Q3 2022 Bigcommerce Holdings Inc Earnings Call

November 3, 2022

Ladies and gentlemen, thank you for standing by and welcome to the Big Commerce third quarter 2022 earnings call. At this time, all participants will be 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, Mr. Daniel Lynch head of Investor Relations you may begin.

Good afternoon, and welcome to the Big Commerce as third quarter 2022 earnings call. We will be discussing the results announced in our press release issued after today's market close with me are big Commerce, as President and CEO , and Chairman, Brent Pelham and CFO Robert Alvarez.

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

Forward looking statements include statements concerning financial and business trends, our expected future business and financial performance and financial condition and our guidance for the fourth quarter of 2022, and the full year 2022.

These statements can be identified by words, such as expect anticipate intend plan believe seek committed will or similar words. These statements reflect our views as of today only and should not be relied upon as representing our views at any subsequent date and we do not undertake any duty to update these statements forward.

Looking statements by their nature address matters that are subject to risks and uncertainties that could cause actual results to differ materially from expectations for a discussion of the material risks and other important factors that could affect our actual results. Please refer to the risks and other disclosures contained in our filings with the Securities and Exchange Commission.

During the call. We will also discuss certain non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures as well as how we define these metrics and other metrics is included in our earnings press release, which has been furnished to the SEC.

And is also available on our website at investors that big Commerce Dot com with that let me turn the call over to Brent.

Thanks, Danielle and thanks to everyone for joining us on today's call are Ian I will review, our third quarter results highlight developments in the quarter and discuss our view on the current operating environment.

We'll also provide our view on Q4 and what we expect to see generally in the front half of 2023 and his discussion on updated guidance.

First and foremost I'm pleased to share that we beat the high side of our guidance range for revenue and also outperformed our expectations on non-GAAP operating loss in Q3 without doubt we face a challenging operating environment appropriately we are managing our business tightly and remain committed to deliver the growth and operating leverage expectations.

We provide.

Discuss the details.

In Q3 total revenue grew to $72 4 million up 22% year over year, our non-GAAP operating loss was $11 $5 million. We concluded Q3 with an annual revenue run rate.

At $305 million up 20% from last year that represents a sequential growth in <unk> of $9 4 million Enterprise account <unk> was $216 2 million up 35% year over year. The enterprise segment now represents 71% of our total company.

We believe enterprise can eventually grow to more than 80% of our total company <unk> and drive strong financial performance in the coming years.

I'd like to highlight four areas of encouraging progress and resilient underlying performance in the business in Q3, and thus far in 2022.

First despite macroeconomic and geopolitical uncertainties, we have over performed revenue expectations every quarter in 2022 and as our eight will discussed on our Q4 guidance. We believe we can exceed the 2022 revenue expectations. We set at the beginning of the year. We saw continued above market growth in subscription and par.

And services revenue in Q3, driven by strong enterprise retention and durable order volume and G. M D.

Second we see tremendous enthusiasm and our partner communities in August and September we held a series of three partner summit, one each for our Americas, EMEA and APAC regions, where we celebrated our joint success and progress and shared our roadmap and priorities for the future. It is clear to us and our partners that the future of enterprise E.

Commerce is open and Composedly and Big Commerce provides a level of compose ability the BTC and <unk> merchants need without the cost and complexity of competitive offerings.

During the summit, we announced the launch of our new Omnichannel certified partner program. This is a new platform agnostic program for agency channel and technology partners that offers unique.

Today's merchants know they need to meet their customers, where they shop and spend their time online, but they often struggled to determine the best combination of channels for their business or the best solutions. They should utilize to drive the best return on AD spend and conversion on each channel. This program solve that and we are.

Doing it in a very big commerce way by leveraging our strong partner relationships with both agency and Tech partners.

Our agency partners benefit by leveraging improved product data and listings through feed optimization, using <unk>, which we acquired last year Omnichannel growth consultations with bad commerce experts and access to exclusive channel partner Alpha and beta programs with partners, including Amazon by with Prime Google <unk>.

Meta snap target plus and Walmart marketplace.

Others in select regions, we're already seeing substantial demand globally with close to 100 agencies and Tech partners in the program since launching at just a few weeks ago. It's a great win win win for merchant partners channels and Big Commerce.

I would also like to reinforce that this is a platform agnostic program. We aim to open commerce. We are using the combined expertise of the commerce in fee dynamics to help businesses succeed in omnichannel advertising and selling whether they are using but commerce or a competing ecommerce platform.

Businesses succeed in Omnichannel commerce, and more agencies are able teams big commerce and feed and omics expertise to better meet their clients' needs the stronger our business will become and the faster we will grow we believe the future of Commerce is open flexible and <unk>. These great partner programs highlight that conviction.

Third we continue to release features product improvement and partnerships that resonate with our target market of established and growing businesses. In Q3, we launched the closed beta of Multilocation inventory at the end of 2022, we will launch a set of new and updated Apis that enable merchants to.

Create custom buy online pickup in store experiences at.

As shoppers increasingly demand flexible fast and convenient fulfillment options. These foundational Apis enabled large enterprise merchants to create complex multi location inventory scenarios.

In addition, our customer segmentation feature is an open beta as well as our App extension feature which allows third parties to deeply integrate into the control panel experience.

In August we announced an expanded partnership with a firm enabling merchants of all sizes to be able to use the firm's adaptive checkout.

This provides eligible customers with the flexibility and control to choose which payment schedule works best for them in September we announced the strategic partnership with crypto currency leaders that PE and coin payments to easily and securely deliver crypto currency payment solutions to Big Commerce merchants, We also announced the launch of Big Commerce on Google Cloud markets.

Place, making it easier for global enterprise customers to modernize their ecommerce platform to expand audience reach and drive business growth.

Gibbs businesses powerful ecommerce tools that work within the Google cloud ecosystem to reach more people and drive sales at every stage of growth.

Earlier this week, we announced our launch of Snapchat forbid commerce in partnership with Snap Inc. This gives the commerce merchants of all sizes, the ability to create manage and optimize snapchat AD campaigns to showcase products and broadened audience reach to millions of Snapchat users.

Also in Q3, we successfully obtained sock one type two and sock to type two certifications demonstrating commitment to protecting our customer sensitive and valuable information.

Certifications are very important to enterprise merchants and strengthen our reputation with those businesses.

Fourth we are rolling out bigger and more sophisticated enterprise accounts than ever.

Loyalty the loyalty program for British Airways and partner Airlines launched the wildfire, a new online store leveraging big Commerce. It opens SaaS API first platform for the millions of members of the British Airways Executive club can exchange loyalty points for wine and earn loyalty points by making purchases.

One Kings Lane, a U S based seller of designer vintage and exclusive home furnishings launched a beautiful custom headless side, taking advantage of our integrations with Avalere Braintree and Cybersource.

Music direct the world's largest online retailer for high end audio equipment music and accessories is now selling a big commerce with a custom order flow built on a custom azure environment that is seamlessly integrated with its ERP.

Hungry harvest, which nobody reduces food waste by selling rescued produce that otherwise would've been discarded due to surplus supplier over purchasing or physical deformity took advantage of our multi storefront functionality to launch two stores one for their customers on demand purchases and another for subscribers.

MKS building supply a prominent UK based hardware and commercial building supply company launched a new headless store that allows them to have more flexibility and an improved website design Jimmy brings one of Australia's largest express alcohol delivery services launched the progressive web App storefront built on big Commerce.

As headless architecture that takes advantage of our local Australia based hosting offering to maximize page speed and minimize the potential for disruptions.

And last but not least different to us the frozen treat brand that our kids no doubt know launched a new storefront that combines a fun and engaging customer experience with checkout functionality that ensures its temperature sensitive products are delivered when their buyers want them.

Now I would like to address some of the macro driven challenges, we face and our actions to focus resources on our highest ROI opportunities are a will expand on many of these further during his remarks as well.

Similar to other ecommerce providers bookings growth was a bit slower in Q3 than in previous quarters. We are seeing different dynamics at play here in the enterprise and non enterprise portions of our business enterprise AOR grew sequentially by $9 6 million, which was a positive result in a difficult climate, we are seeing larger than <unk>.

Larger enterprise deals in our pipeline.

Growing traction with large sophisticated systems integrators and outstanding partner engagement and momentum.

We continue to see high win rates in enterprise as well. However, we are also seeing slightly longer sales cycle times and tighter volume of leads overall consistent with what normally happens during economic down cycles.

With respect to the non enterprise portion of the business. We are actively shifting our demand generation and budgets both in people cost and variable spending towards the superior economics delivered by enterprise accounts. We have tested this increased spending prioritization over the past two quarters and we are moving full speed on this now across all teams and budgets.

We are also focusing on ROI and operating leverage by removing most promotions on new non enterprise bookings. This is increasing revenue and profit even as it delivers fewer short term bookings and the non enterprise business. We will continue to invest in our non enterprise business, but we plan to focus more on R&D and product excellence.

Inbound marketing activities and self service sign ups to improve the LTV to CAC for non enterprise plans.

From a retention point of view, we have seen the same level of strong results in enterprise as we saw both during and post pandemic as we have discussed on previous calls however, non enterprise account retention has not maintain the performance of the pandemic early quarters.

What is different about our business is a strategic focus on merchant concentration and durable resilient enterprise bussi and b to b customers.

Again, the strong unit economics of enterprise accounts are compelling and we are prioritizing our sales and marketing spending on this segment as a result, we expect enterprise to continue to grow into a larger and larger share of our <unk> in the quarters and years ahead.

I'll conclude my discussion about current challenges with an update on our team in Ukraine on a personal note for our teammates. The continued war remains a hardship for our employees, particularly as attacks on civilians targets have resumed and Keith it is tragic on a human level for our friends and teammates.

I'm extremely proud of the resilience of our Ukraine team as well as how supportive for a big commerce team and partner ecosystem has done for them.

As an example at our U S partner Summit in August we were able to raise funds to purchase five ambulances to assist with humanitarian aid efforts in Ukraine, I can't say enough about how inspired we are as a company by the bravery of our colleagues in Ukraine.

I'd like to conclude by speaking at a high level about how we're building our plans for next year.

To repeat we are doubling down our sales and marketing spending on enterprise accounts as we highlighted in our Investor day in May our average LTV to CAC for enterprise accounts across the last four years was eight to one compared to two to one for non enterprise accounts. We believe we are the world's most modern enterprise E Commerce platform and we're going all in.

On the enterprise segment.

Next we remain committed to our open partner centric strategy.

We believe open SaaS is a strategy that will win in the enterprise market, which means our business will become more partner focused than ever in 2023.

Further we are basing our 2023 planning activities on the expectation that the macroeconomic and geopolitical challenges that have impacted this year will persist into 2023 to offset this we will remain disciplined about the pace and size of our investments as we highlighted on previous calls 2022 was an investment year for our.

Our 2022 investment plans were modified throughout the year to stay on track to deliver our original topline and bottom line guidance, which we are pleased to have accomplished through the first three quarters. We remain committed to hit breakeven on an adjusted EBITDA basis in the second half of 2024, and 2023 will therefore be an.

<unk> leverage year, we're making hard decisions to focus and prioritize our spending on our best ROI investments and we will continue to do so during 2023.

Shifting sales and marketing resources away from shorter sales cycles for lower retention non enterprise plans to longer sales cycle and higher retention enterprise plans is an example of this this decision may impact bookings growth in the front half of next year as these investments expand our enterprise deal pipeline at the short term.

Ben some non enterprise pipeline and retail planned bookings. We believe this is the right decision for our business to deliver long term growth and returns to our shareholders.

Ray will discuss this in his remarks.

In conclusion, you've heard me say last quarter that we have spent the last few years building our enterprise capabilities and Q2 marked the moment in time, when we could say with confidence that big Commerce had arrived as a true enterprise platform. The merchants I listed earlier reflect that these are large prominent brands that chose big commerce because of our <unk>.

<unk> capabilities are open platform and our strong partner ecosystem. This is a differentiated winning strategy that our partners are as excited about as we are with that I'll turn it over to Ara.

Thanks, Brent and thank you everyone for joining us today.

During my prepared remarks, I'll walk through our Q3 results and provide details on how current conditions are impacting elements of the business such as bookings and partner in services revenue.

I will also provide details on our Q4 revenue and profit guidance and our current views on 2023, and our long term financial outlook.

In Q3 total revenue was $72 4 million up 22% year over year subscription revenue grew 26% year over year to $53 2 million driven by a continued mix shift to enterprise accounts.

Partner in services revenue or <unk> was up 12% year over year to $19 2 million.

Both subscription revenue and <unk> beat our expectations.

Driven by healthy enterprise MLR retention rates and durable order volumes in <unk>.

We are incredibly encouraged by the resiliency of the enterprise business and a tough climate.

We will continue to take a careful conservative approach to the forecast and I'll address. This further later in my remarks, when discussing our Q4 guidance.

Revenue in the Americas was up 23% in the quarter, while EMEA revenue grew 31% and APAC revenue was up 2% compared to prior year.

We see strong growth in enterprise accounts and bookings in EMEA and we are also encouraged by early signs in our expansion markets.

APAC presence today remains focused on Australia, and New Zealand.

And we hope to drive growth in the coming year as we build additional partnerships more broadly across the APAC region.

I'll now review our non-GAAP Kpis.

<unk> grew to $305 million up 20% year over year.

Driven by continued strength in our enterprise customer base.

That represents a sequential growth in total of $9 4 million.

Enterprise account <unk> was $216 2 million up 35% year over year.

Basis points from the previous quarter.

Meanwhile, we reported gross profit of $56 million up 19% over the prior year.

In Q3 sales and marketing expenses totaled $31 5 million up 31% year over year.

This represented 44% of revenue up 288 basis points compared to last year.

This increase was driven by additional head count, particularly due to investments in international expansion and enterprise go to market efforts.

Research and development expenses were $19 1 million or 26% of revenue up 124 basis points from a year ago.

Given by additional hiring to support investments in.

Our key strategic initiatives.

Finally general and administrative expenses were $16 9 million or 23% of revenue up from 20% of revenue a year ago.

This includes financing accounting legal human resources, some operations spending bad debt expense et cetera.

We expect this to decline as a percentage of revenue during 2023, as we limit hiring and moderate expenses in the coming year.

In Q3, we reported non-GAAP operating loss of $11 5 million.

<unk> 15, 9% operating margin. This compares with negative $3 8 million or a negative six 5% operating margin in Q3, 2021, and a negative $13 7 million or a negative 21% operating margin in the prior quarter.

Adjusted EBITDA was negative $10 9 million and negative 15, 1% adjusted EBITDA margin.

Compared to a negative five 2% in Q3 of 2021.

non-GAAP net loss for Q3 was negative $11 2 million or negative <unk> 15 per share compared to negative $4 2 million or negative <unk> <unk> per share last year.

We ended Q3 with $308 million in cash cash equivalents restricted cash and marketable securities.

Year to date operating cash flow was negative $86 7 million declining from negative $31 5 million a year ago.

We reported free cash flow of negative $90 9 million or a negative 44% free cash flow margin, which includes $32 $5 million paid during the quarter as part of the fee dynamics first anniversary acquisition related payment.

This compares to negative $33 8 million and a negative 22% free cash flow margin in Q3 2021.

I'd now like to transition to a more detailed discussion on several areas of the business starting with subscription.

And bookings in Q3, we.

We saw a different dynamics at play in our enterprise and non enterprise businesses in Q3.

We are extremely encouraged by our success in enterprise, we continue to see strong momentum and performance. Though we are also seeing some challenges with respect to sales cycle time, and the volume of deals in the pipeline.

Again this is not an unexpected dynamic in enterprise software during a down economic cycle.

And we are offsetting this by redoubling, our focus on this segment and actively shifting sales and marketing spending here and away from the non enterprise business.

As a result, we expect to see flat to slightly contracting non enterprise <unk> in the coming quarters.

This is due to a combination of macroeconomic factors and deliberate spending choices.

On the macro front recent economic data highlights. The challenge is small businesses are experiencing in the United States and abroad.

For example, according to the census Bureau, NFIB, New business formation has slowed significantly over the past 12 months, while the SMB optimism index is at its lowest level in 48 years.

Additionally, we are also very deliberately shifting spending away from the non enterprise to the enterprise segment in our business.

This is driven by the underlying differences in ROI that we've shared in our commitment to hit breakeven on an adjusted EBITDA basis at or near mid 2024.

Managing this investment transition further towards enterprise will be key to our 2023 results and driving strong growth in our business overall.

Again, 2022 was an investment year 2023 will be in operating leverage here.

We view driving leverage as both the short term drive to profitability and making long term investment decisions to maximize economic value to shareholders.

Balancing the short term effect of this enterprise prioritization on the P&L against the long term shareholder value. This higher ROI will deliver will be key to our 2023 plants.

In addition, Q3 order volume in <unk> was resilient given the tough macro climate.

Even so we are taking a conservative approach to our guidance for Q4.

Given persistently high inflation and geopolitical issues, we expect headwinds to consumer spending and <unk> to persist into the front half of 2023 and are building our plans accordingly.

Maintaining strong operating discipline will be crucial heading into next year.

We have materially reduced our pace of hiring and diversifying our geographical employee footprint.

Bring in high performing team members from geographies with more favorable cost basis as well.

We are making tough priority calls to focus our spending on the highest long term LTV to CAC and we will remain disciplined about equity compensation and dilution as well.

We will also remain disciplined about sales promotions to attract new merchants.

We have materially reduced the volume and value of promotions on our non enterprise plans to focus on revenue and profitability.

We are also maintain tight discipline around enterprise planned promotions, which often take the form of freight promotional months in the early period of agreements.

As we mix more and more towards enterprise accounts, we are seeing success signing deals that have longer multiyear durations and prenegotiated step ups in pricing.

We will continue to work towards long term enterprise contracts that create consistent durable revenue to big commerce and predictable negotiated pricing for our merchants all while maintaining tight discipline on the level of sales promotions, we offer to merchants.

Now, let's shift to our guidance and outlook for Q4.

And full year 2022.

Then conclude with a discussion about our preliminary view on 2023, and our long term financial outlook.

For the fourth quarter, we expect total revenue in the range of $72 4 million to $74 2 million and.

<unk> a year over year growth rate of 12% to 14% <unk>.

For Q4, our non-GAAP operating loss is expected to be $12 3 million to $14 3 million.

For the full year 2022, we expect total revenue between $279 1 million to $280 9 million translating to a year over year growth rate of approximately 27% to 28%.

We expect a non-GAAP operating loss between $49 9 million and $51 9 million.

We are holding our full year revenue guidance flat at the midpoint based on the Conservative view, we're taking on Q4, <unk> and bookings as we discussed previously.

I would like to conclude my remarks by sharing thoughts on 2023, and our long term performance.

We are leading through a challenging cyclical environment, while making the right decisions to maximize long term shareholder value.

As we discussed our prioritization of enterprise by shifting both people cost and variable cost away from non enterprise to enterprise demand generation activities may create a period of slower bookings and potentially revenue growth in the front half of next year as those resources build an even larger enterprise deal pipeline.

We are confident we can manage through the transition and the current macroeconomic climate with tight spending discipline focus and execution.

We are still in the process of setting up our 2023 plan and we plan to provide detailed guidance on our February 2023 earnings call.

That said, we wanted to be transparent and give you a preliminary glimpse into how we're thinking about the business next year.

Importantly, we continue to target, 25% to 30% multi year revenue CAGR that we outlined in our May Investor day. However.

However, we expect our 2023 growth rate to be below our target CAGR.

As we shift sales and marketing demand generation spending more fully to enterprise accounts to.

To be more specific we believe that we can continue to deliver enterprise growth rates materially above our total AOR growth rates offset by flat to contracting non enterprise or in the near term.

We believe that enterprise can grow to 80% of total <unk> or higher by the end of 2024.

Over time as non enterprise becomes a smaller and smaller percentage of the business there will be less divergence between the overall growth rate of the business and the enterprise growth rate of the business.

We also remain committed to the mid 2024, adjusted EBITDA breakeven timeline that we discussed in our May Investor day.

Improvements in the overall macro climate would help us meet this timeline given the impact on high margin DSR.

But we are aiming to hit at or near that timeline, even in the current climate and we'll continue to make the tough choices necessary to deliver that.

Finally, I would once again like to thank all of our incredible employees merchants and partners.

While the past year has certainly brought many unexpected challenges I'm tremendously proud of the commitment and execution of the big Commerce team and our partners would that Brent and I are happy to take any of your questions operator.

Thank you we will now begin the question and answer session.

To ask a question you May Press Star then one on your Touchtone phone.

If youre using a speakerphone please pick up your handset before pressing the keys and to withdraw your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.

Okay.

And the first question will come from Gabriela Borges with Goldman Sachs. Please go ahead.

Good afternoon. Thank you.

Three in there related to tell us and take out that number one the reallocation I am making an investment.

Enterprise segment.

<unk> do you think before that not to be incremental to demand generation and revenue in the enterprise segment.

He was a commentary around the tighter volume roughly maybe a little more detail on what youre seeing there I would have thought with the new enterprise functionality.

And to your point, though.

That has an offset with re platforming cycle with a pushout.

Great to learn more about that and then the third is do you think kind of enterprise growth rate will be in line with your 25% to 30% next year. Thank you.

Yes, Hey, Gaby I'll start with that last question.

We were guiding on our enterprise business and if it was 100% of the business this would be a lot easier.

As we think about that 25% to 30% CAGR that is going to be driven by our enterprise growth. I mean, if you think about the last 17 quarters, we've grown enterprise north of 35% even this quarter.

We grew 35% what's weighing us down is the non enterprise growth.

If I think about the spend necessary to build pipe.

We've already started deploy.

Deploying that spend we're not waiting for Q1 to do that.

We think about the last couple of quarters.

We took action with the promos. We've also taken action with allocation of spend in sales and marketing away from non enterprise to enterprise. It just takes time, especially as we are entering into larger and larger deals.

If I were to highlight some things for Q3.

Say that we are getting opportunities for much larger deals and b to C and BTB those do take longer.

And the deals that we have been into.

We may not have closed them in Q3, but that doesn't mean, we're not going to close them in Q4.

No.

Again excited about enterprise.

The.

What was your first question Gabby.

How long before the new dollars being allocated to the enterprise start to drive incremental revenue in the enterprise segment.

Yes, I mean, the way we think about it is you deploy the dollars in one quarter you likely see the pipe in the following quarter and then you apply kind of sales cycles and closing times against that so as we think about next year. That's why we're looking at the front half of the year differently than we're looking at the back half of the year.

<unk> is going to get built.

Those deals will likely close hopefully by mid next year in I think we have a good shot at the second half of next year showing.

Much better growth rates in the first half and then also keep in mind, we've got a bigger base periods in Q1, and Q2 that we have to be mindful of.

Then the non enterprise business.

As you've seen in Q3, we expect that dynamic to play out in Q4 and likely in the front half of next year, which is why we are.

As you think about.

Revisiting 2023 numbers, we want to be very transparent as to how we're thinking about it and when we present the kind of.

Guide for the full year next year that those are the things that we're contemplating.

Yes.

And just a little bit of color on the tighter volume at scale.

First of all one thing right platforming cycle kind of Colorado.

Hi, Gabrielle it's Brent.

Primarily on the pipeline the quantity of opportunities.

Is down from trend line due to the economic environment, but thats.

Primarily driven by small business and the lower end of the market.

It's a bit tighter at enterprise, but we actually are seeing large opportunities.

At sizes that are bigger than ever for US why was for example, Q2, such a great quarter, we closed a whole bunch of.

A number of opportunities that we're the largest in our history.

We are.

In most quarters this year, we're more than making up with quality.

What might be lacking in quantity in particular at the low end of the business and it just demonstrates that we're able to compete for ever higher ends of the market than we have in our history.

We're very bullish on that trend continuing next year and beyond.

Okay.

Operator next question please.

We don't know where our operators.

Yeah.

Hear the operator so.

One of them.

We're just waiting.

Yes.

Pardon me. Our next question will come from Mr. Clarke Jeffries with Piper Sandler. Please go ahead.

Okay.

Thank you for taking the question.

Our a you know I wanted to touch on the the expectations of flat to slightly contracting non enterprise are a or are in the coming quarters.

Just really off of the fact that we've kind of been in a flat to slight contraction paradigm for the past few quarters wondering if you could more clearly illuminate what's.

What's the new change happening and whether you would expect it to be more of a.

A maintenance of where we've been at or or <unk>.

<unk> based off of this redeployment of demand generation.

Yeah, Hey, Clarke, so when I think about the retention profile of non enterprise versus enterprise.

I'll highlight that our enterprise retention remains really strong our non and non enterprise retention. When we look at our churn usually happens within the first 12 months right and so.

When you look at last year and the prior quarters. This year, we were spending money to acquire non enterprise merchants and whether it was through the promotions or sign ups.

We also had to look at the retention profile of those merchants as I think about Q4 in the front half of next year I suspect that debt.

The flat to declining trends would continue but I do expect it to moderate as the non enterprise sign ups that we do have.

Likely are going to get past that 12 month, Mark and we see great retention once they once they do that.

Understood. So maybe the cohorts that we're churning in the first half of the year might look different than.

The cohorts going forward in non enterprise.

The second question is really around pricing as a lever in this environment certainly having more discipline around promotions is one way to a tree achieve X sort of pricing outcome, but.

As you continue to innovate and deliver more functionality for the platform the contract value for the enterprise, maybe tied to order volume.

Do you believe pricing might be something we're seriously pursuing in this environment or any thoughts you have on that topic.

Hey, Clarke, it's Brent for sure every year, we modify our rate cards that are salespeople quote on enterprise plans and there are changes ongoing.

That reflect the state of inflation in the economy as well as the extraordinary.

Capabilities and ever increasing enterprise functionality of the core platform and.

So, yes folks should assume that in the background one of the things that drives our continued growth in.

Average revenue per enterprise customer is in fact.

The reflection of the capabilities.

I would also stress that pricing isn't the only thing that drives revenue per customer there's also.

Sales of incremental features and functionality and what's exciting to us about 2023 will be the rollout of our automated billing capabilities, which lead us not just bill for third party applications from our tech apps marketplace, but also additional.

Owned products that we roll out and we have talked about multi storefront, becoming self serve you click a button yada storefront.

We are able to incorporate that into our bill.

Feed anomic self serve is coming or acquisitions, BTB Ninja bundle BTB etcetera, and so there is a lot of opportunity to.

Sell additional.

Revenue driving features functionality capabilities to our customers that improves revenue per customer, but is in fact not pricing related.

Thanks for the question.

Yes. Thank you.

The next question will come from Terry Tillman with the Truest. Please go ahead.

Yeah. Thanks, Brent <unk> Daniel Good afternoon, maybe the first question is I don't know how emphasis for you Brent or a but I think you are describing.

Right.

It's not like wholesale weakening of the volume of leads and enterprise, but you did say tightened in your volume.

If that's the case and I'm, assuming some of these sales cycles can go on a while do you see kind of an ongoing kind of hangover and enterprise subscription bookings.

For example, could it get worse do you think before it gets better as early here in the fourth quarter. So just a little bit more on kind of how the implication will be at the tighter volume of leads in the enterprise side and the that a follow up.

Yes, I mean.

Do I expect it to get worse I do not.

Because.

Ultimately a fair chunk of enterprise opportunities are either migrations.

Where companies have existing businesses and the need to migrate doesn't go away the cycle of migration doesn't go away and if there's a short term delay and migrations by large companies trying to manage investment and cash flow.

Those come back later on like Nothing's changing the laws of physics around the need for.

Enterprises to get off of legacy underperforming platforms. So that eventually catches up and time is really the driver of those needs accumulating that said in all fairness cannot get worse well, yeah. I mean, if we had a deep recession.

Then.

Relative to any trend line companies will save cost delay migrations delayed launches of new businesses relative to what would be happening.

A better economic time, so it could get worse, but it's not my anticipation.

I think I think.

New store launches and migrations that might've been happening.

At a higher pace at this point in the year eventually will come back as.

The economy strengthens or at least settles into.

Current trends, Hey, Terry I, just said that when we when we talk about that where we're talking about the tightening of bleeds in our pipe, but one of the initiatives that we've talked a lot about this year's commerce as a service.

And we're actually seeing really strong opportunities with folks that are actually inbound to us in and looking for opportunities to modernize their ecommerce offering or their storefront switch obviously, it's hard to predict when those deals would close but.

Could have a pretty pretty material impact in terms of our bookings and revenue.

Yes, we have a great pipeline of.

Strong commerce as a service deals and.

We'd be very excited if some of those close this quarter.

Yes, understood and then maybe just a follow up question.

And it's tough, but you are giving us a little bit of color already though for for 'twenty. Three so I can't help myself in terms of yes, you have tougher comps for sure as we move into the first half of the year.

'twenty three to deal with and then it obviously gets easier.

As you anniversary feed and Omics et cetera, I mean, I'm just trying to get a sense on you with kind of the shift away from non enterprise and retail and some of these other dynamics just trying to understand like relative growth rates in the first half to second half of.

<unk> set another way.

Could the growth actually get lighter than what we're talking about here. Unfortunately, thank you.

Yes, Terry obviously more details to come on that front on our next call in February but.

As of today, we believe that the dynamics that contributed to the guide and the range for Q4 will likely persist into the front half of next year, where we also faced those tough comps in the base period.

We believe this growth rates can accelerate though in the second half of 2023.

And it's going to be.

As we build out our plans, obviously with a focus in the investment in enterprise.

That will only increase our chances to really get those growth rates higher.

Higher in the back half.

Understood. Thank you.

The next question will come from Scott Berg with Needham. Please go ahead.

Hey, guys. This is Josh on for Scott, Thanks for taking my questions.

Curious are you seeing any divergence in <unk> versus <unk> ecommerce GMB trends here over the last few quarters and then what specifically can you tell us on how <unk> trends have trended here in the month of October and I guess, maybe the first week of November .

Our things are worsening materially or what are you seeing.

I'll take that Josh we don't have commentary broken out on <unk> versus <unk> trend line.

Split, but on the aggregate GMB, what we're seeing is steady.

Hi.

And.

Solid certainly better now than it was in the first half of the year, Yes, Josh I'll add that Q3 <unk> came in higher than we were expecting we did see better than expected orders and GMB.

But having said that this holiday season, there's a lot of uncertainty around.

Order volumes in <unk> with the holidays. So we're not going to we're not going to be aggressive in those forecasts, but we have seen them hold pretty steady and definitely above industry average.

Got it that's helpful. And then maybe just one follow up is there any characteristics of the non enterprise customers that have had a bit higher churn rate.

Maybe you can identify in your sales and marketing process to kind of weed out those opportunities versus some higher value non enterprise customers. Thanks, guys 100, 100% and I think we commented on this last quarter when we were running.

One month, and even with select partner three months free promotions.

That encouraged a.

Set of customers to comment on who probably werent.

Real businesses or intending to transact long term.

And as soon as they came in they they kind of went out before they ever paid us so they were.

Never really quality merchants and with the elimination of that type of promotion. We believe that type of merchant is no longer coming into our ecosystem and certainly the quality of all of the small business we're signing.

Is higher but the most important thing to say to everybody is no matter how you cut it the.

The LTV to CAC on small business is.

Materially lower than the very attractive LTV to CAC on enterprise and there are sub segments of small business would have.

Extremely high value because you spent no money to acquire them and we've got a lot of those.

So if.

And just give you. An example, if the blended average LTV to CAC on small businesses two to one.

You get that because you spend a whole bunch, where zero right Theres no theres no real return on it and just stopped spending money on the zero return right in the and the LTV to CAC is going to go way up.

Because we get a lot of business through partner channels organically word of mouth high net promoter score.

That we don't have to market and we don't have to sell.

And they're great businesses, and so we want to keep acquiring all of that and divert the variable marketing into very high LTV to CAC enterprise segment.

Yes, the way to think about.

Non enterprise for us going forward.

To make it crystal clear, we're not abandoning small business.

Just going to get really smart in terms of how much sales and marketing we're spending to acquire them a lot of the investments will make us to optimize self serve.

Really try to route leads that.

Need to talk to salespeople.

Solos solos stove is a great example, they started out on our retail plan in couple of years later to two to three years later, they're one of our largest merchants doing hundreds of millions of dollars on on Big Commerce. So we clearly don't want to move away from acquiring more and more solar stoves. So.

Just wanted to make that clear for everybody.

Alright, and then last question will come from DJ Hynes with Canaccord Genuity.

Hi, This is Dan Reagan on for P. J, thanks for taking our question.

So maybe once you Brian so when we think about this story multi store is really open the door to more enterprise opportunities. So just a couple of questions.

As you shift your sales efforts and you build the pipeline what does that mix of Rfps look like in terms of general re platforming, maybe sunsetting of Cogeco.

Is there any piece of Greenfield in there and then secondly, when you see legacy players in the RFP process like Salesforce demand were.

Are you seeing more customers choose these legacy players as more of a platform consolidation play.

Any color there would be great.

Yeah, when we look at where business comes in it's a mix.

More it's closer to 50 50 than a giant swing in either direction between.

New stores that are net new creations and migrations and.

A lot of these.

New stores are existing companies.

That might already have other e-commerce stores or they might be new to e-commerce.

As opposed to brand new businesses starting up.

The migrations the number one sources last time I checked actually not magenta, it's custom.

The agenda is by far number two and then.

Youre not going to see as many from like a salesforce because they don't have as many and they're far larger but we got those two will get some shopify and we will get any of the long tail of 500 other platforms around the world. We really do believe that one conclusion, we have the most modern flexible SaaS.

Platform for enterprise bolt <unk> and Youll continue to see us.

Win deals.

It really migrations from platforms of all sizes as well as net new.

Thanks.

Awesome and then maybe just one for RA as you continue to de emphasize small accounts.

The removal of free trials Youre shifting your sales efforts towards enterprise, it's fair to think that the next several quarters will be a bit of a transitory period.

Maybe fewer and fewer small merchants joining some churn.

Then secondly, as you bring on higher <unk> merchant.

What's the right way to think about <unk> growth and the resulting impact to margin expansion given that a lot of <unk> Super high gross margin. Thanks, guys. Yeah, I mean, when you look at Q3.

Enterprise AOR grew 35% are non enterprise are our contracted a little bit.

I suspect that dynamic is going to likely continue for the next two to three quarters.

Feel like it will moderate because as I mentioned when the non enterprise plans.

Plans do churn, it's usually within that first 12 months.

The <unk> mix is 90% plus of our GMB is from our enterprise accounts.

The more we sign and close bigger and bigger deals.

In both PVC and BTB that that <unk> is only going to increase those orders are only going to increase.

One of the things that.

Uh huh.

I would probably highlight is if you.

You're on a legacy platform today, if you were talking to our partners. Our agency partners are Tech partners. We tried to highlight this in the script, but.

Open Commerce is resonating.

Being able to have composed ability without cost and complexity is resonating there are a lot of merchants that are now.

Looking at their legacy platforms that are about to expire and as they evaluate what what platforms that they want to use to power their e-commerce for the next five years.

The openness of our platform the compose ability of our platform. I think is really really just going to continue to help us win more and more deals in the enterprise and I'll tell you our enterprise win rates are extremely good.

And so again this gives us a lot of confidence that now is the time to really focus on enterprise.

A year ago, we probably werent ready to do this because the product.

Investments, we didn't launch multi store yet multilocation inventory, we didn't have the pieces in place that we do now.

Now that we have all those pieces in place I think the.

Is there the opportunity for us to continue to lead in <unk> lead in Omnichannel, leading composed ability and headless.

We want to continue to increase our leadership position across those because that in the end I think thats, how enterprise becomes 80% of our <unk> by the end of 'twenty, four and likely 90% of our air or more.

Over the next five years.

Operator next question please.

Okay.

The next question will come from Koji Aikido with Bank of America.

Hey, guys. Thanks for taking my questions.

I kind of wanted to follow up with you on some of the commentary you gave on on the on the non enterprise.

Revenue stream here are the <unk> and earlier on the call you talked about.

Expecting flat to contracting for this segment, but I'm just kind of wanted to understand a little bit more you know are you going to be investing sales and marketing to keep.

Or in this in this segment within a tight range. So from a modeling perspective, we have a good expectations of where this this segment should should shake out on a quarterly or annually basis. So.

So yes, I guess that is the first question are you investing too to keep that growth really in that flat to contracting what is it like five 5% or maybe even a little bit more than that on a quarterly basis. Thanks guys.

Yeah Kurt.

I would expect that to again moderate a bit in the coming quarters.

We're we're look we're really serious about getting to that breakeven point.

By the second half of 2024, when we think about the path to get there. We just have to be really smart on where we're investing our dollars, especially around sales and marketing so marketing efforts to drive pipeline for mid market and enterprise is where we're going to focus in our sales teams and go to market teams are going to be.

Very much focused on enterprise in the past.

We probably would spend digital marketing dollars to acquire both small business and enterprise accounts and at the end of the day the retention dynamics and the ROI just doesn't play out favorably enough to still allow us to kind of get get to that breakeven point.

Got it Okay and then just one follow up for me I wanted to go back to the very first question from from Gabrielle a follow up here.

No.

I just wanted to fully understand you know you are shifting resources from non enterprise to enterprise. So as that transition essentially done internally is there more shifting to go and if it is already done or are we heading into a period of do we need to ramp those employees are they all fully ramped and now we're heading into 2023 with that kind of a go get.

<unk> for that.

Yes, no. We're we've operationalized. This we're heading into 2023 with that focus the alignment across all the teams.

Is squarely in place so yeah, we're not waiting.

This is al.

Something that we've operationalized and are completely aligned on.

Got it thanks, alright, thanks for taking the questions.

The next question will come from Keith Weiss with Morgan Stanley . Please go ahead.

Mr. Weiss your line is open.

Yes.

Hi, Ryan on for Keith Weiss here, Thanks for taking my question.

Maybe just following up on your earlier comments around lengthening deal cycles on the macro seeing there's been some discussion this earning season about software customers increasingly looking to prioritize lower total cost of ownership as a way to navigate the environment.

Have you seen any shift in your customer base is behavior as a result of this theme and if so how is big commerce position to help enterprise customers deal with this.

Well, that's a nice way up we've always been.

Higher value lower cost platform then.

The other enterprise platform substantially so on total cost of ownership, whether you're comparing to magenta or sales force or legacies like SAP and Oracle.

He's been a strength of ours and <unk>.

Right now that strength is valued probably more than ever, especially relative to the pandemic side. So.

I think our competitive advantages are only.

Improved in the current economic environment that said.

It's still up companies to make the commitments to do migrations and launched new stores and so that's the overriding overwriting driver of lead opportunities.

Thanks.

Helpful. Thank you and just one more quickly.

Launched in quite a few markets. This year this past year in Europe , and Latin America. Just curious if you have any feedback as to which markets youre seeing the most traction so far and how their various payback periods are deferring.

Yeah, So one thing.

Really can call out because it will be in the footnotes of our report the non U S. Americas, which is primarily Latin America, and Canada is everything ex U S grew 56%.

And it's not an insubstantial amount is more than.

Half the size of APAC and almost half the size of EMEA. So Latin America is off to a nice start led by Mexico.

Europe continues to do very well, we're excited about the emerging interest we're seeing in the middle East and some of the deals there in.

In Asia, it's really all upside for us because when you look at our APAC business APAC business, It's overwhelmingly Australia and New Zealand.

That's our most mature market. We originally founded out of Sydney, Australia in 2009, and so we're excited about adding Asia and in particular, we had major activities launching with a partner in Korea.

Within the last couple of months and we're doing similarly in China, So lots of upside potential there, but you don't see it anywhere in the numbers quite yet.

Thank you.

The next question will come from Brian Peterson with Raymond James. Please go ahead.

Alright, Thanks, gentlemen for taking the question I actually will follow up on Ryan's first question in the <unk>.

Seo dynamics.

If we're thinking about the idea of kind of value price, where everything else from these migrations is that becoming more important like is that something you're stressing more so now and is that a better source of deals I know, it's been a great growth sector for you guys overall, but I'm just wondering if that actually.

Perhaps more important in the win rates actually go up this year.

Kind of the overall activity may be may be down a little uncertain macro above unpack that.

Yes, I mean win rates.

Our high this year, they've always been high for us, but they're they're excellent. This year when deals actually close on some deals are just pushing taking longer I would note in terms of value.

In the world ecommerce platforms there are three.

Truly modern platforms that are growing.

In excess of the rate of e-commerce or well in excess of E. Commerce in our case in commerce tools and their us commerce tools, and Shopify, and we shop and Shopify.

Who is stronger at the low end.

Our extraordinary values in terms of the functionality of what we deliver and how easy it is to deploy I may get the polar opposite extreme of commerce tools for somebody going pure hard lesson. We think we are the faster easier.

More economical way to do had what's right for 98% of the world's businesses and then 2% might tackle.

E Commerce tools at the other end, but for sure value SaaS ease of use flex.

<unk> flexibility, that's what's winning right now on e-commerce.

Thanks Scott.

Maybe unpack kind of the enterprise trends I know you guys mentioned, some some slowing sales cycles any help on how that trended over the course of the quarter. We just love any perspective on linearity would be helpful. Thanks, guys.

Yes, I would say Q3 was weaker than Q1, Q2, and we closed a bunch of really big deals and had I thought excellent quarters of AOR growth Q1 Q2.

We're hoping for and trying to treat for a rebound in Q4.

Thanks, Rick.

The next question will come from Ken Wong with Oppenheimer. Please go ahead.

Hi, This is Nancy on for Ken. Thanks for taking my question just one quick question for me.

I heard you mention that even in the current market environment, you aim to hit breakeven or at or near breakeven.

Fiscal Q4 is that assuming there is any recovery in the macro environment in order to reach that breakeven goal.

Go ahead sure would make it easier, but no were assuming conditions, we're going to operate under these conditions going into next year.

Okay. Thank you.

This concludes our question and answer session I would like to turn the conference back over to our President and CEO and chairman Mr. Brent Bellum for any closing remarks. Please go ahead.

Great. Thanks, everybody for listening in I think.

Final Big picture comment that I would make is.

Everybody in the World of E Commerce, or who follows us knows that this has been a challenging year not just because of.

Lapping the highs of the pandemic, but also because of the macroeconomic environment and high inflation potentially crowding out purchases discretionary purchases that are the bulk of e-commerce.

In fact, some agencies likes the tester and salesforce or even forecasting flat to negative.

Global G M D N e-commerce for the year.

Despite that our.

Our revenue grew 42% in Q.

139% in Q2, and when we were done with lapping. The addition of feed and Omics revenue 22%.

In Q3, all of those growth rates are dramatically in excess of E. Commerce in general it shows we're gaining share at a very strong clip.

We also began this year with.

With guidance for full year revenue at the midpoint of $277 million.

<unk> beat topline and guideline topline and bottom line Q1 Q2 Q3.

And our final full year guide at the midpoint is 280 million so up.

I'll have to search far and wide for other public ecommerce companies.

That havent lowered their full year guidance from beginning to end and have managed to beat each quarter and we've done all of that without.

Layoffs or other dramatic changes, which shows that the original plan, we have we've been able to execute despite the tough environment.

We're proud of that we wish the economy were even stronger we surely have many more points of growth in.

That would be wonderful for all involved but I think some folks just say well the E. Commerce sector are struggling this year and it's a bad place to invest.

Our our growth rates well ahead of the industry and our performance relative to guidance across quarters shows that we're bucking the general trend we're executing.

We're adapting to the macro climate in doing that pretty successfully.

I hope folks, who invest in hope folks who follow us as partners and customers.

I see that the trend lines are very strong.

We're growing we're.

Sort of leading the charge in e-commerce.

You know the future. We believe is very bright thanks, all for tuning in.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

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Head of Investor Relations you may begin.

Good afternoon, and welcome to Big Commerce as third quarter 2022 earnings call, we will be discussing the results announced in our press release issued after today's market close with me are big Commerce, as President CEO , and Chairman, Brent Pelham and CFO Robert Alvarez today's call will contain certain forward looking statements, which are made pursuant to the safe Harbor provisions.

Of the private Securities Litigation Reform Act of 1995.

And is also available on our website at investors that big Commerce Dot com with that let me turn the call over to Brent.

Thanks, Danielle and thanks, everyone for joining us on today's call are Ian I will review, our third quarter results highlight developments in the quarter and discuss our view on the current operating environment.

We'll also provide our view on Q4 and what we expect to see generally in the front half of 2023 and his discussion on updated guidance.

First and foremost I am pleased to share that we beat the high side of our guidance range for revenue and also outperformed our expectations on non-GAAP operating loss in Q3.

Without doubt, we face a challenging operating environment appropriately we are managing our business tightly and remain committed to deliver the growth and operating leverage expectations. We provide let's discuss the details.

In Q3 total revenue grew to $72 4 million up 22% year over year, our non-GAAP operating loss was $11 $5 million. We concluded Q3 with an annual revenue run rate.

We're at $305 million up 20% from last year that represents a sequential growth in IRR of $9 4 million Enterprise account was $216 2 million up 35% year over year. The enterprise segment now represents 71% of our total company.

We believe enterprise can eventually grow to more than 80% of our total company <unk> and drive strong financial performance in the coming years.

I would like to highlight four areas of encouraging progress and resilient underlying performance in the business in Q3, and thus far in 2022.

First despite macroeconomic and geopolitical uncertainties, we have over performed revenue expectations every quarter in 2022.

As <unk> discussed on our Q4 guidance. We believe we can exceed the 2022 revenue expectations. We set at the beginning of the year. We saw continued above market growth in subscription and partner in services revenue in Q3, driven by strong enterprise retention and durable order volume in DMD.

As open and composed of all in Big Commerce provides a level of compose ability the BTC and <unk> merchants need without the cost and complexity of competitive offerings.

During the summit, we announced the launch of our new Omnichannel certified partner program. This is a new platform agnostic program for agency channel and technology partners that offers unique benefits to help merchants sell more across more channels.

Program solve that and we're doing it in a very big commerce way by leveraging our strong partner relationships with both agency and Tech partners.

Our agency partners benefit by leveraging improved product data and listings through feed optimization, using <unk>, which we acquired last year Omnichannel growth consultations with big Commerce expert and access to exclusive channel partner Alpha and beta programs with partners, including Amazon by with Prime Google <unk>.

<unk> meta snap target plus and Walmart marketplace, among others in select regions, we're already seeing substantial demand globally with close to 100 agencies and Tech partners in the program since launching at just a few weeks ago. It's a great win win win for merchant partners channels and Big Commerce.

More businesses succeed in Omnichannel commerce, and the more agencies are able to use big commerce and feed genomics expertise to better meet their clients' needs the stronger our business will become and the faster we will grow we believe the future of Commerce is open flexible and <unk>. These great partner programs highlight that conviction.

Create custom buy online pickup in store experiences at.

As shoppers increasingly demand flexible fast and convenient fulfillment options. These foundational API enabled large enterprise merchants to create complex multi location inventory scenarios.

In addition, our customer segmentation feature is an open beta as well as our App extension feature which allows third parties to deeply integrate into the control panel experience.

In August we announced an expanded partnership with a firm enabling merchants of all sizes to be able to use a firm's adaptive checkout.

This provides eligible customers with the flexibility and control to choose which payment schedule works best for them in September we announced a strategic partnership with crypto currency leaders that PE and coin payments to easily and securely deliver crypto currency payment solutions to bid Commerce merchants, we also announced the launch of Big Commerce on Google Cloud markets.

Place, making it easier for global enterprise customers to modernize their ecommerce platform to expand audience reach and drive business growth.

Gibbs businesses powerful ecommerce tools that work within the Google cloud ecosystem to reach more people and drive sales at every stage of growth.

Earlier this week, we announced our launch of Snapchat for Big Commerce in partnership with Snap Inc. This gives the commerce merchants of all sizes, the ability to create manage and optimize snapchat AD campaigns to showcase products and broaden audience reach to millions of Snapchat users.

Also in Q3, we successfully obtained stock one type two and sock to type two certifications demonstrating commitment to protecting our customer sensitive and valuable information.

These certifications are very important to enterprise merchants and strengthen our reputation with those businesses.

Fourth we are rolling out bigger and more sophisticated enterprise accounts than ever.

Loyalty the loyalty program for British Airways and partner Airlines launched the wildfire a new online store leveraging big Commerce is open SaaS API first platform for the millions of members of the British Airways Executive club can exchange loyalty points for wine and earn loyalty points by making purchases.

Hungry harvest, which notably reduces food waste by selling rescued produce that otherwise would've been discarded due to surplus supplier over purchasing or physical deformity took advantage of our multi storefront functionality to launch two stores one for their customers on demand purchases and another for its subscribers.

So the <unk> architecture that takes advantage of our local Australia based hosting offering to maximize page speed and minimize the potential for disruption.

And last but not least different dots the frozen tree brand that our kids no doubt now launched the new storefront that combines a fun and engaging customer experience with checkout functionality that ensures that the temperature sensitive products are delivered when theyre buyers want them.

Now I would like to address some of the macro driven challenges, we face and our actions to focus resources on our highest ROI opportunities <unk> will expand on many of these further during his remarks as well.

Larger enterprise deals in our pipeline.

Growing traction with large sophisticated systems integrators and outstanding partner engagement and momentum.

With respect to the non enterprise portion of the business. We are actively shifting our demand generation budgets, both in people cost and variable spending towards the superior economics delivered by enterprise accounts.

We have tested this increased spending prioritization over the past two quarters and we are moving full speed on this now across all teams and budgets were.

We're also focusing on ROI and operating leverage by removing most promotions on new non enterprise bookings. This is increasing revenue and profit even as it delivers fewer short term bookings and the non enterprise business. We will continue to invest in our non enterprise business, but we plan to focus more on R&D product excellence.

Marketing activities and self service sign ups to improve the LTV to CAC for non enterprise plans.

What is different about our business is a strategic focus on merchant concentration and durable resilient enterprise P&C and <unk> customers.

The strong unit economics of enterprise accounts are compelling and we are prioritizing our sales and marketing spending on this segment as a result, we expect enterprise to continue to grow into a larger and larger share of our <unk> in the quarters and years ahead.

Ill conclude my discussion about current challenges with an update on our team in Ukraine on a personal note for our teammates. The continued war remains a hardship for our employees, particularly as attacks on civilians targets have resumed and Keith it is tragic on a human level for our friends and teammates.

I am extremely proud of the resilience of our Ukraine team as well as how supportive our big Commerce team and partner ecosystem has been for them.

I'd like to conclude by speaking at a high level about how we're building our plans for next year.

Pete we are doubling down our sales and marketing spending on enterprise accounts as we highlighted in our Investor day in May our average LTV to CAC for enterprise accounts across the last four years was eight to one compared to two to one for non enterprise accounts. We believe we are the world's most modern enterprise E Commerce platform and we're going all in on.

This enterprise segment.

We remain committed to our open partner centric strategy. We believe open SaaS is a strategy that will win in the enterprise market, which means our business will become more partner focused on ever in 2023.

Other we are basing our 2023 planning activities on the expectation that the macroeconomic and geopolitical challenges that have impacted this year will persist into 2023.

To offset this we will remain disciplined about the pace and size of our investments.

As we highlighted on previous calls 2022 was an investment year for our company. Our 2022 investment plans were modified throughout the year to stay on track to deliver our original topline and bottom line guidance, which we are pleased to have accomplished through the first three quarters, we remain committed to hit breakeven on an adjusted EBITDA basis in the second.

Half of 2024, and 2023 will therefore being operating leverage year, we're making hard decisions to focus and prioritize our spending on our best ROI investments and we will continue to do so during 2023.

Shifting sales and marketing resources away from shorter sales cycles, but lower retention non enterprise plans to longer sales cycle and higher retention enterprise plans is an example of.

This decision may impact bookings growth in the front half of next year as these investments expand our enterprise deal pipeline at the short term expense of non enterprise pipeline and retail planned bookings. We believe this is the right decision for our business to deliver long term growth and returns to our shareholders are able will discuss in his remarks.

The merchants I listed earlier reflect that these are large prominent brands that chose big commerce because of our enterprise capabilities, our open platform and our strong partner ecosystem. This is a differentiated winning strategy that our partners are as excited about as we are with that I'll turn it over to Ara.

Thanks, Brent and thank you everyone for joining us today.

During my prepared remarks, I'll walk through our Q3 results and provide details on how current conditions are impacting elements of the business such as bookings and partner in services revenue.

I'll also provide details on our Q4 revenue and profit guidance and our current views on 2023, and our long term financial outlook.

In Q3 total revenue was $72 4 million up 22% year over year subscription revenue grew 26% year over year to $53 2 million driven by a continued mix shift to enterprise accounts.

Partner in services revenue or <unk> was up 12% year over year to $19 2 million.

Both subscription revenue and <unk> beat our expectations.

By healthy enterprise MSR retention rates and durable order volumes in <unk>.

We are incredibly encouraged by the resiliency of the enterprise business and a tough climate.

We will continue to take a careful conservative approach to the forecast and I'll address. This further later in my remarks, when discussing our Q4 guidance.

Revenue in the Americas was up 23% in the quarter, while EMEA revenues grew 31% and APAC revenue was up 2% compared to prior year.

We see strong growth in enterprise accounts and bookings in EMEA and we are also encouraged by early signs in our expansion markets. Our APAC presence today remains focused on Australia, and New Zealand and.

And we hope to drive growth in the coming year as we build additional partnerships more broadly across the APAC region.

I will now review our non-GAAP kpis.

<unk> grew to $305 million up 20% year over year.

Driven by continued strength in our enterprise customer base.

That represents a sequential growth in total of $9 4 million.

Enterprise account AAR was $216 2 million up 35% year over year.

As I outlined on our last call the change in total subscription <unk>, which can be calculated by subtracting the trailing 12 months of <unk> from total <unk> is a good indicator of our underlying change in net bookings during the period.

Subscription <unk> was up seven 4 million.

Versus Q2, and up 21% year over year.

Brent mentioned this growth was a bit slower than previous quarters.

We expect changes in net bookings to have wider variance period to period in the future as we mix more and more towards higher ARPA longer sales cycle enterprise accounts and shift sales and marketing spending into building, an even larger enterprise pipeline.

At the end of Q3, we reported 5560 enterprise accounts up 758 accounts or 16% year over year, including feed and Omics.

ARPA or average revenue per account for enterprise accounts was $38885 up 17% year over year.

I'll now shift to the expense portion of the income statement as a reminder, unless otherwise stated all references to our expenses operating results and per share amounts on a non-GAAP basis.

Q3, gross margin was 77% up 57 basis points from the previous quarter means.

Meanwhile, we reported gross profit of $56 million up 19% over the prior year.

In Q3 sales and marketing expenses totaled $31 5 million up 31% year over year.

This represented 44% of revenue up 288 basis points compared to last year. This.

This increase was driven by additional head count, particularly due to investments in international expansion and enterprise go to market efforts.

Research and development expenses were $19 1 million or 26% of revenue up 124 basis points from a year ago.

Given by additional hiring to support investments in our.

Our key strategic initiatives.

Finally general and administrative expenses were $16 9 million or 23% of revenue up from 20% of revenue a year ago.

This includes financing accounting legal human resources, some operation spending bad debt expense et cetera.

We expect this to decline as a percentage of revenue during 2023, as we limit hiring and moderate expenses in the coming year.

In Q3, we reported non-GAAP operating loss of $11 5 million.

<unk> 15, 9% operating margin. This compares with negative $3 8 million or a negative six 5% operating margin in Q3 2021.

And a negative $13 7 million or a negative 21% operating margin in the prior quarter.

Adjusted EBITDA was negative $10 9 million.

15, 1% adjusted EBITDA margin.

Compared to a negative five 2% in Q3 of 2021.

non-GAAP net loss for Q3 was negative $11 2 million or negative <unk> 15 per share compared to negative $4 2 million or negative <unk> <unk> per share last year.

We ended Q3 with $308 million in cash cash equivalents restricted cash and marketable securities.

Year to date operating cash flow was negative $86 7 million declining from negative $31 5 million a year ago.

We reported free cash flow negative $90 9 million or a negative 44% free cash flow margin, which includes $32 $5 million paid during the quarter as part of the fee dynamics first anniversary acquisition related payments.

This compares to negative $33 8 million and a negative 22% free cash flow margin in Q3 2021.

I'd now like to transition to a more detailed discussion on several areas of the business starting with subscription and <unk>.

And bookings in Q3, we.

We saw a different dynamics at play in our enterprise and non enterprise businesses in Q3.

Again this is not an unexpected dynamic in enterprise software during a down economic cycle and we are offsetting this by redoubling. Our focus on this segment and actively shifting sales and marketing spending here and away from the non enterprise business.

As a result, we expect to see flat to slightly contracted non enterprise <unk> in the coming quarters.

This is due to a combination of macroeconomic factors and deliberate spending choices.

On the macro front recent economic data highlights. The challenge is small businesses are experiencing in the United States and abroad.

For example, according to the census Bureau, NFIB, New business formation has slowed significantly over the past 12 months, while the SMB optimism index is at its lowest level in 48 years. Additionally.

Additionally, we are also very deliberately shifting spending away from the non enterprise to the enterprise segment in our business.

This is driven by the underlying differences in ROI that we've shared in our commitment to hit breakeven on an adjusted EBITDA basis at or near mid 2024.

Managing this investment transition further towards enterprise will be key to our 2023 results and driving strong growth in our business overall.

Again, 2022 was an investment year 2023 will be in operating leverage here.

We view driving leverage as both the short term drive to profitability and making long term investment decisions to maximize economic value to shareholders balance.

Balancing the short term effect of this enterprise prioritization on the P&L.

Against the long term shareholder value this higher ROI, we will deliver.

Will be key to our 2023 plans.

In addition, Q3 order volume and GMB was resilient given the tough macro climate.

Even so we are taking a conservative approach to our guidance for Q4.

Given persistently high inflation and political issues, we expect headwinds to consumer spending and <unk> to persist into the front half of 2023 and are building our plans accordingly.

Maintaining strong operating discipline will be crucial heading into next year.

We have materially reduced our pace of hiring and diversifying our geographical employee footprint.

To bring in high performing team members from geographies with more favorable cost basis as well.

We are making tough priority calls to focus our spending on the highest long term LTV to CAC and we will remain disciplined about equity compensation and dilution as well.

We will also remain disciplined about sales promotions to attract new merchants.

We have materially reduced the volume and value of promotions on our non enterprise plans to focus on revenue and profitability.

We have also maintained tight discipline around enterprise planned promotions.

Often take the form of freight promotional months in the early period of agreements.

As we mix more and more towards enterprise accounts, we are seeing success signing deals that have longer multiyear durations and prenegotiated step ups in pricing.

Now, let's shift to our guidance and outlook for Q4.

And full year 2022.

Then conclude with a discussion about our preliminary view on 2023, and our long term financial outlook.

For the fourth quarter, we expect total revenue in the range of $72 4 million to $74 2 million, implying a year over year growth rate of 12% to 14%.

Q4, our non-GAAP operating loss is expected to be $12 3 million to $14 3 million.

For the full year 2022, we expect total revenue between $279 1 million to $280 9 million translating to a year over year growth rate of approximately 27% to 28%.

We expect the non-GAAP operating loss between $49 9 million and $51 9 million.

We are holding our full year revenue guidance flat at the midpoint based on the Conservative view, we are taking in Q4, <unk> and bookings as we discussed previously.

I would like to conclude my remarks by sharing thoughts on 2023, and our long term performance.

We are leading to a challenging cyclical environment, while making the right decisions to maximize long term shareholder value.

As we discussed our prioritization of enterprise by shifting both people costs and variable cost away from non enterprise to enterprise demand generation activities may create a period of slower bookings and potentially revenue growth in the front half of next year as those resources build an even larger enterprise deal pipeline we have.

Our confident we can manage through the transition and the current macroeconomic climate with tight spending discipline focus and execution.

We are still in the process of setting up our 2023 plan.

And we plan to provide detailed guidance on our February 2023 earnings call.

That said, we wanted to be transparent and give you a preliminary glimpse into how we're thinking about the business next year importantly, we continue to target, 25% to 30% multi year revenue CAGR.

We outlined in our May Investor day.

However, we expect our 2023 growth rate to be below our target CAGR as we shift sales and marketing demand generation spending more fully to enterprise accounts.

To be more specific we believe that we can continue to deliver enterprise growth rates materially above our total <unk> growth rates offset by flat to contracting non enterprise <unk> in the near term.

We believe that enterprise can go to 80% of total <unk> or higher by the end of 2024.

Over time as non enterprise becomes a smaller and smaller percentage of the business.

There will be less divergence between the overall growth rate of the business and the enterprise growth rate of the business.

We also remain committed to the mid 2024, adjusted EBITDA breakeven timeline that we discussed in our May Investor day.

Improvements in the overall macro climate would help us meet this timeline given the impact on high margin CSR.

But we are aiming to hit at or near that time line, even in the current climate and we will continue to make the tough choices necessary to deliver that.

Finally, I would once again like to thank all of our incredible employees merchants and partners while.

While the past year has certainly brought many unexpected challenges I'm tremendously proud of the commitment and execution of the big Commerce team and our partners with that Brett and I are happy to take any of your questions operator.

Thank you we will now begin the question and answer session.

To ask a question you May Press Star then one on your Touchtone phone.

Okay.

And the first question will come from Gabriela Borges with Goldman Sachs. Please go ahead.

Good afternoon. Thank you.

Three and their related so I'll ask them together number one the reallocation that you are making an investment towards the enterprise segment. How long do you think before the call it not to be incremental to demand generation and revenue in the enterprise segment.

The commentary around the tighter volume with me, maybe a little more detail on what Youre seeing there I would have thought that with the new enterprise functionality, you do think that as youre willing. So I imagine is an offset with re platforming cycle, we can push that.

One more about that and then the third is.

Do you think your enterprise growth rate will be in line with your 25% to 30% CAGR next year. Thank you.

Yeah, Hey, Gaby I'll start with that last question.

If we were guiding on our enterprise business and if it was 100% of the business this would be a lot easier.

As we think about that 25% to 30% CAGR that is going to be driven by our enterprise growth. I mean, if you think about the last 17 quarters, we've grown enterprise north of 35%. Even this quarter, we grew 35% what's weighing us down is the non enterprise growth.

If I think about the spend necessary to build pipe.

We've already started.

<unk> that spend we're not waiting for Q1 to do that.

As we think about the last couple of quarters.

If I were to highlight some things for Q3, I would say that we are getting opportunities for much larger deals and b to C and <unk>.

Do take longer.

And the deals that we have been into.

We may not have closed them in Q3, but that doesn't mean, we're not going to close them in Q4.

No.

Again excited about enterprise.

The.

What was your first question Gabby.

How long before the new dollars being allocated to the enterprise.

It's incremental revenue in the enterprise segment.

As we think about next year, that's why we're looking at the front half of the year differently than we're looking at the back half of the year.

The pipe is going to get built.

Those deals will likely close hopefully by mid next year in I think we have a good shot at the second half of next year showing.

Much better growth rates in the first half and then also keep in mind, we've got a bigger base periods in Q1, and Q2 that we have to be mindful of and then the non enterprise business.

As you've seen in Q3, we expect that dynamic to play out in Q4 and likely in the front half of next year, which is why we are.

As you think about.

Revisiting 2023 numbers, we wanted to be very transparent as to how we're thinking about it and when we present the kind of the.

Guide for the full year next year those are the things that we're contemplating.

Yes.

And just a little bit of color on the tighter volume or are you seeing first of all consumer lending right platforming cycle any color there.

Hi, Gabrielle it's Brent.

Primarily on the pipeline the quantity of opportunities is down from trend line due to the economic environment, but thats.

Primarily driven by small business and the lower end of the market.

It's a bit tighter at enterprise, but we actually are seeing large opportunities.

At sizes that are bigger than ever for US why was for example, Q2, such a great quarter, we closed a whole bunch of.

A number of opportunities that we're the largest in our history.

We are.

In most quarters this year, we're more than making up with quality.

What might be lacking in quantity in particular at the low end of the business and it just demonstrates that we're able to compete for ever higher ends of the market than we have in our history.

We're very bullish on that trend continuing next year and beyond.

Okay.

Operator next question please.

We don't know where our operators.

Yes.

Hear the operator so.

We're just waiting.

Yeah.

Pardon me. Our next question will come from Mr. Clarke Jeffries with Piper Sandler. Please go ahead.

Hello, Thank you for taking the question.

Alright.

To touch on the.

The expectations of flat to slightly contracting non enterprise <unk> in the coming quarters.

Just really off of the fact that we've kind of been in a flat to slight contraction paradigm for the past few quarters I'm wondering if you could more clearly illuminate.

Whats the new change happening and whether you would expect it to be more of a.

Our maintenance of where we've been at or change based off of this redeployment of demand generation.

Yeah, Hey, Clarke, so when I think about the retention profile.

Enterprise versus enterprise.

I'll highlight that our enterprise retention remains really strong.

Our non non enterprise retention when we look at our churn usually happens within the first 12 months and so.

When you look at last year and the prior quarters. This year, we were spending money to acquire non enterprise merchants and whether it was through the promotions or sign ups.

We also had to look at the retention profile of those merchants as I think about Q4 in the front half of next year I suspect that that.

Flat to declining trends would continue but I do expect it to moderate as the non enterprise sign ups that we do have.

Likely are going to get past that 12 month, Mark and we see great retention once they once they do that.

Understood. So maybe the cohorts that we're churning in the first half of the year might look different than.

The cohorts going forward in non enterprise.

The second question is really around pricing as a lever in this environment, certainly having more discipline around promotions.

One way to achieve a sort of pricing outcome, but.

As you continue to innovate and deliver more functionality for the platform the contract value for the enterprise, maybe tied to order volume.

Do you believe pricing might be something we're seriously pursuing in this environment or any thoughts you have on that topic.

Hey, Clarke, it's Brent for sure every year, we modify our rate cards that are salespeople quote on enterprise plans and there are changes ongoing.

That reflect the state of inflation in the economy as well as the extraordinary.

Capabilities and ever increasing enterprise functionality of the core platform.

So, yes folks should assume that in the background one of the things that drives our continued growth.

Average revenue per enterprise customer is in fact.

The reflection of the capabilities.

I would also stress that pricing isn't the only thing that drives revenue per customer there's also.

One products that we rollout and we have talked about multi storefront, becoming self serve you click a button yet a storefront.

We are able to incorporate that into our bill.

Fee dynamic self serve is coming or acquisitions, BTB ninja bundled <unk> et cetera, and so there is a lot of opportunity to.

So additional.

Revenue driving features functionality capabilities to our customers that improves revenue per customer, but it's in fact not pricing related.

Thanks for the question.

Yes. Thank you.

The next question will come from Terry Tillman with the Truest. Please go ahead.

Yes, Thanks Brent.

Daniel Good afternoon, maybe the first question is I don't know if this is for you Brent or <unk>, but I think you described it.

It's not like wholesale weakening of the volume of leads and enterprise, but you did say tightened in your volume.

If that's the case and I'm, assuming some of these sales cycles can go on a while do you see kind of an ongoing kind of hangover and enterprise subscription bookings.

For example, could it get worse do you said before it gets better or is it really here is the fourth quarter. So just a little bit more on kind of how the implication will be at the tighter volume of leads in the enterprise side, and then had a follow up.

Yes, I mean.

Do I expect it to get worse I do not.

<unk>.

Ultimately a fair chunk of enterprise opportunities are either migrations.

Those come back later on like nothing is changing the laws of physics around the need for <unk>.

To any trend line companies will save costs.

<unk> migrations delayed launches of new businesses relative to what would be happening.

A better economic times, so it could get worse, but it's not my anticipation.

I think.

Okay.

New store launches and migrations that might have been happening.

At a higher pace at this point in the year eventually will come back.

As the economy strengthens or at least settled into.

Current trends, Hey, Terry I would just add that.

When we talk about that we're talking about the tightening of leads in our pipe, but one of the initiatives that we've talked a lot about this year is commerce as a service.

And we're actually seeing really strong opportunities with folks that are actually inbound to us and looking for opportunities to modernize their ecommerce offering or their storefront switch obviously, it's hard to predict when those deals would close but.

Could have.

Pretty pretty material impact in terms of our bookings and revenue.

Yes, we have a great pipeline of <unk>.

Strong commerce as a service deals in.

We'd be very excited if some of those close this quarter.

Yes, understood and then maybe just a follow up question.

And it's tough because you are giving us a little bit of color all right for 'twenty three so I can't help myself in terms of your tougher comps for sure as we move into the first half of the year.

<unk> 23 to deal with and then obviously gets easier.

As you anniversary feed genomics et cetera, I'm, just trying to get a sense on with kind of the shift away from non enterprise and retail and some of these other dynamics just trying to understand like relative growth rates in the first half second half.

<unk> set another way.

Could the growth actually get lighter than what we're talking about here in <unk> you. Thank you.

Yes, Terry obviously more details to come on that front on our next call in February but.

As of today, we believe that the dynamics that contributed to the guide and the range for Q4, we will likely persist into the front half of next year, where we also faced those tough comps in the base period.

We believe those growth rates can accelerate though in the second half of 2023.

And it's going to be.

As we build out our plans obviously with the focus in the investment in enterprise.

That will only increase our chances to really get those growth rates higher.

Higher in the back half.

Understood. Thank you.

The next question will come from Scott Berg with Needham. Please go ahead.

Hey, guys. This is Josh on for Scott, Thanks for taking my questions.

Curious are you seeing any divergence in <unk> versus <unk> E Commerce GMB trends here over the last few quarters and then what specifically can you tell us on how <unk> trends have trended here in the month of October and I guess, maybe the first week of November .

Are things that we're seeing materially or what are you seeing.

Yeah.

I'll take that Josh we don't have commentary broken out on <unk> versus <unk> trend line.

Split, but on the aggregate GMB, what we're seeing is steady.

Yes.

And.

Solid certainly better now than it was in the first half of the year, Yes, Josh I'll add that Q3 <unk> came in higher than we were expecting we did see better than expected orders and GMB.

But having said that this holiday season, there's a lot of uncertainty around.

Order volumes in <unk> with the holidays. So we're not going to we're not going to be aggressive in those forecasts, but we have seen them hold pretty steady and definitely above industry average.

Got it that's helpful. And then maybe just one follow up is there any characteristics of the non enterprise customers that have had a bit higher churn rate.

That encouraged a.

Of customers to comment on who probably werent.

<unk> businesses or intending to transact long term.

And as soon as they came in they kind of went out before they ever paid us so they were.

The LTV to CAC on small business is.

Materially lower than the very attractive LTV to CAC on enterprise and there are sub segments of small business would have.

Extremely high value because you spend no money to acquire them and we've got a lot of those.

So if.

And just to give you. An example, if the blended average LTV to CAC on small businesses two to one.

You get that because you spend a whole bunch, where it's zero right Theres no theres no real return on it and just stopped spending money on the zero return right in the in the <unk>.

<unk> is going to go way up.

Because we get a lot of business through partner channels organically word of mouth high net promoter score.

That we don't have to market and we don't have to sell.

And they are great businesses, and so we want to keep acquiring all of that.

The variable marketing into very high LTV to CAC enterprise segment.

Yes, and the way to think about.

Non enterprise for us going forward.

Want to make it crystal clear, we're not abandoning small business.

Just going to get really smart in terms of how much sales and marketing we're spending to acquire them a lot of the investments will make us to optimize self serve.

Really try to route leads that need to talk to salespeople.

So those solos stove is a great example, they started out on our retail plan in couple of years later two to three years later they are one of our largest merchants doing hundreds of millions of dollars on on Big Commerce. So we clearly don't want to move away from acquiring more and more solar does so.

Just wanted to make that clear for everybody.

Alright, and then last question will come from DJ Hynes with Canaccord Genuity.

Hi, This is Dan Reagan on for D. J, Thanks for taking our question.

So maybe once your Brent so when we think about this story multi store is really open the door to more enterprise opportunities. So just a couple of questions.

As you shift your sales efforts and you build the pipeline what does that mix of Rfps look like in terms of general re platforming, maybe sunsetting of Genco.

Is there any piece of Greenfield in there and then secondly, when you see legacy players in the RFP process like Salesforce demand were.

Are you seeing more customers choose these legacy players as more of a platform consolidation play.

Any color there would be great.

Yes, when we look at where business comes in it's a mix.

More it's closer to 50 50 than a giant swing in either direction between.

New stores that are net new creations and migrations.

A lot of these new stores our existing companies.

That might already have other e-commerce stores or they might be new to e-commerce.

As opposed to brand new businesses starting up.

The migrations the number one sources last time I checked actually not magenta, it's custom.

The agenda is by far number two and then.

Youre not going to see as many from like a salesforce because they don't have as many of their far larger, but we got those two will get some shopify and we will get any of the long tail of 500 other platforms around the world. We really do believe that one conclusion, we have the most modern flexible SaaS.

Platform for enterprise vault <unk>.

And Youll continue to see us.

When deals.

It really migrations from platforms of all sizes as well as net new.

Thanks.

And then maybe just one for RA as you continue to emphasize small accounts.

The removal of free trials Youre shifting your sales efforts towards enterprise, it's fair to think that the next several quarters will be a bit of a transitory period.

Maybe fewer and fewer small merchants joining some churn.

Then secondly, as you bring on higher <unk> merchant.

Whats the right way to think about <unk> growth and the resulting impact to margin expansion given that a lot of <unk> Super high gross margin. Thanks, guys yeah.

When you look at Q3.

Our enterprise <unk> grew 35% are non enterprise <unk> contracted a little bit.

I suspect that that dynamic is going to likely continue for the next two to three quarters I do feel like it will moderate because as I mentioned when the non enterprise plans.

Plans do churn, it's usually within that first 12 months.

The <unk> mix is 90% plus of our <unk> is from our enterprise accounts.

The more we sign and close bigger and bigger deals.

In both PVC and BTB that that <unk> is only going to increase those orders are only going to increase.

What are the things that.

I should probably highlight is if youre on a legacy platform. Today. If you were talking to our partners. Our agency partners are Tech partners. We tried to highlight this in the script, but.

Open commerce is resonating being able to have composed ability without cost and complexity is resonating there.

Are a lot of merchants that are now.

Looking at their legacy platforms that are about to expire and as they evaluate what platforms that they want to use to power their e-commerce for the next five years.

And so again this gives us a lot of confidence that now is the time to really focus on enterprise.

A year ago, we probably werent ready to do this because the product investments we didn't launch multi store yet multilocation inventory, we didn't have the pieces in place that we do know.

Now that we have all those pieces in place I think.

The opportunity for us to continue to lead in <unk> lead in Omnichannel, leading composed ability and headless.

Over the next five years.

Operator next question please.

Yes.

The next question will come from Koji Aikido with Bank of America.

Hey, guys. Thanks for taking my questions.

I kind of wanted to follow up with you on some of the commentary you gave on on the on the non enterprise.

Revenue stream here are the AAR screen and earlier in the call you talked about trying to I guess expecting flat to contracting for this segment, but I'm just kind of wanted to understand a little bit more are you going to be investing sales and marketing to keep.

And this and this segment within a tight range so from.

A modeling perspective, we have a good expectations of where this this segment should should shake out on a quarterly or annually basis. So.

Yes.

I would expect that to again moderate a bit in the coming quarters.

We're look we're really serious about getting to that breakeven point.

And by the second half of 2024, when we think about the path to get there. We just have to be really smart.

We are investing our dollars, especially around sales and marketing so marketing efforts to drive pipeline for mid market and enterprise is where we're going to focus in our sales teams and go to market teams are going to be very much focused on enterprise in the past.

Got it Okay and then just one follow up for me I wanted to go back to the very first question from from Gabrielle and follow up here.

No.

I just wanted to fully understand you are shifting resources from non enterprise to enterprise. So as that transition essentially done internally is there more shifting to go and if it is already done or are we heading into a period of do we need to ramp those employees or are they all fully ramped and now we're heading into 2023 with that kind of a go get.

<unk> for them.

Yes, no. We've operationalized. This we're heading into 2023 with that focus the alignment across all the teams.

Is squarely in place so we're not waiting.

This is all.

Something that we've operationalized then are completely aligned on.

Got it thanks, alright, thanks for taking the questions.

The next question will come from Keith Weiss with Morgan Stanley . Please go ahead.

Mr. Weiss your line is open.

Hi, Ryan on for Keith Weiss here, Thanks for taking my question.

Maybe just following up on your earlier comments around lengthening deal cycles on the macro seeing there has been some discussion this earnings season about software customers increasingly looking to prioritize lower total cost of ownership as a way to navigating the environment.

Have you seen any shift in your customer base is behavior as a result of this theme and if so how is big commerce position to help enterprise customers deal with this.

Well, that's a nice way up we've always been.

Higher value lower cost platform Dan.

The other enterprise platform substantially so on total cost of ownership, whether youre, comparing to magenta or salesforce or legacy like SAP and Oracle.

He has been a strength of ours and <unk>.

Right now that strength is valued probably more than ever, especially relative to the pandemic side. So.

I think our competitive advantages are only.

Improved in the current economic environment that said.

It's still up companies to make the commitments to do migrations and launched new stores and so that's the overriding overwriting driver of lead opportunities.

Thanks.

Helpful. Thank you and just one more quickly.

Launched in quite a few markets this past year in Europe .

Latin America, just curious if you have any feedback as to which markets youre seeing the most traction so far and how their various payback periods are different.

Yes, so one thing.

Really can call out because it will be in the footnotes of our report the non U S. Americas, which is primarily Latin America, and Canada, that's everything ex U S grew 56%.

And it is not an insubstantial amount is more than.

Half the size of APAC and almost half the size of EMEA. So Latin America is off to a nice start led by Mexico.

Europe continues to do very well, we're excited about the emerging interest we're seeing in the middle East and some of the deals there and Asia is really all upside for us because when you look at our APAC business APAC business, It's overwhelmingly Australia and New Zealand.

That is our most mature market. We originally founded out of Sydney, Australia in 2009, and so we're excited about adding Asia and in particular, we had major activities launching with a partner in Korea.

Within the last couple of months and we're doing similarly in China, So lots of upside potential there, but you don't see it anywhere in the numbers quite yet.

Thanks, Thank you.

The next question will come from Brian Peterson with Raymond James. Please go ahead.

Alright, Thanks, gentlemen for taking the question I actually will follow up on Brian's first question in the <unk>.

<unk> dynamics.

It.

We're thinking about.

The idea of kind of value price, where everything else from these migrations is.

Is that becoming more important like is that something you are stressing and more so now and is that a better source.

Deals I know, it's been a great growth sector for you guys overall, but I'm just wondering if that actually becomes more important in the win rates actually go up this year, even if the kind of the overall activity may be maybe down a little uncertain macro above unpack that a little bit.

Yes, I mean win rates.

Hi, this year, they've always been high for us but.

Theyre excellent this year when deals actually close on some deals are just pushing taking longer I would note in terms of value I think in the world ecommerce platforms. There are three.

Truly modern platforms that are growing.

SaaS of the rate of e-commerce for well in excess of e-commerce in our case in commerce tools.

US commerce tools, and Shopify, and we shop and Shopify.

Who is stronger at the low end.

Our extraordinary values in terms of the functionality.

Of what we deliver and how easy it is to deploy and they get the polar opposite extreme of commerce tools for somebody going pure had listen we think we are the faster easier.

More economical way to do had what's right for 98% of the world's business that was in the 2% might tackle.

Commerce tools at the other end, but for sure value SaaS ease of use flexibility.

Flexibility Thats whats winning right now in e-commerce.

Thanks Scott.

Maybe unpack kind of the enterprise strength I think you guys mentioned, some some slowing sales cycles any help on how that trended over the course of the quarter. We just love any perspective on linearity would be helpful. Thanks, guys.

Yes, I would say Q3 was weaker than Q1, Q2, and we closed a bunch of really big deals and had I thought excellent quarters of AOR growth Q1 Q2.

Yes.

We're hoping for and trying to treat for a rebound in Q4.

Thanks, Greg.

The next question will come from Ken Wong with Oppenheimer. Please go ahead.

Hi, This is Nancy on for Ken. Thanks for taking a question just one quick question from me.

Yeah.

I heard you mention that even in the current macro environment, you aim to hit breakeven or at or near breakeven.

Fiscal Q4 is that assuming any recovery in the macro environment in order to reach that breakeven goal.

Go ahead sure would make it easier, but no were assuming conditions, we're going to operate under these conditions going into next year.

Okay. Thank you.

This concludes our question and answer session I would like to turn the conference back over to our President and CEO and chairman Mr. Brent Bellum for any closing remarks. Please go ahead.

Great. Thanks, everybody for listening in I think.

Final Big picture comment that I would make is.

Everybody in the World of E Commerce, or who follows us knows that this has been a challenging year not just because of.

Lapping the highs of the pandemic, but also because of the macroeconomic environment and high inflation potentially crowding out purchases discretionary purchases that are the bulk of e-commerce.

In fact, some agencies likes the tester and salesforce or even forecasting flat to negative.

Global GMB Guinea commerce for the year.

Despite that.

Our revenue grew 42% in Q.

139% in Q2, and when we were done with lapping. The addition of <unk> revenue 22%.

In Q3, all of those growth rates are dramatically in excess of E. Commerce in general it shows we're gaining share at a very strong clip.

We also began this year with.

With guidance for full year revenue at the midpoint of $277 million.

<unk> topline and guideline, sorry, topline and bottom line in Q1 Q2 Q3.

And our final full year guide at the midpoint is $280 million so up.

Have to search far and wide for other public ecommerce companies.

That havent lowered their full year guidance from beginning to end and have managed to beat each quarter and we've done all of that without.

Lay offs or other dramatic changes, which shows that the original plan, we have we've been able to execute despite the tough environment.

We're proud of that we wish the economy, we're even stronger we surely have many more points of growth.

That would be wonderful for all involved but I think some folks just say well the E. Commerce sector are struggling this year and it's a bad place to invest.

Our our growth rates well ahead of the industry and our performance relative to guidance across quarters shows that we are bucking the general trend we're executing.

We're adapting to the macro climate in doing that pretty successfully.

I hope folks, who invest in hope folks who follow us as partners and customers.

But the trend lines are very strong.

We're growing we're.

Sort of leading the charge in ecommerce.

You know the future. We believe is very bright thanks, all for tuning in.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Q3 2022 Bigcommerce Holdings Inc Earnings Call

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