01—Abstract
Summary
Summary of the 40-F filed February 17, 2021. Cited figures are marked; the original filing is the authoritative source.
Shopify Inc. (SHOP) filed its annual report on Form 40-F for the fiscal year ended December 31, 2020.
This filing indicates robust internal controls over financial reporting, with both management and PricewaterhouseCoopers LLP attesting to their effectiveness and the absence of material weaknesses. The company is a foreign private issuer and has elected to comply with Canadian law regarding quorum requirements for shareholder meetings, which may offer less protection than typical NYSE rules. While no material off-balance sheet arrangements were disclosed beyond operating leases, the company has an established Audit Committee, with a designated financial expert, overseeing financial reporting and auditor independence.
02—Key points
Key Highlights
- Shopify Inc. reported effective internal control over financial reporting as of December 31, 2020, with no material weaknesses identified by management or the independent auditor.
- PricewaterhouseCoopers LLP, the independent registered public accounting firm, audited and attested to the effectiveness of Shopify's internal control over financial reporting.
- The company's Audit Committee is composed of three independent directors, with Colleen Johnston identified as an audit committee financial expert.
- Shopify is a foreign private issuer and adheres to Canadian corporate law for quorum requirements at shareholder meetings, which differs from standard NYSE regulations.
- Aggregate fees paid to PricewaterhouseCoopers LLP for fiscal year 2020 were $1.502 million, primarily for audit fees, an increase from $1.136 million in fiscal year 2019.
- No material off-balance sheet arrangements were disclosed, other than operating leases, which are detailed in the referenced Management's Discussion and Analysis.
- The Audit Committee has policies in place to pre-approve all services provided by the independent registered public accounting firm to ensure auditor independence.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Shopify Inc. kept $0.11.
- Revenue$2.93B100.0%
- Cost of revenue−$1.39B47.4%
- Gross profit$1.54B52.6%
- Operating costs−$1.45B49.5%
- Operating income$90.2M3.1%
- Interest, other & tax$229.4M7.8%
- Net income$319.5M10.9%
Where FY2020 revenue went
$2.93B- Cost of revenue: $1.39B, 47% of revenue
- Other operating costs: $899.2M, 31% of revenue
- R&D: $552.1M, 19% of revenue
- Operating income: $90.2M, 3.1% of revenue
Kept 3.1% as operating incomeOperating income $90.2M · 3.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 17, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $2.93B$1.58B | +85.6% |
| Cost of Revenue | $1.39B$712.53M | +94.8% |
| Gross Profit | $1.54B$865.64M | +78.1% |
| R&D Expenses | $552.13M$355.01M | +55.5% |
| Operating Expenses | $1.45B$1.01B | +44.2% |
| Operating Income | $90.15M-$141.15M | +163.9% |
| Interest Expense | $9.09M$0 | — |
| Net Income | $319.51M-$124.84M | +355.9% |
| EPS (Basic) | $0.27$-0.11 | +342.7% |
| EPS (Diluted) | $0.26$-0.11 | +335.5% |
| Shares Outstanding (Basic) | 1.20B1.13B | +5.8% |
| Shares Outstanding (Diluted) | 1.23B1.13B | +9.2% |
05—Questions
Frequently Asked Questions
What is the overall assessment of Shopify's internal controls over financial reporting for 2020?
Shopify's management, along with their independent auditor PricewaterhouseCoopers LLP, assessed the company's internal control over financial reporting as effective as of December 31, 2020. Importantly, no material weaknesses were identified.
How does Shopify comply with NYSE listing requirements as a foreign private issuer?
As a foreign private issuer, Shopify has elected to comply with Canadian law regarding quorum requirements for shareholder meetings in lieu of certain NYSE provisions. This means their bylaws require at least 25% of the shares entitled to vote to be present (in person or by proxy) for a quorum, which may provide less investor protection than standard NYSE rules.
What was the total amount paid to Shopify's independent auditor in 2020?
Shopify paid a total of $1.502 million to PricewaterhouseCoopers LLP in fiscal year 2020. This amount primarily covers audit fees ($1.461 million), with a smaller portion allocated to tax fees ($39,000) and other fees ($2,000). This represents an increase from the $1.136 million paid in fiscal year 2019.
Are there any significant off-balance sheet arrangements disclosed by Shopify?
No material off-balance sheet arrangements were disclosed by Shopify, other than standard operating leases, which are detailed in the company's Management's Discussion and Analysis (MD&A) that is incorporated by reference into this filing.
06—Continue