Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Shopify Inc  (NYSE:SHOP)
Q1 2019 Earnings Call
April 30, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, my name is Lisa and I will be your conference operator today. At this time, I would like to welcome everyone to the Shopify Q1 2019 Financial Results Conference Call. (Operator Instructions). Thank you, Katie Keita, Head of Investor Relations, you may begin your conference.

Katie Keita -- Senior Director, Investor Relations

Thank you, operator and good morning everyone. We are glad you can join us for Shopify's first quarter 2019 conference call. We are joined this morning by Tobi Lutke, Shopify's CEO, Harley Finkelstein, our Chief Operating Officer and Amy Shapero, 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 US 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 US dollars, all amounts discussed today are in US dollars unless otherwise indicated.

With that I turn the call over to Harley.

Harley Finkelstein -- Chief Operating Officer

Thanks Katie and good morning. Shopify is off to a great start in 2019 delivering strong results in our first quarter. Merchants of all types and all stages of the commerce journey continue to start grow and successfully run businesses on Shopify. From early stage entrepreneurs to establish 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 interests of our merchants at the center of everything we do. Today, I would like to focus my comments on three areas. Our platform, Shopify plus and our partner ecosystem. We continue to strengthen our core platform in the first quarter 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 and we targeting tool that we have built into merchants marketing dashboard, which means that smaller merchants can save valuable time creating ads reach more potential buyers and increased 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, while we built Shopify Pay. Shopify Pay which is our own accelerated checker product has expanded rapidly since its launch two years ago. $3.4 billion 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 million buyers opting in, the number of orders processed on Shopify Pay has also more than doubled year-over-year to over 10 million transactions in the quarter.

Shopify Pay is quickly becoming one of the best ways for buyers to check out online, and more importantly, it is making checkouts faster for our merchants. On a personal note, it should be less than 20 seconds to buy my latest pair of (inaudible) 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 have ever experienced. Multi-channel selling remains one of our core value propositions, one that is evolving with the merging 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.

In line 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 is 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 in our platform without any limitations. Merchant adds in the first quarter, which is typically a slower period nearly matched merchant adds in our fourth quarter typically a stronger period. This momentum reaffirms the strength of Shopify plus is 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 launch this quarter included fashion labels such as Betsey Johnson, Levi's and Hudson Jeans. Celebrity brands like Reese Witherspoon, 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 & Johnson and Procter & Gamble. We remain focused on further solving the business complexity experienced by company selling its scale by understanding the specific needs of these businesses and improving our product market fit.

In our first quarter, 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 still early, multi-currency has gotten off to a solid start and is a great example alongside fraud protect at the multiple ways we are able to add incremental value to our merchants. And finally, turning to our partners, our partners play 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 2700 and a growing number of our partners need to recommend and build on Shopify with more than 19,000 partners having referred merchant to Shopify over the past 12 months.

Over the years, we have built a healthy community of partners that have added tremendous support and value to our merchants. It took us nine years to pay the first $100 million to app developers and just 12 more months to double that number to $200 million 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 a product roadmap and keep working toward the 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 toward long-term health and success.

Amy Shapero -- Chief Financial Officer

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 $320.5 million. Subscription solutions revenue expanded 40% to $140.5 million driven by monthly recurring revenue growth of 36% to $44.2 million. We achieved record net new MRR in Q1 driven by strong merchant adds across our core and plus subscription plans. The pace of merchant adds from international accelerated in Q1 powering net new core MRR while plus merchant growth also increased its contribution to MRR, accounting for $11.3 million 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 million. This growth was driven by GMV expansion, which increased 50% year-over-year to $11.9 billion, 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.

$4.9 billion of GMV was processed and Shopify payments in Q1, an increase of 65% versus the comparable quarter last year. Shopify payments penetration of GMV grew to 41% in the first quarter 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 mix of credit cards in the Q1 versus Q4 as well as by 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 first quarter, surpassing $500 million 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 one third of eligible merchants in the comparable period last year. Gross profit dollars grew 46% from Q1 of 2018 to $180.3 million 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 $1.4 million or 0.4% of revenue compared with $0.2 million or 0.1% of revenue in the first quarter 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 $10.3 million or $0.09 per share over income of $4.2 million or $0.04 per share the same period last year. Mainly, our cash, cash equivalents and marketable securities balance was approximately $2 billion generally consistent with the balance at the end of 2018.

Inspiring entrepreneurship, removing barriers to commerce and helping merchants thrive in a competitive environment, our core to our merchant first philosophy, all of which our investment focus areas aim 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 in Shopify brand starting with international.

Momentum continued to build on our international efforts in the first quarter as we further localize the platform to improve product market fit translated the partner dashboard in the 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 margins 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 margins 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 and 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 are 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 million of brand spend will now be largely distributed over the last 3 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 have released a range of pieces featuring the struggles and triumphs of Shopify merchants and exploring stance in Commerce such as women and entrepreneurship and the hidden layers of commerce behind everyday industries and products.

We have had an incredible response to the content published today and we are excited to continue telling these stories that demonstrate the spirit and resilience of entrepreneurs. All in we are pleased with our performance in the first quarter and expect a momentum with which we have 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 $1.48 billion to $1.5 billion and an adjusted operating income ranging between $20 million and $30 million. For the second quarter, we expect revenue of $345 million to $350 million and an adjusted operating loss between $6 million and $8 million.

Stock based compensation in 2019 is still expected to be approximately $160 million for the full year with about $40 million of this in the second quarter. Our growth vectors 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 or all the right ones that we are confident will continue to attract merchants to Shopify, increase our share of wallet and power merchants success well into the future.

With that, I will hand the call back to Katie.

Katie Keita -- Senior Director, Investor Relations

Thank you, Amy. Before we launch into your questions, I would like to remind everyone to please limit yourself to one question, that way we will have time to take a question from each listener today. With that lease back can we have our first question.

Questions and Answers:

Operator

(Operator Instructions) Our first question comes from the line of Brad Zelnick from Credit Suisse. Your line is open.

Brad Zelnick -- Credit Suisse -- Analyst

Excellent, thanks so much and congrats on a great start to the year and all the innovation that is happening at Shopify. Harley, we noticed some of your largest customers are now using Instagram checkout, how should we think about the balance of co-operation and competition with some of your largest partners?

Harley Finkelstein -- Chief Operating Officer

Hey, Brad. Thanks for that question. We have always said this, with every new channel that comes to market, whether it is 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 you know 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 which Shopify does is retail operating system is allow our merchants to run across as many channels they want. From an economics perspective, of course, we also make sure that we capture economics for rev shares with our partners that we allow our merchant 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.

Brad Zelnick -- Credit Suisse -- Analyst

Awesome, thank you .

Operator

Thank you, Brad. Our next question comes from the line of Ken Wong from Guggenheim Securities. Your line is open.

Ken Wong -- Guggenheim Securities -- Analyst

Brad, thanks a lot for taking my question. Yeah, I saw you guys launched a new Tap and Chip Reader and also some new POS hardware, can you maybe just give us, 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 Clever?

Harley Finkelstein -- Chief Operating Officer

Yeah, I can (inaudible). It is a really important part of our business. The second largest channel after online store clearly, So and it is something we wanted to do really well for long time, but it is just you know we are just sort of getting like growing into the size of the company, where we can be focused on multiple things at the same time. So, you saw a lot of things our own point of sale and you have 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, you know remember Shopify started after I tried to build an online (inaudible) store, which was a little bit early for our new business started online, but this is now the norm. We see a lot of our customers starting new businesses, many of the larger stores are less than 10 years old and as everyone is looking around for opportunities you know internet marketing is starting to get pretty pricey and finally enough expanding offline. So to speak, expanding to brick and mortar is starting to look really good from a cost acquisition perspective. So there is 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 through Harley's point. You need a unified system to run a business across multiple channels. It is really, really very difficult to add a new channel in the old model of signal but we used to call them signal instance software or whatever like just separate software for different channels as less than on before Shopify came around. So we want to support this move offline as a business strategy, make this pretty easy and allow our merchants to have just like look really, really good in their retail stores.

Brad Zelnick -- Credit Suisse -- Analyst

Thanks, Ken.

Operator

Our next question comes from the line of Colin Sebastian from Robert Baird. Your line is open.

Colin Sebastian -- Robert Baird -- Analyst

Thanks, all and my congratulations on the strong start to the year. Just a question on the gross margin in Merchant Solutions that kept a bit, so was just hoping you could describe some of the main 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.

Amy Shapero -- Chief Financial Officer

So good morning, Colin. With respect to Merchant Solutions margin in the first quarter, we did see pretty consistent performance quarter-over-quarter, but we did see a decline year-over-year from the first quarter of 2018. If you recall in the first quarter of 18, 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 second quarter an improvement in merchant solutions margins as we see some volume discounts kick in. So I think you will see that start to shift in the second quarter.

Colin Sebastian -- Robert Baird -- Analyst

Thank you.

Operator

And our next question comes from the line of Kevin Krishnaratne from Paradigm Capital. Your line is open.

Kevin Krishnaratne -- Paradigm Capital -- Analyst

Hey, there. Good morning. Very encouraging pace of adds in international. Are you able to talk about any changes in merchant metrics in your international markets as you are rolling local payments on language, I am thinking any commentary on changes to GMV per merchant, ARPU or even things such as merchant engagement on the platform?

Amy Shapero -- Chief Financial Officer

I can talk about some of the metrics. You know as you can imagine, when you are entering new markets, yeah we are working on product market fit and that is why we are investing heavily in localization in some key markets. You know 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 you know it is prevalent, it is limited and some markets are non-exist and some other markets, but over time we think those will migrate more toward what we are seeing in our core, merchants in our core geographies. In terms of usage of the the platform and you know Harley if you want to add anything, but you know we are seeing a significant over 100,000 merchants using the platform in a language other than English so we think it is very encouraging, the continued attraction to the platform and the new languages that we have rolled out.

Harley Finkelstein -- Chief Operating Officer

I think it is important to remember that Shopify and its core markets is a product that has been working on broad market fit for 15 years and in any given markets, it might be less than a year. So it is going to take a while to get fully up to speed. You know I use Shopify in Germany right now which is clear that if I can do that and it is you know it is really good but every once a while, I said alone no to the team, saying, hey, this part is a little bit funny levered it and so on so. It is a process all the metrics that go up as the product matures in any individual market.

Kevin Krishnaratne -- Paradigm Capital -- Analyst

Thank you very much and again congrats on a good quarter.

Amy Shapero -- Chief Financial Officer

Thanks, Kevin.

Operator

Our next question comes from the line of Darren Aftahi from Roth Capital Partners. Your line is open.

Darren Aftahi -- Roth Capital Partners -- Analyst

Hey good morning. Thanks for taking my question and congratulations. I Just wanted to ask you kind of called out strength in both existing and upgrades on plus and just kind of curious whether that mix skewed toward existing client upgrades or new clients in the platform quarter? Thanks.

Harley Finkelstein -- Chief Operating Officer

Hey Darren. I will take the question. It is Harley. As usual, we are seeing majority of the new adds to Plus come from new to the platform. That being said, it is 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 are seeing not only large CPGs are building specific brand stores, but we are seeing companies like Levi's and Betsey Johnson and Hasbro comes like (inaudible) sold direct consumer before and we are seeing that that will happen on Shopify Plus which is really great for us.

And so I think you will continue to see the majority of the Plus adds come from net new which is great, but we have a very healthy upgrade path, which is really what, it is really important as we want to make sure that the home-grown success stories have a place to grow into as they get really big on Shopify, they never have to leave and I think we have done a good job of that.

Amy Shapero -- Chief Financial Officer

Thanks, Darren.

Operator

Our next question comes from the line of Justin Furby from William Blair & Company. Your line is open.

Justin Furby -- William Blair & Company -- Analyst

Thanks, guys, and nice start to the year. Harley, I guess maybe for you it seems like revenue from the third party apps had another really solid quarter and as that becomes a bigger and more important contributor to growth. I am just wondering how your discussions with partners around monetizing the platform has evolved from over the last few years? Thanks.

Harley Finkelstein -- Chief Operating Officer

Thanks for the question. Yeah, 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 clear market strategy for any applications or third parties that are building applications and software for the retail and for the commerce space. So we are really excited about that. One number, that of course I said about earlier was that it took us you know a long time to get to almost 9 years to get to $100 million in paid out app store rev share and it has taken us 12 months to get to that second 100 million to get us to $200 million. So I think that is 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 the working experience is always you know the best it can be and generally, we have had a really great, really great discussion and dialog with these partners to ensure that that continues.

So I do not think there will be any slowdown there. We have 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 are doing really well. I mean, then of course the referral side, you know in the last 12 months, we have seen 19,000 partners bringing new merchants (inaudible) to Shopify which is really fantastic and so that will continue to grow.

Justin Furby -- William Blair & Company -- Analyst

Great, thank you.

Amy Shapero -- Chief Financial Officer

Thank you, gentleman.

Operator

Our next question comes from the line of Samad Samana from Jefferies. Your line is open.

Samad Samana -- Jefferies -- Analyst

Hi, good morning. Thanks for taking my questions. Great quarter. So Amy, we saw on the company's website that Shopify is paying one-and-a-half times the standard revenue share to partners. So 30% into perpetuity and 20% for stores in international, I think, Germany, France, Japan and Singapore. So I am curious if that is been a factor in driving the acceleration international ads and how long the company plans on keeping that higher commission payout rate going and any thoughts would be helpful? Thank you.

Harley Finkelstein -- Chief Operating Officer

Yeah, from a prudent perspective, obviously we mentioned earlier that we have gone ahead, we done things like translated to Parker 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, Shopify in our sort of English-speaking countries, we think that is going to be the case or nationally too. So we are making easier for them and only learned 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 are talking to them in their language that they speak that is all really important.

The other thing that you will probably see, as you see more experimentation and certain geographies will decide that we want to go ahead and 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 continue to learn more about different partners in different geographies, and so we want the freedom to experiment as we need.

Operator

Great, thanks Samad. Our next question comes from the line of Deepak Mathivanan from Barclays. Your line is open.

Deepak Mathivanan -- Barclays Capital -- Analyst

Hey guys, thanks for taking the questions. Following on Brad's question from earlier, without government into specifics, how different is the economics when a merchant uses Instagram checkout ways is your own checkout solutions like Shopify Payments and then on a related note, how big is the volume for your margins, generate through Instagram currently? Thank you so much.

Harley Finkelstein -- Chief Operating Officer

Hey, it is Harley, I will take the question again. So as I mentioned earlier, we think more channels whether their social media marketplaces or social media platforms or their marketplaces that means our merchant can sell more and so, although we does not necessarily come, you know it may not be (inaudible) to Shopify Payments. What we do is 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 into the marketplaces. Now we ensure that we have economics in place at that therefore, we can capture upside as well. So it does not necessarily fall to the same revenue bucket per say but certainly it does allow us to capture upside when we talk to these partners, and while I cannot go into specifics on individual partner agreements, just it is important to know that we had economics in place that allow us to grow when our partner sells, when our merchants sells more.

Operator

Great, thanks Deepak. Our next question comes from the line of Ross MacMillan from RBC. Your line is open.

Ross MacMillan -- RBC Capital Market -- Analyst

Thanks so much and my congratulations as well. Thanks for all the detail on international. Amy, I think you mentioned Chinese language so presume Mandarin support and we noticed that you have been hiring locally in China or it maybe a limited basis, but nonetheless hiring there. I am just curious either from Tobi 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.

Tobi Lutke -- Chairman of the Board, Chief Executive Officer, Co-Founder

Yeah. Okay, I will take the question. Better start (inaudible), so what we are seeing basically, I mean we are seeing a lot of interesting things in China, you know it is ton of like as a product person. I think it is 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 is booking excellent is export in China right. There is a lot of Chinese brands now (inaudible) which are trying to go global and to so directly and so we have uplift them. They are seeing significant success using the Shopify platform just because I mean obviously we are clever, people are already using us all around the world, so which is exactly the need that Chinese exporters are looking to get referred and so is a market which we are looking at.

Operator

Thanks a lot, Ross. Our next question comes from the line of Josh Beck from KeyBanc. Your line is open.

Josh Beck -- KeyBanc -- Analyst

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?

Tobi Lutke -- Chairman of the Board, Chief Executive Officer, Co-Founder

Yeah, I mean that is pretty much exactly, we want again, what Shopify does the best I think and usually when Shopify becomes more important for our customers and get more customers over switching and so on. It is when you take something that is really, really hard to make it somehow easier because really, I mean, basically, at certain point on that, just wanted to be saying they want to run global wildly profitable business right and so especially around Global that is hard, it is reference out for us. We have 5,000 people company something like this and we are trying to go global, sales of our product and our customers wanting to do it exactly the same thing. Now it is a little bit of different issue but cross border selling is you know the serious challenge and accepting currencies around the world is serious challenge and showing up in the right language is probably going to think so. This is new process not going to be done overnight, but like helping our customers go globally themselves and writing (inaudible) a little bit on everything we have been figuring out on our own journey as 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 have tempted and then give up on and instead make it easy enough to be viable for more and more merchants which perhaps helps them grow and which been because the way our business model books and so aligned with them and so benefiting us again all something, we want to take that seriously and multi-currency is one of those things and it is seeing uptake of course, the Plus initially because most of the people who will need this the most and it will go from there.

Josh Beck -- KeyBanc -- Analyst

Very helpful. Thanks for the call.

Katie Keita -- Senior Director, Investor Relations

Thanks Josh.

Operator

Our next question comes from the line of Koji Ikeda from Oppenheimer. Your line is open.

Koji Ikeda -- Oppenheimer & Company -- Analyst

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 million buyers opting in 10 million transactions in the quarter on Shopify Pay with either double and that is just really tremendous and just building on that at a high level, what is the right way to think about those 2 data points is the mix of overall buyers and overall transactions? Thank you.

Harley Finkelstein -- Chief Operating Officer

Yes. So I mean the reason we brought it up as we have not really talked too much about Shopify Pay in the past. What we are trying to do is create as little friction as possible to check for our merchants and we realize 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 is by allowing these consumers to opt into Shopify Pay, 30 million buyers opting in is obviously really great. We are happy to see that number, but 3.4 billion in GMV and 10 million transactions in the past quarter alone, which as you mentioned is double 2008 is really exciting for us. So I would say Shopify Pay still something that we are excited about. It is something that we are just starting to lean into a little bit, but ultimately what is the reason we are doing it is because it makes check it so frictionless and as I mentioned in my own experience when even try to sell like go buy a pair of sneakers up the Albert 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 we will end up happening is works, we will see more sales, and consumers will come to expect that that is how good experience can be when buying often online store.

Tobi Lutke -- Chairman of the Board, Chief Executive Officer, Co-Founder

And I want to add to the Shopify Pay thing you know 800 something thousand 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 in these kind of things. Increasingly that and we will be super, super careful that those kind of things, but increasingly we are ways fast to use that grouping of people, and the real point behalf to advantage of our everyone on the platform, because we want increasingly there to be advantage for every individual that there are so many others. I am sort of (inaudible) around the term network effects because I just that feels and this feels a little bit different network effect sort of more on the social media side and usually have lower key factor when what I am talking about here but Shopify Pay is one of our ways, that is really works on this way right, like you start a new store tomorrow, you are selling something very exciting and we have 30 million people now who have been any of them show up on your store which did not exist yesterday and they decide they would like to buy this product of yours, can checkout with the single click. You know that is something that is simply not accessible anywhere and therefore it is powerful for a platform the other place like this usually around things like you know fraud protecting and so that really benefit individual store from all the data we see across the system and so on, but we are looking for these kind of effects and productizing them is very successful so far.

Koji Ikeda -- Oppenheimer & Company -- Analyst

Thank you very much.

Operator

Our next question comes from the line of Ygal Arounian from Wedbush. Your line is open.

Ygal Arounian -- Wedbush -- Analyst

Hey, good morning guys. So on Shopify's 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 are coming from other e-commerce software platforms, if there are new to online, if they are coming from internal platforms or competitor platforms and then how you think about the value you offer our merchants versus the ASP of your packages, maybe both on the non-plus and the plus side? Thanks.

Tobi Lutke -- Chairman of the Board, Chief Executive Officer, Co-Founder

Yeah, I will 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 the value and we are doing that because we think there is 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 certainly that equation is certainly on the side of value versus cost and that is 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 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 they wanted to functionality we were offering you know the data that they heard about Apple Pay, they want to be able to use Apple Pay, then they want to use Shopify Pay as well. So, and they are also looking to do things that are, that are more affordable because somebody is large enterprise e-commerce platforms as you know very well are very, very expensive.

In other cases, like the P&G's and Johnson & Johnson, these are big CPGs that for the first time ever are going direct to consumer with individual brands and we have created a relationship with these big CPG, so that is a very easy for them and almost frictionless for them to stand up new stores on Shopify Plus. So I would say there is a variety of those cases where they are coming, they are migrating to us from other existing enterprise platforms, they have never sold before or perhaps they have only sold offline and now they are 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 are getting merchants from all, 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 is still in terms of cost of value, it is still very much in the side of value. We want to make the on-boarding and the starting of the business as easy as possible and is supportable as possible and by making sure that the cost of it is you know couple Starbucks a month, it means that anyone that has ambitions in sort of business on Shopify and that is really important to us.

Ygal Arounian -- Wedbush -- Analyst

Thank you so much.

Operator

Our next question comes from the line of David Hynes from Canaccord. Your line is open.

David Hynes -- Canaccord -- Analyst

Hey, thanks guys, and congrats on the quarter. I want to ask about some of the content initiatives like Shopify studios, the brand campaign if you talked about, I guess the basic question is you know why is now the right time for that, I mean that do you feel like the products gotten to a certain point where it makes sense to put more money behind the brand or I cannot imagine it is being driven by competitive dynamics, but maybe just talk about kind of why now and how you are thinking about measuring ROI on the spend in the early days?

Tobi Lutke -- Chairman of the Board, Chief Executive Officer, Co-Founder

Yeah, why now is we feel confident that can put it off right now, like it is a funny dynamic because it is so little on that talked about but as someone who has build a company from you know first line of code, it is one of the under-appreciated effect and company building as focused management and Shopify has always been the kind of company which would not have staff because of the lack of opportunities, but would have died by indigestion of us trying to do to many things for the same time and so this is why this is such a fun part of a you know company building at this point that we are now because they can be focused on multiple things at the same time. Second, I may bring this up now because it actually really does matter. On the studio side like we telling the story about of what happens, what it looks like of building some of these businesses, it is just really important to the business, because what we find is so many people would like to be entrepreneurs, but just do not have an understanding of what the entire process looks like, demystifying this through you know (inaudible) approach of storytelling, it is just the best way to do this and we think we will absolutely increase participation in this market, but just exposing people to other people stories who can do this. You know my grandmother had a printing shop and she started this and I always spent time there when I was a kid and I sometimes wonder if I would have ever even thought about starting of this business, if I would not have been exposed to an entrepreneur by growing up and most people are great in so finding other ways to do this is I think good. Taking this to ROI yeah it is a tricky thing right like brand marketing is hard to quantify, this is precisely the reason why we did not do it fairly we have rather mass heavy company right we will have feedback loops. We are confident in long term feedback loops that is I think has been a advantage of Shopify over the long term. We are OK that fuzzy attribution, so we have been 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 like to be able to back out the good things that happen. So brand marketing requires a wall of more safe, then this and then there is a wall of more fuzzy in attribution and this is something we, I have to learn how to deal this and so far it has been good I would say (inaudible).

David Hynes -- Canaccord -- Analyst

Yeah that's helpful. Thanks guys.

Amy Shapero -- Chief Financial Officer

Okay. Thank you, David.

Operator

Our next question comes from the line of Mark Zgutowicz, from Rosenblatt Securities. Your line is open.

Mark Zgutowicz -- Rosenblatt Securities -- Analyst

Good morning. Thank you. So we maybe just a quick follow-up on that last question, you know specific to maybe plus or non-plus merchants on the branding side. I am just curious if there might be you know two or three specific KPIs, you are looking at because obviously as the last question alluded to, you obviously have considerable brand strength. So I am just curious if there is a maybe one or two focal points that branding campaign might be you know point to?

Tobi Lutke -- Chairman of the Board, Chief Executive Officer, Co-Founder

I love to give you something specific. I mean maybe Amy can jump in there.

Amy Shapero -- Chief Financial Officer

I can jump in there a little bit. So we have studied our unaided brand awareness and you know it is not as high as we would like it to be. So that is obviously something we are going to watch carefully to see if it moves the needle but we are very focused on continuing to monitor carefully our fully loaded cost of acquisition as well as our LTV and you know LTV has been moving up over time as we brought on more Plus merchants which is 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 are going to be watching very closely to see if our top of funnel widens through the brand campaign in 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 are confident over the long term that this sort of investment will pay off.

We also really confident on the international side based on the learnings over the past sort of 18 months that in the markets where we are localizing we have seen where our brand awareness is higher, our actual marketing acquisition dollars, are more efficient and that is obviously what we are 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 you know for the domestic and core geos where we have been operating for some time, but some of that will be for the international growth as well.

Mark Zgutowicz -- Rosenblatt Securities -- Analyst

Thank you, very helpful.

Operator

Our next question comes from the line of Brian Peterson from Raymond James, your line is open.

Brian Peterson -- Raymond James -- Analyst

Hi, thanks for taking the question. So just wanted to hear on some of your past success this quarter, it sounds like you are adding a lot more merchants and you expected. I am curious, can you bifurcate that a little bit into actually getting in front of more customers or we also seeing when rates improve?

Amy Shapero -- Chief Financial Officer

And yeah, so yeah, I would really attribute this success to a maturing sales team at Plus and you know as they continue to mature, their reach and their rates are continuing to improve and so we are excited about the number of new merchants that they are reaching and bringing in you know it is early mentioned, the first quarter tends to be a seasonal low, at least historically for parts in terms of new merchants and we saw you know a very strong growth versus the first quarter of last year and maintaining almost at the same level as the fourth quarter, so these efforts are working with the Plus team.

Katie Keita -- Senior Director, Investor Relations

Thanks, Brian.

Operator

Our next question comes from the line of Todd Coupland from CIBC. Your line is open.

Todd Coupland -- CIBC -- Analyst

Yeah, good morning everyone. Just want to make sure I am interpreting your international commentary in the right way. So you are basically saying it is 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 going to take a couple of years before it starts to materially impact the results, any color on that would be helpful? Thanks.

Amy Shapero -- Chief Financial Officer

Yeah. we are obviously delighted with our first quarter performance in terms of merchant growth especially with you know with respect to international, is new we have only been investing there for a little over a year and the sustainability of that of that growth comes down to you know how well we continue that momentum. It is early days in international we are still learning but you know we feel really positive with our continued investments in international and brand. So we are optimistic and that is one of the reasons why we increased our guidance for 2019.

Todd Coupland -- CIBC -- Analyst

Thank you .

Katie Keita -- Senior Director, Investor Relations

Thanks, Todd.

Operator

Our next question comes from the line of Brian Essex from Morgan Stanley, your line is open.

Brian Essex -- Morgan Stanley -- Analyst

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 you know from the vendor relationship perspective, now that you kind of have an established brand out this year meaningful vendor in the marketplace relative to kind of, when we did the IPO. What are the vendor relationships on the payment side like internationally and in the economics that you can bargain for as you penetrate new markets, do you think that payments market margins internationally might be able to hit much higher margin rates and maybe you can throw a commentary and customer mix internationally as well large versus small and how that might impact margins specifically on the payment side? Thank you.

Amy Shapero -- Chief Financial Officer

Well, just generally on the international Payments side, you know keep in mind, it is still early days we are continuing to add new markets, you know 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 in 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 is not the case in all markets but it is typically higher and I think that is kind of where we are comfortable saying at this point based on learnings.

Brian Essex -- Morgan Stanley -- Analyst

Any insight on customer mix and how that might affect it?

Amy Shapero -- Chief Financial Officer

Large versus small well right now. Yeah, 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 are seeing internationally is with our standard core subscriptions. So they tend to be on the smaller side, which is why GMV for merchant and take you know take rate is little bit smaller and will increase over time, but we are seeing nice adoption of international payments by these smaller more entrepreneurial merchants and you know we think we are on a good path forward.

Brian Essex -- Morgan Stanley -- Analyst

Great , thank you very much.

Operator

Our final question today comes from the line of Richard Tse from National Bank Financial. Your line is open.

Richard Tse -- National Bank Financial -- Analyst

Yes, thank you. On the international side, do you think those markets that use (inaudible) from the regions at year-end earlier, are those markets very different?

Harley Finkelstein -- Chief Operating Officer

So one of things we have learned about this market is there are some that are sort of bits that looks similar, obviously some places in Western Europe. Some have some similarities, but obviously doing things in Germany is very different doing things in Japan, and that is even as far as you know the way that how we present the landing page to prospective merchant in a place like Japan will typically be all on one page as opposed to having a multiple pages, which we would probably do for more North American or even Western Europe type merchant. So there are nuances to it. That is 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 that right payment providers for them in those regions. We also want make sure the right product for them. So for example there where they want to sell may be different in terms of new channels, maybe 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 is important to have deep empathy for merchants and each specific country is because there needs to differ and we want to help them with product market fit, no matter where we are offering our services.

Richard Tse -- National Bank Financial -- Analyst

Okay, thank you.

Katie Keita -- Senior Director, Investor Relations

Thanks Richard.

Operator

I will now turn the call back to the presenters for closing remarks.

Katie Keita -- Senior Director, Investor Relations

Alright. Thanks everybody for dialing in today and have a great rest of your day.

Operator

This concludes today's conference call. You may now disconnect.

Duration: 57 minutes

Call participants:

Katie Keita -- Senior Director, Investor Relations

Harley Finkelstein -- Chief Operating Officer

Amy Shapero -- Chief Financial Officer

Brad Zelnick -- Credit Suisse -- Analyst

Ken Wong -- Guggenheim Securities -- Analyst

Colin Sebastian -- Robert Baird -- Analyst

Kevin Krishnaratne -- Paradigm Capital -- Analyst

Darren Aftahi -- Roth Capital Partners -- Analyst

Justin Furby -- William Blair & Company -- Analyst

Samad Samana -- Jefferies -- Analyst

Deepak Mathivanan -- Barclays Capital -- Analyst

Ross MacMillan -- RBC Capital Market -- Analyst

Tobi Lutke -- Chairman of the Board, Chief Executive Officer, Co-Founder

Josh Beck -- KeyBanc -- Analyst

Koji Ikeda -- Oppenheimer & Company -- Analyst

Ygal Arounian -- Wedbush -- Analyst

David Hynes -- Canaccord -- Analyst

Mark Zgutowicz -- Rosenblatt Securities -- Analyst

Brian Peterson -- Raymond James -- Analyst

Todd Coupland -- CIBC -- Analyst

Brian Essex -- Morgan Stanley -- Analyst

Richard Tse -- National Bank Financial -- Analyst

More SHOP analysis

Transcript powered by AlphaStreet

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.