What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-12 compared with 2021-08-06 · 134 added, 191 removed, 245 unchanged (57% of the section changed)

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q.

In addition to historical consolidated financial information, the following discussion contains forward-looking statements that involve risk and uncertainties.

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.

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We power both our customers’ branded ecommerce stores and their cross-channel connections to popular online marketplaces, social networks, and offline POS systems.

As of June 30, 2021, we served approximately 58,000 online stores across industries in approximately 147 countries.

As of September 30, 2021, we served approximately 58,600 online stores across industries in approximately 143 countries.

We provide a comprehensive platform for launching and scaling an ecommerce operation, including store design, catalog management, hosting, checkout, order management, reporting, and pre-integration into third-party services like payments, shipping, and accounting.

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We plan to continue to invest in our “Open SaaS” strategy, building new partnerships and continuing to develop a platform that offers best-of-breed functionality with the cost-effectiveness of multi-tenant SaaS.

As we work to develop and deliver this platform for our customers, we will also invest and grow our business by acquiring additional customers to our platform, growing our revenue with existing customers, expanding our presence in new segments and geographies, and potential acquisitions that would synergize and expand our current product offering.

As we work to develop and deliver this platform for our customers, we will also invest and grow our business by acquiring additional customers to our platform, growing our revenue with existing customers, expanding our presence in new segments and geographies, and through acquisitions that would synergize and expand our current product offering.

As a result of the global travel restrictions and stay-at-home or similar orders in effect due to the COVID-19 pandemic, our sales and marketing, research and development, and general and administrative expenses declined as a percentage of revenue in the year ended December 31, 2020.

On August 4, 2020, we completed our IPO, in which we issued and sold 7,877,500 shares of our Series 1 common stock, including 1,027,500 shares of Series 1 common stock that were sold pursuant to the exercise in full of the underwriters’ option to purchase additional shares of Series 1 common stock at $24.00 per share.

The IPO resulted in net proceeds of $171.1 million after deducting underwriting discounts and commissions and other offering costs.

Our 2017 and 2020 Term Loans converted to Series 1 Common Stock in connection with the IPO, resulting in a $53.9 million reduction of our outstanding long-term debt.

On November 12, 2020, we completed our Secondary Offering, in which we issued and sold 1,000,000 shares of our Series 1 common stock at $68.00 per share.

The Secondary Offering resulted in net proceeds of $65.1 million after deducting underwriting discounts, commissions and other offering costs.

Existing stockholders sold an additional 4,750,000 shares of Series 1 common stock, including 750,000 shares of Series 1 common stock that were sold pursuant to the exercise in full of the underwriters’ option to

purchase additional shares of Series 1 common stock at $68.00 per share.

We did not receive any proceeds from the sale of shares by the selling stockholders in the Secondary Offering.

Additionally, upon completion of the Secondary Offering, we fully repaid approximately $22 million of our outstanding indebtedness under our Credit Facility.

On July 23, 2021, we entered into an asset purchase agreement to acquire substantially all the assets and liabilities of Feedonomics LLC.

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The anniversary payments may be paid in shares of our Series 1 common stock or cash based on our discretion.

Key factors affecting our performance

We believe our future performance will depend on many factors, including the following:

Continued growth of ecommerce domestically and globally

Ecommerce is rapidly transforming global B2C and B2B commerce.

B2C ecommerce was nonexistent in the early-1990s and grew to approximately 10% of all global retail spending in 2017, according to eMarketer.

eMarketer estimates that it will take just six years for this percentage to more than double to 21% of global retail spending in 2023.

The rapid growth in ecommerce is prompting companies to adopt ecommerce platforms like BigCommerce to create compelling branded ecommerce stores and power cross-channel connections to online marketplaces, social networks, and offline POS systems.

We believe we have a substantial opportunity to serve a larger number of customers as ecommerce continues to grow around the world by extending into new and emerging segments within ecommerce.

The following segments are significant areas of potential growth and strategic focus for us:

Headless commerce .

This refers to businesses whose technology strategy is to decouple their front-end customer experience technology from their back-end commerce platform.

In terms of online strategy, these companies are typically brand-, marketing-, or experience-led.

We serve headless use cases better than most of our competitors due to years of investment in our platform APIs and integration capabilities.

Pre-built integrations connect our platform with leading CMSs such as Acquia, Adobe, Bloomreach, Drupal, Sitecore, and WordPress.

Since the release of our B2B edition, we have seen a growing interest from B2B customers for our platform.

In many cases, these customers’ needs are met using our native functionality, including B2B features like customer groups and price lists.

In other cases, these customers complement BigCommerce with purpose-built B2B extensions and applications in the BigCommerce Apps Marketplace.

Over time, we intend to add more B2B functionality to both the BigCommerce Apps Marketplace and our native feature set.

Large enterprise .

Increasingly, we are successfully competing for large enterprise sites selling more than $50 million annually online, with our Enterprise plan product feature set, along with our sales, marketing, solutioning, and service capabilities.

Efficient acquisition of new customers

The growth of our customer base is important to our continued revenue growth.

We believe we are positioned to grow significantly through a combination of our own marketing and sales initiatives, customer referrals from our agency and technology partners, and word-of-mouth referrals from existing customers.

We measure the efficiency of new customer acquisition by comparing the lifetime value (“LTV”) of newly-acquired customers to the customer acquisition costs (“CAC”) of the associated time period to get an “LTV:CAC ratio.” We calculate LTV as gross profit from new sales during the four quarters of any given year divided by the estimated future subscription churn rate.

We calculate CAC as total sales and marketing expense incurred during the associated preceding four quarters.

In 2020, new SMB, Mid-Market and Enterprise customers were added at an estimated LTV to CAC ratio of 4.9:1, up from 4.4:1 in 2019.

Retention and growth of our existing customers

We believe our long-term revenue growth is correlated with the growth of our existing customers’ ecommerce businesses.

We strive to maintain industry-leading service levels and platform capabilities to maximize customer success and retention.

Our revenue grows with that of our customers.

As they generate more online sales, we generate more subscription revenue through automated sales-based upgrades on our Essentials plans and order adjustments on our Enterprise plans.

Typical enterprise contracts have terms ranging from 12 to 36 months and do not include the ability to terminate for convenience.

As our customers’ online sales increase, our partner and services revenue generated by revenue-sharing agreements with our strategic technology partners increases as well.

Our ability to retain and grow our customers’ ecommerce businesses often depends on the continued expansion of our platform and the capabilities of our strategic technology partners to provide revenue generating services to our customers.

We continually evaluate prospective and existing partners’ abilities to enhance the capabilities of our customers’ ecommerce businesses.

We add new partners and expand existing partner relationships to enhance the utility of our platform, while creating new opportunities to expand our revenue share in partner and services revenue.

As we continue to grow as a platform, we believe our ability to realize more favorable and expansive revenue share agreements will grow as well.

We also grow by selling additional stores to existing customers.

Our larger customers will often first use our platform to build a single online store that serves a single brand within their portfolio.

These customers can then expand their usage of our platform by launching additional stores to serve additional brands, geographies, or use cases (e.g., B2B in addition to B2C).

Successful rollout of new geographies

We believe our platform can compete successfully around the world.

We enhance usability in new geographies by translating our control panel into local languages and enabling the integration of local payment processors and other local partnerships.

We support the growth of mid-market and large enterprise customers around the world by expanding our regional sales and marketing capabilities.

We opened our first European office in London, UK in 2018 and expanded it throughout 2019-2021.

In EMEA, revenue grew 73% for the six-months ended June 30, 2021.

Similarly, we expanded our existing sales and marketing team in Sydney, Australia, resulting in a 49% revenue growth rate in APAC for the six-months ended June 30, 2021.

2020 brought marked advancements in our international expansion strategy through the launch of new country-specific websites in France, Italy, the Netherlands, and more recently in Mexico, Germany and Spain.

In July of 2021, we launched a partnership with Mercado Libre to power cross-border growth giving our merchants the ability to sell across Latin America to nearly 133 million unique consumers in Mercado Libre’s Marketplace.

We continue to invest in our global presence and in offering native language web experiences that further strengthen our ability to connect more directly with prospects and customers in each region.

Evolution of our technology partner ecosystem

A key part of our strategy is to build a thriving technology partner ecosystem.

We focus on collaborating with, not competing against, partners in our ecosystems.

This strategy contrasts with our largest competitors, who operate software stacks with multiple vertically integrated adjacent services that potentially compete with offerings from technology partners in their ecosystems.

Our customers benefit from the expertise and best-of-breed offerings of our partners, the flexibility to choose without penalty the best offerings for their needs, and the tailored programs developed with our strategic partners.

Through significant investment, we have developed a marketplace of integrated application and technology solutions that is one of the largest of any ecommerce platform.

Our partners currently offer more than 900 pre-built applications and integrations spanning major categories relevant to ecommerce, including shipping, tax, accounting and ERP, marketing, fulfillment, cross-channel commerce, and POS systems, with additional applications and integrations for merchandising, locations, and payments.

We intend to grow partner-sourced revenue by expanding the value and scope of existing partnerships, selling and marketing partner solutions to our customer base, and acquiring and cultivating new, high-value relationships.

Partner referrals of customers are increasingly becoming an efficient customer acquisition strategy for us as we expand our programs for cross-marketing and cross-selling with our partners.

Realizing operating leverage from our investments

We have made significant investments in our SaaS platform and our global infrastructure, which we believe will yield future operating leverage and profit margin expansion.

Research and development has historically been one of our largest operating expense categories.

By opening and expanding a lower-cost engineering center in Kyiv, Ukraine, we are increasing development capacity while also driving leverage in engineering cost as a percentage of total revenue.

In addition, we believe we will achieve operating leverage in marketing by continuing to emphasize lower-cost inbound techniques and growth in customer referrals from our technology and agency partners, especially as our revenue mix continues to shift to our enterprise plans.

We believe we will be able to run our business more efficiently as we continue to grow our revenue and gain further operating scale.

Duration and durability of COVID-19’s impact on partner and services revenue

Ecommerce sales in our major markets have increased significantly due to the widespread closure of physical stores and behavioral changes associated with social distancing.

This increase in sales has bolstered our partner and services revenue, driven predominantly by increases in our partner revenue share streams.

We anticipate that our performance will be affected by the duration of COVID-19’s impact on physical stores and consumer preferences and the resulting increase in ecommerce sales.

Additionally, we expect the widespread availability of treatment options to impact the trend toward ecommerce, which, in turn, may have a significant impact on our performance.

We believe we are well-positioned to continue to benefit from the macro-economic shift to ecommerce that COVID-19 has accelerated, but revenue may be more variable in the near-term as a result.

On September 14, 2021, we issued the 2021 Notes in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”).

The initial conversion price of the 2021 notes represented a premium of approximately 37.5% over the closing price of our common stock on September 9, 2021, the date the 2021 Notes offering was priced.

The net proceeds from the sale of the 2021 Notes were $335.0 million after deducting the offering expenses.

The 2021 Notes will mature on October 1, 2026, unless earlier converted, redeemed or repurchased.

6 million of net proceeds from the 2021 Notes offering to enter into separate capped call instruments (“2021 Capped Call Transactions”) with certain financial institutions.

The 2021 Capped Call Transactions effectively limit the premium for conversion of the 2021 Notes to 100 % and are generally expected to reduce potential dilution to our common stock upon any conversion of the 2021 Notes and/or offset any payments we may upon conversion.

Key business metrics

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Increases or decreases in our key business metrics may not correspond with increases or decreases in our revenue.

We have included the activity of Feedonomics, in our key business metrics from the acquisition date of July 23, 2021 through September 30, 2021.

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

We have excluded any activity pertaining to Feedonomics, from our key business metrics for all periods presented that precede our acquisition.

As a result, year over year or quarter over quarter metrics will not include Feedonomics’ impact in the base period.

Period over period results will be fully comparable after the one-year anniversary of the acquisition.

Annual revenue run-rate

We calculate annual revenue run-rate (“ARR”) at the end of each month as the sum of:

(1) contractual monthly recurring revenue at the end of the period, which includes platform subscription fees, invoiced growth adjustments, recurring professional services revenue, and other recurring revenue, multiplied by twelve to prospectively annualize recurring revenue, and (2) the sum of the trailing twelve-month non-recurring and variable revenue, which includes one-time partner integrations, one-time fees, payments revenue share, and any other revenue that is non-recurring and variable.

(1) contractual monthly recurring revenue at the end of the period, which includes platform subscription fees, invoiced growth adjustments, 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.

Accounts with greater than $2,000 ACV

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To define this $2,000 ACV cohort, we include only subscription plan revenue and exclude partner and services revenue and recurring services revenue.

We consider all stores added and subtracted as of the end of the monthly billing period.

This metric includes accounts that may have either one single store above the ACV threshold or multiple stores that together exceed the ACV threshold.

Accordingly, this cohort would include:

(1) customers on Enterprise plans, (2) customers on Pro plans, and (3) customers with multiple plans that together exceed the ACV threshold.

We consider all stores and brands added and subtracted as of the end of the monthly billing period.

This metric includes accounts that may have either one single store or brand above the ACV threshold or multiple stores or brands that together exceed the ACV threshold.

Average revenue per account

We calculate average revenue per account (“ARPA”) at the end of a period by including customer-billed revenue and an allocation of partner and services revenue.

We 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 March 31, 2020 includes all subscription solutions and professional services billed between January 1, 2020 and March 31, 2020.

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

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

For partner revenue that is not directly linked to customer usage of a partner’s solution, we allocate such revenue based on each customer’s share of total platform GMV.

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To measure the effectiveness of our ability to execute against our growth strategy, particularly within the mid-market and enterprise business segments, we calculate ARR attributable to Enterprise Accounts.

We define Enterprise Accounts as accounts with at least one unique Enterprise plan subscription (“Enterprise Accounts”).

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.

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September 30,

Total ARR (in thousands)

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We use net revenue retention (“NRR”) to evaluate our ability to maintain and expand our revenue with our account base of customers exceeding the ACV threshold over time.

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

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% implies positive net revenue retention.

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Fixed monthly fees and any transaction charges related to subscription solutions are recognized as revenue in the month they are earned.

Subsequent to our acquisition of Feedonomics on July 23, 2021, subscription revenue also includes revenue from Feedonomics.

The Company provides feed management 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.

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

We generate partner revenue from our technology application ecosystem.

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We expect that cost of revenue will increase in absolute dollars, but may fluctuate as a percentage of total revenue from period to period.

With our acquisition of Feedonomics on July 23, 2021, cost of revenue also includes personnel and other costs related to feed management along with other customer support personnel.

Sales and marketing

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Acquisition related expenses

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

Acquisition related expenses consists primarily 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.

Other expenses, net

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Provision for income taxes

Provision for income taxes consists primarily of current income taxes related to certain foreign and state jurisdictions in which we conduct business.

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 and deferred tax liabilities on tax deductible goodwill.

federal income tax purposes and in certain foreign and state jurisdictions, we have NOL carryforwards.

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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.

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 .

Results of operations

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

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

(in thousands)

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Acquisition related expenses

Amortization of intangible assets

Total operating expenses

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Includes stock-based compensation expense as follows:

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

(in thousands)

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Revenue by geographic region

The composition of our revenue by geographic region during the three and six months ended June 2021 and 2020 were as follows:

Three months ended June 30,

Six Months Ended June 30,

The composition of our revenue by geographic region during the three and nine months ended September 2021 and 2020 were as follows:

Three months ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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Total Revenue

Adjusted EBITDA

In addition to our consolidated statements of operations data as determined in accordance with GAAP, we believe the following non-GAAP measure is useful in evaluating our business performance.

Three months ended June 30,

Six months ended June 30,

Adjusted EBITDA

As of June 30,

As of September 30,

As of December 31,

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We define working capital as current assets less current liabilities.

Adjusted EBITDA

In addition to our consolidated statements of operations data as determined in accordance with GAAP, we believe the following non-GAAP measure is useful in evaluating our business performance.

Three months ended September 30,

Nine months ended September 30,

Adjusted EBITDA

Non-GAAP financial measures

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Reconciliation of net loss to Adjusted EBITDA

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Stock-based compensation expense

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Third-party acquisition related costs

Depreciation and amortization

Amortization of intangible asset

Interest income

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Adjusted EBITDA

Comparison of the three and six months ended June 30, 2021 and June 30, 2020

Three months ended June 30,

Six months ended June 30,

Comparison of the three and nine months ended September 30, 2021 and September 30, 2020

Three months ended September 30,

Nine months ended September 30,

(dollars in thousands)

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Total revenue

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020.

Revenue increased $12.7 million, or 35.0%, to $49.0 million for the three months ended June 30, 2021 from $36.3 million for the three months ended June 30, 2020, as a result of increases in both subscription solutions and partner and services revenue.

Subscription solutions revenue increased $10.0 million, or 41.8%, to $34.0 million for the three months ended June 30, 2021 from $23.9 million for the three months ended June 30, 2020, primarily due to growth in mid-market and enterprise activity along with strong overall retention.

Partner and services revenue increased $2.7 million, or 21.7%, to $15.1 million for the three months ended June 30, 2021 from $12.4 million for the three months ended June 30, 2020, primarily as a result of increases in revenue-sharing activity with our technology partners and improved monetization of partner revenue share.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020.

Revenue increased $26.2 million, or 37.7%, to $95.7 million for the six months ended June 30, 2021 from $69.5 million for the six months ended June 30, 2020, as a result of increases in both subscription solutions and partner and services revenue.

Subscription solutions revenue increased $18.5 million, or 38.9%, to $66.0 million for the six months ended June 30, 2021 from $47.5 million for the six months ended June 30, 2020, primarily

due to growth in mid-market and enterprise activity along with strong overall retention .

Partner and services revenue increased $7.7 million, or 35.1%, to $29.7 million for th e six months ended June 30, 2021 from $22.0 million for the six months ended Ju ne 30, 2020 , primarily as a result of increases in revenue-sharing activity with our technology partners and improved monetization of partner revenue share.

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020.

Revenue increased $19.6 million, or 49.2%, to $59.3 million for the three months ended September 30, 2021 from $39.7 million for the three months ended September 30, 2020, as a result of increases in both subscription solutions and partner and services revenue as well as the revenue pertaining to the acquisition of Feedonomics.

Subscription solutions revenue increased $15.6 million, or 58.7%, to $42.1 million for the three months ended September 30, 2021 from $26.5 million for the three months ended September 30, 2020, primarily due to growth in mid-market and enterprise activity along with strong overall retention.

Feedonomics contributed $5.9 million in subscription revenue for the three months ended September 30, 2021.

Partner and services revenue increased $4.0 million, or 30.1%, to $17.2 million for the three months ended September 30, 2021 from $13.2 million for the three months ended September

30, 2020 , primarily as a result of increases in revenue-sharing activity with our technology partners and improved monetization of partner revenue share .

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020.

Revenue increased $45.7 million, or 41.9%, to $154.9 million for the nine months ended September 30, 2021 from $109.2 million for the nine months ended September 30, 2020, as a result of increases in both subscription solutions and partner and services revenue as well as the revenue pertaining to the acquisition of Feedonomics.

Subscription solutions revenue increased $34.0 million, or 46.0%, to $108.1 million for the nine months ended September 30, 2021 from $74.0 million for the nine months ended September 30, 2020, primarily due to growth in mid-market and enterprise activity along with strong overall retention.

Feedonomics contributed $5.9 million in subscription revenue for the nine months ended September 30, 2021.

Partner and services revenue increased $11.7 million, or 33.2%, to $46.9 million for the nine months ended September 30, 2021 from $35.2 million for the nine months ended September 30, 2020, primarily as a result of increases in revenue-sharing activity with our technology partners and improved monetization of partner revenue share.

Cost of revenue, gross profit, and gross margin

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

(dollars in thousands)

Cost of revenue

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020.

Cost of revenue increased $2.3 million, or 30.0%, to $10.2 million for the three months ended June 30, 2021 from $7.8 million for the three months ended June 30, 2020, primarily as a result of higher hosting costs resulting from increased transactions processed of $0.4 million and higher personnel costs, including stock-based compensation expense amounting to $1.8 million.

Gross margin increased to 79.2% during the three months ended June 30, 2021 from 78.4% during the three months ended June 30, 2020.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020.

Cost of revenue increased $4.1 million, or 26.9%, to $19.4 million for the six months ended June 30, 2021 from $15.3 million for the six months ended June 30, 2020, primarily as a result of higher hosting costs resulting from increased transactions processed of $0.9 million and higher personnel costs, including stock-based compensation expense amounting to $3.4 million.

Gross margin increased to 79.7% during the six months ended June 30, 2021 from 78.0% during the six months ended June 30, 2020.

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020.

Cost of revenue increased $3.8 million, or 44.3%, to $12.4 million for the three months ended September 30, 2021 from $8.6 million for the three months ended September 30, 2020, primarily as a result of higher hosting costs resulting from increased transactions processed of $0.3 million, higher personnel costs, including stock-based compensation expense amounting to $1.4 million and expenses related to the acquisition of Feedonomics of $2.1 million.

Gross margin increased to 79.1% during the three months ended September 30, 2021 from 78.4% during the three months ended September 30, 2020.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020.

Cost of revenue increased $7.9 million, or 33.2%, to $31.8 million for the nine months ended September 30, 2021 from $23.9 million for the nine months ended September 30, 2020, primarily as a result of higher hosting costs resulting from increased transactions processed of $1.2 million, higher personnel costs, including stock-based compensation expense amounting to $4.8 million and expenses related to the acquisition of Feedonomics of $2.1 million.

Gross margin increased to 79.5% during the nine months ended September 30, 2021 from 78.1% during the nine months ended September 30, 2020.

Operating expenses

Sales and marketing

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

(dollars in thousands)

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Percentage of revenue

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020.

Sales and marketing expenses increased $5.4 million, or 31.9%, to $22.2 million for the three months ended June 30, 2021 from $16.8 million for the three months ended June 30, 2020, primarily due to higher staffing costs, including stock-based compensation expense of $3.4 million and additional spend to support revenue growth of $1.8 million.

As a percentage of total revenue, sales and marketing expenses decreased to 45.2% during the three months ended June 30, 2021 from 46.3% during the three months ended June 30, 2020, primarily due to increased revenue growth rates coupled with lower marketing costs experienced during the pandemic.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020.

Sales and marketing expenses increased $10.4 million, or 31.9%, to $43.0 million for the six months ended June 30, 2021 from $32.6 million for the six months ended June 30, 2020, primarily due to higher staffing costs, including stock-based compensation expense of $7.0 million and additional spend to support revenue growth of $3.5 million.

As a percentage of total revenue, sales and marketing expenses decreased to 44.9% during the six months ended June 30, 2021 from 46.9% during the six months ended June 30, 2020, primarily due to increased revenue growth rates coupled with lower marketing costs experienced during the pandemic.

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020.

Sales and marketing expenses increased $6.8 million, or 35.0%, to $26.1 million for the three months ended September 30, 2021 from $19.3 million for the three months ended September 30, 2020, primarily due to higher staffing costs, including stock-based compensation expense of $3.1 million, additional spend to support revenue growth of $1.6 million and expenses related to the acquisition of Feedonomics of $1.3 million.

As a percentage of total revenue, sales and marketing expenses decreased to 44.0% during the three months ended September 30, 2021 from 48.6% during the three months ended September 30, 2020, primarily due to increased revenue growth rates coupled with lower marketing costs experienced during the COVID-19 pandemic.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020.

Sales and marketing expenses increased $17.2 million, or 33.1%, to $69.1 million for the nine months ended September 30, 2021 from $51.9 million for the nine months ended September 30, 2020, primarily due to higher staffing costs, including stock-based compensation expense of $10.1 million, additional spend to support revenue growth of $4.8 million and expenses related to the acquisition of Feedonomics of $1.3 million.

As a percentage of total revenue, sales and marketing expenses decreased to 44.6% during the nine months ended September 30, 2021 from 47.5% during the nine months ended September 30, 2020, primarily due to increased revenue growth rates coupled with lower marketing costs experienced during the COVID-19 pandemic.

Research and development

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

(dollars in thousands)

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Percentage of revenue

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020.

Research and development expenses increased $3.4 million, or 29.8%, to $14.7 million for the three months ended June 30, 2021 from $11.3 million for the three months ended June 30, 2020, primarily due to higher staffing costs, including stock-based compensation expense of $2.4 million and additional spend to support engineering projects of $1.0 million.

As a percentage of total revenue, research and development expenses decreased to 30.0% during the three months ended June 30, 2021 from 31.2% during the three months ended June 30, 2020, primarily due to increased operating leverage from revenue growth.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020.

Research and development expenses increased $6.0 million, or 26.9%, to $28.3 million for the six months ended June 30, 2021 from $22.3 million for the six months ended June 30, 2020, primarily due to higher staffing costs, including stock-based compensation expense of $4.5 million and additional spend to support engineering projects of $1.5 million.

As a percentage of total revenue, research and development expenses decreased to 29.5% during the six months ended June 30, 2021 from 32.0% during the six months ended June 30, 2020, primarily due to increased operating leverage from revenue growth.

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020.

Research and development expenses increased $4.4 million, or 36.4%, to $16.5 million for the three months ended September 30, 2021 from $12.1 million for the three months ended September 30, 2020, primarily due to higher staffing costs, including stock-based compensation expense of $2.0 million, additional spend to support engineering projects of $0.7 million and expenses related to the acquisition of Feedonomics of $1.6 million.

As a percentage of total revenue, research and development expenses decreased to 27.9% during the three months ended September 30, 2021 from 30.5% during the three months ended September 30, 2020, primarily due to increased operating leverage from revenue growth.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020.

Research and development expenses increased $10.4 million, or 30.2%, to $44.8 million for the nine months ended September 30, 2021 from $34.4 million for the nine months ended September 30, 2020, primarily due to higher staffing costs, including stock-based compensation expense of $6.5 million, additional spend to support engineering projects of $2.0 million and expenses related to the acquisition of Feedonomics of $1.6 million.

As a percentage of total revenue, research and development expenses decreased to 28.9% during the nine months ended September 30, 2021 from 31.5% during the nine months ended September 30, 2020, primarily due to increased operating leverage from revenue growth.

General and administrative

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

(dollars in thousands)

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Percentage of revenue

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020.

General and administrative expenses increased $5.4 million, or 70.0%, to $13.1 million for the three months ended June 30, 2021 from $7.7 million for the three months ended June 30, 2020.

The increase was primarily due to higher staffing costs, including stock-based compensation expense of $3.4 million and fees associated with operating as a public company amounting to $2.1 million.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020.

General and administrative expenses increased $10.5 million, or 74.3%, to $24.7 million for the six months ended June 30, 2021 from $14.2 million for the six months ended June 30, 2020.

The increase was primarily due to higher staffing costs, including stock-based compensation expense of $6.3 million and fees associated with operating as a public company amounting to $4.6 million.

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020.

General and administrative expenses increased $4.6 million, or 47.5%, to $14.4 million for the three months ended September 30, 2021 from $9.7 million for the three months ended September 30, 2020.

The increase was primarily due to higher staffing costs, including stock-based compensation expense of $2.1 million, fees associated with operating as a public company amounting to $2.4 million and expenses related to the acquisition of Feedonomics of $0.5 million.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020.

General and administrative expenses increased $15.2 million, or 63.4%, to $39.1 million for the nine months ended September 30, 2021 from $23.9 million for the nine months ended September 30, 2020.

The increase was primarily due to higher staffing costs, including stock-based compensation expense of $8.4 million, fees associated with operating as a public company amounting to $5.8 million and expenses related to the acquisition of Feedonomics of $0.5 million.

Acquisition related expenses

Acquisition related expense was $1.1 million for the three and six-months ended June 30, 2021 as a result of third-party legal and other professional services costs to support our acquisition of Feedonomics LLC.

Acquisition related expense was $9.8 million and $10.9 million for the three and nine-months ended September 30, 2021 primarily as a result of acquisition related compensation in conjunction with our business combination.

Interest income

Interest income was insignificant for the three and six-month periods ended June 30, 2021 and 2020.

Interest income was insignificant for the three and nine-month periods ended September 30, 2021 and 2020.

Interest expense

Interest expense decreased $1.2 million to $0.0 for the three months ended June 30, 2021 from $1.2 million for the three months ended June 30, 2020 and decreased $1.9 million to $0.0 million for the six months ended June 30, 2021 from $1.9 million for the six months ended June 30, 2020, as a result of repaying all of our lines of credit.

Interest expense decreased $0.6 million to $0.1 for the three months ended September 30, 2021 from $0.7 million for the three months ended September 30, 2020 and decreased $2.6 million to $0.1 million for the nine months ended September 30, 2021 from $2.7 million for the nine months ended September 30, 2020, as a result of repaying all of our lines of credit.

Change in fair value of financial instrument

The change in in fair value of financial instrument was insignificant for the six-month period ended June 30,2021.

For the six-month period ended June 30, 2020, the increase of $4.4 million in the fair value of financial instrument was the result of a decrease in fair value of the embedded lenders’ put option on our 2020 Convertible Term Loan.

The change in the fair value of the financial instrument was insignificant for the three months ended September 30, 2021 and 2020, respectively and was insignificant for the nine-month period ended September 30, 2021.

For the nine-month period ended September 30, 2020, the change of $4.4 million in the fair value of the financial instrument was the result of a decrease in the fair value of the embedded lenders’ put option on our 2020 Convertible Term Loan.

Other expense

Other expense was insignificant for the three and six-month periods ended June 30, 2021 and 2020.

Other expense was insignificant for the three and nine-month periods ended September 30, 2021 and 2020.

Provision for income taxes

Our provision for income taxes was insignificant in the three and six months ended June 30, 2021 and 2020.

Our provision for income taxes was insignificant in the three and nine months ended September 30, 2021 and 2020.

Liquidity and capital resources

We have incurred losses since our inception and will continue to generate negative operating cash flow, however we believe we have sufficient cash and cash equivalents and marketable securities to continue to fund operations.

As of June 30, 2021, we had an accumulated deficit of $333.1 million, working capital of $201.4 million, and $174.0 million in cash and cash equivalents and restricted cash.

Our debt facilities either expired, were repaid, or terminated in 2020.

During the quarter ended September 30, 2021, we issued approximately $335.0 million in convertible debt, net of offering costs and used $35.6 million of the proceed to enter into capped call transactions.

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

Additionally, as a result of our strategic acquisition of Feedonomics LLC, on July 23, 2021, we used $81.4 million of our $174.0 million in cash and cash equivalents and restricted cash.

Additionally, $81.4 million of cash was used to pay for our acquisition of Feedonomics, on July 23, 2021.

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.

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In the future, we may attempt to raise additional capital through the sale of additional equity or debt financing.

In particular, our strategic acquisition of Feedonomics LLC also requires up to $65.0 million in two annual installments of up to $32.5 million each, within ten business days after the first and second anniversary dates of the acquisition, or the earlier achievement of certain product and financial milestones.

In particular, our strategic acquisition of Feedonomics also requires up to $65.0 million in two annual installments of up to $32.5 million each, within ten business days after the first and second anniversary dates of the acquisition, or the earlier achievement of certain product and financial milestones.

We may elect, in our sole discretion, to make these post-closing payments partially or entirely in cash or shares of BigCommerce Series 1 common stock.

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

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

(in thousands)

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Net cash used in investing activities

Net cash (used in) provided by financing activities

Net increase (decrease) in cash, cash equivalents and restricted cash

As of June 30, 2021, we had $174.0 million in cash, cash equivalents, and restricted cash, an increase of $147.5 million compared to $26.5 million as of June 30, 2020.

Net cash provided by financing activities

Net increase in cash, cash equivalents and restricted cash

As of September 30, 2021, we had $366.1 million in cash, cash equivalents, and restricted cash, an increase of $186.1 million compared to $180.0 million as of September 30, 2020.

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

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Operating activities

Net cash used in operating activities for the three months ended June 30, 2021 and 2020 was $4.6 million and $7.0 million, respectively.

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

Net cash used in operating activities for the six months ended June 30, 2021 and 2020 was $17.4 million and $17.0 million, respectively.

Net cash used in operating activities for the three months ended September 30, 2021 and 2020 was $14.1 million and $6.2 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.

Net cash used in operating activities for the nine months ended September 30, 2021 and 2020 was $31.5 million and $23.2 million, respectively.

Investing activities

Net cash used in investing activities during the three months ended June 30, 2021 and 2020 was $13.2 million and $0.4 million, respectively.

For the three months ended June 30, 2021, it consisted primarily of the purchases of marketable securities of $12.0 million and the purchases of property and equipment of $1.2 million.

For the three months ended June 30, 2020, it consisted primarily of purchases of property and equipment of $0.4 million.

Net cash used in investing activities during the six months ended June 30, 2021 and 2020 was $32.0 million and $1.0 million, respectively.

For the six months ended June 30, 2021, it consisted primarily of the purchases of marketable securities of $30.4 million and the purchases of property and equipment of $1.6 million.

For the six months ended June 30, 2020, it consisted primarily of purchases of property and equipment of $1.0 million.

Net cash used in investing activities during the three months ended September 30, 2021 and 2020 was $94.7 million and $0.3 million, respectively.

In the three months ended September 30, 2021, this consists primarily of the cash paid for the acquisition of Feedonomics of $81.4 million, the purchases of marketable securities of $13.1 million and the purchases of property and equipment of $0.6 million.

In the three months ended September 30, 2020, this consisted primarily of purchases of property and equipment of $0.3 million.

Net cash used in investing activities during the nine months ended September 30, 2021 and 2020 was $126.7 million and $1.4 million, respectively.

In the nine months ended September 30, 2021, this consists primarily of the cash paid for the acquisition of Feedonomics of $81.4 million, the purchases of marketable securities of $43.5 million and the purchases of property and equipment of $2.3 million.

In the nine months ended September 30, 2020, this consisted primarily of purchases of property and equipment of $1.4 million.

Financing activities

Net cash provided by financing activities during the three months ended June 30, 2021 was $1.1 million.

During this period the issuance of shares of Series 1 common stock pursuant to the exercise of stock options provided $1.1 million.

Net cash used in financing activities during the three months ended June 30, 2020, was $0.1 million.

During this period, issuance of shares of Series 1 common stock pursuant to the exercise of stock options provided $0.5 million, partially offset by debt repayments of $0.6 million.

Net cash provided by financing activities during the six months ended June 30, 2021 and 2020 was $2.9 million and $35.4 million, respectively.

In the six months ended June 30, 2021, the issuance of shares of Series 1 common stock pursuant to the exercise of stock options provided $2.9 million.

In the six months ended June 30, 2020, bank borrowings provided $40.7 million and issuance of shares of Series 1 common stock pursuant to the exercise of stock options provided $0.9 million, partially offset by debt repayments of $6.2 million.

Net cash provided by financing activities during the three months ended September 30, 2021 and 2020 was $300.8 million and $160.0 million, respectively.

In the three months ended September 30, 2021, this consisted of the proceeds from the issuance of convertible senior notes (the “Convertible Notes” in an aggregate principal amount of $345.0 million and proceeds from the issuance of shares of Series 1 common stock pursuant to the exercise of stock options of $1.4 million.

This was partially offset by the payment of debt issuance costs of $10.0 million and the purchase of capped calls of $35.6 million.

In the three months ended September 30, 2020, the issuance of common stock upon initial public offering, net of underwriting discounts, commissions and other offering costs provided $171.1 million.

During this same period, proceeds from the issuance of shares of Series 1 common stock pursuant to the exercise of stock options and from debt and line of credit provided $1.0 million and $1.1 million, respectively.

This was partially offset by the payment of dividends and repayment of debt amounting to $12.8 million and $0.5 million, respectively.

Net cash provided by financing activities during th e nine mon ths ended September 30, 2021 and 2020 was $303.6 milli on and $195 .4 million, respectively.

In the nine months ended September 30, 2021, this consisted of the proceeds from the issuance of convertible senior note s in an aggregate principal amount of $345.0 million and proceeds from the issuance of shares of Series 1 common stock pursuant to the e xercise of stock options of $4.2 million.

This was partially offset by the payment of debt issuance costs of $10.0 million and the purchase of capped calls of $35.6 million.

In the nine months ended September 30, 2020, initial public offering proceeds, net of offering costs, provided $171.1 million, bank borrowings provided $41.9 million and issuance of shares of Series 1 common stock pursuant to the exercise of stock options provided $1.9 million, which was partially offset by the payment of dividends and repayment of debt for $12.8 million and $6.7 million, respectively.

Contractual obligations

Our principal commitments consist of (1) operating leases for office space, and (2) purchase obligations with certain technology providers used to host our platform.

The following table summarizes our commitments to settle contractual obligations as of June 30, 2021.

The following table summarizes our commitments to settle contractual obligations as of September 30, 2021.

Payments Due by Period

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Off-balance sheet arrangements

We did not have any off-balance sheet arrangements as of June 30, 2021 or as of December 31, 2020.

We did not have any off-balance sheet arrangements as of September 30, 2021 or as of December 31, 2020.

Critical accounting policies and estimates

There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in “Management's Discussion and Analysis of Financial Condition and Results of Operations” set forth in the Prospectus.

Except for changes resulting from the acquisition of Feedonomics in July 2021, including purchase price allocation and valuation of acquired intangibles, 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, 2020.

Recent accounting pronouncements

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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 2. Management’s Discussion and Analysis