Commerce.com, Inc.

Ladies and gentlemen, thank you for standing by and welcome to BigCommerce Second Quarter 2022 Earnings Call. This time all participants are in listening mode. After the speaker presentation, there will be a question and answer session. Please advise that today's conference is being recorded. I'd like to turn the conference over to your first speakers today, Daniel Lentz, Head of Investor Relations. You may now begin, sir.

Good afternoon and welcome to BigCommerce's second quarter 2022 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 our CFO, Robert Alvarez. Today's call will contain forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning financial and business trends, our expected future business and financial performance and financial condition, and our guidance for the third quarter of 2022 and the full year 2022. These statements can be identified by words such as expect, anticipate, intend, plan, believe, seek, will, or similar words. These statements reflect our views as of today only and should not be relied upon as representing our views at any subsequent date, and we do not undertake any duty to update these statements. forward-looking statements by their nature address matters that are subject to risks and uncertainties that could cause actual results to differ materially from expectations. For a discussion of the material risks and other important factors that could affect our actual results, please refer to the risks and other disclosures contained in our filings with the Securities and Exchange Commission. During the call, we will also discuss certain non-GAAP financial measures which are not prepared in accordance with generally accepted accounting principles. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, as well as how we define these metrics and other metrics, is included in our earnings press release, which has been furnished to the SEC 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, R.A. and I will review our second quarter results and discuss our priorities and approaches. to managing through the current conditions of market turbulence. RA will also provide detail concerning our view on the back half of the year in his discussion on updated guidance. First and foremost, I'm pleased to share that the second quarter was one of the best in our history, a result that encourages us given the macroeconomic climate. Our team continues to deliver on our mission to be the leading open SaaS e-commerce provider, empowering B2C and B2B merchants around the globe. Let's discuss the details. In Q2, Total revenue grew to $68.2 million, up 39% year over year. This was our 10th consecutive quarter of posting 30% or higher revenue growth, which was bolstered by strong results from the feedonomics acquisition in Q3 of 2021. Our non-GAAP operating loss was $13.7 million, which was also ahead of our guidance last quarter. We concluded Q2 with an annual revenue run rate, or ARR, of $296 million, up 41% from last year. That represents a sequential growth in ARR of $15.5 million. This increase was driven by our continued success in the enterprise segment. Enterprise account ARR was $206.6 million of 68% year over year. That marks our 15th consecutive quarter of 40% or higher enterprise ARR growth. Q2 delivered the largest sequential growth in ARR in our history, excluding the quarter of the feedonomics acquisition. It was better even than during the height of the pandemic when we saw strong transaction-driven tailwinds to partner revenue, subscription upgrades, and enterprise plan order adjustments. As I said, our strongest growth is coming from the enterprise segment, which now represents 70% of our total company ARR compared to 52% just before our IPO only two years ago. I am often asked about my views on our current progress and where I feel this business can be in three to five years. I am also asked how we need to operate in a challenging climate to deliver sustainably high revenue growth while hitting our commitments to investors about spending and profitability. What I want to emphasize from the start is this. Our underlying business momentum is strong. We are winning bigger, more complex merchants every quarter. We are delivering a product roadmap we believe is best in class, and industry analysts and merchants are recognizing our emerging enterprise leadership. I have never been more confident about the prospects of this business than I am now. Over the last few years, you have heard me talk often about our upmarket journey from serving SMB to mid-market and enterprise merchants. I've given updates on our steps to develop new products and add APIs and GraphQL capabilities as part of our differentiated Open SaaS approach. With the launch of our multi-storefront functionality to all enterprise merchants in the second quarter, we now offer the key functionality and flexibility that the world's most sophisticated merchants need to be successful. We have crossed the transformational line in our journey as a company to become the world's most modern enterprise e-commerce platform. We at BedCommerce are not the only ones saying this. Forrester, a leading global market research company, named us a strong performer and placed us closest to the leader designation of our relevant competitive set. For B2B e-commerce, Forrester rated us the third highest in terms of the strength of our current B2B offering, Meanwhile, eMERS in Europe named us the top enterprise B2C platform, and we won 2022 Australian Solution Provider of the Year from Retail Global's Vendors in Partnership. Just last week, we received high honors as the top solution in Paradigm's B2B combine for both mid-market and enterprise, receiving 22 out of a possible 24 total medals. We earned six more medals than last year, and that marks the third consecutive year we improved our B2B ranking with Paradigm. On the three continents that comprise our top markets, the experts are ranking us at the top of their platform evaluations. Now that we are officially launched in Mexico and South America, we look forward to competing in those markets as well. While there is no doubt macroeconomic challenges are facing our industry and global markets more broadly, we believe we are still at the front end of a long-term upward curve. IDC's most recent forecast estimated $8 billion in worldwide digital commerce application revenue this year. That is projected to climb to $12 billion in 2025, and the good news for us is that spending for on-premise applications is projected to decline, whereas spending on SaaS solutions like ours is projected to grow at 20.8% CAGR. New enterprise store acquisition drives our growth, and we continue to see strong demand. With our recent acquisitions of longtime technology partners Bundle B2B and B2B Ninja, BigCommerce has expanded its native B2B e-commerce functionality to provide a dynamic platform for all B2B merchants that is easier to use, faster than legacy B2B solutions, and more flexible and powerful than other SaaS platforms at a time when B2B e-commerce is growing faster than B2C. In Q2, our international expansion efforts made further progress. Adding to our operations in the largest Western European economies, we launched our formal presence in the Nordic countries of Denmark, Sweden, and Norway, and further expanded into the DOC region with the addition of Austria. We built on our recent launch in Mexico with expansion to Peru, our first country in South America. In the coming months, we'll launch in additional Latin American countries. We're supporting new languages, adding new geographies, and integrating new payment methods for local markets. We're in the early innings of global expansion, and our growth rates in EMEA, APAC, and non-US Americas give us confidence that expansion will pay off in the near and long term. We continue to add new enterprise merchants to our platform in the second quarter. Mountain Equipment Company, Canada's largest supplier of outdoor gear, launches headless integration using big commerce checkouts to support storefronts in English and French. Well Pharmacy, one of the UK's largest pharmacies, is now selling over-the-counter and prescription medications on its BigCommerce store, leveraging our OpenSAS and Headless capabilities. Australian motorcycle helmet brand, Foresight Helmets, is leveraging Headless to create its beautifully designed storefront. Lifetime Brands, a leading global designer, developer, and marketer of a wide range of household products from KitchenAid, Farberware, and other brands, launched a new store using B2B edition. Tile Warehouse, a subsidiary of major UK tile brand Topps Tiles, launched a pop-up storefront to sell clearance tiles directly to consumers, leveraging a fulfillment partner to pull through real-time inventories and providing custom URLs for product categories and attributes. Finally, Zum Norda, the popular German shoe retailer, turned to BigCommerce to internationalize and relaunch its web shop on a modern platform that doesn't require constant upkeep, and that can be customized to provide an incredible customer experience. I'd now like to share some thoughts about the current operating environment, which is challenging for us as it is for others. Although the majority of our subscription-based business is not directly dependent on the GMV trends of our merchant stores, we are impacted in other ways by downturns in e-commerce spend that can be caused by the economy, return to shopping in physical stores, and or other adverse economic changes, specifically Reduced growth rates in our merchant sales impact our partner and services revenue, balance of subscription upgrades and downgrades, order-based enterprise fees, and trend line for customer retention and bad debt. We try our best to make decisions that balance the achievement of our near-term financial goals with the maximization of our long-term business and shareholder potential. We believe we need to lead with humility, grounding decisions, and our understanding of customer and partner needs and our mission to make Open SaaS the best solution for the next era of e-commerce. Along the way, we have had to respond to unforeseen challenges and occasionally make new bets on opportunities that earn our conviction. Halfway into this challenging year, we've managed to achieve our goals so far. Thanks to our management team's collaboration and adjustment, we continue to believe that we will achieve the top-line and bottom-line guidance we set at the beginning of the year, despite the impact current market conditions have on select components of our P&L. We understand that the market is focused on potential risk areas created by current economic headwinds. Nearly all e-commerce companies have been talking about these risks to their businesses. We too face these risks. But on balance, I believe the strengths of our business model are demonstrated well in this market, and I'd like to dive deeper into why that is. First, 70% of our revenue mix comes from enterprise merchants, which are predominantly established successful businesses from a wide range of categories, geographies, and B2C and B2B use cases. Similarly, but separately, 70% of our revenue comes from recurrent subscription revenue, which provides a stable, predictable top line. The combination of durability from enterprise customers and predictability from subscriptions makes us less vulnerable to short-term economic swings than would be a consumption or GMV-based revenue model. Second, the components of our subscription plans that do adjust with GMV tiers or order counts are calculated using a trailing 12-month look back. This has a moderating effect against short-term and seasonal fluctuations in consumer spending. Sharp movements upward take time to be fully realized in our pricing and revenue, which we saw during the pandemic, noting that our revenue did not increase as fast as total e-commerce GMB did. On the flip side, sharp short-term movements downward are also dampened by our trailing 12-month convention. For us, The most immediate direct impact to our revenue from our customers' GMV fluctuations occurs in partner and service revenue, the biggest component being rev share from our payments partners. We are doing our best to account for e-commerce spending risk in our outlook, and RA will speak to that in detail shortly. Third, nearly all of our direct sales occur in U.S. dollars today. Foreign exchange risk is limited to partner rev share, like in payments, that are earned in non-U.S. GMV, essentials plan subscription upgrades prompted by GMV earned in foreign currencies, and our non-US operating expenses. These FX sensitivities impact a small percentage of our total revenue and expense base today. We do not believe a strong US dollar is a material risk to us at this time. Finally, our product is considered mission critical by our merchants. Success in e-commerce is imperative to all businesses, strategically and financially, especially post-COVID. Recent CIO surveys indicate continued robust spending in software, and we offer a material total cost of ownership advantage over legacy enterprise software competitors. As merchant budgets tighten, our platform should remain attractive and mission critical for most of our customers. Shifting gears now to our board of directors. As we announced earlier this week, we've added two fantastic new directors to our board. Sally Gilligan, Chief Growth Transformation Officer of the GAAP, and Satish Malhotra, Chief Executive Officer of the Container Store. Our goal was to enhance our board with the experience and perspectives of retail veterans. Sally and Satish, respectively, represent the technical and CEO retail buyer personas to whom we sell, while also bringing deep functional expertise to our board governance. We're excited about all they will contribute. Meanwhile, I want to sincerely thank Steve Murray and Jack McDonald for their years of service on our board. Steve was a partner at the venture firms who led our Series C and D rounds and served as our lead independent director. Jack has IPO'd and ran two successful public software companies and served as a valued mentor to me through our process. They were instrumental in our growth to public company status and we're grateful for their leadership and service to BigCommerce. As I wrap up, I would like to reiterate my belief that our team and business performed very well this past quarter. We delivered strong results in a challenging operating environment. Investments made across our strategic priorities continue to deliver customer and business value. We're increasingly viewed as a true leader in the e-commerce industry, and I'm especially grateful for everything our employees and partners have done to earn that during times of dramatic change. With that, I'll turn it over to R.A.