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..

open SaaS, disruptive innovation and commerce as a service and the 5 strategic priorities that support them. Today, I'll briefly review those and discuss the progress we made in 2022 as well as our commitment to these areas this year. Our differentiated open SaaS technology approach is our first strategic pillar.

It combines a truly modern approach to API-first composability with the inherent benefits of multi-tenant SaaS, including built-in performance, security, usability, innovation and lower total cost of ownership. This combination helps businesses turn digital transformation into competitive advantage.

Our software conglomerate competitors attempt to lock customers into their proprietary suites. In contrast with Open SaaS, we provide a configurable and flexible platform that enables complex businesses to adopt best-of-breed technology solutions and customize their e-commerce approach to their specific needs.

Our next strategic pillar, disruptive innovation, is the business strategy to extend upmarket, propelled by an ever higher performing product at a lower total cost of ownership than established incumbents.

Our enterprise capabilities enable high-end merchants to expand faster and further at a much lower cost while providing advanced functionality to smaller businesses that allows them to grow and scale without ever having to replatform.

Our final strategic pillar, Commerce as a Service, describes our ability to enable partners to create and sell customized commerce solutions powered by our platform technology. We aim to leverage our open SaaS platform to empower our ecosystem, not compete with it.

And through Commerce as a Service, our partners combine the power of our platform with their unique use cases and competitive offerings to create comprehensive solutions for their target markets. The 3 pillars of open SaaS, disruptive innovation and Commerce as a Service remain core to our strategy in 2023.

We are laser-focused on 2 big objectives this year, achieving global leadership in enterprise and reaching profitability on an adjusted EBITDA basis in Q4.

By prioritizing our investments in staffing to focus on enterprise growth, we are confident we can both grow our enterprise e-commerce leadership position and accelerate our profitability time line. The continued success of an investment in our 5 strategic priorities will be critical to deliver these goals.

In 2022, we delivered our biggest advancements to date in terms of true enterprise-grade functionality and composability. Our launch of multi storefront capabilities was a major milestone. This enables businesses to easily launch and manage multiple storefronts from a single big commerce back end.

Customers can now launch additional brands, geographies and customer segments such as B2B in addition to B2C at much lower operational cost and complexity than with distinct infrastructures for each storefront. We also bolstered flexibility for enterprise merchants through our launch of multi-location inventory APIs.

These APIs enable customers to execute more complex order fulfillment scenarios, including buy online, pick up in store and multi-warehouse shipping optimization.

Major new brand launches during 2022 and including Ted Baker, Taste of Chicago, One Kings Lane, Ally Pets, Mountain Equipment Company and Lifetime Brands, leverage enterprise capabilities like these to power their growth.

Our omnichannel offering helps customers advertise and sell successfully through more channels than they could on competitive platforms.

In 2022, we made remarkable progress following our 2021 acquisition of Feedonomics, the industry's best solution for managing product catalog integrations at scale into more than 100 of the world's foremost search, advertising, social network and marketplace channels.

Major channels enabled include Amazon, Walmart, Target+, Google, Microsoft, Mercado Libre, Facebook, Instagram, Tik Tok and most recently, Snap. Just last week, we announced a new strategic partnership with WPP to offer omnichannel solutions to help WPP clients drive growth and maximize sales across hundreds of advertising channels and marketplaces.

This innovative partnership will give WPP priority access to new product tools on both e-commerce and Feedonomics in addition to providing APIs and data sets that will enable WPP agencies to develop unique insights for clients across product, trends and purchasing data.

New Feedonomics customers added in 2022 included Tottenham Hotspur, a marquee English Premier League football club for both advertising and marketplace channels.

Landmark Group, one of the largest retail and hospitality conglomerates in the Middle East, Africa and India; and Less Mills, a $150 million-plus fitness company headquartered in Auckland, New Zealand as well as many others across multiple e-commerce platforms. Feedonomics is a platform-agnostic solution.

We will continue to invest in Feedonomics' ability to meet the needs of the world's largest merchants and advertising and marketplace partners whether they are using big commerce or competing e-commerce platforms. Within BigCommerce, we launched our new certified omnichannel partner programs, both for agency and technology partners.

This enterprise-focused initiative gives partners new ways to generate revenue by helping merchants on any e-commerce platform achieve omnichannel success, Armed with numerous tools, services and exclusive channel partner programs, partners can educate and guide merchants on how to strategically expand into new channels that can drive more traffic with higher shopper intent, improve return on ad spend and generate more GMV.

We welcomed Amazon Buy with Prime into the program and in January, the BigCommerce became the inaugural partner for the launch of Buy with Prime, which allows BigCommerce merchants to easily sync their existing catalog across Amazon and BigCommerce and deploy the Buy with Prime button on their sites.

In January, we also started a new partnership with Microsoft Ads and Listings, allowing BigCommerce merchants to create and manage ad campaigns across Microsoft's extensive properties. B2B e-commerce has gone through a major evolution over the last few years.

B2B buyers increasingly expect a modern experience similar to what they see in consumer-focused e-commerce. That means B2B businesses must provide speed and ease of use without compromising the complexity and uniqueness of the B2B buying journey.

Building on the 2021 launch of B2B Edition, our 2022 acquisitions of bundled B2B and B2B Ninja completed a foundation for BigCommerce to become the world's most flexible and easy to deploy B2B platform. Bundle B2B powers the functionality of our B2B addition and B2B Ninja offers best-in-class B2B quoting capabilities.

By incorporating this range of functionality natively within BigCommerce, we have made B2B e-commerce practical and attractive for businesses of all sizes. Our B2B offering has achieved widespread industry recognition from leading analysts, including Gartner, PARADIGM and Forrester.

We further enhanced our international footprint with notable 2022 country launches in Germany, Austria, Spain, Denmark, Norway, Sweden, Mexico and Peru. Expansion markets contributed to revenue growth of 34% in EMEA and 42% in Latin America.

Notable international brand launches included British Airways IAG Loyalty, Jimmy Brings, MKM Building Supplies, Industrial Tool Supplies and Mexico's Chivas soccer club. In addition, we collaborated with partners to grow our presence in markets, including China, Korea, Poland, India, and UAE.

The last of our 5 strategic priorities is composable commerce, of which headless is an important subset. Composable commerce gives merchants the freedom to mix, match and combine best-in-breed tech vendors to create a customized and robust technology stack.

With BigCommerce's open commerce approach and commitment to MACH alliance principles, B2B and B2C merchants can make smart technology investments that are agile, functional and flexible. In an unpredictable economy, flexibility and composability are especially important.

Our open platform is unrivaled in its ability to let merchants build the technology stack that best serves the needs of their customers and their businesses. Finally, I'd like to conclude by speaking at a high level about our plans and operating focus for this year. How we are investing and winning in market has not changed.

Our strategic focus and initiatives have not changed. We have a great product and leadership position in global e-commerce. I believe continued leadership requires commitment, discipline and resolve, staying on strategy, even as market conditions may require tactical adjustments from 1 year to the next.

We intend not to overreact or overcorrect in a way that disrupts long-term growth. Our actions over the last several months reflect this. We chose to focus our time and go-to-market spend on the superior economics of the enterprise segment.

Last quarter, we shifted sales and marketing resources away from nonenterprise prospects with shorter sales cycles to enterprise prospects with longer sales cycles.

We did this knowing it may impact bookings growth in the first half of 2023 because the superior retention profile of enterprise businesses makes this the right priority for the medium and long term. We saw that effect in our Q4 results as well.

In addition, we restructured elements of the business to accelerate our time line to profitability into Q4 of this year while still maintaining key investments in our long-term strategic priority. These are not easy decisions, but they've already made us an even stronger company with an accelerated time line to profitability.

In conclusion, a challenging operating climate requires leadership to adapt, improve and strengthen both strategy and execution. I believe our team successfully rose to the challenges of 2022 while positioning us for continued success in 2023 and beyond.

Our plans reflect the prioritization of improved operating margins and cash flow, balanced with focused investment in enterprise, such that we continue to grow our leadership position in global e-commerce. Profitability and enterprise focus are the commitments of our leadership team to our customers, partners and shareholders.

We remain proud and excited to serve you all. With that, I'll turn it over to R.A..

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 other enterprise software companies, we continue to see longer sales cycles and a tighter deal pipeline. Q4 subscription ARR growth reflected the challenges of that dynamic.

Again, we are confident that the investment choices we are making are the correct ones, focusing on long-term profitable growth with enterprise accounts. We expect subscription ARR growth rates to improve in time as our pipeline investments and prioritization choices are fully realized and as we close larger and larger accounts.

At the end of Q4, we reported 5,786 enterprise accounts, up 750 accounts or 15% year-over-year, including Feedonomics. ARPA, or average revenue per account for enterprise accounts was $38,708, up 13% year-over-year. Enterprise ARPA was approximately flat quarter-over-quarter as sales cycle times at some enterprise merchants lengthened.

We have built our 2023 plans conservatively in line with this dynamic. Finally, net revenue retention, or NRR, from enterprise accounts was 111% in 2022 compared to 118% in 2021. 2022 NRR was impacted by tightening consumer spending that led both to PSR growth rates below that of 2021 and fewer orders driven subscription upgrades.

I'll now shift to the expense portion of the income statement. As a reminder, unless otherwise stated, all references to our expenses, operating results and per share amounts are on a non-GAAP basis. Q4 gross margin was 76%, up 57 basis points from the previous year while gross profit was $55.2 million, up 12% year-over-year.

In Q4, sales and marketing expenses totaled $30.5 million, up 10% year-over-year. This represented 42% of revenue, down 69 basis points compared to last year. Sales and marketing expenses were down $1 million sequentially from Q3, driven by expense reductions in demand generation activities focused on the non-enterprise segment of the business.

Research and development expenses were $19 million or 26% of revenue, down 147 basis points from a year ago and approximately flat spending sequentially from Q3.

We have prioritized product road map initiatives that aim to bring greater enterprise functionality to merchants of all sizes, and we are working diligently to maintain the investments needed to fuel enterprise product improvements while also realizing better operating results on the bottom line.

Finally, general and administrative expenses were $15.1 million or 21% of revenue, down 224 basis points from a year ago. This is down $1.8 million sequentially compared to Q3 due to lower staffing costs and continued operational improvements. In Q4, we reported a non-GAAP operating loss of $9.4 million, a negative 13% operating margin.

This compares with an operating loss of $11.6 million or a negative 17.9% operating margin in Q4 2021 and an operating loss of $11.5 million or a negative 15.9% operating margin in the prior quarter. Recall that we guided to a non-GAAP operating loss range for the quarter of $12.3 million to $14.3 million.

We delivered strong underlying cost reductions, apart from any restructuring efforts, which reinforces our confidence that we will achieve profitability on an adjusted EBITDA basis in Q4 as we announced in December. Adjusted EBITDA was negative $8.6 million, a negative 11.9% adjusted EBITDA margin compared to negative 16.8% in Q4 of 2021.

Non-GAAP net loss for Q4 was negative $7.7 million or negative $0.10 per share compared to negative $12.1 million or negative $0.17 per share last year. We ended Q4 with $305 million in cash, cash equivalents, restricted cash and marketable securities.

For the 3 months ended December 31, 2022, operating cash flow was negative $2.7 million compared to negative $8.8 million a year ago. We reported free cash flow of negative $3.7 million or a negative 5% free cash flow margin.

For the 12 months ended December 31, 2022, operating cash flow was negative $89.4 million, declining from negative $40.3 million a year ago. We reported free cash flow of negative $94.6 million or a negative 34% free cash flow margin.

Note, both full year operating cash flow and free cash flow results include $32.5 million paid in Q3 as part of the Feedonomics first anniversary acquisition-related payment. These full year results compared to negative $43.6 million and a negative 20% free cash flow margin in 2021.

The remainder of my remarks focuses on our outlook and guidance for 2023. For the first quarter, we expect total revenue in the range of $69.7 million to $72.7 million, implying a year-over-year growth rate of 6% to 10%.

For the full year 2023, we expect total revenue between $301 million to $313 million, translating to a year-over-year growth rate of approximately 8% to 12%. I'll now discuss some of the expectations underlying this top line guidance. Q4 subscription ARR grew at a slower pace than we have seen in recent quarters.

We have built our financial plans, assuming similar conservative bookings growth in 2023. We believe we can generate 20% or higher enterprise ARR growth rates in 2023, which we expect to be offset by the contraction in the nonenterprise segment of our business in the mid- to high single digits.

This guidance also includes the estimated impact of announced pricing changes to take effect across Q1 and Q2. While we were encouraged by the resiliency in consumer spending that we observed in Q4, we observed moderation in platform orders and GMV as we exited Q4. This is consistent with recent economic reports, including recent U.S.

Department of Commerce data highlighting lower e-commerce growth in Q4 than in recent years. While we are hopeful that macroeconomic forecast and consumer spending will prove conservative, we have built our 2023 financial plan assuming a modest deceleration in same-store platform GMV and order growth year-over-year.

We expect this to impact subscription pricing upgrades and PSR growth, and we have tightened budgeted spending accordingly. For Q1, our non-GAAP operating loss is expected to be $8.2 million to $12.2 million. For the full year, we expect a non-GAAP operating loss between $15.7 million and $22.7 million.

Our entire industry faces an uncertain macroeconomic climate. Consequently, 2023 will be a year focused on driving profitability while focusing our go-to-market resources on enterprise accounts. Our plans anticipate strong spending discipline across our business while accounting for prudent top line growth assumptions.

Hiring will remain limited compared to prior years. We are not planning material expansion into new countries or geographies in 2023. Rather, we will focus our international investments on gaining scale in existing recently launched countries.

We are confident that the expense reduction actions we have taken, combined with limited hiring and tight expense management, will enable us to deliver our commitment and hit profitability in Q4 of this year. We see strong, durable underlying health in the business that gives us great confidence in the success of these efforts.

Enterprise retention rates and LTV to CAC results remain strong. Win rates remain healthy. The complexity and size of deals in our pipeline continue to move upmarket. We have an outstanding product, gaining widespread recognition across our industry. We have more excitement and momentum with our agency and technology partners than ever before.

We have a strong balance sheet, and our business is heavily concentrated in established merchants with enterprise requirements. These are strong, healthy merchants that prove durable even in down economic cycles.

As I said earlier, we believe we can generate 20% or higher enterprise ARR growth rates in 2023, which we expect to be partially offset by contraction in the non-enterprise segment of our business in the mid- to high single digits. We also believe enterprise accounts could represent nearly 80% of total ARR by the end of 2023 or early 2024.

Our plan puts us on a path to end the year with a strong base of enterprise accounts and sales pipeline as a profitable company, all while maintaining a strong balance sheet. This is a strong profile in which to base our 2023 plan. Finally, I'd once again like to thank all of our incredible employees, merchants and partners. 2022 was not an easy year.

Our results reflect the resilience and dedication of our employees and the care and attention that we feel for our merchants and partners. I'm proud of our results in a tough climate, and I'm very excited about the progress this business will make in 2023. With that, Brent and I are happy to take any of your questions.

Operator?.

[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..