01—Abstract
Summary
Summary of the 40-F filed February 12, 2019. Cited figures are marked; the original filing is the authoritative source.
This 2018 10-K filing for Shopify Inc. (SHOP), filed on February 11, 2019, provides an overview of the company's financial reporting and corporate governance.
Shopify, as an emerging growth company, is primarily reporting on the effectiveness of its disclosure controls and procedures and internal control over financial reporting as of December 31, 2018. Management, along with independent auditors PricewaterhouseCoopers LLP, has affirmed that these controls were effective and that no material weaknesses were identified during the year. The filing also details the composition and independence of the Audit Committee, including the designation of an audit committee financial expert.
Information regarding auditor fees for fiscal years 2018 and 2017 is presented, showing an increase in audit fees primarily related to public offerings. The company confirms it has no material off-balance sheet arrangements beyond operating leases. As a Canadian foreign private issuer, Shopify has elected to follow Canadian law for certain NYSE corporate governance requirements, such as quorum at shareholder meetings, which may offer different investor protections than U.S. domestic issuers.
02—Key points
Key Highlights
- Shopify Inc. reported effective disclosure controls and procedures as of December 31, 2018.
- The company's internal control over financial reporting was deemed effective as of December 31, 2018, with no material weaknesses identified.
- PricewaterhouseCoopers LLP audited and confirmed the effectiveness of Shopify's internal controls over financial reporting.
- Audit fees paid to PricewaterhouseCoopers LLP increased from $600,000 in 2017 to $764,000 in 2018, largely due to services related to public offerings.
- The Audit Committee is composed of four independent directors, with Steven Collins designated as the audit committee financial expert.
- Shopify, as a Canadian foreign private issuer, utilizes exemptions from certain NYSE corporate governance rules, aligning with Canadian law for practices like meeting quorums.
- The company states it has no material off-balance sheet arrangements other than disclosed operating leases.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2018, Shopify Inc. lost $0.06.
- Revenue$1.07B100.0%
- Cost of revenue−$477.0M44.4%
- Gross profit$596.3M55.6%
- Operating costs−$688.2M64.1%
- Operating income−$91.9M8.6%
- Interest, other & tax$27.4M2.5%
- Net income−$64.6M6.0%
04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 12, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $1.07B$673.30M | +59.4% |
| Cost of Revenue | $476.96M$293.05M | +62.8% |
| Gross Profit | $596.27M$380.25M | +56.8% |
| R&D Expenses | $230.67M$136.00M | +69.6% |
| Operating Expenses | $688.19M$429.41M | +60.3% |
| Operating Income | -$91.92M-$49.16M | −87.0% |
| Net Income | -$64.55M-$39.99M | −61.4% |
| EPS (Basic) | $-0.06$-0.04 | −45.2% |
| Shares Outstanding (Basic) | 1.06B957.75M | +10.3% |
05—Questions
Frequently Asked Questions
What is the primary focus of this 10-K filing for Shopify?
This filing's primary focus is on the company's disclosure controls and procedures and internal control over financial reporting as of December 31, 2018. It confirms the effectiveness of these controls and reports on auditor fees and corporate governance matters, particularly those related to Shopify's status as a Canadian foreign private issuer.
Were there any material weaknesses found in Shopify's internal controls during 2018?
No, management and the independent auditor, PricewaterhouseCoopers LLP, assessed the company's internal control over financial reporting and concluded that there were no material weaknesses as of December 31, 2018.
How did auditor fees change from 2017 to 2018?
Audit fees increased from $600,000 in 2017 to $764,000 in 2018. This increase is attributed to services related to the company's public offerings, as well as standard audit services for annual and quarterly financial statements.
What are the implications of Shopify being a Canadian foreign private issuer regarding NYSE rules?
As a Canadian foreign private issuer, Shopify has elected to comply with Canadian corporate governance practices for certain NYSE listing requirements, such as the quorum needed for shareholder meetings. While this aligns with its home country practices, investors should be aware that this may offer different protections compared to U.S. domestic issuers listed on the NYSE.
06—Continue