Commerce.com, Inc. 10-Q

Item 1. Financial Statements. Index to Financial Statements BigCommerce Holdings, Inc. Consolidated Financial Statements Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Operations 4 Condensed Consolidated Statements of Comprehensive Loss 5 Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) 6 Condensed Consolidated Statements of Cash Flows 8 Notes to the Condensed Consolidated Financial Statements 9 2 Table of Contents BigCommerce Holdings, Inc. Condensed Consolidated Balance Sheets (in thousands, except per share amounts) September 30, December 31, 2021 2020 Assets Current assets Cash and cash equivalents $ 364,909 $ 219,447 Restricted cash 1,141 1,160 Marketable securities 43,467 — Accounts receivable, net 33,775 22,894 Prepaid expenses and other assets 13,722 8,000 Deferred commissions 3,445 2,571 Total current assets 460,459 254,072 Property and equipment, net 7,383 7,122 Right-of-use-assets 10,204 11,842 Prepaid expenses, net of current portion 913 — Deferred commissions, net of current portion 4,800 3,590 Intangible assets, net 35,360 — Goodwill 41,374 — Total assets $ 560,493 $ 276,626 Liabilities and stockholders’ equity Current liabilities Accounts payable $ 5,885 $ 5,788 Accrued liabilities 2,890 3,344 Deferred revenue 12,910 11,406 Current portion of operating lease liabilities 2,925 3,173 Other current liabilities 24,148 22,176 Total current liabilities 48,758 45,887 Deferred revenue, net of current portion 1,481 1,308 Long-term debt, net of current portion 335,050 Other long-term liabilities 3,210 Operating lease liabilities, net of current portion 10,805 12,672 Total liabilities 399,304 59,867 Commitments and contingencies (Note 6) Stockholders’ equity Preferred stock, $ 0.0001 par value; 10,000 shares authorized at September 30, 2021 and December 31, 2020; 0 shares issued and outstanding, at September 30, 2021 and December 31, 2020 — — Common stock, $ 0.0001 par value; 500,000 shares Series 1 and, 5,051 shares Series 2 authorized at September 30, 2021 and December 31, 2020; 71,619 , and 64,461 shares Series 1 issued and outstanding at September 30, 2021 and December 31, 2020, respectively, and 0 and 5,051 shares Series 2 issued and, outstanding at September 30, 2021, and December 31, 2020, respectively 7 7 Additional paid-in capital 517,006 530,143 Accumulated deficit ( 355,824 ) ( 313,391 ) Total stockholders’ equity 161,189 216,759 Total liabilities and stockholders’ equity $ 560,493 $ 276,626 The accompanying notes are an integral part of these consolidated financial statements. 3 Table of Contents BigCommerce Holdings, Inc. Condensed Consolidated Statements of Operations (in thousands, except per share amounts) Three months ended September 30, Nine months ended September 30, 2021 2020 2021 2020 Revenue $ 59,285 $ 39,735 $ 154,958 $ 109,225 Cost of revenue 12,403 8,593 31,838 23,910 Gross profit 46,882 31,142 123,120 85,315 Operating expenses: Sales and marketing 26,101 19,328 69,066 51,893 Research and development 16,532 12,124 44,792 34,390 General and administrative 14,370 9,745 39,089 23,925 Acquisition related expenses 9,792 — 10,899 — Amortization of intangible assets 1,402 — 1,402 — Total operating expenses 68,197 41,197 165,248 110,208 Loss from operations ( 21,315 ) ( 10,055 ) ( 42,128 ) ( 24,893 ) Interest income 24 2 65 20 Interest expense ( 125 ) ( 741 ) ( 125 ) ( 2,655 ) Change in fair value of financial instruments — — — 4,413 Other income (expense) 5 ( 75 ) 18 ( 238 ) Loss before provision for income taxes ( 21,411 ) ( 10,869 ) ( 42,170 ) ( 23,353 ) Provision for income taxes 257 ( 14 ) 263 6 Net loss $ ( 21,668 ) $ ( 10,855 ) $ ( 42,433 ) $ ( 23,359 ) Dividends and accretion of issuance costs on Series F preferred stock $ — $ 2,732 $ — $ ( 962 ) Net loss attributable to common stockholders $ ( 21,668 ) $ ( 8,123 ) $ ( 42,433 ) $ ( 24,321 ) Basic and diluted net loss per share attributable to common stockholders $ ( 0.30 ) $ ( 0.16 ) $ ( 0.60 ) $ ( 0.83 ) Weighted average shares used to compute basic and diluted net loss per share attributable to common stockholders 71,372 49,355 70,598 29,145 The accompanying notes are an integral part of these consolidated financial statements. 4 Table of Contents BigCommerce Holdings, Inc. Condensed Consolidated Statements of Comprehensive Loss (in thousands) Three months ended September 30, Nine months ended September 30, 2021 2020 2021 2020 Net loss $ ( 21,668 ) $ ( 10,855 ) $ ( 42,433 ) $ ( 23,359 ) Other comprehensive income (loss): Net unrealized gain (loss) — — — — Total comprehensive loss $ ( 21,668 ) $ ( 10,855 ) $ ( 42,433 ) $ ( 23,359 ) The accompanying notes are an integral part of these consolidated financial statements. 5 Table of Contents BigCommerce Holdings, Inc. Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) (in thousands) Convertible Preferred Stock Common Stock Additional Paid-in Accumulated Accumulated Other Comprehensive Stockholders’ Shares Amount Shares Amount Capital Deficit Loss Equity Balance at December 31, 2020 — $ — 69,512 $ 7 $ 530,143 $ ( 313,391 ) $ — $ 216,759 Exercise of stock options — — 784 — 1,952 — — 1,952 Stock-based compensation — — — — 5,171 — — 5,171 Net loss — — — — — ( 8,544 ) — ( 8,544 ) Balance at March 31, 2021 — $ — 70,296 $ 7 $ 537,266 $ ( 321,935 ) $ — $ 215,338 Exercise of stock options — — 509 — 1,428 — — 1,428 Release of restricted stock units — — 305 — — — — — Stock-based compensation — — — — 6,522 — — 6,522 Net loss — — — — — ( 12,221 ) — ( 12,221 ) Balance at June 30, 2021 — $ — 71,110 $ 7 $ 545,216 $ ( 334,156 ) $ — $ 211,067 Exercise of stock options — — 485 — 1,371 — — 1,371 Release of restricted stock units — — 23 — — — — — Stock-based compensation — — — — 5,989 — — 5,989 Purchase of capped call ( 35,570 ) ( 35,570 ) Net loss — — — — — ( 21,668 ) — ( 21,668 ) Balance at September 30, 2021 — $ — 71,618 $ 7 $ 517,006 $ ( 355,824 ) $ — $ 161,189 The accompanying notes are an integral part of these consolidated financial statements. 6 Table of Contents BigCommerce Holdings, Inc. Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) (in thousands) Convertible Preferred Stock Common Stock Additional Paid-in Accumulated Accumulated Other Comprehensive Stockholders’ Shares Amount Shares Amount Capital Deficit Loss (Deficit) Balance at December 31, 2019 102,030 $ 223,754 18,544 $ 2 $ 17,244 $ ( 274,549 ) $ — $ ( 257,303 ) Exercise of stock options — — 448 — 404 — — 404 Stock-based compensation — — — — 1,026 — — 1,026 Accumulated dividend – Series F — 1,727 — — — ( 1,727 ) — ( 1,727 ) Accretion of Series F issuance costs — 18 — — ( 18 ) — — ( 18 ) Warrants issued in connection with debt — — — — 297 — — 297 Adoption of new accounting standard - See Note 2 — — — — — ( 364 ) — ( 364 ) Net loss — — — — — ( 4,023 ) — ( 4,023 ) Balance at March 31, 2020 102,030 $ 225,499 18,992 $ 2 $ 18,953 $ ( 280,663 ) $ — $ ( 261,708 ) Exercise of stock options — — 351 — 366 — — 366 Exercise of warrants — — 35 — 126 — — 126 Stock-based compensation — — — — 1,144 — — 1,144 Accumulated dividend – Series F — 1,935 — — — ( 1,935 ) — ( 1,935 ) Accretion of Series F issuance costs — 18 — — ( 18 ) — — ( 18 ) Net loss — — — — — ( 8,481 ) — ( 8,481 ) Balance at June 30, 2020 102,030 $ 227,452 19,378 $ 2 $ 20,571 $ ( 291,079 ) $ — $ ( 270,506 ) Exercise of stock options — — 511 — 1,051 — — 1,051 Exercise of warrants — — 349 — — — — — Stock-based compensation — — — — 2,868 — — 2,868 Issuance of common stock upon initial public offering, net of underwriting discounts and commissions and other offering costs — — 7,878 1 171,128 — — 171,129 Conversion of redeemable preferred stock to common stock upon initial public offering ( 102,030 ) ( 211,902 ) 34,442 3 211,899 — — 211,902 Conversion of redeemable convertible debt to common stock upon initial public offering — — 5,250 1 50,172 — — 50,173 Accumulated dividend – Series F — ( 2,744 ) — — — 2,744 — 2,744 Payment of Series F Dividend — ( 12,814 ) — — — — — — Accretion of Series F issuance costs — 8 — — ( 8 ) — — ( 8 ) Net loss — — — — — ( 10,855 ) — ( 10,855 ) Balance at September 30, 2020 — $ — 67,808 $ 7 $ 457,681 $ ( 299,190 ) $ — $ 158,498 The accompanying notes are an integral part of these consolidated financial statements. 7 Table of Contents BigCommerce Holdings, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) Nine months ended September 30, Nine months ended September 30, 2021 2020 Cash flows from operating activities Net loss $ ( 42,433 ) $ ( 23,359 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 3,521 2,377 Amortization of discount on debt 87 480 Stock-based compensation 17,682 5,038 Allowance for credit losses 2,124 1,198 Change in fair value of financial instrument — ( 4,413 ) Changes in operating assets and liabilities: Accounts receivable ( 9,898 ) ( 7,473 ) Prepaid expenses ( 6,507 ) ( 3,675 ) Deferred commissions ( 2,084 ) ( 1,454 ) Accounts payable ( 189 ) 1,685 Accrued and other liabilities 4,537 4,319 Deferred revenue 1,677 2,077 Net cash used in operating activities ( 31,483 ) ( 23,200 ) Cash flows from investing activities: Cash paid for acquisition ( 80,952 ) Purchase of property and equipment ( 2,287 ) ( 1,378 ) Purchase of marketable securities ( 43,467 ) — Net cash used in investing activities ( 126,706 ) ( 1,378 ) Cash flows from financing activities: Proceeds from issuance of convertible senior notes 345,000 — Payment of debt issuance costs ( 10,037 ) — Purchase of capped calls ( 35,570 ) — Proceeds from exercise of stock options 4,239 1,947 Payment of dividends — ( 12,814 ) Proceeds from issuance of common stock upon initial public offering, net of underwriting discounts and commissions and other offering costs — 171,128 Proceeds from debt — 41,861 Repayment of debt — ( 6,715 ) Net cash provided by financing activities 303,632 195,407 Net change in cash and cash equivalents and restricted cash 145,443 170,829 Cash and cash equivalents and restricted cash, beginning of period 220,607 9,150 Cash and cash equivalents and restricted cash, end of period $ 366,050 $ 179,979 Supplemental cash flow information: Cash paid for interest $ — $ 1,519 Noncash investing and financing activities: Conversion of convertible preferred stock into common stock upon initial public offering $ — $ 211,902 Conversion of convertible debt into common stock upon initial public offering $ — $ 50,173 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 364,909 178,846 Restricted cash 1,141 1,133 Total cash, cash equivalents and restricted cash $ 366,050 $ 179,979 The accompanying notes are an integral part of these consolidated financial statements. 8 Table of Contents BigCommerce Holdings, Inc. Notes to Condensed Consolidated Financial Statements 1. Overview BigCommerce is leading a new era of ecommerce. Our software-as-a-service (“SaaS”) platform simplifies the creation of beautiful, engaging online stores by delivering a unique combination of ease-of-use, enterprise functionality, and flexibility. We power both our customers’ branded ecommerce stores and their cross-channel connections to popular online marketplaces, social networks, and offline point-of-sale systems. We provide a comprehensive platform for launching and scaling an ecommerce operation, including store design, catalog management, hosting, checkout, order management, reporting, and pre-integration into third-party services like payments, shipping, and accounting. All our stores run on a single code base and share a global, multi-tenant architecture purpose built for security, high performance, and innovation. Our platform serves stores in a wide variety of sizes, product categories, and purchase types, including business-to-consumer and business-to-business. Our headquarters and principal place of business are in Austin, Texas. We were 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. and its subsidiaries, unless otherwise stated. 2. Summary of significant accounting policies Basis of presentation The accompanying 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 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, 2020, which are included in our Annual Report on Form 10-K, filed with the SEC on February 26, 2021. The results of operations for the nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other period. Basis of consolidation The accompanying consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. Our fiscal year ends on December 31. Use of estimates The preparation of consolidated financial statements in conformity with GAAP requires certain financial instruments to be recorded at fair value; requires our 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; the amortization period for deferred commissions; the allowance for credit losses; a determination of the deferred tax asset valuation allowance and the valuation of our common stock used to determine stock-based compensation expense prior to our IPO. Because of the use of estimates inherent in the financial reporting 9 Table of Contents 2. Summary of significant accounting policies (continued) process and given the additional or unforeseen effects from the COVID-19 pandemic, actual results could differ from those estimates, and such differences could be material to our consolidated financial statements. The COVID-19 pandemic has continued to cause economic disruption in the United States and our target international markets. As a result, we have experienced a significant shift in shopping behavior from offline to online over the last 18 months. Our business has benefited from this shift, both in accelerated sales growth for our existing customers’ stores, and in our sales of new store subscriptions to customers. Nevertheless, we do not have certainty that those trends will continue. Segment and geographic information Our chief operating decision maker is our chief executive officer. Our 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, we have determined that we operate as a single operating and reportable segment. Revenue by geographic region was as follows: Three months ended September 30, Nine months ended September 30, (in thousands) 2021 2020 2021 2020 Revenue: Americas – U.S. $ 46,167 $ 31,483 $ 119,872 $ 87,099 Americas – other 2,129 1,422 5,781 3,827 EMEA 5,342 3,180 14,464 8,493 APAC 5,647 3,650 14,841 9,806 Total revenue $ 59,285 $ 39,735 $ 154,958 $ 109,225 Long-lived assets by geographic region was as follows: September 30, December 31, (in thousands) 2021 2020 Long-lived assets: Americas – U.S. $ 6,868 $ 6,596 APAC 515 526 Total long-lived assets $ 7,383 $ 7,122 Cash and cash equivalents We consider all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. Cash equivalents consist of money market funds and investment securities and are stated at fair value. Restricted cash We maintain a portion of amounts collected through our online payment processor with the online payment processor as a security deposit for future chargebacks. Additionally, we have amounts on deposit with certain financial institutions that serve as collateral for letters of credit and lease deposits. Marketable securities All marketable securities have been classified as available-for-sale and are carried at estimated fair value. We determine the appropriate classification of our investments in debt securities at the time of purchase. Securities may have stated maturities greater than one year. All marketable securities are considered available to support current operations and are classified as current assets. For available-for-sale debt securities in an unrealized loss position, our management first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value and recognized in other income (expense) in the results of operations. For available-for-sale debt securities that do not meet the aforementioned criteria, our 10 Table of Contents 2. Summary of significant accounting policies (continued) management evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, an allowance is recorded for the difference between the present value of cash flows expected to be collected and the amortized cost basis of the security. Impairment losses attributable to credit loss factors are charged against the allowance when management believes an available-for-sale security is uncollectible or when either of the criteria regarding intent or requirement to sell is met. Any unrealized losses from declines in fair value below the amortized cost basis as a result of non-credit loss factors is recognized as a component of accumulated other comprehensive (loss) income, along with unrealized gains. Realized gains and losses and declines in fair value, if any, on available-for-sale securities are included in other income (expense) in the results of operations. The cost of securities sold is based on the specific-identification method. Accounts receivable Accounts receivable are stated at net realizable value and include unbilled receivables. Unbilled receivables arise primarily when we provide subscriptions services in advance of billing. 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, 2021 and December 31, 2020 included unbilled receivables of $ 9.6 million, $ 7.5 million, respectively. We assess the collectability of outstanding accounts receivable on an ongoing basis and maintain an allowance for credit losses for accounts receivable deemed uncollectible. Upon adoption of ASU 2016-13, we analyzed the accounts receivable portfolio for significant risks, historical activity, and an estimate of future collectability to determine the amount that will ultimately be collected. This estimate is analyzed quarterly and adjusted as necessary. Identified risks pertaining to our accounts receivable include the delinquency level, customer type, and current economic environment. Due to the short-term nature of such receivables, 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. Adoption of ASU 2016-13 resulted in an increase in the allowance for credit losses of approximately $ 0.4 million as of January 1, 2020, primarily related to unbilled receivables. The allowance for credit losses consisted of the following: (in thousands) Balance at December 31, 2020 $ 1,992 Provision for expected credit losses 726 Accounts written off ( 358 ) Balance at March 31, 2021 2,360 Provision for expected credit losses 901 Accounts written off ( 491 ) Balance at June 30, 2021 2,770 Provision for expected credit losses 497 Accounts written off ( 218 ) Balance at September 30, 2021 $ 3,049 Property and equipment Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives or the related lease terms (if shorter). The estimated useful lives of property and equipment are as follows: Estimated Useful Life Computer equipment 3 years Computer software 3 years Furniture and fixtures 5 years Leasehold improvements 1 - 10 years 11 Table of Contents 2. Summary of significant accounting policies (continued) Maintenance and repairs that do not enhance or extend the asset’s useful life are charged to operating expenses as incurred. The carrying values of property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, we compare the projected undiscounted future cash flows associated with groups of assets used in combination over their estimated useful lives against their respective carrying amounts. If projected undiscounted future cash flows are less than the carrying value of the asset group, impairment is recorded for any excess of the carrying amount over the fair value of those assets in the period in which the determination is made. Research and development and internal use software Research and development expenses consist primarily of personnel and related expenses for our research and development staff, which include: salaries, benefits, bonuses, and stock-based compensation; the cost of certain third-party contractors; and allocated overhead. Expenditures for research and development, other than internal use software costs, are expensed as incurred. Software development costs associated with internal use software, which are incurred during the application development phase and meet other requirements under the guidance are capitalized. To date, software costs eligible for capitalization have not been significant. Leases We determine if an arrangement is a lease or contains a lease at inception. At the commencement date of a lease, we recognize a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. The lease liability is measured at the present value of lease payments over the lease term. As our leases typically do not provide an implicit rate, we use our incremental borrowing rate for most leases. The right-of-use (“ROU”) asset is measured at cost, which includes the initial measurement of the lease liability and initial direct costs incurred and excludes lease incentives. Lease terms may include options to extend or terminate the lease. We record a ROU asset and a lease liability when it is reasonably certain that we will exercise that option. Operating lease costs are recognized on a straight-line basis over the lease term. We also lease office space under short-term arrangements and have elected not to include these arrangements in the ROU asset or lease liabilities. Business combination We record tangible and intangible assets acquired and liabilities assumed in business combinations under the acquisition method of accounting. We use best estimates and assumptions, including but not limited to, future expected cash flows, expected asset lives, and discount rates, to assign a fair value to the tangible and intangible assets acquired and liabilities assumed in business combinations as of the acquisition date. These estimates are inherently uncertain and subject to refinement. We allocate any excess purchase price over the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed to goodwill. During the measurement period, which may be up to one year from the acquisition date, adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed may be recorded, with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our condensed consolidated statements of operations. Acquisition related expenses Acquisition related expenses consist primarily of cash payments for third-party acquisition costs and other acquisition related expenses, including contingent compensation arrangements entered into in connection with acquisitions. In connection with our acquisition of Feedonomics LLC (“Feedonomics”) on July 23, 2021, as further discussed in Note 5 “Business Combination”, we entered into a contingent compensation arrangement with certain employees of the acquiree, in which payment will be made to those individuals within ten business days after the first and second anniversaries of the closing or upon the earlier achievement of certain product and financial milestones. The compensation arrangement is contingent upon continued post-acquisition employment with us. We account for the cost related to the first and second contingent compensation arrangement payments over the service periods of 12 and 24 months, respectively, beginning on the acquisition date, assuming earlier achievement of product and financial milestones is unlikely to be met. We recognized $ 9.8 million and $ 10.9 million in acquisition related expenses during the three and nine months ended September 30, 2021, respectively. 12 Table of Contents 2. Summary of significant accounting policies (continued) Goodwill and other acquired intangible, net We assess goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter, or more frequently if events or changes in circumstances would more likely than not reduce the fair value of a reporting unit below its carrying value. When we elect to perform a qualitative assessment and conclude it is not more likely than not the fair value of the reporting unit is less than its carrying value, no further assessment of that reporting unit is necessary; otherwise, a quantitative assessment is performed and the fair value of the reporting unit is determined. If the carrying value of the reporting unit exceeds the estimated fair value, impairment is recorded. We evaluate the recoverability of finite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of such asset may not be recoverable. If such review determines the carrying amount of the indefinite-lived asset is not recoverable, the carrying amount of such asset is reduced to its fair value. Acquired finite-lived intangible assets are amortized over their estimated useful lives. We evaluate the estimated remaining useful life of these assets when events or changes in circumstances indicate a revision to the remaining period of amortization. If we revise the estimated useful life assumption for any assets, the remaining unamortized balance is amortized over the revised estimated useful life on a prospective basis. Income taxes We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax balances are adjusted to reflect tax rates based on currently enacted tax laws, which will be in effect in the years in which the temporary differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period of the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that those assets will be realized. To date, we have provided a valuation allowance against all of our deferred tax assets as we believe the objective and verifiable evidence of our historical pretax net losses outweighs any positive evidence of its forecasted future results. We will continue to monitor the positive and negative evidence, and we will adjust the valuation allowance as sufficient objective positive evidence becomes available. We account for uncertain tax positions in accordance with ASC 740, “Income Taxes”, which clarifies the accounting for uncertainty in tax positions. These provisions require recognition of the impact of a tax position in our financial statements only if it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Any interest and penalties related to uncertain tax positions will be reflected as a component of income tax expense . Stock-based compensation We issue stock options, restricted stock units ("RSUs") and performance based restricted stock units (“PSUs”). Stock-based compensation related to stock options is measured at the date of grant and is recognized on a straight-line basis over the service period, net of estimated forfeitures. We use the Black-Scholes option-pricing model to estimate the fair value of stock options awarded at the date of grant. Stock-based compensation related to restricted stock units is measured at the date of grant, net of estimated forfeitures, and recognized ratably over the service period. Stock- based compensation related to performance based restricted stock units is measured at the date of grant and recognized using the accelerated attribution method, net of estimated forfeitures, over the remaining service period. Accounting pronouncements In August 2020, the FASB issued ASU No. 2020-06, "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40)" which simplifies the accounting for convertible debt instruments by eliminating the requirement to separate embedded conversion features from the host contract when the conversion features are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital. In addition, the guidance eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. We adopted this standard on January 1, 2021 using the modified retrospective method. As further discussed in Note 7 “Debt”, we issued certain convertible senior notes and entered into certain contracts in the Company’s own equity during the quarter ended September 30, 2021. The accounting for these instruments was based on the guidance in ASU 2020-06. The adoption of this standard did not have any material impact on our financial statements. 13 Table of Contents 3. Revenue recognition and deferred costs Revenue recognition Our sources of revenue consist of subscription solutions fees and partner and services fees. These services allow customers to access our hosted software over the contract period. The customer is not allowed to take possession of the software or transfer the software. Our revenue arrangements do not contain general rights of refund in the event of cancellations. The following table disaggregates our revenue by major source: Three months ended September 30, Nine months ended September 30, (in thousands) 2021 2020 2021 2020 Subscription solutions $ 42,122 $ 26,545 $ 108,081 $ 74,041 Partner and services 17,163 13,190 46,877 35,184 Total revenue $ 59,285 $ 39,735 $ 154,958 $ 109,225 Subscription solutions Subscription solutions revenue consists primarily of platform subscription fees from all plans. It also includes recurring professional services and sales of SSL certificates. Subscription solutions are charged monthly, quarterly, or annually for our customers to sell their products and process transactions on our platform. Subscription solutions are generally charged per online store and are based on the store’s subscription plan. 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, we have determined we meet 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. A portion of our Enterprise subscription plans include an upfront promotional period in order to incentivize the customer to enter into a subscription arrangement. For these Enterprise arrangements, the total subscription fee is recognized on a straight-line basis over the term of the contract. 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 our retail customers are generally month-to-month, while contracts with our enterprise customers generally range from one to three years . Contracts are typically non-cancellable and do not contain refund-type provisions. Revenue is presented net of sales tax and other taxes we collect on behalf of governmental authorities. Subsequent to our acquisition of Feedonomics on July 23, 2021, 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.). We 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. both marketplaces and advertising). The service offerings constitute a single combined performance obligation. Services are performed and Fees are determined based on monthly usage and are billed in arrears. Partner and services Our partner and services revenue consists of revenue share, partner technology integrations, and marketing services provided to partners. Revenue share relates to fees earned by our partners from customers using our platform, where we have an arrangement with such partner to share such fees as they occur. Revenue share is recognized at the time the earning activity is complete, which is generally monthly. 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. Fees for marketing services are recognized either at the time the earning activity is complete, or ratably over the length of the contract, depending on the nature of the obligations in the contract. Payments received in advance of services being rendered are recorded as deferred revenue and recognized when the obligation is completed. We also derive revenue from the sales of website themes and applications upon delivery. We recognize revenue share, and revenue from the sales of third-party applications, on a net basis as we have determined that we are the agent in our arrangements with third-party application providers. All other revenue is recognized on a gross basis, as we have determined we are the principal in these arrangements. 14 Table of Contents 3. Revenue recognition and deferred costs (continued) Contracts with multiple performance obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Our subscription contracts are generally comprised of a single performance obligation to provide access to our 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, we may be required to allocate the contract’s transaction price to each performance obligation using our best estimate of SSP. Feedonomics’ subscription contracts can include multiple performance obligations but due to the nature of the service, they are performed over the same period. Contracts with our technology solution partners often include multiple performance obligations. In determining whether integration services are distinct from hosting services we consider various factors. These considerations included the level of integration, interdependency, and interrelation between the implementation and hosting service, as well as any promises in the contract. We have concluded that the integration services included in contracts with hosting obligations are not distinct. As a result, we defer any arrangement fees for integration services and recognize such amounts over the life of the hosting obligation. Additional consideration for some partner contracts varies based on the level of customer activity on the platform. We have determined we meet the variable consideration allocation exception and therefore recognize these variable fees in the period they are earned. 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 primary method used to estimate SSP is the expected cost-plus margin approach, which considers margins achieved on standalone sales of similar products, market data related to historical margins within an industry, industry sales price averages, market conditions, and profit objectives. 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 our infrastructure and platform; amortization expense associated with capitalized internal-use software; and allocation of overhead costs. With our acquisition of Feedonomics on July 23, 2021, cost of revenue also includes personnel and other costs related to feed management services along with other customer support personnel. Deferred revenue Deferred revenue primarily consists of amounts that have been billed to or received from customers in advance of performing the associated services. We recognize revenue from deferred revenue when the services are performed, and the corresponding revenue recognition criteria are met. We recognized $ 9.5 million of previously deferred revenue during the nine months ended September 30, 2021. The net increase in the deferred revenue balance for the nine months ended September 30, 2021 is primarily due to increases in SaaS related subscriptions. Amounts recognized from deferred revenue represent primarily revenue from the sale of subscription solutions, integration, and marketing services. As of September 30, 2021, we had $ 129.4 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. We expect to recognize approximately 50 % of the remaining performance obligations as revenue in the following 12 -month period, and the remaining balance in the periods thereafter. 15 Table of Contents 3. Revenue recognition and deferred costs (continued) Deferred commissions Certain sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions are not paid on subscription renewals. We amortize deferred sales commissions ratably over the estimated period of our relationship with customers of approximately four years . Based on historical experience, we determine the average life of our customer relationship by taking into consideration our customer contracts and the estimated technological life of our platform and related significant features. We include amortization of deferred commissions in Sales and marketing expense in the consolidated statements of operations. We periodically review 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. We did no t recognize an impairment of deferred commissions during the nine months ended September 30, 2021 and the year ended December 31, 2020. Sales commissions of $ 4.5 million and $ 2.9 million were deferred for the nine months ended September 30, 2021 and 2020, respectively; and deferred commission amortization expense was $ 2.4 million and $ 1.5 million for the nine months ended September 30, 2021 and 2020, respectively. 4. Fair value measurements, cash equivalents and marketable securities Financial instruments carried at fair value include cash and cash equivalents, restricted cash, marketable securities, and embedded put options. 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. When determining fair value, we consider the principal or most advantageous market in which it would transact, and assumptions that market participants would use when pricing asset or liabilities. The accounting standard for fair value establishes a fair value hierarchy based on three levels of inputs, the first two of which are considered observable and the last unobservable. 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 our data. The following tables summarize the estimated fair value of our cash equivalents, marketable securities and debt. As of September 30, 2021 (in thousands) (Level 1) (Level 2) (Level 3) Total Financial assets: Money market funds $ 342,476 $ — $ — $ 342,476 U.S treasury securities $ 9,140 $ — $ — $ 9,140 Corporate securities $ — $ 34,327 $ — $ 34,327 Total financial assets $ 351,616 $ 34,327 $ — $ 385,943 As of December 31, 2020 (in thousands) (Level 1) (Level 2) (Level 3) Total Financial assets: Money market funds $ 196,521 $ — $ — $ 196,521 16 Table of Contents 4. Fair value measurements, cash equivalents and marketable securities (continued) The following tables summarize the estimated fair value of our cash equivalents and marketable securities. As of September 30, 2021 (in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Cash equivalents: Money market funds $ 342,476 $ — $ — $ 342,476 Marketable securities: U.S treasury securities $ 9,140 $ 9,140 Corporate securities $ 34,327 $ — $ — $ 34,327 As of December 31, 2020 (in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Cash equivalents: Money market funds $ 196,521 $ — $ — $ 196,521 In September 2021, we issued $ 345.0 million aggregate principal amount of 0.25 % convertible senior notes due 2026 (the “Notes”). The estimated fair value of the notes was approximately $ 347.8 million as of September 30, 2021. 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. 5. Business combinations July 2021 Acquisition of Feedonomics, LLC On July 23, 2021 , we acquired 100 % of Feedonomics, a SaaS company offering online product feed management platform used by merchants to optimize product data and syndicate and list products into multiple sales channels, including advertising, marketplace, affiliate and social channels, for a total purchase price of $ 80.9 million in cash. Our purchase accounting is not yet complete, and the fair value of assets acquired, and liabilities assumed, including valuation of intangibles assets, may change as additional information is received during the measurement period. The measurement period will end no later than one year from the acquisition date. The financial results of Feedonomics are included in our financial statements beginning July 23, 2021. For the three-month ended September 30, 2021, our results include $ 5.9 million of revenue and $ 0.3 million of net loss in our Condensed Statements of Operations related to Feedonomics. Acquisition related costs of $ 9.8 million were expensed as incurred during the three months ended September 30, 2021. The table below summarizes the preliminary estimated fair value of the asset acquired and liability assumed at the date of the acquisition. (in thousands) July 23rd, 2021 Accounts receivable $ 3,107 Prepaid expenses and other assets $ 108 Acquisition related intangible assets $ 36,762 Other non-current assets $ 458 Accounts payable and accrued liabilities $ 287 Customer prepaid liabilities $ 225 Operating lease liabilities $ 345 Net asset acquired, excluding goodwill $ 39,578 Total purchase consideration $ 80,952 Goodwill $ 41,374 5. Business combinations (continued) 17 Table of Contents We acquired Feedonomics because it is complementary to our core business. The purchase price was based on the expected financial performance of Feedonomics, 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 goodwill amount represents synergies expected to be realized from the business combination and assembled workforce. Assets acquired and liabilities assumed were reviewed and adjusted to their fair values at the date of the acquisition, as necessary. The fair value of the developed technology and the trade name were determined using the relief from royalty method and customer relationships and non-compete agreement were determined using the multi-period excess earning model. The valuation of the intangibles assets incorporate significant unobservable input and require management judgement and estimate, including the amount and timing of the future cashflow and the determination of the discount rate. The goodwill of $ 41.4 million from this transaction is expected to be deductible for tax purposes. We are still evaluating the tax treatment of contingent compensation arrangements which may be treated as consideration for tax purposes and increase the amount of tax deductible goodwill when paid. In conjunction with the transaction, we entered into a contingent compensation arrangement with certain employees of Feedonomics for their post-acquisition services, in which $ 32.5 .0 million will be made to those individuals within ten business days after both the first and second anniversaries of the closing or upon the earlier achievement of certain product and financial milestones for an aggregate amount of $ 65.0 million. Product milestones include certain product enhancement and integration with existing products and financial milestones include certain revenue and gross margin targets. We account for the cost related to the first and second contingent compensation arrangement payments over the service periods of 12 and 24 months, respectively, beginning on the acquisition date, assuming earlier achievement of product and financial milestones is unlikely to be met. As the contingent compensation is related to post-acquisition services, it is not considered as part of the purchase price of $ 80.9 million. We recognized $ 9.2 million in additional compensation expense related to these contingent compensation arrangements for the three and nine months ended September 30, 2021. We include this expense in acquisition related expenses in our condensed consolidated statements of operations. The preliminary estimated fair value of identifiable intangible assets acquired at the date of the acquisitions are as follows: (in thousands) Estimated fair value Weighted average amortization period (in years) Developed technology $ 11,740 4.0 Customer relationship $ 22,387 5.7 Tradename $ 2,451 5.0 Non-compete agreement $ 184 5.0 Total acquisition-related intangible assets $ 36,762 Unaudited pro forma financial information The unaudited pro forma financial information in the table below presents the combined results of the Company and Feedonomics as if this acquisition had occurred on January 1, 2020. The unaudited pro forma financial information includes adjustments required under the acquisition method of accounting and is presented for informational purposes only and is not necessarily indicative of the results that would have been achieved had the acquisition actually occurred on January 1, 2020. For the three and nine months ended September 30, 2021, pro forma adjustments include a reduction in transaction-related costs of $ 0.6 million and $ 1.7 million excluding the compensation cost related to post-acquisition compensation arrangement, respectively, because they are non-recurring in nature, an increase in amortization of intangible of $ 0.5 million and $ 4.2 million, respectively, and a decrease of $ 5.1 million and increase of $ 3.0 million in compensation costs related to the post-acquisition compensation arrangement, respectively. For the three and nine months ended September 30, 2020, pro forma adjustments include an increase in amortization of intangible of $ 1.9 million and $ 5.6 million, respectively and an increase in compensation cost of $ 12.2 million and $ 36.6 million related to the post-acquisition compensation arrangement, respectively. Three months ended September 30, Nine months ended September 30, (in thousands) 2021 2020 2021 2020 Total revenue $ 61,125 $ 44,672 $ 169,683 $ 122,482 Net loss $ ( 16,894 ) $ ( 24,288 ) $ ( 48,272 ) $ ( 64,748 ) 18 Table of Contents 6. Goodwill and intangible assets Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired. The changes to the carrying amount of goodwill as follows: (in thousands) Balance as of December 31, 2020 $ — Goodwill acquired $ 41,374 Balance as of September 30, 2021 $ 41,374 Goodwill amounts are not amortized but tested for impairment on an annual basis. There was no impairment of goodwill as of September 30, 2021. Definite-lived intangible assets are amortized on a straight-line basis over the useful life. Definite-lived intangible assets amortization was $ 1.4 million and $ 1.4 million for three and nine months ended September 30, 2021, respectively. We did no t record any amortization expense for the three and nine months ended September 30, 2020. Definite-lived intangible assets consists of the following: (in thousands) September 30, 2021 December 31, 2020 Weighted average remaining useful life as of September 30, 2021 (in years) Gross amount Accumulated amortization Net carrying amount Gross amount Accumulated amortization Net carrying amount Developed technology $ 11,740 $ ( 554 ) $ 11,186 $ — $ — $ — 3.8 Customer relationship $ 22,387 $ ( 748 ) $ 21,639 $ — $ — $ — 5.5 Tradename $ 2,451 $ ( 93 ) $ 2,358 $ — $ — $ — 4.8 Non-compete agreement $ 184 $ ( 7 ) $ 177 $ — $ — $ — 4.8 Total definite-lived intangible $ 36,762 $ ( 1,402 ) $ 35,360 $ — $ — $ — As of September 30, 2021, expected amortization expense for definite-lived intangible assets was as follows: (in thousands) September 30, 2021 2021 (October 1st through December 31st) 1,856 2022 7,423 2023 7,423 2024 7,423 2025 6,135 Thereafter 5,100 Total $ 35,360 7. Commitments, contingencies, and leases Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties, and other sources are recorded when it is probable that a liability has been incurred and that the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. From time to time, we are subject to various claims that arise in the normal course of business. In the opinion of management, we are unaware of any pending or unasserted claims that would have a material adverse effect on our financial position, liquidity, or results. Certain executive officers are entitled to payments in the event of termination of employment in connection with a certain change in control. 19 Table of Contents 7. Commitments, contingencies, and leases (continued) Our certificate of incorporation and certain contractual arrangements provide for indemnification of our officers and directors for certain events or occurrences. We maintain a directors and officers insurance policy to provide coverage in the event of a claim against an officer or director. Historically, we have not been obligated to make any payments for indemnification obligations, and no liabilities have been recorded for these obligations on the consolidated balance sheets as of September 30, 2021 or December 31, 2020. Leases We lease certain facilities under operating lease agreements that expire at various dates through 2028 . Some of these arrangements contain renewal options and require us to pay taxes, insurance and maintenance costs. Renewal options were not included in the ROU asset and lease liability calculation. Operating and short- term rent expenses was $ 1.0 million and $ 0.9 million for the three-month periods ended September 30, 2021 and 2020, respectively, and $ 2.8 million and $ 2.7 million for the nine-month periods ended September 30, 2021 and 2020, respectively. Short-term rent expense was not material for any of the periods presented. Supplemental lease information Cash flow information (in thousands) Nine months ended September 30, 2021 2020 Cash paid for operating lease liabilities $ 2,962 $ 2,684 Right-of-use assets obtained in acquisition $ 345 $ — Operating lease information Nine months ended September 30, 2021 2020 Weighted-average remaining lease-term 5.53 6.17 Weighted-average discount rate 5.46 % 5.46 % The future maturities of operating lease liabilities are as follows: (in thousands) September 30, 2021 2021 (October 1st through December 31st) 1,155 2022 3,268 2023 2,527 2024 2,236 2025 2,011 Thereafter 4,923 Total minimum lease payments $ 16,120 Less imputed interest ( 2,389 ) Total lease liabilities $ 13,731 8. Other liabilities The following table summarizes the components of other current liabilities: As of September 30, As of December 31, (in thousands) 2021 2020 Sales tax payable $ 564 $ 814 Payroll and payroll related expenses 13,574 18,255 Acquisition related compensation 6,116 — Other 3,894 3,107 Other current liabilities $ 24,148 $ 22,176 20 Table of Contents 9. Debt 2021 Convertible Senior Notes In September 2021, we issued $ 345.0 million aggregate principal amount of 0.25 % 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”). 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 our senior, unsecured obligations and accrue interest at a rate of 0.25 % 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. Before July 1, 2026, noteholders will have the right to convert their Notes only under the following circumstances: (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 %) 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 %) 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 we call 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; or (4) upon the occurrence of specified corporate events. 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. 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 for the Notes is 13.6783 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. The conversion rate and conversion price will be subject to adjustment upon the occurrence of certain events, such as distribution of stock dividends or stock splits. We 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 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% 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 Notes to be redeemed, plus accrued and unpaid interest, if any, up to, but excluding, the redemption date. Pursuant to the Partial Redemption Limitation (as defined in the indenture for the Notes), we 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 we send 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 us 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. In accounting for the issuance of the Notes, we recorded the Notes as a liability at face value. The effective interest rate for the Notes was 0.84 %. 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 2021 Notes, we entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain financial institutions. 21 Table of Contents 9. Debt (continued) We used $ 35.6 million of the net proceeds from the Notes to enter into privately negotiated capped call instruments the (“Capped Call Transactions”) with certain financial institutions. The Capped Call Transactions are generally expected to reduce potential dilution to holders of our common stock upon any conversion of the Notes and/or offset any cash payments we are 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 our 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 % over the last reported sale prices of our 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 our 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 our stock. The premiums paid for the Capped Call Transaction have been included as a net reduction to additional paid-in capital within stockholders’ equity. The net carrying amount of the Notes consists of the following: (in thousands) September 30, 2021 December 31, 2020 Principal balance $ 345,000 $ — Unamortized issuance costs $ ( 9,950 ) $ — Carrying value, net $ 335,050 $ — The total interest expense recognized related to the Notes consists of the following: Three months ended September 30, Nine months ended September 30, (in thousands) 2021 2020 2021 2020 Contractual interest expense $ 38 $ — $ 38 $ — Amortization of issuance costs 87 — 87 — Total $ 125 $ — $ 125 $ — Convertible Term Loans Prior to our IPO, we entered into two contingent convertible debt agreements (the “Convertible Term Loans”) with Silicon Valley Bank (“SVB) providing for two term loans with a combined borrowing of $ 55.0 million. In conjunction with our IPO on August 5, 2020 , the bank exercised its purchase right and repaid $ 1.1 million of previously paid principal. This balance, combined with the unpaid principal of $ 53.9 million was converted into 5,249,534 shares of Series 1 common stock. No further borrowings are allowed under these convertible debt agreements. The weighted -average interest rate was 5.8 % during the nine-month period ended September 30, 2020. In addition to the conversion shares on the outstanding principal, one of the convertible debt agreements, in the amount of $ 35.0 million, required a deficiency payment if the value of the conversion shares did not meet an applicable required minimum return. The deficiency payment, at the election of the holder, would be settled either (i) by issuance of additional shares of common stock equal to the difference between the minimum return and the conversion value or (ii) in cash in a single installment in the amount of such difference. Our management determined that the required minimum return as defined above represented, in substance, an embedded lenders’ put option designed to provide the investor with a fixed monetary amount, settleable in either additional shares or cash. Management determined that this put option should be separated and accounted for as a derivative primarily because the put option met the net settlement criterion and the settlement provisions were not consistent with a fixed-for-fixed equity instrument. Based on the value of the conversion shares issued to the bank upon completion of the IPO, we met the required minimum return under terms of the Convertible Term Loan and were not required to provide any additional shares or cash . The put option, with an initial fair value of approximately $ 4.4 million, was recorded as a derivative liability on the accompanying balance sheet and a corresponding discount to the Convertible Term Loan. The discount was accreted to interest expense in the consolidated statements of operations over the term of the Convertible Term Loan using the effective interest method. The net balance outstanding under the terms of this agreement was netted against the outstanding principal balance upon conversion to Series 1 Common Stock upon completion of our IPO. We recorded interest expense related to this instrument of $ 0.4 million during the nine-month period ended September 30, 2020. 22 Table of Contents 9. Debt (continued) The estimated fair value of the put option was determined using a multi-scenario probability weighted expected return method analysis in which the future probability of exit events was weighted for its respective probability. Key assumptions included time to exit event, fair value of common stock, and a discount rate. At March 31, 2020, we determined the put option had no fair value due to an increase in market conditions that would make any amounts due under the redemption feature remote. As a result, we recorded a gain in the amount of $ 4.4 million, which was recorded in the accompanying consolidated statements of operations. This instrument was extinguished upon the conversion of the 2020 Convertible Term Debt and completion of our IPO . Credit Facility In 2020, we had an available credit facility with SVB that provided for a $ 20.0 million line of credit and a $ 5.0 million term loan. The outstanding balance under this credit facility was repaid in 2020. We had no outstanding balances as of December 31, 2020 and no further borrowings are allowed under the credit facility. The weighted average interest rate for these borrowings was 4.0 percent for the nine-month period ended September 30, 2020. Mezzanine Facility Loan On February 28, 2020, we entered into a mezzanine loan and security agreement (the “Mezzanine Facility”) with WestRiver Innovation Lending Fund VIII, L.P. (“WestRiver”) providing for a term loan of $ 10.0 million. We did not draw upon the funds available under this facility and formally terminated this facility on November 6, 2020 . In connection with the Mezzanine Facility, we issued warrants to purchase up to 99,000 shares of common stock with an exercise price of $ 9.21 per share with the warrants expiring on March 1, 2023 . The warrant was exercisable for half of the shares. The warrant did not become exercisable for the remaining half of the shares because we did not draw upon the Mezzanine Facility and our ability to draw upon under the Mezzanine Facility terminated. Warrants to purchase 49,500 shares of common stock that were exercisable, were exercised in August 2020 and the remaining portion that did not become exercisable terminated upon the termination of the Mezzanine Facility. We recorded the fair value of the warrants issued in connection with the Mezzanine Facility as a discount on the carrying value of the debt instruments. This discount of $ 0.3 million was amortized to interest expense over the life of the debt instruments as an adjustment to the effective interest rate. Debt fees 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. Interest expense related to debt discount amortization was not material for any of the periods presented. Net unamortized debt issuance fees as of September 30, 2021 amounted to $ 10.0 million. 23 Table of Contents 10. Stockholders’ equity (deficit) Equity Incentive Plans – Stock Options During the nine months ended September 30, 2021, we granted an aggregate of 263,136 shares of stock options, with a weighted average exercise price of $ 58.17 per share. The fair value of options granted was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions (i) expected term of 6.0 years, (ii) expected volatility of 56 %, (iii) risk-free interest rate 1.0 % and (iv) expected dividend yield of 0 %. Restricted Stock Units During the nine months ended September 30, 2021, we granted an aggregate of 1,302,480 RSUs with a weighted grant-date fair value of $ 58.09 . The RSUs vest over the requisite service period of 4 years from the date of grant, subject to the continued employment of the employees. Stock Based Compensation Expense Stock-based compensation expense was included in the following line items in the accompanying condensed consolidated statements of operations during the periods presented (in thousands): Three months ended September 30, Nine months ended September 30, (in thousands) 2021 2020 2021 2020 Cost of revenue $ 293 $ 179 $ 1,206 $ 334 Sales and marketing 1,829 871 5,351 1,511 Research and development 1,566 582 4,180 1,216 General and administrative 2,301 1,236 6,945 1,977 Total stock-based compensation expense $ 5,989 $ 2,868 $ 17,682 $ 5,038 11. Income taxes Our 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, and any applicable income tax credits. The difference in the 21 % U.S. statutory tax rate and the annual forecasted effective tax rate ((.52%) as of September 30, 2021) is primarily a result of valuation allowances offsetting the benefit of forecasted losses in the U.S., Australia, and the United Kingdom. Forecasted income tax expense is primarily related to changes in U.S. deferred tax liabilities associated with amortization of tax deductible goodwill, non-U.S. jurisdictions where we are profitable, and current state income taxes. The effective tax rates for the three months ended September 30, 2021 and 2020 were ( 1.20 ) % and 0.13 % respectively. The effective tax rates for the nine months ended September 30, 2021 and 2020 were ( 0.61 ) % and ( 0.03 ) % respectively. We file tax returns in the U.S., including various state and local returns, and in other foreign jurisdictions including Australia, Ireland, Singapore, Ukraine, and the United Kingdom. We believe adequate provision has been made for all income tax uncertainties. We are not currently under audit in any filing jurisdiction. Fiscal years 2017 through 2019 remain open to examination by the major taxing jurisdictions to which we are subject; although, carry forward attributes that were generated in tax years prior to fiscal year 2017 may be adjusted upon examination by the tax authorities up to the close of the statute of limitations on the year in which the attributes are utilized. 24 Table of Contents 12. Net loss per share Net loss per share Basic and diluted net loss per common share is presented in conformity with the two-class method required for participating securities. Holders of Series F preferred stock were entitled to receive cumulative dividends at the annual rate of 10 % compounded quarterly payable prior and in preference to any dividends on any shares of our common stock, subject to certain adjustments as set forth in our certificate of incorporation. In the event a dividend is paid on common stock, the holders of preferred stock were entitled to a proportionate share of any such dividend as if they were holders of common stock (on an as-if converted basis). Accordingly, all of our outstanding series of preferred stock were considered to be participating securities. The holders of our preferred stock did not have a contractual obligation to share in our losses; therefore, no amount of total undistributed loss was allocated to preferred stock. Net loss attributable to common stockholders is calculated as net loss less current period preferred stock dividends. There was no preferred stock outstanding during the nine-month period ending September 30, 2021 . Basic net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period, which includes both Series 1 and Series 2 outstanding shares. Because we have reported a net loss for the three and nine months ended September 30, 2021, and 2020, the number of shares used to calculate diluted net loss per share of common stock attributable to common stockholders is the same as the number of shares used to calculate basic net loss per share of common stock attributable to common stockholders for the period presented because the potentially dilutive shares would have been antidilutive if included in the calculation. Series 1 and Series 2 have the same rights and privileges except Series 2 are not entitled to vote on any matter except as required by law. A pre-IPO preferred shareholder received Series 2 upon the conversion of their preferred shares at the time of our initial public offering. These Series 2 automatically convert to Series 1 upon a qualifying disposition of the shares by the shareholder. 5.1 million shares converted from Series 2 to Series 1 during the nine-month period ended September 30, 2021. There are no Series 2 shares outstanding as of September 30, 2021. The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted-average shares outstanding because such securities have an antidilutive impact due to losses reported: Three months ended September 30, Nine months ended September 30, (in thousands) 2021 2020 2021 2020 Stock options outstanding 6,393 9,391 6,393 9,391 Restricted stock units 2,245 1,363 2,245 1,363 Acquisition related compensation (1) 1,207 — 1,207 — Convertible debt 4,719 — 4,719 — Total potentially dilutive securities 14,564 10,754 14,564 10,754 (1) In connection with the acquisition of Feedonomics, we entered into a contingent compensation arrangement with certain employees of Feedonomics for their post-acquisition services. Of the $ 65.0 million to be paid, $ 61.1 million can be settled in our own stock assuming a price of $ 50.64 per share. 25 Table of Contents Special Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements. 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 forward-looking statements include statements concerning the following: • the impact of the COVID-19 pandemic and the associated economic uncertainty on us, our customers, and our partners, and our response thereto; • our expectations regarding the prevalence of ecommerce and consumer behavior for periods following the end of the COVID-19 pandemic; • our expectations regarding our revenue, expenses, sales, and operations; • anticipated trends and challenges in our business and the markets in which we operate; • our anticipated areas of investments and expectations relating to such investments; • our ability to compete in our industry and innovation by our competitors; • our ability to anticipate market needs or develop new or enhanced services to meet those needs; • our ability to manage growth and to expand our infrastructure; • our ability to establish and maintain intellectual property rights; • our ability to manage expansion into international markets and new industries; • our ability to hire and retain key personnel; • our ability to successfully identify, manage, and integrate any existing and potential acquisitions; • our ability to adapt to emerging regulatory developments, technological changes, and cybersecurity needs; • our anticipated cash needs and our estimates regarding our capital requirements and our need for additional financing; • the anticipated effect on our business of litigation to which we are or may become a party; and • 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,” 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. Therefore, we caution the reader not to place undue reliance on any forward-looking information or statements. The effect of these factors is difficult to predict. Factors other than these also could adversely affect our results, and the reader should not consider these factors to be a complete set of all potential risks or uncertainties. New factors emerge from time to time, and management cannot assess the impact of any such factor on our business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements only speak as of the date of this document, and we undertake no obligation to update any forward-looking information or statements, whether written or oral, to reflect any change, except as required by law. All forward-looking statements attributable to us are expressly qualified by these cautionary statements. 26 Table of Contents