SHOPIFY INC. (Form: 6-K, Received: 05/05/2022 07:24:31)

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	May	2022
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 First Quarter ended March 31, 2022

99.2 Shopify Inc. – Interim Management’s Discussion and Analysis for the First Quarter ended March 31, 2022

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 28, 2020 (as amended, 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) 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) and the Registration Statement on Form S-8 of the Registrant, which was originally filed with the Securities and Exchange Commission on July 28, 2021 (File No. 333-258230).

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:

May 5, 2022

By:

/s/ Jessica Hertz

Name: Jessica Hertz
Title: General Counsel and Corporate Secretary

EXHIBIT 99.1

Condensed Consolidated

Financial Statements

(unaudited)

March 31, 2022

Shopify Inc.

Condensed Consolidated Balance Sheets

(unaudited)

Expressed in US $000’s except share amounts


		As at
		March 31, 2022	December 31, 2021
	Note	$	$
Assets
Current assets
Cash and cash equivalents	4	2,451,545	2,502,992
Marketable securities	4	4,795,145	5,265,101
Trade and other receivables, net	6	225,252	192,209
Merchant cash advances, loans and related receivables, net	7	486,507	470,722
Income taxes receivable	16	3,369	5,023
Other current assets		113,063	103,273
		8,074,881	8,539,320
Long-term assets
Property and equipment, net		109,570	105,526
Right-of-use assets, net	8	220,205	196,388
Intangible assets, net		131,608	138,496
Deferred tax assets	16	47,064	48,369
Equity and other investments ($1,859,444 and $3,412,166, carried at fair value)	4, 5	2,894,601	3,955,545
Goodwill	9	356,528	356,528
		3,759,576	4,800,852
Total assets		11,834,457	13,340,172
Liabilities and shareholders’ equity
Current liabilities
Accounts payable and accrued liabilities		406,647	456,688
Income taxes payable	16	8,294	13,505
Deferred revenue	6	247,647	216,792
Lease liabilities	8	19,344	15,748

		681,932	702,733
Long-term liabilities
Deferred revenue	6	186,636	162,932
Lease liabilities	8	264,534	246,776
Convertible senior notes	10	911,549	910,963
Deferred tax liabilities	16	211	183,427
		1,362,930	1,504,098
Commitments and contingencies	8, 12
Shareholders’ equity
Common stock, unlimited Class A subordinate voting shares authorized, 114,185,448 and 113,954,492, issued and outstanding; unlimited Class B multiple voting shares authorized, 11,951,154 and 11,942,667 issued and outstanding	14	8,150,878	8,040,099
Additional paid-in capital		174,570	161,074
Accumulated other comprehensive income (loss)	15	413	(5,974)
Retained earnings		1,463,734	2,938,142
Total shareholders’ equity		9,789,595	11,133,341
Total liabilities and shareholders’ equity		11,834,457	13,340,172

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

Shopify Inc.

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income

(unaudited)

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


		Three months ended
			March 31, 2022		March 31, 2021
	Note		$		$
Revenues
Subscription solutions			344,761		320,681
Merchant solutions			858,862		667,966
			1,203,623		988,647
Cost of revenues
Subscription solutions			77,545		58,382
Merchant solutions			488,441		371,549
			565,986		429,931
Gross profit			637,637		558,716
Operating expenses
Sales and marketing			303,371		186,223
Research and development			303,661		175,886
General and administrative			108,088		67,102
Transaction and loan losses			20,493		10,606
Total operating expenses			735,613		439,817
(Loss) income from operations			(97,976)		118,899
Other (expense) income, net
Interest income			6,189		2,830
Interest expense	10		(874)		(873)
Net realized gain on equity and other investments	5		122,322		—
Net unrealized (loss) gain on equity and other investments	5		(1,677,442)		1,250,944
Foreign exchange loss			(5,076)		(2,256)
Total other (expense) income, net			(1,554,881)		1,250,645
(Loss) income before income taxes			(1,652,857)		1,369,544
Recovery of (provision for) income taxes	16		178,449		(111,099)
Net (loss) income			(1,474,408)		1,258,445

Net (loss) income per share attributable to shareholders:
Basic	17		$	(11.70)	$	10.21
Diluted	17		$	(11.70)	$	9.94

Weighted average shares used to compute net (loss) income per share attributable to shareholders:
Basic	17		126,013,066		123,243,650
Diluted	17		126,013,066		126,674,388

Other comprehensive income (loss)
Unrealized gain (loss) on cash flow hedges	15		8,690		(3,706)
Tax effect on unrealized gain (loss) on cash flow hedges	15		(2,303)		982
Total other comprehensive income (loss)			6,387		(2,724)
Comprehensive (loss) income			(1,468,021)		1,255,721

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) $	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			—	—	(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	14		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


	Common Stock		Additional Paid-In Capital $	Accumulated Other Comprehensive Income (Loss) $	Retained Earnings $	Total $
		Shares					Amount $
As at December 31, 2021		125,897,159	8,040,099	161,074	(5,974)	2,938,142		11,133,341


Exercise of stock options		105,513	10,707	(4,421)	—	—		6,286
Stock-based compensation		—	—	117,989	—	—		117,989
Vesting of restricted share units		133,930	100,072	(100,072)	—	—		—
Net loss and comprehensive loss for the period		—	—	—	6,387	(1,474,408)		(1,468,021)
As at March 31, 2022		126,136,602	8,150,878	174,570	413	1,463,734		9,789,595

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



		Three months ended
		March 31, 2022	March 31, 2021
	Note	$	$
Cash flows from operating activities
Net (loss) income for the period		(1,474,408)	1,258,445
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Amortization and depreciation		16,670	15,800

Stock-based compensation		117,989	69,156
Amortization of debt offering costs	10	586	585

Provision for transaction and loan losses		9,805	4,236

Deferred income tax (recovery) expense		(184,214)	100,954
Revenue related to non-cash consideration	18	(26,081)	(2,031)

Net loss (gain) on equity and other investments	5	1,593,655	(1,250,944)
Unrealized foreign exchange loss		6,322	1,734
Changes in operating assets and liabilities:
Trade and other receivables		(31,291)	(39,063)
Merchant cash advances, loans and related receivables		(27,283)	(74,561)
Other current assets		(4,782)	(13,205)
Non-cash consideration received in exchange for services	5	(76,726)	—
Accounts payable and accrued liabilities		(44,024)	39,756
Income taxes receivable and payable		(4,898)	9,525
Deferred revenue	18	80,640	10,358
Lease assets and liabilities		(5,520)	4,938
Net cash (used in) provided by operating activities		(53,560)	135,683
Cash flows from investing activities
Purchase of marketable securities		(1,463,705)	(2,444,955)
Maturity of marketable securities		1,929,395	1,038,316
Purchase of equity and other investments	5	(453,945)	(206,552)

Acquisitions of property and equipment		(15,940)	(5,188)


Net cash used in investing activities		(4,195)	(1,618,379)
Cash flows from financing activities
Proceeds from public equity offerings, net of issuance costs	14	—	1,541,168
Proceeds from the exercise of stock options		6,286	22,925


Net cash provided by financing activities		6,286	1,564,093
Effect of foreign exchange on cash and cash equivalents		22	577
Net (decrease) increase in cash and cash equivalents		(51,447)	81,974
Cash and cash equivalents – Beginning of Period		2,502,992	2,703,597
Cash and cash equivalents – End of Period		2,451,545	2,785,571

Supplemental cash flow information:
Cash paid for amounts included in the measurement of lease liabilities included in cash flows from operating activities		11,636	6,674
Lease liabilities arising from obtaining right-of-use assets		27,123	12,207
Acquired property and equipment remaining unpaid		5,938	1,557
Cash paid for income taxes, net		10,240	561

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 simplicity and reliability, while delivering a better shopping experience for consumers everywhere. The Company's software enables merchants 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 the fair statement of its financial position, results of operations and comprehensive (loss) income, changes in shareholders' equity and cash flows for the interim periods. The financial statements should be read in conjunction with the audited consolidated financial statement and notes thereto for the year ended December 31, 2021. The condensed consolidated balance sheet at December 31, 2021 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 months ended March 31, 2022 are not necessarily indicative of the results expected for the full fiscal year.

3.Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies during the three months ended March 31, 2022, as compared to the significant accounting policies described in the Company’s annual consolidated financial statements for the year ended December 31, 2021.

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. Actual results may differ from the estimates made by management. 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; inputs used to fair value equity and other investments in private companies

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

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

and debt securities, as well as estimates and judgments involved in applying the measurement alternative, including our assessment to evaluate whether an investment is impaired; probabilities of achieving performance milestones associated with non-cash revenue consideration from strategic partnerships; estimates involved in evaluating the recoverability of the Company's right-of-use assets and leasehold improvements, including, but not limited to, the estimated useful lives of right-of-use assets and leasehold improvements; the incremental borrowing rate applied to lease payments; and the probability and amount of loss contingencies.

Concentration of Credit Risk

The Company’s cash and cash equivalents, marketable securities, trade and other receivables, merchant cash advances, loans and related receivables, equity and other investments, debt securities 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 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 notes that its exposure to collectibility risk by customers impacted by the Russian invasion of Ukraine is financially immaterial. The Company has mitigated some of the risks associated with Shopify Capital by opening insurance policies with Export Development Canada (EDC), a wholly-owned corporation of the Government of Canada, who is AAA rated as at March 31, 2022. The Company’s policies cover certain merchant cash advances and loans, subject under certain policies to minimum claim requirements and regional restrictions. The Company pays EDC a monthly premium based on total eligible dollars advanced, and records this as general and administrative expense in the condensed consolidated statements of operations and comprehensive (loss) income. All policies include a deductible set at either a specified dollar loss threshold or calculated as a percentage of eligible advances issued. After considering the Company’s deductible and the insurer's maximum liability under the policies, the majority of the Company's gross outstanding balance of merchant cash advances and loans as at March 31, 2022 is covered. The receivable related to insurance recoveries, if any, is included in the merchant cash advances, loans and related receivables balance. The Company mitigates the risks associated with its equity and other investments and debt securities through its diligence process performed prior to investing. There are no receivables from individual merchants accounting for 10% or more of revenues or receivables.

Foreign Exchange Risk

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 counterparties.

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 Canadian dollars (CAD) and Euros (EUR). As a result, earnings could be adversely affected by an increase in the value of these foreign currencies relative to the USD.

The following table summarizes the effects on revenues, cost of revenues, operating expenses, and (loss) income from operations of a 10% strengthening(1) of the CAD versus the USD without considering the

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

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

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
	March 31, 2022			March 31, 2021
	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	1,203,623	2,988	1,206,611	988,647	1,790	990,437
Cost of revenues	(565,986)	(3,289)	(569,275)	(429,931)	(2,615)	(432,546)
Operating expenses	(735,613)	(19,571)	(755,184)	(439,817)	(15,313)	(455,130)
(Loss) income from operations	(97,976)	(19,872)	(117,848)	118,899	(16,138)	102,761

(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 (loss) income 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.

As at March 31, 2022, a 10% movement in the EUR is not expected to have a material impact on the Company's results.

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

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

4.Financial Instruments

As at March 31, 2022, 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 and agency securities	92,996	92,996	—	—	—	—
Canadian federal bonds and agency securities	104,987	104,987	—	—	—	—
Corporate bonds and commercial paper	474,866	474,863	—	—	—	—

Marketable securities:
U.S. term deposits	880,000	881,383	—	—	—	—
U.S. federal bonds and agency securities	812,441	811,335	—	—	—	—
Canadian federal bonds and agency securities	1,033,468	1,034,492	—	—	—	—
Corporate bonds and commercial paper	—	—	2,069,236	2,068,892	—	—
Derivative assets (classified in other current assets):
Foreign exchange forward contracts	—	—	7,280	7,280	—	—

Equity and other investments:
Equity and other investments with readily determinable fair values	1,454,060	1,454,060	—	—	205,780	205,780
Available-for-sale debt securities under fair value option	—	—	—	—	199,604	199,604

Liabilities:
Derivative liabilities (classified in accounts payable and accrued liabilities):
Foreign exchange forward contracts	—	—	1,960	1,960	—	—

The fair values of marketable securities above include accrued interest of $9,244, which is excluded from the carrying amounts. The accrued interest is included in trade and other receivables in the condensed consolidated balance sheets. Additional accrued interest of $6,040 recognized on the debt securities is included in the carrying amount and fair value above.

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, 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	50,138	50,138	—	—	—	—
Corporate bonds and commercial paper	267,953	268,090	—	—	—	—
Marketable securities:
U.S. term deposits	900,000	901,689	—	—	—	—
U.S. federal bonds and agency securities	680,436	681,629	—	—	—	—
Canadian federal bonds and agency securities	1,215,646	1,218,001	—	—	—	—
Corporate bonds and commercial paper	—	—	2,469,019	2,475,051	—	—
Derivative assets (classified in other current assets):
Foreign exchange forward contracts	—	—	1,824	1,824	—	—
Equity and other investments:
Equity and other investments with readily determinable fair values	2,782,901	2,782,901	—	—	423,387	423,387
Available-for-sale debt security under fair value option	—	—	—	—	205,878	205,878

Liabilities:
Derivative liabilities (classified in accounts payable and accrued liabilities):
Foreign exchange forward contracts	—	—	5,926	5,926	—	—

The fair values above include accrued interest of $13,067, which is excluded from the carrying amounts. The accrued interest is included in trade and other receivables in the condensed consolidated balance sheets. Additional accrued interest of $4,000 recognized on the debt security is included in the carrying amount and fair value above.

All cash equivalents and marketable securities mature within one year of the condensed consolidated balance sheet date. In the three months ended March 31, 2022, $88,040 was transferred from Level 3 to Level 1 due to the vesting of warrants associated with an investment in a strategic partnership (March 31, 2021 - $nil).

As at March 31, 2022, the Company held foreign exchange forward contracts and options for USD, Great Britain Pounds (GBP) and CAD with a total notional value of $617,127 (December 31, 2021 - $586,547), 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.

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

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

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 and options with certain financial institutions and designated those hedges as cash flow hedges. As of March 31, 2022, $5,909 of unrealized gains and $1,254 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 months ended March 31, 2022, $3,058 of realized losses (March 31, 2021 - $9,154 of realized gains) 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.

The Company has entered into a commodity swap contract with a producer to fund renewable energy production and to obtain renewable energy certificates. The contract guarantees the producer a minimum price per megawatt hour with any differences between market prices and this minimum price being settled in cash between the producer and the Company on a monthly basis. The Company's maximum commitment over the life of the 10 year contract is $11,972.

Convertible Senior Notes

As at March 31, 2022, the estimated fair value of the Company's 0.125% convertible senior notes due 2025 (the "Notes"), as further described in note 10 below, was approximately $880,044 (December 31, 2021 - $1,165,410). 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

Equity and other investments are comprised of:


	March 31, 2022	December 31, 2021
	$	$
Equity and other investments with readily determinable fair values	1,659,840	3,206,288
Equity and other investments without readily determinable fair values	1,035,157	543,379
Debt securities under the fair value option	199,604	205,878
Total equity and other investments	2,894,601	3,955,545

Equity and Other Investments with Readily Determinable Fair Values

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 for which the Company developed certain key assumptions, including revenue growth rates and a discount rate. The initial fair value of the consideration received of $24,710 is being recognized into merchant solutions revenue over the expected term of the service contract.

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

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

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 March 31, 2022, the carrying value of the Company's investment in Affirm was $939,373 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 months ended March 31, 2022, unrealized losses of $1,101,753 (March 31, 2021 - $1,277,294 unrealized gains) were recorded within "net unrealized (loss) gain on equity and other investments" in the condensed consolidated statement of operations and comprehensive (loss) income.

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 for which the Company developed certain key assumptions, including revenue growth rates, revenue multiples based on market comparables and a discount for lack of marketability. The initial fair value of the consideration received of $192,300 is being recognized into merchant solutions revenue over the expected term of the service 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 14% at March 31, 2022 (December 31, 2021 - 15%).

On January 4, 2022, Global-E completed its acquisition of Flow Commerce, Inc. ("Flow"), which was also a strategic investment of the Company. As a result of being a shareholder in Flow, the Company received $37,266 in cash consideration and Global-E shares with an initial carrying value of $26,016. The transaction between Global-E and Flow resulted in a realized gain for the Company of $52,800 and is included in "net realized gain on equity and other investments" in the condensed consolidated statement of operations and comprehensive (loss) income.

Concurrent with the acquisition, Global-E agreed to issue the Company additional warrants not tied to the performance of services. The initial fair value of these additional warrants of $70,911 was recorded as a gain included in "net realized gain on equity and other investments" in the condensed consolidated statement of operations and comprehensive (loss) income.

In addition, on January 4, 2022, the Company received a further investment in Global-E, as non-cash revenue consideration, in conjunction with a strategic partnership for cross-border commerce offerings. The investment includes warrants for common shares that vest if certain performance milestones are met, which the Company has estimated that it would meet during the term of services contract. The initial fair value of the consideration received of $29,577 is being recognized into merchant solutions revenue over the expected term of the service contract or until a performance milestone is reached, whichever comes sooner. The probability of achieving the performance milestones will be assessed at each reporting period and any changes to those probabilities, which requires significant management judgment, could result in a change to the non-cash revenue consideration and impact the amount of revenue recognized over the remaining life of the contract. The warrants also require the application of a discount for lack of marketability, which is not an observable input and therefore makes the investment a Level 3 in the fair value hierarchy. The weighted average discount for lack of marketability applied to these unvested warrants was 24% at March 31, 2022.

As at March 31, 2022, the total carrying value of the Company's investments in Global-E was $710,638. For the three months ended March 31, 2022, unrealized losses of $581,056 were recorded within "net unrealized (loss) gain on equity and other investments" in the condensed consolidated statement of operations and comprehensive (loss) income.

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

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

On January 31, 2022, a private company the Company held an investment in was acquired by Silvergate Capital Corporation ("Silvergate") for a combination of cash and Silvergate shares. The Silvergate shares were received by the Company on March 1, 2022 with an initial carrying value of $8,341. As part of this transaction, the Company recorded a realized loss of $1,659 related to its investment in the private company within "net realized gain on equity and other investments" in the condensed consolidated statement of operations and comprehensive (loss) income. As at March 31, 2022, the carrying value of the Company's investment in Silvergate was $9,829. For the three months ended March 31, 2022, unrealized gains of $1,488 were recorded within "net unrealized (loss) gain on equity and other investments" in the condensed consolidated statement of operations and comprehensive (loss) income.

Adjustments related to equity and other investments with readily determinable fair values were as follows:


	Three months ended
	March 31, 2022	March 31, 2021
	$	$
Balance, beginning of the period	3,206,288	—

Adjustments related to equity and other investments with readily determinable fair values:
Investments received not tied to services(1)	105,268	—
Investments received as non-cash consideration in exchange for services	29,577	—
Purchases of equity and other investments	28	—
Net unrealized (losses) gains	(1,681,321)	1,277,294
Transfers from measurement alternative (2)	—	158,152

Balance, end of the period	1,659,840	1,435,446

(1) During the three months ended March 31, 2022, certain private investments were acquired by third-party investors resulting in the deemed sale of equity and other investments in the period and the receipt of shares in certain public companies. Any resulting realized gains or losses were presented as "net realized gain on equity and other investments" in the condensed consolidated statement of operations and comprehensive (loss) income.

(2) 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.

Equity and Other Investments without Readily Determinable Fair Values

For the Company's equity and other investments in private companies without readily determinable fair values, the carrying amount of such investments as at March 31, 2022 was $1,035,157 (December 31, 2021 - $543,379). For the three months ended March 31, 2022, net unrealized gains of $5,692 relating to these investments were recorded within "net unrealized (loss) gain on equity and other investments" in the condensed consolidated statement of operations and comprehensive (loss) income.

In the three months ended March 31, 2022, the Company made an investment of $402,400 in a private company, that is a partner in its ecosystem, without readily determinable fair values. Furthermore, the Company made an additional equity investment in a separate private company, that is also a partner in its ecosystem, totaling $50,000, without readily determinable fair values. These investments are currently accounted for using the measurement alternative.

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

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

In addition, in the three months ended March 31, 2022, the Company received an investment in a private company as non-cash revenue consideration, as a result of services to be rendered in conjunction with a strategic partnership. This equity investment is accounted for using the measurement alternative with its initial fair value based on a market approach for which the Company developed certain key assumptions, including revenue growth rates, revenue multiples based on market comparables and a discount for lack of marketability. The initial fair value of the consideration received of $47,149 is being recognized into merchant solutions revenue over the expected terms of the service contract. This strategic partnership includes variable non-cash components based on achieving certain performance milestones within the term of the service contract. The probability of achieving the performance milestones will be assessed at each reporting period and any changes to those probabilities, which requires significant management judgment, could result in a change to the non-cash revenue consideration and impact the initial investment fair value. As of March 31, 2022, the Company has not met the performance milestones and has not recorded any revenue related to the value of the variable non-cash components until additional information is obtained regarding the progress of our strategic partnership.

In the year ended December 31, 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. In the year ended December 31, 2021, the Company made a fourth investment that was an incremental investment in the private company through the purchase of convertible notes. See "Debt Securities under the Fair Value Option" below for additional information on the investment.

Adjustments related to equity and other investments without readily determinable fair values for the three months ended March 31, 2022 and 2021 were as follows:


	Three months ended
		March 31, 2022	March 31, 2021
		$	$
Balance, beginning of the period		543,379	173,454





Adjustments related to equity and other investments without readily determinable fair values:
Purchases of equity and other investments		452,417	206,552
Investments received as non-cash consideration in exchange for services		47,149	—
Gross unrealized gains		5,692	372
Sales of equity and other investments(1)		(13,480)	—
Transfers to readily determinable fair values (2)		—	(158,152)

Gross unrealized losses and impairments		—	(26,722)

Balance, end of the period		1,035,157	195,504

(1) During the three months ended March 31, 2022, certain private investments were acquired by third-party investors resulting in the deemed sale of equity and other investments in the period. Any resulting realized gains or losses were presented as "net realized gain on equity and other investments" in the condensed consolidated statement of operations and comprehensive (loss) income.

(2) 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.

As at March 31, 2022, cumulative gross unrealized gains related to equity and other investments without readily determinable fair values was $44,572. As at March 31, 2022, cumulative gross unrealized losses and impairment related to equity and other investments without readily determinable fair values was $26,722. These cumulative amounts exclude unrealized gains, unrealized losses and impairment transferred to readily determinable fair values.

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

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

Debt Securities under the Fair Value Option

In July 2021, the Company made an incremental investment in a private company through the purchase of convertible notes for $200,000. In addition, in February 2022, the Company made an investment in a different private company through the purchase of convertible notes for $1,500. The Company has elected to apply the fair value option to account for these instruments. The fair values were determined based on binomial pricing models for which the Company was required to develop its own assumptions, including the underlying entities' valuations. As the inputs used in determining the fair value are unobservable, these investments are classified as a Level 3 investment in the fair value hierarchy. In the three months ended March 31, 2022, interest income of $2,040 was recorded within "interest income" in the condensed consolidated statement of operations and comprehensive (loss) income. The fair value of these investments as at March 31, 2022 was $199,604, resulting in an unrealized loss of $9,814 recorded within "net unrealized (loss) gain on equity and other investments" in the condensed consolidated statement of operations and comprehensive (loss) income.

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:


	March 31, 2022	December 31, 2021	January 1, 2021
	$	$	$
Unbilled revenues, net	88,845	86,795	50,073
Indirect taxes receivable	75,056	39,142	45,961
Trade receivables, net	35,092	40,342	13,449
Other receivables	17,015	12,863	3,706
Accrued interest	9,244	13,067	7,563
	225,252	192,209	120,752

Unbilled revenues represent amounts not yet billed to merchants related to subscription fees for Plus merchants, transaction fees and shipping and fulfillment charges, as at the condensed consolidated balance sheet date.

The allowance for credit losses reflects the Company's best estimate of probable losses inherent in the 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
	March 31, 2022	March 31, 2021
	$	$
Allowance, beginning of the period	6,944	6,041
Provision for credit losses related to uncollectible receivables	1,349	3,653
Write-offs	(1,262)	(1,314)
Allowance, end of the period	7,031	8,380

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
	March 31, 2022	March 31, 2021
	$	$
Balance, beginning of the period	379,724	128,815
Deferral of revenue	139,351	56,062
Recognition of deferred revenue	(84,792)	(47,735)

Balance, end of the period	434,283	137,142

Current portion	247,647	114,725
Long term portion	186,636	22,417
	434,283	137,142

The opening balances of current and long-term deferred revenue were $107,809 and $21,006, respectively, as of January 1, 2021.

As at March 31, 2022, the current and long-term deferred revenue from non-cash consideration received for services rendered in conjunction with strategic partnerships was $110,639 and $170,580, respectively (March 31, 2021 - $8,237 and $10,628). See note 5. The Company will recognize this revenue ratably over the remaining terms of the strategic partnerships which range from 3 to 7 years.

As at March 31, 2022, the long-term deferred revenue excluding non-cash consideration received will be recognized ratably over the remaining terms of the contracts with the customers which range from 2 to 5 years.

7.Merchant Cash Advances, Loans and Related Receivables


	March 31, 2022	December 31, 2021	January 1, 2021
	$	$	$
Merchant cash advances receivable, gross	432,375	439,289	218,840
Related receivables	—	—	819
Allowance for credit losses related to uncollectible merchant cash advances receivable	(41,765)	(38,264)	(15,816)
Loans receivable, gross	99,883	72,751	43,644
Allowance for credit losses related to uncollectible loans receivable	(3,986)	(3,054)	(2,764)
Merchant cash advances, loans and related receivables, net	486,507	470,722	244,723

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

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

Merchant Cash Advances

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


	Three months ended
		March 31, 2022	March 31, 2021
		$	$
Allowance, beginning of the period		38,264	15,816
Provision for credit losses related to uncollectible merchant cash advances receivable		9,732	5,723
Merchant cash advances receivable charged off, net of recoveries		(6,231)	(2,619)
Allowance, end of the period		41,765	18,920
Related receivables		—	(253)
Allowance, net of related receivables		41,765	18,667

Loans

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


	Three months ended
		March 31, 2022	March 31, 2021
		$	$
Allowance, beginning of the period		3,054	2,764


Provision for credit losses related to uncollectible loans receivable		1,766	224
Loans receivable charged off, net of recoveries		(834)	(244)
Allowance, end of the period		3,986	2,744

The following table presents the delinquency status of the principal amount of merchant loans by year of origination. The delinquency status is determined based on the number of days past the expected or contractual repayment date for which the Company anticipates to receive the amounts outstanding. The "current" category represents balances that are within 29 days of the contractual repayment dates, or within 29 days of the expected repayment date.


	March 31, 2022
	Year of origination
	2022		2021		Total		Percent
Current	$	70,375	$	25,825	$	96,200	96.3	%
30-59 Days	—		693		693		0.7	%
60-89 Days	—		392		392		0.4	%
90-179 Days	—		1,085		1,085		1.1	%
180+ Days	—		1,513		1,513		1.5	%
Total	$	70,375	$	29,508	$	99,883	100.0	%

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

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


	December 31, 2021
	Year of origination
	2021		2020		Total		Percent
Current	$	69,350	$	—	$	69,350	95.3	%
30-59 Days	1,114		—		1,114		1.5	%
60-89 Days	419		—		419		0.6	%
90-179 Days	576		—		576		0.8	%
180+ Days	1,292		—		1,292		1.8	%
Total	$	72,751	$	—	$	72,751	100.0	%

The Company maintains an internal monitoring list related to its outstanding loans. A merchant's ability and willingness to repay the financing receivables outstanding under the program is analyzed for a variety of factors that include, but are not limited to: current or expected age of the financing, merchant subscription or financing status, merchant GMV trends and other changes to merchant credit profiles. The Company charges off receivables outstanding under the program when the merchant receivable is included on its internal monitoring list for a period of 90 consecutive days.

For certain Shopify Capital loans, there is a fixed maximum repayment term. For certain other Shopify Capital loans, the Company calculates an expected repayment date. Using the merchant's contractual or expected repayment date, the Company calculates an effective interest rate based on the merchant's expected future payment volume to determine how much of a merchant's repayment to recognize as revenue and how much to apply against the merchant's receivable balance. In the three months ended March 31, 2022 and 2021, $5,908 and $3,715, respectively, of revenue recognized as merchant solutions revenue required the application of an effective interest rate, per ASC 310.

8.Leases

The Company has office, commercial and warehouse 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 15 years, some of which include options to extend the leases for up to 10 years. As at March 31, 2022, additional office space leases are set to commence in 2022, at which point the Company's right-of-use assets and lease liabilities will increase. All of the Company's leases are operating leases.

The components of lease expense were as follows:


	Three months ended
		March 31, 2022	March 31, 2021
		$	$
Operating lease expense		5,297	5,503
Variable lease expense, including non-lease components		2,288	3,262
Total lease expense		7,585	8,765

As at March 31, 2022, the weighted average remaining lease term is 11 years and the weighted average discount rate is 2.9% (December 31, 2021 - 11 years and 3.3%, respectively).

In the three months ended March 31, 2022, the Company terminated a portion of leased office space consisting of leases recognized on the condensed consolidated balance sheet as well as future committed lease space. The termination resulted in a gain of $1,524 which is recorded as an offset within the total lease expense disclosed above.

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

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

Net sublease income for the three months ended March 31, 2022 was $739 (March 31, 2021 - $nil), which is recorded as an offset within the total lease expense disclosed above.

Maturities of lease liabilities as at March 31, 2022 were as follows:


Fiscal Year	Offices $	Warehouses and Commercial Spaces $	Total $

Remainder of 2022	29,431	2,794	32,225
2023	39,463	5,331	44,794
2024	49,774	5,208	54,982
2025	53,663	4,899	58,562
2026	54,802	4,575	59,377
Thereafter	300,041	50,721	350,762
Total future minimum payments	527,174	73,528	600,702
Minimum payments related to leases that have not yet commenced	(19,379)	—	(19,379)
Minimum payments related to variable lease payments, including non-lease components	(212,623)	(38,115)	(250,738)
Imputed interest	(42,149)	(4,558)	(46,707)
Total lease liabilities	253,023	30,855	283,878

Operating lease maturity amounts included in the table above do not include sublease proceeds expected to be received under our various sublease agreements with third parties. Under the agreements initiated with third parties, the Company expects to receive sublease proceeds of $3,150 in the remainder of 2022 and $23,988 thereafter.

9.Goodwill

The Company's goodwill relates to acquisitions of various companies including, but not limited to, 6 River Systems, Inc. (6RS) which was acquired on October 17, 2019 and Donde Fashion Inc. (Donde) which was acquired on July 20, 2021.

No goodwill impairment was recognized in the three months ended March 31, 2022 or in the year ended December 31, 2021.

The gross changes in the carrying amount of goodwill as of March 31, 2022 and December 31, 2021 are as follows:


	March 31, 2022	December 31, 2021
	$	$
Balance, beginning of the period	356,528	311,865
Acquisition of Donde	—	37,567
Other acquisitions(1)	—	7,096
Balance, end of the period	356,528	356,528

(1) During the year ended December 31, 2021, the Company completed immaterial acquisitions that resulted in Goodwill being recognized.

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

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

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 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

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

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

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).

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:


	March 31, 2022	December 31, 2021
	$	$
Principal	920,000	920,000
Unamortized offering costs	(8,451)	(9,037)
Net carrying amount	911,549	910,963

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

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

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


	Three months ended
		March 31, 2022	March 31, 2021
		$	$
Contractual interest expense		288	288
Amortization of offering costs		586	585

Total interest expense related to the outstanding Notes		874	873

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 March 31, 2022 and December 31, 2021, the effective rate was 3.00% and 2.75%, respectively, and no cash amounts were drawn under this credit facility.

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 March 31, 2022, was $110,947.

Litigation and Loss Contingencies

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.

On December 1, 2021, five publishers of educational materials and two of their respective parent companies (the Plaintiffs) filed a claim against the Company in the U.S. District Court for the Eastern District of Virginia for contributory and vicarious copyright infringement and contributory trademark infringement. The Plaintiffs allege that certain merchants who use the Company’s platform and services are engaged in the sale of pirated digital textbooks in violation of the Plaintiffs’ rights, and that the Company has not taken legally adequate steps to curb this alleged infringement. The Plaintiffs seek statutory damages for the alleged copyright infringement. The case is in its early stages and the Company is unable to predict the ultimate resolution of the matter, including the likelihood or magnitude of a possible eventual loss, if any, at this time. The Company has filed its answer to the Plaintiffs’ complaint on January 28, 2022 and intends to defend the case.

13.Related Parties

In January 2022, the Company entered a strategic partnership with a private company totaling $97,149, which is comprised of a $50,000 cash investment in the private company and the receipt of $47,149 in non-cash consideration to provide services for a duration of three years. A member of the Company's board of directors also serves as a director on the board of the aforementioned private company. For the three months ended March, 31, 2022, the Company recognized revenue of $2,991 from the private company.

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

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

14.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.

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 March 31, 2022 there were 30,347,283 shares reserved for issuance under the Company's Stock Option Plan and Long Term Incentive Plan.

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 three months ended March 31, 2022:


	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, 2021	1,153,866	345.23	5.67	1,190,972	—	843,818	1,076.26
Stock options granted	193,182	695.59	—	—	304.06	—	—
Stock options exercised	(105,513)	59.58	—	—	—	—	—
Stock options forfeited	(11,253)	1,040.78	—	—	—	—	—
RSUs granted	—	—	—	—	—	603,366	695.59
RSUs settled	—	—	—	—	—	(133,930)	747.20
RSUs forfeited	—	—	—	—	—	(40,051)	1,048.34
March 31, 2022	1,230,282	418.38	6.33	316,893	—	1,273,203	931.35

Stock options exercisable as of March 31, 2022	785,747	166.02	4.80	400,683

(1) As at March 31, 2022 196,071 of the outstanding stock options were granted under the Company's Legacy Option Plan and are exercisable for Class B multiple voting shares, 1,010,977 of the outstanding stock options were granted under the Company's Stock Option Plan and are exercisable for Class A subordinate voting shares, and 23,234 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 March 31, 2022 and December 31, 2021.

As at March 31, 2022 the Company had issued 933 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 March 31, 2022, 61,040 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 (loss) income, which includes both stock-based compensation and restricted share-based compensation expense.


	Three months ended
	March 31, 2022	March 31, 2021
	$	$
Cost of revenues	2,067	1,515
Sales and marketing	14,723	8,853
Research and development	82,464	44,289
General and administrative	18,735	14,499
	117,989	69,156

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

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

15.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 three months ended March 31, 2022 and 2021:


	Accumulated Other Comprehensive Income (Loss)
	Three months ended
	March 31, 2022	March 31, 2021
	$	$
Balance, beginning of the period	(5,974)	8,770

Other comprehensive income before reclassifications	5,632	5,448
Loss (gain) on cash flow hedges reclassified from accumulated other comprehensive income (loss) to earnings were as follows:
Cost of revenues	94	(399)
Sales and marketing	720	(2,314)
Research and development	1,404	(5,108)
General and administrative	840	(1,333)
Tax effect on unrealized loss (gain) on cash flow hedges	(2,303)	982
Other comprehensive income (loss), net of tax	6,387	(2,724)
Balance, end of the period	413	6,046

16.Income Taxes

The Company's recovery of, or provision for, 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.

As a result of ongoing operations and other discrete items, primarily related to the unrealized loss on equity and other investments, and the change in valuation allowance with respect to deferred income tax assets in Canada and the United States, the Company had a recovery of income taxes of $178,449 in the three months ended March 31, 2022. During the three months ended March 31, 2022, the Company recorded a valuation allowance in Canada against its net deferred income tax assets, which arose due to the overall unrealized loss on the Company's equity and other investments.

The Company had a provision for income taxes of $111,099 in the three months ended March 31, 2021, which was primarily related to ongoing operations, unrealized gains on equity and other investments, the tax benefit associated with share-based compensation, and the reversal of the valuation allowance related to deferred income tax assets in Canada.

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

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

17.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
		March 31, 2022		March 31, 2021







Numerator:
Net (loss) income		$	(1,474,408)	$	1,258,445
After tax effect of debt interest(1)		—		642
Net (loss) income after tax effected debt interest		$	(1,474,408)	$	1,259,087

Denominator:
Basic weighted average number of shares outstanding		126,013,066		123,243,650
Weighted average effect of dilutive securities:
Stock options		—		2,069,857
Restricted share units		—		721,158
Convertible senior notes		—		638,848
Deferred share units		—		875
Diluted weighted average number of shares		126,013,066		126,674,388

Net (loss) income per share:
Basic		$	(11.70)	$	10.21
Diluted		$	(11.70)	$	9.94

Common stock equivalents excluded from income per diluted share because they are anti-dilutive:
Stock options		1,230,282		1,545
Restricted share units		1,273,203		2,540
Convertible senior notes		638,848		—
Deferred share units		933		—
		3,143,266		4,085

(1) When the Notes are dilutive, the after tax effect of debt interest is added back to net income to calculate diluted net income per share.

18.Comparative Figures

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

Shopify Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

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

19.Subsequent Event

On May 4, 2022, the Company agreed to acquire 100 percent of outstanding shares of Deliverr, Inc. ("Deliverr") in a transaction valued at approximately $2,100,000, consisting of approximately 80% in cash and 20% in Shopify Class A Subordinate Voting Shares. Of the 20% in Shopify Class A Subordinate Voting Shares, a portion will be allocated to the purchase price of the acquisition and a portion will be accounted for as stock-based compensation as it relates to post-combination services. The closing of the acquisition is subject to regulatory approval. Deliverr, based in San Francisco, California, is a fulfillment and technology company that provides fulfillment services to ecommerce retailers. The acquisition has not yet been completed, and as such, further disclosure has been omitted.

EXHIBIT 99.2

MANAGEMENT’S DISCUSSION AND ANALYSIS

May 5, 2022

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 ended March 31, 2022 and 2021, and our financial position as of March 31, 2022. You should read this MD&A together with our unaudited condensed consolidated financial statements and the accompanying notes for the fiscal quarter ended March 31, 2022, as well as our audited consolidated financial statements and the accompanying notes for the fiscal year ended December 31, 2021. Additional information regarding Shopify, including our 2021 annual information form and our annual report on Form 40-F for the year ended December 31, 2021, 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:

•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;

•our expectation that we will close the Deliverr, Inc. ("Deliverr") acquisition and that it will successfully integrate into Shopify Fulfillment Network;

•our expectation that we may experience more normalized growth in gross merchandise volume ("GMV") against a more measured macro environment relative to 2021, but also expect that changed behaviours adopted by merchants and consumers that were driven by COVID-19 will continue to expand the prospects for entrepreneurship and digital commerce;

•our expectation that as we develop Shopify Fulfillment Network and 6 River Systems Inc. ("6RS"), these initiatives will be dilutive to the gross margin percentage of merchant solutions;

•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, 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") and the Euro ("EUR") relative to the USD;

•our expectation that as we roll out local currency billing options in geographies outside of North America, a decrease in the value of other currencies relative to the USD will negatively impact our reported subscription revenue and Monthly Recurring Revenue ("MRR");

•our expectation that over time, any impact to MRR from local currency billing will be offset by reduced friction and an enhanced in-market experience, which we anticipate will attract more merchants to our platform and our merchant solutions;

•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 our 0.125% convertible senior notes due 2025 (the "Notes") that are outstanding 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 as a result of macroeconomic factors;

•our expectations regarding contractual obligations and contingencies;

•the impact of inflation on our costs and operations and on our merchants sales;

•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 belief that ecommerce growth will proceed at a normalized rate in 2022, supported by healthy economic growth and continued penetration of retail by ecommerce, but impacted by increased buyer mobility leading to more offline retail spending, a shift in consumer spend to travel and services as well as inflationary pressures on our merchants and their buyers;

•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 by passing our economies of scale on to merchants;

•our ability to develop new solutions to extend the functionality of our platform and 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 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 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 in 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, 2021 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;

•a denial of service attack or security breach;

•our ability to innovate;

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

•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;

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

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

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

•complex and changing laws and regulations worldwide;

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

•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;

•payments processed through Shopify Payments, Shop Pay Installments, or payments processed or funds managed through Shopify Balance;

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

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

•serious errors or defects in our software or hardware;

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

•activities of merchants or partners or the content of merchants' shops and our ability to detect and address unauthorized activity on our platform;

•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;

•acquisitions and investments, including strategic investments;

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

•risks associated with Shopify Capital, and offering financing to merchants;

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

•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;

•the impact of worldwide economic conditions, such as economic impacts due to the Russian invasion of Ukraine, including the resulting effect on spending by small and medium-sized businesses or their buyers;

•manufacturing and supply chain risks;

•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;

•the interoperability of our platform with mobile devices and operating systems;

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

•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 pricing decisions for our solutions;

•our use of open source software;

•seasonal fluctuations;

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

•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;

•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.

Beginning in 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. The momentum continued throughout the year ended December 31, 2021, albeit at a slower pace, as we experienced an increase in GMV relative to the preceding fiscal year. The increase was driven by traditional retail businesses expanding or migrating their operations online with our platform and services as well as by an increase in the number of merchants using our retail Point-of-Sale ("POS") solutions. We believe that the COVID-triggered acceleration of ecommerce that spilled into the first half of 2021 in the form of lockdowns and government stimulus will be absent from 2022 and that macroeconomic factors such as increased mobility, causing consumers to shift towards travel and in-person shopping, and higher inflation are among the main drivers of the deceleration of GMV growth in the first quarter of 2022. We continue to outperform in the ecommerce market and we are moving aggressively to rollout our POS solutions to more merchants in more geographies, which is increasing our market share of offline retail as well. In addition, our ability to pass on our economies of scale to our merchants demonstrates that Shopify is the right place to be in an inflationary environment. This further highlights the resiliency of the platform and omnichannel we have built over the past 16 years, and its ability to help

entrepreneurs navigate through a variety of economic times. 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 are working remotely and embracing 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 and the third quarter of 2021 we decided we would terminate certain lease agreements or seek 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, further reconfigure them for use in a digital-by-design framework, or look to sublease or terminate the related leases in the future.

Russian Invasion of Ukraine

Shopify paused the collection of fees from its Ukrainian merchants and partners and does not intend to reintroduce them for the foreseeable future. We have also temporarily suspended operations in Russia and Belarus. We do not have a large financial exposure in any of these countries. We will continue to monitor this situation and comply with applicable sanctions as they are announced.

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 simplicity and reliability, while delivering a better shopping experience for consumers everywhere.

In an era where social media, cloud computing, mobile devices, augmented reality 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, market 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 have installed 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 21 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, manage cash, payments and transactions, and access financing.

A data advantage. Our software is delivered to merchants as a service, and operates on a shared infrastructure. 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 a merchant's products, providing rich data to inform merchant decisions. With a large, rapidly growing and highly qualified team of data personnel, we expect to continue leveraging data for the benefit of our merchants with critical safeguards in place to ensure privacy, security and compliance.

Shopify also enables merchants to build their own brand, leverage mobile technology, sell internationally, 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 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 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 Shop Pay Installments, and with our investments in additional buyer touchpoints, such as retail, shipping, fulfillment, and Shop, our all-in-one digital shopping companion 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 when 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 a quick and secure check-out option by using Shop Pay, Apple Pay, Facebook Pay, and Google Pay on the web, and we continue to explore other new ways to offer payment flexibility and accelerated checkout. Just as Shopify's tools enable retailers to sell directly to their buyers through online stores, the Shop app provides merchants that same direct sales power through an app. The Shop app is a digital shopping assistant that is available to buyers on iOS and Android mobile devices. Buyers use the Shop app to track packages, discover products from their favorite merchants, and engage with brands directly, which helps merchants increase the loyalty and lifetime value of their buyers. 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, and Shopify continues to strive to make it easier to do so.

Global. Commerce thrives when merchants are able to build a global brand and commerce beyond their own borders with little friction. Shopify Markets, a product introduced in 2021, enables merchants to manage localized storefronts in different countries through one global store, making cross-border commerce easier for entrepreneurs. With Shopify Markets, merchants can easily set up market-specific buying experiences, enabling buyers to shop in their local currencies, languages, domains, and payment methods. Shopify Markets also automatically calculates duty and import fees. Such tailored experiences are designed to increase local buyer trust and conversion, enabling merchants to enter new geographies more easily. Shopify Markets complements our partnership with Global-E, an offering for merchants who want to fully outsource their cross-border business with an approved third-party partner.

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.

Sustainability

Shopify is a company that wants to see the next century, and has taken many steps to build a sustainable company, including committing to carbon neutrality. As part of this commitment, in 2019, we decommissioned our data centres and migrated our platform to Google Cloud, which is 100% powered by renewable energy.

Because we view commerce as a powerful vehicle for positive systemic change, as part of our focus on the long term, in 2019 Shopify launched a sustainability fund for what Shopify believes are the most promising and impactful technologies and projects to combat climate change, with a bias toward solutions that remove carbon from the atmosphere and permanently lock it away, as opposed to traditional offsets that pay others to avoid carbon emissions. In 2021, our sustainability fund invested in offsetting our operational footprint during the year, purchasing renewable energy certificates for our office buildings and employee home offices as well as purchasing carbon removal to completely eliminate the impact of carbon emissions from shipping every single order on our platform over the Black Friday/Cyber Monday shopping weekend. In addition, we continuously offset all carbon emissions associated with shipping orders placed using Shop Pay, our checkout accelerator. We give our merchants the ability to offset the carbon emissions associated with shipping all their orders via Offset, an app we launched in 2020. In March 2022, we signed a power purchase agreement equivalent to powering 100% of office buildings and employee home offices across North America with wind energy. Furthermore, in April 2022, the launch of Frontier was announced, an advance market commitment from a coalition of companies that plan to commit a combined $925 million to purchase permanent carbon removal between 2022 and 2030. Frontier is the world’s largest combined financial commitment to carbon removal and our intent is to commit $100 million to these efforts.

Ecosystem

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. Thousands of these partners have referred merchants to Shopify over the last year, and this strong, symbiotic relationship was further strengthened in the second half of 2021 when we extended more generous revenue sharing terms with app and theme developers. 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 more than 8,000 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.

Business Overview

Our mission is to make commerce better for everyone, and we believe we can help merchants of nearly all sizes, from aspirational entrepreneurs to companies with large-scale, direct-to-consumer operations 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 three months ended March 31, 2022, our platform facilitated GMV of $43.2 billion, representing an increase of 15.7% from the three months ended March 31, 2021. A detailed description of this metric is presented below in the section entitled, “Key Performance Indicators”.

During the three months ended March 31, 2022, our total revenue was $1,203.6 million, an increase of 21.7% versus the three months ended March 31, 2021. 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 three months ended March 31, 2022, subscription solutions revenues accounted for 28.6% of our total revenues (32.4% in the three months ended March 31, 2021). 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, Tupperware, FTD, Netflix and FIGS 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. We also expect to expand the number of markets where we bill in local currency in order to reduce friction and attract more merchants to our platform.

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 POS Pro offering, the sale of themes, the sale of apps, and the registration of domain names. Subscription solutions revenues increased from $320.7 million in the three months ended March 31, 2021 to $344.8 million in the three months ended March 31, 2022, representing an increase of 7.5%. 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 March 31, 2022, MRR totaled $105.2 million, representing an increase of 17.0% relative to MRR at March 31, 2021. MRR grew at a faster rate, from March 31, 2021 to March 31, 2022, than subscription solutions revenue, in the respective quarters, due mainly to lower app and theme related revenue as a result of revised pricing terms with developer partners beginning in the third quarter of 2021 offset slightly by 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 by passing on our economies of scale and augment our subscription solutions. During the three months ended March 31, 2022, merchant solutions revenues accounted for 71.4% of total revenues (67.6% in the three months ended March 31, 2021). We principally generate merchant solutions revenues from payment processing fees and currency conversion 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 and currency conversion 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 Balance, Shopify Shipping, Shopify Fulfillment Network, collaborative warehouse fulfillment solutions, non-cash consideration obtained for services rendered as part of strategic partnerships, the sale of POS hardware, Shopify Email and Shopify Markets. Shopify Capital is currently 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 $668.0 million in the three months ended March 31, 2021 to $858.9 million in the three months ended March 31, 2022, representing an increase of 28.6%.

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 distributed third-party fulfillment centers across the United States and Canada, to help merchants deliver orders to

buyers quickly and cost-effectively, while putting their own brand and customer experience front and center. In 2021, we began building out our own warehouse in Atlanta to test 6RS and our fulfillment under real-world conditions at scale. We intend to consolidate the network into larger, strategically located hub warehouses, and to operate several of them ourselves, while partnering as needed. Additionally, we are simplifying our offer to merchants and unifying the network using warehouse management software we developed to improve quality, operational performance, and variable cost per unit. We expect to continue to invest in and optimize this offering to further support our merchants. Subsequent to March 31, 2022, we agreed to acquire Deliverr, a provider of fulfillment services and order storage services to ecommerce merchants. By adding Deliverr's software, which includes machine learning and optimization technology, we intend to accelerate the development of Shopify Fulfillment Network.

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 months ended March 31, 2022 and 2021.


	Three months ended March 31,
	2022		2021
	(in thousands)
Monthly Recurring Revenue	$	105,249	$	89,931
Gross Merchandise Volume	$	43,199,952	$	37,346,886

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. When applicable, MRR relating to subscription plans billed in a merchant's local currency is converted to USD using the respective currency exchange rate as of the period end date. 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 $105.2 million of MRR as at March 31, 2022 compared to $89.9 million as at March 31, 2021. In the three months ended March 31, 2022, we observed a lower MRR growth rate, relative to the three months ended March 31, 2021 due to an elevated number of merchants joining the platform in the early stages of 2021 amid further COVID-19 related impacts, such as newly discovered variants and increased lockdowns, which further energized the shift to ecommerce. Going forward, we expect to expand the number of markets where we bill in local currency, and that over time any impact to MRR will be more than offset by the fact that the reduced friction and enhanced in-market experience will attract more merchants to our platform who make use of our merchant solutions.

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 months ended March 31, 2022 and 2021, we facilitated GMV of $43.2 billion and $37.3 billion, respectively. In the three months ended March 31, 2021, we experienced elevated GMV coming off the tailwinds of the shift to ecommerce accelerated by COVID-19 in 2020, along with additional drivers in the form of lockdowns and government stimulus. Going forward, we expect more normalized growth in GMV against a more measured macro environment relative to 2021 as a result of increased buyer mobility leading to more offline retail spending and a shift in consumer spend to travel and services. However, we also expect that changed behaviours adopted by merchants and consumers in 2020 and 2021 driven by COVID-19 will continue to expand the prospects for entrepreneurship and digital commerce.

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, Shopify Fulfillment Network, and non-cash consideration obtained for services rendered as part of strategic partnerships, 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 the development of Shopify Fulfillment Network and 6RS to be dilutive to the gross margin percentage for merchant solutions in the short term. 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.

Foreign Currency Fluctuations

While most of our revenues are denominated in USD, a significant portion of our operating expenses are incurred in CAD and EUR. As a result, our results of operations will be adversely impacted by an increase in the value of these foreign currencies relative to the USD. As our operations continue to expand internationally, we may observe additional fluctuations in other foreign currencies, including GBP, as a result of offering local currency billing options and additional operating expenses. 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

See Management's Discussion and Analysis dated February 16, 2022 as well as our Annual Report on Form 40-F for the year ended December 31, 2021 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 months ended March 31, 2022 and 2021.


	Three months ended March 31,
	2022		2021
	(in thousands, except share and per share data)
Revenues:
Subscription solutions	344,761		320,681
Merchant solutions	858,862		667,966
	1,203,623		988,647
Cost of revenues(1)(2):
Subscription solutions	77,545		58,382
Merchant solutions	488,441		371,549
	565,986		429,931
Gross profit	637,637		558,716
Operating expenses:
Sales and marketing(1)(2)	303,371		186,223
Research and development(1)(2)	303,661		175,886
General and administrative(1)	108,088		67,102
Transaction and loan losses	20,493		10,606
Total operating expenses	735,613		439,817
(Loss) income from operations	(97,976)		118,899




Other (expense) income, net	(1,554,881)		1,250,645
(Loss) income before income taxes	(1,652,857)		1,369,544
Recovery of (provision for) income taxes	178,449		(111,099)
Net (loss) income	(1,474,408)		1,258,445

Net (loss) income per share attributable to shareholders:
Basic	$	(11.70)	$	10.21
Diluted	$	(11.70)	$	9.94
Shares used to compute net (loss) income per share attributable to shareholders:
Basic	126,013,066		123,243,650
Diluted	126,013,066		126,674,388

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


	Three months ended March 31,
	2022		2021
	(in thousands)
Cost of revenues	$	2,183	$	1,851
Sales and marketing	15,203		10,885
Research and development	85,737		56,027
General and administrative	20,071		18,205
	$	123,194	$	86,968

(2) Includes amortization of acquired intangibles as follows:


	Three months ended March 31,
	2022		2021
	(in thousands)
Cost of revenues	$	6,234	$	4,531
Sales and marketing	386		386
Research and development	76		58
	$	6,696	$	4,975

Revenues


	Three months ended March 31,						2022 vs. 2021
	2022			2021			% Change
	(in thousands, except percentages)
Revenues:
Subscription solutions	$	344,761		$	320,681		7.5	%
Merchant solutions	858,862			667,966			28.6	%
Total revenues	$	1,203,623		$	988,647		21.7	%
Percentage of revenues:
Subscription solutions	28.6		%	32.4		%
Merchant solutions	71.4		%	67.6		%
	100.0		%	100.0		%

Subscription Solutions

Subscription solutions revenues increased $24.1 million, or 7.5%, for the three months ended March 31, 2022 compared to the same period in 2021. 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. The increase was offset by the impact of our partner pricing terms for both app and theme developers, which eliminates our revenue share on the first million dollars made by the developers annually in order to attract the best developers in the world.

Merchant Solutions

Merchant solutions revenues increased $190.9 million, or 28.6%, for the three months ended March 31, 2022 compared to the same period in 2021. The increase in merchant solutions revenues was primarily a result of Shopify Payments revenue growing in the three months ended March 31, 2022 compared to the same period in 2021. This increase was a result of an increase in our Shopify Payments penetration rate, number of merchants using our platform, and an increase in currency conversion fees. These factors drove $4.7 billion of additional GMV facilitated using Shopify Payments in the three months ended March 31, 2022 compared to the same period in 2021, representing growth of 27.2% quarter over quarter. For the three months ended March 31, 2022, the Shopify Payments penetration rate was 50.9%, resulting in GMV of $22.0 billion that was facilitated using Shopify Payments. This compares to a penetration rate of 46.3% resulting in GMV of $17.3 billion that was facilitated using Shopify Payments in the same period in 2021.

In addition to the increase in revenue from Shopify Payments, non-cash consideration received for services rendered as part of strategic partnerships, referral fees from partners, Shopify Capital, and collaborative warehouse fulfillment solutions revenue increased during the three months ended March 31, 2022 compared to the same period in 2021. The increases in non-cash consideration received for services rendered as part of strategic partnerships and referral fees from partners were driven largely by an increase in the number of arrangements with partners, as well as an increase in referral activity, when compared to the same period in 2021. Shopify Capital revenue increased mainly as a result of an increase in the advances outstanding throughout the respective quarter coupled with the increase in

GMV. Collaborative warehouse fulfillment solutions revenue increased due to higher demand in customers investing in automated fulfillment solutions to improve operational efficiency.

Cost of Revenues


	Three months ended March 31,						2022 vs. 2021
	2022			2021			% Change
	(in thousands, except percentages)
Cost of revenues:
Cost of subscription solutions	$	77,545		$	58,382		32.8	%
Cost of merchant solutions	488,441			371,549			31.5	%
Total cost of revenues	$	565,986		$	429,931		31.6	%
Percentage of revenues:
Cost of subscription solutions	6.4		%	5.9		%
Cost of merchant solutions	40.6		%	37.6		%
	47.0		%	43.5		%

Cost of Subscription Solutions

Cost of subscription solutions increased $19.2 million, or 32.8%, for the three months ended March 31, 2022 compared to the same period in 2021. The increase was due to an increase in the costs necessary to support the growth in traffic and functionality of our platform across multiple jurisdictions, resulting in an increase in: cloud infrastructure costs, employee-related costs, and credit card fees for processing merchant billings. The increase was slightly offset with a decrease in recognized cost of sales related to third-party partners for the development of themes as we commenced recognizing revenue for the sale of themes net of costs in the fourth quarter of 2021. As a percentage of revenues, cost of subscription solutions increased from 5.9% in the three months ended March 31, 2021 to 6.4% in the three months ended March 31, 2022 due to an increase in infrastructure and hosting costs slightly offset by a decrease in recognized cost of sales related to third-party partners for the development of themes.

Cost of Merchant Solutions

Cost of merchant solutions increased $116.9 million, or 31.5%, for the three months ended March 31, 2022 compared to the same period in 2021. The increase was primarily due to higher payment processing and interchange fees resulting from an increase in GMV facilitated through Shopify Payments. Cost of merchant solutions as a percentage of revenues increased from 37.6% in the three months ended March 31, 2021 to 40.6% in the three months ended March 31, 2022 due mainly to Shopify Payments representing a larger percentage of total revenue.

Gross Profit


	Three months ended March 31,						2022 vs. 2021
	2022			2021			% Change
	(in thousands, except percentages)
Gross profit	$	637,637		$	558,716		14.1	%
Percentage of total revenues	53.0		%	56.5		%

Gross profit increased $78.9 million, or 14.1%, for the three months ended March 31, 2022 compared to the same period in 2021. As a percentage of total revenues, gross profit decreased from 56.5% in the three months ended March 31, 2021 to 53.0% in the three months ended March 31, 2022, principally due to Shopify Payments representing a larger percentage of total revenues and higher infrastructure and hosting costs. This was partly offset by an increase in higher margin revenue streams, such as non-cash consideration received for services rendered as part of strategic partnerships and referral fees.

Operating Expenses

Sales and Marketing


	Three months ended March 31,						2022 vs. 2021
	2022			2021			% Change
	(in thousands, except percentages)
Sales and marketing	$	303,371		$	186,223		62.9	%
Percentage of total revenues	25.2		%	18.8		%

Sales and marketing expenses increased $117.1 million, or 62.9%, for the three months ended March 31, 2022 compared to the same period in 2021, due to an increase of $61.2 million spent on marketing programs to support the growth of our business, such as advertisements on display ads and media. The increase in sales and marketing expenses also includes an increase of $53.4 million in employee-related costs ($4.3 million of which related to stock-based compensation and related payroll taxes), largely due to the growth in sales and marketing headcount in the three months ended March 31, 2022 compared to the same period in 2021.

Research and Development


	Three months ended March 31,						2022 vs. 2021
	2022			2021			% Change
	(in thousands, except percentages)
Research and development	$	303,661		$	175,886		72.6	%
Percentage of total revenues	25.2		%	17.8		%

Research and development expenses increased $127.8 million, or 72.6%, for the three months ended March 31, 2022 compared to the same period in 2021, due to an increase of $120.0 million in employee-related costs ($29.7 million of which related to stock-based compensation and related payroll taxes) and a $6.6 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 March 31,						2022 vs. 2021
	2022			2021			% Change
	(in thousands, except percentages)
General and administrative	$	108,088		$	67,102		61.1	%
Percentage of total revenues	9.0		%	6.8		%

General and administrative expenses increased $41.0 million, or 61.1%, for the three months ended March 31, 2022 compared to the same period in 2021, due largely to an increase of $28.8 million in employee-related costs ($1.9 million of which related to stock-based compensation and related payroll taxes). General and administrative expenses also increased due to a $8.6 million increase in professional services for legal and financial services.

Transaction and Loan Losses


	Three months ended March 31,						2022 vs. 2021
	2022			2021			% Change
	(in thousands, except percentages)
Transaction and loan losses	$	20,493		$	10,606		93.2	%
Percentage of total revenues	1.7		%	1.1		%

Transaction and loan losses increased $9.9 million, or 93.2%, for the three months ended March 31, 2022 compared to the same period in 2021, due to an increase in losses related to Shopify Capital of $5.5 million driven by an expansion of our Capital offerings and programs as well as an increase in current expected losses related to Shopify Capital relative to the same period in 2021. The increase is also due to an increase of $4.4 million in losses related to Shopify Payments and Shop Pay Installments, as a result of increased GMV processed through Shopify Payments and Shop Pay Installments, offset by a decrease in the current expected loss rate related to Shopify Payments relative to the same period in 2021.

Other (Expense) Income, net


	Three months ended March 31,				2022 vs. 2021
	2022		2021		% Change
	(in thousands, except percentages)
Other (expense) income, net	$	(1,554,881)	$	1,250,645	*

* Not a meaningful comparison

In the three months ended March 31, 2022 we had other expenses of $1.6 billion, compared to other income of $1.3 billion in the same period in 2021. The expense was driven by a net unrealized loss on equity and other investments of $1.7 billion. The unrealized loss is mainly related to our investments in Affirm and Global-E due to the change in their share prices from December 31, 2021 to March 31, 2022. Additionally, we incurred a foreign exchange loss of $5.1 million in the three months ended March 31, 2022. The unrealized losses were offset slightly by net realized gains on equity and other investments of $122.3 million in the three months ended March 31, 2022.

Recovery of (Provision for) Income Taxes


	Three months ended March 31,				2022 vs. 2021
	2022		2021		% Change
	(in thousands, except percentages)
Recovery of (provision for) income taxes	$	178,449	$	(111,099)	*

* Not a meaningful comparison

As a result of ongoing operations and other discrete items, primarily related to the unrealized loss on equity and other investments, and the change in valuation allowance with respect to deferred income tax assets in Canada and the United States, we had a recovery of income taxes of $178.4 million in the three months ended March 31, 2022. During the three months ended March 31, 2022, we recorded a valuation allowance in Canada against our net deferred income tax assets, which arose due to the overall unrealized loss on our equity and other investments.

This compares to a provision for income taxes of $111.1 million in the same period in 2021 which was primarily related to ongoing operations, unrealized gains on equity and other investments, the tax benefit associated with share-based compensation, and the reversal of the valuation allowance related to deferred income tax assets in Canada.

Summary of Quarterly Results

The following table sets forth selected unaudited quarterly results of operations data for each of the eight quarters ended March 31, 2022. 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
	Mar 31, 2022		Dec 31, 2021		Sep 30, 2021		Jun 30, 2021		Mar 31, 2021		Dec 31, 2020		Sep 30, 2020		Jun 30, 2020
	(in thousands, except per share data)
Revenues:
Subscription solutions	$	344,761	$	351,208	$	336,208	$	334,237	$	320,681	$	279,440	$	245,274	$	196,434
Merchant solutions	858,862		1,028,816		787,532		785,208		667,966		698,304		522,131		517,907
	1,203,623		1,380,024		1,123,740		1,119,445		988,647		977,744		767,405		714,341
Cost of revenues:(1)(2)
Subscription solutions	77,545		75,587		67,355		63,027		58,382		59,250		52,170		44,400
Merchant solutions	488,441		611,778		447,476		435,558		371,549		414,106		310,087		294,907
	565,986		687,365		514,831		498,585		429,931		473,356		362,257		339,307
Gross profit	637,637		692,659		608,909		620,860		558,716		504,388		405,148		375,034
Operating expenses:
Sales and marketing(1)(2)	303,371		275,475		237,949		201,910		186,223		154,728		147,608		144,850
Research and development(1)(2)	303,661		273,912		221,028		183,557		175,886		159,077		143,427		133,227
General and administrative(1)	108,088		101,054		128,722		77,966		67,102		65,395		51,799		83,307
Transaction and loan losses	20,493		27,814		25,311		17,986		10,606		12,647		11,753		13,366
Total operating expenses	735,613		678,255		613,010		481,419		439,817		391,847		354,587		374,750
(Loss) income from operations	(97,976)		14,404		(4,101)		139,441		118,899		112,541		50,561		284




Other (expense) income, net	(1,554,881)		(503,123)		1,344,553		779,874		1,250,645		(2,788)		135,806		4,084
(Loss) income before income taxes	(1,652,857)		(488,719)		1,340,452		919,315		1,369,544		109,753		186,367		4,368
Recovery of (provision for) income taxes	178,449		117,408		(192,020)		(40,222)		(111,099)		14,119		4,701		31,630
Net (loss) income	$	(1,474,408)	$	(371,311)	$	1,148,432	$	879,093	$	1,258,445	$	123,872	$	191,068	$	35,998


Net (loss) income per share attributable to shareholders:
Basic	$	(11.70)	$	(2.95)	$	9.18	$	7.06	$	10.21	$	1.01	$	1.59	$	0.30
Diluted	$	(11.70)	$	(2.95)	$	9.00	$	6.90	$	9.94	$	0.99	$	1.54	$	0.29

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


	Three months ended
	Mar 31, 2022		Dec 31, 2021		Sep 30, 2021		Jun 30, 2021		Mar 31, 2021		Dec 31, 2020		Sep 30, 2020		Jun 30, 2020
	(in thousands)
Cost of revenues	$	2,183	$	1,995	$	1,987	$	1,809	$	1,851	$	1,705	$	2,914	$	1,529
Sales and marketing	15,203		13,735		11,673		10,990		10,885		10,044		11,481		12,431
Research and development	85,737		74,932		63,840		55,988		56,027		54,262		47,741		49,825
General and administrative	20,071		18,735		30,638		23,759		18,205		16,480		13,266		12,682
	$	123,194	$	109,397	$	108,138	$	92,546	$	86,968	$	82,491	$	75,402	$	76,467

(2) Includes amortization of acquired intangibles as follows:


	Three months ended
	Mar 31, 2022		Dec 31, 2021		Sep 30, 2021		Jun 30, 2021		Mar 31, 2021		Dec 31, 2020		Sep 30, 2020		Jun 30, 2020
	(in thousands)
Cost of revenues	$	6,234	$	5,960	$	5,536	$	4,372	$	4,531	$	4,532	$	4,531	$	4,856
Sales and marketing	386		386		386		386		386		384		388		388
Research and development	76		32		58		58		58		59		58		58
	$	6,696	$	6,378	$	5,980	$	4,816	$	4,975	$	4,975	$	4,977	$	5,302

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 March 31, 2022.


	Three months ended
	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020
Revenues:
Subscription solutions	28.6%	25.4%	29.9%	29.9%	32.4%	28.6%	32.0%	27.5%
Merchant solutions	71.4%	74.6%	70.1%	70.1%	67.6%	71.4%	68.0%	72.5%
	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%
Cost of revenues:
Subscription solutions	6.4%	5.5%	6.0%	5.6%	5.9%	6.1%	6.8%	6.2%
Merchant solutions	40.6%	44.3%	39.8%	38.9%	37.6%	42.4%	40.4%	41.3%
	47.0%	49.8%	45.8%	44.5%	43.4%	48.5%	47.2%	47.5%
Gross profit	53.0%	50.2%	54.2%	55.5%	56.5%	51.6%	52.8%	52.5%
Operating expenses:
Sales and marketing	25.2%	20.0%	21.2%	18.0%	18.8%	15.8%	19.2%	20.3%
Research and development	25.2%	19.8%	19.7%	16.4%	17.8%	16.3%	18.7%	18.7%
General and administrative	9.0%	7.3%	11.5%	7.0%	6.8%	6.7%	6.7%	11.7%
Transaction and loan losses	1.7%	2.0%	2.3%	1.6%	1.1%	1.3%	1.5%	1.9%
Total operating expenses	61.1%	49.1%	54.6%	43.0%	44.5%	40.1%	46.2%	52.5%
(Loss) income from operations	(8.1)%	1.0%	(0.4)%	12.5%	12.0%	11.5%	6.6%	0.0%




Other (expense) income, net	(129.2)%	(36.5)%	119.6%	69.7%	126.5%	(0.3)%	17.7%	0.6%
(Loss) income before income taxes	(137.3)%	(35.4)%	119.3%	82.1%	138.5%	11.2%	24.3%	0.6%
Recovery of (provision for) income taxes	14.8%	8.5%	(17.1)%	(3.6)%	(11.2)%	1.4%	0.6%	4.4%
Net (loss) income	(122.5)%	(26.9)%	102.2%	78.5%	127.3%	12.7%	24.9%	5.0%

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 observed a rapid growth in merchant solutions revenue throughout the pandemic. Most notably in the first half of 2021 where further lockdowns and government stimulus propelled the COVID-triggered acceleration of ecommerce. As the COVID-19 related impacts that triggered the acceleration of ecommerce begin to ease, growth in merchant solutions revenue may not replicate recent patterns. As a result of the 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. Due to the continued growth of our merchant solutions offerings, we believe that our business may become more seasonal in the future. 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 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. As anticipated, similar growth in revenue did not replicate itself in the first quarter of 2022, when compared to the same period in 2021. This was due to various macroeconomic factors such as increased mobility of buyers, as a result of fewer lockdowns, the lack of government stimulus support and increased inflationary pressures.

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. The company took additional impairment in the third quarter of 2021, which caused an increase in general and administrative spend relative to revenue in that quarter. Total operating expenses have increased primarily due to the addition of personnel in connection with the expansion of our business, additional marketing initiatives to attract potential merchants as well as additional operating expenses associated with the acquisition of 6RS.

Quarterly Other Income (Expense) Trends

Historically, there have been no consistent trends associated with other income (expense) 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, changes in the fair value of our investments in convertible notes of private companies, 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


	March 31, 2022		December 31, 2021
	(in thousands)
Cash, cash equivalents and marketable securities	$	7,246,690	$	7,768,093
Total assets	11,834,457		13,340,172
Total liabilities	2,044,862		2,206,831
Total non-current liabilities	1,362,930		1,504,098

Total assets decreased $1.5 billion as at March 31, 2022 compared to December 31, 2021, principally due to a $1.1 billion decrease in equity and other investments due mainly to unrealized losses on our investments in Affirm and

Global-E received in conjunction with strategic partnerships, a $521.4 million decrease in cash, cash equivalents and marketable securities driven largely by $453.9 million used to purchase equity and other investments, a $6.9 million decrease in intangible assets due to amortization in the period, a $1.7 million decrease in income taxes receivable, and a $1.3 million decrease in deferred tax assets, offset by a $33.0 million increase in trade and other receivables, a $23.8 million increase in right-of-use assets, a $15.8 million increase in merchant cash advances, loans and related receivables largely due to an expansion of our Capital offerings and programs, a $9.8 million increase in other current assets, and a $4.0 million increase in property and equipment due mainly to purchases of leasehold improvements and computer hardware, offset by depreciation in the period.

Total liabilities decreased by $162.0 million, principally as a result of a $183.2 million decrease in deferred tax liabilities, a $50.0 million decrease in accounts payable and accrued liabilities, and a $5.2 million decrease in income taxes payable, offset by a $54.6 million increase in deferred revenue mainly due to the non-cash consideration received for services rendered in conjunction with our partnership with Global-E and a private company, and a $21.4 million increase in lease 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 July 2021, we filed an amended and restated 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. The shelf prospectus and registration statement allows Shopify to offer 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 the shelf prospectus is effective, which commenced August 6, 2020. The amendment increased the total amount Shopify can offer under the shelf prospectus and registration statement to $10 billion.

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 $1.5 billion after deducting offering fees and expenses of $10.5 million.

Our principal cash requirements are for working capital and capital expenditures. Excluding current deferred revenue, working capital at March 31, 2022 was $7.6 billion. 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, strategic investments 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 decreased by $521.4 million to $7.2 billion as at March 31, 2022 from $7.8 billion as at December 31, 2021, primarily as a result of the purchase of equity and other investments and cash used in our operating activities, slightly offset by proceeds from the exercise of stock options.

Cash equivalents and marketable securities include money market funds, U.S. and Canadian federal bonds and agency securities, and corporate bonds and commercial paper, all maturing within the 12 months from March 31, 2022.

The following table summarizes our total cash, cash equivalents and marketable securities as at March 31, 2022 and 2021 as well as our operating, investing and financing activities for the three months ended March 31, 2022 and 2021:


	Three months ended March 31,
	2022		2021
	(in thousands)
Cash, cash equivalents and marketable securities (end of period)	$	7,246,690	$	7,872,448
Net cash (used in) provided by:
Operating activities	$	(53,560)	$	135,683
Investing activities	(4,195)		(1,618,379)
Financing activities	6,286		1,564,093
Effect of foreign exchange on cash and cash equivalents	22		577
Net (decrease) increase in cash and cash equivalents	(51,447)		81,974
Change in marketable securities	(469,956)		1,402,507
Net (decrease) increase in cash, cash equivalents and marketable securities	$	(521,403)	$	1,484,481

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, employee-related expenditures, advancing funds to merchants through Shopify Capital, third-party shipping and fulfillment partners, marketing programs, and outsourced hosting costs.

For the three months ended March 31, 2022, cash used in operating activities was $53.6 million. This was primarily as a result of our net loss of $1.5 billion, which once adjusted for a net loss on equity and other investments of $1.6 billion, a $184.2 million decrease in net deferred income taxes, $118.0 million of stock-based compensation expense, $26.1 million in revenue related to non-cash consideration, $16.7 million of amortization and depreciation, a $9.8 million increase of our provision for transaction and loan losses, an unrealized foreign exchange loss of $6.3 million, and $0.6 million of amortization of debt offering costs related to the Notes offering contributed $60.3 million of positive cash flows. Cash flows of $63.4 million were used by the following increases in operating assets: $31.3 million in trade and other receivables, $27.3 million in merchant cash advances and loans as we continued to grow Shopify Capital; and $4.8 million in other current assets driven primarily by an increase in deposits. Additional cash flows of $50.5 million were used by the following changes in operating liabilities: a $44.0 million decrease in accounts payable and accrued liabilities, a $5.5 million net change in lease assets and liabilities, and a $4.9 million net change in income tax assets and liabilities, slightly offset by a $80.6 million increase in deferred revenue due mainly to the non-cash consideration received in conjunction with our partnerships with Global-E and a private company, of which the initial value of the total non-cash consideration received in exchange for these services was $76.7 million.

For the three months ended March 31, 2021, cash provided by operating activities was $135.7 million. This was primarily as a result of our net income of $1.3 billion, which once adjusted for a net unrealized gain on equity and other investments of $1.3 billion, a $101.0 million increase in net deferred income taxes, $69.2 million of stock-based compensation expense, $15.8 million of amortization and depreciation, a $4.2 million increase of our provision for transaction and loan losses, $2.0 million in revenue related to non-cash consideration, an unrealized foreign exchange loss of $1.7 million, and $0.6 million of amortization of debt offering costs related to the Notes offering, contributed $197.9 million of positive cash flows. Additional cash flows of $64.6 million were provided by

the following changes in operating liabilities: a $39.8 million increase in accounts payable and accrued liabilities; a $10.4 million increase in deferred revenue; a $9.5 million net change in income tax assets and liabilities; and a $4.9 million increase in net lease assets and liabilities. Cash used of $126.8 million resulted from the following increases in operating assets: $74.6 million in merchant cash advances and loans; $39.1 million in trade and other receivables, and $13.2 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 leasehold improvements and computer equipment.

Net cash used in investing activities in the three months ended March 31, 2022 was $4.2 million, which was driven by $453.9 million used to purchase equity and other investments, and $15.9 million used to purchase property and equipment, which consisted mainly of leasehold improvements to accommodate our future needs at our remaining office locations and computer equipment, offset by net maturities of $465.7 million in marketable securities.

Net cash used in investing activities in the three months ended March 31, 2021 was $1.6 billion, which was driven by net purchases of $1.4 billion in marketable securities, $206.6 million used to purchase equity and other investments, and $5.2 million used to purchase property and equipment.

Cash Flows From Financing Activities

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

Net cash provided by financing activities in the three months ended March 31, 2022 was $6.3 million driven by 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 $1.6 billion for the same period in 2021, driven by $1.5 billion raised in our February 2021 public equity offering, and by $22.9 million which related to stock option exercises.

Contractual Obligations

Our principal commitments consist of our Notes and obligations under our operating leases for office, warehouse and commercial space. The following table summarizes our contractual obligations as of March 31, 2022:


	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	$	921,150	$	—	$	924,600
Bank indebtedness	—		—		—		—		—
Operating lease and unconditional purchase obligations(2)	108,602		148,966		116,470		337,611		711,649
Total contractual obligations	$	109,752	$	151,266	$	1,037,620	$	337,611	$	1,636,249

(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, warehouse and commercial space leases as well as other unconditional purchase obligations.

Litigation and Loss Contingencies

alleged infringement. The Plaintiffs seek statutory damages for the alleged copyright infringement. The case is in its early stages and the Company is unable to predict the ultimate resolution of the matter, including the likelihood or magnitude of a possible eventual loss, if any, at this time. The Company has filed its answer to the Plaintiffs’ complaint on January 28, 2022 and intends to defend the case.

Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements, other than operating leases and other unconditional purchase obligations and contingencies (which have been disclosed above under "Contractual Obligations and Litigation and Loss 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 and EUR. As a result, our earnings are adversely affected by an increase in the value of these foreign currencies relative to the USD. As our operations continue to expand internationally, we may observe additional risk in other foreign currencies, including the GBP, as a result of offering local currency billing options and additional operating expenses. Foreign currency forward contracts are used to hedge against the earning effects of foreign currency fluctuations.

Effect of Foreign Exchange Rates

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


	Three months ended March 31,
	2022				2021
	At Prior Year Effective Rates (1)		Exchange Rate Effect (2)	GAAP Amounts as Reported			GAAP Amounts As Reported

	(in thousands)
Revenues	$	1,210,424			$	(6,801)	$	1,203,623	$	988,647
Cost of revenues	(569,594)				3,608		(565,986)		(429,931)
Operating expenses	(726,173)				(9,440)		(735,613)		(439,817)
(Loss) income from operations	$	(85,343)			$	(12,633)	$	(97,976)	$	118,899

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

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

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 foreign exchange rates 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.

Measurement of our Equity and Other Investments

As at March 31, 2022, we had equity and other investments in public and private companies totaling $2.9 billion. Our equity and other investments in publicly traded companies, which primarily relate to Affirm and Global-E, representing $1.7 billion of our investments, are recorded at fair value, which is subject to market price volatility. Our equity investments in private companies, representing $1.0 billion of our investments, are recorded using the measurement alternative and are assessed each reporting period for observable price changes and impairments, which may involve estimates and judgments given the lack of readily available market data. Our debt investments in convertible notes of private companies are recorded at fair value and represent $199.6 million of our investments, which is impacted by the underlying entities' valuations 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.

Interest Rate Sensitivity

We had cash, cash equivalents and marketable securities in our cash management program totaling $7.2 billion as of March 31, 2022. 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 July 2021, we invested $200.0 million in a private company through the purchase of convertible notes. This investment is classified as an available-for-sale debt security, for which we have elected to account for under the fair value option. The investment is carried at fair value at each balance sheet date and any movements in the fair value are recognized in net income. The fair value is determined based on a binomial pricing model in which the underlying entity's valuation and interest rates impact the market value of the investment.

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

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 notes that its exposure to collectibility risk by customers impacted by the Russian invasion of Ukraine is financially immaterial. The Company has mitigated some of the risks associated with Shopify Capital by opening insurance policies with Export Development Canada (EDC), a wholly-owned corporation of the Government of Canada, who is AAA rated as at March 31, 2022. The Company’s policies cover certain merchant cash advances and loans, subject under certain policies to minimum claim requirements and regional restrictions. The Company pays EDC a monthly premium based on total eligible dollars advanced, and records this as general and administrative expense in the condensed consolidated statements of operations and comprehensive (loss) income. All policies include a deductible set at either a specified dollar loss threshold or calculated as a percentage of eligible advances issued. After considering the Company’s deductible and the insurer's maximum liability under the policies, the majority of the Company's gross outstanding balance of merchant cash advances and loans as at March 31, 2022 is covered. The receivable related to insurance recoveries, if any, is included in the merchant cash advances, loans and related receivables balance. The Company mitigates the risks associated with its equity and other investments and debt securities through its diligence process performed prior to investing. There are no receivables from individual merchants accounting for 10% or more of revenues or receivables.

Inflation Risk

We are subject to inflation risk that could have 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. Furthermore, our merchants are also subject to risks associated with inflationary pressures that could impact their business and financial condition. These pressures could subsequently result in impacts to our GMV and further effect our business.

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 Chief Executive Officer and Chief Financial Officer, 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.

There have been no significant changes in our critical accounting policies during the three months ended March 31, 2022 as compared to the critical accounting policies described in our most recent annual consolidated financial statements.

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 April 29, 2022 there were 114,193,752 Class A subordinate voting shares issued and outstanding, and 11,947,915 Class B multiple voting shares issued and outstanding.

As of April 29, 2022 there were 194,491 options outstanding under the Company’s Fourth Amended and Restated Incentive Stock Option Plan, of which 193,866 were vested as of such date. Each such option is or will become exercisable for one Class B multiple voting share. As of April 29, 2022 there were 1,008,895 options outstanding under the Company’s Amended and Restated Stock Option Plan, of which 572,265 were vested as of such date. Each such option is or will become exercisable for one Class A subordinate voting share. As of April 29, 2022 there were 23,234 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, 17,747 were vested as of such date. Each option is or will become exercisable for one Class A subordinate voting share.

As of April 29, 2022 there were 1,257,872 Restricted Share Units ("RSUs") and 973 Deferred Share Units ("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.

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 March 31, 2022.

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 January 1, 2022 and ended on March 31, 2022 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.

Date: May 5, 2022


/s/ Tobias Lütke
Tobias Lütke
Chief Executive Officer

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 March 31, 2022.

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: May 5, 2022


/s/ Amy Shapero
Amy Shapero
Chief Financial Officer