Shopify Inc. (NYSE:SHOP) Q3 2023 Earnings Call Transcript

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Offline GMV increased 26% year-over-year in the quarter, driven primarily by larger retailers joining the platform. Nearly a third of point-of-sale GMV in Q3 came from Shopify Plus merchants, and our point-of-sale pro subscriber base was up 34%. All powerful indicators that our world class point-of-sale product is fueled by an even stronger go-to-market that is delivering results and bringing more merchants onto the platform. The strength of our unified commerce platform and scalability of our retail channel continues to draw in major omnichannel retailers, like Banana Republic Home, Princess Polly and the Sacramento Kings. We’ve worked consistently to build out the features and functionality that larger, multi-location retailers require, including powerful, customizable staff permissions, remote management of the point-of-sale products, and innovative professional payment devices like our new point-of-sale go, which we brought to the UK and Ireland in the quarter.

Many of these larger merchants are using Shopify point-of-sale to streamline their operations, giving them a clearer view of their business and greater ability to build personalized customer relationships. Even as more and more large brands choose Shopify for our unified commerce capabilities, we remain the best commerce offering for small and medium sized businesses. This is evident on our ongoing partnership with Intuit as well as our newly established partnership with Faire, making them a recommended wholesale marketplace. As part of the partnership, Faire also recommends Shopify as the preferred provider for delivering exceptional point-of-sale experiences to their merchant base, which has hundreds of thousands of retail shops in 20 countries.

This partnership further reinforces the robustness of our offering for retailers aiming to stay at the forefront of commerce. As consumers increasingly expect to interact with their favorite local shops both online and in person, we spent the past year developing a plan for retailers who primarily operate in physical locations, but also desire a simple online presence. We call it our retail plan. Tailored for retail first businesses for $89 a month, retailers can leverage the strength of Shopify through a point-of-sale platform to help them run and manage their brick and mortar stores. Since its launch in early August, 16% of our Retail Pro locations growth has come from merchants subscribing to this plan. While it’s still early days, the retail plan is just another way in which we are uniquely positioning ourselves to expand the entry points into Shopify, thereby facilitating more commerce through a platform driving the Shopify flywheel.

In addition to our success in the retail channel, the momentum in our B2B business continues to accelerate. During the third quarter, our business nearly doubled year-over-year, and by August, we already had surpassed our entire B2B GMV for all of 2022. These are strong indicators that our efforts to develop advanced features for B2B are making an impact, and we have no intention of slowing down. To establish ourselves as industry leaders, particularly for large enterprise merchants, we’re leveraging our rapid innovation and product development muscle to bring additional wholesale features such as staff permissions for sales reps and extensible discounts to make it easier to drive sales. As more consumer favorite brands on Shopify like Laura Mercier and bareMinerals adopt this product, we continue to tap into our immense potential of our platform to enhance our engagement with our existing merchants and support them in growing this channel.

Beyond serving our existing merchant base, B2B is a huge growth opportunity for Shopify to tap into new verticals and cater to an entirely new cohort of merchants who exclusively conduct B2B transactions. It is a massive industry that we believe we can fundamentally transform in our efforts to continue to make commerce better for everyone. As we look to further expand and strengthen our market presence as a leader in commerce, choice and flexibility matter. We have proven that serving both start-ups and large companies is not mutually exclusive, especially when you have one of the best ecosystems on the planet to deliver at both ends of the market. Our partner ecosystem is the largest ecosystem of commerce partners in the world with 4 times more global partners than the next largest commerce provider.

The ecosystem that we have cultivated and extended over the years includes our community of developers and partners that are dedicated to commerce, more than 10,000 apps in our app store, top system integrators like IBM and Deloitte, as well as our recently announced partnership with multinational advertising and technology company, WPP, and strong platform partnerships like Stripe, globally as well as newer partnerships like the expanded ones we are building with Flexport and Adyen. One of Shopify’s greatest strengths is creating world class partnerships with commerce and product companies that are a win-win for both parties. This is central to the flywheel that every company tries to cultivate that we actually have and are incredibly proud of.

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