Q4 2021 Bigcommerce Holdings Inc Earnings Call
Ladies and gentlemen picked were standing by and welcome to the Big Commerce Fourthquarter in fiscal year 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.
Your first speaker, Daniel then head of Investor Relations. Thank you. Please go ahead.
Good afternoon, and welcome to Big Commerce, This fourth quarter in fiscal year 2021 earnings call.
We will be discussing the results in our in our press release issued after today's market close.
With me are big Commerce, as President C E O and chairman, Brent balanced 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 first quarter of 20th.
22, and the full year of 2022.
These statements can be identified by words, such as expect anticipate intend plan believed seek will or similar words. These statements reflect our views as of today only and should not be relied upon as representing our views at any subsequent date and we do not undertake any duty to update these statements forward.
[noise] 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 another disclosures contained in our filings with the Securities and Exchange Commission.
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. Another matrix is included in our earnings press release, which has been furnished to the S. E C.
Is also available on our website at investors Dot Big Commerce Dot com with that let me turn the call over to Brent.
Thanks, Daniel and everyone who's joining us today for our fourth quarter and fiscal year 2021 earnings call. It.
It wasn't exciting your for our team and I'm proud of the incredible progress we've made sense R. I P O in the middle of 2020.
On today's call I will provide updates to our strategic plan, new one current priority and recap are notable achievements over the past year.
I want to frame our progress against our key priorities N y R. A and I are so bullish about the investments we're making in this business.
I'll begin to call with a brief review of Q4 at our 2021 full year results.
Overall, we had another outstanding quarter and year revenue increased at $64.9 million up 50% year over year, including $8.4 million from feeding Omics full.
Full year 2021 revenue grew to $219.9 million up 44% year over year. This represents the fourth consecutive year of accelerating revenue and subscription growth rates.
Annual revenue run rate or a R. R rose to $268.7 million up 48% you're over here.
Are are for accounts with annual contract value or a C V greater than $2000 was up 59% year over year to $237.2 million.
Our enterprise segment in particular posted exceptional growth.
There are from enterprise accounts grew by 72% year over year to $172.9 million and enterprise accounts.
Accounted for 64% of our a R. R as of December 31st compared to 56% in 2020.
We posted a full year non-GAAP operating loss of $22.8 million, which was an improvement of nearly 800 basis points and non-GAAP operating margin versus 2020.
I would like to highlight our financial progress over the last year.
We initially guided to full year revenue of $189 million to $191 million against the non-GAAP operating loss of negative $34 five to negative $33.3 million in 2021.
We finished the year at $219.9 million against the non-GAAP operating loss of negative $22.8 million far outperforming our original expectations for both top line growth and full year operating leverage.
On an organic basis revenue finished at nearly $206 million, surpassing our original guidance by over 8%.
To help guide you through how I view, our current progress as a company I want to discuss three specific areas in our business. The pillars of our company strategy, one of which is new that I will introduce today, how we are working to expand our monetization model in a manner congruent with those strategic pillars and.
And our progress against each strategic priority.
We speak often with investors and partners about our first two strategic pillars open staff and disruptive innovation.
Are differentiated open SaaS technology approach combines the flexibility and customization potential of open source software with the performance security usability and value benefits of Multitenant SaaS. This.
This combination helps businesses term digital transformation into competitive advantage, whereas our software conglomerate competitors attempt to lock customers and their proprietary suites, we focus on the configurability and flexibility of our open platform, enabling each business to optimize their e-commerce approach based on there.
Specific needs.
Our next strategic pillar disruptive innovation does the business strategy to extend upmarket propelled by an ever higher performing product at a lower total cost of ownership then established incumbents.
Our R&D efforts build innovative technology that enables high and merchants to expand faster and further at a much lower cost while also providing enterprise functionality to the small business base that allows them to grow big without ever having to re platform.
Today, I would like to introduce our third and newest strategic pillar commerce as a service.
Commerce is a service is an umbrella term we use to describe our ability to enable technology and agency partners to create and sell customized commerce solutions powered by our platform technology.
Commerce is a service encompasses many different use cases and demonstrates the compose ability and configurability of our platform not just for merchants, but also for partners, who can package and distribute commerce platform capabilities and unique ways and.
In commerce as a service either the core commerce platform or integrated components of commerce capabilities are powered by Big Commerce.
In short Commerce as a service enables partner driven commerce anywhere.
There are a wide range of commerce as a service partnerships already and market and and development I'll highlight a few that have been publicly announced our partnership with wine direct as an example of tailoring commerce to a category vertical in this case wineries served by wind direct with commerce powered by Big Commerce.
Our partnership with New acts status is an example of integrating commerce powered by big Commerce into the leading European fulfillment and service capabilities.
Of the CMA CGM group of.
A third example is how partners such as unbound commerce, and the U S and J mango in Europe create commerce enabled mobile apps powered by Big Commerce.
Commerce is a service has grown organically thanks to pull from our partners as they have sought to use our open SaaS platform to complement and enhance their existing applications or services or to modernise and replace their legacy commerce offerings. We believe this approach is unique to big Commerce as an open SaaS platform as we have.
Often said, we aimed to empower our ecosystem not compete with it with commerce as a service partners can leverage the dedicated investment we've made in building the world's best Open E Commerce platform and couple that with their unique use cases and competitive offerings without concern that we would vertically integrate and compete.
Outside of our core e-commerce platform functionality.
We are incredibly excited about the growth this offers to our merchants and partners.
Now that we've covered our three strategic pillars I'd like to address our efforts to expand our monetization model and ways congruent with those pillars.
In 2021, we added M&A to our Arsenal of growth lovers Phenomics, our first acquisition as a public company provided big commerce globally, leading capabilities for generating demand and selling through the world's leading advertising social network and marketplace channels. So far fee dynamics has been a home run for our company custom.
<unk> and partners.
Today, we'd like to share a major new lever for driving company growth and that is cross selling upsell enabled by automated billing capabilities that we will release later this year.
The first class of products enabled for cross selling up cell will be products and features owned by Big Commerce. Examples include multi storefront channel extensions enabled by feet and Omics and Ah recently announced acquisition of the leading be to be quoting application BTB Ninja the.
The second class of products that can be upsold and krossel our product licensed from partners.
Third and largest class of products for cross selling upsell or third party applications and our app marketplace by utilizing the billing product and Api's currently under development. We will enable these products to be easily added to a single consolidated monthly, but commerce, bill, thereby easing the promotion and adoption of valuable products and features that propel.
Our customers growth.
With this cross selling up sell the commerce will learn direct revenue from our owned and licensed product sales and partner revenue share from third party applications, thereby growing our aggregate revenue and net revenue retention or <unk>.
Historically, our NR has been fueled primarily by customer order count and GMB growth, which leads to subscription growth adjustments.
And secondly revenue share from technology partner agreements.
Enter our for accounts with greater than $2000 in ACB was 116% in 2021 up from 113% in 2020.
We now plan to add overtime, a wide range of cross sell an up sell products that improve enter our while fueling the growth and success of our merchants an ecosystem partners. We believe cross selling up cell can further sustain and grow and are are which leads to higher total revenue and LTV to cap across all of the customers we acquire.
Now that we've talked about our strategic pillars and improvements to our monetization model I would like to recap our five strategic growth priorities the.
The first priority is enterprise and specifically, becoming the world's best open Saf platform, serving the world's mid market in large enterprise businesses.
The second priority is international expansion building.
Building on our expansion in Continental Europe in 2021 in January of this year, we formally launched in Latin America, specifically, Mexico, Germany and Spain.
Later this year, we plan to formally launch in the Nordics in South America and expand further in the dark region.
Our third priority is omnichannel.
We aimed to be the world's best platform for Omnichannel advertising and selling as I mentioned earlier or acquisition to feed enormous bolstered this priority and we are investing in a number of exciting new offerings as a result, including the build out of the self serve feet and omics product for big Commerce merchants and feed enormous for all which enables digital advertisers.
Social commerce channels and market places too and just transform and optimize listing data from any e-commerce platform.
T dynamic there are finished about $35 million in 2021 and grew over 50% the past year, we couldn't be more excited about the future of feet and omics business and the exceptional team members leading it.
The Big Commerce platform is renowned for its B C capabilities and our fourth priority BTB extends our capabilities to be to be in hybrid <unk> to be sellers. We formally launch be addition in June 2021, resulting in strong ratings and BTB platform evaluations by paradigm and software reviews dot com or <unk>.
Acquisition of BTB Ninja brings in house, the most popular Big Commerce me to be quoting application with expanded native b functionality and a strong ecosystem of integrated partner applications that commerce is positioned for growth as a leading SaaS be platform.
Finally, our fifth strategic priority is headless commerce, which refers to the experienced driven technology approach of decoupling front end architecture from the back end Commerce engine are open SaaS platform is highly customizable and composable, while providing out of the box features and functionality that make big commerce simpler to implement.
And operate in a headless or Composable commerce approach.
Switching now to customer updates over the past year, we've added a number of brands with regional and global prominence.
In the coming days, we will launch a new custom tailored online store for Ted Baker at UK based global apparel brand.
Using our multi storefront in headless capabilities, Ted Baker managers are global online presence from a single store to power 12 regional storefront that are fully localized enabling the luxury fashion brand to meet the needs of its standing customer base, while offering a modern and frictionless customer experience tailored to the needs of each market.
Shoppers will have the flexibility to shop in the preferred language, including English French German and Spanish. Additionally, purchases can be made using consumers preferred currencies, including pounds dollars and euros.
Leveraging are open source platform agency partner Wunderman Thompson Commerce seamlessly integrated Bloom reach its content management and search and merchandising solutions into the Ted Baker store to create better shopping experiences.
Additional merchants recently launched on Big Commerce include Draper tools, one of the largest wholesale hardware stores in the UK.
Derma visuals, and Australia, and skincare company, the Nagi in Italy, based wine and spirits company J Parker's UK based mail order horticultural supplier of bulbs plants and shrubs and.
And a personal favorite King Arthur Baking company best known for its flower King Arthur migrated to big Commerce to improve maintenance efficiency speed. The introduction of new features and optimize the end user experience for stronger engagement and improved shopper conversion.
We continue to work hard to show all our customers how much. We appreciate them last week, we received some nice recognition that the feeling is mutual when we were honored with a 2022. Most loved award from trust radius. The Commerce was one of just 101 winters out of over 25000 products considered and we were the only e-commerce platform.
On the list.
Shifting to the new product launches, we bolstered our omnichannel offering with several partnership integrations I'll give two examples and.
In partnership with Google, We launched Google ads and listings to help our merchants in the U S connect their stores to the Google Merchant Center and add products for free.
The new products allow merchants to seamlessly lists their products for free across Google shopping search and images directly from their big Commerce control panel. This service enables merchants to improve the efficiency of their advertising spend via smart shopping campaigns.
We launched and incentivize Tech talk advertising coupon program to invest in and help our merchant succeed on tech talk for business <unk>.
<unk> continues to attract a large audience and is an increasingly important channel for merchants to reach new customers and grow their businesses.
In partnership with charged by Commerce, and a Bcl, we announced the new integration, providing R. B B N B C merchants with a comprehensive solution to manage track and analyze subscription activity and one centralized location.
We also announced the direct integration with digital River that provides an all in one solution that fully managers payments tax fraud, and compliance to simplify cross border selling and accelerate global expansion as a result merchants can easily deploy entry into new markets and as little as six weeks simplified.
Cross border selling processes and decrease operational costs by up to 30%.
As we sided on our last call. We are very excited about the release of native multi storefront capabilities to big Commerce merchants, which we expect to be generally available by the end of Q1, we expect this to be a transformational step forward and our enterprise product offering. We are also investing in multilocation inventory capabilities and.
<unk>, our commerce as a service offering and exploring ways to expand crypto and NFC related capabilities on our platform.
I'd like to close with why I believe we are at an inflection point in our business reinforcing my conviction and confidence in investing for growth.
I believe that our market our business and our team can deliver durable growth for years to come if we invest boldly to do so the time is ripe our product is ready and the unit economic support smart investment to accelerate initiatives that are clearly working.
While we recognize that these investment plans come with the short term decline in margins were convinced that this is the right long term decision for our business and most importantly, our merchants an ecosystem partners.
2020, and 2021 demonstrated our ability to drive significant leverage in our business and we are confident that we can replicate leverage gains against the larger revenue base. After making these investments. Most importantly, we are investing to win in the years ahead, we want to be the world's most innovative e-commerce platform one that through.
<unk> globally serves merchants small medium and large enables omnichannel demand generation and selling better than any platform on earth.
<unk> as well as B C and powers, the world's best Headless and Composable user experiences.
We are bullish about the strategy and growth prospects for Big Commerce, and I'm fired up for 2022, and the E. Commerce leadership. It enables with that I'll pass it over to our right to discuss the results in more detail and provide additional color on our investments and guidance for 2022.
Thanks, Brent and thank you everyone for joining us today I'll walk you through our fourth quarter in 2021 fiscal year results and address are planned growth investments and associated 20 twenty-two outlook. Please.
Please note that all amounts include the results in activity from feet and Omics and a reported on a consolidated basis.
Want to get a very heartfelt shut out to the big Commerce team for another great quarter and outstanding 2021.
We're very well capitalized and positioned to invest across our platform and the U S and abroad setting.
Setting us up for further expansion and durable growth in the years ahead.
Well, we know the global Macroeconomy will face periodic cyclical uncertainty.
We are leading and will continue to lead this business with a long term focus on growth and sustainable structural economics.
We are focused on building, an ecommerce business capable of helping all of our customers.
Their potential and transforming merchant success across the world.
Two four and 2021 advanced our business and product offerings towards that goal and we will continue to lean in and make smart investments and initiatives that are clearly working.
In queue for total revenue was 64.9 million.
50% year over year, including eight 4 million of revenue contributed by Phenomics.
Subscription revenue grew 58% year over year, driven by continued growth in our enterprise business partner and services revenue or PSVR was up 34% year over year.
For the full year 2021 revenue finished at $219 $9 million up 44% versus strong growth in 2020.
This marked our fourth consecutive year of accelerating revenue growth.
Subscription revenue and <unk> were up 49% and 33% respectively year over year.
Subscription revenue posted a fourth consecutive year of accelerated growth on our organic basis as well.
America's revenue was up 49% in two four and up 41% for the full year come.
Combined international revenue grew by 57% in Q4 and 59% for 2021.
Immediate revenue was up 60% in Q4 and 68% for 2021 APAC revenue was up 54% in Q4 and 52% in 2021.
Our international footprint has grown significantly since our IPO and we are confident this revenue growth trajectory of sustainable if we continue our pace of investment and international expansion in the coming quarters, We recently announced our market entry in Germany, Spain, and Mexico. This builds on our 2021 expansion into France, Italy and.
The Netherlands as Brett mentioned, we are also planning launches into South America Nordics, an additional dark countries later into 2022 and I'll provide more color on the associated investment's needed to fuel that growth later in my remarks.
Moving onto our Kpis.
<unk> continued improvement across a broad range of metrics essential to our core business.
Our annual revenue run rate or are grew to $268.7 million up 48% year over year, driven by Fantastic continued enterprise growth and the addition of fee dynamics to the big Commerce portfolio.
Phenomics, our top 35 million up 52% year over year.
As we mentioned on our last earnings call. We will continue to provide commentary on the health and growth of defeat and Omics business beyond this quarter that we do not plan to split out phenomics separately going forward as we more fully integrate our go to market and product development efforts.
Coming back to keep your eye results. We grew a R. R from accounts with $2000 or more in a C V 59% year over year in Q4 to $237.2 million while R. A R. R from enterprise accounts grew by 72% year over year to $172.9 million.
Enterprise accounts accounted for 64% of our air are as of December 31st compared to 56% in 2020.
And we have now averaged nearly 50% quarterly organic growth and enterprise are are across the last two years.
This reflects that continued mix shift in our business towards many of the larger establish businesses for him are open sat strategy, particularly resonates visa.
These up market customers offer strong unit economics high retention rates and ultimately strong and growing net revenue attention as a launch and begin to transact on our platform.
Are open size platform and best of breed approach provides product offerings that are unique.
And we believe provide for a better e-commerce experience, one that's open flexible and dynamic.
Our results show that we can serve the enterprise segment, while also posting healthy gross margins and unit economics.
We're pleased by these results and expect another year of exciting growth ahead.
Shifting the discussion defeat in Omics, we've completed the early phases of our integration and we are working on a number of exciting things, including building self serve version of feet and omics and enhancing our impressive omnichannel capabilities with Phenomics as native data transformation engine.
This opens up opportunities for us to potentially become not only the omnichannel engine for big Commerce merchants, but also for other partners and platforms as well.
Moving to core accounts with the C V greater than $2000 at the end of Q4, we had 12754 customers fall into this category up 2570 accounts or 25% year over year.
The number of accounts with a C V greater than $2000 now makes up 88% of our total a R. A 600 basis points increase from 2020, ARPA or average revenue per account for accounts with a C V greater than $2000 was $18598 up 27.
Percent year over year.
As Brent discussed earlier, our investments in the cross sell and upsell capabilities of owned and partner products.
Are designed to build additional monetization streams that will help our merchants build their businesses and bolster net revenue retention for big Commerce.
As these efforts scale they will provide additional upgrade revenue to offset potential cyclicality in orders or G. M V based pricing adjustments.
Kobe triggered e-commerce volumes have moderated somewhat over the past few months industrywide. So we expect to see comparatively fewer pricing adjustments in 2022 relative to the past couple of years.
We expect this to impact a our growth more in the early part of 2022 and will continue to monitor this and provide updates on future calls.
Our expectations on both 20 twenty-two pricing related growth adjustments and cross selling upsell progress are factored into our 20 twenty-two guidance, which I will discuss at the end of my remarks.
Let's shift our focus to the expense portion of the income statement. Please note that unless otherwise noted all references to our expenses operating results and pressure amounts on a non-GAAP basis.
Gross margin in queue for was down approximately 400 basis points versus Q3 to 76%, while gross profit was $49 $1 million up 47% over the prior year.
Near term reduction and gross margins resulted from higher hosting an international expansion cost additional hiring during Q4 and a full quarter impact of feeding omics is slightly lower margin profile in the results.
As we expand our feet and omics business invest in more localized support and infrastructure.
And continue our makeshift upmarket in the enterprise, we expect some modest margin adjustments with gross margins likely settling in the mid to high seventies overtime.
R Q for sales and marketing expenses totaled 27 $8 million up 49% year over year.
This equates to 43% of revenue essentially fought compared to last year.
In queue for research and development expenses were 18 million or 28% of revenue.
Down from 29% of revenue a year ago.
Q for general and administrative expenses were $14 9 million or 23% of revenue.
From 22% of revenue a year ago. This was driven by additional staffing costs and Sarbanes Oxley compliant spending.
We posted a non-GAAP operating loss of negative $11.6 million or a negative 18% operating margin on the quarter compared to negative $7.6 million or a negative 18% operating margin in Q4 2020.
Adjusted EBITDA was negative 11 million or a negative 17% adjusted EBITDA margin on.
And approximately 120 basis points declined from negative 16% a year ago.
non-GAAP net loss for Q4 was negative 12.1 million or negative 17 cents per share compared to negative 8 million or negative 12 cents per share year ago.
R Q for non-GAAP operating loss fell outside of our guidance range, because we elected to pull in and accelerate specific investments into Q4.
Despite very challenging labor market conditions, we had tremendous success staffing plan rules behind our five strategic initiatives during Q4, and a net increase in headcount was more than double that of Q3.
Consistent with our prior messaging, we will evaluate our investment decisions throw a longterm lens and not constrained the business from quarter to quarter, while preserving our ability to over deliver on our profit guidance. We said at the beginning of the year.
We were in a position to do that in queue for after overdelivering prior three quarters to specifically address critical hiring needs and accelerate funding of international investments they give a strong momentum heading into 2022.
We will continue to seek opportunities to make smart and timely investments to capitalize on top line growth and drive continued momentum.
Shifting to liquidity, we ended Q4 with $401 million in cash cash equivalents restricted cash and marketable securities.
For the 12 months ended December 31st 2021, operating cash flow was negative 43 million down from negative 26.5 million a year ago.
Free cash flow was negative $43.6 million or a negative 20% free cash flow margin compared to a negative $28.5 million in a negative 19% free cash flow margin over the same period a year ago.
Finally, we will close out the call with our guidance for Q1 in fiscal 2022.
For the first quarter, we expect total revenue in the range of 61.9 million to 65.1 million and playing a year over year growth rate of 33% to 40%.
Q1, or non-GAAP operating loss is expected to be $11.5 million to $13.5 million for the full year 2022. We currently expect total revenue between 271.6 million to 283.6 million translating to a year over year growth rate of approximately 24% to 29%.
Are non-GAAP operating loss is expected to be between $45.9 million and $53.9 million.
At this time, we expect our margin profile to gradually improve across the course of the year with queue for representing our highest margin quarter.
We recognize that this is a material increase in investment levels compared to 2021 and I'd like to add some additional color in context around our revenue guidance and these planned spending levels.
On the revenue side, we have base guidance as best as we can based on current macroeconomic spending outlooks and our view of underlying transaction growth coming out of Q4 S.
As such we expect PSVR growth to trail subscription revenue growth during 2022, particularly in Q1, we.
We have high confidence in our plan investments and believe that we can sustain healthy revenue growth rates, even beyond 2022, as we expand our product offerings and geographic reach.
Finally, let's shift our focus to our key initiatives and investments for 2022 and the associated guidance for non-GAAP operating loss.
As Brent highlighted earlier, we view 2022 is a key year for big Commerce as investment plans.
Are strong 4.9 L T V to catch and 116% net revenue retention for accounts with greater than $2000 in a C V.
Give us confidence that we can maintain our level of investment from Q4, 2021 and sustained strong in an economics over the long term.
We finished 2021 with a non-GAAP operating loss of $22.8 million in our 20 twenty-two guidance range reflects an additional $23 million to $31 million in over on that investment.
We expect roughly $10 million to $12 million of that to be spent to support our international expansion initiatives.
We also expect another $10 million to $12 million to be spent across our remaining strategic initiatives and efforts, including commerce as a service as a new strategic pillar.
And our other strategic initiatives focused on enterprise growth headless Omnichannel and B b.
The remainder is primarily driven by higher labor costs offset by underlying operating leverage improvement.
This would put us at a non-GAAP operating loss percentage in the high teens at the midpoint.
From a timing perspective, many of these investments or front end loaded requiring capital in 2022.
With revenue contribution building over time as a result, these investments will shift out our timeline to profitability, but we believe this is the right time to build our leadership position across these critical initiatives.
Finally, I want to applaud all of our employees and sincerely, thank our merchants and partners.
We are incredibly bullish about the growth opportunities for this business and they're excited to execute our 20 twenty-two plans.
With that Brent and I are happy to take any of your questions operator.
Certainly before we go into the question and answer session of today's program I'd like to hand, the program back to Brent Bell him for a few remarks.
Thanks, and before welcoming our first question I'd like to begin with a statement about the situation in Ukraine at.
At noon today I had my monthly meetings scheduled with the leadership of our 105 person team that is based in Keith.
To my and that's really one of our three leaders was able to join line and Debrief me on the safety morale and support needs of the 105 lives we affect commerce care so tremendously about.
Within the last 24 hours, we've heard back from 100 per cent of our employees.
As you can imagine their situations vary tremendously but.
The vast majority of reported back as safe, whether it's still and keep her outside of it.
Several have joined the military and taken up arms in defense of their country.
Several have reported as being in places, where they are not safe whether inside keever outside.
We have been commerce are working around the clock 24, seven to ensure a full support for them no matter what situation there.
We have a whole range of communication infrastructure and activity coordinated to help and our employees have reported back as receiving and appreciating that support.
We will continue to do all in our power to support our Ukrainian employees and.
And we pray for the restoration of peace safety freedom and sovereignty for their people.
If you were a big commerce customer partner employee or Investor.
Please know that you support a company.
That believes wholeheartedly and the talent character and dignity of.
The people of Ukraine.
We are behind them 100 per cent and commit to doing everything that we can to help them get through this time of crisis.
In my conversations with our team members up until just a few days before the invasion began.
To a person or your cranium team members were optimistic and.
An invasion would not happen in.
In their words they.
They said, we're a peaceful nation have done nothing to provoke hostility and can coexist in friendship and extra Russia.
I'm, so sad that wasn't enough and that they are now the victims of the type of aggression, we wish would no longer occur in the modern world.
I Trust that I'll join us a big commerce, and wishing and praying for the return of peace and freedom to the beautiful people of Ukraine.
With that will open up to live questions.
Certainly, ladies and gentlemen, who can I have a question at this time. Please press Star then one if your question has been answered and you'd like to remove yourself from the queue. Please press the pound key we have eight <unk> cute today. So we ask our analysts to please limit yourself to one question. Our first question comes from the line of Gabrielle on Board just from Goldman Sachs. Your question. Please.
Great. Good afternoon, I appreciate all that detail and the prepared remarks.
I want to come back to the commentary on your time investment for long term benefit to the model I imagine that at the time you went public he had a tree a forecast that you have a mafia what got me thinking about your own tunnel.
And so I'd like to understand on the base line. It sounds like you're Opex expectations are higher than maybe what you would have predicted a year ago. A T. M's again. Please correct me if I'm not on that I'm sorry, the questions for for granted Alright, If I may ask how are you thinking about the long term patients can learn you mentioned earlier.
You get a cat is it fair to say that you took your wellness and expectations and undermining now structurally hydrograph margin structurally hierarchy attack structurally logic can help us understand how we can think about returns from the 2022 does that you're making flowing through and benefiting no longer time.
Model.
Yeah, Gabby that's <unk>, that's exactly how we were really kind of framing or investment decisions Ltv's <unk> as a lens that we apply to all of our investments. When you think about international expansion, obviously, those investments or front end loaded, but even across is different initiatives, whether it be to be headless.
Omnichannel, there's some investments that we wanted to make after buying feeding omics that we're really excited about it but really it's really around structured growth lubbers that we think can drive revenue not just in 2022, but in the years. After we believe look this market.
Is is getting bigger the opportunities that we have in front of us are getting bigger than they were a year or two ago. We know the investments that we've made have been working.
And clearly we want a double down on the ones that do so.
Consider these measured investments that may be front end loaded but in our belief we have high conviction that'll drive good growth for us in in in for many years ahead.
I would add to that simply that the investment reflects our strong belief that the opportunities directly in front of us are even bigger today than we could have imagined a year to a year and a half ago remember when we guided at the beginning of 2021.
We then proceeded to over deliver on the top line by 8%.
And also generated.
800 basis points of better operating leverage than we had guided too. So clearly we showed simultaneously that the growth opportunity is higher than we initially planned and we could drive better leverage and as we look at all of the growth opportunities directly in front of us including international.
B headless.
Enterprise.
This investment is basically going after capturing that full potential so put simply were extraordinarily bullish about the global ecommerce market and our ability to win and.
Thank you quite our next.
Question comes from the line of code you got kicked off from Bank of America. Your question. Please.
Hey, guys. Thanks, Thanks for taking my questions. So I had a question on the long term target revenue mix, maybe help us understand or or put some guardrails around the revenue MA model. There you know maybe how many years do you think it will take to get that target Nick.
Mix or maybe by revenue scale. Thank you.
Yeah, Hey, Koji Great question, we actually added a slide in the I R. A deck to kind of paint this picture.
You know I think long term you know our subscriptions are gonna be subscriptions from our existing software offerings. But then we're also going to add subscriptions for omnichannel therapy dynamics through costs selling upsell through are owned and partner products those are gonna add subscription.
Revenue growth in that line item. So long term, we could see kind of existing software being 50%, 10% for cross selling upsell, 10% for feeding Omics Omnichannel subscription solutions P. S. R. As we know it today.
Likely.
Well forecasted at around 25% services will never be a big component of revenue. So we would expect that to still be around 5%, but that the slide that we had it really is intended to show kind of where this business is headed and where this business is headed is being able to add a lot of different product offerings across.
Omnichannel as well as our ability to cross sell an up sell our partner products and support our ecosystem uhm to where a lot of that growth is going to build overtime and subscription revenue. While we also generate a lot of Rev share from the transactions flowing through the platform there's no time.
Nine that we're giving right now but in terms of long term target mix. This is kind of what we see today. We also see gross margins kind of isn't that high 70 range longterm as we as we scale further and there's no reason for us to believe that you know at scale, we wouldn't be able to deliver.
Long term operating margins north of 20%.
Q. Our next question comes from the line of Perry Tilman from Truest. Your question. Please.
Hey, guys. Thanks, so much for taking the question. This is Joe mirrors on for Terry Great Great job on the enterprise. There are gross I think Terry actually asked last quarter or they're just gonna stay both 50 I'm just wondering if the multi storefront stuff is hoping here yet.
And you know what your expectations are going forward for this number.
Mulkey storefront is not in general availability, yet and so when it is I expect that is when we will see the significant uplift.
In sales conversion bolt new prospects and then once we build it into self serve even for R. S. M. B customers there'll be able to click a button that store fronts and AD revenue to their subscription so that is coming and it's within hopefully weeks away Ah being general availability watch. It then.
<unk> closed data now for quite a few months and indeed, we've sold and deployed stores on it is working very successfully but in short the upside potential is still to come.
Starting hopefully in a in a month or two from now.
Thank you. Our next question comes from the line of Clark Jeffries from Piper Sandler Your question. Please.
Hello, Thank you for taking the question maybe.
Maybe spending some time right, citing revenue guidance.
R. A what are what are your assumptions for gross and the core business in the second half as I think about maybe a relatively unchanged run rate of feeding all mixed exited in Q4, I think it implies maybe moderation in the core business, perhaps more than we were expecting so I just wanted to maybe right sides are there any.
Significant difference to the current Putinomics run right or something else, we should be aware of when thinking about the core growth assumptions.
Yeah, you know going into 2022 I think.
Let's revisit your P. S. Our expectations, we're happy to do that with you I mean, what we what we're seeing is kind of a G. M. B gross P. S are related revenue kind of going back to pre COVID-19 levels going into you know the beginning of this year P S or is likely going to trail subscription.
Revenue for.
For the front half of 2022, so if you're going to tweak anything it's probably the P. S are assumptions versus our core subscription.
And then feeding omics.
Expect putinomics to grow in line with our enterprise business is kind of how we're modeling it but you know in.
In terms of like the macro headwinds on G M B or G M b per merchant or what other folks are seeing that probably affects us more in the first half than it does in the second half, but I would I suspect. It's your P S or a number that.
We're happy to dig into.
Thank you. Our next question comes from the line of Josh back from Keybanc. Your question. Please.
Thank you for taking my question I wanted to.
Ask a similar question to Clark C. A little bit of a different angle I was just noticing the the rescue range for Q1 seems to be a bit wider than.
Historically, what you've got it too so anything that we need to be.
Mindful of obviously you know it was about a month left in the quarter.
Oh, Yeah, no I wouldn't say I wouldn't look too much into that we just realized last shared a ranges were way too tight and so when we evaluated kind of ranges on our peers set we just adopted a wider range, but no I wouldn't I wouldn't look into that all that much. The one thing that you would factor in for.
<unk> Q1, 22 versus 21 as you remember.
You know.
Yeah. There there is a stimulus effect last march that affected somewhat R. Q1 number so maybe factor that and but I wouldn't look anything into in terms of the the wider range.
Okay. So more of I would just use the <unk> yeah just solution.
Philosophy evolution, Yeah, we got a lot of feedback that are Ah ranges are way way too tight on on revenue and non-GAAP op lost so we just adopted to what those in our peers that are doing.
Perfect. Thanks for sure.
Sure.
Thank you. Our next question comes from the line of Parker Lane from Stifel. Your question. Please.
Hi, Smacks I was notes on for Parker laying thanks for taking my question I just wanted to focus a little bit more on the international investment and the strong growth that you've seen so far how are you thinking about the overall mix in revenue as though we look out in the future from these international markets compared to the U S.
Okay.
Yeah, we have a pretty.
I would say successful framework in terms of our international expansion efforts every six months you know we're identifying countries that we want to have folks locally in market.
Internally you know there's a there's definitely a goal of our gross new getting to 50 50, 50% U S. 50% non U S. A today you know as if you just look at our revenue base, it's still high seventies in terms of U S revenue concentration over time as we as we become more and more success.
Well selling outside of the U S I could see that number coming down, but an internally gross new targets in in the next couple of years, where we're hoping that we can get to a 50 50 split but in terms of the revenue impact you know take longer.
Thank you. Our next question comes from the line of stands Laski from Morgan Stanley . Your question. Please.
Hey, guys good afternoon and.
Congratulations on a strong finished two 2021 why don't you just maybe you can follow up on a on a on a prior question and once again asked slightly different. So if we did the math of reported a R. R. Minus the inorganic are are from Phenomics.
You you back up yeah, sorry, you get to about 27% organic monthly.
Monthly recurring revenue growth in Q4 verses largely would essentially number would be about 30% in Q3. So.
What's the calculus, four feet and omics going forward into 2022 and versus the 24% to 29% growth for revenue.
For the full year of 2022, what are the puts and takes their.
Thank you.
Yeah, Hey, Stan the 20th slightly higher than that I'd say for the core it really I'd split it up between our enterprise accounts or accounts greater than two K.
Versus the account's less than two K. If you think about our that cohort of enterprise accounts are retention profile is actually improving churn metrics for our enterprise has actually improved over the last 12 or 18 months.
When you look at accounts less than two K, you know, that's where it's probably more subject to you know the impacts of Covid that we think that are kind of in a rear view some of the adjustments to upgrades in net new would be impacting those standard and plus plans and don't forget those accounts greater than.
<unk> K have those standard and plus plans that actually graduate so don't look at those R. Retail business is only our current standard and plus spans because it's not going to capture those that are actually graduating so when I think about 2022, where we have to be conservative is kind of the same store sales grew.
<unk>, we're looking at Canada industry forecasts and the benchmarks. We're applying that we're also generating revenue now from things outside of payments. So we're starting to see an uptake in Rev share from buy now pay later, one quick check out Rev share from Omnichannel. So we're factoring all of those at <unk>.
Into our P. S. R guide for the next year, we are going to see <unk>, probably slightly lower than subscription in the first half but in terms.
Of like gross new or gross new bookings remains strong both in the U S and international where we have to do some COVID-19 impacts or at least lapping big bass periods in 21 Israeli around the upgrades downgrades insurance for net new but in terms of gross new feel really good about that across all of our teams.
Thank you you want next question comes from the line of Rainbow Lynch L from Barclays. Your question. Please.
Yep hate and congrats on me as well been like quick question on the the <unk>.
<unk> plans for the year. So clearly you must be seeing some big opportunities and the urgency to kind of I'll take.
And benefit from being better exposure could you just kind of all elaborated and talk a little bit about like how you kind of get that because obviously be clearly on the market where.
Sofa and talking about <unk> are a little bit on the pressure and kind of doing what you did today you must have known liberate what's going to happen, but what drove your your your decision to cut all kind of double up here and and make this mood today. Thank you.
Yeah, right now well because the investments that we've made are working really well like if you look at the markets that where we have go to market teams in London, covering Europe in Sydney covering APAC you can see our growth rates. When we think about our expansion framework. We've got that first space, that's a test and learn Faye.
<unk> and then we move into a country entry phase, where we invest in local talent across the go to market teams local support and you know in terms of the.
Quotas and how fast we can ramp that team we've got.
Kind of great use case in terms of the teams that have already ramps and so yeah. I mean, clearly we recognize what's going on in the market, but we're managing this business for the long term and so I think with these investments international Oh, as we mentioned earlier, we were gonna lean and invest in feet and omics couldn't be.
More excited about the opportunities in Omnichannel with feeding Omics, we went to invest roughly $5 million to $6 million to build out putinomics self serve as well as speed and Omics for all where we can actually allow our partners and merchants to actually leverage our infrastructure for omnichannel, whether they're on the <unk>.
Big Commerce platform or not so we're super excited about that and then across those other initiatives be to be headless, that's where the remaining $5 million to $6 million go but that really these investments are investments that we have a lot of proof points around we're not guessing we the these are very purpose.
Pointed investments that we can measure and so yeah, we're leading in because we think it's the it's our opportunity to do that.
Q. Our next question comes from the line if somebody from Jeffries. Your question. Please.
Hi, good evening. Thanks for taking my question. So maybe one I'm more near term and it's not a guidance question more but just as I think about the <unk> the pipeline for new enterprise logo deals that you're looking at at this time into 2022 and how that compares to maybe this time.
Last year.
And how should we think about maybe the composition of that pipeline in terms of is it more index towards.
More mega logos or just just a higher number of a large logos just how should we think about the the enterprise logo pipeline given to that underpins a lot of the the guidance.
Great I only got one or you want me to think okay. I'll I'll take that yeah, I would say that our pipeline coverage starting 20th 22 is even stronger than it was at the beginning of 2021 in particular the strength is.
<unk> not just in the Americas, but in a meal. We're also starting to see the growth hi.
Pipeline very meaningful pipeline in new geography, So continental Europe , Italy off to a roaring start we're seeing strength in France, and other continental European country, and Mexico, which we just announced is already building a really good pipeline that they can burke at anything like what we've seen EM.
Other geographies like me said Wow, the futures incredibly bright in Latin America again, we've launched in Mexico, but we have plans later this year to get to South America as well in general is it quantity over sized it is.
It's a combination of.
<unk>, we have more what we would call historically kinda wale opportunities in the pipeline than we've had before but there's also a real strength in the singles and doubles in the mid market. So across the board, we're going pretty good.
Thanks for the questions to my.
Thank you. Our next question comes from the line if P. J Hines from Ken Accord Your question. Please.
Hey, guys. Thanks for taking the question.
Right. So you spent a time a bunch of time talking about kind of be improved monetization model and I I.
I get kind of all the new levers to growth in the cross sell upsell side that you talked about what where I could use a little bit more clarity is on the.
The third party apps and the changes that are happening there like how will you monetizing.
That ecosystem before we moved to this kind of consolidated invoicing program and and.
Like is there any way to frame. If you are monetizing those third party apps and the way that you will in the future kind of what that would amount to an revenue for you does that make sense.
Sure the way it works today is.
The thousand plus App.
M. R. R asked marketplace. The majority of those have some kind of a rough share agreement with us, but our inability to add.
A subset of those out to the actual bed commerce Bill hurts two things one it hurts our ability to convert some market and sell merchants apps that will help them grow their business because it requires a separate far smaller company to independently market their product.
Sell their product sign.
Sign up the merchant with the new payment billing relationship so.
So it hurts conversion. It also hurts Rev share capture because we're relying on manual processes to validate and collect on revenue share but.
But I would say, there's a third dimension that we're also missing out on.
And that is that for a lot of app developers it is equal or more difficult to build an actual billing engine as it is the app itself, if you're if you're creating a new app. It's one thing to code. The app. It's another to have to come up with your own engine for billing customers and.
Dealing with upgrade downgrades and cancellations and all that other stuff.
And the result of that is because we don't have the ability today to automatically add.
These apps to the Big Commerce Bill those asked that don't have their own billing engine aren't on big Commerce, there on shopify or another platform that might have that but they can't come use us and it is our expectation that once we offer up our own billing edge and many of those apps who are out there that don't have one of their own will then.
Integrate into big Commerce would become available and so that is basically addition of apps and pure upside. In addition to the other two factors ultimately there's clearly a lot of upside here. If you use the Apple iPhone example, where 100 per cent of the apps are billed for through.
Apple's billing system, you can see the full potential upside it's not our intention to require the.
Of every App will do it when it makes sense mutually but there is an awful lot of ability to further expand the adoption of revenue driving.
Uhm applications for our customers when I say revenue driving I mean revenue driving to them to help them grow and will profit along the way.
But our next question comes from the line of Scott <unk> from need your question. Please.
Hey, guys. This is John Carradine on for Scott I. Appreciate you taking my questions just curious as far as the pull forward into quarter Uhm at what point did you guys decided to pull forward those investments and really how would you frame those around relative to kind of your three uhm two strategic pillars. Thanks.
Yeah. It was really on the hiring front you know, it's a it's a competitive market out there. So when we had the opportunity to hire the folks that we wanted a higher we were we were full speed ahead across a lot of our team specifically or go to market teams, we were able to hire some folks in the countries that we.
We're expanding into.
Last year, we expanded to France, Italy, Netherlands, Germany, Spain, and Mexico recently, and so we were able to start hiring folks across those countries, which we're super excited about and then we also were able to invest in some local infrastructure costs for hosting in those countries.
Local hosting local infrastructure as important as well as local people so.
So we were able to pull in those investments we did not you know pause hiring you know if we could hire folks on the teams that we needed them. You know we were full speed ahead. So we didn't it never never doubt that back.
Q as a reminder, ladies and gentlemen, if you have a question at this time. Please press stronger than one. Our next question comes from the line of Brian Peterson from Raymond James Your question. Please.
Hi, Thanks for taking the question. This is John on for Brian in our our growth in 2021 was really impressive and your slideshow 2020 cohort performing really well how much of that's a function of just market dynamics around e-commerce growth versus your evolving landed expand and then the comments on the higher percentage from enterprise accounts.
Should we expect that that metric to grow again in 20th way too. Thanks.
Yeah, It really it's really both.
Think that improvement is driven from the continued mix shift, but it's also driven by you know higher upgrades from a pricing adjustments the elevated volumes that we saw in COVID-19 from Covid this year or last year. So I think it's a combination.
<unk> of both you know as we think about you no longer term, it's fair to assume that as we launch.
Launch more sites and win more deals like Ted Baker and some of these very big sites, you know with that comes expansion revenue overtime. So you know the reality is I think it is both I think it's the make shift as well as you know elevated GMB levels Uhm that we saw last year.
That you weren't next question comes from the line of vehicular Rooney from Wedbush. Your question. Please.
Hey, guys Uhm, some more clarification on the investments for for me <unk>.
<unk> talk a little bit more about commerce as a service what it means exactly how it's different from.
What are you guys to do it today is it a completely new market opportunities to cannibalize any of what you do just would love to understand uhm.
Did that and it may be broader scale. Thanks.
Great Here's a different angle on it so.
You're used to thinking of bad commerce, selling ourselves exclusively to merchants right merchants sign up for a monthly subscription to create one or more stores with the commerce <unk>.
Commerce as a service is that when a technology partner.
Oftentimes are sometimes an agency partner is instead, the one who is.
Working with the commerce.
And enabling customers of theirs to sign up to us in ways that typically commerce is out of the box with whatever their core offering. It. So as an example, again wind Iraq is a company who serves wineries and it gives not just an e-commerce website, but all of the <unk>.
<unk>.
Services, including pointed.
Point of sale mailing list management, sometimes fulfillment services tax and compliance.
And so when they decide hey, the.
The component of death that is the platform technology powering the actual commerce website, we want that to come from a specialist and they contract with us and they're able to actually sell and provision.
E Commerce web sites to wineries that are powered by big Commerce.
But it's wine direct who was doing that and so you can think of many other partners of ours. So let me give you. Another example, let's say a point of sale software company. We done. This we've been doing this for a couple of years, if a point of sale partner says, okay I'm powering the store terminals the in store terminals in the physical world of retailers.
But I want them to be able to also.
Automatically generate a pre integrated e-commerce website, that's using the same inventory and products out of the boxes, what's for sale in the stores and may be using the same payments mechanism. You know in the same way that a square or a shopify wood, but without having to create or own their own e-commerce platform than they.
Can do that with bad Commerce, and we use are powered by a P. I N. So you could be a customer of that point of sale software running your stores with it.
On their website sign up to have an ecommerce website added and have that pre integrated already with the same inventory and the same capabilities that that the point of cell provider enables you could you could imagine scenarios such as new geographies, where we have agency are technology partners, who.
Start marketing and selling E.
E Commerce stores and other countries that are powered by the commerce.
But there may be doing the translation they may be doing the pricing and the billing for those and that's real examples that are in the works right now but haven't watched yet. So this is something that we've been doing for a couple of years, you've seen major announcements already about such as wind direct such as ox out us but.
But we're putting a name behind us because it's been sort of a hip pocket secret and now we're going bright with it when we first announced it technology partners a lot of eyes opened and they said Wow. This is a great idea I can see how this would really work for me our core business and so we expect many more examples to come in the quarters ahead.
Thanks for the question.
Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Brian <unk>, President and CEO and chairman for any further remarks.
Great. Thanks, everybody for dialing in I would again, just like to conclude by emphasizing worked thrilled with a 50% growth rate in queue for the fourth consecutive year of accelerating growth rate on ever larger basis. It shows that our business is gaining momentum.
<unk> and as we look to the future, we see more opportunities for global leadership and growth then.
A traditional expenditure model would contain so we're investing ahead of the curve.
As already said, we've already proven that our investments and enterprise in international expansion in omni and headless and indeed, B R paying off and we expect that the investments that we began in queue for and will continue through 2022, well paved the way for gray.
[noise] durable continued growth for years to come and big Commerce truly being the most successful and innovative.
<unk> platform and the many years. So thanks for following us and good luck to our folks in Ukraine, we're praying for him and doing everything we can to support.
Return to normal there.
<unk>.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
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