Shopify Inc.

Good morning, and thank you for joining Shopify's first quarter 2024 conference call. Harley Finkelstein, Shop Vice 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'll turn the call over to Hartley.

Thanks, Kerry, and good morning, everyone. The start of 2024 has been very strong for Shopify, with more and more merchants thriving on our platform. This is the strongest version of Shopify yet. We're helping millions of merchants around the world to both start and scale their businesses. For four straight quarters, we have demonstrated our ability to drive results at scale, growing revenue over 25%, excluding logistics. And as we have proven over the last two decades, the more hard problems we solve for merchants, the more we add to our flywheel and the better off commerce is for everyone today, tomorrow, and for many years to come. We've talked a lot about this new shape of Shopify and how it's enabling us to drive greater growth and profitability at a larger scale. and it's working. The penetration of payments is on the rise. We're making significant strides in our offline and enterprise sectors. Our efforts towards international growth are yielding positive results, and our attach rate is expanding. Our operating discipline has been a key factor in the success, ensuring that we maintain efficiency, invest from our position of strength, and deliver value at every turn. Shopify has always been high volume, high velocity when it comes to building and shipping products. In the span of just two years, we've rolled out more than 400 new features and updates to our platform, setting a pace that demonstrates our leadership in building for the future. In that time, we've launched what we call additions twice a year, changing how we present and unveil Shopify's progress. These biannual moments have not only increased engagement, product adoption, and visibility with our merchants and partners, but also reinforced our leadership in commerce. In fact, in our recent Q1 edition, 62% of businesses who installed Shopify subscriptions had never previously installed a subscription app on Shopify, demonstrating the impact these key storytelling moments can have on driving adoption. We're dedicated to continually creating great software that allows brands to start and scale, fighting their desired features quickly and intuitively, as if each feature had been integrated from the start. From foundational elements like expansion of variant limits to 2,000, and the rollout of our web performance dashboard, which can improve a store's search rankings and boost conversion, to new AI-enabled editing tools, and within point of sale, the launch of email capture at offline checkout. we are relentlessly working to reduce friction and making it easier for merchants to run and manage their business. Our additions have become key milestones for Shopify and the innovation engine we are powering at scale, not only extending our reach to a broader audience, but also redefining how our ecosystem engages and builds with us. Touching briefly on AI, our unique position enables us to tap into the immense potential of AI for entrepreneurship and our merchants. Currently, the most practical applications of AI are found in tools that simplify business operations and enhance productivity, all of which we've been developing deeper capabilities with our AI product suite, Shopify Magic. However, we also firmly believe that we're just scratching the surface of what's possible, as we're still in the nascent stages of understanding the vast potential that AI holds for businesses and commerce. Launched over a decade ago, our most scaled product is Shopify Payments. Its GMV penetration has steadily increased, reaching 58% in 2023, with Q1 achieving 60% GMV penetration. We expect it to continue to be a key contributor to our growth moving ahead. Our seamless integrated payment solution continues to be a key gateway for other product offerings like Capital, Installments, and ShopPay, the world's highest converting accelerated checkout. In Q1, ShopPay increased 56%, processing $14 billion in GMV and accounting for 39% of our gross payments volume, as it continues to be the preferred choice for consumers seeking a fast, secure, and hassle-free checkout. Ensuring that these checkouts are fast loading, secure, and compliant can be complex, which is why Shopify works to make it simple. At Shopify, we stay ahead of what's next for our merchants. We inherently build in potential updates to compliance, including the latest PCI security standards for payments, so that merchants will be compliant with no additional work required. Shopify payments and our accelerated checkout will continue to play a vital role in the expansion of our unified commerce platform. As we continue to improve our features and global integrations and expand our offline and enterprise segments, we anticipate increased growth and adoption. This will be partially driven by the new avenues and flexibility provided by our commerce components offering. Notably, the international acclaimed fashion brand Coach recently committed to join Shopify via commerce components, intending to roll out ShopPay off-platform across all of their US and Canada outlet businesses in the coming months. This mix of composability, reliability, and speed will further solidify the position of Shopify payments as a crucial tool for merchants with ShopPay continuing to become the go-to choice for quick, secure, and seamless checkout at scale. Moving to our channels and growth drivers. More merchants are leveraging the value of Shopify Point of Sale, a true omnichannel solution, as the number of locations using our new Point of Sale Pro increase substantially over the prior year. Key feature enhancements like draft order functionality and fully customizable printed POS receipts continue to advance our offering. As a result, more merchants, especially large complex multi-location merchants, are coming to Shopify. we saw location growth of 52% in the quarter for merchants with 20 or more locations. Our increased investments in performance marketing for Shopify point of sale, as well as experimenting with other acquisition tactics, are yielding positive results. For example, Frank & Oak, a Montreal-born apparel brand, launched our point of sale in more than a dozen of the retail locations in this past quarter, as did Michigan-based food company Cherry Republic. In Q1, we saw growth across merchants, locations, and geographies, supporting our 32% offline GMV growth year over year as we continue to gain share. Moving to B2B, Shopify has been making significant strides with Q1 B2B GMV growing over 130% year over year after doubling in 2023. B2B merchants are loving the power of self-serve purchasing by customers with a 7X increase in the number of orders coming in through the online store than a year ago. So why does this matter? Well, it means that there are fewer manual orders having to be entered by merchants using draft orders, which gives merchants back the value of time to focus on winning new business. B2B represents a significant growth opportunity for Shopify, allowing us to reach new verticals and cater to merchants focused on B2B transactions. We understand the specific needs of B2B businesses and are continually refining our platform to address those needs and boost efficiency and growth. For example, we've made it easier for existing customers who previously managed B2B buyers through their DTC storefront and third-party apps to move their entire wholesale business to our B2B solution, a key feature for Plus merchants. Further validation of just how competitive our B2B offering is. Two days ago, Forrester's 2024 B2B commerce platform wave evaluation came out and Shopify was placed in the leader category. This is our first appearance on a top two enterprise validation report for B2B and a clear signal that Shopify is increasingly becoming a leader in unified commerce for online, offline, B2B, and everywhere in between. Moving to international, Q1 international GMV growth outpaced North America, with continued strength in Europe, posting Q1 GMV of 38%, marking our third consecutive quarter of GMV growth above 35%. With international making up less than 30% of our revenue base last year, the opportunity remains significant for us to equip merchants with the tools to make selling globally as easy as selling locally. Now, to do this, we are laser-focused on building products and tools that cater to the unique needs and preferences of our international merchants. This quarter, we continued to make headway on our localization efforts in international markets, with tools like shipping localized brochures in Japan, Spain, and Italy, helping our merchants ensure a tailored experience and expand their reach. We've also been working to get more of our products into more countries. For example, in Q1, we successfully launched our Point of Sale Go and Point of Sale Terminal in Australia, further increasing the on-ramps into Shopify in this key market. Enabling merchants to sell cross-border to buyers anywhere in the world has been a key focus for us. In Q1, we saw a 70% increase in our markets product over last year, which makes it easy for merchants to sell in local currencies. we are further simplifying international expansion with MarketsPro, our native all-in-one cross-border merchant of record offering, which became generally accessible in the US in September of 2023. Brands are leveraging MarketsPro to enter global markets within days and see immediate increases in their global sales. Take Chicago-based apparel company Suit Shop, which grew international orders by 600% since adopting Markets Pro, or New York-based skincare brand Beekman 1802, which experienced 137% international sales growth in six months. And with cross-border GMV up 15% in Q1, representing roughly 14% of total GMV, we will continue to enable greater cross-border transactions for our merchants. As we mentioned on the last call, we continue to aggressively pursue enterprise brands in 2024, and we are seeing results. Whether it was key events like NRF and ShopTalk, our engagements with the larger brands are escalating every single quarter, with our plus and enterprise GMV growth continuing to uppace overall GMV growth. Additionally, following our leadership rankings in IDC and Gartner last year, an independent study recently validated that Shopify's total cost of ownership is up to 36% better than competitors in the enterprise space. This study proves that our unified commerce platform offers exceptional value and cost savings that only Shopify can offer. And in turn, we pass on the economies of scale we capture to our merchants, saving them money. What we are hearing from our conversations with enterprise level brands is that there are really two primary reasons that are driving their decision to move to Shopify. First is the exceptional value of Shopify, the powerful and reliable infrastructure and the cutting edge products that offer composability and choice, making the total cost of ownership hard to pass up. And second, Shopify's core value proposition of innovation, scale and ease of launch. Let me dive into that last point about ease of launch as it's really important. While Shopify moves fast, and certainly faster than the competition, making the decision to replatform is incredibly hard, and larger brands can typically take anywhere from 12 to 18 months to completely migrate over. But that is not always the case, especially when it comes to Shopify. Takeoverstock.com, the well-known online discount retailer. We had them up and running in under 100 days, which, considering the size and complexity, is nothing short of amazing. That's what we do at Shopify. On the flip side, we recently signed BarkBox, a leading subscription service for dog products with over 2 million subscribers. They recently made the decision to migrate all of their business to Shopify. Their debut in our platform is anticipated for 2025 and will be the largest subscription merchant to join Shopify to date. While timelines to market vary, the main point is that we are winning businesses and migrations with larger, more complex brands. The launch of these brands and the work we are doing today is building a sustainable foundation that will continue to deliver growth for years to come. Beyond the two brands I just mentioned, we are seeing more high-volume merchants sign up and launch with Shopify across the board, adding more companies across verticals, industries, and geographies to further energize our flywheel. Brands like consumer packaged good companies, Harry's and Pretty Litter, fashion apparel brands like Laura Canada and Intersport, fitness and wellness companies Juice Plus, Balance of Nature, and SoulCycle, home goods retailer Rugs USA, consumer electronics company Skullcandy, manufacturer of cleaning equipment Karcher, health and beauty brand Fragrancenet.com, and celebrity brands like Serena Williams beauty brand Win Beauty, Beyonce's hair care brand Sacred, and Dwayne The Rock Johnson skincare line Papatouille. The past years show that we can cater to both startups and large companies, and we continue to invest in both to expand our merchant base. Our business model focuses on accelerating the success of our merchants and driving long-term value rather than short-term gains. We are a product-led company, and we will invest in those products and strategies that ultimately offer greater value for our merchants and thereby for Shopify. We think about marketing the same way we think about products. Build great solutions, use the best internally developed and externally available tools, drive decision through data, and be world class. Our goal is to always get the most out of every existing channel up to our guardrail limits, and continually find and experiment with new channels. That is what we build our tools and our AI models to do, and we're using them to create some incredibly compelling opportunities. Let me give you a very recent example. At the end of last year and early into January, we drove significant efficiency improvements in one of our primary channels in performance marketing. where teams have created and leveraged advanced models using AI and machine learning, which now allows us to target our audiences with unprecedented precision. Using these models and strategies, we drove nearly 130% increase in merchant ads within our primary marketing channel from Q4 to Q1, while still remaining squarely within our payback guardrails. Similar to how we build products, we continually assess emerging technology and how we can leverage them to improve our own tools. We are also advancing our operational rigor with our marketing data team using our tools to conduct data inspections at a faster velocity and more granular level than ever before. This agility allows us to quickly seize opportunities and boldly move forward when others may hesitate. These are two of our Shopify-wide principles, agility and finding the unobvious opportunities, leaning to those opportunities when others pull back, even when and often especially because to others, they may appear unobvious. And we know it's working. Back in Q3 2022, as we mentioned in our July earnings that year, we began a wave of new marketing tool production and tightened our payback guardrails even further. Our initiatives have successfully driven significant improvements in both new merchant acquisition and CAC in core performance marketing, our largest component of marketing investment. Comparing Q3 2022 to Q1 2024, new merchant acquisition has grown 180% while CAC has improved almost 60%. You can see why we're investing heavily and why we feel confident in our future and our growth in 2025 and beyond. You should expect us to approach every quarter with the same mental model, testing and opportunistically investing into the areas where we know it will contribute well to our growth and stay within our guardrails. We intend to continue spending when marketing opportunities are within an average 18-month payback period, which we are finding a lot of right now, along with increasingly supporting longer-term initiatives such as expanding into international, enterprise, and point-of-sale. Right now, you are seeing the strongest version of Shopify in our history, and we see an excellent opportunity to further our lead in our established products and fuel the strong momentum of our emerging products. Today, we are building an even stronger Shopify. We know our team is one of our most valuable assets, and given that it makes up over half of our cost base, we believe we've architected ourselves to be faster and more agile. which has enabled us to consistently deliver 25% revenue growth, excluding logistics, all while keeping our headcount flat for three straight quarters. More importantly, because of the structure and the automation we have worked to put in place, we think we can continue to operate against very limited headcount growth while achieving a continued combination of consistent top-line growth and profitability. As Kaz mentioned at our investor day in December, over the past 18 months, we've committed significant effort into building efficient infrastructure and systems which are instrumental in streamlining our work and maintaining our high velocity product releases. We do this through our Shopify operating system, the foundation for every role and purpose at Shopify that uses data to help tell us how many resources we need for any project and the skill set or craft needed for the project. Essentially, these systems and this infrastructure act as catalysts, enabling us to operate with increased efficiency and speed. So as we create a crafter's paradise, empowering teams to pursue their passions while having an incredible impact on our mission, we are doing it in a way that optimizes our talent and ensures we continue to make the most important thing the most important thing. To close, we are proud of the strides we've made in Q1 and the execution we continue to deliver consistently quarter over quarter. The strength of our business model, the commitment of our team, and our unwavering focus on serving our merchants has positioned us to lean into the opportunities we see ahead and invest responsibly to sustain our long-term growth objectives. The best companies are built this way, staying grounded in their reason for being and committed to their mission. For Shopify, our team's dedication coupled with our evolved marketing strategy is reshaping the company and moving us forward. We look forward to sharing our journey with you in the quarters to come. And with that, let me turn the call over to Jeff.

Thanks, Harley. We have started off 2024 incredibly strong, building on our momentum from 2023. Let's launch into our Q1 results. GMV in Q1 was 60.9 billion, up 23% year-over-year. The strong Q1 GMV was driven by same-store sales growth of our existing merchants, continued growth in our merchant base globally, strength in EMEA, which grew 38% year-over-year from both strong same-store sales growth from our existing merchant base, and new merchant acquisition, with same-store sales growth being the slightly larger contributor this quarter. And finally, 32% growth year-over-year in our offline business, driven primarily by larger retailers joining the platform. Revenue for the first quarter was $1.9 billion, up 23% year-over-year, which equates to 29% year-over-year growth when excluding the logistics businesses. This represents the fourth consecutive quarter that our revenue growth has been greater than 25% on an organic basis, excluding logistics. The key drivers of this growth were the GMV strength just discussed, growth in subscription solutions revenue from both new merchant growth and the pricing increases on standard plans, and lastly, increased payments penetration, which hit 60% for Q1. Q1 merchant solutions revenue was 1.4 billion, increasing 20% year over year, fueled by growth in GMV, continued penetration of Shopify payments, continued growth of our scaled products, most notably markets, and growing adoption of our emerging products, including installments and shop cash. Those contributors were partially offset by the absence of the logistics business. $36.2 billion of GMV was processed on Shopify payments in the first quarter, 32% higher than in the first quarter of 2023. The penetration rate of Shopify payments as a percentage of GMV was 60% compared to 56% in Q1 of 2023. Several factors powered 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, which was 39% of GPV in the quarter, and continued growth of our point of sale solution. These items were partially offset by the continued strength of our business in Europe, which was a larger percentage of GMV, but where we have a lower GPV penetration than North America. Subscription solutions revenue was 511 million, up 34% over Q1 of 2023, with the two largest drivers being the impact from the pricing increases of our standard plans, which went into effect for existing merchants in the second quarter of 2023, and the growth in the number of merchants. These two factors were roughly equally balanced contributors. An increase in revenues from variable platform fees was also a contributor to the quarter. As a reminder, existing plus merchants had until the end of April to commit to their existing rates or move to a new pricing plan. As of today, the majority of our existing plus merchants have chosen to commit to three-year contracts at existing 2023 rates. A clear testament to the exceptional value that we provide and the trust and confidence our merchants place in us to consistently deliver the solutions they need for their success. We expect more of the financial impact from these changes to occur in the second half of the year. We are not anticipating as much of a benefit from this pricing change as we did from the changes to standard pricing in 2023. MRR was 151 million, up 32% 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 these three categories combined with, for Plus, growth from both new Shopify merchants joining and existing merchants upgrading from one of our standard plans of Plus, with Plus representing 32% of MRR for Q1 of this year. You should expect the Plus pricing changes to have more of an impact on our second quarter MRR as existing Plus merchants did not have to commit until after the end of Q1. For point of sale MRR, which was up 50% year-over-year, growth was driven by improvements in our go-to-market strategy and our new retail plan. And for standard, the pricing change that we implemented last year. On a sequential quarter-over-quarter basis, MRR increased in plus, standard, and point of sale, primarily from growth in the number of merchants in each of these groups. It is important to note we refined our MRR calculation for standard. We adjusted how we factor in merchants transitioning from a paid trial to full price status. Previously, we reflected in MRR the full price plan when the merchant's paid trial ended, but before the first payment was received. Now we do not capture an MRR of the change in the pricing until after we have received the first full price payment. We believe this approach better reflects the way we look at our business. The change does not impact revenue. In Q1, our attach rate was 3.06%, up from 3.04% in Q1 of 2023. Key drivers of a tax rate expansion in the quarter were the continued gains in GPV penetration and higher subscription revenues, largely offset by the logistics business in the prior year and lower non-cash revenues from strategic partnerships. Moving to gross profit. Gross profit was $957 million for the quarter, up 33% year-over-year. Gross margin for subscription solutions was 81.4% compared to 78.0% in Q1 of 2023. The increase stems from pricing changes on standard plans and, to a lesser extent, continued support and hosting efficiencies. Gross margin for merchant solutions was 40.1% compared to 37.2% in Q1 of 2023. Our improvement in gross margin for merchant solutions was primarily due to the benefit from the absence of logistics, which was dilutive to margin. When excluding the impact of logistics, our merchant solutions gross margin was down year over year, primarily from lower non-cash revenues from certain partnerships and the continued growth of our lower margin Shopify payments business with these impacts partially offset by growth in products like shop cash and installments. This brings our overall Q1 gross margin to 51.4% compared to 47.5% in the prior year. Operating expenses were $871 million for the quarter, in line with our expectations and representing 47% of revenue. Compared to Q1 of 2023, operating expenses of Q1 2024 were down 4%. The decline year over year was primarily due to the sale of the logistics business and lower headcount, partially offset by increases in marketing spend. I know many of you look at operating expenses both pre and post stock-based comp. OpEx excluding SBC and related payroll taxes or adjusted OpEx for the quarter was 41% of revenue compared to 51% of revenues in Q1 2023. We continue to remain disciplined on headcount, with total headcount remaining essentially flat for the past three quarters, all while maintaining and in fact accelerating our product innovation capabilities and continuing the top line momentum of our business. How we leverage AI internally is an important element of how we are able to do that. And as an example, let's talk about how we are using AI and merchant support. A couple of data points for you. During Q1, over half of our merchant support interactions were assisted with AI and often fully resolved with the help of AI. AI has enabled 24 seven live support in eight additional languages that previously were offered only certain hours of the day. We have significantly enhanced the merchant experience. The average duration of support interactions has decreased and the introduction of AI has helped reduce the reluctance that some merchants previously had towards asking questions that they might perceive as trivial or naive. Additionally, our support staff has experienced a significant reduction in the amount of toil that is part of their jobs. We are improving the merchant support process and achieving much greater efficiency than ever before. Moving to operating income. For the quarter, operating income was $86 million or approximately 5% of revenue compared to an operating loss of 193 million in Q1 of 2023. Stock-based compensation for Q1 was $111 million and capital expenditures were $6 million for the quarter. Free cash flow was $232 million, or 12% of revenue, doubling as a percentage of revenue versus Q1 2023 free cash flow margin of 6%. Turning to our balance sheet, our cash and marketable securities balance was $5.2 billion as of March 31st, and we had a net cash position of $4.3 billion after consideration of the outstanding convertible notes. Before turning to our outlook, a few comments regarding the broader economy and the macroeconomic assumptions that underpin our Q2 expectations. We see consumer spend in North America remaining resilient, but we have factored in headwinds related to FX from the strong US dollar and some softness in European consumer spending in our Q2 outlook. We have and expect to continue to outperform the e-commerce growth rates in North America and Europe. We otherwise assume that the macroeconomic environment remains consistent with current conditions. Keeping all this in mind, let's now turn to outlook. Our expectations for the second quarter of 2024 are as follows. First on revenue, we expect Q2 year-over-year revenue growth to be in the high teens on a gap basis, which equates to a year-over-year growth rate in the low to mid-20s when excluding the 300 to 400 basis point impact from the sale of our logistics business. An important dynamic to highlight is the impact of the standard and plus pricing changes and how they affect our growth rate for Q2 versus Q1. The impacts of the pricing changes in standard and plus will have a smaller combined benefit in Q2 versus Q1. In Q2, we begin to lap the initial pricing changes on our standard plans that went into effect in April of 2023, resulting in a headwind to our revenue growth quarter over quarter. While the plus pricing billing cycle went into effect today for those existing merchants who did not sign up for the three-year contract, this uplift is expected to be minimal in Q2, given both the mid-quarter timing of the change and the fact that the majority of our merchants did choose to opt into three-year contracts at their existing 2023 price. Q2 will simply be a quarter where the lapping effect of the standard plan changes exceeds the initial benefit of the plus pricing changes. We remain resolutely confident in the great products and go-to-market initiatives fueling our continuous growth and our ability to further strengthen our position as a leader in unified commerce. We expect Q2 to be a continuation of our strong momentum. Q2 gross margin is expected to be down approximately 50 basis points from Q1 of 2024. The primary drivers of the decline quarter over quarter are the expected growth of our lower margin payments business and lower revenue contribution from a high margin non-cash partnership revenue agreement that we'll have fully amortized. Offsetting these factors are the expected positive impacts from the standard and plus pricing changes that I just referenced above and the benefit from shortening our trial length from three months down to one month. Turning to operating expenses, we believe that our Q2 operating expense dollars on a gap basis will be up at a low to mid single digit percentage rate compared to our Q1 operating expenses of 871 million. As a percentage of revenue, we expect our Q2 gap operating expense dollars to be approximately 45 to 46%, implying a decrease of 100 to 200 basis points versus Q1. I previously have not been guiding toward operating expenses as a percentage of revenue. Q2 will mark a full year since we began to operate in the new, fitter, faster shape of Shopify, as well as assail the majority of our logistics businesses. Given these changes, the year-over-year comparability of operating expenses has been less telling over the past year, hence why I've been talking about sequential changes to OPEX dollars. Going forward, I plan to talk about operating expenses as a percentage of our revenue, as it better aligns with our goal of striking the optimal balance between growth and operational leverage to deliver improving profitability over time. For this quarter, I wanted to provide you both metrics. For the second quarter, the two primary drivers of the operating expense dollar increase over Q1 are marketing spend and our Summit event, which will happen at the end of June, with Summit being the primary driver of the increase. Summit is our annual event where we engage in a collaborative week dedicated to aligning on the bold ideas that we have as a company, a spotlight on our mission, our product roadmap, and the mental models that we are using to build incredible things. We consider it a critical week for our product development efforts, company culture, and work with external developers. This will be our first completely in-person summit since 2018, and everyone is really looking forward to it. We highly value and remain committed to our remote-first culture and concurrently believe that getting teams together periodically is a critical load-bearing element that enables our remote-first culture to thrive. This year's summit will be aggregated into one event, what in other years is multiple discrete events, including our three-day internal Hack Day event, where we ask our teams to start new projects. Our Hack Days have kickstarted many key products and features, like Point of Sale and the Shop app. This week's work also includes a series of events for our external development partners, additions.dev, which includes hands-on technical walkthroughs and immersive workshops. Additions.dev gives us an opportunity to share our vision with our developer partners and get external feedback on our products and roadmap. It is one of the most highly anticipated events for developers within the Shopify ecosystem, both internal and external, and we consider it an investment in our team, our product roadmap, and our partners. Regarding marketing, Harley shared with you some insights into our thinking and some of our recent successes there. We intend to continue to invest when opportunities are within an average 18-month payback period, and we are finding a lot of them right now, as well as supporting longer-term initiatives such as international, enterprise, and point-of-sale. Moving to stock-based compensation, Q2 SBC is expected to be $120 million and Q2 capital expenditures $5 million. Finally, on free cash flow. For Q2, we expect our free cash flow margin to be similar to Q1 of 2024. We have now delivered three consecutive quarters of double-digit free cash flow margin with no expectation for this trend to change. In summary, Q1 was a very strong start to the year. We continue to deliver on the product initiatives that we have laid out, our merchants are performing well, and we continue to expand the value that we can provide our merchants. We are making key investments in our future and continuing to build an even stronger Shopify, all while delivering a compelling mix of both growth and profitability. With that, I now turn the call back over to Kerry for your questions.