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
2020

Commission File Number
001-37400

 Shopify Inc.
(Translation of registrant’s name into English)

150 Elgin Street, 8th Floor
Ottawa, Ontario, Canada K2P 1L4
(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, 2020
99.2 Shopify Inc. – Interim Management’s Discussion and Analysis for the Second Quarter ended June 30, 2020
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)
Documents 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 28, 2020 (File No. 333-240142), 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 29, 2020 By: /s/ Joseph A. Frasca
Name: Joseph A. Frasca
Title: Chief Legal Officer and Corporate Secretary


EXHIBIT 99.1




SHOP6KCOPYIMAGE1A501.JPG

Condensed Consolidated
Financial Statements
(unaudited)
June 30, 2020




Shopify Inc.
Condensed Consolidated Balance Sheets
(unaudited)
Expressed in US $000’s except share amounts
As at 
June 30, 2020 December 31, 2019
Note $ $
Assets
Current assets
Cash and cash equivalents 4 1,882,362    649,916   
Marketable securities 4 2,118,593    1,805,278   
Trade and other receivables, net 5 106,409    90,529   
Merchant cash advances, loans and related receivables, net 6 166,495    150,172   
Income taxes receivable 13 49,173    —   
Other current assets 66,162    48,833   
4,389,194    2,744,728   
Long-term assets
Property and equipment, net 7 95,506    111,398   
Intangible assets, net 151,254    167,282   
Right-of-use assets 7 126,213    134,774   
Deferred tax assets 13 24,407    19,432   
Goodwill 8 311,865    311,865   
709,245    744,751   
Total assets 5,098,439    3,489,479   
Liabilities and shareholders’ equity
Current liabilities
Accounts payable and accrued liabilities 240,996    181,193   
Income taxes payable 13 1,062    69,432   
Deferred revenue 5 67,455    56,691   
Lease liabilities 7 10,993    9,066   
320,506    316,382   
Long-term liabilities
Deferred revenue 5 6,866    5,969   
Lease liabilities 7 142,128    142,641   
Deferred tax liabilities 13 —    8,753   
148,994    157,363   
Commitments and contingencies 7, 10
Shareholders’ equity
Common stock, unlimited Class A subordinate voting shares authorized, 108,221,159 and 104,518,173 issued and outstanding; unlimited Class B multiple voting shares authorized, 11,874,317 and 11,910,802 issued and outstanding
11 4,859,950    3,256,284   
Additional paid-in capital 73,578    62,628   
Accumulated other comprehensive income (loss) 12 (4,934)   1,046   
Accumulated deficit (299,655)   (304,224)  
Total shareholders’ equity 4,628,939    3,015,734   
Total liabilities and shareholders’ equity 5,098,439    3,489,479   

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


2



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, 2020 June 30, 2019 June 30, 2020 June 30, 2019
Note $ $ $ $
Revenues
Subscription solutions 196,434    153,047    384,043    293,498   
Merchant solutions 517,907    208,932    800,299    388,963   
714,341    361,979    1,184,342    682,461   
Cost of revenues
Subscription solutions 44,400    29,538    82,112    57,523   
Merchant solutions 294,907    127,676    470,246    239,882   
339,307    157,214    552,358    297,405   
Gross profit 375,034    204,765    631,984    385,056   
Operating expenses
Sales and marketing 144,850    119,210    299,712    224,232   
Research and development 133,227    85,520    249,623    161,875   
General and administrative 7, 15 83,307    34,922    128,149    65,225   
Transaction and loan losses 3, 15 13,366    4,733    27,449    9,134   
Total operating expenses 374,750    244,385    704,933    460,466   
Income (loss) from operations 284    (39,620)   (72,949)   (75,410)  
Other income
Interest income, net 5,952    12,174    16,419    24,252   
Foreign exchange gain (loss) (1,868)   (1,232)   774    (1,671)  
4,084    10,942    17,193    22,581   
Income (loss) before income taxes 4,368    (28,678)   (55,756)   (52,829)  
Recovery of income taxes 13 31,630    —    60,325    —   
Net income (loss) 35,998    (28,678)   4,569    (52,829)  
Other comprehensive income (loss)
Unrealized gain (loss) on cash flow hedges 12 14,495    6,746    (8,136)   16,020   
Tax effect on unrealized gain (loss) on cash flow hedges (3,842)   —    2,156    —   
Comprehensive income (loss) 46,651    (21,932)   (1,411)   (36,809)  
Net income (loss) per share attributable to shareholders:
Basic 14 $ 0.30    $ (0.26)   $ 0.04    $ (0.47)  
Diluted 14 $ 0.29    $ (0.26)   $ 0.04    $ (0.47)  
Shares used to compute net income (loss) per share attributable to shareholders:
Basic 14 118,740,645    112,013,409    117,773,612    111,470,359   
Diluted 14 122,749,980    112,013,409    121,919,207    111,470,359   

The accompanying notes are an integral part of these condensed consolidated financial statements.
3



Shopify Inc.
Condensed Consolidated Statements of Changes in Shareholders’ Equity
(unaudited)
Expressed in US $000’s except share amounts
Note Common Stock   Additional
Paid-In Capital
$
Accumulated Other Comprehensive Income (Loss)
$
Accumulated Deficit
$
Total
$
Shares Amount
$
As at December 31, 2018 110,392,689    2,215,936    74,805    (12,216)   (187,757)   2,090,768   
Adjustment related to the transition to Topic 842, Leases —    —    —    —    8,375    8,375   
As at January 1, 2019 110,392,689    2,215,936    74,805    (12,216)   (179,382)   2,099,143   
Exercise of stock options 747,686    18,964    (6,908)   —    —    12,056   
Stock-based compensation —    —    31,596    —    —    31,596   
Vesting of restricted share units 342,152    30,340    (30,340)   —    —    —   
Net loss and comprehensive loss for the period —    —    —    9,274    (24,151)   (14,877)  
As at March 31, 2019 111,482,527    2,265,240    69,153    (2,942)   (203,533)   2,127,918   
Exercise of stock options 738,873    24,173    (8,605)   —    —    15,568   
Stock-based compensation —    —    39,630    —    —    39,630   
Vesting of restricted share units 309,173    23,785    (23,785)   —    —    —   
Net loss and comprehensive loss for the period —    —    —    6,746    (28,678)   (21,932)  
As at June 30, 2019 112,530,573    2,313,198    76,393    3,804    (232,211)   2,161,184   

















4



Shopify Inc.
Condensed Consolidated Statements of Changes in Shareholders’ Equity
(unaudited)
Expressed in US $000’s except share amounts
Note Common Stock   Additional
Paid-In Capital
$
Accumulated Other Comprehensive Income (Loss)
$
Accumulated Deficit
$
Total
$
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 $28,305 11 2,127,500    1,460,945    —    —    —    1,460,945   
Net income and comprehensive income for the period —    —    —    10,653    35,998    46,651   
As at June 30, 2020 120,095,476    4,859,950    73,578    (4,934)   (299,655)   4,628,939   

The accompanying notes are an integral part of these condensed consolidated financial statements.
5



Shopify Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Expressed in US $000’s
Six months ended
June 30, 2020 June 30, 2019
$ $
Cash flows from operating activities
Net income (loss) for the period 4,569 (52,829)  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization and depreciation 34,297 14,207   
Stock-based compensation 116,076 70,432   
Impairment of right-of-use assets and leasehold improvements 7 31,623 —   
Provision for transaction and loan losses 12,040 7,398   
Deferred income taxes (13,728) —   
Unrealized foreign exchange (gain) loss (1,231) 1,917   
Changes in operating assets and liabilities:
Trade and other receivables (18,980) (20,540)  
Merchant cash advances, loans and related receivables (22,349) (31,222)  
Other current assets (20,815) (5,910)  
Accounts payable and accrued liabilities 61,659 56,049   
Income tax assets and liabilities (115,387) —   
Deferred revenue 11,661 6,345   
Lease assets and liabilities 800 1,555   
Net cash provided by operating activities 80,235 47,402   
Cash flows from investing activities
Purchase of marketable securities (1,970,693) (1,022,814)  
Maturity of marketable securities 1,659,159 1,249,319   
Acquisitions of property and equipment (25,329) (30,437)  
Acquisitions of intangible assets (262) (1,935)  
Acquisition of businesses, net of cash acquired (12,476)  
Net cash (used in) provided by investing activities (337,125) 181,657   
Cash flows from financing activities
Proceeds from public offering, net of issuance costs 11 1,460,945 —   
Proceeds from the exercise of stock options 37,595 27,624   
Net cash provided by financing activities 1,498,540 27,624   
Effect of foreign exchange on cash and cash equivalents (9,204) 1,624   
Net increase in cash and cash equivalents 1,232,446 258,307   
Cash and cash equivalents – Beginning of Period 649,916 410,683   
Cash and cash equivalents – End of Period 1,882,362 668,990   
Supplemental cash flow information:
Cash paid for amounts included in the measurement of lease liabilities included in cash flows from operating activities 10,142 7,209   
Lease liabilities arising from obtaining right-of-use assets 24,429 103,310   
Acquired property and equipment remaining unpaid 1,502 963   

The accompanying notes are an integral part of these condensed consolidated financial statements.
6


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 global commerce company, providing 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.

The Company’s headquarters and principal place of business are in Ottawa, Canada.

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), cash flows and changes in shareholders’ equity 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, 2019. The unaudited condensed consolidated balance sheet at December 31, 2019 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, 2020 are not necessarily indicative of the results expected for the full fiscal year.

3.Significant Accounting Policies

Except for the adoption of Topic 326, Financial Instruments - Credit Losses, 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, 2020, as compared to the significant accounting policies described in the Company’s annual consolidated financial statements for the year ended December 31, 2019.

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
7


Shopify Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
Expressed in US $000's except share and per share amounts

Company is the principal or an agent to the arrangements with merchants, and the estimated period over which contract costs should be amortized; estimates of future events and the impact on our provisions for expected credit losses related to our financial assets measured at amortized cost, including our contract balances and merchant cash advances and loans; recoverability of deferred tax assets; estimated annual effective tax rate; income projections and discount rates used to fair value acquired intangible assets; estimates involved in calculating the impairment of our right-of-use assets and leasehold improvements, including, but not limited to, the determination of asset groups and the calculation of their fair values; changes in the useful lives of leasehold improvements and other fixed assets; and the discount rate used to determine the present value of lease payments. Actual results may differ from the estimates made by management.

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 credit worthy. 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 particular 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 and have resulted in adjustments to the Company's allowances for expected credit losses on contract balances and merchant cash advances and loans, as discussed in notes 5 and 6, respectively. The Company continues its assessment given the fluidity of COVID-19's global impact.

Provision for Credit Losses Related to Merchant Cash Advances and Loans

Merchant cash advance receivables and loans represent the aggregate amount of Shopify Capital related receivables owed by merchants as of the condensed consolidated balance sheet date, net of an allowance for expected credit losses. The Company estimates the provision based on an assessment of various factors, including historical trends, merchants' gross merchandise volume, supportable forecasted information and other factors, including the potential impact of COVID-19, that may affect the merchants' ability to make future payments on the receivables. Additions to the provision are reflected in current operating results, while charges against the provision are made when losses are incurred. These additions are classified within transaction and loan losses on the condensed consolidated statements of operations and comprehensive income (loss). Recoveries are reflected as a reduction in the allowance for credit losses related to merchant cash advances and loans when the recovery occurs.

Provision for Transaction Losses Related to Shopify Payments

Payments losses arise when refunded merchant transactions cannot be recovered. The Company estimates the provision based on an assessment of various factors, including historical trends, gross merchandise volume facilitated using Shopify Payments, supportable forecasted information and other factors, including the potential impact of COVID-19, that may increase the volume of refunded transactions. Additions to the provision are reflected in current operating results, while charges against the provision are made when
8


Shopify Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
Expressed in US $000's except share and per share amounts

losses are incurred. These additions are classified within transaction and loan losses on the condensed consolidated statements of operations and comprehensive income (loss).

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 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, 2020 June 30, 2019
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 714,341    2,354    716,695    361,979    657    362,636   
Cost of revenues (339,307)   (2,065)   (341,372)   (157,214)   (946)   (158,160)  
Operating expenses (374,750)   (10,175)   (384,925)   (244,385)   (7,359)   (251,744)  
Income (loss) from operations 284    (9,886)   (9,602)   (39,620)   (7,648)   (47,268)  
Six months ended
June 30, 2020 June 30, 2019
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 1,184,342    3,300    1,187,642    682,461    1,208    683,669   
Cost of revenues (552,358)   (3,342)   (555,700)   (297,405)   (1,860)   (299,265)  
Operating expenses (704,933)   (21,944)   (726,877)   (460,466)   (18,292)   (478,758)  
Loss from operations (72,949)   (21,986)   (94,935)   (75,410)   (18,944)   (94,354)  
(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.

9


Shopify Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
Expressed in US $000's except share and per share amounts


Accounting Pronouncements Adopted in the Period

In June 2016, the Financial Accounting Standards Board issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), which replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates on loans, trade and other receivables, held-to-maturity debt securities, and other instruments. In May 2019, the Financial Accounting Standards Board issued ASU No. 2019-05, Financial Instruments - Credit Losses, which provides transition relief that is optional for, and available to, all reporting entities within the scope of Topic 326. The updates are effective for annual periods beginning after December 15, 2019 including interim periods within those periods. The Company adopted the standard effective January 1, 2020 using a modified retrospective approach. Upon adoption, the Company changed its approach to estimating its expected credit losses, which did not have a material impact on any of its existing allowances at that time.

4.Financial Instruments

As at June 30, 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 24,993    24,992    —    —    —    —   
Marketable securities:
U.S. term deposits 500,000    502,508    —    —    —    —   
U.S. federal bonds 813,020    814,094    —    —    —    —   
Canadian federal bonds 215,446    215,495    —    —    —    —   
Corporate bonds and commercial paper —    —    590,127    593,208    —    —   
Derivative assets:
Foreign exchange forward contracts —    —    2,344    2,344    —    —   
Liabilities:
Derivative liabilities:
Foreign exchange forward contracts —    —    4,650    4,650    —    —   
The fair values above include accrued interest of $5,294, which is excluded from the carrying amounts. The accrued interest is included in Trade and other receivables in the condensed consolidated balance sheets.

10


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, 2019, 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:
Repurchase agreements —    —    200,000    200,009    —    —   
Marketable securities:
U.S. term deposits 300,000    301,354    —    —    —    —   
U.S. federal bonds 222,713    223,403    —    —    —    —   
Canadian federal bonds 69,922    69,919    —    —    —    —   
Corporate bonds and commercial paper —    —    1,212,643    1,216,822    —    —   
Derivative assets:
Foreign exchange forward contracts —    —    5,830    5,830    —    —   
The fair values above include accrued interest of $5,754, 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, 2020, the Company held equity investments in private companies carried at cost of $12,500 (December 31, 2019 - $2,500), with no observable price changes or indicators of impairment.

As at June 30, 2020, the Company held foreign exchange forward contracts to convert USD into CAD, with a total notional value of $303,945 (December 31, 2019 - $285,700), 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, 2020, $2,344 of unrealized gains and $4,650 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 (loss) 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, 2020, $4,011 and $5,306 of realized losses (June 30, 2019 - $2,215 and $5,493 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.


11


Shopify Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
Expressed in US $000's except share and per share amounts

5.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,
2020
December 31, 2019 January 1, 2019
$ $ $
Unbilled revenues 40,291    31,629    12,653   
Indirect taxes receivable 38,277    36,821    3,774   
Trade receivables 17,549    9,660    11,191   
Accrued interest 5,294    5,754    5,109   
Other receivables 4,998    6,665    8,620   
  106,409    90,529    41,347   
        
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, potential impacts of COVID-19 and other currently available evidence. 

Activity in the allowance for credit losses was as follows:
Three months ended
Six months ended
  June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019
$ $ $ $
Allowance, beginning of the period 4,576    1,214    2,894    1,023   
Provision for credit losses related to uncollectible receivables(1)
2,443    569    4,149    1,285   
Write-offs (1,404)   (212)   (1,428)   (737)  
Allowance, end of the period 5,615    1,571    5,615    1,571   
(1) The provision for the three and six months ended June 30, 2020 includes expected losses as a result of macroeconomic factors, including the impact of COVID-19.

Changes in deferred revenue were as follows:
Three months ended
Six months ended
  June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019
$ $ $ $
Balance, beginning of the period 68,464    44,757    62,660    41,061   
Deferral of revenue 39,360    27,167    50,517    36,178   
Recognition of deferred revenue (33,503)   (24,125)   (38,856)   (29,440)  
Balance, end of the period 74,321    47,799    74,321    47,799   
Current portion 67,455    45,707   
Long term portion 6,866    2,092   
74,321    47,799   
The opening balances of current and long-term deferred revenue were $39,180 and $1,881, respectively, as of January 1, 2019.
12


Shopify Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
Expressed in US $000's except share and per share amounts
6.Merchant Cash Advances, Loans and Related Receivables
        
June 30,
2020
December 31, 2019 January 1, 2019
$ $ $
Merchant cash advances receivable, gross 151,065    131,227    77,653   
Related receivables(1)
4,700    3,179    4,482   
Allowance for credit losses related to uncollectible merchant cash advances receivable (15,577)   (10,420)   (6,249)  
Loans receivable, gross 28,863    28,547    16,959   
Allowance for credit losses related to uncollectible loans receivable (2,556)   (2,361)   (972)  
Merchant cash advances, loans and related receivables, net 166,495    150,172    91,873   
(1) Presentation of related receivables represents a comparative figure reclassification referenced in note 15.

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, 2020 June 30, 2019 June 30, 2020 June 30, 2019
$ $ $ $
Allowance, beginning of the period 19,110    8,866    12,781    7,221   
Provision for credit losses related to uncollectible merchant cash advances receivable(2)
2,560    2,727    9,656    5,567   
Merchant cash advances receivable charged off, net of recoveries (2,300)   (2,288)   (4,499)   (3,789)  
Provision (recovery) for credit losses related to uncollectible loans receivable(2)
(736)   445    1,071    799   
Loans receivable charged off, net of recoveries (501)   (178)   (876)   (226)  
Allowance, end of the period 18,133    9,572    18,133    9,572   
Related receivables(1)
(4,700)   (3,309)   (4,700)   (3,309)  
Allowance, net of related receivables 13,433    6,263    13,433    6,263   
(1) Presentation of related receivables represents a comparative figure reclassification referenced in note 15.
(2) The provision for the three and six months ended June 30, 2020 includes expected losses as a result of macroeconomic factors, including the impact of COVID-19.


7.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 12 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within 1 year. Additional office space leases are set to commence between later this year and 2027, 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 space that are set to commence after June 30, 2020, which will create significant right-of-use assets and lease liabilities. All of the Company's leases are operating leases.




13


Shopify Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
Expressed in US $000's except share and per share amounts
The components of lease expense were as follows:
Three months ended Six months ended
June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019
$ $ $ $
Operating lease expense 5,126    3,895    10,726    7,533   
Variable lease expense, including non-lease components 4,067    3,083    7,549    6,307   
Total lease expense 9,193    6,978    18,275    13,840   

As at June 30, 2020, the weighted average remaining lease term is 9 years and the weighted average discount rate is 4.3% (December 31, 2019 - 9 years and 4.9%, respectively).
        
During the three months ended June 30, 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.

With respect to certain office locations the Company has ceased using, and will be terminated or sublet, the Company has changed its asset groups and recorded impairment charges of $14,785 related to its right-of-use assets and $16,838 related to its leasehold improvements for the three months ended June 30, 2020. These losses were determined by comparing the asset groups' fair values, made up of the right-of-use assets and leasehold improvements, to their carrying values as of the impairment measurement date, as required under ASC 360, Property, Plant and Equipment. Fair value was determined based on the present value of the estimated future cash flows. These estimates may vary from the actual amounts due to termination or sublease agreements ultimately executed, if at all, which may result in an adjustment to the charges. These charges were recorded as general and administrative expenses in the condensed consolidated statements of operations and comprehensive income (loss).

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

Maturities of lease liabilities as at June 30, 2020 were as follows:
Fiscal Year Operating Leases
$
Remainder of 2020
7,431   
2021 34,919   
2022 41,228   
2023 41,368   
2024 49,867   
Thereafter
390,679   
Total future minimum payments
565,492   
 Minimum payments related to leases that have not yet commenced (152,018)  
Minimum payments related to variable lease payments, including non-lease components
(224,834)  
Imputed interest
(35,519)  
Total lease liabilities
153,121   
14


Shopify Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
Expressed in US $000's except share and per share amounts
8.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, 2020 or in the year ended December 31, 2019.
The gross changes in the carrying amount of goodwill as of June 30, 2020 and December 31, 2019 are as follows:
June 30,
2020
December 31, 2019
 
$  
$  
Balance, beginning of the year 311,865    38,019   
Acquisition of 6 River Systems, Inc. —    264,527   
Other acquisitions —    9,319   
Balance, end of the period 311,865    311,865   

9.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, 2020 the effective rate was 2.75%, and no cash amounts have been drawn under this credit facility.

10.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, 2020, was $13,527.

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.

15


Shopify Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
Expressed in US $000's except share and per share amounts

11.Shareholders’ Equity

Public Offerings

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.

In September 2019, the Company completed a public offering in which it issued and sold 2,185,000 Class A subordinate voting shares at a public offering price of $317.50 per share, including the 285,000 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 $688,014 after deducting offering fees and expenses of $5,724, net of tax of $1,541.

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.

Stock-Based Compensation

As at June 30, 2020 there were 19,327,356 shares reserved for issuance under the Company's Stock Option Plan and Long Term Incentive Plan.

16


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 stock option and Restricted Share Unit ("RSU") award activities under the Company's share-based compensation plans for the six months ended June 30, 2020:
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, 2019 3,812,242    54.59    6.14    1,307,565    —    1,939,918    159.13   
Stock options granted 236,910    465.60    —    —    179.32    —    —   
Stock options exercised (864,816)   43.48    —    —    —    —    —   
Stock options forfeited (28,199)   139.12    —    —    —    —    —   
RSUs granted —    —    —    —    —    332,178    507.73   
RSUs settled —    —    —    —    —    (674,185)   121.18   
RSUs forfeited —    —    —    —    —    (52,711)   197.19   
June 30, 2020 3,156,137    87.73    5.97    2,718,918    —    1,545,200    249.33   
Stock options exercisable as of June 30, 2020 2,179,017    35.57    5.00    1,990,817   
(1) As at June 30, 2020 1,235,273 of the outstanding stock options were granted under the Company's Legacy Option Plan and are exercisable for Class B multiple voting shares, 1,851,767 of the outstanding stock options were granted under the Company's Stock Option Plan and are exercisable for Class A subordinate voting shares, and 69,097 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, 2020 and December 31, 2019.

As at June 30, 2020 the Company had issued 748 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, 2020, 122,080 of the Class A subordinate voting shares remained restricted.

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, 2020 June 30, 2019 June 30, 2020 June 30, 2019
$ $ $ $
Cost of revenues
1,188    894    2,336    1,608   
Sales and marketing
10,613    8,409    21,820    15,244   
Research and development
39,361    22,983    71,965    41,098   
General and administrative
11,162    6,982    19,955    12,482   
62,324    39,268    116,076    70,432   

17


Shopify Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
Expressed in US $000's except share and per share amounts
12.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, 2020 and 2019:
Accumulated Other Comprehensive Income (Loss)
Six months ended
June 30, 2020 June 30, 2019
$ $
Balance, beginning of the period 1,046    (12,216)  
Other comprehensive income (loss) before reclassifications (13,442)   10,526   
Loss on cash flow hedges reclassified from accumulated other comprehensive income (loss) to earnings were as follows:
Cost of revenues 257    300   
Sales and marketing 1,390    1,617   
Research and development 2,883    2,788   
General and administrative 776    789   
Tax effect on unrealized gain (loss) on cash flow hedges 2,156    —   
Other comprehensive income (loss), net of tax (5,980)   16,020   
Balance, end of the period (4,934)   3,804   

13.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.

In the third quarter of 2019, the Company formally established its EMEA headquarters in Ireland and its Asia-Pacific headquarters in Singapore. As a result of these actions, the Company transferred regional relationship and territory rights from its Canadian entity to enable each regional headquarters to develop and maintain merchant and commercial operations within its respective region, while keeping the ownership of all of the Company's current developed technology within Canada. These transfers reflect the growing proportion of the Company's business occurring internationally and resulted in a one-time capital gain in the third quarter of 2019. The Company's effective tax rates for the three and six months ended June 30, 2020 were approximately 11% and 10%, respectively. As a result of the application of the Company's effective tax rate on the results of ongoing operations, other discrete items, primarily related 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, the Company has a recovery of income taxes of $31,630 and $60,325 in the three and six months ended June 30, 2020.

18


Shopify Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
Expressed in US $000's except share and per share amounts
14.Net Income (Loss) per Share

The Company applies the two-class method to calculate its basic and diluted net income (loss) 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, 2020 June 30, 2019 June 30, 2020 June 30, 2019
Numerator:
Net income (loss)
$ 35,998    $ (28,678)   $ 4,569    $ (52,829)  

Denominator:
Basic weighted average number of shares outstanding
118,740,645    112,013,409    117,773,612    111,470,359   
Effect of dilutive securities
4,009,335    —    4,145,595    —   
Diluted weighted average number of shares
122,749,980    112,013,409    121,919,207    111,470,359   

Net income (loss) per share:
Basic
$ 0.30    $ (0.26)   $ 0.04    $ (0.47)  
Diluted
$ 0.29    $ (0.26)   $ 0.04    $ (0.47)  

Common stock equivalents excluded from income (loss) per diluted share because they are anti-dilutive
—    6,628,521    —    6,628,521   

In the three and six months ended June 30, 2019, the Company was in a loss position and therefore diluted loss per share is equal to basic loss per share.

15.Comparative Figures
        
Certain comparative figures have been reclassified in order to conform to the current period presentation.
19



EXHIBIT 99.2

MANAGEMENT’S DISCUSSION AND ANALYSIS
July 29, 2020

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 for the three and six months ended June 30, 2020 and 2019, our cash flows for the six months ended June 30, 2020 and 2019 and our financial position as of June 30, 2020. 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, 2020, as well as with our audited consolidated financial statements and the accompanying notes for the fiscal year ended December 31, 2019. Additional information regarding Shopify, including our 2019 annual information form and our annual report on Form 40-F for the year ended December 31, 2019, 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 “may”, “will”, “could”, “expects”, "further", “intends”, “plans”, “anticipates”, “believes”, “potential”, “continue”, 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:

the extent of the impact of the novel coronavirus ("COVID-19") on our business, financial performance, revenues, and results of operations;
disruption to our operations due to the impact of COVID-19 and the impact of COVID-19 on our employees, suppliers, partners, and our merchants and their customers, the success of and risk related to
1


new products and initiatives launched in response to COVID-19, and the effect of economic conditions as a result of COVID-19 on the value of our investments and our share price;
our expectation that Shopify employees will continue to work remotely for the remainder of 2020 and beyond 2020 the majority will work remotely permanently;
our plan to maintain office presence in key demographic areas, and to terminate lease agreements or seek to sublet space at certain office locations;
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 to drive future growth;
our expectation that we will continue to invest in, develop and scale 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 intention to accelerate the development of Shopify Fulfillment Network;
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 we may experience a decrease in gross merchandise volume ("GMV") as a result of lower consumer spending, which decrease would be partially offset by more traditional businesses expanding or migrating online;
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;
our expectation that our monthly recurring revenue ("MRR") growth rate will increase at an accelerated rate in the near term, due to the timing of the expiration of our extended free trial periods;
our expectation that the cost of subscription solutions will increase and that our subscription solutions gross margin percentage will fluctuate modestly over time;
our expectation that the cost of merchant solutions will increase in absolute dollars in future periods;
our plan to continue to expand sales and marketing efforts to attract new merchants, retain revenue from existing merchants and increase revenues from both new and existing merchants, including adding sales personnel and expanding our marketing activities to continue to generate additional leads and build brand awareness;
our expectation that our research and development expenses will increase in absolute dollars as we continue to increase the functionality of our platform, but will eventually decline as a percentage of total revenues;
our expectation that general and administrative expenses will increase on an absolute dollar basis, but may decrease as a percentage of our total revenues as we focus on processes, systems and controls to enable our internal support functions to scale with the growth of our business;
our expectation that transaction and loan losses related to Shopify Payments and Shopify Capital will increase on an absolute dollar basis over time, including as a result of the ongoing COVID-19 pandemic;
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;
expected credit losses related to the impact of COVID-19;
2


our belief that we have sufficient liquidity to meet our current and planned financial obligations over the next 12 months, including any potential negative impacts to cash that may occur as a result of the impact from COVID-19;
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;
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, including the potential impact from COVID-19 and our move to "digital-by-default"; 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 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;
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;