Shopify Inc. (SHOP) Earnings Call Transcript & Summary

Excellent. Thank you, everyone, for joining us. My name is Keith Weiss. I run the Morgan Stanley U.S. software research franchise. And very pleased to have with us from Shopify, both CFO, Jeff Hoffmeister; and Director of IR, Carrie Gillard. Thank you guys for joining us.

Thanks, Keith.

Yes.

Before we get started, for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. All right. Excellent. We'll have to talk quickly there. All right. I wanted to start off a little bit off script, but this is the big topic of this week. As you know, there's always some global catastrophes that takes place during the Morgan Stanley TMT Conference, and tariffs, a topic of conversation. And I'm getting the question a lot of like what does it mean for Shopify in terms of a world that now has tariffs that didn't exist a couple of days ago.

Yes. Well, certainly from a tariff perspective, the first thing we did was focus on what can we do for our merchants. And so how do we start building products? And we've given some insights into that in terms of, for example, how do we help merchants buy local, source local. It's obviously especially for our B2B clients, that's a big issue. How do we think merchants help them adapt to everything that's going on in this world, whether it's things we're doing on the capital side, on the payment side. We focus first there. There are some things we're doing internally, which I'll get to in a second. When you look at our GMV, and we've talked a little bit, as you know, about cross-border, what percentage of our GMV is cross-border, but a certain percentage of that is actually within Europe, for example. And so when you think about the percentage of our GMV, which is actually within country, so U.S. merchant selling to a U.S. consumer, Canadian merchants selling to Canadian consumer, that is the significant majority of our GMV, right? We talked about cross-border GMV being 14% the last quarter. And so -- and again, assuming some portion of that, a large portion of that is within region, within Europe or within other regions, the cross-border issue that we have is not that large. And obviously, the tariffs came on just a few days ago. Obviously, there's already talk about how long they will persist and how this is going back and forth. But when we did guidance for the last quarter and when we have those results, the tariffs were obviously something which were in the realm of possibility. And so as we gave guidance, that was something that we factored into our thinking.

Awesome. Got it. And then in terms of just kind of the broader potential impacts on consumer behavior, one of the hallmarks of the Shopify story and the one that you talk to a lot is execution sort of enabling you guys to outperform kind of the underlying macro volatility. So the way I wanted to frame up this conversation, and I like my Ps and Qs. And I want to kind of dig into the Ps and Qs of the Shopify growth equation, because I think there's a lot of interesting kind of elements on both sides of the equation. And maybe starting on the Q side of the equation in terms of the expansion of your merchant base. And there's a couple of avenues of that expansion. Maybe from like a high-level perspective, you could talk a little bit about the year that we just came out of. How are you guys thinking about the opportunity around merchant growth? Where are we in terms of an ability to continue growing in the U.S.? Where are we in terms of the ability to continue growing internationally?

Yes. We feel really good about merchant growth. We've talked -- I've talked most explicitly when it comes to Europe, we've talked about some of the GMV strength, and I've said that the strength has been roughly equally balanced between new merchant acquisition and same-store sales growth. And so while I've not made those comments as explicitly about the U.S., that is something which has been the case as well. So you think about the success in the U.S., you think about the case in the success in Europe, you think more broadly, it's been a very good mix. In any given quarter, it maybe tilts a little bit one direction versus the other. I've also talked going back to the Investor Day, and it's and it's held true. I talked that in the U.S. in terms of the pace of e-commerce growth, I mentioned in any given quarter, we're roughly 2x the pace of e-commerce in terms of what Shopify is doing, in terms of our growth rate and the share we're taking. And so you can show is kind of you get to that success level again by adding merchants across the board. And the other thing that's been really helpful for us in terms of the types of the expansion of the merchant base is the types of merchants, right? Now we have B2B, now we have point-of-sale. Now we have enterprise. Now we have a lot of segments, which historically we just didn't have. And so we feel really -- and that's in addition to obviously the success of what's happening on the marketing side, which we've talked about for a few quarters. So I like your P&Q framing very well. And so in terms of the merchants that we have, it's been really, really strong. And then the only other thing I'd add too is, as you know, we talked about Everlane, most recently in terms of enterprise merchants that are also taking subscriptions. But when you look at the growth in MRR for Plus, it doesn't capture a lot of the large enterprises. So even that as a proxy as a metric for the strength in enterprise doesn't fully capture it. And of course, one big enterprise merchant addition can be a multiple of what we may see for some of the smaller merchants.

And I would just add from like a diversity perspective, right, that's also where there's a lot of merchant growth left to go in terms of verticals, right? Obviously, we started mostly in kind of traditional apparel accessories. It's our largest vertical today, but you're seeing success in us winning more health and beauty or furniture, right? So it's also about diversifying our merchant base, and what markets they serve and then layering on things like Jeff said, of B2B, which is a whole new market and new merchant base that is very new and early days, but an opportunity that we have. So it's also about diversifying within our kind of markets that we play today.

Outstanding. A lot to unpack there. I want to focus first on the enterprise opportunity, something that started, I would say, kind of building in the investor conversation throughout 2024. And I think one of the interesting things to sort of bear in mind is that the nature of how these relationships build up is different than your SMB merchant, whereas the SMB merchant takes the platform all at once. You've talked about it in terms of like there's stages of kind of how these enterprise relationships work. Can you talk to us about what that means? Kind of what are the stages of how these enterprise merchants are going to start utilizing Shopify? And kind of where are we in terms of the ramp, if you will?

Yes. Well, if you go back to 2 years ago, we really didn't have -- we had Plus, but we really didn't have much of a presence in large enterprise. And so we've gone through some step functions in terms of how we interact and engage with partner with these large enterprises. And so most of them, as you know very well, Keith, most of them started on the payment side. And so if there was a tip of the spear or kind of the start of the relationship, well, if you go back 2 years ago, the first thing we did was obviously build out the sales force, build out the capabilities. The quality of the platform, the capabilities of the platform have always been there, right? You think of some of the things we do in the large flash sales, it wasn't an issue of whether the platform has the ability to do enterprise scale. A lot of it was just building the go-to-market muscle that matched what we did and kind of the tech capabilities of the platform. And so you start with building the sales force. It started then with getting a lot on the payment side. It then went from kind of being one, maybe 2 things that the enterprise is purchasing from us to kind of that what I call that next stage where it's Payments, Plus, a couple of other things, like it's point-of-sale or it's tax or it's installments or it's our e-mail marketing product or something like that. And obviously, Everlane is the most recent example of they're taking the subscription as they're broadening out things, which are buying from us. And so as I think of the enterprise cohort, and if I think of cohort less in terms of year, but the enterprise customer size, it's -- we're getting to that point where -- and it's part of it is just the success of all the other merchants. So if you're a large enterprise a couple of years ago and you thought about, well, should I purchase, should I put my e-commerce stack on Shopify, there was some resistance initially because there just wasn't a long track record. All the success that we've had is removing that barrier for people. And so people upfront are willing to and are buying more from us.

Got it. Got it. And on the product side of the equation, you said the capabilities of the platform have always been robust enough for the enterprise. But you guys did make it more digestible for the enterprise by putting in sort of commerce components and making it more digestible. The combination of that plus like the marketing spend that you guys picked up in the beginning of 2024, to us kind of felt like a bit of an inflection point where we started to hear about that traction. Are we thinking about the timing right of that like when those 2 pieces came together, momentum started building up in enterprise, and that should yield when?

Yes. So you're absolutely right that from an enterprise go-to-market perspective, we gave them a few different choices, right? You could do the components, you could do Plus. You can do this in pieces where you're like, all right, so I want this module. So -- and obviously, headless is the third piece of that. So that was a big, big piece for realistically for an enterprise, a big truly multinational that's had their website. It's custom built. It's set out exactly the way they want it. They've spent years, if not decades, building it. They've got a bunch of people internally who are focused on it. For us to go in and basically ask them to do a forklift upgrade of their whole stack was unrealistic. And so that's why both headless and commerce components was a great way to start to build that momentum on the enterprise side. And yes, there are some things on the marketing side that we've been doing to help that as well. But -- and the other piece, too, which most -- I made the comment that most of our enterprise stack technology has been just an extension of what we were already doing. B2B is -- that's a corollary to that statement. It's not -- I mean, B2B, we had to build independently, right? And that's a little bit less the capabilities as much it is some of the modules, the interfaces that we had to do on that side. But the tech stack has been there. So it's just expanding those capabilities.

Got it. I want to dig in on one part of that commerce component, which is Shop Pay, right, and accelerated checkout. I think it's -- in doing this job, some of the interesting areas are stuff that management teams talk about a lot, but investors don't necessarily talk about a lot. And I think this is one of those areas of where there's an importance to that accelerated checkout that you guys talk to us a lot about that doesn't necessarily translate into an investor conversation. So maybe we could dig into that. Why is that so important? And why does that prove to be such an effective entry point for you guys into these enterprise conversations?

Yes. The accelerated checkout, without getting into all the statistics that we discussed with prospective merchants, it is we can make some very tangible connections in terms of what it means, for example, in the abandoned cart. So you can sit down with the CTO of a large enterprise and say, "All right, so give me a sense of what your abandoned cart number was last year " And Harley and I have both talked about kind of the 5% uplift that we see in conversion just from the accelerated checkout. And there are -- all of you as consumers, you can get to the checkout and there's various reasons why maybe you don't complete the transaction, you get distracted, you change your mind, it takes too long. You don't want to populate the credit card. There's just all kinds of reasons why it doesn't happen. And so for us to be able to go to a large enterprise and basically say, take this abandoned cart and basically take a certain percentage of that and have it be incremental revenues to you, it's a pretty compelling conversation. And so we spent a lot of time on -- from Toby on down in terms of making sure that the speed, the interface the engageability, everything as it relates to the accelerated checkout is exceptional. We continue to spend a lot of time on that. And it translates into real dollars for the large merchants.

And I think it's important on the consumer side of that, right? Again, for merchants, those are all the like features and things that make it great for them. But from a consumer, if you haven't used it, right, it is very easy to use. It's frictionless, right? We're making shopping simpler and easier for a consumer, which, again, if that's going to drive the more merchant sales, that's ultimately what our goal is and one is. So it's playing a very important role as well in terms of how consumers are shopping and making it as easy as possible for our merchants. So that's also helping us in those enterprise conversations versus other checkouts or other ways in which they try to drive consumer interest to their sites. Consumers more and more trust that [ Shopify ] button. They trust that it's going to be fast and easy and have their information. And so it's continuing to kind of put those 2 pieces together that's really helping it be more successful.

Got it. So if we take a step back and think about sort of the enterprise opportunity, you guys have the underlying platform. You created commerce components and some entry components like, hey, that's really attractive. You have the headless commerce, which is important for these customers. And you talked about it -- and I would say there's a fourth element that you guys are going to be too polite to talk about, but a competitive dynamic of where a lot of the enterprise competitors are kind of long in the tooth, right? And I think there's a lot of legacy asset there to be replaced. You talked about Everlane is a good success story of a company that has kind of taken that journey and started from sort of the components and has now become a full platform customer. I did some homework and I dug in. And I think you first started talking about Everlane 15 months ago, right? And this quarter, you're talking about it going to the full platform. Is that the right kind of time frame to think about how these relationships are going to progress, right? Or is that more accelerated or slower than we should think?

Yes. I think obviously, every specific enterprise sale is a unique set of circumstances. I would say, in general, Keith, it's been about 6, 9, 12 months in terms of the selling cycle. It's probably -- it started -- when we first started in this business a couple of years ago, it probably was closer to 12 to 15 months. I think it's probably closer to, I'd say, maybe 9 to 12 months. As we build more and more momentum and our brand presence gets better, as our relationships with the SIs get even stronger as there's more and more reports from Gartner, Forrester, all the third-party sites that helps accelerate and shorten the selling cycle. But let's call it 9 months for the moment for kind of picking a midpoint. And then the implementation cycle can be about a similar amount of time, not because our technology can't go faster, and we've cited some situations where it goes very quickly. But generally, the larger the merchant, especially if it's a custom-built stack, which we're replacing, which usually is the case, there's some inertia, right? The bigger the enterprise, probably the more department heads that are involved in it, the more people that are involved, the more decisions. There's just -- and just the larger the enterprise generally, the slower the decision-making. And so that plays into it. So if you say that we're kind of, I'll call it, kind of 2.5 years into the enterprise effort and you kind of take 9 months selling cycle, 9-month implementation cycle and you stack those 2 on top of each other, we're really kind of in the last 12 months, really starting to build that momentum that you're starting to see on all the -- especially when Harley, on the quarterly earnings call talks in his prepared remarks about all the wins, right? We're talking about the logo wins, and we're talking about the implementations. You're just hearing more and more of those, right? And so if you look at the various earnings calls and how many did Harley announce this quarter, how many did we announce this quarter, like the number keeps going up. So we're seeing that momentum. That being said, in terms of -- while we believe very strongly in the success of enterprise, it's still -- because of this like 12 months into it, it's still early days. And while it's becoming a larger and larger percentage of GMV, the GMV itself is just so large and so many other elements of our business are doing so well that this moving target is, in a good way, still doing a pace where for enterprise to catch up and be a bigger piece, it's just going to take some time which we love.

Yes. And it's an opportunity that's been unfolding for you guys. You guys have been executing to it well, and you're investing behind it. And particularly in terms of sort of the go-to-market motion, you talked a lot about performance marketing. You've talked about hiring some salespeople to kind of go after that opportunity. How should investors think about the scale of that investment? And sort of how much further does that have to grow in the near term to keep up with the pace of the opportunity?

Yes. I think in terms of the size of our sales force and our go-to-market motion, it's largely there because, again, I'll start to -- and I'll go back for as good a milestone as any. when Bobby Morrison, our Chief Revenue Officer, when he joined -- he joined roughly 2.5 years ago. And he had been at Microsoft before and Intuit and a few other places where he understands very well kind of the building a sales force and the dynamics around it. So that's one of the first things he did. So this is not like with each enterprise win, we need to have more people in this geography or in this segment. That's something which we've really laid the groundwork to give us the success that we have. So will we add more salespeople? Of course. Will we continue to get the number of inbounds we get a very, very talented salespeople that are other platforms. And generally, a salesperson wants to be on a platform where the technology is really good. We'll do an easier sale rather than a harder sale. And so we're getting a lot of really good talent. So we'll continue to add on that front. But it's not like we're sitting here saying, "Oh, there's a bunch of pieces we don't have yet."

Got it. I want to switch gears a little bit and talk about B2B. It's still a relatively small part of GMV, but one that's really quickly growing. I think you've talked about over 100% growth over the last 6 quarters. So it's been a good initiative for you. This is kind of a relatively simple question. I get the competitive advantages in B2C very intimately. B2B, a little bit more abstract for us. Can you talk to us about why Shopify succeeds in that B2B sales motion? What are the competitive advantages you guys bring to the market?

Yes. Well, I think part of it that's easily forgotten is there's been a B2B element of our business for a long period of time, right? The average direct-to-consumer platform merchant, they probably have some percentage of the revenue, which is B2B, right? Like 80%, 90% of their revenue may be D2C, but they may have another piece that they sell through a bigger merchant or a bigger platform. And -- so we've been servicing that part of the tech stack for our merchants for a while. It's really, to your point, like 2 years ago that we really started putting an emphasis on it. And it's been a couple of things. I think just the ease of use of commerce to a certain extent is intuitively the same, whatever the region, kind of whatever the segment. And so I think the fact that our platform handles commerce so well, and as you talked about in enterprise in terms of some platforms being long in the tooth, we are anything but. And so just kind of the ease of use, the speed, everything, it goes back to our conversation around checkout. The experience is just exceptional. And so for a lot of the situations we win, it's just a point of comparison in terms of what we're doing versus some of the other stuff, even though we maybe don't have 20 years of experience serving that industry. But a lot of what you see in B2B is not necessarily super technology challenges, but there's just nuances in each of the different segments, like I need to do double stacking of discounts or I need this kind of an additional layer of the supply chain or this is kind of something specific to that segment, where if we can build that functionality, and that's a little bit more just -- it's an API, it's an interface, it's some element of the UX, which from a technology perspective is not as hard as some of the things we've done in our core engine. So as we continue to build those out, we're having a lot of success. And B2B is with the segment -- or sorry, with the merchant wins that we've announced on some of the calls, more than any other segment that we serve, there's more behind the curtain, if you will, because generally, in B2B, there's a little bit more hesitancy from some merchants to get their name out there. But the success has been, as you point out in terms of the growth rates. Admittedly, it's starting from a small base, so the percentages can be misleading. But it's obviously a great sign of the progress we're making. The other thing I really like about it is just expanding some of the segments that we serve, right? It's just -- you go back 2, 3 years ago to think about an [ overall ] part supplier or HVAC equipment provider or someone like that to purchase from us. That's just not something you would have seen before. And with each success, it just opens the eyes of other merchants in the segment to feel like, you know what, actually, I should take a look at the software.

Got it. So to Carrie's point, like it enables you guys to address a broader set of merchants versus where you've traditionally found the most success. I want to talk about international. It's been a really successful push for you guys. 30% plus GMV growth in international for the past 2 years. Jeff, historically, you've kind of talked about focusing on different tiers of the opportunity, right? Is there a focus here for FY '25 that we should be thinking about?

No, I don't think there's a specific tier other than continued success across the board. Obviously, Western Europe has been kind of the classic definition of Western Europe has been our strong point. I did a little bit less this last quarter versus prior quarters in terms of taking through all the countries only because we're starting to sound in a good way, a little bit like a broken record of kind of the success. But what I love across all of Western Europe is the uniform success we've seen. It's not like we have 1 or 2 countries that are doing super, super well that are kind of dragging along everybody else. It's very strong success across the board. We've been talking about the GMV growth rates. We talked earlier about our 2x multiple in terms of what we're seeing in U.S. e-commerce. You can do the math and kind of look at the e-commerce growth rates in these various countries, and you can see the growth we're delivering, and you can see it's obviously, a higher multiple than that. And so I think as we think about 2025, as we think about 2026 and beyond, it's the continued momentum of where we've been in Western Europe. We also disclosed a percentage of our GMV from, for example, like Central and South America, a tiny percentage. It's all greenfield for us basically. And so as you think kind of Europe writ large and a bunch of other geographies where we haven't had -- we just haven't put as much time and effort into like Southeast Asia, like we're really strong in Australia, New Zealand, Japan, as you know, there's significant opportunity because our brand is 2 things: one, our brand is very, very strong; and two, again, as I alluded to, just kind of the nature of commerce is pretty uniform. So -- and AI is going to allow us and has allowed us to be even more effective, timely, quicker in rolling out everything from just kind of the look and feel and everything from the marketing to the back end to just all elements of it, it's going to help us do that even faster.

Right. One of the data points that really struck me last quarter, I think it was from you, 12% penetration in the U.S. sort of e-commerce marketplace, less than 1% if you think about the global e-commerce market. So still a ton of runway there on the international side. Offline has been another bright spot for the business. You talked about the off-line presence scaling to over $100 billion in cumulative GMV. Last year, we talked a lot about sort of the upgrade of the product, continuing that momentum. I wanted to ask you a question, kind of a more strategic question of that now that you start to gain sort of that full perspective of the merchant, it's not just their online presence, but also their offline presence, you get a more cohesive view of what they're doing. Does this enable really to open the aperture to other opportunities like maybe supply chain or inventory now that you're just like the whole front end for the customer?

Yes. We certainly have a much better view of their business and allows us, as we've talked about, like we believe we've had an online commerce, the best tech stack for years. And we think we have the best tech stack on offline point-of-sale as well. So you really give the merchant the ability to not have to choose. It literally have the best of both worlds in one platform. Obviously, that then translates into one set of analytics, one dashboard, all the things that allows you to make much smarter decisions and just track your engagement with consumers, track your inventory, track all of that across the business. Does that lead us to do to your -- specifically to your question of doing more modules, additional things that feed into that? We could -- as you know, like we announced the partnership with Manhattan, 2 quarters ago, I believe, I should know exactly. But -- so historically, we've done more partnerships than build on stuff like that. So I think for us, the buy versus partner versus build is always leaned towards if there's something that's in our wheelhouse and we think we can build it exceptionally well, great. Otherwise, we're going to partner. And I think we're actually very effective at how we partner with others. Is there anything though Keith, I'd say, well, hey, this leads us to do enter this segment of, for example, enterprise software, that like not at this time.

Got it. I want to switch to the P side of the equation. The biggest part of the monetization of the GMV on the P side of the equation has been Payments, right? 64% of GMV was processed through Payments in Q4. That expanded by 4 percentage points on a year-on-year basis. Can you talk to us about kind of what's driving that expansion in the attach rate? And how high could this feasibly go?

Well, starting the second piece, we haven't given an exact number in terms of what the penetration rate will be. There's -- it obviously continues to -- we get this question a lot. We have for years. It continues to just chug along, right? Like if you look at year, we -- in our Investor Day -- sorry, our investor deck that's on our website, we show it on a quarterly basis in terms of how the progression. We show year-over-year in terms of the progression, it continues to do very well for us. The other thing that I love about Shopify Payments is that it brings -- it's to our conversation around enterprise, a lot of times, it's the tip of the spear that brings along a lot of other products behind it, right? And so that's where the merchant conversation will start and then it expands into all the other modules, which they'll buy from us. I think -- and this goes a little bit to when we talked about Shop Pay and the enterprise before and just kind of Payments. It's just a product that performs very, very well for merchants. And so from our vantage point, we'll continue to roll it out internationally to the conversation we just had. We're continuing to spend a lot of time on making it even faster, even better, integrate with more local payment providers and everything we're doing. It's just doing really well for us.

Got it. And the increasing kind of penetration into the enterprise space, how should investors think about how that impacts payment attach rate and sort of the potential of Payments? Is it a positive or a negative when we think about that dynamic?

Yes. Well, I think about it, attach rates certainly for the large enterprises will initially be a headwind. I think over time, as we talked about, as enterprise take more and more modules from us over time. And as we have that initial sale is a broader set of products, that will change the attach rate dynamic. At the moment, to my comment of kind of you say we're 2.5 years in and you take the 9 months and 9 months, and it kind of leaves you a year that we've really been building on the enterprise. We're still at that front part where our enterprise cohort is mostly merchants that have a few products, not many. Over time, that cohort, the enterprise cohort will be an amalgamation, a collection of those that are 3, 4 years in that have a bunch of modules and those that are just joining that maybe they have only a couple of modules, they have more than they would have started -- had they been starting with us 2 years ago, but it's still going to be a blend. So that -- therefore, from my vantage point, attach rate is an output rather than an input. But yes, we're all for continued success of Payments.

Got it. So when we think about the monetization of that GMV, Payments definitely sort of dominates the conversation. I think there's a little bit of like an investor bingo of what are the other categories that could become a big contributor. I think probably front and center in most people's bingo cards is Shopify Audiences. So if you talk about the potential for monetization there? How has that sort of initiative been ramping for you guys?

Yes. No, Audiences is one where we haven't given a whole lot of disclosure in terms of the conversations we have with merchants and the effectiveness that they're getting from it. But the merchants that -- as we look at the ROI on their spend and how it's helping them get more customers, it's been very effective. The monetization for us, as you know, we keep it in Plus. And that's -- there are some things we just think we should have feature-gated within Plus. It doesn't necessarily have to be Audiences. It doesn't necessarily have to be B2B, but it should be something. And so those are the 2 right now that we feature gate there, obviously, with the change in pricing on Plus, where we raised prices last year, that obviously helps the monetization further. As it relates to us pulling audiences out and charging for it separately, I don't have anything to say now in terms of the timing on that. But we actually -- I mean it's working very well where it is. Again, it's pulling more merchants from Standard to Plus, the Payments volumes are going through Plus. It's compelling for us where it is.

Got it. Probably #2 in terms of what investors are focused on the Shop App. It's grown quite a bit. I think you guys rolled it out in 2022. In the most recent quarter, you talked about Shop App native GMV up 84% on a year-on-year basis. Any sense you could give us like what percentage of overall GMV is driven through that app now? Or any other kind of KPIs on usage of Shop App?

I don't have any new KPIs for you on usage. I would say it's what -- and you know this. This is for us an aid to the merchant rather than trying to be some big broad marketplace. It's where as a merchant, you can have consumers go to your website, you can have consumers go to Shop App and to somewhat be interchangeable. And we continue to hear more and more anecdotal stories from merchants who like you'd be amazed that I have some consumer who's been a long-standing customer of mine, you would think that they bought T-shirts from me or they bought pants for me, they didn't know that we sold rugs or something else. And they didn't find it out on the merchant website, they found it out actually on the Shop App. So we're trying very hard to make sure the Shop App does a really good job of helping merchants get more consumers and those consumers expand their understanding about the merchants we are all selling. So yes, we do look at all the merchants that you would suspect in terms of -- sorry, all the metrics that you would suspect in terms of usage by consumers, how long they stay on the site, how many things they buy from the site, how that expands over time. All those are very compelling. We just haven't talked about it.

Got it. Last one I want to touch on, and this is my bet on what's going to become more material faster than people expect, fulfillment and shipping, right? And it's something that you guys made the decision to go with the partner route rather than doing it first party. Does that partner route still offer good opportunity for Shopify on a go-forward basis? Because it is a big part of what merchants spend on. It is a big sort of dollar opportunity out.

Yes. No, especially going back to your very first question in terms of tariffs and kind of what's changing in kind global supply chain world. This is Obviously, we have the relationship with Flexport. They remain our primary partner. We spend, I think, Ryan is doing some very interesting compelling things there. And just given our merchant's choice, it's something we've done, right? We have a relationship with Amazon, as you know. But yes, to the extent that a merchant can look to us and say, this is my trusted partner and helping me think about how I get goods from point A to point B. Yes, the relationship with Flexport, but more broadly on the partners -- on the shipping side has been very, very good for us.

Got it. I want to close out with at least one question on margins. I focused a lot on margins. So you came out of Q4 talking about feeling comfortable with your level of free cash flow margins on a go-forward basis, suggesting that this is the right balance between kind of growth and profitability for you guys right now. We're optimistic about Shopify growth on a go-forward basis. That gives you a lot of investment dollars. It sounds like not a lot of that is in headcount. You feel pretty comfortable with your level of headcount. How should we think about where the sort of investment opportunities are? Any kind of clues you could give us on where those dollars will go to?

Well, I think I'll start on the headcount piece. I mean we can keep headcount relatively flat. And obviously, as you know from our annual report, it was actually down 2023 versus 2024. That doesn't mean, though, as we think about some shifting dynamics within our employee base, -- so there may be some segments of our employee base, which is on a per head basis, lower comp versus, for example, a higher comp high-end AI engineer or some other pieces where even though the headcount number may be flat, the comp dollars going to total comp may increase, and we've seen some of that. We've talked about that on one of the calls. We obviously, on a marketing spend perspective, we continue to be very disciplined in terms of marketing as a percentage of revenue. But we obviously, on a dollar basis, continue to lean into marketing, and that's one of those segments. We're going to continue to support everything we're doing across all the enterprise drivers we've talked about, supporting enterprise, supporting B2B, supporting point-of-sale, et cetera. So there'll be dollars going into that. One of the beauties of our model, as you know, we have basically no CapEx. But the investment dollars will go back into comp and marketing are by far the 2 biggest pieces of our P&L, as you know. So as we think about how those pieces ramp and then the other piece in terms of getting to those free cash flow margin numbers, the other piece, of course, is gross profit dollars, gross margin and we're out of time. I'd refer people back to the comments I made as it relates to kind of Q1 gross profit. When you think about Q1 gross profit of this year versus last year, I talked about some of the dynamics, some of which are temporary and some of which are more permanent. That will give you a sense of kind of how gross margin plays into the OpEx spend and how it gets you to the free cash flow dollars.

Outstanding. Well, Jeff, Carrie, thank you so much for joining us at the TMT conference and walking us through an exciting story at Shopify.

Thank you.

Thank you.