Q4 2023 Shopify Inc Earnings Call

Operator: 2023 conference call. Harley Finkelstein, Shop Vice 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.

Harley Finkelstein shop, Vice 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.

Speaker Change: Sept as required by law you can read about these assumptions risks and uncertainties in our press release this morning, as well as in our filings with the U S and Canadian regulators will also speak to adjusted financial measures, which are non-GAAP and are not a substitute for GAAP financial measures reconciliations between the two are in the tables at the end of our press release and finally, we report in U S dollar.

Carrie Gillard: You can read about these assumptions, risks, and uncertainties in our press release this morning, as well as in our filings with U.S. and Canadian regulators. We'll also speak to adjusted financial measures, which are non-GAAP and not a substitute for GAAP financial measures. Reconciliations between the two are in the tables at the end of our 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 will turn the call over to Harley. Thanks Carrie, and good morning everyone.

Speaker Change: So all amounts discussed today are in U S dollars, unless otherwise indicated with that I will turn the call over to Hartley.

Hartley: Thanks, Carrie and good morning, everyone 2023 was a phenomenal year for Shopify Commerce moves fast and we moved faster we reshape the company to be flatter more agile and built to address every corner of commerce never losing sight of our mission to make commerce better for everyone.

Harley Finkelstein: 2023 was a phenomenal year for Shopify. Commerce moves fast, and we move fast. We reshaped the company to be flatter, more agile, and built to address every corner of commerce, never losing sight of our mission to make commerce better for everyone.

Harley Finkelstein: And as a result, we continue to break down barriers, accelerate the power of entrepreneurship, and fuel our merchant success. No matter which way you look at our business, be it merchants, products, or channels, we delivered an incredible fourth quarter to finish off an amazing year of growth. From a merchant perspective, more businesses of all sizes continue to choose Shopify. Our overall merchant base grew from entrepreneur to enterprise, a direct result of the powerful growth engine, products, and go-to market we have built. Compared to 2022, we have had 35% more merchants from outside North America launch and grow their businesses on Shopify. We have signed and added to our incredible roster of merchants, bringing on more diverse businesses across verticals, geographies, and channels. Brands like Carrier, Nike Strength, Dollar Shave Club, Banana Republic Home, Authentic Brands Group, Tim Hortons, Goofy Renger, Bye Bye Baby, Oscar De La Renta, Everlane, and On Running.

Hartley: And as a result, we continue to break down barriers accelerate the power of entrepreneurship and fuel our merchant success.

Which when you look at our business be it merchants products or channels, we delivered an incredible fourth quarter to finish off an amazing year of growth from a merchant perspective more businesses of all sizes continue to choose shopify.

Hartley: Our overall merchant base grew from entrepreneur to enterprise a direct result of the powerful growth engine products and go to market we have built.

Hartley: Compared to 2022, we had 35% more merchants from outside North America launch and grow their businesses on Shopify, we have decided to add it to our incredible roster of merchants, bringing on more diverse businesses across verticals geographies and channels brands like carrier Nike strength dollar Shave club Banana Republic home offer.

Hartley: The two brands group, Tim Hortons, Gucci Ringer, Bye Bye baby, Oscar Dela Renta ever Lane and on running to name a few.

Harley Finkelstein: Our unified commerce platform has been meticulously constructed and designed to enable brands to start, grow, and scale on Shopify. Every feature we launch and every developer tool we create is aimed at making the hard things easy and everything else possible. In 2023, our momentum was bolstered by our strong foundation, as we made it even easier for merchants to run and manage a business using tools that are crafted to be simple and intuitive to enable them to focus on what matters most, their product. For streamlining expense management, we launched Shopify BillPay. And for things like managing taxes, the Shopify Tax Platform now allows enterprise-grade tax services to manage end-to-end sales tax compliance within Shopify's existing infrastructure. We expanded our back-office merchant solutions to more countries to allow greater customization, upgraded our checkout extensibility, and rolled out one-page checkout to make the world's best-converting checkout even faster.

Hartley: Our unified Commerce platform has been meticulously constructed and designed to enable brands to start grow and scale on Shopify every feature relaunch and every developer tool. We create are aimed at making the hard things easy and everything else possible in 2023, our momentum was bolstered by our strong foundation has made it even easier for merchants to.

Hartley: Run and manage their business using tools that are crafted to be simple and intuitive to enable them to focus on what matters most their product.

Hartley: For streamlining expense management, we launched Shopify, Bill pay and for things like managing taxes. The shop by tax platform now allows enterprise great tax services to manage end to end sales tax compliance within shopify is existing infrastructure, we expanded our back office merchant solutions to more countries to allow greater customization upgrade our check what extensibility and rolled out one.

Hartley: Page checkout to make the world's best converting checkout, even faster we continue to unlock the connectivity of the platform to sell wherever buyers are with products like shopify collective and the marketplace connect App, we integrated sharp pains stomach into point of sale rolled out a point of sale terminal for enterprise and mid markets generally available in the U S.

Harley Finkelstein: We continue to unlock the connectivity of the platform to sell wherever buyers are with products like Shopify Collective and the Marketplace Connect app. We integrated ShopPay installments into Point-of-Sale, rolled out a Point-of-Sale terminal for Enterprise, and made MarketsPro generally available in the U.S. We made it easier for merchants to discover and engage with their customers. We continue to build the Shop app with new features, including Shop Cash and Shop on the Web, so merchants and buyers can more easily discover each other, connect, and build relationships. We further refine our algorithms for audiences, which have shown reductions in CAC of up to 50 percent, while increasing the advertising platform partners to include TikTok, Snap, Pinterest, and Criteo.

Hartley: We made it easier for merchants to discover and engage with their customers. We can do to build the shop app with new features including shop cash and shop on the web some merchants and buyers can more easily discover each other connect and build relationships. We further refined our algorithms for audiences, which is shown reductions in CAC of up to 50%, while increasing the advertising.

Hartley: Plot from partners to include Tictoc, snap Pinterest and <unk>, we've expanded the on ramps for merchants into shopify to thrive at any stage of their growth journey in just the last year. We enabled two new ways for merchants to choose shopify for retailers, who primarily operate in physical locations the retail plan and for larger volume enterprise brands.

Harley Finkelstein: We've expanded the on-ramps for merchants into Shopify to thrive at any stage of their growth. In just the last year, we enabled two new ways for merchants to choose from when shopping. For retailers who primarily operate in physical locations, the retail store, and for larger volume enterprise brands looking for composability, Commerce Components by Shopify. Earlier this year, we further expanded our optionality for enterprises, providing a plan that enables them to build with the highest velocity across either the full-stack, composable, or headless.

Hartley: For compose ability commerce components by Shopify.

Hartley: Earlier this year, we further expanded our optionality for enterprises, providing a plan that enables them to build with the highest velocity across either the full stack composedly or headless and the ITC market scape 'twenty 'twenty four mid market assessment took note recently, placing shopify in the leader category had a dozens of other software companies.

Harley Finkelstein: And the IDC Marketscape 2024 Mid-Market Assessment took note, recently placing Shopify in the leader category ahead of dozens of other software companies. All of this while also being recognized by Gartner as the Magic Quadrant Leader for Enterprise, placing us as the highest in our ability to execute. We also expanded and deepened our ecosystem of partners to include systems integrators like IBM and Cognizant. We signed a commercial agreement with Flexport, launched Built for Shopify, partnered to bring the Amazon Buy with Prime app into our ecosystem, and enabled a deeper integration with Adyen for Enterprise. And finally, we cannot talk about 2023 without mentioning AI.

Hartley: All of this while also being recognized by Gartner as the Magic quadrant leader for enterprise, placing us as the highest in our ability to execute.

Hartley: We also expanded and deepened our ecosystem of partners to include systems integrators, like IBM and cognizant, we signed a commercial agreement with Flex Port Lodge built for Shopify partner to bring the Amazon by with Prime map into our ecosystem and enable the deeper integration with audience for enterprise and finally, we cannot talk about 2023 without mentioning AI.

Harley Finkelstein: We launched our suite of AI-powered tools, known as Shopify Magic, an AI shopping assistant in our Shop app, and further embedded AI tools within Shopify to increase productivity and streamline administrative tasks that have saved our merchants and our team thousands of hours of work, enabling us to ship faster and make great decisions quicker. What we have known from day one at Shopify is that when our merchants are more successful, Shopify is more successful. Revenue hit $7.1 billion, up 26% year-over-year, with Q4 surpassing $2 billion in a single quarter for the first time ever.

Hartley: We launched our suite of AI powered tools known as Shopify Magic and AI shopping assistant on our shop, App and further embedded AI tools within shopify to increase productivity and streamline administrative tasks that are safe, our merchants and our team thousands of hours of work, enabling us to ship faster and make great decisions quicker.

Hartley: Well, we've known from day, one it's shopify is that what our merchants are more successful shopify is more successful revenue hit $7.1 billion up 26% year over year with Q4, surpassing 2 billion in a single quarter for the first time ever gross profit dollars for the year grew 28% with Q4 hitting $1 billion of grew.

Harley Finkelstein: Gross profit dollars for the year grew 28%, with Q4 hitting $1 billion of gross profit in a single quarter for the first time in Shopify's history. And finally, we generated free cash flow of $905 million for the year, successfully growing both free cash flow dollars and free cash flow margin sequentially each and every quarter throughout 2020. In short, we are right where we want to be on our journey to becoming a 100-year-old person.

Hartley: Profit in a single quarter for the first time and Shopify is history and finally, we generated free cash flow of $905 million for the year successfully growing both free cash flow dollars and free cash flow margin sequentially, each and every quarter throughout 2023 in.

Hartley: In short we are right, where we want to be on our journey to becoming a 100 year company. The trust we have built with our merchants as the best place for entrepreneurship to thrive combined with the strong operational discipline. We have put in place we are well positioned to continue to deliver a compelling combination of both growth and profitability.

Harley Finkelstein: The trust we have built with our merchants as the best place for entrepreneurship to thrive, combined with the strong operational discipline we have put in place, we are well positioned to continue to deliver a compelling combination of both growth and profitability. So, let's go into more detail on the key accomplishments for the quarter that further demonstrate the progress we are making to strengthen our position as a leader in unified commerce. I will first quickly touch on our Black Friday and Cyber Monday results before diving into our products, channels, and international, starting with the incredible success of our merchants on Black Friday and Cyber Monday. In that four-day period alone, our merchants collectively generated $9.3 billion in sales, representing 24% growth over the prior year.

Hartley: So let's go into more detail on the key accomplishments for the quarter that further demonstrates the progress we're making to strengthen our position as a leader in unified commerce.

Hartley: Well first quickly touch on our Black Friday, cyber Monday results before diving into our products channels and international.

Hartley: With the incredible success of our merchants on Black Friday, cyber Monday in that four day period alone our merchants collectively generated $9 $3 billion in sales representing 24% growth over the prior year, approximately 61 million consumers worldwide purchase from brands powered by Shopify.

Harley Finkelstein: Approximately 61 million consumers worldwide purchased from brands powered by Shopify. Additionally, over 17,500 merchants made their first sale, and more than 55,000 merchants had their highest selling day ever on Shopify. All of this, on our platform, handled a staggering 967,000 requests per second, which is the same as 58 million requests per minute, nearly 80% higher than our peak traffic just two years ago. This is a testament to the resiliency and the scalability of our platform that powers more and more of the modern world.

Hartley: Over 17500 merchants made their first sale and more than 55000 merchants had their highest selling day ever on shopify.

Hartley: All of this in our platform entered a staggering 967000 requests per second which is the same as 58 million requests per minute nearly 80% higher than our peak traffic just two years ago. This is a testament to the resiliency and the scalability of our platform that powers more and more of modern commerce turning to product.

Harley Finkelstein: Turning to product, Shopify is all about choice. Constantly iterating, expanding, and offering more solutions to meet the needs of merchants and their shifting preferences of their customers, which is why a little over two years ago, we launched Hydrogen and Oxygen to give merchants that wanted to go headless an easier development path, helping them to get to market faster. Hydrogen, our React-based toolkit, surpassed $1 billion in GMB in Q4 alone.

Hartley: Shopify is all about choice constantly iterating, expanding and offering more solutions to meet the needs of merchants and theyre shifting preferences of their customers, which is why a little over two years ago, we launched hydrogen and oxygen to give merchants that wanted to go head list in easier development path, helping them to get to market faster hydrogen or react based toolkit.

Hartley: Surpassed $1 billion in G. M V. In Q4 alone for the year. The G. M. D was more than six times, what we achieved in all of 2022, reinforcing shopify <unk> position as a reliable commerce partner for Headless Commerce, we are seeing more new brands like Butcher box into covas, joining shopify and launching hydrogen and expect this momentum to continue.

Harley Finkelstein: For the year, the GMV was more than six times what we achieved in all of 2022, reinforcing Shopify's position as a reliable commerce partner for headless commerce. We are seeing more new brands like ButcherBox and Tocovus join Shopify and launch Hydrogen, and expect this momentum to continue into 2024. We know conversion is king when it comes to making a sale, and in 2023, we made significant improvements across our platform because we know that not all checkouts are created equal. Our checkout converts better and is now faster than ever before, up to four seconds faster on average, in fact.

Hartley: Into 2024, we know conversion is king when it comes to making a sale and a 2023 we made a significant improvements across our platform because we know that not all checkouts are created equal our checkup converts better and is now faster than ever before up to four seconds faster on average in fact this year our team made substantial progress.

Harley Finkelstein: This year, our team made substantial progress reducing friction for our merchants and their customers by introducing features like sign in with shop and one-page checkout. Because when everything works seamlessly together to make the shopping experience better for everybody, everybody. We've always felt that we have the best converting checkout in the world. And in 2023, we got validation.

Hartley: Reducing friction for our merchants and their customers by introducing features like signing with shop in one page checkout, because when everything work seamlessly together to make the shopping experience better everybody wins.

Hartley: We've always felt that we had the best converting checkout in the world and in 2023 we got validation of that in April and external study by a big three consulting company confirmed that Shopify is overall conversion rate surpasses the competition by up to 36% and an average is 15% higher than others. The data also.

Harley Finkelstein: In April, an external study by a Big Three consulting company confirmed that Shopify's overall conversion rate surpassed the competition by up to 36% and on average is 15% higher than others. The data also showed that the mere presence of Shopify, even when it is not used by a buyer, results in higher conversion by 5%. And when it is used, it can lift conversion as much as 50% versus guest checkout, outpacing all other accelerated checkouts by at least 10%. And it's showing up in our results.

Hartley: <unk> that the mere presence of sharpie, even when it is not used by a buyer resulted in higher conversion by 5% and when it is us can lift conversion as much as 50% versus guest checkout outpacing all other accelerated checkouts by at least 10%.

Hartley: And it's showing up in our results for the quarter shop pay which is the best converting accelerated check it on the internet with over 150 million buyers signed up facilitated $18 billion of DMV up 58% year over year and a staggering 50% for all of 2023. It is now reaching <unk> 127 billion.

Harley Finkelstein: For the quarter, ShopPay, which is the best converting accelerated checkout on the internet, with over 150 million buyers signed up, facilitated $18 billion of GMV, up 58% year over year, and a staggering 50% for all of 2023. It has now reached a commitment of $127 billion since its launch in 2017, and continues to become the go-to choice for consumers looking to buy quickly, securely, and with as little friction as possible. It also has surpassed all other wallets for Shopify merchants, as we look to make ShopPay the leading checkout across the internet. Transitioning to AI, Shopify is capitalizing on the immense opportunity to support its merchants in this new technological era where AI will become the most powerful sidekick for business creation.

Hartley: Since its launch in 2017 and continues to become the go to choice for consumers looking to buy quickly securely and with as little friction as possible. It also has surpassed all other wallet for shopify merchants as we look to make shop pay the leading checkout across the internet.

Hartley: Transition to AI shop place capitalizing on the immense opportunity to support our merchants in this new technological era, where AI becomes the most powerful sidekick for business creation.

Harley Finkelstein: Our strategy involves integrating AI at the heart of our platform, simplifying the process for merchants to expand their businesses and adapt to the ever-evolving commerce landscape. This is particularly relevant as we begin to shift towards more declarative software versus iterative, a concept that Glenn Coates, our VP of Core Product, discussed at Investor Day. In 2023, we brought nearly a dozen AI-enabled tools to our Shopify Magic product suite. We're one of the first platforms to bring AI-generated product descriptions to market and made solid progress towards building Sidekick, a first-of-its-kind AI-enabled commerce assistant. As part of our Winter Editions a few weeks ago, we introduced new features to our Shopify Magic suite of AI tools. These new generative AI tools simplify and enhance product image editing directly within the product image editor in the Shopify admin.

Hartley: Our strategy involves integrating AI at the heart of our platform simplifying the process for merchants to expand their businesses and adapt to the ever evolving commerce landscape. This is particularly relevant as we begin to shift towards more declared a software versus iterative a concept that Glenn coach our VP of core product discussed at Investor Day in 2023, we.

Hartley: Brought nearly a dozen AI enabled tools through our shopify magic product suite, one of the first platforms to bring AI generated product descriptions to market and made solid progress towards building sidekick, a first of its kind AI enabled commerce assistant.

Hartley: As part of our winter editions, a few weeks ago, we introduced new features to Shopify Magic suite of AI tools. These new generative AI tool simplified and enhanced product image editing directly within the product image editor in the Shopify admin with Shopify Magic merchants can now leverage AI to create stunning images and professional edits with just a few clicks or keywords saving on cost and time.

Harley Finkelstein: With Shopify Magic, merchants can now leverage AI to create stunning images and professional edits with just a few clicks or keywords, saving on cost and time. And given the significant advancements in AI in 2023, we plan to seize this enormous opportunity ahead of us and are excited to introduce new modalities and text-to-image capabilities to Shopify in 2024. Capitalizing on our scale and the trust we've established with merchants over time, we continue to unlock differentiated advantages for our merchants as we power millions of global storefronts. Offerings such as Shopify Collective, Shopify Audiences, Shopify Capital, and Shopify Cash Offers illustrate how we use the power of our platform and data-informed product development to offer something truly unique in the market that you can only get if you are on Shopify. Take Shop Like Collective, which launched in our summer editions in July. Users of this product range from celebrity brands like Drake's Drake Related and Reese Witherspoon's Reese's Book Club to iconic brands like Mattel, elevating its cachet and connecting even more merchants together.

Hartley: And given the significant advancements in AI in 2023, we plan to seize this enormous opportunity ahead of us and are excited to introduce new modalities and text to image capabilities to shopify in 2024.

Hartley: Capitalizing on our scale and the trust we have established with merchants over time, we continue to unlock differentiated advantages for our merchants as we power millions of global storefronts.

Hartley: <unk>, such a shopify collective shops like audiences shopping like capital shop cash offers illustrate how we use the power of our platform and data from product development to offer something truly unique in the market and you can only get if you are on shopify.

Hartley: Takes you up like collective, which launched at our summer editions in July users of this product range from celebrity brands like Drakes drink related reached Wetherspoons recent book club two iconic brands like Mattel elevating its cachet and connecting even more merchants together, it's incredibly humbling to hear the success stories from independent merchants, who opt.

Harley Finkelstein: It's incredibly humbling to hear the success stories from independent merchants who take advantage of this opportunity to join forces and help each other. Shopify Capital, a product that's been aiding merchant growth for over 7 years, continues to gain momentum. This financial support often plays a key role in making our merchants' ambitions more attainable. Because we help our merchants run their businesses, we are able to get them the funding they need in a few weeks. This helps brands like Nomad, Chalk Zero, and Porter Road get the funding they need to support their growth and grow their business.

Hartley: <unk> on this opportunity to join forces and help each other succeed Chuck.

Hartley: <unk> capital a product that's been eating merchant growth for over seven years keep seniors to gain momentum. This financial support often plays a key role in making our merchants ambitions more attainable because we help our merchants run their businesses, we were able to get the funding they need in a few clicks. This helps brands like Nomad chalk zero and Puerto Road get the funding they need.

Hartley: To support their growth scale and grow their businesses and we know the capital product has been effective because we're seeing a repeat renewal rate of over 70% a testament to our ability to help merchants access the funding they need for growth, particularly ahead of key sale times, including the crucial Q4 holiday shopping season.

Harley Finkelstein: And we know the capital product has been effective because we're seeing a repeat renewal rate of over 70 percent. A testament to our ability to help merchants access the funding they need for growth, particularly ahead of key sale times, including the crucial Q4 holiday shopping. A newer product that just launched in the summer of 2023, ShopCash, is a great example of harnessing the power of the platform via the Shop App to build new ways for merchants to acquire new customers. As we move into 2024, ShopCash offers will become a part of a broader product suite called Shopcamp. Brands like Netflix, Nike Strength, and Carraway have already signed up and launched their first shop campaigns during the quarter, giving them access to millions of highly qualified buyers in the shop app and creating a new tool for paid customer acquisition.

Hartley: A newer product that just launched in the summer of 2023 shop cash is a great example of harnessing the power of platform by shop App to build new ways for merchants to acquire new customers as we move into 2024 shop cash offers will become a part of a broader product suite called shop campaigns brands like Netflix Nike strength and <unk>.

Hartley: Caraway have already signed up and launched their first shop campaigns during the quarter, giving them access to millions of highly qualified buyers in the shop, app and creating a new tool for paid customer acquisition. While still early days. We are very excited about the potential of this product and making it easier for merchants to discover and engage with their customers.

Harley Finkelstein: While still early days, we are very excited about the potential of this product in making it easier for merchants to discover and engage with their customers. Encouraged by the momentum across our product offerings, we know that for most of our merchants, Shopify is the online store. But we know that that's only the start.

Hartley: Encouraged by the momentum across our product offerings, we know that for most of our merchants Shopify is the online store, but we know that that's only to start as commerce is getting to evolve transactions and brand engagement have moved far beyond the traditional retail or online stores in order to discover new customers and build deeper connections with existing ones.

Harley Finkelstein: As commerce is beginning to evolve, transactions and brand engagement have moved far beyond traditional retail or online stores. In order to discover new customers and build deeper connections with existing ones, you need to be online, offline, and everywhere in between. And this is one of our superpowers and why merchants of all sizes are coming to Shopify to build their own future, starting with our offline channel.

Hartley: You need to be online offline and everywhere in between and this is one of our superpowers and why merchants of all sizes are coming to shopify to build their own future.

Hartley: Starting with our offline channel our go to market efforts combined with enhancements to our product offering continue to resonate with more merchants that operate both offline and online presences in the quarter offline Jimmy was up 28% year over year, driven by the growth of our merchants combined with the expansion of locations by our merchant base are offline.

Harley Finkelstein: Our go-to-market efforts, combined with enhancements to our product offering, continue to resonate with more merchants that operate both offline and online presences. In the quarter, offline GMB was up 28% year-over-year, driven by the growth of our merchants, combined with the expansion of locations by our merchant base. Our offline success is broad-based across all of the avenues of growth.

Hartley: <unk> is broad based across all of the avenues of growth for digitally native brands already on Shopify like figs, we were there when they launched their first physical retail location in L. A and cannot wait to be part of wherever they go next.

Harley Finkelstein: For digitally native brands already on Shopify, like Figs, we were there when they launched their first physical retail location in L.A. and cannot wait to be part of wherever they go next. Or, Sage Natural in Canada, which has over 70 retail locations today, chose to migrate over their existing point-of-sale to Shopify. Thanks to the features and functionality we offer, including a point-of-sale terminal, seamlessly integrated back into the online store, and the capability to now support over 1,000 physical products. In addition, we're seeing merchants coming to Shopify primarily for our point of sale. Multi-store brands like EverEve and Akira that want to modernize their offline tech stack with our cutting-edge platform are these on-ramps, or entry points, into Shopify. This further substantiates our role as the unified commerce operating system for merchants, whether they come to us to sell online, offline, or anywhere in between. For the year, our offline revenue was $441 million, which included revenue from payments, offline subscriptions, and point-of-sale hardware.

Hartley: <unk> saves natural in Canada, which is over 70 retail location today chose to migrate over their existing point of sale to shopify thinks of the features and functionality, we offer including point of sale terminal seamlessly integrated back into the online store and the capability now support over 1000 physical stores.

Hartley: In addition, we're seeing merchants coming to shopify, primarily for our point of sale multi store brands like ever even Akira they'll want to modernize their offline tech stack with our cutting edge platform. These on ramps or entry points into shopify further substantiate our role as the unified Commerce operating system for merchants, whether they come to us to sell.

Hartley: Online offline or anywhere in between.

Hartley: For the year, our offline revenue was $441 million, which includes revenue from payments all find subscriptions and point of sale hardware. This is more than five X. What are often revenue was just four years ago and it speaks to the strength of this channel as a growing important onramp into shopify with a tam for offline and b to be estimated at over four.

Harley Finkelstein: This is more than 5X what our offline revenue was just four years ago and speaks to the strength of this channel as a growing, important on-ramp into Shopify. With a TAM for offline and B2B estimated at over $450 billion, we have barely scratched the surface of this opportunity and expect it to be a key growth driver in 2025. As we invest further into the unique needs of offline commerce, we will remain focused on simplifying the tech stack while bringing all of the capabilities that we offer for online to offline.

Hartley: $450 billion, we have barely scratched the surface of this opportunity and expect it to be a key growth driver in 2024, as we invest further into the unique needs for offline commerce. We will remain focused on simplifying the tech stack or bringing all of the capabilities that we offer for online to offline. This remains a big opportunity for us, especially as we are.

Harley Finkelstein: This remains a big opportunity for us, especially as our offline offering represents additional pathways to bring even more merchants and customers into the Shopify flyway. Diving into B2B, a big and exciting growth opportunity for Shopify, we are continually enhancing our offering, investing in both the product and the go-to-market strategies to support this additional growth driver. During the fourth quarter, our business was up nearly 150% year-over-year, with total B2B GMB doubling in 2023. Similar to offline retail, new channels like B2B allow our merchants to reach more customers and broaden their brand visibility.

Hartley: Often offering represents additional pathways to bring even more merchants and customers into the shop like flywheel.

Hartley: I think it to be to be a big and exciting growth opportunity for shopify, we are continually enhancing our offering investing about the product and the go to market strategies to support this additional growth driver during the fourth quarter, our business was up nearly 150% year over year with total beat of BG and be doubling in 2023 similar to offline retail new channels.

Hartley: Like B to B allow our merchants to reach more customers and brought in their brand visibility while our growth in 2023 is primarily stem from existing merchants adopting b to b like home decor, and furniture company Lulu in Georgia, and fashion jewelry and accessories company Bauble bar. We've also secured some b to b only merchants like carrier, which signed in Q4.

Harley Finkelstein: While our growth in 2023 has primarily stemmed from existing merchants adopting B2B, like home decor and furnishing company Lulu in Georgia and fashion, jewelry, and accessories company Bobble Bar, we've also secured some B2B-only merchants, like Carrier, which signed in Q4, opening the door to a whole new category of industries we previously didn't serve. In 2024, we will continue to focus on growing our merchant base by catering to businesses who conduct only B2B transactions through a differentiated B2B offering. We are building on our commitment to help merchants sell to all of their customers from a single, unified commerce platform with upgrades to our B2B offering, including headless B2B storefronts and support for sales reps in the admin, among others, as we look to establish our B2B offering as a leader in commerce.

Hartley: Opening the door to a whole new opportunity of industries. We previously it didn't serve.

Hartley: In 'twenty 'twenty four we will continue to focus on growing our merchant base by catering to businesses, who conduct only be transactions through a differentiated <unk> offering we are building on our commitment to help merchants sell to all of their customers from a single unified commerce platform with upgrades to our b to b offering, including headless speed up storefronts and support for sales reps in the admin.

Hartley: Among others as we look to establish our b to b offering as a leader in commerce.

Harley Finkelstein: With over 70% of Shopify's online checkouts in a year made via mobile devices, it is vital for a merchant to integrate commerce into more platforms to effectively discover and engage their customers. Our investment in the Shop app, which offers an instant mobile storefront and a built-in audience of millions of new buyers, continues to become a powerful free channel for our merchants.

Hartley: With over 70% of Shopify is online checkouts in the year made via mobile devices. It is vital for a merchant to integrate commerce into more platforms to effectively discover and engage their customers our investment in the shop, App, which offers an instant mobile storefront and built an audience of millions of new buyers continues to become a powerful free channel for.

Harley Finkelstein: In Q4, the Shop app nearly reached $100 million in GMV in a single month, underscoring the immense value we can bring to our merchants, a feature that is only available if you are on Shopify. We also brought in Shopify to include a web experience, providing more touch points for our merchants to maintain customer relationships. We've continued to unlock new ways for our brands to foster genuine connections with their consumers through the Shop app. After our successful collaboration with Drake last quarter, we partnered with Mr. Beast in a video that has attracted more than 165 million views.

Hartley: Our merchants in Q4, the shop App nearly reached $100 million in <unk> in a single month underscoring the immense value we can bring to our merchants a feature that is only available. If you were on Shopify. We also brought in shop to include web experience, providing more touch points for our merchants to maintain customer relationships.

Hartley: We can do to unlock new ways for our brands to foster genuine connections with their consumers through the shop App. After our successful collaboration with Drake last quarter, we partnered with Mr. Beast on the video that has attracted more than 165 million views. Mr be invited viewers to use the shop app to request a holiday gift from a shopify merchants. This helps you.

Harley Finkelstein: MrBeast invited viewers to use the Shop app to request a holiday gift from a Shopify merchant. This helped drive the Shop app into a top 3 spot on Apple's free iOS apps chart, and hundreds of thousands of fans participated, with thousands of gifts from Shopify merchants shipped to their doorsteps. All of this is powered by Shopify as we continue to unleash new ways for merchants to engage and drive authentic connections with their customers. In 2024, we look to further refine the way merchants interact with their customers through the Shop app to drive customer engagement, increase sales, and build long-term relationships with their customers. Let's now talk about our international initiatives.

Hartley: The shop App into a top three spot in Apple's free iOS apps chart and hundreds of thousands of fans participated with thousands of gifts from shopify merchants shipped to their doorstep. All of this is powered by Shopify as we continued to unleash new ways for merchants to engage and drive authentic connections with their customers in.

Hartley: In 'twenty 'twenty four we look to further refine the way merchants interact with their customers through the shop out and drive customer engagement increase sales and build long term relationships with their customers.

Let's now talk about our international initiatives shop place continuing to invest in building products that work for more merchants and more buyers across different parts of the world.

Harley Finkelstein: Shopify is continuing to invest in building products that work for more merchants and more buyers across different parts of the world. Cross-border GMV was approximately 14% of total GMV in the quarter, and within Europe, we continue to see strong growth from both our existing merchant base as well as growth in new merchant additions. With EMEA now over $1.2 billion in annual revenue and representing 27% of our total merchant base, we've proven that our go-to-market and investments in expanding our capabilities and localization efforts are worth it. Our Go-To-Market teams have had an incredible year expanding the brands on our platform with recent international brands that have signed or launched with Shopify, including London-based clothing label Bodin, our largest deal in the UK in our history. German Curated Home & Living Company, West Wing, and Berlin-based active brand, Oceans Apart.

Hartley: Cross border G. M. B was approximately 14% of total Jimmy in the quarter and within Europe, We continue to see strong growth from both our existing merchant base as well as growth in new merchant additions with EMEA now over $1.2 billion in annual revenue and representing 27% of our total merchant base, we've proven that our go to more.

Hartley: Kit and investments into expanding our capabilities and localization efforts are working.

Hartley: Our go to market teams have had an incredible year expanding the brands on our platform with the recent international brands that are signed or launched shopify, including London based clothing label Bowden, our largest deal in the U K in our history, German curated home and living company West wing.

Hartley: Berlin based active brand oceans apart.

Harley Finkelstein: Japan Headquarters Suntory, the well-known beverage multinational, and On Running, the Swiss athletic sports company that has taken the footwear category by storm, just to name a few. At MarketsPro, we continue to enable our go-to-market strategy to increase the adoption of this product. In the past quarter, thousands of merchants leveraged MarketsPro for cross-border sales, and over the Black Friday-Cyber Monday weekend, 15% of all global orders were cross-border. Brands such as Red Hot Chili Peppers and Z-Packs launched in MarketsPro, and we're eager to extend this offering to more countries in 2024 and beyond.

Hartley: Japan headquartered some Tory the well known beverage multinational and on running the Swiss Athletic Sports company that has taken the footwear category by store just to name a few on markets probe. We continue to enable our go to market to increase the adoption of this product in the past quarter thousands of merchants leverage markets Pro for cross.

Hartley: Brewer sales and over the Black Friday, Cyber Monday weekend, 15% of all global orders were cross border brand.

Hartley: Brands, such as the Red Hot Chili Peppers, and Z packs launched in markets Pro and we're eager to extend this offering to more countries in 2024 and beyond our key product initiatives to drive our international growth include additional localization of the online store and themes more integrations with local shipping carriers launching shopify as tax platform to global merchants, making poor.

Harley Finkelstein: Our key product initiatives to drive our international growth include additional localization of the online store and themes, more integrations with local shipping carriers, launching Shopify's tax platform to global merchants, making point-of-sale available in more markets, and integrating with local marketplaces and sales channels. We've hit the ground running in 2024, maintaining our momentum post-holiday season, just like our merchants, with a strong push to build on our 2023 traction in enterprise and the release of our winter edition. First, on our enterprise efforts. We kicked off 2024 at NRF, which is the conference for enterprise retail and the Shopify show. Despite it being only our second year of attendance, the engagement level and pipeline of GMV opportunities we encountered this year compared to the last were remarkably different. Our enterprise offerings, whether full stack, headless, or composable, are gaining widespread recognition.

Hartley: A sale available in more markets and integrating with local marketplaces and sales channels. We have hit the ground running in 2020 for maintaining our momentum post holiday season, just like our merchants with a strong push to build on our 'twenty 'twenty retraction in enterprise and the release of our winter additions first on our enterprise efforts, we kicked off two one.

Hartley: 24 at an RF, which is V conference for enterprise retail and Shopify showed up despite it being only our second year of attendance the engagement level and pipeline of G. M. The opportunities we encountered this year compared to the last was remarkably different.

Hartley: Our enterprise offerings, whether full stack headless are composed of all are gaining widespread recognition, we engage with hundreds of large established brands and businesses, making our presence felt while also announcing partnerships with miracle, Google cloud marketplace slalom and Manhattan.

Harley Finkelstein: We engage with hundreds of large, established brands and businesses, making our presence felt while also announcing partnerships with Miracle, Google Cloud Marketplace, Slalom, and Manhattan. Just as we've developed a robust ecosystem for entrepreneurs and SMBs, these partnerships further underscore our strategic positioning as a key player in the enterprise sector across all facets of commerce. This is steadily paving more enterprise pathways towards Shopify, and we plan to amplify our presence this year as we build on our momentum. This is a clear demonstration of our commitment to building the best product to make commerce better at a velocity unmatched in the industry. Before I wrap up and hand it over to Jeff, I want to say thank you to our team for consistently bringing their A-game, their innovative ideas, and their challenger mindset to advance our mission and make the hard things easy.

Hartley: Just as we've developed a robust ecosystem for entrepreneurs and Smbs. These partnerships further underscore our strategic positioning as a key player in the enterprise sector across all facets of Commerce. This is steadily paving more enterprise pathways towards shopify, and we plan to amplify our presence this year as we build on our momentum.

Hartley: Two weeks ago, our winter edition dropped if you haven't checked it up yet you really should our most recent addition span across the pillars of conversion channels marketing and operation all of the areas that are foundational to merchant success. This is our fourth edition in just two years each time introducing over 100, new features and updates are cleared.

Hartley: Demonstrating our commitment to building the best product to make commerce better at a velocity unmatched in the industry before I wrap up and hand, it over to Jeff I want to say, thank you to our team for consistently bringing their a game their innovative ideas and their challenger mindset to advance our mission and make the hard things easier.

Harley Finkelstein: Building a unified commerce operating system that delights millions of merchants across the globe is hard. Shopify is great at solving hard problems. We are operating at an unprecedented level in our history thanks to the incredible work of the thousands of people that work at Shopify all over the world. Thank you for your adaptability and unwavering efforts to preserve and expand entrepreneurship and for giving our merchants superpowers. To wrap it up, we delivered in 2023. For 2024, we will not slow down.

Hartley: Building, a unified commerce operating system that delights millions of merchants across the globe is hard but shopify is great at solving hard problems. We are operating at an unparalleled level in our history and the incredible work of the thousands of people that work at Shopify all over the world. Thank.

Hartley: Thank you for your adaptability and unwavering efforts to preserve and expand entrepreneurship and forgiving our merchants superpowers to wrap it up we delivered in 2023 for 'twenty 'twenty four we will not slow down we will be relentless in our craftsmanship of our foundation to keep us at the center of Commerce and building the future for entrepreneurs for those.

Harley Finkelstein: We will be relentless in our craftsmanship in our foundation to keep us at the center of commerce and building the future for entrepreneurs, for those that are adaptable, unapologetic, and ready. With continued advances in technology and the changing consumer landscape, we believe more and more individuals will continue to try their hand at entrepreneurship. When they do, Shopify will be there, as we have been for nearly two decades, building commerce to make it simpler, easier, and more democratized. And with that, let me turn the call over to you. Thanks, Harley.

Hartley: That are adaptable unapologetic and ready with continued advances in technology and the changing consumer landscape, we believe more and more individuals will continue to try their hand and entrepreneurship when they do shopify will be there as we have been for nearly two decades building commerce to make it simpler easier and more democratized.

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

Jeff: Thanks, Harley 2023 was certainly a phenomenal year for our merchants and our team are powerful platform mission driven investments and focus on execution and are providing a strong foundation for our merchants to compete and thrive in this past quarter was no exception.

Jeff Hoffmeister: 2023 was certainly a phenomenal year for our merchants and our team. Our powerful platform, mission-driven investments, and focus on execution are providing a strong foundation for our merchants to compete and thrive. And this past quarter was no exception.

Jeff Hoffmeister: Let's dive into our quarterly results, and then I will provide a summary at the end of my comment. GMV in Q4 was $75.1 billion, up 23% year-over-year, delivering the highest quarterly GMV growth rate since the pandemic-driven growth rates of 2021. Moreover, this resulted in our quarterly GMB growth rate increasing sequentially for each quarter of 2023. The Q4 GMB results stemmed from the following

Jeff: Let's dive into our quarterly results and then I will provide a summary at the end of my comments.

Jeff: G N V. In Q4 was $75 1 billion up 23% year over year, delivering the highest quarterly GMB growth rates since the pandemic driven growth rates of 2021. Moreover, this resulted in a quarterly GMB growth rate increasing sequentially for each quarter of 2023, the Q4 <unk> results stemmed from the <unk>.

Jeff Hoffmeister: Same-store sales growth for our existing merchandise, continued growth in our merchant-based global business, and strength in EMEA, which grew 40% in the quarter from both strong same-store sales growth and new merchant acquisition, with growth from our existing merchant base being the larger contributor this quarter. And finally, 28% growth year-over-year in our offline business, driven primarily by larger retailers joining the platform. Turning to revenue. Revenue for the fourth quarter was $2.1 billion, up 24% year-over-year, which translates into 30% year-over-year growth when excluding logistics.

Jeff: Following.

Jeff: Same store sales growth for our existing merchants continued growth in our merchant base globally strengthen EMEA, which grew 40% in the quarter from both strong same store sales growth and new merchant acquisition with growth from our existing merchant base being the larger contributor this quarter and finally, 28% growth year over year in our <unk>.

Jeff: Offline business, driven primarily by larger retailers joining the platform.

Jeff: Turning to revenue revenue for the fourth quarter was $2 1 billion up 24% year over year, which translates into 30% year over year growth when excluding the logistics businesses.

Jeff Hoffmeister: This represents the third consecutive quarter that our growth has been greater than 25% on an organic basis. Our strong Black Friday and Cyber Monday weekend and continued strength through the holiday season were the key drivers of this Q4 outperformance. Increased payments penetration, which hit 60% in Q4, and strong growth in the number of merchants on our platform were also key drivers of our overall revenue growth. I will now get into the key dynamics of our two revenue streams, merchant solutions and subscriptions, which will provide you some additional detail on our growth. Q4 merchant solutions revenue was $1.6 billion, increasing 21% year over year, driven by growth in GMV, which came in stronger than our expectations on the back of a particularly strong Black Friday, Cyber Monday weekend, and overall Q4 holiday shopping season for our Continued Penetration of Shopify Payments and strengthen our merchant solutions products, particularly markets, Shopify tax, and installment.

Jeff: This represents the third consecutive quarter that our growth has been greater than 25% on an organic basis ex logistics.

Jeff: Our strong Black Friday, cyber Monday weekend and continued strength through the holiday season were the key drivers of this Q4 outperformance.

Jeff: Increased payments penetration, which at 60% in Q4 and strong growth in the number of merchants on our platform were also key drivers of our overall revenue growth.

Jeff: I will now get into the key dynamics of our two revenue streams merchant solutions and subscriptions, which will provide you some additional detail on our outperformance.

Jeff: Q4 merchant solutions revenue was 1.6 billion, increasing 21% year over year driven by growth in G. M B, which came in stronger than our expectations on the back of a particularly strong black Friday, cyber Monday weekend, and overall Q4 holiday shopping season for our merchants.

Jeff: Continued penetration of shopify payments.

Jeff: And strengthen our merchant solutions products, particularly markets shopify tax and installments.

Jeff Hoffmeister: With those contributions partially offset by not having the logistics business in the quarter, which, as I mentioned a few moments ago, had a 600 basis point impact on our total revenue year over year. $45.1 billion of GMB was processed on Shopify payments in the fourth quarter, 32% higher than in the fourth quarter of 2022. The penetration rate of Shopify payments as a percentage of GMV was 60% compared to 56% in Q4 of 2022.

Jeff: With those contributions partially offset by not having the logistics business in the quarter, which as I mentioned, a few moments ago had a 600 basis point impact on our total revenue year over year growth rate.

Jeff: $45 1 billion of <unk> was processed on shopify payments in the fourth quarter, 32% higher than in the fourth quarter of 2022, the penetration rate of shopify payments as a percentage of G. M V was 60% compared to 56% in Q4 of 2022.

Jeff Hoffmeister: Several factors drove the quarter's higher gross payments volume compared to the prior year, including the strong performance of those merchants utilizing Shopify payments, an increasing percentage of which are Shopify Plus merchants, more merchants across the globe adopting, Greater penetration of Shopify and continued growth of our point-of-sale solution. However, these are partially offset by our GMV mix shifting to EMEA, where we have lower GPV penetration than North It is important to remember that Q4 is the quarter which traditionally sees the highest percentage of revenue from payments. For the year, GPV penetration was 58%, up from 54% in 2022.

Jeff: Several factors drove the quarter's higher gross payments volume compared to the prior year, including the strong performance of those merchants utilizing shopify payments and increasing percentage of which our shopify plus more merchants across the globe adopting payments gray.

Jeff: Greater penetration of shop, PE and continued growth of our point of sale solution. These were partially offset by our GMB mix shifting to EMEA, where we have lower G. P V penetration in North America.

Jeff: It is important to remember that Q4 is a quarter, which traditionally sees the highest percentage of revenue from payments for the year G. P. V penetration was 58% up from 54% in 2022.

Jeff Hoffmeister: Subscription solutions revenue was $525 million, up 31% over Q4 of 2022, primarily driven by the growth in the number of merchants and, to a lesser extent, the impact from the pricing increases on our standard plans. This combined strength across merchant solutions revenue and subscription solutions revenue generated our first quarter of greater than $2 billion in revenue. Q4 MRR was $149 million, up 35% year-over-year.

Jeff: Subscription solutions revenue was $525 million up 31% over Q4 of 2022 primarily driven by the growth in the number of merchants and to a lesser extent the impact from the pricing increases on our standard plans. This combined strength across merchant solutions revenue and subscription solutions revenue generated our first quarter of greater than two <unk>.

Jeff: <unk> and revenue.

Jeff: For MRI was $149 million up 35% year over year, we saw growth year over year in MRO are across each of standard plus an offline point of sale the strength stemmed from increases in the number of merchants in each of the three categories combined with.

Jeff Hoffmeister: We saw growth year-over-year in MRR across each of the standard plus an offline point-of-sale. The strength stemmed from increases in the number of merchants in each of the three categories combined with, and as per standard, the pricing change that we implemented last year. For PLUS, growth from both first-time Shopify merchants starting on PLUS and existing merchants upgrading from one of our standard plans to PLUS, with PLUS representing 31% of MRR for Q4 of this year, consistent with Q3. And for point of sale, which was up 46%, driven by both improvements in our go-to-market strategy and our new retail plan, which, as a reminder, is our new plan for retail-first businesses that primarily sell through brick and mortar but which also want a simple online presence.

Jeff: For standard the pricing change that we implemented last year for plus growth from both first time shopify merchants, starting on plus an existing merchants upgrading from one of our standard plans to plus with plus representing 31% of MRO or for Q4 of this year consistent with Q3 and for point of sale, which was up 46 person.

Jeff: Sent driven by both improvements in our go to market strategy and our new retail plan, which as a reminder is our new plan for retail first businesses that primarily sell through brick and mortar, but which also want a simple online presence.

Jeff Hoffmeister: Similar to our year-over-year results, MRR increased in each of the three categories on a sequential quarter-over-quarter basis as well, largely due to growth in the number of merchants in each category. In Q4, our catch rate was 2.85%, which is in line with Q4 of 2022 and up year over year when considering the impact of the sale of our logistics business. Key drivers of attach rate expansion in the quarter were the continued gains in GPV penetration, higher subscription revenues, and greater product adoption led by markets and ShopCap. The quarterly sequential decline in our attach rate, as we have consistently experienced in prior years, is primarily driven by Q4 being more heavily weighted to payments revenues from the strong holiday season.

Jeff: Similar to our year over year results MLR increase in each of the three categories on a sequential quarter over quarter basis, as well largely from growth in the number of merchants in each group.

Jeff: In Q4, our attach rate was 2.85%, which is in line with Q4 of 2022 and up year over year, when considering the impact of the sale of our logistics business.

Jeff: Key drivers of attach rate expansion in the quarter were the continued gains in G. PV penetration higher subscription revenues and greater product adoption led by markets and shop cash.

Jeff: The quarterly sequential decline in our attach rate as we have consistently experienced in prior years is primarily driven by Q4 being more heavily weighted to payments revenues from the strong holiday season.

Jeff Hoffmeister: Moving to gross profit. Gross profit was $1.1 billion for the quarter, up 33% year-over-year, outpacing revenue growth and delivering our first quarter of gross profit dollars above a billion dollars in a single quarter. Gross Margin for Subscription Solutions was 81.5%.

Jeff: Moving to gross profit.

Jeff: Gross profit was $1 1 billion for the quarter up 33% year over year outpacing revenue growth and delivering our first quarter of gross profit dollars above a billion dollars in any single quarter.

Jeff: Gross margin for subscription solutions was 81, 5% compared to 78, 5% in Q4 of 2022. The increase was driven primarily by pricing changes on standard plans and to a lesser extent continued support efficiencies.

Jeff Hoffmeister: The increase was driven primarily by pricing changes on standard plans and to a lesser extent continued support for fiscal year 2022. Gross margin for merchant solutions was 39.2% compared to 36.3% in Q4 of 2020. Our improvement in gross margins for merchant solutions was primarily due to the absence of logistics, which was a dilute of the margin.

Jeff: Gross margin for merchant solutions was 39, 2% compared to 36, 3% in Q4 of 2020 to our improvement in gross margins for merchant solutions was primarily due to the absence of logistics, which was dilutive to margins when excluding the impact of logistics, our merchant solutions gross margin was down year over year with the key factors being.

Jeff Hoffmeister: When excluding the impact of logistics, our merchant solutions gross margin was down year-over-year, with the key factors being growth in our lower margin Shopify payments business and a decrease in some higher margin partnership revenues, with both of those impacts being partially offset by growth in our Shopify tax product and other higher margin products within Merchant. This brings our overall Q4 gross margin to 49.5% compared to 46% in the prior year and in line with the outlook we provided in our last earnings report. For the full year, gross margin was 49.8%, up from 49.2% in 2022, primarily driven by the absence of logistics. The pricing changes on standard plans and support efficiencies are partially offset by the continued growth in our lower margin payments.

Jeff: Growth of our lower margin shopify payments business and a decrease in some higher margin partnership revenue with both of those impacts being partially offset by growth in our shopify tax product and other higher margin products within merchant solutions.

Jeff: This brings our overall Q4 gross margin of 49, 5% compared to 46% in the prior year and in line with the outlook. We provided on the last earnings call for.

Jeff: For the full year gross margin was 49, 8% up from 49, 2% in 2022, primarily driven by the absence of logistics the pricing changes on standard plans and support efficiencies, partially offset by the continued growth in our lower margin payments business.

Jeff Hoffmeister: Operating expenses were $773 million for the quarter, down 22% compared to Q4 of 2022, down 1% quarter over quarter, and in line with our guidance from our last earnings. The decline year over year was primarily due to the sale of the logistics business, lower headcount, and the lack of a real estate impairment charge, which we had in the prior year.

Jeff: Operating expenses were 773 million for the quarter down 22% compared to Q4 of 2022 down 1% quarter over quarter and in line with our guidance from our last earnings call.

Jeff: The decline year over year was primarily due to the sale of the logistics business lower head count and the lack of a real estate impairment charge, which we had in the prior year, partially offset by increases in marketing spend primarily in performance marketing both offline and online to further support our key growth initiatives.

Jeff Hoffmeister: Partially offset by increases in marketing spend, primarily in performance marketing, both offline and online, to further support our key growth. Operating income for the quarter was $289 million, or 13.5% of revenues, up from Q3 operating income of $700,000. Stock base compensation for Q4 was $103 million, in line with our Q3 SBC, also $103 million. Capital expenditures were $2 million for the quarter.

Jeff: Operating income for the quarter was 289 million or 13.5% of revenues up from Q3 operating income of 7%.

Jeff: Stock based compensation for Q4 was $103 million in line with our Q3 S. B C also a $103 million.

Jeff: Capital expenditures were 2 million for the quarter.

Jeff Hoffmeister: Q4 free cash flow was $446 million, or 21% of revenue. The outperformance in GMV in the quarter drove the higher free cash flow margin. For the year, we achieved a 13% margin, growing both free cash flow dollars and free cash flow margins sequentially every quarter of 2023. We have now delivered five consecutive quarters of positive free cash flow with no expectation of this trend. Turning to our balance. Our cash and marketable securities balance was $5.0 billion as of December 31, and we had a net cash position of $4.1 billion after consideration of the outstanding convertible debt. In Q4, we invested $260 million in Flexport via a convertible note as part of Shopify's continued partnership with Flexport.

Jeff: Q4, free cash flow was $446 million or 21% of revenue the outperformance in <unk> in the quarter drove the higher free cash flow margin.

Jeff: For the year, we achieved a 13% margin growing both free cash flow dollars and free cash flow margin sequentially every quarter of 2023.

Jeff: We have now delivered five consecutive quarters of positive free cash flow with no expectation for this trend to change.

Jeff: Turning to our balance sheet, our cash and marketable securities balance was 5.0 billion as of December 31st and we had a net cash position of $4 1 billion after consideration of the outstanding convertible notes.

Jeff: In Q4, we invested $260 million in flex port via a convertible note as part of Shopify has continued partnership with the Flex Park team.

Jeff Hoffmeister: Before turning to our outlook, a few comments on the perspectives underpinning our expectations for 2024. From a macro perspective, we expect the same resiliency from our merchants and their buyers that we experienced in 2023. We expect our existing merchant cohorts to continue to deliver strong growth, coupled with our ambitions to continue to add more new merchants of all sizes, from entrepreneurs to large enterprises, across channels, including offline and B2B.

Jeff: Before turning to our outlook a few comments on our perspectives underpinning our expectations for 'twenty 'twenty four from a macro perspective, we expect the same resiliency from our merchants and their buyers that we experienced in 2023.

Jeff: We expect our existing merchant cohorts do continue to deliver strong growth coupled with our ambitions to continue to add more new merchants of all sizes from entrepreneurs to large enterprises and channels, including offline and b to b.

Jeff Hoffmeister: In 2024, we plan to remain disciplined on headcount growth and continue to find more ways to use AI and automation to be even more efficient operations. We will lean into growth opportunities and provide the essential go-to-market support while continuing to execute with the operational discipline that we demonstrated this past year in order to deliver a compelling mix of growth and profitability. Last week, we updated our plus price. This marks the first change to our plus pricing in six years. We believe that we still offer by far the best value in the industry for the powerful, innovative, and reliable tools that we've built for our merchant success. These changes went into effect for new merchants on February 8th, and they go into effect on May 8th for existing merchants that don't choose to lock in a three-year contract at the existing 2023 rate.

Jeff: And 'twenty 'twenty four we plan to remain disciplined on head count growth and continue to find more ways to use AI and automation to be even more efficient operationally, we will lean into growth opportunities and provide the essential go to market support while continuing to execute with the operational discipline that we demonstrated this past year in order to deliver a compelling mix of <unk>.

Jeff: And profitability.

Jeff: Last week, we updated our plus pricing. This marks a first change to our plus pricing in six years, we believe that we still offer by far the best value in the industry for the powerful innovative and reliable tools that we built for our merchants success.

These changes went into effect for new merchants on February 8th and it goes into effect on may eight for existing merchants that don't choose the lock in a three year contract at the existing 'twenty twenty-three rates.

Jeff Hoffmeister: Therefore, we expect more of the financial impact from these changes to occur in the second half. Keeping all this in mind, let's now turn to our expectations for the first quarter of 2024. First, on revenue. We expect our merchant momentum from Q4 to carry over into Q1. However, we recognize that Q1 is consistently our lowest quarter season.

Jeff: Therefore, we expect more of the financial impact from these changes to occur in the second half of the year.

Jeff: Keeping all this in mind, let's now turn to outlook our expectations for the first quarter of 'twenty 'twenty four are as follows.

Jeff: First on revenue.

Jeff: We expect our merchant momentum from Q4 to carryover into Q1, recognizing that Q1 is consistently our lowest quarter seasonally.

Jeff Hoffmeister: We expect Q1 revenue growth in the low 20s on a gap basis, which translates into a year-over-year growth rate in the mid to high 20s, when excluding the 500 to 600 basis point impact from the sale of our logistics business. Q1 thereby would mark the fourth consecutive quarter where our year-over-year revenue growth would be above 25% ex fligitimate. Q1 Gross Margin is expected to increase approximately 150 basis points over Q4, which is the same Q4 to Q1 Margin Uplift that we saw in the prior year.

Jeff: We expect Q1 revenue growth in the low twenties on a GAAP basis, which translates into a year over year growth rate in the mid to high twenties, when excluding the 500 to 600 basis point impact from the sale of our logistics business.

Jeff: Q1, thereby would mark the fourth consecutive quarter, where our year over year revenue growth would be above 25% ex logistics.

Q1 gross margin is expected to increase approximately 150 basis points over Q4, which is the same Q4 to Q1 margin uplift that we saw in the prior year. The largest component of the increase is the expected higher mix of subscription solutions revenue in Q1.

Jeff Hoffmeister: The largest component of the increase is the expected higher mix of subscription solutions revenue in Q1. We believe that our Q1 operating expense dollars, on a gap basis, will be up at a low teens percentage rate compared to our Q4 operating expense dollars of $773 million. The two primary drivers of the increase relative to the fourth quarter are marketing and employee-related expenses.

Jeff: We believe that our Q1 operating expense dollars on a GAAP basis will be up at a low teens percentage rate compared to our Q4 operating expense dollars of $773 million.

Jeff: The two primary drivers of the increase relative to the fourth quarter, our marketing and employee related expenses. These two items represent the significant majority of the increase and are roughly evenly balanced with marketing being a slightly larger contributor.

Jeff Hoffmeister: These two items represent a significant majority of the increase and are roughly evenly balanced, with marketing being a slightly larger contributor. In terms of marketing, the two areas in particular where we are leaning in this quarter are performance marketing and point of sale. Within performance marketing, our team has unlocked some opportunities to reach potential customers at highly attractive LTV to CAC and payback. In fact, tactics that we implemented on some channels earlier this year, including through the enhanced use of AI and automation, have improved paybacks by over 30%, enabling us to invest more in these channels while still maintaining our operating discipline on the underlying unit economy. For our offline point-of-sale business, our results demonstrate the traction we are gaining, with offline growth continuing to outpace online growth and representing a significant addressable market for us.

Jeff: In terms of marketing the two areas in particular, where we are leaning in this quarter, our performance marketing and point of sale.

Jeff: Within performance marketing our team has unlocked some opportunities to reach potential customers at highly attractive LTV to CAC and paybacks.

Jeff: In fact tactics that we've implemented on some channels earlier this year, including through the enhanced use of AI and automation have improved paybacks by over 30%.

Jeff: You know us to invest more into these channels, while still maintaining our operating discipline on the underlying unit economics.

Jeff: For our offline point of sale business our results demonstrate the traction we're gaining with offline growth continuing to outpace online growth and representing a significant addressable market for us we want to be the clear leader in unified Commerce.

Jeff Hoffmeister: We want to be the clear leader in unified growth. We consider both of these opportunities to be ones that we want to seize and in the best interest of supporting our growth products and simply the smart thing to do for our business. Employee Expenses, two components. Payroll Taxes and Compensation. Payroll taxes will increase over Q4 given the normal annual front-loading of some types of payroll taxes, specifically Social Security and Canadian Employer Contribution, which are not ratable throughout.

Jeff: We consider both of these opportunities to be ones that we want to seize and in the best interest of supporting our growth products and simply the smart thing to do for our business.

Jeff: Unemployed expenses, two components payroll taxes and compensation.

Jeff: Taxes will increase over Q4, given the normal annual frontloading of some types of payroll taxes, specifically, social security and Canadian employer contributions, which are not ratable throughout the year.

Jeff Hoffmeister: Headcount is expected to be flat, Q4 versus Q1. However, as of January 1st, we did have some pay increases go into effect for some employees. The payroll tax impact is expected to be larger than the impact of the compensation.

Jeff: Head count is expected to be flat Q4 versus Q1, but as of January 1st we did have some pay increases go into effect for some employees.

Jeff: The payroll tax impact is expected to be larger than the impact of the compensation increases.

Jeff Hoffmeister: Moving to stack-based compensation, SBC is expected to be $105 million in Q1, and Q1 capital expenditures are expected to be approximately $10 million. Finally, on free cash. We anticipate that our Q1 free cash flow margin will be in the high single-digit percentage of revenue. As a reminder, Q1 has historically been our lowest revenue quarter, so the revenue scale impacts our free cash flow margin. Precastal generation and margin improvements remain a key focus area. We expect that as our revenue scales throughout the year, balanced with operational discipline, that we will be able to generate greater free cash flow dollars each quarter, and that free cash flow margin will sequentially improve each quarter. So to wrap it up, 2023 was an incredible year for both Shopify and our merch.

Jeff: Moving to stock based compensation SPC is expected to be $105 million in Q1, and Q1 capital expenditures are expected to be approximately $10 million.

Jeff: Finally on free cash flow, we anticipate that our Q1 free cash flow margin will be in the high single digit percentage of revenue.

Jeff: As a reminder, Q1 has historically been our lowest revenue quarter. So the revenue scale impacts our free cash flow margin.

Jeff: Free cash flow generation and margin improvements remain a key focus area for us.

We expect that as our revenue scales throughout the year balanced with operational discipline that we will be able to generate greater free cash flow dollars each quarter and that free cash flow margin will sequentially improve each quarter.

Jeff: So to wrap it up 2023 was an incredible year for both Shopify and our merchants are strong financial results are a testament to us executing to our road map and the progress that we've made building fast reliable and unified software for merchants of all sizes.

Jeff Hoffmeister: Our strong financial results are a testament to us executing on our roadmap and the progress that we've made building fast, reliable, and unified software for merchants of all sizes. In Q4 alone, revenue grew 30% on an organic basis, and we delivered the largest revenue quarter in our history. Moreover, we delivered the largest gross profit dollars in our history, and Free Cash Flow Margin hit 21%. We are executing across the board.

Jeff: In Q4 alone revenue grew 30% on an organic basis, and we delivered the largest revenue quarter in our history. Moreover, we delivered the largest gross profit dollars in our history and free cash flow margin hit 21%.

Jeff: We are executing across the board looking ahead to 'twenty 'twenty four we anticipate not only maintaining our strong revenue growth into Q1, but also generating free cash flow margin that will continue to improve year over year.

Jeff Hoffmeister: Looking ahead to 2024, we anticipate not only maintaining our strong revenue growth into Q1, but also generating free cash flow margin that will continue to improve year over year. In closing, we will continue to innovate, to empower entrepreneurs, and to set the standard for what's possible in the world of commerce. Thank you for joining us on this journey. With that, I'll now turn the call back over to Carrie.

Jeff: In closing, we will continue to innovate to empower entrepreneurs and to set the standard for what's possible in the world of Commerce. Thank you for joining us on this journey.

Jeff: With that I'll now turn the call back over to Kerry for your questions.

Operator: We will now open the call for your questions. Please use the raise hand feature in Zoom to ask your question. If you are dialing in by phone, you will need to press star nine to join the queue and star six to unmute yourself.

Kerry: We will now open the call for your questions. Please use the raise hand feature and zoom to ask your question. If you are dialing in by phone you will need to press star and I had to join the queue and star sector on yourself.

Operator: We ask that you limit yourself to one question so we can try to get to as many questions as possible. Our first question comes from Ken Wong at Oppenheimer. Hi, great.

Kerry: I thought you left yourself to one question. So we can try to get to as many questions as possible. Our first question comes from Ken Wong at Oppenheimer.

Ken Wong: Hi, great. Thank you for taking my question I wanted to preface this dive into the the the merchant solutions side of things really strong GMB growth.

Ken Wong: Thank you for taking my question. I wanted to perhaps just dive into the merchant solution side of things, really strong GMV growth. I did notice that take rate ticked down a little bit sequentially. Can you provide any color on the dynamic there? Hey Ken, it's Harley.

Ken Wong: Noticed that take rate ticked down a little bit sequentially can you provide any color on the dynamic there.

Ken Wong: Hey, Ken it's Harley I'll I'll start with that one yeah, I mean look attach rate it was around 3% for the year, which can use to grow up to go up that's up from like two 6% five years ago or so but over the long run we're focused on driving both DMV and revenue, but that doesn't necessarily always translate to a higher attach rate what we the way do we think about attach rates that's an output.

Harley Finkelstein: I'll start with that one. Yeah, I mean, look, the attach rate was around 3% for the year, which continues to go up. That's up from like 2.6%, you know, five years ago or so. But over the long run, we're focused on driving both GMV and revenue, but that doesn't necessarily always translate to a higher attach rate. The way that we think about attach rates is that it's an output of an activity of our platform. So between attach rate growth and revenue growth, you should really focus more on revenue growth than I think about attach rate growth. That said, we expect attach rates to continue to go up. And particularly, as we create more solutions, as we expand the solutions to more geographies, you will continue to see that grow.

Ken Wong: Of an activity of our platform so between attach rate growth and revenue growth you should really focus more revenue growth and I think attach rate that said, we expect attach rates will continue to go up and particularly as we create more solutions as we expand the solutions it's more.

Ken Wong: More geographies you will continue to see that grow, but we think chaptalize a product company and we're focused on making commerce better for everyone and the velocity and the pace of innovation that we have right now will obviously help in terms of that attach rates. So you should see increasing that as well, but on quarters. For example, like Q4, where <unk> is just so outsized given <unk>.

Harley Finkelstein: But we think, you know, Shopify is a product company; we're focused on making commerce better for everyone. And the velocity and the pace of innovation that we have right now will obviously help in terms of that attach rate. So you should see an increase in that as well. But in quarters, for example, like Q4, where GMV is just so outsized, given seasonal shopping trends, you may see a small dip from time to time. But, you know, we're around 3% for the year, which we're really proud of. Yeah, and the only thing I'd add to Harley's comments exactly as he mentioned in terms of GMB being heavy for the quarter, there was some non-cash revenue, which we had in Q4, which just doesn't scale to the extent it's more of a straight line revenue piece. So it doesn't scale as much. So that will have a slight tick. That was the only reason.

Ken Wong: Seasonal shopping trends you may see a small dip from time to time, but we are around 3% for the year, which we're really proud of.

Speaker Change: Yeah, and the only thing I'd add to harley's comments exactly to what he mentioned in terms of G M b being heavy for the quarter.

Speaker Change: There was some.

Speaker Change: Some noncash revenue, which we had in Q4, which is it doesn't scale to the extent, it's more of a straight line revenue piece. So it doesn't scale as much so that will have a slight tick that was the only reasons.

Jeff Hoffmeister: Thank you for your question, Ken. Our next question comes from Darren Aftahi at Roth Capital. Hey guys, thanks for taking my questions. Nice quarter. You guys talked a lot about point of sale, large retailers. I'm kind of curious, what percentage of your point of sale wins in calendar 23 already had an online customer presence with Shopify versus not? I'll take that question. Thanks, Darren.

Speaker Change: Thank you for your question Ken. Our next question comes from Darren <unk> at Roth capital.

Darren: Hey, guys. Thanks, taking my questions Nice quarter, you guys talked a lot about our point of sale and large retailers I'm kind of curious what percentage of your point of sale wins in calendar 'twenty three already had an online customer presence with shopify versus not.

Speaker Change: I'll take that question. Thanks, Darren So point of sale I mean, it is really humming right now we saw offline GM V for the quarter excuse me revenue for the quarter at over $440 million. That's five X. What it was just a couple of you know four years ago, we saw outsized growth in offline GMB, which was up 28% in the quarter as well so in terms of where it's coming from we are.

Harley Finkelstein: So point of sale, I mean, it is really humming right now. We saw offline GMV for the quarter, excuse me, revenue for the quarter at over $440 million. That's 5x what it was just a couple of years ago; we saw outsized growth in offline GMV, which is up 28% in the quarter as well. So in terms of where it's coming from, we are seeing existing brands, for example, I mentioned figs, my favorite brands that are coming to us that already have a very large online presence that are now expanding offline. And so Shopify is becoming, you know, for them, the obvious solution. But then you're also seeing some other things happening.

Darren: Being.

Darren: Existing brands for example, I mentioned fixing my prepared remarks that are coming to us that already have a very large online presence that are now expanding offline and so shopify is becoming you know for them. The obvious solution, but then you're also seeing some other things happening so when banana Republic, we're launching their home stores. For example, they wanted to use shopify point of sale across all this physical.

Harley Finkelstein: So when Banana Republic was launching their home stores, for example, they wanted to use Shopify point of sale across all the physical locations. Sage Natural had 70 locations. This is sort of part of sort of something new that I think we're all seeing here, which is that there are these new on ramps into Shopify, which means that more businesses across more industries and verticals are able to actually use Shopify that historically may not have been able to. It was great to have, I mentioned this on the B2B side, but it was great to have Mamafuco and Brooklinen and Bare Minerals use B But now getting brands like Carrier, the heating and cooling company, to come in specifically for B2B, or seeing, you know, as I mentioned, Banana Republic Home coming in specifically for physical retail. Those are new ramps into Shopify, which we think does a few things.

Darren: <unk> stage natural had 70 locations. This is sort of part of sort of something new that I think we're all seeing here, which is there are these new on ramps into shopify, which means that more businesses across more industries and verticals are able to actually use shopify that historically may not have been able to you know it was great to have I've mentioned this on the <unk> side, but it was great to have Mamma Foucault and Brook.

Darren: Linen and bare minerals used be.

Darren: <unk> to be in a wholesale product because they were existing merchants are ready, but now getting brands like carrier the heating and cooling company to come in specifically for <unk> or seeing you know as I mentioned better public home coming in specifically for physical retail.

Darren: Those are new on ramps into Shopify, which we think there's a few things one it expands our tam and our ability to to help more merchants and more and more verticals, but also it means that the existing merchants that are honest if they do have other products, we want to really collapse more of those tabs in the browser. So the entirety of their commerce business is on shopify. So it's a.

Harley Finkelstein: One, it expands our TAM and our ability to help more merchants and more verticals. But also, it means that the existing merchants that are on us, if they do have other products, we want to really, you know, collapse more of those tabs in that browser. So the entirety of their commerce business is on Shopify. So it's a mix in terms of POS.

Darren: Mix in terms of P. O S. B to B of course is still very new we're beginning now to see <unk> to be exclusive merchants come on and then in terms of the enterprise question. That's also really humming we've had a great year for enterprise retail we've seen very very large brands I mentioned some of them.

Harley Finkelstein: B2B, of course, is still very new. We're beginning now to see B2B-exclusive merchants come on. And then in terms of the enterprise question, that's also really humming. We've had a great year for enterprise retail. We've seen very, very large brands. I mentioned some of them on the call, in my prepared remarks, brands like Nike Strength and companies, you know, Roxy, Quicksilver, On Running, Oscar de la Renta.

Darren: On the call.

Darren: In the prepared remarks brands like Nike strength and and companies.

Darren: Roxy quick silver on running Oscar Dela Renta. These are brands that historically did not always think about shopify and now because we have a multiple of options around enterprise, whether it's composed of all with Ccs or if it's shopify plus or even our headless product with with hydrogen. It means we have something for everybody that.

Harley Finkelstein: These are brands that historically did not, you know, always think about Shopify. And now, because we have a multitude of options around enterprise, whether it's composable with CCS, or, you know, it's Shopify Plus, or even our headless product with Hydrogen, it means we have some sort of solution for everybody that needs a great product, great software for the future of their retail business. And I think all of those are really aligning with a very strong go-to-market effort right now. Thank you for your question.

Darren: <unk>, great product great software for the future of their retail business and I think all of those were really aligning with a very strong go to market effort right now.

Speaker Change: Thank you for your question.

Jeff Hoffmeister: Our next question comes from Terry Tillman at Truist Security. Yeah, thank you for taking my question. Jeff, it's actually a question for you in terms of Shopify Plus and the pricing changes that are going to go into effect, both for new and existing customers. Can you give me a little bit of how the impact would be on subscription solutions revenue, whether it's 3Q or 4Q, in terms of just trying to understand the timing and how that'll show up? And then the second part of this is, how are you thinking about the assumption around customers committing to three-year contracts, existing ones, versus one-year contracts? What are you assuming there? Thank you.

Speaker Change: Our next question comes from Terry Tillman at tourists Securities.

Yeah. Thank you for taking my question, Jeff That's actually a question for you in terms of Shopify, plus and the pricing changes that are going to go into effect, both for new and existing customers can you shape, a little bit how the impact would be in subscription solutions revenue, whether it's three tiered <unk> in terms of just trying to understand that.

Jeff: The timing and how that'll show up and then the second part of this is how are you thinking about the assumption around customers committing to three year contracts existing ones versus one year contracts like what are you assuming there. Thank you.

Jeff Hoffmeister: Yeah, no, I like the way you asked the question because you recognize that most of this will come in the latter half of the year because, obviously, it's similar to what we did with the changes in pricing for standard last year. We have, there's a different timeline for new merchants versus existing merchants. And really, the full effect of this will go into effect in May. It's early, as you know, it's literally just days since we announced this. So it's too early for us to give you exact numbers and percentages in terms of how we're thinking about it for the year. Like standard, there are going to be a few different things that are going to play into this one, such as just what percentage lock it in early.

Jeff: Yeah, No I like the way you asked the question because you recognize that most of this will come in the latter half of the year because obviously, it's similar to what we did with the changes in pricing for standard last year, where you have a theres a different timeline for new merchants versus existing merchants and really the full effect of this will go into a into course in may it's early it's Jeff.

Jeff: As you know it's literally just days since we've announced is so it's too early for us to give you exact numbers percentages in terms of how we're thinking about it for the year like standard theres going to be a few different things are going to play into this one is just what percentage lock it in early.

Jeff Hoffmeister: And obviously, part of it is going to be to the extent that there are any merchants that choose not to upgrade, which obviously, based on what we saw in standard was a very small percentage, and we're hoping and expecting to see something similar here. And so that's just going to be a question about how that plays out. I just don't have a whole lot for you right now.

Jeff: And obviously part of it is going to be to the extent that there is any merchants to choose not to upgrade which obviously based on what we saw in standard was a very small percentage and we're hoping and expecting to see something similar here.

Jeff: And so that's just going to be a question, which is so that plays out I just don't have a whole lot for you right now.

Jeff Hoffmeister: But we are still convinced, and this has been the case for a very, very long time; we still believe that, by far, we are delivering the greatest combination of value and power to the platform that merchants can get anywhere. So we expect to have our merchants vote again with confidence in terms of staying on the Shopify platform. But I just as we get later into the year, we'll be able to give you a better perspective on it. But right now, it's again, just a few days in.

Jeff: But we are still convinced and this has been the case for a very very long time, we still believe that by far we are delivering the greatest combination of value empower to the platform that merchants can get can get anywhere. So we expect to have our what our merchants vote again with confidence in terms of staying on the shopify platform, but I just as we get later into the year.

Jeff: We'll be able to give you a better perspective on it but right now it's again just a few days.

Harley Finkelstein: Thank you for your question. Our next question comes from Dan Chan at TD Security. Yes, hi, good morning.

Jeff: Thank you for your question. Our next question comes from Dan Chan at TD Securities.

Dan Chan: Yes, hi, good morning.

Dan Chan: So we saw some of the credit card networks talk about lower volumes in January, but your revenue guide suggests that you may not have seen any color around any seasonality or weather impacts in January. Thank you. Hey Dan, I'll take that question.

Dan Chan: So we saw some of the credit card networks talk about lower volumes in January but your revenue guide suggests that you may not see any any color around any seasonality or weather impacts in January. Thank you.

Speaker Change: Hey, Dan I'll take that question.

Harley Finkelstein: You know, in terms of the macro, one of the things we've seen at a sort of high level is that consumers, last year and certainly now, still want to buy from their favorite brands, the brands they love, and they have an affinity for versus staples. And obviously, we do well when those consumers vote with their wallets to buy from those brands. Most of those brands, but not all of them, are on Shopify.

Speaker Change: In terms of the macro one of the things we've seen as sort of a high level is that consumers.

Dan Chan: And last year, and certainly now still want to buy from their favorite brands the brands that they love and they have an affinity to versus staples, and obviously, we do well when those consumers vote with their wallet to buy from those brands most of those brands not all of them are on shopify and so we're not seeing big changes in the factors that I think fueled our success, we think that entrepreneurship remained strong.

Harley Finkelstein: And so we're not seeing big changes in the factors that I think fueled our success; we think that entrepreneurship remains strong, we see that the consumer remains very resilient, but more importantly, you're seeing this intentionality to purchase from brands that consumers really have a connection to. And, you know, as I've been mentioning on this call, we have a lot of them already, and we're getting more and more of them every single day. Thank you.

Dan Chan: We see that the consumer remains very resilient, but more importantly, youre seeing this intentionality to purchase from brands that consumers really have a connection to and.

Dan Chan: I as I've been mentioning on this call we have a lot of them already and we're getting more and more of them every single day.

Speaker Change: Thank you. Our next question will come from Deepak Matti Vanhanen at Wolfe Research.

Deepak Mathivanan: Our next question will come from Deepak Mathivanan at Wolf Research. Great. Thanks for taking the question. Jeff, the first quarter APEX guide implies slightly faster growth than recent trends. Is marketing the primary element of it? How should we think about the fixed cost growth for the rest of 2024? Thanks so much.

Speaker Change: Great. Thanks for taking the question, Jeff the first quarter Opex guide implies lightning faster growth than recent trends is marketing the primary element of it how should we think about the fixed cost growth for the rest of 'twenty 'twenty four thanks, so much.

Jeff Hoffmeister: Yeah, as I mentioned, thanks, Deepak. As I mentioned in my comments earlier in the call, it's pretty, in terms of the increase from Q4 to Q1 OpEx, it's pretty evenly balanced with marketing being a little bit higher than what we saw on the employee-related expenses when I talked to both of those. From a marketing perspective, we really put a lot of effort into getting us into the new size and shape of Shopify. And we've been doing this over multiple quarters.

Speaker Change: Yeah as I mentioned, thanks, Deepak because I mentioned in my comments earlier in the call. It's pretty in terms of the increase from Q4 to Q1 Opex. It's a it's pretty evenly balanced with marketing to be a little being a little bit higher than what we saw on the employee related expenses when I talked to both of those.

Speaker Change: From a marketing perspective, we really put a lot of effort in getting us into the new size and shape of shopify and we've been doing this over multiple quarters. So head count has been essentially flat since the end of Q2.

Jeff Hoffmeister: So headcount has been essentially flat since the end of Q2. And it's even in these quarters that we've been able to deliver top line growth of greater than 25% on an organic basis, ex logistics. And as you know, we were very disciplined on marketing spend throughout 2023. So we've been executing on a playbook for a while now that has been very disciplined on marketing spend, and this is something we know how to do well. And from our vantage point, this discipline on headcount means that we've created essentially the possibility to seize select opportunities in some areas like marketing and still drive down operating expenses as a percentage of revenue. And that's how we think about it. We'll continue to use AI and automation internally to make Shopify even more effective and efficient.

Speaker Change: Even in these quarters that we've been able to deliver topline growth, which have been greater than 25% on an organic basis ex logistics.

Speaker Change: And as you know we were very disciplined on marketing spend throughout 2020 threes that we've been executing unemployed look.

For a while now which has got has been which has been very disciplined on marketing spend and this is something we know how to do well.

And from our vantage point this discipline on head count means that we can have we created essentially the possibility to see select opportunities in some areas like marketing and still drive down operating expenses as a percentage of revenue and that's how we think about it we'll continue to use AI and automation to internally to make shopify, even more effective and efficient.

Jeff Hoffmeister: We are, though, as you know, you've followed us for a while, we are a growth company, and we will take the opportunities to invest today for future growth when the opportunities are there at a very high return. And I'd also say, Deepak, keep in mind that the OPEX numbers that we're talking about that we're discussing are GAAP. I mentioned separately the $105 million in stock-based comp for those of you that think about OPEX both pre- and post-stock-based comp. And also, I'd say just go back to what we just delivered for the quarter.

Speaker Change: We are though as you know this you've followed us for a while we are a growth company and we will take the opportunities to invest today for future growth when the opportunities are there at a very high return.

Speaker Change: And I'd also say Deepak keep in mind that the Opex numbers that we're talking about that we're discussing our gap I mentioned separately the $105 million in stock based comp for for those of you to think about.

Speaker Change: Opex, both pre and post stock based comp.

Speaker Change: And also I'd say just go back to what we just delivered for the quarter, we delivered a quarter with 30% top line organic growth and 21% free cash flow margin. So I think we've proven our ability to execute.

Jeff Hoffmeister: We delivered a quarter with 30% top-line organic growth and 21% free cash flow margin. So I think we've proven our ability to execute, and we believe we can continue to deliver on this combination of top-line growth, disciplined investment, and free cash flow for 2023. And I talked in my comments earlier about how we think about free cash flow. So this is something for us, as I mentioned before, it's simply the smart thing to do in terms of taking advantage of the marketing opportunity we see here. Thank you for your questions.

Speaker Change: And we believe we can continue to deliver on this combination of topline growth disciplined investment and free cash flow for 2023, and I talked in my comments earlier about how we think about free cash flow. So this is something for us as I mentioned before is simply the smart thing to do in terms of taking advantage of the market opportunity we see here.

Speaker Change: Thank you for your question. Our next question will come from Tyler Radke at Citi.

Tyler Radke: Our next question will come from Tyler Radke at Citi. Yeah, thanks for taking the question. Harley, you talked about some pretty remarkably different pipeline, I think, coming out of NRF on the enterprise side. I was wondering if you could expand on that a little bit? You know, any quantitative metrics you could put around, you know, enterprise pipeline growth? And who do you see as kind of the biggest competitor to take share from? Thank you.

Tyler Radke: Yeah. Thanks for taking the question Harley you talked about some.

Tyler Radke: Pretty remarkably different pipeline I think coming out of NR as an on the enterprise side wondering if you could expand on that a little bit.

Tyler Radke: Any quantitative metrics you could put around enterprise pipeline growth and who do you see kind of the biggest competitor to take share from thank you.

Harley Finkelstein: I'll answer the question. NRF was quite remarkable because it felt, in some ways, like Shopify's, you know, coming out party. We were there last year, but that was our first year there.

Speaker Change: Thanks, I'll answer the question I mean that RF was quite remarkable because what it felt like was felt in some ways like shopify is coming out party. We were there last year, but that was our first year. This year, we really had a presence and in a very very big way I think a couple of things that we're noticing first of all.

Harley Finkelstein: This year, we really had a presence and in a very, very big way. I think a couple of things that we're noticing. First of all, it's not simply just the pipeline; we have a lot going on all at the same time. So, for example, IDC came out with this market scape report showing that Shopify is the leader ahead of pretty much every other enterprise software company. We also have Gartner's Magic Quadrant, which placed us highest in our ability to execute exactly where we needed to be. These were things we were not necessarily doing historically.

Speaker Change: It's not simply just the pipeline we have a lot happening all at the same time. So for example, IDC came up with this market escape.

Speaker Change: Report showing that shopper is the leader ahead of pretty much every other enterprise software company.

Speaker Change: We also have Gartner magic quadrant came out placing is highest in ability to execute exactly we needed to be these were things we were not necessarily doing historically, we also announced that interrupt partnerships with miracle with Google cloud with slalom with Manhattan with Sci agreements now with everyone from Deloitte to Ian why to Accenture to cognizant. So it's not one thing in particular.

Harley Finkelstein: We also announced at NRF partnerships with Miracle, with Google Cloud, with Slalom, with Manhattan. We have SI agreements now with everyone from Deloitte to E&Y to Accenture to Cognizant. So it's not one thing in particular that is necessarily driving it. It's all these things.

Speaker Change: That is necessarily driving it it's all these things the product has gotten as good as any product on the market and it only gets better over time and I think there's a real focus now on the go to market side of it whether it's leveraging our size being at the right places and we're simply winning more deals because of that so.

Harley Finkelstein: The product has gotten as good as any product on the market and only gets better over time. And I think there's a real focus now on the go-to-market side of it, whether it's leveraging SIs, being in the right places, and we're simply winning more deals because of that. So, you know, I mentioned this a little earlier, but worth repeating, the key is no matter what these very large merchants need from Shopify, we have a product and a solution that's right for them. Some want headless; they can use hydrogen.

Speaker Change: I think the other I mentioned this a little earlier, but worth repeating the key is no matter. What these very large merchants need from shopify, we have a product for EDA solution, that's right for them someone headless. They can use hydrogen someone plus a one size fits all some once something quite different modularized ever Lane for example, using shop pay as a component. It means that we now have a relation.

Harley Finkelstein: Some want plus, one-size-fits-all. Some, you know, want something quite different and modularized. I mean, you know, Everlane, for example, using ShopPay as a component means that we now have a relationship with that company, and over time, we hope to bring more of their business together. So there's sort of something for everyone. Everyone is now on the enterprise side, and even with the pricing change, the total cost of ownership is lower, so much lower than every other option on the market. The upgrade path is obvious.

Speaker Change: With that company and over time, we hope to bring more of their business together, so there's sort of something for everything everyone now on the enterprise side.

Speaker Change: And even with the pricing change the codell toss it the total cost of ownership is lower so much lower than every other option on the market. The upgrade path is obvious our speed to market is much faster and we can have the resiliency you're seeing when we launch flash sales or people like Taylor Swift or Supreme It gives a lot of confidence to the bye bye babies in the bill.

Harley Finkelstein: Our speed to market is much faster, and we can have, you know, the resiliency you're seeing when we launch flash sales for people like Taylor Swift or Supreme. It gives a lot of confidence to the Bye Bye Babies and the Billabongs and the Oscar DeLaurentis and the on-runnings of the world that we can be a future-proofed partner for them in the very long term. In terms of where it's coming from, it's also a mix of existing enterprise solutions that they have. Many of them are sort of legacy.

Speaker Change: Bongs and the Oscar Dela Renta is in the on running to the world that we can be a future proofed partner for them in the very long term in terms of where it's coming from it's a mix also of existing enterprise solutions that they have many of them are sort of legacy and some of them. You know in the case of glossy for example, very famously had a very large homegrown e-commerce.

Harley Finkelstein: And some of them, you know, in the case of Glossier, for example, very famously had a very large homegrown e-commerce system. And when Kyle took over, he said it was time for them to get back to cosmetics and let Shopify handle their enterprise commerce functionality, and it's been a great partnership. So a lot of momentum there, and it's driven by the product, and it's also driven by an incredible go-to-market machine that's humming. Thank you for your question, Tyler. Our next question will come from Colin Sebastian at Baird. Colin, are you there?

Speaker Change: System and when Kyle took over it said there was time for them to get back to cosmetics and lets shopify handle their enterprise commerce functionality and it's been a great partnership so a lot of momentum there and it's driven by the product and it is driven also by incredible go to market machine that is humming.

Speaker Change: Thank you for your question Tyler Our next question will come from Colin Sebastian at Baird.

Colin Sebastian: Colin are you there.

Operator: Yes, can you hear me? Yes. Okay, sorry about that. Just one quick follow up on the expense guidance for Q1 and, and I guess how that flows through the year. I mean, on the sales and marketing side, if that's primarily performance marketing, just wondering how quickly we should expect the payback in terms of revenue and GMB growth and, again, sort of how you anticipate that flowing through the year. Thank you. Yeah, it's performance marketing, but it's also point of sale, so I mentioned both of them. And you should think about them as roughly evenly balanced.

Colin Sebastian: Yes can you hear me.

Colin Sebastian: Yes.

Colin Sebastian: Okay, sorry about that.

Colin Sebastian: Just one quick follow up on the <unk>.

Colin Sebastian: Your expense guidance for Q1, and I guess, how that flows through the year.

Colin Sebastian: On the sales and marketing side, if that's primarily performance marketing just wondering how quickly we should expect the payback in terms of revenue and GMB growth.

Colin Sebastian: And again sort of how you how do you anticipate that flowing through the year. Thank you.

Colin Sebastian: Yeah.

Colin Sebastian: As for farmers marketing, but it's also a point of sale. So I mentioned both of them.

Colin Sebastian: You should think about them as roughly evenly balanced and for something like point of sale. As you know we we have a lot of very large margin merchants that we're bringing on platform as well as some smaller ones and so the lead time for those will vary based on the size of the merchant.

Jeff Hoffmeister: And for something like point of sale, as you know, we have a lot of very large margin merchants that we're bringing on the platform as well as some smaller ones. And so the lead time for those will vary based on the size of the merchant. And the same is true for performance marketing. So you'll see some of the impact as it relates to this year. But also, this is creating the opportunity for growth in the medium term and long term. And so I think from our vantage point in terms of all the levers that we have for growth, we talked about them a lot at investor day, as we think about what we're doing in terms of new merchant acquisition, in terms of bringing more and more large enterprises on the platform, putting more value into all the subscription plans, for example, what we're doing with We've talked about them a bunch, you know, that from following us. So this is just an opportunity we saw.

Colin Sebastian: And same is true for for performance marketing, so you'll see some of the impact as it relates to this year, but also this is creating the opportunity for growth in the medium term and long term and so I think from our vantage point in terms of all the levers that we have for growth we've talked about them a lot at the Investor day, as we think about what we're doing in terms of new merchant acquisition in terms of bringing.

Colin Sebastian: More and more large enterprises on the platform putting more value into all the subscription plans for example, what we're doing with audiences and b to B.

Colin Sebastian: Going into plus international point of sale itself payments growth I mean, all those things are the growth engines for the future we've talked about them a bunch of you know from following US. So this is just an opportunity we saw and I talked about the paybacks that we're seeing in the increases here. This was an opportunity for us to take advantage of that some of which will help us this year and some of us will.

Harley Finkelstein: And I talked about the paybacks that we're seeing and the increases here. This was an opportunity for us to take advantage of that, some of which will help us this year, and some of us will, some of which will help us in the years going forward. But it's to continue and deliver that top line growth rate. I just want to add to that, because I know this question has come up twice now. Look, we have a new shape for Shopify. It is faster, it is flatter, and it is far more agile.

Colin Sebastian: Some of which will help us in the years going forward, but it's due to continuing to deliver that top line growth rate I just want to add to that just because I know this question's come up now are twice.

Colin Sebastian: We have a new shape of shopify. It is faster. It is flatter it is far more agile and we've taken a ton of measures to build for this long term success and manage cost and I think we've done so all while investing in very critical areas for growth that we think will arm, our merchants and shopify for very good long term opportunities in the last 18 months or so we've made incredible.

Harley Finkelstein: And we've taken a ton of measures to build for this long-term success and manage costs. And I think we've done so all while investing in very critical areas for growth that we think will arm our merchants and Shopify for very good long-term opportunities. In the last 18 months or so, we've made incredible improvements across go-to-market and growth engines, which optimizes a couple of things. It optimizes our ways of working, it drives greater automation efficiency, but it also diversifies our marketing efforts to support our growth. Now, what that means is we can actually have incredible rigor and discipline when we see opportunities that enable our success. That doesn't mean we're going to just spend when we don't see those things, but when there are opportunities where we think we can get a very good return with an incredible payback, we're going to seek those out at the same time, continue to be really fast, really flat, and very, very agile and manage those costs. Thank you for your question. Our next question will now come from Jeff Cantwell at Seaport Research. Todd, can you hear me?

Colin Sebastian: <unk> improvements across go to market and growth engines, which optimizes a couple of things that optimizes, our ways of working it drives greater automation efficiency, but it also diversifies our marketing efforts to support our growth now that what that means is we can actually have incredible rigor and discipline when we see opportunities that enable our success. It doesn't mean, we're going to just spend when we don't see those things but when.

And there are opportunities, where we think we can get a very good returns with an incredible payback, we're going to seek those out at the same time continue to be really fast really flat and it's very very agile and manage those costs.

Colin Sebastian: Thank you for your question. Our next question will now come from Jeff Cantwell at Seaport Research.

Jeff Cantwell: I can hear me.

Jeff Hoffmeister: Yes, we can. Great. Thanks.

Jeff Cantwell: Yes, we can.

Jeff Cantwell: Great. Thanks, I wanted to ask you about your progress outside of North America. This quarter helped.

Harley Finkelstein: I want to ask you about your progress outside of North America this quarter. You helped 35% more merchants launch outside North America. You also said growth in EMEA was 40%.

Jeff Cantwell: 35% more merchants larger outside North America. We also said growth in EMEA was 40%. So can you talk some more about what's driving your growth outside North America I'm curious, whether you can break out for us what the percentage of GMB is coming from enterprise versus more traditional SMB reach out and then just operationally going forward what are your thoughts on what it would be great.

Harley Finkelstein: So can you talk some more about what's driving your growth outside North America? I'm curious whether you can break out for us what the percentage of GMB is coming from enterprise versus more traditional SMB retail. And then just operationally going forward, what are your thoughts on whether the growth you did outside North America this quarter is sustainable? Can you walk us through your thoughts on the outlook there? That's a great question.

Jeff Cantwell: Outside North America this quarter sustainable can you walk us through your thoughts on the outlet.

Speaker Change: Yeah, It's a great question.

Harley Finkelstein: I think the investments we've been making internationally, both in expanding our capabilities and also localizing efforts there, are really starting to pay off, especially in Europe, where we saw a lot of great growth in 2023. You know, GMV and EMEA grew 40% in Q4 year on year. And EMEA, you know, reached about $1.2 billion in annual revenue and about 27% of our total merchant base. At the same time, whether it's Bowdoin or West Wing or Suntory in Japan or running, we're seeing a lot larger brands also come to us as well. The priorities for us are there are a couple of things.

Speaker Change: The investments we've been making internationally both in expanding our capabilities, but also localizing efforts there.

Speaker Change: Really starting to pay off, especially in Europe, where we saw a lot of great growth in 2023 G. M V. In EMEA grew 40% in Q4 year on year.

Speaker Change: And EMEA has reached about $1 $2 billion in annual revenue and about 27% of our total merchant base at the same time.

Speaker Change: Whether its boat in our west wing or Suntory and in Japan are on running we're seeing a lot larger brands also come to us as well the priorities for US there are a couple of things. One is we really want to be focused on compliance improving the merchant funnel, increasing localization efforts, but also making sure that there are no product gaps around the world and I think getting into getting.

Harley Finkelstein: One thing we really want to be focused on compliance, improving the merchant funnel, increasing localization efforts, but also making sure that there are no product gaps around the world. And I think getting more product integrations into those local markets is a major priority. There are opportunities for us to go beyond Europe, of course. We've talked about LATAM and APAC in the past, but we definitely see a lot of opportunity there. I mean, we've captured less than 1% of market share in global retail sales, even as our product and geographies have expanded. We see, I mean, you know, if you think about it.

Speaker Change: More product integrations into those local markets is a major priority there are opportunities for us to go beyond Europe of course, we've talked about Latam and APAC in the past, but we definitely see a lot of opportunity. There I mean, we've captured less than 1% of market share in global retail sales, even as our product and geographies have expanded we see.

Speaker Change: If you think about.

Harley Finkelstein: The Market Opportunity In just Europe alone, we think that not only are there small businesses there that would benefit from Shopify, but a lot of larger businesses too. When you add in this idea of being by default global, so when you use Shopify, effectively, whether it's Markets or Markets Pro, day one, you're immediately selling to a global base of customers. It's very appealing to those merchants in Europe and elsewhere, and so we're providing that also. And I think that as Markets Pro, which I think, in Q4, 14% of our GMV was cross-border, you're seeing more and more merchants think about their business as a global business, which, again, in order to have that, you have to be on Shopify. So I think both from a merchant acquisition perspective, but also helping merchants sell to more customers from a GMV perspective, both things are working really, really well. And we'll continue to focus on international. We think we're still under-penetrated in there.

Speaker Change: The market opportunity than just Europe alone, we think that not only their small business there that that would benefit from shopify, but a lot of longer larger business too when you add in this idea of being default global so when you use shopify you effectively whether it's markets or markets Pro day, one year immediately sell into a global base of customers that is very appealing to them.

Speaker Change: Types of those merchants in Europe, and elsewhere, and so we're providing that also and I think that as markets Pro which I think in Q4, 14% of our G. M. V was cross border Youre seeing more and more merchants think about their business as a global business, which again in order to have that you have to be on shopify. So I think both from a merchant acquisition perspective, but also help.

Speaker Change: <unk> merchant sell to more customers from a G&P perspective, both things are working really really well and we'll continue to focus on international we think we're still underpenetrated there.

Jeff Hoffmeister: Thank you for your question. Our next question will come from Paul Treiber at RBC Capital. Thanks very much, and good morning.

Speaker Change: Thank you for your question. Our next question will come from Paul Treiber at RBC capital.

Paul Treiber: Thanks, very much and good morning, just wanted to I have a question on advertising and specifically in regards to shopify campaigns.

Paul Treiber: Just wanted to have a question on advertising and specifically in regards to Shopify campaigns. You effectively entered the advertising market on behalf of your merchants. What do you see as the value proposition to merchants for advertising? And what were your considerations that you took into account before moving into that segment?

Paul Treiber: Are you effectively entered the advertising market on behalf of your merchants, but what did you say you think the value proposition to merchants in advertising and what was your considerations you took into account before moving into that segment.

Harley Finkelstein: Yeah, I mean, obviously, we talked a lot about audiences in the past, which I'm happy to mention as well or talk about too. But in terms of shop campaigns, which are sort of formally known as ShopCash offers, they went into GA in June 2023. And really, the idea is, buyers earn ShopCash when they use ShopPay at checkout.

Speaker Change: Yes, I mean, obviously, we've talked a lot about audiences in the past, which I'm happy to chat to dimension as well, we're talking about too but in terms of shock Ham shop campaigns, which sort of formally known as sharp cash offers it went into <unk> in June 2023, and really the idea is.

Speaker Change: <unk> earned shop cash when they use shop head checkout. So this way is this is a way for us to actually establish shop cash as a key buyer acquisition tool and it allows merchants to provide everything they need to have great increase revenues through higher visibility much better conversion and we want to see more and more of our brands, usually we think it's a wonderful way for them to.

Harley Finkelstein: So this is a way for us to actually establish ShopCash as a key buyer acquisition tool, and it allows merchants to provide everything they need to have great increased revenue through higher visibility and much better conversion. And we want to see more and more of our brands use it. We think it's a wonderful way for them to get a very strong return on ad spend. And we're already seeing big brands like, you know, Mr. Beast, for example, now using it for a lot of his brands on the shop app.

Speaker Change: A very strong return on an AD spend and we're already seeing big brands like Mr. Beast. For example, now using it for a lot of his is brands on on the shop App. So we'll continue to do so.

Harley Finkelstein: So we'll continue to do so. Right now, we know that it could drive up to 24% new customer growth, and it's already helped merchants find over 1 million new buyers. So given that it's still fairly new, we're really quite ambitious about where it's going. We think more of our merchants will use it. And again, it's one of those things that, as it gets better, it's another reason that, you know, you choose Shopify. Because in order to use it, you have to be on Shopify, but we think ShopCash can be a key buyer acquisition tool. And our last question will come from Richard Suh at the National Bank. Yes, can you hear me?

Speaker Change: Right now we know that it drive it could drive up to 24% new customer growth and it's already helped merchants find over 1 million new buyers. So given that it's still fairly a new product, we're really quite ambitious with with where its going we think more of our merchants will use it and again, it's one of those things that as it gets better it's another reason that.

Speaker Change: You choose shopify, because once you use it you have to be on shopify, but we think shop cash can be a key buyer acquisition tool.

And our last question will come from Richard <unk> at National Bank.

Richard: Yes can you hear me.

Jeff Hoffmeister: Yes. Yeah, I know you don't specifically talk about churn, but one of you made me talk about the order of magnitude of the churn rate over the past few years as you have become what seems to be incredibly more efficient at deploying capital here. Yeah, I mean, I'll start with, from a traditional perspective, in terms of what has been our starting point, our core base of small and medium businesses, our churn has been very, very low, industry leading in terms of what we're seeing versus what some other players are seeing that serve the small and medium business segment. And obviously, as we do more in enterprise, as you know, as you look across all of the software providers, generally But if you can deliver a great solution for them, they stay on the platform longer. So I think our churn is going to get even better. So you're right, we haven't given exact numbers, Richard, in terms of how we talked about it.

Richard: Yes.

Richard: Yes, I know you don't specifically talk about churn, but I was wondering if you maybe talk about the order of magnitude of churn rates over the past two years as you become what seems to be incredibly more efficiently deploying capital here.

Yeah, I mean, I'll start I think from a traditional perspective in terms of what has been our starting point, our core base of small and medium businesses. Our churn has been very very strong industry, leading in terms of what we're seeing versus what some other players are seeing that.

Richard: That serve the small and medium business segment, and obviously as we do more on enterprise as you know as you look across all of software providers generally on the enterprise side, you see less churn and it takes a little bit longer to get them one platform, but if you can deliver a great solution for them. They stay on platform longer. So I think our churn is going to get even better so you're right we haven't given.

Richard: Exact numbers Richard in terms of how we talked about it but I would tell you in terms of what we see we are we've had strong success there and obviously, we continue to grow the number of merchants that we have on our platform every single year not only in North America, but obviously is hardly just talked about in terms of what we're doing in Europe. So.

Jeff Hoffmeister: But I would tell you in terms of what we see, we've had strong success there. And obviously, we continue to grow the number of merchants that we have on the platform every single year, not only in North America but, obviously, as Harley just talked about, in terms of what we're doing in Europe. So it is, of course, something that we think about and track, but our success rate there has been very high. Thanks, Jeff.

Richard: It is of course, something that we think about on track, but our success rate there has been very high.

Operator: I think just before I close, thanks for joining the call, everyone. I think 2023 was an exceptional year for Shopify and our merchants. I think we're operating with greater discipline. We're delivering a strong top line and improving profitability. Brands of all sizes and from all industries are now turning to Shopify to power their commerce offerings in-store and everywhere in between. And I think Shopify's future is not just e-commerce. We are competing, and we are winning, in every part of the evolving commerce landscape, and we're not slowing down. So, thank you for your time today, and we'll see you soon. This concludes our fourth quarter 2023 conference call. Thank you for joining us. Goodbye.

Speaker Change: Thanks, Jeff I think just before I close.

Speaker Change: Thanks for joining the call everyone. I think 2023 was an exceptional year for shopify and our merchants I think we're operating with greater discipline, and we're delivering strong top line and improving profitability brands of all sizes from all industries are now turning to shopify to power their commerce offerings in store everywhere in between and and I think she'll buy futures not just E. Commerce, we are competing and we are winning.

Speaker Change: And every part of the evolving commerce landscape and we're not slowing down. So thank you for your time today and we'll see you soon.

Speaker Change: This concludes our fourth quarter 2023 conference call. Thank you for joining us goodbye.