Q2 2020 Bigcommerce Holdings, Inc. Earnings Call

September 9, 2020

Ladies and gentlemen, thank you for standing by and welcome to Big Commerce's second quarter 2020 earnings call.

This time all participants are in a listen only mode. After the speakers 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 Roquette hearing head of Investor Relations. Thank you. Please go ahead.

Good afternoon, and welcome to Big Commerce in second quarter 2020 earnings call, we will be discussing the results announced in our press release issued after the market close today with me are big Converses, President and CEO and chairman Brent elements and CFO Robert.

Alvarez.

Today's call will contain forward looking statements, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Forward looking statements include statements concerning financial and business trends are expected future business and financial performance and financial condition and our guidance for the third quarter of 2020 in the full year 2020.

It can be identified by words, such as expect anticipate intend plan believe seek for will.

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 discussed in today's press release, our final prospectus under rule four to four be filed with the Securities and Exchange Commission on August 2020, our quarterly report on form 10-Q for the quarter ended June Thirtyth 2020 to be filed with the SEC and our other.

The Arctic filings with the SEC.

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 for 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 that the commerce dotcom.

With that let me turn the call over to Brent.

Thank you Robert and good afternoon, everyone. Thank you all for joining us on our first earnings call as a public company.

During today's call Robert and I will provide details on our Q2 results as well as Q3 and 2020 full year guidance. We will also spend more time than we will on future earnings calls covering the business our strategy and the opportunity ahead as many of you may be new to the Big Commerce story.

Feel free to grab some popcorn and beverage.

Let's kick this off with a few highlights of our Q2 financial results.

Our goal is to deliver the best open SaaS ecommerce platform in the world.

We are making consistent progress toward that goal and that progress was reflected in our Q2 results. We believe we had a strong quarter with Q2 revenue coming in at $36.3 million, which was up 33% year over year.

Total annual revenue run rate for our was $151.8 million, which was up 32% year over year.

Q2 revenue and air our growth achieved our highest growth rates in 12 quarters and so far after two quarters 2020 represents our third successive year of growth rate acceleration.

Enterprise account air our was up 44% year over year in Q2, reflecting our continued momentum serving the needs of mid market and large enterprise businesses. These customers value our open SaaS platforms enterprise functionality flexibility and lower total cost of ownership importantly, we delivered these results while continuing to.

Drive operating leverage across the business as shown by a 19 percentage point year over year improvement to our adjusted EBITDA margin I.

Im proud of our team and I would like to acknowledge our big Commerce employees and partners for their resiliency and dedication to serve and support our customers. During these unprecedented times.

For those of you who are new to the Big Commerce story, the commerce as a software as a service platform that power some of the world's most interesting and engaging ecommerce stores, we provide everything a business means to create manage and grow and online store from the design in hosting of the store through checkout, along with the tools that help a business merchandise market.

Operating ROE, we handle the technology, allowing our customers to focus on what matters most of them their products their customers and growing their businesses.

The commerce is participating in one of the largest and fastest transformations in human economic history, the global shift in commerce from offline to online.

It took 23 years for E Commerce to go from nonexistent to 10% of all global consumer spending in 2017.

Market or predicts that will take just six years for this percentage to more than double to 21% of global retail spending in 2023.

E Commerce is seeing explosive growth in part because it allows businesses to engage with their customers wherever they spend time online. It's no longer just about an online channel versus offline channel, it's about omni channel, where by consumers and businesses can shop flexibly across devices websites and selling formats search.

Tensions remain an important that minority starting point for E. Commerce shopping journeys today shopping experiences can start in social media or on a content side or on a marketplace or directly on a businesses website.

Best ecommerce platforms enable their customers to seamlessly and efficiently integrate their branded websites with the main sites there potential customers spend time online and offline.

I'd see estimates at the global market for digital Commerce applications was $4.7 billion in 2019 and is expected to grow at a compound annual growth rate of 11% to reach 7.8 billion in 2020 for.

This global market includes legacy ecommerce platforms and SaaS ecommerce platforms.

Legacy on premise software solutions are declining in store count and in platform spend.

In contrast.

Ecommerce platforms are driving the industry store count and share gains.

As a side note our total addressable market is actually larger than that for E. Commerce platform spending alone due to the additional revenue we are in partnership with our technology partner ecosystem.

We believe there are many underserved segments in ecommerce for attracted to the big commerce value proposition of speed the launch ease of use high performance and continuously updated benefits associated with Multitenant SaaS.

These include digitally native direct to consumer brands, especially those with enterprise requirements.

Established brands that often have offline complexities.

Migrating sites that need the flexibility to retain functionality and integrations.

Multichannel retailers.

And businesses, who are selling either be to be directly or in a hybrid b to C and b to B model.

Good commerce wins in the market based on five things that we think we do better than anybody else.

First and foremost we are an open SaaS solutions, we offer the benefits of SaaS, but with the eyes and platform openness that allow complex businesses to integrate modify and customize their ecommerce stores based on their unique requirements. This resonates in the market with merchants of all sizes, but especially larger companies who have estate.

Published businesses and require best of breed solutions and seamless integrations.

And at the eyes allow our customers to create a unique and tailored front end experience, but with the native integrations and best of breed tools that store owners need on the backend.

As a SaaS platform, we seamlessly introduced new features and capabilities on a continuous basis merchants automatically benefit from these updates without having to manage disruptive updates of their own static installations of open source software.

Second we bring unique and native enterprise features and applications to our merchants, including our capability to also serve headless implementations with the world's leading content management systems, including Wordpress Bloom reach Grupo lock, we have site core and Adobe experience manager.

Now lets commerce is a dynamic and growing cross channel category, where we excel headless commerce demonstrates the power and flexibility to commerce and we power. Many hundreds of headless sites have less commerce involves a decoupling of the technology used to create the front end user experience of the site with the engine the powers backend, including the product catalog checkout order processing.

Okay and everything that integrates into this is best use by sites, who are very innovative with their design or marketing and our design centric I want to basically managing unique user experience that differs radically from the traditionally template ties version of ecommerce that comes out of the box.

We integrate seamlessly with leading CMS as digital experience platforms design frameworks and custom front end.

Third we are a leader in cross channel Commerce Cross sell commerce involves the integration of a customer's commerce capabilities with other sites online and offline.

Consumers and businesses make their purchases our success is driven by the success of our merchants. So we offer free direct integrations with leading social networks, such as Facebook and Instagram search engine such as Google.

Online marketplaces, such as Amazon and ebay and point of sale platforms like square Clover Heartland and then.

Fourth we offer lower total cost of ownership and higher return on investment.

South can be dramatically cheaper on a total cost basis and on premise software with SaaS merchant saves the cost of hiring software and hardware engineers, they save on software licensing costs. They save on hosting costs. They say bug fixing cause versioning security patches upgrading the big Commerce platform includes all of these are.

Empliciti and ease of use generates ROI for our customers, we offer enterprise stability and security without complexity.

We can get customers up and running smoothly.

And quickly sometimes in a matter of weeks, we offer developers the agility to innovate on our platform and integrate new solutions, while offering best in class customer support for merchants of all sizes.

Fifth and finally, there is performance and security. We recently completed the rollout of our new store front architecture and as measured by Google page speed insights our platform benchmark faster than leading ecommerce sites.

Our faster response and page load times benefit customers by improving shopper experience and organic search engine page rankings are built and security, including ISO 27001 certification is highly valued by our Midmarket and enterprise merchants businesses using on premise software to power ecommerce have to manage the compliance.

Insecurity other ecommerce store themselves with the commerce customers get the benefit of the investments that we have made in uptimes feed and security.

We are proud to see the confidence that our customers continue to place and our open SaaS platform and we had a number of fantastic merchant launch with us in the first half of 2020.

This includes sites from nine different Fords global 2000 corporations, such as Royal Dutch shell, the audio sharp electronics and two of the world's largest consumer packaged goods companies.

Let me share a few specific examples of new store launches in the first half of this year that we're really excited about.

While perla isn't Italian luxury apparel company, who chose big commerce because of our open SaaS platform functionality and our cross border Multicurrency capabilities.

The National Baseball Hall of Fame and Cooperstown merchandise store chose our platform because it allowed them to use their preferred payment gateway.

Great with their retail point of sale software and achieve lower total cost of ownership.

Yes, he cycles, a high end mountain bike manufacturer, which I'm very happy customer chose did commerce because of our open SaaS platforms, headless commerce capabilities, allowing them to take advantage of their existing front end content management system, while reducing total cost of ownership.

Hey, how Q RC Paypals quick reference code store represents a nice digital goods use case, they chose the commerce because of our robust EIS, which enabled paypals custom integrations low cost and fast time to market.

And finally, Sheryl tree, the leading store for all things tree care chose bid commerce because of our open SaaS capabilities, which provided them with both b to B and BDC capabilities on the same site faster time to market and more native functionality versus our competition.

We continue to invest and innovate to build the best open Safi Commerce platform in the world supported by an integrated with our extensive network of best of breed technology and agency partners. Some important examples of new product functionality and partner integrations include.

Page builder, which is our intuitive drag and drop visual merchandising and design tool that enables merchants and especially their marketing and brand staff to build differentiated shopping experiences and tell their brand story with a simple drag and drop editor without entering a single line of code.

Merchants can preview pages before publishing and they changes on the fly the tool is open and allows developers and partners to innovate and extended by building custom content widgets.

We rolled out our orders our order refunds, API, which allows merchants and agencies to integrate third party order management solutions within commerce.

We launched two new control panel languages, Italian in Spanish for merchants, who want to operate their stores in those languages.

As we invest to build the world's best open SaaS ecommerce platform. We also invest to integrate and partner with best of breed technology extensions and services I'll provide a few examples from the first half of this year.

To be we signed two new preferred technology partners. The first assistant who provides enterprise grade insight into our merchants inventory orders invoices and more.

The second is bundled b to b to provide BTD sellers with the seamless ability to review transactions and manage customer accounts.

And payments, we completed a number of integrations to support our global merchants, including elevation add yen and we chat pay we upgraded integrations with Clarendon Multicurrency, Paypal vaulting and Google pay on authorized Dot net and Barclay card by partnering with these best of breed companies, we enable our merchants to pick the partner the best soon.

Their unique requirements in the U.S. and abroad.

We added additional multicurrency support for Paypal Express checkout, Braintree elevation converge clarita add yen and blue snap.

And cross channel, we enhanced our existing strategic partnership with Facebook and Instagram as we announced a couple of weeks ago. This partnership enables our merchants to easily connect their ecommerce store fronts catalogs, Instagram and gives customers the ability to buy from their favorite brands directly on Instagram.

In other verticals, we launched the second phase of our square point of sale integration, we improved non us tax automation by adding global support travel era at attacks our partner at Connecticut completed the integration of as ERP solutions for finance inventory and fulfillment.

Our open south strategy resonates with merchants around the world and enables our continued international expansion efforts in Q2, we delivered 65% year over year revenue growth.

EMEA and 38% revenue growth in APAC International expansion continues to be a core strategic focus for Big Commerce, We recently launched international marketing sites, and France, Italy, and the Netherlands in order to better reach and serve merchants in Continental Europe, we see enormous opportunity for international expand.

And we'll continue to invest in our international product and go to market capability for years to comp.

Looking forward, we're pursuing multiple growth levers.

First we grow when our merchants businesses thrived and growing our platform the pricing on our essential and enterprise plans are designed to adjust as our customer sales volumes increase above thresholds. We also grow when customers purchase additional stores to serve additional brands geographies and use cases.

Second we grow by acquiring new merchants of all sizes for SMB to mid market to large enterprise. We also seek to extend our sales and share and high potential industries customer segments and use cases. The major industry example is b to b, which generates roughly a third of all ecommerce platforms than in is faster growing than.

To see we estimate that about 10% of our customers globally are primarily be to be sellers.

The major segment example is large enterprise sites, which we define as having gross merchandize ecommerce sales in excess of $50 million. Our recent favorable reviews by leading industry analysts like Gartner and Forrester research have favorably positioned us to grow share among the large enterprise implementations.

A major use case example is have was commerce as as described above whereby we serve customers utilize popular content management systems Progressive web apps and or custom design frameworks in conjunction with big Commerce.

Third we grow by expanding our product and go to market capabilities in geographies around the world. The commerce serves the needs of merchants and over 120 countries and a wide variety of languages and currencies, we've enhanced self serve usability and new geographies by translating our control panel and the local languages and enabling the integration of.

Local payment processors, we support the growth of mid market and large enterprise customers around the world by expanding our regional sales and marketing capabilities. We continue to invest in Europe, Latin American Asia, our strong growth our strong revenue growth rates outside the Americas show. These investments are working and we seek to continue this.

For years to come.

Finally, we grow by expanding our technology expenses some of the revenue and partnership.

In contrast to our largest competitors, we're not a software conglomerate, we seek to be the platform industry leader at collaborating with not competing against the broader E commerce ecosystem.

Our apps marketplace is one of the largest and any E commerce platforms.

Includes payments shipping tax accounting in ERP marketing fulfillment and cross channel Commerce partnerships.

As we add partners to our network, we provide our customers with choice and best in class capabilities.

As our customers adopt those partner solutions, we often generate revenue share from our partners, especially in categories like payment shipping and advertising.

In conclusion, we are thrilled to join the public markets. We're excited to expand our product offerings and earned the trust of businesses of all sizes as the shift to ecommerce continues to accelerate we believe our open soft strategy offers a compelling solution for our businesses and partners around the world and excited to lead this company.

In the next phase of growth.

I will now turn the call over to Robert to talk about our financial results.

Thanks, Frank and thanks, again to everyone for joining us today. Since this is our first earnings call I'd like to start by providing a brief overview of our financial model and then ill go through our second quarter results in detail then I'll move on the guidance for the third quarter as well as for the full year 2020.

As a reminder to everyone. Please note that we had previously shared an expected range of our preliminary Q2 results in our SEC filings before going public today I'll share our final Q2 results in more detail.

Also before discussing detailed financial results I'd like to clean out that in addition to our GAAP results I'll also be discussing certain non-GAAP results, our GAAP financial results along with the reconciliation between GAAP and non-GAAP results can be found in our earnings release.

As Brent mentioned, we generated total revenue in Q2 of 36.3 million.

Up 33% year over year as a reminder, our revenue comes from two sources subscription solutions revenue and partner in services revenue.

Subscription solutions revenue consists primarily of platform subscription fees from our retail and enterprise plans.

Subscription solutions are generally charge for online store front and are based on the stores subscription plan tailored to their size and feature needs.

There are two types of subscription plans that we offered to our merchants enterprise and essentials.

Our enterprise plans are sold to larger merchants either in the mid market, which are sites doing online annual sales of 1 million to 50 million in annual transactions or in the larger enterprise segment, which are sites doing more than 50 million in annual transactions.

Enterprise playing contracts are generally first fixed term of one to three years and are billed monthly or annually.

Our enterprise Sands that order based and as merchants exceed their initial order tier threshold on a trailing 12 month basis. They move to the next year of order growth adjustments.

Since 2015, we've been focused on providing the best open SaaS solution in the market to disrupt legacy open source providers in the Midmarket and enterprise segments, we measure the increasing mix shift of our enterprise accounts by tracking or enterprise account, a our our enterprise account a our grew 44 per.

Sent to 79.8 million in Q2, and enterprise accounts represented 53% of our a our our as of June thirtyth compared to 48% as at June Thirtyth 2019, demonstrating our increase enterprise mix shift and continued traction in this segment of the market to keep this mix shift.

In perspective, less than 10% of our a our AR was from enterprise accounts in 2015.

Within essentially we offer three distinct retail plans based on a merchants annual transaction volumes are essential plans are sold to small and medium sized businesses, which we define as sites transacting up to a million in annual online sales Big Commerce Essentials offers three retail plans standard plus and pro price.

Got it roughly $30 $80 and $300 per month, respectively. Our retail plans are generally month to month contracts in our based on the merchants annual GMB as merchants exceed their GMB thresholds. They are programmatically upgraded to the appropriate plan in their next billing cycle.

Subscription revenue was 23.9 million in Q2 up 19% year over year.

That growth rate was down slightly versus Q1 as a result of an essential as planned promotion that we ran during Q2 as part of our bricks to clicks campaign to help margins. During the initial months of that covert 19 pandemic subscription revenue accounted for 66% of our Q2 revenue led by our underlying new merchant gross.

And planned upgrades from existing merchants.

Partnering services revenue or PSR consist of two parts partner revenue and services revenue.

We spend a minute discussing the partner revenue component in more detail.

The way to think about partner revenue is the revenue share we generate from our best of breed technology ecosystem as our merchants benefit from their products and services. They commerce is open SaaS approach means that customers can tailor their stores to meet their feature needs by integrating applications developed by our technology partners in the mid March.

But in enterprise segments. The majority of merchants require a level of customization and best of breed product and service offerings versus a simple out of the box solution.

Examples of strategic Technology partners include payment partners point of sale partners tax and accounting partners or shipping partners just to name a few.

We generate revenue from these partnerships in three ways.

Revenue sharing arrangements technology integration fees and partner marketing and promotions.

It's important to call out that we recognized revenue on a net basis from revenue sharing arrangements when the underlying transaction occurs partner revenue represents the majority of our overall PSR revenue. So the gross margin from our PSR revenue is really strong.

Partnered services revenue was 12.4 million in Q2 up 74% year over year, which accounted for 34% of our Q2 revenue.

The increase in partnering services revenue was primarily as a result of increased ecommerce activity driven in part by the Coven 19 pandemic any improved monetization of partner revenue share.

Now, let's switch to our key business metrics.

First let's discuss our or our annual revenue run rate.

Our our consists of the some of the current months monthly recurring revenue or EMR multiplied by 12.

Plus the trailing 12 month revenue, we generate from partner and services revenue or PSR as we mentioned earlier Q2, Aer was 151.8 million.

Up 32% every year.

We consider revenue growth in a our growth to be the best leading indicators for the growth in our business and do not consider other deferred billings related calculations to be good proxies.

We also track the total number of accounts with annual contract value or ACB greater than $2000 as of the end of a monthly billing period.

For this cohort, we only consider subscription plan revenue in determining which accounts have contract value greater than $2000 in HCV.

We ended Q2 with 9378 customers over the $2000 threshold, an increase of 641 accounts or 7% year over year.

Compared to Q1 2020, we've seen an increase of 390 accounts or 4% sequentially.

We saw strong growth in both our pro Essentials plans and enterprise plans during Q2, which reflects our progress and continued traction with Midmarket and enterprise merchants as well as established Smbs.

This metric can fluctuate on a quarter by quarter basis based on the planned mix, we see in the business, but we are confident in sustaining mid single digit year over year growth rates in the back half of 2020.

Accounts above the 2000 dollar HCV threshold grew almost 40% in Q2 and represented 80% of our total a are in Q2.

Up from 76% in Q2 2019.

It's important to point out that these growth rates are different than our enterprise, a our growth rates, but our directionally similar due to the fact that we can have non enterprise paying customers exceeding the $2000 threshold. An example would be an SMB customer on our pro plan, which is a higher end retail plan.

Another key metric, we track is ARPA or average revenue per account.

For accounts above the $2000 ACB threshold ARPA for Q2 was $12936 up 29% year over year, driven by a mix shift towards our higher end retail pro plans and enterprise accounts as we closed a higher mix of larger deals in Q2.

As many of you know, we don't plan to disclose quarterly and our metrics, but I'm happy to share that we were very pleased with our and our dynamics through the first half of 2020, driven by the increase in PSR revenue and the related GMB in order base growth adjustments.

In discussing the remainder of the income statement. Please note that unless otherwise noted all references to our expenses operating results in share count on a non-GAAP basis.

Our gross margin profile is strong and that has allowed us to be very intentional and purposeful on where we invest our money.

In Q2, our gross profit was $28.6 million, representing a gross margin of 79%.

This compares to gross margin of 77% a year ago, and 78% last quarter.

The year over year increase in our gross margins was impacted in part of the high margin revenue share. We earned from a subset of our strategic technology partners.

Turning to sales and marketing expenses, our sales and marketing expenses for Q2 were $16.5 million or 45% of total revenue.

Compared to $15.8 million and 58% a year ago.

We've made significant investments in sales and marketing throughout 2019, and the first half of 2020 focused on expanding our market reach even while investing we've been able to drive leverage because of our investments in our self service flow and the further mix shift in our enterprise accounts most of our Midmarket and enterprise leads.

From inbound marketing second agency partner referrals, and outbound sales motions, which means we can continue to grow in this segment without having to spend large sums in digital marketing.

Research and development expenses for Q2 were $11 million or 30% of revenue compared to $10.3 million and 38% a year ago.

We have invested purposely and aggressively in product engineering, while also showing leverage we nosy investments are working as evidenced by the growth rates in our enterprise ARR. Many of the investments required to disrupt the midmarket and enterprise segments has already been made so we're seeing good leverage in R&D and expect for.

Further leverage as we continue to scale up our offshore development teams in keys.

General and administrative expenses for Q2 was $7.3 million or 20% of revenue compared to $4.8 million, an 18% a year ago.

On a dollar basis the growth in gene a was mainly a result of expenses incurred in anticipation of our initial public offering we expect general and administrative expenses to increase in 2020, but to decrease as a percentage of revenue as we continue to scale operations overtime.

Non-GAAP operating loss for Q2 was negative $6.2 million or a negative 17% operating margin.

Compared to a negative $9.8 million or a negative 36% operating margin in a year ago quarter.

Adjusted EBITDA was negative $5.4 million or a negative 15% adjusted EBITDA margin, a 19 point improvement from a negative 34% adjusted EBITDA margin a year ago.

This result was better than our expectations and was driven by the significant increase in high margin PSR revenue and our ability to manage spend effectively while driving leverage across the area as I previously mentioned.

Non-GAAP net loss for Q2 was negative $7.3 million or negative 38 cents per share compared to a net loss of negative $10.2 million or negative 68 cents per share year ago.

As we continue to scale the business. We believe we have a significant opportunity to continue to gain leverage as our mix continues to shift to larger and bigger enterprise merchants, we expect to see continued improvement and our underlying unit economics and key metrics.

Turning to the balance sheet and cash flow statement. We ended Q2 with 25.4 million in cash and cash equivalents.

On a pro forma basis, assuming our IPO had occurred at the end of Q2.

Our cash and cash equivalents would've been $184.5 million net of dividends paid on our series F preferred stock as well as our estimated IPO costs. Our net proceeds from the IPO were $175.8 million net of our underwriters discount and commissions.

Our remaining performance obligations are ARPO totaled approximately 73.5 million.

96% from 37.5 million last year.

We expect to recognize approximately 52% or $38.3 million of the total ARPU as revenue over the next 12 months.

Operating cash flow year to date was negative 17 million compared to negative 21.2 million a year ago free cash flow is negative $18 million year to date or a negative 26% free cash for a margin compared to negative 25.2 million and a negative 48% free cash flow margin a year.

Ago.

The nearly 22 point improvement in free cash flow margin was driven by our ability to drive more leverage in the business and our mix shift to enterprise, which has a higher mix of prepaid contracts.

I will now conclude the call by providing guidance for Q3 and for the full year 2020.

Even though we have seen elevated ecommerce activity across our merchants related to koby 19, our guidance assumes continued uncertainty surrounding the cobot 19 pandemic.

As a result, our guidance assumes continued growth across all plans and geographies, but a lower PSR revenue growth rate as compared to Q2 as transaction activity may moderate in the back half of 2020.

Clearly a significant variation from this assumption because us to modify our guidance higher or lower.

For the third quarter fiscal 2020, we expect total revenue in the range of 35.9 million to 36.3 million or a year over year growth rate of 27% to 28%.

We expect non-GAAP operating loss in the range of negative 10.4 million to negative 10.1 million.

For the full fiscal year 2020, we expect total revenue in the range of 142.5 million to 143.3 million or a year over year growth rate of 27% to 28%.

We expect non-GAAP operating loss in the range of negative 33.5 million to negative 32.9 million.

With that Brett and I are happy to take any of your questions.

Operator.

As a reminder, cast a question you will need to press star one on your telephone to withdraw your question press. The pound team. We ask that you. Please limit yourself to one question and one follow up question. Please standby will resemble the Q and a roster.

Our first question comes from the line array Merrill Lynch go from Barclays. Your line is now open.

Thank you and congratulations on the successful IPO.

Two questions if I may.

First from for brand spend can you just run us through like when you talk about that open.

Oh, hi, driven solution that you're offering.

But then you see like some of your Abra competitors kind of doing like is close to approach where is the try to kind of monetize as much as possible can you maybe kind of.

Comparing contrast of ever bid kind of why someone would you do this approach and why and where your approach fits in then kind of gives you an advantage and then a question for Robert.

If you look at your subscription revenue.

So at a 19% growth year over year, obviously, there were other factors and guess what how do we have to think about that kind of underlying be crews I guess, the promotions kind of kind of brought that number down a little bit. Thank you.

Thanks, Yes, the open SAS approach is.

The best option for.

Larger businesses complex businesses fast growing businesses, who really want to optimize their entire approached ecommerce in their technology stack around best of breed and what fits their requirements the vast.

In pursuing open south as our strategy think of it as analogous to what Magento did back in the on premise era with their open source platform. They quickly grew from.

Yes, nonexistent before 2008 to the largest platform in the world for merchant small medium and large largely because there were so many different types of merchants, who benefited from the combination of openness and.

Enterprise functionality there limitation as it was on premise software and most businesses do not want to have to spend the money higher the expertise and become I T specialists to run their own software hardware security et cetera, we are basically the open and flexible model for the SaaS Kara and.

That is as you mentioned in contrast to many of our largest competitors who are software conglomerates, they grow by acquiring and adding an ever larger number of pre integrated offerings, often to the exclusion or competition that guidance.

Other competitors in those same areas and May therefore limits choice for businesses.

Theres not necessarily an argument that says one model is better than the others, but I would emphasize that we are the only best of breed sold product E commerce platform specialists competing against.

A wide number of large market cap software conglomerates, and we think therefore customers when they evaluate us get something unique and differentiated which is best of breed up and down or E commerce.

Makes sense. Thank you.

Hi jump in here, Hey, Raimo, Thanks for the question.

Yes. This is a 19% really was driven mostly by the product of the essentials promo that we ran throughout most of Q2 as well as the timing of enterprise deals throughout the quarter and I'll dive deeper onto both.

So encoded first hit we wanted to act really quickly to help as many merchants as possible to sell online. We offered a 90 day free site wide promo for our essential as planned and that we could we saw traction and decided to run it through the quarter.

The revenue recognized from the promo is depressed for the three months that they are on promo because remember we don't recognize revenue while stores are on promo, but we do capture the bookings as part of our a are.

Without the promo that total subs growth would have been positive relative to Q1.

And then the other part is the enterprise plans. So as we mentioned previously in the beginning of the quarter, we had some enterprise deals push their timing.

Thankfully we came back really strong in late May and June as you can see our enterprise accounts grew 44% in Q2.

It had a modest impact in revenue base and the timing of those deals, but when you look at our a are you can see our a our reflects our strong quarter in both enterprise plans as well as the bookings that we generated from Centrals.

Perfect. Thank you congratulations.

Thank you.

Okay. Thanks. Thank you. Our next question comes on the line of Stan Zlotsky from Morgan Stanley. Your line is now open.

Perfect. Thank you so much.

Maybe just.

To follow up on on Ramos question there.

All right, maybe could you help us with.

The essential promo that you ran from Q2.

How much did depressed.

Actual subscription revenue, maybe try to quantify that and then.

A quick.

Follow up.

On the.

Do you charge customers right is as push through GMB limits, that's when the.

Step up to the high level skews.

How much of that momentum going into the back half for the year as we continues.

We see very.

Tom perspective is moving forward.

Yes.

Okay.

Yes, hey, sand, you're breaking up a little bit, but I think I get to just to the question.

Q1 subscription revenue was roughly 22.4% year over year without.

That promo you could you know it would have came in probably slightly higher than that for Q2.

So thats really the the impact of of how that promo affected subscription revenue in terms is growth adjustments. When we think when you think about our retail plans. Our retail plans are based on GMB threshold, so as merchants exceed those thresholds in the following period they will.

The programmatically moved up to the next plan our enterprise plans are.

As growth adjustments built in but it's really based on a trailing 12 month basis. So as enterprise accounts exceed their initial order thresholds on that trailing 12 month basis, then you'll see them upgraded Oh are you will see the growth adjustments once they cross that threshold, so with the surgeon GMB.

That we've seen since March there's usually about a month or so lag between when you'll see the adjustments.

But yet we're seeing strong good strong upgrades and growth adjustments scrip across retail and enterprise plants.

Perfect. Thank you so much.

Sure.

Thank you. Our next question comes from the line of some on pharma from Jefferies. Your line is now open.

Hi, good afternoon dish payment questions and likewise, let me echo the congrats on the on the IPO one for you Brett and then a follow up for Robert but maybe first starting with.

I think to Fortune 2000 comment resonated with us as we think about larger.

Roger retailers moving over to SAS open platforms are you seeing.

Greater inbound leads coming in not just because of covet I mean, maybe able to think about what the trend. There was even if we go back to early 2020 and have you seen that accelerate and maybe to what degree are you getting more fortune 2000, or larger merchants that may have been more hesitant historically start to Don move to to an open platform like the commerce.

[music].

Yes, other actually two things really helping us as we speak for the largest enterprises in the world one is.

Being public the IPO itself, because our largest competitors Adobe Salesforce Oracle.

Safety Shopify are all public company and when we were a private company the transparency and credibility disadvantage that we competed with worked against US and now we have leveled the playing field. So thats been helping us for the last month, but the other thing that.

Has made a real difference in recent months is the slew of recognition coming in from the third party research analysts and I don't mean.

Sorry for panels I'd be industry technology research analysts in particular, it began with the Forrester wave report back again.

Hey, where we were made as a strong performer another large appetite commerce platform reports for bolt VTB DSE.

Then it was followed up with paradigm.

Which I was there any carbine, one or more than seven out of 10 categories.

And then finally, the Gartner report came out with a favorable positioning of the commerce. So this additional recognition.

From the folks who go very deep on large enterprise platform.

Ultimate better consideration sets and compete more effectively than we could what's called a year or two ago.

Great very helpful and then Robert.

Don't know if I heard this correctly, but if I did done very positive, but it sounds like you said RPL was.

Increased 96% year over year I was wondering if maybe you could help us understand what that looks like in one Q just for comparison sake and then if we think about that twoq growth number is that a good representation of maybe you know it cancels out some of the noise around promos et cetera, but how should we maybe think about that that growth rate that you.

Called out for ARPU.

Yes. Good question summit, I mean, again that our PEO and deferred billings I would I would point you to our A.R.R. as the best measurement of our bookings quarter over quarter.

Our IPO for Q1 was 66.2 in Q2 73 five but.

Again, I would then I would encourage you and everyone else to just really look at our change in a Rs divest measurement of the change in bookings because that will capture bookings for both essential oils and enterprise plans during that period.

Great very helpful. Adjusted to address that we wanted to today again I'll pass the baton along thanks again for taking my questions. Thanks the month.

Thank you. Our next question comes from the line of Josh back from Keybanc. Your line is now open.

Thank you for for taking the question maybe.

Just to share with you Dread summit figure assume this amazing surge in E. Com. Some companies are saying four to five years of.

Penetration or are happening and four to five months. So im just curious as it certainly seems like if I look across several of your metrics the net ads.

For the grew to two k. accounts seem to be really positive.

[music] Roberts last point, our growth seems to accelerate nicely. So im just kind of curious maybe how this is this is manifesting across your business I know this one you had mentioned they new enterprise sales really perked up so any color on on maybe how that as follow through.

Some some context there.

Yeah sure I mean, clearly the metric that reacts first to growth in E Commerce is.

Customer sales and the closest financial disclosure proxy, we have to that as our PSR revenue because a meaningful portion of.

Partner revenue for US is directly generated from customer transactions from gross merchandise sales and order count and as you saw that was up 74%.

In Q2, which was a big accelerations and 52 in Q1 versus.

Being in the Thirtys the prior three quarters, 30% to 37%. So that's gone up very dramatically and the real operating question well, how long will online sales stay elevated.

The industry data suggests there not dropping off when you look at the third party Bank reports on online credit card volumes, it's still pretty robust.

That's very encouraging I think the most.

Important beliefs that we and many others like industry.

Tumor behavior has changed.

Hey, various change.

Businesses in particular can no longer regard online selling as an option.

Subsidy and has to be a core part of their strategies. Many companies who have adopted ecommerce by now realize that theres much more they can do additional brands geographies customer segments. They can sell into and they might be so in early stages of digital transformation. We're here to serve them and consumers have found so many.

The new brands to buy from use cases to take advantage out.

It's likely that we'll we'll just continue to grow from here for many years to come.

[noise] really helpful and Robert maybe for you as as we will come into the second half any obviously you provided some helpful. Guys. It's just any other factors we should be aware of it. It's really seems like these drill those convert you could certainly see subscription revenue.

Increase on the contrary seems like you want to be really conservative about.

So our revenue because it is tough to predict E commerce volumes than.

It also seems like when we think about hey are that it ticked up and maybe it's going to be less impacted by those just just given the definition so.

There's a lot of moving parts to the model, but just anything that we should be mindful of those as we build out.

Our models here for the second half.

Yes, Hey, Josh.

We saw strong bookings momentum for sure in Q2.

We feel good about continued growth in bookings both for essential as an enterprise as great to see enterprise at 44% year over year and again keep in mind I mean, we're really focused on disrupting segments of the market, where our enterprise plans fit really nicely. So.

Whether your mid market, our enterprise merchant, our differentiated strategy really.

Fits well into that and it's reflected in those year over year gross numbers. So we feel good about bookings we feel good about subscription.

You know the challenge for US is really predicting the continued impact of the transactions that we've seen since March I mean, clearly with the 74% year over year, we've seen a spike in GMB and monetize CNBC the platform.

Given that we are you public company, we just want to take a prudent approach in terms of and how we forecast that going forward. So we're moderating that a bit in the second half.

But continued momentum in subscription bookings and kind of taking a prudent approach around.

MD and then the related PSR.

Bill access because you both.

Thanks.

Thank you. Our next question comes on the line as David Hynes from Canaccord. Your line is now open.

Hey, guys. Thanks for taking the questions and congrats on the momentum.

Maybe Brian.

I'll start with you so to the extent that headless is a driver of demand for big Commerce.

Can you just talk about what's typically the catalyst to drive a merchant to adopt a headless strategy and then.

Is there anyway to kind of characterize where you think we are in terms of merchants adopting headless strategies and whether that trajectory as changed over the last year. So.

Yeah, I mean, the funny enough business has come from two polar opposite directions to have less in one case. It's those companies who are late adopters of E. Commerce started with a marketing centric website, maybe created in the low end in word processor at the.

Hi ended drupal or Adobe experience manager and then want to commerce enabled that without having to redesign their full site. So in those cases, they start with content non transactional.

And then add commerce using headless model at the polar opposite and our companies who are trying to lead with customer experience and create the most innovative immersive.

Interactive user experiences, maybe going well outside the norm of a typical pamphlets highest or hierarchical category structure to an E commerce site and they want to be unconstrained by the E com platform using.

Purpose built frameworks for a third party CMS.

In that case again.

Headless is a perfect use case now how is it actually changing as a percentage of total installed ecommerce site I wish I had a good.

Way of analyzing that but honestly I don't I mean, if you look at.

Bill, we'll still see gets it could get not just 30% of all stores around the world. Our had less you get most of the way there just with Wordpress sites.

But I honestly don't know what that trend as relative to the total pie.

Yes, okay that makes sense and.

Helpful color.

And then I don't know if this is better for you or alright, but if we if we think about the mix of merchant additions, obviously lots as strong as in the quarter.

Can you characterize the mix of those that are re platforming versus maybe merchants that are new to online. So the first time and whether that's kind of changed over the last year.

Sure I'll take this I mean general rule for US is it runs around 50 50.

New sites versus migrations sites.

During the pandemic, though the shift has been more in the direction of new sites in particular for companies that were caught flat footed or who are late adopters for who are trying to go through a more thorough digital transformation across what they do it's a little bit harder right now.

To migrate a platform when your employee base may not be able to get together in person to collaborate on that.

So there could be an opportunity in the future for companies, who kind of held on by their fingernails during the pandemic on their old platform once they're back in the offices to to think about modernizing what they do.

That's great. Thanks to all the color and congrats again.

Thanks.

Thank you. Our next question comes from the line of copper from Needham and company. Your line is now open.

Okay.

Hi, Brent and alright, congrats and good quarter, thanks for taking my questions.

I guess first one is Brent can you made comments on the newly announced or expanded.

Facebook Instagram relationship.

Is that partnership differ much from any of your other technology partnerships and do you have any maybe differing expectations on what that can bring great Big commerce, maybe over the next couple of years.

Hey, Scott, it's certainly the case that what Facebook and Instagram are doing is.

Very different than what other partners like ebay and Amazon and Google shopping do.

Fundamentally.

The Facebook platform is an amazing way to full three target existing site visitors and then do look alike targeting for new ones and Instagram is an unbelievable way to engage a following that you build up that you build up as a brand through Instagram and.

Try to cater to with very.

Rich photos and stories that should tell we've been partners with Facebook and Instagram four years, one of only two that has been basically a release partner each phase of what they have done in E commerce.

Were very keen to keep investing in that because we see so many successes amongst our customers who are.

Early adopters and taking advantage of those channels and what really means for a business is.

If you're on our platform you can.

Seamlessly freely sync youre catalog.

Uploaded into Facebook and Instagram.

Process orders, there and basically manage those orders and manage your customers and interactions all on the same technology stack that you run your branded store on so it's very powerful integration.

And especially useful for any brand that takes advantage of Facebook and Instagram.

Got it helpful. And then maybe one follow up for Ferrari on the PSR revenues in the quarter, obviously, GMB volumes up significantly driving probably better payments.

Related revenues, but as you look at the mix of revenues in this kogan driven environment versus maybe the last couple of years is the composition of those revenues like significantly different between the types of partners in there or do they all kind of have similar benefits in this.

Environment.

Yes, Hey, Scott I mean, as you know majority of our PSR today is driven by.

Rev share that we get from payments and we have.

Put partnerships in place across ecosystem really over the last 12 to 18 months that we're starting to monetize on quarter over quarter and I think the same rules apply it says payments is just.

It's more mature.

In in kind of our business, but thats not to say that are.

Share of wallet or our ability to monetize.

Even further beyond payments were excited about that opportunity going forward.

Great helpful. Congrats again guys. Thanks, Thanks, Scott I appreciate it.

Thank you. Our next question comes on the line of Ryan Peterson from Raymond James Your line is now open.

Hi, gentlemen, congrats on the IPO the strong results. So I wanted to follow up on or want to dgs questions, but.

Theres still a large president of some of these legacy platforms out there I think the value of the commerce versus those who is well documented and I'm curious on the pace of migrations that you've seen so far during a pandemic and if theres any change in the shared owners that are migrating onto the platform.

Yes.

Again, it's my perception that.

Migrations during the pandemic of actually slowed a little bit.

Relative to.

Companies, who are doing net new sites.

For new brands, new geographies, new use cases.

Because of migration is harder to pull off.

In the midst of a pandemic when your employees can all get together and when your online channel, which may not have been your primary channel free pandemic becomes your primary channel it's out much riskier to undergo a migration now. This is just perception I don't have statistics on the pace of migration.

But inevitably as you can see just on built with or more than 500 platforms around the world most of them are quite old and not investing to stay.

Up to speed and stay competitive and current.

And so it's a it's a giant part of the market that still on those platforms and may well be looking to upgrade modernized in the months in years ahead.

Got it that's great color and maybe just on B to B I think a lot of us or who the b to C pickup in the pandemic is well understood. All I'm curious on the B to B evolution has the pandemic really accelerated that migration and maybe what do you see is the kind of one to two key large catalyst to kind of facilitate that thank you.

[music].

Yes, I think it has accelerated b to B I think one of the statistics or surveys we shared in our S. One was that there was a surface several hundred.

The sellers done recently and half of them said that day.

We're not selling at all on line and in the Middle pandemic offline sales for many companies get shut down or hindered the option not to sell online.

And they've had to scramble. So my team would say a higher percentage now, especially at our clients.

Was that we had been doing.

Down before the pandemic have Dan.

The sales.

Thank you. Our next question comes from the lineup Terry Tillman procure with Securities. Your line is now open.

Hey, guys. This is actually in the going for Terry Thanks for taking my question.

I think you, especially with a little bit in the script, but in terms of product development can you talk about the importance of page Golar and how is resonating with customers. So far and then just as a follow up can you just an update on the payments SDK.

Those are working on how you expect that to impact the business overall thanks.

Sure page builder is our drag and drop Interactives.

Capability for page design team design and theme editing it introduces a much more whizzy when type experience.

For ease of use but also for powerful incorporation of widgets widgets can power a recommendations engine promotions engine.

Just a drag and drop incorporate into a page we rolled that out in beta to new stores, starting at the very beginning of Q2.

And saw four.

New trials stores too.

In any way chose to interact with it.

The spectacularly.

Big increase in trout paid conversion now there's.

Yes, there is going to be a bias towards companies that were already more highly engaged interact with the tool like that but the feedback has been great. It's one of those rare product releases that goes out seemingly without bonds or without issues. We quickly moved on to GA for new stores and are now working on that for existing stores.

But overall I would say.

Builder has done a real success for us.

And our customers and then your second question is around payments SDK.

So with the SDK does is.

In the eyes around payments as allow third party payment providers or a system integrator operating on their behalf actually integrate.

Third party payment solution and us rather than putting the burden always ops to integrate into that.

Once they are done doing that we then certify that code take it in and manage the PCIA.

Compliance so phase one of the payments STK is for plain vanilla credit card processing, it's not like we have beta partners, who are transacting and processing transactions on behalf of merchants the big benefit for US long term is it makes it a lot more easy and scalable.

For us to take on new country or region specific payment providers all around the world. It's if we had to do every integration and maintain every integration ourselves.

The world the big place under a lot of providers, we have hard time covering everything this makes that scalable and I think as a result of that in the quarters ahead, it will be a catalyst to.

Just to our growth in new countries new regions.

Got it that's really helpful. Thanks, guys.

Thanks.

Thank you at this time I'm showing no further questions I would like to turn the call back over to Brent Belem, President CEO and chairman for closing remarks.

Great well, thanks, everybody for joining us on our first public company call I want to say on a personal note. This has been an incredible journey and I want to thank our employees customers and partners for getting us to this point. Thank you for your interest in Big Commerce, and we look forward to talking to you on our next call August.

Ladies and gentlemen, this concludes today's conference call. Thanks for participating you may now disconnect.

[music].

Ladies and gentlemen, thank you for standing by and welcome to Big Commerce, The second quarter 2020 earnings call.

All participants are no listen only mode. After the speakers presentation. There will be a question and answer session. Please be advised that todays conference is being recorded I wouldn't I like the chemicals or what's your first speaker today Roclatan hearing head of Investor Relations. Thank you. Please go ahead.

Good afternoon, and welcome to Big Commerce that second quarter 2020 earnings call, we'll be discussing results announced in our press release issued after the market close today.

With me are Big Congresses, President CEO and chairman Brent.

Yeah, So Robert Alpros.

This call will contain forward looking statements, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act at 1995.

It can be identified by words, such as expect anticipate intend plan believe C or will.

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 I dress matters that are subject to risks and uncertainties that could cause actual results to differ materially from expectations.

For a discussion of material risks and other important factors that could affect our actual results. Please refer to the risks discussed in today's press release, our final prospectus underworld four to four be filed with the Securities and Exchange Commission on August 2020, our quarterly report on form 10-Q for the quarter ended June Thirtyth 2020 to be filed with the FTC and our other.

Erotic filings with the FTC.

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 metric is included in our earnings press release, which has been furnished to the FCC and is also available on our website at investors Dr. ecommerce dotcom.

With that let me turn the call over to Brent.

Thank you Robert and good afternoon, everyone. Thank you all for joining us on our first earnings call as a public company.

During today's call Robert and I will provide details on our Q2 results as well as Q3 and 2020 call your guidance.

Also spend more time, then we will on future earnings calls covering the business our strategy and the opportunity ahead as many of you maybe new to the Big Commerce story.

Feel free to grab some popcorn and beverage.

Kicked this off with a few highlights of our Q2 financial results.

Our goal is still what are the best open south ecommerce platform in the world.

We're making consistent progress toward that goal and that progress was reflected in our Q2 results. We believe we had a strong quarter with Q2 revenue coming in at $36.3 million, which was up 33% year over year.

Total annual revenue run rate or a arc was $151.8 million, which was up 32% year over year.

Q2 revenue and air our growth achieved our highest growth rates in 12 quarters.

So far after two quarters 2020 represents our third successive year of growth rate acceleration.

Enterprise account air our was up 44% year over year in Q2, reflecting our continued momentum serving the needs of mid market and large enterprise businesses. These customers value our open south platforms enterprise functionality flexibility and lower total cost of ownership importantly, we delivered these results while continuing to draw.

<unk> operating leverage across the business as shown by a 19 percentage point year over year improvement to our adjusted EBITDA margin.

I'm proud of our team and I would like to acknowledge our big Commerce employees and partners for their resiliency and dedication to serve and support our customers. During these unprecedented times.

For those of you who are new to the Big Commerce story, the commerce as a software as a service platform that power some of the world's most interesting and engaging ecommerce stores, we provide everything a business means to create manage and grow and online store from the design of hosting of the store through checkout, along with the tools that help a business merchandise market.

Operating ROE, we handle the technology, allowing our customers to focus on what matters most of them their products their customers and growing their businesses.

The Congress is participating in one of the largest and fastest transformations in human economic history, the global chef in commerce from offline to online.

23 years for E Commerce to go from nonexistent to 10% of all global consumer spending in 2017 in market or predicts that will take just six years for this percentage to more than double to 21% of global retail spending in 2023.

E commerce sustain explosive growth in part because it allows businesses to engage with their customers wherever they spend time online. It's no longer just about an online channel versus offline channel, it's about omni channel whereby consumers and businesses can shop flexibly across devices web sites and selling formats search.

Tensions remain an important that minority starting point for E Commerce shopping journey.

Today shopping experiences can start and social media or on a content side or on a marketplace or directly on a businesses website.

The best ecommerce platforms enable their customers to seamlessly and efficiently integrate their branded web sites with the main sites there potential customers spend time online and offline.

I do see estimates that the global market for digital Commerce applications was $4.7 billion in 2019, and that's expected to grow at a compound annual growth rate of 11% to reach 7.8 billion in 2024.

This global market includes legacy ecommerce platforms, and Sop ecommerce platforms.

Legacy on premise software solutions are declining in store count and in platform spend.

In contrast.

South ecommerce platforms are driving the industry store count and share gains.

As a side note our total addressable market is actually larger than that for ecommerce platform spending alone.

The additional revenue we are in partnership with our technology partner ecosystem.

We believe there aren't many underserved segments in ecommerce or attracted to the big commerce value proposition.

The launch ease of use high performance and continuously updated benefits associated with Multitenant SaaS.

These include digitally native direct to consumer brands, especially those with enterprise requirements.

Established brands that often have offline complexity.

Migrating sites that need the flexibility to retain functionality and integrations.

Multichannel retailers.

And businesses, who are selling either be directly or in a hybrid b to C and b to B model.

Good commerce wins in the market based on five things that we think we do better than anybody else.

First and foremost we are an open SaaS solutions, we offer the benefits of south, but with the eyes and platform openness that allow complex businesses to integrate modify and customize their ecommerce stores based on their unique requirements. This resonates in the market with merchants of all sizes, but especially larger companies who have estate.

Published businesses and require best of breed solutions and seamless integration.

Hi, guys allow our customers to create unique tailored front end experience, but with the native integrations and best of breed tools that store owners need on the backend.

Second we bring unique and native enterprise features and applications to our merchants, including our capability to also serve headless implementations with the world's leading content management systems, including Wordpress Bloom rates Drupal lock web site core as Adobe experience manager.

Now lets commerce is a dynamic and growing cross channel category, where we excel Tubeless commerce demonstrates the power and flexibility of bit commerce, and we power. Many hundreds of headless sites help us commerce involves a decoupling of the technology used to create the front end user experience of the site with the engine that powers, the Bakken, including the product catalog checkout order processing.

And everything that integrates into that.

Thats used by sites, who are very innovative with their design or marketing and our design centric I want to basically managing unique user experience a difference radically from the traditionally template ties version of ecommerce that comes out of the box.

We integrate seamlessly with leading CMS as digital experience platforms design frameworks and customer front end.

Third we are a leader in cross channel Commerce Cross sell commerce involves the integration of a customer's commerce capabilities with other sites online and offline.

For consumers and businesses make their purchases our success is driven by the success of our merchants. So we offer free direct integrations with leading social networks, such as Facebook and Instagram search engine such as Google.

Online marketplaces, such as Amazon and ebay and point of sale platforms like square Clover Heartland and that.

Fourth we offer lower total cost of ownership and higher return on investment.

South can be dramatically cheaper on a total cost basis, an on premise software with SAP merchant saved the costs of hiring software and hardware engineers, they save on software licensing costs. They save on hosting costs. They say bug fixing cost burgeoning security patches upgrading the big Commerce platform includes all of these.

Our simplicity and ease of use generates ROI for our customers, we offer enterprise stability and security without complexity.

We can get customers up and running smoothly.

Yes, and finally, there is performance and security. We recently completed the rollout of our new store front architecture and as measured by Google page speed insights our platform benchmark faster than leading E commerce sites.

Insecurity other ecommerce store themselves, but the commerce customers get the benefit of the investments that we have made in uptimes feed and security.

We are proud to see the confidence that our customers continue to place and our open SaaS platform and we had a number of fantastic merchants launch with us in the first half 2020.

This includes sites from nine different Fords global 2000 corporations, such as Royal Dutch shell, the audio sharp electronics and two of the world's largest consumer packaged goods companies.

Let me share a few specific examples of new store launches in the first half of this year that we're really excited about.

While perla doesn't Italian luxury apparel company, who chose big commerce because of our open SaaS platform functionality and our cross border Multicurrency capabilities.

The National Baseball Hall of Fame and Cooperstown merchandise store chose our platform because it allowed them to use their preferred paint gateway.

Their retail point of sale software and achieve lower total cost of ownership.

Yeah, you cycles, a high end mountain bike manufacturer, which I'm very happy customer chose did commerce because of our open south platforms headless commerce capabilities, allowing them to take advantage of their existing front end content management system, while reducing total cost of ownership.

Hey, how PRC Paypal quick reference code store represents a nice digital goods use case, they chose been commerce because of our robust cpis, which enabled paypals custom integrations low cost and fast time to market.

And finally, Sheryl tree, the leading store for all things tree care.

Good commerce because of our open soft capabilities, which provided them with both b to B and BDC capabilities on the same site faster time to market and more native functionality versus our competition.

We continue to invest and innovate to build the vast open Safi commerce platform in the world supported by an integrated with our extensive network a best in breed technology and agency partners. Some important examples of new product functionality and partner integrations include.

Merchants can preview pages before publishing and they changes on the fly.

The tool is open and allows developers and partners to innovate and extend that by building custom content widgets.

We rolled out our orders per order refunds, Ipi, which allows merchants and agencies to integrate third party order management solutions with the commerce.

We launched two new control panel languages, Italian in Spanish for merchants, who want to operate their stores in those languages.

As we invest to build the world's best open SaaS ecommerce platform, we also invest to integrate and partner with best in breed technology extensions and services I'll provide a few examples from the first half of this year.

Maybe we signed two new preferred technology partners. The first the system provides enterprise great insight into our merchandise inventory orders invoices and more.

The second is bundled b to B could provide baby sellers with the seamless ability to review transactions and manage customer accounts.

And payments, we completed a number of integrations to support our global merchants, including elevation add yen and we chat pay we upgraded integrations with quantum Multicurrency, Paypal vaulting and Google pay on authorize dot net and barclaycard by partnering with the best of breed companies, we enable our merchants to pick the partner the best.

Their unique requirements in the U.S. and abroad.

We added additional multicurrency support for Paypal Express checkout Braintree, Oliver on converge Clarita add yen and blue snap.

In cross channel, we enhanced our existing strategic partnership with Facebook and Instagram as we announced a couple of weeks ago. This partnership enables our merchants to easily connect their ecommerce storefronts catalogs, Instagram and gives customers the ability to buy from their favorite brands directly on Instagram.

In other verticals, we launched the second phase of our square point of sale integration, we improved non us tax automation by adding global support travel era, how the tax our partner at Connecticut completed the integration of as ERP solutions for finance inventory and fulfillment.

Our open south strategy resonates with merchants around the world and enables our continued international expansion efforts in Q2, we delivered 55% year over year revenue growth.

EMEA and 38% revenue growth in APAC International expansion continues to be a core strategic focus for big Commerce.

We recently launched international marketing sites in France, Italy, and the Netherlands in order to better reach in certain merchants in Continental Europe, we see enormous opportunity for international expansion and we'll continue to invest in our international product and go to market capability for years to comp.

Looking forward, we're pursuing multiple growth levers.

First we grow when our merchants businesses strides in growing our platform the pricing on our essential and enterprise plans are designed to adjust as our customer sales volumes increase above thresholds. We also grow when customers purchase additional stores to serve additional brands geographies and use cases.

Second we grow by acquiring new merchants of all sizes for SMB to mid market to large enterprise. We also seek to extend our sales and share and high potential industries customer segments and use cases, a major industry example is b to b, which generates roughly a third of all E commerce platform spend and as faster growing them.

To see we estimate that about 10% of our customers globally are primarily be to be sellers.

The major segment example is large enterprise sites, which we define us having gross merchandize ecommerce sales and access of $50 million. Our recent favorable reviews by leading industry analysts like Gartner and Forrester research favorably positioned us to grow share among the large enterprise implementations.

A major use case example is habits commerce as as described about whereby we serve customers utilize popular content management systems Progressive web apps and or custom design frameworks in conjunction with that commerce.

Third we grow by expanding our product and go to market capabilities and geographies around the world. The commerce serves the needs of merchants and over 120 countries and a wide variety of languages and currencies, we've enhanced self serve usability and new geographies by translating our control panel and the local languages and enabling the integration of.

Local payment processors, we support the growth of mid market and large enterprise customers around the world by expanding our regional sales and marketing capabilities. We continue to invest in Europe, Latin American Asia, our strong growth strong revenue growth rates outside the Americas show. These investments are working and we seek to continue this.

Three years to comp.

Finally, we grow by expanding our technology, some kind of your partnership.

In contrast to our largest competitors, we're not a software conglomerate.

We seek to be the platform industry leader at collaborating with not competing against the broader E commerce ecosystem.

Our apps marketplace is one of the largest any ecommerce platforms.

It includes payments shipping tax accounting in ERP marketing fulfillment and cross channel Commerce partnerships.

As we add partners to our network, we provide our customers with choice and best in class capabilities.

As our customers adopt those partner solution, we often generate revenue share from our partners, especially in categories like payments shipping and advertising.

In conclusion, we are thrilled to join the public markets. We're excited to expand our product offerings and earned the trust and businesses of all sizes as the ship to ecommerce continues to accelerate we believe our open south strategy offers a compelling solution for our business isn't partners around the world and excited to lead this company.

The next phase of growth.

I will now turn the call over to Robert to talk about our financial results.

Thanks, Brian and thanks again to everyone for joining us today. Since this is our first earnings call I'd like to start by providing a brief overview of our financial model and then I'll go through our second quarter results in detail then I'll move on the guidance for the third quarter as well as for the full year 2020.

Also before discussing detailed financial results I'd like to point out that in addition to our GAAP results I'll also be discussing certain non-GAAP results, our GAAP financial results along with the reconciliation between GAAP and non-GAAP results can be found in our earnings release.

As Bret mentioned, we generated total revenue in Q2 of 36.3 million.

33% year over year as a reminder, our revenue comes from two sources subscription solutions revenue and partner in services revenue.

Subscription solutions revenue consists primarily of platform subscription fees from our retail and enterprise plans.

Subscription solutions are generally charge per online storefront and are based in the stores subscription plan tailored to their size and feature needs.

There are two types of subscription plans that we offered to our merchants enterprise and essentials.

Enterprise playing contracts are generally first fixed term of one to three years and are billed monthly or annually.

Our enterprise Sands order based and as merchants exceed their initial order to your threshold on a trailing 12 month basis. They move to the next year of order growth adjustments.

Since 2015, we've been focused on providing the best open SaaS solution in the market did disrupt legacy open source providers in the Midmarket and enterprise segments, we measure the increasing mix shift of our enterprise accounts by tracking or enterprise account.

Our enterprise account, a our grew 44% to 79.8 million in Q2 and enterprise accounts represented 53% of our A.R.R. as of June 30, compared to 48% as of June Thirtyth 2019, demonstrating our increase enterprise mix shift and continue to.

Action in this segment of the market to keep this mix shift in perspective less than 10% of our a our west from enterprise accounts in 2015.

Within essentially we offer three distinct retail plans based on a merchants annual transaction volumes are essential his plans are sold the small and medium sized businesses, which we define as sites transacting up to now.

In annual online sales Big Commerce, essentially offers three retail plans standard plus and pro priced at roughly $30 $80 and $300 per month, respectively. Our retail plans are generally month to month contracts and are based on the merchants annual GMB as merchants exceed their GMB thresholds their program.

Radically upgraded to the appropriate plan in their next billing cycle.

Subscription revenue was 23.9 million in Q2, 19% year over year.

That growth rate was down slightly versus Q1 as a result of an essential as planned promotion that we ran during Q2 as part of our bricks to clicks campaign to help margins during the initial months as it covert 19 pandemic subscription revenue accounted for 66% of our Q2 revenue led by our underlying new merchant gross.

And fan upgrades from existing merchants.

Partnering services revenue or PSR consist of two parts.

Net revenue and services revenue.

We spend a minute discussing the partner revenue component in more detail.

The way to think about partner revenue is the revenue share we generate from our best of breed technology ecosystem as our merchants benefit from their products and services Big Commerce is open SaaS approach means that customers can tailor their stores to meet their featuring needs by integrating applications developed by our technology partners in the mid March.

Good and enterprise segments. The majority of merchants require a level of customization and best of breed product and service offerings versus a simple out of the box solution.

Examples of strategic Technology partners include payment partners point of sale partners tax and accounting partners or shipping partners just to name a few.

We generate revenue from these partnerships in three ways.

Revenue sharing arrangements technology integration fees and partner marketing and promotions.

Partnered services revenue was 12.4 million in Q2 up 74% year over year, which accounted for 34% of our Q2 revenue.

The increase in partnering services revenue was primarily as a result of increased E commerce activity driven in part by the Coven 19 pandemic any improved monetization of partner revenue share.

Now, let's switch to our key business metrics.

First let's discuss our our annual revenue run rate.

Our consists of the some of the current months monthly recurring revenue or EMR multiplied by 12.

Plus the trailing 12 month revenue, we generate from partner and services revenue or PSR as we mentioned earlier Q2, our was 151.8 million.

32% every year.

We consider revenue growth in a our growth to be the best leading indicators for the growth in our business and do not consider other deferred billings related calculations to be good proxies.

We also track the total number of accounts with annual contract value or ACB greater than $2000 as of the end of a monthly billing period.

For this cohort, we only consider subscription plan revenue in determining which accounts have contract value greater than $2000 in ACB.

We ended Q2 with 9378 customers over the $2000 threshold, an increase of 641 accounts or 7% year over year.

Compared to Q1 2020, we've seen an increase of 390 accounts or 4% sequentially.

We saw strong growth in both our pro Essentials plans and enterprise plans during Q2, which reflects our progress in continued traction with Midmarket and enterprise merchants as well as established Smbs.

This metric can fluctuate on a quarter by quarter basis based on the plan mix, we see in the business, but we are confident in sustaining mid single digit year over year growth rates in the back half of 2020.

Accounts above the 2000 dollar HCV threshold grew almost 40% in Q2 and represented 80% of our total are in Q2.

Up from 76% in Q2 2019.

It's important to point out that these growth rates are different than our enterprise our growth rates, but our directionally similar due to the fact that we can have non enterprise paying customers exceeding the $2000 threshold. An example would be an SMB customer on our pro plan, which is a higher end retail plan.

Another key metric, we track is ARPA or average revenue per account.

For accounts above the 2000 dollar ACB threshold Arthur for Q2 was $12936 up 29% year over year, driven by a mix shift towards our higher end retail pro plans and enterprise accounts as we closed a higher mix of larger deals in Q2.

In discussing the remainder of the income statement. Please note that unless otherwise noted all references to our expenses operating results in share count on a non-GAAP basis.

Our gross margin profile is strong and that has allowed us to be very intentional and purposeful on where we invest our money.

In Q2 gross profit was $28.6 million, representing a gross margin of 79%.

This compares to gross margin of 77% a year ago, and 78% last quarter.

Year over year increase in our gross margins was impacted in part at the high margin revenue share we earn from a subset of our strategic technology partners.

Turning to sales and marketing expenses, our sales and marketing expenses for Q2 were $16.5 million or 45% of total revenue compared to $15.8 million and 58% a year ago.

From inbound marketing second agency partner referrals, and outbound sales motions, which means we can continue to grow in this segment without having to spend large sums in digital marketing.

Research and development expenses for Q2 were $11 million or 30% of revenue compared to $10.3 million and 38% a year ago.

We have invested purposely and aggressively in product engineering, while also showing leverage we nosy investments are working as evidenced by the growth rates in our enterprise ARR. Many of the investments required to disrupt the midmarket and enterprise segments have already been made so we're seeing good leverage in R&D and expect.

Further leverage as we continue to scale up our offshore development teams in Keith.

General and administrative expenses for Q2 was $7.3 million or 20% of revenue compared to $4.8 million, an 18% a year ago.

On a dollar basis the growth in Jna was mainly a result of expenses incurred in anticipation of our initial public offering we expect general and administrative expenses to increase in 2020, but to decrease as a percentage of revenue as we continue to scale operations overtime.

Non-GAAP operating loss for Q2 was negative $6.2 million or negative, 17% operating margin compared to a negative $9.8 million or a negative 36% operating margin in a year ago quarter.

Adjusted EBITDA was negative $5.4 million or a negative 15% adjusted EBITDA margin, a 19 point improvement from a negative 34% adjusted EBITDA margin a year ago.

Non-GAAP net loss for Q2 was negative $7.3 million or negative 38 cents per share compared to a net loss of negative $10.2 million or negative 58 cents per share year ago.

Turning to the balance sheet and cash flow statement. We ended Q2 with 25.4 million in cash and cash equivalents.

On a pro forma basis, assuming our IPO had occurred at the end of Q2.

Our remaining performance obligations are ARPO totaled approximately 73.5 million.

96% from 37.5 million last year.

We expect to recognize approximately 52% or $38.3 million of the total ARPU as revenue over the next 12 months.

Operating cash flow year to date was negative 17 million compared to negative 21.2 million a year ago free cash flow is negative $18 million year to date or a negative 26% free cash flow margin compared to negative 25.2 million and a negative 48% free cash flow margin a year.

Ago.

The nearly 22 point improvement in free cash flow margin was driven by our ability to drive more leverage in that business and our mix shift to enterprise, which has a higher mix of prepaid contracts.

I will now conclude the call by providing guidance for Q3 and for the full year 2020.

Even though we have seen elevated E commerce activity across our merchants related to Koby 19, our guidance assumes continued uncertainty surrounding the cobot 19 pandemic.

Early a significant variation from this assumption because us to modify our guidance higher or lower.

For the third quarter fiscal 2020, we expect total revenue in the range of 35.9 million to 36.3 million or a year over year growth rate of 27% to 28%.

We expect non-GAAP operating loss in the range of negative 10.4 million to negative 10.1 million.

For the full fiscal year 2020, we expect total revenue in the range of 142.5 million to 143.3 million or a year over year growth rate of 27% to 28%.

We expect non-GAAP operating loss in the range of negative 33.5 million to negative 32.9 million.

With that Brett and I are happy to take any of your questions.

Operator.

As a reminder, cast a question you wanting to press star one on your telephone to withdraw your question press. The pound team. We ask that you. Please limit yourself to one question and one follow up question. Please standby will resemble the Q and a roster.

Our first question comes from the line of Raimo Lynch goal from Barclays. Your line is now open.

Thank you and congratulations on the successful IPO.

Two questions if I mean.

First from for Brian Brian can you just run us through like when you talk about that open.

Hi, driven solution that you're offering.

But then you see like some of your Abra competitors kind of doing liked is close to approach ready to try to kind of monetize as much as possible can you maybe kind of.

Comparing contrast of elevated kind of why if someone were to date at this approach trend and why and where your approach fits and then kind of gives you an advantage and then a question for Robert.

If you look at your subscription revenue.

So on a 19% growth year over year, obviously, there were other factors. Some guys. So how do we have to think about that kind of underlying be crews I guess, the promotions kind of kind of brought that number down a little bit. Thank you.

Thanks, Yes, the open SAS approach is.

The best option for.

Larger businesses complex businesses fast growing businesses.

I really want to optimize their entire approached ecommerce and their technology staff around best of breed and what fits their requirements the bass.

In pursuing open south as our strategy think of it as analogous to what Magento did back in the on premise era with their open source platform. They quickly grew from.

Non existant before 2008 to the largest platform in the world for merchant small medium and large largely because there were so many different types of merchants, who benefited from the combination of openness.

And.

Enterprise functionality there limitation as it was on premise software and most businesses do not want to have to spend the money higher the expertise and become IP specialist to run their own software hardware security et cetera, we are basically the open and flexible model for the SaaS Kara.

And that is as you mentioned in contrast to many of our largest competitors who are software conglomerates, they grow by acquiring and adding than ever larger number of pre integrated offerings, often to the exclusion or competition against.

Other competitors in those same areas and they therefore limits choice for businesses.

There is not necessarily an argument, but says one model is better than the others, but I would emphasize that we are the only best of breed sold product E commerce platform specialists competing against.

A wide number.

Large market cap software conglomerates, and we think therefore customers when they evaluate us get something unique and differentiated which is best of breed up and down or E commerce.

Makes sense. Thank you.

Hi jump in here, Hey, Raimo, Thanks for the question.

Yes, the 19% really was driven mostly by the product of the essential promo that we ran throughout most of Q2 as well as the timing of enterprise deals throughout the quarter and I'll dive deeper onto both.

So when cobot first hit we wanted to act really quickly to help as many merchants as possible to sell online. We offered a 90 day free site wide promo for our essentially plant and that we could we saw traction and decided to run it through the quarter.

The revenue recognized.

The promo was depressed for the three months that they are on promo because remember we don't recognize revenue while stores are on promo, but we do capture that bookings as part of our AR.

Without the promo that total subs growth would have been positive relative to Q1.

Then the other part is the enterprise plans. So as we mentioned previously in the beginning of the quarter, we had some enterprise deals push their timing.

Thankfully, we came back fairly strong in late May and June as you can see our enterprise accounts grew 44% in Q2.

It had a modest impact in revenue based on the timing of those deals, but when you look at our a are you can see our a our reflects our strong quarter in both enterprise plans as well as the bookings that we generated from essentially.

Perfect. Thank you congratulations.

Thank you.

Hi, Thanks.

Thank you. Our next question comes from the line of Stan Zlotsky from Morgan Stanley. Your line is now open.

Perfect. Thank you so much.

Maybe just.

Follow up on on bringing those question there.

All right, maybe could you help us with.

The essential.

Promos.

Q2.

How much did depress the actual subscription revenue maybe try to quantify that and then.

A quick.

Hello.

On the way to you.

Customers right is as push through GMB limits.

When the.

Step up to the high level excuse.

How much of that momentum going into the back half for the year as we continue.

Very helpful ecommerce activity moving forward.

Yes.

Okay.

Yes, hey, sand, you're breaking up a little bit, but I think I get that just a question.

Q1 subscription revenue was roughly 22.4% year over year without.

That promo you could.

Would it came in probably slightly higher than that for Q2.

So thats really the the impact of of how that promo affected subscription revenue in terms of growth adjustments. When we think when you think about our retail plans. Our retail plans are based on GMB threshold. So as.

Merchants exceed those thresholds in the following period.

There will be programmatically moved up to the next plan our enterprise plans are.

Growth adjustments built in but it's really based on a trailing 12 month basis. So as enterprise accounts exceed their initial order thresholds on that trailing 12 month basis, then you'll see them upgraded Oh are you will see the growth adjustments once they cross that threshold, so with the surgeon GMB.

That we've seen since March there's usually about a month or so lag between when you'll see the adjustments.

But yet we're seeing strong strong upgrades and growth adjustments supra across retail and enterprise plants.

Perfect. Thank you so much.

Sure.

Thank you. Our next question comes from the line of some odd Solana from Jefferies. Your line is now open.

Hi, Good afternoon. Thank you very my questions and likewise, let me echo the congrats on the on the IPO one for you Brett and then a follow up for Robert but maybe first starting with.

I think to Fortune 2000 comment resonated with us as we think about larger.

Larger retailers moving over to SAS open platforms are you seeing.

Greater inbound leads coming and not just because of covet I mean, maybe able to think about what that trend. There was even if I go back to early 2020 and have you seen that accelerate and maybe to what degree are you getting more fortune 2000 or larger merchants that may have been more has historically start to thawed move to to an open platform like the ecommerce.

[music].

Yes, other actually two things really helping us as we speak for the largest enterprises in the one is.

Being public the IPO itself, because our largest competitors Adobe Salesforce Oracle.

Safety Shopify are all public company.

When we were a private company the transparency and credibility disadvantage that we competed with worked against US and now we have leveled the playing field. So thats been helping us for the last month, but the other thing that has made a real difference in recent months is.

The slew of recognition coming in from the third party research analysts I don't mean.

Sorry for example, semi industry technology research analysts in particular.

And with the Forrester wave report back again.

Where we were made as a strong performer another large enterprise commerce platform reports for both VTB DTC.

It was followed up with paradigm.

Which.

The combined one or more than seven out of 10 categories.

And then finally, the Gartner report came out with a favorable positioning of the commerce. So this additional recognition.

The folks who go very deep on large enterprise platform.

Ultimate better consideration sets.

Pete more effectively than we could what's called a year or two ago.

Great very helpful and then Robert.

I don't know if I heard this correctly, but if I did done is very positive, but it sounds like you said RPL was.

Increased 96% year over year I was wondering if maybe you could help us understand what that looks like in one queue. I'd just for comparison Segun. Then if we think about that twoq growth number is that a good representation of maybe.

Cancels out some of the noise around promos et cetera, but how should we maybe think about that growth rate that you called out for RPL.

Yes. Good question summit, I mean, again that our PEO and deferred billings I would I would point you to our A.R.R. as the best measurement of our bookings quarter over quarter.

Our IPO for Q1 was 66.2 in Q2 73 five but.

Great very helpful. Just to address that we wanted to today again I'll pass the baton along thanks again for taking my question.

Thanks, a month.

Thank you. Our next question comes from the line of Josh back from Keybanc. Your line is now open.

Thank you for for taking the question maybe.

Just to start with you rent summit figures seamless amazing surge in E. Com. Some companies are saying four to five years of.

Attrition or are happening and four to five months. So im just curious it certainly seems like.

Look across some of your metrics the net ads.

For the group to K accounts seem to be really positive.

Robert last point, our growth seemed to accelerate nicely. So im just kind of curious maybe how this is this is manifesting across your business I know this one you had mentioned they new enterprise sales really perked up so any color on.

Maybe how that this follow through would love some some context there.

Yeah sure I mean, clearly the metric that reacts first to growth in E Commerce is.

Customer sales and the closest financial disclosure proxy, we have to that as our PSR revenue because in meaningful portion of partner revenue for US is directly generated from customer transactions from gross merchandise sales and order count down as you saw that was up.

74%.

In Q2, which was a big accelerations and 52 in Q1 versus.

Being in the Thirtys the prior three quarters, 30% to 37%. So that's gone up very dramatically and the real operating question well, how long will online sales stay elevated.

The industry data suggests theyre not dropping off when you look at the third party Bank reports on online credit card volumes, it's still pretty robust.

That's very encouraging I think the most.

Important belief that we and many other industry.

Tumor behavior has changed.

Hey, guys exchange.

Businesses in particular can no longer regard online selling has an option.

Subsidy, Dan has to be a core part of their strategies.

Many companies, who have adopted E commerce by now realize that theres much more they can do additional brands geographies customer segments. They can sell into and they might be so in early stages of digital transformation. We're here to serve them and consumers have found so many new brands to buy from use cases to take advantage.

Okay.

Hi, it's likely that we'll we'll just continue to grow from here for many years to come.

Really helpful and Robert maybe for you as as we look at the end to the second half any obviously you provided some helpful guidance, but just any other factors we should be.

Where it's really seems like disease promos convert you could certainly see subscription revenue.

Increase on the contrary seems like you want to be really conservative about.

PSR revenue because it is tough to predict ecommerce volumes then.

Also seems like when we think about hey are that it ticked up and maybe it's going to be less impacted by those just just given the definition so.

I know theres a lot of moving parts to the model, but just anything that we should be mindful of us as we build out.

Our models here for the second half.

Yes, Hey, Josh.

We saw strong bookings momentum for sure in Q2.

We feel good about continued growth in bookings both for essential as an enterprise.

Great to see enterprise at 44% year over year and again keep in mind I mean, we're really focused on disrupting segments of the market, where our enterprise plans fit really nicely. So.

Whether your mid market or enterprise merchant, our differentiated strategy really fits well into that and it's reflected in those year over year gross numbers. So we feel good about bookings we feel good about subscription.

The challenge for US is really predicting it continued impact of the transactions that we've seen since March I mean, clearly with the 74% year over year, we've seen a spike in GMB and monetize CNBC the platform.

Given that we are you public company.

We just want to take a prudent approach in terms of.

How we forecast that going forward. So we're moderating that a bit in the second half.

But continued momentum in subscription bookings and kind of taking a prudent approach around GMB and then the related PSR.

Bill et cetera, because you both.

Thanks.

Thank you. Our next question comes from the line of David Hynes from Canaccord. Your line is now open.

Hey, guys. Thanks for taking the questions and congrats on the momentum.

Brent.

I'll start with you so to the extent that had most is a driver of demand for big Commerce.

Can you just talk about what's typically the catalyst to drive a merchant to adopt a headless strategy and then.

There anyway to kind of characterize where you think we are in terms of merchants adopting headless strategies and whether that trajectory as changed over the last year. So.

Yeah, I mean, the plenty enough business has come from two polar opposite directions to headless.

In one case, it's those companies who are late adopters of E. Commerce started with a marketing centric website may be created in the low end in word processor at the high end drupal or Adobe experience manager and then want to commerce enable that without having to redesign their full site.

So in those cases, they start with content non transactional.

And then add commerce using headless model at the polar opposite.

Our companies, who are trying to lead with customer experience and create the most innovative immersive.

Interactive user experiences, maybe going well outside the norm a typical template ties are hierarchical category structure to an E commerce site and they want to be unconstrained by the E com platform using.

Purpose built frameworks for a third party CMS.

In that case again.

Headless is a perfect use case now how is it actually changing as a percentage of total installed ecommerce site I wish I had a good.

Way of analyzing that but honestly I don't I mean, if you look at.

Bill I will say gets it could guess not just 30% in all stores around the world. Our had once you get most of the way there just with Wordpress sites.

But I honestly don't know what the trend is relative to the total.

Yep.

That makes sense and it's helpful color.

And then I don't know if this is better for you or alright, but if we if we think about the mix of merchant additions, obviously lots of strong ads in the quarter.

Can you characterize the mix of those that are re platforming versus maybe merchants that are new to online. So the first time and whether that's kind of changed over the last year.

Sure I'll take this I mean general rule for US is it runs around 50 50.

New sites versus migration sites.

During the pandemic, though the shift has been more in the direction of new sites in particular for companies that were caught flat footed or who are late adopters or who are trying to come through a more thorough digital transformation across what they do it's a little bit harder right now.

Now to migrate a platform when your employee base may not be able to get together in person to collaborate on that.

And so there could be an opportunity in the future for companies to kind of held on by their finger nails during the pandemic on their old platform. Once they are back in the offices to to think about modernizing what they do.

That's great. Thanks to all the color and congrats again.

Thanks.

Thank you. Our next question comes from the lineup Scott Berg from me Tam and company. Your line is now open.

Hi, Brian and alright, congrats and good quarters, thanks for taking my questions.

I guess first one is Brent can you maybe comments on the newly announced or expanded.

Facebook Instagram relationship.

Is that partnership differ much from any of your other technology partnerships and you have any maybe differing expectations on what that can bring big commerce, maybe over the next couple of years.

Hey, Scott, it's certainly the case at what Facebook and Instagram are doing is.

Very different than what other partners like ebay and Amazon and Google shopping do.

Fundamentally.

The Facebook platform is an amazing way to both retarget existing site visitors and look alike targeting for new ones and Instagram is an unbelievable way to engage a following that youve built up that you build up as a brand through Instagram ads.

Try to cater to with very.

Rich photos and stories that should tell we've been partners with Facebook and Instagram four years, one of only two that has been basically a release partner at each stage of what they have done in E commerce.

Very keen to keep investing in that because we see so many successes amongst our customers who are.

Early adopters and taking advantage of those channels.

And what it really means for a business is.

If you're on our platform you can.

Seamlessly freely sync youre catalog.

Uploaded into Facebook and Instagram.

Process orders, there and basically managed those orders and manage your customers and interactions all on the same technology stack that you run your branded store. So it's very powerful integration.

And especially useful for any brand that takes advantage of Facebook and Instagram.

Got it helpful. And then maybe one follow up for Ferrari on the PSR revenues in the quarter, obviously, GMP volumes up significantly driving probably better payments.

Yes, Hey, Scott I mean, as you know majority of our PSR today is driven by.

Sure that we get from payments we have.

Put partnerships in place across the ecosystem really over the last 12 to 18 months that we're starting to monetize on quarter over quarter and I think the same rules apply it's just payments is just.

More mature.

In kind of our business.

But thats not to say that are.

Share of wallet or our ability to monetize.

Even further beyond payments were excited about that opportunity going forward.

Great helpful. Congrats guys. Thanks, Thanks, Scott I appreciate it.

Thank you. Our next question comes on the line of Ryan Peterson from Raymond James Your line is now open.

Hi, gentlemen, congrats on the IPO the strong results. So I wanted to follow up on one of the Pges questions but.

Theres still a large president of some of these legacy platforms out there I think the value of commerce versus those which is well documented but I'm curious on the pace of migrations that you've seen so far during that pandemic and if theres any change in the shared owners that are migrating onto the platform.

Yeah.

Again, it's my perception that.

Migrations during the pandemic has actually slowed a little debt.

Relative to.

Companies, who are doing net new sites.

For new brands, new geographies, new use cases.

As a migration is harder to pull off.

In the midst of a pandemic when your employees can all get together and when your online channel, which may not have then your primary channel free pandemic becomes your primary channel it's out much riskier to undergo a migration now. This is just perception I don't have statistics on the pace of migration.

But inevitably as you can see just on built with or more than 500 platforms around the world. Most of them are quite old and not investing to stay up to speed and stay competitive and current.

And so it's a giant part of the market that's still on those platforms and may well be looking to upgrade modernized in the months in years ahead.

Got it that's great color and maybe just on B to B I think a lot of us or who the b to C pick up in the pandemic is well understood.

I'm curious on the B to B evolution has the pandemic really accelerated that migration and maybe what do you see is that kind of one to two key large catalyst to kind of facilitate that thank you.

Yes, I think it has accelerated b to B I think one of the statistics or surveys we shared in our house. One was that there was a surface several hundred.

The sellers done recently and half of them said that day.

We're not selling at all on line and in the middle enhance as offline sales for many companies get shut down or hindered the option.

Not to sell online.

They've had to scramble. So my team would say a higher percentage now, especially at horizon sales that we had been doing.

Down before the pandemic.

Dan B to B sales.

Thank you. Our next question comes from the line of Terry Tillman procure with Securities. Your line is now open.

Hey, guys. This is actually going for Terry this is going to question.

I think especially with a little bit in this growth, but in terms of product development can you talk about the importance of page builder and how does resonate with customers so far.

Then just as a follow up can you just an update on the payments STK you guys are working on how you expect that to impact the business overall thanks.

Sure page builder is our.

Drag and drop Interactives.

Capability for page design team design theme editing it introduces a much more whizzy when type experience.

For ease of use but also for powerful incorporation of widgets widgets can power a recommendation engine promotions engine.

Just a drag and drop incorporate into a page we rolled that out in beta to new stores, starting at the very beginning of Q2.

Saw four.

New trial stores, who.

In any way chose to interact with that.

Spectacularly.

Big increase in trial paid conversion now there's.

Overall, I would say filter has done a real success for us.

Our customers and then your second question is around payments that's the thing.

So if the SDK does.

[music].

Can you guys around payments as allow third party payment providers or a system integrator operating on their behalf actually integrate.

Third party payment solution.

Rather than putting the burden always asta integrates into that.

Once they are done doing that we've done certify that code take it in and manage the PCIA.

Compliance so phase one.

The payments STK is for claims I know a credit card processing, it's not like we have beta partners, who are transacting and processing transactions on behalf of merchants the big benefit for US long term is it makes it a lot more easy and scalable for us to take on new country.

Or region specific payment providers all around the world. It's if we had to do every integration and maintain every integration ourselves.

The world the big place under a lot of providers, we have hard time, covering everything just makes that scalable and I think as a result of that in the quarters ahead, it will be a catalyst to.

Our growth in new countries new regions.

Got it Thats really helpful. Thanks, guys.

Thanks.

Thank you at this time I'm showing no further questions I would like to turn the call back over to Brent Belem, President CEO and chairman for closing remarks.

Ladies and gentlemen, this concludes today's conference call. Thanks for participating you may now disconnect.

Q2 2020 Bigcommerce Holdings, Inc. Earnings Call

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