality index partners are a little bit stronger on that front.

Just another question from me, just on the geographic front have you seen a greater push this quarter than in what sort of country or region, and kind of what’s the plan for the rest of the year?

So we’re doing a number of things to increase our presence outside of our core markets and we’ve seen that both in terms of merchant count as well as the GMV coming from sort of a non-North America, UK, Australia markets, and we expect that to continue to grow as we continue to do things like translating our blog and more focused efforts in some of these areas.

Your next question comes from Kevin Krishnaratne of Paradigm Capital. Your line is open.

Just one question from me on point-of-sale, wondered if you can talk about your thoughts around the push there. You mentioned you had 65,000 merchants sold on POS last year and you’re expecting that the rise in 2017 to maybe half of your merchants selling in person. I’m wondering if you can comment on that and maybe just thoughts around related merchant ad trends, ARPUs and then on the cost side if there’s anything to think about on how hardware subsidies might impact either margin or CapEx.

Point-of-sale for a number of years has been an important piece and a lot of merchants currently not online do have brick and mortar. So having that combination puts us in a very good spot to capitalize on. In terms of providing some of these free card readers to further push that market, that will be very much a sales and marketing expense and so reflected in that line going forward.

Are you thinking differently about your camp, does it change your thoughts or are you moving down more smaller market micro merchants. What would that potentially mean to ARPUs or average GMVs, just any kind of additional color on how you’re thinking about the market opportunities for that.

Point-of-sale we kind of view as just another selling channel and an important one and so typically people that have brick and mortar would be larger merchants, and so more GMV. Again on the payment side whether it’s a card present or a card not present transaction, we can process both and so it’s just part of the way we think of the world that this is something that is required, and because we’ve been able to do it, it’s something that give us advantage.

And that was our final question today. I’d now return the call to Katie Keita.

Thanks Chris. And I will pass the mic to Tobi for some closing remarks.

Thanks. So I think we’ve done it for eight quarters now. I think everyone’s starting to get a feel for the company. We are very much mission driven, we are really trying to look at this market, look at this entire situation and kind of have an opinion about just how things should be, rather than how things have been and how incrementally things that already exists could be done slightly better. But rather like just looking backwards from how would we invent the retail world right now if it was an original idea and no one has ever sold a product or anyone, like what would we do in that case and then see if we can - the products that support these kind of behaviors and then invite everyone over. This (inaudible) was a really important ingredient in this. And I think if you read between the lines of our announcements, you kind of get the sense from the company. We really want people to be able to check out instantly and not from the addresses. We really want people to use how they check in, having back from it, do a sale everywhere, and we really want people to have a point-of-sale product that kind of fits in to the times like retailers changing rapidly, the big box retailers are all struggling as they go in those. And what’s going to be left of retailer is essentially a form of entertainment, because all the necessities will eventually be purchased online or through automatic refills and these kinds of things. So, all these things need different software to support them, and from this vantage point we have, we’ve been seeing this for a while. Like if you go back through various quarters, you would see that retail and online retail its playing not exactly the way we predicted all along. And so I think this is the strength. We learnt a lot of things at Unite and this is clearly the kind of company which is firing on all cylinders, and the financial results are really good. I’m really proud of what we’ve done here, but they are reflective of the things we announced last year on Unite. So I think it’s important. We’ve hit our stripes as a public company, we hit our stripe as a company in this space. It started to be more comfortable of leading this market and taking it to places where we want to instead of sort of being a participant and a data point in it. With that thank you very much, and I’ll talk to you soon.

Thank you for your participation. This concludes today’s conference call. Good bye.