Commerce.com, Inc. Q3 FY2024 earnings call

Key Points

• Ellen Simanoff introduced Travis Hess as the new CEO, highlighting Brent's past contributions and the need for structural changes. Travis emphasized focusing on discerning customers with complex needs, integrating products like Feedonomics and MakeSwift, and investing in B2B capabilities. He also mentioned making organizational changes with new hires such as Doug Hollinger, John Huntington, and Ryan Means. Daniel Lentz covered Q3 results, cost reductions, operating leverage, and non-GAAP KPIs, including ARR growth and enterprise account performance.

Product Integration

• Travis discussed integrating MakeSwift as part of the Catalyst reference architecture, with a debut around NRF in January. Feedonomics has a robust enterprise offering and a self-serve version in development to widen the addressable market.

B2B Focus

• Travis outlined three types of B2B-oriented clients and plans to add functionality to streamline complex selling and buying processes in Q4, focusing on true B2B use cases to widen the total addressable market.

Organizational Changes

• The company is streamlining the go-to-market organization, realigning sales teams around B2C, B2B, and small business offerings, and making leadership changes to enhance agility and focus.

In Q3, total revenue was just under $84 million, up 7% year over year. Subscription revenue grew 7% year over year to approximately $63 million. Partner and services revenue (PSR) increased 8% year over year to just under $21 million. Regionally, revenue in the Americas grew 6%, EMEA increased by 12%, and APAC was up 9% compared to the prior year. ARR was approximately $348 million, up 5% year over year, with sequential ARR growth of $2 million. Enterprise account ARR was approximately $257 million, up 7% year over year, representing 74% of total ARR. Non-enterprise accounts using exclusively Essentials plans had an ARR of just under $91 million, down 1% year over year. Average revenue per account for enterprise accounts was $43,600, up 8% year over year.

Q4 Guidance

• Expected revenue in the range of $85.8 million to $87.8 million, reflecting year-over-year growth of 2% to 4%.

Full-Year 2024 Guidance

• Revenue between $331.7 million and $333.7 million, representing growth of approximately 7% to 8%, consistent with previous full-year guidance at the midpoint. Non-GAAP operating income for Q4 is expected to be between $4.4 million and $6.4 million, with full-year non-GAAP operating income projected to be between $13.8 million and $15.8 million.

2025 Outlook

• Early planning indicates mid-single-digit growth rates for 2025, with growth rates expected to ramp modestly across the year, and the changes aiming to improve operating margins and cash flow.

Risks

• Risks related to macroeconomic conditions that could affect consumer spending and platform demand.
• Challenges in executing strategic changes and achieving the expected growth rates, including potential difficulties in pipeline build and account retention.

Q: Ken Wong asked about how integrating Feedonomics and MakeSwift changes BigCommerce's open ecosystem approach and if they would compete with ISV partners.

A: Travis Hess stated they are committed to an open approach, with MakeSwift as a strong visual editor and Feedonomics complementary, respecting that some Feedonomics revenues come from brands not using BigCommerce.

Q: Natalie Howe inquired about R&D efforts and the timeline for technical integrations.

A: Travis mentioned MakeSwift is part of the Catalyst accelerator, debuting at NRF in January, and Feedonomics has an enterprise offering with a self-serve version in development.

Q: DJ Hines asked about what BigCommerce won't be going forward to simplify the organization.

A: Travis said they'll narrow focus to discerning customers looking to scale, with B2B, B2C, and SMB being the key offerings, requiring a bifurcated approach.

Q: Maddie Schrage asked about early learnings as CEO and go-to-market timeline.

A: Travis said the biggest gap was aligning go-to-market with authenticity, and Daniel mentioned go-to-market changes are ongoing, with substantial changes by end of Q4 and hiring to be mostly done in front half of 2025.

Q: Katie Cuser asked about broader e-commerce demand and operational changes' resilience.

A: Travis said commerce trends are steady, and Daniel noted the changes give durability regardless of economic conditions.

Q: Arti asked about AI capabilities and doubling quota-carrying capacity timeline.

A: Travis said there'll be expansion to AI, and Daniel mentioned ramp time for sales reps is within 2-3 quarters, with hiring to be mostly in front half of 2025.

Q: Scott Berg asked about operational performance expectations and why double quota-carrying capacity.

A: Daniel said they aim for a sustainable rule of forty profile, and Travis said they're not in enough rooms, with B2B being a strong growth area.

Q: Jeremy asked about 2025 guidance and enterprise ARPA growth.

A: Daniel said 2025 growth is based on pipeline and bookings, and ARPA growth is from prioritizing dollarized retention in large accounts.

Q: Brian Peterson asked about integration timeline and international focus.

A: Travis said integration target is end of Q4, with MakeSwift debuting at NRF, and Daniel noted EMEA has strong momentum.