Document

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934


For the month of	July	2021
Commission File Number	001-37400
Shopify Inc.
(Translation of registrant’s name into English)
151 O’Connor Street, Ground Floor Ottawa, Ontario, Canada K2P 2L8
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:


Form 20-F						Form 40-F			X

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

DOCUMENTS INCLUDED AS PART OF THIS REPORT

Exhibit

99.1 Shopify Inc. – Interim Financial Statements for the Second Quarter ended June 30, 2021

99.2 Shopify Inc. – Interim Management’s Discussion and Analysis for the Second Quarter ended June 30, 2021

99.3 Shopify Inc. – Form 52-109F2 Certificate of Interim Filings by CEO (pursuant to Canadian regulations)

99.4 Shopify Inc. – Form 52-109F2 Certificate of Interim Filings by CFO (pursuant to Canadian regulations)

Exhibits 99.1 and 99.2 of this Report on Form 6-K are incorporated by reference into the Registration Statement on Form F-10 of the Registrant, which was originally filed with the Securities and Exchange Commission on July 27, 2021 (File No. 333-258189), the Registration Statement on Form S-8 of the Registrant, which was originally filed with the Securities and Exchange Commission on May 29, 2015 (File No. 333-204568), the Registration Statement on Form S-8 of the Registrant, which was originally filed with the Securities and Exchange Commission on May 12, 2016 (File No. 333-211305) and the Registration Statement on Form S-8 of the Registrant, which was originally filed with the Securities and Exchange Commission on October 17, 2019 (File No. 333-234341).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Shopify Inc.

(Registrant)

Date:

July 28, 2021

By:

/s/ Erin Zipes

Name: Erin Zipes
Title: Corporate Secretary

Document

EXHIBIT 99.1

Condensed Consolidated

Financial Statements

(unaudited)

June 30, 2021

Shopify Inc.

Condensed Consolidated Balance Sheets

(unaudited)

Expressed in US $000’s except share amounts


		As at
		June 30, 2021	December 31, 2020
	Note	$	$
Assets
Current assets
Cash and cash equivalents	4	2,364,670	2,703,597
Marketable securities	4	5,390,717	3,684,370
Trade and other receivables, net	6	153,400	120,752
Merchant cash advances, loans and related receivables, net	7	415,354	244,723
Income taxes receivable	15	56,943	56,067
Other current assets		79,082	68,247
		8,460,166	6,877,756
Long-term assets
Property and equipment, net	8	86,671	92,104
Intangible assets, net		124,203	135,676
Right-of-use assets, net	8	124,342	119,373
Deferred tax assets	15	52,110	52,677
Equity and other investments	5	2,796,321	173,454
Goodwill	9	311,865	311,865
		3,495,512	885,149
Total assets		11,955,678	7,762,905
Liabilities and shareholders’ equity
Current liabilities
Accounts payable and accrued liabilities		289,537	300,795
Income taxes payable	15	22,544	19,677
Deferred revenue	6	183,160	107,809
Lease liabilities	8	15,842	10,051

		511,083	438,332
Long-term liabilities
Deferred revenue	6	135,321	21,006
Lease liabilities	8	151,162	144,836
Convertible senior notes	3, 10	909,791	758,008
Deferred tax liabilities	15	127,777	—
		1,324,051	923,850
Commitments and contingencies	8, 12
Shareholders’ equity
Common stock, unlimited Class A subordinate voting shares authorized, 113,198,847 and 110,929,570 issued and outstanding; unlimited Class B multiple voting shares authorized, 11,564,593 and 11,599,301 issued and outstanding	13	7,837,824	6,115,232
Additional paid-in capital		118,396	261,436
Accumulated other comprehensive income	14	3,303	8,770
Retained earnings		2,161,021	15,285
Total shareholders’ equity		10,120,544	6,400,723
Total liabilities and shareholders’ equity		11,955,678	7,762,905

The accompanying notes are an integral part of these condensed consolidated financial statements.

Shopify Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(unaudited)

Expressed in US $000’s, except share and per share amounts


		Three months ended				Six months ended
		June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
	Note	$		$		$		$
Revenues
Subscription solutions		334,237		196,434		654,918		384,043
Merchant solutions		785,208		517,907		1,453,174		800,299
		1,119,445		714,341		2,108,092		1,184,342
Cost of revenues
Subscription solutions		63,027		44,400		121,409		82,112
Merchant solutions		435,558		294,907		807,107		470,246
		498,585		339,307		928,516		552,358
Gross profit		620,860		375,034		1,179,576		631,984
Operating expenses
Sales and marketing		201,910		144,850		388,133		299,712
Research and development		183,557		133,227		359,443		249,623
General and administrative		77,966		83,307		145,068		128,149
Transaction and loan losses		17,986		13,366		28,592		27,449
Total operating expenses		481,419		374,750		921,236		704,933
Income (loss) from operations		139,441		284		258,340		(72,949)
Other income, net
Interest income		3,092		5,952		5,922		16,419

Interest expense		(870)		—		(1,743)		—
Net unrealized gain on equity and other investments	5	777,749		—		2,028,693		—
Foreign exchange (loss) gain		(97)		(1,868)		(2,353)		774
Total other income, net		779,874		4,084		2,030,519		17,193
Income (loss) before income taxes		919,315		4,368		2,288,859		(55,756)
(Provision for) recovery of income taxes	15	(40,222)		31,630		(151,321)		60,325
Net income		879,093		35,998		2,137,538		4,569

Net income per share attributable to shareholders:
Basic	16	$	7.06	$	0.30	$	17.25	$	0.04
Diluted	16	$	6.90	$	0.29	$	16.83	$	0.04

Shares used to compute net income per share attributable to shareholders:
Basic	16	124,547,501		118,740,645		123,899,177		117,773,612
Diluted	16	127,475,063		122,749,980		127,075,352		121,919,207

Other comprehensive (loss) income
Unrealized (loss) gain on cash flow hedges	14	(3,733)		14,495		(7,439)		(8,136)
Tax effect on unrealized (loss) gain on cash flow hedges	14	990		(3,842)		1,972		2,156
Comprehensive income (loss)		876,350		46,651		2,132,071		(1,411)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Shopify Inc.

Condensed Consolidated Statements of Changes in Shareholders’ Equity

(unaudited)

Expressed in US $000’s except share amounts


		Common Stock		Additional Paid-In Capital $	Accumulated Other Comprehensive Income (Loss) $	Accumulated Deficit $	Total $
	Note		Shares					Amount $
As at December 31, 2019			116,428,975	3,256,284	62,628	1,046	(304,224)		3,015,734
Exercise of stock options			409,965	30,753	(11,326)	—	—		19,427
Stock-based compensation			—	—	53,752	—	—		53,752
Vesting of restricted share units			385,757	46,370	(46,370)	—	—		—
Net loss and comprehensive loss for the period			—	—	—	(16,633)	(31,429)		(48,062)
As at March 31, 2020			117,224,697	3,333,407	58,684	(15,587)	(335,653)		3,040,851
Exercise of stock options			454,851	30,272	(12,104)	—	—		18,168
Stock-based compensation			—	—	62,324	—	—		62,324
Vesting of restricted share units			288,428	35,326	(35,326)	—	—		—
Issuance of Class A subordinate voting shares, net of offering costs of $26,804, net of tax of $1,501	13, 17		2,127,500	1,462,446	—	—	—		1,462,446
Net income and comprehensive income for the period			—	—	—	10,653	35,998		46,651
As at June 30, 2020			120,095,476	4,861,451	73,578	(4,934)	(299,655)		4,630,440

Shopify Inc.

Condensed Consolidated Statements of Changes in Shareholders’ Equity

(unaudited)

Expressed in US $000’s except share amounts


		Common Stock		Additional Paid-In Capital $	Accumulated Other Comprehensive Income $	Retained Earnings $	Total $
	Note		Shares					Amount $
As at December 31, 2020			122,528,871	6,115,232	261,436	8,770	15,285		6,400,723
Adjustment related to the adoption of ASU 2020-06, Debt	3		—	—	(158,810)	—	8,198		(150,612)
As at January 1, 2021			122,528,871	6,115,232	102,626	8,770	23,483		6,250,111
Exercise of stock options			349,730	35,681	(12,756)	—	—		22,925
Stock-based compensation			—	—	69,156	—	—		69,156
Vesting of restricted share units			268,711	66,113	(66,113)	—	—		—
Issuance of Class A subordinate voting shares, net of offering costs of $7,742, net of tax of $2,790	13		1,180,000	1,543,958	—	—	—		1,543,958
Net income and comprehensive income for the period			—	—	—	(2,724)	1,258,445		1,255,721
As at March 31, 2021			124,327,312	7,760,984	92,913	6,046	1,281,928		9,141,871
Exercise of stock options			268,958	31,828	(11,463)	—	—		20,365
Stock-based compensation			—	—	81,958	—	—		81,958
Vesting of restricted share units			167,170	45,012	(45,012)	—	—		—
Net income and comprehensive income for the period			—	—	—	(2,743)	879,093		876,350
As at June 30, 2021			124,763,440	7,837,824	118,396	3,303	2,161,021		10,120,544

The accompanying notes are an integral part of these condensed consolidated financial statements.

Shopify Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

Expressed in US $000’s



		Six months ended
		June 30, 2021	June 30, 2020
	Note	$	$
Cash flows from operating activities
Net income for the period		2,137,538	4,569
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and depreciation		30,463	34,297

Stock-based compensation		151,114	116,076
Amortization of debt offering costs	10	1,171	—
Impairment of right-of-use assets and leasehold improvements	8	—	31,623
Provision for transaction and loan losses		14,855	12,040

Deferred income tax expense (recovery)		128,344	(13,728)
Revenue related to non-cash consideration		(18,121)	—
Net unrealized gain on equity and other investments	5	(2,028,693)	—
Unrealized foreign exchange loss (gain)		1,451	(1,231)
Changes in operating assets and liabilities:
Trade and other receivables		(27,406)	(18,980)
Merchant cash advances, loans and related receivables		(188,083)	(22,349)
Other current assets	17	(16,497)	(10,815)
Non-cash consideration received in exchange for services		(192,300)	—
Accounts payable and accrued liabilities		(10,162)	61,659
Income tax assets and liabilities		6,753	(115,387)
Deferred revenue		207,787	11,661
Lease assets and liabilities		3,890	800
Net cash provided by operating activities		202,104	90,235
Cash flows from investing activities
Purchase of marketable securities		(4,149,857)	(1,970,693)
Maturity of marketable securities		2,437,951	1,659,159
Purchase of equity and other investments	17	(401,874)	(10,000)
Acquisitions of property and equipment		(13,451)	(25,329)
Acquisitions of intangible assets		—	(262)

Net cash used in investing activities		(2,127,231)	(347,125)
Cash flows from financing activities
Proceeds from public equity offerings, net of issuance costs	13	1,541,168	1,460,945

Proceeds from the exercise of stock options		43,290	37,595

Net cash provided by financing activities		1,584,458	1,498,540
Effect of foreign exchange on cash and cash equivalents		1,742	(9,204)
Net (decrease) increase in cash and cash equivalents		(338,927)	1,232,446
Cash and cash equivalents – Beginning of Period		2,703,597	649,916
Cash and cash equivalents – End of Period		2,364,670	1,882,362

Supplemental cash flow information:
Cash paid for amounts included in the measurement of lease liabilities included in cash flows from operating activities		13,253	10,142
Lease liabilities arising from obtaining right-of-use assets		12,207	24,429
Acquired property and equipment remaining unpaid		2,264	1,502

The accompanying notes are an integral part of these condensed consolidated financial statements.

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

Expressed in US $000's except share and per share amounts

1.Nature of Business

Shopify Inc. (“Shopify” or the “Company”) was incorporated as a Canadian corporation on September 28, 2004. Shopify is a leading provider of essential internet infrastructure for commerce, offering trusted tools to start, grow, market, and manage a retail business of any size. Shopify makes commerce better for everyone with a platform and services that are engineered for reliability, while delivering a better shopping experience for consumers everywhere. Merchants use the Company's software to run their business across all of their sales channels, including web and mobile storefronts, physical retail locations, social media storefronts, and marketplaces. The Shopify platform provides merchants with a single view of their business and customers across all of their sales channels and enables them to manage products and inventory, process orders and payments, fulfill and ship orders, build customer relationships, source products, leverage analytics and reporting, and access financing, all from one integrated back office.

Founded in Ottawa, Canada, the Company's principal place of business is the internet.

2.Basis of Presentation and Consolidation

These unaudited condensed consolidated financial statements include the accounts of the Company and its directly and indirectly held wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated upon consolidation.

These unaudited condensed consolidated financial statements of the Company have been presented in United States dollars (USD) and have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), including the applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding financial reporting. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations.

In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position, results of operations and comprehensive income (loss), changes in shareholders’ equity and cash flows for the interim periods. The financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2020. The condensed consolidated balance sheet at December 31, 2020 was derived from the audited annual financial statements, but does not contain all of the footnote disclosures from the annual financial statements.

The interim results for the three and six months ended June 30, 2021 are not necessarily indicative of the results expected for the full fiscal year.

3.Significant Accounting Policies

Except for the adoption of the Financial Accounting Standards Board's (FASB) Accounting Standards Update (ASU) No. 2020-06, which is discussed below, there have been no material changes to the Company’s significant accounting policies during the three and six months ended June 30, 2021, as compared to the significant accounting policies described in the Company’s annual consolidated financial statements for the year ended December 31, 2020.

As a result of the fair value of some of the Company's investments becoming readily determinable in the period, information on the policy is further described in note 5.

Debt - Accounting for Convertible Instruments

In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which eliminates certain models associated with accounting for

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

Expressed in US $000's except share and per share amounts

convertible instruments, makes targeted improvements to the disclosures for convertible instruments and earnings per share guidance, and amends the guidance for the derivative scope exception for contracts in an entity's own equity. The updates are effective for annual periods beginning after December 15, 2021 including interim periods within those periods. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those periods. The Company early adopted this ASU effective January 1, 2021 using the modified retrospective approach. The adoption eliminated the requirement to separately account for the liability and equity components of its 0.125% convertible senior notes due 2025 (the "Notes"), which existed under previous accounting guidance. This results in a reclassification of $158,810 from additional paid-in capital to long-term liabilities. Furthermore, as a result of the adoption, non-cash interest expense related to the Company's currently outstanding Notes has been eliminated. As the Company previously recognized non-cash interest expense relating to the debt discount on the liability component, this results in a $8,198 cumulative adjustment to increase opening retained earnings.

The Company accounts for the Notes at amortized cost as a single unit of account on the balance sheet. The carrying value of the liability is represented by the face amount of the Notes, less debt offering costs, plus any amortization of offering costs. Offering costs are being amortized to interest expense over the term of the Notes using the effective interest rate method.

Use of Estimates

The preparation of consolidated financial statements, in accordance with U.S. GAAP, requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates, judgments and assumptions in these condensed consolidated financial statements include: key judgments related to revenue recognition in determining whether the Company is the principal or an agent to the arrangements with merchants; estimates of expected credit losses related to financial assets measured at amortized cost, including contract balances and merchant cash advances and loans; inputs used to fair value acquired intangible assets and equity investments; estimates involved in evaluating the recoverability of right-of-use assets and leasehold improvements, including, but not limited to, the estimated useful lives of right-of-use assets and leasehold improvements; and the incremental borrowing rate applied to lease payments. Actual results may differ from the estimates made by management.

Revenue Recognition - Non-Cash Consideration

In connection with certain revenue contracts with customers, the Company, from time to time, receives non-cash consideration in the form of equity investments as a component of the transaction price. As disclosed in the revenue recognition policy described in the Company’s annual consolidated financial statements for the year ended December 31, 2020, when the transaction price includes non-cash consideration, the non-cash consideration is measured as the fair value at the inception of the contract, and any changes in fair value after contract inception is excluded from revenue.

The Company has entered into contracts with Affirm Holdings, Inc. (Affirm) in July 2020 and Global-E Online Ltd. (Global-E) in April 2021. The estimated fair value of these contracts were determined using multiple valuation techniques, including the income approach and the market approach. In the case of the strategic partnerships with Affirm and Global-E, the Company is required to provide services for the duration of the strategic partnerships, and revenue is deferred and recognized over time on a ratable basis over the expected terms of the contracts.

Concentration of Credit Risk

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

Expressed in US $000's except share and per share amounts

Company to concentrations of credit risk. Management mitigates this risk associated with cash and cash equivalents by making deposits and entering into foreign exchange derivative products only with large banks and financial institutions that are considered to be highly creditworthy. Management mitigates the risks associated with marketable securities by adhering to its investment policy, which stipulates minimum rating requirements, maximum investment exposures and maximum maturities. Due to the Company’s diversified merchant base, there is no material concentration of credit risk related to the Company’s trade and other receivables and merchant cash advances and loans receivable. Trade and other receivables and merchant cash advances and loans receivable are monitored on an ongoing basis to ensure timely collection of amounts. The Company has mitigated some of the risks associated with Shopify Capital by entering into an agreement with a third party that insures a portion of the merchant cash advances and loans offered by Shopify Capital. The receivable related to insurance recoveries is included in the merchant cash advances, loans and related receivables balance. There are no receivables from individual merchants accounting for 10% or more of revenues or receivables. Potential ongoing effects from the novel coronavirus "COVID-19" pandemic on the Company's credit risk have been considered in the Company's allowances for expected credit losses on contract balances and merchant cash advances and loans. The Company continues its assessment given the fluidity of COVID-19's global impact.

Interest Rate Risk

Certain of the Company’s cash, cash equivalents and marketable securities and loans earn interest. The Company’s trade and other receivables, accounts payable and accrued liabilities and lease liabilities do not bear interest. The Company's Notes have a fixed annual interest rate and thus, the Company does not have economic interest rate exposure on the Notes. The Company is not exposed to material interest rate risk.

Foreign Exchange Risk

The Company’s exposure to foreign exchange risk is primarily related to fluctuations between the Canadian Dollar (CAD) and the USD. The Company is exposed to foreign exchange fluctuations on the revaluation of foreign currency assets and liabilities. The Company uses foreign exchange derivative products to manage the impact of foreign exchange fluctuations. By their nature, derivative financial instruments involve risk, including the credit risk of non-performance by counter parties.

While the majority of the Company's revenues and cost of revenues are denominated in USD, a significant portion of operating expenses are incurred in CAD. As a result, earnings are adversely affected by an increase in the value of the CAD relative to the USD.

The following table summarizes the effects on revenues, cost of revenues, operating expenses, and income (loss) from operations of a 10% strengthening(1) of the CAD versus the USD without considering the impact of the Company's hedging activities and without factoring in any potential changes in demand for the Company's solutions as a result of changes in the CAD to USD exchange rates.


	Three months ended
	June 30, 2021			June 30, 2020
	GAAP Amounts As Reported $	Exchange Rate Effect (2) $	At 10% Stronger CAD Rate (3) $	GAAP Amounts As Reported $	Exchange Rate Effect (2) $	At 10% Stronger CAD Rate (3) $
Revenues	1,119,445	2,586	1,122,031	714,341	2,354	716,695
Cost of revenues	(498,585)	(3,168)	(501,753)	(339,307)	(2,065)	(341,372)
Operating expenses	(481,419)	(15,268)	(496,687)	(374,750)	(10,175)	(384,925)
Income (loss) from operations	139,441	(15,850)	123,591	284	(9,886)	(9,602)

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

Expressed in US $000's except share and per share amounts


	Six months ended
	June 30, 2021			June 30, 2020
	GAAP Amounts As Reported $	Exchange Rate Effect (2) $	At 10% Stronger CAD Rate (3) $	GAAP Amounts As Reported $	Exchange Rate Effect (2) $	At 10% Stronger CAD Rate (3) $
Revenues	2,108,092	4,376	2,112,468	1,184,342	3,300	1,187,642
Cost of revenues	(928,516)	(5,783)	(934,299)	(552,358)	(3,342)	(555,700)
Operating expenses	(921,236)	(30,581)	(951,817)	(704,933)	(21,944)	(726,877)
Income (loss) from operations	258,340	(31,988)	226,352	(72,949)	(21,986)	(94,935)

(1) A 10% weakening of the CAD versus the USD would have an equal and opposite impact on our revenues, cost of revenues, operating expenses and income (loss) from operations as presented in the table.

(2) Represents the increase or decrease in GAAP amounts reported resulting from a 10% strengthening in the CAD-USD foreign exchange rates.

(3) Represents the outcome that would have resulted had the CAD-USD rates in those periods been 10% stronger than they actually were, excluding the impact of our hedging program and without factoring in any potential changes in demand for the Company's solutions as a result of changes in the CAD-USD rates.

4.Financial Instruments

As at June 30, 2021, the carrying amount and fair value of the Company’s financial instruments were as follows:



	Level 1 $		Level 2 $		Level 3 $
	Carrying Amount	Fair Value	Carrying Amount	Fair Value	Carrying Amount	Fair Value
Assets:
Cash equivalents:
Canadian federal bonds and agency securities	25,425	25,543	—	—	—	—
Corporate bonds and commercial paper	62,170	62,255	—	—	—	—

Marketable securities:
U.S. term deposits	1,125,000	1,127,362	—	—	—	—
U.S. federal bonds and agency securities	933,488	936,365	—	—	—	—
Canadian federal bonds and agency securities	902,008	904,066	—	—	—	—
Corporate bonds and commercial paper	—	—	2,430,221	2,436,615	—	—
Derivative assets:
Foreign exchange forward contracts	—	—	10,678	10,678	—	—
Equity and other investments:
Equity and other investments with readily determinable fair values (see note 5)	1,865,826	1,865,826	—	—	508,217	508,217

Liabilities:
Derivative liabilities:
Foreign exchange forward contracts	—	—	1,503	1,503	—	—

The fair values above include accrued interest of $13,395, which is excluded from the carrying amounts. The accrued interest is included in Trade and other receivables in the condensed consolidated balance sheets.

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

Expressed in US $000's except share and per share amounts

As at December 31, 2020, the carrying amount and fair value of the Company’s financial instruments were as follows:


	Level 1 $		Level 2 $		Level 3 $
	Carrying Amount	Fair Value	Carrying Amount	Fair Value	Carrying Amount	Fair Value
Assets:
Cash equivalents:
U.S federal bonds	174,397	174,399	—	—	—	—
Corporate bonds and commercial paper	134,056	134,396	—	—	—	—
Repurchase agreements	—	—	290,000	290,001	—	—
Marketable securities:
U.S. term deposits	885,000	887,102	—	—	—	—
U.S. federal bonds	1,224,052	1,226,657	—	—	—	—
Canadian federal bonds	24,988	24,987	—	—	—	—
Corporate bonds and commercial paper	—	—	1,550,330	1,552,907	—	—
Derivative assets:
Foreign exchange forward contracts	—	—	16,340	16,340	—	—

The fair values above include accrued interest of $7,563, which is excluded from the carrying amounts. The accrued interest is included in Trade and other receivables in the condensed consolidated balance sheets.

All cash equivalents and marketable securities mature within one year of the condensed consolidated balance sheet date.

As at June 30, 2021, the Company held foreign exchange forward contracts to convert USD into CAD, with a total notional value of $433,679 (December 31, 2020 - $340,843), to fund a portion of its operations. The foreign exchange forward contracts have maturities of twelve months or less. The fair value of foreign exchange forward contracts and corporate bonds was based upon Level 2 inputs, which included period-end mid-market quotations for each underlying contract as calculated by the financial institution with which the Company has transacted. The quotations are based on bid/ask quotations and represent the discounted future settlement amounts based on current market rates.

Derivative Instruments and Hedging

The Company has a hedging program to mitigate the impact of foreign currency fluctuations on future cash flows and earnings. Under this program, the Company has entered into foreign exchange forward contracts with certain financial institutions and designated those hedges as cash flow hedges. As of June 30, 2021, $10,404 of unrealized gains and $1,503 of unrealized losses related to changes in the fair value of foreign exchange forward contracts designated as cash flow hedges were included in accumulated other comprehensive income and current assets and current liabilities on the condensed consolidated balance sheet. These amounts are expected to be reclassified into earnings over the next twelve months. In the three and six months ended June 30, 2021, $9,325 and $18,479 of realized gains (June 30, 2020 - $4,011 and $5,306 of realized losses) related to the maturity of foreign exchange forward contracts designated as cash flow hedges were included in cost of revenues and operating expenses. Under the current hedging program, the Company is hedging cash flows associated with payroll and facility costs.

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

Expressed in US $000's except share and per share amounts

Convertible Senior Notes

As at June 30, 2021, the estimated fair value of the Company's Notes, as further described in note 10 below, was approximately $1,198,880. The estimated fair value was determined based on the last executed trade for the Notes of the reporting period in an over-the-counter market, which is considered as Level 2 in the fair value hierarchy.

5.Equity and Other Investments

Strategic investments are a part of the Company's strategy and use of capital, expanding our expertise and building strong partnerships around strategic initiatives. The Company holds equity and other investments in public companies with readily determinable fair values, as well as in private companies without readily determinable fair values. Equity and other investments in public companies with readily determinable fair values are carried at fair value at each balance sheet date and any movements in the fair value are recognized into income. Equity and other investments in private companies without readily determinable fair values are carried at cost less impairments, with subsequent adjustments for observable changes (referred to as the measurement alternative).

In July 2020, the Company received an investment in Affirm, as non-cash revenue consideration, as a result of services rendered in conjunction with its strategic partnership for Shop Pay Installments. This equity investment was initially accounted for using the measurement alternative with fair value based on an income approach. The initial value of the investment of $24,710 is being recognized into merchant solutions revenue over the expected term of the contract.

On January 13, 2021, Affirm completed its initial public offering and began trading on the Nasdaq. As a result, the fair value of the investment became readily determinable and the use of the measurement alternative was no longer applicable. As at June 30, 2021, the carrying value of the Company's investment in Affirm was $1,367,043 measured using Affirm's closing share price on the last day of trading of the reporting period and is therefore a Level 1 investment in the fair value hierarchy. For the three and six months ended June 30, 2021, an unrealized loss of $68,403 and an unrealized gain of $1,208,891, respectively, were recorded within other income in the statement of operations and comprehensive income (loss).

In April 2021, the Company received an investment in Global-E, as non-cash revenue consideration, as a result of services rendered in conjunction with a strategic partnership for cross-border commerce offerings. This equity investment was initially accounted for using the measurement alternative with fair value based on a market approach. The initial fair value of the investment of $192,300 is being recognized into merchant solutions revenue over the expected term of the contract.

On May 12, 2021, Global-E completed its initial public offering and began trading on the Nasdaq. As a result, the fair value of the investment became readily determinable and the use of the measurement alternative was no longer applicable. The investment includes common shares and warrants for common shares that vest over time. The common shares are measured using Global-E's closing share price on the last day of trading of the reporting period and are therefore a Level 1 in the fair value hierarchy. The warrants that vest over time require the application of a discount for lack of marketability, which is not an observable input and therefore makes this portion of the investment a Level 3 in the fair value hierarchy. The weighted average discount for lack of marketability applied to the unvested warrants was 18% at June 30, 2021. As at June 30, 2021, the carrying value of the Company's investment in Global-E was $1,007,000. For the three months ended June 30, 2021, an unrealized gain of $814,622 was recorded within other income in the statement of operations and comprehensive income (loss).

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

Expressed in US $000's except share and per share amounts

Adjustments related to equity and other investments with readily determinable fair values in the three and six months ended June 30, 2021 were as follows:


	Three months ended	Six months ended
	June 30, 2021	June 30, 2021
	$	$
Balance, beginning of the period	1,435,446	—

Adjustments related to equity and other investments with readily determinable fair values:
Transfers from measurement alternative (1)(2)	192,378	350,530
Net unrealized gains	746,219	2,023,513

Balance, end of the period	2,374,043	2,374,043

(1) Effective January 13, 2021, the Company's investment in Affirm no longer qualified for the use of the measurement alternative as the fair value of the investment became readily determinable.

(2) Effective May 12, 2021, the Company's investment in Global-E no longer qualified for the use of the measurement alternative as the fair value of the investment became readily determinable.

For the Company's equity and other investments in private companies without readily determinable fair values, the carrying amount of such investments as at June 30, 2021 was $422,278 (December 31, 2020 - $173,454). For the three and six months ended June 30, 2021, net unrealized gains of $31,530 and $5,180, respectively, relating to these investments were recorded within other income in the statement of operations and comprehensive income (loss).

In the six months ended June 30, 2021, the Company made three separate investments totaling $375,000 in a private company, that is a partner in its ecosystem, without readily determinable fair values, which are currently accounted for using the measurement alternative. Subsequent to the closing of the first investment, the second investment represented an observable transaction and resulted in the recognition of a $26,722 unrealized loss on the first investment.

Adjustments related to equity and other investments without readily determinable fair values for the three and six months ended June 30, 2021 and 2020 were as follows:


	Three months ended		Six months ended
	June 30, 2021	June 30, 2020	June 30, 2021	June 30, 2020
	$	$	$	$
Balance, beginning of the period	195,504	12,500	173,454	2,500





Adjustments related to equity and other investments without readily determinable fair values:
Additions	387,622	—	594,174	10,000
Transfers to readily determinable fair values (1)(2)	(192,378)	—	(350,530)	—
Gross unrealized gains	31,530	—	31,902	—
Gross unrealized losses and impairments	—	—	(26,722)	—
Balance, end of the period	422,278	12,500	422,278	12,500

(1) Effective January 13, 2021, the Company's investment in Affirm no longer qualified for the use of the measurement alternative as the fair value of the investment became readily determinable.

(2) Effective May 12, 2021, the Company's investment in Global-E no longer qualified for the use of the measurement alternative as the fair value of the investment became readily determinable.

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

Expressed in US $000's except share and per share amounts

Cumulative gross unrealized gains and cumulative gross unrealized losses and impairment related to equity and other investments without readily determinable fair values held at June 30, 2021 were approximately $33,855 and $26,722, respectively.

6.Contract Balances

When revenue is recognized, the Company records a receivable that is included in trade and other receivables on the condensed consolidated balance sheet. Trade receivables and unbilled revenues, net of allowance for credit losses, were as follows:


	June 30, 2021	December 31, 2020	January 1, 2020
	$	$	$
Unbilled revenues, net	71,297	50,073	31,629
Indirect taxes receivable	41,506	45,961	36,821
Trade receivables, net	20,581	13,449	9,660
Accrued interest	13,395	7,563	5,754
Other receivables	6,621	3,706	6,665
	153,400	120,752	90,529

The allowance for credit losses reflects our best estimate of probable losses inherent in our unbilled revenues and trade receivables accounts. The Company determined the provision based on known troubled accounts, historical experience, supportable forecasts of collectibility and other currently available evidence.

Activity in the allowance for credit losses was as follows:


	Three months ended		Six months ended
	June 30, 2021	June 30, 2020	June 30, 2021	June 30, 2020
	$	$	$	$
Allowance, beginning of the period	8,380	4,576	6,041	2,894
Provision for credit losses related to uncollectible receivables	1,480	2,443	5,133	4,149
Write-offs	(3,435)	(1,404)	(4,749)	(1,428)
Allowance, end of the period	6,425	5,615	6,425	5,615

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

Expressed in US $000's except share and per share amounts

Changes in deferred revenue were as follows:


	Three months ended		Six months ended
	June 30, 2021	June 30, 2020	June 30, 2021	June 30, 2020
	$	$	$	$
Balance, beginning of the period	137,142	68,464	128,815	62,660
Deferral of revenue	233,853	39,360	260,754	50,517
Recognition of deferred revenue	(52,514)	(33,503)	(71,088)	(38,856)
Balance, end of the period	318,481	74,321	318,481	74,321

Current portion			183,160	67,455
Long term portion			135,321	6,866
			318,481	74,321

The opening balances of current and long-term deferred revenue were $56,691 and $5,969, respectively, as of January 1, 2020.

The ending balance for the three and six months ended June 30, 2021 contains deferred revenue from the non-cash consideration received in conjunction with a strategic partnership with Global-E, as further described in note 5.

7.Merchant Cash Advances, Loans and Related Receivables


	June 30, 2021	December 31, 2020	January 1, 2020
	$	$	$
Merchant cash advances receivable, gross	380,862	218,840	131,227
Related receivables	—	819	3,179
Allowance for credit losses related to uncollectible merchant cash advances receivable	(26,570)	(15,816)	(10,420)
Loans receivable, gross	64,409	43,644	28,547
Allowance for credit losses related to uncollectible loans receivable	(3,347)	(2,764)	(2,361)
Merchant cash advances, loans and related receivables, net	415,354	244,723	150,172

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

Expressed in US $000's except share and per share amounts

The following table summarizes the activities of the Company’s allowance for credit losses related to uncollectible merchant cash advances and loans receivable:


	Three months ended		Six months ended
	June 30, 2021	June 30, 2020	June 30, 2021	June 30, 2020
	$	$	$	$
Allowance, beginning of the period	21,664	19,110	18,580	12,781
Provision for credit losses related to uncollectible merchant cash advances receivable	9,702	2,560	15,425	9,656
Merchant cash advances receivable charged off, net of recoveries	(2,052)	(2,300)	(4,671)	(4,499)
Provision for credit losses related to uncollectible loans receivable	984	(736)	1,208	1,071
Loans receivable charged off, net of recoveries	(381)	(501)	(625)	(876)
Allowance, end of the period	29,917	18,133	29,917	18,133
Related receivables	—	(4,700)	—	(4,700)
Allowance, net of related receivables	29,917	13,433	29,917	13,433

8.Leases

The Company has office leases in Canada, the United States, Singapore, Ireland and other countries in Europe and Asia. These leases have remaining lease terms of 1 year to 11 years, some of which include options to extend the leases for up to 10 years. Additional office space leases are set to commence between 2021 and 2026, at which point the Company's right-of-use assets and lease liabilities will increase. The Company has entered into various lease agreements for office and commercial space that are set to commence after June 30, 2021, which will create significant right-of-use assets and lease liabilities. All of the Company's leases are operating leases.

The components of lease expense were as follows:


	Three months ended		Six months ended
	June 30, 2021	June 30, 2020	June 30, 2021	June 30, 2020
	$	$	$	$
Operating lease expense	5,218	5,126	10,721	10,726
Variable lease expense, including non-lease components	2,910	4,067	6,172	7,549
Total lease expense	8,128	9,193	16,893	18,275

As at June 30, 2021, the weighted average remaining lease term is 8 years and the weighted average discount rate is 4.2% (December 31, 2020 - 9 years and 4.4%, respectively).

During the year ended December 31, 2020, in light of the COVID-19 pandemic, the Company decided to move from a primarily physical office-centric work model to a primarily digital work-from-home-centric work model. The Company plans to keep, but repurpose certain office locations to support the new model and terminate or sublet other office locations that it ceases to use. In the three months ended June 30, 2021 the Company started subleasing some of its office locations resulting in $326 of sublease income, which is recorded as an offset within the total lease expense disclosed above.

With respect to certain office locations expected to be kept, but repurposed, the Company has recognized accelerated depreciation of certain leasehold improvements and furniture in order to reflect changes that it plans to make to accommodate greater physical distancing and increased team onsite meeting spaces.

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

Expressed in US $000's except share and per share amounts

During the year ended December 31, 2020, the Company identified $40,457 of leasehold improvements and furniture that will be accelerated over a 2 to 3 year period as the Company retrofits its existing offices.

With respect to certain office space the Company has ceased using, for which the lease has been or will be either terminated or sublet, these decisions resulted in impairment charges of $14,785 related to its right-of-use assets and $16,838 related to its leasehold improvements in the year ended December 31, 2020.

Maturities of lease liabilities as at June 30, 2021 were as follows:


Fiscal Year			Operating Leases $

Remainder of 2021			19,854
2022			41,524
2023			48,342
2024			56,056
2025			59,128
Thereafter			426,594
Total future minimum payments			651,498
Minimum payments related to leases that have not yet commenced			(182,627)
Minimum payments related to variable lease payments, including non-lease components			(268,080)
Imputed interest			(33,787)
Total lease liabilities			167,004

9.Goodwill

The Company's goodwill relates to previous acquisitions of various companies including, but not limited to, 6 River Systems, Inc. (6RS) which was acquired on October 17, 2019.

No goodwill impairment was recognized in the three and six months ended June 30, 2021 or in the year ended December 31, 2020.

There have been no gross changes in the carrying amount of goodwill in the six months ended June 30, 2021 or in the year ended December 31, 2020.

10.Convertible Senior Notes

In September 2020, the Company issued $920,000 aggregate principal amount of 0.125% convertible senior notes due 2025. The net proceeds from the issuance of the Notes were $907,950 after deducting underwriting fees and offering costs.

The interest on the Notes is payable semi-annually in arrears on May 1 and November 1 of each year, beginning on May 1, 2021. The Notes will mature on November 1, 2025, unless earlier redeemed or repurchased by the Company or converted pursuant to their terms.

The Notes will have an initial conversion rate of 0.6944 Class A subordinate voting shares per one thousand dollars of principal amount of Notes, which is equivalent to an initial conversion price of approximately $1,440.09 per share. The conversion rate is subject to adjustment following the occurrence of certain specified events, as set out or defined in the Trust indenture agreement for the Notes. In addition, upon the occurrence of a make-whole fundamental change prior to the maturity date or upon our issuance of a notice of redemption, as set out or defined in the Trust indenture agreement for the Notes, the Company will, in certain circumstances, increase the conversion rate by a number of additional Class A

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

Expressed in US $000's except share and per share amounts

subordinate voting shares for a holder that elects to convert its Notes in connection with such make-whole fundamental change or during the relevant redemption period.

Prior to the close of business on the business day immediately preceding August 1, 2025, the Notes may be convertible at the option of the holders only under the following circumstances:

(1) during any calendar quarter commencing after March 31, 2021, and only during such calendar quarter, if the last reported sale price of the Class A subordinate voting shares on the New York Stock Exchange (the "NYSE") for at least 20 trading days (whether or not consecutive) in a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is more than or equal to 130% of the conversion price for the Notes on each applicable trading day;

(2) during the ten business day period after any ten consecutive trading day period in which, for each trading day of that period, the trading price per one thousand dollars principal amount of Notes for each trading day was less than 98% of the product of the last reported sale price of the Class A subordinate voting shares on the NYSE and the conversion rate for the Notes on each such trading day;

(3) if the Company calls any or all of the Notes for optional redemption, clean-up redemption or tax redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or

(4) upon the occurrence of certain specified corporate events.

On or after August 1, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Notes may, at their option, convert all or any portion of their Notes regardless of the foregoing conditions.

Upon conversion, the Company can elect to settle in cash, Class A subordinate voting shares, or a combination of cash and Class A subordinate voting shares.

On or after September 15, 2023, the Company may, at its option, redeem for cash all or any portion of the Notes if the last reported sale price of the Company's Class A subordinate voting shares on the NYSE has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No "sinking fund" is provided for the Notes.

The Company may redeem for cash all, but not less than all, of the Notes at any time if less than $80,000 aggregate principal amount of Notes remains outstanding at such time, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

The Company may redeem all, but not less than all, of the Notes if the Company has or would become obligated to pay to the holder of any Note additional amounts (which are more than a de minimis amount) as a result of a change in applicable Canadian tax laws or regulations after September 15, 2020 at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest (including additional interest, if any) to, but excluding, the applicable redemption date but without reduction for applicable Canadian taxes (except in respect of certain excluded holders).

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

Expressed in US $000's except share and per share amounts

Upon the occurrence of a fundamental change (as set out or defined in the Trust indenture agreement for the Notes) prior to the maturity date of the Notes, the Company, subject to limited exceptions, will be required to offer to purchase all of the Notes for cash at a price equal to 100% of the principal amount thereof, plus any accrued and unpaid interest thereon to, but excluding, the fundamental change purchase date.

The Notes are governed by customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of at least 25% in aggregate principal amount of the Notes then outstanding may declare 100% of the principal of, and accrued and unpaid interest on, all the Notes to be due and payable immediately.

The Notes are senior unsecured obligations and will rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment with the Company’s existing and future unsecured liabilities that are not so subordinated; effectively subordinated to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of current or future subsidiaries of the Company.

The Company accounts for the Notes as a single unit of account on the balance sheet. The carrying value of the liability is represented by the face amount of the Notes, less total offering costs, plus any amortization of offering costs. Total offering costs upon issuance of the Notes were $12,050 and are amortized to interest expense using the effective interest rate method over the contractual term of the Notes. Interest expense is recognized at an annual effective interest rate of 0.38% over the contractual term of the Notes.

The net carrying amount of the outstanding Notes was as follows:


	June 30, 2021	December 31, 2020
	$	$
Principal	920,000	920,000
Unamortized offering costs (1)	(10,209)	(9,434)
Unamortized discounts (1)	—	(152,558)
Net carrying amount	909,791	758,008

(1) Prior to the adoption of ASU 2020-06 on January 1, 2021, the Company accounted for its Notes as separate liability and equity components. The comparative figures represent the offering costs and debt discount related to the liability component prior to adoption.

The following table sets forth the interest expense recognized related to the outstanding Notes:


	Three months ended	Six months ended
	June 30, 2021	June 30, 2021
	$	$
Contractual interest expense	284	572
Amortization of offering costs	586	1,171
Total interest expense related to the outstanding Notes	870	1,743

11.Credit Facility

The Company has a revolving credit facility with Royal Bank of Canada for $8,000 CAD. The credit facility bears interest at the Royal Bank Prime Rate plus 0.30%. As at June 30, 2021 the effective rate was 2.75%, and no cash amounts have been drawn under this credit facility.

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

Expressed in US $000's except share and per share amounts

12.Commitments and Contingencies

Unconditional Purchase Obligations

The Company has entered into agreements where it commits to certain usage levels related to third party services. The amount of the minimum fixed and determinable portion of the unconditional purchase obligations over the next five years, as at June 30, 2021, was $163,314.

Litigation and Loss Contingencies

The Company records accruals for loss contingencies when losses are probable and reasonably estimable. From time to time, the Company may become a party to litigation and subject to claims incidental to the ordinary course of business, including intellectual property claims, labour and employment claims and threatened claims, breach of contract claims, tax and other matters. The Company currently has no material pending litigation or claims. The Company is not aware of any litigation matters or loss contingencies that would be expected to have a material adverse effect on the business, consolidated financial position, results of operations, or cash flows.

13.Shareholders’ Equity

Public Offerings

In February 2021, the Company completed a public offering in which it issued and sold 1,180,000 Class A subordinate voting shares at a public offering price of $1,315.00 per share. The Company received total net proceeds of $1,541,168 after deducting offering fees and expenses of $10,532.

In September 2020, the Company completed a public offering in which it issued and sold 1,265,000 Class A subordinate voting shares at a public offering price of $900.00 per share, including the 165,000 Class A subordinate voting shares purchased by the underwriters pursuant to the exercise of the over-allotment option. The Company received total net proceeds of $1,117,646 after deducting offering fees and expenses of $20,854.

In May 2020, the Company completed a public offering in which it issued and sold 2,127,500 Class A subordinate voting shares at a public offering price of $700.00 per share, including the 277,500 Class A subordinate voting shares purchased by the underwriters pursuant to the exercise of the over-allotment option. The Company received total net proceeds of $1,460,945 after deducting offering fees and expenses of $28,305.

Common Stock Authorized

The Company is authorized to issue an unlimited number of Class A subordinate voting shares and an unlimited number of Class B multiple voting shares. The Class A subordinate voting shares have one vote per share and the Class B multiple voting shares have 10 votes per share. The Class B multiple voting shares are convertible into Class A subordinate voting shares on a one-for-one basis at the option of the holder. Class B multiple voting shares will also automatically convert into Class A subordinate voting shares in certain other circumstances.

Preferred Shares

The Company is authorized to issue an unlimited number of preferred shares issuable in series. Each series of preferred shares shall consist of such number of shares and having such rights, privileges, restrictions and conditions as may be determined by the Company’s Board of Directors prior to the issuance thereof. Holders of preferred shares, except as otherwise provided in the terms specific to a series of preferred shares or as required by law, will not be entitled to vote at meetings of holders of shares.

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

Expressed in US $000's except share and per share amounts

Stock-Based Compensation

As at June 30, 2021 there were 25,147,442 shares reserved for issuance under the Company's Stock Option Plan and Long Term Incentive Plan.

The following table summarizes the stock option and Restricted Share Unit ("RSU") award activities under the Company's share-based compensation plans for the six months ended June 30, 2021:


	Shares Subject to Options Outstanding					Outstanding RSUs
	Number of Options (1)	Weighted Average Exercise Price $	Remaining Contractual Term (in years)	Aggregate Intrinsic Value (2) $	Weighted Average Grant Date Fair Value $	Outstanding RSUs	Weighted Average Grant Date Fair Value $
December 31, 2020	2,489,277	103.76	5.45	2,559,442	—	1,112,967	377.08
Stock options granted	129,853	1,266.08	—	—	530.44	—	—
Stock options exercised	(618,688)	69.97	—	—	—	—	—
Stock options forfeited	(48,437)	822.14	—	—	—	—	—
RSUs granted	—	—	—	—	—	232,032	1,220.23
RSUs settled	—	—	—	—	—	(435,881)	254.94
RSUs forfeited	—	—	—	—	—	(77,650)	537.16
June 30, 2021	1,952,005	173.97	5.21	2,512,252	—	831,468	661.45

Stock options exercisable as of June 30, 2021	1,544,504	69.19	4.49	2,149,619

(1) As at June 30, 2021 759,573 of the outstanding stock options were granted under the Company's Legacy Option Plan and are exercisable for Class B multiple voting shares, 1,150,967 of the outstanding stock options were granted under the Company's Stock Option Plan and are exercisable for Class A subordinate voting shares, and 41,465 of the outstanding stock options were granted under the 6 River Systems 2016 Amended and Restated Stock Option and Grant Plan and are exercisable for Class A subordinate voting shares.

(2) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option awards and the closing market price of the Company's Class A subordinate voting shares as of June 30, 2021 and December 31, 2020.

As at June 30, 2021 the Company had issued 898 Deferred Share Units under its Long Term Incentive Plan.

In connection with the acquisition of 6RS, 122,080 Class A subordinate voting shares were issued with trading restrictions. The restrictions on these shares are lifted over time and are being accounted for as stock-based compensation as the vesting is contingent on continued employment and therefore related to post-combination services. As at June 30, 2021, 91,560 of the Class A subordinate voting shares remained restricted.

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

Expressed in US $000's except share and per share amounts

The following table illustrates the classification of stock-based compensation expense in the condensed consolidated statements of operations and comprehensive income (loss), which includes both stock-based compensation and restricted share-based compensation expense.


	Three months ended		Six months ended
	June 30, 2021	June 30, 2020	June 30, 2021	June 30, 2020
	$	$	$	$
Cost of revenues	1,637	1,188	3,152	2,336
Sales and marketing	9,671	10,613	18,524	21,820
Research and development	48,747	39,361	93,036	71,965
General and administrative	21,903	11,162	36,402	19,955
	81,958	62,324	151,114	116,076

14.Changes in Accumulated Other Comprehensive Income (Loss)

The following table summarizes the changes in accumulated other comprehensive income (loss), which is reported as a component of shareholders’ equity, for the six months ended June 30, 2021 and 2020:


	Accumulated Other Comprehensive Income (Loss)
	Six months ended
	June 30, 2021	June 30, 2020
	$	$
Balance, beginning of the period	8,770	1,046

Other comprehensive income (loss) before reclassifications	11,040	(13,442)
(Gain) loss on cash flow hedges reclassified from accumulated other comprehensive income (loss) to earnings were as follows:
Cost of revenues	(852)	257
Sales and marketing	(4,734)	1,390
Research and development	(10,111)	2,883
General and administrative	(2,782)	776
Tax effect on unrealized loss on cash flow hedges	1,972	2,156
Other comprehensive loss, net of tax	(5,467)	(5,980)
Balance, end of the period	3,303	(4,934)

15.Income Taxes

The Company's provision for, or recovery of, income taxes is determined by applying the estimated annual effective tax rate to income or loss from recurring operations and adding the effects of any discrete income tax items specific to the period.

The Company updates its estimate of the annual effective tax rate each quarter and makes cumulative adjustments if its estimated annual tax rate changes. The Company’s effective tax rate may be subject to fluctuation during the year as new information is obtained, which may affect the assumptions used to estimate the annual effective tax rate, including factors such as the mix of forecasted pre-tax earnings in the various jurisdictions in which the Company operates, valuation allowances against deferred tax assets, the recognition and derecognition of tax benefits related to uncertain tax positions, and changes in or the interpretation of tax laws in jurisdictions where the Company conducts business.

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

Expressed in US $000's except share and per share amounts

During the six months ended June 30, 2021, the Company released a portion of the valuation allowance against its deferred income tax assets in Canada due to the overall unrealized gain on the Company’s equity and other investments. As a result of the unrealized gain on equity and other investments, ongoing operations, other discrete items, primarily related to tax benefits for share-based compensation, the Company's ability to carry-back losses to prior years in Canada, and the recognition of deferred tax assets in Canada, the Company has a provision for income taxes of $40,222 and $151,321 in the three and six months ended June 30, 2021, respectively. The Company had a recovery of income taxes of $31,630 and $60,325 in the three and six months ended June 30, 2020, respectively, primarily due to tax benefits for share-based compensation, the impairment of right-of-use assets and fixed assets, the Company's ability to carry-back losses to prior years in Canada, and the recognition of deferred tax assets in the United States.

16.Net Income per Share

The Company applies the two-class method to calculate its basic and diluted net income per share as both classes of its voting shares are participating securities with equal participation rights and are entitled to receive dividends on a share for share basis.

The following table summarizes the reconciliation of the basic weighted average number of shares outstanding and the diluted weighted average number of shares outstanding:


	Three months ended				Six months ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020







Numerator:
Net income	$	879,093	$	35,998	$	2,137,538	$	4,569
After tax effect of debt interest	639		—		1,281		—
Net income after tax effected debt interest	$	879,732	$	35,998	$	2,138,819	$	4,569

Denominator:
Basic weighted average number of shares outstanding	124,547,501		118,740,645		123,899,177		117,773,612
Effect of dilutive securities(1)	2,927,562		4,009,335		3,176,175		4,145,595
Diluted weighted average number of shares	127,475,063		122,749,980		127,075,352		121,919,207

Net income per share:
Basic	$	7.06	$	0.30	$	17.25	$	0.04
Diluted	$	6.90	$	0.29	$	16.83	$	0.04

(1) Included in the effect of dilutive securities is the assumed conversion of employee stock options, employee RSUs and the Notes.

17.Comparative Figures

Certain comparative figures have been reclassified in order to conform to the current period presentation.

18.Subsequent Event

Consistent with the Company's ongoing strategic investments, on July 6, 2021, the Company made an incremental $200,000 investment in a private company, that is a partner in its ecosystem. The Company continues to have a minority ownership in the private company.

Document

EXHIBIT 99.2

MANAGEMENT’S DISCUSSION AND ANALYSIS

July 28, 2021

In this Management's Discussion and Analysis ("MD&A"), "we", "us", "our", "Shopify" and "the Company" refer to Shopify Inc. and its consolidated subsidiaries, unless the context requires otherwise. In this MD&A, we explain Shopify's results of operations and cash flows for the three months and six months ended June 30, 2021 and 2020, and our financial position as of June 30, 2021. You should read this MD&A together with our unaudited condensed consolidated financial statements and the accompanying notes for the fiscal quarter ended June 30, 2021, as well as with our audited consolidated financial statements and the accompanying notes for the fiscal year ended December 31, 2020. Additional information regarding Shopify, including our 2020 annual information form and our annual report on Form 40-F for the year ended December 31, 2020, is available on our website at www.shopify.com, or at www.sedar.com and www.sec.gov.

Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). All amounts are in U.S. dollars ("USD") except where otherwise indicated.

Our MD&A is intended to enable readers to gain an understanding of Shopify’s results of operations, cash flows and financial position. To do so, we provide information and analysis comparing our results of operations, cash flows and financial position for the most recently completed quarter with the same quarter from the preceding fiscal year. We also provide analysis and commentary that we believe will help investors assess our future prospects. In addition, we provide “forward-looking statements” that are not historical facts, but that are based on our current estimates, beliefs and assumptions and which are subject to known and unknown important risks, uncertainties, assumptions and other factors that could cause actual results to differ materially from current expectations. Forward-looking statements are intended to assist readers in understanding management's expectations as of the date of this MD&A and may not be suitable for other purposes. See “Forward-looking Statements” below.

In this MD&A, references to our “solutions” means the combination of products and services that we offer to merchants, and references to “our merchants” as of a particular date means the total number of unique shops that are paying for a subscription to our platform.

Forward-looking Statements

This MD&A contains forward-looking statements under the provisions of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, and forward-looking information within the meaning of applicable Canadian securities legislation.

In some cases, you can identify forward-looking statements by words such as "aim", “may”, “will”, “could”, “expects”, "further", “plans”, “anticipates”, “believes”, “potential”, “continue”, "estimate", or the negative of these terms or other similar words. In addition, any statements or information that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking. In particular, forward-looking statements in this MD&A include, but are not limited to, statements about:

•our expectation that we may experience a decrease in gross merchandise volume ("GMV") as a result of lower consumer spending on goods, which decrease would be partially offset by more traditional businesses expanding or migrating online;

•the extent of the impact of the novel coronavirus ("COVID-19") on our business, financial performance, revenues, and results of operations;

•our expectation that the majority of Shopify employees will work remotely permanently ("digital-by-design");

•our plan to repurpose or reconfigure our remaining office space and potentially terminate additional leases or sublet other spaces;

•our exploration of new ways to accelerate checkout;

•our ability to make it easier for merchants to manage their storefronts via their mobile devices;

•the achievement of innovations and enhancements to, and expansion of, our platform and our solutions;

•whether a merchant using Shopify will ever need to re-platform;

•the continued growth of our app developer, theme designer and partner ecosystem and the effect on the growth of our merchant base;

•the continued expansion of the number of channels for merchants to transact through;

•our plan to continue making investments in our business to drive future growth;

•our expectation that we will continue to invest in and optimize Shopify Fulfillment Network to provide our merchants with fast and affordable fulfillment and our expectation that Shopify Fulfillment Network is well positioned to improve supply chain economics and delivery for merchants;

•our expectation that the gross margin percentage of merchant solutions will decline in the short term as we develop Shopify Fulfillment Network and 6 River Systems Inc. ("6RS");

•our expectation that the continued growth of merchant solutions may cause a decline in our overall gross margin percentage;

•our expectation that as a result of the continued growth of our merchant solutions offerings, our seasonality will continue to affect our quarterly results and our business may become more seasonal in the future, and that historical patterns may not be a reliable indicator of our future performance;

•our expectation that our results of operations will be adversely impacted by an increase in the value of the Canadian dollar ("CAD") relative to the USD;

•the change in fair value of certain equity and other investments which may fluctuate period to period, and may cause volatility to our earnings;

•our expectation that the overall trend of merchant solutions revenue making up an increasing component of total revenues over time, most notably in the fourth quarter due to higher holiday volume, will continue over time;

•our future obligation to purchase outstanding 0.125% convertible senior notes due 2025 (the "Notes") on the occurrence of a fundamental change;

•our belief that we have sufficient liquidity to meet our current and planned financial obligations over the next 12 months;

•our future financing requirements and the availability of capital;

•the future value of our investment income, in particular as a result of changes in interest rates, fair value or due to observable changes in price or impairments;

•the fair market value of the Notes as a result of changes in interest rates or the price of our Class A subordinate voting shares;

•expected credit losses related to the impact of COVID-19;

•our expectations regarding contractual obligations and contingencies;

•the impact of inflation on our costs and operations;

•our accounting estimates, allowances, provisions, and assumptions made in the preparation of our financial statements; and

•our expectations regarding the impact of recently adopted accounting standards.

The forward-looking statements contained in this MD&A are based on our management’s perception of historic trends, current conditions and expected future developments, as well as other assumptions that management believes are appropriate in the circumstances, which include, but are not limited to:

•our belief that the near-term costs of reducing our leased footprint and transitioning remaining spaces to their future intended purpose will yield longer term benefits;

•our ability to increase the functionality of our platform;

•our ability to offer more sales channels that can connect to the platform;

•our belief in the increasing importance of a multi-channel platform that is both fully integrated and easy to use;

•our belief that an increasing awareness among buyers that Shopify provides a superior and secure checkout experience is an additional advantage for our merchants;

•our belief that commerce transacted over mobile will continue to grow more rapidly than desktop transactions;

•our ability to expand our merchant base, retain revenue from existing merchants as they grow their businesses, and increase sales to both new and existing merchants, including our ability to retain merchants that have moved from physical retail to ecommerce as a result of the COVID-19 pandemic;

•our ability to manage our growth effectively;

•our ability to protect our intellectual property rights;

•our belief that our merchant solutions make it easier for merchants to start a business and grow on our platform;

•our ability to develop new solutions to extend the functionality of our platform, provide a high level of merchant service and support;

•our ability to hire, retain and motivate qualified personnel and to manage our operations in a digital-by-design model;

•our ability to enhance our ecosystem and partner programs, and the assumption that this will drive growth in our merchant base, further accelerating growth of the ecosystem;

•our belief that our strategic investments and acquisitions will increase our revenue base, improve the retention of this base and strengthen our ability to increase sales to our merchants and help drive our growth;

•our ability to achieve our revenue growth objectives while controlling costs and expenses, and our ability to achieve or maintain profitability;

•our belief that Monthly Recurring Revenue ("MRR") is most closely correlated with the long-term value of our merchant relationships;

•our assumptions regarding the principal competitive factors in our markets;

•our ability to predict future commerce trends and technology;

•our assumptions that higher-margin solutions such as Shopify Capital and Shopify Shipping will continue to grow through increased adoption and international expansion;

•our expectation that Shopify Payments will continue to expand internationally;

•our expectation that Shopify Fulfillment Network will continue to scale and grow as we optimize the network, and we will continue to invest to support this growth;

•our belief that our investments in sales and marketing initiatives will continue to be effective in growing the number of merchants using our platform, in retaining revenue from existing merchants and increasing revenues from both;

•our ability to develop processes, systems and controls to enable our internal support functions to scale with the growth of our business;

•our ability to retain key personnel;

•our ability to protect against currency, interest rate, concentration of credit and inflation risks;

•our assumptions as to our future expenses and financing requirements;

•our assumptions as to our critical accounting policies and estimates; and

•our assumptions as to the effects of accounting pronouncements to be adopted.

Factors that may cause actual results to differ materially from current expectations may include, but are not limited to, risks and uncertainties that are discussed in greater detail in the "Risk Factors" section of our Annual Information Form for the year ended December 31, 2020 and elsewhere in this MD&A, including but not limited to risks relating to:

•sustaining our rapid growth;

•managing our growth;

•our potential inability to compete successfully against current and future competitors;

•the security of personal information we store relating to merchants and their buyers, as well as consumers with whom we have a direct relationship including users of our apps;

•our history of losses and our potential inability to maintain profitability;

•a denial of service attack or security breach;

•our limited operating history in new and developing markets and new geographic regions;

•our ability to innovate;

•international sales and operations and the use of our platform in various countries;

•our current reliance on a single supplier to provide the technology we offer through Shopify Payments;

•our potential inability to hire, retain and motivate qualified personnel;

•our use of a single cloud-based platform to deliver our services;

•the COVID-19 pandemic and its impact on our business, financial condition and results of operations including the impact of measures taken to contain the virus and the impact on the global economy and consumer spending and on our merchants' and partners' ecosystem;

•the reliance of our growth in part on the success of our strategic relationships with third parties;

•complex and changing laws and regulations worldwide;

•our dependence on the continued services and performance of our senior management and other key employees;

•our potential failure to effectively maintain, promote and enhance our brand;

•payments processed through Shopify Payments;

•serious errors or defects in our software or hardware or issues with our hardware supply chain;

•our potential inability to achieve or maintain data transmission capacity;

•activities of merchants or partners or the content of merchants' shops;

•evolving privacy laws and regulations, cross-border data transfer restrictions, data localization requirements and other domestic or foreign regulations may limit the use and adoption of our services;

•unanticipated changes in tax laws or adverse outcomes resulting from examination of our income or other tax returns;

•being required to collect federal, state, provincial or local business taxes, sales and use taxes or other indirect taxes in additional jurisdictions on transactions by our merchants;

•ineffective operations of our solutions when accessed through mobile devices;

•changes to technologies used in our platform or new versions or upgrades of operating systems and internet browsers;

•acquisitions and investments, including strategic investments;

•our ability to successfully scale, optimize and operate Shopify Fulfillment Network;

•Shopify Capital and offering financing to merchants;

•the impact of worldwide economic conditions, including the resulting effect on spending by small and medium-sized businesses ("SMBs") or their buyers;

•our reliance on computer hardware, purchased or leased, software licensed from and services rendered by third parties, in order to provide our solutions and run our business, sometimes by a single-source supplier;

•potential claims by third parties of intellectual property infringement or other third party or governmental claims, litigation, disputes, or other proceedings;

•our potential inability to obtain, maintain and protect our intellectual property rights and proprietary information or prevent third parties from making unauthorized use of our technology;

•our use of open source software;

•seasonal fluctuations;

•exchange rate fluctuations that may negatively affect our results of operations;

•our potential failure to maintain a consistently high level of customer service;

•our dependence upon buyers’ and merchants’ access to, and willingness to use, the internet for commerce;

•provisions of our financial instruments including the Notes;

•our potential inability to raise additional funds as may be needed to pursue our growth strategy or continue our operations, on favorable terms or at all;

•our tax loss carryforwards;

•our pricing decisions for our solutions;

•ownership of our shares;

•our sensitivity to interest rate fluctuations; and

•our concentration of credit risk, and the ability to mitigate that risk using third parties, and the risk of inflation.

Although we believe that the plans, intentions, expectations, assumptions and strategies reflected in our forward-looking statements are reasonable, these statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future results. You should read this MD&A and the documents that we reference in this MD&A completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.

The forward-looking statements in this MD&A represent our views as of the date of this MD&A. We anticipate that subsequent events and developments may cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. Therefore, these forward-looking statements do not represent our views as of any date other than the date of this MD&A.

COVID-19

In light of the ongoing COVID-19 pandemic, we have continued to focus on the health and well-being of our employees, partners, service providers, and communities. We have also accelerated products that we believe will best serve our merchants as they deal with the challenges of COVID-19.

Since March 2020, we observed sustained strong momentum in GMV, buoyed by restrictions related to COVID-19, as consumers looked for ways to purchase at a safe distance, utilizing ecommerce and benefiting from features such as curbside pickup and local delivery. Going forward, we may experience a decrease in GMV as a result of lower consumer spending on goods, but also expect that any decrease would be at least partially offset by more traditional retail businesses expanding or migrating their operations online with our platform and services. The effect of COVID-19 on other aspects of our results of operations and financial performance in the long-term, such as revenues, remains uncertain and may only be reflected in future periods.

The effects of COVID-19 have led us to reimagine the way we work resulting in the decision to be a "digital-by-design" company. Shopify employees will continue to work remotely in 2021 and beyond 2021 Shopify will embrace this digital-first way of thinking, working, and operating with the intention that the majority of employees will work remotely permanently. We believe the near-term costs of reducing our leased footprint and transitioning remaining spaces to their future intended purpose, including use for team collaboration and events, will yield longer-term benefits, including leveling the playing field for employees who already work from home, helping our employees stay healthy and safe, opening ourselves up to a diverse global talent pool, eliminating unnecessary commutes and fast-tracking new and better ways to work together that are more productive and rewarding. As a result of this decision, in the second quarter of 2020 we terminated certain lease agreements or sought to sublet space at certain office locations. We continue to assess the ongoing need for the remaining offices and may repurpose them to accommodate physical distancing measures, reconfigure them for use in a digital-by-design framework, or look to sublease or terminate the related leases in the future.

Overview

Shopify is a leading provider of essential internet infrastructure for commerce, offering trusted tools to start, grow, market, and manage a retail business of any size. Shopify makes commerce better for everyone with a platform and services that are engineered for reliability, while delivering a better shopping experience for consumers everywhere.

In an era where social media, cloud computing, mobile devices, and data analytics are creating new possibilities for commerce, Shopify provides differentiated value by offering merchants:

A multi-channel front end. Our software enables merchants to easily display, manage, and sell their products across over a dozen different sales channels, including web and mobile storefronts, physical retail locations, pop-up shops, social media storefronts, native mobile apps, buy buttons, and marketplaces. More than two-thirds of our merchants use two or more channels. The Shopify application program interface ("API") has been developed to support custom storefronts that let merchants sell anywhere, in any language.

A single integrated back end. Our software provides one single integrated, easy-to-use back end that merchants use to manage their business and buyers across these multiple sales channels. Merchants use their Shopify dashboard, which is available in 20 languages, to manage products and inventory, process orders and payments, fulfill and ship orders, discover new buyers and build customer relationships, source products, leverage analytics and reporting, and access financing.

A data advantage. Our software is delivered to merchants as a service, and operates on a shared infrastructure. With each new transaction processed, we grow our data proficiency. This cloud-based infrastructure not only relieves merchants from running and securing their own hardware, it also consolidates data generated by the interactions between buyers and merchants’ shops, as well as those of our merchants on the Shopify platform, providing rich data to inform both our own decisions as well as those of our merchants.

Shopify also enables merchants to build their own brand, leverage mobile technology, and handle massive traffic spikes with flexible infrastructure:

Brand ownership. Shopify is designed to help our merchants own their brand, develop a direct relationship with their buyers, and make their buyer experience memorable and distinctive. We recognize that in a world where buyers have more choices than ever before, a merchant’s brand is increasingly important. The Shopify platform is designed to allow a merchant to keep their brand present in every interaction to help build buyer loyalty and competitive advantage. While our platform is designed to empower merchants first, merchants benefit when buyers are confident that their payments are secure. We believe that an increasing awareness among buyers that Shopify provides a superior and secure checkout experience is an additional advantage for our merchants in an increasingly competitive market. For merchants using Shopify Payments, buyers are already getting a superior experience, with features such as Shop Pay, and with our investments in additional touchpoints with their buyers, such as retail, shipping, fulfillment, and Shop, our all-in-one mobile shopping assistant app, brands that sell on Shopify can offer buyers an end-to-end, managed shopping experience that previously was only available to much larger businesses.

Mobile. As ecommerce expands as a percentage of overall retail transactions, a trend that accelerated in 2020 as the global COVID-19 pandemic necessitated physically distanced commerce, buyers expect to be able to transact anywhere, anytime, on any device through an experience that is simple, seamless, and secure. As transactions over mobile devices represent the majority of transactions across online stores powered by Shopify, the mobile experience is a merchant’s primary and most important interaction with online buyers. Shopify has focused on enabling mobile commerce, and the Shopify platform includes a mobile-optimized checkout system, designed to enable merchants’ buyers to more easily buy products over mobile websites. Our merchants are able to offer their buyers the ability to quickly and securely check out by using Shop Pay, Apple Pay, and Google Pay on the web, and we continue to explore other new ways to accelerate checkout. Shopify’s mobile capabilities are not limited to the front end: merchants who are often on-the-go find themselves managing their storefronts via their mobile devices, as Shopify continues to strive to make it easier to do so.

Infrastructure. We build our platform to address the growing challenges facing merchants and with the aim of making complex tasks simple. The Shopify platform is engineered to enterprise-level standards and functionality and designed for simplicity and ease of use. We also design our platform with a robust technical infrastructure able to manage large spikes in traffic that accompany events such as new product releases, holiday shopping seasons, and flash sales. We are constantly innovating and enhancing our platform, with our continuously deployed, multi-tenant architecture ensuring all of our merchants are always using the latest technology.

This combination of ease of use with enterprise-level functionality allows merchants to start with a Shopify store and grow with our platform to almost any size. Using Shopify, merchants may never need to re-platform. Our Shopify Plus subscription plan was created to accommodate larger merchants, with additional functionality, scalability and support requirements. The Shopify Plus plan also appeals to larger merchants not already on Shopify who want to migrate from their expensive and complex legacy solutions and get more functionality.

A rich ecosystem of app developers, theme designers and other partners, such as digital and service professionals, marketers, photographers, and affiliates has evolved around the Shopify platform. Approximately 46,400 of these partners have referred merchants to Shopify over the last year, and this strong, symbiotic relationship continues to grow. We believe this ecosystem has grown in part due to the platform’s functionality, which is highly extensible and can be expanded through our API and the approximately 7,000 apps available in the Shopify App Store. The partner ecosystem helps drive the growth of our merchant base, which in turn further accelerates growth of the ecosystem.

Our mission is to make commerce better for everyone, and we believe we can help merchants of nearly all sizes, from aspirational entrepreneurs to large enterprises, and all retail verticals realize their potential at all stages of their business life cycle. While our platform can scale to meet the needs of large merchants, we focus on selling to small and medium-sized businesses and entrepreneurs. Most of our merchants are on subscription plans that cost less than $50 per month, which is in line with our focus of providing cost effective solutions for early stage businesses. In the six months ended June 30, 2021, our platform facilitated GMV of $79.5 billion, representing an increase of 67.4% from the six months ended June 30, 2020. A detailed description of this metric is presented below in the section entitled, “Key Performance Indicators”.

Our business has experienced rapid growth. During the six months ended June 30, 2021, our total revenue was $2,108.1 million, an increase of 78.0% versus the six months ended June 30, 2020. Our business model has two revenue streams: a recurring subscription component we call subscription solutions and a merchant success-based component we call merchant solutions.

In the six months ended June 30, 2021, subscription solutions revenues accounted for 31.1% of our total revenues (32.4% in the six months ended June 30, 2020). We offer a range of plans that increase in price depending on additional features and economic considerations. Our highest-end plan, Shopify Plus, is offered at a starting rate that is several times that of our standard Shopify plans. Shopify Plus solves for the complexity of merchants as they grow and scale globally, offering additional functionality, and support, including features like Shopify Flow and Launchpad, for ecommerce automation, and dedicated account management where appropriate. Allbirds, Gymshark, Heinz, and Staples Canada are a few of the Shopify Plus merchants seeking a reliable, cost-effective and scalable commerce solution. The flexibility of our pricing plans is designed to help our merchants grow in a cost-effective manner and to provide more advanced features and support as their business needs evolve.

Revenue from subscription solutions is generated through the sale of subscriptions to our platform, including variable platform fees, as well as through the sale of subscriptions to our Point-of-Sale ("POS") Pro offering, the sale of themes, the sale of apps, and the registration of domain names. Subscription solutions revenues increased from $384.0 million in the six months ended June 30, 2020 to $654.9 million in the six months ended June 30, 2021, representing an increase of 70.5%. Our merchants typically enter into monthly subscription agreements. The revenue from these agreements is recognized over time on a ratable basis over the contractual term and therefore we have deferred revenue on our balance sheet. We do not consider this deferred revenue balance to be a good indicator of future revenue. Instead, we believe MRR is most closely correlated with the long-term value of our merchant relationships. As of June 30, 2021, MRR totaled $95.1 million, representing an increase of 66.8% relative to MRR at June 30, 2020. From the six months ended June 30, 2020 to the six months ended June 30, 2021, subscription solutions revenue grew at a faster rate than MRR due mainly to platform fees increasing as a percentage of total subscription solutions. A detailed description of this metric is presented below in the section entitled, "Key Performance Indicators".

We offer a variety of merchant solutions that are designed to add value to our merchants and augment our subscription solutions. During the six months ended June 30, 2021, merchant solutions revenues accounted for 68.9% of total revenues (67.6% in the six months ended June 30, 2020). We principally generate merchant solutions revenues from payment processing fees from Shopify Payments. Shopify Payments is a fully integrated payment processing service that allows our merchants to accept and process payment cards online and offline. In addition to payment processing fees from Shopify Payments, we also generate merchant solutions revenue from other transaction services, referral fees, advertising revenue on the Shopify App Store, Shopify Capital, Shop Pay Installments, Shopify Shipping, Shopify Fulfillment Network, non-cash consideration obtained for services rendered as part of strategic partnerships, the sale of POS hardware and collaborative warehouse fulfillment solutions. Shopify Capital is available for merchants in the United States, the United Kingdom and Canada. Our merchant solutions revenues are directionally correlated with the level of GMV that our merchants process through our platform. Merchant solutions revenues increased from $800.3 million in the six months ended June 30, 2020 to $1,453.2 million in the six months ended June 30, 2021, representing an increase of 81.6%.

Our business model is driven by our ability to attract new merchants, retain revenue from existing merchants, and increase sales to both new and existing merchants. Our merchants represent a wide array of retail verticals, business sizes, and geographies and no single merchant has ever represented more than five percent of our total revenues in a single reporting period. We believe that our future success is dependent on many factors, including our ability to expand our merchant base, retain merchants as they grow their businesses on our platform, offer more sales channels that connect merchants with their specific target audience, develop new solutions to extend our platform’s functionality and catalyze merchants’ sales growth, enhance our ecosystem and partner programs, provide a high level of merchant support, hire, retain and motivate qualified personnel, and build with a focus on maximizing long-term value.

We have focused on rapidly growing our business and plan to continue making investments to drive future growth. We believe that our investments will increase our revenue base, improve the retention of this base and strengthen our ability to increase sales to our merchants.

Consistent with investing for the long-term, in 2019 we began building Shopify Fulfillment Network, a network of fulfillment centers across the United States, to help merchants deliver orders to buyers quickly and cost-effectively. Shopify Fulfillment Network aims to leverage our scale with machine learning, including demand forecasting, smart inventory allocation across warehouses and intelligent order routing to ultimately improve supply chain economics and delivery for merchants. We expect to continue to invest in and optimize this offering to further support our merchants.

Key Performance Indicators

Key performance indicators, which we do not consider to be non-GAAP measures, that we use to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions include Monthly Recurring Revenue ("MRR") and Gross Merchandise Volume ("GMV"). Our key performance indicators may be calculated in a manner different than similar key performance indicators used by other companies.

The following table shows MRR and GMV for the three and six months ended June 30, 2021 and 2020.


	Three months ended June 30,			Six months ended June 30,
		2021		2020		2021		2020
	(in thousands)			(in thousands)
Monthly Recurring Revenue		$	95,112	$	57,027	$	95,112	$	57,027
Gross Merchandise Volume		$	42,193,370	$	30,105,466	$	79,540,256	$	47,520,718

Monthly Recurring Revenue

We calculate MRR at the end of each period by multiplying the number of merchants who have subscription plans with us at the period end date by the average monthly subscription plan fee, which excludes variable platform fees, in effect on the last day of that period, assuming they maintain their subscription plans the following month. Subscription plans to both our platform and our POS Pro offering are included in this calculation. Merchants on free trials are excluded from this calculation through the duration of the free trial. MRR allows us to average our various pricing plans and billing periods into a single, consistent number that we can track over time. We also analyze the factors that make up MRR, specifically the number of paying merchants using our platform and changes in our average revenue earned from subscription plan fees per paying merchant. In addition, we use MRR to forecast monthly, quarterly and annual subscription plan revenue, which makes up the majority of our subscription solutions revenue. We had $95.1 million of MRR as at June 30, 2021 compared to $57.0 million as at June 30, 2020. Our MRR growth rate increased in the three and six months ended June 30, 2021, when compared to the same periods in previous years. This increase was largely driven by the continued shift to ecommerce during the periods, most notably as a result of COVID-19, and our initiatives to support new merchants since March 2020.

Gross Merchandise Volume

GMV is the total dollar value of orders facilitated through our platform including certain apps and channels for which a revenue-sharing arrangement is in place in the period, net of refunds, and inclusive of shipping and handling, duty and value-added taxes. GMV does not represent revenue earned by us. However, the volume of GMV facilitated through our platform is an indicator of the success of our merchants and the strength of our platform. Our merchant solutions revenues are also directionally correlated with the level of GMV facilitated through our platform. For the three and six months ended June 30, 2021, we facilitated GMV of $42.2 billion and $79.5 billion, respectively (2020 - $30.1 billion and $47.5 billion, respectively). Going forward, we may experience a decrease in GMV as a result of lower consumer spending on goods, but also expect that any decrease would be at least partially offset by more traditional retail businesses expanding or migrating their operations online with our platform and services.

Factors Affecting the Comparability of Our Results

Change in Revenue Mix

As a result of the continued growth of Shopify Payments, revenue-sharing agreements, transaction fees, Shopify Shipping, Shopify Capital, and Shopify Fulfillment Network, our revenues from merchant solutions have generally increased significantly. Merchant solutions are intended to complement subscription solutions by providing additional value to our merchants and increasing their use of our platform. Gross profit margins on Shopify Payments, the biggest driver of merchant solutions revenue, are typically lower than on subscription solutions due to the associated third-party costs of providing this solution. We view this revenue stream as beneficial to our operating margins, as Shopify Payments requires significantly less sales and marketing and research and development expense than Shopify’s core subscription business. We expect to see our gross margin percentage for merchant solutions decline in the short term as we develop Shopify Fulfillment Network and 6RS. The lower margins on merchant solutions compared to subscription solutions means that the continued growth of merchant solutions may cause a decline in our overall gross margin percentage.

Seasonality

Our merchant solutions revenues are directionally correlated with the level of GMV that our merchants facilitated through our platform. Our merchants typically process additional GMV during the fourth quarter holiday season. As a result, we have historically generated higher merchant solutions revenues in our fourth quarter than in other quarters. While we believe that this seasonality has affected and will continue to affect our quarterly results, our rapid growth has largely masked seasonal trends to date. As a result of the continued growth of our merchant solutions offerings, we believe that our business may become more seasonal in the future and that historical patterns

in our business may not be a reliable indicator of our future performance. In addition, the ongoing effect of the COVID-19 pandemic has accelerated the shift of purchase habits to ecommerce. This contributed to additional GMV during the last three quarters of 2020 and the first two quarters of 2021. Going forward, we may experience a decrease in GMV as a result of lower consumer spending on goods, although we expect that any decrease would at least be partially offset by more traditional retail businesses expanding or migrating their operations online with our platform and services.

Foreign Currency Fluctuations

While most of our revenues are denominated in USD, a significant portion of our operating expenses are incurred in CAD. As a result, our results of operations will be adversely impacted by an increase in the value of the CAD relative to the USD. In addition, a portion of Shopify Payments revenue is based on the local currency of the country in which the applicable merchant is located and these transactions expose us to currency fluctuations to the extent non-USD based payment processing and other merchant solutions revenues increase. Refer to the "Risks and Uncertainties—Foreign Currency Exchange Risk" section below for additional information on the effect on reported results of changes in foreign exchange rates.

Key Components of Results of Operations

During the three and six months ended June 30, 2021, the only significant change to the key components of results of operations, when compared to our key components for the year ended December 31, 2020, was that the fair value of our investments in Affirm Holdings, Inc. ("Affirm") and Global-E Online Ltd. ("Global-E") became readily determinable and the use of the measurement alternative was no longer applicable. As a result, these investments are re-measured to fair value at each balance sheet date and any movements in the fair values are recognized into income. The results from these equity investments may fluctuate from period to period based on their respective closing share prices on the last day of trading of each reporting period and may cause volatility to our earnings as well as impact comparability of our results from period to period.

See Management's Discussion and Analysis dated February 17, 2021 as well as our Annual Report on Form 40-F for the year ended December 31, 2020 for details on the key components of results of operations.

Quarterly Results of Operations

The following table sets forth our results of operations for the three and six months ended June 30, 2021 and 2020.


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
	(in thousands, except share and per share data)
Revenues:
Subscription solutions	334,237		196,434		654,918		384,043
Merchant solutions	785,208		517,907		1,453,174		800,299
	1,119,445		714,341		2,108,092		1,184,342
Cost of revenues(1)(2):
Subscription solutions	63,027		44,400		121,409		82,112
Merchant solutions	435,558		294,907		807,107		470,246
	498,585		339,307		928,516		552,358
Gross profit	620,860		375,034		1,179,576		631,984
Operating expenses:
Sales and marketing(1)(2)	201,910		144,850		388,133		299,712
Research and development(1)(2)	183,557		133,227		359,443		249,623
General and administrative(1)	77,966		83,307		145,068		128,149
Transaction and loan losses	17,986		13,366		28,592		27,449
Total operating expenses	481,419		374,750		921,236		704,933
Income (loss) from operations	139,441		284		258,340		(72,949)




Other income, net	779,874		4,084		2,030,519		17,193
Income (loss) before income taxes	919,315		4,368		2,288,859		(55,756)
(Provision for) recovery of income taxes	(40,222)		31,630		(151,321)		60,325
Net income	879,093		35,998		2,137,538		4,569

Net income per share attributable to shareholders:
Basic	$	7.06	$	0.30	$	17.25	$	0.04
Diluted	$	6.90	$	0.29	$	16.83	$	0.04
Shares used to compute net income per share attributable to shareholders:
Basic	124,547,501		118,740,645		123,899,177		117,773,612
Diluted	127,475,063		122,749,980		127,075,352		121,919,207

(1) Includes stock-based compensation expense and related payroll taxes as follows:


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
	(in thousands)
Cost of revenues	$	1,809	$	1,529	$	3,660	$	2,853
Sales and marketing	10,990		12,431		21,875		24,865
Research and development	55,988		49,825		112,015		86,246
General and administrative	23,759		12,682		41,964		22,449
	$	92,546	$	76,467	$	179,514	$	136,413

(2) Includes amortization of acquired intangibles as follows:


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
	(in thousands)
Cost of revenues	$	4,372	$	4,856	$	8,903	$	10,425
Sales and marketing	386		388		772		776
Research and development	58		58		116		116
	$	4,816	$	5,302	$	9,791	$	11,317

Revenues


	Three months ended June 30,						2021 vs. 2020		Six months ended June 30,						2021 vs. 2020
	2021			2020			% Change		2021			2020			% Change
	(in thousands, except percentages)
Revenues:
Subscription solutions	$	334,237		$	196,434		70.2	%	$	654,918		$	384,043		70.5	%
Merchant solutions	785,208			517,907			51.6	%	1,453,174			800,299			81.6	%
Total revenues	$	1,119,445		$	714,341		56.7	%	$	2,108,092		$	1,184,342		78.0	%
Percentage of revenues:
Subscription solutions	29.9		%	27.5		%			31.1		%	32.4		%
Merchant solutions	70.1		%	72.5		%			68.9		%	67.6		%
	100.0		%	100.0		%			100.0		%	100.0		%

Subscription Solutions

Subscription solutions revenues increased $137.8 million, or 70.2%, for the three months ended June 30, 2021 compared to the same period in 2020. The period-over-period increase was primarily a result of growth in MRR, which was driven largely by the higher number of merchants using our platform. For the three months ended June 30, 2020, MRR was depressed as a result of the 90-day free trial offered to all new standard plan merchants from March 21, 2020 through May 31, 2020.

Subscription solutions revenues increased $270.9 million, or 70.5%, for the six months ended June 30, 2021 compared to the same period in 2020. The period-over-period increase was primarily a result of growth in MRR, which was driven largely by the higher number of merchants using our platform. For the six months ended June 30, 2020, MRR was depressed as a result of the 90-day free trial offered to all new standard plan merchants from March 21, 2020 through May 31, 2020.

Merchant Solutions

Merchant solutions revenues increased $267.3 million, or 51.6%, for the three months ended June 30, 2021 compared to the same period in 2020. The increase in merchant solutions revenues was primarily a result of Shopify Payments revenue growing in the three months ended June 30, 2021 compared to the same period in 2020. This increase was a result of consumers turning to ecommerce for more of their purchases due to the impacts of COVID-19, an increase in number of merchants using our platform, improved pricing, continued expansion into new geographical regions, and an increase in our Shopify Payments penetration rate, which was 48.0%, resulting in GMV of $20.3 billion that was facilitated using Shopify Payments for the three months ended June 30, 2021. This compares to a penetration rate of 44.6% resulting in GMV of $13.4 billion that was facilitated using Shopify Payments in the same period in 2020.

Merchant solutions revenues increased $652.9 million, or 81.6%, for the six months ended June 30, 2021 compared to the same period in 2020. The increase in merchant solutions revenues was primarily a result of Shopify Payments revenue growing in the six months ended June 30, 2021 compared to the same period in 2020. This increase was a result of consumers turning to ecommerce for more of their purchases due to the impacts of COVID-19, an increase in number of merchants using our platform, improved pricing, continued expansion into new geographical regions, and an increase in our Shopify Payments penetration, which was 47.2%, resulting in GMV of $37.6 billion that was facilitated using Shopify Payments for the six months ended June 30, 2021. This compares to a penetration rate of 43.7% resulting in GMV of $20.8 billion that was facilitated using Shopify Payments in the same period in 2020.

In addition to the increase in revenue from Shopify Payments, referral fees from partners, Shopify Shipping, revenue from transaction fees, Shopify Capital, and Shopify Fulfillment Network increased during the three and six months ended June 30, 2021 compared to the same periods in 2020, as a result of the increase in GMV facilitated through our platform compared to the same periods in 2020. Furthermore, non-cash consideration for services rendered as part of strategic partnerships drove an increase in merchant solutions revenue during the three months ended June 30, 2021 compared to the same period in 2020.

Cost of Revenues


	Three months ended June 30,						2021 vs. 2020		Six months ended June 30,						2021 vs. 2020
	2021			2020			% Change		2021			2020			% Change
	(in thousands, except percentages)
Cost of revenues:
Cost of subscription solutions	$	63,027		$	44,400		42.0	%	$	121,409		$	82,112		47.9	%
Cost of merchant solutions	435,558			294,907			47.7	%	807,107			470,246			71.6	%
Total cost of revenues	$	498,585		$	339,307		46.9	%	$	928,516		$	552,358		68.1	%
Percentage of revenues:
Cost of subscription solutions	5.6		%	6.2		%			5.8		%	6.9		%
Cost of merchant solutions	38.9		%	41.3		%			38.3		%	39.7		%
	44.5		%	47.5		%			44.0		%	46.6		%

Cost of Subscription Solutions

Cost of subscription solutions increased $18.6 million, or 42.0%, for the three months ended June 30, 2021 compared to the same period in 2020. The increase was due to an increase in the costs necessary to support a greater number of merchants using our platform, resulting in an increase in: infrastructure and hosting costs, credit card fees for processing merchant billings, employee-related costs, and payments to third-party partners for the registration of domain names. As a percentage of revenues, cost of subscription solutions decreased from 6.2% in the three months ended June 30, 2020 to 5.6% in the three months ended June 30, 2021 as a result subscription solution revenues growing at a faster rate than the related costs, and certain platform related intangibles having been fully depreciated prior to the beginning of the three months ended June 30, 2021.

Cost of subscription solutions increased $39.3 million, or 47.9%, for the six months ended June 30, 2021 compared to the same period in 2020. The increase was due to an increase in the costs necessary to support a greater number of merchants using our platform, resulting in an increase in: infrastructure and hosting costs, credit card fees for processing merchant billings, employee-related costs, payments to third-party partners for the registration of domain names, and payments to third-party theme developers. As a percentage of revenues, cost of subscription solutions decreased from 6.9% in the six months ended June 30, 2020 to 5.8% in the six months ended June 30, 2021 due to subscription solutions representing a smaller percentage of our total revenues as higher GMV generated on the platform shifted the weighting of revenues towards merchant solutions. Furthermore, the decrease was due to

subscription solution revenues growing at a faster rate than the related costs, and certain platform related intangibles having been fully depreciated prior to the beginning of the six months ended June 30, 2021.

Cost of Merchant Solutions

Cost of merchant solutions increased $140.7 million, or 47.7%, for the three months ended June 30, 2021 compared to the same period in 2020. The increase was primarily due to higher payment processing and interchange fees resulting from an increase in GMV facilitated through Shopify Payments. The increase was also due to an increase in costs associated with 6RS such as employee-related costs, materials and third-party manufacturing costs, costs associated with operating Shopify Fulfillment Network, cost of POS hardware units, credit card fees for processing merchant billings, infrastructure and hosting costs, and employee-related costs. Cost of merchant solutions as a percentage of revenues decreased from 41.3% in the three months ended June 30, 2020 to 38.9% in the three months ended June 30, 2021 due to lower payment processing and interchange fees from Shopify Payments relative to the increase in Shopify Payments revenues, as well as lower amortization related to acquired intangible assets and lower product costs associated with supporting and expanding our product offerings relative to the increase in merchant solutions revenues. Cost of merchant solutions as a percentage of revenues also decreased as a result of the recognition of non-cash consideration for services rendered as part of strategic partnerships which have higher margins.

Cost of merchant solutions increased $336.9 million, or 71.6%, for the six months ended June 30, 2021 compared to the same period in 2020. The increase was primarily due to higher payment processing and interchange fees resulting from an increase in GMV facilitated through Shopify Payments. The increase was also due to an increase in costs associated with operating Shopify Fulfillment Network, credit card fees for processing merchant billings, costs associated with 6RS such as employee-related costs, materials and third-party manufacturing costs, cost of POS hardware units, infrastructure and hosting costs, and product costs associated with supporting and expanding our product offerings. Cost of merchant solutions as a percentage of revenues decreased from 39.7% in the six months ended June 30, 2020 to 38.3% in the six months ended June 30, 2021, due to lower payment processing and interchange fees from Shopify Payments relative to the increase in Shopify Payments revenues, as well as lower amortization related to acquired intangible and lower product costs associated with supporting and expanding our product offerings relative to the increase in merchant solutions revenues. Cost of merchant solutions as a percentage of revenues also decreased as a result of the recognition of non-cash consideration for services rendered as part of strategic partnerships which have higher margins.

Gross Profit


	Three months ended June 30,						2021 vs. 2020		Six months ended June 30,						2021 vs. 2020
	2021			2020			% Change		2021			2020			% Change
	(in thousands, except percentages)
Gross profit	$	620,860		$	375,034		65.5	%	$	1,179,576		$	631,984		86.6	%
Percentage of total revenues	55.5		%	52.5		%			56.0		%	53.4		%

Gross profit increased $245.8 million, or 65.5%, for the three months ended June 30, 2021 compared to the same period in 2020. As a percentage of total revenues, gross profit increased from 52.5% in the three months ended June 30, 2020 to 55.5% in the three months ended June 30, 2021, principally due to higher revenues from higher margin products such as referral revenue, Shopify Shipping, and Shopify Capital, as well as revenues growing at a faster rate than the related costs, and certain platform related intangibles having been fully depreciated since the three months ended June 30, 2020. The increase was also due to the recognition of non-cash consideration for services rendered as part of strategic partnerships which bear higher margins. The overall increase was offset slightly by the costs associated with 6RS.

Gross profit increased $547.6 million, or 86.6%, for the six months ended June 30, 2021 compared to the same period in 2020. As a percentage of total revenues, gross profit increased from 53.4% in the six months ended June 30, 2020 to 56.0% in the six months ended June 30, 2021, principally due to higher revenues from higher margin

products such as referral revenue, Shopify Shipping, and Shopify Capital, as well as improved Shopify Payments margins, revenues growing at a faster rate than the related costs, and certain platform related intangibles having been fully depreciated since the six months ended June 30, 2020. The increase was also due to the recognition of non-cash consideration for services rendered as part of strategic partnerships which bear higher margins. The overall increase was offset slightly by the costs associated with the continued development of Shopify Fulfillment Network and the costs associated with 6RS.

Operating Expenses

Sales and Marketing


	Three months ended June 30,						2021 vs. 2020		Six months ended June 30,						2021 vs. 2020
	2021			2020			% Change		2021			2020			% Change
	(in thousands, except percentages)
Sales and marketing	$	201,910		$	144,850		39.4	%	$	388,133		$	299,712		29.5	%
Percentage of total revenues	18.0		%	20.3		%			18.4		%	25.3		%

Sales and marketing expenses increased $57.1 million, or 39.4%, for the three months ended June 30, 2021 compared to the same period in 2020, due to an increase of $36.0 million spent on marketing programs to support the growth of our business, such as advertisements on search engines and display ads, as well as payments to partners. The increase in sales and marketing expenses also includes an increase of $19.8 million in employee-related costs (which was offset by a $1.4 million decrease related to stock-based compensation and related payroll taxes) as the growth in our employee base was slightly offset by lower facilities costs in the three months ended June 30, 2021 compared to the same period in 2020.

Sales and marketing expenses increased $88.4 million, or 29.5%, for the six months ended June 30, 2021 compared to the same period in 2020, due to an increase of $61.5 million in marketing programs to support the growth of our business, such as advertisements on search engines and display ads, as well as payments to partners, offset slightly by lower spend on media. The increase in sales and marketing expenses also includes an increase of $24.0 million in employee-related costs (which was offset by a $3.0 million decrease related to stock-based compensation and related payroll taxes) as the growth in our employee base was slightly offset by lower facilities costs in the six months ended June 30, 2021 compared to the same period in 2020.

Research and Development


	Three months ended June 30,						2021 vs. 2020		Six months ended June 30,						2021 vs. 2020
	2021			2020			% Change		2021			2020			% Change
	(in thousands, except percentages)
Research and development	$	183,557		$	133,227		37.8	%	$	359,443		$	249,623		44.0	%
Percentage of total revenues	16.4		%	18.7		%			17.1		%	21.1		%

Research and development expenses increased $50.3 million, or 37.8%, for the three months ended June 30, 2021 compared to the same period in 2020, due to an increase of $46.1 million in employee-related costs ($6.2 million of which related to stock-based compensation and related payroll taxes) and a $3.6 million increase in computer hardware and software costs, all as a result of the growth in our employee base and expanded development programs.

Research and development expenses increased $109.8 million, or 44.0%, for the six months ended June 30, 2021 compared to the same period in 2020, due to an increase of $100.2 million in employee-related costs ($25.8 million of which related to stock-based compensation and related payroll taxes) and an $8.4 million increase in computer

hardware and software costs, all as a result of the growth in our employee base and expanded development programs.

General and Administrative


	Three months ended June 30,						2021 vs. 2020		Six months ended June 30,						2021 vs. 2020
	2021			2020			% Change		2021			2020			% Change
	(in thousands, except percentages)
General and administrative	$	77,966		$	83,307		(6.4)	%	$	145,068		$	128,149		13.2	%
Percentage of total revenues	7.0		%	11.7		%			6.9		%	10.8		%

General and administrative expenses decreased $5.3 million, or 6.4%, for the three months ended June 30, 2021 compared to the same period in 2020, due largely to an impairment of $31.6 million recognized in the three months ended June 30, 2020 relating to certain office locations we have ceased using and have been or will be either terminated or sublet. This decrease was partly offset by an increase of $22.9 million in employee-related costs ($11.1 million of which related to stock-based compensation and related payroll taxes) and a $3.1 million increase in professional services for legal and financial services.

General and administrative expenses increased $16.9 million, or 13.2%, for the six months ended June 30, 2021 compared to the same period in 2020, due to an increase of $35.3 million in employee-related costs ($19.5 million of which related to stock-based compensation and related payroll taxes), a $6.2 million increase in professional services for legal and financial services and a $6.0 million increase in finance costs, which includes sales and use and other value added taxes, sustainability spend, and an increase in general bad debt expense related to expected credit losses. The increase was offset due to an impairment of $31.6 million recognized in the six months ended June 30, 2020 relating to certain office locations we have ceased using and have been or will be either terminated or sublet.

Transaction and Loan Losses


	Three months ended June 30,						2021 vs. 2020		Six months ended June 30,						2021 vs. 2020
	2021			2020			% Change		2021			2020			% Change
	(in thousands, except percentages)
Transaction and loan losses	$	17,986		$	13,366		34.6	%	$	28,592		$	27,449		4.2	%
Percentage of total revenues	1.6		%	1.9		%			1.4		%	2.3		%

Transaction and loan losses increased $4.6 million, or 34.6%, for the three months ended June 30, 2021 compared to the same period in 2020, due to an increase in losses related to Shopify Capital of $7.9 million driven by an expansion of our Capital offerings and programs, offset by a decrease in the current expected losses related to Shopify Capital relative to the same period in 2020. The increase is offset by a decrease of $3.3 million in losses related to Shopify Payments, as a result of a decrease in the current expected losses related to Shopify Payments relative to the same period in 2020, offset slightly by increased GMV processed through Shopify Payments.

Transaction and loan losses increased $1.1 million, or 4.2%, for the six months ended June 30, 2021 compared to the same period in 2020, due to an increase in losses related to Shopify Capital of $6.6 million driven by an expansion of our Capital offerings and programs, offset by a decrease in the current expected losses related to Shopify Capital relative to the same period in 2020. The increase is offset due to a decrease of $5.5 million in losses related to Shopify Payments, as a result of a decrease in the current expected losses related to Shopify Payments relative to the same period in 2020, offset slightly by increased GMV processed through Shopify Payments.

Other Income


	Three months ended June 30,				2021 vs. 2020	Six months ended June 30,				2021 vs. 2020
	2021		2020		% Change	2021		2020		% Change
	(in thousands, except percentages)
Other income, net	$	779,874	$	4,084	*	$	2,030,519	$	17,193	*

* Not a meaningful comparison

In the three months ended June 30, 2021 we had other income of $779.9 million, compared to other income of $4.1 million in the same period in 2020. The increase was driven by a net unrealized gain on equity and other investments of $777.7 million. The net unrealized gain is mainly related to our investment in Global-E received in connection with our strategic partnership. Due to the completion of Global-E's initial public offering on May 12, 2021, the fair value of the investment became readily determinable and is subsequently measured using Global-E's closing share price on the last day of trading of the reporting period and by applying a discount for lack of marketability to the portion of the investment that has not yet vested. An additional unrealized gain of $31.5 million from an investment in a private company was also recognized in the three months ended June 30, 2021 as a result of observable price changes. These gains were partly offset by an unrealized loss on our investment in Affirm due to the change in their share price from March 31, 2021 to June 30, 2021. Additionally, other income increased due to a reduction in foreign exchange loss from $1.9 million in 2020 to $0.1 million in 2021, resulting in an increase of $1.8 million, offset slightly by a reduction in interest income of $2.9 million, primarily as a result of lower interest rates, and a $0.9 million increase in interest expense related to the Notes.

In the six months ended June 30, 2021 we had other income of $2,030.5 million, compared to other income of $17.2 million in the same period in 2020. The increase was driven mainly by the unrealized gains from our Affirm and Global-E investments totaling $2,023.5 million and an unrealized gain in an investment in a private company of $31.5 million as a result of observable price changes. The increase was slightly offset by an unrealized loss related to two separate investments in another private company that is a partner in our ecosystem. These two investments do not have readily determinable fair values and are currently accounted for using the measurement alternative. Subsequent to the closing of the first investment, the second investment was part of an observable transaction and resulted in the recognition of a $26.7 million unrealized loss. Additionally, other income was offset by a reduction in interest income of $10.5 million, primarily as a result of lower interest rates, a change in the foreign exchange gain of $0.8 million in 2020 to a foreign exchange loss of $2.4 million in 2021, resulting in a decrease in other income of $3.1 million, and a $1.7 million increase in interest expense related to the Notes.

(Provision for) Recovery of Income Taxes


	Three months ended June 30,				2021 vs. 2020	Six months ended June 30,				2021 vs. 2020
	2021		2020		% Change	2021		2020		% Change
	(in thousands, except percentages)
(Provision for) recovery of income taxes	$	(40,222)	$	31,630	*	$	(151,321)	$	60,325	*

* Not a meaningful comparison

As a result of the unrealized gain on equity and other investments, ongoing operations, other discrete items, primarily related to tax benefits for share-based compensation, our ability to carry-back losses to prior years in Canada, and the recognition of deferred tax assets in Canada, we have a provision for income taxes of $40.2 million and $151.3 million in the three and six months ended June 30, 2021, respectively. This compares to a recovery of income taxes of $31.6 million and $60.3 million in the same periods in 2020 primarily due to tax benefits for share-based compensation, the impairment of right-of-use assets and fixed assets, our ability to carry-back losses to prior years in Canada, and the recognition of deferred tax assets in the United States.

Summary of Quarterly Results

The following table sets forth selected unaudited quarterly results of operations data for each of the eight quarters ended June 30, 2021. The information for each of these quarters has been derived from unaudited condensed consolidated financial statements that were prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflects all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the results of operations for these periods in accordance with U.S. GAAP. This data should be read in conjunction with our unaudited condensed consolidated financial statements and audited consolidated financial statements and related notes for the relevant period. These quarterly operating results are not necessarily indicative of our operating results for a full year or any future period.


	Three months ended
	Jun 30, 2021		Mar 31, 2021		Dec 31, 2020		Sep 30, 2020		June 30, 2020		Mar 31, 2020		Dec 31, 2019		Sep 30, 2019
	(in thousands, except per share data)
Revenues:
Subscription solutions	$	334,237	$	320,681	$	279,440	$	245,274	$	196,434	$	187,609	$	183,166	$	165,577
Merchant solutions	785,208		667,966		698,304		522,131		517,907		282,392		321,994		224,975
	1,119,445		988,647		977,744		767,405		714,341		470,001		505,160		390,552
Cost of revenues:(1)(2)
Subscription solutions	63,027		58,382		59,250		52,170		44,400		37,712		37,369		33,263
Merchant solutions	435,558		371,549		414,106		310,087		294,907		175,339		203,900		140,593
	498,585		429,931		473,356		362,257		339,307		213,051		241,269		173,856
Gross profit	620,860		558,716		504,388		405,148		375,034		256,950		263,891		216,696
Operating expenses:
Sales and marketing(1)(2)	201,910		186,223		154,728		147,608		144,850		154,862		132,063		116,546
Research and development(1)(2)	183,557		175,886		159,077		143,427		133,227		116,396		102,753		90,387
General and administrative(1)	77,966		67,102		65,395		51,799		83,307		44,842		50,518		38,022
Transaction and loan losses	17,986		10,606		12,647		11,753		13,366		14,083		8,636		7,399
Total operating expenses	481,419		439,817		391,847		354,587		374,750		330,183		293,970		252,354
Income (loss) from operations	139,441		118,899		112,541		50,561		284		(73,233)		(30,079)		(35,658)




Other income (expenses), net	779,874		1,250,645		(2,788)		135,806		4,084		13,109		11,539		11,212
Income (loss) before income taxes	919,315		1,369,544		109,753		186,367		4,368		(60,124)		(18,540)		(24,446)
(Provision for) recovery of income taxes	(40,222)		(111,099)		14,119		4,701		31,630		28,695		19,311		(48,338)
Net income (loss)	$	879,093	$	1,258,445	$	123,872	$	191,068	$	35,998	$	(31,429)	$	771	$	(72,784)


Net income (loss) per share attributable to shareholders:
Basic	$	7.06	$	10.21	$	1.01	$	1.59	$	0.30	$	(0.27)	$	0.01	$	(0.64)
Diluted	$	6.90	$	9.94	$	0.99	$	1.54	$	0.29	$	(0.27)	$	0.01	$	(0.64)

(1) Includes stock-based compensation expense and related payroll taxes as follows:


	Three months ended
	Jun 30, 2021		Mar 31, 2021		Dec 31, 2020		Sep 30, 2020		June 30, 2020		Mar 31, 2020		Dec 31, 2019		Sep 30, 2019
	(in thousands)
Cost of revenues	$	1,809	$	1,851	$	1,705	$	2,914	$	1,529	$	1,324	$	1,209	$	1,041
Sales and marketing	10,990		10,885		10,044		11,481		12,431		12,434		11,319		9,692
Research and development	55,988		56,027		54,262		47,741		49,825		36,421		32,361		25,913
General and administrative	23,759		18,205		16,480		13,266		12,682		9,767		8,533		7,853
	$	92,546	$	86,968	$	82,491	$	75,402	$	76,467	$	59,946	$	53,422	$	44,499

(2) Includes amortization of acquired intangibles as follows:


	Three months ended
	Jun 30, 2021		Mar 31, 2021		Dec 31, 2020		Sep 30, 2020		June 30, 2020		Mar 31, 2020		Dec 31, 2019		Sep 30, 2019
	(in thousands)
Cost of revenues	$	4,372	$	4,531	$	4,532	$	4,531	$	4,856	$	5,569	$	4,820	$	1,649
Sales and marketing	386		386		384		388		388		388		283		—
Research and development	58		58		59		58		58		58		58		58
	$	4,816	$	4,975	$	4,975	$	4,977	$	5,302	$	6,015	$	5,161	$	1,707

The following table sets forth selected unaudited quarterly statements of operations data as a percentage of total revenues for each of the eight quarters ended June 30, 2021.


	Three months ended
	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	June 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019
Revenues:
Subscription solutions	29.9%	32.4%	28.6%	32.0%	27.5%	39.9%	36.3%	42.4%
Merchant solutions	70.1%	67.6%	71.4%	68.0%	72.5%	60.1%	63.7%	57.6%
	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%
Cost of revenues:
Subscription solutions	5.6%	5.9%	6.1%	6.8%	6.2%	8.0%	7.4%	8.5%
Merchant solutions	38.9%	37.6%	42.4%	40.4%	41.3%	37.3%	40.4%	36.0%
	44.5%	43.5%	48.4%	47.2%	47.5%	45.3%	47.8%	44.5%
Gross profit	55.5%	56.5%	51.6%	52.8%	52.5%	54.7%	52.2%	55.5%
Operating expenses:
Sales and marketing	18.0%	18.8%	15.8%	19.2%	20.3%	32.9%	26.1%	29.8%
Research and development	16.4%	17.8%	16.3%	18.7%	18.7%	24.8%	20.3%	23.1%
General and administrative	7.0%	6.8%	6.7%	6.7%	11.7%	9.5%	10.0%	9.7%
Transaction and loan losses	1.6%	1.1%	1.3%	1.5%	1.9%	3.0%	1.7%	1.9%
Total operating expenses	43.0%	44.5%	40.1%	46.2%	52.5%	70.2%	58.1%	64.5%
Income (loss) from operations	12.5%	12.0%	11.5%	6.6%	0.0%	(15.6)%	(5.9)%	(9.1)%




Other income (expenses), net	69.7%	126.5%	(0.3)%	17.7%	0.6%	2.8%	2.3%	2.9%
Income (loss) before income taxes	82.1%	138.5%	11.2%	24.3%	0.6%	(12.8)%	(3.6)%	(6.3)%
(Provision for) recovery of income taxes	(3.6)%	(11.2)%	1.4%	0.6%	4.4%	6.1%	3.8%	(12.4)%
Net income (loss)	78.5%	127.3%	12.7%	24.9%	5.0%	(6.7)%	0.2%	(18.6)%

We believe that year-over-year comparisons are more meaningful than our sequential results due to seasonality in our business. While we believe that this seasonality has affected and will continue to affect our quarterly results, our rapid growth has largely masked seasonal trends to date. Our merchant solutions revenues are directionally correlated with our merchants' GMV. Our merchants' GMV typically increases during the fourth-quarter holiday season. As a result, we have historically generated higher merchant solutions revenues in our fourth quarter than in other quarters. Due to the ongoing effect of the COVID-19 pandemic, which has accelerated the shift of purchasing habits to ecommerce, we have observed a rapid growth in merchant solutions revenue in our most recent quarters. As a result of the continued growth of our merchant solutions offerings, we believe that our business may become more seasonal in the future, and that historical patterns in our business may not be a reliable indicator of our future performance.

Quarterly Revenue and Gross Margin Trends

Historically, revenues experienced a seasonal decrease in our first quarters as buyers typically reduce their spending following the holiday season resulting in a seasonal decrease in GMV per merchant, which was not completely offset by merchant and MRR growth. Subsequently, revenues have increased in each of the next three quarters as a result of merchant, MRR, and overall GMV growth. Our merchants have processed additional GMV during the fourth-quarter holiday seasons, and as a result we have generated higher merchant solutions revenues in our fourth quarters compared to other quarters. However, due to the ongoing effect of the COVID-19 pandemic which has accelerated the shift of purchasing habits to ecommerce, we have observed a rapid increase in merchant solutions revenue in our most recent quarters that do not replicate historical patterns. As a result, and in combination with strong subscription solutions growth, total revenues in the first quarter of 2021 exceeded total revenues from the fourth quarter of 2020. Due to the continued growth of our merchant solutions offerings, we believe that our business may become more seasonal in the future.

Our gross margin percentage has varied over the past eight quarters and is generally driven by the mix between our higher-margin subscription solutions revenue and lower-margin merchant solutions revenue. While our total revenues have increased in recent periods, the mix has shifted towards merchant solutions revenue, most notably in the fourth quarter due to higher holiday volume of orders facilitated and the resulting Shopify Payments revenue during this period. We expect this overall trend to continue over time.

Quarterly Operating Expenses Trends

Total operating expenses have increased sequentially for each period presented, with the exception of the third quarter of 2020 when quarter over quarter expenses decreased as a result of the impairment charges and accelerated depreciation on certain office space recognized in the second quarter of 2020. Total operating expenses have increased primarily due to the addition of personnel in connection with the expansion of our business, additional operating expenses associated with the acquisition of 6RS as well as additional marketing initiatives to attract potential merchants.

Quarterly Other Income (Expenses) Trends

Historically, there have been no consistent trends associated with other income (expenses) as changes are impacted by fluctuations in the fair value of our equity investments in public companies with readily determinable fair values, observable changes or impairments associated with our equity investments in private companies without readily determinable fair values, foreign exchange rates, and interest rates. The results from these changes may fluctuate from period to period and may cause volatility to our earnings as well as impact comparability of our results from period to period.

Key Balance Sheet Information


	June 30, 2021		December 31, 2020
	(in thousands)
Cash, cash equivalents and marketable securities	$	7,755,387	$	6,387,967
Total assets	11,955,678		7,762,905
Total liabilities	1,835,134		1,362,182
Total non-current liabilities	1,324,051		923,850

Total assets increased $4,192.8 million as at June 30, 2021 compared to December 31, 2020, principally due to a $2,622.9 million increase in equity and other investments due mainly to unrealized gains on our investments in Affirm and Global-E received in conjunction with strategic partnerships, a $1,367.4 million increase in cash, cash equivalents and marketable securities driven largely by our February 2021 public equity offering partly offset by the purchase of equity and other investments, a $170.6 million increase in merchant cash advances, loans and related

receivables largely due to an expansion of our Capital offerings and programs, a $32.6 million increase in trade and other receivables, a $10.8 million increase in other current assets, a $5.0 million increase in right-of-use assets, and a $0.9 million increase in income taxes receivable. These increases were partially offset by: a $11.5 million decrease in intangibles assets due to amortization in the period; a $5.4 million decrease in property and equipment due to amortization in the period; and a $0.6 million decrease in deferred tax assets. Total liabilities increased by $473.0 million, principally as a result of a $189.7 million increase in deferred revenue mainly due to the non-cash consideration received in conjunction with our partnership with Global-E, an increase of $151.8 million in the carrying amount of the Notes due to the adoption of ASU 2020-06 in the period resulting in a single unit of account on the balance sheet as further described below in the section entitled "Critical Accounting Policies and Estimates", a $127.8 million increase in deferred tax liabilities, a $12.1 million increase in lease liabilities, and a $2.9 million increase in income taxes payable. These increases were partially offset by a $11.3 million decrease in accounts payable and accrued liabilities.

Liquidity and Capital Resources

To date, we have financed our operations primarily through the sale of equity securities as well as the sale of the Notes, raising approximately $7.8 billion, net of issuance costs, from investors.

In February 2021, the Company completed a public offering in which it issued and sold 1,180,000 Class A subordinate voting shares at a public offering price of $1,315.00 per share. The Company received total net proceeds of $1,541.2 million after deducting offering fees and expenses of $10.5 million.

In September 2020, the Company completed a public offering in which it issued and sold 1,265,000 Class A subordinate voting shares at a public offering price of $900.00 per share, including 165,000 Class A subordinate voting shares purchased by the underwriters pursuant to the exercise of the over-allotment option. The Company received total net proceeds of $1,117.6 million after deducting offering fees and expenses of $20.9 million.

In September 2020, the Company also issued $920.0 million aggregate principal amount of 0.125% convertible senior notes due 2025. The net proceeds from the issuance of the Notes were $908.0 million after deducting underwriting discounts and offering costs. The Notes have an initial conversion rate of 0.6944 Class A subordinate voting shares per one thousand dollars of principal amount of Notes, which is equivalent to an initial conversion price of approximately $1,440.09 per share. The Notes bear cash interest at 0.125% per year and, if we undergo a "fundamental change" (which includes a change of control of more than 50% of our common equity or our liquidation or dissolution) prior to the maturity date of the Notes, we will, subject to limited exceptions, be required to purchase for cash all outstanding Notes at a purchase price equal to 100% of the principal amount of the Notes, plus accrued and unpaid interest to, but excluding, the fundamental change purchase date.

In July 2020, due to the expiry of our previous short-term base shelf prospectus, we filed a new short-form base shelf prospectus with the securities commissions in each of the provinces and territories of Canada, except Quebec, and a corresponding shelf registration statement on Form F-10 with the U.S. Securities and Exchange Commission. This shelf prospectus and registration statement allows Shopify to offer up to $7.5 billion of Class A subordinate voting shares, preferred shares, debt securities, warrants, subscription receipts, units, or any combination thereof, from time to time during the 25-month period that the shelf prospectus is effective.

In May 2020, the Company completed a public offering in which it issued and sold 2,127,500 Class A subordinate voting shares at a public offering price of $700.00 per share, including 277,500 Class A subordinate voting shares purchased by the underwriters pursuant to the exercise of the over-allotment option. The Company received total net proceeds of $1,460.9 million after deducting offering fees and expenses of $28.3 million.

Our principal cash requirements are for working capital and capital expenditures. Excluding current deferred revenue, working capital at June 30, 2021 was $8,132.2 million. Given the ongoing cash generated from operations and our existing cash and cash equivalents, we believe there is sufficient liquidity to meet our current and planned financial obligations over the next 12 months. Our future financing requirements will depend on many factors including our growth rate, subscription renewal activity, the timing and extent of spending to support development

of our platform, the expansion of sales and marketing activities, the macroeconomic conditions and overall levels of consumer spending on goods, and potential mergers and acquisitions activity. Although we currently are not a party to any material undisclosed agreement and do not have any understanding with any third parties with respect to potential material investments in, or material acquisitions of, businesses or technologies, we may enter into these types of arrangements in the future, which could also require us to seek additional equity or debt financing. Additional funds may not be available on terms favorable to us or at all.

Cash, Cash Equivalents and Marketable Securities

Cash, cash equivalents, and marketable securities increased by $1,367.4 million to $7,755.4 million as at June 30, 2021 from $6,388.0 million as at December 31, 2020, primarily as a result of proceeds from the public equity offering in February 2021, cash provided by our operating activities, and proceeds from the exercise of stock options, partly offset by the purchase of equity and other investments.

Cash equivalents and marketable securities include money market funds, term deposits, U.S. and Canadian federal bonds and agency securities, corporate bonds and commercial paper, all maturing within the 12 months from June 30, 2021.

The following table summarizes our total cash, cash equivalents and marketable securities as at June 30, 2021 and 2020 as well as our operating, investing and financing activities for the six months ended June 30, 2021 and 2020:


	Six months ended June 30,
	2021		2020
	(in thousands)
Cash, cash equivalents and marketable securities (end of period)	$	7,755,387	$	4,000,955
Net cash provided by (used in):
Operating activities	$	202,104	$	90,235
Investing activities	(2,127,231)		(347,125)
Financing activities	1,584,458		1,498,540
Effect of foreign exchange on cash and cash equivalents	1,742		(9,204)
Net (decrease) increase in cash and cash equivalents	(338,927)		1,232,446
Change in marketable securities	1,706,347		313,315
Net increase in cash, cash equivalents and marketable securities	$	1,367,420	$	1,545,761

Cash Flows From Operating Activities

Our largest source of operating cash is from merchant solutions. Within merchant solutions, the largest source of cash flows are Shopify Payments processing fee arrangements, which are received on a daily basis as transactions are processed. We also generate significant cash flows from our subscription solutions with subscription revenues being our single largest source of cash flows. These payments are typically paid to us at the beginning of the applicable subscription period, except for our Shopify Plus merchants who typically pay us at the end of their monthly billing cycle. Our primary uses of cash from operating activities are for third-party payment processing fees, advancing funds to merchants through Shopify Capital, employee-related expenditures, third-party shipping and fulfillment partners, marketing programs, outsourced hosting costs, and leased facilities.

For the six months ended June 30, 2021, cash provided by operating activities was $202.1 million. This was primarily as a result of our net income of $2,137.5 million, which once adjusted for a net unrealized gain on equity and other investments of $2,028.7 million, $151.1 million of stock-based compensation expense, a $128.3 million increase in net deferred income taxes, $30.5 million of amortization and depreciation, $18.1 million in revenue related to non-cash consideration, a $14.9 million increase of our provision for transaction and loan losses, an unrealized foreign exchange loss of $1.5 million, and $1.2 million of amortization of debt offering costs related to

the Notes offering, contributed $418.1 million of positive cash flows. Additional cash flows of $16.0 million were provided by the following changes in operating liabilities: a $207.8 million increase in deferred revenue due mainly to the non-cash consideration received in conjunction with our partnership with Global-E, of which the initial value of the non-cash consideration received in exchange for the services was $192.3 million; a $6.8 million net change in income tax assets and liabilities; and a $3.9 million net change in lease assets and liabilities; offset by a $10.2 million decrease in accounts payable and accrued liabilities. Cash used of $232.0 million resulted from the following increases in operating assets: $188.1 million in merchant cash advances and loans as we continued to grow Shopify Capital; $27.4 million in trade and other receivables; and $16.5 million in other current assets driven primarily by an increase in deposits and prepaid expenses.

For the six months ended June 30, 2020, cash used in operating activities was $90.2 million. This was primarily as a result of our net income of $4.6 million, which once adjusted for $116.1 million of stock-based compensation expense, $34.3 million of amortization and depreciation, $31.6 million of impairment of right-of-use assets and leasehold improvements, a $13.7 million change in net deferred income taxes, a $12.0 million increase of our provision for transaction and loan losses, and an unrealized foreign exchange gain of $1.2 million, contributed $183.6 million of positive cash flows. These cash flows were offset by cash used of $41.3 million resulting from the following changes in operating liabilities: $115.4 million net change in income tax assets and liabilities, largely driven by a $68.4 million decrease in corporate taxes payable relating to a payment made to the Government of Canada, with the remaining change relating to an increase in corporate taxes receivable; a $61.7 million increase in accounts payable and accrued liabilities; an $11.7 million increase in deferred revenue; and a $0.8 million increase in net lease liabilities. Additional cash used of $52.1 million resulted from the following increases in operating assets: $22.3 million in merchant cash advances and loans; $19.0 million in trade and other receivables; and $10.8 million in other current assets.

Cash Flows From Investing Activities

Cash flows used in investing activities are primarily related to the purchase and sale of marketable securities, equity and other investments, and purchases of computer equipment.

Net cash used in investing activities in the six months ended June 30, 2021 was $2,127.2 million, which was driven by net purchases of $1,711.9 million in marketable securities, $401.9 million used to purchase equity and other investments, and $13.5 million used to purchase property and equipment, which consisted mainly of computer equipment and leasehold improvements to accommodate our future needs at our remaining office locations

Net cash provided by investing activities in the six months ended June 30, 2020 was $347.1 million, which was driven by net purchases of $311.5 million in marketable securities, $25.3 million used to purchase property and equipment, which primarily consisted of expenditures on leasehold improvements made prior to our decision to shift to being a digital-by-design company, $10.0 million used to purchase equity and other investments, and $0.3 million used for purchasing and developing software.

Cash Flows From Financing Activities

Cash flows from financing activities are primarily related to public offerings, the issuance of the Notes, and exercises of stock options.

Net cash provided by financing activities in the six months ended June 30, 2021 was $1,584.5 million driven by $1,541.2 million raised in our February 2021 public equity offering, and $43.3 million in proceeds from the issuance of Class A subordinate voting shares and Class B multiple voting shares as a result of stock option exercises. This compares to $1,498.5 million for the same period in 2020, driven by the $1,460.9 million raised in our May 2020 public offering and by $37.6 million which related to stock option exercises.

Contractual Obligations and Contingencies

Our principal commitments consist of our Notes and obligations under our operating leases for office and commercial space. The following table summarizes our contractual obligations as of June 30, 2021:


	Payments Due by Period
	Less Than 1 Year		1 to 3 Years		3 to 5 Years		More Than 5 Years		Total
	(in thousands)
Convertible senior notes(1)	$	1,150	$	2,300	$	921,725	$	—	$	925,175
Bank indebtedness	—		—		—		—		—
Operating lease and unconditional purchase obligations(2)	96,360		203,025		118,530		396,897		814,812
Total contractual obligations	$	97,510	$	205,325	$	1,040,255	$	396,897	$	1,739,987

(1) $920,000 of the payments due in three to five years may be settled in Class A subordinate voting shares instead of cash, at our option.

(2) Consists of payment obligations under our office and commercial leases as well as other unconditional purchase obligations.

Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements, other than operating leases and other unconditional purchase obligations (which have been disclosed above under "Contractual Obligations and Contingencies").

Risks and Uncertainties

We are exposed to a variety of risks, including foreign currency exchange fluctuations, changes in the fair values of our equity and other investments, changes in interest rates, concentration of credit and inflation. We regularly assess currency, interest rate and inflation risks to minimize any adverse effects on our business as a result of those factors. We are also exposed to other uncertainties as the COVID-19 pandemic continues to evolve. For further discussion of these risks and uncertainties see "Risk Factors" in our annual information form.

Foreign Currency Exchange Risk

While the majority of our revenues are denominated in USD, a significant portion of operating expenses are incurred in CAD. As a result, our earnings are adversely affected by an increase in the value of the CAD relative to the USD. Foreign currency forward contracts are used to hedge against the earning effects of such fluctuations.

Effect of Foreign Exchange Rates

The following non-GAAP financial measure converts our revenues, cost of revenues, operating expenses, and income (loss) from operations using the comparative period's monthly average exchange rates:


	Six months ended June 30,
	2021						2020
	GAAP Amounts As Reported		Exchange Rate Effect (1)		At Prior Year Effective Rates (2)		GAAP Amounts As Reported
	(in thousands)
Revenues	$	2,108,092	$	(4,104)	$	2,103,988	$	1,184,342
Cost of revenues	(928,516)		4,139		(924,377)		(552,358)
Operating expenses	(921,236)		3,629		(917,607)		(704,933)
Income (loss) from operations	$	258,340	$	3,664	$	262,004	$	(72,949)

(1) Represents the increase or decrease in GAAP amounts reported resulting from using the comparative period's effective CAD-USD foreign exchange rates.

(2) Represents the outcome that would have resulted if the comparative period's effective CAD-USD foreign exchange rates are applied to the current reporting period.

This effect of foreign exchange rates on our consolidated statements of operations disclosure is a supplement to our consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP. We have provided the above non-GAAP disclosure as we believe it presents a clear comparison of our period to period operating results by removing the impact of fluctuations in the CAD to USD exchange rate and to assist investors in understanding our financial and operating performance. Non-GAAP financial measures are not recognized measures for financial statement presentation under U.S. GAAP, do not have standardized meanings, and may not be comparable to similar measures presented by other public companies. Such non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with U.S. GAAP.

Interest Rate Sensitivity

We had cash, cash equivalents and marketable securities totaling $7,755.4 million as of June 30, 2021. The cash and cash equivalents are held for operations and working capital purposes. Our investments within cash, cash equivalents and marketable securities are made for capital preservation purposes. We do not enter into these types of investments for trading or speculative purposes.

Our cash equivalents and our portfolio of marketable securities are subject to market risk due to changes in interest rates. Fixed rate securities may have their market value adversely affected due to a rise in interest rates. Our future investment income may fall short of our expectations due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates. However, because we classify our debt securities as "held to maturity," no gains or losses are recognized due to changes in interest rates unless such securities are sold prior to maturity or declines in fair value are determined to be other than temporary.

In September 2020, we issued $920.0 million aggregate principal amount of Notes. The Notes have a fixed annual interest rate of 0.125%; accordingly, we do not have economic interest rate exposure on the Notes. However, the fair market value of the Notes is exposed to interest rate risk. Generally, the fair market value of our fixed interest rate Notes will increase as interest rates fall and decrease as interest rates rise. In addition, the fair market value of the Notes will generally fluctuate as the price of our Class A subordinate voting shares fluctuates. On our balance sheet, we carry the Notes at face value less debt offering costs, plus any amortization of offering costs, and we present the fair value for required disclosure purposes only.

Concentration of Credit Risk

The Company’s cash and cash equivalents, marketable securities, trade and other receivables, merchant cash advances, loans and related receivables, and foreign exchange derivative products subject the Company to concentrations of credit risk. Management mitigates this risk associated with cash and cash equivalents by making deposits and entering into foreign exchange derivative products only with large banks and financial institutions that are considered to be highly creditworthy. Management mitigates the risks associated with marketable securities by adhering to its investment policy, which stipulates minimum rating requirements, maximum investment exposures and maximum maturities. Due to the Company’s diversified merchant base, there is no material concentration of credit risk related to the Company’s trade and other receivables and merchant cash advances and loans receivable. Trade and other receivables and merchant cash advances and loans receivable are monitored on an ongoing basis to ensure timely collection of amounts. The Company has mitigated some of the risks associated with Shopify Capital by entering into an agreement with a third party that insures a portion of the merchant cash advances and loans offered by Shopify Capital. The receivable related to insurance recoveries is included in the merchant cash advances, loans and related receivables balance. There are no receivables from individual merchants accounting for 10% or more of revenues or receivables. Potential ongoing effects from the COVID-19 pandemic on the Company's credit risk have been considered in the Company's allowances for expected credit losses on contract balances and merchant cash advances and loans. The Company continues its assessment given the fluidity of COVID-19's global impact.

Inflation Risk

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

Internal Control Over Financial Reporting

All control systems, no matter how well designed, have inherent limitations. Accordingly, even disclosure controls and procedures, and internal controls over financial reporting determined to be effective can only provide reasonable assurance of achieving their control objectives with respect to financial statement preparation and presentation.

Management of the Company, under the supervision of the Company's CEO and CFO, is responsible for establishing and maintaining adequate internal control over the Company's financial reporting, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP.

During the period covered by this quarterly report, there were no changes in the Company’s internal control over financial reporting, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Critical Accounting Policies and Estimates

We prepare our condensed consolidated financial statements in accordance with U.S. GAAP. In the preparation of these condensed consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we re-evaluate these estimates on an ongoing basis.

Other than the adoption of the Financial Accounting Standards Board's ("FASB") Accounting Standards Update ("ASU") No. 2020-06 described below, and the fair value of our investments in Affirm and Global-E being readily determinable, as described under "Key Components of Results of Operations", there have been no significant

changes in our critical accounting policies during the three and six months ended June 30, 2021 as compared to the critical accounting policies described in our most recent annual consolidated financial statements.

In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which eliminates certain models associated with accounting for convertible instruments, makes targeted improvements to the disclosures for convertible instruments and earnings per share guidance, and amends the guidance for the derivative scope exception for contracts in an entity's own equity. The updates are effective for annual periods beginning after December 15, 2021 including interim periods within those periods. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those periods. The Company early adopted this ASU effective January 1, 2021 using the modified retrospective approach. The adoption eliminated the requirement to separately account for the liability and equity components of its 0.125% convertible senior notes due 2025 (the "Notes"), which existed under previous accounting guidance. This results in a reclassification of $158,810 from additional paid-in capital to long-term liabilities. Furthermore, as a result of the adoption, non-cash interest expense related to the Company's currently outstanding Notes has been eliminated. As the Company previously recognized non-cash interest expense relating to the debt discount on the liability component, this results in a $8,198 cumulative adjustment to increase opening retained earnings.

Shares Outstanding

Shopify is a publicly traded company listed on the New York Stock Exchange (NYSE: SHOP) and on the Toronto Stock Exchange (TSX: SHOP). As of July 22, 2021 there were 113,224,439 Class A subordinate voting shares issued and outstanding, and 11,564,284 Class B multiple voting shares issued and outstanding.

As of July 22, 2021 there were 759,255 options outstanding under the Company’s Fourth Amended and Restated Incentive Stock Option Plan, of which 756,755 were vested as of such date. Each such option is or will become exercisable for one Class B multiple voting share. As of July 22, 2021 there were 1,126,116 options outstanding under the Company’s Amended and Restated Stock Option Plan, of which 748,458 were vested as of such date. Each such option is or will become exercisable for one Class A subordinate voting share. As of July 22, 2021 there were 41,351 options outstanding under the 6 River Systems 2016 Amended and Restated Stock Option and Grant Plan, which the Company assumed on closing of its acquisition of 6RS on October 17, 2019. Of these options, 18,745 were vested as of such date. Each option is or will become exercisable for one Class A subordinate voting share.

As of July 22, 2021 there were 825,137 RSUs and 909 DSUs outstanding under the Company’s Amended and Restated Long Term Incentive Plan. Each such RSU or DSU will vest as one Class A subordinate voting share.

Document

EXHIBIT 99.3

FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS

FULL CERTIFICATE

I, Tobias Lütke, Chief Executive Officer of Shopify Inc., certify the following:

1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Shopify Inc. (the “issuer”) for the interim period ended June 30, 2021.

2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

4. Responsibility: The issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuer's Annual and Interim Filings, for the issuer.

5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer and I have, as at the end of the period covered by the interim filings

(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.

5.1 Control framework: The control framework the issuer's other certifying officer and I used to design the issuer's ICFR is the Internal Control- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

5.2 N/A

5.3 N/A

6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on April 1, 2021 and ended on June 30, 2021 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.

Date: July 28, 2021


/s/ Tobias Lütke
Tobias Lütke
Chief Executive Officer

Document

EXHIBIT 99.4

FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS

FULL CERTIFICATE

I, Amy Shapero, Chief Financial Officer of Shopify Inc., certify the following:

1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Shopify Inc. (the “issuer”) for the interim period ended June 30, 2021.

5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer and I have, as at the end of the period covered by the interim filings

(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

5.2 N/A

5.3 N/A

Date: July 28, 2021


/s/ Amy Shapero
Amy Shapero
Chief Financial Officer