BIGCOMMERCE HOLDINGS, INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that involve risk and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in "Risk Factors." See "Special Note Regarding Forward-Looking Statements." OverviewBigCommerce is leading a new era of ecommerce. Our SaaS platform simplifies the creation of beautiful, engaging online stores by delivering a unique combination of ease-of-use, enterprise functionality, and flexibility. We allow merchants to build their ecommerce solution their way with the freedom of choice that makes the most sense for their unique business and product offerings. We power both our customers' branded ecommerce stores and their cross-channel connections to popular online marketplaces, social networks, and offline POS systems. As ofJune 30, 2021 , we served approximately 58,000 online stores across industries in approximately 147 countries. We provide a comprehensive platform for launching and scaling an ecommerce operation, including store design, catalog management, hosting, checkout, order management, reporting, and pre-integration into third-party services like payments, shipping, and accounting. All our stores run on a single code base and share a global, multi-tenant architecture purpose built for security, high performance, and innovation. Our platform serves stores in a wide variety of sizes, product categories, and purchase types, including B2C and B2B. Our customers includeAvery Dennison , Ben & Jerry's, Burrow, SC Johnson,SkullCandy , and Sony. We offer access to our platform on a subscription basis. We serve customers with subscription plans tailored to their size and feature needs. For our larger customers, our Enterprise plan offers our full feature set at a monthly subscription price tailored to each business. For SMBs, BigCommerce Essentials offers three retail plans: Standard, Plus, and Pro, priced at$29.95 ,$79.95 , and$299.95 per month, respectively. Our Essentials plans include GMV thresholds with programmatic upgrades built in as merchants exceed each plan's threshold. Partners are essential to our open strategy. We believe we possess one of the deepest and broadest ecosystems of integrated technology solutions in the ecommerce industry. We strategically partner with, rather than compete against, the leading providers in adjacent categories, including payments, shipping, POS, CMS, CRM, and ERP. We focus our research and development investments in our core product to create a best-of-breed ecommerce platform and co-market and co-sell with our strategic technology partners to enhance the breadth of the product offering to our customers. As a result, we earn high-margin revenue share from a subset of our strategic technology partners, which complements the high gross margin of our core ecommerce platform. We plan to continue to invest in our "Open SaaS" strategy, building new partnerships and continuing to develop a platform that offers best-of-breed functionality with the cost-effectiveness of multi-tenant SaaS. As we work to develop and deliver this platform for our customers, we will also invest and grow our business by acquiring additional customers to our platform, growing our revenue with existing customers, expanding our presence in new segments and geographies, and potential acquisitions that would synergize and expand our current product offering. As a result of the global travel restrictions and stay-at-home or similar orders in effect due to the COVID-19 pandemic, our sales and marketing, research and development, and general and administrative expenses declined as a percentage of revenue in the year endedDecember 31, 2020 . OnAugust 4, 2020 , we completed our IPO, in which we issued and sold 7,877,500 shares of our Series 1 common stock, including 1,027,500 shares of Series 1 common stock that were sold pursuant to the exercise in full of the underwriters' option to purchase additional shares of Series 1 common stock at$24.00 per share. The IPO resulted in net proceeds of$171.1 million after deducting underwriting discounts and commissions and other offering costs. Our 2017 and 2020 Term Loans converted to Series 1 Common Stock in connection with the IPO, resulting in a$53.9 million reduction of our outstanding long-term debt. OnNovember 12, 2020 , we completed our Secondary Offering, in which we issued and sold 1,000,000 shares of our Series 1 common stock at$68.00 per share. The Secondary Offering resulted in net proceeds of$65.1 million after deducting underwriting discounts, commissions and other offering costs. Existing stockholders sold an additional 4,750,000 shares of Series 1 common stock, including 750,000 shares of Series 1 common stock that were sold pursuant to the exercise in full of the underwriters' option to 21
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purchase additional shares of Series 1 common stock at$68.00 per share. We did not receive any proceeds from the sale of shares by the selling stockholders in the Secondary Offering. Additionally, upon completion of the Secondary Offering, we fully repaid approximately$22 million of our outstanding indebtedness under our Credit Facility. OnJuly 23, 2021 , we entered into an asset purchase agreement to acquire substantially all the assets and liabilities ofFeedonomics LLC . Purchase consideration consisted of approximately$145.0 million with$80.0 million paid upon closing and up to$65.0 million in two annual installments of up to$32.5 million each to be paid upon each of the first and second anniversaries of closing or upon the earlier achievement of certain milestones. The anniversary payments may be paid in shares of our Series 1 common stock or cash based on our discretion.
Key factors affecting our performance
We believe our future performance will depend on many factors, including the following:
Continued growth of ecommerce domestically and globally
Ecommerce is rapidly transforming global B2C and B2B commerce. B2C ecommerce was nonexistent in the early-1990s and grew to approximately 10% of all global retail spending in 2017, according to eMarketer. eMarketer estimates that it will take just six years for this percentage to more than double to 21% of global retail spending in 2023. The rapid growth in ecommerce is prompting companies to adopt ecommerce platforms likeBigCommerce to create compelling branded ecommerce stores and power cross-channel connections to online marketplaces, social networks, and offline POS systems. We believe we have a substantial opportunity to serve a larger number of customers as ecommerce continues to grow around the world by extending into new and emerging segments within ecommerce. The following segments are significant areas of potential growth and strategic focus for us:
• Headless commerce. This refers to businesses whose technology strategy is
to decouple their front-end customer experience technology from their
back-end commerce platform. In terms of online strategy, these companies
are typically brand-, marketing-, or experience-led. We serve headless use
cases better than most of our competitors due to years of investment in
our platform APIs and integration capabilities. Pre-built integrations
connect our platform with leading CMSs such as
Drupal, Sitecore, and WordPress.
• B2B. Since the release of our B2B edition, we have seen a growing interest
from B2B customers for our platform. In many cases, these customers' needs
are met using our native functionality, including B2B features like
customer groups and price lists. In other cases, these customers
complement
in the
functionality to both the
feature set.
• Large enterprise. Increasingly, we are successfully competing for large
enterprise sites selling more than
Enterprise plan product feature set, along with our sales, marketing,
solutioning, and service capabilities.
Efficient acquisition of new customers
The growth of our customer base is important to our continued revenue growth. We
believe we are positioned to grow significantly through a combination of our own
marketing and sales initiatives, customer referrals from our agency and
technology partners, and word-of-mouth referrals from existing customers.
We measure the efficiency of new customer acquisition by comparing the lifetime
value ("LTV") of newly-acquired customers to the customer acquisition costs
("CAC") of the associated time period to get an "LTV:CAC ratio." We calculate
LTV as gross profit from new sales during the four quarters of any given year
divided by the estimated future subscription churn rate. We calculate CAC as
total sales and marketing expense incurred during the associated preceding four
quarters. In 2020, new SMB, Mid-Market and Enterprise customers were added at an
estimated LTV to CAC ratio of 4.9:1, up from 4.4:1 in 2019.
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Retention and growth of our existing customers
We believe our long-term revenue growth is correlated with the growth of our existing customers' ecommerce businesses. We strive to maintain industry-leading service levels and platform capabilities to maximize customer success and retention. Our revenue grows with that of our customers. As they generate more online sales, we generate more subscription revenue through automated sales-based upgrades on our Essentials plans and order adjustments on our Enterprise plans. Typical enterprise contracts have terms ranging from 12 to 36 months and do not include the ability to terminate for convenience. As our customers' online sales increase, our partner and services revenue generated by revenue-sharing agreements with our strategic technology partners increases as well. Our ability to retain and grow our customers' ecommerce businesses often depends on the continued expansion of our platform and the capabilities of our strategic technology partners to provide revenue generating services to our customers. We continually evaluate prospective and existing partners' abilities to enhance the capabilities of our customers' ecommerce businesses. We add new partners and expand existing partner relationships to enhance the utility of our platform, while creating new opportunities to expand our revenue share in partner and services revenue. As we continue to grow as a platform, we believe our ability to realize more favorable and expansive revenue share agreements will grow as well. We also grow by selling additional stores to existing customers. Our larger customers will often first use our platform to build a single online store that serves a single brand within their portfolio. These customers can then expand their usage of our platform by launching additional stores to serve additional brands, geographies, or use cases (e.g., B2B in addition to B2C).
Successful rollout of new geographies
We believe our platform can compete successfully around the world. We enhance usability in new geographies by translating our control panel into local languages and enabling the integration of local payment processors and other local partnerships. We support the growth of mid-market and large enterprise customers around the world by expanding our regional sales and marketing capabilities. We opened our first European office inLondon, UK in 2018 and expanded it throughout 2019-2021. In EMEA, revenue grew 73% for the six-months endedJune 30, 2021 . Similarly, we expanded our existing sales and marketing team inSydney, Australia , resulting in a 49% revenue growth rate in APAC for the six-months endedJune 30, 2021 . 2020 brought marked advancements in our international expansion strategy through the launch of new country-specific websites inFrance ,Italy ,the Netherlands , and more recently inMexico ,Germany andSpain . In July of 2021, we launched a partnership withMercado Libre to power cross-border growth giving our merchants the ability to sell acrossLatin America to nearly 133 million unique consumers inMercado Libre's Marketplace. We continue to invest in our global presence and in offering native language web experiences that further strengthen our ability to connect more directly with prospects and customers in each region.
Evolution of our technology partner ecosystem
A key part of our strategy is to build a thriving technology partner ecosystem. We focus on collaborating with, not competing against, partners in our ecosystems. This strategy contrasts with our largest competitors, who operate software stacks with multiple vertically integrated adjacent services that potentially compete with offerings from technology partners in their ecosystems. Our customers benefit from the expertise and best-of-breed offerings of our partners, the flexibility to choose without penalty the best offerings for their needs, and the tailored programs developed with our strategic partners. Through significant investment, we have developed a marketplace of integrated application and technology solutions that is one of the largest of any ecommerce platform. Our partners currently offer more than 900 pre-built applications and integrations spanning major categories relevant to ecommerce, including shipping, tax, accounting and ERP, marketing, fulfillment, cross-channel commerce, and POS systems, with additional applications and integrations for merchandising, locations, and payments. We intend to grow partner-sourced revenue by expanding the value and scope of existing partnerships, selling and marketing partner solutions to our customer base, and acquiring and cultivating new, high-value relationships. Partner referrals of customers are increasingly becoming an efficient customer acquisition strategy for us as we expand our programs for cross-marketing and cross-selling with our partners.
Realizing operating leverage from our investments
We have made significant investments in our SaaS platform and our global infrastructure, which we believe will yield future operating leverage and profit margin expansion. Research and development has historically been one of our largest operating expense categories. By opening and expanding a lower-cost engineering center inKyiv, Ukraine , we are increasing development capacity while also driving leverage in engineering cost as a percentage of total revenue. In addition, we believe we will achieve operating leverage in marketing by continuing to emphasize lower-cost inbound techniques and growth in customer referrals from our technology and agency partners, especially as our revenue mix continues to shift to our enterprise plans. We believe we will be able to run our business more efficiently as we continue to grow our revenue and gain further operating scale. 23
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Duration and durability of COVID-19's impact on partner and services revenue
Ecommerce sales in our major markets have increased significantly due to the widespread closure of physical stores and behavioral changes associated with social distancing. This increase in sales has bolstered our partner and services revenue, driven predominantly by increases in our partner revenue share streams. We anticipate that our performance will be affected by the duration of COVID-19's impact on physical stores and consumer preferences and the resulting increase in ecommerce sales. Additionally, we expect the widespread availability of treatment options to impact the trend toward ecommerce, which, in turn, may have a significant impact on our performance. We believe we are well-positioned to continue to benefit from the macro-economic shift to ecommerce that COVID-19 has accelerated, but revenue may be more variable in the near-term as a result.
Key business metrics
We review the following key business metrics to measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. Increases or decreases in our key business metrics may not correspond with increases or decreases in our revenue.
Annual revenue run-rate
We calculate annual revenue run-rate ("ARR") at the end of each month as the sum
of: (1) contractual monthly recurring revenue at the end of the period, which
includes platform subscription fees, invoiced growth adjustments, recurring
professional services revenue, and other recurring revenue, multiplied by twelve
to prospectively annualize recurring revenue, and (2) the sum of the trailing
twelve-month non-recurring and variable revenue, which includes one-time partner
integrations, one-time fees, payments revenue share, and any other revenue that
is non-recurring and variable.
Accounts with greater than
We track the total number of accounts with annual contract value ("ACV") greater
than $2,000 (the "ACV threshold") as of the end of a monthly billing period. To
define this $2,000 ACV cohort, we include only subscription plan revenue and
exclude partner and services revenue and recurring services revenue. We consider
all stores added and subtracted as of the end of the monthly billing period.
This metric includes accounts that may have either one single store above the
ACV threshold or multiple stores that together exceed the ACV threshold.
Accordingly, this cohort would include: (1) customers on Enterprise plans,
(2) customers on Pro plans, and (3) customers with multiple plans that together
exceed the ACV threshold.
Average revenue per account
We calculate average revenue per account ("ARPA") at the end of a period by
including customer-billed revenue and an allocation of partner and services
revenue. We bill customers for subscription solutions and professional services,
and we include both in ARPA for the reported period. For example, ARPA as of
March 31, 2020 includes all subscription solutions and professional services
billed between January 1, 2020 and March 31, 2020 . We allocate partner revenue
primarily based on each customer's share of GMV processed through that partner's
solution. For partner revenue that is not directly linked to customer usage of a
partner's solution, we allocate such revenue based on each customer's share of
total platform GMV. Each account's partner revenue allocation is calculated by
taking the account's trailing twelve-month partner revenue, then dividing by
twelve to create a monthly average to apply to the applicable period in order to
normalize ARPA for seasonality.
Enterprise Account metrics
To measure the effectiveness of our ability to execute against our growth
strategy, particularly within the mid-market and enterprise business segments,
we calculate ARR attributable to Enterprise Accounts. We define Enterprise
Accounts as accounts with at least one unique Enterprise plan subscription
("Enterprise Accounts"). These accounts may have more than one Enterprise plan
or a combination of Enterprise plans and Essentials plans.
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The chart below illustrates certain of our key business metrics as of the
periods ended:
June 30, March 31, December 31, September 30, June 30,
2021 2021 2020 2020 2020
Total ARR (in
thousands) $ 209,289 $ 196,274 $ 181,166 $ 167,022 $ 151,814
Accounts with ACV
greater than
$2,000 10,986 10,509 10,184 9,777 9,378
% of Total ARR
attributable to
accounts
with ACV greater
than $2,000 85 % 83 % 82 % 81 % 80 %
ARPA attributable to
accounts with
ACV greater than
$2,000 $ 16,133 $ 15,582 $ 14,615 $ 13,792 $ 12,936
ARR Attributable to
Enterprise Accounts
(in thousands) $ 122,737 $ 112,350 $ 100,771 $ 89,820 $ 79,806
% of Total ARR
attributable to
Enterprise Accounts 59 % 57 % 56 % 54 % 53 %
Net revenue retention
We use net revenue retention ("NRR") to evaluate our ability to maintain and
expand our revenue with our account base of customers exceeding the ACV
threshold over time. The total billings and allocated partner revenue for the
measured period are divided by the total billings and allocated partner revenue
for such accounts, corresponding period one year prior. An NRR greater than 100%
implies positive net revenue retention. This methodology includes stores added
to or subtracted from an account's subscription during the previous twelve
months. It also includes changes to subscription and partner and services
revenue billings, and revenue reductions from stores or accounts that leave the
platform during the previous one-year period. Net new accounts added after the
previous one-year period are excluded in our NRR calculations. NRR for accounts
with ACV greater than $2,000 was 113% and 106% for the years ended December 31,
2020 and 2019, respectively. We update our reported NRR at the end of each
fiscal year and do not report quarterly changes in NRR.
Components of results of operations
Revenue
We generate revenue from two sources: (1) subscription solutions revenue and (2) partner and services revenue.
Subscription solutions revenue consists primarily of platform subscription fees from all plans. It also includes recurring professional services and sales of SSL certificates. Subscription solutions are charged monthly, quarterly, or annually for our customers to sell their products and process transactions on our platform. Subscription solutions are generally charged per online store and are based on the store's subscription plan. Our Enterprise plan contracts are generally for a fixed term of one to three years and are non-cancelable. Our retail plans are generally month-to-month contracts. Monthly subscription fees for Pro and Enterprise plans are adjusted if a customer's GMV or orders processed are outside of specified plan thresholds on a trailing twelve-month basis. Fixed monthly fees and any transaction charges related to subscription solutions are recognized as revenue in the month they are earned. We generate partner revenue from our technology application ecosystem. Customers tailor their stores to meet their feature needs by integrating applications developed by our strategic technology partners. We enter into contracts with our strategic technology partners that are generally for one year or longer. We generate revenue from these contracts in three ways: (1) revenue-sharing arrangements, (2) technology integrations, and (3) partner marketing and promotion. We recognize revenue on a net basis from revenue-sharing arrangements when the underlying transaction occurs. We also generate revenue from non-recurring professional services that we provide to complement the capabilities of our customers and their agency partners. Our services help improve customers' time-to-market and the success of their businesses usingBigCommerce . Our non-recurring services include education packages, launch services, solutions architecting, implementation consulting, and catalog transfer services. 25
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Table of Contents Cost of revenue Cost of revenue consists primarily of: (1) personnel-related costs (including stock-based compensation expense) for our customer success teams, (2) costs that are directly related to hosting and maintaining our platform, (3) fees for processing customer payments, and (4) the allocation of overhead costs. We expect that cost of revenue will increase in absolute dollars, but may fluctuate as a percentage of total revenue from period to period.
Sales and marketing
Sales and marketing expenses consist primarily of: (1) personnel-related expenses (including stock-based compensation expense), (2) sales commissions, (3) marketing programs, (4) travel-related expenses, and (5) allocated overhead costs. We focus our sales and marketing efforts on creating sales leads and establishing and promoting our brand. We plan to increase our investment in sales and marketing by hiring additional sales and marketing personnel, executing our go-to-market strategy globally, and building our brand awareness. Incremental sales commissions for new customer contracts are deferred and amortized ratably over the estimated period of our relationship with such customers. No incremental sales commissions are incurred on renewals of customer contracts. We expect our sales and marketing expenses will increase in absolute dollars, but will decrease as a percentage of total revenue over time.
Research and development
Research and development expenses consist primarily of personnel-related expenses (including stock-based compensation expense) incurred in maintaining and developing enhancements to our ecommerce platform and allocated overhead costs. To date, software development costs eligible for capitalization have not been significant. We believe delivering new functionality is critical to attracting new customers and enhancing the success of existing customers. We expect to continue to make substantial investments in research and development. We expect our research and development expenses to increase in absolute dollars, but decrease as a percentage of total revenue over time, as we continue to leverage and expand our lower-cost engineering center inKyiv, Ukraine . We expense research and development expenses as incurred.
General and administrative
General and administrative expenses consist primarily of: (1) personnel-related expenses (including stock-based compensation expense) for finance, legal and compliance, human resources, and IT, (2) external professional services, and (3) allocated overhead costs. We expect to incur additional general and administrative expenses as a result of operating as a public company. We also expect to increase the size of our general and administrative functions to support the growth of our business. As a result, we expect that our general and administrative expenses will increase in absolute dollars but may fluctuate as a percentage of total revenue from period to period.
Acquisition related expenses
Acquisition related expenses consists primarily of cash payments for third-party acquisition costs, other acquisition related expenses, including contingent compensation arrangements entered into in connection with acquisitions.
Other expenses, net
Other expenses, net consists primarily of interest expense on our bank borrowings partially offset by interest income on corporate funds invested in money market instruments and highly liquid short-term investments.
Provision for income taxes
Provision for income taxes consists primarily of current income taxes related to certain foreign and state jurisdictions in which we conduct business. ForU.S. federal income tax purposes and in certain foreign and state jurisdictions, we have NOL carryforwards. The foreign jurisdictions in which we operate have different statutory tax rates than those ofthe United States . Additionally, certain of our foreign earnings may also be currently taxable inthe United States . Accordingly, our effective tax rate will vary depending on the relative proportion of foreign to domestic income, use of foreign tax credits, changes in the valuation of our deferred tax assets and liabilities, applicability of any valuation allowances, and changes in tax laws in jurisdictions in which we operate. 26
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Results of operations
The following table sets forth our results of operations for the periods
presented:
Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
(in thousands)
Revenue $ 49,013 $ 36,316 $ 95,673 $ 69,490
Cost of revenue(1) 10,185 7,837 19,435 15,317
Gross profit 38,828 28,479 76,238 54,173
Operating expenses:
Sales and marketing(1) 22,157 16,803 42,966 32,565
Research and development(1) 14,725 11,345 28,260 22,266
General and administrative(1) 13,110 7,714 24,718 14,180
Acquisition related expenses 1,107 - 1,107 -
Total operating expenses 51,099 35,862 97,051 69,011
Loss from operations (12,271 ) (7,383 ) (20,813 ) (14,838 )
Interest income 29 17 41 18
Interest expense - (1,152 ) - (1,914 )
Change in fair value of financial instrument - - - 4,413
Other expense 27 40 13 (163 )
Loss before provision for income taxes (12,215 ) (8,478 ) (20,759 ) (12,484 )
Provision for income taxes 6 3 6 20
Net loss $ (12,221 ) $ (8,481 ) $ (20,765 ) $ (12,504 ) (1) Includes stock-based compensation expense as follows:
Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
(in thousands)
Cost of revenue $ 526 $ 81 $ 913 $ 154
Sales and marketing 1,943 352 3,522 641
Research and development 1,466 330 2,614 634
General and administrative 2,587 381 4,644 741
Total stock-based compensation expense
Revenue by geographic region
The composition of our revenue by geographic region during the three and six
months ended
Three months ended June 30, Change Six Months Ended June 30, Change
2021 2020 Amount % 2021 2020 Amount %
(dollars in thousands) (dollars in thousands)
Revenue
Americas - U.S. $ 37,544 $ 28,883 $ 8,661 30.0 $ 73,654 $ 55,616 $ 18,038 32.4
Americas - other 1,906 1,305 601 46.1 3,641 2,405 1,236 51.4
EMEA 4,782 2,871 1,911 66.6 9,185 5,313 3,872 72.9
APAC 4,781 3,257 1,524 46.8 9,193 6,156 3,037 49.3
Total Revenue $ 49,013 $ 36,316 $ 12,697 35.0 $ 95,673 $ 69,490 $ 26,183 37.7
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Adjusted EBITDA
In addition to our consolidated statements of operations data as determined in
accordance with GAAP, we believe the following non-GAAP measure is useful in
evaluating our business performance.
Three months ended June 30 , Six months
ended
2021 2020 2021 2020
Adjusted EBITDA $ (3,469 ) $ (5,428 ) $ (5,900 ) $ (11,153 )
As of June 30, As of December 31,
2021 2020
(in thousands)
Consolidated balance sheet data:
Cash and cash equivalents $ 172,872 $ 219,447
Working capital (1) 200,364 208,185
Total assets 266,512 276,626
Total liabilities 55,445 59,867
Total stockholders' equity 211,067 216,759
(1) We define working capital as current assets less current liabilities.
Non-GAAP financial measures
To supplement our financial statements presented in accordance with GAAP and to provide investors with additional information regarding our financial results, we have presented in this Quarterly Report on Form 10-Q Adjusted EBITDA, a non-GAAP financial measure. Adjusted EBITDA is not based on any standardized methodology prescribed by GAAP and is not necessarily comparable to similarly titled measures presented by other companies. We define Adjusted EBITDA as our net loss, excluding the impact of stock-based compensation expense and related payroll tax expense, third party acquisition-related costs and other acquisition related expenses, including contingent compensation arrangements entered into in connection with acquisitions, depreciation and amortization expense, interest income, interest expense, change in fair value of financial instruments, and our provision for income taxes. The most directly comparable GAAP measure is net loss. We monitor and have presented in this Quarterly Report on Form 10-Q Adjusted EBITDA because it is a key measure used by our management and board of directors to understand and evaluate our operating performance, to establish budgets, and to develop operational goals for managing our business. In particular, we believe excluding the impact of these expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core operating performance. We believe Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we include in net loss. Accordingly, we believe Adjusted EBITDA provides useful information to investors, analysts, and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects.
Adjusted EBITDA is not prepared in accordance with GAAP and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of Adjusted EBITDA rather than net loss, which is the most directly comparable financial measure calculated and presented in accordance with GAAP. Some of these limitations are:
• Adjusted EBITDA excludes stock-based compensation expense and payroll tax
associated with stock-based compensation expense as it has recently been,
and will continue to be for the foreseeable future, a significant
recurring non-cash expense for our business;
• Adjusted EBITDA excludes depreciation and amortization expense and,
although this is a non-cash expense, the assets being depreciated and
amortized may have to be replaced in the future;
• Adjusted EBITDA does not reflect cash payments for acquisition related
expenses consisting primarily of cash payments for third-party acquisition
cost and other acquisition related expenses, including contingent
compensation arrangements entered into in connection with acquisitions as
these amounts do not reflect core operating performance of the business.
• Adjusted EBITDA does not reflect the cash requirements necessary to
service interest on our debt which affects the cash available to us;
• Adjusted EBITDA does not reflect the monies earned from our investments
since it does not reflect our core operations;
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• Adjusted EBITDA does not reflect change in fair value of financial
instruments including derivatives since it does not reflect our core
operations and is a non-cash expense;
• Adjusted EBITDA does not reflect income tax expense that affects cash
available to us; and
• the expenses and other items that we exclude in our calculations ofAdjusted EBITDA may differ from the expenses and other items, if any, that
other companies may exclude from Adjusted EBITDA when they report their
operating results.
In addition, other companies may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison.
The following table reconciles Adjusted EBITDA to net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP.
Reconciliation of net loss to Adjusted EBITDA
Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
Net loss $ (12,221 ) $ (8,481 ) $ (20,765 ) $ (12,504 )
Stock-based compensation
expense 6,522 1,144 11,693 2,170
Payroll tax associated
with stock-based
compensation expense 415 - 663 -
Third-party acquisition
related costs 1,107 - 1,107 -
Depreciation and
amortization 731 771 1,437 1,678
Interest income (29 ) (17 ) (41 ) (18 )
Interest expense - 1,152 - 1,914
Change in fair value of
financial instrument - - - (4,413 )
Provision for income
taxes 6 3 6 20
Adjusted EBITDA $ (3,469 ) $ (5,428 ) $ (5,900 ) $ (11,153 )
Comparison of the three and six months ended June 30, 2021 and June 30, 2020
Revenue
Three months ended June 30, Change Six months ended June 30, Change
2021 2020 Amount % 2021 2020 Amount %
(dollars in thousands)
Revenue
Subscription solutions $ 33,955 $ 23,943 $ 10,012 41.8 % $ 65,959 $ 47,496 $ 18,463 38.9 %
Partner and services 15,058 12,373 2,685 21.7 % 29,714 21,994 7,720 35.1 %
Total revenue $ 49,013 $ 36,316 $ 12,697 35.0 % $ 95,673 $ 69,490 $ 26,183 37.7 %
Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020 .
Revenue increased $12.7 million , or 35.0%, to $49.0 million for the three months
ended June 30, 2021 from $36.3 million for the three months ended June 30, 2020 ,
as a result of increases in both subscription solutions and partner and services
revenue. Subscription solutions revenue increased $10.0 million , or 41.8%, to
$34.0 million for the three months ended June 30, 2021 from $23.9 million for
the three months ended June 30, 2020 , primarily due to growth in mid-market and
enterprise activity along with strong overall retention. Partner and services
revenue increased $2.7 million , or 21.7%, to $15.1 million for the three months
ended June 30, 2021 from $12.4 million for the three months ended June 30, 2020 ,
primarily as a result of increases in revenue-sharing activity with our
technology partners and improved monetization of partner revenue share.
Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020 .
Revenue increased $26.2 million , or 37.7%, to $95.7 million for the six months
ended June 30, 2021 from $69.5 million for the six months ended June 30, 2020 ,
as a result of increases in both subscription solutions and partner and services
revenue. Subscription solutions revenue increased $18.5 million , or 38.9%, to
$66.0 million for the six months ended June 30, 2021 from $47.5 million for the
six months ended June 30, 2020 , primarily
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due to growth in mid-market and enterprise activity along with strong overall retention. Partner and services revenue increased$7.7 million , or 35.1%, to$29.7 million for the six months endedJune 30, 2021 from$22.0 million for the six months endedJune 30, 2020 , primarily as a result of increases in revenue-sharing activity with our technology partners and improved monetization of partner revenue share.
Cost of revenue, gross profit, and gross margin
Three months ended June 30, Change Six months ended June 30, Change
2021 2020 Amount % 2021 2020 Amount %
(dollars in thousands)
Cost of revenue $ 10,185 $ 7,837 $ 2,348 30.0 $ 19,435 $ 15,317 $ 4,118 26.9
Gross profit $ 38,828 $ 28,479 $ 10,349 36.3 $ 76,238 $ 54,173 $ 22,065 40.7
Gross margin 79.2 % 78.4 % 79.7 % 78.0 %
Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020 .
Cost of revenue increased $2.3 million , or 30.0%, to $10.2 million for the three
months ended June 30, 2021 from $7.8 million for the three months ended June 30,
2020 , primarily as a result of higher hosting costs resulting from increased
transactions processed of $0.4 million and higher personnel costs, including
stock-based compensation expense amounting to $1.8 million . Gross margin
increased to 79.2% during the three months ended June 30, 2021 from 78.4% during
the three months ended June 30, 2020 .
Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020 . Cost
of revenue increased $4.1 million , or 26.9%, to $19.4 million for the six months
ended June 30, 2021 from $15.3 million for the six months ended June 30, 2020 ,
primarily as a result of higher hosting costs resulting from increased
transactions processed of $0.9 million and higher personnel costs, including
stock-based compensation expense amounting to $3.4 million . Gross margin
increased to 79.7% during the six months ended June 30, 2021 from 78.0% during
the six months ended June 30, 2020 .
Operating expenses
Sales and marketing
Three months ended June 30, Change Six months ended June 30, Change
2021 2020 Amount % 2021 2020 Amount %
(dollars in thousands)
Sales and marketing $ 22,157 $ 16,803 $ 5,354 31.9 $ 42,966 $ 32,565 $ 10,401 31.9
Percentage of revenue 45.2 % 46.3 % 44.9 % 46.9 %
Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020 .
Sales and marketing expenses increased $5.4 million , or 31.9%, to $22.2 million
for the three months ended June 30, 2021 from $16.8 million for the three months
ended June 30, 2020 , primarily due to higher staffing costs, including
stock-based compensation expense of $3.4 million and additional spend to support
revenue growth of $1.8 million . As a percentage of total revenue, sales and
marketing expenses decreased to 45.2% during the three months ended June 30,
2021 from 46.3% during the three months ended June 30, 2020 , primarily due to
increased revenue growth rates coupled with lower marketing costs experienced
during the pandemic.
Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020 . Sales
and marketing expenses increased $10.4 million , or 31.9%, to $43.0 million for
the six months ended June 30, 2021 from $32.6 million for the six months ended
June 30, 2020 , primarily due to higher staffing costs, including stock-based
compensation expense of $7.0 million and additional spend to support revenue
growth of $3.5 million . As a percentage of total revenue, sales and marketing
expenses decreased to 44.9% during the six months ended June 30, 2021 from 46.9%
during the six months ended June 30, 2020 , primarily due to increased revenue
growth rates coupled with lower marketing costs experienced during the pandemic.
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Research and development
Three months ended June 30, Change Six months ended June 30, Change
2021 2020 Amount % 2021 2020 Amount %
(dollars in thousands)
Research and development $ 14,725 $ 11,345 $ 3,380 29.8
30.0 % 31.2 % 29.5 % 32.0 %
Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020 .
Research and development expenses increased $3.4 million , or 29.8%, to
$14.7 million for the three months ended June 30, 2021 from $11.3 million for
the three months ended June 30, 2020 , primarily due to higher staffing costs,
including stock-based compensation expense of $2.4 million and additional spend
to support engineering projects of $1.0 million . As a percentage of total
revenue, research and development expenses decreased to 30.0% during the three
months ended June 30, 2021 from 31.2% during the three months ended June 30,
2020 , primarily due to increased operating leverage from revenue growth.
Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020 .
Research and development expenses increased $6.0 million , or 26.9%, to
$28.3 million for the six months ended June 30, 2021 from $22.3 million for the
six months ended June 30, 2020 , primarily due to higher staffing costs,
including stock-based compensation expense of $4.5 million and additional spend
to support engineering projects of $1.5 million . As a percentage of total
revenue, research and development expenses decreased to 29.5% during the six
months ended June 30, 2021 from 32.0% during the six months ended June 30, 2020 ,
primarily due to increased operating leverage from revenue growth.
General and administrative
Three months ended June 30, Change Six months ended June 30, Change
2021 2020 Amount % 2021 2020 Amount %
(dollars in thousands)
General and
administrative $ 13,110 $ 7,714 $ 5,396 70.0 $ 24,718 $ 14,180 $ 10,538 74.3
Percentage of
revenue 26.7 % 21.2 % 25.8 % 20.4 %
Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020 .
General and administrative expenses increased $5.4 million , or 70.0%, to
$13.1 million for the three months ended June 30, 2021 from $7.7 million for the
three months ended June 30, 2020 . The increase was primarily due to higher
staffing costs, including stock-based compensation expense of $3.4 million and
fees associated with operating as a public company amounting to $2.1 million .
Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020 .
General and administrative expenses increased $10.5 million , or 74.3%, to
$24.7 million for the six months ended June 30, 2021 from $14.2 million for the
six months ended June 30, 2020 . The increase was primarily due to higher
staffing costs, including stock-based compensation expense of $6.3 million and
fees associated with operating as a public company amounting to $4.6 million .
Acquisition related expenses
Acquisition related expense was$1.1 million for the three and six-months endedJune 30, 2021 as a result of third-party legal and other professional services costs to support our acquisition ofFeedonomics LLC .
Interest income
Interest income was insignificant for the three and six-month periods ended
Interest expense
Interest expense decreased$1.2 million to$0.0 for the three months endedJune 30, 2021 from$1.2 million for the three months endedJune 30, 2020 and decreased$1.9 million to$0.0 million for the six months endedJune 30, 2021 from$1.9 million for the six months endedJune 30, 2020 , as a result of repaying all of our lines of credit. 31
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Change in fair value of financial instrument
The change in in fair value of financial instrument was insignificant for the six-month period endedJune 30,2021 . For the six-month period endedJune 30, 2020 , the increase of$4.4 million in the fair value of financial instrument was the result of a decrease in fair value of the embedded lenders' put option on our 2020 Convertible Term Loan.
Other expense
Other expense was insignificant for the three and six-month periods ended
Provision for income taxes
Our provision for income taxes was insignificant in the three and six months
ended
Liquidity and capital resources
We have incurred losses since our inception and will continue to generate negative operating cash flow, however we believe we have sufficient cash and cash equivalents and marketable securities to continue to fund operations. As ofJune 30, 2021 , we had an accumulated deficit of$333.1 million , working capital of$201.4 million , and$174.0 million in cash and cash equivalents and restricted cash. Our debt facilities either expired, were repaid, or terminated in 2020. Our operational short-term liquidity needs primarily include working capital for sales and marketing, research and development, and continued innovation. Additionally, as a result of our strategic acquisition ofFeedonomics LLC , onJuly 23, 2021 , we used$81.4 million of our$174.0 million in cash and cash equivalents and restricted cash. We have generated significant operating losses and negative cash flows from operations as reflected in our accumulated deficit and condensed consolidated statements of cash flows. We expect to continue to incur operating losses and negative cash flows from operations in the future and may require additional capital resources to execute strategic initiatives to grow our business. Our future capital requirements will depend on many factors, including our growth rate, levels of revenue, the expansion of sales and marketing activities, market acceptance of our platform, the results of business initiatives, the timing of new product introductions, and the continued impact of the COVID-19 pandemic on the global economy and our business, financial condition, and results of operations. As the impact of the COVID-19 pandemic on the global economy and our operations evolves, we will continue to assess our liquidity needs. We believe that our existing cash and cash equivalents will be sufficient to meet our working capital and capital expenditure needs for at least the next twelve months. In the future, we may attempt to raise additional capital through the sale of additional equity or debt financing. In particular, our strategic acquisition ofFeedonomics LLC also requires up to$65.0 million in two annual installments of up to$32.5 million each, within ten business days after the first and second anniversary dates of the acquisition, or the earlier achievement of certain product and financial milestones. We may elect, in our sole discretion, to make these post-closing payments partially or entirely in cash or shares of BigCommerce Series 1 common stock. If we choose to issue stock to settle these payments, we will be required to register these shares with theSecurities and Exchange Commission on Form S-3 . The sale of additional equity would be dilutive to our stockholders. Additional debt financing could result in increased debt service obligations and more restrictive financial and operational covenants. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results and financial condition could be adversely affected.
Cash flows
The following table sets forth a summary of our cash flows for the periods
indicated.
Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
(inthousands)
Net cash used in operating activities$ (4,648 ) $ (7,004 ) $ (17,406 ) $ (16,994 ) Net cash used in investing activities$ (13,187 ) $ (448 ) $ (32,041 ) $ (1,045 ) Net cash (used in) provided by financing activities $ 1,127$ (149 ) $ 2,868 $ 35,400 Net increase (decrease) in cash, cash equivalents and restricted cash$ (16,708 ) $ (7,601 ) $ (46,579 ) $ 17,361 32
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Table of Contents As ofJune 30, 2021 , we had$174.0 million in cash, cash equivalents, and restricted cash, an increase of$147.5 million compared to$26.5 million as ofJune 30, 2020 . Cash and cash equivalents consist of highly-liquid investments with original maturities of less than three months. Restricted cash consists of security deposits for future chargebacks and amounts on deposit with certain financial institutions. We maintain cash account balances in excess ofFDIC -insured limits.
Operating activities
Net cash used in operating activities for the three months ended
Net cash used in operating activities for the six months endedJune 30, 2021 and 2020 was$17.4 million and$17.0 million , respectively. This consisted primarily of our net losses adjusted for certain non-cash items including depreciation and amortization, stock-based compensation, debt discount amortization, bad debt expense, and the effect of changes in working capital.
Investing activities
Net cash used in investing activities during the three months endedJune 30, 2021 and 2020 was$13.2 million and$0.4 million , respectively. For the three months endedJune 30, 2021 , it consisted primarily of the purchases of marketable securities of$12.0 million and the purchases of property and equipment of$1.2 million . For the three months endedJune 30, 2020 , it consisted primarily of purchases of property and equipment of$0.4 million . Net cash used in investing activities during the six months endedJune 30, 2021 and 2020 was$32.0 million and$1.0 million , respectively. For the six months endedJune 30, 2021 , it consisted primarily of the purchases of marketable securities of$30.4 million and the purchases of property and equipment of$1.6 million . For the six months endedJune 30, 2020 , it consisted primarily of purchases of property and equipment of$1.0 million .
Financing activities
Net cash provided by financing activities during the three months endedJune 30, 2021 was$1.1 million . During this period the issuance of shares of Series 1 common stock pursuant to the exercise of stock options provided$1.1 million . Net cash used in financing activities during the three months endedJune 30, 2020 , was$0.1 million . During this period, issuance of shares of Series 1 common stock pursuant to the exercise of stock options provided$0.5 million , partially offset by debt repayments of$0.6 million . Net cash provided by financing activities during the six months endedJune 30, 2021 and 2020 was$2.9 million and$35.4 million , respectively. In the six months endedJune 30, 2021 , the issuance of shares of Series 1 common stock pursuant to the exercise of stock options provided$2.9 million . In the six months endedJune 30, 2020 , bank borrowings provided$40.7 million and issuance of shares of Series 1 common stock pursuant to the exercise of stock options provided$0.9 million , partially offset by debt repayments of$6.2 million .
Contractual obligations
Our principal commitments consist of (1) operating leases for office space, and (2) purchase obligations with certain technology providers used to host our platform. The following table summarizes our commitments to settle contractual obligations as ofJune 30, 2021 . Payments Due by Period Less than More than 5 Total 1 year 1 - 3 Years 3 - 5 Years years (in thousands) Lease obligations 16,704 1,980 5,547 4,254 4,923 Purchase obligations 6,623 2,290 4,333 Total contractual obligations$ 23,327 $ 4,270 $ 9,880 $ 4,254 $ 4,923 33
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Off-balance sheet arrangements
We did not have any off-balance sheet arrangements as of
Critical accounting policies and estimates
There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in "Management's Discussion and Analysis of Financial Condition and Results of Operations" set forth in the Prospectus.
Recent accounting pronouncements
A discussion of recent accounting pronouncements is included in Note 2 to our
consolidated financial statements included elsewhere in this Quarterly Report on
Form 10-Q.
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