Shopify Initiation

RBC Capital Markets, LLC
RBC Dominion Securities Inc.

Ross MacMillan (Analyst) Paul Treiber, CFA (Analyst)
(212) 428-7917;
(416) 842-7811;
ross.macmillan@rbccm.com
paul.treiber@rbccm.com
Rohit Kulkarni (Analyst)
(415) 633-8652;
rohit.kulkarni@rbccm.com
Matthew Hedberg (Analyst)
(612) 313-1293;
matthew.hedberg@rbccm.com
June 30, 2015
Shopify Inc.
Sector Perform
Shopiflying High: Initiating at Sector Perform
NYSE: SHOP; USD 31.32; TSX: SH
Our view: We like the technology, runway for growth, management vision
and potential for higher customer lifetime value; however, valuation
seems full even if our/Street estimates prove conservative. Our channel
diligence and sensitivity analyses highlighted in the report lead us to
conclude that we could be more positive on a better entry point,
meaningful new monetization opportunities or improved competitive
dynamics.
Price Target USD 35.00

Scenario Analysis*
Downside
Scenario
Current
Price
Price
Target
Upside
Scenario
23.00
27%
31.32
35.00
12%
53.00
69%
*Implied Total Returns
Key points:
The operating system for SMB Commerce: Shopify can be used across
multiple channels (online, mobile, social media, brick-and-mortar stores)
and over time we think the platform can become richer through the
addition of new services. These services include Payments (introduced
2013), Shipping (which we expect later this year) and potentially others
in the future. These services could drive higher ARPU, reduce churn and
make the platform synonymous with a commerce operating system for
SMBs.
We believe the key to long-term value is with larger merchants: We
believe the Pareto Rule is highly applicable at Shopify, where high value
merchants matter more than low value merchants on a customer lifetime
value (CLTV) basis (see our dive into unit economics on P23 and associated
sensitivity on P26). Growth of high value merchants in the mix could
provide upside to top line and margins over time.
Key Statistics
Shares O/S (MM):
Dividend:
90.2
0.00
Market Cap (MM):

Yield:
Avg. Daily Volume:
2,825
0.0%
NA
RBC Estimates
FY Dec
Revenue
EPS, Ops Diluted
P/E
2014A
105.0
NM
2015E
159.1
(0.26)
NM
2016E
210.0
(0.22)
NM
2017E
270.7
(0.15)
NM
Revenue
2014
2015
2016
EPS, Ops Diluted
2015
2016
Q1
18.8A
37.3A
47.7E
Q2
23.7A
38.1E
50.8E
Q3
27.3A
39.1E
52.6E
Q4
35.2A
44.6E
58.9E
(0.07)E
(0.08)E
(0.06)E
(0.07)E
(0.06)E
(0.05)E
(0.03)E
All values in USD unless otherwise noted.
Product and vision drive differentiation in a crowded space: We think

Shopify's architecture has a competitive lead in terms of non-technical
user requirements, speed of implementation, customer experience,
scalability and app and partner ecosystem (customer interview summaries
on P10 and app benchmarking on P12). This has resulted in faster
merchant growth than other pure play ecommerce platforms.
Upside potential to estimates, but valuation reflects this... Given the
implied deceleration in net merchant adds in our/Street estimates, we
think forecasts could prove conservative. However, the valuation already
appears to reflect this given the stock trades on ~17x CY15E and ~13x
CY16E EV/Sales.
...and our $35 price target assumes a reasonable base line of success:
We believe Shopify can achieve ~12% share in a 10M merchant market
worldwide (from ~1.6% today) and we assume 10% higher ARPU by 2022
driven by the addition of new merchant services.
Priced as of prior trading day's market close, EST (unless otherwise noted).
For Required Non-U.S. Analyst and Conflicts Disclosures, see page 43.
Shopify Inc.
Target/Upside/Downside Scenarios
Investment summary
Exhibit 1: Shopify Inc.

27 Days
21MAY15 - 29JUN15
44
UPSIDE
53.00
TARGET
35.00
CURRENT
31.32
42
40
38
36
Shopify provides a leading multichannel operating system

for SMB commerce, with product and vision driving
differentiation in a crowded space. However, valuation seems
full even if our/Street estimates prove conservative - we'd
be more constructive on a better entry point, meaningful
new monetization opportunities or improved competitive
dynamics.
34
32
DOWNSIDE 23.00
30
15m
10m
5m
M15
25
SHOP
Rel. S&P 500 COMPOSITE
J15
15
22
29
Jun 2016
MA 40 weeks
Source: Bloomberg and RBC Capital Markets estimates for Upside/Downside/Target
Target price/base case

Our $35 price target is based on the stock trading at 11x our
CY17 EV/ Sales estimate of $271M. The price target is also
supported by our DCF that assumes the company achieves
~12% unit market share and 10% higher ARPU by 2022.
Upside scenario
Our upside case of $53 is based on the stock trading at 12x our
CY17 EV/ Sales upside estimate of $352M, which is based on a
higher rate of merchant growth and ARPU. We note that this
valuation discounts around 16% unit market share and 20%
higher ARPU by 2022.
Downside scenario
Our downside case of $23 is based on the stock trading at
7x our CY17 EV/ Sales downside estimate of $248M. This
valuation is also supported by our DCF that assumes the
company achieves 8% unit market share and constant ARPU
by 2022.
Potential Catalysts
Net merchant adds could provide upside optionality: Our
model assumes 51K new merchant adds in FY15 vs. 61K in
FY14 and we note that F1Q15 saw 17K new adds (+38% Y/
Y). While the rate of merchant adds has decelerated, we still
expect it to grow in this relatively early stage of the company's
lifecycle.
ARPU could increase more materially with the addition
of new merchant solutions: ARPU increased by 12% in
FY14, although Average Gross Profit per Merchant was
approximately flat. We believe the addition of higher margin
new merchant services (such as shipping) could drive higher
value across the base.
Operating leverage: Shopify has run at a modest loss over
the last few years and while we model losses through FY17,
we believe upside to revenue could drive a faster path to
operating profits and positive FCF.
Potential Risks
Highly competitive market: We note that there are many
angles of competition including other pure-play commerce
platforms, web site builder/hosting companies and potentially
large internet assets that are in some cases partners to Shopify
today.
High churn rate across SMBs: Although Shopify has driven
higher recurring revenue per merchant to offset churn, we
believe that unit churn is high within the business due to
the SMB nature of the customer base. As the base grows,
merchant growth will be harder to sustain given the churn
effect on the base.
Gross margin pressure: Payments will grow faster than
Subscriptions for the near future, resulting in pressure on
gross margins due to mix.
June 30, 2015
Ross MacMillan,
(212) 428-7917; ross.macmillan@rbccm.com
Shopify Inc.
Key questions
Our view
1. What is Shopifys total addressable
market (TAM) and whats a reasonable
share that they can take over time?
We think Shopifys global addressable market is in the $10B range, sized by

addressable merchants and the current economic value that Shopifys business
model extracts per merchant. By this methodology, Shopify only has ~1.6%
market share today in a very fragmented market. Upside to this would be driven
by greater success in the long-tail of international markets and/or higher
average revenue per merchant driven by the addition of new Merchant
Solutions. We think merchant addition trends should be relatively strong given
the current level of market penetration and believe the company should sacrifice
near-term profitability to drive merchant growth, especially for larger merchants
that have the highest customer lifetime value. We dont think that this is a
winner-take-all market, and believe that Shopify can achieve 12% unit market
share by 2022 in our base case; and up to 16% market share in our upside case.
2. What differentiates Shopify from other

solutions and why will it win in a hypercompetitive environment?
Designed from the ground up as a dedicated ecommerce solution, we think

Shopifys architecture has a competitive lead in terms of non-technical user
requirements, speed of implementation, customer-experience, scalability and
the application/partner ecosystem. Management has been visionary in designing
and developing a best-in-class platform and we believe that merchant growth
has been higher than at other (predominantly private company) pure-play
platforms. We think scale and network effects can drive further competitive
differentiation, although we are conscious that well-capitalized, large internet
properties could become competitors in the future.
3. Is Shopifys target financial model

achievable how do they get to operating
margins in the 20s?
So long as Shopify can grow with positive unit economics, we do not expect the
company to achieve its long-term model for many years as long as they continue
to pursue growth. The long-term model is based on 6064% GMs and 20%+
operating margins, and we can see a path to margin expansion on two levels as
the company evolves. First, we think gross margins can expand as the company
augments payments with additional Merchant Solutions, and improves the mix
of High vs Low value customers. Second, Sales and Marketing expense should fall
as a percentage of sales as the company scales. We note that today, 70% of
customer acquisition is through organic or referral channels suggesting
significant leverage potential. Finally, we expect the company to achieve
economies of scale on Research and Development over time.
4. Is Shopify a potential strategic asset?
While not core to our investment thesis, we do think the company could prove
attractive to larger players, especially those that have ambitions in extending
their digital marketing platforms into the long-tail of ecommerce.
June 30, 2015
Ross MacMillan,
Shopify Inc.
Table of contents
Key questions ....................................................................................................................... 3
Our view ..................................................................................................................................... 3
Table of contents.................................................................................................................. 4
Company description............................................................................................................ 5
IPO and Ownership .................................................................................................................... 5
Key investment points .......................................................................................................... 6
Leadership position in large and growing addressable market ................................................. 6
Attractive merchant dynamics with respect to growth and retention ...................................... 8
Attractive value proposition to merchants .............................................................................. 10
Strong partner ecosystem ........................................................................................................ 11
An SMB omnichannel retail operating system ......................................................................... 13
Risks to investment thesis and price target ........................................................................ 15
Significant competition ............................................................................................................ 15
ecommerce pure-plays............................................................................................................. 16
Mid-market competitors .......................................................................................................... 17
Others....................................................................................................................................... 17
High churn rate of a small business customer base ................................................................. 18
Lack of profitability and near-term gross margin pressure ...................................................... 20
Key financial points ............................................................................................................ 21
High and Low Value merchants: Parsing the economics of Shopify ........................................ 23
Valuation ............................................................................................................................ 27
Product overview ............................................................................................................... 31
Segments............................................................................................................................ 33
Cost of Goods ........................................................................................................................... 34
Sales and Marketing ................................................................................................................. 35
Management team ............................................................................................................. 37
June 30, 2015
Ross MacMillan,
Shopify Inc.
Company description
Shopify provides a leading cloud-based commerce platform designed for small- and mediumsized businesses. Shopifys mission critical software enables merchants to manage products
and inventory, process orders and payments, build customer relationships and leverage
analytics and reporting across all of their sales channels. The company was founded in 2004
and is based in Ottawa, Canada.
Shopify has ~165K merchants in 155 countries around the world. Of these users, over 300 are
Plus! subscribers. Shopify offers both monthly and annual subscriptions, ranging from $14 to
$179 a month for the regular plans.
Exhibit 2: Shopify timeline
2004
Jaded Pixel (later named Shopify)
founded by Tobias Lutke, Daniel
Weinand and Scott Lake
2004
2005
2006
Jun-2006
Shopify is released
Capital
Markets
Activity
Jun-2009
Launched API
Platform and
App Store
2007
2008
Mar-2008
Shopify annual GMV
surpassed US$10M
Jan-2010
1st Build-ABusiness
competition
2009
2010
Aug-2013
Launched Shopify
Payments and POS;
Acquired Jet Cooper
2011
Apr-2010
Shopify Theme Store
unveiled
2012
2013
Feb-2012
Acquired
Select Start
2010
2011
Raised $7M Raised $15M
(Series A)
(Series B)
Mar-2015
>150k businesses
now use Shopify;
Multichannel
Shopify launched
2014
2015
Feb-2014
Shopify Plus
launched
2013
Raised $100M
(Series C)
May-2015
Shopify IPO
Source: Company reports
Mobile represents about ~60% of Shopifys traffic and ~35% of Shopifys overall GMV. There
are no significant differences between the economics of desktop and mobile and Shopify was
designed with a mobile first mindset.
IPO and Ownership

On May 20, 2015, Shopify issued 8.9M shares of common stock at $17.00 per share above
the initial filing range of $12 to $14 per share. Proceeds from the offering were used to
strengthen the balance sheet and provide flexibility to fund growth strategies. Note that RBC
Capital Markets was a book runner for Shopifys initial public offering. Also note that
Bessemer Venture Partners, FirstMark Capital, Klister Credit Corp, OMERS and Tobias Ltke
th
(Shopifys founder and CEO) are subject to a 180-day lock-up, expiring November 16 , for
their shares, which in total constitute approximately 70% of the shares outstanding.
June 30, 2015
Ross MacMillan,
Shopify Inc.
Key investment points

Leadership position in large and growing addressable market
While the ecommerce platform space is crowded, Shopify is larger than its immediate pureplay competitors, Bigcommerce and Volusion, in terms of number of merchants. Economics
are extracted on both a merchant basis (subscription revenue) and a gross merchant value
basis (Merchant Solutions). We size the market at just below $10B based on our estimate of
number of addressable merchants and an average annual revenue (ARR) per merchant of
$1,000, which is the current run-rate. While this could increase as additional services are
added to the platform, we are taking a conservative approach to accommodate the risk of
subscription price pressure over time.
Market sizing
Our different approaches to
market sizing suggest ~10M
addressable merchants
worldwide.
We believe in the general business trend that SMBs will dedicate more dollars to software
solutions over the next few years. According to Intuit and Nielsen Consumer Insights,
businesses with fewer than 20 employees spent about $630 on software in 2014, up from
$590 in 2013, and 85% of them are planning to increase their spending on software over the
next five years.
Shopifys IPO filing sizes the current addressable market at 10 million merchants with less
than 500 employees operating in key geographies, with up to 46 million merchants
worldwide. At annual revenue of ~$1,000 per merchant, the implied addressable market is
~$10B. We triangulate around this figure with the following approaches:
Methodology 1: Other SMB facing businesses:
Accounting Software approach

suggests 8.2M merchants.
Online backup approach

suggests 9.3M merchants.
Accounting software user bases: Intuit has ~4.5M QuickBooks customers (offline and
online), Sage has 1.8M customers on support, Xero has 371K customers and MYOB has 100K
customers. Combined these add to ~6.3M customers, which we think underrepresents the
overall market because: (i) these vendors do not capture small business across every
international market (especially those in Asia Pacific and Latin America); (ii) not all SMBs who
use Shopifys solution would be sophisticated enough for third-party accounting software;
and (iii) other accounting software players like Intacct, FreshBooks, NetSuite Financials,
FinancialForce, etc., dont disclose comparable user numbers.
Online backup services: Carbonite, a provider of SaaS backup services to US-based
SMBs, sizes the US addressable SMB market at ~6.2M small businesses (defined as 500
employees or less), and note that the average spend for business continuity services is
US$2,800/year. We scale this by a factor of 150% to account for ex-US customers.
Hosting services: Wix, a free website builder, has 62.5M registered users of which 1.37M
are on premium subscriptions. Wix believes its solutions can target a good portion of
~125M SMBs globally (statistics from the World Bank/IFC), and ~27M+ SMBs in the US.
GoDaddy, the worlds largest domain name registrar, has 13M+ customers and
generated $1.7B in bookings in 2014. We note that GoDaddys ARPU of $115 per
customer is ~11% of what SHOP generates per merchant, highlighting the different
services offered (i.e., predominantly domain names and hosting vs. ecommerce).
Methodology 2: Government website statistics
June 30, 2015
Step 1: US Census government data provides a count of 5.7 million enterprises (defined
as a business organization consisting of one or more domestic establishments under
common ownership or control) with fewer than 500 employees. We go through the
different subsectors, ranking them from low to high in their propensity for an
ecommerce solution. For example, we assume that Mining and Agricultural subsectors
Ross MacMillan,
Shopify Inc.
will have a Low propensity for ecommerce solutions and weight them at 5%; while
Wholesale trade and Retail Trade subsectors have a High propensity for ecommerce
solutions, and weight them at 50% and 100%, respectively. This leads us to a weighted
average of 27% across all subsectors.
Exhibit 3: US Census subsets
Subsector
Firms
('000s)
Propensity for
ecommerce
% adj.
Agriculture
21.3
5%
Low
1.1
Mining
22.1
5%
Low
1.1
Utilities
6.0
5%
Low
0.3
Construction
641.0
5%
Low
32.0
Manufacturing
256.4
50%
High
128.2
Wholesale trade
315.0
50%
High
157.5
Retail Trade
650.7
100%
High
650.7
Transportation and warehousing
168.1
5%
Low
8.4
71.1
30%
Medium
21.3
Finance and Insurance
234.8
5%
Low
11.7
Real estate and rental
270.0
5%
Low
13.5
Professional, scientific, technical
772.7
30%
Medium
231.8
Information
Management of companies and enterprises

Admin + Support Waste management
Educational Services
26.8
5%
Low
1.3
327.2
5%
Low
16.4
84.5
5%
Low
4.2
Health care
640.7
5%
Low
32.0
Arts entertainment rec
115.0
30%
Low
34.5
Accomodation and food services
495.3
5%
Low
24.8
Others
667.2
30%
Medium
200.2
Total
5,786.0
1,571.1
Weighted Average
27%
Source: Census.gov, RBC Capital Markets estimates
Government statistics
approach suggests 13.4M
merchants.
June 30, 2015
Step 2: Government statistics on SMBs: US-based figures from SBA.gov cite 28M USbased domestic small businesses, of which more than 85% have fewer than five
employees. These businesses tend to be service oriented, with more than 80% in
business for at least three years. Corresponding European Commission studies cite
21.6M SMBs in EU28 in 2013, of which more than 90% have fewer than 10 employees.
This SMB base employed ~88.8 million people and generated ~EUR3.3 trillion in value.
This centers us around an SMB base of 49.6 million. We apply the above factor
adjustment of 27% to this based on our weighting from the census subsectors.
Ross MacMillan,
Shopify Inc.
Exhibit 4: Market sizing

Factor
Adjustment*
Number (m)
Methodology 1
Accounting software customers
Online backup services
Methodology 2
SME base in Europe + USA
Company defined addressable market
Annual
Est. Rev.
Implied
Market size ($M) Market share**
Comments
6.8
6.2
120%
150%
$1,000
$1,000
$8,125
$9,300
2.0%
1.7%
Sum of Quickbooks, Xero, Sage and MYOB customer bases

Factor adjustment for ex-US
49.6
10.0
27%
100%
$1,000
$1,000
$13,392
$10,000
1.2%
1.6%
European Commission + SBA.Gov

AMI Partners
$10,204
1.6%
Average TAM:
* Merchants we estimate who would be willing to pay for Shopify's solution
** Based off a 2015E $160M Revenue base
Source: European Commission, SBA.Gov, AMI Partners, Company websites
By these methodologies, we estimate that Shopify currently has approximately 1.6% market
share in a very fragmented, $10B market worldwide.
International growth opportunity

Shopify currently operates in 150 countries, although only 17% of merchants, 10% of
revenue and 8% of GMV comes from ex-US territories as opposed to 17% of merchants. We
believe that Shopifys brand success overseas represents an undervalued call option on
growth.
Attractive merchant dynamics with respect to growth and

retention
The merchant base has grown from 488 in 2007 to 162K by end-March 2015. The majority of
merchant additions are SMBs, however, the platform is flexible enough to power larger,
higher volume businesses. For example, Shopify Plus customers (which include the
merchandise sites of Tesla, Budweiser, and the LA Lakers) have grown from 21330
merchants in 2014.
Exhibit 5: Customer trends
Merchant growth has been rapid
200
Merchants vs pure-play competitors 2010 vs 2015

200%
162
145
160
120
124.6% 120.5%
109.2%
80
51
60
71
115
84
104.9%
128
40
160
150%
140
120
96
90.7% 90.8%
100%
81.8%
100
2015
Merchants
80
72.6% 68.2%
50%
0%
Q1:13 Q2:13 Q3:13 Q4:13 Q1:14 Q2:14 Q3:14 Q4:14 Q1:15
Y/Y Growth
2015
Merchants
60
40
0
Total Merchants (est)
2015
Merchants
Merchants
180
2010
Merchants
20
2010
Merchants
2010
Merchants
0
Bigcommerce
Volusion
Shopify
Source: Company Reports, TechCrunch, Practicalecommerce.com, RBC Capital Markets estimates
June 30, 2015
Ross MacMillan,
Shopify Inc.
Cohort analysis suggests unit churn is broadly offset by ARPU increases

Shopifys average merchant generates around $34K of GMV per year (annualized off 1Q15
figures) and is squarely in the SMB segment of the market. As a result, we believe merchant
retention rates are consistent with what would normally be associated with early stage
businesses. SBA.gov and Statisticbrain.com cite small business failure rates of 2025% in the
first year of operation.
However, cohort analysis provided by the company suggests that the decline in merchant
units is largely offset by increased billings from the remaining merchants in that cohort. This
demonstrates the strength of Shopifys monetization strategy as merchants have grown
their businesses and become more successful, they generate more GMV that Shopify
monetizes through moving merchants up the subscription tiers and through payments.
As can be seen in Exhibit 6, a significant portion of total 2014 revenue was generated by
customers who were with the company in the prior years, through a combination of
subscription renewals and purchases of new products.
Exhibit 6: Cohort analysis
Source: Shopify
June 30, 2015
Ross MacMillan,
Shopify Inc.
Attractive value proposition to merchants

Shopifys intuitive user experience, where merchants can set up shop rapidly with little
technical capability, has been one of the key factors in its success to date. This has driven
positive merchant acquisition growth with relatively modest investment in sales.
Importantly, Shopify addresses customers across the lifecycle: entrepreneurs get fast time to
market; medium-sized businesses get easy integration and reporting; and large businesses
get large product catalogue support and the ability to handle traffic spikes with ease. We
have interviewed several merchants as part of our due diligence process, and extracts of the
conversations are provided in the exhibit below. Recurring themes across the conversations
are (1) Ease of use; (2) Scalability; (3) Quality of the infrastructure.
Exhibit 7: Excerpts from customer/partner interviews
Company
Revenues
Employees
Company A
$2.5-$5M
<20
Highlights
Shopify was a great entry-level platform, scaled and "have grown up with Shopify"
Difficult to transition away as ecommerce is >80% of current business
Company B
$2.5-$5M
<20
Seamless" migration from Magento without a moment of downtime during the migration
Website is 100% custom, and built a video streaming platform on top via a Shopify API
Magento couldnt handle the spikes in traffic
Company C
<$1M
<5
Magento back end not user friendly, Shopify easiest to get up in short amount of time
Overseas product not as robust as US, limited in terms of payments and partners
Company D
>$10M
<10
If I was happy with Magento I would have stuck with it

Shopify handled NYTimes-related traffic spike without any issues
Entry-level plan at Shopify was more expensive than BigCommerce, but Shopifys Unlimited Plan was cheaper
Consulting firm A
na
<10
Ability to be customized on front and back end for Shop

More mature, looked like best ecommerce marketplace solution to adopt
Not as feature rich as the really upstream platforms like DWRE or N
Source: Selected customer interviews
June 30, 2015
Ross MacMillan,
10
Shopify Inc.
Strong partner ecosystem

Over 900 partner apps on the
platform and growing rapidly.
Shopify has one of the strongest partner ecosystems of any ecommerce pure-play platform,
with over 5.8K annual active partners. Partners assist with both merchant acquisition and
product enhancement.
Merchant Referring Partners work as an effective business development tool, with Shopify
acquiring notable customers such as Zagat, Taco Bell, Wikipedia, Pabst Blue Ribbon and
Patagonia through the channel. Revenue-sharing plans for business leads are typically split
20% to the partner/80% to Shopify.
Exhibit 8: App ecosystem
Source: Shopify
Product Enhancing Partners have built an ecosystem of over 900 apps to aid in shipping,
sales, inventory and marketing. Apps are priced as a one-off license fee, monthly recurring
fee or on a freemium basis. Over 25K merchants have purchased at least one app in their
lifetime and over 78K shops have a Shopify app installed. Shopifys partner site indicates that
Shopify apps generate $345K a month collectively (~$4.1M annually) with the top 5 earning
$215K on average annually.
We went through app reviews and sorted them by the most reviewed to provide a snapshot
of what customers spend on. We found that the primary focus of spend is sales and
marketing related where the return is immediately quantifiable. Typically, customers spend a
median of ~$10 a month on these apps. We note that when an app is sold on the Shopify
store, the economics are typically split 20% to Shopify/80% to the app developer.
June 30, 2015
Ross MacMillan,
11
Shopify Inc.
Exhibit 9: Top 10 reviewed apps

Per month Payment
One Time
Count
Type
App Name
Low
High
Reviews
Tools
Product options
20
755
Shipping
Aftership
Free
Sales/Marketing
Product Upsell
10
60
533
Sales/Marketing
Quantity breaks tiered pricing
17
17
424
Sales/Marketing
Product Customizer
420
Sales/Marketing
Product discount - daily deals, flash sales
Sales/Marketing
SEO Meta Manager
Tools
Persistent Cart
Free
Sales/Marketing
Customer Pricing
30
30
324
10
Sales/Marketing
Sales Motivator
313
624
100
412
50
360
351
Although the app ecosystem is currently subscale, with Shopifys apps generating just over
$4M per year in revenue, we believe it has potential to be a more significant contributor to
the business over time.
June 30, 2015
Ross MacMillan,
12
Shopify Inc.
An SMB omnichannel retail operating system

We see potential new
monetization through ad
placements, in-housing of
apps, data services and
potentially even financing.
We believe that Shopify could increase revenue and profit per merchant by introducing
value-added services and features that merchants pay for above their basic subscription
plans. The first major service that Shopify launched, Payments, has been available since 2H13
in the US and has been rolled out to other geographies in the merchant ecosystem. This
offering has seen successful adoption by the customer base, with ~70% of merchants using
the solution within the base, although it tends to be more concentrated across mid- and
smaller-sized merchants (~3035% of ecosystem GMV passes through Shopify payments
today).
We believe a number of additional services could be provided by Shopify, many of which
could be monetized given tight integration with the platform, value-added features and
current economics of alternative providers. For example, we expect Shopify to offer shipping
services in 2H15.
Shipping labels and other high margin tack-on shipping services
ShipStation, a cloud solution designed to help ecommerce retailers process, fulfill and
ship their orders from the most popular marketplaces and shopping carts charges rates
ranging from $25$145 a month depending on scale and functionality.
Point of Sale systems for in-person/omnichannel
Shopify already has a PoS solution, which it monetizes through subscriptions ranging
from $9 to $159 a month.
Other potential value-added service opportunities as the ecosystem matures
June 30, 2015
Ad placements on homepage/within ecosystem, or featured site of the day with

marketplaces (such as Alibaba, Wayfair, Etsy).
o Shopify currently provides search engine optimization (SEO) features such as a
content generation system, editable title tags and meta descriptions and URLs for
pages. It is possible that it could charge customers for ad placements for trending
items or daily sales, as well as traffic direction from the different sales channels
across which their merchants lie.
In-housing popular app functionality (Intuit)
o We see a potential growth opportunity for Shopify to augment the organic platform
with areas of functionality that might be provided by third-party paid apps and
services today. For example, Intuit acquired Lettuce apps for $30M to provide
inventory and order management systems to QuickBooks. It is possible that Shopify
will similarly go deeper into core functions in cash management and accounting
over time.
Sublicensing payment metadata to customers/advertisers
o As the Payments system matures and more transactions happen through the
platform, the company develops huge amounts of useful metadata (payment
method, location, average ticket size, shipping method, profile of customer,
previous transaction history, frequency of purchase, etc.) that would be valuable to
both customers and advertisers.
SMB financing opportunities (e.g., Alibaba and Lending Club)
o As the metadata system gets richer, its potential to generate data (payment terms,
working capital, asset backing, delinquency history, inventory levels) to assist in
small business lending should not be underestimated. Lending Club has recently
Ross MacMillan,
13
Shopify Inc.
June 30, 2015
partnered with Alibaba for such a venture to help American companies buy parts
from Chinese manufacturers. We do not view it as too much of a stretch to see the
value that an SMB data-rich platform could bring to the table for both traditional
and non-traditional lenders.
Frictionless commerce (e.g., Buy with Shopify button)
o We highlight the Pinterest partnership announcement on June 2, 2015, in which
Shopify provides an avenue for small- and medium-sized businesses to sell using
Buyable Pins. SMBs that possess an online store with Shopify can start selling
products on Pinterest by adding the Pinterest sales channel. We also highlight the
Shopify beta test with Facebook announced on June 10, 2015, where consumers
can purchase products they discover in their News Feed or on Pages without leaving
Facebook. These avenues reduce buying friction, and help to build upon the
companys omnichannel strategy, where Shopify customers should eventually be
able to use Shopifys technology and platform to sell across multiple sales channels
(online captive stores, vertical specific marketplaces, open marketplaces, offline).
Ross MacMillan,
14
Shopify Inc.
Risks to investment thesis and price target

Significant competition
According to our interpretation of Gartners report "Market Share: All Software Markets,
Worldwide, 2014" (dated March 31, 2015), the market for ecommerce platforms is highly
fragmented with ~60% addressed by solutions outside of the top 5 vendors. Most of these
vendors focus on particular niche areas within the larger ecommerce ecosystem. However, it
does show how fragmented and fluid the platform space is. In the exhibit below, we list the
vendors that are deployed in some capacity within the US online retailer base.
Exhibit 10: ecommerce platform vendor list
3dCart
Celerant
eFashionSolutions
MarketLive
Prosodie Interactive
Upshot Commerce
Ability Commerce
ChannelAdvisor
Elastapath
Micros
ProStores
VE Interactive
AbleCommerce
ColdFusion
Enfinity
Microsoft
SaleCycle
Volusion
Acadaca
CommerceRack
Epicor
MiRetail
SAP
Weblinc
AdvancedEMedia
CommerceServer
EPiServer
MIVA Merchant
SAP Triversity
X-Cart
Agilence
Constant Contact
Everest Software
NetCache
Savtira
Xenocast
Americommerce
CoreCommerce
Greatson Media
Netsolace
SearchFit
Yahoo
Ascentium
CoreSense
Homestead TechnologiesNetSuite
SEO-Cart
Znode
ASP.NET
CRE Loaded
IBM
Network Solutions
Sequoia Retail Systems Zoovy
Aspdotnetstorefront CS Cart
InstanteStore.com
New Directions
Shopify
Auspient
CyberSource
Intershop
NOX
ShopSite
BigCommerce
Delivery Agent
Interspire
OfBiz
ShopVisible
Blueport Commerce
Demandware
InterWorld
OneStop
Sitefinity
Blueswitch
Digital River
Java Technologies
Onestop Internet
Smith
BPS Solutions
Divinity
JDA Software Group
Opentaps
Speed Commerce
Broadleaf
DomaNet
Kalio
Optimum return
Spree Commerce
BroadVision
Drupal
LAMP
Oracle
StoresOnline
BT Fresca
Dydacomp
LemonStand
Orbit
Symphony Commerce
BV Commerce
eBay Enterprise
Lucidiom
OrderDynamics
Truition
CartLogic
Ecometry
Magento
Pinnacle Cart
UniteU
Source: Internet Retailer, RBC Capital Markets
June 30, 2015
Ross MacMillan,
15
Shopify Inc.
Exhibit 11: ecommerce landscape

Web Infrastructure
Website Builders
In House Infrastructure
Custom Software
Commerce
Solutions
Payments /
Processing
Outbound
Marketing
ENTERPRISE
SMB
SOHO
Source: Company reports, RBC Capital Markets estimates
ecommerce pure-plays
Magento (eBay)
Shopify has grown merchants
faster than other pure play
platforms.
Magentos early development started in 2007 and the company was fully acquired by eBay in
2011. Currently under eBay Enterprise, Magento is one of the more technologically flexible
and sophisticated ecommerce solutions for SMBs in the space. Running at ~240K merchants
with their own app ecosystem (Magento Connect), we believe this platform requires more
technical knowledge on the part of merchants to build a robust solution (hiring Magento
developers, etc). Magento Go, a simplified version of the Magento offering, was
discontinued in February 2015 after limited successful traction. Notable Magento customers
include: Rosetta Stone, Christian Louboutin, Ghirardelli, Olympus, Nike, Fiji Water, Fun4Kids,
Mikimoto, Vizio, etc.
Bigcommerce
Founded in 2009, Bigcommerce is a global ecommerce provider helping entrepreneurs and
growing businesses sell more online. Selected as the SaaS ecommerce migration provider for
ProStores and Magento Go, Bigcommerce has migrated more than 6K retailers from these
platforms onto its platform. Bigcommerce runs over 90K stores and prices are in the same
range as Volusion and Shopify. Current clients include established and emerging brands such
as Grace and Lace, Josie Maran, Stupid Cancer, Gibson Guitars, and Schwinn.
Volusion
Founded in 1999, Volusion employs 450+ people and runs over 40K stores. The company
claims that the annual sales of the average Volusion merchant are $85K vs. Shopify at $34K,
implying a generally larger merchant skew. Current clients include established and emerging
brands such as Nalgene, Airloop, Evolution Motorsports, Korbella, Popcorn Bistro, etc.
We demonstrate in the table below that pricing on the basic subscription package is highly
competitive for largely similar feature sets.
June 30, 2015
Ross MacMillan,
16
Shopify Inc.
Exhibit 12: Pricing benchmark for closest equivalent plans (similar feature sets) implies limited pricing power
Starter Plan
Basic
Professional
Unlimited
Shopify
$14
$29
$79
$179
Volusion
$14
$35
$75
$135
$30
$80
$36
$86
Bigcommerce
3dCart
$20
$130
Mid-market competitors
NetSuite
Shopify today does not
compete with NetSuite or
Demandware, but growth in
larger merchants may change
that in future.
NetSuites SuiteCommerce is positioned as a highly integrated ecommerce suite for midmarket customers. It is positioned as an alternative to the upper-tier solutions from Oracle,
IBM, and SAP yet includes multiple product areas including ecommerce, Point of Sale, Order
Management, Merchandising, and Financials. SuiteCommerce can be purchased as a standalone, but we think the majority of implementations include other parts of the NetSuite
product portfolio. We also note that NetSuite recently augmented its organically developed
solution with the acquisition of Venda in mid-2014 and Bronto Software in early 2015. The
next generation of SuiteCommerce with its in-store POS solution and customer profile
framework marks a clear shift to focus on omnichannel commerce.
Demandware
Founded in 2004, Demandware provides a hosted service that enables companies to develop
and manage easy-to-use, customizable ecommerce websites, rather than building a site from
scratch. The technology includes an open, cloud-based platform with applications for
ecommerce merchants, developers, and administrators. The platform enables worldwide
consumer engagement across devices, including laptop, desktop, tablet and mobile
computers. Demandwares subscription structure uses a revenue share model.
Demandwares solution is evolving to become a full commerce vendor addressing digital,
store and analytic solutions. The company is integrating its acquisitions of Order
Management (Mainstream), Predictive Intelligence (CQuotient) and Point of Sale (Tomax)
and plans to have a group of charter customers using multiple solutions exiting 2015. By way
of comparability, Demandware currently has 279 live customers, at an ARPU of $591,000, 22
of which have over $100M GMV per year.
Others
Website creators Wix/GoDaddy/Weebly/Jimdo/Squarespace
While the primary focus of these businesses is web design, construction and hosting, they
generally compete with Shopify in the form of ecommerce vertical specific solutions.
WixStores, GoDaddy Online Stores, Weebly ecommerce, JimdoBusiness commerce and
Squarespace commerce offer solutions with varying levels of sophistication for the aspiring
ecommerce entrepreneur. We believe these options, while easily accessible and benefiting
from the larger customer base that the complementary web hosting solution provides, are
generally less scalable and flexible (e.g., no app ecosystem, shipping/payment/bandwidth
limitations, etc.) than Shopify. In fact, some of these website creation properties partner
with Shopify such as Wix (which has had a Shopify app since 2012).
June 30, 2015
Ross MacMillan,
17
Shopify Inc.
Open source WooCommerce, Reaction Commerce, Spree Commerce, etc.

Recently acquired by Automattic (the parent company of WordPress) for ~$30M in May
2015, WooCommerce is another private competitor to watch. WooCommerce is an open
source ecommerce plugin that turns WordPress into a store, and currently powers roughly
~660,000 storefronts. WooCommerce is available for free, with apps that charge a monthly
fee providing additional functionality. Slightly more setup is involved on the part of a user,
but WooCommerce benefits from the content management system back end (blogging,
news, shopping) of WordPress. We believe that WooCommerce lacks the plug and play
capabilities of Shopify, is slightly less robust on performance and features, and thus could run
into scalability issues as businesses get more sophisticated. That said, WooCommerce has
one of the largest footprints in terms of Shop Creation Tools (as measured by builtwith.com),
and the recent acquisition means a renewed focus on the business. Spree Commerce (45,000
customers) and Reaction Commerce are two other up and coming Storefront creators that
power retailers such as Bonobos, Casper, and Nutrisystem.
Large platforms Google, Facebook

Large platforms are friendly to
Shopify today (e.g. the Buy
button on Facebook).
While Google and Facebook are partners today, the risk is that they could become
competitive in the future. SEO, SEM and Facebook together represent about 70% of
customer acquisition traffic for Shopify. Search engine algorithm changes could affect
organic traffic trends. Google has entered the domains business and could enter website
creation related services for SMBs. Furthermore, the Buy with Google functionality for
mobile search serves a similar use case as the Buy with Shopify button to reduce customer
friction for online purchases. Facebook has made several attempts at ecommerce in different
forms in the past, with Gifts and free business pages with the ability to accept payments
through Stripe. The recent beta test with Shopify is promising, but it is possible that they
could decide to introduce deeper functionality on an independent basis.
High churn rate of a small business customer base

The SMB nature of the customer base means an inherently high churn rate given the
propensity for failure (we try to quantify this in the Customer Lifetime Value Analysis
section). For reference, GoDaddys churn rate in 2014 was just under 15%, and Web.com
reports churn of approximately 1%/month (a bit higher than 12% annually). We believe this
compares quite well to overall small business failure rates stated in SBA.gov and
Statisticbrain.com, which suggest closer to 2025% in year one. We also note that Intuit
typically assumes a 25%+ churn rate for its QuickBooks Online customer base.
A high rate of unit churn requires the company to be marketing constantly to replace
customers lost to business failure. While Shopify does not disclose unit churn figures, the
cohort analysis demonstrates that merchant decline within a cohort has been largely offset
by increased billings from remaining merchants within that cohort.
The law of large numbers can make it challenging for SMB-focused businesses to sustain
growth rates over time if there are no material shifts with the customer base that would
improve the churn algorithm, as shown in the chart below. In the Key Financial Points
section, we highlight the material difference in churn rates between two merchant segments
what we define as High Value and Low Value, and believe that we will continue to see
migration up to the High Value segment from Low Value merchants as they gain success
(corroborated by the Cohort analysis.)
June 30, 2015
Ross MacMillan,
18
Shopify Inc.
Exhibit 13: Hypothetical analysis: Base effect makes it harder to sustain growth at larger sizes
2012
Year
Small Business Cumulative Failure Rate
2013
2014
2015
2016
2017
25%
36%
44%
50%
55%
31
26
23
21
18
53
40
34
30
27
79
59
50
44
80
60
51
94
70
Period
1
41
2
3
4
5
Start of year merchant count

Merchants lost through churn/failure rate
Implied additions throughout the year
End of Year merchant count
41
41
84
145
196
254
(10)
(18)
(29)
(35)
(44)
53
79
80
94
121
84
145
196
254
331
1.0%
17.5%
29.0%
35.0%
29.8%
30.3%
Rate of growth of merchant addition % Y/Y

End of year Merchant growth % Y/Y
June 30, 2015
Ross MacMillan,
19
Shopify Inc.
Lack of profitability and near-term gross margin pressure

Like most fast-growing young companies, Shopify currently is expected to be unprofitable for
the near term. We also expect to see ongoing gross margin pressure near term as lower
margin Merchant Solutions business grows at a rate exceeding that of subscription and
merchant adds. However, we note that gross profit dollars are higher as a result of the
Merchant Solutions business, while customer acquisition costs are the same and churn is
potentially lower. Shopifys target operating model suggests a long-term gross margin of 60
64%, which implies a revenue mix of up to ~30% coming from merchant Services at the
current margin profile. However, we think merchant Services gross margins have the
potential to move higher as new, higher margin services are added.
Exhibit 14: Gross margin mix
Subscription solutions GM
87%
78%
76%
88%
79%
77%
88%
78%
92%
89%
90%
83%
81%
81%
79%
79%
80%
77%
Merchant solutions GM
77%
75%
Overall GM
78%
75%
76%
74%
64%
62%
61%
60%
67%
Shopify launched
Payments in the U.S.
in Q3:2013
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
34%
Jun-13
Sep-13
Dec-13
32%
32%
33%
Mar-14
Jun-14
Sep-14
76%
56%
29%
Dec-14
June 30, 2015
Ross MacMillan,
20
Shopify Inc.
Key financial points

Middle-of-the-pack SaaS metrics, slightly eroding CAC ratio
We benchmark Shopify against other Software as a Service companies in our universe on
their Customer Acquisition Cost ratio (incremental subscription gross profit for the quarter
divided by previous quarters sales and marketing spend). We can see that Shopifys CAC
ratio has gone down over the past few quarters (along with the slight deterioration in
subscription gross margin from ~78% to ~75%). We believe it can stabilize close to the
current level, where the implied payback for a customer is ~18 months.
Exhibit 15: Subscription revenue CAC ratio benchmarking
1.2x
1.0x
0.8x
0.6x
0.4x
0.2x
0.0x
Dec-14
Sep-14
Jun-14
Mar-14
ServiceNow (NOW)
NetSuite (N)
Dec-13
Sep-13
Jun-13
Mar-13
Dec-12
Sep-12
Demandware (DWRE)
Fleetmatics (FLTX)
Salesforce.com (CRM)
Jun-12
Mar-12
Dec-11
Sep-11
Jun-11
Mar-11
Dec-10
Sep-10
Jun-10
Mar-10
Dec-09
Workday (WDAY)
Shopify (SHOP)
Benefitfocus (BNFT)
Ultimate Software (ULTI)

Proofpoint (PFPT)
Gross revenue and profitability per merchant increasing

We see limited ability to raise the basic headline subscription price given competitive
dynamics. We believe this is corroborated by the relatively flat monthly recurring
subscription revenue per merchant over the last two years. However, we believe in the
ability of the company to institute supplemental revenue streams through Merchant
Solutions and other associated features, and highlight the companys growth in gross
profit/gross revenue per merchant over the past several quarters in the chart below.
June 30, 2015
Ross MacMillan,
21
Shopify Inc.
Exhibit 16: Per merchant metrics

$0.30
$0.25
$0.20
$0.15
$0.10
$0.05
$0.00
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Total Revenue per merchant ($M)
Jun-13
Sep-13
Dec-13
Mar-14
Total Gross Profit per merchant ($M)
Jun-14
Sep-14
Dec-14
Mar-15
MRR per merchant ($M)
Subscription revenue margin profile in line with SaaS comps

Shopifys subscription gross margin revenue is high quality and in line with some of the best
of breed SaaS companies. The company discloses and guides to high visibility Monthly
Recurring Revenue (MRR) figures that have grown at an 81% CAGR over the last two years to
$7.4M in 1Q15 primarily due to volume increases (more merchants).
Exhibit 17: Subscription revenue and MRR
MRR growth
Subscription gross margin benchmarking
8,000
100.0%
7,000
90.0%
6,000
5,000
80.0%
4,000
70.0%
3,000
2,000
60.0%
1,000
BNFT
ELLI
ULTI
SHOP
NOW
DWRE
CRM
WDAY
1Q15
4Q14
3Q14
2Q14
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
2Q12
1Q12
50.0%
Source: Company Reports, RBC Capital Markets estimates
June 30, 2015
Ross MacMillan,
22
Shopify Inc.
High and Low Value merchants: Parsing the economics of Shopify

After speaking with the company and conducting more diligence on the space, we believe
that simple averages obscure two very distinct groups within Shopifys customer base. The
Pareto Rule is highly applicable in the case of Shopifys business, and thus we segment into
High Value and Low Value merchants.
We define High Value merchants as those that have sold more than one item on the platform
and pay more than $50 a month (on the Professional/Unlimited/Plus plans) in subscription
fees. We believe this segment of merchants demonstrates significantly lower churn (higher
retention) rates and materially higher average GMVs than the company average. High Value
merchants comprise approximately 30% of the merchant base but account for ~70% of the
GMV. We estimate High Value merchants generate ~$1,500$2,000 of revenue per year per
customer to Shopify (we note that a Shopify Plus customer would be a minimum of $12,000,
for example). Shopify is focused on growing these accounts through a targeted effort
(starting to hire direct sales capability in 2015 to focus on Shopify Plus! sales). We would
expect the trend of Shopify Plus! customers to provide some insight into the overall health of
the High Value segment.
Low Value merchants on the other hand, churn faster due to general business failure rates.
The Low Value segment comprises ~70% of the merchant base and less than ~30% of GMV.
We estimate these customers generate ~$500$600 of revenue per year per customer to
Shopify.
While Shopify should have some ability to target High vs. Low Value merchants (anyone in
the High Value bucket should already have a selling solution for their scale, so it would
involve displacement of competing solutions), part of their business models success also
stems from migrating Low Value merchants upwards. The more services Shopify can provide
to improve business survivability (selling on more channels, reducing churn, reducing
customer buying friction, reducing third-party costs for merchants), the more success they
will see in migrating merchants up the funnel from Low to High Value, and the associated
economics.
Illustrative segmented Customer Lifetime Value analysis

We back into our Customer Lifetime Value assumptions using a 70/30 rule for the GMV split.
While the company does not provide customer-level profitability, we would inherently
assume that High Value customers would be more profitable than Low Value customers due
to their extended lifespans. The purpose of this exercise is primarily to demonstrate that
High Value merchants are hugely more valuable than Low Value or even an average
merchant. The inherent implication, which is unfortunately both difficult to quantify and
track at this point in time, is that upside to our numbers can not only be found by absolute
merchant acquisition figures, but also by a mix shift in the customer base to the High Value
merchants.
June 30, 2015
Ross MacMillan,
23
Shopify Inc.
Exhibit 18: High Value CLTV example

CLTV Analysis
Notes
Year
1
15%
Subscription
Merchant Services (est.)
Annual Revenue
Annual Contribution
$100
$37
$1,644
$1,069
Uplift Multiplier
Annual Value
1.00
$1,069
1.02
$1,090
1.02
$1,112
1.02
$1,134
1.02
$1,157
1.02
$1,180
1.02
$1,203
1.02
$1,227
1.02
$1,252
1.02
$1,277
$908
$845
$778
$714
$659
$590
$542
$516
$488
$460
Failure rate adjusted annual value
2
23%
3
30%
4
37%
5
43%
6
50%
7
55%
8
58%
9
61%
10
64%
Lower Churn
Monthly
Monthly
Annual
Annual
Avg MRR Per Merchant

Avg GMV of 76K per merchant per annum; 0.6% take rate
65%
Discount rate
NPER
Discount rate
10%
1
1.10
2
1.21
3
1.33
4
1.46
5
1.61
6
1.77
7
1.95
8
2.14
9
2.36
10
2.59
PV of annual adjusted value
826
698
585
488
409
333
278
241
207
177
Customer acquisition cost
120
CLTV (Lifetime value less CAC)

Assuming 3 year average lifespan
Gross Margin
Inflation multiplier of 2% per year
706
1,404
1,989
2,477
2,886
Exhibit 19: Low Value CLTV example

CLTV Analysis
Year
Notes
1
25%
2
36%
3
44%
4
50%
5
55%
6
60%
7
63%
8
66%
9
69%
10
71%
Source: statisticbrain.com
Subscription
Merchant Services (est.)
Annual Revenue
Annual Contribution
$20
$28
$576
$288
Monthly
Monthly
Annual
Annual
Avg MRR Per Merchant

Avg GMV of 14K per merchant per annum; 2.4% take rate
Uplift Multiplier
Annual Value
1.00
$288
1.02
$294
1.02
$300
1.02
$306
1.02
$312
1.02
$318
1.02
$324
1.02
$331
1.02
$337
1.02
$344
Failure rate adjusted annual value
$216
$188
$168
$153
$140
$127
$120
$112
$105
$100
50%
Discount rate
NPER
Discount rate
10%
1
1.10
2
1.21
3
1.33
4
1.46
5
1.61
6
1.77
7
1.95
8
2.14
9
2.36
10
2.59
PV of annual adjusted value
196
155
126
104
87
72
62
52
44
38
Customer acquisition cost
120
CLTV (Lifetime value less CAC)

232
358
462
549
621
Gross Margin
Inflation multiplier of 2% per year
June 30, 2015
Ross MacMillan,
24
Shopify Inc.
Long-term margin profile

We highlight the companys long-term margin profile in the exhibit below and address it in
greater detail in the unit economics discussion in the Segments section. We can see the path
to operating leverage on two levels: (1) Gross profit expansion given both mix and
incremental improvements on merchant solutions; and (2) Sales and Marketing spend, given
approximately 80% of the cost base is variable and can be adjusted downward at scale.
Exhibit 20: Long-term margin profile
2012A
2013A
2014A
2015E
2016E
2017E
LT Model
Gross Margin
80%
73%
59%
56%
55%
54%
60-64%
Research and Development
26%
25%
22%
19%
18%
17%
14-15%
Sales and Marketing
51%
46%
43%
38%
36%
32%
20-22%
General and Admin
7%
8%
8%
9%
9%
8%
7-8%
Total Opex
84%
78%
73%
65%
63%
58%
41-45%
Operating Income Margin
-4%
-5%
-14%
-9%
-8%
-4%
20%+
Source: RBC Capital Markets estimates
Revenue sensitivity analysis

We believe our model is conservative in terms of gross merchant acquisition and net
merchant growth. We demonstrate sensitivity in the table below to highlight what could be
possible in two separate cases:
1)
Customer addition sensitivity assuming a base, keeping in mind that the company added
17K merchants from 4Q14 to 1Q15.
Exhibit 21: Top line sensitivity based on customer adds

Customer Adds Sensitivity
Merchants (000s)
Base
Upside 1
Upside 2
2015
4Q14
4Q15
Adds
GMV ($000)
Revenues ($M)
145
196
51
$5,813
$159
0%
145
203
58
$5,898
$161
1%
145
210
65
$5,983
$164
3%
145
218
73
$6,068
$166
4%
145
225
80
$6,153
$168
6%
Merchants (000s)
Base
Upside 1
Upside 2
Difference
2016
Difference
4Q15
4Q16
Adds
GMV ($000)
Revenues ($M)
196
254
59
$8,015
203
274
71
$8,433
$210
0%
$221
11
5%
210
294
84
$8,859
$232
22
10%
218
315
98
$9,295
$243
33
16%
225
337
112
$9,739
$255
45
21%
June 30, 2015
Ross MacMillan,
25
Shopify Inc.
2)
Mix shift We keep our base customer counts from 2015 and 2016, and instead
sensitize the mix of large and small customers within it, assuming similar estimated
historical unit economics.
Exhibit 22: Top line sensitivity based on High Value vs. Low Value merchant mix shift
Mix Sensitivity
4Q15
Base
Upside 1
Upside 2
Mix
Upside 1
Upside 2
Difference from base
Mix
High
Low
Revenues
High
Low
196
59
137
$159
0%
30%
70%
196
64
132
$164
3%
33%
67%
196
69
127
$169
10
6%
35%
65%
196
74
122
$174
14
9%
38%
62%
196
79
117
$178
19
12%
40%
60%
4Q16
Base
2015
Merchants
Mix
2016
Difference
Mix
Merchants
High
Low
Revenues
High
Low
254
76
178
$214
0%
30%
70%
254
81
173
$219
2%
32%
68%
254
86
168
$228
15
7%
34%
66%
254
91
163
$243
30
14%
36%
64%
254
96
158
$263
50
23%
38%
62%
The conclusion from this is that if you assume any degree of accelerated mix shift towards
higher value add customers with a slightly less conservative assumption around customer
adds, you can find material upside to our $210M 2016 revenue estimate number.
Long-term revenue sensitivity

We also perform a longer-term revenue sensitivity analysis, of market share in 2022 and
ARPU CAGR per year till then, to show roughly the range of outcomes depending on
investors views of the main variables. Our base case outcome of ~$1.1B revenues in 2022
assumes ARPU growth to around $1.1K per merchant and that Shopify can gather ~12% of
market share (~1.2M merchants vs. 1Q15s 162K).
Exhibit 23: Top line sensitivity vs. ARPU and market share
Market Share*
Merchant Count (K)
ARPU
2%
2%
3%
4%
5%
6%
7%
8%
9%
10%
2022
CAGR
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
ARPU ($)
$903
$949
$995
$1,044
$1,095
$1,148
$1,202
$1,259
$1,318
4.0%
400
Revenue ($M)
$361
$379
$398
$418
$438
$459
$481
$504
$527
6.0%
600
$542
$569
$597
$627
$657
$689
$721
$755
$791
8.0%
800
$723
$759
$796
$835
$876
$918
$962
$1,007
$1,054
10.0%
1,000
$903
$949
$995
$1,044
$1,095
$1,148
$1,202
$1,259
$1,318
12.0%
1,200
$1,084
$1,138
$1,195
$1,253
$1,314
$1,377
$1,443
$1,511
$1,581
14.0%
1,400
$1,265
$1,328
$1,394
$1,462
$1,533
$1,607
$1,683
$1,763
$1,845
16.0%
1,600
$1,445
$1,518
$1,593
$1,671
$1,752
$1,836
$1,924
$2,014
$2,108
18.0%
1,800
$1,626
$1,707
$1,792
$1,880
$1,971
$2,066
$2,164
$2,266
$2,372
20.0%
2,000
$1,807
$1,897
$1,991
$2,089
$2,190
$2,295
$2,404
$2,518
$2,636
* assumes 10 million merchants

June 30, 2015
Ross MacMillan,
26
Shopify Inc.
Valuation
Our $35 price target is based on the stock trading at 11x our CY17 EV/ Sales estimate of
$271M, a premium to the peer group median multiple of 4x (refer to Exhibit 28). We believe
this premium is acceptable given the higher sustainable growth over a longer period, in light
of the runway the company has in its addressable markets. The price target is also supported
by our DCF that assumes the company achieves ~12% unit market share and 10% higher
ARPU by 2022.
Exhibit 24: Discounted Cash Flow analysis
Cash Flow Projection (FYE)
($ in Ms)
2014
Total Revenue
Y/Y Growth
2022
2023
2024
2025
2026
2027
2028
CAGR: 2014-2028
31%
271
379
531
719
972
1,313
1,641
2,002
2,383
2,812
3,234
3,557
29%
40%
40%
36%
35%
35%
25%
22%
19%
18%
15%
10%
(15)
(14)
(16)
(11)
11
37
72
117
171
230
300
381
506
614
711
-14%
-9%
-8%
-4%
3%
7%
10%
12%
13%
14%
15%
16%
18%
19%
20%
22
35
51
69
90
114
152
184
213
0%
0%
0%
0%
0%
0%
30%
30%
30%
30%
30%
30%
30%
30%
30%
-15
-14
-16
-11
11
37
50
82
119
161
210
267
354
430
498
-14%
-9%
-8%
-4%
3%
7%
7%
8%
9%
10%
11%
11%
13%
13%
14%
142
12
15
23
32
36
49
53
66
80
95
112
129
4%
5%
6%
5%
6%
6%
5%
5%
4%
4%
4%
4%
4%
4%
4%
(20)
(25)
(23)
(25)
(27)
(32)
(43)
(49)
(66)
(66)
(80)
(95)
(112)
(129)
(142)
20%
15%
11%
9%
7%
6%
6%
5%
5%
4%
4%
4%
4%
4%
4%
12
10
15
21
26
35
48
46
51
53
60
59
45
357%
-14%
-45%
61%
71%
40%
24%
34%
35%
-4%
10%
5%
13%
-2%
-23%
Less: Capex
Less: Increase in WC
Y/Y Change in Revs ($)
55
54
51
61
108
152
188
253
341
328
361
380
429
422
323
21%
19%
11%
15%
14%
14%
14%
14%
14%
14%
14%
14%
14%
14%
14%
uFCF
(19)
Y/Y Growth
(21)
(21)
(12)
23
58
70
117
154
207
261
320
414
489
543
10%
1%
-44%
-290%
157%
19%
68%
32%
34%
26%
23%
29%
18%
11%
(21)
(19)
(10)
17
39
42
64
77
93
106
118
138
148
PV of uFCF
2,037
($ in Ms)
961
32%
2,037
68%
2,999
100%
Add: Cash
197
148
7,461
Present Value of Equity

PV of FCF
PV of Terminal Value
Enterprise Value
Less: Debt
2021
210
D&A as a % of Revs
Terminal Value
2020
32%
Add: D&A
WC as a % of Change in Rev
2019
159
NG NOPAT
Y/Y Growth in WC
2018
52%
Tax Rate
Capex as a % of Revs
2017
105
Tax Expense
NOPAT Margin
2016
109%
NG Operating Income
NG Op Margin
2015
WACC = (E/D+E) + (D/E+D)*(1-T)

Return on Equity
Rf
Adjusted Beta
Rp
Re
DCF Assumptions
WACC
10.5%
4.0%
Perpetual Growth Rate
1.3
3.0%
5.0%
Tax Rate
10.5%
30.0%
$2.19
Capital Structure
Equity Value
Equity Value
3,196
FDS
Equity Value/ Share
#Calc
RBC Price Target v Current Price
#VALUE!
0%
Total Capitalization
$35
SHOP Current Share Price
100%
Debt Value
90
#Calc
100%
Rd
3.6%
Tax Rate
30%
WACC
10.5%
June 30, 2015
Ross MacMillan,
27
Shopify Inc.
Exhibit 25: DCF sensitivity analysis

0.0025
Risk Free Rate

Rp
3.25%
3.50%
3.75%
4.00%
4.25%
4.50%
4.75%
5.00%
4.00%
$55
$52
$49
$46
$44
$41
$39
$38
4.25%
$51
$48
$45
$43
$41
$39
$37
$35
Target
4.50%
$47
$45
$42
$40
$38
$36
$35
$33
Share
4.75%
$44
$42
$40
$38
$36
$34
$33
$31
Price
5.00%
$41
$39
$37
$35
$34
$32
$31
$30
5.25%
$38
$37
$35
$33
$32
$31
$29
$28
5.50%
$36
$34
$33
$32
$30
$29
$28
$27
5.75%
$34
$33
$31
$30
$29
$27
$26
$25
0.0025
Risk Free Rate

Rp
3.25%
3.50%
3.75%
4.00%
4.25%
4.50%
4.75%
5.00%
4.00%
8.5%
8.7%
9.0%
9.2%
9.5%
9.7%
10.0%
10.2%
4.25%
8.8%
9.0%
9.3%
9.5%
9.8%
10.0%
10.3%
10.5%
WACC
4.50%
9.1%
9.4%
9.6%
9.9%
10.1%
10.4%
10.6%
10.9%
Analysis
4.75%
9.4%
9.7%
9.9%
10.2%
10.4%
10.7%
10.9%
11.2%
5.00%
9.8%
10.0%
10.3%
10.5%
10.8%
11.0%
11.3%
11.5%
5.25%
10.1%
10.3%
10.6%
10.8%
11.1%
11.3%
11.6%
11.8%
5.50%
10.4%
10.7%
10.9%
11.2%
11.4%
11.7%
11.9%
12.2%
5.75%
10.7%
11.0%
11.2%
11.5%
11.7%
12.0%
12.2%
12.5%
June 30, 2015
Ross MacMillan,
28
Shopify Inc.
Exhibit 26: EV/CY16E sales
17.0x
16.0x
15.0x
14.0x
13.0x
12.0x
11.0x
10.0x
9.0x
8.0x
Average
Source: RBC Capital Markets, FactSet
Exhibit 27: EV/CY16E sales vs. 15-16E Revenue Growth
14.0x
SHOP
12.0x
10.0x
8.0x
HUBS
DWRE
ZEN
6.0x
MKTO
WIX
CVT
4.0x
GDDY
2.0x
0.0x
10%
15%
20%
25%
30%
35%
40%
Source: RBC Capital Markets, FactSet
June 30, 2015
Ross MacMillan,
29
Shopify Inc.
Exhibit 28: Comp sheet

Price
Market
Enterprise
Revenue
EV / Sales
Growth
Company
Ticker
6/29/15
Cap
Cash
Debt
Value
2015E
2016E
2017E
2015E
2016E
2017E
Godaddy
GDDY
$28.18
4,807
198
1,418
6,027
1,601
1,826
2,067
3.8x
3.3x
2.9x
14%
13%
Demandware
DWRE
$68.95
2,735
244
2,491
234
312
nm
10.7x
8.0x
nm
34%
nm
Zendesk
ZEN
$22.71
1,973
122
1,858
194
265
353
9.6x
7.0x
5.3x
37%
33%
Marketo
MKTO
$27.36
1,325
113
1,217
209
278
355
5.8x
4.4x
3.4x
33%
27%
Hubspot
HUBS
$48.58
1,765
124
1,642
167
212
255
9.8x
7.7x
6.4x
27%
20%
Cvent
CVT
$25.72
1,138
168
970
182
224
257
5.3x
4.3x
3.8x
23%
14%
Wix.com
WIX
$23.26
1,091
95
996
203
271
339
4.9x
3.7x
2.9x
33%
25%
Mean
7.1x
5.5x
4.1x
29%
22%
Median
5.8x
4.4x
3.6x
33%
23%
High
10.7x
8.0x
6.4x
37%
33%
Low
3.8x
3.3x
2.9x
14%
13%
16.5x
12.5x
9.7x
32%
29%
Shopify
SHOP
$31.32
2,820
197
2,622
159
210
271
'16E Y/Y Rev '17E Y/Y Rev
Source: Company reports, RBC Capital Markets estimates for Shopify, FactSet for comparables
June 30, 2015
Ross MacMillan,
30
Shopify Inc.
Product overview
Shopifys subscriptions incorporate all the basic functionality that a small business needs to
sell both online and in person (more recently developed). While the old way of ecommerce
involved merchants having to find separate solutions for hosting, payment, analytics, SEO,
etc., Shopify deals with the complexity for a fraction of the cost. The feature set is listed
below for both functions.
Exhibit 29: Feature sets
Sell Online
Storefront
Shopping cart
Store
Management
Marketing and
SEO
Products
Web Hosting
Analytics
Shopify Mobile
24/7 Support
100+ pro themes
Secure s hoppi ng ca rt
Cus tomer profi l es
SEO
Inventory ma na gement
Unl i mi ted ba ndwi dth
Da s hboa rd
Mobi l e da s hboa rd
Dedi ca ted s upport tea m
Mobi l e commerce rea dy
Accept credi t ca rds wi th

Shopi fy
70 pa yment ga tewa ys
Cus tomer a ccounts
Googl e Adwords Credi ts
Product va ri a tions
Da i l y ba ckups
Product reports
Ma na ge i nventory
Knowl edge ba s e
Work wi th expert
Cus tomer Groups
Product orga ni za tion
Ema i l forwa rdi ng
Export reports
Ema i l or ca l l cus tomers
Shopi fy Experts
Ful l bl oggi ng pl a tform
Mul tipl e l a ngua ges
Drops hi ppi ng
Di s count codes a nd
coupons
Soci a l medi a i ntegra tion
Di gi tal products
Level 1 PCI compl i a nt
Googl e Ana l ytics
Da ta s ync
Di s cus s i on Forums
Edi t HTML a nd CSS
Automa tic ca rri er

s hi ppi ng ra tes a nd taxes
Aba ndoned checkout
recovery
Refunds
Ema i l ma rketing
Mul tipl e i ma gs e
Tra ffi c/Referra l reports
Ma na ge on the go
Product revi ews
SEO Product tags
99.98% uptime a nd 24/7

moni tori ng
Ins tant upgra des
Ema i l templ a tes
Sel l on Fa cebook
Unl i mi ted products
Bra nd a nd Cus tomi ze

your onl i ne s tore
Your own doma i n na me
Web-ba s ed webs i te
bui l der
Ecommerce Uni vers i ty
Order Ful fi l ment
Sell In Person
Payments
Checkout
Store
management
Customer
management
Products
Hardware
Analytics
Shopify Mobile
24/7 Support
Accept Credi t Ca rds
Di s counts
Refunds
Cus tomer profi l es
Product orga ni za tion
Work wi th i Pa d or i Phone
Da s hboa rd
Mobi l e da s hboa rd
Dedi ca ted s upport tea m
Us e own termi na l
Cus tom s a l e
Order hi s tory
Sync onl i ne/offl i ne
Ba rcode s upport
POS Ki ts
Product reports
Ma na ge i nventory
Knowl edge ba s e
Spl i t tenders
Order notes
Ca s h fl oa t
Ema i l ma rketing
Inventory Ma na gement
Credi t Ca rd Rea der
Export reports
Ema i l or ca l l cus tomers
Shopi fy Experts
Store Credi t
Ta xes
Da i l y total s
Product va ri a tions
Recei pt Pri nter
Retai l reports
Da ta s ync
Di s cus s i on Forums
Cus tom pa yment types
Shi ppi ng
Staff a ccounts
Product a pps a nd pl ugi ns
Ba rcode s ca nner/pri nter
Pa rtia l pa yments
Bri ng regi s ter to cus tomer
Accounting i ntegra tion
Unl i mi ted products
Free ha rdwa re s hi ppi ng

a nd returns
Gi ft ca rds
Cus tom recei pts
Source: Company website
Simplicity is at the core of the online store setup process. We took 15 minutes from start to
finish in order to set up basic functionality for a trial store. Admittedly, it could have taken
longer if we went through the full range of customizable themes and functionality through
third-party apps. The point is that a merchant can be up and running in a very short space of
time with a professional and highly functional storefront.
June 30, 2015
Ross MacMillan,
31
Shopify Inc.
Exhibit 30: Store creator interface
Source: Shopify
Exhibit 31: Sample storefronts
Source: Shopify Websites
June 30, 2015
Ross MacMillan,
32
Shopify Inc.
Segments
Shopify generates revenue under two reporting segments: Subscription Solutions and
Merchant Solutions.
Subscription Solutions: Shopify generates revenue in this segment through the sale of
subscriptions to its platform, as well as the sale of themes, applications and registration of
domain names. Plans typically have a one-month term, although a small number of
merchants have annual or multi-year terms. Subscriptions auto renew and fees are paid in
advance.
Subscription plans span various price points, from starter plans to plans catered to
merchants with high volume sales and additional functionality requirements (e.g., Gift Card
Support, Abandoned Cart Recovery and Advanced Analytics). Themes, apps and domains
provide uplift to the basic subscription package, averaging ~10% of MRR in 2012, ~7% in
2013 and ~7% in 2014.
Exhibit 32: Unit economics of Subscription
AVERAGE
Average MRR
Average merchants ('000s)
MRR per Merchant
End 4Q14
End 1Q15
1Q15
6,573
7,400
6,987
145
162
153
45
46
46
MRR x 3
20,960
Net sale of Apps/Themes/Domains

Uplift effect
106.6%
Subscription Revenue per quarter
$22,352
Source: Company, RBC Capital Markets estimates
Exhibit 33: Pricing scheme for Basic Subscription plans
Price per month:

Credit Card Rate:
Features:
Starter Plan
Basic
Professional
Unlimited
Plus
$14
$29
$79
$179
$1000+, Custom
Online: 2.9% + 30c
Online: 2.9% + 30c
Online: 2.6% + 30c
Online: 2.4% + 30c
In person: 2.7% + 0c
Custom
1 GB File Storage
Shopify POS
Shopify POS
Shopify POS
Basic plan features
Up to 25 Products
1 GB File Storage
5 GB File Storage
Unlimited File Storage
Account management
24/7 Support
Unlimited Products
Unlimited Products
Unlimited Products
Advanced API
Unlimited bandwidth
24/7 Support
24/7 Support
24/7 Support
Project Management
Chat and email support
Discount code engine
New Feature access
Fraud analysis tools
SSL checkout
Gift cards
Gift cards
Dedicated Priority Support
Professional Reports
Professional Reports
ERP/CRM/Accounting
Abandoned cart recovery
Abandoned cart recovery
Multichannel Sales
Advanced report builder
CDN
Real-time carrier shipping
Custom Fulfilment
June 30, 2015
Ross MacMillan,
33
Shopify Inc.
Merchant Solutions: Revenue is generated through a variety of services provided to

customers, which are correlated with the level of gross merchandise volume (GMV)
processed through the platform. Processing revenue includes credit card processing fees
(through Stripe), transaction fees, and third-party referral fees. The majority of this segment
is Shopify Payments today, which launched in the US in August 2013, in Canada in September
2013, and the UK in November 2014. Payments eliminates the hassle of setting up thirdparty payment gateways and merchant accounts.
Exhibit 34: PayPal comparison
SHOPIFY
Credit Card Rate:
Starter Plan
Basic
Online: 2.9% + 30c
Professional
Unlimited
Plus
Online: 2.9% + 30c
Online: 2.6% + 30c
Online: 2.4% + 30c
$0.01 - $3,000.00
$3,000.01 - $10,000.00
$10,000.01 - $100,000.00
Over $100,000.00
2.9% + $0.30 USD
2.5% + $0.30 USD
2.2% + $0.30 USD
1.9% + $0.30 USD
Custom
PAYPAL MERCHANT RATES

Monthly Sales Volume
Merchant Rates
Merchant solutions represent Shopifys fastest-growing revenue segment. While lower gross
margin than the subscription business, it is overall accretive to revenue/profitability on an
absolute basis. This segment has some variability to it, given the seasonality inherent in any
commerce business (i.e., holiday season GMV). Newer initiatives (currently non-revenue
generating) with slightly different margin profiles such as shipping (starting 3Q) may change
the medium- to long-term margin profile of this segment as they grow.
Cost of Goods
The subscription costs are 7580% and are close to best-in-class SaaS subscription gross
margins. Costs primarily consist of those associated with hosting infrastructure, billing
processing fees, operations and merchant support expenses, third-party developer payouts,
domain registration fees and certain capitalized development costs. The slight decrease in
gross margin percentage in 2014 was principally due to a one-time cost associated with
building out the companys second data center for geographical redundancy, and is expected
to result in operational efficiencies going forward.
Costs for the Payments revenue stream of merchant Services largely comprise of interchange
and fees paid to Stripe (an online payments structure platform). We present an illustrative
gross margin walkthrough below. Keep in mind that payments currently account for 35% of
transaction volumes on the overall platform (resulting in a take rate of ~1%+ on overall
GMV), and this is expected to grow higher over time. Shopify currently supports other
payment providers like PayPal, Authorize.Net, allowing customers full freedom of choice. We
believe continued scale should allow them to gain operating leverage with Stripe and
interchange. Shopifys target model assumes a long-term gross margin of 6064%, which
implies a revenue mix of up to ~30% coming from merchant Services at current gross margin
levels.
June 30, 2015
Ross MacMillan,
34
Shopify Inc.
Exhibit 35: Illustrative unit economics of Payments

Item GMV
$100
Gross Revenue recognized by Shopify
2.9% + 30c
$3.20
Less: Interchange (Visa/Mastercard/Amex)
$1.81
Stripe
$0.26
Default/Chargeback/Others
$0.17
Total COGS
$2.24
Gross Profit
$0.96
Gross Margin
30%
Sales and Marketing

We focus on the Sales and Marketing line item in opex as we expect to see the most leverage
(up to 1200 bps) from this line versus the target financial model. Shopify has not had a
salesforce for most of its history and has only recently started to hire the first batch of its
quota carrying salespeople. These salespeople are targeting Shopify Plus! customers, which
as we outline above, we believe have materially higher lifetime values and should be strongly
value-accretive to the company even at a higher acquisition cost. We explored the slightly
deteriorating CAC ratio in the Key Financial Points section, and benchmark Sales and
Marketing costs as a percentage of revenue in the chart below.
Exhibit 36: Benchmarking Sales and Marketing costs as a % of revenue
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
N
WDAY
CRM
DWRE
NOW
SHOP
ULTI
ELLI
BNFT
40% of customers have historically been acquired through organic means (word of mouth)
given Shopifys thought leadership in the space. 30% of other customer acquisitions have
typically come half from partner referrals and the remaining 30% from advertising spend
(Facebook and Google).
June 30, 2015
Ross MacMillan,
35
Shopify Inc.
We estimate online ad spend at ~45% of overall Sales and Marketing costs; headcount
related costs at 3540%, with the remaining split between partner referrals and others. Thus,
we can conceptually see leverage on about 80% of the Sales and Marketing cost base (more
so on the headcount side than the online ad spend side), both as the company uses
headcount to target High Value merchants, and as the Shopify brand effect increases the
efficacy of the ad spend. We highlight the Google Trends graph below, of Shopify vs. their
closest competitors.
Exhibit 37: Google Trends of Shopify vs. competitors
To get a sense of the competitive dynamic and sustainability of Shopifys brand advantage,
we ran a series of 16 Google search terms covering three main themes Attracting new
customers (e.g., Start ecommerce business), Switching to competitive alternatives (e.g.,
Alternatives to Bigcommerce), and Vertical specific searches (e.g., Sell Jewelry Online). The
results were telling and mirror the Google Trends graph, with none of Shopifys closest
competitors in the SMB space showing up in the organic search results.
Exhibit 38: May 2015 Paid vs. Organic search results
Paid search results
10
9
8
8
7
6
5
4
3
2
1
0
Shopify
Organic search results
BigCommerce
Volusion
18
16
14
12
10
8
6
4
2
0
16
Shopify
May-15
BigCommerce
Volusion
May-15
Source: Company Reports, RBC Capital Markets
June 30, 2015
Ross MacMillan,
36
Shopify Inc.
Management team
Tobias Ltke Chief Executive Officer and Co-Founder
Tobias Ltke co-founded Shopify in September 2004. Mr. Ltke has served as Chief Executive
Officer since April 2008. Prior to that, Mr. Ltke acted as the Chief Technology Officer
between September 2004 and April 2008. Mr. Ltke worked on the core team of the Ruby on
Rails framework and has created many popular open source libraries such as Active
Merchant.
Russell Jones Chief Financial Officer

Russell Jones has been the Chief Financial Officer since March 2011. Prior to his appointment
at Shopify, Mr. Jones served as Chief Financial Officer to both BDNA Corporation from
September 2009 to August 2010 and to Xambala Incorporated from September 2007 to
February 2011. Between March 2002 and August 2007, Mr. Jones co-founded CFO4Results,
which provided interim chief financial officer, business and operational support services to a
number of early to mid-stage technology companies. Mr. Jones holds a Bachelor of
Commerce (Honors) degree from Carleton University and is a CPA, CA.
Daniel Weinand Chief Design Officer and Co-Founder

Daniel Weinand joined Shopify in August 2005 and co-founded the Shopify platform that
launched in 2006. He has been Chief Design Officer since 2008 and Chief Culture Officer since
2012. Prior to joining Shopify, Mr. Weinand was a freelance web designer for private and
corporate clients. Mr. Weinand studied Computer Science and Music at the University of
Dortmund in Germany.
Harley Finkelstein Chief Platform Officer

Harley Finkelstein has acted as Chief Platform Officer since 2010. Prior to that, Mr.
Finkelstein founded numerous other startups and ecommerce companies. Mr. Finkelstein
currently serves on the board of The C100, a non-profit organization that supports Canadian
technology entrepreneurship through mentorship, partnership and investment. Mr.
Finkelstein holds a B.A. degree in Economics from Concordia University and a J.D./M.B.A.
joint degree in Law and Business from the University of Ottawa.
Cody Fauser Chief Technology Officer

Cody Fauser has served as Chief Technology Officer since 2008, after acting as a software
developer at Shopify for the prior two years. Mr. Fauser holds a Bachelor of Science degree
in Computer and Electrical Engineering from the University of Alberta.
Craig Miller Chief Marketing Officer

Craig Miller joined Shopify in September 2011 and acts as Chief Marketing Officer. Mr. Miller
previously held several product and marketing roles at Kijiji, an eBay Company, between
2009 and 2011. Mr. Miller holds a Bachelor degree in Electrical Engineering from McGill
University.
Joseph Frasca General Counsel

Joseph Frasca has served as General Counsel and Secretary for Shopify since May 2014. Prior
to his appointment at Shopify, Mr. Frasca was Senior Corporate Counsel at EMC Corporation
between May 2011 and May 2014 and Corporate Counsel at EMC Corporation between
January 2008 and May 2011. Mr. Frasca also worked in private practice as an Associate at
Skadden, Arps, Slate, Meagher & Flom LLP prior to EMC. Mr. Frasca holds a J.D. from Boston
University School of Law, a Master of Arts in Law and Diplomacy from The Fletcher School at
Tufts University and a B.S. in Russian Language and Linguistics from Georgetown University.
June 30, 2015
Ross MacMillan,
37
Shopify Inc.
Exhibit 39: Income statement

CY14
Mar-14
CY15E
Dec-17E
FY17E
15.6
17.7
20.4
66.7
22.4
23.0
23.7
26.2
95.3
29.0
30.7
31.1
33.4
124.2
35.9
37.9
38.4
41.3
153.6
Y/Y
74%
80%
75%
69%
74%
71%
48%
34%
29%
43%
30%
33%
31%
28%
30%
24%
24%
24%
24%
24%
Q/Q
8%
19%
14%
15%
10%
3%
3%
10%
11%
6%
1%
8%
7%
6%
1%
8%
Q/Q
Total Revenue
Y/Y
Q/Q
Cost of Subscription Solutions
Subscription Solutions Gross Margin
Cost of Merchant Solutions
Merchant Solutions Gross Margin
Total Cost of Revenue
Dec-14
FY14
Mar-15
Jun-15E
Sep-15E
Dec-15E
FY15E
Mar-16E
Jun-16E
Sep-16E
CY17E
13.1
Y/Y
Sep-14
CY16E
Subscription Solutions Revenue
Merchant Solutions Revenue
Jun-14
Dec-16E
FY16E
Mar-17E
Jun-17E
Sep-17E
5.8
8.1
9.7
14.8
38.3
15.0
15.1
15.4
18.4
63.9
18.8
20.0
21.5
25.5
85.8
25.7
27.3
29.3
34.9
117.1
253%
313%
264%
162%
222%
160%
86%
59%
24%
67%
25%
33%
40%
38%
34%
37%
36%
36%
37%
37%
2%
41%
19%
54%
1%
1%
2%
20%
2%
7%
7%
19%
1%
6%
7%
19%
18.8
23.7
27.3
35.2
105.0
37.3
38.1
39.1
44.6
159.1
47.7
50.8
52.6
58.9
210.0
61.6
65.2
67.7
76.2
270.7
106%
123%
115%
98%
109%
98%
61%
43%
27%
52%
28%
33%
34%
32%
32%
29%
29%
29%
29%
29%
6%
26%
15%
29%
6%
2%
3%
14%
7%
6%
4%
12%
5%
6%
4%
13%
3.2
3.8
4.6
4.9
16.5
5.0
5.5
5.8
6.3
22.6
7.1
7.5
7.6
8.0
30.3
8.6
9.1
9.2
9.9
36.9
75.2%
75.7%
74.2%
75.7%
75.2%
77.8%
76.0%
75.5%
76.0%
76.3%
75.5%
75.5%
75.5%
76.0%
75.6%
76.0%
76.0%
76.0%
76.0%
76.0%
3.9
5.5
6.5
10.5
26.4
10.8
11.2
11.5
14.0
47.4
14.2
15.1
16.2
19.1
64.6
19.3
20.5
21.9
26.2
87.8
32.3%
31.9%
32.8%
29.0%
31.1%
28.3%
26.0%
25.0%
24.0%
25.7%
24.5%
24.5%
24.5%
25.0%
24.6%
25.0%
25.0%
25.0%
25.0%
25.0%
7.1
9.3
11.1
15.5
43.0
15.7
16.7
17.3
20.3
70.0
21.3
22.7
23.8
27.1
94.9
27.9
29.6
31.2
36.1
124.7
Total Gross Profit
11.7
14.4
16.3
19.7
62.0
21.6
21.4
21.8
24.3
89.1
26.5
28.1
28.7
31.8
115.1
33.7
35.7
36.5
40.1
146.0
Total Gross Margin
62%
61%
60%
56%
59%
58%
56%
56%
55%
56%
55%
55%
55%
54%
55%
55%
55%
54%
53%
54%
Sales and Marketing
9.6
12.4
11.3
12.0
45.2
13.4
14.6
15.7
16.1
59.7
17.7
18.6
19.2
19.1
74.6
20.9
21.5
21.7
22.9
87.0
Research and Development
5.2
6.0
6.1
5.9
23.1
6.5
7.5
7.8
8.0
29.9
9.5
9.6
9.5
10.0
38.7
11.4
11.7
11.5
12.6
General and Administrative
1.7
2.0
2.2
2.7
Operating Expense
16.5
20.5
19.5
Operating Profit
(4.9)
(6.1)
(3.2)
-25.8%
-25.7%
Other Income/ expemse
(0.4)
Pre Tax Income
(5.2)
Operating Margin
47.2
8.7
3.2
3.6
3.5
3.6
13.9
4.3
4.6
4.7
4.7
18.3
5.2
5.5
5.7
6.4
22.7
20.5
77.0
23.1
25.8
27.0
27.7
103.5
31.5
32.8
33.4
33.8
131.6
37.5
38.7
38.8
41.8
156.9
(0.8)
(15.0)
(1.5)
(4.3)
(5.2)
(3.4)
(14.4)
(5.1)
(4.7)
(4.7)
(2.0)
(16.5)
(3.8)
(3.1)
(2.3)
(1.7)
(10.9)
-11.8%
-2.4%
-14.3%
-3.9%
-11.4%
-13.4%
-7.6%
-9.1%
-10.6%
-9.2%
-8.9%
-3.5%
-7.8%
-6.2%
-4.7%
-3.4%
-2.2%
-4.0%
0.2
(0.2)
(0.3)
(0.7)
(1.1)
(0.3)
(0.3)
(0.3)
(1.8)
(0.3)
(0.3)
(0.3)
(0.3)
(1.0)
(0.3)
(0.3)
(0.3)
(0.3)
(1.2)
(5.9)
(3.4)
(1.1)
(15.7)
(2.5)
(4.6)
(5.5)
(3.6)
(16.2)
(5.3)
(4.9)
(4.9)
(2.3)
(17.5)
(4.1)
(3.4)
(2.6)
(2.0)
(12.1)
Tax
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Tax rate
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
(5.2)
(5.9)
(3.4)
(1.1)
(15.7)
(2.5)
Net Income
(4.6)
(5.5)
(3.6)
(16.2)
(5.3)
(4.9)
(4.9)
(2.3)
(17.5)
(4.1)
(3.4)
(2.6)
(2.0)
(12.1)
(0.08)
(0.07)
(0.05)
(0.26)
(0.07)
(0.06)
(0.06)
(0.03)
(0.22)
(0.05)
(0.04)
(0.03)
(0.02)
(0.15)
Y/Y
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
Q/Q
NM
NM
NM
NM
NM
NM
NM
NM
(0.09)
NM
(0.09)
NM
(0.06)
NM
(0.35)
NM
(0.09)
NM
(0.08)
NM
(0.07)
NM
(0.07)
NM
EPS Operating
EPS GAAP
(0.11)
(0.10)
(0.07)
(0.31)
(0.10)
NM
NM
NM
NM
NM
NM
NM
NM
NM
Basic Shares Outstanding
55.7
75.6
76.7
61.9
77.5
78.3
79.1
79.9
78.7
80.7
81.5
82.3
83.1
81.9
Fully Diluted Shares Outstanding
55.7
75.6
76.7
61.9
77.5
78.3
79.1
79.9
78.7
80.7
81.5
82.3
83.1
81.9
Y/Y
Q/Q
(0.30)
NM
June 30, 2015
Ross MacMillan,
38
Shopify Inc.
Exhibit 40: Income statement analysis

( $ in millions, except per share data)
CY14
Mar-14
Y/Y Growth
Revenues
Gross Profit
Operating Income (non-GAAP)
Net Income (non-GAAP)
Cost of Revenues
R&D
S&M
G&A
Operating Expenses
CY15E
Jun-14
Sep-14
Dec-14
74%
80%
253%
313%
106%
123%
58%
67%
-1307%
432%
-1364% 259098%
75%
264%
115%
70%
32%
282%
FY14
CY16E
Mar-15E
Jun-15E
Sep-15E
Dec-15E
69%
162%
98%
74%
-66%
-56%
71%
160%
98%
85%
-76%
-52%
48%
86%
61%
49%
35%
-22%
34%
59%
43%
34%
522%
62%
FY15E
CY17E
Mar-16E
Jun-16E
Sep-16E
Dec-16E
29%
24%
27%
23%
-78%
216%
30%
25%
28%
22%
17%
111%
33%
33%
33%
31%
-11%
7%
31%
40%
34%
32%
38%
-10%
FY16E
Mar-17E
Jun-17E
Sep-17E
Dec-17E
28%
38%
32%
31%
-86%
-37%
24%
37%
29%
27%
-19%
-23%
24%
36%
29%
27%
-34%
-31%
24%
36%
29%
27%
14%
-46%
24%
37%
29%
26%
-90%
-12%
FY17E
301%
176%
128%
189%
147%
362%
166%
143%
138%
149%
248%
65%
87%
119%
82%
141%
24%
56%
98%
49%
120%
25%
39%
85%
40%
80%
25%
18%
79%
26%
57%
29%
39%
60%
38%
31%
37%
34%
30%
35%
35%
46%
32%
34%
37%
36%
28%
27%
26%
27%
37%
21%
23%
34%
24%
34%
25%
19%
32%
22%
31%
19%
18%
20%
19%
31%
22%
16%
20%
18%
31%
22%
13%
20%
16%
33%
25%
20%
36%
24%
8%
2%
6%
3%
98%
102%
19%
41%
26%
23%
25%
13%
14%
19%
15%
13%
-47%
-43%
15%
54%
29%
21%
-74%
-66%
10%
1%
6%
10%
75%
120%
3%
1%
2%
-1%
196%
82%
3%
2%
3%
2%
20%
19%
10%
20%
14%
12%
-35%
-34%
11%
2%
7%
9%
50%
47%
6%
7%
6%
6%
-8%
-8%
1%
7%
4%
2%
0%
0%
8%
19%
12%
11%
-56%
-53%
7%
1%
5%
6%
85%
78%
6%
6%
6%
6%
-18%
-17%
1%
7%
4%
2%
-25%
-22%
8%
19%
13%
10%
-27%
-24%
11%
11%
25%
25%
20%
30%
15%
29%
17%
24%
19%
1%
-9%
9%
-5%
40%
-3%
6%
25%
5%
2%
12%
12%
17%
12%
6%
15%
9%
13%
12%
4%
4%
7%
-3%
5%
17%
3%
3%
1%
3%
5%
19%
10%
21%
14%
6%
1%
5%
6%
4%
5%
-2%
4%
4%
2%
14%
6%
-1%
0%
1%
3%
14%
10%
10%
11%
6%
3%
3%
6%
3%
5%
-2%
1%
4%
0%
16%
9%
6%
13%
8%
69%
31%
100%
62%
-26%
66%
34%
100%
61%
-26%
65%
35%
100%
60%
-12%
58%
42%
100%
56%
-2%
63%
37%
100%
59%
-14%
60%
40%
100%
58%
-4%
60%
40%
100%
56%
-11%
61%
39%
100%
56%
-13%
59%
41%
100%
55%
-8%
60%
40%
100%
56%
-9%
61%
39%
100%
55%
-11%
61%
39%
100%
55%
-9%
59%
41%
100%
55%
-9%
57%
43%
100%
54%
-3%
59%
41%
100%
55%
-8%
58%
42%
100%
55%
-6%
58%
42%
100%
55%
-5%
57%
43%
100%
54%
-3%
54%
46%
100%
53%
-2%
57%
43%
100%
54%
-4%
38%
28%
51%
9%
88%
39%
25%
52%
9%
86%
40%
22%
41%
8%
71%
44%
17%
34%
8%
58%
41%
22%
43%
8%
73%
42%
17%
36%
9%
62%
44%
20%
38%
10%
68%
44%
20%
40%
9%
69%
45%
18%
36%
8%
62%
44%
19%
38%
9%
65%
45%
20%
37%
9%
66%
45%
19%
37%
9%
65%
45%
18%
37%
9%
64%
46%
17%
32%
8%
57%
45%
18%
36%
9%
63%
45%
19%
34%
8%
61%
45%
18%
33%
8%
59%
46%
17%
32%
8%
57%
47%
17%
30%
8%
55%
46%
17%
32%
8%
58%
EPS - Diluted (Non-GAAP)

EPS - Diluted (GAAP)
Q/Q Growth
Revenues
Gross Profit
Cost of Revenues
R&D
S&M
G&A
Operating Expenses
EPS - Diluted (Non-GAAP)
EPS - Diluted (GAAP)
% of Revenues
Revenues
Gross Profit
Cost of Revenues
R&D
S&M
G&A
Operating Expenses
June 30, 2015
Ross MacMillan,
39
Shopify Inc.
Exhibit 41: Balance sheet

Shopify
Balance Sheet
Mar-14
80.9
Jun-14
74.2
CY14
Sep-14
65.5
Dec-14
42.0
CY15E
Sep-15E
169.7
17.7
7.3
1.0
195.7
CY16E
Sep-16E
144.5
17.7
9.8
1.0
173.0
CY17E
Sep-17E
129.8
17.7
12.6
1.0
161.2
5.3
5.9
6.5
7.2
85.8
80.9
72.8
68.4
FY14
42.0
17.7
7.2
1.5
68.4
PPE
Goodwill
Intangibles
Total LT Assets
5.5
2.4
1.4
9.4
8.0
2.4
1.6
11.9
15.8
2.4
2.0
20.2
21.7
2.4
2.7
26.8
21.7
2.4
2.7
26.8
25.5
2.4
1.4
29.3
29.9
2.4
1.7
34.0
34.7
2.4
3.3
40.4
39.8
2.4
3.5
45.6
39.8
2.4
3.5
45.6
42.1
2.4
3.7
48.2
44.5
2.4
4.0
50.9
47.2
2.4
4.7
54.2
50.0
2.4
5.0
57.4
50.0
2.4
5.0
57.4
52.2
2.4
5.6
60.2
54.6
2.4
5.7
62.7
57.1
2.4
5.8
65.3
59.9
2.4
6.0
68.2
59.9
2.4
6.0
68.2
Total Assets
95.2
92.8
92.9
95.2
95.2
97.3
236.2
236.1
232.9
232.9
232.4
229.2
227.2
226.4
226.4
226.7
226.1
226.5
226.9
226.9
9.0
4.9
0.4
14.4
10.1
5.6
0.4
16.1
12.0
6.0
0.4
18.5
12.5
6.8
0.5
19.8
12.5
6.8
0.5
19.8
15.9
7.9
0.5
24.3
15.6
9.0
0.5
25.0
18.0
9.6
0.5
28.2
18.2
9.8
0.5
28.5
18.2
9.8
0.5
28.5
21.9
10.7
0.5
33.1
23.3
10.9
0.5
34.7
24.8
12.1
0.5
37.3
25.3
12.8
0.5
38.6
25.3
12.8
0.5
38.6
28.7
13.5
0.5
42.7
30.5
14.2
0.5
45.1
32.4
14.9
0.5
47.8
33.6
15.7
0.5
49.8
33.6
15.7
0.5
49.8
LT Deferred
Lease Incentives
Total LT Liabilities
0.2
0.4
0.6
0.2
2.2
2.4
0.3
3.2
3.5
0.4
7.3
7.7
0.4
7.3
7.7
0.4
7.8
8.2
0.7
7.8
8.5
0.8
9.8
10.7
1.0
9.8
10.8
1.0
9.8
10.8
1.2
9.8
11.0
1.3
9.8
11.2
1.6
9.8
11.5
1.9
9.8
11.7
1.9
9.8
11.7
2.2
9.8
12.0
2.5
9.8
12.3
2.8
9.8
12.7
3.2
9.8
13.1
3.2
9.8
13.1
Total Liabilities
15.0
18.5
21.9
27.5
27.5
32.6
33.5
38.8
39.3
39.3
44.1
45.9
48.8
50.3
50.3
54.7
57.5
60.5
62.9
62.9
64.8
202.7
197.2
193.6
188.2
183.3
178.4
176.1
172.0
168.6
166.0
164.0
97.3
236.2
236.0
232.9
232.3
229.2
227.2
226.4
226.7
226.1
226.5
226.8
Cash
ST Investments
Trade and Other Receivables
Other ST Assets
Total ST Assets
Accounts Payable and Accrued Liabilities

ST Deferred Revenue
ST Lease Incentives
Total ST Liabilities
Shares
APIC
Accumulated Deficit
Shareholders Equity
Shareholders Equity and Total Liabilities
80.2
74.3
71.0
67.7
91.1
5.7
(29.1)
67.7
95.2
92.8
92.9
95.2
95.2
Mar-15
41.5
17.7
7.3
1.5
68.0
Jun-15E
176.0
17.7
7.1
1.5
202.3
Dec-15E
161.5
17.7
7.1
1.0
187.3
FY15E
161.5
17.7
7.1
1.0
187.3
Mar-16E
156.1
17.7
9.4
1.0
184.2
Jun-16E
150.1
17.7
9.5
1.0
178.3
Dec-16E
139.3
17.7
11.0
1.0
169.0
FY16E
139.3
17.7
11.0
1.0
169.0
Mar-17E
135.7
17.7
12.2
1.0
166.5
Jun-17E
132.5
17.7
12.2
1.0
163.4
Dec-17E
126.2
17.7
13.8
1.0
158.7
FY17E
126.2
17.7
13.8
1.0
158.7
June 30, 2015
Ross MacMillan,
40
Shopify Inc.
Exhibit 42: Cash Flow statement

Mar-15
0.0
Jun-15E
(6.1)
CY15E
Sep-15E
(13.4)
Dec-15E
(19.0)
4.7
3.8
0.7
0.1
1.5
1.4
0.0
0.0
3.5
3.0
0.0
0.0
5.7
4.7
0.0
0.0
8.0
6.8
0.0
0.0
0.5
0.0
0.0
0.0
Change in Receivables
Change in Payables
Changes in Lease Incentives
Changes in Deferred Revenue
Changes in non-working capital items
7.3
2.8
1.7
(0.1)
1.8
0.5
1.1
1.3
0.1
1.4
0.5
2.5
1.1
Cash flow from Operations
(0.8)
7.6
5.9
(20.5)
(17.8)
(2.1)
(3.8)
0.3
0.0
(10.2)
0.0
0.0
(17.2)
0.0
0.0
(24.6)
0.0
0.0
(40.4)
(3.6)
(10.2)
(17.2)
0.1
0
0.1
138.3
0.0
0.1
0.1
(0.5)
0.0
Net Loss
Amortization and Depreciation
Stock Based Compensation
Vesting of Restricted Stock
Gain/ Loss on Asset Disposal
Other
Unrealized Foreign Exchange Loss
Capex
Purchase/ Sales of ST Investments
Intangible Assets
Acquisitions of businesses, net of cash
Cash flow from Investing
Issuance of Shares
Proceeds from exercise of stock options
Cash flow from Financing
Effect of foreign exchange on cash and equivalents

Net Increase of cash
Cash - BoP
Cash - EoP
Mar-14
(6.4)
1.0
1.1
Jun-14
(13.2)
2.1
2.1
CY14
Sep-14
(17.5)
3.4
3.0
Dec-14
(22.3)
4.7
3.8
0.7
FY14
(22.3)
(41.6)
83.5
42.0
4.1
42.0
46.0
Mar-16E
(7.6)
Jun-16E
(14.9)
CY16E
Sep-16E
(22.3)
Dec-16E
(27.3)
Mar-17E
(7.0)
Jun-17E
(13.5)
CY17E
Sep-17E
(19.4)
Dec-17E
(24.8)
8.0
6.8
0.0
0.0
2.8
2.2
0.0
0.0
5.8
4.6
0.0
0.0
9.0
7.2
0.0
0.0
12.5
9.9
0.0
0.0
12.5
9.9
0.0
0.0
3.4
2.9
0.0
0.0
6.9
6.0
0.0
0.0
10.7
9.3
0.0
0.0
14.8
12.7
0.0
0.0
14.8
12.7
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(0.1)
3.9
2.5
3.3
(0.1)
0.1
4.1
2.5
3.7
(0.3)
0.1
4.1
2.5
3.7
(0.3)
(2.3)
3.7
0.0
1.0
(0.2)
(2.4)
5.1
0.0
1.4
(0.5)
(2.7)
6.6
0.0
2.9
(1.2)
(3.9)
7.1
0.0
3.9
(1.5)
(3.9)
7.1
0.0
3.9
(1.5)
(1.2)
3.4
0.0
1.0
(0.6)
(1.2)
5.2
0.0
2.0
(0.7)
(1.6)
7.2
0.0
3.0
(0.8)
(2.8)
8.3
0.0
4.2
(0.9)
(2.8)
8.3
0.0
4.2
(0.9)
6.7
5.9
5.9
(0.3)
(0.8)
(0.6)
0.5
0.5
1.9
4.8
8.4
11.5
11.5
(24.6)
0.0
0.0
(5.1)
0.0
0.0
(10.6)
0.0
0.0
(16.4)
0.0
0.0
(22.7)
0.0
0.0
(22.7)
0.0
0.0
(5.6)
0.0
0.0
(11.6)
0.0
0.0
(17.9)
0.0
0.0
(24.7)
0.0
0.0
(24.7)
0.0
0.0
(24.6)
(24.6)
(5.1)
(10.6)
(16.4)
(22.7)
(22.7)
(5.6)
(11.6)
(17.9)
(24.7)
(24.7)
138.3
0.0
138.3
0.0
138.3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
138.3
0.0
138.3
138.3
138.3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
134.0
42.0
176.0
127.7
42.0
169.7
119.6
42.0
161.5
119.6
42.0
161.5
FY15E
(19.0)
(5.4)
161.5
156.1
(11.4)
161.5
150.1
(17.0)
161.5
144.5
(22.2)
161.5
139.3
FY16E
(27.3)
(22.2)
161.5
139.3
(3.6)
139.3
135.7
(6.8)
139.3
132.5
(9.5)
139.3
129.8
(13.1)
139.3
126.2
FY17E
(24.8)
(13.1)
139.3
126.2
June 30, 2015
Ross MacMillan,
41
Shopify Inc.
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June 30, 2015
Ross MacMillan,
42
Shopify Inc.
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June 30, 2015
Ross MacMillan,
43
Shopify Inc.
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For the purpose of ratings distributions, regulatory rules require member firms to assign ratings to one of three rating categories
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Distribution of ratings
RBC Capital Markets, Equity Research
As of 30-Jun-2015
Investment Banking
Serv./Past 12 Mos.
Rating
BUY [Top Pick & Outperform]
HOLD [Sector Perform]
SELL [Underperform]
Count
Percent
Count
Percent
935
707
117
53.15
40.19
6.65
293
124
6
31.34
17.54
5.13
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June 30, 2015
Ross MacMillan,
44
Shopify Inc.
https://www.rbccm.com/global/file-414164.pdf
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June 30, 2015
Ross MacMillan,
45
Shopify Inc.
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Ross MacMillan,
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Shopify Initiation

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Shopify Initiation

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RBC Capital Markets, LLC

RBC Dominion Securities Inc.

June 30, 2015

Shopiflying High: Initiating at Sector Perform

NYSE: SHOP; USD 31.32; TSX: SH

Price Target USD 35.00

*Implied Total Returns

Market Cap (MM):

All values in USD unless otherwise noted.

Product and vision drive differentiation in a crowded space: We think

Exhibit 1: Shopify Inc.

Shopify provides a leading multichannel operating system

Rel. S&P 500 COMPOSITE

Source: Bloomberg and RBC Capital Markets estimates for Upside/Downside/Target

Target price/base case

June 30, 2015

(212) 428-7917; ross.macmillan@rbccm.com

We think Shopifys global addressable market is in the $10B range, sized by

2. What differentiates Shopify from other

Designed from the ground up as a dedicated ecommerce solution, we think

3. Is Shopifys target financial model

4. Is Shopify a potential strategic asset?

June 30, 2015

(212) 428-7917; ross.macmillan@rbccm.com

June 30, 2015

(212) 428-7917; ross.macmillan@rbccm.com

Source: Company reports

IPO and Ownership

June 30, 2015

(212) 428-7917; ross.macmillan@rbccm.com

Key investment points

Accounting Software approach

Online backup approach

Methodology 2: Government website statistics

June 30, 2015

(212) 428-7917; ross.macmillan@rbccm.com

Transportation and warehousing

Finance and Insurance

Real estate and rental

Professional, scientific, technical

Management of companies and enterprises

Arts entertainment rec

Accomodation and food services

Source: Census.gov, RBC Capital Markets estimates

June 30, 2015

(212) 428-7917; ross.macmillan@rbccm.com

Exhibit 4: Market sizing

Sum of Quickbooks, Xero, Sage and MYOB customer bases

European Commission + SBA.Gov

International growth opportunity

Attractive merchant dynamics with respect to growth and

Merchants vs pure-play competitors 2010 vs 2015

Source: Company Reports, TechCrunch, Practicalecommerce.com, RBC Capital Markets estimates

June 30, 2015

(212) 428-7917; ross.macmillan@rbccm.com

Cohort analysis suggests unit churn is broadly offset by ARPU increases

June 30, 2015

(212) 428-7917; ross.macmillan@rbccm.com

Attractive value proposition to merchants

If I was happy with Magento I would have stuck with it

Ability to be customized on front and back end for Shop

Source: Selected customer interviews

June 30, 2015

(212) 428-7917; ross.macmillan@rbccm.com