We believe over time, they will take more of those components. Now the product attach rate is really important is because it’s a proxy for the value we’re adding for all the products that we have, whether it’s something like capital or it’s payments or any of the other point-of-sale, for example, any of the other solutions that we think are really important for merchants to be utilizing to build their business. But in the case of enterprise, in particular, I think the reason that you’re seeing Overstock and BarkBox and Intersport, Skullcandy, all these brands coming to us at this increased clip is because this is by far the best product. And the total cost of ownership, we just had an independent study validate this. The total cost of ownership for Shopify’s enterprise offering is 36% better than competitors.
That is unbelievable. I mean the value to cost ratio is so far on the side of value here. And they’re choosing Shopify because it’s a great product, it’s a great value, and we’ll continue to see that as well. Now in terms of directly answering your question on the attach rate, over time, what we do see is that more and more merchants take more of our solutions as they fully integrate into the platform. So think about these things like CSS and Hydrogen and Plus as on-ramps into the enterprise product. But once they’re in the enterprise product, we have the opportunity to show them better value on things like payments, for example, better value on — get them using Audiences, for example. That’s sort of the model here. And when you add on top of that a much more aggressive go-to-market effort, which frankly is — we’ve been working on now for, call it, 24 months, you’re seeing the fruits of those labors.
And so I think you’ll continue to see that as well. But over time, we like that the product attach continues to grow. Again, it’s a proxy for the value we create for the people that use Shopify.
Carrie Gillard: Okay. Thank you for your question. Our next question comes from Martin Toner at ATB Capital.
Martin Toner: Good morning. Thanks for taking my question. Free cash flow margins have been greater than adjusted op income margins last two quarters. Is that something we should expect will continue?
Jeff Hoffmeister: Well, yeah, from a free cash flow margin perspective versus operating income, there’s a few things in play. But yeah, in general, it’s been and we expect it to continue to be a few points higher. So — and that’s just a function of how you think about our P&L and kind of how that flows through the P&L. But yes.
Carrie Gillard: Okay. Our next question will come from Andrew Bauch at Wells Fargo.
Andrew Bauch: Hey, thanks for taking the question. Just wanted to unpack the Shop Pay growth, three straight quarters over 50%. And, Harley, you mentioned the off-platform opportunity and its interplay with commerce components really starting to show traction. So can you give us a sense on what the drivers of Shop Pay’s growth are at this point? And what does the pipeline look like for Shop Pay off-platform as we get into the back half of this year?
Harley Finkelstein: Yeah. I mean simply put, Shop Pay is the highest converting seller to check out on the Internet. It converts 36% better than competition and 15% more on average. There’s now 150 million buyers, 150 million that have opted into Shop Pay. And for Q1 alone, we facilitated $14 billion of GMV. That’s a 56% year-on-year. I think total cumulative, it’s about $140 billion so far. So I think — I mean people are coming to Shop — people want to use Shop Pay because, frankly, even the mere presence of Shop Pay on the check — even if it’s not used results in a 5% higher conversion. It’s becoming a really bad idea for any brand or any retailer on the planet to not use it. And so we like the fact that people are coming to us specifically for Shop Pay.
Again, it allows us to begin a business relationship with brands that maybe historically we had not otherwise spoken to. But we’re going to continue to make Shop Pay the default checkout on the Internet. And we do that because it’s faster. It reduces friction and ultimately it drives greater adoption by both merchants and ultimately for more buyers, which means merchants want it. But it’s — we think — we’re really excited about it. We are very focused on making it easier to checkout with Shop Pay and extend it to way more surfaces and the pipeline for Shop Pay is something that is new, but very, very exciting.
Carrie Gillard: And our last question will come from Samad Samana at Jefferies.
Samad Samana: Hi, good morning. Thanks for squeezing me in. I appreciate it. So I wanted to ask a question maybe on the point-of-sale GMV and point-of-sale MRR. Jeff, I know you guys gave off-line revenue targets last year at the Analyst Day, which was really helpful. Could you give us any sense of maybe what the MRR contribution from point-of-sale is and maybe how you’re expecting the overall point-of-sale growth this year? And then not to make it a multiparter, but just trying to understand maybe what the GPV for offline merchant dynamics are versus online. Thanks again for squeezing in, appreciate it.
Jeff Hoffmeister: Yeah, of course. A couple of things on that, Samad. In terms of some of the growth rates in some of the sizing that we talked about at the Investor Day regarding retail point-of-sale, that is consistent in terms of how that business is performing. As strong as our core business is performing, the off-line piece continues to perform at an even higher level. So that is something, obviously, which from our vantage point is a great thing. It’s a testimony to a lot of merchants Harley talked a little bit about, especially some of the larger multi-location retail merchants that are using point-of-sale more and more. And it’s also helpful from their vantage point to use our platform because obviously, they can look at one tech stack and basically say, all right, I have the best technology, the best tech stack on the online side, and now I have the best on the offline side as well.
Really all do that from one pane of glass, one set of data analysis, et cetera. It’s been a really, really compelling value proposition, I guess, for lack of a better way of saying it. And so that’s been one of the things that’s been fueling the growth. And we’re doing a lot, and we talked to maybe a couple of quarters ago as it relates to things like installments, where we’re taking them, Samad, from our core online business and adding them to the offline offering that we’re giving to retailers. And we continue to expand the countries that we’re in with point-of-sale. So that being said, we don’t — in terms of the attach rate, we just don’t have the number of just in terms of sheer number. We don’t have the same number of offerings for point-of-sale that we also have in online, but that’s also an opportunity because we’re going to be able to migrate more and more functionality at the point-of-sale.
And so over time, the attach rate and some of the opportunities overall are going to increase. As I believe you know, the point-of-sale, the retail piece for us is primarily a payments piece. There’s obviously the subscription element to that. Those two make up the significant majority of the revenues that we get from retail. We — unfortunately, we’re not breaking out as it relates to percentage of MRR what is exactly retail, but you can expect as we — again, the kind of continuation of the trends, as I alluded to before. So it’s doing really well, and it’s a function of all the things both Harley and I have covered. So with that, maybe Harley, I’ll turn it back to you.
Harley Finkelstein: Yeah. Let me just close that before we finish the call because I just want to say one thing that I think may be getting lost here, but it’s really important. We just delivered 29% pro forma revenue growth and 12% free cash flow margins. Now for Q2, our outlook points to free cash flow margin similar to the 12% we achieved in Q1. And that combined with pro forma revenue growth in the low to mid-20s, I mean this business can do something very rare and unique relative to almost every single company on the planet. We can deliver growth and margins, all while creating and leaning into opportunities that enhance our growth in the future. And so I just — I think it’s important to say like the strength of this business means we can accomplish all three of those things and build stronger company longer term.
This is what the best companies do. And I think this is how you achieve long-term durable growth. And I’ve never been more excited about Shopify, about our business, and I’ve never been more proud to work with this world-class team. I think this is the best version of Shopify ever, and thank you so much for joining us today on the call.
Carrie Gillard: This concludes our first quarter 2024 conference call. Thank you.
