SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
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For the month of | February | | 2024 |
Commission File Number | 001-37400 | | |
Shopify Inc. |
| (Translation of registrant’s name into English) |
151 O'Connor Street, Ground Floor Ottawa, Ontario, Canada K2P 2L8 |
| (Address of principal executive offices) |
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
DOCUMENTS INCLUDED AS PART OF THIS REPORT
Exhibit
99.1 Shopify Inc. - Shopify Announces Fourth-Quarter and Full-Year 2023 Financial Results
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| Shopify Inc. |
| (Registrant) |
| Date: | | February 13, 2024 | | By: | /s/ Michael L. Johnson |
| Name: Michael L. Johnson
Title: Corporate Secretary |
EXHIBIT 99.1
Shopify Announces Fourth-Quarter and Full-Year 2023 Financial Results
Fourth Quarter Revenue up 24% and Free Cash Flow Margin Hits 21%;
Full Year Revenue up 26% and Free Cash Flow Margin Achieves 13%
Internet, Everywhere - February 13, 2024 - Shopify Inc. (NYSE, TSX: SHOP), a provider of essential internet infrastructure for commerce, announced today financial results for the quarter and year ended December 31, 2023.
“2023 was an incredible year for both Shopify and our merchants. Our strong Q4 and annual results are a powerful testament to the progress we have made building fast, reliable, and unified software for merchants of all sizes,” said Harley Finkelstein, President of Shopify. “As we look ahead to 2024, our focus remains on driving innovation in an ever-evolving commerce landscape, delivering products that will propel our merchants’ businesses forward, with the support of our world-class talent and our valued merchants and partners.”
“Our GMV growth accelerated in Q4 and for all of 2023, which powered Shopify’s strong financial results. In Q4 we delivered year-over-year revenue growth of 24%, which represents 30% growth when adjusting for the sale of our logistics businesses, and achieved an operating income margin of 13% and a free cash flow margin of 21%,” said Jeff Hoffmeister, Chief Financial Officer of Shopify. “For 2024, we look to build on the momentum that we achieved in 2023 and continue to deliver a strong combination of both top-line growth and profitability.”
2023 Business Highlights
Shopify’s commitment to its mission, to make commerce better for everyone, remained unwavering in 2023. We continued to build mission critical solutions to power the future of commerce, signing and bringing more merchants of all sizes on to our commerce platform including brands like Carrier, Nike Strength, Dollar Shave Club, Banana Republic Home, and Boardriders which is home to well-known brands including Roxy, Quiksilver, Billabong, among many others.
Below are some highlights from the year that further expanded our unified commerce operating system to enable merchants of all sizes to start, scale, and grow their businesses:
•Launched Shopify Magic, a suite of AI-enabled features integrated across the Shopify platform, to make it easier for merchants to run their businesses
•Introduced Sidekick, an AI-enabled commerce assistant that allows merchants to use AI to increase productivity, improve workflows, make smarter decisions, and spend less time on operational tasks
•Powered by OpenAI’s ChatGPT API, Shopify launched an AI shopping assistant on Shop, creating a fast and more personalized shopping experience for consumers that serves up more relevant product recommendations across Shop’s millions of products
•Expanded availability of Shopify’s all-in-one mobile point-of-sale system, POS Go, to Canada, the U.K., and Ireland
•Released in the U.S. and Canada, new enterprise-grade payments hardware, POS Terminal, which combines POS Go and the all-new POS Go Dock to give merchants the option to turn their mobile point-of-sale system into a WiFi and ethernet-connected reliable countertop payment device
•Integrated Shop Pay Installments into Shopify POS allowing retail merchants the ability to offer in-store shoppers the same payment flexibility offered online
•Completed the U.S. roll out of Shop Cash, a rewards program that allows shoppers to earn Shop Cash on eligible Shop Pay purchases and redeem it on both the app and web-based versions of Shop
•Expanded Shopify’s end-to-end, cross-border commerce solution, Shopify Markets Pro, to general availability in the U.S.
•Optimized Shopify Checkout for speed and conversion by redesigning the checkout to a streamlined one-page checkout experience and expanded its extensibility with new APIs and updates
•Launched Shopify Bill Pay, a tool that streamlines expense management by enabling merchants to manage and pay vendors directly in the Shopify admin
•Launched Shopify Credit, a pay-in-full business credit card exclusively for Shopify merchants and designed to help flex monthly cash flow with tailored credit limits based on sales with no credit check, interest or fees while earning cashback savings on the top eligible spend categories
•Launched Shopify Collective, a low-cost, low-risk business-to-business solution that enables merchants to source products from other brands on Shopify and have them shipped directly to their customers
•Launched Shopify Marketplace Connect app, a centralized hub for merchants to sell on all major marketplaces, including Amazon, eBay, and Walmart, while connecting, managing, and fulfilling their orders through Shopify
•Launched Commerce Components by Shopify (“CCS”), the modern, composable stack for enterprise retail. CCS combines access to Shopify’s foundational, high-performing components along with flexible APIs to build dynamic customer experiences that integrate seamlessly with a retailer’s preferred back office services
•Announced an app integration with Amazon that offers U.S. merchants the option to add the Buy with Prime app into Shopify Checkout with transactions processed through Shopify Payments
•Recognized as a leader in the 2023 Gartner® Magic Quadrant™ for Digital Commerce and placed highest in the ability to execute, further exemplifying Shopify’s culture of innovation and unique vision for commerce
•Launched the Retail Plan, a new pricing plan for brick-and-mortar businesses selling primarily in-person that includes all Shopify POS Pro features as well as tools to build a simple online presence
Recent Business Highlights
•Released on January 31, Shopify’s Winter ‘24 Edition focused on strengthening its commerce foundations with new capabilities spanning across conversion, channels, marketing, and operations. Over 100+ updates were featured in this Edition including the following:
◦Implemented merchandising upgrades that include improved product classification with a new taxonomy that maps products to a rich set of associated attributes and an expanded variant limit of 2,000 to better support merchants with large or complex catalogs
◦Launched Shopify Subscriptions, an app that gives merchants an easy way to set up and manage their subscriptions directly from the Shopify admin, to help merchants increase their customer lifetime value and predictable revenue
◦Introduced Ship from Store to Shopify POS allowing staff at brick-and-mortar locations to easily pick, pack, and ship online orders to customers
◦Expanded Shop Cash offers to Shop Campaigns to help merchants more efficiently target and acquire customers
◦Rolled out new features to Shopify Magic including a Media Editor that can make professional image edits with just a few clicks or keyword prompts
•Shopify updated its pricing for Plus plans and Shopify Payments. The updated pricing went into effect for new Plus merchants on February 8, 2024
Fourth-Quarter Financial Highlights
•Gross Merchandise Volume1 (“GMV”) increased 23% to $75.1 billion, an increase of $14.2 billion over the fourth quarter of 2022
•Revenue increased 24% to $2.1 billion compared to the prior year, which translates into year-over-year growth of 30% after adjusting for the sales of our logistics businesses
•Merchant Solutions revenue increased 21% to $1.6 billion compared to the prior year, driven primarily by the growth of GMV and continued penetration of Shopify Payments
•Gross Payments Volume2 ("GPV") grew to $45.1 billion, representing 60% of GMV processed in the quarter, versus $34.2 billion, or 56%, for the fourth quarter of 2022
•Subscription Solutions revenue increased 31% to $525 million compared to the prior year, driven by the growth in the number of merchants and the pricing increases on our Standard subscription plans
•Monthly Recurring Revenue3 ("MRR") as of December 31, 2023 increased 35% to $149 million compared to the prior year, driven by continued growth across all of our subscription plans. Shopify Plus contributed $46 million, or 31%, of MRR compared with 33% of MRR as of December 31, 2022
1. Gross Merchandise Volume, or GMV, represents the total dollar value of orders facilitated through the Shopify platform including certain apps and channels for which a revenue-sharing arrangement is in place in the period, net of refunds, and inclusive of shipping and handling, duty and value-added taxes.
2. Gross Payments Volume, or GPV, is the amount of GMV processed through Shopify Payments.
3. Monthly Recurring Revenue, or MRR, is calculated by multiplying the number of merchants by the average monthly subscription plan fee in effect on the last day of that period and is used by management as a directional indicator of subscription solutions revenue going forward assuming merchants maintain their subscription plan the following month.
•Gross profit dollars grew 33% to $1.1 billion compared to the prior year. Gross margin for the quarter was 49.5% compared to 46.0% in the fourth quarter of 2022, driven primarily by the lack of the dilutive impact of the logistics business
•Free cash flow4 was $446 million compared to free cash flow of $90 million in the prior year
•Free cash flow margin4 for the quarter was 21% compared to free cash flow margin of 5% in the fourth quarter of 2022
•Cash and marketable securities were $5.0 billion as of December 31, 2023, and we had a net cash position of $4.1 billion after consideration of our outstanding convertible notes
Full-Year Financial Highlights
•Gross Merchandise Volume increased 20% to $235.9 billion, an increase of $38.7 billion over the prior year
•Total revenue increased 26% to $7.1 billion compared to 2022. Within this, Merchant Solutions revenue grew 27% to $5.2 billion, and Subscription Solutions revenue grew 23% to $1.8 billion
•Gross Payment Volume was $137.0 billion, which accounted for 58% of GMV processed, versus $106.1 billion or 54% for 2022
•Gross profit dollars grew 28% to $3.5 billion in 2023, compared with $2.8 billion for 2022. Gross margin was 49.8% compared to 49.2% in 2022, driven primarily by the lack of the dilutive impact of the logistics business, the pricing changes on standard plans, and support efficiencies within subscription solutions which were partially offset by the continued growth in our lower margin payments business
•Free cash flow4 was $905 million compared to negative free cash flow of $186 million in the prior year
•Free cash flow margin4 was 13% compared to negative free cash flow margin of 3% for 2022, achieving sequential growth in both free cash flow dollars and free cash flow margin every quarter this year
2024 Outlook
The outlook that follows supersedes all prior financial outlook statements made by Shopify, constitutes forward-looking information within the meaning of applicable securities laws, and is based on a number of assumptions and subject to a number of risks. Actual results could vary materially as a result of numerous factors, including certain risk factors, many of which are beyond Shopify’s control. Please see "Forward-looking Statements" below for more information.
Note that year-over-year comparability in our financial outlook will be impacted by the sales of our logistics businesses, which we expect will create a revenue growth headwind of approximately 500 to 600 basis points and a gross margin tailwind of approximately 450 to 500 basis points when compared to the first quarter of 2023.
For the first quarter of 2024, we expect:
4. Free Cash Flow and Free Cash Flow Margin are non-GAAP financial measures. Please refer to “Non-GAAP and Other Financial Measures” below for more information.
•Revenue to grow at a low-twenties percentage rate on a year-over-year basis, which translates into a year-over-year growth rate in the mid-to-high-twenties when adjusting for the 500 to 600 basis points impact from the sale of our logistics businesses;
•Gross margin for Q1 is expected to increase approximately 150 basis points compared to Q4 2023;
•GAAP operating expense dollars to be up at a low-teens percentage rate compared to Q4 2023;
•Stock-based compensation to be approximately $105 million, and capital expenditures to be approximately $10 million; and
•Free cash flow as a percentage of revenue to be in the high-single digits, with sequential improvement every quarter throughout the year
Quarterly Conference Call
Shopify’s management team will hold a conference call to discuss our fourth-quarter and 2023 annual results today, February 13, 2024, at 8:30 a.m. ET. The conference call will be webcast on the investor relations section of Shopify’s website at https://investors.shopify.com/news-and-events/. An archived replay of the webcast will be available following the conclusion of the call.
Shopify’s Audited Consolidated Financial Statements and accompanying Notes, Management's Discussion and Analysis and Annual Information Form for the year ended December 31, 2023 will be available on Shopify’s website at www.shopify.com and will be filed on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov. Shareholders may, upon request, receive a hard copy of the complete audited financial statements free of charge.
About Shopify
Shopify is the leading global commerce company that provides essential internet infrastructure for commerce, offering trusted tools to start, scale, market, and run a retail business of any size. Shopify makes commerce better for everyone with a platform and services that are engineered for speed, customization, reliability, and security, while delivering a better shopping experience for consumers online, in store and everywhere in between. Shopify powers millions of businesses in more than 175 countries and is trusted by brands such as Mattel, Gymshark, Heinz, FTD, Netflix, Kylie Cosmetics, SKIMS, Supreme, and many more. For more information, visit www.shopify.com.
Forward-looking Statements
This press release contains certain forward-looking statements within the meaning of applicable securities laws, including statements related to Shopify’s planned business initiatives and operations and outlook, the performance of Shopify's merchants, and the impact of Shopify's business on its merchants and other entrepreneurs. Words such as “continue”, “will”, “intend”, “believe” and “expect” or similar expressions are intended to identify forward-looking statements.
These forward-looking statements are based on Shopify’s current projections and expectations about future events and financial trends that management believes might affect its financial condition, results of operations, business
strategy and financial needs, and on certain assumptions and analysis made by Shopify in light of the experience and perception of historical trends, current conditions and expected future developments and other factors management believes are appropriate. These projections, expectations, assumptions and analyses are subject to known and unknown risks, uncertainties, assumptions and other factors that could cause actual results, performance, events and achievements to differ materially from those anticipated in these forward-looking statements. Although Shopify believes that the assumptions underlying these forward-looking statements are reasonable, they may prove to be incorrect, and readers cannot be assured that actual results will be consistent with these forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements as a result of numerous factors, including certain risk factors, many of which are beyond Shopify’s control, including but not limited to: sustaining our rapid growth; managing our growth; our potential inability to compete successfully against current and future competitors; the security of personal information we store relating to merchants and their buyers, as well as consumers with whom we have a direct relationship including users of our apps; a cyberattack or security breach; our ability to innovate; the impact of worldwide economic conditions, including the resulting effect on spending by small and medium-sized businesses or their buyers; our current reliance on a few suppliers to provide the technology we offer through Shopify Payments; the reliance of our business, including the services we provide to merchants, in part on the success of our strategic relationships with third parties; our limited operating history in new and developing markets and new geographic regions; international sales and operations and the use of our platform in various countries; our potential inability to hire, retain and motivate qualified personnel, including key personnel; our reliance on third-party cloud providers to deliver our services; complex and changing laws and regulations worldwide; our dependence on the continued services and performance of our senior management and other key employees; payments processed through Shopify Payments, Shop Pay Installments, or payments processed or funds managed through Shopify Balance; our potential failure to effectively maintain, promote and enhance our brand; our history of losses and our efforts to maintain profitability; serious errors or defects in our software or hardware; evolving privacy laws and regulations, cross-border data transfer restrictions, data localization requirements and other domestic or foreign regulations that may limit the use and adoption of our services; acquisitions and investments, including strategic investments and fluctuations in our share of income and loss from equity method investment; risks associated with Shopify Capital, and offering financing to merchants; our potential inability to achieve or maintain data transmission capacity; potential claims by third parties of intellectual property infringement or other third party or governmental claims, litigation, disputes, or other proceedings; activities of merchants or partners or the content of merchants' shops and our ability to detect and address unauthorized activity on our platform; unanticipated changes in tax laws or adverse outcomes resulting from examination of our income or other tax returns; being required to collect federal, state, provincial or local business taxes, sales and use taxes or other indirect taxes in additional jurisdictions on transactions by our merchants; changes to technologies used in our platform or new versions or upgrades of operating systems and internet browsers; our potential inability to obtain, maintain and protect our intellectual property rights and proprietary information or prevent third parties from making unauthorized use of our technology; our pricing decisions and changes to our pricing models for our solutions; our use of open source software; seasonal fluctuations in our operating results; exchange rate fluctuations
that may negatively affect our results of operations; our dependence upon buyers’ and merchants’ access to, and willingness to use, the internet for commerce; provisions of our financial instruments including our convertible notes; our potential inability to raise additional funds as may be needed to pursue our growth strategy or continue our operations, on favorable terms or at all; our tax loss carryforwards; the ownership of our shares; our ability to maintain an effective system of internal controls over financial reporting; the perceived impact of a return on investment without issuing a dividend; our status as a foreign private issuer and the laws applicable to us as a foreign private issuer; the impact of provisions of Canadian law applicable to us; provisions of our constating documents and charter documents; and other events and factors disclosed previously and from time to time in Shopify’s filings with the U.S. Securities and Exchange Commission and the securities commissions or similar securities regulatory authorities in each of the provinces or territories of Canada. The forward-looking statements contained in this news release, represent Shopify’s expectations as of the date of this news release, or as of the date they are otherwise stated to be made, and subsequent events may cause these expectations to change. Shopify undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.
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| CONTACT: | | |
| INVESTORS: | | MEDIA: |
| Carrie Gillard | | Alex Lyons |
| Director, Investor Relations | | Communications Lead |
| IR@shopify.com | | press@shopify.com |
| SOURCE: Shopify | | |
| | |
Shopify Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Expressed in US millions, except share and per share amounts, unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended | | Years ended |
| December 31, 2023 | | December 31, 2022 | | December 31, 2023 | | December 31, 2022 |
| $ | | $ | | $ | | $ |
| Revenues | | | | | | | |
| Subscription solutions | 525 | | 400 | | 1,837 | | 1,488 |
| Merchant solutions | 1,619 | | 1,335 | | 5,223 | | 4,112 |
| 2,144 | | 1,735 | | 7,060 | | 5,600 |
| Cost of revenues | | | | | | | |
| Subscription solutions | 97 | | 86 | | 354 | | 331 |
| Merchant solutions | 985 | | 851 | | 3,191 | | 2,515 |
| 1,082 | | 937 | | 3,545 | | 2,846 |
| Gross profit | 1,062 | | 798 | | 3,515 | | 2,754 |
| Operating expenses | | | | | | | |
| Sales and marketing | 317 | | 298 | | 1,220 | | 1,230 |
| Research and development | 311 | | 440 | | 1,730 | | 1,503 |
| General and administrative | 100 | | 214 | | 491 | | 708 |
| Transaction and loan losses | 45 | | 34 | | 152 | | 135 |
| Impairment on sales of Shopify's logistics businesses | — | | — | | 1,340 | | — |
| Total operating expenses | 773 | | 986 | | 4,933 | | 3,576 |
| Income (loss) from operations | 289 | | (188) | | (1,418) | | (822) |
| Other income (expense), net | 393 | | (426) | | 1,603 | | (2,801) |
| Income (loss) before income taxes | 682 | | (614) | | 185 | | (3,623) |
| (Provision for) recovery of income taxes | (25) | | (9) | | (53) | | 163 |
| Net income (loss) | 657 | | (623) | | 132 | | (3,460) |
| Other comprehensive income (loss) | 10 | | 22 | | 20 | | (10) |
| Comprehensive income (loss) | 667 | | (601) | | 152 | | (3,470) |
| | | | | | | |
| Net income (loss) per share attributable to shareholders: | | | | | | | |
| Basic | 0.51 | | (0.49) | | 0.10 | | (2.73) |
| Diluted | 0.51 | | (0.49) | | 0.10 | | (2.73) |
| | | | | | | |
| Weighted average shares used to compute net income (loss) per share attributable to shareholders: | | | | | | | |
| Basic | 1,285,498,532 | | 1,273,338,804 | | 1,281,554,559 | | 1,266,268,155 |
| Diluted | 1,297,295,576 | | 1,273,338,804 | | 1,295,511,385 | | 1,266,268,155 |
Shopify Inc.
Condensed Consolidated Balance Sheets
(Expressed in US millions except share amounts, unaudited)
| | | | | | | | | | | |
| | | |
| As of |
| December 31, 2023 | | December 31, 2022 |
| $ | | $ |
| Assets | | | |
| Current assets | | | |
| Cash and cash equivalents | 1,413 | | | 1,649 | |
| Marketable securities | 3,595 | | | 3,404 | |
| Trade and other receivables, net | 282 | | | 273 | |
| Loans and merchant cash advances, net | 816 | | | 580 | |
| Other current assets | 169 | | | 144 | |
| 6,275 | | | 6,050 | |
| Long-term assets | | | |
| Property and equipment, net | 49 | | | 131 | |
| Operating lease right-of-use assets, net | 98 | | | 355 | |
| Intangible assets, net | 29 | | | 390 | |
| Deferred tax assets | 44 | | | 41 | |
| Equity and other investments ($2,977 and $869, carried at fair value) | 3,597 | | | 1,954 | |
| Equity method investment | 780 | | | — | |
| Goodwill | 427 | | | 1,836 | |
| 5,024 | | | 4,707 | |
| Total assets | 11,299 | | | 10,757 | |
| Liabilities and shareholders’ equity | | | |
| Current liabilities | | | |
| Accounts payable and accrued liabilities | 579 | | | 542 | |
| Deferred revenue | 302 | | | 296 | |
| Operating lease liabilities | 17 | | | 18 | |
| 898 | | | 856 | |
| Long-term liabilities | | | |
| Deferred revenue | 196 | | | 268 | |
| Operating lease liabilities | 217 | | | 465 | |
| Convertible senior notes | 916 | | | 913 | |
| Deferred tax liabilities | 6 | | | 16 | |
| 1,335 | | | 1,662 | |
| Commitments and contingencies | | | |
| Shareholders’ equity | | | |
| Common stock, unlimited Class A subordinate voting shares authorized, 1,207,318,947 and 1,195,697,614, issued and outstanding; unlimited Class B restricted voting shares authorized, 79,251,346 and 79,430,952 issued and outstanding; 1 Founder share authorized, 1 and 1 issued and outstanding | 9,201 | | | 8,747 | |
| Additional paid-in capital | 251 | | | 30 | |
| Accumulated other comprehensive income (loss) | 4 | | | (16) | |
| Accumulated deficit | (390) | | | (522) | |
| Total shareholders’ equity | 9,066 | | | 8,239 | |
| Total liabilities and shareholders’ equity | 11,299 | | | 10,757 | |
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Shopify Inc.
Condensed Consolidated Statements of Cash Flows
(Expressed in US millions, unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended | | Years ended |
| December 31, 2023 | | December 31, 2022 | | December 31, 2023 | | December 31, 2022 |
| $ | | $ | | $ | | $ |
| Cash flows from operating activities | | | | | | | |
| Net income (loss) for the period | 657 | | (623) | | 132 | | (3,460) |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | | | | | | | |
| Amortization and depreciation | 10 | | 30 | | 70 | | 93 |
| | | | | | | |
| Stock-based compensation | 98 | | 142 | | 615 | | 549 |
| Impairment of right-of-use assets and leasehold improvements | — | | 84 | | 38 | | 84 |
| Provision for transaction and loan losses | 29 | | 20 | | 80 | | 74 |
| Deferred income tax recovery | (3) | | (6) | | (1) | | (187) |
| Revenue related to non-cash consideration | (35) | | (34) | | (158) | | (121) |
| Impairment on sales of Shopify's logistics businesses | — | | — | | 1,340 | | — |
| Net (gain) loss on equity and other investments | (368) | | 476 | | (1,419) | | 2,919 |
| Net loss on equity method investment | 48 | | — | | 58 | | — |
| Unrealized foreign exchange (gain) loss | (12) | | (14) | | (6) | | 12 |
| Changes in operating assets and liabilities | 24 | | 23 | | 195 | | (99) |
| Net cash provided by (used in) operating activities | 448 | | 98 | | 944 | | (136) |
| Cash flows from investing activities | | | | | | | |
| Purchases of property and equipment | (2) | | (8) | | (39) | | (50) |
| Purchases of marketable securities | (1,683) | | (1,443) | | (5,841) | | (5,011) |
| Maturities of marketable securities | 1,612 | | 1,616 | | 5,590 | | 6,890 |
| Purchases and originations of loans | (527) | | (149) | | (1,861) | | (526) |
| Repayments of loans | 514 | | 148 | | 1,338 | | 367 |
| Purchases of equity and other investments | (260) | | (5) | | (364) | | (635) |
| Acquisition of businesses, net of cash acquired | — | | — | | (31) | | (1,754) |
| Other | — | | — | | (36) | | — |
| Net cash (used in) provided by investing activities | (346) | | 159 | | (1,244) | | (719) |
| Cash flows from financing activities | | | | | | | |
| Proceeds from the exercise of stock options | 17 | | 7 | | 60 | | 18 |
| Net cash provided by financing activities | 17 | | 7 | | 60 | | 18 |
| Effect of foreign exchange on cash and cash equivalents | 7 | | 7 | | 4 | | (17) |
| Net increase (decrease) in cash and cash equivalents | 126 | | 271 | | (236) | | (854) |
| Cash and cash equivalents – Beginning of Period | 1,287 | | 1,378 | | 1,649 | | 2,503 |
| Cash and cash equivalents – End of Period | 1,413 | | 1,649 | | 1,413 | | 1,649 |
Non-GAAP and Other Financial Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with United States generally accepted accounting principles ("GAAP"), Shopify uses certain non-GAAP and other financial measures to provide additional information in order to assist investors in understanding our financial and operating performance. These measures are not recognized measures for financial presentation under U.S. GAAP, do not have standardized meanings, and may not be comparable to similar measures presented by other public companies.
Adjusted gross profit, adjusted sales and marketing, adjusted research and development, adjusted general and administrative expenses, adjusted impairment on sales of Shopify's logistics businesses, adjusted operating income/loss, adjusted net income/loss and adjusted net income/loss per share are non-GAAP financial measures that exclude the effect of stock-based compensation expenses and related payroll taxes, accelerated stock-based compensation, amortization of acquired intangibles, severance related costs, provisions associated with litigation-related accruals, real estate-related impairment charges, and impairment on sales of Shopify’s logistics businesses. Adjusted net income/loss and adjusted net income/loss per share also exclude unrealized and realized gains and losses on equity and other investments, net loss on equity method investment, and tax effects related to non-GAAP adjustments. Free cash flow is a non-GAAP financial measure calculated as cash flow from operations less capital expenditures. Free cash flow margin is a non-GAAP ratio calculated as free cash flow divided by revenue. Shopify considers free cash flow and free cash flow margin as indicators of the efficiency and liquidity of Shopify's business, showing cash available after capital expenditures, to make strategic investments and drive future growth.
Management uses non-GAAP and other financial measures internally for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Shopify believes that these non-GAAP measures provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. The non-GAAP and other financial measures used herein be considered as a supplement to, and not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. See the financial tables below for a reconciliation of the non-GAAP measures.
Shopify Inc.
Reconciliation from GAAP to Non-GAAP Results
(Expressed in US millions, except share and per share amounts, unaudited) | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended | | Years ended |
| December 31, 2023 | | December 31, 2022 | | December 31, 2023 | | December 31, 2022 |
| $ | | $ | | $ | | $ |
| GAAP Gross profit | 1,062 | | | 798 | | | 3,515 | | | 2,754 | |
| % of Revenue | 50 | % | | 46 | % | | 50 | % | | 49 | % |
| add: stock-based compensation and related payroll taxes | 1 | | | 3 | | | 4 | | | 9 | |
| | | | | | | |
| add: amortization of acquired intangibles | 4 | | | 19 | | | 35 | | | 49 | |
| Adjusted Gross profit | 1,067 | | | 820 | | | 3,554 | | | 2,812 | |
| % of Revenue | 50 | % | | 47 | % | | 50 | % | | 50 | % |
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| GAAP Sales and marketing | 317 | | | 298 | | | 1,220 | | | 1,230 | |
| % of Revenue | 15 | % | | 17 | % | | 17 | % | | 22 | % |
| less: stock-based compensation and related payroll taxes | 14 | | | 15 | | | 54 | | | 65 | |
| less: accelerated stock-based compensation | — | | | — | | | 5 | | | — | |
| less: amortization of acquired intangibles | — | | | 2 | | | 3 | | | 5 | |
| less: severance related costs | — | | | — | | | 28 | | | 11 | |
| Adjusted Sales and marketing | 303 | | | 281 | | | 1,130 | | | 1,149 | |
| % of Revenue | 14 | % | | 16 | % | | 16 | % | | 21 | % |
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| GAAP Research and development | 311 | | | 440 | | | 1,730 | | | 1,503 | |
| % of Revenue | 15 | % | | 25 | % | | 25 | % | | 27 | % |
| less: stock-based compensation and related payroll taxes | 69 | | | 104 | | | 333 | | | 396 | |
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| less: accelerated stock-based compensation | — | | | — | | | 164 | | | — | |
| less: severance related costs | — | | | — | | | 102 | | | 8 | |
| Adjusted Research and development | 242 | | | 336 | | | 1,131 | | | 1,099 | |
| % of Revenue | 11 | % | | 19 | % | | 16 | % | | 20 | % |
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| GAAP General and administrative | 100 | | | 214 | | | 491 | | | 708 | |
| % of Revenue | 5 | % | | 12 | % | | 7 | % | | 13 | % |
| less: stock-based compensation and related payroll taxes | 19 | | | 24 | | | 76 | | | 93 | |
| less: impairment of right-of-use assets and leasehold improvements | — | | | 84 | | | 38 | | | 84 | |
| less: severance related costs | — | | | — | | | 18 | | | 11 | |
less: expense related to litigation matters | — | | | — | | | — | | | 97 | |
| Adjusted General and administrative | 81 | | | 106 | | | 359 | | | 423 | |
| % of Revenue | 4 | % | | 6 | % | | 5 | % | | 8 | % |
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| GAAP Transaction and loan losses | 45 | | | 34 | | | 152 | | | 135 | |
| % of Revenue | 2 | % | | 2 | % | | 2 | % | | 2 | % |
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| GAAP Impairment on sales of Shopify's logistics businesses | — | | | — | | | 1,340 | | | — | |
| % of Revenue | — | % | | — | % | | 19 | % | | — | % |
| less: impairment on sales of Shopify's logistics businesses | — | | | — | | | 1,340 | | | — | |
| Adjusted Impairment on sales of Shopify's logistics businesses | — | | | — | | | — | | | — | |
| % of Revenue | — | % | | — | % | | — | % | | — | % |
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Shopify Inc.
Reconciliation from GAAP to Non-GAAP Results (continued)
(Expressed in US millions, except share and per share amounts, unaudited)
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| Three months ended | | Years ended |
| December 31, 2023 | | December 31, 2022 | | December 31, 2023 | | December 31, 2022 |
| $ | | $ | | $ | | $ |
| GAAP Operating expenses | 773 | | | 986 | | | 4,933 | | | 3,576 | |
| % of Revenue | 36 | % | | 57 | % | | 70 | % | | 64 | % |
| less: stock-based compensation and related payroll taxes | 102 | | | 143 | | | 463 | | | 554 | |
| less: accelerated stock-based compensation | — | | | — | | | 169 | | | — | |
| less: amortization of acquired intangibles | — | | | 2 | | | 3 | | | 5 | |
| less: impairment of right-of-use assets and leasehold improvements | — | | | 84 | | | 38 | | | 84 | |
| less: severance related costs | — | | | — | | | 148 | | | 30 | |
less: expense related to litigation matters | — | | | — | | | — | | | 97 | |
| less: impairment on sales of Shopify's logistics businesses | — | | | — | | | 1,340 | | | — | |
| Adjusted Operating expenses | 671 | | | 757 | | | 2,772 | | | 2,806 | |
| % of Revenue | 31 | % | | 44 | % | | 39 | % | | 50 | % |
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| GAAP Operating income (loss) | 289 | | | (188) | | | (1,418) | | | (822) | |
| % of Revenue | 13 | % | | (11) | % | | (20) | % | | (15) | % |
| add: stock-based compensation and related payroll taxes | 103 | | | 146 | | | 467 | | | 563 | |
| add: accelerated stock-based compensation | — | | | — | | | 169 | | | — | |
| add: amortization of acquired intangibles | 4 | | | 21 | | | 38 | | | 54 | |
| add: impairment of right-of-use assets and leasehold improvements | — | | | 84 | | | 38 | | | 84 | |
| add: severance related costs | — | | | — | | | 148 | | | 30 | |
add: expense related to litigation matters | — | | | — | | | — | | | 97 | |
| add: impairment on sales of Shopify's logistics businesses | — | | | — | | | 1,340 | | | — | |
| Adjusted Operating income | 396 | | | 63 | | | 782 | | | 6 | |
| % of Revenue | 18 | % | | 4 | % | | 11 | % | | — | % |
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| GAAP Net income (loss) | 657 | | | (623) | | | 132 | | | (3,460) | |
| % of Revenue | 31 | % | | (36) | % | | 2 | % | | (62) | % |
| add: stock-based compensation and related payroll taxes | 103 | | | 146 | | | 467 | | | 563 | |
| add: accelerated stock-based compensation | — | | | — | | | 169 | | | — | |
| add: amortization of acquired intangibles | 4 | | | 21 | | | 38 | | | 54 | |
| add: impairment of right-of-use assets and leasehold improvements | — | | | 84 | | | 38 | | | 84 | |
| add: severance related costs | — | | | — | | | 148 | | | 30 | |
add: expense related to litigation matters | — | | | — | | | — | | | 97 | |
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| add: impairment on sales of Shopify's logistics businesses | — | | | — | | | 1,340 | | | — | |
| add: net (gain) loss on equity and other investments | (368) | | | 474 | | | (1,419) | | | 2,874 | |
| add: net loss on equity method investment | 48 | | | — | | | 58 | | | — | |
| add: income tax effects related to non-GAAP adjustments | (3) | | | (9) | | | (24) | | | (195) | |
| Adjusted Net income | 441 | | | 93 | | | 947 | | | 47 | |
| % of Revenue | 21 | % | | 5 | % | | 13 | % | | 1 | % |
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Shopify Inc.
Reconciliation from GAAP to Non-GAAP Results (continued)
(Expressed in US millions, except share and per share amounts, unaudited)
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| Three months ended | | Years ended |
| December 31, 2023 | | December 31, 2022 | | December 31, 2023 | | December 31, 2022 |
| $ | | $ | | $ | | $ |
| Basic GAAP Net income (loss) per share attributable to shareholders | 0.51 | | | (0.49) | | | 0.10 | | | (2.73) | |
| add: stock-based compensation and related payroll taxes | 0.08 | | | 0.11 | | | 0.36 | | | 0.44 | |
| add: accelerated stock-based compensation | — | | | — | | | 0.13 | | | — | |
| add: amortization of acquired intangibles | — | | | 0.02 | | | 0.03 | | | 0.04 | |
| add: impairment of right-of-use assets and leasehold improvements | — | | | 0.07 | | | 0.03 | | | 0.07 | |
| add: severance related costs | — | | | — | | | 0.12 | | | 0.02 | |
add: expense related to litigation matters | — | | | — | | | — | | | 0.08 | |
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| add: impairment on sales of Shopify's logistics businesses | — | | | — | | | 1.05 | | | — | |
| add: net (gain) loss on equity and other investments | (0.29) | | | 0.37 | | | (1.11) | | | 2.27 | |
| add: net loss on equity method investment | 0.04 | | | — | | | 0.05 | | | — | |
| add: income tax effects related to non-GAAP adjustments | — | | | (0.01) | | | (0.02) | | | (0.15) | |
| Basic Adjusted Net income per share attributable to shareholders | 0.34 | | | 0.07 | | | 0.74 | | | 0.04 | |
| Weighted average shares used to compute GAAP and adjusted basic net income (loss) per share attributable to shareholders | 1,285,498,532 | | | 1,273,338,804 | | 1,281,554,559 | | | 1,266,268,155 |
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Diluted GAAP Net income (loss) per share attributable to shareholders(1) | 0.51 | | | (0.48) | | | 0.10 | | | (2.69) | |
| add: stock-based compensation and related payroll taxes | 0.08 | | | 0.11 | | | 0.36 | | | 0.44 | |
| add: accelerated stock-based compensation | — | | | — | | | 0.13 | | | — | |
| add: amortization of acquired intangibles | — | | | 0.02 | | | 0.03 | | | 0.04 | |
| add: impairment of right-of-use assets and leasehold improvements | — | | | 0.07 | | | 0.03 | | | 0.07 | |
| add: severance related costs | — | | | — | | | 0.11 | | | 0.02 | |
add: expense related to litigation matters | — | | | — | | | — | | | 0.08 | |
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| add: impairment on sales of Shopify's logistics businesses | — | | | — | | | 1.03 | | | — | |
| add: net (gain) loss on equity and other investments | (0.28) | | | 0.37 | | | (1.10) | | | 2.24 | |
| add: net loss on equity method investment | 0.04 | | | — | | | 0.04 | | | — | |
| add: income tax effects related to non-GAAP adjustments | — | | | (0.01) | | | (0.02) | | | (0.15) | |
| Diluted Adjusted Net income per share attributable to shareholders | 0.34 | | | 0.07 | | | 0.73 | | | 0.04 | |
Weighted average shares used to compute GAAP and adjusted diluted net income (loss) per share attributable to shareholders(1) | 1,297,295,576 | | 1,285,359,361 | | 1,295,511,385 | | 1,285,676,885 |
(1) As the adjustments to GAAP net loss per share for the three months and year ended December 31, 2022 have resulted in an adjusted net income per share, the diluted GAAP net loss and the weighted average shares used to compute GAAP and non-GAAP diluted net income (loss) have been adjusted to reflect the effect of dilutive securities.
Free Cash Flow Reconciliation
The following table illustrates how free cash flow is calculated in this press release:
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| Three months ended | | Years ended |
| December 31, 2023 | | December 31, 2022 | | December 31, 2023 | | December 31, 2022 |
| $ | | $ | | $ | | $ |
| (in millions, except percentages) |
| Net cash provided by (used in) operating activities | 448 | | | 98 | | | 944 | | | (136) | |
less: capital expenditures(1) | (2) | | | (8) | | | (39) | | | (50) | |
| Free cash flow | 446 | | | 90 | | | 905 | | | (186) | |
| Revenue | 2,144 | | | 1,735 | | | 7,060 | | | 5,600 | |
| Free cash flow margin | 21 | % | | 5 | % | | 13 | % | | (3) | % |
(1) Capital expenditures is equivalent to the amount included in "purchases of property and equipment" on our Condensed Consolidated Statement of Cash Flows for the reported period.
Financial Performance Constant Currency Analysis
The following table converts our GMV, revenues, gross profit and (loss) income from operations using the comparative period's monthly average exchange rates. The table below setting out the effect of foreign exchange rates on GMV and our consolidated statements of operations disclosure is a supplement to our consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP. We have provided the below disclosure as we believe it presents a clear comparison of our period to period operating results by removing the impact of fluctuations in foreign exchange rates and to assist investors in understanding our financial and operating performance. Adjusted gross profit and adjusted operating income/loss are not recognized measures for financial statement presentation under U.S. GAAP, do not have standardized meanings, and may not be comparable to similar measures presented by other public companies. Such non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with U.S. GAAP.
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| Three months ended December 31, |
| GMV | | Revenue | | Subscription Solutions Revenue | | Merchant Solutions Revenue | | Gross Profit | | (Loss) Income from Operations |
| (in millions, except percentages) |
| 2022 As Reported (GAAP, excl. GMV) | $ | 60,958 | | | $ | 1,735 | | | $ | 400 | | | $ | 1,335 | | | $ | 798 | | | $ | (188) | |
| 2022 As Adjusted | $ | 60,958 | | | $ | 1,735 | | | $ | 400 | | | $ | 1,335 | | | $ | 820 | | | $ | 63 | |
| 2023 As Reported (GAAP, excl. GMV) | $ | 75,125 | | | $ | 2,144 | | | $ | 525 | | | $ | 1,619 | | | $ | 1,062 | | | $ | 289 | |
| 2023 As Adjusted | $ | 75,125 | | | $ | 2,144 | | | $ | 525 | | | $ | 1,619 | | | $ | 1,067 | | | $ | 396 | |
| Percentage Change Y/Y (GAAP, excl. GMV) | 23 | % | | 24 | % | | 31 | % | | 21 | % | | 33 | % | | (254) | % |
| Percentage Change Y/Y (As Adjusted) | 23 | % | | 24 | % | | 31 | % | | 21 | % | | 30 | % | | 529 | % |
| Constant Currency Impact | $ | 571 | | | $ | 9 | | | $ | 1 | | | $ | 8 | | | $ | 6 | | | $ | 13 | |
| Percentage Change Y/Y (GAAP, excl. GMV) Constant Currency | 22 | % | | 23 | % | | 31 | % | | 21 | % | | 32 | % | | (247) | % |
| Percentage Change Y/Y (As Adjusted, excl. GMV) Constant Currency | 22 | % | | 23 | % | | 31 | % | | 21 | % | | 29 | % | | 508 | % |
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| Years ended December 31, |
| GMV | | Revenue | | Subscription Solutions Revenue | | Merchant Solutions Revenue | | Gross Profit | | (Loss) Income from Operations |
| (in millions, except percentages) |
| 2022 As Reported (GAAP, excl. GMV) | $ | 197,167 | | | $ | 5,600 | | | $ | 1,488 | | | $ | 4,112 | | | $ | 2,754 | | | $ | (822) | |
| 2022 As Adjusted | $ | 197,167 | | | $ | 5,600 | | | $ | 1,488 | | | $ | 4,112 | | | $ | 2,812 | | | $ | 6 | |
| 2023 As Reported (GAAP, excl. GMV) | $ | 235,910 | | | $ | 7,060 | | | $ | 1,837 | | | $ | 5,223 | | | $ | 3,515 | | | $ | (1,418) | |
| 2023 As Adjusted | $ | 235,910 | | | $ | 7,060 | | | $ | 1,837 | | | $ | 5,223 | | | $ | 3,554 | | | $ | 782 | |
| Percentage Change Y/Y (GAAP, excl. GMV) | 20 | % | | 26 | % | | 23 | % | | 27 | % | | 28 | % | | 73 | % |
| Percentage Change Y/Y (As Adjusted) | 20 | % | | 26 | % | | 23 | % | | 27 | % | | 26 | % | | 12933 | % |
| Constant Currency Impact | $ | (796) | | | $ | (9) | | | $ | 1 | | | $ | (10) | | | $ | — | | | $ | 53 | |
| Percentage Change Y/Y (GAAP, excl. GMV) Constant Currency | 20 | % | | 26 | % | | 23 | % | | 27 | % | | 28 | % | | 79 | % |
| Percentage Change Y/Y (As Adjusted, excl. GMV) Constant Currency | 20 | % | | 26 | % | | 23 | % | | 27 | % | | 26 | % | | 12050 | % |
Key Performance Indicators
The following represents a summary of our key performance indicators, along with period-over-period changes:
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| Three months ended | | 2023 vs. 2022 |
| December 31, 2023 | | December 31, 2022 | | % Change /
Change (bps) |
| (in millions, except percentages) |
| GMV | $ | 75,125 | | | $ | 60,958 | | | 23 | % |
| GPV | $ | 45,074 | | | $ | 34,230 | | | 32 | % |
| GPV as a % of GMV | 60 | % | | 56 | % | | 380 bps |
| MRR | $ | 149 | | | $ | 110 | | | 35 | % |
| Shopify Plus MRR as a % of total MRR | 31 | % | | 34 | % | | (270) bps |
| Revenue | $ | 2,144 | | | $ | 1,735 | | | 24 | % |
Attach Rate(1) | 2.85 | % | | 2.85 | % | | — | |
(1) Attach rate is defined as total revenue divided by GMV and is a key performance indicator of our business and our ability to generate greater value for our merchants.
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| Years ended | | 2023 vs. 2022 |
| December 31, 2023 | | December 31, 2022 | | % Change /
Change (bps) |
| (in millions, except percentages) |
| GMV | $ | 235,910 | | | $ | 197,167 | | | 20 | % |
| GPV | $ | 137,040 | | | $ | 106,066 | | | 29 | % |
| GPV as a % of GMV | 58 | % | | 54 | % | | 430 bps |
| Revenue | $ | 7,060 | | | $ | 5,600 | | | 26 | % |
Attach Rate(1) | 2.99 | % | | 2.84 | % | | 150 bps |
(1) Attach rate is defined as total revenue divided by GMV and is a key performance indicator of our business and our ability to generate greater value for our merchants.
Shopify (NYSE:SHOP)
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