amy final presentation _june 18
TRANSCRIPT
FORWARD-LOOKING STATEMENTS
June 19, 2019
This presentation contains forward-looking statements/forward-looking information within the meaning of applicable U.S. and Canadian securities laws, including, but not limited to, statements about the Shopify Fulfillment Network, in particular its planned development, scheduled rollout, and projected volume, as well as the expected amount and timing of our investment in the Shopify Fulfilment Network over the next five years.
These statements are based on our management’s current estimates, beliefs and assumptions, which are based on management’s perception of historical trends, current conditions and expected future developments, as well as other assumptions management believes are appropriate, including but not limited to: our expectation that incremental revenue from the Shopify Fulfillment Network will largely offset the costs; our expectations with respect to costs associated with each phase; our expectation that the bulk of the investment will come as the project scales; our ability to develop the Shopify Fulfillment Network; our ability to expand our merchant base, retain revenue from existing merchants and increase sales to new and existing merchants through channel, checkout and marketing; our ability to manage our growth effectively and hire, retain and motivate qualified personnel; our belief that our 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; our intention to continue to grow internationally; our ability to leverage transactional data; and our assumptions as to our future expenses and financing requirements.
Investors are cautioned against placing undue reliance on the statements, which are not a guarantee of future results or outcomes. Although we believe that the statements and underlying assumptions are reasonable, the statements relate to future events and performance and involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control. These risks are described in further detail in the section of our Annual Information Form entitled “Risk Factors” and elsewhere in our publicly available filings, and include, but are not limited to, risks relating to: merchant acquisition and retention; managing our growth; our ability to innovate; the security of personal information we store relating to merchants and their buyers, as well as buyers with whom we have a direct relationship; our potential inability to hire, retain and motivate qualified personnel; international sales and the use of our platform in various countries; our potential inability to compete successfully; the reliance of our growth in part on the success of our strategic relationships with third parties; and other important factors disclosed in our filings with the U.S. Securities and Exchange Commission and the various Canadian securities regulatory authorities. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual results may vary materially from those implied or projected by the statements.
The statements are forward-looking and represent our views as of the current date. We anticipate that subsequent events and developments may cause our views to change. Nothing in this presentation should be regarded as a representation that the statements will be achieved and we undertake no duty to update the statements except as required by law. The forward-looking statements contained in this presentation are presented for the purpose of assisting our shareholders in understanding our business and objectives, and may not be appropriate for other purposes.
To supplement the financial measures prepared in accordance with generally accepted accounting principles (GAAP), we use non-GAAP financial measures that exclude certain items. Non-GAAP financial measures are not prepared in accordance with GAAP; therefore, the information is not necessarily comparable to other companies and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.
June 19, 2019
NON-GAAP FINANCIAL MEASURES
THE SHOPIFY FLYWHEEL
• Rise of self-employment • E-Commerce growth • Consumerization of the enterprise
SECULAR TAILWINDS
• International • Share of wallet • Machine learning
OPPORTUNITIES
SIMPLIFY MERCHANT
OPERATIONS
CATALYZE MERCHANTS’ SALES
WIDEN THE FUNNEL
MOR
E Merc
hants MORE Channels,
Partners & Capabilities
MORE GMV
NEWER COHORTS
ANNUAL COHORTS ESTABLISH STRONG FOUNDATION FOR FUTURE CASH FLOWSRevenue by Cohort
$0M
$100M
$200M
$300M
$400M
Q1-FY14
Q2-FY14
Q3-FY14
Q4-FY14
Q1-FY15
Q2-FY15
Q3-FY15
Q4-FY15
Q1-FY16
Q2-FY16
Q3-FY16
Q4-FY16
Q1-FY17
Q2-FY17
Q3-FY17
Q4-FY17
Q1-FY18
Q2-FY18
Q3-FY18
Q4-FY18
Pre 2014 Cohorts 2015 Cohort 2016 Cohort 2017 Cohort 2018 Cohort
GMV RETENTION IS HIGH, AS SUCCESSFUL MERCHANTS REMAIN ON THE PLATFORMGMV Generated by Annual Cohorts Over Time
$0M
$200M
$400M
$600M
$800M
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48
2014 2015 2016 2017
STRONG GMV GROWTH FROM CORE, PLUS UPGRADES AND PLUS NEW BUSINESS
GMV By Segment $0B
$4B
$8B
$12B
$16B
2014
Q1
2014
Q2
2014
Q3
2014
Q4
2015
Q1
2015
Q2
2015
Q3
2015
Q4
2016
Q1
2016
Q2
2016
Q3
2016
Q4
2017
Q1
2017
Q2
2017
Q3
2017
Q4
2018
Q1
2018
Q2
2018
Q3
2018
Q4
Core Plus Upgrade Plus New Business
MERCHANT SOLUTIONS
SUBSCRIPTION SOLUTIONS
NEW PRODUCT OFFERINGS EXPAND REVENUES FROM EXISTING MERCHANTSRevenue by Revenue Stream $0M
$100M
$200M
$300M
$400M
Q1-FY14
Q2-FY14
Q3-FY14
Q4-FY14
Q1-FY15
Q2-FY15
Q3-FY15
Q4-FY15
Q1-FY16
Q2-FY16
Q3-FY16
Q4-FY16
Q1-FY17
Q2-FY17
Q3-FY17
Q4-FY17
Q1-FY18
Q2-FY18
Q3-FY18
Q4-FY18
Subscriptions Apps/Themes/Domains/Platform Fees Financial SolutionsShipping Transaction/Partner referral/Other
Need for fast, reliable, affordable fulfillment is clear and growing
WHY FULFILLMENT, AND WHY NOW?
SHOPIFY FULFILLMENT NETWORK
Need for fast, reliable, affordable fulfillment is clear and growing
Offer streamlined fulfillment experience with intelligent inventory and order routing
WHY FULFILLMENT, AND WHY NOW?
SHOPIFY FULFILLMENT NETWORK
Need for fast, reliable, affordable fulfillment is clear and growing
Offer streamlined fulfillment experience with intelligent inventory and order routing
Deliver value for merchants first, through competitive rates and higher cart conversion
WHY FULFILLMENT, AND WHY NOW?
SHOPIFY FULFILLMENT NETWORK
PHASE Product-Market Fit
2019-2020WHEN
• Build the brainWHAT
• 3PL partnerships (WMS & warehouses)
PHASE Scale
2021-2023WHEN
• Continue 3PL partnershipsWHAT
• Build owned warehouse capacity as required to accommodate demand
ACHIEVE PRODUCT-MARKET FIT, THEN SCALE
*See slide “Safe Harbour” at the beginning of this presentation for a disclaimer regarding forward-looking statements contained in this presentation.
PLAN: A PHASED APPROACH WITH TRIPWIRES
Fulfillment Volume Variable Cash Costs Fixed Cash Costs
PHASE
DISCIPLINED SPEND TO BUILD PRODUCT-MARKET FIT
PRODUCT-MARKET FIT SCALE
20232019
*See slide “Safe Harbour” at the beginning of this presentation for a disclaimer regarding forward-looking statements contained in this presentation.
Plan: a phased approach with tripwires
SCALE VOLUME WITH INCREASING EFFICIENCIES
Fulfillment Volume Variable Cash Costs Fixed Cash Costs
PHASE PRODUCT-MARKET FIT SCALE
20232019
*See slide “Safe Harbour” at the beginning of this presentation for a disclaimer regarding forward-looking statements contained in this presentation.
Plan: a phased approach with tripwires
EXPECTED TO BE LARGELY CASH NEUTRAL OVER FIVE YEARS, WITH FURTHER INVESTMENTS TRIGGERED BY ADOPTIONExpected spend of approximately $1 billion over next five years (consisting of expected cost to build and variable cost to operate)
We expect incremental revenue to largely offset costs
Bulk of spend comes with scale and is success-based, bulk of net return expected beyond 2023
*See slide “Safe Harbour” at the beginning of this presentation for a disclaimer regarding forward-looking statements contained in this presentation.