BigCommerce Holdings, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the BigCommerce fourth quarter and fiscal year 2021 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your first speaker, Daniel Lentz, Head of Investor Relations. Thank you. Please go ahead.

Good afternoon and welcome to BigCommerce's fourth quarter and fiscal year 2021 earnings call. We will be discussing the results announced in our press release issued after today's market close. With me are BigCommerce's president, CEO and chairman, Brent Bellum, and CFO, Robert Alvarez. Today's call will contain forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning financial and business trends, our expected future business and financial performance and financial condition, and our guidance for the first quarter of 2022 and the full year 2022. These statements can be identified by words such as expect, anticipate, intend, plan, believe, seek, will, or similar words. These statements reflect our views as of today only and should not be relied upon as representing our views at any subsequent date. and we do not undertake any duty to update these statements. Forward-looking statements by their nature address matters that are subject to risks and uncertainties that could cause actual results to differ materially from expectations. For a discussion of the material risks and other important factors that could affect our actual results, please refer to the risks and other disclosures contained in our filings with the Securities and Exchange Commission. During the call, we will also discuss certain non-GAAP financial measures. which are not prepared in accordance with generally accepted accounting principles. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, as well as how we define these metrics and other metrics, is included in our earnings press release, which has been furnished to the SEC, is also available on our website at investors.bigcommerce.com. With that, let me turn the call over to Brent.

Thanks, Daniel, and to everyone who's joining us today for our fourth quarter and fiscal year 2021 earnings call. It was an exciting year for our team, and I'm proud of the incredible progress we've made since our IPO in the middle of 2020. On today's call, I will provide updates to our strategic plans, new and current priorities, and recap our notable achievements over the past year. I want to frame our progress against our key priorities and why RA and I are so bullish in about the investments we're making in this business. I'll begin the call with a brief review of Q4 and our 2021 full-year results. Overall, we had another outstanding quarter and year. Revenue increased at $64.9 million, up 50% year-over-year, including $8.4 million from feedonomics. Full-year 2021 revenue grew to $219.9 million, up 44% year-over-year. This represents the fourth consecutive year of accelerating revenue and subscription growth rates. Annual revenue run rate, or ARR, rose to $268.7 million, up 48% year over year. ARR for accounts with annual contract value, or ACV, greater than $2,000, was up 59% year over year to $237.2 million. Our enterprise segment, in particular, posted exceptional growth. ARR from enterprise accounts grew by 72% year-over-year to $172.9 million, and enterprise accounts accounted for 64% of our ARR as of December 31st compared to 56% in 2020. We posted a full-year non-GAAP operating loss of $22.8 million, which was an improvement of nearly 800 basis points in non-GAAP operating margin versus 2020. I would like to highlight our financial progress over the last year. We initially guided to full year revenue of $189 million to $191 million against a non-GAAP operating loss of negative $34.5 to negative $33.3 million in 2021. We finished the year at $219.9 million against a non-GAAP operating loss of negative $22.8 million. far outperforming our original expectations for both top-line growth and full-year operating leverage. On an organic basis, revenue finished at nearly $206 million, surpassing our original guidance by over 8%. To help guide you through how I view our current progress as a company, I want to discuss three specific areas in our business. The pillars of our company strategy, one of which is new that I will introduce today, how we are working to expand our monetization model in a manner congruent with those strategic pillars, and our progress against each strategic priority. We speak often with investors and partners about our first two strategic pillars, open SaaS and disruptive innovation. Our differentiated open SaaS technology approach combines the flexibility and customization potential of open source software with the performance, security, usability, and value benefits of multi-tenant SaaS. This combination helps businesses turn digital transformation into competitive advantage. Whereas our software conglomerate competitors attempt to lock customers into their proprietary suites, we focus on the configurability and flexibility of our open platform, enabling each business to optimize their e-commerce approach based on their specific needs. Our next strategic pillar, disruptive innovation, is the business strategy to extend up market propelled by an ever higher performing product at a lower total cost of ownership than established incumbents. Our R&D efforts build innovative technology that enables high-end merchants to expand faster and further at a much lower cost, while also providing enterprise functionality to the small business base that allows them to grow big without ever having to replatform. Today, I would like to introduce our third and newest strategic pillar, commerce as a service. Commerce as a service is an umbrella term we use to describe our ability to enable technology and agency partners to create and sell customized commerce solutions powered by our platform technology. Commerce as a service encompasses many different use cases and demonstrates the composability and configurability of our platform, not just for merchants, but also for partners who can package and distribute BigCommerce's platform capabilities in unique ways. In Commerce as a Service, either the core commerce platform or integrated components of commerce capabilities are powered by BigCommerce. In short, Commerce as a Service enables partner-driven commerce anywhere. There are a wide range of Commerce as a Service partnerships already in market and in development. I'll highlight a few that have been publicly announced. Our partnership with Wine Direct is an example of tailoring commerce to a category vertical, in this case wineries, served by Wine Direct with commerce powered by BigCommerce. Our partnership with Nuoxatis is an example of integrating commerce powered by BigCommerce into the leading European fulfillment and service capabilities of the CMA-CGM group. A third example is how partners such as Unbound Commerce in the U.S. and J Mango in Europe create commerce-enabled mobile apps powered by BigCommerce. Commerce as a service has grown organically thanks to pull from our partners as they have sought to use our Open SaaS platform to complement and enhance their existing applications or services or to modernize and replace their legacy commerce offerings. We believe this approach is unique to BigCommerce as an Open SaaS platform. As we have often said, we aim to empower our ecosystem, not compete with it. With Commerce as a Service, partners can leverage the dedicated investment we've made in building the world's best open e-commerce platform and couple that with their unique use cases and competitive offerings without concern that we would vertically integrate and compete outside of our core e-commerce platform functionality. We are incredibly excited about the growth this offers to our merchants and partners. Now that we've covered our three strategic pillars, I'd like to address our efforts to expand our monetization model in ways congruent with those pillars. In 2021, we added M&A to our arsenal of growth levers. Feedonomics, our first acquisition as a public company, provided BigCommerce globally leading capabilities for generating demand and selling through the world's leading advertising, social network, and marketplace channels. So far, Feedonomics has been a home run for our company, customers, and partners. Today we'd like to share a major new lever for driving company growth, and that is cross-sell and up-sell enabled by automated billing capabilities that we will release later this year. The first class of products enabled for cross-sell and up-sell will be products and features owned by BigCommerce. Examples include multi-storefront, channel extensions enabled by Feedonomics, and a recently announced acquisition of the leading B2B quoting application, B2B Ninja. The second class of products, that can be up-sold and cross-sold are products licensed from partners. The third and largest class of products for cross-sell and up-sell are third-party applications in our apps marketplace. By utilizing the billing product and APIs currently under development, we will enable these products to be easily added to a single consolidated monthly BigCommerce bill, thereby easing the promotion and adoption of valuable products and features that propel our customers' growth. With this cross-sell and up-sell, BigCommerce will earn direct revenue from our owned and licensed product sales and partner revenue share from third-party applications, thereby growing our aggregate revenue and net revenue retention, or NRR. Historically, our NRR has been fueled primarily by customer order count and GMV growth, which leads to subscription growth adjustments, and secondly, revenue share from technology partner agreements. NRR for accounts with greater than $2,000 in ACV was 116% in 2021, up from 113% in 2020. We now plan to add, over time, a wide range of cross-sell and up-sell products that improve NRR while fueling the growth and success of our merchants and ecosystem partners. We believe cross-sell and up-sell can further sustain and grow NRR, which leads to higher total revenue and LTV to CAC across all of the customers we acquire. Now that we've talked about our strategic pillars and improvements to our monetization model, I'd like to recap our five strategic growth priorities. The first priority is enterprise, and specifically, becoming the world's best Open SaaS platform, serving the world's mid-market and large enterprise businesses. The second priority is international expansion. Building on our expansion in continental Europe in 2021, in January of this year, we formally launched in Latin America, specifically Mexico, Germany, and Spain. Later this year, we plan to formally launch in the Nordics and South America and expand further in the DOC region. Our third priority is omnichannel. We aim to be the world's best platform for omnichannel advertising and selling. As I mentioned earlier, our acquisition of Feedonomics bolstered this priority, and we are investing in a number of exciting new offerings as a result, including the build-out of a self-serve Feedonomics product for big commerce merchants, and Feedonomics for All, which enables digital advertisers, social commerce channels, and marketplaces to ingest, transform, and optimize listing data from any e-commerce platform. Feedonomics ARR finished above $35 million in 2021 and grew over 50% the past year. We couldn't be more excited about the future of Feedonomics business and the exceptional team members leading it. The big commerce platform is renowned for its B2C capabilities, and our fourth priority, B2B, extends our capabilities to B2B and hybrid B2C B2B sellers. We formally launched B2B Edition in June 2021, resulting in strong ratings in B2B platform evaluations by Paradigm and SoftwareReviews.com. Our recent acquisition of B2B Ninja brings in-house the most popular big commerce B2B quoting application. With expanded native B2B functionality and a strong ecosystem of integrated partner applications, BigCommerce is positioned for growth as a leading SaaS B2B platform. Finally, our fifth strategic priority is headless commerce, which refers to the experience-driven technology approach of decoupling front-end architecture from the back-end commerce engine. Our Open SaaS platform is highly customizable and composable, while providing out-of-the-box features and functionality that make BigCommerce simpler to implement and operate in a headless or composable commerce approach. Switching now to customer updates. Over the past year, we've added a number of brands with regional and global prominence. In the coming days, we will launch a new custom-tailored online store for Ted Baker, a UK-based global apparel brand. Using our multi-storefront and headless capabilities, Ted Baker manages their global online presence from a single store to power 12 regional storefronts that are fully localized, enabling the luxury fashion brand to meet the needs of its expanding customer base while offering a modern and frictionless customer experience tailored to the needs of each market. Shoppers will have the flexibility to shop in their preferred language, including English, French, German, and Spanish. Additionally, purchases can be made using consumers' preferred currencies, including pounds, dollars, and euros. Leveraging our Open SaaS platform, agency partner Wunderman Thompson Commerce seamlessly integrated BloomReach's content management and search and merchandising solutions into the Ted Baker store to create better shopping experiences. Additional merchants recently launched on BigCommerce include Draper Tools, one of the largest wholesale hardware stores in the UK, Dermaviduals, an Australian skincare company, Denagi, an Italy-based wine and spirits company, Jay Parker's, a UK-based mail order horticultural supplier of bulbs, plants, and shrubs, and a personal favorite, King Arthur Baking Company, best known for its flour. King Arthur migrated to BigCommerce to improve maintenance efficiency, speed the introduction of new features, and optimize the end user experience for stronger engagement and improve shopper conversion. We continue to work hard to show all our customers how much we appreciate them. Last week, we received some nice recognition that the feeling is mutual when we were honored with a 2022 Most Loved Award from Trust Radius. BigCommerce was one of just 101 winners out of over 25,000 products considered. and we were the only e-commerce platform on the list. Shifting to the new product launches, we bolstered our omnichannel offering with several partnership integrations. I'll give two examples. In partnership with Google, we launched Google Ads and Listings to help our merchants in the U.S. connect their stores to the Google Merchant Center and add products for free. The new products allow merchants to seamlessly list their products for free across Google Shopping, Search, and Images, directly from their BigCommerce control panels. This service enables merchants to improve the efficiency of their advertising spend via smart shopping campaigns. We launched and incentivized TikTok advertising coupon program to invest in and help our merchants succeed on TikTok for business. TikTok continues to attract a large audience and is an increasingly important channel for merchants to reach new customers and grow their businesses. In partnership with Chargeify Commerce and Abysseo, we announced a new integration providing our B2B and B2C merchants with a comprehensive solution to manage, track, and analyze subscription activity in one centralized location. We also announced a direct integration with Digital River that provides an all-in-one solution that fully manages payments, tax, fraud, and compliance to simplify cross-border selling and accelerate global expansion. As a result, merchants can easily deploy entry into new markets in as little as six weeks, simplify cross-border selling processes, and decrease operational costs by up to 30%. As we cited on our last call, we are very excited about the release of native multi-storefront capabilities to big commerce merchants, which we expect to be generally available by the end of Q1. We expect this to be a transformational step forward in our enterprise product offerings. We are also investing in multi-location inventory capabilities, enhancing our commerce as a service offering, and exploring ways to expand crypto and NFT-related capabilities on our platform. I'd like to close with why I believe we are at an inflection point in our business, reinforcing my conviction and confidence in investing for growth. I believe that our market, our business, and our team can deliver durable growth for years to come if we invest boldly to do so. The time is right, our product is ready, and the unit economics support smart investment to accelerate initiatives that are clearly working. While we recognize that these investment plans come with a short-term decline in margins, we are convinced that this is the right long-term decision for our business, and most importantly, our merchants and ecosystem partners. Both 2020 and 2021 demonstrated our ability to drive significant leverage in our business, and we are confident that we can replicate leverage gains against a larger revenue base after making these investments. Most importantly, we are investing to win. In the years ahead, we want to be the world's most innovative e-commerce platform, one that thrives globally, serves merchants small, medium, and large, enables omnichannel demand generation and selling better than any platform on earth, serves B2B as well as B2C, empowers the world's best headless and composable user experiences. We are bullish about the strategy and growth prospects for big commerce, and I'm fired up for 2022 and the e-commerce leadership it enables. With that, I'll pass it over to RA to discuss our results in more detail and provide additional color on our investments and guidance for 2022.

Thanks, Brent, and thank you, everyone, for joining us. Today, I'll walk you through our fourth quarter in 2021 fiscal year results. and address our planned growth investments and associated 2022 outlook. Please note that all amounts include the results and activity from Fedonomics and are reported on a consolidated basis. I want to give a very heartfelt shout-out to the BigCommerce team for another great quarter and outstanding 2021. We're very well capitalized and positioned to invest across our platform in the U.S. and abroad, setting us up for further expansion and durable growth in the years ahead. While we know the global macroeconomy will face periodic, cyclical uncertainty, we are leading and will continue to lead this business with a long-term focus on growth and sustainable structural economics. We are focused on building an e-commerce business capable of helping all of our customers reach their potential and transforming merchant success across the world. Q4 in 2021 advanced our business and product offerings towards that goal, and we will continue to lean in and make smart investments and initiatives that are clearly working. In Q4, total revenue was $64.9 million, up 50% year-over-year, including $8.4 million of revenue contributed by Feedonomics. Subscription revenue grew 58% year-over-year, driven by continued growth in our enterprise business. Partner and services revenue, or PSR, was up 34% year-over-year. For the full year 2021, revenue finished at $219.9 million. up 44% versus strong growth in 2020. This marked our fourth consecutive year of accelerating revenue growth. Subscription revenue and PSR were up 49% and 33%, respectively, year over year. Subscription revenue posted a fourth consecutive year of accelerated growth on an organic basis as well. America's revenue was up 49% in Q4 and up 41% for the full year. Combined international revenue grew by 57% in Q4 and 59% for 2021. EMEA revenue was up 60% in Q4 and 68% for 2021. APAC revenue was up 54% in Q4 and 52% in 2021. Our international footprint has grown significantly since our IPO, and we are confident this revenue growth trajectory is sustainable if we continue our pace of investment and international expansion in the coming quarters. We recently announced our market entry in Germany, Spain, and Mexico. This builds on our 2021 expansion into France, Italy, and the Netherlands. As Brent mentioned, we are also planning launches into South America, Nordics, and additional DOC countries later into 2022, and I'll provide more color on the associated investments needed to fuel that growth later in my remarks. Moving on to our KPIs. we saw continued improvement across a broad range of metrics essential to our core business. Our annual revenue run rate, or ARR, grew to $268.7 million, up 48% year-over-year, driven by fantastic continued enterprise growth and the addition of feedonomics to the big commerce portfolio. Feedonomics ARR topped $35 million, up 52% year-over-year. As we mentioned on our last earnings call, we will continue to provide commentary on the health and growth of the feedonomics business beyond this quarter, though we do not plan to split out feedonomics ARR separately going forward as we more fully integrate our go-to-market and product development efforts. Coming back to KPI results, we grew ARR from accounts with $2,000 or more in ACV 59% year-over-year in Q4 to $237.2 million, while our ARR from enterprise accounts grew by 72% year-over-year in to 172.9 million. Enterprise accounts accounted for 64% of our ARR as of December 31st, compared to 56% in 2020. And we have now averaged nearly 50% quarterly organic growth in enterprise ARR across the last two years. This reflects a continued mixed shift in our business towards many of the larger established businesses for whom our Open SaaS strategy particularly resonates. These upmarket customers offer strong unit economics, high retention rates, and ultimately strong and growing net revenue retention as they launch and begin to transact on our platform. Our open SaaS platform and best-of-breed approach provides product offerings that are unique and we believe provide for a better e-commerce experience, one that's open, flexible, and dynamic. Our results show that we can serve the enterprise segment while also posting healthy gross margins and unit economics. We're pleased by these results and expect another year of exciting growth ahead. Shifting the discussion to feedonomics, we have completed the early phases of our integration, and we are working on a number of exciting things, including building a self-serve version of feedonomics and enhancing our impressive omnichannel capabilities with feedonomics' native data transformation engine. This opens up opportunities for us to potentially become not only the omnichannel engine for big commerce merchants, but also for other partners and platforms as well. Moving to core accounts with ACV greater than $2,000, at the end of Q4, we had 12,754 customers fall into this category, up 2,570 accounts, or 25% year-over-year. The number of accounts with ACV greater than $2,000 now makes up 88% of our total ARR, a 600 basis points increase from 2020. ARPA, or average revenue per account for accounts with ACV greater than $2,000, was $18,598, up 27% year-over-year. As Brent discussed earlier, our investments in the cross-sell and up-sell capabilities of owned and partner products are designed to build additional monetization streams that will help our merchants build their businesses and bolster net revenue retention for BigCommerce. As these efforts scale, they will provide additional upgrade revenue to offset potential cyclicality in orders or GMV-based pricing adjustments. COVID-triggered e-commerce volumes have moderated somewhat over the past few months industry-wide, so we expect to see comparatively fewer pricing adjustments in 2022 relative to the past couple of years. We expect this to impact ARR growth more in the early part of 2022, and we'll continue to monitor this and provide updates on future calls. Our expectations on both 2022 pricing-related growth adjustments and cross-sell and up-sell progress are factored into our 2022 guidance, which I will discuss at the end of my remarks. Let's shift our focus to the expense portion of the income statement. Please note that unless otherwise noted, all references to our expenses, operating results, and per share amounts are on a non-GAAP basis. Gross margin in Q4 was down approximately 400 basis points versus Q3 to 76%, while gross profit was 49.1 million, up 47% over the prior year. Near-term reduction in gross margins resulted from higher hosting and international expansion costs, additional hiring during Q4, and the full quarter impact of feedonomics' slightly lower margin profile in the results. As we expand our feedonomics business, invest in more localized support and infrastructure, and continue our mixed shift upmarket into enterprise. We expect some modest margin adjustments, with gross margins likely settling in the mid to high 70s over time. Our Q4 sales and marketing expenses totaled $27.8 million, up 49% year over year. This equates to 43% of revenue essentially fought compared to last year. In Q4, research and development expenses were 18 million, or 28 percent of revenue, down from 29 percent of revenue a year ago. Q4 general and administrative expenses were 14.9 million, or 23 percent of revenue, up from 22 percent of revenue a year ago. This was driven by additional staffing costs and Sarbanes-Oxley compliance spending. We posted a non-GAAP operating loss of negative 11.6 million, or a negative 18% operating margin on the quarter compared to negative 7.6 million or a negative 18% operating margin in Q4 2020. Adjusted EBITDA was negative 11 million or a negative 17% adjusted EBITDA margin, an approximately 120 basis points decline from negative 16% a year ago. Non-GAAP net loss for Q4 was negative 12.1 million or negative 17 cents per share compared to negative 8 million or negative 12 cents per share a year ago. Our Q4 non-GAAP operating loss fell outside of our guidance range because we elected to pull in and accelerate specific investments into Q4. Despite very challenging labor market conditions, we had tremendous success staffing planned roles behind our five strategic initiatives during Q4, and our net increase in headcount was more than double that of Q3. Consistent with our prior messaging, We will evaluate our investment decisions through a long-term lens and not constrain the business from quarter to quarter, while preserving our ability to over-deliver on our profit guidance we set at the beginning of the year. We were in a position to do that in Q4 after over-delivering in the prior three quarters to specifically address critical hiring needs and accelerate funding of international investments that give us strong momentum heading into 2022. we will continue to seek opportunities to make smart and timely investments to capitalize on top-line growth and drive continued momentum. Shifting to liquidity, we ended Q4 with $401 million in cash, cash equivalents, restricted cash, and marketable securities. For the 12 months ended December 31, 2021, operating cash flow was negative $40.3 million, down from negative $26.5 million a year ago. Free cash flow was negative 43.6 million or a negative 20% free cash flow margin compared to a negative 28.5 million and a negative 19% free cash flow margin over the same period a year ago. Finally, we will close out the call with our guidance for Q1 and fiscal 2022. For the first quarter, we expect total revenue in the range of 61.9 million to 65.1 million, implying a year-over-year growth rate of 33 percent to 40 percent. For Q1, our non-GAAP operating loss is expected to be 11.5 million to 13.5 million. For the full year, 2022, we currently expect total revenue between 271.6 million to 283.6 million, translating to a year-over-year growth rate of approximately 24 to 29 percent. Our non-GAAP operating loss is expected to be between 45.9 million and 53.9 million. At this time, we expect our margin profile to gradually improve across the course of the year, with Q4 representing our highest margin quarter. We recognize that this is a material increase in investment levels compared to 2021, and I'd like to add some additional color and context around our revenue guidance and these planned spending levels. On the revenue side, we have base guidance as best as we can based on current macroeconomic spending outlooks. and our view of underlying transaction growth coming out of Q4. As such, we expect PSR growth to trail subscription revenue growth during 2022, particularly in Q1. We have high confidence in our plan investments and believe that we can sustain healthy revenue growth rates even beyond 2022 as we expand our product offerings and geographic reach. Finally, let's shift our focus to our key initiatives and investments for 2022 and the associated guidance for non-GAAP operating loss. As Brent highlighted earlier, we view 2022 as a key year for BigCommerce's investment plans. Our strong 4.9 LTV to CAC and 116% net revenue retention for accounts with greater than $2,000 in ACV give us confidence that we can maintain our level of investment from Q4 2021 and sustain strong unit economics over the long term. We finished 2021 with a non-GAAP operating loss of $22.8 million, and our 2022 guidance range reflects an additional $23 to $31 million in overall net investment. We expect roughly $10 to $12 million of that to be spent to support our international expansion initiatives. We also expect another $10 to $12 million to be spent across our remaining strategic initiatives and efforts, including commerce as a service as a new strategic pillar, and our other strategic initiatives focused on enterprise growth, headless, omnichannel, and B2B. The remainder is primarily driven by higher labor costs offset by underlying operating leverage improvement. This would put us at a non-gap operating loss percentage in the high teams at the midpoint. From a timing perspective, many of these investments are front-end loaded, requiring capital in 2022 and with revenue contribution building over time. As a result, these investments will shift out our timeline to profitability, but we believe this is the right time to build our leadership position across these critical initiatives. Finally, I want to applaud all of our employees and sincerely thank our merchants and partners. We are incredibly bullish about the growth opportunities for this business and are excited to execute our 2022 plans. With that, Brent and I are happy to take any of your questions. Operator?

Certainly. Before we go to the question and answer session of today's program, I'd like to hand the program back to Brent Bellum for a few remarks.

Thanks. And before welcoming our first question, I'd like to begin with a statement about the situation in Ukraine. At noon today, I have my monthly meeting scheduled with the leadership of our 105-person team that is based in Kyiv. To my immense relief, one of our three leaders was able to join live and debrief me on the safety, morale, and support needs of the 105 lives that we at BigCommerce care so tremendously about. Within the last 24 hours, we've heard back from 100% of our employees. As you can imagine, their situations vary tremendously. The vast majority have reported back as safe, whether still in Kiev or outside of it. Several have joined the military and taken up arms in defense of their country. Several have reported as being in places where they are not safe, whether inside Kiev or outside. We at BigCommerce are working around the clock 24-7 to ensure our full support for them, no matter what situation they are in. We have a full range of communication infrastructure and activity coordinated to help, and our employees have reported back as receiving and appreciating that support. We will continue to do all in our power to support our Ukrainian employees. And we pray for the restoration of peace, safety, freedom, and sovereignty for their people. If you're a big commerce customer, partner, employee, or investor, please know that you support a company that believes wholeheartedly in the talent, character, and dignity of the people of Ukraine. We are behind them a hundred percent and commit to doing everything that we can to help them get through this time of crisis. In my conversations with our team members up until just a few days before the invasion began, to a person, our Ukrainian team members were optimistic an invasion would not happen. In their words, they said we're a peaceful nation, have done nothing to provoke hostility, and can coexist in friendship next to Russia. I'm so sad that wasn't enough and that they are now the victims of the type of aggression we wish would no longer occur in the modern world. I trust that all join us at BitCommerce in wishing and praying for the return of peace and freedom to the beautiful people of Ukraine. With that, we'll open up to live questions.

Certainly. Ladies and gentlemen, if you have a question at this time, please press star then 1. If your question has been answered and you'd like to remove yourself from the queue, please press the pound key. We have a full queue today, so we ask our analysts to please limit yourselves to one question. Our first question comes from the line of Gabrielle Borges from Goldman Sachs. Your question, please.

Great. Good afternoon. I appreciate all of the detail in the prepared remarks. I want to come back to the commentary on near-term investment for longer-term benefit to the model. I imagine that at the time you went public, you had a three-year forecast or that you have a multi-year forecast when you think about your internal planning assumptions. And so I'd love to understand on the baseline, it sounds like your OPEX expectations for this year are higher than maybe what you would have predicted a year ago or two years ago. Please correct me if I'm wrong on that. And so the question for Brent and RA, if I may, is how are you thinking about the long-term implications for your model? You mentioned LTV to CAC. Is it fair to say that you took your long-term expectations and are underwriting now structurally higher risk margins, structurally higher LTV to CAC, structurally larger term. Help us understand how we can think about some of the returns from the 2022 investments that you're making flowing through and benefiting your longer-term model.

Yeah, Gabby, that's exactly how we were really kind of framing our investment decisions. You know, LTV to CAC is a lens that we apply to all of our investments. When you think about international expansion, you know, obviously those investments are front-end loaded. But even across those different initiatives, whether it's B2B, Headless, Omnichannel, there are some investments that we wanted to make after buying Feedonomics that we're really excited about. But really, it's really around structured growth levers that we think can drive revenue, not just in 2022, but in the years after. We believe, look, this market is getting bigger. The opportunities that we have in front of us are getting bigger than they were a year or two ago. We know the investments that we've made have been working, and clearly we want to double down on the ones that do. So, you know, consider these measured investments that may be front-end loaded, but, you know, in our belief, we have high conviction that will drive good growth for us in, you know, for many years ahead.

I'd add to that simply that the investment reflects our strong belief that the opportunities directly in front of us are even bigger today than we could have imagined a year to a year and a half ago. Remember when we guided at the beginning of 2021, we then proceeded to over deliver on the top line by 8% and also generated 800 basis points of better operating leverage than we had guided to. So clearly we showed simultaneously that the growth opportunity is higher than we initially planned and we could drive better leverage. And as we look at all of the growth opportunities directly in front of us, including international, B2B, headless, enterprise, this investment is basically going after capturing that full potential. So put simply, we're extraordinarily bullish about the global e-commerce market and our ability to win in it.

Thank you. Our next question comes from the line of Koji Akita from Bank of America. Your question, please.

Hey, guys. Thanks for taking my questions. So I had a question on the long-term target revenue mix. You know, maybe help us understand or put some guardrails around the revenue model there. You know, maybe... You know, how many years do you think it will take to get that target, Nix, or maybe by revenue scale? Thank you.

Yeah, hey, Koji, great question. We actually added a slide in the IR deck to kind of paint this picture. You know, I think long-term, you know, our subscriptions are going to be subscriptions from our existing software offerings, but then we're also going to add subscriptions for omnichannel through Fedonomics. through cross-sell and up-sell, through our own and partner products, those are going to add subscription, you know, revenue growth in that line item. So long-term, we could see kind of existing software being 50%, 10% for cross-sell and up-sell, 10% for feedonomics or omni-channel subscription solutions. PSR, as we know it today, you know, likely, you know, we'll forecast it at around 25%. Services will never be a big component of revenue, so we would expect that to still be around 5%. But that slide that we added really is intended to show kind of where this business is headed. And where this business is headed is being able to add a lot of different product offerings across omnichannel as well as our ability to cross-sell and up-sell our partner products and support our ecosystem to where a lot of that growth is going to build over time in subscription revenue while we also generate a lot of rev share from the transactions flowing through the platform. There's no timeline that we're giving right now, but in terms of long-term target mix, this is kind of what we see today. We also see gross margins kind of in that high 70 range long-term as we scale further, and there's no reason for us to believe that at scale we wouldn't be able to deliver long-term operating margins north of 20%.

Thank you. Our next question comes from the line of Terry Tillman from Truist. Your question, please.

Hey, guys. Thanks so much for taking the question. This is Joe Mears on for Terry. Great job on the enterprise ARR growth. I think Terry actually asked last quarter whether this could stay above 50. Just wondering if the multi-storefront stuff is helping here yet and what your expectations are going forward for this number.

Multi-storefront is not in general availability yet. And so when it is, I expect that is when we will see the significant uplift in sales conversion, both new prospects, and then once we build it into self-serve, even for our SMB customers, they'll be able to click a button, add storefronts, and add revenue to their subscription. So that is coming, and it's within hopefully weeks away of being general availability launch. It's been in closed beta now for quite a few months, and indeed we've sold and deployed stores on it. It's working very successfully. But in short, the upside potential is still to come, you know, starting hopefully in a month or two from now.

Thank you. Our next question comes from the line of Clark Jeffries from Piper Sandler. Your question, please.

Hello. Thank you for taking the question. You know, maybe spending some time right-siding revenue guidance. You know, Ari, what are your assumptions for growth in the core business in the second half? You know, as I think about maybe a relatively unchanged run rate of feednomics exiting Q4, I think it implies maybe a moderation in the core business, perhaps more than we were expecting. So I just wanted to maybe right-size, are there any significant difference to the current pedonomics run rate or something else we should be aware of when thinking about the core growth assumptions?

Yeah, you know, going into 2022, I think, you know, let's revisit your PSR expectations. You know, we're happy to do that with you. I mean, what we're seeing is kind of GMV growth, PSR-related revenue, kind of going back to pre-COVID levels, going into, you know, the beginning of this year, PSR is likely going to trail subscription revenue for the front half of 2022. So if you're going to tweak anything, it's probably the PSR assumptions versus our core subscription. And then expect feedonomics to grow in line with our enterprise business is kind of how we're modeling it. But in terms of like the macro headwinds on GMV or GMV per merchant or what other folks are seeing, you know, that probably affects us more in the first half than it does in the second half, but I suspect it's your PSR number that, you know, we're happy to dig into.

Thank you. Our next question comes from the line of Josh Beck from KeyBank. Your question, please.

Thank you, Keem, for taking the question. I wanted to... ask a similar question to Clark's, maybe a little bit of a different angle. I was just noticing the revenue range for Q1 seems to be a bit wider than historically what you've guided to. So anything that we need to be mindful of, obviously there's about a month left in the quarter that could... Oh yeah, no joke.

I wouldn't look too much into that. We just realized last year our our ranges were way too tight. And so when we evaluated kind of ranges on our peer set, we just adopted a wider range. But no, I wouldn't look into that all that much. The one thing that, you know, you would factor in for Q1-22 versus 21 is, remember, you know, yeah, there was a stimulus effect last March that affected somewhat our Q1 numbers. So maybe factor that in, but I wouldn't look at anything in terms of the wider range. Okay, so more of a philosophy evolution. Philosophy evolution. Yeah, we got a lot of feedback that our ranges are way too tight on revenue and non-GAAP op loss, so we just adopted to what those in our peer set are doing.

Perfect. Thanks, Ari. Sure.

Sure.

Your next question comes to the line. Parker Lane from Stiefel. Your question, please.

Hi, it's Max Osno. It's on for Parker Lane. Thanks for taking my question. I just want to focus a little bit more on the international investment and the strong growth that you've seen so far. How are you thinking about the overall mix in revenue as we look out in the future from these international markets compared to the U.S. markets?

Yeah, we have a pretty, I would say, successful framework in terms of our international expansion efforts. Every six months, we're identifying countries that we want to have folks locally in market. Internally, there's definitely a goal of our gross new getting to 50-50, 50% U.S., 50% non-U.S. Today, if you just look at our revenue base, it's still... high 70s in terms of U.S. revenue concentration. You know, over time, as we become more and more successful selling outside of the U.S., I could see that number coming down. But internally, gross new targets, you know, in the next couple years, we're hoping that we can get to a 50-50 split. But in terms of the revenue impact, you know, it will take longer.

Thank you. Our next question comes from the line. That's Dan Zlotsky from Washington. Morgan Stanley, your question, please.

Hey, guys. Good afternoon, and congratulations on a strong finish to 2021. I wanted to just maybe follow up on a prior question and, once again, ask slightly different. So if we do the math of reported ARR minus the inorganic ARR from Phenonomics, and you back out PSR, you get to about 27% organic ARR. monthly recurring revenue growth in Q4 versus largely, essentially number would be about 30% in Q3. So what's the calculus for feedonomics going forward into 2022 and versus the 24% to 29% growth for revenue for the full year 2022? What are the puts and takes there? Thank you.

Yeah, hey, Stan. You know, slightly higher than that, I'd say for the core, and really I'd split it up between our enterprise accounts or accounts greater than 2K versus the accounts less than 2K. You know, if you think about that cohort of enterprise accounts, our retention profile is actually improving. Turn metrics for our enterprise has actually improved over the last 12 or 18 months. When you look at accounts less than 2K, you know, that's where it's probably more subject to, you know, the impacts of COVID that we think that are kind of in our rear view. Some of the adjustments to upgrades and net new would be impacting those standard and plus plans. And don't forget, those accounts graded in 2K have those standard and plus plans that actually graduate. So, you know, don't look at those, our retail business as only our current standard and plus plans because it's not going to capture those that are actually graduating. So when I think about 2022, where we have to be conservative is kind of the same store sales growth. You know, we're looking at kind of the industry forecast and the benchmarks. We're applying that. We're also generating revenue now from things outside of payments. So we're starting to see an uptick in rev share from buy now, pay later, one-click checkout, rev share from Omnichannel. So, you know, we're factoring all those things into our PSR guide for the next year. We are going to see PSR probably slightly lower than subscription in the first half. But in terms of gross new, our gross new bookings remain strong, both in the U.S. and international, where we have some COVID impacts or at least lapping big base periods in 21 is really around the upgrades, downgrades, and churn for net new. But in terms of gross new, feel really good about that across all of our teams.

Thank you. Our next question comes from the line of Raymond Lenzchow from Barclays. Your question, please.

Yeah. Hey, congrats from me as well. Ben, quick question on the... investment plans for the year. So clearly you must be seeing some big opportunities and the urgency to kind of take, you know, and benefit from kind of being better exposed to it. Can you just kind of elaborate and talk a little bit about like how you kind of did that? Because obviously we clearly are in the market where, you know, software and software valuations are a little bit under pressure and kind of doing what you did today, you must have known a little bit what's going to happen, but what drove your decision to kind of double up here and make this move today? Thank you.

Yeah, Raimo, well, because the investments that we've made are working really well. Like if you look at the markets where we have go-to-market teams, you know, in London covering Europe, in Sydney covering APAC, you can see our growth rates. You know, when we think about our expansion framework, we've got that first phase that's a test and learn phase, and then we move into a country entry phase where we invest in local talent across, you know, the go-to-market teams, local support. And, you know, in terms of the quotas and how fast we can ramp that team, we've got, you know, a kind of great use case in terms of the teams that have already ramped. And so, yeah, I mean, clearly we recognize, you know, what's going on in the market, but we're managing this business for the long term. And so I think with these investments international, as we mentioned earlier, we're going to lean in and invest in feedonomics. Couldn't be more excited about the opportunities in Omnichannel. With feedonomics, we want to invest, you know, roughly $5 million to $6 million to build out feedonomics self-serve as well as feedonomics for all. where we can actually allow our partners and merchants to actually leverage our infrastructure for Omnichannel, whether they're on the big commerce platform or not. So we're super excited about that. And then across those other initiatives, B2B, Headless, you know, that's where the remaining $5 million to $6 million go. But really these investments are investments that we have a lot of proof points around. We're not guessing. These are very purpose, you know, pointed investments that we can measure. And so, yeah, we're leaning in because, you know, we think it's our opportunity to do that.

Thank you. Our next question comes from the line. It's from Jefferies. Your question, please.

Hi, good evening. Thanks for taking my question. So maybe one more on near term, and it's not a guidance question, but just as I think about the pipeline for new enterprise logo deals, that you're looking at, um, at this time into 2022 and how that compares to maybe this time last year. And how should we think about maybe the composition of that pipeline in terms of, is it more indexed towards, um, kind of more mega logos or just, uh, just a higher number of large logos? Just how should we think about the, the enterprise logo pipeline given that that underpins a lot of the guidance?

Yeah, I would say that our pipeline coverage starting 2022 is even stronger than it was at the beginning of 2021. You know, in particular, the strength is seen not just in the Americas, but in EMEA. We're also starting to see the growth of pipeline, very meaningful pipeline and new geography. So continental Europe, Italy's off to a roaring start. We're seeing strength in France and other continental European countries. And Mexico, which we just announced, is already building a really good pipeline. If they convert at anything like what we've seen in other geographies like EMEA, then, wow, the future is incredibly bright in Latin America. Again, we've launched in Mexico, but we have plans later this year to get to South America as well. in general, is a quantity over size. It is a combination of both. We have more, you know, what we would call historically kind of whale opportunities in the pipeline than we've had before, but there's also real strength in the singles and doubles in the mid-market. So, you know, across the board, we're feeling pretty good. Thanks for the question, Samad.

Thank you. Our next question comes from the line of DJ Heinz from Canaccord. Your question, please.

Hey, guys. Thanks for taking the question. Brent, so you spent a bunch of time talking about kind of the improved monetization model, and I get kind of all the new levers to growth on the cross-sell, off-sell side that you talked about. Where I could use a little bit more clarity is on the third-party apps and the changes that are happening there. Like, how are you monetizing that ecosystem more? before we moved this kind of consolidated invoicing program and, and, um, like, is there any way to frame if you were monetizing those third party apps in the way that you will in the future, kind of what that would amount to in revenue for you? Does that make sense?

Sure. The way it works today is, uh, the thousand plus apps in our, in our apps marketplace. The majority of those have some kind of a rev share agreement with us, but our inabilities, to add a subset of those apps to the actual big commerce bill hurts two things. One, it hurts our ability to convert, you know, to market and sell merchants apps that will help them grow their business because it requires a separate, far smaller company to independently market their product, sell their product, sign up the merchant with a new payment billing relationship. So it hurts conversions. It also hurts rev share capture because we're relying on manual processes to validate and collect on revenue share. But I would say that there's a third dimension that we're also missing out on, and that is that for a lot of app developers, it is equal or more difficult to build an actual billing engine as it is the app itself. If you're creating a new app, It's one thing to code the app. It's another to have to come up with your own engine for billing customers and dealing with upgrades and downgrades and cancellations and all that other stuff. And the result of that is because we don't have the ability today to automatically add these apps to the big commerce bill. Those apps that don't have their own billing engine aren't on big commerce. They're on Shopify or another platform that might have that. but they can't come use us. And it is our expectation that once we offer up our own billing engine, many of those apps who are out there that don't have one of their own will then integrate into BigCommerce and become available. And so that is basically addition of apps and pure upside in addition to the other two factors. Ultimately, there's clearly a lot of upside here if you use the Apple iPhone example where 100% of the apps are billed for through Apple's billing system. You can see the full potential upside. It's not our intention to require this of every app. We'll do it when it makes sense mutually. But there is an awful lot of ability to further expand the adoption of revenue-driving applications for our customers. When I say revenue-driving, I mean revenue-driving for them. It helps them grow and will profit along away.

Thank you. Our next question comes to the line of Scott Berg from Needham. Your question, please. Hey, guys.

This is John Godine. I'm for Scott. Appreciate you taking my questions. Just curious as far as the pull forward in the quarter. At what point did you guys decide to pull forward those investments? And really, how would you frame those around or relative to kind of your three key strategic pillars? Thanks.

Yeah, it was really on the hiring front. It's a competitive market out there, so when we had the opportunity to hire the folks that we wanted to hire, we were full speed ahead across a lot of our teams, specifically our go-to-market teams. We were able to hire some folks in the countries that we were expanding into. Last year, we expanded to France, Italy, Netherlands. Germany, Spain, and Mexico recently. And so we were able to start hiring folks across those countries, which we're super excited about. And then we also were able to invest in some local infrastructure costs for hosting in those countries. You know, local hosting, local infrastructure is important as well as local people. So we were able to pull in those investments. We did not you know, pause hiring. You know, if we could hire folks on the teams that we needed them, you know, we were full speed ahead. So we never dialed that back.

Thank you. As a reminder, ladies and gentlemen, if you have a question at this time, please press star more than one. Our next question comes to the line of Brian Peterson from Raymond James. Your question, please.

Hi, thanks for taking the question. This is John on for Brian. The NRR growth in 2021-2021 was really impressive, and your slide showed 2020 cohort performing really well. How much of that's a function of just market dynamics around e-commerce growth versus your evolving land and expand? And then the comments on the higher percentage from enterprise accounts, should we expect that metric to grow again in 2022? Thanks.

Yeah, it's really both. I think that improvement is driven from the continued mixed shift, but it's also driven by you know, higher upgrades from pricing adjustments, the elevated, you know, volumes that we saw, you know, in COVID, from COVID this year or last year. So, I think it's a combination of both. You know, as we think about, you know, longer term, you know, it's fair to assume that as we, you know, launch more sites and win more deals like Ted Baker and some of these very big sites, you know, with that comes expansion revenue over time. So... you know, the reality is I think it is both. I think it's the mixed shift as well as, you know, elevated GMV levels that we saw last year.

Thank you. Our next question comes from the line of Jaikul Aronian from Woodbush. Your question, please.

Hey, guys. I think some more clarification on the investments for me. Can we talk a little bit more about commerce as a service, what it means exactly, how it's different from, what you guys are doing today? Is it a completely new market opportunity? Is it cannibalized? Any of what you do? Just would love to understand that at a maybe broader scale. Thanks.

Great. Here's a different angle on it. So you're used to thinking of big commerce, selling ourselves exclusively to merchants, right? Merchants sign up for a monthly subscription to create one or more stores with BigCommerce. Commerce as a service is instead when a technology partner, oftentimes, or sometimes an agency partner is instead the one who is working with BigCommerce and enabling customers of theirs to sign up to us in ways that typically commerce is out of the box with whatever their core offering is. So as an example, again, Wine Direct is a company who serves wineries, and it gives them not just an e-commerce website, but all of the related services, including point of sale, mailing list management, sometimes fulfillment services, tax and compliance. And so when they decide, hey, the component of this that is the platform technology powering the actual commerce website, we want that to come from a specialist. And they contract with us, and they're able to actually sell and provision e-commerce websites to wineries that are powered by big commerce, but it's Wine Direct who is doing that. And so you can think of many other partners of ours. Let me give you another example. Let's say a point-of-sale software company, and we've done this, we've been doing this for a couple of years. If a point-of-sale partner says, okay, I'm powering the store terminals, the in-store terminals in the physical world of retailers, but I want them to be able to also automatically generate a pre-integrated e-commerce website that's using the same inventory and products out of the box as what's for sale in the stores and maybe using the same payments mechanism in the same way that a Square or a Shopify would, but without having to create or own their own e-commerce platform, then they can do that with big commerce. And we use our powered by API. And so you could be a customer of that point of sale software, running your stores with it on their website, sign up to have an e-commerce website added and have that pre-integrated already with the same inventory and the same capabilities that the point of sale provider enables. You know, you could imagine scenarios such as new geographies where we have agency or technology partners who start marketing and selling e-commerce stores in other countries that are powered by big commerce. But they may be doing the translation. They may even be doing the pricing and the billing for those. And that's real examples that are in the works right now that haven't launched yet. So this is something that we've been doing for a couple of years. You've seen major announcements already about it, such as Wine Direct, such as Oxatus. But we're putting a name behind it because it's been sort of a hip pocket secret. And now we're going bright with it. When we first announced it to technology partners, a lot of eyes opened and they said, wow, this is a great idea. I can see how this would really work for me and our core business. And so we expect many more examples to come in the quarters ahead. Thanks for the question.

Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Brent Bellum, President, CEO, and Chairman for any further remarks.

Great. Thanks, everybody, for dialing in. I would again just like to conclude by emphasizing we're thrilled with the 50% growth rate in Q4, the fourth consecutive year of accelerating growth rate on ever larger basis. It shows that our business is gaining momentum. And as we look to the future, we see more opportunities for global leadership and growth than, you know, a traditional expenditure model would contain. So we're investing ahead of the curve. As I already said, we've already proven that our investments in enterprise and international expansion and Omni and Headless and in B2B are paying off. And we expect that the investments that we began in Q4 and will continue through 2022 will pave the way for great, durable, continued growth for years to come and BigCommerce truly being the most successful and innovative Open SaaS platform in the many years ahead. So thanks for following us and good luck to our folks in Ukraine. We're praying for them and doing everything we can to support the return to normal there. Cheers.

Thank you ladies and gentlemen for your participation at today's conference. This does conclude the program. You may now disconnect. Good day.