BigCommerce Holdings, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the BigCommerce first quarter 2023 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 today, Daniel Lentz, Head of Investor Relations. You may begin.

Good afternoon and welcome to BigCommerce's first quarter 2023 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 certain 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 second quarter of 2023 and the full year 2023. These statements can be identified by words such as expect, anticipate, intend, plan, believe, seek, committed, 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 and is also available on our website at investors.bigcommerce.com. With that, let me turn the call over to Brent.

Thanks, Daniel, and thanks, everyone, for joining us. On today's call, I will walk through our first quarter results and share my perspective on our progress thus far in 2023. Our A will later share greater detail on our financial results and conclude the call with a discussion on updated guidance. Let's discuss the details. In Q1, total revenue was $71.8 million, up 9% year over year. Our Q1 non-GAAP operating loss was $6.4 million, which was well ahead of our quarterly guidance and a strong step toward our goal of reaching break-even on an adjusted EBITDA basis in Q4 of this year. We concluded Q1 with an annual revenue run rate, or ARR, of $316.7 million, up 13% year-over-year. That represents a sequential growth in ARR of $5.0 million. Enterprise account ARR was $228.8 million, up 21% year-over-year. Enterprise accounts now represent slightly over 72% of our total company ARR. On our previous earnings call, we noted that we are aiming for enterprise ARR growth in 2023 at or above 20% year over year, which we believe will be offset by non-enterprise account ARR contraction in the mid single digits. Q1 results met this goal. Non-enterprise account ARR was $87.9 million, up slightly on a sequential basis compared to Q4, and down slightly year over year as expected as we take action to build a scalable, more self-serve small business segment. I'd like to elaborate on a few areas in particular that demonstrate our progress. Our shift of go-to-market focus from small business to the enterprise segment is showing positive results. Sales pipeline as of the start of Q2 for this segment is approximately 20% higher than where we were at this time last year. Win rates remain strong. Sales cycle times in the lower end of this segment are largely unchanged, while larger enterprise opportunities have seen an increase of approximately 50 days between first engagement with a merchant and close compared to this time last year. Before I elaborate on how we are responding to these dynamics, I'd like to clarify what we mean by enterprise accounts and the parts of the market we serve. We sell four different e-commerce plan types to merchants. The first three, standard plus and pro, are collectively our essentials plans geared towards small businesses. Our enterprise plans have richer feature sets, customized pricing and terms, and are typically sold to merchants in what we deem the mid-market and enterprise customer segments. We consider merchants doing between $1 million to $50 million per year in online gross merchandise value, or GMV, our mid-market segment, and merchants doing more than $50 million in online GMV per year, our large enterprise segment. We consider any account buying at least one enterprise plan, an enterprise account, and we include select financial metrics from these accounts in our quarterly results. As a result, our enterprise account metrics reflect a mixture of mid-market and large enterprise segment merchants. We are responding to the sales cycle time dynamics I mentioned previously by further prioritizing channels and products that deliver strong ROI with faster time to close. We are increasing our investment in lead generation with our agency partners and in the mid-market segment as these opportunities tend to have shorter sales cycle times and a strong LTV to CAC. Finally, We are seeing strong success with Feedonomics, which offers our customers incredible ROI with fast time to merchant value and also high ROI for BigCommerce. All merchants are actively seeking ways to increase revenue and improve their return on ad spending, and Feedonomics can help merchants running on many different platforms see strong results without the need to replatform. Feedonomics continues to win accolades and customer satisfaction and deepen BigCommerce's relationship with key partners and merchants. 30% of the top 1,000 internet retailers trust Feedonomics to optimize their product catalogs and expand their market reach. In Q1, G2 issued their Spring Grid Reports that measure overall customer satisfaction and market presence. Feedonomics was in the leadership position in three e-commerce software categories, multi-channel retail, catalog management, and online marketplace optimization tools. Feedonomics also rolled out its own native integration into Amazon multi-channel fulfillment during the quarter, enabling thousands of merchants to take advantage of Amazon's fulfillment services for orders that originate on non-Amazon channels. Theodonomics also continues to support merchant adoption of key global channel programs, including Macy's.com, Meta's Facebook, and Instagram shop ads, and TikTok shop. Our platform and omni-channel products drive scalable, cost-effective growth for our merchants. We are confident that we will continue to broaden our mid-market base even as we invest in expansion further into the enterprise segment as well. We also saw healthy stabilization in our non-enterprise or retail accounts. While this portion of our business was down 4% year over year, it showed sequential growth for the first time since Q4 2021. As we have shifted focus towards more established small businesses, adjusted plan pricing to encourage prepayment, and decreased the volume and depth of sales promotions, We have seen improved net retention results in this portion of our business and encouraging signs of stabilization in ARR. We expect results from this portion of the business to benefit from our recent pricing changes as well. We will not see the full effect of the February pricing action on our base retail accounts until June, but early results are strong. New merchant bookings remain consistent, and we are also seeing a higher mix of prepaid annual plans as well. Finally, our Q1 results reflect progress on our path towards profitability. To be clear, adjusted EBITDA breakeven in Q4 is not a finish line. It is a starting line in our business from which we will drive profitable growth for our shareholders. Q1 was a strong step toward that goal. Despite the prevailing caution among businesses regarding the near-term economic outlook, established and mid-market and enterprise merchants continue to demonstrate interest in long-term investments and our e-commerce platform and omni-channel capabilities. Although acquiring these larger merchants may come at a greater financial cost and require a longer time to close deals, they offer significantly higher long-term value. These merchants have impressive retention rates, greater cross-selling potential, and healthier unit economics. They are also more likely to adopt technologies and omni-channel integrations that help sustain and accelerate their growth, which drives significant revenue for us. These merchants are central to our strategic and financial success, and we will continue to balance the need to invest in winning these segments while also improving profitability and cash flow. Our average revenue per account, or ARPA, for enterprise accounts was a little over $39,000 in Q1, which was up steadily from $35,000 in Q1 2022 and $32,000 in Q1 2021. The consistent growth we have seen in this metric reflects our progress moving up from our historical base in small business into the mid-market segment, and now early progress in the enterprise segment as well. This move into enterprise is succeeding, as is evident by merchants such as Curology, Kahn's Home Plus, and Harley-Davidson launching with us in Q1, as I'll discuss more later, and also by merchants such as Coldwater Creek picking us as their new e-commerce provider. This go-to-market focus on the mid-market and enterprise segments does not mean that we are walking away from small business merchants. We continue to acquire and serve small businesses on our platform, and we are committed to helping them build their business with BigCommerce. But we have optimized our go-to-market approach to small businesses to be more self-serve with less sales and marketing demand generation investment. The goal is to build a small business segment with a scalable LTV to cap. Our recent standard plus and pro pricing action and prioritization of annual prepayment is an example of the adjustments we are making to build this segment into a profitable and more scalable business. Our e-commerce and omnichannel solutions are designed to be flexible, composable, and scalable, providing unmatched versatility for both B2C and B2B clients alike. Earlier this week, we announced the latest update to B2B Edition, our comprehensive suite of B2B functionalities that enhance the online selling experience for suppliers, manufacturers, distributors, and wholesalers. The new release introduces multi-storefront compatibility, a brand-new B2B buyer portal, and headless support. Next-level B2B edition functionalities allow merchants to manage quotes, invoices, and buyer approval workflows. B2B edition's open and intuitive solution transforms the way sellers and buyers do business, turning legacy B2B practices into a modern, agile, and nimble digital operation with a composable foundation ready to scale with the business. These enterprise-grade capabilities provide B2B brands with the flexibility and customization they need to elevate online selling experiences, launch new brands, and expand into new regions. In addition to strengthening B2B addition, BigCommerce continues to release features and product enhancements that resonate with our target market. In March, we launched Buy Online Pickup in Store functionality, also known as Click and Collect, giving merchants more options to meet shoppers where they are and provide frictionless shopping experiences. Previously only available for enterprise merchants, we expanded our multi-storefront offering in Q1 as a self-service feature accessible to small and mid-sized BigCommerce merchants running on our retail plans. BigCommerce merchants of all sizes now have the advantage to manage multiple storefronts to grow sales in new regions, streamline operations for multiple brands, and customize various customer segments to drive global growth. In Q1, we announced a new strategic partnership with WPP to offer omnichannel solutions to help WPP clients drive growth and maximize sales across hundreds of advertising channels and marketplaces. This innovative partnership will give WPP priority access to new product tools on both BigCommerce and Feedonomics, in addition to providing APIs and data sets that will enable WPP agencies to develop unique insights for clients across product, trend, and purchasing data. Given the attractiveness of the joint BigCommerce and Feedonomics value proposition to enterprise brands, we continue to be focused on engaging, activating, and enabling many other global agency partners to serve mutual merchants with these market-leading capabilities across advertising, marketplace, and branded commerce channels. We also announced a new global partnership with InfoTrax Systems, a leading provider of commission software and distributor tools for direct sales companies. The new InfoTracks powered by BigCommerce solution will give thousands of direct selling customers access to more innovative and sophisticated commerce capabilities, including the ability to launch omnichannel sales strategies using feedonomics. In addition, THG Ingenuity, the complete commerce division of THG PLC, and BigCommerce intend to develop a US and EMEA-focused complete commerce solution that would bring together BigCommerce's composable e-commerce storefront with Ingenuity's fully integrated technology stack and operational capabilities. Earlier in Q1, in partnership with Amazon, we launched the Buy with Prime app for BigCommerce, a new self-service integration for US merchants to easily enable Buy with Prime on their BigCommerce storefront with no coding required. With shopping benefits that millions of Prime members know and trust, including fast, free shipping, Buy with Prime is shown to increase conversion by 25% on average. This week, we also announced that we have expanded our global footprint into Poland, Romania, India, the UAE, and South Africa with an expanded engineering team in Poland, two partner-led entities in Eastern and Central Europe, and a new country leader in India. In Q1, we continue to grow our roster of leading, notable brands and merchants on our platform. Innovative health and beauty brand Curology launched a beautiful new storefront leveraging our NetSuite ERP partnership to connect Curology Store with its ERP for product and inventory data syncing. Antone Plus, a leading retailer of furniture, appliances, and electronics, with more than 160 stores across 15 U.S. states, recently launched on BigCommerce using a natively hosted stencil storefront and a custom BigCommerce checkout, taking advantage of integrations with custom financing solutions and location-based pricing. Tottenham Hotspur, one of the world's top football clubs, is leveraging BigCommerce's platform to further enhance its popular online stores capabilities and fan experience, not only at home in the UK, but also in APAC and North America, where the club has a significant and growing fan base. Asa Abloy, a global leader in door-opening solutions used in many of the world's locks and security installations, is revolutionizing its customers' experience by integrating its broad product catalog and using our B2B edition solution to customize the shopping experience. Iconic motorcycle brand Harley-Davidson launched a new line of lifestyle apparel utilizing BigCommerce's APIs to build a full suite of custom integrations with backend systems and leveraging BigCommerce's stencil framework to build a chic frontend. Diamonds Direct, a worldwide leader in diamond sourcing, selection, education, and value, launched a new store with a headless digital experience frontend and BigCommerce backend to deliver a seamless, intuitive shopping experience, including custom ring builder options. Edonomics also signed many new customers on the corner as well, with highlights including Chico's, Sindel, Rappi, Tiendamia, as well as signing new agreements with existing BigCommerce customers, such as Solo Brands, Diono, Hauser, and Badgley Mishka, among many others. To conclude, our 2023 plan is focused on three primary goals. First, continued top line growth in the mid-market and enterprise segments. Second, break even in Q4 on an adjusted EBITDA basis. And third, further efficiencies in our business to improve operating cash flow. We are laser focused on delivering these commitments. These set up our business for strong, profitable growth in 2024. We are operating from a position of strength in the mid-market segment and building momentum in the enterprise segment as well. We have a winning product and a growing market with a diverse partner ecosystem vested in our success. We are encouraged by results thus far in 2023, and we are committed to deliver healthy returns to our shareholders. Next, I'd like to turn it over to RA to discuss our financial results in more detail and conclude with our updated guidance for Q2 and 2023.

Thanks, Brent, and thank you, everyone, for joining us today. During my prepared remarks, I'll cover our Q1 results in detail, provide additional commentary on some of our key goals for the year, and finally conclude with updated guidance. In Q1, total revenue was $71.8 million, up 9% year-over-year. Subscription revenue grew 12% year-over-year to $53.8 million, while partner and services revenue, or PSR, was down 1% year-over-year to $17.9 million. Revenue in Americas was up 7%. while EMEA revenue grew 27% and APAC revenue was up 1% compared to prior year. As I mentioned on the last earnings call, we built our 2023 financial plan assuming conservative net bookings growth, particularly in the front half of the year. We also assumed further moderation in consumer spending, which would impact volume-driven pricing upgrades and PSR. Q1 results were largely in line with these assumptions, and I am encouraged by the progress that we showed in the quarter. I'll now review our non-GAAP KPIs. Our ARR grew to $316.7 million, up 13% year-over-year. That represents a sequential growth in total ARR of $5 million. Enterprise account ARR was $228.8 million, up 21% year-over-year. Subscription ARR was up $5.1 million, versus Q4 end up 15% year-over-year. As we mentioned last quarter, we are aiming for enterprise ARR growth in 2023 at or above 20% year-over-year, which we believe will be offset by non-enterprise account ARR contraction in the mid-single digits. Q1 non-enterprise results exceeded our expectations. We believe improving cohort health and recent pricing changes will offset the degree of contraction risk we outlook at the beginning of the year. At the end of Q1, we reported 5,828 enterprise accounts, up 463 accounts, or 9% year-over-year. ARPA, or average revenue per account, for enterprise accounts was $39,260, up 11% year-over-year. I'll now shift to the expense portion of the income statement As a reminder, unless otherwise stated, all references to our expenses, operating results, and per share amounts are on a non-GAAP basis. Q1 total cost of revenue was $16.3 million, down approximately $1 million sequentially from Q4. Q1 total operating expenses were $61.9 million, down $2.7 million sequentially from Q4. Q1 gross margin was 77%. up 192 basis points from the previous year, while gross profit was $55.5 million, up 11% year-over-year. This gross margin expansion is notable in that we drove healthy margin expansion even while growth in high gross margin PSR was challenged. We are making deliberate decisions on automation, staffing, and other cost drivers to drive sustainable margin improvements over time. In Q1, sales and marketing expenses totaled $31.2 million, up 2% year over year. This represented 43% of revenue, down 297 basis points compared to last year. Research and development expenses were $17.3 million, or 24% of revenue, down 366 basis points from a year ago, and down $1.7 million sequentially from Q4. General administrative expenses were $13.4 million, or 19% of revenue, down 121 basis points from a year ago. In Q1 2023, we reclassified certain costs that we had previously included in general administrative expenses into sales and marketing expenses. To maintain consistency between comparable periods, we reclass $1.5 million from general and administrative expenses to sales and marketing expenses for the period ending March 31, 2022. This change in classification had no effect on the reported results of our operations or cash flow. In Q1, we reported a non-GAAP operating loss of $6.4 million, a negative 9% operating margin. This compares with an operating loss of $12.4 million or a negative 18.7% operating margin in the prior year and an operating loss of $9.4 million or a negative 13% operating margin in the prior quarter. Adjusted EBITDA was negative 5.5 million and negative 7.6% adjusted EBITDA margin compared to negative 11.6 million and a negative 17.5% adjusted EBITDA margin in the prior year. Non-GAAP net loss for Q1 was negative 4.9 million or negative 7 cents per share compared to negative 13.2 million or negative 18 cents per share last year. We ended Q1 with $283.5 million in cash, cash equivalents, restricted cash, and marketable securities. For the three months ended March 31, 2023, operating cash flow was negative $20.8 million compared to negative $22 million a year ago. We reported free cash flow of negative $21.9 million or a negative 31% free cash flow margin. This compares to negative 23.3 million and a negative 35% free cash flow margin in Q1 2022. Q1 operating cash flow results included a number of one-time impacts that contributed to the difference between cash flow and our non-GAAP operating loss results. These differences included approximately $4 million between severance related to our December restructuring and normal year-end bonus payments and $6 million in Q1 revenue from a payments technology partner, which was paid in early April and will be reflected in our Q2 operating cash flow. Apart from these timing-related impacts, operating cash flow would have been between negative $10 to $11 million on the quarter. I'd also note that Q1 is the quarter in which we have the most prepaid software obligations as well, which also contributes to a difference between operating cash flow and the underlying operating results during the period as well. As Brent mentioned, our 2023 plan is focused on three primary goals. First, we are investing to continue to win in the mid-market and enterprise segments. Topline revenue results and net bookings in Q1 were a positive first step. We saw strong growth from the mid-market segment and feedonomics, and we are encouraged by the sales pipeline heading into Q2. We continue to see strong win rates in our key segments as well. However, we are also seeing fewer volume-driven pricing upgrades and additional conservatism with respect to software spending from our existing merchants, which is in line with the expectations on which we built our plans. Second, we are operating with discipline to reach break-even by the end of Q3 on an adjusted EBITDA basis and remain confident in our ability to deliver positive EBITDA for the full quarter in Q4 of this year. Q1 results reflect our continued progress and are a strong indicator that we are on track to meet this goal. We are also highly focused on driving operating leverage further as we scale the business. One important item to note with respect to GAAP net loss is how the August 2021 $145 million acquisition of Fedonomics is accounted for in our financial statements. Our Q1 net loss includes over $6 million in expenses from third-party acquisition costs and intangible asset amortization from that transaction. We expect the majority of third-party acquisition costs to be fully recognized by the end of Q2 of this year. Our focus is scaling this business while balancing top line and bottom line growth, and we will continue to manage our spending in a financially disciplined way to accomplish that, including costs to run the business, careful evaluation of potential acquisitions and partnerships, and equity grants to employees. Third, we are taking steps to prioritize cash flow improvements to drive healthy, consistent cash flow generation. As I mentioned before, apart from one-time impacts in the quarter, operating cash flow would have finished between negative $10 to $11 million. We are taking numerous actions to drive cash flow improvements, such as prioritizing advanced billing on new subscriptions, investing in our quote-to-cash systems and processes, and maintaining tight discipline around accounts receivable and collections. We will see the full effect of our February pricing action on our base of customers on retail plans beginning in June, so we expect to see further improvements in operating cash flow from annual payments from our base of merchants in June through the end of the year. We believe these initiatives will ultimately yield a better customer experience, higher deferred revenue, and long-term improvements to DSO as well. I'll now conclude with an updated view on our outlook and guidance for the second quarter and full year 2023. For the second quarter, we expect total revenue in the range of $72.1 million to $74.1 million, implying a year-over-year growth rate of 6% to 9%. Note that we expect subscription revenue and PSR to grow in the mid-single digits, similar to the growth reflected in the guidance range for the quarter. For the full year 2023, we expect total revenue between 303 million to 311 million, translating to a year-over-year growth rate of approximately 9% to 11%. For Q2, our non-GAAP operating loss is expected to be between 5.5 million and 9.5 million. For the full year, we expect a non-GAAP operating loss between 14 million and 20 million. While we are encouraged by progress thus far in the year, we intend to remain conservative in our guidance based on the macroeconomic uncertainty in our industry. We believe this is a reasonable approach at this time. Note that the midpoint of this guidance range for Q2 non-GAAP operating loss is sequentially down slightly compared to Q1 results. This is primarily due to some one-time expense benefits in Q1 and select investments planned for Q2. Let me elaborate on this just for a moment. Q1 non-GAAP operating loss saw approximately $2.1 million of one-time expense benefits to the quarter from two primary sources. First, we regularly reserved for doubtful accounts under our normal practice, and we made good progress in collections on a number of outstanding accounts in Q1. That contributed a $1 million expense benefit to the quarter. Second, our increased sales and marketing spending towards the mid-market and enterprise segments ramped a little more slowly than expected as we added resources and new marketing channels, which contributed approximately $1.2 million of benefit to the quarter. We also plan to make small investments and select initiatives in sales and marketing in Q2 to capitalize on opportunities we are seeing in the marketplace and continue to build a strong sales pipeline for the back half of the year. Apart from the effect of those Q1 items and the small investment increase in Q2, Our non-GAAP operating loss outlook at the midpoint would have been sequentially better as we worked towards breakeven by the end of Q3. While we may make additional changes or investments as the year progresses, we plan to keep spending relatively flat across the remainder of the year. Our aim is to reach breakeven in late Q3 with full quarter positive adjusted EBITDA in Q4. We remain incredibly bullish about the potential of this business. We have the product, market opportunity, and partner ecosystem to build our presence further in the mid-market and expand upmarket into the enterprise segment. We have many paths for growth, including B2C, B2B, composable commerce and headless, international growth, cross-sell with our existing customers, and omnichannel expansion across merchants using both BigCommerce and other e-commerce platforms. We also have the organizational focus necessary to win in these segments while driving the operational improvements necessary to profitably scale the business and generate strong returns for our shareholders. With that, Brett and I are happy to take any of your questions. Operator?

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone cell. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. And at this time, we will pause momentarily to assemble our roster.

Thank you.

First question will come from Terry Tillman with Truist. Please go ahead.

Oh, great. Thanks. This is actually Connor for Terry. Appreciate you taking the questions. Maybe just to start, I would love to kind of dig deeper into the progression of feedonomics. Sounds like it's continued to do really well. Lots of nice wins with some large versions. I'm just curious if you could share anything directional on what the growth expectations are around feedonomics and maybe the size of that business versus BQC as a whole. And then also, maybe what are the puts and takes on the sales cycles here as well?

What does a typical sales cycle look like for FEDO? Yeah, I'll jump in here.

You know, as we always thought, FEDONOMICS would grow at or above the pace of our enterprise business. And, you know, I think in terms of performance, they've definitely done that. We've also integrated FEDONOMICS in a lot of different ways with the launch of our Omnichannel Certified Partner Program. Our agency partners, tech partners, have definitely embraced feedonomics, and we're seeing really great demand signals in terms of interest from their merchants, as highlighted with WPP. I think we're just now really enabling our ecosystem to sell feedonomics across their base of merchants, whether they're on BigCommerce or not. And if you think about the selling cycle or go-to-market motions for e-commerce versus what feedonomics does, I think that 90%, 95% of merchants out there are looking for ways to increase top-line revenue, increase their return on ad spend. And so I think collectively between big commerce now really exposing our ecosystem to feedonomics, we're seeing really great brands signing up, new accounts, gross new sales are strong. sales cycles are actually less than our enterprise sales cycles, which is good. And we couldn't be more excited and more bullish about feedonomics going into this year.

Great. That's really helpful. Appreciate the color. Maybe just a quick follow-up on international. So I just wanted to ask around the recent entries into Poland, Romania, India, a few others. What did you see in these regions that kind of gives you the confidence to invest there? Was that kind of partners pulling you towards them or maybe just low-hanging fruit in terms of being able to get in there with an open SaaS platform for some of the enterprise sellers there?

Yes, to clarify, as we launch in these markets, we're launching a marketing presence, not a headcount-focused sales presence in those markets. We're relying especially on partners and organic traffic. But the reason we picked these markets is that they are among the very top performing markets in the world for us that did not already have their own dedicated country landing pages and websites. So Poland, Romania had been top performing countries for us, the Middle East, particularly UAE, a top performing country for us, and India as well. So putting now marketing presence in those countries where we can better coordinate lead volume in conjunction with our best partners is really a ROI no-brainer to help further accelerate growth in those countries. So the biggest thing is just organic pre-existing business tells us that they're very attractive markets for big commerce. And, of course, it helps as well that India, the UAE, and South Africa can all be supported with English language websites.

Great. Thank you.

Thank you. And the next question will come from Rob Morelli from Needham & Company. Please go ahead.

Hey, thanks for taking my question. I'm for Scott Berg here. You know, just to carry on with that question, what's the pace of, you know, this new country entry, you know, with those recently announced, you know, expansions? Are there any other regions, you know, in markets that you see an opportunity in, you know, nearby next?

In the long term, absolutely. We really want to be competing effectively in every country around the world in the long run where our differentiated open SaaS platform can serve a meaningful part of the market. But for this year, priority number one is achieving profitability on an adjusted EBITDA basis in Q4. So whereas in prior years, we had full market entries that included a meaningful build-out of sales, solutioning, business development in countries that we enter. This year, we're focused on those markets that were already established and not really adding headcount into new markets. What we're excited to see is just how much we can accelerate countries where we don't have a big human presence with marketing support like these five. And if that works, then conceivably there are quite a few other countries around the world that we'll look to in 2024 to expand in a similar way. Thanks for the question. Oh, I think the other thing I would add, I mean, just while we're on the international topic in case nobody else asks about it, it was notable that if you break out the growth rates for the various regions, we saw an increase in the quarter-on-quarter growth So the year-on-year growth rate in Q1 relative to Q4 in all of our non-U.S. geographies, you know, APAC improved by 7%, EMEA growth rate improved by roughly 5%, non-U.S. Americas by roughly 12%. So it was a very strong quarter and strong momentum continuing around the world for us.

And the next question will be from Parker Lane from Steeple. Please go ahead.

Hi, guys. Thanks for taking the question. Brent, I know self-serve small business is a smaller part of the business from an ARR perspective, but with the changes you've been making, what are some of the signals you see from this channel and what are your growth expectations that are going forward under this new model?

The price change has not had a seemingly negative impact on volume of new business coming in on our small business plan since we turned off the heavy marketing and sales spigot in Q4. So what we are seeing is a very positive trend that a higher percentage of folks signing up for the plans are picking annual prepay so that their price doesn't change relative to before. And of course, those picking monthly are now paying meaningfully more and so we get the benefit on ROI from the small business segment on both ends. We're both making more money off each new sign up and getting more upfront prepayment where we don't get that and we're spending less money to acquire the plan. So the business is much healthier on an LTV to CAC standpoint than ever before. And so we're very encouraged by that as we look to continue to grow it around the world.

Got it. Understood. And then touching on multi-storefront real quickly, I saw that you expanded that beyond the enterprise merchants down to small and medium-sized merchants. When I think about the enterprise, there's obviously a lot more complexity there given their size and scale. How do I think about the addressable opportunity and the adoption patterns you're seeing in multi-storefront outside of that enterprise market where you've brought this tool to?

Well, as you mentioned, it's less than a quarter new for the small business plan, but there are plenty of businesses that have complexity. Historically, they would have been faced with the choice of either not launching additional stores or having them on their own completely independent account with a separate set of integrations, etc. That's a lot more work. So we make it easier to add additional brands and sub-brands, additional geographies and or additional segments like B2B plus B2C than any other platform and have democratized it all the way down. A nice thing is that each time a small business customer clicks a button and adds another storefront, their revenue to us goes up very substantially relative to what they were paying before. So it's real enterprise functionality of great benefit even to small businesses with a value for the customer and a big revenue boost for us every time it's chosen.

Understood. Thanks for the color. Appreciate it.

And the next question is from Ramo Renschow from Barclays. Please go ahead.

Hi, this is Isaac Piliov for Onforimo. Thanks for taking the question. Could you speak a little bit to what you're seeing with the new changes in the B2B segment rollout and any increased traction or early feedback based on these new functionalities? Thank you.

Yeah, you're referencing the updated release for our B2B edition that only went out a couple business days ago, and there are you know, very few product releases in our history that are as exciting as this one. So just to let everybody know, the new updated version of B2B Edition includes full compatibility with our multi-storefront and headless capabilities, which are, you know, really market-leading capabilities built into the BC core. But very importantly, we have now created a buyer portal set of capabilities that we're getting a lot of feedback from agency partners and early adopters saying that it is really the best buyer experience on the market. It has a fully customized purchasing experience where the, you know, the region, the industry vertical and the needs are basically delivered into the buyer. They can, customers can pre set prices and shopping lists for their individual company purchasers. incorporate configure price and quote into it, and have easy reordering. So it's a super slick, very B2C-like user interface, but meets all the complex needs of B2B buyers. We think it's a game changer. We think it's the best on the market, and we're optimistic that there will be a lot of excitement in the industry as customers and agency partners take a close look at it. Thanks for the question.

And then if I could just follow up with one more quickly, can you speak a little bit to the pipeline for new deals comparing to last quarter and what the trajectory for that is looking like moving forward?

Yeah, I can say... Go ahead, Brent.

No, you are right.

Yeah, I can say through Q1 and into Q2, our pipeline for enterprise is roughly 20% higher than it was last year. I'd also say month one of Q2 has been stronger than month one of Q1. But when we look at the pipeline for enterprise opportunities, really we're seeing strength in mid-market and we're really starting to build pipeline in those large enterprise opportunities. Feedback from the launch of B2B edition this week has been overwhelmingly positive with a strong presence at B2B online where We got a ton of great feedback and deal registrations from really large prospects and partners. So with that launch, we expect that pipeline to continue to grow. And once we factor in some of the longer sales cycles we see, we feel pretty confident in the, you know, reacceleration that we're, you know, forecasting and planning for in the second half of this year.

Great. Appreciate the color. Thank you.

And the next question will be from Josh Baer from Morgan Stanley. Please go ahead.

Great. Thank you for the question. I was just hoping, Brett, to get your take on Shopify's commerce components. You know, on the one hand, completely validates your open SaaS strategy. On the other hand, just wondering how you think or if you think it changes BigCommerce's competitive environment.

I don't want to comment on their product. I will comment on ours. We've been doing headless and composable since our first major customers, including Harvard Business Publishing, went live in 2016. They're still with us. Proud to serve them. We were the second platform to enter the Mock Alliance, which is basically an alliance of the leading advocates and providers of composable commerce i'm on the board of the mock alliance and it's a big part of our business we serve thousands of headless and composable customers across all popular front end frameworks and content management systems so it's a very material part of what we do but it's also consistent with our open commerce philosophy and commitment from the very beginning. It's not a new way of doing business for us. It's a natural competitive advantage that extends off our commitment to openness. And why are we so committed to open? It's because that is what enables us to best serve the world's complex mid-market and enterprise businesses. Instead of telling them, hey, here is how we prescribe that you do e-commerce. We have the best APIs and the best flexibility. for you to optimize your stack around your business requirements. So we're really committed to it. We're a leader in headless and composable e-commerce, have been recognized as such for years and believe more than any other platform, we take the headache away from composable. Composable is a more complex approach for businesses. It requires more coordination across individual components and there's no platform that makes that easier to accomplish across a wide range of front ends and frameworks than BigCommerce.

Perfect. Thank you. I wanted to dig in a little bit on the comments on the stronger pipeline. Is there any way to give more context around how strong is lead generation, qualified leads that are moving into the pipeline versus just like the pipeline could be getting bigger as a function of elongating sales cycles? You know, how did those two or how did those all work together? Thank you.

Yeah, I would characterize it as high quality. I think the quality is getting better as we go. But also remember where we get a lot of our leads from. And when you think about the initiatives that, you know, we're really leaning into and getting great demand signals from, whether it's omnichannel or B2B, A lot of those leads are coming from our agency partners. Agency and tech partners are really embracing the differentiation that we have around omnichannel and B2B, and every month that goes by, we're seeing even larger and larger opportunities come our way. I don't know, Brent, if you want to add anything.

I agree. I think you got it.

Thank you. And the next question will be from Brian Peterson from Raymond James. Please go ahead.

Hi, thanks for taking the question. This is John for Brian. I'm curious if you can maybe speak to the growth algorithm here. So enterprise ARR growth has been really good. It's outpaced enterprise accounts. I'm curious if you can maybe quantify how the growth has been split between land versus expand. Are you seeing new merchants come on the platform maybe larger than you expected? And in a similar vein, I realize we're early in the year. But how is, like, enterprise NRR tracked versus your expectations? Then I have a quick follow-up.

Yeah, I would say definitely larger in Q1, and we expect that trend to continue. You know, we have opportunities for sure on expansion, and, you know, we're working towards that, especially around feedonomics. There's definitely ways for us to really improve our cross-cell motions with feedonomics, and we're doing that, not just in the U.S., but internationally. in all of our markets where we have go-to-market teams. And I'll say the reception around feedonomics in that offering in markets like EMEA and APAC has been incredibly strong. So higher quality, probably much larger in terms of opportunities. And in terms of cross-sell, I think that's just a big opportunity in front of us.

Thanks. It's a great color there. And then I'm curious on social commerce. It's obviously been a point of emphasis in the past. I think you announced a Snap integration back late last year. Can you maybe give any insights into sort of attach rates you're seeing there or increased conversion or GMV uplift from merchants that integrate big commerce with social networks like Snap and Meta? Thank you.

We don't have statistics to share, but I would really emphasize the takeaway that for a business wanting to do social commerce and especially do it the optimal way with purchasing enabled on those platforms or to do it across many platforms feedonomics is the best solution on the market it has incredible integrations into facebook instagram into snap into tech talk into all the leading channels and what it lets businesses do is not just integrate and optimize their products for sale in those channels, but also track the ordering and the inventory across the channels so they can have one view into orders and one view into fulfillment. So Feedonomics is a market leader in this area, especially in the enterprise segment, and a prime partner of each of the major social networks.

Thank you very much.

And the next question is from Daniel Reagan from Canaccord Genuity. Please go ahead.

Hey, guys. Thanks for taking our question. Maybe I'll start with RA. So it's great to see stabilization in non-enterprise retail accounts. I'm wondering, are we out of the woods yet, do you think? And what are your expectations in terms of retail accounts being an anchor to growth from here, especially as we think about the full pricing effect hitting in June?

Yeah, that's a great question. Listen, I think we're very pleased with the cohort health of the non-enterprise segment. Like you mentioned, I think we're going to know a lot more in early June. Again, our expectation and assumption is that most folks are going to want to keep their prices the same. So we'll probably get a real benefit for cash flows. But if that mix changes, I think we'll have a positive lift to revenue. But in terms of the health of that I would say that we feel like it's stronger today than we thought it was even three months ago. And I think that with the pricing action we took and with what we're seeing, we have a chance of that being even better as the year progresses, but we're really going to have to see how the impact of that June 1st rollout goes. So we'll know a lot more the next time we speak. Gotcha. Excellent.

And then maybe just one for Brent. As we think about the setup for 2023, in the second half, we're expecting non-enterprise to be less of an anchor to growth. And then the mounting enterprise pipeline from the shift in resources should hopefully begin converting at a higher level. So my question is, where would you say you are compared to your initial expectations when you set out on this strategic pivot? And then how are you thinking about close rates of the enterprise pipeline in the second half? Thanks very much, guys. I think we're on track.

You know, the changing mix in our business, the impact on, you know, gross new sales, and then the quarterization of it is roughly in line with what we anticipated. And we know that our platform has really strong competitive advantages relative to our competition in the enterprise segment. But historically, that's not where we spent the lion's share of our marketing and lead generation. And so we have a lot of confidence that as our enterprise marketing and sales generation motions gain maturity, we're doing more field marketing in Q1 than we've ever done before by a long shot. We're really getting the word out. Our agency and tech partner ecosystems are rallying around that because they like the enterprise business a lot more too in general. And so we're quite optimistic about how things can fold out, not just in the second half of this year, which is when we start to see this maturing, but especially in 2024. The only part of the whole equation that we wish were healthier especially in the Americas right now, is the sales cycle time for enterprise in the U.S. As R.A. has mentioned, we're seeing mid-market deals continue to close at a normal pace, but the large enterprise deals are still being delayed in the relatively soft economy right now. And at some point, that's going to come around and return to normal. We look forward to that because that will be an additional accelerator, though we – really didn't build that expectation into our plans for H2.

Thank you. And the next question will come from Mark Murphy from J.P.

Morgan.

Please go ahead.

Thanks. This is already on for Mark Murphy. First question, you know, you guys said that you're still aiming for the 20% growth for enterprise ARR. just kind of looking at a little bit of deceleration and the customer ad being about 42 for that category, what is the level of confidence? Are you still feeling the same way or has that changed either direction?

No, I mean, we're feeling pretty confident that we'll be able to deliver that. Again, it's 20% for the full year. Some quarters could be slightly less, some could be more. But for the full year, we feel really good about our ability to deliver that. And also I'll say that, you know, I think that we're on track to, you know, exit this year really with a quarter where we're, you know, positive and adjusted EBITDA. Our margins will be in the high 70s. And we'll have, you know, reaccelerating growth rates for both subscription and PSR as we exit this year. And all of that is tied to, you know, our confidence to deliver those growth rates in enterprise.

Great. That's really good to hear. And then just one quick last one. In terms of linearity, anything change from Q4 into Q1? And if it did, is it something that you expect to continue through Q2 and beyond?

You know, the only thing is what we called out with the path to profitability. You know, we had some one-time items in Q1. When you factor that in, I think we've got that kind of path, nice path to that break-even point by the end of Q3. I'll also mention, you know, PSR. We had some one-time items in our base period. If you remove that, our PSR would have been kind of in line with, you know, U.S. e-commerce growth. And, you know, we're past those, I think, one-time items into Q2. If you look at Q2 last year, you know, the base period effect won't be there this coming quarter. And so anyway, just wanted to call that out for you in terms of trends.

I think that's helpful.

Thank you. And once again, if you have a question, please press star then one. The next question will be from Ken Wong from Oppenheimer and Company. Please go ahead.

Hi, thanks for taking the question. This is Nancy. I'm for Ken. So your enterprise ARR mix has been increasing over the past several quarters, but I saw it stagnated here in one queue. Is there any color you can provide on why that occurred or how we should think about the cadence of the next shift going forward?

Yeah, it's interesting. Since our non-enterprise segment performed better than we thought, you know, that mix remained kind of at that 72% mark. You know, had it kind of played out like we thought, enterprise would have been roughly 73%. I still think, you know, throughout the year that mix is going to trend up significantly. to the high 70s, and I think Q1 was just a matter of the non-enterprise ARR performing much better.

And ladies and gentlemen, that concludes our question and answer session. I would like to turn the conference back over to Brent Bellum, President, CEO, and Chairman for closing remarks.

Thanks, everybody, for joining. That wraps up the call for Q1 quarter that we feel very good about, most particularly the strong progress that we made toward our goal of achieving positive adjusted EBITDA in Q4, while continuing to successfully execute a organizational focus and growth in the mid-market and enterprise segments. So, we feel good about the quarter. And we look forward to our next conversation a quarter from now. Until then, thanks.

And thank you. The conference has now concluded. Thank you for attending today's presentation.

You may now disconnect. you Thank you.

Ladies and gentlemen, thank you for standing by and welcome to the BigCommerce first quarter 2023 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 today, Daniel Lentz, Head of Investor Relations. You may begin.

Good afternoon and welcome to BigCommerce's first quarter 2023 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 certain 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 second quarter of 2023 and the full year 2023. These statements can be identified by words such as expect, anticipate, intend, plan, believe, seek, committed, 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 and is also available on our website at investors.bigcommerce.com. With that, let me turn the call over to Brent.

Thanks, Daniel, and thanks, everyone, for joining us. On today's call, I will walk through our first quarter results and share my perspective on our progress thus far in 2023. R.A. will later share greater detail on our financial results and conclude the call with a discussion on updated guidance. Let's discuss the details. In Q1, total revenue was $71.8 million, up 9% year over year. Our Q1 non-GAAP operating loss was $6.4 million, which was well ahead of our quarterly guidance and a strong step toward our goal of reaching break-even on an adjusted EBITDA basis in Q4 of this year. We concluded Q1 with an annual revenue run rate, or ARR, of $316.7 million, up 13% year over year. That represents a sequential growth in ARR of $5.0 million. Enterprise account ARR was $228.8 million, up 21% year over year. Enterprise accounts now represent slightly over 72% of our total company ARR. On our previous earnings call, we noted that we are aiming for enterprise ARR growth in 2023 at or above 20% year over year, which we believe will be offset by non-enterprise account ARR contraction in the mid single digits. Q1 results met this goal. Non-enterprise account ARR was $87.9 million, up slightly on a sequential basis compared to Q4, and down slightly year over year, as expected, as we take action to build a scalable, more self-serve small business segment. I'd like to elaborate on a few areas in particular that demonstrate our progress. Our shift of go-to-market focus from small business to the enterprise segment is showing positive results. Sales pipeline as of the start of Q2 for this segment is approximately 20% higher than where we were at this time last year. Win rates remain strong. Sales cycle times in the lower end of this segment are largely unchanged, while larger enterprise opportunities have seen an increase of approximately 50 days between first engagement with a merchant and close compared to this time last year. Before I elaborate on how we are responding to these dynamics, I'd like to clarify what we mean by enterprise accounts and the parts of the market we serve. We sell four different e-commerce plan types to merchants. The first three, standard, plus, and pro, are collectively our essentials plans geared towards small businesses. Our enterprise plans have richer feature sets, customized pricing and terms, and are typically sold to merchants in what we deem the mid-market and enterprise customer segments. We consider merchants doing between $1 million to $50 million per year in online gross merchandise value, or GMV, our mid-market segment, and merchants doing more than $50 million in online GMV per year, our large enterprise segment. We consider any account buying at least one enterprise plan, an enterprise account, and we include select financial metrics from these accounts in our quarterly results. As a result, our enterprise account metrics reflect a mixture of mid-market and large enterprise segment merchants. We are responding to the sales cycle time dynamics I mentioned previously by further prioritizing channels and products that deliver strong ROI with faster time to close. We are increasing our investment in lead generation with our agency partners and in the mid-market segment, as these opportunities tend to have shorter sales cycle times and a strong LTV to CAC. Finally, We are seeing strong success with Feedonomics, which offers our customers incredible ROI with fast time to merchant value and also high ROI for BigCommerce. All merchants are actively seeking ways to increase revenue and improve their return on ad spending, and Feedonomics can help merchants running on many different platforms see strong results without the need to re-platform. Feedonomics continues to win accolades and customer satisfaction and deepen BigCommerce's relationship with key partners and merchants. 30% of the top 1,000 internet retailers trust Feedonomics to optimize their product catalogs and expand their market reach. In Q1, G2 issued their Spring Grid Reports that measure overall customer satisfaction and market presence. Feedonomics was in the leadership position in three e-commerce software categories, multi-channel retail, catalog management, and online marketplace optimization tools. Feedonomics also rolled out its own native integration into Amazon multi-channel fulfillment during the quarter, enabling thousands of merchants to take advantage of Amazon's fulfillment services for orders that originate on non-Amazon channels. Theonomics also continues to support merchant adoption of key global channel programs, including Macy's.com, Meta's Facebook, and Instagram shop ads, and TikTok shop. Our platform and omni-channel products drive scalable, cost-effective growth for our merchants. We are confident that we will continue to broaden our mid-market base even as we invest in expansion further into the enterprise segment as well. We also saw healthy stabilization in our non-enterprise or retail accounts. While this portion of our business was down 4% year over year, it showed sequential growth for the first time since Q4 2021. As we have shifted focus towards more established small businesses, adjusted plan pricing to encourage prepayment, and decreased the volume and depth of sales promotions, We have seen improved net retention results in this portion of our business and encouraging signs of stabilization in ARR. We expect results from this portion of the business to benefit from our recent pricing changes as well. We will not see the full effect of the February pricing action on our base retail accounts until June, but early results are strong. New merchant bookings remain consistent, and we are also seeing a higher mix of prepaid annual plans as well. Finally, our Q1 results reflect progress on our path towards profitability. To be clear, adjusted EBITDA breakeven in Q4 is not a finish line. It is a starting line in our business from which we will drive profitable growth for our shareholders. Q1 was a strong step toward that goal. Despite the prevailing caution among businesses regarding the near-term economic outlook, established and mid-market and enterprise merchants continue to demonstrate interest in long-term investments and our e-commerce platform and omnichannel capabilities. Although acquiring these larger merchants may come at a greater financial cost and require a longer time to close deals, they offer significantly higher long-term value. These merchants have impressive retention rates, greater cross-selling potential, and healthier unit economics. They are also more likely to adopt technologies and omnichannel integrations that help sustain and accelerate their growth, which drives significant revenue for us. These merchants are central to our strategic and financial success, and we will continue to balance the need to invest in winning these segments while also improving profitability and cash flow. Our average revenue per account or ARPA for enterprise accounts was a little over $39,000 in Q1, which was up steadily from $35,000 in Q1 2022 and $32,000 in Q1 2021. The consistent growth we have seen in this metric reflects our progress moving up from our historical base in small business into the mid-market segment and now early progress in the enterprise segment as well. This move into enterprise is succeeding, as is evident by merchants such as Curology, Kahn's Home Plus, and Harley-Davidson launching with us in Q1, as I'll discuss more later, and also by merchants such as Coldwater Creek picking us as their new e-commerce provider. This go-to-market focus on the mid-market and enterprise segments does not mean that we are walking away from small business merchants. We continue to acquire and serve small businesses on our platform, and we are committed to helping them build their business with BigCommerce. But we have optimized our go-to-market approach to small businesses to be more self-serve with less sales and marketing demand generation investment. The goal is to build a small business segment with a scalable LTV to cap. Our recent standard plus and pro pricing action and prioritization of annual prepayment is an example of the adjustments we are making to build this segment into a profitable and more scalable business. Our e-commerce and omnichannel solutions are designed to be flexible, composable, and scalable, providing unmatched versatility for both B2C and B2B clients alike. Earlier this week, we announced the latest update to B2B Edition, our comprehensive suite of B2B functionalities that enhance the online selling experience for suppliers, manufacturers, distributors, and wholesalers. The new release introduces multi-storefront compatibility, a brand new B2B buyer portal, and headless support. Next-level B2B edition functionalities allow merchants to manage quotes, invoices, and buyer approval workflows. B2B edition's open and intuitive solution transforms the way sellers and buyers do business, turning legacy B2B practices into a modern, agile, and nimble digital operation with a composable foundation ready to scale with the business. These enterprise-grade capabilities provide B2B brands with the flexibility and customization they need to elevate online selling experiences, launch new brands, and expand into new regions. In addition to strengthening B2B addition, BigCommerce continues to release features and product enhancements that resonate with our target market. In March, we launched Buy Online Pickup and Store functionality, also known as Click and Collect, giving merchants more options to meet shoppers where they are and provide frictionless shopping experiences. Previously only available for enterprise merchants, we expanded our multi-storefront offering in Q1 as a self-service feature accessible to small and mid-sized BigCommerce merchants running on our retail plans. BigCommerce merchants of all sizes now have the advantage to manage multiple storefronts to grow sales in new regions, streamline operations for multiple brands, and customize various customer segments to drive global growth. In Q1, we announced a new strategic partnership with WPP to offer omnichannel solutions to help WPP clients drive growth and maximize sales across hundreds of advertising channels and marketplaces. This innovative partnership will give WPP priority access to new product tools on both big commerce and feedonomics, in addition to providing APIs and data sets that will enable WPP agencies to develop unique insights for clients across product, trend, and purchasing data. Given the attractiveness of the joint BigCommerce and Feedonomics value proposition to enterprise brands, we continue to be focused on engaging, activating, and enabling many other global agency partners to serve mutual merchants with these market-leading capabilities across advertising, marketplace, and branded commerce channels. We also announced a new global partnership with InfoTrax Systems, a leading provider of commission software and distributor tools for direct sales companies. The new InfoTracks powered by BigCommerce solution will give thousands of direct selling customers access to more innovative and sophisticated commerce capabilities, including the ability to launch omnichannel sales strategies using feedonomics. In addition, THG Ingenuity, the complete commerce division of THG PLT, and BigCommerce intend to develop a U.S. and EMEA-focused complete commerce solution that would bring together BigCommerce's composable e-commerce storefront with Ingenuity's fully integrated technology stack and operational capabilities. Earlier in Q1, in partnership with Amazon, we launched the Buy with Prime app for BigCommerce, a new self-service integration for U.S. merchants to easily enable Buy with Prime on their BigCommerce storefront with no coding required. With shopping benefits that millions of Prime members know and trust, including fast, free shipping, Buy with Prime is shown to increase conversion by 25% on average. This week, we also announced that we have expanded our global footprint into Poland, Romania, India, the UAE, and South Africa with an expanded engineering team in Poland, two partner-led entities in Eastern and Central Europe, and a new country leader in India. In Q1, we continue to grow our roster of leading, notable brands and merchants on our platform. Innovative health and beauty brand Curology launched a beautiful new storefront leveraging our NetSuite ERP partnership to connect Curology Store with its ERP for product and inventory data syncing. Hans Home Plus, a leading retailer of furniture, appliances, and electronics, with more than 160 stores across 15 US states, recently launched on BigCommerce using a natively hosted Stencil storefront and a custom BigCommerce checkout, taking advantage of integrations with custom financing solutions and location-based pricing. Tottenham Hotspur, one of the world's top football clubs, is leveraging BigCommerce's platform to further enhance its popular online stores capabilities and fan experience, not only at home in the UK, but also in APAC in North America, where the club has a significant and growing fan base. Asa Abloy, a global leader in door-opening solutions used in many of the world's locks and security installations, is revolutionizing its customers' experience by integrating its broad product catalog and using our B2B edition solution to customize the shopping experience. Iconic motorcycle brand Harley-Davidson launched a new line of lifestyle apparel utilizing BigCommerce's APIs to build a full suite of custom integrations with back-end systems and leveraging BigCommerce's stencil framework to build a chic front end. Diamonds Direct, a worldwide leader in diamond sourcing, selection, education, and value, launched a new store with a headless digital experience front end and BigCommerce back end to deliver a seamless, intuitive shopping experience, including custom ring builder options. Edonomics also signed many new customers on the quarter as well, with highlights including Chicos, Sindel, Rappi, Tiendamia, as well as signing new agreements with existing BigCommerce customers, such as Solo Brands, Diono, Hauser, and Badgley Mishka, among many others. To conclude, our 2023 plan is focused on three primary goals. First, continued top line growth in the mid-market and enterprise segments. Second, break even in Q4 on an adjusted EBITDA basis. And third, further efficiencies in our business to improve operating cash flow. We are laser focused on delivering these commitments. These set up our business for strong, profitable growth in 2024. We are operating from a position of strength in the mid-market segment and building momentum in the enterprise segment as well. We have a winning product in a growing market with a diverse partner ecosystem vested in our success. We are encouraged by results thus far in 2023, and we are committed to deliver healthy returns to our shareholders. Next, I'd like to turn it over to RA to discuss our financial results in more detail and conclude with our updated guidance for Q2 and 2023.

Thanks, Brent, and thank you, everyone, for joining us today. During my prepared remarks, I'll cover our Q1 results in detail, provide additional commentary on some of our key goals for the year, and finally conclude with updated guidance. In Q1, total revenue was $71.8 million, up 9% year-over-year. Subscription revenue grew 12% year-over-year to $53.8 million, while partner and services revenue, or PSR, was down 1% year-over-year to $17.9 million. Revenue in Americas was up 7%. while EMEA revenue grew 27% and APAC revenue was up 1% compared to prior year. As I mentioned on the last earnings call, we built our 2023 financial plan assuming conservative net bookings growth, particularly in the front half of the year. We also assumed further moderation in consumer spending, which would impact volume-driven pricing upgrades and PSR. Q1 results were largely in line with these assumptions, and I am encouraged by the progress that we showed in the quarter. I'll now review our non-GAAP KPIs. Our ARR grew to $316.7 million, up 13% year-over-year. That represents a sequential growth in total ARR of $5 million. Enterprise account ARR was $228.8 million, up 21% year-over-year. Subscription ARR was up $5.1 million, versus Q4 end up 15% year-over-year. As we mentioned last quarter, we are aiming for enterprise ARR growth in 2023 at or above 20% year-over-year, which we believe will be offset by non-enterprise account ARR contraction in the mid single digits. Q1 non-enterprise results exceeded our expectations. We believe improving cohort health and recent pricing changes will offset the degree of contraction risk we outlook at the beginning of the year. At the end of Q1, we reported 5,828 enterprise accounts, up 463 accounts, or 9% year-over-year. ARPA, or average revenue per account, for enterprise accounts was $39,260, up 11% year-over-year. I'll now shift to the expense portion of the income statement As a reminder, unless otherwise stated, all references to our expenses, operating results, and per share amounts are on a non-GAAP basis. Q1 total cost of revenue was $16.3 million, down approximately $1 million sequentially from Q4. Q1 total operating expenses were $61.9 million, down $2.7 million sequentially from Q4. Q1 gross margin was 77%. up 192 basis points from the previous year, while gross profit was $55.5 million, up 11% year-over-year. This gross margin expansion is notable in that we drove healthy margin expansion even while growth and high gross margin PSR was challenged. We are making deliberate decisions on automation, staffing, and other cost drivers to drive sustainable margin improvements over time. In Q1, sales and marketing expenses totaled 31.2 million, up 2% year-over-year. This represented 43% of revenue, down 297 basis points compared to last year. Research and development expenses were 17.3 million, or 24% of revenue, down 366 basis points from a year ago, and down $1.7 million sequentially from Q4. General administrative expenses were 13.4 million, or 19% of revenue down 121 basis points from a year ago. In Q1 2023, we reclassified certain costs that we had previously included in general administrative expenses into sales and marketing expenses. To maintain consistency between comparable periods, we reclass $1.5 million from general and administrative expenses to sales and marketing expenses for the period ending March 31, 2022. This change in classification had no effect on the reported results of our operations or cash flow. In Q1, we reported a non-GAAP operating loss of $6.4 million, a negative 9% operating margin. This compares with an operating loss of $12.4 million or a negative 18.7% operating margin in the prior year and an operating loss of $9.4 million or a negative 13% operating margin in the prior quarter. Adjusted EBITDA was negative 5.5 million, a negative 7.6% adjusted EBITDA margin, compared to negative 11.6 million and a negative 17.5% adjusted EBITDA margin in the prior year. Non-GAAP net loss for Q1 was negative 4.9 million, or negative 7 cents per share, compared to negative 13.2 million, or negative 18 cents per share last year. We ended Q1 with $283.5 million in cash, cash equivalents, restricted cash, and marketable securities. For the three months ended March 31, 2023, operating cash flow was negative $20.8 million compared to negative $22 million a year ago. We reported free cash flow of negative $21.9 million or a negative 31% free cash flow margin. This compares to negative 23.3 million and a negative 35% free cash flow margin in Q1 2022. Q1 operating cash flow results included a number of one-time impacts that contributed to the difference between cash flow and our non-GAAP operating loss results. These differences included approximately $4 million between severance related to our December restructuring and normal year-end bonus payments and $6 million in Q1 revenue from a payments technology partner, which was paid in early April and will be reflected in our Q2 operating cash flow. Apart from these timing-related impacts, operating cash flow would have been between negative $10 to $11 million on the quarter. I'd also note that Q1 is the quarter in which we have the most prepaid software obligations as well, which also contributes to a difference between operating cash flow and the underlying operating results during the period as well. As Brent mentioned, our 2023 plan is focused on three primary goals. First, we are investing to continue to win in the mid-market and enterprise segments. Top line revenue results and net bookings in Q1 were a positive first step. We saw strong growth from the mid-market segment and feedonomics, and we are encouraged by the sales pipeline heading into Q2. We continue to see strong win rates in our key segments as well. However, we are also seeing fewer volume-driven pricing upgrades and additional conservatism with respect to software spending from our existing merchants, which is in line with the expectations on which we built our plans. Second, we are operating with discipline to reach break-even by the end of Q3 on an adjusted EBITDA basis and remain confident in our ability to deliver positive EBITDA for the full quarter in Q4 of this year. Q1 results reflect our continued progress and are a strong indicator that we are on track to meet this goal. We are also highly focused on driving operating leverage further as we scale the business. One important item to note with respect to GAAP net loss is how the August 2021 $145 million acquisition of Fedonomics is accounted for in our financial statements. Our Q1 net loss includes over $6 million in expenses from third-party acquisition costs and intangible asset amortization from that transaction. We expect the majority of third-party acquisition costs to be fully recognized by the end of Q2 of this year. Our focus is scaling this business while balancing top line and bottom line growth, and we will continue to manage our spending in a financially disciplined way to accomplish that, including costs to run the business, careful evaluation of potential acquisitions and partnerships, and equity grants to employees. Third, we are taking steps to prioritize cash flow improvements to drive healthy, consistent cash flow generation. As I mentioned before, apart from one-time impacts in the quarter, operating cash flow would have finished between negative 10 to $11 million. We are taking numerous actions to drive cash flow improvements, such as prioritizing advanced billing on new subscriptions, investing in our quote-to-cash systems and processes, and maintaining tight discipline around accounts receivable and collections. We will see the full effect of our February pricing action on our base of customers on retail plans beginning in June, so we expect to see further improvements in operating cash flow from annual payments from our base of merchants in June through the end of the year. We believe these initiatives will ultimately yield a better customer experience, higher deferred revenue, and long-term improvements to DSO as well. I'll now conclude with an updated view on our outlook and guidance for the second quarter and full year 2023. For the second quarter, we expect total revenue in the range of $72.1 million to $74.1 million, implying a year-over-year growth rate of 6% to 9%. Note that we expect subscription revenue and PSR to grow in the mid-single digits, similar to the growth reflected in the guidance range for the quarter. For the full year 2023, we expect total revenue between 303 million to 311 million, translating to a year-over-year growth rate of approximately 9% to 11%. For Q2, our non-GAAP operating loss is expected to be between 5.5 million and 9.5 million. For the full year, we expect a non-GAAP operating loss between 14 million and 20 million. While we are encouraged by progress thus far in the year, we intend to remain conservative in our guidance based on the macroeconomic uncertainty in our industry. We believe this is a reasonable approach at this time. Note that the midpoint of this guidance range for Q2 non-GAAP operating loss is sequentially down slightly compared to Q1 results. This is primarily due to some one-time expense benefits in Q1 and select investments planned for Q2. Let me elaborate on this just for a moment. Q1 non-GAAP operating loss saw approximately $2.1 million of one-time expense benefits to the quarter from two primary sources. First, we regularly reserved for doubtful accounts under our normal practice, and we made good progress in collections on a number of outstanding accounts in Q1. That contributed a $1 million expense benefit to the quarter. Second, our increased sales and marketing spending towards the mid-market and enterprise segments ramped a little more slowly than expected as we added resources and new marketing channels, which contributed approximately $1.2 million of benefit to the quarter. We also plan to make small investments and select initiatives in sales and marketing in Q2 to capitalize on opportunities we are seeing in the marketplace and continue to build a strong sales pipeline for the back half of the year. Apart from the effect of those Q1 items and the small investment increase in Q2, Our non-GAAP operating loss outlook at the midpoint would have been sequentially better as we worked towards breakeven by the end of Q3. While we may make additional changes or investments as the year progresses, we plan to keep spending relatively flat across the remainder of the year. Our aim is to reach breakeven in late Q3 with full quarter positive adjusted EBITDA in Q4. We remain incredibly bullish about the potential of this business. We have the product, market opportunity, and partner ecosystem to build our presence further in the mid-market and expand upmarket into the enterprise segment. We have many paths for growth, including B2C, B2B, composable commerce and headless, international growth, cross-sell with our existing customers, and omni-channel expansion across merchants using both BigCommerce and other e-commerce platforms. We also have the organizational focus necessary to win in these segments while driving the operational improvements necessary to profitably scale the business and generate strong returns for our shareholders. With that, Brett and I are happy to take any of your questions. Operator?

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone cell. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. And at this time, we will pause momentarily to assemble our roster.

Thank you.

First question will come from Terry Tillman with Truist. Please go ahead.

Oh, great. Thanks. This is actually Connor Passarello on for Terry. Appreciate you taking the questions. Maybe just to start, I would love to kind of dig deeper into the progression of feedonomics. Sounds like it's continued to do really well. Lots of nice wins with some large versions. I'm just curious if you could share anything directional on what the growth expectations are around feedonomics and maybe the size of that business versus big C as a whole. And then also, maybe what are the puts and takes on the sales cycles here as well?

What does a typical sales cycle look like for FIDO? Yeah, I'll jump in here.

You know, as we always thought, FIDOnomics would grow at or above the pace of our enterprise business. And, you know, I think in terms of performance, they've definitely done that. We've also integrated FIDOnomics in a lot of different ways with the launch of our Omnichannel Certified Partner Program. Our agency partners, tech partners, have definitely embraced feedonomics, and we're seeing really great demand signals in terms of interest from their merchants, as highlighted with WPP. I think we're just now really enabling our ecosystem to sell feedonomics across their base of merchants, whether they're on BigCommerce or not. And if you think about the selling cycle or go-to-market motions for e-commerce versus what feedonomics does, I think that 90%, 95% of merchants out there are looking for ways to increase top-line revenue, increase their return on ad spend. And so I think collectively between big commerce now really exposing our ecosystem to feedonomics, we're seeing really great brands signing up, new accounts, gross new sales are strong. Sales cycles are actually less than our enterprise sales cycles, which is good. And we couldn't be more excited and more bullish about feedonomics going into this year.

Great. That's really helpful. Appreciate the color. Maybe just a quick follow-up on international. So I just wanted to ask around the recent entries into Poland, Romania, India, a few others. What did you see in these regions that kind of gives you the confidence to invest there? Was that kind of partners pulling you towards them or maybe just low-hanging fruit in terms of being able to get in there with an open SaaS platform for some of the enterprise sellers there?

Yes, to clarify, as we launch in these markets, we're launching a marketing presence, not a headcount-focused sales presence in those markets. We're relying especially on partners and organic traffic. But the reason we picked these markets is is that they are among the very top performing markets in the world for us that did not already have their own dedicated country landing pages and websites. So Poland, Romania had been top performing countries for us, the Middle East, particularly UAE, a top performing country for us, and India as well. So putting now marketing presence in those countries where we can better coordinate lead volume in conjunction with our best partners is really a ROI no-brainer to help further accelerate growth in those countries. So the biggest thing is just organic pre-existing business tells us that they're very attractive markets for big commerce. And, of course, it helps as well that India, the UAE, and South Africa can all be supported with English language websites.

Great. Thank you.

Thank you. And the next question will come from Rob Morelli from Needham & Company. Please go ahead.

Hey, thanks for taking my question. I'm for Scott Berg here. You know, just to carry on with that question, what's the pace of this new country entry with those recently announced expansions? Are there any other regions and markets that you see an opportunity in, you know, nearby expansion?

In the long term, absolutely. We really want to be competing effectively in every country around the world in the long run where our differentiated Open SaaS platform can serve a meaningful part of the market. But for this year, priority number one is achieving profitability on an adjusted EBITDA basis in Q4. So whereas in prior years, we had full market entries that included you know, a meaningful build out of sales, solutioning, business development in countries that we enter. This year, we're focused on those markets that were already established and not adding a lot, you know, not really adding headcount into new markets. What we're excited to see is just how much we can accelerate countries where we don't have a big human presence with marketing support like these five. And if that works, then conceivably there are quite a few other countries around the world that we'll look to in 2024 to expand in a similar way. Thanks for the question. Oh, I think the other thing I would add, I mean, just while we're on the international topic in case nobody else asks about it, it was notable that if you break out the growth rates for the various regions, we saw an increase in the quarter-on-quarter growth So the year-on-year growth rate in Q1 relative to Q4 in all of our non-U.S. geographies, you know, APAC improved by 7%, EMEA growth rate improved by roughly 5%, non-U.S. Americas by roughly 12%. So it was a very strong quarter and strong momentum continuing around the world for us.

And the next question will be from Parker Lane from Steeple. Please go ahead.

Hi, guys. Thanks for taking the question. Brent, I know self-serve small business is a smaller part of the business from an ARR perspective, but with the changes you've been making, what are some of the signals you see from this channel and what are your growth expectations that are going forward under this new model?

The price change has not had a seemingly negative impact on volume of new business coming in on our small business plan since we turned off the heavy marketing and sales spigot in Q4. So what we are seeing is a very positive trend that a higher percentage of folks signing up for the plans are picking annual prepay so that their price doesn't change relative to before. And of course, those picking monthly are now paying meaningfully more and so we get the benefit on ROI from the small business segment on both ends. We're both making more money off each new sign up and getting more upfront prepayment where we don't get that and we're spending less money to acquire the plan. So the business is much healthier on an LTV to tax standpoint than ever before. And so we're very encouraged by that as we look to continue to grow it around the world.

Got it. Understood. And then touching on multi-storefront real quickly, some of you expanded that beyond the enterprise merchants down to small and medium-sized merchants. When I think about the enterprise, there's obviously a lot more complexity there given their size and scale. How do I think about the addressable opportunity and the adoption patterns you're seeing in multi-storefront outside of that enterprise market where you've brought this tool to?

Well, as you mentioned, it's less than a quarter new for the small business plan, but there are plenty of businesses that have complexity. Historically, they would have been faced with the choice of either not launching additional stores or having them on their own completely independent account with a separate set of integrations, etc. That's a lot more work. So we make it easier to add additional brands and sub-brands, additional geographies and or additional segments like B2B plus B2C than any other platform and have democratized it all the way down. A nice thing is that each time a small business customer clicks a button and adds another storefront, their revenue to us goes up very substantially relative to what they were paying before. So it's real enterprise functionality of great benefit even to small businesses with a value for the customer and a big revenue boost for us every time it's chosen.

Understood. Thanks for the color. Appreciate it.

And the next question is from Ramo Renschow from Barclays. Please go ahead.

Hi, this is Isaac Piliov for Onforimo. Thanks for taking the question. Could you speak a little bit to what you're seeing with the new changes in the B2B segment rollout and any increased traction or early feedback based on these new functionalities? Thank you.

Yeah, you're referencing the updated release for our B2B edition that only went out a couple business days ago, and there are you know, very few product releases in our history that are as exciting as this one. So just to let everybody know, the new updated version of B2B Edition includes full compatibility with our multi-storefront and headless capabilities, which are, you know, really market-leading capabilities built into the BC core. But very importantly, we have now created a buyer portal set of capabilities that we're getting a lot of feedback from agency partners and early adopters saying that it is really the best buyer experience on the market. It has a fully customized purchasing experience where the, you know, the region, the industry vertical and the needs are basically delivered into the buyer. They can, customers can preset prices and shopping lists for their individual company purchasers. incorporate configure price and quote into it, and have easy reordering. So it's a super slick, very B2C-like user interface, but meets all the complex needs of B2B buyers. We think it's a game changer. We think it's the best on the market, and we're optimistic that there will be a lot of excitement in the industry as customers and agency partners take a close look at it. Thanks for the question.

And then if I could just follow up with one more quickly. Can you speak a little bit to the pipeline for new deals comparing to last quarter and what the trajectory for that is looking like moving forward?

Yeah, I can say... Go ahead, Brent.

No, you are right.

Yeah, I can say through Q1 and into Q2, our pipeline for enterprise is roughly 20% higher than it was last year. I'd also say month one of Q2 has been stronger than month one of Q1. But when we look at the pipeline for enterprise opportunities, really we're seeing strength in mid-market and we're really starting to build pipeline in those large enterprise opportunities. Feedback from the launch of B2B edition this week has been overwhelmingly positive with a strong presence at B2B online where We got a ton of great feedback and deal registrations from really large prospects and partners. So with that launch, we expect that pipeline to continue to grow. And once we factor in some of the longer sales cycles we see, we feel pretty confident in the, you know, reacceleration that we're, you know, forecasting and planning for in the second half of this year.

Great. Appreciate the color. Thank you.

And the next question will be from Josh Baer from Morgan Stanley. Please go ahead.

Great. Thank you for the question. I was just hoping, Brett, to get your take on Shopify's commerce components. You know, on the one hand, completely validates your open SaaS strategy. On the other hand, just wondering how you think or if you think it changes BigCommerce's competitive environment.

I don't want to comment on their product. I will comment on ours. We've been doing headless and composable since our first major customers, including Harvard Business Publishing, went live in 2016. They're still with us. Proud to serve them. We were the second platform to enter the Mock Alliance, which is basically an alliance of the leading advocates and providers of composable commerce. I'm on the board of the Mock Alliance, and it's a big part of our business. We serve thousands of headless and composable customers across all popular front-end frameworks and content management systems. So it's a very material part of what we do, but it's also consistent with our open commerce philosophy and commitment from the very beginning. It's not a new way of doing business for us. It's a natural competitive advantage that extends off our commitment to openness. And why are we so committed to open? It's because that is what enables us to best serve the world's complex mid-market and enterprise businesses. Instead of telling them, hey, here is how we prescribe that you do e-commerce. We have the best APIs and the best flexibility. for you to optimize your stack around your business requirements. So we're really committed to it. We're a leader in headless and composable e-commerce, have been recognized as such for years, and believe more than any other platform, we take the headache away from composable. Composable is a more complex approach for businesses. It requires more coordination across individual components, and there's no platform that makes that easier to accomplish across a wide range of front ends and frameworks than BigCommerce.

Perfect. Thank you. I wanted to dig in a little bit on the comments on the stronger pipeline. Is there any way to give more context around how strong is lead generation, qualified leads that are moving into the pipeline versus just like the pipeline could be getting bigger as a function of elongating sales cycles? How did those all work together? Thank you.

Yeah, I would characterize it as high quality. I think the quality is getting better as we go. But also remember where we get a lot of our leads from. And when you think about the initiatives that we're really leaning into and getting great demand signals from, whether it's omnichannel or B2B, A lot of those leads are coming from our agency partners. Agency and tech partners are really embracing the differentiation that we have around omnichannel and B2B. And every month that goes by, we're seeing even larger and larger opportunities come our way. I don't know, Brent, if you want to add anything.

I agree. I think you got it.

Thank you. And the next question will be from Brian Peterson from Raymond James. Please go ahead.

Hi, thanks for taking the question. This is John for Brian. I'm curious if you can maybe speak to the growth algorithm here. So enterprise ARR growth has been really good. It's outpaced enterprise accounts. Curious if you can maybe quantify how the growth has been split between land versus expand. Are you seeing new merchants come on the platform maybe larger than you expected? And in a similar vein, I realize we're early in the year. But how is enterprise NRR tracked versus your expectations? Then I have a quick follow-up.

Yeah, I would say definitely larger in Q1, and we expect that trend to continue. We have opportunities for sure on expansion, and we're working towards that, especially around feedonomics. There's definitely ways for us to really improve our cross-cell motions with feedonomics, and we're doing that, not just in the U.S., but in all of our markets where we have go-to-market teams. And I'll say the reception around feedonomics in that offering in markets like EMEA and APAC has been incredibly strong. So higher quality, probably much larger in terms of opportunities. And in terms of cross-sell, I think that's just a big opportunity in front of us.

Thanks. It's a great color there. And then I'm curious on social commerce. It's obviously been a point of emphasis in the past. I think you announced a Snap integration back late last year. Can you maybe give any insights into sort of attach rates you're seeing there or increased conversion or GMV uplift from merchants that integrate big commerce with social networks like Snap and Meta? Thank you.

We don't have statistics to share, but I would really emphasize the takeaway that for a business wanting to do social commerce and especially do it the optimal way with purchasing enabled on those platforms or to do it across many platforms, Feedonomics is the best solution on the market. It has incredible integration into Facebook, Instagram, into Snap, into TikTok, into all the leading channels. And what it lets businesses do is not just integrate and optimize their products for sale in those channels, but also track the ordering and the inventory across the channels so they can have one view into orders and one view into fulfillment. So Feedonomics is a market leader in this area, especially in the enterprise segment, and a prime partner of each of the major social networks.

Thank you very much.

And the next question is from Daniel Reagan from Canaccord Genuity. Please go ahead.

Hey, guys. Thanks for taking our question. Maybe I'll start with RA. So it's great to see stabilization in non-enterprise retail accounts. I'm wondering, are we out of the woods yet, do you think? And what are your expectations in terms of retail accounts being an anchor to growth from here, especially as we think about the full pricing effect hitting in June?

Yeah, it's a great question. Listen, I think we're very pleased with the cohort health of the non-enterprise segment. Like you mentioned, I think we're going to know a lot more in early June. Again, our expectation and assumption is that most folks are going to want to keep their price the same. So we'll probably get a real benefit for cash flows. But if that mix changes, I think we'll have a positive lift to revenue. But in terms of the health of that I would say that we feel like it's stronger today than we thought it was even three months ago. And I think that with the pricing action we took and with what we're seeing, we have a chance of that being even better as the year progresses, but we're really going to have to see how the impact of that June 1st rollout goes. So we'll know a lot more the next time we speak. Gotcha. Excellent.

And then maybe just one for Brent. As we think about the setup for 2023, in the second half, we're expecting non-enterprise to be less of an anchor to growth. And then the mounting enterprise pipeline from the shift in resources should hopefully begin converting at a higher level. So my question is, where would you say you are compared to your initial expectations when you set out on this strategic pivot? And then how are you thinking about close rates of the enterprise pipeline in the second half? Thanks very much, guys.

I think we're on track. You know, the changing mix in our business, the impact on, you know, gross new sales, and then the quarterization of it is roughly in line with what we anticipated. And we know that our platform has really strong competitive advantages relative to our competition in the enterprise segment. But historically, that's not where we spent the lion's share of our marketing and lead generation. And so we have a lot of confidence that as our enterprise marketing and sales generation motions gain maturity, we're doing more field marketing in Q1 than we've ever done before by a long shot. We're really getting the word out. Our agency and tech partner ecosystems are rallying around that because they like the enterprise business a lot more too in general. And so we're quite optimistic about how things can fold out, not just in the second half of this year, which is when we start to see this maturing, but especially in 2024. The only part of the whole equation that we wish were healthier in especially in the americas right now is the sales cycle time for enterprise in the us as ra has mentioned we're seeing mid-market deals uh continue to close at a normal pace but the large enterprise deals are still being delayed in the relatively soft economy right now and at some point that's going to come around and return to normal we look forward to that because that'll be an additional accelerator though we really didn't build that expectation into our plans for H2.

Thank you. And the next question will come from Mark Murphy from J.P.

Morgan.

Please go ahead.

Thanks. This is already on for Mark Murphy. First question, you know, you guys said that you're still aiming for the 20% growth for enterprise ARR. Just kind of looking at, you know, a little bit of deceleration and the customer ad being about 42 for that category. What is the level of confidence? Are you still feeling the same way or has that changed out of direction?

No, I mean, we're feeling pretty confident that, you know, we'll be able to deliver that. Again, it's 20% for the full year. Some quarters could be slightly less, some could be more. But for the full year, we feel really good about our ability to deliver that. And also I'll say that, you know, I think that we're on track to, you know, exit this year really with a quarter where we're, you know, positive in adjusted EBITDA. Our margins will be in the high 70s. And we'll have, you know, reaccelerating growth rates for both subscription and PSR as we exit this year. And all of that is tied to, you know, our confidence to deliver those growth rates in enterprises.

Great. That's really good to hear. And then just one quick last one. In terms of linearity, anything change from Q4 into Q1? And if it did, is it something that you expect to continue through Q2 and beyond?

The only thing is what we called out with the path to profitability. We had some one-time items in Q1. When you factor that in, I think we've got that kind of path nice path to that break-even point by the end of Q3. I'll also mention PSR. We had some one-time items in our base period. If you remove that, our PSR would have been kind of in line with U.S. e-commerce growth. And we're past those, I think, one-time items into Q2. If you look at Q2 last year, the base period effect won't be there this coming quarter. And So anyway, just wanted to call that out for you in terms of trends.

Thanks. That's helpful.

Thank you. And once again, if you have a question, please press star then 1. The next question will be from Ken Wong from Oppenheimer and Company. Please go ahead.

Hi. Thanks for taking the question. This is Nancy. I'm for Ken. So your enterprise ARR mix has been increasing over the past several quarters, but I saw it stagnated here in one queue. Is there any color you can provide on why that occurred or how we should think about the cadence of the next shift going forward?

Yeah, it's interesting. Since our non-enterprise segment performed better than we thought, that mix remained kind of at that 72% mark. Had it kind of played out like we thought enterprise would have been, roughly 73%. I still think throughout the year that mix is going to trend up to the high 70s, and I think Q1 was just a matter of the non-enterprise ARR performing much better.

And ladies and gentlemen, that concludes our question and answer session. I would like to turn the conference back over to Brent Bellum, President, CEO, and Chairman for closing remarks.

Thanks, everybody, for joining. That wraps up the call for Q1 quarter that we feel very good about, most particularly the strong progress that we made toward our goal of achieving positive adjusted EVA DOT in Q4. while continuing to successfully execute an organizational focus and growth in the mid-market and enterprise segments. So we feel good about the quarter, and we look forward to our next conversation a quarter from now. Until then, thanks.

And thank you. The conference has now concluded. Thank you for attending today's presentation.

You may now disconnect.