Ladies and gentlemen, thank you for standing by and welcome to BigCommerce’s Second Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to turn the conference over to your first speaker today, Rohit Giri, Head of Investor Relations. Thank you Please go ahead.

Good afternoon and welcome to BigCommerce’s second quarter 2020 earnings call. We will be discussing the results announced in our press release issued after the market close today. With me are BigCommerce’s President, CEO and Chairman, Brent Bellm and CFO, Robert Alvarez. Today’s call will contain forward-looking statements which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning financial and business trends, our expected future business and financial performance and financial condition and our guidance for the third quarter of 2020 and the full year 2020. It can be identified by words such as expect, anticipate, intend, plan, believe, seek or will. These statements reflect our views as of today only and should not be relied upon as representing our views at any subsequent date and we do not undertake any duty to update these statements. Forward-looking statements by their nature address matters that are subject to risks and uncertainties that could cause actual results to differ materially from expectations. For a discussion of material risks and other important factors that could affect our actual results, please refer to the risks discussed in today’s press release, our final prospectus under Rule 424(b) filed with the Securities and Exchange Commission on August 5, 2020, our quarterly report on Form 10-Q for the quarter ended June 30, 2020 to be filed with the SEC and our other periodic filings with the SEC. During the call, we will also discuss certain non-GAAP financial measures which are not prepared in accordance with generally accepted accounting principles. A reconciliation of these non-GAAP financial measures 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.bigcommerce.com. With that, let me turn the call over to Brent.

Thank you, Rohit and good afternoon everyone. Thank you all for joining us on our first earnings call as a public company. During today’s call, Robert and I will provide details on our Q2 results as well as Q3 and 2020 full year guidance. We will also spend more time than we will in future earnings calls covering the business, our strategy and the opportunity ahead, as many of you may be new to the BigCommerce story. Feel free to grab some popcorn and a beverage. Let’s kick this off with a few highlights of our Q2 financial results. Our goal is to deliver the best open SaaS e-commerce platform in the world. We are making consistent progress towards that goal and that progress was reflected in our Q2 results. We believe we had a strong quarter, with Q2 revenue coming in at $36.3 million, which was up 33% year-over-year. Total annual revenue run-rate, or ARR, was $151.8 million, which was up 32% year-over-year. Q2 revenue and ARR growth achieved our highest growth rates in 12 quarters. And so far after two quarters, 2020 represents our third successive year of growth rate acceleration. Enterprises account ARR was up 44% year-over-year in Q2, reflecting our continued momentum, serving the needs of mid-market and large enterprise businesses. These customers value our open SaaS platforms, enterprise functionality, flexibility and lower total cost of ownership. Importantly, we delivered these results while continuing to drive operating leverage across the business as shown by a 19 percentage point year-over-year improvement to our adjusted EBITDA margin. I am proud of our team and I would like to acknowledge our BigCommerce employees and partners for their resiliency and dedication to serve and support our customers during these unprecedented times. For those of you who are new to the…

Thanks, Brent and thanks again to everyone for joining us today. Since this is our first earnings call, I would like to start by providing a brief overview of our financial model, and then I will go through our second quarter results in detail. Then I will move on to guidance for the third quarter as well as for the full year 2020. As a reminder to everyone, please note that we had previously shared an expected range of our preliminary Q2 results in our SEC filings before going public. Today, I will share our final Q2 results in more detail. Also before discussing detailed financial results, I would like to point out that in addition to our GAAP results, I will also be discussing certain non-GAAP results. Our GAAP financial results, along with the reconciliation between GAAP and non-GAAP results can be found in our earnings release. As Brett mentioned, we generated total revenue in Q2 of $36.3 million, up 33% year-over-year. As a reminder, our revenue comes from two sources: subscription solutions revenue and partner and services revenue. Subscription solutions revenue consists primarily of platform subscription fees from our retail and enterprise plans. Subscription solutions are generally charged per online storefront and are based in the store’s subscription plan tailored to their size and feature needs. There are two types of subscription plans that we offer to our merchants, enterprise and essentials. Our enterprise plans are sold to larger merchants either in the mid-market, which are sites doing online annual sales of $1 million to $50 million in annual transactions, or in the larger enterprise segment, which recites doing more than $50 million in annual transactions. Our enterprise planning contracts are generally for a fixed term of 1 to 3 years and are billed monthly or annually. Our…

[Operator Instructions] Our first question comes from the line of Raimo Lenschow from Barclays. Your line is now open.

Thank you and congratulations on the successful IPO. Two questions if I may. First one for Brent, Brent, can you just run us through like you talked about that open or API-driven solution that you are offering, but then you see like some of your other competitors, kind of doing like this cost approach where they try to kind of monetize as much as possible. Can you maybe kind of compare and contrast a little bit kind of why someone we did this approach and why and where your approach fits in and kind of gives you an advantage? And then a question for Robert, if you look at your subscription revenue, we saw the 19% growth year-over-year, obviously, there were other factors in there, so how do we have to think about that kind of underlying, because I guess the promotions kind of brought that number down a little bit? Thank you.

Thanks. Yes, the open SaaS approach is the best option for larger businesses, complex businesses, fast growing businesses who really want to optimize their entire approach to e-commerce and their technology stack around best-of-breed and what fits their requirements the best. In pursuing open SaaS as our strategy think of it as analogous to what Magento did back in the on-premise era with their open source platform. They quickly grew from non-existent before 2008 to the largest platform in the world for merchants small, medium and large largely because there were so many different types of merchants who benefited from the combination of openness and enterprise functionality. There limitation is it was on-premise software and most businesses do not want to have to spend the money, hire the expertise and become IT specialist to run their own software, hardware security, etcetera. We are basically the open and flexible model for the SaaS era. And that is as you mentioned in contrast to many of our largest competitors who are software conglomerates, they grow by acquiring and adding an ever larger number of pre-integrated offerings often to the exclusion or competition against other competitors in those same areas. And they therefore limits choice to our businesses. There is not necessarily an argument that says one model is better than the others, but I would emphasize that we are the only best-of-breed sole product, e-commerce platform specialists competing against a wide number of large market cap software conglomerates and we think therefore customers when they evaluate us get something unique and differentiated, which is best-of-breed up and down their e-commerce platform.

Thank you.

I will jump in here. Hey, Raimo. Thanks for the question. Yes, the 19% really was driven mostly by the product of the essentials promo that we ran throughout most of Q2 as well as the timing of enterprise deals throughout the quarter and I will dive deeper on to both. So when COVID first hit, we wanted to act really quickly to help as many merchants as possible to sell online. We offered a 90-day free site-wide promo for our essentials plan and we quickly saw traction and decided to run it through the quarter. The revenue recognized from the promo was depressed for the 3 months that they are in promo, because remember we don’t recognize revenue while stores are on promo, but we do capture the bookings as part of our ARR. Without the promo, the total subscript would have been positive relative to Q1 and then the other part is the enterprise plan. So, as we mentioned previously, in the beginning of the quarter, we had some enterprise deals push their timing thankfully we came back really strong in late May and June as you can see our enterprise accounts grew 44% in Q2. It had a modest impact in revenue based on the timing of those deals. But when you look at our ARR, you can see our ARR reflects our strong quarter in both enterprise plans as well as the bookings that we generated from essentials

Perfect. Thank you. Congratulations.

Thank you.

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

Perfect. Thank you so much. Maybe just a follow-up on Raimo’s question there. RA, maybe could you help us with the essentials promo that you ran from Q2. How much did it depress the actual subscription revenue when you try to quantify that and then a quick follow up on the way that you charge customers right and as they push through GMV limits, that's when they – sort of step up to the high level disputes how much of that momentum do you have going into the back half of the year as we continue to see obviously very healthy ecommerce activity moving forward through this current environment?

Yes, hey, Stan, you are breaking up a little bit, but I think I get the gist of the question, Q1 subscription revenue was, roughly 22.4% year-over-year, without that promo, you could, it would have came in probably slightly higher than that for Q2. So that’s really the impact of how that promo affected subscription revenue in terms of growth adjustments, when we think when you think about our retail plans. Our retail plans are based on GMV thresholds. So as merchants exceed those thresholds in the following period, they will be programmatically moved up to the next plan. Our enterprise plans are as growth adjustments built in, but it is really based on a trailing 12 month basis. So, as enterprise accounts exceed their initial order thresholds on that trailing 12 month basis, then you will see them upgraded, or you will see the growth adjustments once they cross that threshold. So with the surge of GMV that we have seen since March, there’s usually about a month or so lag between when you will see the adjustments. Yes, we are seeing strong growth, strong upgrades and growth adjustments across retail and enterprise plants.

Perfect. Thank you so much.

Thank you. Our next question comes from the line of Samad Samana from Jefferies. Your line is now open.

Hi, good afternoon. Thanks for taking my questions and likewise let me echo the congrats on the IPO. One for you, Brent and then a follow-up for Robert, but maybe first starting with, the I think the fortune 2000 kind of resonated with us, as we think about, larger retailers moving over to SaaS open platforms, are you seeing greater inbound leads coming in? Not just because of COVID? I mean may be I was thinking about what the trend there was, even if we go back to early 2020. And have you seen that accelerate? And maybe to what degree are you getting more fortune 2000 or larger merchants that may have been more hesitant historically start to thaw and move to an open platform like BigCommerce?

Yes, there are actually two things really helping us as we compete for the largest enterprises in the world. One is being public, the IPO itself because our largest competitors Adobe, Salesforce, Oracle, SAP, Shopify, are all public companies. And when we were a private company, the transparency and credibility disadvantage that we competed with work against us and now we have leveled the playing field. So that’s been helping us for the last month. But the other thing that has made a real difference in recent months is the slew of recognition coming in from the third party research. Analysts and I don’t mean sorry for analysts, I mean, industry technology research analysts in particular. It began with the Forrester wave report back in May, where we were rated as a strong performer in the large enterprise commerce platform reports for both B2B and B2C then was followed up with paradigm research bench, observe the combine with one award and 7 out of 10 categories. And then finally, the Gartner report came out with a favorable positioning of BigCommerce. And so this additional recognition from the folks who go very deep on large enterprise platform is helping us build better consideration sets and compete more effectively than we could let’s call it a year or 2 ago.

Great. Very helpful. And then Robert, I don’t know if I heard this correctly, but if I did it sound very positive, but it sounds like you said RPO was increased 96% year-over-year, I was wondering if maybe you could help us understand what that looks like in 1Q just for comparison sake? And then if we think about that Q2 growth number, is that a good representation of maybe it cancels out some of the noise around promos, etcetera, but how should we maybe think about that, that growth rate that you called out for RPO?

Yes, good questions, Samad. I mean, again, the RPO and deferred billings, I would point you to our ARR as the best measurement of our bookings quarter-over-quarter. Our RPO for Q1 was 66.2, in Q2, it’s 73.5, but again, I would encourage you and everyone else to just really look at our change in ARR is the best measurement of the change in bookings, because that will capture our bookings for both essentials and enterprise plans during that period.

Great. Very helpful. [indiscernible] I will pass the baton along. Thanks again for taking my questions.

Thanks, Samad.

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

Thank you for taking the question. Maybe just to share with new brands, I mean, I think we have seen this amazing surge in e-com some companies are saying we have 4 to 5 years of penetration are happening in 4 to 5 months. So, I am just kind of curious it certainly seems like if I look across some of your metrics, the net adds for the greater than 2-K accounts seem to be really positive to Robert’s last point, the ARR growth seemed to accelerate nicely. So, I am just kind of curious on maybe how this is manifesting across your business, I know in S-1, you had mentioned May, new enterprise sales really perked up. So, any color on maybe how that is followed through, would love some context there?

Yes, sure. I mean, clearly the metric that reacts first to growth in e-commerce is customer sales and the closest financial disclosure proxy we have to that is our PSR revenue, because a meaningful portion of partner revenue for us is directly generated from customer transactions from gross merchandise sales and order count. And as you saw that was up 74% in Q2, which was a big acceleration from 52% in Q1 versus being in the 30s, the prior three quarters, 30% to 37%. So, that’s gone up very dramatically. And the real operating question, well, how long will online sales stay elevated? The industry data suggests they are not dropping off. When you look at the third-party bank reports on online credit card volumes, it’s still pretty robust and that’s very encouraging. I think the most important belief that we and many others look in the industry is that consumer behaviors change and business behaviors change. Now, businesses in particular can no longer regard online selling as an option, it’s a necessity and it has to be a core part of their strategies. Many companies who have adopted e-commerce by now realize that there is much more they can do additional brands, geographies, customer segments, they can sell into and they might be still in early stages of digital transformation. We are here to surge them. And consumers have found so many new brands to buy from use cases to take advantage of. It’s likely that we will just continue to grow from here for many years to come.

Really helpful. And Robert, maybe for you as we are looking into the second half, I mean, obviously, you have provided some helpful guidance, but is there any other factors we should be aware that certainly really seems like as these promos convert, you can certainly see subscription revenue increase. On the contrary, it seems like you want to be really conservative about PSI revenue because it is tested with ecommerce volumes. And we are it also seems like when we think about ARR and that it ticked up and maybe it’s going to be less impacted by those just given the definition. So I know there is a lot of moving parts to the model, but just anything that we should be mindful of as we build out our models here for the second half.

Yes. Hey, Josh. We saw strong bookings momentum, for sure, in Q2, we feel good about continued growth in bookings, both for essentials and enterprise. It’s great to see enterprise at 44% year-over-year. And again, keep in mind, I mean, we are really focused on disrupting segments in the market where our enterprise plans fit really nicely. So whether you are mid market or enterprise merchant, our differentiated strategy really fits well into that and it is reflected in those year-over-year growth numbers, so we feel good about bookings, we feel good about subscription. The challenge for us is really predicting the continued impact of the transactions that we have seen since March. I mean, clearly, with the 74% year-over-year, we have seen a spike in GMV and monetize GMV through the platform. Given that we are new public company, we just want to take a prudent approach in terms of how we forecast that going forward. So we are moderating that a bit in the second half. But continued momentum and subscription in bookings and kind of taking a prudent approach around GMV and the related PSR.

Yes, makes sense. Thank you both.

Thanks.

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

Hey, guys. Thanks for taking the questions and congrats on the momentum. Maybe, Brent, I will start with you. So to the extent that headless is a driver of demand for BigCommerce, can you just talk about what what’s typically the catalyst to drive a merchant to adopt a headless strategy? And then, is there any way to kind of characterize where you think we are in terms of, merchants adopting headless strategies and whether that trajectory has changed over the last years up?

Yes, I mean, the funny enough, businesses come from two polar opposite directions to headless, in one case, it’s those companies who are late adopters of e commerce started with a marketing centric website, maybe created in the low end in WordPress, or at the high end and Drupal or Adobe Experience manager, and then want to commerce enabled that without having to redesign their whole site. So in those cases, they start with content non transactional and then add commerce using a headless model, at the polar opposite end are companies who are trying to lead with customer experience and create the most innovative, immersive interactive user experiences may be going well outside the norms of a typical templatized or hierarchical category structure to an e commerce site. And they want to be unconstrained by the e-com platform using, purpose built frameworks or a third party CMS. And in that case, again, headless is a perfect use case. Now, how is it actually changing as a percentage of total installed e commerce sites? I wish I had a good way of analyzing that but honestly, I don’t I mean, if you look at build on what we still see, it could be as much as 30% of all stores around the world are headless, you get most of the way there just with WordPress sites but I honestly don’t know what the trend is relative to the total time.

Yes that that makes sense and that’s a helpful color. And then I don’t know if this is better for you alright but if we think about the mix of merchant additions obviously lots of strong ads in the quarter. Can you characterize the mix of those that are replatforming versus, maybe merchants that are new to online for the first time and whether that’s kind of changed over the last year?

Sure, I will take this. I mean, a general rule for us is it runs around 50-50 new sites versus migration sites. During the pandemic, though the shift has been more in the direction of new sites in particular, for companies that were caught flat footed for who aren’t late adopters or who are trying to go through a more thorough digital transformation across what they do. It’s a little bit harder right now to migrate a platform when your employee base may not be able to get together in person to collaborate on that. And so there could be an opportunity in the future for companies who kind of held on by their fingernails during the pandemic on their old platform once they are back in the offices to think about modernizing what they do.

That’s great. Thanks for all the color and congrats again.

Thanks.

Thank you. Our next question comes from the line of Scott Berg from Needham & Company. Your line is now open.

Hi, Brent and RA. Congrats on a good quarter. Thanks for taking my questions. I guess the first one is Brent, can you maybe comment on the newly announced or expanded Facebook, Instagram relationship? Does that partnership differ much from any of your other technology partnerships and do you have any maybe differing expectations on what that can bring BigCommerce maybe over the next couple of years?

Hey, Scott. It’s certainly the case that what Facebook and Instagram are doing is very different than what other partners like eBay and Amazon and Google Shopping do. Fundamentally, the Facebook platform is an amazing way to both retarget its existing site visitors and then do look-alike targeting for new ones. And Instagram is an unbelievable way to engage a following that you built up – that you build up as a brand through Instagram and try to cater to with very rich photos and stories that you tell. We have been partners with Facebook and Instagram for years one of only two that has been basically a release partner in each phase of what they have done in e-commerce. We are very keen to keep investing in that, because we see so many successes amongst our customers who are early adopters and taking advantage of those channels. And what it really means for a business is if you are on our platform, you can seamlessly freely sync your catalog, upload it into Facebook and Instagram, process orders there and basically manage those orders and manage your customers’ interactions all on the same technology stack that you run your branded store on. So, it’s a very powerful integration and especially useful for any brand that takes advantage of Facebook and Instagram.

Got it. Helpful. And then maybe one follow-up for RA, on the PSR revenues in the quarter, obviously GMV volume is up significantly driving probably better payments related revenues. But as you look at the mix of revenues in this COVID driven environment versus maybe the last couple of years, is the composition of those revenues like significantly different between the types of partners and they all kind of have similar benefits in this heightened environment?

Yes. Hey, Scott. I mean, as you know, majority of our PSR today is driven by rev share that we get from payments. We have put partnerships in place across the ecosystem really over the last 12 to 18 months that we are starting to monetize quarter-over-quarter. And I think the same rules apply, it’s just payments is just much more mature in kind of our business, but that’s not to say that our share of wallet or our ability to monetize even further beyond payments we are excited about that opportunity going forward.

Great, helpful. Congrats again guys. Thanks.

Thanks. Scott. Appreciate it.

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

Hi, gentlemen. Congrats on the IPO in the strong results. So, I wanted to follow-up on one of DJ’s questions, but there is still a large presence of some of these legacy platforms out there, the value of BigCommerce versus SOs is well documented. But I am curious on the pace of migration that you have seen so far during the pandemic and if there is any change in the shared owners that are migrating on to the platform?

Yes. Again, it’s my perception that the migrations during the pandemic have actually slowed a little bit relative to companies who are doing net new sites for new brands, new geographies, new used cases, because migration is harder to pull off in the midst of a pandemic when your employees can't all get together, and when your online channel which may not have been your primary channel pre pandemic becomes your primary channel. It's that much riskier, to undergo a migration. Now, this is just perception. I don't have statistics on the pace of migration. But inevitably, as you can see, just on built with there are more than 500 platforms around the world. Most of them are quite old and not best to stay up to speed and stay competitive and current. And so it's a giant part of the market that still on those platforms in may well be looking to upgrade modernize in the months and years ahead.

Got it. That's great color and maybe just on B2B, I think a lot of us are – yes, the B2C pick up in the pandemic as well understood. I am curious on the B2B evolution, has the pandemic really accelerated that migration? And maybe what do you see as the kind of one or two key large catalysts to kind of facilitate that? Thank you.

Yes, I think it has accelerated B2B. I think one of the statistics or surveys we shared in our S-1 was that there was a survey of several hundred B2B sellers done recently and half of them said that they were not selling it all online. And in the middle of the pandemic as offline sales for many companies get shutdown or hindered, the option not to sell online has dropped and they have had to scramble. So, my team would say a higher percentage now especially at enterprise sales that we have been doing them before the pandemic have been B2B sales.

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

Hey, guys. This is actually Nick on for Terry. Thanks for taking my question. I think you guys touched on this a little bit in the script, but in terms of product development, can you talk about the importance of Page Builder and how it’s resonating with customers so far? And then just as a follow-up, can you give us an update on the Payments SDK, you guys are working on and how you expect that to impact the business overall? Thanks.

Sure. Page Builder is our drag and drop interactive capability for page design, theme design and theme editing. It introduces a much more wizzy win type experience for ease of use, but also for powerful incorporation of widgets. Widgets can power a recommendations engine, our motions engine and it’s easy just to drag and drop and incorporate into a page. We rolled that out in beta to new stores starting at the very beginning of Q2 and saw for the new trial stores who in anyway chose to interact with that a spectacularly big increase in trial paid conversion. Now, there is going to be a bias towards companies that were already more highly engaged to interact with a tool like that, but the feedback has been great. It’s one of those rare product releases that goes out seemingly without bugs or without issues. We quickly moved on to GA for new stores and are now working on that for existing stores. But overall, I would say, Page Builder has been a real success for us and our customers. And then your second question is around Payments SDK. So what the SDK does is and the APIs around payments, is allow third-party payment providers or a system integrator operating on their behalf to actually integrate third-party payment solution into us rather than putting the burden always on us to integrate into them. And then once they are done doing that, we then certify that code, take it in and manage the PCI compliance. So Phase 1 of the payments SDK is for plain vanilla credit card processing, it’s now why we have beta partners who are transacting and processing transactions on behalf of merchants. The big benefit for us long-term is it makes it a lot more easy and scalable for us to take on new country or region specific payment providers all around the world. If we had to do every integration and maintain every integration ourselves, the world is a big place and there are a lot of providers. We have a hard time covering everything. This makes that scalable. And I think as a result of that, in the quarters ahead, it will be a catalyst to our growth in new countries, new regions.

Got it. That’s really helpful. Thanks, guys.

Thanks.

Thank you. At this time, I am showing no further questions. I would like to turn the call back over to Brent Bellm, President, CEO and Chairman for closing remarks.

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

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.