Q2 2024 BigCommerce Holdings Inc Earnings Call
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Speaker Change: Ladies and gentlemen, thank you for standing by and welcome to the BigCommerce second quarter 2024 earnings call. At this time all participants are in a listen-only mode.
Speaker Change: After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.
Speaker Change: I would now like to turn the conference over to your first speaker today, Tyler Duncan, Senior Director, Finance and Investor Relations. You may begin.
Operator: Good morning, and welcome to BigCommerce's second quarter 2024 earnings call. We will be discussing the results announced in a press release issued before today's market open. With me are BigCommerce's Chief Executive Officer and Chairman, Brent Bellm, and Chief Financial Officer, Daniel Lentz. 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.
Speaker Change: Good morning, and welcome to BigCommerce's second quarter 2024 earnings call. We will be discussing the results announced on a press release issued before today's market opened. With me are BigCommerce's Chief Executive Officer and Chairman, Brent Bellm, and Chief Financial Officer, Daniel Lentz.
Speaker Change: Today's call contains certain forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Speaker Change: Forward looking statements include statements concerning financial and business trends, as well as our expected future business and financial performance, financial condition, and our guidance for both the third quarter of 2024 and the full year 2024.
Speaker Change: These statements can be identified by words such as expect, anticipate, intend, plan, believe, seek, committed, will, or similar words.
Speaker Change: 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.
Operator: 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. During the call, we will also discuss certain non-GAAP financial measures that are not prepared in accordance with generally accepted accounting principles.
Speaker Change: For discussion of the material risks and other important factors that could affect our actual results, please refer to the risks and other disclosures contained in our filings with the Securities and Exchange Commission.
Speaker Change: During the call, we will also discuss certain non-GAAP financial measures which are not prepared in accordance with generally accepted accounting principles.
Speaker Change: The reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure, as well as how we define these metrics and other metrics, is included in our earnings press release, which has been furnished to the SEC and is also available on our website at investors.bigcommerce.com.
Brent Bellm: The reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure, as well as how we define these metrics and other metrics, is included in our earnings press release, which has been furnished to the SEC and is also available on our website at investors.bigcommerce.com. With that, I will turn the call over to Brent. Our number one priority for 2024 remains efficient revenue growth, and I'm excited to share updates on our progress towards that goal during our call today.
Speaker Change: With that, let me turn the call over to Brent.
Brent: Thanks, Tyler, and thanks, everyone, for joining us.
Brent: Our number one priority for 2024 remains efficient revenue growth, and I'm excited to share updates on our progress towards that goal during our call today. First, I'll provide a brief summary of our quarterly results. Following that, I'll highlight some exciting customer launches that showcase the power of our platform.
Brent: Then, I'll discuss our latest product innovations that fuel growth and innovation for our customers.
Brent: Finally, I'll look ahead at what's next for the business.
Brent: Q2 delivered results consistent with our top and bottom line plans.
Brent: Revenue finished just under $82 million, of 8% year-over-year. Adjusted EBITDA came in at $3 million, or approximately 4% of revenue.
Brent: We also had a strong quarter from a cash flow perspective, achieving operating cash flow of just under $12 million. We see tremendous upside in this business, and Q2 results highlight our progress and the success that our customers are seeing on our platform.
Speaker Change: I'm thrilled to announce that The RealReal, the world's largest online marketplace for authenticated resale luxury goods, has launched on BigCommerce.
Speaker Change: This implementation allows The RealReal to fully leverage BigCommerce's industry-leading checkout and shopping cart functionality, which they integrated with their existing systems in a phased, composable approach.
Speaker Change: The result has been a faster and more intuitive checkout process for the real, real customers and improvements in the brand's new customer purchase conversion rate.
Brent Bellm: The RealReal nicely demonstrates BigCommerce's continued traction in luxury apparel, compatibility, complex enterprise implementations, and high-volume sites, in their case selling more than $1 billion online annually. Also just launched on BigCommerce is Bell's, the Florida-based department store chain with more than 600 stores and 100 years of proud history.
Speaker Change: The RealReal nicely demonstrates BigCommerce's continued traction in luxury apparel, composability, complex enterprise implementations, and high-volume sites, in their case selling more than $1 billion online annually.
Speaker Change: Also just launched on BigCommerce is Bell's, the Florida-based department store chain with more than 600 stores and 100 years of proud history.
Brent Bellm: They achieved a remarkably successful migration of multiple brands from legacy platform HCL Commerce in just three months from contract. Notably, Bell's utilized BigCommerce's new reference-composable architecture, Catalyst, in conjunction with Vercel for hosting, Manhattan for OMS, and a tech stack tailored to their omni-channel operations. In sum, Bell showcases the unprecedented speed with which complex store-based retailers can migrate from legacy to fully modern, composable technology, in this case, Catalyst, our next JS and React-based architecture.
Speaker Change: They achieved a remarkably successful migration of multiple brands from legacy platform HCL Commerce in just three months from contract signature.
Speaker Change: Notably, Bell's utilized BigCommerce's new reference-composable architecture, Catalyst, in conjunction with Vercel for hosting, Manhattan for OMS, and a tech stack tailored to their omni-channel operations.
Speaker Change: Bell's and their agency partner DMI heavily customized the BigCommerce checkout to incorporate their specific payments, tax, and shipping requirements.
Speaker Change: In sum, Bell showcases the unprecedented speed with which complex store-based retailers can migrate from legacy to fully modern, composable technology, in this case, Catalyst, our next JS and React-based architecture.
Speaker Change: As part of a wider digital transformation project, Sports Shoes, the UK's largest independent retailer of sporting goods, has unveiled a new composable commerce website on BigCommerce.
Brent Bellm: Sports Shoes is dedicated to helping people lead happier, healthier lives through running and fitness. Catering to everyone from elite athletes to fitness enthusiasts, Sports Shoes chose BigCommerce, and our partner e-commerce.., to modernize their e-commerce operations and web site.
Speaker Change: Sports Shoes is dedicated to helping people lead happier, healthier lives through running and fitness, catering to everyone from elite athletes to fitness beginners.
Speaker Change: Sports Shoes chose BigCommerce and our partner ecosystem to modernize their e-commerce operations and website.
Speaker Change: Since migrating to BigCommerce, SportsChoose has seen significant improvements in conversion, average order value, and checkout completions, enhancing their ability to deliver the best online retail experience for their customers.
Brent Bellm: Our B2B segment continues to show strong momentum, with a number of manufacturers, suppliers, and distributors moving to BigCommerce. Enhancements like real-time stock visibility have significantly boosted their customer experience and operational effectiveness. In Q2, leading brands and retailers such as Patagonia, Melissa & Doug, and Faraday Brand turned to Fedonomics to optimize their data and performance across search, social, affiliate, and marketing. Dunium Bork, a renowned leather goods company known for its superior quality handbags, luggage, and accessories, selected Fedonomics to optimize product data and improve keyword relevancy on Google and other major channels, driving more impressions, improved funnel progression, and increased revenue.
Speaker Change: Our B2B segment continues to show strong momentum with a number of manufacturers, suppliers, and distributors moving to BigCommerce.
Speaker Change: For example, Inovus, a medical technology company with $1.7 billion in revenue, migrated to our platform in Q2 from Magento to escape escalating costs and reliability issues.
Speaker Change: Leveraging BigCommerce's robust B2B features, InnoVis has experienced greater platform stability and efficiency since migrating. Enhancements like real-time stock visibility have significantly boosted their customer experience and operational effectiveness, positioning InnoVis for sustained growth in the B2B market.
Speaker Change: Additionally, we welcome Starrett, a renowned manufacturer of precision tools.
Speaker Change: They upgraded to BigCommerce while retaining their existing content management system, which streamlined their purchasing process, improved user management, and enhanced security.
Speaker Change: In Q2, leading brands and retailers such as Patagonia, Melissa & Doug, and Faraday Brand turned to Fedonomics to optimize their data and performance across search, social, affiliate, and marketing channels.
Speaker Change: Duny & Bork, a renowned leather goods company known for its superior quality handbags, luggage, and accessories, selected Feedonomics to optimize product data and improve keyword relevancy on Google and other major channels, driving more impressions, improved funnel progression, and increased revenue.
Speaker Change: I'm proud of the progress and results that our customers are achieving with BigCommerce, and these stories illustrate our platform's ability to deliver exceptional performance, flexibility, and growth across various industries and customer segments.
Speaker Change: Later this month in Austin, we're excited to showcase our latest product advancements under the banner of Next Big Thing at Big Summit, our annual flagship event in North America.
Speaker Change: Big Summit has historically been a partner event, but encouraged by the approach of our team in EMEA at their Big Summit in April . We will also expand the America's Big Summit to welcome customers and prospects.
Speaker Change: We're thrilled to have industry leaders like Wal-Mart and e-commerce innovators like Burrow speaking at the event.
Speaker Change: At the EMEA Big Summit in April , we announced over 100 new innovative features and partner integrations as part of the inaugural Next Big Thing.
Speaker Change: While I won't cover the entire list, I'd like to highlight a few major releases from Q2.
Speaker Change: We have expanded our customers' global reach with new multi-geographic selling functionality.
Speaker Change: After a successful closed beta with over 200 participants, we soft-launched international enhancements for multi-storefront with a full launch and additional features planned for Q3.
Speaker Change: Our Multi-Geo offering now allows brands and retailers to offer unique checkout experiences per storefront, enabling shoppers in different regions to select their preferred storefront for a truly local experience.
Speaker Change: Additionally, in partnership with Fujitsu, we introduced Japanese as a supported language in the control panel and as an option for automatic storefront translation.
Brent Bellm: After highlighting the open sourcing of our B2B buyer portal last quarter, we're excited to announce our next major B2B release, Custom Buyer Roles and Permission Management. This strategic enhancement supports complex organization structures and unique workflows common to B2B businesses. Big AI Copywriter streamlines workflows and saves time by generating high-quality, high-performing product descriptions.
Speaker Change: After highlighting the open sourcing of our B2B buyer portal last quarter, we're excited to announce our next major B2B release, Custom Buyer Roles and Permission Management.
Speaker Change: This strategic enhancement supports complex organization structures and unique workflows common to B2B businesses.
Speaker Change: For business buyers, this functionality improves purchasing controls and oversight, operational efficiency, and customer satisfaction and loyalty.
Speaker Change: We are leveraging generative AI technology to enhance customer growth on BigCommerce with tools like Big AI Copywriter, which is being updated this month to use Google's more powerful Gemini AI. Big AI Copywriter streamlines workflows and saves time by generating high-quality, high-performing product descriptions.
Speaker Change: In July , we launched the beta of AI-powered product recommendations, also powered by Google AI, offering personalized and highly relevant product suggestions to shoppers in real time, thereby increasing average order value and conversion rates.
Brent Bellm: Later in the year, we are planning to launch generative AI-assisted quoting workflows for B2B sellers. In aggregate, BigCommerce's product capabilities, innovation, and quality continue to receive industry recognition and awards. In the mid-market review, BigCommerce received the most gold medals and the highest aggregate medal count of any B2B platform in the world.
Speaker Change: Later in the year, we are planning to launch generative AI-assisted quoting workflows for B2B sellers. Our subsidiary, Fedonomics, utilizes AI to optimize product data and improve keyword relevancy across major channels, driving more impressions and increased revenue for brands like Patagonia and Dell.
Speaker Change: Additionally, our recently acquired visual site editor, MakeSwift, is investing in AI to generate page layouts and creative content, enabling non-technical users to effortlessly design and publish engaging site content.
Speaker Change: Earlier this year, we announced that BigCommerce was the first e-commerce platform to integrate with Fastlane, PayPal's passwordless, accelerated guest checkout solution, which speeds shoppers through checkout and drives higher conversion rates.
Speaker Change: I'm excited to share that this feature will become available to all of our U.S. customers starting in August .
Speaker Change: In aggregate, BigCommerce's product capabilities, innovation, and quality continue to receive industry recognition and awards.
Speaker Change: For the second consecutive year, BigCommerce achieved a perfect score in the Paradigm B2B combines for digital commerce solutions.
Speaker Change: Earning medals in 24 out of 24 categories.
Speaker Change: In the mid-market review, BigCommerce received the most gold medals and the highest aggregate medal count of any B2B platform in the world.
Brent Bellm: IDC named us a leader in the IDC marketscape for worldwide enterprise B2C digital commerce applications and also recognized us as a leader in their marketscapes for worldwide enterprise headless digital commerce platforms and mid-market growth. Under Travis, we have unified end-to-end ownership of the customer, including acquisition, satisfaction, and growth. And looking ahead, we plan to make further improvements in the latter half of the year to bolster top-line growth and operational efficiency.
Speaker Change: IDC named us a leader in the IDC market scape for worldwide enterprise B2C digital commerce applications and also recognized us as a leader in their market scapes for worldwide enterprise headless digital commerce platforms and mid-market growth.
Speaker Change: I'd now like to provide an update to the go-to-market changes and improvements we're making under the leadership of our new president, Travis Hess. Under Travis, we have unified end-to-end ownership of the customer, including acquisition, satisfaction, and growth.
Speaker Change: As a result, we're improving operational processes and metrics to drive customer retention, success, and expansion.
Speaker Change: We've seen encouraging results in multi-product sales, inclusive of our core e-commerce platform, Fedonomics, MakeSwift, and the products and services of our partner ecosystem.
Speaker Change: Growth and net retention rates are pacing well against our internal plans. We're excited by gains already achieved in go-to-market efficiency and cohesion, and we expect continued improvements in the quarters ahead.
Speaker Change: In terms of customer acquisition, we're improving the targeting and efficiency of marketing spend by refining our ideal customer profile definitions.
Speaker Change: Leveraging Travis's background from Accenture, we're expanding our network of global systems integrator partnerships, building on existing relationships such as WPP and EPAM.
Speaker Change: We have stabilized our small business segment and are improving our ability to help small businesses grow into our enterprise offering.
Speaker Change: We are streamlining our revenue operations capabilities to drive go-to-market effectiveness and transparency on spend ROI.
Speaker Change: We are more tightly integrating BigCommerce, Fedonomics, and MakeSwift teams to improve cross-sell results.
Speaker Change: And looking ahead, we plan to make further improvements in the latter half of the year to bolster top-line growth and operational efficiency.
Speaker Change: I'll share more details on these efforts in coming quarters as we progress plans and achieve continued improvement and profitability.
Speaker Change: Looking toward the back half of the year, I am optimistic about BigCommerce's business momentum. We are making significant strides. We are winning deals with large, complex customers and earning strong accolades for the strength of our products.
Brent Bellm: By significantly enhancing our go-to-market operations, we are well-positioned to re-accelerate revenue growth while continuing to improve profitability and cash flow. Thank you for your continued support, and I look forward to updating you on our progress in the coming quarters.
Speaker Change: By significantly enhancing our go-to-market operations, we are well-positioned to re-accelerate revenue growth while continuing to improve profitability and cash flow.
Speaker Change: Thank you for your continued support and I look forward to updating you on our progress in the coming quarters. With that, I'll turn it over to Daniel.
Daniel: Thanks Brent and thank you everyone for joining us today. During my prepared remarks I'll cover our Q2 results, provide additional detail on our key areas of operational focus, and offer updated guidance for Q3 and the full year 2024.
Daniel Lentz: In Q2, total revenue was just under $82 million, up 8% year-over-year. Subscription revenue grew 10% year-over-year to approximately $62 million, while partner and services revenue, or PSR, was up 4% year-over-year to just over $20 million. Revenue in the Americas was up 9%, while EMEA revenue grew 7%, and APAC revenue was up 9% compared to the prior year. Our Q2 non-GAAP operating income was just under $2 million versus a loss of $3 million a year ago.
Daniel: In Q2, total revenue was just under $82 million, up 8% year-over-year. Subscription revenue grew 10% year-over-year to approximately $62 million, while partner and services revenue, or PSR, was up 4% year-over-year to just over $20 million.
Speaker Change: Revenue in the Americas was up 9% while EMEA revenue grew 7% and APAC revenue was up 9% compared to the prior year.
Speaker Change: We remain committed to operating a profitable growth business.
Speaker Change: Our Q2 non-gap operating income was just under $2 million versus a loss of $3 million a year ago. These results represent a nearly 7-point year-over-year improvement to non-gap operating margins, increasing from negative 5% in Q2 2023 to positive 2% in Q2 2024.
Daniel Lentz: These results represent a nearly 7-point year-over-year improvement in non-GAAP operating margins, increasing from negative 5% in Q2 2023 to positive 2% in Q2 2020. We are seeing strong growth in B2B, in particular. B2B ARR finished Q2 up 35% year over year, and B2B GMB grew more than 50% year over year. We see healthy retention rates in B2B as well, with gross retention tracking more than 20% higher than the remainder of the... Second, we committed to improving our operating leverage and delivering profitable growth.
Daniel: As we did on the previous earnings call, I want to give you an update on where we stand with the three strategic priorities I called out at the beginning of the year.
Speaker Change: First, we made a commitment to drive efficient revenue growth. In Q1, we had sequential improvements in both gross and net retention from Q4 2023. We saw further sequential improvement in Q2 as well, consistent with our 2024 financial plan.
Speaker Change: We are seeing strong growth in B2B in particular. B2B ARR finished Q2 up 35% year-over-year, and B2B GMB grew more than 50% year-over-year. We see healthy retention rates in B2B as well, with gross retention tracking more than 20% higher than the remainder of the business.
Speaker Change: Our goal is to re-accelerate revenue growth, and we are optimistic about the trend in retention we are seeing so far in 2024, and are confident in the actions we are taking under Travis's leadership to build top-line momentum.
Speaker Change: Second, we committed to improving our operating leverage and deliver profitable growth. Q2 non-gap operating income exceeded the high end of our guidance expectations. In particular, we are laser focused on improving go-to-market efficiency.
Daniel Lentz: In particular, we are laser-focused on improving go-to-market... That represents sequential growth in ARR of nearly six... As a part of that transaction, we have announced the expected repurchase of a large portion of our existing convertible notes due October 2021. And separately, the anticipated exchange of a portion of our existing convertible notes due in October. The structure of the new debt instrument reflects both our investors' confidence in the upside of this business and our intent to minimize shareholder debt.
Speaker Change: In Q2, we delivered our largest sequential growth in enterprise ARR in 12 months, and we did so with modestly improved go-to-market spending efficiency.
Speaker Change: Like many other SaaS software companies, we've seen lower sales and marketing efficiency results in recent quarters, as platform investment spending has tightened across our industry. As Brent noted earlier, addressing this issue is one of our top priorities.
Speaker Change: Third, we committed to healthy cash flow generation and cash management by focusing on operational discipline.
Brent: We continue to achieve success in transitioning our existing customer base from legacy month-to-month contracts to more favorable payment terms for BigCommerce. As a result, we have seen a 25% increase in upfront payment terms quarter-over-quarter in our enterprise accounts.
Speaker Change: This improvement has resulted in operating cash flow of just over $8 million for the first half of 2024, a $14 million improvement year-over-year.
Speaker Change: Deferred revenues have also increased year-over-year by $13 million, from $29 million to $42 million. That 46% year-over-year increase in deferred revenue reflects a substantial improvement in the quality of our contracts.
Speaker Change: I'll now turn to our non-GAAP KPIs. We concluded Q2 with an ARR of approximately 346 million, up 4% year-over-year. That represents a sequential growth in ARR of nearly 6 million.
Speaker Change: Enterprise Account ARR was approximately $254 million, up 7% year-over-year. As of the end of Q2, Enterprise Accounts represent 73% of our total company ARR. Accounts using exclusively our Essentials plans, or non-Enterprise Accounts.
Speaker Change: Finished with ARR slightly over $92 million, down 3% year-over-year as we lapped the small business plan price adjustments in the base period.
Speaker Change: At the end of Q2, we reported 5,961 enterprise accounts of 32 accounts or 1% year over year. ARPA, or Average Revenue Per Account for Enterprise Accounts, was 42,576 of 7% year over year.
Speaker Change: Before we move on to guidance, I would like to point out that our GAAP results include certain charges incurred in consideration of various alternatives associated with inbound inquiries and interest in BigCommerce.
Speaker Change: Following an assessment of these alternatives, we elected to move forward with the restructuring of our debt.
Speaker Change: As a part of that transaction, we have announced the expected repurchase of a large portion of our existing convertible notes due October 2026, and separately, the anticipated exchange of a portion of our existing convertible notes due October 2026.
Speaker Change: For new convertible notes due October 28, meaningfully decreasing our overall leverage and better optimizing maturities. The structure of the new debt instrument reflects both our investors' confidence in the upside of this business and our intent to minimize shareholder dilution.
Speaker Change: We intend to further streamline operations and investments in coming quarters with the goal of improving growth rates profitably and maximizing long-term shareholder value.
Daniel Lentz: I'll now shift to our outlook and guidance for the upcoming quarter and the full year. Together, we are well-prepared to navigate the challenges and opportunities. If, at any time, your question has been addressed, and you would like to withdraw your question, please press star, then 2.
Speaker Change: I'll now shift to our outlook and guidance for the upcoming quarter and the full year.
Speaker Change: For Q3, we expect revenue in the range of $82 million to $84 million, implying a year-over-year growth rate of 5% to 8%.
Speaker Change: For the full year 2024, we expect revenue between $330.2 million to $335.2 million, a year-over-year growth rate of approximately 7% to 8%.
Speaker Change: For Q3, our non-GAAP operating income is expected to be between $500,000 and $1.5 million.
Speaker Change: For the full year, we expect non-GAAP operating income between $10.7 million and $13.7 million.
Speaker Change: In closing, I'm excited by our prospects and confident in our ability to seize the opportunities ahead of us. Our team's relentless dedication and our robust platform provide us with strong momentum to reach our strategic objectives.
Speaker Change: We remain unwavering in our commitment to drive innovation, deliver exceptional value to our customers, and achieve sustainable growth and profitability. Together, we are well-prepared to navigate the challenges and opportunity.
Speaker Change: With that, Brent and I are happy to take any of your questions. Operator?
Speaker Change: We will now begin the question and answer session. To ask a question you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.
Operator: At this time, we will pause momentarily to assemble our roster. The first question comes from Raimo Lenschow with Barclays. Please go ahead. Congratulations on another solid quarter.
Speaker Change: The first question comes from Raimo Lenschow with Barclays. Please go ahead.
Raimo Lenschow: My first question was about the go-to-market changes and the cadence, how long it will take. Like, if you think about the steps that we're taking, how do you think that that will translate into a pipeline, but then also kind of deal closure and revenue? Just kind of get us on that journey a little bit in terms of, like, the changes that were made, you know, when does it show up in the top of the funnel, and when does it show up in terms of closure rate. I know you can't give, like, precise numbers, but just to give us a kind of framework for how we should think about it. And then I might not be as good on the debt side.
Raimo Lentsho: My first question was on the go-to-market changes and
Speaker Change: and the cadence, how long it will take, like if you think about the steps that we're taking.
Speaker Change: How do you think that that will translate into a pipeline, but then also kind of deal closure and revenue? Just kind of kind of get us on that journey a little bit in terms of like the changes that were made
Speaker Change: When does it show up in the top of the funnel? And when does it show up in terms of closure rate? I know you can't give like...
Speaker Change: precise numbers, but just to give us a kind of a framework of how we should think about it. And then the, I might not be as good on the debt side, like,
Speaker Change: The, you know, I had a few questions from investors, you're swapping a 0.25 convertible into like a much higher interest rate vehicle. What kind of drove that desire to do it now versus waiting until rates are coming down? Many thanks.
Speaker Change: Thanks, Raimo. It's Brent. As a reminder to all on the call, Travis Hess, our new...
Travis Hess: Global Presidents started about three months ago in terms of the timing.
Travis Hess: of when we might start seeing...
Speaker Change: Improvement in Results as a Result of Changes Being Made in Go-To-Markets.
Speaker Change: I would say you're already seeing some of that in gross and net retention.
Travis Hess: changes that predated his arrival, a focus on...
Travis Hess: [inaudible]
Travis Hess: Improvements in Gross and Net Retention Q1 and Q2.
Travis Hess: And we're optimistic that with more changes coming, we'll keep getting better in those departments.
Travis Hess: A second major area of change that we're going to see under Travis's leadership is our improvement in brand.
Travis Hess: Positioning in the market.
Travis Hess: I believe there's long been a disparity between
Travis Hess: [inaudible]
Speaker Change: by third party tech analysts and authorities who evaluate it, and the awareness and perception of that in the market. So it's incumbent on us to make changes in how we message and position BigCommerce to close that gap.
Speaker Change: One of the big closures of that messaging and positioning, frankly, went live yesterday.
Speaker Change: So if you go to our website, which is split between our Enterprise offering and our Essentials offering, Essentials is for small business customers doing typically below a million dollars of GMV online. We rolled out the new website content last night. As long as you're in the 80%...
Matthew B.: and Matthew B. I'm proud of what it says and the design. We're positioned as the top rated e-commerce platform for growing businesses. We back that up and I'm optimistic that that improved positioning as the top rated e-commerce platform for growing businesses.
Brent Bellm: It gets viewed in the market will result in an improvement in adoption in small business, and I'm hopeful to see those metrics in the coming months and quarters. Meanwhile, we'll keep refining our enterprise messaging in the market. We're also refining our definition of the ideal customer profile, targeting marketing spend against that. I suspect I may get other questions later that allow me to go deeper into those changes. But I would say, you know, in the coming quarters, right, he had to come in first and get on board, visit the team globally.
Matthew B.: It gets viewed in the market will result in an improvement in adoption in small business And I'm hopeful to see those metrics in the coming
Matthew B.: Meanwhile, we'll keep refining our enterprise messaging in the market. We're also refining our definition of ideal customer profile, targeting marketing spend against that. I suspect I may get other questions later that allow me to go deeper into those changes.
Matthew B.: But I would say in, you know, in the coming quarters, right, he had to come in first and get on board, visit the team globally, but the changes that we know we can make across the board and go to market are substantial.
Brent Bellm: But the changes that we know we can make across the board and go to market are substantial, and I couldn't be more bullish that the changes will have an impact and that we are doing something that a lot of others in e-commerce are not doing. We are bringing in true industry veterans, people whose careers have been built in retail and e-commerce, people who know the competition and all the ways of that competition over time and who have conviction at established points in their careers that BigCommerce truly does have the best enterprise offering in the world and who are eager to take that to market, evangelize it, and see us become the established leader in enterprise e-commerce globally.
Matthew B.: And I couldn't be more bullish.
Matthew B.: that
Matthew B.: The changes will have an impact.
Matthew B.: and that we are doing something that a lot of others in e-commerce are not doing.
Matthew B.: We are bringing in true industry veterans.
Matthew B.: People whose career are built in retail and e-commerce.
Matthew B.: People who know the competition.
Matthew B.: and all the ways of that competition over time and who have conviction.
Matthew B.: at established parts in their careers at BigCommerce.
Speaker Change: Truly does have the best enterprise offering in the world and who are eager to take that to market, evangelize it, and see us become the established leader in enterprise e-commerce globally. Travis, Tom, Armstrong, and I'm sure more to come are all part of that.
Brent Bellm: Travis, Tom, Armstrong, and I'm sure more to come are all part of that, and in time, we're going to see the connection between our market adoption and growth and the quality of our platform. I'm very confident. Daniel?
Speaker Change: you know, in time, we're going to see...
Speaker Change: the closure between our market adoption and growth and the quality of our platform, I'm very confident. Daniel? Yeah, and then I'll take the question on the debt, Raimo. Thank you for posing that. I think as we approached.
Daniel Lentz: Yeah, and then I'll take the question on the debt, Raimo. Thank you for asking that. I think as we approached the restructuring of the debt, there were really three objectives that we wanted to accomplish. Number one, we wanted to lower our overall leverage. Number two, we wanted to space out maturities well in advance of the 2026 notes coming due. We wanted to, in so doing, reduce our net debt, and, finally, we wanted to do so in a way that minimized market execution risk and potential dilution to shareholders.
Speaker Change: The restructuring of the debt, there were really three objectives that we wanted to accomplish. Number one, we wanted to lower our overall leverage. Number two, we wanted to space out maturities well in advance of...
Daniel: The 2026 notes coming due, we wanted to in so doing reduce our net debt and finally we wanted to do so in a way that kind of minimized market execution risk and potential dilution to shareholders. We feel really that we did a good job on the balance and how we did that. From the point of view of the yield.
Daniel Lentz: We really feel that we did a good job on the balance and how we did that. From the point of view of the yield, where we landed net of the strike price on the new note is, very much from a cost of capital point of view, in line with what a lot of new market issuances are paying once you factor in the cost of a caller effectively in order to get the strike price we negotiated in this deal.
Daniel: where we landed net of the strike price on the new note is very much from a cost of capital point of view in line with what a lot of new market issuances are paying once you factor in the cost of a caller effectively in order to get the strike price where we negotiated in this deal so we think it's a it's a competitive market interest rate it does so in a way that minimized risk
Brent Bellm: We think it's a competitive market rate, and it does so in a way that minimizes risk, and it got way ahead of where we were on maturity basis and sends a signal that we're very confident in the long-term prospects here and also that this also reflects a lot of the improvements we're seeing in cash flow, such that we feel that we can manage the increased interest costs that come along with that. The RealReal picked us, I don't know how many quarters ago, but it was indeed a typical large enterprise lengthy sales cycle.
Daniel: And it got way ahead of where we were from maturity basis and sends a signal that we're very confident in the long-term prospects here and also that this also reflects a lot of the improvements we're seeing in cash flow such that we feel that we can manage the increased interest costs that come along with that.
Speaker Change: Okay, perfect. Thank you.
Speaker Change: https://www.youtube.com.au
Speaker Change: The next question comes from Ken Wong with Oppenheimer. Please go ahead.
Ken Wong: Thank you for taking my call. Brent, I think I'll take you up on your offer to dig in a little more. I couldn't help but notice that B2B was a particularly strong segment, and when you pair that with the fact that you guys are looking to
Speaker Change: Refine your ideal customer profile. Would you characterize that B2B segment as one of the areas that you guys plan to lean in?
Brent: 100%, and I would emphasize that B2B is itself not a single entity.
Brent: category or vertical obviously. It is a very wide range of use cases.
Brent: It includes manufacturers selling to their business customers, wholesalers, distributors, professional services firms, and of course, B2C companies or brands also selling to their wholesale buyers.
Brent: What I would emphasize is that BigCommerce is very much like Magento was back in the day.
Brent: We are a broad-ranging B2B platform.
Brent: The functionality...
Brent: to serve each of those four segments and use cases and do that with a user experience in our buyer portal that we believe is the most attractive, usable, and frankly
Brent: Innovative.
Brent: in the world of B2B that is out there
Brent: Modular and modifiable approach, especially with that buyer portal, which you can now...
Brent: [inaudible]
Brent: So, B2B is a very big deal for us.
Brent: Maybe somebody else will ask me a question about the B2C ideal customer profile later. But I want to finish on something that's really fun for us. With the Olympics going on right now in Paris, there is, in essence, an Olympics every year in Paris.
Speaker Change: B2B e-commerce platforms. Andy Hora Paradigm goes through all B2B platforms and has what he calls a mid-market combine and an enterprise combine, where he awards gold, silver, and bronze medals to the B2B platforms of
Speaker Change: The World.
Speaker Change: and what was fun for us as a competitor in that each year.
Speaker Change: For the mid-market combine, we won gold medals in 8 out of 12 categories, 3 silvers, 1 bronze. So we won medals in every category, but we had the most number of golds overall, and the highest aggregate count. That's basically in sum. BigCommerce won the Olympics.
Speaker Change: by the best expert out there evaluating mid-market platforms. We were tied for fourth in the enterprise one, but only a couple points away from...
Speaker Change: https://www.kenhub.com
Speaker Change: [inaudible]
Daniel: Fantastic. Appreciate the context. Daniel, you kind of alluded to getting inbound inquiries earlier. Can you perhaps provide a little more color on those conversations and what led to the decision to remain an independent entity?
Daniel: Yeah, I appreciate the question. You know, we recognize that there are some rumors that were circulating on this topic, as there will be from time to time. Obviously, there are some limits to how much we can comment on this, but I'd like to provide at least a little extra detail for you on this.
Daniel: As we stated in the prepared remarks, we received inbound interest in the company and evaluated those options. And this is a great company with a lot of upside.
Daniel: We see that upside, as does the board, our investors, and our stakeholders. Our board's focused on maximizing shareholder value, and we're confident that our operating plans will drive efficient revenue growth and meet the potential of the business.
Speaker Change: Okay, perfect. Thanks a lot.
Speaker Change: The next question comes from Koji Ikeda with Bank of America. Please go ahead.
Koji Kedda: Hey guys, thanks for taking the questions. In the prepared remarks, Brent, you talked about RealReal.
Koji Ikeda: as one of your big customer wins. So I was wondering if you could walk us through that sales cycle and implementation process. You know, it is such a big marketplace and it does seem to imply a very traditional sales cycle and pretty complex implementation. So curious to hear a little bit more on how you were able to win that deal.
Speaker Change: Yeah, you're correct. So, as background, The RealReal is the world's largest...
Speaker Change: Marketplace for authenticated luxury goods primarily sold on consignment. I love it. My wife loves it. They do more than, I think, about a billion and a half in online GMV in 2023, so it's an enormous site.
Speaker Change: The RealReal ticked us, I don't know how many quarters ago, but it was indeed a typical large enterprise lengthy sales cycle. And then in terms of implementation, what we're observing in the market is that there are two approaches.
Brent Bellm: And then in terms of implementation, what we're observing in the market is that there are two approaches to implementation. There's a rip and replace approach, and then there is a componentized approach, which allows me to bring in certain components now, make them work with my existing legacy tech, swap out some, and then I'll gradually migrate over time. Now, who would have thought that was possible? It actually sort of breaks the record.
Speaker Change: The RealReal chose the latter approach and so as said in the press release They're using BigCommerce for checkout and cart with the intention of bringing more in over time But the observation I would make and this is a surprise to many perhaps
Speaker Change: A lot of people in the industry should pay attention to this. Bells of Florida, 650 plus stores across multiple brands, had been on one of the most legacy of legacy platforms, IBM, WebSphere, now HCL, and they did a rip and replace.
Brent Bellm: We've had other really great store-based retailers like Francesca's and White Stuff in the UK do rip and replace in eight months or less, but to do it in three months is really extraordinary. So I go through this extended explanation, and take notice because there's still a lot of phenomenally big, important businesses that are on legacy tech who should realize they can get off that quickly and onto the very best enterprise platform with a much better user experience, conversion, and cost structure than ever before, a giant area of competitive advantage and growth.
Speaker Change: We are very proud of being so flexible that we can be brought in to start just as Checkout and CART with more things to come later. But we can also do radical transformation.
Speaker Change: With a cost structure that has been slashed by sometimes 70-80% overall, and do that in record time. And we have multiple store-based retailers who have pulled that off in the last year, year and a half. And I hope the industry...
Speaker Change: Take notice, because there's still a lot of phenomenally big, important businesses that are on Legacy Tech who should realize they can get off that quickly and on to the very best enterprise platform with much better user experience, conversion, and cost structure than ever before.
Speaker Change: When we look at BigCommerce, there's many different growth factors.
Speaker Change: to think about within BigCommerce, but I did want to ask it quite from a simple perspective. You know, maybe thinking about the business, enterprise, SMB.
Speaker Change: Well, I'm actually really optimistic about what we can do with small business now that we have the new messaging and positioning out on our website that I just mentioned. But, unquestionably, enterprise is our...
Brent Bellm: I believe, especially with Travis's leadership, that we can very quickly establish BigCommerce as the best, most modern enterprise platform in the world, in essence, the successor to the legacy tech of the past, whether it was custom or software giant. The next question comes from David Hynes with Canaccord; please go ahead.
Speaker Change: giant
Speaker Change: area of competitive advantage and growth, I believe, especially with Travis's leadership.
Speaker Change: The legacy tech of the past, whether it was custom or the software giants, and that is what will really drive our growth in the years ahead.
Speaker Change: But I would argue that our
Speaker Change: Bye.
Speaker Change: You know, our messaging, positioning, awareness, and go-to-market hasn't been...
Speaker Change: The next question comes from David Hynes with Canaccord. Please go ahead.
Brent Bellm: Going forward, the one that's outside of our control is just the state of the European economy. And I think, as people know, it has not been growing as quickly as the American economy. You know, that'll turn around, currencies, et cetera. And now that we have that complete, we are really ready to rock in Europe and have a strong competitive advantage in these areas against other SMB-like platforms who don't have multi-storefront and multi-geo capabilities.
Speaker Change: Expenditure minimization. They can't do that forever, right? And with every passing quarter that the European businesses maybe put off migrations, you're building a backlog and eventually there's going to be that need to catch up.
Speaker Change: The thing within our control, and I would say it's partly to explain why the European growth rate
Speaker Change: And it was feature-complete for companies selling, let's call it, B2C plus B2B. It was not yet feature-complete for the most extreme complexities of...
Speaker Change: With each storefront, I want a different country, different language, different...
Speaker Change: Payment provider, different shipping provider, a change to checkout, the language changes, you know, you get the complex use case of some countries have tax included in pricing and others excluded.
Speaker Change: [inaudible]
Speaker Change: We are really ready to rock.
Speaker Change: In these areas against other SMB like platforms.
Brent Bellm: So, you know, my own team would tell you there's a primary explanation for gross new sales having stalled as we waited for this functionality. And now that the functionality is there, there's a lot of confidence that we can take that to market in Europe and very much get our growth rates back up to very high levels as they were a few years ago. Okay, very clear.
Speaker Change: who don't have multi-storefront and multi-geo capabilities.
Speaker Change: There's a primary explanation for...
Operator: A follow-up for you, Daniel, which falls on Ken's question around B2B. Obviously, the GMV growth there was pretty impressive. From a PSR perspective, is there any difference in how you're positioned to monetize B2C versus B2B GMV? Thank you, guys.
Joshua Phillip Baer: The next question comes from Josh Baer with Morgan Stanley, please go ahead. The major social networks, the major affiliate networks, the major display ad networks, and then marketplaces like Amazon, Walmart, Target, and the other retail marketplace businesses. AI is the core differentiator of what Feedonomics does because it is used to take a merchant's catalog, which on average may only be a 60% optimization match for Google Schema, and get that to very close to 100%, and then humans do the remaining work.
Speaker Change: Great, thanks. This is Katie Kueser on for Josh Baer this morning.
Speaker Change: You spoke to leveraging AI to enhance customer growth. It would be helpful to get a sense of how your AI capabilities are differentiated relative to your e-commerce peers.
Speaker Change: And then what might be or is becoming more table stakes in the industry relative to where you may have a competitive advantage? Thank you.
Speaker Change: Yeah, I boldly assert we have the most scaled and most impactful AI in the entire world of e-commerce, and it is a core of what makes our subsidiary Fedonomics such a large and successful business.
Speaker Change: In a nutshell, Feedonomics is the world's largest enterprise platform for helping businesses not just think, but optimize their catalog feeds into the leading advertising channels and marketplace channels. So, add channels like Feedonomics.
Speaker Change: The major social networks, the major affiliate networks, the major display ad networks.
Speaker Change: And then marketplaces like Amazon, Walmart, Target, and the other retailer marketplace businesses.
Joshua Phillip Baer: On average, their customers, who are the biggest brands in the world, like Patagonia just announced, will see a 20% lift as a result of sales through the channels used, like Google, and then they'll add more channels. And so what other AI in the world is delivering a 20% sales lift through the very biggest advertising and marketplace channels? There's not anything out there, I don't believe.
Speaker Change: On average, their customers, who are the biggest brands in the world, like Patagonia just announced,
Speaker Change: We'll see a 20% lift as a result in sales through the channels used.
Speaker Change: 1 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Speaker Change: The very biggest.
Speaker Change: Advertising and Marketplace Channels
Brent Bellm: So we are a very big leader in AI there. And then, very briefly, in terms of core platform capabilities, we keep emphasizing things that I think matter a lot to merchants, including reducing costs, such as through the big AI copywriter, lifting sales on the website, where we have product recommendations powered by Google AI when that product is out, and frankly, our own customer service. Our customers love the fact that they have the option of typing into chat questions.
Speaker Change: There's not anything out there I don't believe. So we are a very much leader in AI there. And then very briefly, in terms of core platform capabilities, we keep emphasizing things that I think matter a lot to merchants, including.
Speaker Change: Our customers love the fact that they have the option of typing into chat questions.
Brent Bellm: And 25% of the time, we're using AI, going through our knowledge base and answering those questions perfectly the first time so that the customer never has to talk to one of our live reps on the phone because they get a perfect answer using AI. We have a very open approach.
Speaker Change: And 25% of the time...
Speaker Change: We're using AI going through our knowledge base and answering those questions perfectly the first time.
Operator: Our ecosystem is also developing AI products that go into our e-commerce marketplace. We're partnering with the major AI creators and MLMs. So, very much innovating in the world of AI, but I'd go back and emphasize that what Feedonomics does is at scale, more powerful, and more beneficial to merchant growth than any other platform's AI. Consumer Growth Rates in the U.S. have been in the single digits since late 2021. That continued to be the case in Q1. We get Q2 results later this month. And, you know, is that... makes sense?
Speaker Change: using AI.
Speaker Change: We have a very open approach. Our ecosystem is also developing AI products that go into our e-commerce marketplace. We're partnering with a major AI
Speaker Change: Creators and MLMs, so very much innovating in the world of AI, but I go back and emphasize that what Feedonomics does is, at scale, more powerful, more beneficial to merchant growth than any other platform's AI.
Speaker Change: That's super helpful, thank you. Also wanted to just quickly drill in on the consumer spending and macro backdrop, you know, if any notable trends emerged in the quarter and what if any assumptions from a macro or consumer spending perspective underpin that go-forward outlook would be helpful. Thank you.
Speaker Change: Yeah, I'll take that one. With respect to consumer spending, we use the word resilient in the prepared remarks to describe what we're seeing on the consumer spend side. Use the term deliberately, like it's not
Speaker Change: demonstrably improving versus where it's been in terms of you know prior quarters but we're not seeing it really eroding or getting significantly worse.
Speaker Change: I'd add, at a macro level, U.S. Department of Commerce and Census Bureau have been reporting e-commerce.
Speaker Change: No, it's not. I mean, it'd be delightful to have double-digit.
Mark Ronald Murphy: Thank you. The next question comes from Mark Murphy with JP Morgan; please go ahead. The folks who implemented legacy tech 15 years ago, customers of one of these platforms, multi-brand, multi-category online retailers like the RealReal or store-based retailers like Bell's, have been waiting for a modern SaaS enterprise platform to say, hey, we can do that. Look at these success examples.
Speaker Change: Thank you so much. So Brent, you did mention a number of wins and go live. I'm curious which e-commerce platforms
Speaker Change: You see customers are most commonly migrating away from at this juncture. In other words, how often is it Magento, which I think you mentioned, how often is it Shopify?
Speaker Change: Relatively more legacy and vulnerable out there, and then I've got a quick follow-up.
Brent: Well, it depends whether you're talking total count, which has lots of SMBs in it, or at the upper end.
Speaker Change: I would say at the upper end, Custom and Magento followed by Shopify have been the biggest migrations over time at the, you know, at the SMB level. It's a wide range, you know, it's WooCommerce, it's Shopify, it's
Speaker Change: Magento as well
Speaker Change: companies out there on the big legacy stacks like IBM and Oracle, SAP.
Speaker Change: I just love examples like, you know, the ones I've been giving, because...
Speaker Change: The way I characterize the industry is for the last five years, it's been a little bit paralyzed. The folks who implemented legacy tech 15 years ago, customer one of these platforms,
Speaker Change: know and want to get off it, but they've been waiting for a modern enterprise platform to show them that they can and that they're betting on the right company for the next 15 years.
Speaker Change: They've been waiting for a modern SaaS enterprise platform to say, hey, we can do that, look at these success examples, and that's what we're doing now. And that's where I see there being so much upside to our business model going forward.
Operator: And that's what we're doing now. And that's where I see there being so much upside to our business model going forward. At the same time, the number of enterprise customers added, it seems like it's pretty severely down to about 32. And I'm trying to remember if you re-indexed.
Speaker Change: Okay, thank you. And then, and then for Daniel,
Brent Bellm: Did you flush out customers at the bottom of that tier? Or is that just shifting towards the larger customer base? And then, kind of, tying in with that and to the prior question.
Daniel: Did you re-index? Did you flush out customers at the bottom of that tier? Or is that just shifting towards the larger customer lands? And then going back to kind of tying in with that and to the prior question.
Speaker Change: There's just so many large consumer-oriented companies that are struggling lately. I mean, it's Starbucks and Nike and, you know, you see it in UPS and Tesla and McDonald's.
Speaker Change: Why do you think that your B2C customers would show more resilience in that, or why do you think they'd be able to avoid a tougher part of the business cycle?
Speaker Change: Where, you know, the consumer often does start to roll over, you know, 18-24 months after a Fed hiking cycle.
Brent Bellm: Let me take the last question first, and then I'll get back to the net customer ads. I think on the consumer side, again, just to reinforce that, we're not seeing the type of growth rates and consumer spending that we're used to seeing in e-commerce. But we're not saying that we're not seeing the effects.
Speaker Change: Let me take the last question first and then I'll get back to the net customer ads. I think on the consumer side, again just to reinforce that, we're not seeing the type of growth rates in consumer spending that we're used to seeing in e-commerce. We're not saying that we're not seeing the effects. What we're saying is that what we are seeing is in line with what we expected.
Brent Bellm: What we're saying is that what we are seeing is in line with what we expected. I think perhaps we may have – I mean, we have really, really good vertical and sector diversity in our customer base. We're not overly exposed to one sector or another, which may help. But overall, I think that though we are not seeing as much growth as we would like to see in that area, overall, we think it's been relatively healthy. But we're taking a cautious outlook because we're seeing the same macroeconomic data that you're referring to, and we're basing our guidance and building our plans according to that kind of commensurate level of conservatism.
Speaker Change: I think perhaps we may have, I mean, we have really, really good vertical and sector diversity in our customer base. We're not overly exposed to one sector and another, which may help. But overall, I mean, I think that...
Speaker Change: Though we are not seeing as much growth as we would like to see in that area
Speaker Change: Overall, we think it's been relatively healthy, but we're taking a cautious outlook because we're seeing the same macroeconomic data that you're referring to, and we're basing our guidance and building our plans according to that kind of commensurate level of conservatism.
Brent Bellm: With respect to net ads, part of it is that we're trending towards larger customers, and we're trending towards healthier contracts. I mean, if you look at what we're seeing in deferred revenue and also in RPO, deferred revenue is up 46% year over year, and RPO is up 37% year over year.
Speaker Change: with respect to net ads.
Speaker Change: Part of it is that we're trending towards larger customers and we're trending towards
Brent Bellm: I mean, we're really, really putting a lot of energy and focus not just on getting higher in mid-market and enterprise customers but making those contracts healthier and better for shareholders than they have been before. We are seeing really good results in improving trends in gross and net retention. The area that we're struggling a little bit with is what we're seeing in the new ads, which is where you're seeing that in terms of the net customer ads.
Speaker Change: https://www.patreon.com
Brent Bellm: We want to see better pipeline growth than we've seen over the course of the last few quarters, and we want to do that with better efficacy and efficiency in the dollars that we're putting at work on the go-to-market side as well. So, I mean, I'd say where we wanted to be for gross and net retention or where we wanted to be from a contract quality point of view. But to Brent's point, as he was discussing, it's a bit of a tough environment from a migration point of view, and that's kind of impairing a little bit of the net new ads on the new logo side of things. Hey guys,
Brent: We want to see better pipeline growth than what we've seen over the course of the last few quarters. We want to do that with better efficacy and efficiency in the dollars that we're putting at work on the go-to-market side as well. I'd say where we wanted to be for gross and net retention were where we want to be from a contract quality point of view. But to Brent's point, as he was discussing, it's a bit of a tough environment from a migration point of view, and that's kind of impairing a little bit of the net new ads.
Speaker Change: Makes sense. Thank you so much.
Speaker Change: I'll take that one. I think that it's...
Speaker Change: Next.
Brent: A little less quickly towards enterprise than where we probably would have anticipated a couple of years ago for two reasons. One, the small business portion of the business is stabilizing and doing a little better than what we expected. We thought that we would be able to stabilize that and start turning it back around into growth. I think it's done that a little bit sooner than we expected. That's part one. Part two, I think the trend into mid-market and enterprise is we're seeing some of the challenges in market that we've discussed already about new customer ads and migrations. It's a little bit of a tough environment that has perhaps slowed that trend up.
Speaker Change: But when you look at the improvements we're seeing in B2B in particular, where we think the success that we're seeing with some of the merchant migrations and customer migrations we've been describing, we're really confident that we're still going to continue to mix the business more and more towards enterprise accounts. It just maybe is going a little bit slower by a couple quarters than what we anticipated, but the long-term trend is the same.
Speaker Change: Yeah, I mean, I would say we think over time that B2B can and likely will become a greater percentage of the overall mix for several reasons which Brent has already discussed.
Speaker Change: In terms of overall mix of the business, we haven't disclosed which, what the exact percentages are. What I can say is that B2B has been a disproportionate grower as a portion of our total mix for probably the last two to three years, and we do anticipate that continuing. It's a really, really healthy part of the business, not just in the growth trends.
Speaker Change: but also in the underlying health, like as we mentioned in the prepared remarks.
Speaker Change: And that's with, you know, the ability to continue to maintain the type of take rates that we see over time in PSR. So when we look at the underlying economics and the trends and the product differentiation, it's a clear winner for us and it's going to be an area we continue to invest.
Speaker Change: The next question comes from Brian Peterson with Raymond James. Please go ahead.
Brian Peterson: Hi gentlemen, thanks for taking the question. So Brent, I'll take you up on your offer on the ideal B2C customer. What does that look like as you see the opportunity of other platforms? What does that look like in terms of what might migrate over to BigCommerce?
Brent Bellm: What does that look like, in terms of what might migrate over to... Yeah, let me talk about the evolution in our business. When we started 15 years ago, we were a small business platform built for startups and small businesses. So, think of... an ICP back then of a digitally native, direct-to-consumer business or a very small branded manufacturer. When I came in in 2015 and we started moving upmarket, we expanded our ICP into real, true branded manufacturers. Businesses that, by definition, are omni-channel because they sell through third-party distribution; they're online and offline in terms of sales.
Speaker Change: Let me talk about the evolution in our business. When we started 15 years ago, we were a small business platform built for startups and small businesses.
Speaker Change: So think of an ICP back then of a digitally native direct-to-consumer business or a very small branded manufacturer.
Speaker Change: When I came in in 2015, we started moving upmarket.
Speaker Change: We expanded our ICP into
Speaker Change: Real, true branded manufacturers. Businesses that, you know, by definition are omnichannel because they sell through third-party distribution, they're online and offline in terms of sales. That's a more complex customer.
Brent Bellm: That's a more complex customer. And I would say up until the last couple of years, that has been our sweet spot, far more complex, and businesses that, though we had examples of them, let's call it five, ten years ago, would not have been our sweet spot. Today, with examples like RealReal, Soul Trader, and Sports Shoes, all of which we just announced, those are examples of multi-brand, predominantly online retailers at a very, very, very large scale and complexity.
Speaker Change: And I would say up until the last couple of years, that has been our sweet spot.
Speaker Change: The point to emphasize for the market, though, is, by my analysis, if you look at the top thousand B to C
Brent Bellm: And I just gave you three great examples from Europe and the U.S. that you can draw a line through. And then the other example of store-based retailers, like Bell's, like Anderton's, which is a music leader in the U.K., two examples in this earnings release that you can draw a line through for store-based retail. This is where more than 80 percent of our revenue comes from. The vast majority of the time, companies are going to rip and replace rather than do components. Doing components is harder because you're mixing and matching, and it takes longer.
Speaker Change: Soul Trader, and Sports Shoes.
Speaker Change: All of which we just announced. Those are examples of multi-brand, predominantly online retailers.
Speaker Change: At very, very, very large scale and complexity. And I just gave you three great examples from Europe and the U.S. that you can draw a line through.
Speaker Change: of Online GMV is located.
Speaker Change: And historically, these were not the primary areas of growth for us, but because our platform has advanced and matured so significantly, we can now displace the custom platforms and legacy platforms that used to power the biggest
Speaker Change: Online retailers in the world. So what I'm proud to say is in terms of ideal customer profile, there are now big subsets of each of those two areas that we're winning, and I think this last quarter has great examples of both.
Culler: That's great, Kolar. And as you kind of target that opportunity, you know, I'm curious, you mentioned some comments before on some customers buying components versus a full rip and replace.
Speaker Change: The vast majority of the time companies are going to rip and replace rather than do components. Doing components is harder because you're mixing and matching and it takes longer. That's our experience. It doesn't always play out that way, but mostly we think it will be rip and replace.
Speaker Change: Again, if you have a question, please press star, then 1.
Speaker Change: The next question comes from Gabriela Borges with Goldman Sachs. Please go ahead.
Speaker Change: and our new reference architecture Catalyst.
Speaker Change: Based on Next.js and React, and our market-leading Next.js visual editor, MakeSwift, are really, in our opinion, the best offering in the market. Bell's, in particular, is...
Bell's: who implemented Catalyst. So you want a perfect example of just how successful you can be.
Speaker Change: Implementing Composable in record time. That's what Bells did. They used Catalyst, Next.js, and React.
Brent Bellm: That's our experience; it doesn't always play out that way, but mostly, we think it will be rip and replace. We noticed some examples of headless in the press release and prepared remarks. Great, thanks for taking the question. Brent, you called out further efficiencies in the back half of the year in your prepared remarks. I guess, how should we be thinking about the impact of those further efficiencies on more of the go-to-market side versus really the broader BigCommerce. In particular, we're focused on go-to-market efficiency, and by that, not just the absolute dollars but the efficiency of the dollars and also the efficacy of the results that we're getting out of the money that we're spending.
Speaker Change: Great, thanks for taking the question. Brent, you called out further efficiencies in the back half of the year in your prepared remarks. I guess, how should we be thinking about the impact of those further efficiencies on more of the go-to-market side versus really the broader big commerce business? I have a follow-up after that. Thanks.
Brent Bellm: So we talked about this in the prepared remarks. We're really, really laser-focused, not just on the growth rate but the efficiency of how we're getting to that growth rate. Lots of companies similar to us have seen some declines in what they're getting from a go-to-market efficiency point of view. We are laser-focused on re-accelerating top-line growth and doing it in a way that's more efficient with the way that we are investing our operating dollars.
Speaker Change: So, we talked about this in the prepared remarks, we're really, really laser-focused, not just on the growth rate, but the efficiency of how we're getting to that growth rate. And lots of companies similar to us have seen...
Brent Bellm: So I would characterize what we're doing in go-to-market, not to overuse sports analogies, but we're probably in the third inning. We've started that process, but there's a lot we have left to do. And as we get through the back half of the year, we're going to continue to build upon the foundation that we've already started, and we're going to continue to do that until we get to a reaccelerated top line and better efficiency in the spend that's driving that.
Operator: Got it. Very helpful. Thank you both. This concludes our question and answer session. I would like to turn the conference back over to Brent Bellm, CEO and Chairman, for any closing remarks. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: The overnight boom in AI popularity starting late, I guess, 2022.
Speaker Change: Google has been working on AI models and prioritizing e-commerce in particular as an application area.
Speaker Change: For longer than the recent boom in MLM, they've just been a natural partner of ours and a great partner of ours. But by all means, we are not exclusive to any one model. Either we, our customers, or our agency and tech partners.
Speaker Change: Because we're open.
Speaker Change: Any models and it's up to the choice of us or customers and partners which to employ and the collaboration.
Speaker Change: of the actual MLM developers. But I praise Google for leaning into e-commerce.
Speaker Change: on their models. What's different about big commerce is with the exception of feedonomics where we don't have and rely on proprietary models and we do tend to be open and transparent about what we're working on and what others are working on. So that's a differentiated approach that I think gets the best
Speaker Change: From all the innovation happening in AI model development.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Brent Bellm, CEO and Chairman, for any closing remarks.
Speaker Change: are really gaining momentum as a profitable cash flow generating.
Speaker Change: The big segments of the market, both B2C and B2B.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.