So we’ve been executing on a playbook for a while now, which has got us been — which has just 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 — we’ve 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. 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.
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. 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.
Carrie Gillard: Thank you for your question. Our next question will come from Tyler Radke at Citi.
Tyler Radke: 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. Wondering if you could expand on that a little bit? 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: Thanks, Tyler. I’ll answer the question. I mean NRF was quite remarkable because what it felt like was — it felt in some ways like Shopify’s coming out party. We were there last year, but that was our first year there. This year, we really had a presence 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 happening 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 Magic Quadrant came out placing us highest in our ability to execute exactly where we needed to be. These were things we were not necessarily doing historically.
We also announced at NRF partnerships with Mirakl, 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. 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 at the right places and we’re simply winning more deals because of that. So 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 and a solution that’s right for them.
Someone had less, they can use Hydrogen, someone plus or one-size-fits-all. Some want something quite different to modularized. I mean, Everlane, for example, using Shop Pay 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 everything everyone now on the enterprise side. And even with the pricing change, the total cost of ownership is so much lower than every other option in the market. The upgrade path is obvious. Our speed to market as much faster, and we can have 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 Buy Buy Baby and the Billabong and the Oscar de la Rentas and the On Running of the world that we can be a future-proof 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, in the case of Glossier, for example, very famously had a very large home-grown e-commerce system. And when Kyle took over, said there 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 driven also by incredible go-to-market machine that’s coming.
Carrie Gillard: Thank you for your question, Tyler. Our next question will come from Colin Sebastian at Baird. Colin, are you there|?
Colin Sebastian: Yes. Can you hear me.
Carrie Gillard: Yes.
Colin Sebastian: Okay. Sorry about that. Just one quick follow-up on the expense guidance for Q1. And I guess how that flows through the year. I mean on the sales and marketing side, primarily performance marketing. Just wondering how quickly we should expect to pay back in terms of revenue and GMV growth and again, sort of how you anticipate that flowing through the year? Thank you.
Jeff Hoffmeister: Yes. It’s performance marketing, but it’s also a point-of-sale. So I mentioned both of them, and you should think about them as roughly evenly balanced. And for something like point-of-sale. As you know, we have a lot of very large 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. And 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 the 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 audiences in B2B 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 you know that from following us. So this is just an opportunity we saw, 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 continuing to do to lower that top line growth rate.
Harley Finkelstein: Yes. I just want to add to that, just because I know this question has come up now twice. Look, 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 costs. And I think we’ve done so all while investing in very critical areas for growth that we think will arm our merchants in 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 and efficiency, but it also diversifies our marketing effort 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.
Carrie Gillard: Thank you for your question. Our next question will now come from Jeff Cantwell at Seaport Research.
Jeff Cantwell: Hi. Can you hear me?
Carrie Gillard: Yes. We can.
Jeff Cantwell: Thanks. I wanted to ask 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%. So can you talk some more about what’s driving your growth outside North America? I’m curious whether you can break out risk, what the percentage of GMV is coming from enterprise versus more traditional SMB retail? And then just operationally going forward, what are your thoughts on — what are the growth you did outside North America this quarter is sustainable? Can you walk us through your thoughts on the outlook there? Thanks.
Harley Finkelstein: Yes, it’s a great question. I think the investments we’ve been making internationally, both in expanding our capabilities, but also localizing efforts there are really starting to pay off, especially in Europe, where we saw a lot of great growth in 2023. GMV in EMEA grew 40% in Q4 year-on-year. And EMEA has reached about $1.2 billion in annual revenue and about 27% of our total merchant base. At the same time, whether it’s Boden or Westwing or Suntory in Japan or 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 apps around the world.
And I think getting into — 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 if you think about 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 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, you’re immediately selling to a global base of customers that is very appealing to those types — those merchants in Europe and elsewhere.
