Ladies and gentlemen, thank you for standing by, and welcome to the BigCommerce Fourth Quarter and Fiscal Year 2022 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers presentation there will be question and answer session. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your first speaker today, Daniel Lentz, Head of Investor Relations. You may begin.

Good afternoon, and welcome to BigCommerce's fourth quarter and fiscal year 2022 earnings call. We will be discussing the results announced in our press release issued after today's market close. With me are BigCommerce's President, CEO and Chairman, Brent Bellm; and CFO, Robert Alvarez. Today's call will contain certain forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning financial and business trends, our expected future business and financial performance and financial condition and our guidance for the first quarter of 2023 and the full year 2023. These statements can be identified by words such as expect, anticipate, intend, plan, believe, seek, committed, will or similar words. These statements reflect our views as of today only and should not be relied upon as representing our views at any subsequent date, and we do not undertake any duty to update these statements. Forward-looking statements, by their nature, address matters that are subject to risks and uncertainties that could cause actual results to differ materially from expectations. For a discussion of the material risks and other important factors that could affect our actual results, please refer to the risks and other disclosures contained in our filings with the Securities and Exchange Commission. During the call, we will also discuss certain non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures as well as how we define these metrics and other metrics is included in our earnings press release which has been furnished to the SEC and is also available on our website at investors.bigcommerce.com. With that, let me turn the call over to Brent.

Thanks, Daniel, and thanks, everyone, for joining us. On today's call, I will walk through our results for the quarter and year, share my thoughts on the e-commerce business climate, outline progress against our 5 strategic priorities and finally, share perspectives on our approach to 2023. R.A. will also share some of the assumptions on which we have built our 2023 financial plan. He will conclude with our high-level expectations for 2023 in his discussion on full year guidance. In a challenging year for global e-commerce, big commerce grew faster than the broader e-commerce industry, and our Q4 results showed strong progress in both profitability and operating cash flow. We also delivered on our full year opening guidance set last February, highlighted by our 27% full year top line revenue growth. Let's discuss the details. In Q4, total revenue grew to $72.4 million, up 12% year-over-year. Full year 2022 revenue grew to $279.1 million, up 27% year-over-year. Our Q4 non-GAAP operating loss was $9.4 million, and the full year was $47 million. We concluded Q4 with an annual revenue run rate, or ARR, at $311.7 million, up 16% year-over-year. That represents a sequential growth in ARR of $6.4 million. Enterprise account ARR was $224 million, up 30% year-over-year. The enterprise segment now represents 72% of our total company ARR. Let me now share some perspectives on our results. Without a doubt, 2022 was a challenging year in Global Ecommerce. As macroeconomic conditions deteriorated in the first half, we took decisive action to reduce planned spending and focused efforts on our enterprise business. I am confident these choices are yielding the proper balance between necessary tactical adjustments to near-term economic conditions and steady long-term investments in the strategic initiatives that will drive profitable growth in the years ahead. Our results reflect…

Thanks, Brent, and thank you, everyone, for joining us today. During my prepared remarks, I'll walk through our Q4 results, provide details on some of the key assumptions behind our 2023 plans and conclude with a discussion on our Q1 and full year revenue guidance. In Q4, total revenue was $72.4 million, up 12% year-over-year. Subscription revenue grew 14% year-over-year to $53.3 million while partner and services revenue, or PSR, was up 6% year-over-year to $19.1 million. For the full year 2022 revenue finished at $279.1 million, up 27% versus 2021. Subscription revenue in PSR were up 33% and 13%, respectively, year-over-year. In Q4, revenue in the Americas was up 12% while EMEA revenue grew 22% and APAC revenue was down 6% compared to prior year. For the full year 2022, Americas and EMEA revenue were up 28% and 33%, respectively, year-over-year, while APAC grew 9% year-over-year. 2022 was a tough environment for e-commerce and SaaS software. Despite those headwinds, we posted solid growth in subscription revenue, especially in the Americas and EMEA, where we launched the new markets. We also generated PSR growth that outpaced consumer spending in e-commerce as a whole. I'll now review our non-GAAP KPIs. Our ARR grew to $311.7 million, up 16% year-over-year. That represents a sequential growth in total ARR of $6.4 million. Enterprise account ARR was $224 million, up 30% year-over-year and is up more than 2.2 times from where it was just 2 years ago. As we have outlined previously, the change in total subscription ARR, which can be calculated by subtracting the trailing 12 months of PSR from total ARR is a good indicator of our underlying change in net bookings during the period. Subscription ARR was up $5.3 million versus Q3 and up 17% year-over-year. As Brent mentioned, like many…

[Operator Instructions] Our first question will come from Gabriela Borges with Goldman Sachs. You may now go ahead.

I appreciate the detail on the 2 impacts to your bookings in the first half from cost reallocation plus macro. I want to better understand the rate of change. Are you still seeing further deterioration in bookings as we speak? Or are you seeing stability at a lower more muted level?

Gabby, yes, in terms of bookings, I'll say that it's stabilized on enterprise. In terms of the nonenterprise contraction, we still see it in that kind of mid- to high single digits. We did roll out recently, pricing changes to our essentials plans, which really encourages upfront payment, annual prepay. We're focused on profitability this year, but we're also focused on improving our cash flow from operations. There is an element and an option to go monthly. With that monthly price, there is an increase in terms of our standards and Pro plans. For our base of merchants, that really doesn't take effect until the June time frame. So really, the impact of that isn't going to be seen until the back half of this year. Based on the impact of that pricing, based on the mix of annual prepay or monthly, we're not building in a big impact from that pricing action, but we do think that the second half could potentially get down to the mid- to low single digits on nonenterprise. For enterprise, very, very focused on building that pipeline. I think the lead flow since the beginning of the year is encouraging. I think the quality of leads are encouraging, especially with larger accounts. And then in the addition of Commerce as a Service, where we typically see larger opportunities with partners that also carry some longer sales cycles, we're building in assumptions around the close rates and the time line to close to where we see better bookings by midyear and definitely through the back half of '23.

Our next question will come from Scott Berg with Needham. You may now go ahead.

Congratulations on all of the hard work in the quarter. I guess a couple of things. I wanted to first talk about the confidence in the enterprise segment. I was at the NRF conference a month ago and all the chatter amongst other vendors in the space seem to be -- enterprise or demand in the enterprise-type segment remains pretty constant versus down market, smaller customers, which is certainly waning versus good in the last couple of years. I guess when you look at all that, especially with the macro backdrop, why are you so confident in still being able to grow the enterprise segment of your business at this 20% plus rate here in '23?

Scott, this is Brent. I'll take that, and it was nice to see you on the floor at NRF, which tends to attract a larger enterprise retail customer set relative to some of the other e-commerce events. We have a lot of confidence in our enterprise momentum and positioning. As you can see, we ended the year with 30% ARR growth for enterprise, which is dramatically higher than the 7% GMV growth in U.S. e-commerce across the course of the year and probably a roughly comparable number globally. So we gained a lot of share in aggregate in this last year. Our product, we think, is the -- is uniquely positioned in the market because in an environment where enterprises are trying to save money, become more profitable and simplify their approach to e-commerce while excelling, we do that better than anybody. We truly simplify the approach to enterprise e-commerce by having a SaaS model with so much ease of use and functionality built in that deploys quickly and then has the most modern connections in the various omnichannel demand generation channels. Increasingly, we're being rated the best or one of the very best e-commerce enterprise platform in the world for both B2C and B2B. You see that with Forrester, Gartner, IDC, EMRs in Europe. And so the outside experts, when they evaluate enterprise platforms, they're saying we're the best or one of the very best. And that is being corroborated by the share gains that we had during the course of the year. So that's a multifaceted answer to your question. I could go on at length about the product and its capabilities, our partners and theirs. But I think I'll summarize with that.

I guess as a continuation on that. I think if we look at your innovation over the last couple of years, whether it's multi-store, multi-inventory a variety of other things, and functionality that you've called out, you seem to believe you're at feature parity today relative to the other platforms or have surpassed them. As you continue to evaluate what's out there, do you feel like you're missing anything to capitalize on those goals today? Or is what you have plenty of horsepower to meet the next couple of years?

I think at the highest level, we have delivered the major components of an enterprise platform, both in terms of functionality and flexibility. There are always both new innovations that are important to the market as well as individual features that might help us grow in given countries, given industry segments, et cetera. There's a lot of upside from what we're doing in B2B, whereas I would say on the B2C side, we're a very, very, very fully competitive enterprise platform. We will get there during the course of this year as we fully integrate and improve and expand on the functionality in both B2B Ninja and bundle B2B, which we acquired. I'm really excited to say that we're now multistorefront compatible with our B2B offering and theme independent. And we have some incredible product releases that I think will be industry-leading during the course of this year. So I would say we're 95% of the way to the current market, but the market is always dynamic on B2C and maybe 80% of the way there on B2B with a very aggressive agenda for this year.

Our next question will come from DJ Hynes with Canaccord Genuity. You may now go ahead.

This is Daniel Reagan on for DJ Hynes. Maybe I'll start, Brent. As we think about the launch of the new certified omnichannel partner program, are there components of this that would incentivize those partners that might be multivendor to bring more business towards BigCommerce? And then second to this, can you talk about what the customer expansion strategy looks like at the partner level?

Absolutely. I love that question. The answer is yes. As background, our certified omnichannel partner program includes both agency partners and systems integrators as well as advertising agencies and technology partners. Really, anybody who serves businesses in a way that helps them expand their advertising and selling channels to the leading search engines like Google and Microsoft, who we just added. The leading social networks, Facebook, Instagram, TikTok, Snap, et cetera. The leading affiliate networks, the leading display ad platforms and the leading marketplaces like eBay and especially Amazon, where we announced our Buy with Prime integration. So what Feedonomics does, it's the world's best platform for enterprises to get their catalogs not just synced into all of these advertising and selling programs, but also optimized to perform with the keywords and the schema exactly the way that those various channels want them to improve both organic performance as well as return on ad spend. So that's the background. An agency -- Feedonomics is not platform dependent, although we have an incredible integration into BigCommerce, many of their customers are giant enterprises on custom platforms and on competing platforms to BigCommerce. Feedonomics integrates and has integrations into all of them. And so what's relevant is that for any given agency, let's say that x percent of their merchant base is using BigCommerce, it may be 20%, it may be 80%. Feedonomics in the omnichannel program is not just relevant to 100%. It's actually probably the single highest ROI thing that the agencies can do to help those businesses expand demand generation and improve the return on ad spending. So it's extraordinarily powerful. Of course, most businesses spend a lot more money on their advertising and demand gen. Then they do their technology stack. So this is a very leveraged way for our omnichannel partners to have a completely independent and incremental way to help their customers and drive business. In answer to your second question, yes. So when a business starts working with Feedonomics and starts usually realizing a very significant improvement in their performance within days or weeks, it naturally builds a relationship with the broader BigCommerce entity, which may or may not lead to other conversations down the road. But it's important to note that we're not compromising Feedonomics' ability to serve all merchants and do that in a way that is respectful of the platforms and the technology stack that those merchants have. Thanks for the question.

And then just one for R.A. and really appreciate the time. As we largely pass the non-enterprise challenges by the end of 1H, what are your expectations for non-enterprise growth beyond 1H going into 2H and beyond? What's the strategy for turning non-enterprise business into more of a product-led self-serve motion? I know enterprise has been getting a lot of attention, but maybe you can shed some light on some of the work that's being done there and what your growth expectations might be.

Sure. I mean, in terms of the second half, we do think that non-enterprise will stabilize. As I mentioned earlier, TBD on the pricing impact, but that could potentially reduce contraction as we exit 2023. We do believe by early '24, by then, most of our non-enterprise accounts will be transacting merchants who are established with -- have better retention profiles. And that by nature is going to improve that contraction level as most non-enterprise accounts would churn in that first kind of 12-month period. In terms of how do we sign up additional nonenterprise accounts. We're definitely going tech partner and agency partner. The whole partner ecosystem is one where it's still going to drive both enterprise and nonenterprise accounts. We also have self-service flows that we're going to continue to optimize. We're just not going to spend a lot of our sales and marketing go-to-market dollars to drive those accounts. I mean if you think about our initiatives that are so squarely tied to disrupting enterprise, it is omnichannel, it's B2B, it's composable headless commerce. If you peel the onion back on omnichannel, the vast majority of subscriptions from Feedonomics are enterprise accounts, when you use big commerce, cross-sell speed Feedonomics, it's usually enterprise accounts. When you think about B2B, those are majority enterprise accounts and ARR. And if you think about composable, it's really the same. So Gabby asked the question in terms of our confidence level to deliver north -- 20% or higher enterprise ARR growth throughout the year. It's squarely tied to those initiatives in the ecosystem that we have, the partners that we have are all part of building out that enterprise growth for this year and into next year.

Our next question will come from Koji Ikeda with Bank of America. You may now go ahead.

This is George [indiscernible] on for Koji. I had a question on -- you might have seen Shopify announced today revamped partner program to incentivize and drive partnership growth and growth through partners. So I was wondering, in light of that, if you had anything to call out in terms of changes in the competitive environment or maybe changes in competition with Shopify specifically.

This is Brent. Lots of respect for them. Obviously, as a company and a competitor, they're very strong. Much of what they're doing is catch up. I mean, with respect to enterprise, their promotion of both enterprise as a segment of composable and having a certified program for partners are all things that we've been doing for years. We've been doing headless on Composable since 2016. We've had partner certifications around development for quite a period of time. And we've got enterprise focused for a long period of time, too, now with our go-to-market as well, but in our products since 2015. So they're indeed trying to move up market. They, like us, recognize that the economics in terms of retention and unit profitability are very strong in that segment. So they'll keep competing, but we have dramatically different offerings to the market. We are open and not trying to push a suite to customers. Instead, we're giving them the best enterprise platform in the world, and then they -- for a complex business, associate the world's best payment solutions, shipping and fulfillment, point-of-sale, any other components of a stack to optimize for a complex business rather than a sort of one-size-fits-all suite. So 2 very compelling offerings, and a segment of the market will view us as having the best offering in the world and another segment will pick them. But increasingly, we're really the 2 lead options out there and well differentiated and distinct from one another in the types of merchants we win and serve.

I had a question on EMEA growth is robust and -- could you maybe provide some color on the drivers of that and maybe how we should be thinking about EMEA as a growth factor in the medium term?

Yes. We had a very good year of selling in EMEA relative to the internal plan for gross new sales, it's very strong. And during the course of the year, we expanded our footprint to major new regions. We expanded into the Nordics, we expanded in Germany and Austria, and that was all added to existing countries like Italy and France and Spain and the Netherlands where we already had a presence. In each country, there are a different set of merchants, a different set of partners. It takes a little bit of time to establish a network there and start selling effectively, but we're seeing great traction and great wins and examples in all of those regions that I've mentioned on top of our historic -- super strong pace in the U.K. Long term, I think we are extremely well positioned to compete in Europe. Europe has the most complexity because of countries, languages and currencies. That type of complexity naturally favors a business like ours, a product and platform like ours that has native multistorefront, full support and leadership in headless or composable. We make it a lot easier and more scalable to add countries and serve the complexities of Europe. And then when you can do it both B2C and B2B, even better. So we're very bullish on Europe. We're very proud of the job that team is doing and expect it to be a continued strong driver of our growth in the years ahead.

Our next question will come from Samad Samana with Jefferies. You may now go ahead.

Maybe first, R.A., I wanted to follow up on the commentary about the contraction for the non-enterprise segment. Should we think about that more as a function of a decline in same-store sales GMV at those customers? Or more a function of churn or downgrades of SKUs? I'm just trying to understand what's driving that contraction. Is it more on the downgrade side from SKU levels or more around churn? And I guess, what have you experienced the first couple of months into the first quarter versus what you just guided for that's baked into the full year guidance?

Yes. You saw it in Q4 that's carrying over into Q1. I mean, essentially, it's the retention profiles of enterprise versus nonenterprise accounts. We have a base of non-enterprise accounts that are contracting. We're not investing a lot in terms of building funnel and spending our sales and marketing dollars to replace any ones that would churn with new accounts. Over time, I think that as those cohorts of transacting, and I want to emphasize that because the non-enterprise accounts who are transacting and are established, they do quite well. The retention profiles are quite strong. We expect them to not only stay on the platform but grow in the platform. We do think that that's going to improve over the course of the year as the maturity of the cohorts that are maybe in the last 12 to 15 months, we find out whether or not they're going to stay or go. But I think overall, going into 2024, we should exit this year with a more stable nonenterprise business. And who knows? I mean, with Commerce as a Service, we do have tech partners that we go to market with that oftentimes will bring not just enterprise accounts, but non-enterprise accounts to big commerce. We're not spending or investing in sales and marketing, but they're selling big commerce into their base. And we're not factoring the impact of that, but that could definitely stabilize non-enterprise, if not grow it in the years ahead.

And then maybe just on the overall flow of your guidance. I know you gave the total revenue outlook, but should we expect the spread to widen between subscription revenue growth and maybe PSR growth? Or just how should we think about -- I know you again gave commentary around same-store sales, assumptions on GMV and order growth, but just how should we think about subscription revenue versus PSR in that full year guidance assumption?

Yes. I would say in the first half, they're going to grow roughly in line with each other. As we close some of our larger deals, and we see that kind of impacting midyear, second half of the year. Subscriptions should pick up in terms of revenue, the revenue we recognized on those bookings. On PSR, the biggest driver of growth that we see this year is launching major accounts that we have line of sight to launch. We have a number of accounts that we're excited to launch and the impact of those accounts are going to drive elevated GMV as well as PSR in Q2 or by mid-'23.

Our next question will come from Raimo Lenschow with Barclays. You may now go ahead.

Just quick questions. Like, obviously, macro is a problem and there's that much you can do about it. What do you see -- how do you think this will play out in terms of periods because obviously, the online retailers are suffering at the moment. Do you think that that's just a time period? And then once they all are through that pain, it start kind of picking up from there again? Do you think that's an ongoing thing as people renew the kind of the dominant renew revenue lower? Like how do you see this playing out from your perspective?

Raimo, I'll -- go ahead, Brent.

Go ahead, R.A. I'll let you go.

Raimo, I mean, we're building our plans for this year in a way where, obviously, we want to enter the year with a high level of confidence on the top line. Just like we did last year, the initial guidance we set, we wanted to make sure we were able to achieve that top line guidance for the year. We're not baking in or assuming improvements in the macro with our plans. We're assuming the challenging environment persists throughout the year and building our spend plans accordingly. So high confidence on the top line and then building our spend plans to ensure that we get to that profitability point in Q4.

Our next question will come from Josh Baer with Morgan Stanley. You may now go ahead.

So you had a really strong quarter as far as new enterprise account additions and then the ARPU sequentially was a little bit weaker. I think you mentioned in the prepared remarks that, that was driven by sales cycle times lengthening. I was just wondering if you could expand on that, how does that dynamic impact ARPA.

Yes, you bet. I mean, some quarters will have a lower number of new accounts, but bigger deals. In some quarters, it will be a higher volume of accounts, but the size of deals could be lower. I think Q4, we saw a number of deals that probably more look like in the mid-market range. We had some large enterprise deals that, due to sales cycles, may be pushed into Q1. But I think that's more of a mix issue than anything else.

So a little bit of a mix of customer change in the quarter. But then like thinking ahead to the 20% plus enterprise ARR growth, like any context for how that growth is derived between ARPA and new accounts?

It's a combination of both. I mean, we've got -- we build our pipeline, looking at size of deals, size of merchants, size of accounts. We are building our enterprise or larger enterprise pipeline nicely. And I think it's going to be one where you may have, again, quarters where we sign really large deals. And if that's the case, the ARPA is going to be higher, maybe some quarters where we signed both. But I think for us, we're looking at the pipe, looking at kind of size of merchant, size of opportunity, and we're building our pipeline to where we're really now have opportunities to win larger deals, especially with the conviction that our partners have with big commerce, the opportunities that they see for us with the merchants they work with. So we're going to look at it both and that mix should continue to affect both ARPA number throughout the year.

So there could be some puts and takes in any given quarter as far as ARPU, but the general trend line should still be looking for growth from these levels?

Yes, for sure. I mean it goes back to my comment around how our initiatives are squarely tied to driving enterprise accounts and our Commerce as a Service initiative, how we go to market with partners also drive enterprise accounts. So it's -- all of that is factored in.

Our next question will come from Brian Peterson with Raymond James. You may now go ahead.

This is John up for Brian. As you guys look at the pipeline in new business, where do you see the biggest share of customers that are migrating to your platform? And I'm curious your view on how the choppy macro maybe impacts migration. Does the TCO savings become a bigger part of the logic for potential customers?

Yes. In fact, we just had partner events in both Europe, Australia and here in Austin for North America. And a common theme across all of these events is that more than in any prior year, profitability and total cost of ownership are absolutely essential. And therefore, the strongest contributors to migrations to big commerce are going to be the platform -- the legacy platform options that are most expensive. The single most expensive is a custom platform where your engineers are responsible for all the code, all the hosting, managing the hosting, the security, the versioning, the bug fixing, et cetera. The next most expensive will be on-premise software like Magento for legacy platforms, Oracle ATG, IBM WebSphere, SAP Hybris and then a long list of old ones. Finally, there are some sort of outdated and antiquated SaaS platforms that are still pretty expensive to maintain because you have to do so much to keep them up to date. And all of those are very good contributors to us and play into our strength because we provide so much enterprise functionality and ease of use at a very competitive total cost of ownership.

[Operator Instructions] Our next question will come from Mark Murphy with JPMorgan. You may now go ahead.

This is [indiscernible] for Mark Murphy. Just on the pricing change you guys have, any kind of -- I know it's early, but any kind of feedback you're hearing from customers on that kind of elasticity? And any expectation on how it's going to go between the billings and the price increase? Am I right to assume that most of the enterprises are already -- enterprise customers, excuse me, are already on the annual billing?

Well, I'll start there, and it's way too early to tell because it just went out today, but I passed one of our great leaders in the halls and he said, wow, we sure had a lot of requests come in to switch from monthly to annual billing on this first day of the announcement. Now you can't draw a trend line through a single data point, but the good news is when people switch from monthly to annual, the way we've changed the prices they're paying us basically the same amount, but now we get all the money upfront. So it's a wonderful benefit in terms of free cash flow. And we'll -- with time, we'll see how that peters off, especially when they get to the January 1 date on existing customers where they -- the new pricing goes into effect. So most of the ones who want to keep their monthly build the same, will switch to annual by that date. And we just don't know what that mix will be. But in either scenario, we're either getting a free cash flow benefit or we're getting a revenue benefit. Both of those are great for our business. In the enterprise area, this set of changes doesn't affect anything there. We have a separate set of incentives built into enterprise contracts that incent upfront payment, but it's still an opportunity of ours to drive ever higher adoption of that for free cash flow benefits.

And just to clarify -- sorry, Brent, just to clarify, the effective date for the base of merchants that we have is June 1, not January.

I'm sorry. I'm meant June 1. You're right.

Our next question will come from Ken Wong with Oppenheimer & Co. You may now go ahead.

Just one quick question for me. When we think about that second half inflation, I guess what's driving that confidence there? I guess when we think about the puts and takes, is it purely just using comps? Is it the pricing? Is it kind of the potential to see some enterprise uptick? Would just love some color around that, either other Brent or R.A.

Yes. I'd say it's -- number one, it's kind of visibility into the pipeline in terms of the opportunities that we even see today. I think that it's also a function of -- with PSR, it's a function of major account launches. So we do expect some major account launches to happen in the first half, which will impact PSR in the back half. And I think that that's probably the bigger drivers for both subscription and PSR in the second half versus first half.

It appears there are no further questions. This concludes our question-and-answer session. I'd like to turn the conference back over to Brent Bellm for any closing remarks.

Well, I just want to thank everybody for joining this call and following the company. It was a tough year in the macro economy, but we're really proud of our 27% top line growth. The fact that we were one of the very, very, very few e-commerce companies in the publicly traded world to have not missed and actually achieved within or above the range of top line and bottom line that we set each quarter as well as for the full year. We gained a lot of share this past year. We know that the global economy is not out of the woods. There's still relatively soft growth and a real focus on profitability that can extend selling time cycles, but we see solid pipeline, and we're more excited than ever about our positioning in the market. We hope for another great year in 2023. And we look forward to the follow-on conversations with all of our investors and followers in the year ahead. Thanks.

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