Shopify (SHOP) 8 May 242024 Q1 Earnings call transcript

Good morning, and thank you for joining Shopify's First Quarter 2024 Conference Call. Harley Finkelstein, Shopify's President; and Jeff Hoffmeister, our CFO, are with us today. After their prepared remarks, 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.

these morning and our as the about press in filings read U.S. this release well can assumptions, uncertainties risks our with You as in regulators. Canadian and

not measures, We'll in between Reconciliations U.S. we our are at are also press adjusted tables X for financial dollars. the end speak non-GAAP financial to the and report the a in measures. release. substitute GAAP finally, which of And

are in U.S. unless So amounts discussed today all otherwise dollars indicated.

the turn that, Harley. over With call to I'll

start our The helping for version everyone. businesses. XXXX is morning, has and world strong good and yet. millions Carrie, strongest very of Shopify the their around more to been Thanks, We're the merchants Shopify of merchants platform. both more of scale with start thriving on This and

have the ability at our we tomorrow straight hard For is the we to XX%, logistics. better we for decades, X many off growing commerce solve scale, merchants, to proven more today, And quarters, X more years and results have last [indiscernible] and to we flywheel as over everyone add revenue the our problems for for come. the drive over demonstrated

a new how enabling and and our and on is to making strides this of Shopify We're significant it's it's growth larger enterprise lot in profitability offline penetration drive talked greater scale, a payments of about us at sectors. and shape The We've working. the rise.

our results, Our rate efforts towards and expanding. attach international positive yielding are is growth

been velocity comes every and turn. products. efficiency, Our deliver at strength from has of in building success, always our and discipline the ensuring that operating been invest to high we when maintain a has shipping factor high key value it volume, Shopify position

pace new time, X future. out demonstrates years, that that the In platform, span features our we've a we've setting the XXX launched rolled In in updates for leadership to and building moments have our unveil present our than of more just also product engagement, reinforced not our editions adoption biannual leadership progress. changing only with how but and Shopify's a commerce. These year, we partners, we visibility increased in twice and call and what merchants

dedicated fact, demonstrating moments who installed In Shopify, these previously of our Shopify key the on installed XX% subscriptions if creating have never subscription their software impact to edition, each from driving adoption. We're a intuitively on app storytelling QX in great had can finding and allows start as businesses recent the been brands had continually features to that feature scale, quickly desired start. and integrated

expansion limits dashboard, to within the editing X,XXX search like elements web rankings storage foundational launch of checkout. off-line variant performance and a which can to at boost improve e-mail the of of sale, tools and From of conversion point capture and our rollout AI-enabled new

reduce and their are make We and relentlessly friction to for it run business. manage to merchants working easier

are Shopify milestones at audience, also only and become our for scale, have us. editions innovation with redefining engine a key broader our extending not Our ecosystem powering but we and the build engages reach how to

AI. on briefly Touching

found of suite, all our enhance in Our simplify unique our we've Magic. operations the and to are of us the capabilities Shopify been AI AI deeper of product merchants. most potential for applications tools tap and immense position enables into with Currently, which developing productivity, AI practical entrepreneurship that business

steadily AI the also increased, a penetration. Launched understanding of surface possible still XX% that commerce. and vast penetration over for stages has However, with just achieving our XXXX the ago, product most Shopify scaled firmly Payments. we're we we're Its hold in nascent reaching XX% scratching in decade believe that the QX of as GMV businesses GMV is what's potential

moving ahead. contributor key continue We to expect to it to growth a be our

XX%, preferred checkout. be volume be continues for to processing In Shop $XX highest hassle-free the like for Pay, Pay in the product it installments and capital, integrated solution key accelerated world's accounting payments increased to gross for and other payment XX% our choice gateway of secure continues billion seeking seamless converting consumers fast, as Our checkout. a QX, GMV, offerings Shop a

are checkouts with make to it PCI which Shopify including payments what's build that standards complex, and be compliant loading, required. compliant be to will latest Shopify, merchants ahead work that updates why next our so no is fast merchants. secure Ensuring can simple. stay potential we these in We the for inherently security works additional of for At compliance,

vital will in platform. checkout commerce expansion a the Shopify our continue to Payments and unified of role our accelerated play

and will to growth avenues As improve by we increased partially enterprise flexibility offering. and adoption. we and continue by features anticipate our offline components driven new provided This our expand be and segments, our and commerce integrations global the

Coach, committed of recently the intending with choice speed across Notably, Canada commerce the go-to mix [indiscernible] the off-platform Shop seamless join composability, their brand, continuing and U.S. tool secure acclaimed of to Shop reliability merchants position Shopify Shopify components, and become will Payments the for in scale. all coming This crucial to via further to for of as fashion checkout international and at months. outlets Pay a solidify Pay quick,

to receipts like our over and offering. the using advance Key fully are omnichannel new increased Pro of point-of-sale, and feature true functionality prior continue number leveraging solution point-of-sale enhancements as POS our draft channels of printed Moving the our to Shopify order a substantially locations merchants growth value the customizable drivers. More year.

result, are of locations. with more more especially quarter a growth saw or merchants the As coming for We XX% complex, location in XX large, to merchants, merchants Shopify. multi-location

performance results. for as point-of-sale yielding Our Shopify increased investments as acquisition experimenting other in well positive with are marketing tactics

QX, past Montreal-born a did dozen retail Michigan-based the [ a to our gain year-over-year we For this In of example, continue growth Frank saw company, quarter locations geographies, offline than launched Cherry share. GMV as Republic we food in merchants, XX% ]. locations Oak, supporting as point-of-sale more apparel growth our brand across in and and

with of XXXX. Xx BXB. in increase BXB of merchants orders to XXX% in online with are QX doubling coming in than making over store customers BXB growing after has a year power Shopify Moving number loving the been strides through the by purchasing the ago. a significant GMV year-over-year self-serve

orders that growth by merchants it to on are business. and cater means having orders, why fewer gives winning entered manual this matter? opportunity reach which merchants BXB focus there time a represents of for Shopify, be Well, focused significant on So verticals value new using draft us new to BXB transactions. the back does merchants to allowing to

needs BXB growth. are the understand efficiency specific platform refining needs and continually and We those boost address of to our and businesses

front BXB easier feature solution, For for their Plus to key existing managed to previously apps third-party made customers DTC wholesale example, business a we merchants. our move BXB it their through who store and to for buyers entire

was in of competitive Further our XXXX the is platform, is, offering category. This Forrester's validation out, our leader placed BXB just commerce came how BXB ago, X Evaluation, and Shopify Wave commerce first a appearance is unified X leader Shopify in that BXB in increasingly validation online, top and on report a BXB enterprise becoming between. everywhere signal offline, clear for a for days and

to Moving to the outpaced growth globally making of continued posting opportunity our selling to Europe, less XX%, for remains as international. America in us last equip GMV XX% our year, QX easy than revenue international of above marking up of locally. tools North international make QX base XX%. third GMV strength GMV with as quarter With the with merchants significant growth consecutive

products tools of preferences the unique Now and needs our that cater to and to do on this, merchants. laser-focused building we international are

localization helping on expand to markets localized international This Japan, shipping Italy, reach. tailored Spain make quarter, tools headway brochures and we in merchants ensure like continued our their a efforts in with and our experience

into our of been working get products to also more more We've countries.

increasing For example, in launched and QX, in on-ramps Australia, key Shopify our further successfully point-of-sale go we this the in terminal market. into point-of-sale

local merchants [ sell to markets XX% focus QX, us. product ] has to a last merchants currencies. sell which Enabling to it the key we for easy saw increase in anywhere been buyers over cross-border year, In world for makes in a our in

Markets are cross-border Pro, further expansion with which became the native in simplifying all-in-one XXXX. U.S. We of September record offering, our generally of in accessible merchant international

in ], months. Brands international ], X company, XXX% which immediate markets global XXX% to brand, Markets global adopting [ skincare in international by sales. grew York-based Pro and sales which Take Beekman experienced orders within enter or are see days apparel New Markets SuitShop [ Pro growth leveraging Chicago-based increases since their XXXX

GMV roughly to total cross-border of XX% we greater will with GMV, XX% cross-border enable continue representing up in QX, transactions And for [indiscernible].

aggressively As to we on continue are pursue in mentioned brands XXXX, seeing call, and we enterprise we last the results.

GMV Whether every plus our are it was Shoptalk, engagements to and with continuing NRF outpace our and growth with key like growth. overall brands events enterprise single larger the quarter GMV escalating

enterprise last Additionally, is in up that space. following than of rankings competitors IDC an total in XX% better to study year, leadership and the ownership cost validated our Gartner Shopify's recently independent

only that This and commerce we our platform economies study And capture on pass proves Shopify turn, offer. scale value savings unified we in offers the saving merchants, cost can exceptional them money. of to our that

our enterprise-level to with from brands to hearing are that driving are conversations move we is that X reasons decision really primary Shopify. their are What there

exceptional offer ownership choice, of that up. and total hard composability the and the is the products pass Shopify, value and First cutting-edge powerful reliable the of cost infrastructure making to

core ease Shopify's and second, And proposition value of scale launch. of innovation,

of ease really it's into Let important. point me that as launch dive about

to the faster XX But certainly not to Shopify. is brands migrate when incredibly can over. than to and replatform take it making months anywhere fast and especially moves XX case, Shopify is decision comes hard, from competition, to While typically always larger the completely the that

the online and retailer. short and do considering complexity discount well-known in nothing is what That's under which the Shopify. we running overstock.com, Take days, size amazing. up them XXX had We at of

dog is to over to XXXX date. X of largest we recently merchant their platform subscription to for They all On Their will join anticipated on to flip debut Shopify Shopify. a side, BarkBox, the with made a subscription business million for products our migrate and leading service subscribers. signed the decision be recently

doing deliver are to continue While brands the complex The migrations will larger, the work are sustainable we and to growth launch years a these building winning for of more is come. that brands. foundation timelines businesses main today vary, and is to that we market with point

sign home fitness line, more Beyonce's more Litter, mentioned, apparel Cycle, launch Pretty geographies brands company brands of good electronics Serena Harry's like and across companies brand with Johnson's Sole further Beyond goods Balance Secret our verticals, manufacturer brand, Intersport, to board, [indiscernible]. the I and health Carter, retailer beauty and the up fragrancenet.com Shopify LoRa fashion Nature and wellness like Juice X Win Dwayne equipment industries energize skincare Beauty, consumer just brands companies high-volume are beauty and and adding Skullcandy, brand consumer Rock Brands care we USA, packaged companies, of Williams' the hair and Rugs cleaning Canada celebrity Plus, and and like across seeing flywheel. merchants

expand to our years And show base. we to past we to cater in that The merchant companies. can large and continue both start-ups invest both

accelerating value business on driving rather Our short-term merchants gains. than long-term and of model focuses our the success

a We the those externally are solutions, developed ultimately invest our product-led strategies for through about and think best merchants company, greater We build think tools, decision use and products, products will and and the be we way thereby about data same marketing Shopify. value drive world-class. in we internally available and for great offer that

Our and them goal find continuingly we're existing to to new models compelling is channel of some is using up and That to always opportunities. our and the incredibly AI most we do, tools out and channels. every experiment build our our with get what create guardrail to limits

primary improvements a in me audiences have advanced learning, models into AI and example. recent last you early in At leveraged us one year unprecedented which the January, efficiency allows our with to where our and Let target end of drove we now performance using marketing, machine of precision. and teams created give significant channels very

merchant we emerging remaining assess to QX strategies, nearly in and leverage build increase them channel we to technology how tools. while products, own drove we marketing squarely from we within payback Using QX, how guardrails. our our and can models still ads our XXX% improve primary these within to Similar continually

us operational others hesitate. to We velocity than connect inspections when This granular and may using and with before. faster data are level rigor tools also quickly advancing more move forward agility seize our our boldly a opportunities our ever to at marketing allows team data

when are unobvious wide we leaning opportunities, it's may to even These because Shopify And often, X back appear finally, working. our principles, agility especially those know to of opportunities others, and unobvious. when the pull and others they

even in we Back began that of mentioned our marketing payback earnings we year, XXXX, guardrails tightened wave production new a in July tool as and QX our further.

Our component in merchant significant marketing, initiatives and investment. in core performance improvements acquisition driven have CAC of our successfully new both marketing largest

almost grown Comparing QX QX has merchant XXXX while improved CAC new acquisition to XX%. XXXX, has XXX%,

feel we confident heavily You can our we're and in see future and growth investing our XXXX why in why and beyond.

the into intend opportunities opportunistically to will it testing model, areas with as expanding to and should continue stay well growth contribute lot we point-of-sale. within investing approach our finding of XX-month You market which are to right spending increasingly know and the supporting to a payback when with average our initiatives where such We along expect are now within quarter same period, into guardrails. every an international and longer-term we

of Right now, excellent momentum products. you're strongest in the an our our opportunity history. products the we our Shopify fuel to established version in seeing further emerging strong and And lead of our see

flat excluding Today, that our makes Shopify. has while headcount is We to know growth, logistics, enabled base, assets. we've X And ourselves straight be most deliver architected stronger revenue over valuable faster one believe of all which cost more agile, of our are XX% consistently building half given for an quarters. team we keeping even us we to and our our it up

structure the growth top place, line think importantly, because put automation achieving we of and a limited we we combination while worked very More continued growth of operate the and against headcount to profitability. continue have consistent to in can

past high at Day As in maintaining which velocity infrastructure mentioned our December, effort our and significant releases. into XX efficient Investor instrumental months, product we've committed streamlining over building work the are [indiscernible] and in our systems,

need act and or for help and this any skill for uses Shopify enabling speed. operate set needed resources infrastructure systems to the through this do that craft these the catalysts, and system, us We at every our and us project as to the Shopify Essentially, how increased operating many foundation we role tell data project. with purpose for efficiency

talent while most important teams So most to the empowering doing incredible as their our thing ensures we having pursue thing. create it the and that our optimizes way passions were impact to a a continue we paradise, in on mission, an crafter's important we make

execution To made and into of team growth our ahead we QX strength deliver our in we've focus close, quarter-over-quarter. see to the and we objectives. to [indiscernible] the responsibly the has us strides the The to and our long-term model, business are proud opportunities consistently of we merchants unwavering sustain continue lean invest our serving on positioned of our

The and companies this best built being grounded to staying in their reason mission. are committed way, for their

to reshaping and forward. journey the with coupled forward moving evolved in marketing our quarters to Shopify, look you come. For our strategy, dedication, team's our is with us company We sharing the

And with let that, the turn call to over me Jeff.

Thanks, Harley.

strong, off We XXXX. have started XXXX from incredibly building on our momentum

platform. joining billion, our year-over-year from same-store XX% new strength launch $XX.X strong into QX year-over-year larger this being both primarily our strong XX% The existing up sales sales and year-over-year. the larger QX same-store merchants, merchant in with Let's contributor And driven QX the growth which results. by our growth existing was finally, base retailers driven grew base slightly acquisition sales off-line of merchant in in business from growth growth our our quarter. XX% continued in GMV merchant globally, growth same-store GMV was by EMEA,

billion, the the $X.X up to logistics XX% been when basis XX% for logistics. equates revenue year-over-year, quarter consecutive on our excluding organic quarter first businesses. which Revenue fourth growth greater an has that This growth XX% the excluding year-over-year than represents was

on increases key the margin growth revenue this the XX% Solutions new growth hit lastly, increased growth and strength in which and QX. both standard pricing GMV The Subscription penetration, were from payments discussed, drivers just for of plans

products, by and of were our the by continued the markets and absence shop $X.X products, in including growth Solutions Those growing cash. contributors of our Merchant Payments, logistics adoption penetration notably was of business. of increasing GMV, QX partly emerging installments year-over-year, XX% revenue billion, Shopify fueled offset most scaled continued growth

GMV $XX.X adopting volume are merchants payments factors of penetration billion Shopify powered of greater quarter's a ] merchants the than Shopify in was Pay, to year, of the in payments, XX% increasing solution. XXXX. Payments, the more in quarter of point-of-sale first was and the was quarter, XX% on percentage those quarter first the The of the continued performance Shopify [ Payments which compared which utilizing XX% gross XXXX. of to Several of processed Payments of rate GPV an Shopify strong of XX% growth GMV Plus, percentage the higher across globe Shop prior higher in of including compared QX as penetration our

partially pricing penetration America. Subscription items than These our million, quarter being into equally the roughly was the was continued lower XXXX, factors $XXX drivers merchants were from went in second a were offset merchants. by in GPV largest of effect strength standard the impact revenue of Solutions a existing XXXX growth which where X for of business the plans, These Europe, larger have QX increases which percentage and in of but number with our the up of the we balanced XX% over North of GMV, contributors. X the

variable An from quarter. a fees revenues the platform to was increase in also contributor

to a As commit April Plus end pricing until existing to to rates the merchants their a existing new or reminder, move had of plan.

in our majority our XXXX for today, contracts trust their chosen of at clear rates, a As and of confidence the the deliver and to the X-year Plus need we exceptional they that provide to success. to value place commit solutions merchants us testament consistently merchants existing to existing have the

second half the of these more of changes to in financial expect We from the impact occur the year.

did from to are anticipating changes not as of standard the as change this pricing We we pricing much XXXX. a from benefit in

MRR existing merchants of with MRR and the This of plus of We categories standard with Plus in upgrading QX from combined merchants each plans Shopify with, both million, XX% year. for Plus, for each new XX% from this these from Plus, our joining year-over-year in representing $XXX merchants one stemmed point-of-sale. growth standard, and year-over-year. of increases X up saw of across MRR in number strength of was growth off-line

You to existing of the of pricing should MRR more quarter end expect QX. an the to our until have commit impact Plus Plus merchants have on after changes not as did second

For point-of-sale MRR, by was plan. improvements in and new which driven was up go-to-market our XX% our year-over-year, retail strategy growth

basis, sequential implemented in each of number in the change merchants that these growth we standard, a plus, and for quarter-over-quarter MRR pricing the standard year. of groups. And from primarily On in last point-of-sale, increased

an price we payment is first status. the before our calculation refined It trial MRR a transitioning merchant's from how but We the paid paid full MRR we we full was adjusted important note, received. to price trial standard. the for factor reflected in merchants ended to plan when Previously,

MRR do The the until after we impact Now not revenue. payment. this first we capture an full price in believe we change business. the does not change better look the our at received pricing have reflects We way the approach

logistics In attach continued X.XX% QX, Key in the noncash largely by was expansion revenues, rate in the revenues XXXX. in GPV our gains of were and from the offset quarter attach partnerships. X.XX%, in year lower and subscription from of business QX strategic the rate prior up drivers higher penetration

was Moving was pricing from Solutions The Gross to continued to hosting gross year-over-year. increase in for Subscription profit. on quarter, XX% the Gross XXXX. plans and XX.X% support of changes margin stems million $XXX extent, for a efficiencies. up to and, QX XX.X% compared lesser profit standard

compared in for Gross to Merchant Solutions QX of was margin XXXX. XX.X% XX.X%

from absence Solutions due of gross in margin logistics, improvement primarily margin. Our for dilutive was the to the which was to Merchant benefit

lower-margin margin business to and partnerships certain products down with the QX growth our of compared Shopify lower was these XX.X% the Cash growth of partially gross This Shop Payments Solutions prior overall revenues our When Merchant by noncash XX.X% the from the impacts gross like offset installments. primarily to margin year. in brings and excluding year-over-year from logistics, our impact in continued

spend. in XXXX, representing to due lower to were line XXXX decline for of our offset partially sale The the Compared was and down million expenses with revenue. expenses were Operating and XX% of operating X%. expectations QX QX quarter, increases by of of year-over-year $XXX the in the logistics marketing business headcount, primarily

to related expenses post and of of the quarter pre for revenue in payroll I revenues XX% of or XXXX. QX OpEx OpEx XX% and taxes at look you know compared both excluding operating SBC stock-based many was adjusted comp.

that. important with line AI of headcount our total maintaining on and disciplined essentially business. are flat for the and, the X top How product past in remaining we continuing all remain momentum our internally leverage while we to headcount continue of element able is accelerating an innovation We to how fact, quarters, capabilities do

in And AI how let's talk an using support. data couple for A example, points about you. are we of as merchant

with over QX, support of During and the half resolved interactions were with AI. assisted of AI our merchant often help fully

enabled of X support has AI in live day. offered additional that were the previously hours languages only certain XX/X

have And that previously the average merchant of The reluctance helped trivial asking that interactions the enhanced of duration the naive. support might significantly merchants introduction towards perceive questions We some has AI experience. had has decreased. reduce as or they

a staff support toil of significant part that experienced reduction has in Additionally, their jobs. the of is our amount

are process much the achieving merchant improving support efficiency than greater We and before. ever

income. operating to Moving

quarter, of the $X million or of or XX% was $XXX a $XX compensation were QX million quarter. income was million in million, operating revenue flow free compared to doubling For the approximately flow $XXX Free and as of revenue, QX million revenue of versus percentage loss of cash margin XXXX was operating QX capital for XXXX. an $XXX X%. expenditures cash of X% Stock-based for

balance to sheet. Turning our

$X.X as $X.X billion we the billion a had after net and And cash convertible notes. outstanding was balance consideration marketable March XX. of position securities of of Our cash

North Before the to We European remaining economy factored U.S. in dollar in some that FX consumer outlook, the our headwinds strong in to consumer our macroeconomic a have resilient few regarding that softness the America assumptions see broader expectations. spend spending QX and we outlook. comments QX turning related from our and in underpin

and America assume the remains We outperform expect We current conditions. rates macroeconomic that e-commerce to consistent with otherwise environment growth North to have and Europe. continue the in

in all Keeping outlook. now let's to mind, this turn

XXXX second the are for as expectations of follows. Our quarter

First, on revenue.

XXX impact business. of in basis basis, the point from to the year-over-year when sale the teens logistics on a revenue be the which XXX our in growth to GAAP equates excluding year-over-year to expect low growth QX mid-XXs to We rate high a

highlight plus the how pricing the is in of QX the An impact our and QX will to affect and benefit combined versus QX. of impact standard QX. a plus standard and versus in they have changes growth rate important for The dynamic smaller changes pricing

went in our we changes a standard to pricing initial growth begin plans QX, on of into to in In revenue headwind effect lap our April quarter-over-quarter. resulting the XXXX, that

plus the cycle effect of went merchants the the those given not merchants pricing While expected to their did billing to the mid-quarter existing QX, minimal uplift existing the into at majority for for contract, be fact X-year timing up that price. opt our sign this X-year in choose both is did today who change and into contracts the of XXXX

the QX pricing fueling will exceeds and initiatives standard growth products quarter effect ability simply remain be go-to-market a in resolutely plan the initial of our the a our continuous lapping commerce. to confident We unified changes the position leader further and strengthen our benefit the changes. where in of plus great as

a benefit our down factors from impacts that the are X from and fully the referenced we'll gross changes from noncash QX revenue lower We these strong and shortening Offsetting is from payments expected business plus of approximately partnership momentum. points that expected lower-margin continuation our I down to the the the amortized. our and quarter-over-quarter be drivers XXXX. QX to decline XX expect to expected are growth of primary a of be margin from positive months The have contribution QX above revenue X basis trial length standard of pricing just high-margin month. agreement

to GAAP dollars will We a $XXX our be our basis expenses. at operating expenses expense operating a percentage believe rate QX mid-single-digit that on million. to of up compared to operating low QX Turning

approximately the percentage began of businesses. of a fitter, basis as I implying previously decrease a As of shape QX. faster a as expense we operating revenue, percentage dollars as XXX expect be operate XX%, in to versus of mark new XXX operating not expense since toward have guiding to majority of to QX the of revenue. well a to our logistics full the Shopify XX% we our been will points QX GAAP year sale

changes the has comparability year. changes, telling operating dollars. expenses Given over these about talking less I've to year-over-year the of Hence, been sequential OpEx been why past

operating with improving revenue over leverage Going forward, to aligns time. our plan goal of percentage striking as talk profitability a I of between it operational growth about our to the balance better deliver optimal expenses and as

For this to wanted quarter, I you provide metrics. both

our the second with the primary the X primary of at QX increase being the event, quarter, end which of and marketing the dollar will Summit of driver drivers happen June the Summit over are spend expense For operating increase.

really This using company since completely and it. build developers. be our with our week everyone looking engage event a incredible that on to spotlight work a will and is a things. week models We for to consider company, Summit critical our have efforts, annual dedicated road our is the product external in it mission, we to collaborative forward we the our product development we culture first map where ideas bold a on as aligning mental that in-person Summit are XXXX, and

our teams year, in to element and multiple a events, will day one aggregated where what We other that remain culture enables critical into be to committed ask our teams our to believe discrete This internal culture event start we value that Summit is concurrently load-bearing new together periodically getting X-day remote-first years projects. is remote-first including event highly and our hack thrive.

products Our the point-of-sale like hack days many app. have and kickstarted and key features Shop

an partners on external partners, Additions.dev opportunity workshops. get includes share walk-throughs external our This feedback events also with our development to and our the consider in for events immersive and us road map it developer an It hands-on work one of includes road additions.dev, which gives series within vision investment our week's our the internal highly our of map. and technical external. for a team, products And anticipated and developers is we most Shopify our product and ecosystem, both partners.

within continue our we such international, shared to of as supporting initiatives and XX-month as our a are opportunities Harley insights them And invest successes as you of well point-of-sale. We an and with average marketing, right some period. some now recent intend to longer-term Regarding enterprise finding thinking there. payback into when are lot

be to million, expenditures, Moving $X to $XXX and stock-based SBC expected compensation. million. is QX capital QX

Finally, cash on flow. free

expect be similar we cash free QX, XXXX. For of QX margin to to flow our

cash delivered this of expectation no now have X consecutive We for free double-digit with trend quarters to flow change. margin

was the strong QX to year. summary, a start very In

deliver We have to on continue the that product initiatives laid we out.

can performing that merchants our and are continue to the we value Our merchants. well, provide we expand

future making of Shopify, while growth are and in a build profitability. all our continuing an stronger investments delivering key and mix to even compelling We both

With back over now your call Carrie the that, I'll questions. for to turn

Barclays. first Trevor at Instructions] question [Operator Young Our comes from

Great.

slightly on was some that up Just on definitional on of MRR, expected we just merchant just amount core terms something Is that is demand? there why up the us Or Q-on-Q, you maybe a would color only going standard that in a can have smaller change? seasonally? just give

Yes. been definitional It to X% a have No, just if you that's look of QX. terms up QX it in would at change.

acquisition overall And right well now. that merchant so function of just change. it's really doing a The engine is really,

else nothing into there's to read that. So

Okay. Thank you.

question next are come Code Our will you Matt, there? at Autonomous. Matt from

I am.

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Yes.

very, in I months. as been done quarters talked think and some Harley recently broader about just past to and little marketing the mean things very terms let's the we've the well perspective, methodologies and over of is the improve bit sales things in I sales talk as we're through our using. of our few doing right in how the not well Harley about talked tools we only going a overall. And some now few some call we've past over those as of of the and a from marketing, think terms margins

relates terms As back it are go about relates -- there, guidance to talked the flow think we in gave obviously start free then of as we it, with margin cash effectively let's margins. specifically in and said QX. how And what I QX terms what of it to about we results I'd to we

gets outperformed, free into an a cash an to pro of on And terms margins result. QX uptick did is revenue we had QX expected consider QX. from also that from QX great. XX% QX, We growth. flow strong forma margin. I which uptick that in In XX%

as line. things going to around mentioned periods payback that this merchant our of in how the of you script key and think That's of his the talked did, piece a we hit when Harley engine. We through terms the top acquisition some is in about kind

revenue about But in to cash our QX margins, we that mid-XXs. low similar also And achieved think pro forma being to the back we XX% to points the flow is to free going in that with for combined how the growth QX. margins just the guidance

while the leaning can and we both deliver business opportunities concurrently growth are all our enhance So margins, into that growth. creating and

long to this good it business the an is marketing So this do our which, will we as continuing strength think feel us the for again, spend term. of us investment allows things, in And the continue all and business really we to to for about accomplish X. all future strengthen the

a well the that moment are really fairly because take known to these just merchant Matt, is was think coming let winning just in SMB I that important understand. me to segment, of on Shopify that we were Historically, direct-to-consumer the it And merchants. types

But the favorite remains buying seeing and different We're the brands we're merchants, their we on seeing win now around mean consumer resilient. We brands in too. affinity to. remember, but some Shopify. are consumers to continue I those types talk they the Those feel state there's love do not consumer. that merchants, of only think of

are joined to coming have recently Nestle brands for also less the or BarkBox, Shopify. But country. sorry, these are I in that all of -- Hines, hospitals discretionary we ButcherBox, brands are mean Staples, FIGS, also discretionary. have more less example, other that

brands Shopify in to are really for international example, things for coming you grow, different BXB, on-ramps view new opportunity that working really, these like will continue merchants, a beautifully which growing or all huge all is When seeing our there that you're add well. and to into

same times point important drive way data. developed about We and we countercyclical. internally Now think best solutions. marketing decisions products. the think spend we to seem tools, the -- around can understand We at that use and to may at Jeff's agile thing they the And through times we one great be build about that's is

But these we merchants. all can variety strong all stronger of to -- drivers, with business is very drive profitable. really it top long sustained different means can does different what and of on-ramps a But term a we line much lead have different types be growth very, growth it these

your question, Matt. for Thanks

move now will We to Mark Benchmark. Zgutowicz at

Okay.

We will the in back queue. put Mark

Let's go instead to...

I'm here.

Oh, there you are.

Okay. Great.

Sorry on maybe hit last that picking Harley, it. up about that, Carrie. point. I Thought just

you guess, the is there what You and merchant period, that how could you're a ads where about talked XX But geo strategy maybe geo of months? from talk and expansion that sort I seeing if on a sort ad into the merchant little perspective, there payback about of component. fits bit vertical

audience broadly. of If average in that payback? higher of helpful. if would terms other then And of one it look deals, an just your other just you be sort scale, just Is versus terms these could, in in some that I quick XX-month U.S. across geos? advertising Is of scale one,

sense year trying to of Just relative year. look how get will a to your last numbers target this scaling audience

Yes.

international. Shopify no with small Mark, for America. start, just business me I Let North in mean is longer

seeing great channels, international GMV growth are America. And cross-sell, regional. at We across QX pace North revenue grow

fact, lead to continues growth Europe our particular, America. North In outside in

the quarter third GMV QX that region. was there. consecutive XX% in growth think like I above XX% of growth That's

opportunity there. So there's a lot of

I expanded. global captured as in than share less product have our think market sales we've retail even and geographies X%

Merchant [indiscernible] in in you we on have have If just products Solutions countries. countries X we XXXX, products Today, side. back than to the go more XX X

and means And about today, underpenetrated. ahead have are when billion market a you focus working with means developers, we which That We this products on on significantly operate where ground in we core SIs places. with with our working in That localization matter. $XXX opportunity working just particular, partners, Commercial geographies massive opportunity the product on side, expansion with of these large matters. the app initiatives matters. really

Europe. think also obviously, provide be focus And then slowing to success And we seeing we're to and APAC no the LatAm there. will that I on there's continue opportunities down. reason for in But some incredible really

proud me important. especially audiences Let about one think we've talking generally it's we're advertising about Obviously, because of. particular Shopify, audiences talk also on in quickly I that is but been

the It's with results The Look, to XX% in launched better algorithms from helping getting we finding high-intent lead -- May. leading CAC every digital in helps XXXX, And is ads. some now that this better are are this get merchants day we improvements. cases, customers. thing thing up at seeing this

So it is really important.

reason in free just April. plus. merchants a We also more. key used to upgrade a experimenting XX-day We're It's launched trial why now to

it. can who actually are with merchants Shopify in Plus not experiment Some

Of start the course, to get goal upgrade, to also the but them get using it. them

And measuring just buyers January, target we new performance. as ads. twice better many much in about then benchmarks and edition, retargeting potential in list, stronger for targeting boost customer for ad winter We talked the benchmarks with

something differentiates probably really in we proud continue see what think see into is on I experiment audience you'll The interpret it. advertising of. But And general, to ability I that lean our down is opportunities. us to then we're data, think these Shopify and where double

for every with a business, marketing And ourselves of referenced audiences to think, example prepared [indiscernible] my that. is be and a including of remarks marketing. in everything our our I merchants to helping And aspect great speaks, I desire

Very use brands better through and which Cash much Shop or leverage early to as have if as these merchants The brand experimenting, it things want like much part Shopify. And things incredible we're about increased again, seeing to stage great other Shop higher retailer known visibility, be previously on course, audiences Campaigns, Offers. and conversions. you and you is the already revenue merchant, but Shop Campaigns of a is one, find of

Thanks, Mark.

will next from Andrew JMP Boone Our question come at Securities.

to laid the talk the pretty in you but year? flowing how can we P&L plus the back And of about clearly, about you the do think XQ reaction price out that through Jeff, increases? half

then of which I to mention testimony saying merchants the -- we I is we A a tools which plus multiyear on what I to and remarks and mentioned we've testimony Yes. been contracts, a all them additional to Thanks, work for is period, looking earlier something couple a did call is want X-year points. really couple is set provide obviously the to of prepared the majority a had which a this I want platform. to that for value us the and Andrew. -- a doing. on -- of things commit we've this of is This that with to to a commit is continue at great

is hit very day of the first in what cycle. today, billing MRR -- this we to going in So it's saw essentially in similar know, hit you first, fact, is the right? As changes, standard today we'll because day, the pricing MRR QX

MRR And so QX. it will hit in

until revenue and margins QX. hit really It won't therefore, in really obviously, mostly

and be both little back will pretty half just track else. time same And will pretty plus, a it So at implemented changes, standard these in timing terms of of of more this of the because year. a anything the bit phenomenon than similar much the we the

So a in it track will similar manner.

last I have big But year. have impact did again, that for given think the opted of X-year contracts, merchants into plus will standard don't fact us majority the just it as the as of an

Our next ISI. question comes from Mark Mahaney at Evercore

think Merchant you takes the versus in for how we subscription FX the balance year-over-year bit guide? a in about Can in the enterprise little Ian unpack increases Peterson QX the more revenue your embedded Mark. given How Peterson. guide big the teens flowing is more puts the on help quarter, us online? And headwind This high guide? is between price and through should in customers the Solutions coming Ian

go one. Yes. that and ahead Ian. I'll on start Thanks,

changes. a want in rates QX back growth this between QX and this my impact. the So to dynamic comparison -- in I this the reminder impact I The comments as to is the earlier. and of largest that mentioned pricing go largest

That the standard before driver. plus that's and seeing this have you is before get biggest you And ramp the in. waning year-over-year the where terms what the lift plan pricing the effectively QX on quarter, kicked in we're pricing is changes of really really of really

plus, to The doing forget, obviously, other of things Payments, point-of-sale seeing, the standard, relates of to in it when what that all are in don't of all the of terms enterprise great additions they're as really our really, we're plus strength MRR all and strong going all Harley as in point-of-sale, -- this I merchant numbers. well. that talked The you really, other we're BXB, about products. and terms alluding across isolation, take of

the takeaways. those are key So

comments year-over-year that's XXX roughly from rates, impact had basis is as in you days that of is a factors obviously, that economic of also number it quarter some normalized the mentioned which leap when look earlier, the rate, just the mind. to relates growth points actually something from tailwind about in growth the did, -- there dollar. QX to impact the QX is I my is roughly of U.S. rate, in There the growth broader think strengthening at some I keep the year, to

was and as then that are do back and the slowdown, And economic but keep perspective go some seeing I most mentioned where earlier, please and in Europe we U.K., specifically -- report noted you EMEA of of as this year, the you annual whole that. for year. a to just that our piece And mentioned XXXX, the U.K. XX% as we revenues one last for is

the past rates the moments few high obviously about we've ago, for a just mentioned Harley in and obviously quarters we've the talking And been in EMEA. growth few XXs

also been importantly, continue not So expect to in market, outgrow exceptionally Europe, doing the America. more to North only we well but there, we and have

impact, is pricing biggest change and again, And for our our engine suite are QX. I well. is performing merchant think this product acquisition the factor So it which really

right business we now. feel the of So good strength the about

Thank you for question. your

Our Morton Michael at next from question will MoffettNathanson. come

behind The might attach It's and that how and rate enterprise try moment. have attach success hear parts on forward? you to the just about impact in to get people some from really growing just more the the this not about the the enterprise think the as as love from moving see should the investors expect will to going we in Would is quickly at it some rate. the probably outside #X tricky investors question growth as forecast

Michael, I'll take that question.

are can [indiscernible] is bunch some is Shopify. of continued it very not them list enterprise and way enterprises foremost, to there some of ways different hydrogen here. and traction and a remix. wants use about first And want really one large that think also can The -- they that So that every we gain

that enterprise the But don't of brand out needs complex all Some And have want one takes well. high-volume box. this as offering fits wraps value size want CSS of those that very and into level something of plus we're now out every plus, the the all for of we box, brands. the

these call Shopify, I today. the over seeing take to We're Coach that I necessarily they of on believe will take one time, of historically Everlane us didn't more We to to now come mentioned more brands look components. mentioned component. previously. its

Now all to proxy that the it's of the for or solutions be of payments something it's important the capital other any because is value we're a have, for product adding or attach rate that is to the any really think the other it's business. important really products are whether point-of-sale, like we we merchants example, for for build utilizing their

Skullcandy, clip of far offering you're at in had an independent better these and because to validate Shopify's the increased this total reason Overstock Total brands Intersport, XX% best in is BarkBox That of I is ownership, think is the coming unbelievable. us for we particular, just case that is this. of But and product. enterprise, study than enterprise seeing ownership cost by And cost the the competitors. this all

is value to and value continue great the as on And to here. cost they're see because that far the Shopify a side so I a mean we'll ratio of it's value, great choosing product, it's well.

do time, integrate fully over that see of solutions rate, question the answering take they in directly attach on more into platform. Now of terms as your the merchants what is our more and more we

to enterprise So enterprise and have in value product, like plus things value on them product. as the like -- they're payments, the we on get and things audiences, on example, into think the opportunity for ramps them about example. better But better for once these show using CSS Hydrogen

now more of of call labors. top on the And we've you're aggressive you it, which seeing add been those for, when -- much the here. months, on frankly is sort of fruits That's model XX that effort, a go-to-market working

time, for product for proxy again over to use see the think continues that that And a create people to like I But continue as you'll that attach Shopify. grow as we we well. so the the value

Thank you your question. for Okay.

at Toner Martin from comes question next Our Capital. ATB

income will Is been continue? that Free op should margins margins cash X last adjusted greater we have than expect flow quarters. something

to yes, points operating free flow versus be income, expect been a yes, a cash Well, it's to it there's continue in and a margin general, few from things perspective in higher. play. But we few

-- how of yes. kind you a So P&L. about through and how that's just But think that and function our P&L flows of the

Okay.

next at Wells question Andrew come Bauch from Our will Fargo.

traction. growth, Pay the commerce components off-platform starting over and with unpack Shop And to Harley, mentioned to the Just interplay straight X really opportunity XX%. quarters show its wanted you

can you into the Pay And this of the Pay's as back this at what us the Shop a sense like what does Shop we growth off-platform So drivers give pipeline point? get on year? are look of half for

Pay alone, million for is Shop converting the on than opted converts Internet. There's GMV. we better more checkout competition and Pay. the average. Yes. XXX I mean that year-on-year. a facilitated put, highest XX% of billion simply XX% on It have buyers, now XXX $XX That's [indiscernible] million into XX% Shop And QX

it's billion total far. think about cumulative, so $XXX I

any not of in a want it. on or the used mere -- I X% people brand really idea presence even Pay on to because, check I the higher shop people So retailer think even -- to if mean results conversion. coming frankly, not a planet are any Shop It's Pay the to for it's use becoming use -- bad Shop

because which brands the means Shop that ultimately people to. by fact Shop like Again, we're for reduces And we a more and friction both otherwise for buyers, to on are allows spoken maybe to to it's it. specifically business want historically checkout coming the relationship merchants But it Pay we that default faster. And us not merchants the adoption begin going It us so ultimately we with continue Internet. make had greater do that drives Pay. and to

really -- it's think we're -- But it. we excited about

are checkout to making Shop very Pay new, way it the for very extend more with very, pipeline and Shop is it and to that easier something on but focused We Pay surfaces exciting. is

question Samad last from Samana will come at our And Jefferies.

it. appreciate I

Jeff, a Analyst off-line Could know maybe what to I growth overall really maybe guys but helpful. revenue point-of-sale just the which MRR trying online. Day, expecting this offline ask contribution us MRR. and dynamics the it for GMV to targets gave to not the GPV understand wanted is the year what any from you are multiparter, on is you're last how I of give year? sense merchant a maybe you So at point-of-sale maybe versus the and point-of-sale And question then point-of-sale make

on of things Samad. Yes, A course. that, of couple

of rates how some about that of in the growth terms of is in In is Day business some the sizing of performing. that the point-of-sale, we that Investor regarding at retail consistent talked terms

as to an core business perform is higher performing, even the strong continues As level. piece off-line at our

of basically So And one from on tech a that stack and I at can and I helpful point some best of also are side lot using thing. talked as right, from technology, online is our side, point larger the now bit "All say, that platform to merchants more look vantage our their to obviously, and offline use the have a Harley It's great best obviously, best little something, testimony which especially vantage they the the about, merchants a retail stack well." because tech have the is the point-of-sale multi-location it's more. a on

guess, Really all really, value I way do proposition, that of for better data cetera. saying of of It's of been from one a et lack analysis, a set pane one really glass, it. compelling

been one the of that's the so growth. And that's been fueling things

core to of like from that we're talked our in offline relates adding and taking maybe we're it ago a the online giving to we retailers. we're point-of-sale. and we business installments, couple lot, things that where doing a to And we're offering continue countries as with quarters them to the expand to And them, Samad,

and don't have more to in don't offerings more at of number rate, of functionality of don't point-of-sale opportunity same that have we going -- we're sheer also but the in the we number. the number terms have for that's in said, be able terms also migrate attach being just point-of-sale. that to because an online, we just So of We the

rate overall are and over And opportunities time, the some to going so of attach the increase.

the believe that the from for There's to you subscription piece piece. is we revenues significant point-of-sale, payments I us Those know, the X majority primarily obviously a the of that. As retail. the element up make get retail

of but we're trends, exactly out you is as the -- we -- it We again, retail, of percentage relates not expect I of unfortunately, kind can alluded breaking the to as continuation as before. MRR what to

it's the all doing Harley well, function it's and I So really a covered. of both and have things

back maybe So to with Harley, it that, turn you. I'll

Yes.

may Let finish be cash pro me just want say close here, that one XX% because that just the it's lost margins. think important. free I to before call really growth we but just We forma and thing flow getting XX% delivered revenue I

Now business company very the for we growth points outlook our something single cash every to almost rare QX, I the mid-XXs, margin that mean the forma flow to achieved in do pro XX% free and unique this combined low with to planet. relative revenue on in to can QX. And similar

creating We growth our margins, while that future. the all and in growth opportunities and can deliver enhance into leaning

term. say those accomplish stronger longer I -- the means And I X strength company can this so like important all and business of things build just it's to think we of

excited how the I've world-class more proud been I've work companies And And do. durable been business, This more about team. you never to is this never is what this about growth. I Shopify, think best and long-term with our achieve

thank today of version ever, joining for the is so this Shopify and much the on us think I best you call.

conference call. This first quarter concludes Thank XXXX you. our