10-KPeriod: FY2019

SHOPIFY INC. Annual Report, Year Ended Dec 31, 2019

Filed February 12, 2020For Securities:SHOP

Summary

Shopify Inc. (SHOP) filed its 2019 Annual Report on Form 40-F on February 11, 2020, providing an overview of its financial and governance practices for the fiscal year ended December 30, 2019. The report emphasizes the effectiveness of the company's disclosure controls and procedures and internal controls over financial reporting, as attested by management and audited by PricewaterhouseCoopers LLP. This indicates a commitment to accurate financial reporting and transparency. The company also outlines its corporate governance structure, including its Audit Committee composition and the designation of an audit committee financial expert. Shopify's adherence to its Code of Conduct and the auditor's independence, supported by the Audit Committee's pre-approval process for services, further bolsters investor confidence. While specific financial performance metrics are detailed in referenced exhibits (Audited Consolidated Financial Statements and MD&A), this filing focuses on the foundational aspects of reporting integrity and corporate oversight.

Financial Highlights

46 data points
Beta

Revenue

$1.58B

54.9% Gross Margin

Net Income

-$124.84M

-7.9% Net Margin

EPS (Diluted)

$-0.11

Total Assets

$3.49B

Cash & Equivalents

$649.92M

Free Cash Flow

$13.86M

Financial Statements
Beta
Revenue$1.58B
Cost of Revenue$712.53M
Gross Profit$865.64M
R&D Expenses$355.01M
Operating Expenses$1.01B
Operating Income-$141.15M
Interest Expense$0
Net Income-$124.84M
EPS (Basic)$-0.11
EPS (Diluted)$-0.11
Shares Outstanding (Basic)1.13B
Shares Outstanding (Diluted)1.13B

Key Highlights

  • 1Effective Disclosure Controls and Internal Financial Reporting: Management and independent auditors affirmed the effectiveness of Shopify's internal controls over financial reporting as of December 30, 2019, with no material weaknesses identified.
  • 2Strong Corporate Governance: The company maintains a dedicated Audit Committee with independent directors, including a designated audit committee financial expert, ensuring robust financial oversight.
  • 3Auditor Independence Maintained: PricewaterhouseCoopers LLP's independence as auditor was maintained, with the Audit Committee closely monitoring and pre-approving all services provided, ensuring objectivity.
  • 4Code of Ethics in Place: Shopify operates under a comprehensive Code of Conduct applicable to all employees, officers, and directors, promoting ethical business practices.
  • 5Adherence to Foreign Private Issuer Status: As a Canadian company, Shopify utilizes exemptions permitted under Canadian law for NYSE listing requirements, particularly concerning quorum for shareholder meetings, while otherwise complying with NYSE rules.
  • 6No Material Off-Balance Sheet Arrangements: The company states it has no material off-balance sheet arrangements beyond standard operating leases, simplifying its financial structure for investors.
  • 7Significant Increase in Audit Fees: Audit fees paid to PricewaterhouseCoopers LLP increased substantially from $764,000 in 2018 to $1,133,000 in 2019, reflecting growth and potentially increased audit scope.

Frequently Asked Questions

This Form 40-F filing serves as Shopify Inc.'s annual report for the fiscal year ended December 30, 2019. It provides crucial information regarding the company's disclosure controls, internal financial reporting integrity, corporate governance structure, and auditor independence, all of which are vital for investor assessment of financial reporting reliability and corporate oversight.

Yes, the report states that both management and the independent registered public accounting firm, PricewaterhouseCoopers LLP, have assessed and concluded that Shopify's internal control over financial reporting was effective as of December 31, 2019. No material weaknesses were identified.

Shopify's Audit Committee is responsible for overseeing auditor independence. They pre-approve all audit and non-audit services provided by PricewaterhouseCoopers LLP, assessing potential conflicts and ensuring that the services and related fees do not impair the auditor's independence. The company also limits the provision of non-audit services by its auditors.

As a Canadian foreign private issuer, Shopify has elected to comply with certain Canadian corporate governance practices instead of specific NYSE rules. Notably, they use a lower quorum requirement (25% of shares entitled to vote) for shareholder meetings compared to typical U.S. domestic issuers on the NYSE. The company may utilize other foreign private issuer exemptions in the future.