Morning. My name is Lisa, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Shopify Q1 20 19 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Thank you. Katie Keita, Head of Investor Relations, you may begin your conference.
Thank you, operator, and good morning, everyone. We are glad you can join us for Shopify's Q1 2019 conference call. We are joined this morning by Toby Lutke, Shopify's CEO Harley Finkelstein, our Chief Operating Officer and Amy Shapiro, our CFO. After 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 risks and uncertainties in our press release this morning as well as in our filing with U. S. And Canadian regulators. Also, our commentary today will include adjusted financial measures, which are non GAAP measures.
These should be considered as a supplement to and not a substitute for GAAP financial measures. Reconciliations between the two can be found in our earnings press release, which is available on our website. And finally, note that because we report in U. S. Dollars, all amounts discussed today are in U.
S. Dollars unless otherwise indicated. With that, I turn the call over to Harley.
Thanks, Katie, and good morning. Shopify is off to a great start in 2019, delivering strong results in our Q1. Merchants of all types and at all stages of their commerce journey continue to start, grow and successfully run businesses on Shopify, from early stage entrepreneurs to established businesses, to merchants in a variety of verticals and geographies. We continue to attract such a wide and diverse range of merchants to our platform because we put the best interest of our merchants at the center of everything we do. Today, I'd like to focus my comments on 3 areas, our platform, Shopify Plus and our partner ecosystem.
We continue to strengthen our core platform in the Q1 to help merchants of all sizes sell more and sell more efficiently. We launched new marketing capabilities focused on smaller merchants such as Facebook Dynamic Product Ads, a retargeting tool that we've built into merchants marketing dashboard, which means that smaller merchants can save valuable time creating ads, reach more potential buyers and increase conversion to sales. We also introduced Store Switcher, a tool that creates a better experience for brands that run multiple shops simultaneously. Similar to marketing, frictionless commerce is another highly effective catalyst for GMV, which is why we support Google Pay, Apple Pay, and of course, why we build Shopify Pay. Shopify Pay, which is our own accelerated checkout product, has expanded rapidly since it launched 2 years ago.
Dollars 3,400,000,000 of GMV has been processed through Shopify Pay since then, with GMV process in Q1 more than doubling relative to the same period last year. With nearly 30,000,000 buyers opting in, the number of orders processed on Shopify Pay has also more than doubled year over year to over 10,000,000 transactions in the quarter. Shopify Pay is quickly becoming one of the best ways for buyers to check out online and more importantly, it's making checkouts faster for our merchants. On a personal note, it took me less than 20 seconds to buy my latest pair of Allbirds using Shopify Pay from initial landing on their store to receiving a confirmation of a completed checkout. It is by far the best and fastest checkout I've ever experienced.
Multichannel selling remains one of our core value propositions, one that is evolving with the emerging of online and offline commerce. Through our partnership with the innovative concept store Showfields, we are powering new retail experiences by giving some of Shopify's rising digital native brands and merchants the opportunity to sell their products in person using Shopify point of sale. Aligned with our brick and mortar efforts, we also released the tap and ship point of sale reader last week, further enhancing the merchant and buyer physical retail experience. Moving to Shopify Plus, which had a fantastic quarter, benefiting from a strong sales team that's constantly improving, as well as a strong mix of upgrades, validating our strategy of developing the widest funnel for new entrepreneurs that can grow really large on our platform without any limitations. Merchant adds in the Q1, which is typically a slower period, nearly matched merchant adds in our 4th quarter, typically a stronger period.
This momentum reaffirms the strength of Shopify Plus' value proposition, which more larger volume merchants are beginning to recognize. Brands across a variety of verticals choose Shopify Plus to help them manage the increasing complexity of their businesses, while also leveraging the agility, flexibility and cost effectiveness of our platform. Shopify Plus brands that launched this quarter included fashion labels such as Betsey Johnson, Levi's and Hudson Jeans, celebrity brands like Reese Witherspoon's Draper James brand the toy company Hasbro publishing house HarperCollins personal transportation company Segway and even more brand specific shops from consumer packaged good companies like Johnson and Johnson and Procter and Gamble. We remain focused on further solving the business complexity experienced by company selling at scale by understanding the specific needs of these businesses and improving our product market fit. In our Q1, we continue to enhance enterprise level features such as templates for Shopify Flow, our integration tool that connects applications and automates repetitive tasks.
We also launched multi currency for Shopify Plus merchants using Shopify Payments, enabling these merchants to sell in multiple currencies and get paid in their local currency. While it's still early, multi currency has gotten off to a solid start and is a great example alongside Fraud Protect of the multiple ways we're able to add incremental value to our merchants. And finally turn to our partners. Our partners play an incredibly important role in our merchant success and our partner ecosystem remains strong and continues to grow. Our partners added more than 200 apps in Q1, bringing the number of apps in our app store to more than 2,700.
And a growing number of our partners continue to recommend and build on Shopify with more than 19,000 partners having referred merchants to Shopify over the past 12 months. Over the years, we've built a healthy community of partners that have added tremendous support and value to our merchants. It took us 9 years to pay out the first $100,000,000 to app developers and just 12 more months to double that number to $200,000,000 paid out. We continually work to nurture and shape the development of this ecosystem to encourage the best possible merchant experience. As we grow in our core and international markets, our partners will continue to play a vital component in our journey.
We are excited to come together with our partners at our Unite conference in June to share more of our product roadmap and keep working towards a future that empowers merchants all over the world. Placing the merchant at the core of our decision making is critical in achieving our mission, which is to make commerce better for everyone. This means that we will continue to work relentlessly to give merchant the tools, knowledge, opportunities and support they need to help them make the best decisions for themselves and for their buyers, paving the way towards long term health and success.
Thanks, Harley, and good morning, everyone. Our stellar first quarter results reflect the diversity and strength of our growth drivers and the solid execution of our strategy. We grew revenue approximately 50% year over year to $320,500,000 Subscription solutions revenue expanded 40% to $140,500,000 driven by monthly recurring revenue growth of 36% to $44,200,000 We achieved record net new MRR in Q1, driven by strong merchant adds across our core and Plus subscription plans. The pace of merchant ads from international accelerated in Q1, powering net new core MRR, while Plus merchant growth also increased its contribution to MRR accounting for $11,300,000 or 26% compared with 22% of MRR in Q1 of 2018. Subscription solutions revenue grew faster than MRR in the quarter due in part to strong growth in app and plus platform fee revenue, which is not included in MRR.
Merchant Solutions revenue grew 58% over the same period in 2018 to $180,000,000 This growth was driven by GMV expansion, which increased 50% year over year to $11,900,000,000 benefiting from our ongoing investments in international growth and Plus. Continued penetration of Shopify Payments, Shipping and Capital also contributed to Merchant Solutions revenue growth. Dollars 4,900,000,000 of GMV was processed on Shopify Payments in Q1, an increase of 65% versus the comparable quarter last year. Shopify Payments penetration of GMV grew to 41% in the Q1 versus 38% in Q1 2018 as Shopify Plus increased its share of gross payments volume and payments adoption increased internationally. Quarter over quarter, however, gross payments volume penetration remained relatively flat.
This is partly driven by a seasonally lower a greater mix of GMV in the quarter coming from international. In fact, GMV from international was nearly twice what it was in Q1 of 2018. Capital and shipping also experienced solid year over year revenue growth. Shopify Capital had a nice funding milestone in the Q1, surpassing $500,000,000 in cumulative financing. Shopify Shipping rolled out pricing that is more favorable to merchants on our USPS offering, which we believe will help our merchants provide a better experience for their buyers and drive shipping adoption over the long term.
During the quarter, the percent of eligible merchants using Shopify Shipping grew to above 40% versus 1 third of eligible merchants in the comparable period last year. Gross profit dollars grew 46% from Q1 of 2018 to $180,300,000 as merchant solutions revenue, which carries lower gross margins, grew within the revenue mix from 53% to 56% of total revenues. Adjusted operating loss in Q1 was $1,400,000 or 0.4 percent of revenue compared with $200,000 or 0.1 percent of revenue in the Q1 of 2018. We achieved a better than expected adjusted operating loss in Q1 relative to February guidance due in part to a later start than we first anticipated of our brand campaign, which I hope you have all gotten to see by now. Adjusted net income for the quarter more than doubled to $10,300,000 or $0.09 per share over income of $4,200,000 or $0.04 per share the same period last year.
Finally, our cash, cash equivalents and marketable securities balance was approximately $2,000,000,000 generally consistent with the balance at the end of 2018. Inspiring entrepreneurship, removing barriers to commerce and helping merchants thrive in a competitive environment are core to our merchant first philosophy, all of which are investment focus areas aimed to achieve. Harley spoke about our achievements related to continued investments in Platform and Plus. I will cover our accomplishments in newer investment areas, international and the Shopify brand, starting with international. Momentum continued to build in our international efforts in the Q1 as we further localized the platform to improve product market fit, translated the partner dashboard into 6 new languages to expand the partner ecosystem and added tools to reduce the friction presented by cross border sales.
Our efforts are clearly paying off as our mix of international merchants relative to total new merchant adds reached a new high in Q1 and their contribution relative to overall GMV continued to expand. With our international localization efforts just over a year old, we are still very much in learning mode, paying close attention to the idiosyncrasies of each geography and adjusting our approach as needed to optimize product market fit. Once we achieve that, we can expect GMV and take rate for international merchants to be more comparable with those in our core geographies. And we are making progress. This quarter, we plan to launch Shopify Payments in the Netherlands, which features an integrated local payment method that allows for bank transfers, which are more popular there in addition to credit card payments.
Over the past week, we launched a beta of Shopify's platform to some of our existing merchants in simplified Chinese and Dutch. Stay tuned as we plan to introduce several more new languages over the coming months. Now turning to brand. On April 15, Shopify launched its first ever brand campaign in 12 markets across North America. This campaign runs until mid July and includes television, digital video, radio, social and out of home advertising.
So keep your eye out for our billboard and subway ads on your way to work. We're excited to have kicked off this initiative to reach a far greater number of potential merchants, catalyze the next generation of entrepreneurs, and as a result, increased brand awareness of Shopify. With our campaign launching in April, most of our $30,000,000 of brand spend will now be largely distributed over the last three quarters of the year. Our merchants not only create and sell amazing products, but their journeys to launch and sustain those businesses are truly inspiring. Since launching Shopify Studios in January, we've released a range of pieces featuring the struggles and triumphs of Shopify merchants and exploring themes in commerce such as women and entrepreneurship and the hidden layers of commerce behind everyday industries and products.
We've had an incredible response to the content published to date and we're excited to continue telling these stories that demonstrate the spirit and resilience of entrepreneurs. All in, we are pleased with our performance in the Q1 and expect the momentum with which we've kicked off the year to continue throughout 2019. As a result, we are raising our expectations for our financial results for the year. We now expect revenue for the full year to be in the range of $1,480,000,000 to $1,500,000,000 and an adjusted operating income ranging between $20,000,000 $30,000,000 For the Q2, we expect revenue of $345,000,000 to $350,000,000 and an adjusted operating loss between $6,000,000 $8,000,000 Stock based compensation in 2019 is still expected to be approximately $160,000,000 for the full year with about $40,000,000 of this in the Q2. Our growth factors remain strong as entrepreneurs around the world look to Shopify to launch and grow their businesses.
Our priority investments this year in international growth, brand and product expansion are all the right ones that we are confident will continue to attract merchants to Shopify, increase our share of wallet and power merchant success well into the future. With that, I'll hand the call back to Katie.
Thank you, Amy. Before we launch into your questions, I'd like to remind everyone to please limit yourself to one question. That way we'll have time to take a question from each listener today. With that, Lisa, can we have our first question? Thank you.
Our first question comes from the line of Brad Zelnick from Credit Suisse. Your line is open.
Excellent. Thanks so much and congrats on a great start to the year and all the innovation that's happening at Shopify. Harley, we noticed some of your largest customers are now using Instagram checkout. How should we think about the balance of cooperation and competition with some of your largest partners?
Hey, Brad. Thanks for that question. We've always said this, with every new channel that comes to market, whether it's a social media platform or a new marketplace, what that does is it makes Shopify more valuable as a retail operating system. Again, our entire objective here is to reduce complexity and simplify running a business. And so more channels means our merchants can sell in more places.
And so what Shopify does is retail operating system is allow our merchants to run across as many channels as they want. From an economics perspective, of course, we also make sure that we capture economics through rev shares with our partners that we allow our merchants to sell through, which is important to us. But again, with every new channel, we think the Shopify retail operating system, product and offering gets better and better.
Awesome. Thanks. Great.
Thank you, Brad.
Our next question comes from the line of Ken Wong from Guggenheim Securities. Your line is open.
Great. Thanks a lot for taking my question. I saw you guys launched a new tap and chip reader and also some new POS hardware. Can you maybe just give us a sense for kind of what your strategy is going forward on the physical POS side? And perhaps what are some of the competitive advantages you guys have against competitors such as Square and Clover?
Yes. Hi, Ken. This is Toby. It's a really important part of our business, the 2nd largest channel after online store clearly. So and it's something we wanted to do really well for a long time, but it just we are just sort of getting like growing into the size of a company where we can be focused on multiple things at the same time.
So you saw a lot of things around point of sale and then you will probably see a lot of other things around this segment in the future. Because I think one of the things which was pretty clear pretty early, remember Shopify started after I tried to build an online store, which was a little bit early for a new business started online, but this is now the norm. We see a lot of our customers are starting new businesses, many of the largest stores are less than 10 years old. And as everyone is looking around for opportunities, Internet marketing is starting to get pretty pricey. And finally, NAS expanding offline, so to speak, expanding to brick and mortars is starting to look really good from a cost per acquisition perspective.
So there's lots and lots of reasons that are pushing retailers back to the retail stores. And this is something which is just enormously complicated unless the software really, really makes us easy to Harley's point. You have to you need a unified system to run a business across multiple channels. It is really, really, really difficult to add a new channel in the old model of single what do we used to call them, single instance software or whatever, like just separate software for different channels as was the norm before Shopify came around. So we want to support this move offline as a business strategy and make this really easy and allow our merchants to have just like look really, really good in their retail stores.
Great. Thanks, Ken.
Our next question comes from the line of Colin Sebastian from Robert Baird. Your line is open.
Thanks. My congratulations on the strong start to the year. Just a question on the incremental gross margin in Merchant Solutions that dipped a bit. So I was just hoping you could describe some of the moving parts there. I think Amy suggested that there was maybe some pricing changes that occurred, if you could go through those.
Thank you very much.
So good morning, Collin. With performance quarter over quarter, but we did see a decline year over year from the Q1 of 2018. If you recall, in the Q1 of 2018, we saw one time favorable billing adjustment from Payment Partners that makes comparability year over year difficult. We also saw year over year decrease in the Shopify Payments margin as we continue to grow Plus adoption, which has a smaller margin than the overall. We should see going forward in the Q2 an improvement in merchant solutions margins as we see some volume discounts kick in.
So I think you'll see that start to shift
in the Q2. Thank you.
And our next question comes from the line of Kevin Krishnaratne from Paradigm Capital. Your line is open.
Hey there, good morning. Very encouraging pace of ads in international. Are you able to talk about any changes in merchant metrics in your international markets as you are rolling out local payments and language? I'm thinking any commentary on changes to GMV per merchant, ARPU or even things such as merchant engagement on the platform?
I can talk about some of the metrics. As you can imagine, when you're entering new markets, you're we're working on product market fit and that's why we've we're investing heavily in localization in some key markets. Initially, GMV per merchant is going to be lower than the average and take rate will be as well, while the availability of merchant solutions is not as prevalent, it's limited and some markets are not existent in some other markets. But over time, we think those will migrate more towards what we're seeing in our core merchants and our core geographies. In terms of usage of the platform, I don't know, Harla, if you want to add anything, we are seeing a significant over 100,000 merchants using the platform in a language other than English.
So we think it's very encouraging the continued attraction to the platform and the new languages that we've rolled out.
Yes, I think it's important to remember that Shopify in its core markets is a product that has been booked on product market fit for 15 years. And in any given market, it might be less than a year. So it's going to take a while to get fully up to speed. I use Shopify in German right now, which is cool that I finally can do that. And it's really good, but every once in a while, I send a little note to the team saying, hey, this part is a little bit funnily worded and so on.
So it's a process. All the metrics will go up as the product matures in any individual market.
Thank you very much. And again, congrats on a good quarter.
Thanks, Kevin.
Our next question comes from the line of Darren Aftahi from Roth Capital Partners. Your line is open.
Good morning. Thanks for taking my question and congratulations. Just wanted to ask the you kind of called out strength in both existing and upgrades on Plus. I'm just kind of curious whether that mix skewed towards existing client upgrades or new clients in the platform in the quarter? Thanks.
Hey there, I'll take the question. It's Harley. As usual, we're seeing majority of the new adds to Plus come from new to the platform. That being said, it's really important that merchants that are doing really well on Shopify do upgrade to Plus and we have a process and a team in place to ensure that happens. But more than half of the new adds to Plus in this quarter came new to the platform, which is really exciting for us.
The other thing that I mentioned in my earlier remarks is that the variety of merchants coming to Plus now is really interesting. We're seeing not only large CPGs that are building specific brand stores, but we're seeing companies like Levi's and Betsy Johnson and Hasbro. Companies like Hasbro have never really sold direct to consumer before and we're seeing that all happen on Shopify Plus, which is really great for us. And so I think you'll continue to see the majority of the Plus ads come from net new, which is great, but we have a very healthy upgrade path, which is really what it's really important to us. We want to make sure that the homegrown success stories have a place to grow into as they get really big on Shopify, so they never have to leave.
And I think we've done a good job of that.
Thanks, Darren.
Our next question comes from the line of Justin Furby from William Blair and Company. Your line is open.
Thanks guys and nice start to the year. Harley, I guess maybe for you, it seems like revenue from the 3rd party apps had another really solid quarter. And as that becomes a bigger and more important contributor to growth, I'm just wondering how your discussions with partners around monetizing the platform has evolved from over the last few years? Thanks.
Thanks for the question. Yes, I would say that the partner ecosystem has never been healthier. It is thriving. The Shopify app store has become the go to market strategy, almost entirely go to market strategy for any applications or third parties that are building applications and software for the retail and for the commerce space. So we're really excited about that.
One number that, of course, I posted about earlier was that it took us a long time to get to almost 9 years to get to $100,000,000 in paid out app store rev share and it's taken us 12 months to get to that second $100,000,000 to get us to $200,000,000 So I think that's really exciting for us. In terms of the dynamics, I think the relation we have with our partners is really great. I mean, we have some expectations that are all about experience and making sure that the merchant experience is always the best it can be. And generally, we've had a really great discussion and dialogue with these partners to ensure that that continues. So I don't think there'll be any slowdown there.
We've added a couple of 100 new apps. Again, the idea of the app store is not to have every app out there on the App Store, but rather to have the most important apps to make every merchant have full product market fit regardless of the intricacies and complexity of their particular business. And in that case, I think we're doing really well. And then of course, on the referral side, in the last 12 months, we've seen 19,000 partners bring in new merchants and refer merchants to Shopify, which is really fantastic. And so that will continue to grow.
Great. Thank you.
Thank you, Dan.
Our next question comes from the line of Samad Samana from Jefferies. Your line is open.
Great quarter. So Amy, we saw on the company's website that Shopify is paying 1.5 times the standard revenue share to partners. So 30% into perpetuity instead of 20% for stores in international, I think Germany, France, Japan and Singapore. So I'm curious if that's been a factor in driving the acceleration in international ads and how long the company plans on keeping that higher commission payout rate going? And any thoughts would be helpful.
Thank you.
Yes. From a partner perspective, obviously, we had mentioned earlier that we've gone ahead. We've done things like translated the partner dashboard inside of Shopify. We want to encourage the creation of new and scale partner communities around the world internationally is really important for us for the future of the company. And as partners have always been really important to Shopify in our sort of English speaking countries, we think that's going to be the case internationally too.
So we're making easier for them to not only learn about Shopify, but also to build really big businesses around Shopify. So things of course like increased rev share and obviously making sure that we're talking to them in their language that they speak. That's all really important. The other thing that you'll probably see is you'll see more experimentation. In certain geographies, we'll decide that we want to go ahead and we want to get really aggressive in terms of getting more partners on.
In other countries, we feel like we already have pent up demand and may not need to do that. So I would say that generally that sort of growth strategy is young still and we're continuing to learn more about different partners in different geographies. And so we want the freedom to experiment as we need.
Great. Thanks, Samad.
Our next question comes from the line of Deepak Mathivanan from Barclays. Your line is open.
Hey, guys. Thanks for taking
the questions. Following on Brad's question from earlier, without going into specifics, how different is the economics when a merchant uses Instagram checkout versus your own checkout solutions like Shopify Payments? And then on a related note, how big is the volume for your merchants generate through Instagram currently? Thank you so much.
Hey, it's Harley. I'll take that question again. So as I mentioned earlier, we think more channels, whether they're social media marketplaces or they're social media platforms or their marketplaces, that means our merchant can sell more. And so, although it doesn't necessarily come it may not be processed through Shopify Payments, what we do is we work with these partners who are very excited to work with us because we bring on so many amazing merchants and products to their platforms and to their marketplaces. We ensure that we have economics in place that therefore we can capture upside as well.
So it doesn't necessarily fall into the same revenue bucket per se, but certainly it does allow us to capture upside when we talk to these partners. And while I can't go into specifics on individual partner agreements, just it's important to know that we had economics in place that allow us to grow when our partner sells when
our merchant sells more.
Great. Thanks, Deepak.
Our next question comes from the line of Ross MacMillan from RBC.
Congratulations as well. Thanks for all the detail on international. Amy, I think you mentioned Chinese language, I presume Mandarin support. And we noticed that you have been hiring locally in China maybe a limited basis, but nonetheless hiring there. I'm just curious either from Toby or Harley, if you can just talk to us a little bit about your thoughts around China as a market given its size, but given how different it is in many ways from other, certainly Western market?
Thanks.
Yes. Okay. I'll take the question. Where to start, right? So what we are seeing basically, I mean, we're seeing a lot of interesting things in China.
Like as a product person, I think it's very, very important market to study because I think we increasingly see innovation, especially in our space come from there. More specifically from a numbers perspective, the thing that's working excellently is export from China, right? There's a lot of Chinese brands now out there, which are trying to go global and do so directly. And so we have worked with them. They are seeing significant success using the Shopify platform just because, I mean, obviously, we are global, we are people are already using us all around the world, so which is exactly the need that Chinese exporters are looking to get fulfilled.
And so this is a market which we are looking at.
Great. Thanks a lot, Ross.
Our next question comes from the line of Josh Beck from KeyBanc. Your line is open.
Thank you for taking the question. I wanted to ask about this multi currency feature on Shopify Payments that you introduced. Do you see this as an opportunity to increase cross border sales for merchants? And does this improve your confidence in ramping payments among the Plus category?
I mean that's pretty much exactly it. We want again, what Shopify does like best, I think, and usually when Shopify becomes more important for customers and gets more customers over switching and so on, is when we take something that's really, really hard to make it somehow easier because really, I mean, basically, at a certain point, all merchants want to do the same. They want to run a global, wildly profitable business, right? And so especially around global, that's hard. It's hard for us.
We have 5,000 people companies, something like this. And we are trying to go global ourselves with our product and our customers are wanting to do exactly the same thing. Now it's a little bit of a different issue, but cross border selling is the CEO's challenge. And accepting currencies are on the world is the CEO's challenge and showing up in the right language and all these kind of things. So this is new for us and it's not going to be done overnight, but like helping our customers go global themselves and riding the coattails a little bit on everything we've been figuring out on our own journey.
It's one of those areas where you can take something that would have taken them forever to do themselves or would have been exceptionally labor intensive or would have been something that they've attempted and then gave up on. And instead make it easy enough to be viable for more and more merchants, which perhaps helps them grow and which then because the way our business model works and is so aligned with them ends up benefiting us again and then for something we want to take very seriously and multi currency is one of those things. And it's seeing uptake of course the plus initially because most of the people who need this the most and it will go from there.
Very helpful. Thanks for the color.
Thank you, Josh. Our next question comes from the line of Koji Ikeda from Oppenheimer. Your line is
open. Congrats on the quarter and thank you for taking my question. I just wanted to follow-up on some of Harley's prepared comments. Very early in your comments, Harley, you did talk about Shopify trends in the quarter with 30,000,000 buyers opting in, 10,000,000 transactions in the quarter on quarter by ks, which is a double. And that's just really tremendous.
And just building on that at a high level, what's the right way to think about those two data points as a mix of overall buyers and overall transactions? Thank you.
Yes. So I mean, the reason we brought it up is we haven't really talked too much about Shopify Pay in the past. What we're trying to do is create as little friction as possible in the checkout for our merchants. What we realized with so many buyers across all the Shopify stores, we do actually have some ways that we can help our merchants capture more sales and that's by allowing these consumers to opt into Shopify Pay. 30,000,000 buyers opting in is obviously really great and we're happy to see that number, but $3,400,000,000 in GMV and $10,000,000 transactions in the past quarter alone, which as you mentioned is double 2,008, is really exciting for us.
So would say Shopify Pay is still something that we're excited about. It's something that we're just starting to lean into a little bit. But ultimately, the reason we're doing is because it makes checkout so frictionless. And as I mentioned, even my own experience, I mean, try it yourself, like go buy a pair of sneakers off the Allbirds shop. It is an amazing experience.
And I think it actually creates a new bar for how accelerated a checkout can be. And I think what will end up happening is merchants will see more sales and consumers will come to expect that that's how good an experience can be when buying off an online store.
I want to add to the Shopify Pay thing. There's 800 something 1000 merchants on Shopify. So far, we have put that fact to use mostly through negotiation power, like getting really good payment rates, getting really good shipping, label printing rates and these kind of things. Increasingly, there and we will be super, super careful with those kind of things, but increasingly are ways for us to use that grouping of people and the viewpoint we have to advantage of everyone on the platform because we want increasingly there to be advantage for every individual that there are so many others. I'm sort of skirting around the term network effects because I just that feels this feels a little bit different.
Network effects are more on the social media side and usually have a lower K factor than what I'm talking about here. But Shopify Pay is one of those ways that is really works this way, right? Like you start a new store tomorrow, you're selling something really exciting and we have 30,000,000 people now who when any of them show up on your store, which didn't exist yesterday and they decide they would like to buy this product of yours, can check out with a single click. That does something that is simply not accessible anywhere else and therefore is powerful for our platform. There are other place like this usually around things like fraud detecting and so that really benefits every individual store from all the data we see across the system and so on.
But we are looking for these kind of effects and prioritizing them is very successful so far.
Thank you very much.
Our next question comes from the line of Yigal Aronian from Wedbush. Your line is open.
Hey, good morning, guys. Good morning, guys.
So on Shopify Plus
new ads, which continues to see strength, Just curious what the split is between the new ads. So the net new customers that come online, if they're coming from other e commerce software platforms, if they're new to online, if they're coming from internal platforms or competitor platforms? And then how do you think about the value you offer merchants versus the ASP of your packages, maybe both on the non plus and the plus side? Thanks.
Yes. I mean, I'll start with the second question, which is sort of the value to cost equation. Certainly, when it comes to Shopify Plus, that ratio is heavily on the side of value. And we're doing that because we think there's an opportunity for us to take a lot of market share, but also to get a lot more merchants on Shopify Plus. So I would say that there that's certainly that equation is certainly on the side of value versus cost and that's done intentionally.
In terms of where the source of these customers are coming from, if you just think about some of the stores that I mentioned a little earlier on, I mean, some of them like Betsey Johnson and Levi's, they obviously they had an existing platform and they were looking to migrate for a bunch of reasons. Some of them are the fact that they wanted the functionality that we were offering. The data that they heard about Apple Pay, they want to be able to use Apple Pay, they may want to use Shopify Pay as well. So and they're also looking to do things that are more affordable because some of these large enterprise e commerce platforms as you know very well are very, very expensive. In other cases like the P and Gs and the Johnson and Johnson, these are big CPGs that for the first time ever are going direct to consumer with individual brands.
And we've created a relationship with these big CPGs, so that is very easy for them and almost frictionless for them to stand up new stores on Shopify Plus. So I would say there's a variety of those cases where they're coming they're migrating to us from other existing enterprise platforms, they've never sold before or perhaps they've only sold offline and now they're beginning to sell online with us as well. And I think that is part of the strength of the Shopify Plus business model, where we're getting merchants from a whole bunch of place, including a very new, but growing quickly partner network for Shopify Plus. And I would say the same is the case for Shopify, our core offering, which is that it's still in terms of cost to value, it's still very much on the side of value. We want to make the onboarding and the starting of a business as easy as possible and as affordable as possible.
And by making sure that the cost of it is a couple Starbucks a month, it means that anyone that has ambition can start a business on Shopify. And that is really important to us.
Great. Thank you
so much.
Our next question comes from the line of David Hynes from Canaccord. Your line is open.
Hey, thanks guys and congrats on
the quarter. I want to ask about some of the content initiatives, right, Shopify Studios, the brand campaign you talked about. I guess the basic question is, why is now the right time for that? I mean, is it do
you feel like the product has gotten
to a certain point where it makes sense to put more money behind the brand? Or I can't imagine it's being driven by competitive dynamics, but maybe just talk about kind of why now and how you're thinking about measuring ROI on the spend in the early days?
Yes. Why now is we feel confident that that can pull it off right now. Like I it's a funny dynamic because it's so little under talked about, but as someone who's built a company from 1st line of code, it's one of the underappreciated effects in company building is focused management. And Shopify has always been the kind of company which wouldn't have staffed because of a lack of opportunities, but would have died by indigestion of us trying to do too many things at the same time. And so this is why this is such a fun part of company building at this point where we are now because we can be focused on multiple things at the same time.
It's the second time I bring this up now because it actually really does matter. The on the Studio side and like telling these stories about of what happens, what it looks like of building some of these businesses is just really important to the business because what we find is so many people would like to be entrepreneurs, but just don't have an understanding of what the entire process looks like. Demystifying this through age old approach of storytelling is just the best way to do this. And we think we'll absolutely increase participation in this market, but just exposing people to other people's stories who've gone through this. My grandmother had a printing shop and she started this as well.
And this is where I always spend time when I was a kid. And I just sometimes wonder if I would have ever even thought about starting a business if I wouldn't have been exposed to an entrepreneur by growing up. And most people aren't, right? And so finding other ways to do this is, I think, good. Taking this to ROI, yes, this is the tricky thing, right?
Like brand marketing is hard to quantify. This is precisely the reason why we didn't do it. We are fairly like we are rather mass heavy company, right? We love feedback loops. We are confident with long term feedback loops, which is I think has been an advantage of Shopify over the long term.
We are okay with fuzzy attribution. So we are not falling into the trap of only doing short term kind of things because they happen to be more trackable. But we do really, really, really like to be able to back attribute the things that happen. So brand marketing requires a rollout more faith than this and then there is a rollout more fuzzy in attribution. And this is something the I have to learn how to deal with in this.
So far it's been good, I would say. It's hot. Just don't know.
Yes. That's helpful color. Thanks, guys.
Great. Thank you, David.
Our next question comes from the line of Mark Zekowicz from Rosenblatt Securities. Your line is open.
Good morning. Thank you. Thank you. Tobey, maybe just a quick follow-up on that last question. Specific to maybe Plus or non Plus merchants on the branding side, I'm just curious if there might be 2 or 3 specific KPIs you're looking at?
Because obviously, as the last question alluded to, you obviously have considerable brand strength. So I'm just curious if there's maybe 1 or 2 focal points that branding campaign might be pointed to?
I'd love to give you something specific there. I mean maybe Amy can jump in. Yes. I can
jump in there a little bit. So we've studied our unaided brand awareness and it's not as high as we would like it to be. So that's obviously something we're going to watch carefully to see if it moves the needle. But we're very focused on continuing to monitor carefully our fully loaded cost of acquisition as well as our LTV. And our LTV has been moving up over time as we've brought on more Plus merchants, which has offset the more entrepreneurial merchants that have come on board.
And so we feel like we can afford to take this test and learn and see if this helps our top of funnel activity. So we're going to be watching very closely to see if our top of funnel widens through the brand campaign and the studio efforts and what the conversion rates look like and monitoring and managing our LTV to CAC very, very carefully over time. It may be under a little bit of pressure near term, but we're confident over the long term that this sort of investment will pay off. We're also really confident on the international side based on the learnings over the past sort of 18 months that in the markets where we're localizing, we've seen where our brand awareness is higher, our actual marketing acquisition dollars are more efficient. And that's obviously what we're aiming for over the long term is more efficiency on the cost of acquisition side.
And so part of the brand campaign is not only for the domestic or core geos where we've been operating for some time, but some of that will be for the international growth as well.
Thank you.
That's very helpful.
Thank you, Mark.
Our next question comes from the line of Brian Peterson from Raymond James. Your line is open.
Hi, thanks for taking the question. So just wanted to hit on some of your Plus success this quarter. It sounds like you're adding a lot more merchants than you expected. I'm curious, can you bifurcate that a little bit into actually getting in front of more customers? Or are we also seeing win rates improve?
Yes.
So
I really attribute the success to a maturing sales team at Plus. And as they continue to mature, their reach and their win rates are continuing to improve. And so we're excited about the number of new merchants that they're reaching and bringing in. As Harley mentioned, the first quarter tends to be a seasonal low, at least historically for Plus in terms of new merchants. And we saw a very strong growth versus the Q1 of last year and maintaining almost at the same level as the Q4.
So these efforts are working with the Plus team.
Thanks, Brian.
Our next question comes from the line of Todd Coupland from CIBC. Your line is open.
Yes. Good morning, everyone. I just want to make sure I'm interpreting your international commentary in the right way. So you're basically saying it's a long road to build in these various markets. Would you expect to have enough momentum for it to be a material tailwind later this year?
Or is it going to take a couple of years before it starts to materially impact the results? Any color on that would be helpful.
Yes. We're obviously delighted with our Q1 performance in terms of merchant growth, especially with respect to international, is new. We've only been investing there for a little over a year. And the sustainability of that growth comes down to how well we continue that momentum. It is early days in international.
We're still learning. But we feel really positive with our continued investments in international and brands. So we're optimistic and that is one of the reasons why we increased our guidance for 2019.
Thank you.
Thanks, Todd.
Our next question comes from the line of Brian Essex from Morgan Stanley. Your line is open.
Hi, good morning and thank you for taking the question. Amy, I wonder if you could maybe dig into international payments a little bit. Just wondering, from the vendor relationship perspective, now that you kind of have an established brand and obviously you're a meaningful vendor
in the marketplace relative to kind
of when we did the IPO, what are the payment side like internationally and the economics that you can bargain for as you penetrate new markets? Do you think that payments margins internationally might be able to hit much higher margin rates? And maybe if you can throw a little commentary on customer mix internationally as well, large versus small, how that might impact margins specifically on the payment side? Thank you.
Well, just generally on the international payments side, keep in mind, it's still early days. We're continuing to add new markets. Our vendor relationship has continued to be primarily Stripe, but we have made and will make some exceptions depending on local, specific local needs to merchants and their buyers in those markets. So but generally, I can say that international payment margins in most markets typically are a little bit higher than our core geographies. That's not the case in all markets, but it's typically higher.
And I think that's kind of what we're comfortable saying at this point based on learnings.
Any insight on customer mix and how that might affect it?
Large versus small? Well, right now, Plus is primarily focused on the English speaking geographies, while they continue to work on product market fit. So most of the growth that we're seeing internationally is with our standard core subscriptions. So they tend to be on the smaller side, which is why GMV per merchant and take rate is a little bit smaller and will increase over time. But we're seeing nice adoption of international payments by these smaller more entrepreneurial merchants and we think we're on a good path forward.
Great. Thank you very much.
Our final question today comes from the line of Richard Tse from National Bank Financial. Your line is open.
Yes. Thank you. On the international side, do you think those markets that you feel and feel
learn from the regions that you're in earlier? Or are those markets very different?
So one of the things we've learned about these markets is there are some that are sort of that look similar. Obviously, some places in Western Europe have some similarities, but obviously doing things in Germany is very different, doing things in Japan. And that's even as far as the way that we present a landing page to a prospective merchant in a place like Japan will typically be all in one page as opposed to having it on multiple pages, which we would probably do for a more North American or even a Western Europe type merchant. So there are nuances to it. That's one of the reasons that language is not just the only thing we want to do there.
We also want to make sure we have the right partner ecosystem. We want to make sure we have the right payment providers for them in those regions. We also want to make sure we have the right product for them. So for example, what they want to sell may be different in terms of new channels, may be different than what the North American merchants want to sell. So I would say that there are some similarities between certain countries.
But generally, the reason that's important to have deep empathy for merchants in each specific country is because their needs do differ. And we want to help them with product market fit no matter where we're offering our services.
Okay. Thank you.
Thanks, Richard.
I'll now turn the call back to the presenters for closing remarks.
All right. Thanks everybody for dialing in today and have a great rest of your day.