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Speaker 1: Shopify made progress in its attempt to prioritize its core

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Speaker 1: business after cost cutting and price changes. The Canadian e

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Speaker 1: commerce giant reported second quarter sales and profit that beat

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Speaker 1: analyst expectations. President Harley Finkelstein said the results speak to

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Speaker 1: Shopify's efforts to improve shipping and expland its global merchant base.

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Speaker 1: Harley joins us Now, good morning, good afternoon to you.

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Speaker 2: Harley.

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Speaker 1: Okay, so a beat in the quarter, somewhat negative share reaction,

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Speaker 1: and Morgan Stanley actually raised its price target on the

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Speaker 1: stock fifty four dollars to fifty nine. But they point

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Speaker 1: out that what was missing was a roadmap for investors

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Speaker 1: to understand how you're going to grow in the future.

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Speaker 2: So let's start there.

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Speaker 1: How are you going to grow in the future.

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Speaker 3: Well, look, I mean you started by talking about are

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Speaker 3: announcement last quarter were reported on Q one. We talked

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Speaker 3: about that we are really creating a new ship or

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Speaker 3: ketting a new shape of sharp led make sure we

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Speaker 3: can go faster with greater talent density for focus on

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Speaker 3: our main quest, which is commerce software and retail software.

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Speaker 3: And the results are you know, the results exemplify that, right.

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Speaker 3: Revenue is up thirty one percent to one point seven

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Speaker 3: billion gmbs up to seventy was up to fifty five

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Speaker 3: billion dollars. That's up seventeen percent. I think the thing

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Speaker 3: that people missed, however, is that we are also earning

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Speaker 3: more parts of merchants businesses. We use a metric here

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Speaker 3: called the product attach rate, which measures the usage of

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Speaker 3: our products, all of our products by our merchants, and

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Speaker 3: that was above three percent for the second time. All

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Speaker 3: that and we also had the third consecutive quarter of

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Speaker 3: positive free cash flow, and we expect that actually free

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Speaker 3: cash flow profitability for the third quarter of this year

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Speaker 3: to be great at the entire first half. So we're

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Speaker 3: really firing on all cylinders here. But in terms of

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Speaker 3: our you know, the future and what we're looking to

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Speaker 3: do next, there's a couple things. First of all, we

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Speaker 3: now know that most people that are considering starting a

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Speaker 3: business do so with Shopify. People that have ideas in

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Speaker 3: the shower in the morning, aspirational entrepreneurs, Shopify is the

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Speaker 3: go to for them.

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Speaker 2: Now we know all not all will.

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Speaker 3: Succeed, but the ones that do come to Shopify and

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Speaker 3: stay with Shoplight long to the future. I mean, that's

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Speaker 3: the gym sharks stories. That's the All Birds story, the

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Speaker 3: fig story, these homegrown success stories. But we're also seeing

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Speaker 3: very large brands coming to Shopify as well. Whether it's

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Speaker 3: companies like Spanks, or it's Mattel, or it's Colossier, or

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Speaker 3: it's Staples. We're seeing the enterprise come to us too.

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Speaker 3: So that's the first thing. The second thing is when

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Speaker 3: you look horizontally about our through our merchant solutions, whether

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Speaker 3: it's Shopify Payments or Shopify Capital or Shoplight Audiences which

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Speaker 3: helps you buy ads more effectively, or things like Collective,

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Speaker 3: you're seeing we are looking across every pain point that

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Speaker 3: a merchant may have and making it easies. Even and

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Speaker 3: I were talking offline earlier, it's before we started about

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Speaker 3: the size of Shopify. I mean, Shopify now powers more

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Speaker 3: than ten percent of all US e commerce retail which

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Speaker 3: means that if we were a retailer, we'd be the

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Speaker 3: second largest retailer in America online retailer in America. And

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Speaker 3: that means that we can now get incredible economies of

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Speaker 3: scale and give them to the millions of stores that

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Speaker 3: you shopify, and we are set up at the future

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Speaker 3: and we're.

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Speaker 1: Yeah, so Holly, I understand this story the primary growth

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Speaker 1: engine business formation, and those new businesses stay.

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Speaker 2: With you for a long time.

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Speaker 1: So what happens in a recession when new businesses are

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Speaker 1: not formed.

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Speaker 3: Yeah, there's two things that happen in a recession. First

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Speaker 3: of all, existing businesses look to one modernize the technology

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Speaker 3: software they use, and they look to also find the

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Speaker 3: best value the best value in the software they use.

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Speaker 2: That's Shopify.

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Speaker 3: I mean, for thirty nine dollars a month, you can

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Speaker 3: build a multimillion dollar in some cases a multi billion

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Speaker 3: dollar company. So Shopify is value to cost ratio is

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Speaker 3: so far on the side of value that even in

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Speaker 3: times of recessionary pressure, we've seen more and more merchants

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Speaker 3: migrate to Shopify.

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Speaker 2: That's the first thing.

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Speaker 3: The second thing is on the consumer side. One of

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Speaker 3: the other things that we're seeing in you know, the

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Speaker 3: GMV this quarter demonstrates that we saw fifty five billion

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Speaker 3: dollars of GMB flow through Shopify. Consumers in these recessionary

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Speaker 3: times vote with their wallets to buy direct from the

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Speaker 3: brands they really care about, and all those brands are.

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Speaker 2: On shop as well.

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Speaker 3: So both on the merchant side and the consumer side,

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Speaker 3: we think that we've been around for almost.

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Speaker 2: Two decades now, we've seen that we do well.

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Speaker 3: In both you know, boom cycles and bear cycles, and

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Speaker 3: we'll continue doing that.

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Speaker 1: Harley, can you quantify it the exposure that the Shopify

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Speaker 1: has to new business versus I suppose the way of

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Speaker 1: putting it is established online merchants.

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Speaker 2: Yeah, that's the best part ed. We can do both.

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Speaker 2: So the idea that you.

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Speaker 3: Can start, you know, you can you have an idea

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Speaker 3: in the morning, you can sit down at your mom's

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Speaker 3: kitchen table or at a coffee shop and you can build

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Speaker 3: a store on shop line a matter of a couple

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Speaker 3: of hours for thirty nine dollars. We see that happening

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Speaker 3: every single day. At the same time, we're seeing much

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Speaker 3: larger brands migrate over to Shopify as well, whether it's

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Speaker 3: the Alo Yogas or the Viewrys or the Spanks or Supreme,

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Speaker 3: one of my favorite brands coming on to us to

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Speaker 3: leverage this enterprise scale software. So that's the great part

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Speaker 3: of the business model. It isn't simply just one segment

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Speaker 3: of the market. It's the entire e commerce stack. And

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Speaker 3: then when you think about the few future of retail

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Speaker 3: being retail everywhere, I mean our point of sale product.

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Speaker 3: This particular quarter had an incredible had incredible quarter. We're

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Speaker 3: now going and ripping it and replacing all dilapidated traditional

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Speaker 3: point of seale system with shop by point of sale,

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Speaker 3: and what you end up with is a fundamentally a

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Speaker 3: retail operating system.

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Speaker 2: And I think that's what modern retailers want.

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Speaker 3: They want one single place where they have an entire

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Speaker 3: view of their business, regardless of sales channels.

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Speaker 2: I heard a.

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Speaker 3: Previous guest talk about, you know, Etsy being a great

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Speaker 3: sales channel. Well, from Shopify, you can push products at

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Speaker 3: Etsy if you want. You can also push products to

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Speaker 3: TikTok and Instagram and online and offline and everywhere, but

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Speaker 3: it all feeds back into one centralized retail operating system,

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Speaker 3: and that really is a shop line product.

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Speaker 1: There's a relationship between Shopify and Amazon Amazon reporting after

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Speaker 1: the bell, and it's focused on fulfillment. A lot of

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Speaker 1: folks I've spoken to want to understand what progress is

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Speaker 1: there the relationship with Amazon and shop fi. To many,

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Speaker 1: it's kind of been a slow mover.

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Speaker 2: Yeah.

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Speaker 3: Look, I said this on the call yesterday because I

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Speaker 3: got questions like this. You know, we're still progressing there,

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Speaker 3: but there's no news to report on that just yet.

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Speaker 1: Okay, understood. We started this segment talking about the cost

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Speaker 1: cuts you've made, particularly in the context of profit, and

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Speaker 1: then the roadmap a lack of roadmap for future growth

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Speaker 1: to cost excuse me to cost cuts continue? Or are

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Speaker 1: you going to start investment mode again to start growing

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Speaker 1: this business?

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Speaker 2: Yeah.

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Speaker 3: And the important part to understand of a Shopify that

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Speaker 3: I think a lot of our investors and actually think

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Speaker 3: you probably know this too, is that we've always been

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Speaker 3: very thoughtful but spending, and we've always spent in a

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Speaker 3: very disciplined fashion.

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Speaker 2: We were not raised on venture capital.

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Speaker 3: Of the way some of our peers were, so we

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Speaker 3: always from the very early days of Shopify, we always

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Speaker 3: made sure we stretched every dollar. So spending will happen,

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Speaker 3: but in a very disciplined fashion. And so what we think,

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Speaker 3: what we're seeing is that while our beex will remain stable,

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Speaker 3: revenue will continue to grow mean revenue again up thirty

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Speaker 3: one percent year on year. When we see opportunities, however,

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Speaker 3: where we can actually have incredible returns right now, for example,

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Speaker 3: and things like offline marketing and point of sale, where

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Speaker 3: the cost of customer acquisition profiles look really in line

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Speaker 3: with an optimal you know, cap to LTV ratio. We're

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Speaker 3: going to take those and we'll spend there, but we

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Speaker 3: will always do so in an incredible an incredibly disciplined fashion.

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Speaker 3: In terms of the team size that you mentioned, we

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Speaker 3: want to make sure we retain the best and the

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Speaker 3: brightest on Shopify. We really like the size of the

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Speaker 3: company right now. We expect headcounter remain largely consistent and

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Speaker 3: we're not looking to undo any of the HEADCOUMT.

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Speaker 2: Decisions from last quarter.

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Speaker 3: But obviously we do want to make sure the best

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Speaker 3: and the brights come here and stay here and what

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Speaker 3: can you do so in a very discipline buffle way.

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Speaker 1: All right, Shop five, President Harley think Lstein. When you're

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Speaker 1: ready to talk about Amazon, do it back here on

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Speaker 1: bloembck Technology.

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Speaker 2: Thank you,