Thank you for standing by. This is the conference operator. Welcome to the Shopify Third Quarter 2020 Financial Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Katie Keita, Director of Investor Relations. Please go ahead.

Thank you, operator, and good morning everyone. We are joined this morning by Tobi Lutke, Shopify's CEO; Harley Finkelstein, Shopify's President and Amy Shapero, our CFO. After some brief prepared remarks by Harley and Amy, we will open it up for your questions. We will make forward-looking statements on our call today that are based on assumptions and therefore, subject to risks and uncertainties that could cause actual results to differ materially from those projected. We undertake no obligation to update these statements except as required by law. You can read about these risks and uncertainties in our press release this morning, as well as in our filings with U.S. and Canadian regulators. Note that, the adjusted financial measures we speak to you today are non-GAAP measures, which are not a substitute for GAAP financial measures. Reconciliations between the two can be found in our earnings press release. And finally we report in U.S. dollars, so all amounts discussed today are in U.S. dollars unless otherwise indicated. With that, I turn the call over to Harley.

Thanks, Katie, and good morning, everyone. We continue to see incredible demand as the decisive shift to digital commerce persisted in our third quarter and more entrepreneurs than ever before turned to Shopify to start, to run and to grow their businesses. Making commerce better for everyone is what we do and Shopify is achieving this by lowering the barrier to entry to entrepreneurship. Last quarter, I outlined several initiatives we shipped to help merchants adapt quickly to a rapidly changing retail environment, triggered by COVID, getting them online fast and building resilience into their businesses at a really challenging time. We believe these changes in the landscape will endure, as consumers new shopping behavior stick and become the new normal. Shopify has always taken and always will take a merchant-first approach this year. This translated to an increased urgency around helping entrepreneurs to get online fast and start selling easily to get discovered and to get their products to buyers. Today, I'll talk about how our efforts are paying off for our merchants and for Shopify. In Q3, a record number of merchants became paid subscribers to Shopify, even excluding merchants who converted following the end of their 90-day extended free trial. The extended free trial made it easier for new source to get online fast and make sales, enabling many of these entrepreneurs to generate cash, while their physical stores were shut down at the onset of the pandemic. Some of these businesses made their first online sales faster than typical entrepreneurs coming online for the first time proving out the power of omnichannel commerce for brick-and-mortar retailers. Fast transitions like this contributed to Shopify's tremendous GMV performance, which increased 109% over the same quarter last year. Not only do we help merchants get up and running quickly,…

Thanks Harley. As that conversation just illustrated businesses of all sizes rely on Shopify during these challenging times. We are in lockstep with them on their journey, as demonstrated by another strong quarter, thanks to ecommerce tailwinds, our merchants resilience and the continued strong execution by the Shopify team. Revenue nearly doubled once again in our third quarter to $767.4 million, up 96% over the same period last year, driven by strong performance from both our Merchant Solutions and Subscription Solutions segments. Subscription Solutions revenue increased 48% year-over-year to $245.3 million, largely due to exceptional growth in Monthly Recurring Revenue. Our growth accelerated to 47% year-over-year to $74.4 million as merchants from both the 90-day free trial offered from March 21 through May 31 and standard 14 day free trial offered from June 1 onwards converted into paying merchants in the quarter, creating a double cohort effect. While demand remains higher for subscriptions compared to pre-COVID levels, we do not expect the year-on-year MRR growth rate in Q4 to match what we saw in Q3, given the benefit to third quarter results from this double cohort effect. Shopify Plus contributed $18.7 million to MRR or 25% compared with 27% of MRR in Q3 of 2019, as the strong growth of standard MRR outstrip that of Shopify Plus, primarily due to the double cohort effect just discussed as Shopify Plus was excluded from the 90-day free trial. Merchant Solutions revenue grew 132% to $522.1 million in Q3, compared to the same period in 2019. This tremendous growth was driven primarily by merchants strong sales with GMV increasing 109% year-over-year to $30.9 billion and increased adoption of Shopify Payments capital and shipping driving revenue from these products higher. $14 billion of GMV was processed on Shopify Payments in Q3, an increase of…

Thanks, Amy. And before I turn the call over to the operator for your questions, I want to remind everybody to please try to limit yourself to just one question and then. And well, let's get going. Ariel.

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Thomas Forte of DA Davidson. Please go ahead.

All right, thanks for taking my question. So, I know you discussed this at length in the prepared remarks, but I wanted to highlight my question and get your short answer on it. So, I think this is going to be a very challenging holiday from a supply chain and logistics standpoint. So, what gives you confidence in your merchants ability to have stock inventory for the upcoming holiday and for Shopify Fulfillment Network's ability to deliver products in time for holiday? Thanks for taking my question.

Thanks for that question. It's Harley here. So, a couple of things to point out. First of all, as we mentioned prepared remarks, we now have 51% of our merchants, elder merchants using Shopify Shipping that's up from 45% last year. Now, see more merchants use Shopify Shipping means that as the entire macro environment for shipping has issues. We think Shopify merchants are better positioned. We're also working with them now to ensure to be advised customers when purchasing that there may be some delays based on either supply chain or on the last mile side of things. That being said, our focus in 2020 around SFN is to achieve product market fit, which we plan to continue up to -- into 2021. We want to ensure that the foundation of the fulfillment network is strong and the merchants experience is outstanding before we enter sort of the scale phase. But in terms of how we're arming our merchants are, I mean, the rebels to ensure that they have a great holiday season. We're doing everything we can to make sure that we give them the tools, the information and the context, so that they can ensure that their end consumers understand and appreciate what is happening, but so far so good. We see that there has not been too much slow down and again, more people using Shopify Shipping means that more people have a -- more merchants have more information.

Our next question comes from Ken Wong of Guggenheim Securities. Please go ahead.

Great. Thanks for taking my question. Another solid quarter, guys. And I just wanted to maybe pick your brain Harley in terms of kind of what you guys saw from a linearity perspective as far as merchant growth and GMV volumes through the quarter? And then, to the extent that you're able to comment just kind of how you're thinking about the shape of the holiday season. Lots of moving pieces there from macro to elections to social distancing and just a surge online, how might this comp to maybe Black Friday last year?

Yes, thanks for the question, Ken. A couple of things, first of all, I think the Black Friday, Cyber Monday weekend is now becoming an entire season. So, we're certainly seeing merchants start much faster. We also know that more consumers have already decided to do the majority of their holiday shopping online and so obviously that's going to provide some good tailwinds to our merchants. In terms of GMV as Amy mentioned in Plus merchants certainly continue to grow their share of GMV and we're one of the biggest contributors to GMV in absolute terms. International merchants also maintain their share of GMV and continue to grow quickly year-over-year. This is mostly coming from apparel, accessories and cosmetics as are sort of the largest ranking categories in verticals for us. That said, with the onset of COVID and the pandemic, we are seeing food, beverage and tobacco continue to experience strong growth in Q3 as well. So, the nice part about our GMV growth is that it's not coming from any one particular vertical, it's not coming from any one particular type of merchant, it's coming across the board and we look forward to a very strong Black Friday, Cyber Monday and holiday season.

Yes. And I think if I could just add, you had asked at the very beginning of your question about merchant growth. So, I want to just highlight that we did have a record quarter in Q3 for merchant growth due to the double cohort effect that I talked about in my opening remarks. But I think it's really important to emphasize that even excluding the 90-day free trial as who converted in Q3, we still would have seen an acceleration in our merchant growth over pre-COVID levels, which tells you that there are more merchants coming to the platform with this shift to online commerce and COVID. The demand for the platform has increased as we're seeing more business generation occur in this environment and a desire for multi-channel commerce.

Thank you, Ken.

Our next question comes from Siti Panigrahi of Mizuho. Please go ahead.

Thanks for taking my question. I just wanted to -- just a follow-up to last question. You have mentioned 71% increase in new store creations in Q2 and mostly, they were 90 days free trial. So, how does the conversion rates from that free trial considering subscription revenue grew 48%? And how is the new shop creation trend again in this quarter?

Yes. So, the new store creations in Q2 were the new stores coming on the platform associated with the 90-day free trial. So, we were not able to count them as merchants in Q2. We saw many of them convert to paying merchants in Q3. The conversion rates that we've seen on the 90-day free trialist is slightly lower than cohorts historically on 14 day free trials, but we think that's okay, because they're more intentional when they convert because they've had a longer time period. The data that we have in the three months in some of the earliest 90-day free trial cohorts and converted suggests that those merchants that have a higher retention than 14-day free trialists. As we know, many of them coming online in Q2 were established businesses looking for a multi-channel platform. And so we believe that those 90-day free trialists will be more sticky than the 14-day free trialists cohorts historically.

Thank you.

Thank you, Siti.

Our next question comes from Colin Sebastian of Baird. Please go ahead.

Good morning, thanks for taking my question and congrats to Harley on the new title. I was hoping you could talk about the combination of Shop Pay and the Shop app in terms of how this benefits merchants, assuming areas such as conversion rates or repeat order volume? And if there are plans to push adoption of these more consumer facing services more aggressively in the year ahead through more marketing, advertising or other promotions? Thank you.

This is Tobi. Yes, so I mean, Shop app and Shop Pay, they're connected in as much as, this is like the brand to the buyers like this is always a little bit hard to appreciate from all respect to fix. You all have a good understanding Shopify company, but again Shopify is brand to merchant entrepreneurs and we decide to go with the Shop for -- on the buyer facing side. So, this is clearly something we are doing now -- like more of now. I don't have specific plans for like -- like media purchases or so and amplification of our Shop and Shop Pay are growing really, really, really good on merit, I think, right now and because it's not real problems and it's a focus of ours. We want to try to figure out how to make all of -- I think all of commerce is very, very, very -- like the way it organically sort of [indiscernible] onto the internet. It's very -- that's made strong lines delineation like that you go to basically we started in 2000s there you go to a browser and you hopefully make your way some way to an online store. And the moment you place the purchase, it's like the role of the e-commerce software really stopped, it might have sent you some emails, but you had to go like some email client to figure out where you orders is. Maybe it had a tracking number, it takes you to USPS and there you figure out what may be they can look up the thing where ever your package is. And if you ever want to do a return you go find the email ideally via search, if you can even find it. And like it's janky as hell experience. We all got used to it, so we are familiar with it, but that doesn't mean it's good. So, we are trying to like as much [indiscernible] I can, we try to aim for global maxima accepting sort of a winding path towards there. And Shop Pay specifically avoiding that anyone has to enter their address, from their phones, and the shop and taking the alley-hoop to personal computer of our times, which is a phone and telling you exactly where your packages is and when it might be arriving and for the end of relationship process. So, this is sort of a vision around at all. And you'll see a lot of brokers, I think from us over the next while of all those lines.

All right, thank you, Colin.

Our next question comes from Josh Beck of KeyBanc. Please go ahead.

Thank you for taking the question. You mentioned that 6 River, I believe had its strongest bookings quarter ever. I think, which is a great example of the product in the interest, a little bit curious about its application within SFN? Really if you could maybe just talk about how that's progressing and how important the robotics automation? Is it really be able to scale, SFN over time.

Yes. So SFN, and 6 River Systems exist at two levels like what 6 River Systems does, the role it has within Shopify as to modernize the insights of a warehouse and really gets the fulfilment warehouse to the point there, it's almost a software addressable black box. It's obviously not, but it leading this, but from our perspective of most of Shopify, which the Company that mostly does like things in software and in Bytes this is idea because once we can treat warehouses as a -- basically a task management system, where we just say okay, this package has to go there and here is a -- here the pellet the things that need to be stocked, and so on. And this can happen to 99 point something reliability and all these kind of things and the exceptions are managed. Then, as if I can think about warehouses globally right, and say, if we can have 10s, 100s, potentially 1,000s potentially like partners and some homegrown ones around the world and balance the products that our customers' needs to where they need to -- where they need to be stored. So, the robotics are very really, really important for warehouse, they increase efficiency enormously. They like just gotten more important because of -- it's easier to social distance amongst people then robots, do a lot of moving things. And if you think really, really great result, it's a great product and those two things, absolutely need each other to be successful.

Our next question comes from Paul Treiber of RBC Capital Markets. Please go ahead.

Thanks very much and good morning. This is a follow-up a little bit of a follow-up to Tobi's previous comment or first comment. But there has been obviously, mass acceleration in e-commerce. But it's been a unique environment for so many people working from home. Broadly what's your view on the biggest remaining points of friction for e-commerce into what degree is it possible for Shopify to develop solutions to address these remaining points of friction? Or are some outside of the control of the company?

That's good question. I mean, I don't think there are insurmountable challenges in the world. It's just question of time and capital allocation. So, it's certainly in scope for us to make a whole thing as simple as possible. I mean, literally but I mean -- but the ideal way for us to do the Shopify within the network is employee teleportation. Like if you can figure out the physics related to that and can just make things appear on the desk right when you want them and that's -- that would be awesome. Failing that, we are sort of like this is actually our starting points with literally the first line in the memo I wrote for SFN. And then we worked backwards towards what's possible. And, of course, this is hard, and I'm sure everyone -- I know this -- if you give us some everyone in the logistics work, but it's hard, it's really, really, really harder when people think even the know that it's hard. So, there is a lot of friction in this process and a lot of that is hard to see right now how do avoid it. Like processes can only get you so much and software can only do so much, like there is headroom. But there is finer headroom. So, in the end you will have to -- the way you're dealing this things going wrong events have being much more important than the quality of the processes when everything goes right. It's just, I mean obviously this is -- everyone knows that this is true everywhere now, thanks to COVID and there is the [indiscernible]. So, we want to sort of friction, logistics has a lot of it. Like there is an information -- like a lot of the friction exists right now in different systems not talking to each other. Like the systems of logistics knows how long it will take to get the package to people unless something goes really, really, really wrong. But the systems aren't sophisticated enough to refocus, respect to the buyer at the time when they want to purchase. And so that's a lot of our work goes into -- into bridging some legacy systems to modern systems. There's a lot of machine learning that can help getting more specificity around this, and so we are chipping away one step at a time.

Thank you, Paul.

Our next question comes from Brad Zelnick of Credit Suisse. Please go ahead.

Thanks so much and congrats again on all the success. Tobi, I actually want to follow up on that last question, in the past you've talked about how the pandemic has accelerated e-commerce trends by a decade and in terms of solving the problems ahead of us and things to come. There is no doubt Shopify is capitalizing on this opportunity today, but you said these adjacencies and really, it comes down to time and capital allocation. But with $6 billion in cash why not deploy more capital to even further distance Shopify ahead of everybody else to ensure your leadership for more years to come.

I mean, that's a fantastic question. And I don't know, the best way to answer that. Like I think do you have the money in the bank for optionality and there's not -- like we will use that we -- but there is -- I mean, I think I hope that we are showing that we are prudent capital allocators. And I think actually we have -- probably not the best company in the world with capital allocation like that's from a financial thing. But I think we might be amongst the best companies in the world in attention allocation, which is actually the much more finite resource. And so this is the tricky thing like -- there is a lot of reduction that's thinking especially about M&A, which sort of, where people think that a deal ends up at a transaction time or when the money is in the bank like the opportunity cost of integrating is enormous, right. And so we're trying to take a broad picture perspective. So, this has made us potentially more careful. But I also think just more realistic about what they can do for a company like in the past. But we are also like rethinking every one of our previous approaches and buyers as we learn from it. I'd like, so very well may be that's we're going to see a lot of things that could help us accelerate the roadmap, but that's going to be the way to do it. Like we will -- want to accelerate our roadmap through M&A. That's all the M&A deals we have done in this way, I don't -- I'm not a huge fan of M&A for acquiring revenue. So, it's going to be the strategy going forward.

Right, thank you, Brad.

Our next question comes from Richard Tse of National Bank Financial. Please go ahead.

Yes, thank you. So, it's obviously, been a challenging environment. So, kind of, outside of the obvious operating response. Has there been any change from your former strategic plans going forward because I know some organizational changes in this quarter, perhaps you could sort of talk about that.

I mean like -- what hasn't changed. The first thing I asked the company to do is like delete our plans and then COVID happened. It's times of significant change like times where we're most adaptable are doing well. Now, I think we have a bit of idea for the shape of what's happened. We've seen the acceleration of e-commerce. I think we've seen sort of the final truth and that's like it's really retail, both if ecommerce it's a sort of it's a tactical channel, it all has to be combined. We saw that, like I just was really the content of my kick off in 2012, so that it's like -- this was not a surprise. It was not a surprise for anyone in the industry, but we have now I think shift a lot of what we needed to do. Like I said, we are working on a lot of like really sort of detailed machine learning modeling to try to get, make sure that we can do an even better job forecasting demand and assessing risk and telling people when their packages arrive and all those kind of things. So, we're now going really, really deep on the various things that we've launched over the last half year. So, now what organizationally for us and really important thing now is to go and build infrastructure again because I think great products. I mean, great products are basically just pick important topic and get a million tiny details, right. But the only way to get details right is to be able to draw on infrastructure you've built and built up over years. And so like this is maybe going to organizationally just make sure that we are building up the infrastructure that a company that can serve millions and millions businesses around the world can support. So, there's lots of things like this is not what I'm thinking of when I say that because there's a million things that are related to this. But around the world thing is really important like we have just spend a lot of time for instance on performance work like, so we -- we -- in some cases we're now serving people in Australia, from Australia, which is sort of a global deployment is the kind of thing again, we can do at scale for the entire platform, but no individual retailer could really -- small and medium business, but not invest in this kind of deployment otherwise. So, there's a lot of these kind of things that we can do now because infrastructure work we've done a couple of years ago. And it's really important to keep that balance that the -- like infrastructure is basically a fuel that you run the engine off and we rev the engine pretty hard for COVID, so to make sure to fill the fuel again.

Thank you, Richard.

Our next question comes from Walter Pritchard of Citi. Please go ahead.

Hi, I'm wondering if you could update us on how you're thinking about the marketing channel your email product that's been out there and the partnerships, you have and sort of what impact that's having driving the front-end obviously demand is very strong, generally, so may be hard to tell. But just curious how the current environment and what you're seeing there may impact your views?

Thanks for that. It's Harley, here. So, couple of things on email as you, as you heard earlier, we've now merchants now sent out more than 500 million emails in Q3, and we've now also there is now a monetization model around email. So, 2500 emails are free and then if the dollar per thousand emails after that. The reason we're doing email and the reason that we are spending time investing in the marketing channels and generally marketing for merchants is that for a lot of merchants getting the products, making the products, building the online store and building the retail model is that they can do that we've give the tools to do so, but finding customers is something that remains a challenge. So anything we can do that. Further, levels the playing field, so they can have a single dashboard where they can see where their traffic is coming from, what's converting better than other traffic sources. And therefore, they can go and invest further in those channels. That is going to be helpful. Tobi mentioned earlier that retailing itself is not overly complicated but bringing it all together into that centralized retail operating system is that really is the value of Shopify that we take all the different pain points, all the different challenge areas and we simplify them so that small businesses can become very large businesses on our platform in the long run. So whether it's email or its new things we're doing with TikTok, for example, or if any of the other marketing channels we have, what we're trying to do is make it easier for merchants to get started. And then to scale their businesses and definitely on Shopify and email and some of other stuff we've announced recently or just more furthering that goal and that objective.

All right, thanks for your question, Walter.

Our next question comes from Darren Aftahi of ROTH Capital Partners. Please go ahead.

Yes, good morning guys. Thanks for taking my question. Congrats on your results. Question on the mix of domestic versus non-English speaking merchant adds in the quarter. And I'm kind of curious about the relative conversion rate of those two segments? Thanks.

So we saw a similar trend across all of the regions, very comparable to the overall trend that you saw. So strong internationally as well as in our core English speaking and the conversion numbers were similar as well.

I think one thing I'd like to just add is conversion numbers are one of us super unobvious things just I know matter where a lot of the enterprise space. But like it in the SMB space. The company might actually get significantly better. One of the conversion rate goes down because you're feeling like your marketing spend, are you feeling more people the funnel that's more general interest and in the topic of entrepreneurship. So as people are developing their models. I would encourage not to use conversion rate as kind of a proxy for it. So just, I just like to say.

Yes. One final point on that, I think many of you know, but Q3 2020 the United States had a record number of new business creations actually the highest it's been since 2004. What we're trying to do is we want to capture any thinking about starting a business whether or not they become the next Gymshark the next Allbirds it remains to be seen, but the idea is that we want to capture anyone who has any ambition to sort of business on Shopify.

Right. Okay, thanks, Darren.

Our next question comes from Brian Peterson of Raymond James. Please go ahead.

Hi, everyone. Thanks for taking my question. So, Harley, I just wanted to hit on the Plus strength obviously that was strong this quarter. I'm curious, how should we think about the upgrades versus net new logos, anything you can share on competitive dynamics? Thank you.

Thanks for the question. Yes so Plus had its second consecutive record quarter, have net new merchants in Q3, it wasn't just upgrade. It was also a lot of strong new brands during the platform coming online in some case for the very first time. We also continue to see these re-platforming from other providers and but coming to us because of flexibility cost effectiveness of the platform, which seems to be happening is that the world is refactoring off of old legacy systems to modern platforms and you will see that effect on our GMV in the future with the Plus. So a part of it is we are seeing upgrades. We're seeing more merchants become more successful on our platform, but we're also seeing continued migrations and as I mentioned earlier, brands like [indiscernible] or Telefonica or Jenny Craig, some of these brands didn't sell online ever before some of them are migrating from legacy platforms. And with new products that were coming that we're developing for these larger merchants, whether it's automation, enhancing flow to make it easier for merchants to automate the business tasks or integrate with other platforms or it’s the new Plus admin, which allows for far more flexibility and the multi-shop admin itself, it's been quickly adopted because it allows large brands to manage large organizations have all the security they require and I think they said, I think last in earnings call Shopify Plus remains the best solution and certainly at the best value for enterprise and fast growing brands.

Thank you, Brian.

Our next question comes from Samad Samana of Jefferies. Please go ahead.

Hi, good morning. Thanks for taking my questions and a great quarter. First, Tobi, we want to factor in Teleportation into e-commerce [indiscernible] but we're hopeful you'll get there, but for the short term, Amy, my question is on sales and marketing, Shop has seen incredible efficiency with record net adds without really a material dollar increase in sales and marketing. How should we think about that S&M efficiency and is this leverage sustainable and maybe just -- what's the short -- I guess short or medium-term philosophy on investing in that sales and marketing line? Thanks again for taking my question.

Yes. So we have seen efficiencies that are operating leverage on the sales and marketing line and really first and foremost, driven by the significant growth in revenue. But also keep in mind that with COVID, it's reduced some of our event marketing. We've also been more intentional about brand and studio spend in the COVID, and really, we decided to pull back on some of the brand work that we did in 2019 and focus more on meeting the immediate needs of merchants during COVID with like the 90-day free trial instead. And actually I would say we're leaning into this opportunity that we see with new business formation increasing and spending more for online marketing and some other initiatives that that we're doing, including the Operation Hope announcement that we made where we see some real opportunity to widen the upper part of the funnel and continue to democratize commerce. So there is leverage there. But where we see opportunity, we're going to lean into it.

Thanks, Samad.

Our next question comes from Koji Ikeda of Oppenheimer. Please go ahead.

Okay, great. Thanks for taking my questions and congrats on a really great quarter. I wanted to ask you a question on take rate. Our model shows that there was really just a slight compression in the take rate quarter -- in this quarter and I know it's really not picking but I wanted to ask, since we haven't seen take rate compression in our models since 2016 and also considering there are a lot more GMV monetization levels today compared to 4 years ago. So was there anything meaningful that would have caused that compression in the take rate in this quarter that we should be aware of?

Yes, so let me -- let me review that with you. But first let me start by saying, we did see a compression quarter-over-quarter, but we still posted a healthy gain year-over-year in our take rate. The quarter-over-quarter decrease was driven by Shopify Payments and payment transaction fees and it was more a function of Q2 than anything specific to Q3. So let me walk you through Q2 first. In Q2 with a rush to online given COVID and the extended free trial that we offered, we saw two things happen. First a jump in our GMV mix processed at the higher payment rates associated with lower cost subscription plan, our basic plan. For both Shopify Payments as well as for the transaction fee for those not on Shopify Payments. The second thing, we saw a dip in average order value in Q2 resulting in a higher fixed per transaction fee on a percentage or take rate basis. The fast-forwarding to Q3, we saw a return to a mix more similar to our pre-COVID distribution with increased plus GPV mix quarter-over-quarter. As you know Plus has lower payment take rates than Basic and Plus had a very strong Q3 growth and GPV. Second thing in Q3, we saw a return to an average order value to pre-COVID levels. Similar to Q1, it went up versus Q2. So we fully expect our take rate will continue to rise over the long term and we've been clear that mixed shifts and other movements, like AOB may play a factor quarter-over-quarter.

Thanks, Koji.

Our next question comes from Ygal Arounian of Wedbush Securities. Please go ahead.

Hey, good morning, everyone, and thanks for taking my question. I want to ask about SSN and as logistics obviously takes center stage a little bit more. If you could help how much is, understand, what our merchants considering when they're thinking about SSN versus the 3PL or another shipping partner or even if it's whether they’re fulfilling on their own versus moving to a 3PL? And what's the consideration set for them? And as you move up and look at larger merchants, what are the missing pieces? What do you need to kind of do around SSN to get your largest merchants on board? I would think that they have a lot more complexities than in their needs. And then just lastly on the same topic, in the past couple of quarters you updated on kind of penetration volumes. Any update you can give around the numbers and volume during Q3? Thanks.

Yes. So the number of merchants enrolled in Q3 was fairly consistent with Q2. We're continuing to manage enrollment. We want to build volumes at a rate that we can maintain, really, really high quality standards. Demand continues to increase in the quarter just because commerce is accelerating, but also to your point, merchants generally and retailers generally find that fulfillment is not something that is easy for them -- either they are not able to maintain particular two-day delivery at a reasonable price that consumers are now beginning to expect and demand. What we think we can do is we can simply -- we now have about nine partner nodes operational in the U.S.. It's an addition to the R&D center we have in Ottawa, which opened in Q1. Four of those nodes are using 6Rs [ph] technology. So what we're trying to do is we're trying to make it so that merchants don't have to think about fulfillment. They don’t have to think about their shipping. Now, who is going to be the exact target for SSN longer term? Well the nice part of having some time to experiment is that we can figure out which merchants should put which products into our fulfillment network. And it may not be for every merchant. There's going to be smaller merchants who simply outgrow their living room as a fulfillment warehouse. There’s going be very large merchants who simply weren’t satisfied with their existing 3PLs and we think we can attract both sides of it. But we're trying to be like everything else to go at Shopify, like incredibly thoughtful of who we accept and how we deliver a great essence and service to them and that's the reason why we are taking our time and building something that we think is going to be really high quality.

Hey, thanks, Ygal.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.