Q2 2021 Bigcommerce Holdings Inc Earnings Call
[music].
Ladies and gentlemen, thank you for standing by and welcome to Big Commerce's second quarter 2021 earnings call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
Please be advised that today's conference is being recorded.
I would now like to turn the conference over to your first speaker today, Daniel Lynch head of Investor Relations. Thank you. Please go ahead.
Good afternoon, and welcome to the Big Commerce second quarter 2021 earnings call, we will be discussing the results announced on our press release issued after today's market close with me are big Commerce as President and CEO.
And chairman, Brent Berlin, 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 $19.95.
Forward looking statements include statements concerning financial and business trends, our expected future business and financial performance and financial condition and our guidance for the third quarter of 2021, and the full year 2021 day.
On our third quarter in 2021 full year guidance.
Let's begin with a brief recap of our queue to financial results momentum across our business segments continues to gain speed. We saw strong revenue growth in the second quarter, increasing to $49 million up 35% year over year and it represents the sixth consecutive quarter of 30% or higher revenue growth are partners in team.
Across all geographies are doing a tremendous job executing on our strategy. So I want to start by thanking them for their continued commitment and all their efforts.
The underlying trends in our key metrics also continue to strengthen starting with IRR, our annual revenue run rate, which grew to $209.3 million up 38% from a year ago. We continue to see strong momentum and our target market of established and growing businesses are enterprise accounts are are was 120.
$2.7 million, which was up 54% year over year.
<unk> for accounts greater than $2000 in annual contract value per HCV finished at $177.2 million up 46% year over year.
International expansion, BTB headlights, and expanding our partner on services revenue opportunities. It's clear this acquisition fits well within our core strategic pillars.
The ecommerce has demonstrated its ability to drive strong and durable revenue growth rates, while generating leverage with a disciplined approach to capital allocation.
As I mentioned on our IR call last week, our market continues to get bigger and there are many opportunities for us to invest in our business, both organically or inorganically through targeted M&A.
We will continue to make smart investments that accelerate our strategic initiatives and deliver outsized value to our merchants and partners over the long term.
Now I'll move on to discussing new customers that launched exciting sites on our platform in Q2, we had several premier brands joining big Commerce.
Well known fashion brand Peter Christian recently moved from a legacy platform to Big Commerce to launch 2 international storefronts that leveraged our react custom product Butler with us the merchant can combine many products into a single product detail page, creating a better customer experience qual.
Quality Marine which offers 1 of the widest and highest quality selections of Aqua culture, and sustainably caught marine fish and invertebrates upgraded from a custom built solution to launch a website on big Commerce that enables both <unk> and <unk> functionality.
Through its work with Big Commerce in an agency partner quality Marine is able to showcase multiple brand sites single Commerce instance.
Industry, leading manufacturer and distributor main tax migrated to big Commerce in order to take advantage of bundled <unk> functionality, which is available exclusively on our platform AAM touchdown on supply also chose big commerce for our <unk> capabilities and leverage the recently launched <unk> addition to support its complexities around cost tracking.
Customer groups and pricing on products. Additionally, the brand needed a platform that could support mobile responsiveness and offered a tight integration with its ERP.
Cardio equipment production manufacturing brand with more than 75 stores nationwide launch the first headless storefront on big Commerce using site Cindy as at CMS. The company was drawn to Big Commerce is open source mentality on flexibility and felt that it's open Apis allow them to connect all the pieces of their overall solution together.
Parent company care low Hot launched its second sight on Big Commerce color changing product company dealt so after successful launch of its flagship site <unk> dot com last quarter.
The ecommerce also expanded and added many key partnerships for which we are very excited.
On the channel, we announced a partnership agreement with Amazon launching a native integration with Amazon multi channel fulfillment or Mcf. This partnership will give us merchants natively built on big commerce and easier way to fulfill their ecommerce orders using amazon's warehousing in order fulfillment platform.
Merchant can utilize the service whether they sell on Amazon are not improving their fulfillment logistics and customer experience.
Near the beginning of Q3, we announced a partnership with Mercado Libre that will allow big commerce merchants to access the largest Latin American marketplace through our channel manager, who will allow merchants to quickly start selling throughout the region managing for them the complications of currency conversion and language translation.
Our partnership with Commonwealth Bank of Australia will provide the banks' business customers the ability to grow their online businesses, leveraging big Commerce platform and Cba's comprehensive financial services.
We launched our new <unk> edition, which is already seeing strong traction the BW edition packages many of the capabilities most popular among <unk> sellers, including corporate account management invoicing sales rep, quoting and masquerading manage logins and share shopping list the service facilitates channel expansion a.
<unk> and <unk> selling on a single platform and the extension of <unk> like experiences for <unk> buyers.
Finally, with our data analytics suite, we launched big open data solutions. The tool that gives merchants extreme flexibility and control in the management of their data in conjunction with Google Big query data warehouse. The ecommerce merchants can centralize all data into a single location for analytical insights the solution works across <unk>.
<unk> intelligence and data platforms.
We believe our merchants data is their data and we will continue to implement ways for them to leverage that data to manage and grow their businesses better on big commerce than on any other platform.
Looking to the balance of 2021, we're excited about our prospects for continued merchant acquisition product enhancements partnership introductions and geographic expansion.
We believe our open sales strategy is differentiated and valued by businesses globally, and we will continue to make bold bets on the strategic priorities that we've consistently articulated I will now turn the call over to Robert to talk about our financial results.
Thanks, Brent and thanks, everyone for joining our call today today I'll review, our second quarter financial results and provide an update to our third quarter and full year 2021 guidance I'm really proud of our team for another great quarter across all fronts, and we remain confident in delivering our full year outlook for.
They are for accounts with greater than $2000 in annual contract value or ACB grew 46% to $177.2 million and.
Price account <unk> grew 54% year over year to 122.7 million in queue to an enterprise accounts represented 59% of our <unk> as of June 30, compared to 53% last year.
These results demonstrate that are flexible opens as platform and best of breed strategy is resonating with our target market of established and growing businesses in the us on abroad.
We're now seeing investments on our platform flowing through to our financial results are expansion on the enterprise space is still in the early days in many ways.
Over the past year, the new opportunities and partnerships. We have formed have given us a solid foothold in a market that was historically dominated by legacy on premise E. Commerce platforms, we're not only competing but we're winning large enterprise accounts at a healthy clip across all the geography's we serve share.
<unk> to the total number of accounts with ACB greater than $2000 at the end of Q2, we had 10986 customers over the $2000 threshold.
An increase of approximately 1600 accounts or 17% year over year.
Or go to market teams are making steady progress and taking consistent market share within the mid market enterprise segments.
As of the end of Q2 accounts with ACB greater than $2000 made up 85% of our total AOR. That's a nearly 5 point increase over last year.
Now I'll move on to ARPA or average revenue per account in general. We think this provides an overview of our customer mix and growth trajectory.
<unk> for accounts with ACB greater than $2000 for Q2 was $16133 up 25% year over year, we saw a strong mix of mid market enterprise accounts, coupled with healthy growth and PSVR driving this number.
Moving on to the remainder of the income statement. Please note that unless otherwise noted all references to our expenses operating results and share count on a non-GAAP basis.
I'm on some into 2022.
We are ramping up investment in a number of key areas in our business and our hiring aggressively towards that end, we saw higher than expected operating leverage in queue to partially as a result of the timing of planned hires mostly in non revenue generating roles. We.
We may see some temporarily improved operating leverage in the back half of the year, depending upon progress against or aggressive hiring plans. However, our investment plans remain unchanged and we are committed to ramping up the resources necessary to fuel our top line growth and strategic initiatives.
For the quarter General and administrative expenses were 10, 4 million or 21% of revenue compared to $7.3 million or 20% of revenue a year ago.
In Q2, we posted on adjusted non-GAAP operating loss of negative for $2 million or a negative 9% operating margin compared to a negative 6.2 million or negative 17% operating margin in Q2.2020.
That EBITDA was negative $3.5 million or a negative 7% adjusted EBITDA margin on 8 point improvement from a negative 15% adjusted EBITDA margin a year ago. This leverage was driven by a combination of strong top line growth and slight delays and the timing of plant hires as we have increased investments throughout the business.
Non-GAAP net loss for Q2 was negative for $2 million or negative 6 cents per share compared to a net loss of negative $7.3 million or negative 38 cents per share year ago.
We ended Q2 with $203 million in cash cash equivalents and marketable securities for the 6 months ended June 32021, operating cash flow was negative 17.4 million essentially flat over the same period, a year ago free cash flow was negative $19 million or a negative 38% free cash flow margin compare.
To a negative $18 million in a negative 50% free cash flow margin over the same period a year ago.
As we hit our 1 year anniversary as a public company, our commitment to enhancing our platform and merchant experience remains our focus we've demonstrated our steadfast approach to delivering innovative tools and our conviction in building the best open SaaS platform and the market has never been greater.
Defeat in Omics acquisition accelerates, a strategic vision and serves as a complimentary addition to the big Commerce offering.
We remain committed to moving the business towards profitability in 2022, However, we may adjust.
Are anticipated timeline based on smart strategic and go to market investment opportunities that present themselves. We will have more details to share on this and future quarters as we further develop our plans for 2022 now.
Now, let's shifted discussing guidance for Q3 and for the full year of 2021.
The results in the first half of the year show our ability to deliver consistent growth.
The durability of R E Commerce platform and the strength of our partnerships were encouraged by the momentum we're witnessing in our underlying business, we're optimistic going into the second half of 2021, but we will continue to take a moderate approach to consumer spending expectations in the back half of the year as we continue to monitor the impact of the Covid ninth.
<unk> pandemic on e-commerce trends.
A meaningful shift in the broader macroeconomic environment and e-commerce spending could cause us to modify your guidance higher or lower and we will continue to provide our best view of these trends in future earnings calls.
For the third quarter of fiscal 2021, we expect total revenue in the range of $54.5 million to 55 million translating into a year over year growth rate of 37% to 38%.
This guidance range includes our early estimates of feet on Amex's revenue contribution.
Without raising any outside capital defeat in Omics team has built a very impressive business with healthy growth rate similar to big Commerce.
And we expect that business to deliver $11 million or more in revenue for the remainder of the year post closing we.
We believe there are strong future revenue synergies between big Commerce and feed on Omics. So we plan to invest accordingly to continue to grow this business together over the long term.
This guidance also includes a negotiated 1 time revenue share increase on an existing payments agreement from the inception of the contract to date, which we expect to generate an incremental $1 million and partner in services revenue in Q3.
4 Q3 are non-GAAP operating losses expected to be $9.5 million to $10.5 million as we ramp up our hiring and make planned investments to fuel the synergies and cross sell opportunities with feet and omics.
For the full year of 2021, we currently expect total revenue between $210.7.
The $211.7 million translating into a year over year growth rate of 38% to 39%.
Are non-GAAP operating losses expected to be between $33 million and $32.3 million, which includes our plan near term investments and phenomics as well.
Given our overperformance here to date.
We are able to make these investments and still stay within our prior guidance for the full year.
We're committed to long term growth and profitability, even if that means some tweaking to our near term plans as opportunities present themselves are market continues to get bigger and the underlying trends in our business continue to get better as we enter our fourth consecutive year of accelerated revenue growth.
We think the fundamental backdrop of E. Commerce platform is excellent and e-commerce trends as a percentage of total retail continue to grow at an accelerated rate.
We believe the rapid movement towards e-commerce positions as well to capitalize on opportunities to expand our Tam and extend our reach within the segments of the market, we serve best today and in the future.
Would that Britain I are happy to take any of your questions operator.
If you'd like to ask a question at this time. Please press the star and the number 1 key on your on Touchtone telephone.
To withdraw your question price the pound key.
Our first question comes from Terry Tilman with truest.
Hey, everyone. Good afternoon, congrats on the results on the corner of the enterprise traction on the.
The partnerships on the international Brent I think we could do like a whole analysts. They on just partnerships I mean that was a lot to have to go through.
But it was all good stuff.
My first.
My first question in Britain for Ya relates to we've gotten a lot of questions on Amazon and Mercado Libre.
How do we think about the timing of the benefit there are those revenue share programs. Just can you shed some more light on how this could positively affect the model aside from just making you more competitive with your open south strategy.
Hey, Terry.
So we don't disclose obviously details.
Around specific.
Partner agreements on contracts some will in ball.
Share some will not involve Rev share I would say for those 2 specific opportunities. They are both extremely exciting for us on our ecosystem in the Amazon case, the new announcement was integration into Amazon.
Fulfillment systems, specifically for merchants doing fulfillment of Amazon for example from their website and so that direct integration in the Amazon.
Is leading merchants choose to take advantage of.
What is clearly 1 of the best fulfillment networks in terms of speed.
Warehousing capability and.
In the United States, that's the new news with Amazon and then Mercado Libra is exciting because yes.
For shadowing of our excitement and interest in serving the Latin American region and in particular this is now helping to open up sales in Latin America, primarily to our customers that are today in North America, but we of course have aspirations on serving sites.
Latin America, serving Latin American consumers as well, but very exciting news with Mercado Libra.
Okay. Thanks for that.
I guess, maybe you did mentioned in your prepared remarks increased monitored monetization on the <unk> side. I think you did just also mentioned a new kind of updated rough share that impacts the third quarter positively by $1 million, but I would love to hear a little bit more by you know kind of what you mean by increased monetization and then how do we think about fee dynamics in terms of battle on.
On the million across per year <unk>. Thank you.
Yes, Harry we actually added a slide in the Investor presentation on kind of our current views of our addressable market overtime. The previous version really just focused on e-commerce platform spending.
Now we've added kind of our views on how we kind of layer in the components the major components of <unk>.
Card number of social commerce channels.
And it's it's becoming a more important factor that's contributing set your head to head wind rates against income minutes, and then I just have 1 follow up.
All brought on the question beyond just social channels, but to include everything that the dynamics dresses, which is advertising channels now the biggest ones are search engine marketing channels like Google Microsoft ads.
Social channels would of course be Facebook Instagram Snapchat affiliate channel display AD anytime, there's a product C going into the actual paid advertisements they covered that and also marketplace channels Amazon ebay at sea Walmart wish etcetera collectively.
<unk>.
This represents almost 50 per cent of U S. E Commerce, we shared in the press release around see dynamics that and that's enough for 34% on.
U S e-commerce sales are marketplace sellers on marketplaces, and then more than 20 per cent of our own customer sales on their branded websites are from digital advertising as the last question. So you can combine those you get the almost 50 per cent and what's so.
Compelling and powerful about Vietnam. It is that it is both the best and our opinion teed management solution out there in terms of getting your data from your branded website or E. R P or him into these various channels and enhancing it based on the schema.
On the criteria by which then your advertising or your listings will perform best.
It's also the most broad based in so you can start with 1 channel like Google or 1 channel like Amazon and expand pretty easily to many others all from a single solution.
So consequently, we view this as probably the single thing that we could do in the world that would be most effective at helping our customers maximize third party demand generation and third party sales you know basically buying the best feed management tool in the world and putting that out there just.
Suppose on so I think the you know the impact on potential sales for our customers is enormous and we're really excited to continue to build the feet and Omics business Bowl for our customers EM all the ones you use it.
Great. Thank you and then 1 last 1 from US have there been any P. S are categories. This year surpassed your expectations. So far and then more broadly as we see some potential for longer disruption from the pandemic on there.
There any services that you anticipate will resonate most with customers a day in best in their digital Commerce strategy. Thank you.
Yeah, I'd say payments.
For sure has exceeded our expectations on.
<unk>, obviously as we start to see the early traction and volume generated by our channel partners in again the orders they are driving for our merchants those probably would be the top too.
Over time, as we build out our capabilities as we've talked about in the past building our own kind of version of our Apple App store, we feel like there's a lot of monetization opportunities from the apps and our app marketplace and.
And then beyond that I'd, I'd say, probably shipping would be next in terms of our ability to <unk>.
Expand some of our take right through Rev share from shipping.
Our next question comes from Josh back with Keybanc.
Thank you for for taking the the question and all the great contacts there.
Did ask about the cohort chart. So if I if I look at the last few years that new cohort size is certainly.
Increased.
Certainly last year there there are a lot of factors at play so maybe without getting too specific just how do you think about the prospects for larger note new cohorts and in the years ahead.
Yeah, Hey, J B, yes that is a function of the size of merchants, we've been signing up as well as the PSVR revenue that we attach from the larger volumes from them, we've done a great job on.
On the gross retention side as well as on the net revenue retention site you saw improvements year over year last year those.
Improvements are continuing so the improvements in or are we feel like are becoming more and more durable as we <unk>.
Expand that mixed more enterprise, we've got now 59% a R. R. R.
That's enterprise plans.
85%, it's tied to accounts greater than 2 K N. As we've talked about a lot I mean, all of those merchants for us have really strong it in economics and so as those cohorts mature those are the cohorts that are going to.
Benefit from a lot of the investments that we're making when you think about feet and Omics. We're doing that so that we can drive orders from our merchants and they're the ones that over time, we think are going to really benefit from these investments in the NR picture should should.
Evolve.
Even better as as we bring on bigger and bigger merchants.
[noise] very hopeful and then maybe just to follow up on the buy now pay later space obviously, but.
Very great.
Light show on deployment. This week, so I'm just curious maybe what.
Have the.
Customer interest Ben and Bye now pay later.
Just conceptually.
The economic arrangements similar to other payment partners that you have.
I'll take that.
We're really bullish on the role buy now pay later plays in retail because it <unk>.
Creates.
Incremental spending power for consumers that they didn't have from their existing.
Credit card lines or bank balance is.
If you just look back in the history of retail before e-commerce and the day.
Dominated by the discount stores the department stores furniture stores. They all had major private label credit programs that delivered bolt incremental credit to consumers and incremental marketing offers and incentives to buy like 6 months no interest type stuff, so the internet with flow to.
To introduce its own versions of that so it wasn't really until Bill me later around 2008 that it started to be introduced in the U S. And then the last 5 years or spend an explosion.
We announced a partnership which sounds low which we're really excited about we have existing integration in the U S and to Paypal pay later affirm Clark car as a leader in Europe down in Australia, you've got after pay and ZIP and other 1.
As a <unk>.
Company, who really believes and openness and choice and letting businesses optimized for what since then best we believe in.
Integrating with serving all of these methods and negotiating the best partnerships that we can on behalf of our merchants and our ecosystem. So.
They'll keep being change they'll keep being innovation in this area because when you do deliver incremental credit to consumers. They move forward their purchasing power and they buy more that's that's in the interest of everybody involved.
Great. Thanks, Brett.
Thanks.
Our next question comes from Tom Roderick with Stifel.
Yeah, Hi, Brent Harris. Thanks for taking my question is great to hear from you guys nice job on the quarter 1 of the things we've gotten some questions on it just the the the nature of the fulfillment marketing and ultimately.
How that sort of seamlessly wines itself into an omnichannel strategy of course ecommerce being part of that we'd love to hear your take on on how that segment of the ultimately the supply chain is evolving integrating with you're offering and if there's a role for for big commerce on the fulfillment.