Commerce.com, Inc.

Ladies and gentlemen, thank you for standing by. And welcome to the BigCommerce First Quarter 2024 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, Tyler Duncan, Senior Director of Finance and Investor Relations. You may begin.

Good morning and welcome to BigCommerce's first quarter 2024 earnings call. We will be discussing the results announced in our press release issued today before market open. With me are BigCommerce's Chief Executive Officer and Chairman Brent Bellum and Chief Financial Officer Daniel Lentz. Today's call will contain certain forward-looking statements which are made pursuant to the safe harbors provision 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 2024 and the full year 2024. 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 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, Tyler, and thanks everyone for joining us. Over the last two years, our business has dramatically improved its ability to deliver profitability and positive operating cash flow. As of 2024, our focus shifts to efficient revenue growth, and that imperative is front and center across every team in the company. We have yet to achieve the full growth potential of this business, but we pursue it with urgency and confidence. I will focus my remarks today on improvements underway and how we go to market, key success metrics we're monitoring and improving, and an exciting leadership addition. I will also touch on product innovation that unlocks growth potential. Let me start by briefly summarizing key financial results on the quarter. Q1 results reflected a good start to the year relative to our top and bottom line plans. Revenue finished just above $80 million, up 12% year over year. Adjusted EBITDA came in just over $4 million, or approximately 5% of revenue. We also had a solid start to the year from a cash flow perspective, improving free cash flow by more than 25 points as a percentage of revenue year over year. Turning now to growth, we recognize the importance of re-accelerating our top-line growth profitably, and we are laser-focused on accomplishing that. Let me move into a more detailed discussion of improvements we are making to realize our growth potential. As a reminder, BigCommerce was originally founded to serve the needs of small business customers. In my nine years as CEO, we have radically improved our product and service capabilities on behalf of the complex needs of mid-market and enterprise businesses, and we have successfully moved our customer base up market as a result. As part of that progression, certain legacy behaviors, metrics, and systems reflective of our roots must advance to incorporate the best practices of world-class enterprise software companies. I'll now describe three examples of these advancements. First, We reorganized our business teams and leadership structure to introduce clear and unified end-to-end ownership of the customer. Sales, customer success, marketing, and our business development teams have congruent and clear targets that unify their efforts around customer success and growth. In Q4, we centralized end-to-end customer success ownership under our company president. Our company president now oversees all go-to-market efforts across the business, including the platform product, feedonomics, and PSR. Second, our internal performance metrics and goals have improved to better reflect our move up market. As we discussed in our last earnings call, our previous metrics and goals prioritize new customer acquisition as the primary means to fuel top-line growth. New customer acquisition remains a priority, of course, but it is now balanced with a strong focus on customer retention, satisfaction, and growth. Target metrics now balance gross retention, net retention, and new customer growth, including a greater focus on portfolio cross-sell of feedonomics and partner solutions. Third, we are optimizing our data and operational systems to improve the management of net retention and sales pipeline. A new customer master data management system will unify disparate partner and prospect data. We are also re-architecting our CRM and marketing automation systems to put our platform and feedonomics sales and marketing teams under one unified architecture built for account expansion, cross-sell, and multi-product sales growth. We expect these systems' investments to be complete by mid-2025, and we are making tactical changes in the meantime to build momentum in our current architecture. We are excited about the growth potential these investments can enable, and we included the associated costs in our financial plans at the outset of the year. These changes are by no means the only enhancements to our go-to-market strategy and operations. but they are illustrative of our transformation in pursuit of becoming a world-class enterprise software company. To help lead this transformation, I'm pleased to welcome Travis Hess as our new company president. Travis brings more than 15 years of exceptional enterprise e-commerce leadership experience involving many of our top platform competitors. And his expertise in service and implementation, ecosystem partnerships, and competitive selling and positioning will help drive our go-to-market transformation and success. He has served on partner advisory boards for Shopify, Klaviyo, SAP Hybris, and Rackspace, and he most recently worked at Accenture as a managing director leading their direct-to-consumer e-commerce offering and go-to-market strategy. Travis will target resources and attention on categories in which we are seeing the greatest customer traction and success, including apparel, home and garden, sports and outdoors, and B2B. We have many outstanding customers in these focus categories. Companies such as Coldwater Creek, Francesca's, Harvey Nichols, and White Stuff in apparel and accessories. Burrow, One Kings Lane, and Hauser in home garden and furniture. Marucci, Level 9 Sports in Tottenham Hotspur, who recently hosted our EMEA Big Summit in sports and outdoors. MKM Building Supplies, Imperial Dade, and United Aqua Group in B2B. We also continue to be a great fit for brands and B2B businesses in health and beauty, food and beverage, electronics, and other arenas spanning both B2C and B2B. Our R&D investments continue to deliver industry-leading innovation on behalf of our customer promise of enterprise e-commerce simplified. A few weeks ago, we unveiled our inaugural Next Big Thing, an extraordinary collection of more than 100 platform enhancements new features, and partner integrations. I won't go through all 100 here, of course, but I do want to call out a few examples of industry-leading innovation on behalf of our customers and ecosystem partners. I'll start with Catalyst, our next-generation storefront technology, which we announced in Q1. Catalyst provides a simplified starting point for customers, agency partners, and e-commerce developers to easily and quickly build beautiful, high-performing stores using a headless composable architecture. It combines a streamlined GraphQL client optimized for the latest version of Next.js and React Server components with a reference storefront featuring industry-leading Google Lighthouse scores of 100 out of the box. Catalyst is the culmination of more than 4,000 headless and composable builds on BigCommerce since 2016. It represents the fastest and simplest path to developing extraordinary customer experiences leveraging the world's highest performing and most popular front-end storefront technologies. Catalyst lowers the technical requirements and complexity of a composable implementation, making it far easier for customers and agencies to realize the store design and performance benefits of composable without added implementation, cost, and complexity. Customers using Catalyst will set high standards for shopper UX, site performance, and conversion rates, while benefiting from faster, higher-quality development. Simply put, with Catalyst, we aim to make Composable as easy to use as our native hosting and theming framework, Stencil. Modare, Whitestuff, Cons Home+, Brompton, and Bestway Europe are but a few examples of recent launches leveraging BigCommerce's expertise in Composable builds. Whitestuff in particular saw an immediate 80% improvement in site speed and 100% on its mobile site, after launching its composable store on BigCommerce. Another major area of product innovation featured in Next Big Theme is multi-geography selling, leveraging our multi-storefront product capabilities. Our multi-geo and multi-language functionality enables multi-storefront localization, such as language, content, pricing, payment methods, and promotions. Customers and partners can configure unique checkout experiences for every storefront, all while maintaining one centralized backend for easy and efficient management. We also announced our new open source B2B buyer portal. Open sourcing B2B additions buyer portal equips enterprise suppliers, manufacturers, distributors, and wholesalers with the tools to deliver a bespoke buyer experience throughout the entire buyer lifecycle, from product discovery to sale, service and warranty, directly from a single portal. By leveraging this customizable starting point, B2B brands can tailor their site experience to the unique needs of their business, their customers, and their operational cost minimization. The open sourcing of our B2B buyer portal represents another example of the industry-leading flexibility of BigCommerce's platform. Just as our platform-wide APIs and open checkout brought industry-leading flexibility to B2C e-commerce for a SaaS platform, the open sourcing of our buyer portal has now done the same for B2B e-commerce. For us, Open SaaS is a philosophy, the foundation of our product strategy, and a major source of competitive advantage. Finally, we announced Instant Commerce from Feedonomics. Instant Commerce represents the enablement by Feedonomics of same-day fulfillment and delivery of orders. Feedonomics provides the catalog, inventory, order, and fulfillment data connectivity between brands and retailers and the third-party marketplaces like Amazon and Walmart, through which they sell and fulfill. It also supports same-day delivery apps and driver services. For same-day delivery and or in-store pickup, inventory must be held in a store warehouse within delivery service proximity of the customer. As the popularity of same-day delivery explodes, instant commerce from Feedonomics connects brands, retailers, and businesses to the leading marketplace and delivery services that enable it. I'll conclude my remarks with a few observations on the macro environment in e-commerce. Consumer spending remains resilient across our major markets, though aggregate e-commerce is growing at lower rates than during and before the pandemic. I'm encouraged overall by the underlying consumption signals that we are seeing in our business. The consumer health that we observed in the 2023 holiday period held up well in Q1, which is a good sign both for 2024 and long-term e-commerce growth. We believe platform investment spending will inevitably improve, and we're transforming our go-to-market capabilities to capitalize on that. Overall, I'm encouraged by our start to the year and see a path to growth re-acceleration fueled by our go-to-market transformation and continued industry-leading product innovation. We already see encouraging improvements in gross and net retention since initiating operational changes in Q4. Our competitive advantage and total cost of ownership is stronger than ever, thanks to price increases taken by our competitors. Our product continues to receive strong reviews and advocacy by customers and partners. With strong competitive advantages in product and service, combined with significantly improved sales, marketing, and service practices, BigCommerce can achieve its full potential for growth and profitability. With that, I'll turn it over to Daniel.