Shopify Inc.

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 U.S. and Canadian regulators. We'll also speak to adjusted financial measures, which are non-GAAP and not a substitute for GAAP financial measures. Reconciliations between the two are in the tables at the end of our press release. And finally, we report in U.S. dollars, so all amounts discussed today are in U.S. dollars unless otherwise indicated. With that, I will turn the call over to Hartley.

Thanks Kerry, 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 continue to break down barriers, accelerate the power of entrepreneurship, and fuel our merchant success. No matter which way you look at our business, be it merchants, products, or channels, we delivered an incredible fourth quarter to finish off an amazing year of growth. From a merchant perspective, more businesses of all sizes continue to choose Shopify. Our overall merchant base grew from entrepreneur to enterprise, a direct result of the powerful growth engine, products, and go-to market we have built. Compared to 2022, we had 35% more merchants from outside North America launch and grow their businesses on Shopify. We have signed and added to our incredible roster of merchants, bringing on more diverse businesses across verticals, geographies, and channels. Brands like Carrier, Nike Strength, Dollar Shave Club, Banana Republic Home, Authentic Brands Group, Tim Hortons, Goofy Renger, Bye Bye Baby, Oscar de la Renta, Everlane, and On Running, 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 hard things easy and everything else possible. In 2023, our momentum was bolstered by our strong foundation as we made it even easier for merchants to run and manage a business using tools that are crafted to be simple and intuitive to enable them to focus on what matters most, their product. For streamlining expense management, we launched Shopify 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 continued to unlock the connectivity of the platform to sell wherever buyers are with products like Shopify Collective and the Marketplace Connect app. We integrated ShopPay installments into Point of Sale, rolled out a Point of Sale terminal for enterprise, and made MarketsPro generally available in the U.S. We made it easier for merchants to discover and engage with their customers. We continued 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 Built for Shopify, partnered to bring the Amazon Buy with Prime app into our ecosystem, and enabled a deeper integration with Audion 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 date ever on Shopify. All of this on our platform entered 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 their shifting preferences of their customers, which is why a little over two years ago, we launched Hydrogen and Oxygen to give merchants that wanted to go headless an easier development path, helping them to get to market faster. Hydrogen, our React-based toolkit, surpassed $1 billion in 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 Tecovis 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 ShopPay, even when it is not used by a buyer, results 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, ShopPay, which is the best converting accelerated checkout on the internet with over 150 million buyers signed up, facilitated $18 billion of GMV, up 58% year over year, and a staggering 50% for all of 2023. It has now reached a committal of $127 billion since its launch in 2017, and continues to become the go-to choice for consumers looking to buy quickly, securely, and with as little friction as possible. It also has surpassed all other wallets for Shopify merchants, as we look to make ShopPay the leading checkout across the internet. Transitioning to AI, Shopify is capitalizing on the immense opportunity to support 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 Glenn 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 editions a few weeks ago, we introduced new features to our Shopify Magic suite of AI tools. These new generative AI tools simplify and enhance product image editing directly within the product image editor in the Shopify admin. 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 Shop by Collective, which launched in our summer editions in July. Users of this product range from celebrity brands like Drake's 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 Carraway have already signed up and launched their first shop campaigns during the quarter, giving them access to millions of highly qualified buyers in the shop app and creating a new tool for paid customer acquisition. While still early days, we are very excited about the potential of this product in making it easier for merchants to discover and engage with their customers. Encouraged by the momentum across our product offerings, we know that for most of our merchants, Shopify is the online store. But we know that that's only the start. As commerce is getting to evolve, transactions and brand engagement have moved far beyond the traditional retail or online stores. In order to discover new customers and build deeper connections with existing ones, you need to be online, offline, and everywhere in between. And this is one of our superpowers and why merchants of all sizes are coming to Shopify to build their own future. Starting with our offline channel, our go-to-market efforts combined with enhancements to our product offering continue to resonate with more merchants that operate both offline and online presences. In the quarter, offline GMB was up 28% year-over-year, driven by the growth of our merchants combined with the expansion of locations by our merchant base. offline 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 sage 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 offline tech stack with our cutting-edge platform. These on-ramps or entry points into Shopify further substantiate our role as the unified commerce operating system for merchants, whether they come to us to sell online, offline, or anywhere in between. For the year, our offline revenue was $441 million, which includes revenue from payments, offline subscriptions, and point-of-sale hardware. This is more than 5x what our offline revenue was just four years ago and speaks to the strength of this channel as a growing, important on-ramp into Shopify. With a TAM for offline and B2B estimated at over $450 billion, we have barely scratched the surface of this opportunity and expect it to be a key growth driver in 2024. As we invest further into the unique needs for offline commerce, we will remain focused on simplifying the tech stack while bringing all the capabilities that we offer for online to offline. 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 GMB doubling in 2023. Similar to offline 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 in Georgia, and fashion jewelry and accessories company Bobble Bar, we've also secured some B2B-only merchants like Carrier, which signed in Q4, opening the door to a whole new 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 through our 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-in 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 merchant. 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 Bowdoin, our largest deal in the UK in our history. German curated home and living company West Wing, Berlin-based active brand Oceans Apart, 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 MarketsPro, we continue to enable our go-to-market to increase the adoption of this product. In the past quarter, thousands of merchants leveraged MarketsPro for cross-border sales, and over the Black Friday, Cyber Monday weekend, 15% of all global orders were cross-border. Brands such as the Red Hot Chili Peppers and Zpacks launched in MarketsPro 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 Miracle, Google Cloud Marketplace, Slalom, and Manhattan. Just as we've developed a robust ecosystem for entrepreneurs and SMBs, these partnerships further underscore our strategic positioning as a key player in the enterprise sector across all facets of commerce. This is steadily paving more enterprise pathways towards Shopify, and we plan to amplify our presence this year as we build on our momentum. Two weeks ago, our winter edition dropped. If you haven't checked it out yet, you really should. Our most recent editions span across the pillars of conversion, channels, marketing, and operation, all of the areas that are foundational to emerging success. This is our fourth edition 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 mindset to advance our mission and make the hard 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 in 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.

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 and 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 stemmed from the following. Same-store sales growth for our existing merchants, continued growth in our merchant base globally, Strengthened 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 an offline point of sale. The strengths 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 want 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 upset 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 headcount, 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 103 million. Capital expenditures were 2 million for the quarter. Q4 free cashflow was 446 million or 21% of revenue. The outperformance in GMV in the quarter drove the higher free cashflow margin. For the year, we achieved a 13% margin growing both free cashflow dollars and free cashflow 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 offline and B2B. In 2024, we plan to remain disciplined on headcount growth and continue to find more ways to use AI and automation to be even more efficient 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 six years. we believe that we still offer by far the best value in 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 gap basis, which translates into a year-over-year growth rate in the mid to high 20s when excluding the 500 to 600 basis point impact from the sale of our logistics business. Q1 thereby would mark the fourth consecutive quarter where our year-over-year revenue growth would be above 25% X 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 gap basis will be up at a low teens percentage rate compared to our Q4 operating expense dollars of $773 million. The two primary drivers of the increase relative to the fourth quarter are marketing and employee related expenses. 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 offline point of sale business, our results demonstrate the traction we are gaining, with offline growth continuing to outpace online growth and representing a significant addressable market for us. 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. Headcount 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 roadmap and the progress that we've made building fast, reliable, and unified software for merchants of all sizes. In Q4 alone, revenue grew 30% on an organic basis, and we delivered the largest revenue quarter in our history. Moreover, we delivered the largest gross profit dollars in our history, and free cash flow margin hit 21%. we are executing across the board. 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 Kerry for your questions.