Shopify (NYSE:SHOP) has reported adjusted earnings of 34 cents per share for the fourth quarter of 2023, surpassing the Consensus Estimate by 9.68%. This marks a significant increase from earnings of 7 cents per share in the same quarter last year.

The company’s total revenues for the quarter saw a substantial year-over-year increase of 23.6% to reach $2.14 billion, exceeding the Consensus Estimate by 3.66%.

Key Highlights of the Quarter

Subscription Solutions revenues rose by 31.3% year over year to $525 million, driven by an increase in the number of merchants joining the platform and pricing changes for existing merchants on its Standard subscription plans.

Merchant Solutions revenues grew by 21.3% year over year to $1.62 billion, fueled by strong Gross Merchandise Volume (GMV), which increased by 23% year over year to $75.1 billion.

Monthly Recurring Revenues (MRR) as of December 31, 2023, reached $149 million, up 35% from the same quarter last year. Shopify Plus revenues were $46 million, accounting for 31% of MRR compared to 33% in the year-ago quarter.

Gross Payments Volume surged to $45.1 billion, representing 60% of GMV processed in the fourth quarter, compared to $34.2 billion (56% of GMV) in the year-ago quarter.

Operating Details

Non-GAAP gross profit increased by 30.1% year over year to $1.07 billion, with the gross margin expanding by 250 basis points (bps) year over year to 49.8%.

Adjusted sales and marketing expenses, as a percentage of revenues, decreased by 210 bps year over year to 14.1%. Adjusted general and administrative expenses decreased by 230 bps to 3.8%.

Adjusted research and development expenses, as a percentage of revenues, decreased by 810 bps year over year to 11.3%.

Non-GAAP operating expenses decreased by 11.4% year over year to $671 million, with operating expenses as a percentage of revenues at 31.3%, compared to 43.6% in the year-ago quarter.

Shopify’s adjusted operating income was $396 million, a significant increase from $63 million in the year-ago quarter.

Balance Sheet

As of December 31, 2023, Shopify had a cash, cash equivalents, and marketable securities balance of $5 billion, compared to $4.92 billion as of September 30, 2023.

The free cash flow for the quarter was $446 million, compared to $276 million in the year-ago quarter.

Guidance

For the first quarter of 2024, Shopify expects revenue growth in the low-twenties on a year-over-year basis. Adjusting for a 500-600 bps headwind related to the divestiture of the logistics business, revenues are expected to grow in the mid to high-twenties on a year-over-year basis.

The gross margin is expected to increase by 150 bps sequentially.

Operating expenses are expected to increase at a low-teens percentage rate sequentially.