What changed in this filing

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Item 1. Financial Statements

2024-05-09 compared with 2023-11-08 · 357 added, 798 removed, 354 unchanged (77% of the section changed)

3 unchanged sentences

(in thousands)

September 30,

Current assets

3 unchanged sentences

Accounts receivable, net

Prepaid expenses and other assets

Prepaid expenses and other assets, net

Deferred commissions

5 unchanged sentences

Intangible assets, net

Liabilities and stockholders’

Liabilities and stockholders’ equity

Current liabilities

2 unchanged sentences

Deferred revenue

Current portion of long-term debt

Current portion of debt

Current portion of operating lease liabilities

1 unchanged sentence

Total current liabilities

Deferred revenue, net of current portion

Long-term debt

Long-term portion of debt

Operating lease liabilities, net of current portion

1 unchanged sentence

Total liabilities

Commitments and contingencies (Note 7)

Stockholders’

Common stock, $ 0.0001 par value;

505,051 shares authorized at September 30, 2023 and December 31, 2022, respectively;

76,082 and 73,945 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively.

Stockholders’ equity

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated other comprehensive gain (loss)

Accumulated deficit

Total stockholders’

Total liabilities and stockholders’

Total stockholders’ equity

Total liabilities and stockholders’ equity

The accompanying notes are an integral part of these condensed consolidated financial statements.

3 unchanged sentences

(in thousands, except per share amounts)

Three months ended September 30,

Nine months ended September 30,

For the three months ended March 31,

Cost of revenue (1)

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Interest expense

Other expenses

Other income (expense)

Loss before provision for income taxes

3 unchanged sentences

(1) Amounts include stock-based compensation expense and associated payroll tax costs, as follows:

Three months ended September 30,

Nine months ended September 30,

For the three months ended March 31,

Cost of revenue

7 unchanged sentences

(in thousands)

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

Other comprehensive income (loss):

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BigCommerce Holdings, Inc.

Condensed Consolidated Statements o f Stockholders’

Condensed Consolidated Statements o f Stockholders’ Equity

(in thousands)

Three and Nine months ended September 30, 2023

Three months ended March 31, 2024

Comprehensive

Stockholders’

Balance at December 31, 2023

4 unchanged sentences

Balance at March 31, 2024

Proceeds from exercise of stock options

Release of restricted stock units

Stock-based compensation

Total other comprehensive loss

Balance at June 30, 2023

Proceeds from exercise of stock options

Release of restricted stock units

Issuance of common stock as consideration for an acquisition

Stock-based compensation

Total other comprehensive loss

Balance at September 30, 2023

The accompanying notes are an integral part of these condensed consolidated financial statements.

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BigCommerce Holdings, Inc.

Condensed Consolidated Statements of Stockholders’

Equity (Continued)

(in thousands)

Three and Nine months ended September 30, 2022

Three months ended March 31, 2023

Comprehensive

Stockholders’

Balance at December 31, 2022

Exercise of stock options

Proceeds from exercise of stock options

Release of restricted stock units

2 unchanged sentences

Balance at March 31, 2023

Exercise of stock options, net of shares withheld for taxes

Release of restricted stock units

Issuance of common stock as consideration for an acquisition

Stock-based compensation

Total other comprehensive loss

Balance at June 30, 2022

Exercise of stock options, net of shares withheld for taxes

Release of restricted stock units

Issuance of common stock as consideration for an acquisition

Stock-based compensation

Total other comprehensive loss

Balance at September 30, 2022

The accompanying notes are an integral part of these condensed consolidated financial statements.

3 unchanged sentences

(in thousands)

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

Cash flows from operating activities

2 unchanged sentences

Amortization of discount on debt

Stock-based compensation

Stock-based compensation expense

Provision for expected credit losses

Other noncash expenses

Changes in operating assets and liabilities:

7 unchanged sentences

Cash flows from investing activities:

Cash paid for acquisition

Purchase of property and equipment

1 unchanged sentence

Purchase of marketable securities

Net cash provided by (used in) investing activities

Net cash used in investing activities

Cash flows from financing activities:

1 unchanged sentence

Taxes paid related to net share settlement of stock options

Proceeds from debt

Repayment of debt

Net cash provided by financing activities

Net cash used in financing activities

Net change in cash and cash equivalents and restricted cash

4 unchanged sentences

Cash paid for taxes

Noncash investing and financing activities:

Changes in capital additions, accrued but not paid

Fair value of shares issued as consideration for acquisition

Reconciliation of cash, cash equivalents and restricted cash within the condensed consolidated balance sheet to the amounts shown in the statements of cash flows above:

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents and restricted cash

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Notes to Condensed Consolidated Financial Statements

BigCommerce (the “Company”) is leading a new era of ecommerce.

The Company’s software-as-a-service (“SaaS”) platform simplifies the creation of engaging online stores by delivering a unique combination of ease-of-use, enterprise functionality, and flexibility.

The Company empowers both its customers’

branded ecommerce stores and their cross-channel connections to popular online marketplaces, social networks, and offline point-of-sale systems.

BigCommerce Holdings, Inc.

(the “Company”) is leading a new era of ecommerce.

The Company empowers both its customers’ branded ecommerce stores and their cross-channel connections to popular online marketplaces, social networks, and offline point-of-sale systems.

The Company empowers businesses to turn digital transformation into a competitive advantage, and allows merchants to build their ecommerce solution their way with the flexibility to fit their unique business and product offerings.

The Company provides 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 of the Company’s stores run on a single code base and share a global, multi-tenant architecture purpose built for security, high performance, and innovation.

The Company’s platform serves stores in a wide variety of sizes, product categories, and purchase types, including business-to-consumer and business-to-business.

The Company’s headquarters and principal place of business are in Austin, Texas.

The Company was formed in Australia in December 2003 under the name Interspire Pty Ltd and reorganized into a corporation in Delaware under the name BigCommerce Holdings, Inc.

in February 2013 .

References in these consolidated financial statements to “we,”

“us,”

“our,”

the “Company,”

or “BigCommerce”

refer to BigCommerce Holdings, Inc.

All of the Company’s stores run on a single code base and share a global, multi-tenant architecture purpose built for security, high performance, and innovation.

The Company’s platform serves stores in a wide variety of sizes, product categories, and purchase types, including business-to-consumer and business-to-business.

References in these condensed consolidated financial statements to “we”, “us”, “our”, the “Company”, or “BigCommerce” refer to BigCommerce Holdings, Inc.

and its subsidiaries, unless otherwise stated.

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Basis of presentation

The accompanying condensed unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information.

Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

In the opinion of management, the accompanying interim unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting of normal, recurring adjustments, necessary for a fair presentation.

Certain information and disclosures normally included in the notes to the annual consolidated financial statements prepared in accordance with GAAP have been omitted from these interim unaudited condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the accompanying notes for the fiscal year ended December 31, 2022, which are included in the Company's Annual Report on Form 10-K, filed with the SEC on March 1, 2023.

The results of operations for the three and nine months ended September 30, 2023, are not necessarily indicative of the results to be expected for the year ending December 31, 2023, or for any other period.

In December 2022, the Company had a reduction in force event that eliminated certain positions and changed the reporting hierarchy and job responsibilities for certain people in its general and administrative function.

This resulted in the expense related to these individuals being classified as sales and marketing expenses, when previously, they had been classified as general and administrative expense.

Certain prior year amounts have been reclassified for consistency with the current year presentation.

For the three and nine months ended September 30, 2022 , the Company reclassified $ 1.5 million and $ 4.7 million, respectively, from general and administrative expenses to sales and marketing expenses.

Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the accompanying notes for the fiscal year ended December 31, 2023, which are included in the Company's Annual Report on Form 10-K, filed with the SEC on February 29, 2024.

The results of operations for the three months ended March 31, 2024 , are not necessarily indicative of the results to be expected for the year ending December 31, 2024, or for any other period.

Basis of consolidation

The accompanying condensed consolidated financial statements include the Company’s accounts and the accounts of the Company’s wholly-owned subsidiaries.

All material intercompany accounts and transactions have been eliminated in consolidation.

The Company’s fiscal year ends on December 31.

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References to "fiscal 2024," for example, refer to the fiscal year ended December 31, 2024.

Use of estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires certain financial instruments to be recorded at fair value;

requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting periods.

Significant estimates, judgments, and assumptions in these consolidated financial statements include:

allocating variable consideration for revenue recognition, constrained revenue;

the amortization period for deferred commissions;

the allowance for credit losses and a determination of the deferred tax asset valuation allowance.

Because of the use of estimates inherent in financial reporting process actual results could differ and the differences could be material to the Company’s consolidated financial statements

Accounting pronouncements

There were no recently issued accounting pronouncements that had or are expected to have a material impact on the Company’

s consolidated financial statements.

The Company’s chief operating decision maker is the Company’s chief executive officer.

The Company’s chief executive officer reviews the financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance.

Accordingly, the Company has determined that the Company operates as a single operating and reportable segment.

The preparation of condensed consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions in the Company’s consolidated financial statements and notes thereto.

Significant estimates and assumptions made by management in these consolidated financial statements include:

• the allowance for credit losses;

• constrained revenue;

• variable consideration for revenue recognition;

• the period of benefit associated with costs capitalized to obtain revenue contracts;

• the useful lives of intangible assets;

• the recognition, measurement and valuation of current and deferred income taxes and uncertain tax positions;

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Because of the use of estimates inherent in financial reporting process actual results could differ and the differences could be material to the Company’s consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

ASU 2023-07, Segment Reporting (Topic 280)

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

ASU 2023-07 requires all public entities, including those public entities that have a single reportable segment to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually.

Additionally, it requires a public entity to disclose the title and position of the individual or the name of the group or committee identified as the chief operating decision maker (“CODM”).

ASU 2023-07 is effective for the Company’s fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company is currently assessing the impact this standard will have on the Company’s but does not expect it to have a material impact on the consolidated financial statements.

ASU 2023-09, Income Taxes (Topic 740)

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

ASU 2023-09 requires all entities to provide more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

The amendments in this Update also eliminate requirements such as (1) the disclosure of the nature and estimate of the range of the reasonably possible change in the unrecognized tax benefits balance in the next 12 months, (2) or making a statement that an estimate of the range cannot be made, and (3) the disclosure of the cumulative amount of each type of temporary difference when a deferred tax liability is not recognized because of the exceptions to comprehensive recognition of deferred taxes related to subsidiaries and corporate joint ventures.

Lastly, the amendments in this Update replace the term ‘public entity’ as currently used in Topic 740 with the term ‘public business entity’.

ASU 2023-09 is effective for the Company’s fiscal years beginning after December 15, 2024.

The Company is currently assessing the impact this standard will have on the Company but does not expect it to have a material impact on the consolidated financial statements.

Other accounting standard updates effective for interim and annual periods beginning after December 31, 2023 are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

The Company’s CODM is the chief executive officer.

Accordingly, the Company has determined that it operates as a single operating and reportable segment.

Revenue Recognition

Subscription solutions

Subscription solutions revenue consists primarily of platform subscription fees from all plans.

It also includes recurring professional services and sales of Secure Sockets Layer ( “

) certificates.

Subscription solutions are charged monthly, quarterly, or annually for the Company’s customers to sell their products and process transactions on the Company’s platform.

Subscription solutions are generally charged per online store and are based on the store’s subscription plan.

Monthly subscription fees for Pro and Enterprise plans are adjusted if a customer’s gross merchandise volume or orders processed are above specified plan thresholds on a trailing twelve-month basis.

For most subscription solutions arrangements, excluding enterprise subscription plans, the Company has determined the Company meets the variable consideration allocation exception and, therefore, recognize fixed monthly fees or a pro-rata portion of quarterly or annual fees and any transaction fees as revenue in the month they are earned.

During the second quarter of fiscal 2023, the Company adopted a new pricing structure that provided a discount to the contractual price for a period of time in lieu of promotional periods.

Subscription solutions revenue consists primarily of platform subscription fees from all plans and recurring professional services.

Subscription solutions are charged monthly, quarterly, or annually for the Company’s customers to sell their products and process transactions on the Company’s platform.

Subscription solutions are generally charged per online store and are based on the store’s subscription plan.

Monthly subscription fees for enterprise plans are adjusted if a customer’s gross merchandise volume ("GMV") or orders processed are above specified plan thresholds on a trailing twelve-month basis.

For most subscription solutions arrangements, excluding enterprise subscription plans, the Company has determined the Company meets the variable consideration allocation exception and, therefore, recognizes fixed monthly fees or a pro-rata portion of quarterly or annual fees and any transaction fees as revenue in the month they are earned.

During the second quarter of fiscal 2023, the Company adopted a new pricing structure that provided a discount to the contractual price for customers who pay quarterly or annually.

Prior to this date, enterprise subscription plans included an upfront promotional period in order to incentivize the customer to enter into a subscription arrangement.

In both of these scenarios, the total subscription fee is recognized on a straight-line basis over the term of the contract.

Revenue recognized in advance of billing is recorded as unbilled accounts receivable.

In determining the amount of revenue to be recognized, the Company determines whether collection of the transaction price is probable.

In determining the amount of revenue to be recognized, the Company determines whether collection of the entire transaction price is probable.

Only amounts deemed probable are recognized as revenue.

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Subscription revenue includes revenue from Feedonomics.

Feedonomics provides a technology platform and related services that enables online retailers and other sellers to automate online listings of the sellers’

information across multiple third-party marketplaces and advertisers (such as Amazon, Google, Facebook, etc.).

Feedonomics provides a technology platform and related services that enables online retailers and other sellers to automate online listings of the sellers’ information across multiple third-party marketplaces and advertisers (such as Amazon, Google, Facebook, etc.).

The Company provides these services under service contracts which are generally one year or less, and in many cases month-to-month.

These service types may be sold stand-alone or as part of a multi-service bundle (e.g.

These service types may be sold stand-alone or as part of a

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multi-service bundle (e.g.

both marketplaces and advertising).

1 unchanged sentence

Professional services, which primarily consist of education packages, launch services, solutions architecting, implementation consulting, and catalog transfer services, are generally billed and recognized as revenue when delivered.

Contracts with the Company’s retail customers are generally month-to-month, while contracts with the Company’s enterprise customers generally range from one to three years .

Contracts are typically non-cancelable and do not contain refund-type provisions.

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Partner and services

The Company’s partner and services revenue ( “PSR”

) includes revenue share, partner technology integrations, and marketing services provided to partners.

Revenue share relates to fees earned by the Company’s partners from customers using the Company’s

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platform, where the Company has an arrangement with such partners to share such fees as they occur.

Revenue share is recognized at the time the earning activity is complete, which is generally monthly.

The Company’s partner and services revenue includes revenue share, partner technology integrations, and marketing services provided to partners.

Revenue share relates to fees earned by the Company’s partners from customers using the Company’s platform, where the Company has an arrangement with such partners to share such fees as they occur.

Revenue share is recognized at the time the earning activity is complete, which is generally monthly and variable based on customer usage on the platform.

Revenue for partner technology integrations is recorded on a straight-line basis over the life of the contract commencing when the integration has been completed.

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The Company also derives revenue from the sales of website themes and applications upon delivery.

The Company recognizes revenue share from the sales of third-party applications, on a net basis as the Company has determined that the Company is the agent in the Company’s arrangements with third-party application providers.

The Company recognizes partner revenue share on a net basis as the Company has determined that the Company is the agent in the Company’s arrangements with third-party application providers.

All other revenue is recognized on a gross basis, as the Company has determined the Company is the principal in these arrangements.

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Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.

The Company’s subscription contracts are generally comprised of a single performance obligation to provide access to the Company’s platform, but can include additional performance obligations.

For contracts with multiple performance obligations where the contracted price differs from the standalone selling price (“SSP”) for any distinct good or service, the Company may be required to allocate the contract’s transaction price to each performance obligation using the Company’s best estimate of SSP.

The Company’s subscription contracts are generally comprised of a single performance obligation to provide access to the Company’s platform, but can include additional performance obligations.

Judgment is required to determine the SSP for each distinct performance obligation.

A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

The Company has determined that its standard list price is its best approximation of SSP.

Contracts with the Company’s technology solution partners may include multiple performance obligations, which can include integrations and marketing activities.

A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

The primary method used to estimate SSP is the observable prices of products or services sold or priced separately in comparable circumstances to similar customers.

Contracts with the Company’s technology solution partners may include multiple performance obligations, which can include integrations and marketing activities.

In determining whether integration services are distinct from hosting services the Company considers various factors.

These considerations included the level of integration, interdependency, and interrelation between the implementation and hosting service.

These considerations include the level of integration, interdependency, and interrelation between the implementation and hosting services.

The Company has concluded that the integration services included in contracts with hosting obligations are not distinct.

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These contracts are evaluated to determine if the guaranteed minimum is substantive.

If the minimum is deemed substantive, revenue is recognized ratably over the life of the agreement, which results in a contract asset that is included in unbilled receivables.

For most of the Company’s contracts, the Company has determined the variable consideration allocation exception has been met and therefore variable fees are recognized in the period they are earned.

If the minimum is deemed substantive, revenue is recognized ratably over the life of the agreement.

The timing of revenue recognition, billings and cash collections can result in billed accounts receivable, unbilled receivables, contract assets, and deferred revenue.

Contract Assets

Billings scheduled to occur after the performance obligation has been satisfied and revenue recognition has occurred result in contract assets.

Contract assets are recorded on the condensed consolidated balance sheets at the end of each reporting period in Prepaid expenses and other assets, net.

Typically, contract assets arise from agreements that have tiered billings over the contract life,

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promotional billing periods, and partner and services revenue agreements that include substantive minimums.

Net contract assets were $ 12.7 million as of March 31, 2024 as compared to $ 11.9 million as of December 31, 2023.

The Company is exposed to credit losses primarily through sales of products and services to customers and partners.

The Company assesses the collectability of outstanding contract assets on an ongoing basis and maintain a reserve which is included in the allowance for credit losses for contract assets deemed uncollectible.

The Company analyzes the contract asset portfolio for significant risks by considering historical collection experience and forecasting future collectability to determine what will ultimately be collected from its customers and partners, delinquency level and customer type have been identified as the primary specific risk affecting the Company’s contract assets, and the estimate for losses is analyzed annually and adjusted as necessary.The Company has provisioned $ 1.3 million and $ 1.5 million for credit losses related to contract assets as of March 31, 2024 and December 31, 2023, respectively.

Deferred revenue

Deferred revenue primarily consists of amounts that have been received from customers in advance of the performance obligation being satisfied.

The Company recognizes revenue from deferred revenue when the services are performed and the corresponding revenue recognition criteria are met.

Amounts recognized from deferred revenue represent primarily revenue from the sale of subscription solutions, integration, and marketing services.

The Company recogni zed $ 15.9 million of previously deferred revenue during the three months ended March 31, 2024.

The Company experienced an increase in the deferred revenue balance as of March 31, 2024, compared to December 31, 2023, which was primarily driven by the Company's continued shift to annual billing cycles.

Remaining performance obligation

As of March 31, 2024, the Company ha d $ 171.8 million of remaining performance obligations, which represents contracted revenue minimums that have not yet been recognized, including amounts that will be invoiced and recognized as revenue in future periods.

Remaining performance obligation is subject to future economic risks, including bankruptcies, regulatory changes and other market factors.

The Company expects to recognize approximately 60 p ercent of the remaining performance obligations as revenue in the following 12 month period, and the remaining balance in the periods thereafter.

Remaining performance obligation consisted of the following:

(in thousands)

As of March 31, 2024

As of March 31, 2023

Cost of revenue

Cost of revenue consists primarily of personnel-related costs, including:

stock-based compensation expenses for customer support and professional services personnel;

costs of maintaining and securing infrastructure and platform;

allocation of overhead costs and credit card processing;

and amortization expense associated with capitalized internal-use software.

Accounts receivable

Accounts receivable are stated at net realizable value and include unbilled receivables.

Agreements with enterprise customers can contain promotional billing periods.

Since merchants have full access to the functionality of the Company’s platform upon contract execution, and the Company has enforceable rights to receive payments for the promotional period if the contract is early terminated, revenue is recognized ratably over the contract life.

When this occurs, the Company recognizes revenue in advance of invoicing, creating an unbilled receivable.

In addition, some of the Company’s PSRs include substantive minimums where the consideration paid varies over the term of the contract and revenue is recognized ratably over the contract term.

Accounts receivable are stated at net realizable value and include both billed and unbilled receivables.

Accounts receivable are net of an allowance for credit losses, are not collateralized, and do not bear interest.

Payment terms range from due immediately to due within 90 days .

The accounts receivable balance at September 30, 2023 and December 31, 2022 included unbilled receivables of $ 16.4 million and $ 19.9 million, respectively.

Unbilled receivables at September 30, 2023 and December 31, 2022 includes contract assets related to enterprise subscription solutions of $ 13.2 million and $ 15.7 million, and PSR customers of $ 3.2 million and $ 4.2 million, respectively.

Payment terms range from due immediately to due within 90 day s .

The accounts receivable balance at March 31, 2024 and December 31, 2023 included unbilled receivables of $ 10.7 million, and $ 11.0 million, respectively.

The Company assesses the collectability of outstanding accounts receivable on an ongoing basis and maintains an allowance for credit losses for accounts receivable deemed uncollectible.

The balance of accounts receivable includes accounts that have been invoiced but unpaid, and unbilled amounts, which represents revenues recognized in advance of billing.

The Company analyzes both the invoiced accounts receivable portfolio and unbilled accounts receivable for significant risks, historical collection activity, and an estimate of future collectability to determine the amount that the Company will ultimately collect.

This estimate is analyzed quarterly and adjusted as necessary.

The Company analyzes grouped customers by similar risk profiles, along with the invoiced accounts receivable portfolio and unbilled accounts receivable for significant risks, historical collection activity, and an estimate of future collectability to determine the amount that the Company will ultimately collect.

This estimate is analyzed annually and adjusted as necessary.

Identified risks pertaining to the Company’s invoiced accounts receivable include the delinquency level and customer type.

The estimate of the amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances, historical customer delinquency, and assessment of the overall portfolio and general economic conditions.

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Identified risks pertaining to the Company’s invoiced accounts receivable include the delinquency level, customer type, and current economic environment.

The estimate of the amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers, the Company’s assessment of the overall portfolio and general economic conditions.

Identified risks pertaining to the Company’s subscription unbilled accounts receivable include customer type, customer activity on the Company’s platform, historical contract termination rates, and customer delinquency.

The estimate of the amount of accounts receivable that may not be collected is based primarily on historical contract termination rates, customer delinquency rates and an assessment of the overall portfolio and general economic conditions.

The identified risk related to the Company’s unbilled accounts related to its PSR business are current partner engagement and activity, the financial wherewithal of the partner, the partner’s future plans and the ability to execute on the plans, and their liquidity and overall financial position.

The estimate of the amount of accounts receivable that may not be collected is based primarily on the specific evaluation of the partner based on current level of engagement with the Company, their overall financial position and general economic conditions.

The allowance for credit losses consisted of the following:

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Provision for expected credit losses

Accounts written off

Write-offs charged against the allowance

Balance at March 31, 2024

Provision for expected credit losses

Accounts written off

Balance at June 30, 2023

Provision for expected credit losses

Accounts written off

Balance at September 30, 2023

The decline in the provision for expected credit losses in the third quarter of 2023 was due to improved collections efforts on old accounts, along with an improved billing process which reduced the overall rate of delinquent accounts.

Additionally, in the third quarter of 2023, certain balances pertaining to delinquent accounts were written off.

These write-offs were fully reserved.

Stock-based compensation

The Company issues stock options, restricted stock units (“RSUs”) and performance based restricted stock units (“PSUs”) to employees.

The Company values stock options using the Black-Scholes option-pricing model at the date of grant and recognizes the relates stock-based compensation expense on a straight-line basis over the service period, net of estimated forfeitures, which is typically four years .

The Company values RSUs at the closing market price on the date of grate.

RSUs typically vest in equal installments over a four-year period, subject to continued service, and compensation expense is recognized straight-line over the requisite service period.

The Company grants PSUs which provide for shares of common stock to be earned based on the Company's total stockholder return compared to the Russell 2000 index, and referred to as market-based awards.

The Company values these market-based awards on the grant date using the Monte Carlo simulation model.

The determination of fair value is affected by the Company's stock price and a number of assumptions including the expected volatility and the risk-free interest rate.

The Company assumes no dividend yield and recognizes stock-based compensation expense ratably from grant date over the performance period of the award.

The market-based awards will cliff-vest at the end of the three-year period ranging from 0 percent to 200 percent of the target number of PSUs granted.

The Company also grants PSUs which provide for shares of common stock to be earned based on its attainment of the Company's adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA") and revenue relative to a target specified in the applicable agreement, and are referred to as Company performance-based awards.

The Company values these awards at the closing market price on the date of grant.

The vesting of Company performance-based awards is conditioned upon the achievement of certain targets and will vest in three annual tranches in a percentage of the target number of shares between 0 % to 200 %.

The Company recognizes stock based compensation expense over the performance period, if it is probable that the performance condition will be achieved.

Adjustments to stock based compensation expense are made, as needed, each reporting period based on changes in our estimate of the number of units that are probable of vesting.

Revenue recognition and deferred costs

Revenue recognition

The Company’s source of revenue consists of subscription solutions fees and partner and services fees.

These services allow customers to access the Company’s hosted software over the contract period.

The Company’s source of revenue consists of subscription solutions fees and partner and services fees.

These services allow customers to access the Company’s hosted software over the contract period.

The customer is not allowed to take possession of the software or transfer the software.

The Company’s revenue arrangements do not contain general rights of refund in the event of cancellations.

Disaggregation of revenue

The following table disaggregates revenue by major source:

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

(in thousands)

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Revenue by geographic region was as follows:

Three months ended September 30,

Nine months ended September 30,

(in thousands)

Americas –

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Cost of revenue

Cost of revenue consists primarily of personnel-related costs, including:

stock-based compensation expenses for customer support and professional services personnel;

costs of maintaining and securing infrastructure and platform;

amortization expense associated with capitalized internal-use software;

and allocation of overhead costs.

Deferred revenue

Deferred revenue primarily consists of amounts that have been billed to or received from customers in advance of performing the associated services .

The Company recognizes revenue from deferred revenue when the services are performed, and the corresponding revenue recognition criteria are met.

The Company recognized $ 1.7 million and $ 13.4 million of previ ously deferred revenue during the three and nine months ended September 30, 2023, respectively.

The net increase in the deferred revenue balance for the nine months ended September 30, 2023 is primarily due to increases in in prepaid contracts.

Amounts recognized from deferred revenue represent primarily revenue from the sale of subscription solutions, integration, and marketing services.

As of September 30, 2023 , the Company had $ 157.2 million of remaining performance obligations, which represents contracted revenue minimums that have not yet been recognized, including amounts that will be invoiced and recognized as revenue in future periods.

The Company expects to recognize approximately 60 percent of the remaining performance obligations as revenue in the following 12 -month period, and the remaining balance in the periods thereafter.

Three months ended March 31,

(in thousands)

Americas – U.S.

Americas – other (1)

(1) Americas-other revenue includes revenue from North and South America, other than the U.S.

Revenue by geographical region is determined based on the region of the Company’s contracting entity, which may be different than the region of the customer.

Revenue attributed to the United States was 76 percent and EMEA was 11 percent during the three months ended March 31, 2024 and 2023.

No single country, other than the United States, represented more than ten percent of total revenue during the three months ended March 31, 2024 and 2023.

Deferred commissions

Certain sales commissions earned by the Company’s sales force are considered incremental and recoverable costs of obtaining a contract with a customer.

Sales commissions are not paid on subscription renewals.

The Company amortizes deferred sales commissions ratably over the estimated period of its relationship with customers of approximately three years .

Based on historical experience, the Company determined the average life of its customer relationship by taking into consideration customer contracts and the estimated technological life of the Company’s platform and related significant features.

Certain sales commissions earned by the Company’s go-to-market teams are considered incremental and recoverable costs of obtaining a contract with a customer.

The Company amortizes deferred sales commissions ratably over the average customer life which is three years .

The Company includes amortization of deferred commissions in sales and marketing expense in the condensed consolidated statements of operations.

The Company periodically reviews the carrying amount of deferred commissions to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these deferred costs.

The Company did no t recognize an impairment of deferred commissions during the three and nine months ended September 30, 2023 and the year ended December 31, 2022.

Sales com missions of $ 3.0 million and $ 7.3 million were deferred for the three and nine months ended September 30, 2023 , respectively;

and $ 1.9 million and $ 6.4 million were deferred for the three and nine months ended September 30, 2022, respectively.

Deferred commission amortization expense was $ 1.9 million and $ 5.2 million for the three and nine months ended September 30, 2023 , respectively;

and $ 1.4 million an d $ 3.7 million for the three and nine months ended September 30, 2022 respectively.

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The Company did no t recognize an impairment of deferred commissions during the three months ended March 31, 2024 and the year ended December 31, 2023.

Sales commissions of $ 2.1 million and $ 1.7 million were deferred for the three months ended March 31, 2024 and 2023, respectively;

deferred commission amortization expense wa s $ 2.3 million and $ 1.6 million for the three months ended March 31, 2024 and 2023 , respectively.

Fair value measurements

Financial instruments carried at fair value include cash and cash equivalents, restricted cash and marketable securities.

The carrying amount of accounts receivable approximates fair value due to their relatively short maturities.

For assets and liabilities measured at fair value, fair value is the price to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.

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The standard requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The three levels of inputs that may be used to measure fair value are as follows:

Level 1 –

Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2 –

Inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 –

Inputs are unobservable that are significant to the fair value of the asset or liability and are developed based on the best information available in the circumstances, which might include the Company’s data.

As of September 30, 2023 and December 31, 2022, marketable securities and debt consisted of the following:

As of September 30, 2023

• Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

• Level 2 – Inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

• Level 3 – Inputs are unobservable that are significant to the fair value of the asset or liability and are developed based on the best information available in the circumstances, which might include the Company’s data.

The following table presents information about the Company’s cash equivalents, marketable securities and liabilities that were measured at fair value as of March 31, 2024 and December 31, 2023:

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As of March 31, 2024

(in thousands)

Quoted Prices in

Active Markets

for Identical Assets

Significant Other

Total Fair Value

Cash equivalents (1) :

Money market mutual funds & cash equivalents

Marketable securities:

Corporate bonds

treasury securities

Corporate securities

Commercial paper

Total marketable securities

Convertible senior notes due 2026

As of December 31, 2023

(in thousands)

Quoted Prices in

Active Markets

for Identical Assets

Significant Other

Total Fair Value

Cash equivalents (1) :

Money market mutual funds & cash equivalents

Marketable securities:

Corporate bonds

treasury securities

Corporate securities

Commercial paper

Total marketable securities

Convertible senior notes due 2026

(1) Included in “Cash and cash equivalents” in the accompanying Condensed Consolidated Balance Sheets, in addition t o $ 28.3 million, and $ 33.1 million of cash, as of March 31, 2024 and December 31, 2023 , respectively.

The contractual maturities of the investments classified as marketable securities were as follows:

(in thousands)

As of September 30, 2023

As of March 31, 2024

As of December 31, 2023

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Total marketable securities

The following tables summarize the estimated fair value of marketable securities.

As of September 30, 2023

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The following tables summarize the gains, losses, and estimated fair value of cash equivalents, marketable securities and liabilities as of March 31, 2024 and December 31, 2023 :

As of March 31, 2024

(in thousands)

Amortized Cost/ Principal amount

Cash equivalents:

Money market mutual funds & cash equivalents

Marketable securities:

Corporate bonds

treasury securities

Corporate securities

Commercial paper

Total marketable securities

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Convertible senior notes due 2026

As of December 31, 2023

(in thousands)

Amortized Cost/ Principal amount

Cash equivalents:

Money market mutual funds & cash equivalents

Marketable securities:

Corporate bonds

treasury securities

Corporate securities

Commercial paper

Total marketable securities

In September 2021, the Company issued $ 345.0 million aggregate pri ncipal amount of 0.25 percent convertible senior notes due 2026 (the “Notes”).

The estimated fair value of the notes was approximately $ 272.1 mill ion as of September 30, 2023 .

The Notes were categorized as Level 2 instruments as the estimated fair value was determined based on estimated or actual bids and offers of the Notes in an inactive market on the last business day of the period.

Convertible senior notes due 2026

Business combinations

Acquisition of Bundle B2B Inc.

In April, 2022, the Company completed its acquisition of Bundle B2B Inc.

(“Bundle”), a B2B ecommerce solution that provides advanced B2B functionality seamlessly with the Company’s platform.

The total purchase price was approximately $ 7.7 million.

The Company acquired Bundle because it is complementary to the Company’s core business and will allow the Company to expand the Company's product offerings to its merchant base.

The purchase price was based on the expected financial performance of Bundle, not on the value of the net identifiable assets at the time of the acquisition.

This resulted in a significant portion of the purchase price being attributed to goodwill.

The purchase price included the issuance of common stock in the amount of $ 4.6 million, cash of $ 0.8 million, an escrow withheld in the amount of $ 0.9 million and $ 1.4 million of contingent consideration.

The amount held in escrow will be paid out on the first anniversary date with the issuance of the stock based on the fair value of the Company’s common stock on the date of payment.

Of the $ 1.4 million contingent consideration, $ 0.7 million is tied to the migration of old merchants to updated plans over a 6 -months period from acquisition date and the remaining $ 0.7 million is tied to ongoing performance measures over a 1 2 -months period from the acquisition date.

Both the milestones were met by Bundle and the Company issued 87,865 shares of common stock in the fourth fiscal quarter of 2022 and 89,285 shares of common stock in the third fiscal quarter of 2023.

The purchase price primarily included $ 0.4 million of developed technology and $ 7.3 million of goodwill that is not expected to be deductible for tax purposes.

The identifiable intangible assets, which consisted of developed technology, have estimated useful lives of four years .

Acquisition of Makeswift

In October 2023, the Company acquired all issued and outstanding stock of Makeswift, Inc.

(“Makeswift”) pursuant to a merger agreement.

Makeswift is a leading visual editor for Next.js websites.

The total purchase consideration for Makeswift was approximately $ 9.2 million which consisted of the following:

(in thousands)

Base purchase price

Deferred compensation

Total purchase consideration (1)

(1) Of the total purchase consideration, $ 1.1 million of cash was held back by the Company for potential breaches of representation and warranties, as well as adjustments to working capital.

Subsequent to March 31, 2024, the Company dispersed working capital hold back o f $ 0.1 million .

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The table below summarizes the estimated fair value of the assets acquired and liabilities assumed in the Makeswift acquisition, at acquisition date:

(in thousands)

October 31, 2023

Tangible assets acquired

Right-of-use asset

Intangible assets acquired

Liabilities assumed

Deferred tax liability

Lease liability

Net assets acquired, excluding goodwill

Total purchase consideration

As of March 31, 2024, the purchase price allocation is not finalized as the Company has not yet filed the Makeswift tax return for the period ended October 31, 2023.

Once this return is filed in fiscal 2024, the Company will update the estimated fair value liabilities assumed in the acquisition.

The fair value of identifiable intangible assets acquired at the date of the acquisitions is as follows:

(in thousands)

Useful life (in years)

Developed technology

Customer relationships

Total acquisition-related intangible assets

The $ 2.3 m illion goodwill balance is primarily attributable to synergies and expanded market opportunities that are expected to be achieved from the integration of Makeswift with the Company’s offerings and assembled workforce.

The goodwill balance is not deductible for income taxes purposes.

As part of the Makeswift merger agreement, $ 2.0 million of the purchase consideration is subject to clawback if any of the key Makeswift employees voluntarily terminate their employment within 18 months after the closing date of the transaction.

The $ 2.0 million is accounted for as compensation expense and therefore not included in the purchase consideration.

The related compensation is recognized as post-combination expense over the 18 month service period on a straight-line basis.

The Company incurred $ 0.3 million of compensation costs during the three months ended March 31, 2024 .

The Company has $ 1.3 million of unvested amounts of cash retention payments recorded in prepaid expenses and other current assets and other assets on the condensed consolidated balance sheet as of March 31, 2024.

Goodwill and intangible assets

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Goodwill amounts are not amortized but tested for impairment on an annual basis.

There was no impairment of goodwill as of September 30, 2023 and December 31, 2022.

There was no impairment of goodwill as of March 31, 2024.

Intangible assets are amortized on a straight-line basis over the useful life.

Intangible assets amortization was $ 2.0 million for each of the three months ended September 30, 2023 and 2022, and was $ 6.1 m illion for each of the nine months ended September 30, 2023 and 2022.

Intangible assets amortization was $ 2.5 million and $ 2.0 million for the three months ended March 31, 2024 and 2023, respectively.

Intangible assets consists of the following:

(in thousands)

September 30, 2023

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March 31, 2024

December 31, 2023

Weighted average remaining useful life as of September 30, 2023 (in years)

(in thousands)

Accumulated amortization

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Net carrying amount

Weighted average remaining useful life as of March 31, 2024 (in years)

Developed technology

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Total intangible assets

As of September 30, 2023, expected amortization expense for intangible assets was as follows:

As of March 31, 2024, expected amortization expense for intangible assets was as follows:

(in thousands)

September 30, 2023

Remaining three months of 2023

March 31, 2024

Remaining nine months of 2024

Commitments, contingencies, and leases

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The outcomes of legal proceedings and other contingencies are, however, inherently unpredictable and subject to significant uncertainties.

The Company is not presently a party to any legal proceedings that, if determined adversely to the Company, would have a material adverse effect on the Company.

The Company is not presently a party to any legal proceedings that, if determined adversely to the Company, would have a material adverse effect on the Company's condensed consolidated financial statements.

Purchase Obligations

The Company has contractual commitments for services with third-parties related to hosting and internal software systems.

These commitments are non-cancellable and expire within one to three years .

The Company had unconditional purchase obligations as of March 31, 2024 as follows:

(in thousands)

March 31, 2024

Remaining nine months of 2024

2027 and thereafter

The Company leases certain facilities under operating lease agreements that expire at various dates through 2028 .

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Renewal options were not included in the right-of-use asset and lease liability calculation.

Operating expense relating to in-place leases was $ 0.7 million and $ 1.0 million for the three months ended September 30, 2023 and 2022, respectively, and was $ 2.1 mil lion and $ 3.0 million for the nine months ended September 30, 2023 and 2022, respectively.

As of March 31, 2024 , there were no finance leases.

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Supplemental lease i nformation

Cash flow information (in thousands)

Three months ended September 30,

Nine months ended September 30,

Cash paid for operating lease liabilities

Operating lease information

Three months ended September 30,

Nine months ended September 30,

Weighted-average remaining lease-term (years)

Weighted-average discount rate

Operating expense relating to leases was $ 0.8 million and $ 0.9 million for the three months ended March 31, 2024 and 2023, respectively.

The future maturities of operating lease liabilities are as f ollows:

(in thousands)

September 30, 2023

Remaining three months of 2023

As of March 31, 2024

Remaining nine months of 2024

Total minimum lease payments

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Other exit-related costs are recognized as incurred.

In December 2022, the Company executed a plan to reduce its cost structure which included a reduction of Company workforce and office space (the “2022 Restructure”).

The 2022 Restructure included workforce reduction initiatives which resulted in $ 3.6 million of severance and other compensation charges, $ 3.4 million of which was paid in the first quarter of 2023.

Additionally, in the third quarter of 2023 the Company paid $ 0.3 million in connection with the 2022 Restructure.

The Company has no accruals recorded as of September 30, 2023 related to the 2022 Restucture.

The Company does not expect any more material charges under this plan.

The 2022 Restructure also included the decision to cease using certain leased office space in Texas and to make such office space available for sublease in January 2023.

As a result, in 2022, the Company evaluated the recoverability of right-of-use assets and determined the carrying values were not fully recoverable.

The Company calculated the impairment by comparing the carrying amount of the asset group to its estimated fair value based on inputs derived from market prices for similar assets.

As a result, the Company impaired $ 3.7 million in right-of-use assets and have recorded this amount in Restructuring Charges on the accompanying condensed consolidated statements of operations for the previous year ended December 31, 2022.

The impairment charge represents the amount by which the carrying value exceeded the estimated fair value of the asset group.

These charges were recorded within the operating expenses on the accompanying condensed consolidated statement of operations.

In September 2023, the Company commenced a restructuring plan (the “2023 Restructure”) which includes a reduction of the Company’s workforce that is intended to advance the Company’s ongoing commitment to profitable growth.

The actions associated with the employee restructuring under the 2023 Restructure are expected to be complete by the end of the Company’s fiscal 2024, subject to employee jurisdictions.

The Company recorded approximately $ 5.5 million in expenses in connection with the 2023 Plan in the third quarter of fiscal year 2023, which consists of charges related to severance payments, employee benefits, and professional service and legal fees.

These charges were recorded within the operating expenses on the accompanying condensed consolidated

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statement of operations.

No cash payments were made in the third quarter of fiscal year 2023.

The actions associated with the employee restructuring under the 2023 Restructure are expected to be complete by the end of the Company’s fiscal 2024, subject to employee jurisdictions.

The Company recorded approximately $ 5.5 million in expenses in connection with the 2023 Restructure in fiscal 2023, which consists of charges related to severance payments, employee benefits, and professional service and legal fees.

These charges were recorded within the operating expenses on the accompanying consolidated statement of operations.

The Company does not expect any more material charges under this plan.

The following table summarizes the activities related to the 2023 Restructure as of March 31, 2024:

(in thousands)

Workforce reduction

Liability, as of December 31, 2023

Liability, as of March 31, 2024

Other liabilities

The following table summarizes the components of other current liabilities:

As of September 30,

As of March 31,

As of December 31,

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2021 Convertible Senior Notes

In September 2021, the Company issued $ 345.0 million aggregate principal amount of 0.25 percent convertible senior notes due 2026 (the “Notes”).

The Notes were issued in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”).

In September 2021, the Company issued $ 345.0 million aggregate principal amount of 0.25 percent convertible senior notes due 2026 (the “Notes”).

The Notes were issued in a private offering to qualified institutional buyers pursuant to Rule 144A under the

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Securities Act of 1933, as amended (the “Securities Act”).

The net proceeds from the sales of the Notes was approximately $ 335.0 million after deducting offering and issuance costs related to the Notes and before the 2021 Capped Call transactions, as described below.

The Notes are the Company’s senior, unsecured obligations and accrue interest at a rate of 0.25 percent per annum, payable semi-annually in arrears on April 1 and October 1 of each year , beginning on April 1, 2022.

The Notes will mature on October 1, 2026 , unless earlier converted, redeemed or repurchased by us.

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(1) during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ending on December 31, 2021, if the Last Reported Sale Price (as defined in the indenture for the Notes) per share of Common Stock (as defined in the indenture for the Notes) exceeds one hundred and thirty percent ( 130 percent) of the Conversion Price (as defined in the indenture for the Notes) for each of at least twenty ( 20 ) Trading Days (as defined in the indenture for the notes) (whether or not consecutive) during the thirty ( 30 ) consecutive Trading Days ending on, and including, the last Trading Day of the immediately preceding calendar quarter;

(2) during the five (5) consecutive Business Days (as defined in the indenture for the Notes) immediately after any ten (10) consecutive Trading Day period (such ten (10) consecutive Trading Day period, the “Measurement Period”) if the Trading Price per $ 1,000 principal amount of Notes for each Trading Day of the Measurement Period was less than ninety-eight percent ( 98 percent) of the product of the Last Reported Sale Price per share of Common Stock on such Trading Day and the Conversion Rate (as defined in the indenture for the Notes) on such Trading Day;

(3) if the Company calls any or all of the Notes for redemption, such Notes called for redemption may be converted any time prior to the close of business on the second business day immediately before the redemption date;

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From and after July 1, 2026, noteholders may convert their Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date.

As of September 30, 2023 and December 31, 2022, no conditions for the notes to convert have been called or met.

The Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election.

As of March 31, 2024 and December 31, 2023, no conditions for the notes to convert have been called or met.

The Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election.

The initial conversion rate for the Notes is 13.68 shares of common stock per $ 1,000 principal amount of Notes, which represents an initial conversion price of approximately $ 73.11 per share of common stock.

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The Company may not redeem the Notes prior to October 7, 2024.

The Notes will be redeemable, in whole or in part (subject to certain limitations), for cash at the Company’s option at any time, and from time to time, on or after October 7, 2024 and on or before the 25th scheduled trading day immediately before the maturity date, but only if the last reported sale price per share of the Company’s common stock exceeds 130 percent of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice;

and (ii) the trading day immediately before the date the Company sends such notice.

The redemption price will be a cash amount equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, up to, but excluding, the redemption date.

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principal amount of Notes are outstanding and not subject to redemption as of the time the Company sends the related redemption notice.

If a “fundamental change”

(as defined in the indenture for the Notes) occurs, then, subject to a limited exception, noteholders may require the Company to repurchase their Notes for cash.

Pursuant to the Partial Redemption Limitation (as defined in the indenture for the Notes), the company may not elect to redeem less than all of the outstanding Notes unless at least $ 150.0 million aggregate principal amount of Notes are outstanding and not subject to redemption as of the time the Company sends the related redemption notice.

If a “fundamental change” (as defined in the indenture for the Notes) occurs, then, subject to a limited exception, noteholders may require the Company to repurchase their Notes for cash.

The repurchase price will be equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, up to, but excluding, the applicable repurchase date.

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Transaction costs of $ 10.0 million, attributable to the issuance of the Notes were recorded as a direct deduction from the related debt liability in the Consolidated Balance Sheet and are amortized to interest expense over the term of the Notes.

2021 Capped Call Transactions

In connection with the pricing of the Notes, the Company used $ 35.6 million of the net proceeds from the Notes to enter into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain financial institutions.

The Capped Call Transactions are generally expected to reduce potential dilution to holders of the Company’s common stock upon any conversion of the Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the Notes upon conversion of the Notes in the event that the market price per share of the Company’s common stock is greater than the strike price of the Capped Call Transactions with such reduction and/or offset subject to a cap.

The Capped Call Transactions have an initial cap price of approximately $ 106.34 per share, which represents a premium of 100 percent over the last reported sale prices of the Company’s common stock of $ 53.17 per share on September 9, 2021, and is subject to certain adjustments under the terms of the Capped Call Transactions.

Collectively, the Capped Call Transactions cover, initially, the number of shares of the Company’s common stock underlying the Notes, subject to anti-dilution adjustments substantially similar to those applicable to the Notes.

The Capped Call Transactions do not meet the criteria for separate accounting as a derivative as they are indexed to the Company’s common stock.

The premiums paid for the Capped Call Transaction have been included as a net reduction to additional paid-in capital within stockholders’

2023 Term Debt

In the second quarter of 2023, the Company entered into an agreement to finance a software license in the amount of $ 1.1 million.

The borrowing is under this arrangement and the agreement bears interest at 4.4 percent.

The principal amount will be paid in eight quarterly installments beginning on July 1, 2023.

As of September 30, 2023, the Company had $ 0.8 million outstanding under this agreement.

The net carrying amount of the Notes and Term Debt consists of the following:

The net carrying amount of the Company's debt consists of the following:

(in thousands)

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Contractual Interest Rate

Outstanding Principal as of September 30, 2023

Carrying Value as of September 30, 2023

Outstanding Principal as of March 31, 2024

Carrying Value as of March 31, 2024

Carrying Value as of December 31, 2023

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current portion of debt

Total noncurrent debt

The total interest expense recognized related to the Convertible Notes and Term Debt consists of the following:

Three months ended

September 30,

Nine months ended

September 30,

Total long-term portion of debt

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The total interest expense recognized related to the Company's debt consists of the following:

Three months ended March 31,

(in thousands)

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Lender fees that were paid upfront to the lenders and debt issuance fees paid to third parties are recorded as a discount to the carrying amount of debt and are being amortized to interest expense over the life of the debt.

2021 Capped Call Transactions

The Capped Call Transactions do not meet the criteria for separate accounting as a derivative as they are indexed to the Company’s common stock.

The premiums paid for the Capped Call Transaction have been included as a net reduction to additional paid-in capital within stockholders’ equity.

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Stockholders’

In 2020, the Company’s board of directors approved the 2020 Equity Incentive Plan, or 2020 Plan, under which stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and units and other cash-based or stock-based awards may be granted to employees, consultants and directors.

Stockholders’ equity

2020 Equity incentive plan

In 2020, the Company adopted the 2020 Equity Incentive Plan, or “2020 Plan”, under which stock options, stock appreciation rights, restricted stock, restricted stock units, performance-based restricted stock units and other cash-based or stock-based awards may be granted to employees, consultants and directors.

Shares of common stock that are issued and available for issuance under the 2020 Plan consist of authorized, but unissued or reacquired shares of common stock or any combination thereof.

The Company has issued awards of stock options and restricted stock units under the 2020 Plan.

The Company has granted awards of stock options, restricted stock units, and market-based and performance-based restricted stock units under the 2020 Plan.

A total of 3,873,885 shares of common stock were initially authorized and reserved for issuance under the 2020 Plan.

This share reserve automatically increased on January 1, 2021, 2022, and 2023 and will increase on each subsequent January 1st through and including January 1, 2031, by an amount equal to the smaller of (a) 5 % of the number of shares of common stock issued and outstanding on the immediately preceding December 31 and (b) an amount determined by the board of directors.

On January 1, 2024, 2023 and January 1, 2022 the share reserve increased by 3,820,681 shares, 3,695,569 shares and 3,616,312 shares, respectively.

As of March 31, 2024, a total of 1,096,370 registered shares of common stock remained available for future issuance under the 2020 Plan.

Subsequent to March 31, 2024, the Company registered an additional 9,548,587 shares on Form S-8.

Stock Options

Stock options generally vest and become exercisable over a service period of 4 years from the date of grant, subject to continued service.

The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option pricing model using the assumptions described below in this table.

Nine months ended September 30,

The following table summarizes the weighted-average grant date value of options and the assumptions used to develop their fair value.

Three months ended March 31,

Year ended December 31,

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3.65 % - 4.30 %

1.82 % - 3.88 %

Expected volatility

65.02 % - 66.56 %

63.07 % - 66.83 %

Expected life in years

6.06 - 6.11 years

6.09 - 6.10 years

The Company estimated its future stock price volatility considering both its observed option-implied volatilities and its peer historical volatility calculations.

The Company estimated its future stock price volatility using a combination of its observed option-implied volatilities and its peer historical volatility calculations.

Management believes this is the best estimate of the expected volatility over the expected life of its stock options.

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The Company does not anticipate paying any cash dividends in the foreseeable future and therefore uses an expected dividend yield of zero in the option pricing model.

Stock option activity for the nine months ended September 30, 2023 was as follows:

Stock option activity for the three months ended March 31, 2024 was as follows:

(in thousands)

Weighted-Average Grant Date Fair Value

Weighted-Average Exercise Price

Aggregate Intrinsic Value

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Plan shares expired or canceled

Balance as of September 30, 2023

Balance as of March 31, 2024

Vested and expected to vest

Exercisable as of September 30, 2023

Exercisable as of March 31, 2024

The expected stock-based compensation expense remaining to be recognized as of March 31, 2024 is $ 8.6 million, which reflects outstanding stock option awards that are vested and outstanding stock option awards that are expected to vest.

This expense will be recognized over a weighted-average period of 2.76 years.

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Restricted Stock Units

Restricted stock units, which upon vesting entitle the holder to one share of common stock for each restricted stock unit, generally vest over a service period of 4 years from the date of grant, subject to continued service.

Restricted stock unit activity for the nine months ended September 30, 2023 was as follows:

Restricted stock unit activity for the three months ended March 31, 2024 was as follows:

(in thousands)

Weighted-Average Grant Date Fair Value

Grant Date Fair Value

Aggregate Intrinsic Value

Balance as of December 31, 2023

Granted –

restricted stock units

Granted – restricted stock units

Granted – market-based and performance-based restricted stock units

Vested and converted to shares

Balance as of September 30, 2023

Balance as of March 31, 2024

Vested and expected to vest

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The aggregate expected stock-based compensation expense remaining to be recognized as of September 30, 2023 is $ 90.3 million, which reflects outstanding stock awards that are vested and outstanding stock awards that are expected to vest.

The income tax expense for the three and nine months ended September 30, 2023 is based on the estimated annual effective tax rate for fiscal 2023.

The Company’s provision for income taxes is based on estimated effective tax rates derived from an estimate of annual consolidated earnings before taxes, adjusted for nondeductible expenses, other permanent items, valuation allowances, and any applicable income tax credits.

The Company’s provision for income taxes reflected an effective tax rate of ( 0.72 ) percent and ( 0.28 ) percent for the three months ended September 30, 2023 and 2022, respectively.

For the nine months ended September 30, 2023 and 2022, the Company had an effective tax rate of ( 0.91 ) percent and ( 0.23 ) percent, respectively.

For the three and nine months ended September 30, 2023 and 2022, the Company’s effective tax rate was lower than the U.S.

federal statutory rate of 21 percent primarily due to the Company’s valuation allowance offsetting the benefits of losses.

The Company’s current income tax expenses and benefits consist primarily of state current income tax expense, deferred income tax expense relating to the tax amortization of acquired goodwill and current income tax expense from foreign operations.

The Company has provided a valuation allowance against most of the Company’s deferred tax assets as it believes the objective and verifiable evidence of the Company’s historical pretax net losses outweighs any positive evidence of forecasted future results.

The grant date fair value of the market-based awards was $ 10.01 .

Significant assumptions used in the Monte Carlo simulation model for the market-based awards granted are as follows:

Three months ended March 31,

Risk-free interest rate

Dividend yield

As of March 31, 2024, no market-based or performance-based restricted stock units have been canceled or vested.

Stock compensation expense recognized for the market-based and performance-based awards was not material for the three months ended March 31, 2024.

The aggregate expected stock-based compensation expense remaining to be recognized as of March 31, 2024 is $ 63.6 million related to RSUs, which reflects outstanding stock awards that are vested and outstanding stock awards that are expected to vest.

This expense will be recognized over a weighted-average period of 2.46 years.

The income tax expense for the three months ended March 31, 2024 is based on the estimated annual effective tax rate for fiscal 2024.

The Company’s provision for income taxes reflected an effective tax rate of ( 4.75 ) percent and ( 0.90 ) percent for the three months ended March 31, 2024 and 2023, respectively.

For the three months ended March 31, 2024 and 2023, the Company’s effective tax rate was lower than the U.S.

federal statutory rate of 21 percent primarily due to the Company’s valuation allowance offsetting the benefits of losses.

The Company will continue to monitor the positive and negative evidence and will adjust the valuation allowance as sufficient objective positive evidence becomes available.

As of September 30, 2023, the Company had approximately $ 0.4 million in uncertain tax positions representing no increase from the balance on December 31, 2022.

Operating losses generated in years prior to 2018 remain open to adjustment until the statute of limitations closes for the tax year in which the net operating losses are utilized.

As of March 31, 2024, the Company had approxim ately $ 0.4 million in uncertain tax positions representing no increase from the balance on December 31, 2023.

Operating losses generated in years prior to 2019 remain open to adjustment until the statute of

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limitations closes for the tax year in which the net operating losses are utilized.

Tax years 2019 through 2021 generally remain open to examination by the major taxing jurisdictions to which the Company is subject.

The Company is currently not under audit by any taxing jurisdiction.

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Net loss per share

Basic net loss per share is computed by dividing net loss by the number of shares of common stock outstanding for the period.

Because the Company has reported a net loss for the three and nine months ended September 30, 2023, and 2022, the number of shares used to calculate diluted net loss per share is the same as the number of shares used to calculate basic net loss per share for the period presented because the potentially dilutive shares would have been antidilutive if included in the calculation.

Three months ended September 30,

Nine months ended September 30,

Because the Company has reported a net loss for the three months ended March 31, 2024, and 2023, the number of shares used to calculate diluted net loss per share is the same as the number of shares used to calculate basic net loss per share for the period presented because the potentially dilutive shares would have been antidilutive if included in the calculation.

Three months ended March 31,

(in thousands)

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The following potentially dilutive securities outstanding have been excluded from the computation of basic weighted-average shares outstanding because such securities have an antidilutive impact due to losses reported:

As of September 30,

As of March 31,

(in thousands)

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Total potentially dilutive securities

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Subsequent events

In October 2023, the Company acquired all outstanding stock of Makeswift, Inc.

(“Makeswift”), a leading visual editor for Next.js websites.

The total estimated cash consideration for Makeswift was approximately $ 9.0 million which includes various working capital considerations and employee retention agreements.

Special note regarding forward-looking statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1993, as amended ("the Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").

Any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions, or future events or performance are not historical facts and may be forward-looking.

These statements are often, but not always, made through the use of words or phrases such as “anticipate,”

“believe,”

“can,”

“continue,”

“could,”

“estimate,”

“expect,”

“intend,”

“may,”

“ongoing,”

“plan,”

“potential,”

“predict,”

“project,”

“should,”

“will,”

and similar words or phrases.

These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” and similar words or phrases.

These forward-looking statements include statements concerning the following:

4 unchanged sentences

• our anticipated cash needs and our estimates

regarding our capital requirements and our need for additional financing;

regarding our capital requirements and our need for additional financing or refinancing;

• our ability to compete in our industry and innovation by our competitors;

6 unchanged sentences

• our ability to adapt to emerging regulatory developments, technological changes, and cybersecurity needs;

our reduction in force and the related anticipated cost savings, and operational and efficiency improvements;

• the anticipated effect on our business of litigation to which we are or may become a party

other statements described in this Quarterly Report on Form 10-Q under “Risk Factors,”

and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

• our ability to remediate the material weakness;

• other statements described in this Quarterly Report on Form 10-Q under “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Although we believe the expectations reflected in these forward-looking statements are reasonable, these statements are not guarantees of future performance and involve risks and uncertainties which are subject to change based on various important factors, some of which are beyond our control.

For more information regarding these risks and uncertainties as well as certain additional risks that we face, refer to “Risk Factors”

in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed on March 1, 2023 and “Risk Factors,”

in this Quarterly Report on Form 10-Q as well as factors more fully described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

and elsewhere in this Quarterly Report on Form 10-Q.

For more information regarding these risks and uncertainties as well as certain additional risks that we face, refer to “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed on February 29, 2024 and “Risk Factors,” in this Quarterly Report on Form 10-Q as well as factors more fully described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q.

If one or more of the factors affecting the expectations reflected in our forward-looking information and statements proves incorrect, our actual results, performance, or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed 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 risks 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.”

Investors and others should note that we announce material financial information to our investors using our investor relations website (investors.bigcommerce.com), SEC filings, press releases, public conference calls and webcasts.

We intend to use our investor relations website as a means of disclosing information about our business, our financial condition and results of operations and other matters and for complying with our disclosure obligations under Regulation FD.

The information we post on our investor relations website, including information contained in investor presentations, may be deemed material.

Accordingly, investors should monitor our investor relations website, in addition to following our press releases, SEC filings and public conference calls and webcasts.

BigCommerce is leading a new era of ecommerce.

Our SaaS platform simplifies the creation of online stores by delivering a unique combination of ease-of-use, enterprise functionality, composability and flexibility.

We allow merchants to build their ecommerce solution their way with the flexibility to fit 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.

Our strategy is to provide the world’s best combination of freedom of choice and flexibility in a multi-tenant SaaS platform.

We describe this strategy as “Open SaaS.”

As of September 30, 2023 we served 5,951 enterprise accounts.

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 of 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 include Molton Brown, Burrow, SC Johnson, SkullCandy, SoloStove and Vodafone.

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, $79, and $299 per month when paid annually, or $39, $105, and $399 per month, when paid monthly, respectively.

Our Essentials plans include GMV thresholds with programmatic upgrades built in as merchants exceed each plan’s threshold.

Our differentiated Open SaaS technology approach combines the flexibility and customization potential of open source software with the performance, security, usability, and value benefits of multi-tenant SaaS.

This combination helps businesses turn digital transformation into competitive advantage.

While some software conglomerate providers attempt to lock customers into their proprietary suites, we focus on the configurability and flexibility of our open platform, enabling each business to optimize their ecommerce approach based on their specific needs.

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, point of sale (POS), content management system (CMS), customer relationship management (CRM), and enterprise resource planning (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 our mutual prospects and 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.

Key factors affecting our performance

Our operational and financial results have been, and will continue to be, affected by a number of factors that present significant opportunities as well as risks and challenges, including those discussed below and elsewhere in this quarterly report and in our Annual

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Report on 10-K, particularly in Part I, Item 1A, “Risk Factors.”

The key factors discussed below impacted our 2023 results or are anticipated to impact our future results .

“Go-to-Market”

Strategy and Subscription Expansion

Our go-to-market investments have traditionally focused on acquiring new customers driven by investments in digital marketing and sales.

Over the last four years, approximately 60-70 percent of subscription ARR expansion has come from new stores and logos, with the remaining 30-40 percent coming from expansion of existing stores.

We expect to focus on a more efficient land and expand business model targeting mid-market and enterprise companies across key verticals, product categories, and use cases.

This model will be oriented around the initial sale serving as a platform to more effectively upsell and cross sell additional solutions within the same account.

We will employ the same land and expand model in key regions, including US brands which also have global operations.

This go-to-market focus up market on mid-market and enterprise customers does not lessen our commitment to our small business customers.

We will continue to support our small business customers with a more efficient, digital-first engagement model.

We remain a great technology for fast growing small businesses that require more flexibility and product capabilities.

These customers, in many cases, evolve into enterprise accounts as their business grows through our platform as well.

Macroeconomic environment and customer spend

The macroeconomic environment impacts our customers differently, and our success will depend upon our success in providing tailored offerings across our various cohorts of customers.

For example, in the current macroeconomic environment, we are experiencing significant increases in sales cycle durations for large enterprise merchants compared to 2022.

This cohort of the industry tends to have lengthier sales cycles and more complicated business requirements, which magnify the impact of macroeconomic uncertainty.

As a result, we have recently experienced a slower-than-expected increase in enterprise account ARR.

Although it will take time to scale up our market penetration in this cohort of the industry, we believe we have product market fit for merchants of this size and complexity.

To offset the impact of the current macroeconomic climate on our large enterprise merchants, we are increasing our investment in mid-market sales generation, where we observe fewer macroeconomic challenges and strong performance.

Furthermore, due to current macroeconomic conditions, including high inflation and corresponding increases to interest rates, we have experienced slower ecommerce order and GMV growth in 2023.

This has led to fewer orders and GMV-based pricing upgrades compared to prior years, and which also negatively affected partner and services revenue growth.

Similarly, we have also experienced a tighter business spending environment, which has negatively impacted our revenue.

Over the last twelve months, we have seen a small increase in existing customers seeking to reduce committed order volumes in exchange for lower pricing.

We are successfully retaining key customers while negotiating more favorable prepayment terms and effective price per order increases.

Some smaller customers have also chosen to delay or cancel projects as a result of macroeconomic conditions.

Customers are spending more time evaluating platform investments, which has contributed to enterprise ARR not increasing as anticipated .

Acquisition Strategy

We plan to continue to reinvest a portion of our income from operations in future periods to grow and innovate our business and service offerings and expand our leadership role in the ecommerce industry and we anticipate that the success of these investments will impact our business performance going forward.

We regularly evaluate acquisitions and investment opportunities in complementary businesses, services, technologies and intellectual property rights in an effort to expand our service offerings.

Past acquisitions have enabled us to deliver innovative solutions in new categories, including feed management.

We continue to evaluate opportunities and expect to continue to make investments and acquisitions in the future, such as our most recent acquisition of Makeswift, the world ’

s most powerful visual editor for Next.js websites.

We expect that Makeswift will become an optional component of composable BigCommerce builds in 2024, and thereafter, a part of our natively hosted visual editing toolkit.

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.

Our key business metrics, such as annual revenue run-rate, subscription annual revenue run-rate, average revenue per account and others are calculated as of the end of the last month of the reporting period.

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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, product feed management subscription fees, 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.

Subscription annual revenue run-rate

We calculate subscription annual revenue run-rate (“ARR”) at the end of each month as the sum of contractual monthly recurring revenue at the end of the period, which includes platform subscription fees, invoiced growth adjustments, product feed management subscription fees, recurring professional services revenue, and other recurring revenue, multiplied by twelve to prospectively annualize recurring revenue.

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, where applicable.

We bill customers for subscription solutions and professional services, and we include both in ARPA for the reported period.

For example, ARPA as of September 30, 2023, includes all subscription solutions and professional services billed between January 1, 2023, and September 30, 2023.

We allocate partner revenue, where applicable, primarily based on each customer’s share of GMV processed through that partner’s solution.

Partner revenue that is not directly linked to customer usage of a partner’s solution is allocated 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 or an enterprise level feed management subscription (collectively “Enterprise Accounts”).

These accounts may have more than one Enterprise plan or a combination of Enterprise plans and Essentials plans.

The chart below illustrates certain of our key business metrics as of the periods ended:

September 30,

Total ARR (in thousands)

Subscription ARR (in thousands)

Enterprise account metrics:

Number of enterprise accounts

ARR attributable to enterprise accounts (in thousands)

ARR attributable to enterprise accounts as a percentage of Total ARR

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, where applicable, for the measured period are divided by the total billings and allocated partner revenue for such accounts, corresponding to the period one year prior.

An NRR greater than 100 percent 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 from our NRR calculations.

NRR for enterprise accounts was 111 percent and 118 percent for years ended December 31, 2022 and 2021, respectively.

We update our reported NRR at the end of each fiscal year and do not report quarterly changes in NRR.

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Components of results of operations

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 secure sockets layer (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 for convenience.

In the first half of 2023, we implemented a new pricing strategy that provided enterprise merchants a discount for a period of time from their contractual monthly fee.

Prior to this new strategy, certain enterprise agreements contain promotional periods.

Under both models, merchants have full access to the functionality of our platform upon contract execution, and revenue is recognized ratably over the contract life.

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.

Through Feedonomics, we provide feed management solutions under service contracts which are generally one year or less and, in many cases, month-to-month.

These service types may be sold stand-alone or as part of a multi-service bundle (e.g.

both marketplaces and advertising) and are billed monthly in arrears.

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 using BigCommerce.

Our non-recurring services include education packages, launch services, solutions architecting, implementation consulting, and catalog transfer services.

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, (4) personnel and other costs related to feed management, and (5) allocated costs, such as, technology and facility 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.

As a result of our growth plans and integration of our previously acquired businesses, we have incurred expenses for equity and cash retention awards and amortization of purchased intangibles, which has increased our operating loss and increased our use of cash currently and for the remainder of fiscal 2024.

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 and sales support 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 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 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 engineers in other low-cost international locations.

We expense research and development expenses as incurred.

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General and administrative

General and administrative expenses consist primarily of:

(1) personnel-related expenses (including stock-based compensation expense) for finance, legal and compliance, and human resources, (2) external professional services, and (3) allocated overhead costs, such as, technology and facility costs.

We expect our general and administrative expenses to remain stable.

Acquisition related expenses

Acquisition related expenses consists of cash payments for third-party acquisition costs and other acquisition related expenses, including contingent compensation arrangements entered into in connection with acquisitions.

Amortization of intangible assets

Amortization of intangible assets consist of non-cash amortization of acquired intangible assets which were recognized as a result of business combinations and are being amortized over their expected useful life.

Restructuring charges

Restructuring charges are comprised of costs incurred as a result of our 2022 Restructure and the 2023 Plan as well as an impairment of the right-of-use assets triggered by our decision to cease using a significant portion of certain leased facilities as a result of the 2022 Restructure.

As a part of our effort to drive improved results and evolve our go to market approach, in September 2023, we commenced a restructuring, the 2023 Plan, that affects approximately 7 percent of our global workforce.

While headcount and non-headcount reductions impact all teams across the company, we expect to see the largest improvement in margins reflected in sales and marketing expenses.

Interest income

Interest income is earned on our cash, cash equivalents and investments.

Interest expense

Interest expense consists primarily of the interest from the amortization of the debt issuance costs and coupon interest attributable to our convertible note issued in 2021, as well as interest associated with a financing agreement entered into in the first half of 2023.

Other expenses

Other expenses, net primarily consists of loss from share issuance related to the Bundle acquisition and foreign currency translation adjustments.

Provision for income taxes

Provision for income taxes consists primarily of deferred income taxes associated with amortization of tax deductible goodwill and current income taxes related to certain foreign and state jurisdictions in which we conduct business.

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 of the United States.

Additionally, certain of our foreign earnings may also be currently taxable in the 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.

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Results of operations

The following table sets forth our results of operations for the periods presented:

Three months ended September 30,

Nine months ended September 30,

Cost of revenue (1)

Operating expenses:

Sales and marketing

Research and development

General and administrative

Acquisition related expenses

Restructuring charges

Amortization of intangible assets

Total operating expenses

Loss from operations

Interest income

Interest expense

Other expenses

Loss before provision for income taxes

Provision for income taxes

(1) Amounts include stock-based compensation expense and associated payroll tax costs, as follows:

Three months ended September 30,

Nine months ended September 30,

(in thousands)

Cost of revenue

Sales and marketing

Research and development

General and administrative

Total stock-based compensation expense

Revenue by geographic region

The composition of our revenue by geographic region during the three and nine months ended September 30, 2023 and September 30, 2022 were as follows:

Three months ended September 30,

Nine Months Ended September 30,

(in thousands)

Americas –

Total Revenue

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Comparison of the three and nine months ended September 30, 2023 and September 30, 2022

Three months ended September 30,

Nine months ended September 30,

(dollars in thousands)

Subscription solutions

Partner and services

Total revenue

Total revenue increased $5.7 million, or 7.8 percent, to $78.0 million for the three months ended September 30, 2023, from $72.4 million for the three months ended September 30, 2022, as a result of increases in both subscription solutions and partner and services revenue.

Subscription solutions revenue increased $5.5 million, or 10.3 percent, to $58.7 million for the three months ended September 30, 2023, from $53.2 million for the three months ended September 30, 2022, primarily due to increases in enterprise, mid-market, and Feedonomics activity.

Partner and services revenue increased $0.2 million, or 0.9 percent, to $19.3 million for the three months ended September 30, 2023, from $19.2 million for the three months ended September 30, 2022, primarily as a result of increases in stand ready activity offset by decreases in integration, revenue share activity, along with other one-time revenue items recorded in the prior year.

Total revenue increased $18.6 million, or 9.0 percent, to $225.2 million for the nine months ended September 30, 2023 from $206.6 million for the nine months ended September 30, 2022, as a result of increases in both subscription solutions and partner and services revenue.

Subscription solutions revenue increased $16.1 million or 10.6 percent, to $168.7 million for the nine months ended September 30, 2023, from $152.5 million for the nine months ended September 30, 2022, primarily due to growth in enterprise, mid-market, and Feedonomics activity.

Partner and services revenue increased $2.5 million, or 4.5 percent, to $56.6 million for the nine months ended September 30, 2023, from $54.1 million for the nine months ended September 30, 2022, primarily as a result of increases in stand ready activity offset by decreases in integration, revenue share, along with other one-time events recorded in the prior year.

Cost of revenue, gross profit, and gross margin

Three months ended September 30,

Nine months ended September 30,

(dollars in thousands)

Cost of revenue

Gross margin percentage

Cost of revenue increased $1.5 million, or 8.7 percent, to $19.1 million for the three months ended September 30, 2023, from $17.5 million for the three months ended September 30, 2022, primarily as a result of higher software costs and processing fees of $0.9 million, and higher salaries and stock based compensation costs of $0.6 million.

Gross margin decreased to 75.6 percent from 75.8 percent, primarily as a result of these additional transaction processing costs associated with hosting.

Cost of revenue increased $3.8 million, or 7.3 percent, to $55.3 million for the nine months ended September 30, 2023, from $51.5 million for the nine months ended September 30, 2022, primarily as a result of higher software costs and processing fees of $2.9 million, and higher salaries and stock based compensation costs of $0.6 million.

Gross margin increased to 75.5 percent from 75.1 percent, primarily as a result of cost cutting measures from the 2022 Restructure.

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Operating expenses

Sales and marketing

Three months ended September 30,

Nine months ended September 30,

(dollars in thousands)

Sales and marketing

Percentage of revenue

Sales and marketing expenses increased $0.3 million, or 0.8 percent, to $36.3 million for the three months ended September 30, 2023 from $36.0 million for the three months ended September 30, 2022, primarily due to higher variable marketing costs of $0.3 million.

As a percentage of total revenue, sales and marketing expenses decreased to 46.5 percent from 49.7 percent, primarily as a result of cost cutting measures from the 2022 Restructure.

Sales and marketing expenses increased $0.3 million or 0.2 percent, to $105.9 million for the nine months ended September 30, 2023 from $105.6 million for the nine months ended September 30, 2022, primarily due to higher variable marketing costs of $0.3 million.

As a percentage of total revenue, sales and marketing expenses decreased to 47.0 percent from 51.1 percent, primarily as a result of cost cutting measures from the 2022 Restructure.

Research and development

Three months ended September 30,

Nine months ended September 30,

(dollars in thousands)

Research and development

Percentage of revenue

Research and development decreased $0.5 million, or 2.4 percent, to $21.7 million for the three months ended September 30, 2023 from $22.2 million for the three months ended September 30, 2022, due to the cost cutting measures from the 2022 Restructure.

As a percentage of total revenue, research and development expenses decreased to 27.8 percent from 30.7 percent, primarily as a result of cost cutting measures from the 2022 Restructure.

Research and development decreased $1.6 million, or 2.5 percent, to $64.0 million for the nine months ended September 30, 2023 from $65.6 million for the nine months ended September 30, 2022, due to the cost cutting measures from the 2022 Restructure.

As a percentage of total revenue, research and development expenses decreased to 28.4 percent from 31.7 percent, primarily as a result of cost cutting measures from the 2022 Restructure.

General and administrative

Three months ended September 30,

Nine months ended September 30,

(dollars in thousands)

General and administrative

Percentage of revenue

General and administrative expenses decreased $4.6 million, or 24.2 percent , to $14.3 million for the three months ended September 30, 2023 from $18.9 million for the three months ended September 30, 2022, primarily due to decreased bad debt expense of $3.7 million due to focus on collection efforts and decreased spend of $0.9 million in salaries and share-based compensation driven by decreases in headcount.

As a percentage of total revenue, general and administrative expenses decreased to 18.4 percent from 26.2 percent, primarily as a result of cost cutting measures from the 2022 Restructure.

General and administrative expenses decreased $7.0 million, or 13.5 percent , to $45.3 million for the nine months ended September 30, 2023 from $52.3 million for the nine months ended September 30, 2022, primarily due to a $5.5 million decrease in

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bad debt expense due to focus on collection efforts and a $1.4 million decrease in various areas including, but not limited to audit fees, insurance, contracting services, travel As a percentage of total revenue, general and administrative expenses decreased to 20.1 percent from 25.3 percent, primarily as a result of cost cutting measures from the 2022 Restructure.

Acquisition related expenses

Acquisition related expense decreased $5.2 million, or 82.5 percent, to $1.1 million for the three months ended September 30, 2023, from $6.3 million for the three months ended September 30, 2022, and decreased $22.1 million, or 70.4 percent, to $9.3 million for the nine months ended September 30, 2023, from $31.4 million for the nine months ended September 30, 2022.

This decrease was primarily as a result of a decrease in acquisition related compensation in conjunction with our Feedonomics business combination.

Restructuring charges

Restructuring charges were $5.8 million for the three months ended September 30, 2023, respectively, and $6.2 million for the nine months ended September 30, 2023.

These charges primarily related to charges from the 2023 Plan which included a one time charge of $5.5 million resulting from severance and other related charges.

Interest income

Interest income increased $1.7 million, or 121.4 percent, to $3.1 million for the three months ended September 30, 2023, from $1.4 million for the three months ended September 30, 2022, and increased $6.2 million, or 295.2 percent to $8.3 million for the nine months ended September 30, 2023 from $2.1 million for the nine months ended September 30, 2022.

This increase was primarily as a result of investment income reinvested at higher interest rates for our cash, cash equivalents and marketable securities.

Interest expense

Interest expense was $0.7 million and $0.7 million for the three months ended September 30, 2023 and 2022, respectively, and was $2.2 million and $2.1 million for the nine months ended September 30, 2023 and 2022 related to our outstanding debt.

Liquidity and capital resources

We have incurred losses since our inception and may 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.

Our operational short-term liquidity needs primarily include working capital for sales and marketing, research and development, and continued innovation.

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 for the full year 2023 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 conflict in Ukraine and inflation on the global economy and our business, financial condition, and results of operations.

We believe that our existing cash and cash equivalents and our cash flows from operating activities 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 connection with our acquisition of Feedonomics, we paid $32.5 million in cash at the first anniversary of closing and in July 2023, we made the final payment of $32.5 million in cash.

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.

From time to time, we may seek to repurchase, redeem or otherwise retire our convertible notes through cash repurchases and/or exchanges for equity securities, in open market repurchases, privately negotiated transactions, tender offers or otherwise.

Such repurchases, redemptions or other transactions, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors.

The amounts involved may be material.

We do not have any material off-balance sheet arrangements that we expect would materially affect our liquidity and capital resources.

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The following table sets forth a summary of our cash flows for the periods indicated.

Three months ended September 30,

Nine months ended September 30,

(in thousands)

Net cash used in operating activities

Net cash provided by (used in) investing activities

Net cash provided by financing activities

Net decrease in cash, cash equivalents and restricted cash

As of September 30, 2023, we had $70.9 million in cash, cash equivalents, and restricted cash, a decrease of $31.1 million compared to $102.0 million as of September 30, 2022.

Cash and cash equivalents consist of highly-liquid investments with original maturities of less than three months.

Our restricted cash balance of $1.1 million and $1.4 million at September 30, 2023 and 2022 respectively, consists of security deposits for future chargebacks and amounts on deposit with certain financial institutions.

Our marketable securities balance of $195.6 million and $211.9 million at September 30, 2023 and 2022 respectively, consists of investments in corporate and US treasury securities .

We maintain cash account balances in excess of Federal Deposit Insurance Corporation (FDIC) insured limits.

Operating activities

Net cash used in operating activities for the three months ended September 30, 2023 and 2022 was $31.4 million and $50.8 million, respectively.

This consisted primarily of our net losses adjusted for certain non-cash items including depreciation, stock-based compensation, debt discount amortization, amortization of intangible assets, bad debt expense, and the effect of changes in working capital.

Outflows from operating activities were primarily driven by the Feedonomics anniversary payout of $32.5 million and $4.0 million of payments for directors and officers insurance.

Net cash used in operating activities for the nine months ended September 30, 2023 and 2022 was $37.5 million and $86.7 million, respectively.

Investing activities

Net cash provided by (used in) investing activities during the three months ended September 30, 2023 and 2022 was $26.4 million and ($69.3) million, respectively.

In the three months ended September 30, 2023, this consists primarily of the sale and maturity of marketable securities of $83.1 million offset by the purchase of property and equipment of $1.1 million and the purchase of marketable securities of $55.7 million.

Of the cash proceeds from the sale of marketable securities, $32.5 million was used to fund acquisition related compensation in conjunction with our business combinations.

In the three months ended September 30, 2022, this consists primarily of the purchases of marketable securities of $90.6 million and the purchases of property and equipment of $0.7 million offset by the maturity of marketable securities of $22.1 million.

Net cash provided by (used in) investing activities during the nine months ended September 30, 2023 and 2022 was $14.0 million and ($110.1) million, respectively.

In the nine months ended September 30, 2023, this consists primarily of the sale and maturity of marketable securities of $206.2 million offset by the purchase of property and equipment of $3.1 million and the purchase of marketable securities of $189.1 million.

In the nine months ended September 30, 2022, this consists primarily of the cash paid for the acquisition of Bundle of $0.7 million, the purchases of marketable securities of $169.9 million and the purchases of property and equipment of $4.2 million offset by the maturity of marketable securities of $64.7 million.

Financing activities

Net cash provided by financing activities during the three months ended September 30, 2023 and 2022 was $0.3 million and $0.2 million, respectively.

In the three months ended September 30, 2023, this was attributable to proceeds from exercise of stock options of $1.5 million offset by withholdings from the issuance of shares of common stock pursuant to the exercise of stock options and vesting of restricted stock units of $1.0 million and repayments of debt of $0.1 million.

In the three months ended September 30, 2022, this was attributable to proceeds from the issuance of shares of common stock pursuant to the exercise of stock options of $0.2 million

Net cash provided by financing activities during the nine months ended September 30, 2023 and 2022 was $1.4 million and $0.1 million, respectively.

In the nine months ended September 30, 2023, this was attributable to proceeds from exercise of stock options of $3.7 million and proceeds from the issuance of debt of $1.1 million offset by withholdings from the issuance of shares of common stock pursuant to the exercise of stock options and vesting of restricted stock units of $3.3 million and repayment of debt of $0.1

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In the nine months ended September 30, 2022, this was attributable to proceeds from the issuance of shares of common stock pursuant to the exercise of stock options of $0.1 million.

2021 Convertible senior notes

In September 2021, we issued $345,000,000 principal amount of 0.25 percent Convertible Senior Notes due 2026 (the “Convertible Notes”).

The Convertible Notes were issued pursuant to, and are governed by, an indenture (the “Convertible Notes Indenture”), dated as of September 14, 2021, between us and U.S.

Bank National Association, as trustee.

The Convertible Notes are our senior, unsecured obligations and are (i) equal in right of payment with our future senior, unsecured indebtedness;

(ii) senior in right of payment to our future indebtedness that is expressly subordinated to the Convertible Notes in right of payment;

(iii) effectively subordinated to our future secured indebtedness, to the extent of the value of the collateral securing that indebtedness;

and (iv) structurally subordinated to all future indebtedness and other liabilities, including trade payables, and (to the extent we are not a holder thereof) preferred equity, if any, of our subsidiaries.

The Convertible Notes accrue interest at a rate of 0.25 percent per annum, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on April 1, 2022.

The Convertible Notes will mature on October 1, 2026, unless earlier repurchased, redeemed or converted.

Before July 1, 2026, noteholders have the right to convert their Convertible Notes only upon the occurrence of certain events.

From and after July 1, 2026, noteholders may convert their Convertible Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date.

We will settle conversions by paying or delivering, as applicable, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.

The initial conversion rate was 13.6783 shares of common stock per $1,000 principal amount of Convertible Notes, which represents an initial conversion price of approximately $73.11 per share of common stock.

The conversion rate and conversion price are subject to customary adjustments upon the occurrence of certain events.

In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change”

(as defined in the Convertible Notes Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

We may not redeem the Convertible Notes at our option at any time before October 7, 2024.

The Convertible Notes will be redeemable, in whole or in part (subject to the “Partial Redemption Limitation”

(as defined in the Convertible Notes Indenture)), at our option at any time, and from time to time, on or after October 7, 2024 and on or before the 25th scheduled trading day immediately before the maturity date, but only if the last reported sale price per share of our common stock exceeds 130 percent of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date we send the related redemption notice;

and (ii) the trading day immediately before the date we send such notice.

The redemption price will be a cash amount equal to the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

In addition, calling any Convertible Note for redemption will constitute a Make-Whole Fundamental Change with respect to that Convertible Note, in which case the conversion rate applicable to the conversion of that Convertible Note will be increased in certain circumstances if it is converted after it is called for redemption.

Pursuant to the Partial Redemption Limitation, we may not elect to redeem less than all of the outstanding Convertible Notes unless at least $150.0 million aggregate principal amount of Convertible Notes are outstanding and not subject to redemption as of the time we send the related redemption notice.

If certain corporate events that constitute a “Fundamental Change”

(as defined in the Convertible Notes Indenture) occur, then, subject to a limited exception for certain cash mergers, noteholders may require us to repurchase their Convertible Notes at a cash repurchase price equal to the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.

The definition of Fundamental Change includes certain business combination transactions involving us and certain de-listing events with respect to our common stock.

The Convertible Notes have customary provisions relating to the occurrence of “Events of Default”

(as defined in the Convertible Notes Indenture), which include the following:

(i) certain payment defaults on the Convertible Notes (which, in the case of a default in the payment of interest on the Convertible Notes, will be subject to a 30-day cure period);

(ii) our failure to send certain notices under the Convertible Notes Indenture within specified periods of time;

(iii) our failure to comply with certain covenants in the Convertible Notes Indenture relating to our ability to consolidate with or merge with or into, or sell, lease or otherwise transfer, in one transaction or a series of transactions, all or substantially all of the assets of us and our subsidiaries, taken as a whole, to another person;

(iv) a default by us in our other obligations or agreements under the Convertible Notes Indenture or the Convertible Notes if such default is not cured or waived within 60 days after notice is given in accordance with the Convertible Notes Indenture;

(v) certain defaults by us or any of our significant subsidiaries with respect to indebtedness for borrowed money of at least $65,000,000;

and (vi) certain events of bankruptcy, insolvency and reorganization involving us or any of our significant subsidiaries.

If an Event of Default involving bankruptcy, insolvency or reorganization events with respect to us (and not solely with respect to a significant subsidiary of us) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the Convertible Notes

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then outstanding will immediately become due and payable without any further action or notice by any person.

If any other Event of Default occurs and is continuing, then, the trustee, by notice to us, or noteholders of at least 25 percent of the aggregate principal amount of Convertible Notes then outstanding, by notice to us and the trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the Convertible Notes then outstanding to become due and payable immediately.

However, notwithstanding the foregoing, we may elect, at our option, that the sole remedy for an Event of Default relating to certain failures by us to comply with certain reporting covenants in the Convertible Notes Indenture consists exclusively of the right of the noteholders to receive special interest on the Convertible Notes for up to 180 days at a specified rate per annum not exceeding 0.50 percent on the principal amount of the Convertible Notes.

Off-balance sheet arrangements

We did not have any off-balance sheet arrangements as of September 30, 2023 or as of December 31, 2022.

Critical accounting policies and estimates

Our condensed consolidated financial statements have been prepared in accordance with GAAP.

The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities.

We also make estimates and assumptions on the reported revenue generated and reported expenses incurred during the reporting periods.

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances.

The results of these estimates form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these 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 our Annual Report on Form 10-K for the year ended December 31, 2022.

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.

Quantitative and Qualitati ve Disclosures About Market Risk.

Interest rate risk

Our cash, cash equivalents and restricted cash, consist primarily of interest-bearing accounts.

Such interest-earning instruments carry a degree of interest rate risk.

To minimize interest rate risk in the future, we intend to maintain our portfolio of cash equivalents in a variety of investment-grade securities, which may include commercial paper, money market funds, and government and non-government debt securities.

Because of the short-term maturities of our cash, cash equivalents, restricted cash, and marketable securities, we do not believe that an increase in market rates would have any significant negative impact on the realized value of our investments.

Foreign currency exchange risk

All of our revenue and a majority of our expense and capital purchasing activities for the nine months ended September 30, 2023 were transacted in U.S.

As the we expand our sales and operations internationally, we will be more exposed to changes in foreign exchange rates.

Our international revenue is currently invoiced and collected in U.S.

In the future, as we expand into additional international jurisdictions, we expect that our international sales will be primarily denominated in U.S.

If we decide in the future to denominate international sales in currencies other than the U.S.

dollar, unfavorable movement in the exchange rates between the U.S.

dollar and the currencies in which we conduct foreign sales could have an adverse impact on our revenue.

A portion of our operating expenses are incurred outside the United States and are denominated in foreign currencies, which are subject to fluctuations due to changes in foreign currency exchange rates.

In particular, in our Australia and UK-based operations, we pay payroll and other expenses in Australian dollars, British pounds sterling, Euros and Mexican pesos.

Our operating results and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates.

However, we believe that the exposure to foreign currency fluctuation from operating expenses is relatively small at this time as the related costs do not constitute a significant portion of our total expenses.

We currently do not hedge foreign currency exposure.

We may in the future hedge our foreign currency exposure and may use currency forward contracts, currency options, and/or other common derivative financial instruments to reduce foreign currency risk.

It is difficult to predict the effect future hedging activities would have on our operating results.

Financial instruments that potentially subject us to concentration of credit risk consist of cash, cash equivalents, restricted cash, accounts receivable and marketable securities.

We invest our cash equivalents in highly rated money market funds.

Our marketable securities consist of debt securities issued by highly rated corporate entities, foreign governments, the U.S.

federal government or state and local governments.

Our exposure to any individual corporate entity is limited by policy.

Deposits may exceed federally insured limits, and we are exposed to credit risk on deposits in the event of default by the financial institutions to the extent account balances exceed the amount insured by the FDIC.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements