Good morning. My name is Sylvie and I will be your conference operator today. At this time, I would like to welcome everyone to the Shopify Q1 2016 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Katie Keita, Director of Investor Relations, you may begin your conference.

Good morning. Thank you all for joining us for Shopify's first quarter 2016 conference call. Opening today's call is Tobi Lütke, Shopify's founder and CEO. After Tobi's remarks, Harley Finkelstein, our Chief Operating Officer will discuss our progress, especially with regards to partners and Shopify Plus. Then Russ Jones our Chief Financial Officer will review our first quarter results and discuss our expectations for the rest of 2016. After that, we will open it up for your questions. First a brief reminder that during today's discussion we will make forward-looking statements which are based on current assumptions and our subject to risks and uncertainties that could cause actual results to differ materially from those projected in these statements. We undertake no obligation to update these statements except as required by law. Information about these risks and uncertainties is contained in our press release this morning as well as in our filings with securities regulators in both Canada and the U.S. Also our commentary today will include adjusted financial measures which are non-GAAP measures which should be considered as a supplement to and not a substitute for our GAAP financial measures. Reconciliations between GAAP and non-GAAP financial measures for our reported results can be found in our earnings press release which is available on our website. And finally, note that we report in USDs all amounts discussed or in U.S. dollars unless otherwise indicated. With that, I will turn the call over to Tobi. Tobi Lütke: Thanks for joining us today and thanks again for your interest in Shopify. We've got another really great quarter and sort of high-level what happened is really gratified to see so many new merchant adds. I mean obviously that is really very important to us, especially entrepreneurs who are adopting our platform to start and…

Thanks Tobi and thanks everyone who is listening in this morning for your interest in Shopify. I'm glad to have a couple of minutes here to update you all on some of the great things we accomplished this past quarter. As you know, I took on the role of Chief Operating Officer in January to allow Tobi to further focus on product and technology while I work more closely with our merchants and partners. I just have been assuming merchant support as part of my new responsibilities which has been a great group to take on because we have an amazing team there with strong leadership in place. This past quarter in a nutshell. As Tobi mentioned we hosted a fantastic conference in San Francisco in March with our top partners from around the world. We made good progress developing the Shopify Plus program and adding new merchants there and on the ground we continue to see really solid execution from teams all around Shopify on the opportunity that surrounds us. Let me start with Unite our partner conference. With more than 650 partners attending we had a sold-out event which is a great achievement for an inaugural conference. Even so, this is still just a small sample of our much larger global community of partners who are building their own successful businesses on top of Shopify. They are building apps for us. They are building teams for us and they are referring merchants to us. We announced a number of new SDKs and [indiscernible] the conference and one of the more exciting SDKs is a sales channel SDK. The sales channel SDK makes Shopify's APIs available to partners and merchants wanting to integrate a new sales channel with the Shopify platform. These are the very same APIs we use…

Thanks Harley. As you saw in our results this morning we had another great quarter and delivered a solid start to 2016. We continue to benefit from the ongoing strong demand that exists for ever-expanding platform among entrepreneurs of all sizes including some of the largest and best known brands in the world. On top of this we continue to benefit from our merchant success through capabilities like Shopify Payments and now Shopify Shipping. Revenue in the first quarter of 2016 grew by 95% over the same period of 2015 to $72.7 million. $38.7 million or 53% of this was subscription solutions revenue. Year-on-year growth of subscription solutions revenue was 73%. The main driver here was the continued strong addition of new merchants to the Shopify platform which surpassed 275,000 merchants during the first quarter. One thing we discovered as we have integrated additional selling channels is they are also a source of new merchants and as a result we targeted some additional marketing spend in the quarter to capitalize on this. As most you know it is because of this wide variety of merchants that we focus on a monthly recurring revenue rather than merchant growth as one of our key metrics. MRR expanded to $12.8 million at the end of Q1. This compares with $11.3 million at the end of the fourth quarter of 2015 and $7.4 million at the end of the first quarter of 2015. Our Q1 merchant solutions revenue grew 127% year-on-year to $34 million. The rapid growth here was due to a couple of things. First, the expanding base of merchants coupled with the sales success of existing merchants drove GMV on the Shopify platform in Q1 to approximately $2.7 billion, not far off the $2.8 billion of GMV achieved in the seasonably strong…

Thank you, Russ. Sylvie, we are ready to open up the lines for questions.

Very good. [Operator Instructions] Your first question comes from the line of Michael Nemeroff of Credit Suisse. Please go ahead.

Thanks for taking, hi this Karl [indiscernible] sitting in for Michael. Thanks for taking the question and congratulations on a really strong quarter. I guess just to Tobi or Harley, as you look at the initiatives that you've announced over the last 6 to 12 months [indiscernible] shipping the developer SDKs, the conversational commerce and then Shopify Capital, I guess in your view what represents the largest opportunity and how would you rank the financial contributions from these initiatives in the near term and then the long term?

Yes, so excellent question which I don’t have a direct answer for. Like even internally, like we have sort of our company like talks a lot about [indiscernible] and the launch of lot of initiatives as I think you guys are observing in our first year as a public company. Like if you take a step back and sort of look at all this and like I think what you see is that all the things that we launched cohesively move our software into a certain direction that we think is where all software has to go in our market and which is really to empower and enable small businesses and then be there for the larger ones as well than the smaller ones make it to the size. It is where they have the [indiscernible] they all pushes to a flywheel and we actually don’t get too hung up on the individual contribution of their initiatives but rather because we see the value and not in any individual ones but in the way how they are compound on to each other. So you can easily see this and just two things we are currently talking about like merchant cash advances and like the Kit acquisition clearly go where there is leverage between those two because making the capital available to a business that allows them to invest into the top of their business. And then giving them a good way of using some of that capital outside of just financing their merchandise to sell but to put it smartly into the marketing is a really good way how two things interact already and intersection of most things that is now available to any individuals.

Great, that's helpful. Thanks for the color. And I guess Russ, clearly a really strong quarter in terms of net merchant additions. In your view is there anything standout that drove this strong merchant adds perhaps retention, the digital marketing experiments, partner outperformance? And then also based on what you've seen thus far this year, do you see any risk that you could add fewer net merchants this year than you did in 2015?

No, to answer the second part of that, no. I think we'll see continued good merchant growth throughout the year. In terms of Q1, it's really some of the merchants that are coming to the platform for some of our social media capabilities, we started to experiment with a little bit more paid marketing on those platforms and it quickly turned into a lot of new merchants. And so we think that was a good thing for the quarter because typically Q1 is one of our slower quarters for merchant growth, so the fact that it was a record for us, I think puts us in a very good position for the year.

That’s really helpful. Congratulations on the results.

Your next question comes from the line of Ross MacMillan of RBC Capital Markets. Please go ahead.

Thanks so much and congratulations from me as well on a strong quarter. Maybe I can just start with Russ one for you on merchant solution gross margins, they were up sequentially for the second quarter in a row and by a bigger amount, is that a function of lower interchange as you start to move into international payments or are we starting to see the early impact from shipping?

Yes I think there is a couple of things that we saw in the quarter, definitely international becoming a bigger piece where we see better margins is part of it. Interchange itself we did see some improvement there. With our volume we move into better sort of price ranges with some of the contracts we have negotiated, so some of that happened. Shipping did have an impact on the overall merchant solutions margins. And then the last one is that during every quarter we take a provision for potential losses on the chargebacks that hit payments. For Q4 with the higher volume, the amount of that provision as you would expect gets a bit larger, but then we didn’t see that from an experience point of view in Q1 and so that benefited the Q1 margins.

That is great, great color. Thank you. And maybe one for Tobi, just curious obviously we have seen this very strong breakout in merchant net adds and there is a lot of incremental channels that you opened up especially around social and increasingly now with the investments in Plus. I’m just curious, is social really the - maybe the key driver as Russ alluded to, is that the one where you’re seeing the most traction quickest from a new channel perspective? Thanks. Tobi Lütke: I think the driver, the main driver you are looking for is actually people using multiple channels. I think, I mean again this was previously not talked about, but clearly was the extra demand of our market, except with no software kind of fulfilling this need. So we do have substantial number of people coming into the Shopify platform now selling directly into a social channel, to them that is where they are from, that is where maybe they talked a lot about the product, they were creating, that is where they had the initial audience. That is the first one they wanted to aggregate, but then the time to second channel like which often is the website they are turning on or like you may go on sort of a similar channel like from Facebook to something like Pinterest which like has some similarities in the way you would promote is a common thing. But really it’s not like, I think this is probably pretty obvious as well, where we are going to is we are talking a lot about channels because we are launching channels right now. But we shouldn’t actually think about any individual channel as a big thing. But I think the importance is that the channels are kind of going to middle in the future right, because what you really want to do is, you want to think about your product, you want to think about your business, you want to think about promoting your business. And when the channel is in implementation detail of how the order happens. And the important thing for the business is that you know channels right and I think like we very clearly stated that that is our ambition and we would like to enable this and like even if a particular channel that you might be interested in happens to not be part of official offering right now, I think there is significant amount of trust now that this will come and the channel SDK which we just launched will ensure that you will be able to see, subscribe products in across all the channels on the Internet and I think this is really the place we are going to.

Thanks and maybe just one quick one for Russ I want to ask is, just on the Unite conference, could you quantify maybe the impact on sales and marketing in the quarter, is that a material impact on that line? Thank you.

Yes so in Q1 the cost was just under $2 million for Unite. Originally we had in our original projections we thought it would be a little bit less than that. But the demand and the number of partners that attended went up from our original estimates and so relative to what we were thinking it was a little big higher than that, but it is just under that $2 million.

That is great, congratulations again. Thanks a lot.

Your next question comes from the line of Gil Luria of Wedbush Securities. Please go ahead.

Thank you, good morning. So the peers did the relationship integration with marketplaces and in various channels becoming an important differentiator, what is the nature of the agreements that you have with the Amazon, Facebook or Pintrest? Are those exclusive to an extent or relationships that say BigCommerce has with eBay, that exclusive or could eBay get out of the channel later on? Is this something that you can keep your competitors out of or will eventually everybody be integrated with all the channels?

Hey there, this is Harley, I will take that question. Thanks for that. In terms of the channels as Tobi mentioned we want to allow our merchants to sell whatever they potentially have customers hanging out and so there were some channels that we build ourselves like Facebook and Pinterest and Twitter those integrations, in other cases by opening up the sales channel SDK we now allow any channel and any marketplace anywhere in the world in any specific product vertical to easily and easily allow our merchants across those products on those platforms. In terms of the exclusivity, we certainly do not have exclusivity with these marketplaces or platforms. That being said, we tend to be early on an early partner for them simply because we think a product carefully here and we are able to provide them with integrations at a much faster pace and in many cases at higher quality than others might be able to. But certainly we expect that other competitors of ours may also integrate with these channels eventually, but we think we are certainly ahead of the curve there.

And then on Merchant Cash Advance, the value proposition is very clear from your perspective from the small business perspective, but one of the things we have seen is there is recently IPO payments company out there that has so gotten enamoured with this business that it now represents substantial amount of their growth, almost half of their growth in revenue. And that now puts them at a significant amount of risk if there is a change in the credit cycle if their third party financers decide to pull out. Would you ever foresee it becoming that big that it’s so much of your business that you put the rest of the business at risk?

It’s still at a very early stage, but I mean with the strength of our platform and the number of merchants and what they’re doing on the platform unlikely to get us in the situation that you’re referring to. The other thing that I think is important is, although it is a revenue source and it’s a high margin revenue source, it’s not the prime driver here. Really the prime driver is how do we make merchants more successful because as part of that they become stickier on the platform and because of our other merchant solutions we also participate in their success, so that is kind of the really the drivers for us. In addition, the advances that we’re talking about are pretty short term in their nature and so any sort of macro trends there is something we could react to, but also relative to the market itself, the position that we’re in with the amount of data and information on a particular merchant also puts us in a good position to make sure that we’re doing it in a very thoughtful way in terms of the risk associated with it.

Got it, thank you very much.

Your next question comes from the line of Colin Sebastian of Robert Baird. Please go ahead.

Great, thanks and congrats guys on another fine quarter. I have a couple of questions, first off following up on the merchant subscriber growth which was above our expectations, I wonder if you could address any changes you are seeing in the competitive environment? I know a couple of other platforms announced expanded services recently. And then secondly Russ, on the last call, I think you highlighted R&D and infrastructure as the key incremental investments for 2016, but given the bigger step ups from Q4 were actually in sales and marketing and G&A which you described a bit. I was hoping you could frame the trajectory of those expense line items as we look through the balance of the year? Thanks.

Yes so if you look at the area of the investment actually sales and marketing through our investment in Plus and of the conferences and other marketing activities is an area that we were expecting to see increases year-on-year and so that clearly was the case. On the R&D front, I mean we're in a great position competitively and from a roadmap point of view and so we'll continue to add R&D and other related resources as they become available and we've had quite a good success there Q1 with actually another good hiring period for us. In terms of the merchants, again all sources of places that we get merchants whether it's organic, through the partners or through paid mechanisms generated good increases in merchant growth, so nothing specific to an area there.

Okay and then lastly, I was hoping you could just clarify on the payment side the difference between the integration you've had with the Stripe and now with PayPal? I know PayPal cited an expanded relationship with Shopify on their earnings call. Thanks very much.

Yes, so when we on board merchants and Shopify Payments we also on board them PayPal as well and really the expansion of the relationship there was just an expansion of our partnership outside of really North America, so to align with the places that we're being successful on the payment side.

Thank you.

Your next question comes from the line of Richard Davis of Canaccord. Please go ahead.

Hey, thanks guys it's DJ on the line for Richard. So you spent a bunch of time talking about growth in mobile on the call. So I guess my question is, do you feel like you're better able to monetize merchants when GMV comes in via mobile channels? And I guess what I mean is, I know the economics are the same, but do you feel like there are more tools that you can sell to enable success on this front or does the channel not really matter to Shopify and that's just the direction that commerce is moving?

Yes, I think it's too early to tell. Like right now you're right it looks the same to us, because frankly because a lot of our business model has been developed in a pre-mobile mode. I think the concept of the SaaS company predates like iPhone by good deal. So in terms of the way the all this model is going to invoice and how it's going to be reacting how it depends on the channels and the way that merchants have their business and so on. All these kind of things haven’t really crystallized yet, I would say. It’s a good question. I would give a more in-depth answer if I had one. Like mobile is really it’s really just sort of not as far long as I think a lot of people think and frankly, it's not that sort of global brainstorm about how to really build mobile applications, constellations and businesses frankly. It is not as far along as sort of the calendar suggests. Just because it is such a, I think we all thought when the Smartphone came out that this was sort of like a touch enabled smaller PC and maybe just I think we all didn't like appreciate the magnitude until it like sort of almost hit us over the heads. And so I think now like no one is confused about this anymore and now you see a lot of things and of course as phenomenal success stories of a very good companies that are mobile and the more sources a thing that are unheard of. And so far I think what we what we did well is maybe like came on to these conclusions a little bit early. We always have advantage of all the data that's a sort of they are at our fingertips. And we are fully focused right now on how can something so big as a ecommerce software can run again like something that you built into your lunch break or that can run like $100 million a year business how you shrink something like this completed to the phone and then how like can we be the e-commerce and commerce software of choice in a world where people don't like to get their laptops out of their closets any more or out of their drawers or wherever they store them.

Yes now it makes sense. And then maybe – this is maybe geared towards Russ, on the Shopify Plus side, can you just talk about direct sales hiring plans for this year, how many reps do you guys have now? Is your target for yearend, can you wrap any numbers around that that would be helpful?

Hey DJ, it is Harley. I'll take this question. In terms of how many sales do we have, we’d mentioned that we ended last year sort of in the mid teens. We're going to continue to add to the Plus sales team as we need and we expect that that team will be amongst one of the fastest growing teams for the year, but more than that we're not giving any specifics on it.

Okay, got it. All right thanks guys, good quarter.

Your next question comes from the line of Monika Garg with Pacific Crest Securities. Please go ahead.

Hi, thanks a lot for taking my question. First on the Shopify capsule could you maybe provide more details like for example what were you expecting as an attach rate as a percent of GMV less than 1% e as advances to merchant and then which sources do you plan to raise capital from and if you can provide details around remittance rates, factor rates anything else? Thanks.

In terms of the sort of the larger projection there, too early at this stage to go in much. I mean, we've done it in the initial phase two. Hundreds of merchants just to make sure that we had a lot of the operational stuff found out. For the initial rollout we will do it with our own balance sheet and our credit facilities that we already have in place. But we are exploring a number of other options as we see that take up improve. In terms of factor rates we're looking in the low teens in terms of that. The reason being is really what we're trying to do is really just help businesses get to the next level. So that's really where we're going to see the monetization from it. And in terms of repayment rate it really ties into the amount that we're giving as well as the sales of that merchant has and so we adjust that accordingly.

Okay thanks. And then your business definitely is growing very fast and it is understandable you have to invest. But you've raise 2016 revenue guidance did not raise EBITDA guidance so when are you expecting to be EBITDA positive, cash flow positive?

So we've always talked about hitting adjusted operating income in the fourth quarter of 2017 and that remains our plan.

Got it, thank you, so much.

Your next question comes from the line of Darren Aftahi of ROTH Capital Partners. Please go ahead.

Thanks guys. Thanks for taking my questions and I'll add my congratulations as well. Just a couple, first so on your integration with Facebook Messenger how does that help you if at all in terms of driving the merchants that we are using Facebook pages for local brand awareness and then now you said you've kind of increased paid marketing on social channels, but I'm curious if that's actually sort of the lead generation for you as the channel.

So the Facebook Messenger integration so far, I don't think has impact directly on synapse [ph] other than that is something that about some merchants might want to take advantage off and they might be considering a re-platform and might so, like a decision to what Shopify. So I mean this is also because like the Facebook messenger channel like the entire like really in infancy pick up rates by our customer bases is extremely enthusiastic. It has been growing very, very quickly. Our merchants' feedback we are getting is like incredibly positive, like being - because one thing it does to the sales process is that instead of getting a standard email confirmation that everyone has probably hundreds of in their inbox. We can deliver this like the buying confirmation directly through Facebook Messenger which it draws you into a chat with the merchants and the merchants love to get their little thank you back and love the opportunity to just actually engage our customer base and almost they are more sort of pre-Internet kind of way like the little chitchat that happens after in the checkout line that we have lost and this move towards electronic payments. So again these are all purchase on a Flywheel. So this is the way we think about it. We don’t really have like [indiscernible] model or Facebook Messenger going on that that tells us exactly what might be coming out of it we just know that it makes the Flywheel go faster and that the Facebook together we are going to fully explore the potential of commerce through these chat channels and we are already excited about sort of medium and forward plans that we're hatching.

Great and then just second, you know Russ I think you had said you took that aid, social marketing in the quarter and that kind of helped with merchant growth. Is that something you plan to increase going forward, maybe just some color around I mean your marketing spends to the channel will be helpful? Thanks.

Yes, so for all of these things we do experiments and once we find an experience works, we will put so more dollars towards it and then when it stops working then we'll move the investment somewhere else. And so not a craze increase there, but just something again very thoughtful like everything else we invest in.

Great thank you.

Your next question comes from the line of Brian Essex from Morgan Stanley. Please go ahead.

Good morning, thank you for taking the question and congratulations from me as well on the quarter. I was wondering if maybe this is a question for Harley that given that you are still in the Shopify Plus questions, but I was wondering aside from getting greater detail what is the philosophy with which you go in that business? And when I say that I mean we've seen some other vendors kind of stumble in that regard given in the particular businesses is much higher customer acquisition costs. So I guess in terms of growth philosophy there as you look to grow that business how do you look to measure the profitability or the efficacy of that sales force in that effort versus the growth of the rest of the business?

Thanks for the question Brian. So unlike most enterprise software businesses we don’t have an enterprise, traditional enterprise sales team behind it with massive commission structures and long lead time and closing times. In many cases what we're noticing is that a lot of these larger brands, whether it is Nescafe or it is Jones Soda, they are actually looking for quick time to market. They are looking for a product that is really easy to use and easy to customize and they are looking to be able to sell many millions of dollars on it without even thinking about the infrastructure. And so, in many ways a lot of these larger brands are starting to operate with a similar needs to what the entrepreneurs need and in that case having built Shopify initially for entrepreneurs and continue to focus on entrepreneurs a lot of these large brands are coming to us in that regard. In terms of some of the different ways that we are working to better monetize some of these brands, again a lot of these brands do come to us with existing payment gateways, others are coming and actually using our payment gateway which is great to see, but were running, I mean even though these brands are traditionally large enterprise brands we are – the way that we're selling to them and marketing to them is really as we do with the rest of our merchants. Obviously they are getting a little bit more handholding but other than that we're able to do that scale and in a very effective way.

Got it, that's super helpful, so thank you. And is there a way to think about the payback on that business in terms of these represented - are these direct reps at this point paying for themselves or do you have a certain amount of visibility that you land a large deal with a large enterprise customer and you have certain amount of visibility that that can be a self-sustaining effort?

I mean in some cases obviously they are coming to us and it is inbound in those cases those deals are closed pretty quickly, in other cases it takes a little bit longer to ensure that we can provide them everything that they are looking for, specifically for those that are migrating off larger platforms we'd want to make sure that they have a comfort and the confidence that we can provide them everything they were getting from one of the larger enterprise platforms, but we think we're doing a good job there.

Great, thank you.

Your next question comes from the line of Kevin Krishnaratne of Paradigm Capital. Please go ahead.

Hi good morning guys. A questions for you, as so channel seems to be the theme of the year for sure and great to see the number of channels increasing, I'm wondering as you add more channels and as merchants enable more channels is that potentially a way for merchants to potentially move up from one of the low lower level key packages into a higher channel? I'm just thinking as the number of channels and the complexity in the business grows that makes things like the Report Builder and Advanced Analytics a bit more attractive to them. So I'm wondering if the adding of channels can help stimulate growth in price plans?

Yes probably through two ways. So clearly more channels will result in more sales and so there are some capabilities like reporting that become more relevant the more sales you have. The other way is that the way we price the merchant solutions is that you get for example lower payment processing rate as you move to higher plans. So the two very much go hand-in-hand.

Okay great and then I guess just related question on channels, I know it is very early days on the social channels, but you had great, great read throughs on some of the players like Twitter and Facebook this quarter in terms of SMB growth. I'm wondering nothing quantitative, but are there any kinds of need examples or anything that has surprised you with respect to use cases from merchants that have been that coming into the system on either of those platforms?

Yes, I wish I would like a really, really good example, but unfortunately nothing directly comes to mind. I mean one of my favorite things about Shopify is we do get to get a little bit of an inside view at sometimes at just what's going on in a market and we can even sort of see the nature of entrepreneurship changing and it is just like it is extremely gratifying to just watch, like I can watch people because, you know like 10 years ago I was building a snowboard store and it was just absolutely like the [indiscernible] like experience. I was trying to find my first customer but actually like had a profound impact on me and now I see entrepreneurs with exactly the same kind of background to the one I had and like of formative like experience in retail industry. And they just arrived this massive audiences which are sort of accidentally created by just being into saying and then could like savagely [ph] creating the products that fell into the kind of thing and becoming this massive business overnight. I'm just like, I'm just stunned. And then this - like it's something I kind of expected to see that, but at this point we're kind of seeing it daily and it is just really cool. And we're seeing this kind of this kind of think definitely on the social channels a lot more just because, like a lot of people just didn’t know that they had monetizable audiences. They built them for completely other reasons, not for business reasons. They just knew something they are much better than some other people are into commenting on it and that's how they built them. And so explaining – we are almost, our positions is almost creating a product that's just sort of suggests to them, but by way like you didn’t know of this, but you actually built a business and that's cool to see that.

That's great to hear. Congrats again on a great quarter.

Your next question comes from the line of Terry Tillman from Raymond James. Please go ahead.

Hi, thanks for taking my questions. Most of them have been answered, but I still had a couple. I guess if you looked on your website it talks about selling on Amazon coming soon. I'd like to get maybe an update on when do you suspect that capability will be launched and would there be additional economics for that capability?

Hey there, it is Harley I'll take that question. So as you recall, we announced our partnership with Amazon back in September and beyond just the migration of some of their Webstore merchants to Shopify. As part of that partnership we also integrated with Fulfillment Amazon and Amazon Payments which is already being used by merchants. The sell on Amazon channel is currently being worked on and we should have that by the end of the year.

And in terms of Harley, in terms of economic is there a thought process on that or would that be part and parcel with whatever the subscription solution want to subscribe to?

Yes, so again once we sort of see the uptake on that channel we can talk more about the economics behind it.

Okay and Russ just one last one in terms of obviously you're seeing some payoff from the investments in the Plus sales force, but going forward in terms of additional investments in that and maybe more ad spending on social or other channels would that get in the way of potential sales and marketing leverage as a percentage of revenue over the next couple of years or do you still seeing that unfold or should we think about leverage coming in other areas not so much in sales and marketing? Thanks and nice job.

Yes, our view is that we will get leverage in all areas. Even our investments that we're doing in paid marketing have a fairly quick return on them like those merchants start on our 14-day trial and then become paid merchants and so we will continue to see the leverage. Because this year is an investment year, you won't see the drop that you saw in 2015 versus some of the prior years, but we'd still expect to see leverage.

Your last question comes from the line of Gene Munster from Piper Jaffray. Please go ahead.

Good afternoon and good morning and I'll add my congratulations and just a high level question about the addressable market, your merchant adds have been impressive for two consecutive quarters. Investors tend to have this anxiety about what the addressable market is and I think that the results speak for themselves. But as you think about the addressable market maybe in terms of numbers of potential merchants over the next few years, how would you frame that for investors? Thank you.

Yes, I mean even at 275,000 merchants relative to the SMB space we're a very small piece of that, so lots of room to grow there. In addition to that, we're seeing new waves of people starting commerce businesses, whether it's celebrities or people with some other following or people that want to start out selling on Pinterest or Facebook and so I think what's really happening is our addressable space continues to grow. And we've always said that the 10 million in our core market and 46 million retail SMBs is just sort of a subset of the market that we address and so what we're seeing now is that both the plus level and that entrepreneurial level were getting more and more opportunity to help satisfy these needs.

And the addition of new channels those you've been talking about on the call today potentially could expand that base?

Absolutely, so I mean of the things with Pinterest is people go there with buying intention and now they can actually buy and so Facebook very similar and so as new opportunities and new channels arise really our platform focus will allow us to take advantage of those. And I think that puts us in a very good position. I mean other people, as one of the earlier caller said, can also do that, but having first mover advantage is always the best position to be in.

Great, congratulations.

There are no further questions at this time. I will turn the call back over to Tobi Lütke. Tobi Lütke: Okay thanks a lot everyone. I think this has been fun, good quarter I think. Lots and lots of little releases and lots and lots of pushes on this every increasingly fast flywheel we are building. Investors even from the first days have that have tried to raise any money have always kind of struggled wrapping their head around Shopify because it is not exactly a simple business, like it is a there is a lot to it. So I'm glad that everyone has got to witness sort of our first year as a public company roughly and just we've gotten a feel for the way we finger away the experiments and way we launch, because I think this is the correct way to act in our industry and because the industry is actually a lot earlier than sort of people expected. There is a lot more brainstorming, a lot more exploration that has to happen. And sort of our approach really lends itself for us like slowly establishing what the software actually should do for its merchants. Okay and I'm a nerd, so I wish everyone may the force be with you. Thank you.

This concludes today's conference call. You may now disconnect.