Shopify Inc. (NYSE:SHOP) Q4 2023 Earnings Call Transcript

Shopify Inc. (NYSE:SHOP) Q4 2023 Earnings Call Transcript February 13, 2024

Shopify Inc. beats earnings expectations. Reported EPS is $0.34, expectations were $0.31. Shopify Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Carrie Gillard: Good morning and thank you for joining Shopify’s Fourth Quarter 2023 Conference Call. Harley Finkelstein, Shopify’s President; and Jeff Hoffmeister, our CFO, are with us today. After their prepared remarks, we will open it up for your questions. We will make forward-looking statements on our call today that are based on assumptions and therefore subject to risks and uncertainties that could cause actual results to differ materially from those projected. We undertake no obligation to update these statements except as required by law. You can read about these assumptions, risks and uncertainties in our press release this morning, as well as in our filings with the US 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 US dollars. So all amounts discussed today are in US dollars unless otherwise indicated. With that, I will turn the call over to Harley.

Harley Finkelstein: Thanks, Carrie, and good morning, everyone. 2023 was a phenomenal year for Shopify. Commerce moved fast and we moved faster. 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. And as a result, we continued to break down barriers, accelerate the power of entrepreneurship, and fuel our merchants’ 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 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, Guthy-Renker, Buy Buy Baby, Oscar de la Renta, Everlane and On Running to name a few. 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 are aimed at making the heart 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 of their product.

For streamlining expense management, we launched Shopify Bill Pay 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, upgrade our checkout extensibility and rolled out one-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 Shop Pay Installments into point-of-sale, rolled at a point-of-sale terminal for enterprise and made markets pro generally available in the US.

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Q&A Session

We made it easier for merchants to discover and engage with our 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 refined our algorithms for audiences, which has shown reductions in CAC of up to 50% while increasing the advertising platform partners to include TikTok, Snap, Pinterest and Criteo. 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 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. 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 Build for Shopify, partner to bring the Amazon Buy with Prime app into our ecosystem and enable a deeper integration with Adyen for Enterprise.

And finally, we cannot talk about 2023 without mentioning AI. We launched our suite of AI-powered tools known as Shopify Magic, an AI shopping assistant on 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. 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 2023. 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. So let’s go into more detail on the key accomplishments for the quarter that further demonstrates the progress we are making to strengthen our position as a leader in unified commerce. I will first quickly touch on our Black Friday-Cyber Monday results before diving into our products, channels and international.

Starting 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 purchased from brands powered by Shopify, 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 and our platform handed 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 modern commerce. Turning to product.

Shopify is all about choice, constantly iterating, expanding and offering more solutions to meet the needs of merchants and they’re 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, our react-based toolkit, surpassed $1 billion in GMV in Q4 alone. 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 Tecovas joining Shopify and launching 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. 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, everybody wins. We’ve always felt that we have the best converting checkout in the world, and in 2023, we got validation of that. 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 Shop Pay even when it is not used by a buyer result in higher conversion by 5%. And when it is used, 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. For the quarter, Shop Pay, 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 cumulative $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 wallet for Shopify merchants as we look to make Shop Pay the leading checkout across the Internet.

Transitioning to AI. Shopify is capitalizing on the immense opportunity to support our merchants in this new technological era where AI becomes the most powerful sidekick for business creation. 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 Glen Coates, our VP of Core Product discussed at Investor Day. In 2023, we brought nearly a dozen AI-enabled tools through 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 edition 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. 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, Shop 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 Shopify Collective, which launched in our summer editions in July. Users of this product range from celebrity brands like Drakes, Drake-related, Reese Witherspoon’s Reese’s Book Club to 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 optimize on this opportunity to join forces and help each other succeed. Shopify Capital, a product that’s been aiding merchant growth for over seven 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 clicks. This helps brands like Nomad, ChocZero and Porter Road get the funding they need 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. A newer product that just launched in the summer of 2023. Shop Cash is a great example of harnessing the power of platform via 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 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 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 a start. As commerce is getting to evolve, transactions and brand engagement have moved far beyond the traditional retail or online source.

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 off-line channel. Our go-to-market efforts, combined with enhancements to our product offering continue to resonate with more merchants that operate both off-line and online presences. In the quarter, offline GMV was up 28% year-over-year, driven by the growth of our merchants combined with the expansion of locations by our merchant base. Our off-line success 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 LA and cannot wait to be part of wherever they go next.

Or Saje Natural in Canada, which is 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 point-of-sale terminal seamlessly integrated back into the online store and the capability to now support over 1,000 physical stores. In addition, we’re seeing merchants come into Shopify primarily for our point-of-sale. Multi-store brands like Evereve and AKIRA that want to modernize their off-line 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 online, off-line or anywhere in between. For the year, our off-line revenue was $441 million, which includes revenue from payments, off-line subscriptions and point-of-sale hardware.

This is more than 5x what our off-line revenue was just four years ago and speaks to the strength of this channel as a growing important on-ramp into Shopify. With the TAM for offline and B2B estimated over $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 off-line commerce, we will remain focused on simplifying the tech stack while bringing all of the capabilities that we offer for online to off-line. 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 flywheel. 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 GMV doubling in 2023. Similar to off-line retail. New channels like B2B allow our merchants to reach more customers and broaden their brand visibility. While our growth in 2023 has primarily stemmed from existing merchants adopting B2B, like Home Decor and furnishing company, Lulu and Georgia; and fashion jewelry and accessories company, BaubleBar, we’ve also secured some B2B-only merchants like Carrier, which signed in Q4, opening the door to a whole new opportunity 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 that were 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. With over 70% of Shopify’s 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 our merchants. 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 Shop to include 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 MrBeast on a video that has attracted more than 165 million views. MrBeast invited viewers to use the Shop app to request a holiday gift from a Shopify merchants. This helped drive 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 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 and drive customer engagement, increase sales and build long-term relationships with their customers. Let’s now talk about our international initiatives. 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 into expanding our capabilities and localization efforts are working.

Our go-to-market teams have had an incredible year expanding their brands on our platform with the recent international brands that have signed or launched with Shopify, including London-based clothing label Boden, our largest deal in the UK in our history. German curated Home & Living company, Westwing, Berlin-based active brand, OCEANSAPART, Japan headquartered, 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. On Markets Pro, we continue to enable our go-to-market to increase the adoption of this product. In the past quarter, thousands of merchants to leverage Markets Pro for cross-border sales and over the Black Friday-Cyber Monday weekend, 15% of all global orders were cross-border.

Brands such as the Red Hot Chili Peppers and Zpacks 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’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 editions. First, on our enterprise efforts. We kicked off 2024 at NRF, which is the conference for enterprise retail and Shopify showed up.

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 was remarkably different. Our enterprise offerings, whether full stack, headless or composable are gaining widespread recognition. We engage with hundreds of large established brands and businesses, making our presence felt while also announcing partnerships with Mirakl, Google Cloud Marketplace, Slalom and Manhattan. Just as we 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.

Two weeks ago, our winter addition dropped. If you haven’t checked it out yet, you really should. Our most recent edition span across the pillars of conversion, channels, marketing and operation. All of the areas that are foundational to a merchant success. This is our fourth addition in just two years, each time introducing over 100 new features and updates, 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 mind-set to advance our mission and make the heart things easier. 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 from 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. 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 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.

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

Jeff Hoffmeister: Thanks, Harley. 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. Let’s dive into our quarterly results, and then I will provide a summary at the end of my comments. 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 GMV growth rate increasing sequentially for each quarter of 2023. The Q4 GMV results stem from the following. Same-store sales growth for our existing merchants, continued growth in our merchant base globally, 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 the logistics businesses. This represents the third consecutive quarter that our growth has been greater than 25% on an organic basis ex logistics. Our strong Black Friday-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 outperformance.

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 merchants, continued penetration of Shopify Payments and strength in our merchant solutions products, particularly Markets, Shopify Tax and Installments, 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. $45.1 billion of GMV 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. 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, more merchants across the globe adopting payments, greater penetration of Shop Pay and continued growth of our point-of-sale solution. These were partially offset by our GMV mix shifting to EMEA where we have lower GPV penetration than North America. It is important to remember that Q4 is a quarter which traditionally sees the highest percentage of revenue from payments. For the year, GPV penetration was 58% up from 54% in 2022.

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. We saw growth year-over-year in MRR across each of Standard, Plus, and Off-line point-of-sale. The strength stem from increases in the number of merchants in each of the three categories, combined with, for 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 won a simple online presence. 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 from growth in the number of merchants in each group. 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. 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 Shop Cash.

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. 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 $1 billion in a single quarter. 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. Gross margin for Merchant Solutions was 39.2% compared to 36.3% in Q4 of 2022. 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 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. 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 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.

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. 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. Operating income for the quarter was $289 million or 13.5% of revenues, up from Q3 operating income of 7%. Stock-based compensation for Q4 was $103 million in line with our Q3 SBC also of $103 million. Capital expenditures were $2 million for the quarter.

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 margin sequentially every quarter of 2023. We have now delivered five consecutive quarters of positive free cash flow with no expectation for this trend to change. 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. In Q4, we invested $260 million in Flexport via convertible note as part of Shopify’s continued partnership with the Flexport team. Before turning to our outlook, a few comments on our 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 and channels, including off-line and B2B. In 2024, 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 growth and profitability.

Last week, we updated our Plus pricing. This marks the first change to our plus pricing in 6 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 it goes into effect on May 8th for existing merchants that don’t choose to lock in a three-year contract at the existing 2023 rates. Therefore, we expect more of the financial impact from these changes to occur in the second half of the year. Keeping all this in mind, let’s now turn to outlook. Our expectations for the first quarter of 2024 are as follows. First, on revenue. We expect our merchant momentum from Q4 to carry over into Q1, recognizing that Q1 is consistently our lowest quarter seasonally.

We expect Q1 revenue growth in the low 20s on a GAAP 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-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. 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.

The two primary drivers of the increase relative to the fourth quarter are 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. 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 paybacks. 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%, enabling us to invest more into these channels while still maintaining our operating discipline on the underlying unit economics.

For our off-line point-of-sale business, our results demonstrate the traction we are gaining with off-line growth continuing to outpace online growth and representing a significant addressable market for us. We want to be the clear leader in unified commerce. 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. On 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 contributions, which are not ratable throughout the year. 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. The payroll tax impact is expected to be larger than the impact of the compensation increases. Moving to stock-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 flow. 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. 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.

So to wrap it up, 2023 was an incredible year for both Shopify and our merchants. Our 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. 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. 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 for your questions.

A – Carrie Gillard: [Operator Instructions] We will now open the call for your questions. [Operator Instructions] Our first question comes from Ken Wong at Oppenheimer.

Kenneth Wong: Hi. Great. Thank you for taking my question. I wanted to perhaps just dive into the Merchant Solutions side of things, really strong GMV growth. Did notice that take rate ticked down a little bit sequentially. Can you provide any color on the dynamic there?

Harley Finkelstein: Hey, Ken, it’s Harley. I’ll start with that one. Yes, I mean, look, attach rate was around 3% for the year, which continues to go up. That’s up from like 2.6%, 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’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 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 to more — to more geographies, you will continue to see that grow.

But we think 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 increase in that as well. But on 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 we’re around 3% for the year, which we’re really proud of.

Jeff Hoffmeister: Yes. And the only thing I’d add to Harley’s comments exactly to what he mentioned in terms of GMV being heavy for the quarter, there was some noncash revenue, which we had in Q4, which doesn’t scale to the extent it’s more of a straight line revenue piece. So it doesn’t scale as much so that we’ll have a slight tick. That were the only reason.

Carrie Gillard: Thank you for your question, Ken. Our next question comes from Darren Aftahi at ROTH Capital.

Darren Aftahi: Hey, guys. Thanks for taking my question. Nice quarter. You guys talked a lot about point-of-sale in 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? Thanks.

Harley Finkelstein: I’ll take that question. Thanks, Darren. 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 four years ago. We saw outsized growth in off-line 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 in my prepared remarks, that are coming to us that already have a very large online presence that are now expanding off-line and so Shopify is becoming, for them, the obvious solution. But then you’re also seeing some other things happening. So when Banana Republic were launching their home stores, for example, they wanted to use Shopify point-of-sale across all this physical locations.

Saje 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. It was great to have — I mentioned this on the B2B side, but it was great to have Momofuku and Brooklinen and bareMinerals use B2B in our wholesale product because they were existing merchants already. But now getting brands like Carrier, the heating and cooling company to come in specifically for B2B or seeing, as I mentioned, Banana Republic Home coming in specifically for physical retail, those are new on-ramps into Shopify, which we think there’s a few things.

One, it expands our TAM and our ability to help more merchants and more verticals, but also it means that existing merchants that are honest, if they do have other products, we want to really collapse more of those tabs in that browser. So the entirety of their commerce business on Shopify. So it’s a mix in terms of POS. 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 the prepared remarks, brands like Nike Strength and companies Roxy, Quiksilver, On Running, Oscar de la 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 composable of CCS, or it’s Shopify Plus or even our headless product with Hydrogen, it means we have something sort of for everybody that needs 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.

Carrie Gillard: Thank you for your question. Our next question comes from Terry Tillman at Truist Securities.

Terry Tillman: 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 shape a little bit how the impact would be in Subscription Solutions revenue, whether it’s 3Q or 4Q in terms of just trying to understand the timing and how that will 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 versus one-year contracts? Like what are you assuming there? Thank you.

Jeff Hoffmeister: Yes. 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. There’s a different timeline for new merchants versus existing merchants and really full effect of this will go into course in May. It’s just, as you know, it’s literally just days since we’ve announced it. 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, there’s going to be a few different things that are going to play into this. One is just what percentage lock it in early. And obviously, part of it is going to be to the extent that there’s 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 which until that plays out, I just don’t have a whole lot for you right now. 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.

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

Daniel Chan: Yes, hi. Good morning. 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 that. Any color around any seasonality or weather impacts in January? Thank you.

Harley Finkelstein: Hey, Dan, I’ll take that question. In terms of the macro, one of the things we’ve seen at sort of a 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 to versus staples. And obviously, we do well when those consumers go with their wallets 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 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 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.

Carrie Gillard: Thank you. Our next question will come from Deepak Mathivanan at Wolfe Research.

Deepak Mathivanan: Great. Thanks for taking the question. Jeff, the first quarter OpEx 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.

Jeff Hoffmeister: Yes, as I — 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 to be a little — being a little bit higher than what we saw in the employee-related expenses, and I talked to you both of those. From a marketing perspective, we’ve 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 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, which has been 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, 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.

And so we’ll provide 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 underpenetrated there.

Carrie Gillard: 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 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 and advertising? And what was your considerations that you took into account before moving into that segment?

Harley Finkelstein: Yes. 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 sort of formerly known as Shop Cash offers, it went into GA in June 2023. And really, the idea is buyers earn Shop Cash when they use Shop Pay at 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 increased revenue through higher visibility, 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 MrBeast, for example, now using it for a lot of his brands on the Shop App.

So we’ll continue to do so. 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 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 choose Shopify because in order to use it, you have to be on Shopify, but we think Shop Cash can be a key buyer acquisition tool.

Carrie Gillard: And our last question will come from Richard Tse at National Bank.

Richard Tse: Yes. Can you hear me?

Carrie Gillard: Yes.

Richard Tse: Yeah, I know you don’t specifically talk about churn, but I was wondering if you can maybe talk about the order of magnitude of the churn rate over the past few years as you become what seems to be incredibly more efficient at deploying capital here?

Jeff Hoffmeister: Yes. 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 serve the small and medium business segment. And obviously, as we do more in enterprise, as you know, as you look across all of software providers, generally, on the enterprise side, you see less churn. It takes a little bit longer to get them on 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 exact numbers, Richard, in terms of how we talked about it.

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 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 on track, but our success rate there has been very high.

Harley Finkelstein: Thanks, Jeff. 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 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 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.

Carrie Gillard: This concludes our fourth quarter 2023 conference call. Thank you for joining us. Goodbye.