What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-04 compared with 2021-11-12 · 114 added, 187 removed, 192 unchanged (61% of the section changed)

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

We allow merchants to build their ecommerce solution their way with the freedom of choice that makes the most sense for their unique business and product offerings.

We allow merchants to build their ecommerce solution their way with the flexibility to fit their unique business and product offerings.

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

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

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

We describe this strategy as “Open SaaS.” As of March 31, 2022, we served approximately 60,000 online stores and 12,972 accounts with greater than $2,000 in annual contract value.

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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Our platform serves stores in a wide variety of sizes, product categories, and purchase types, including B2C and B2B.

Our customers include Avery Dennison, Ben & Jerry’s, Burrow, SC Johnson, SkullCandy, and Sony.

Our customers include Avery Dennison, Ben & Jerry’s, Molton Brown, Burrow, SC Johnson, SkullCandy, SoloStove and Vodafone.

We offer access to our platform on a subscription basis.

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

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

This combination helps businesses turn digital transformation into competitive advantage.

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

Partners are essential to our open strategy.

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We strategically partner with, rather than compete against, the leading providers in adjacent categories, including payments, shipping, POS, CMS, CRM, and ERP.

We focus our research and development investments in our core product to create a best-of-breed ecommerce platform and co-market and co-sell with our strategic technology partners to enhance the breadth of the product offering to our customers.

As a result, we earn high-margin revenue share from a subset of our strategic technology partners, which complements the high gross margin of our core ecommerce platform.

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

As we work to develop and deliver this platform for our customers, we will also invest and grow our business by acquiring additional customers to our platform, growing our revenue with existing customers, expanding our presence in new segments and geographies, and 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 July 23, 2021, we entered into an asset purchase agreement to acquire substantially all the assets and liabilities of Feedonomics LLC.

Purchase consideration consisted of approximately $145.0 million with $80.0 million paid upon closing and up to $65.0 million in two annual installments of up to $32.5 million each to be paid upon each of the first and second anniversaries of closing or upon the earlier achievement of certain milestones.

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

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.

We have included the activity of Feedonomics in our key business metrics from the acquisition date of July 23, 2021, through March 31, 2022.

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.

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

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

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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, 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.

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

Accounts with greater than $2,000 ACV

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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.

Partner revenue that is not directly linked to customer usage of a partner’s solution is allocated based on each customer’s share of total platform GMV.

Each account’s partner revenue allocation is calculated by taking the account’s trailing twelve-month partner revenue, then dividing by twelve to create a monthly average to apply to the applicable period in order to normalize ARPA for seasonality.

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

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

September 30,

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

September 30,

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This methodology includes stores added to or subtracted from an account’s subscription during the previous twelve months.

It also includes changes to subscription and partner and services revenue billings, and revenue reductions from stores or accounts that leave the platform during the previous one-year period.

Net new accounts added after the previous one-year period are excluded in our NRR calculations.

It also includes changes to subscription and partner and services

revenue billings, and revenue reductions from stores or accounts that leave the platform during the previous one-year period.

Net new accounts added after the previous one-year period are excluded from our NRR calculations.

NRR for accounts with ACV greater than $2,000 was 116% and 113% for the years ended December 31, 2021 and 2020, respectively.

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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.

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

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

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We generate partner revenue from our technology application ecosystem.

Customers tailor their stores to meet their feature needs by integrating applications developed by our strategic technology partners.

Customer’s tailor their stores to meet their feature needs by integrating applications developed by our strategic technology partners.

We enter into contracts with our strategic technology partners that are generally for one year or longer.

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(1) personnel-related costs (including stock-based compensation expense) for our customer success teams, (2) costs that are directly related to hosting and maintaining our platform, (3) fees for processing customer payments, and (4) the allocation of overhead costs.

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

We expect that cost of revenue will increase in absolute dollars, but may fluctuate as a percentage of total revenue from period to period as our mix between business lines change and we build out additional localized support as we expand internationally.

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.

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We expect to continue to make substantial investments in research and development.

We expect our research and development expenses to increase in absolute dollars, but decrease as a percentage of total revenue over time, as we continue to leverage and expand our lower-cost engineering center in Kyiv, Ukraine.

We expense research and development expenses as incurred.

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

We expect to incur additional general and administrative expenses as a result of operating as a public company.

We also expect to increase the size of our general and administrative functions to support the growth of our business.

As a result, we expect that our general and administrative expenses will increase in absolute dollars but may fluctuate as a percentage of total revenue from period to period.

We incur additional general and administrative expenses as a result of operating as a public company and have increased the size of our general and administrative functions to support the growth of our business.

As a result, we expect that general and administrative expenses will increase in absolute dollars but may fluctuate as a percentage of total revenue from period to period.

Acquisition related expenses

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

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

Amortization of intangible assets

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Other expenses, net

Other expenses, net consists primarily of interest expense on our bank borrowings partially offset by interest income on corporate funds invested in money market instruments and highly liquid short-term investments.

Other expenses, net consists primarily of interest expense on our convertible debt partially offset by interest income on corporate funds invested in money market instruments and highly liquid short-term investments.

Provision for income taxes

Provision for income taxes consists primarily of 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 September 30,

Nine months ended September 30,

Three months ended March 31,

(in thousands)

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Interest expense

Change in fair value of financial instrument

Other expense

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Includes stock-based compensation expense as follows:

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

(in thousands)

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Revenue by geographic region

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)

The composition of our revenue by geographic region during the three months ended March 2022 and 2021 is as follows:

Three months ended March 31,

(dollars in thousands)

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Total Revenue

As of September 30,

As of December 31,

(in thousands)

Consolidated balance sheet data:

Cash and cash equivalents

Working capital (1)

Total liabilities

Total stockholders' equity

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

To supplement our financial statements presented in accordance with GAAP and to provide investors with additional information regarding our financial results, we have presented in this Quarterly Report on Form 10-Q Adjusted EBITDA, a non-GAAP financial measure.

Adjusted EBITDA is not based on any standardized methodology prescribed by GAAP and is not necessarily comparable to similarly titled measures presented by other companies.

We define Adjusted EBITDA as our net loss, excluding the impact of stock-based compensation expense and related payroll tax expense, third party acquisition-related costs and other acquisition related expenses, including contingent compensation arrangements entered into in connection with acquisitions, depreciation and amortization expense, interest income, interest expense, change in fair value of financial instruments, and our provision for income taxes.

The most directly comparable GAAP measure is net loss.

We monitor and have presented in this Quarterly Report on Form 10-Q Adjusted EBITDA because it is a key measure used by our management and board of directors to understand and evaluate our operating performance, to establish budgets, and to develop operational goals for managing our business.

In particular, we believe excluding the impact of these expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core operating performance.

We believe Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we include in net loss.

Accordingly, we believe Adjusted EBITDA provides useful information to investors, analysts, and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects.

Adjusted EBITDA is not prepared in accordance with GAAP and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP.

There are a number of limitations related to the use of Adjusted EBITDA rather than net loss, which is the most directly comparable financial measure calculated and presented in accordance with GAAP.

Some of these limitations are:

Adjusted EBITDA excludes stock-based compensation expense and payroll tax associated with stock-based compensation expense as it has recently been, and will continue to be for the foreseeable future, a significant recurring non-cash expense for our business;

Adjusted EBITDA excludes depreciation and amortization expense and, although this is a non-cash expense, the assets being depreciated and amortized may have to be replaced in the future;

Adjusted EBITDA does not reflect cash payments for acquisition related expenses consisting primarily of cash payments for third-party acquisition cost and other acquisition related expenses, including contingent compensation arrangements entered into in connection with acquisitions, as these amounts do not reflect core operating performance of the business.

Adjusted EBITDA does not reflect the cash requirements necessary to service interest on our debt which affects the cash available to us;

Adjusted EBITDA does not reflect the monies earned from our investments since it does not reflect our core operations;

Adjusted EBITDA does not reflect change in fair value of financial instruments including derivatives since it does not reflect our core operations and is a non-cash expense;

Adjusted EBITDA does not reflect income tax expense that affects cash available to us;

the expenses and other items that we exclude in our calculations of Adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from Adjusted EBITDA when they report their operating results.

In addition, other companies may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison.

The following table reconciles Adjusted EBITDA to net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP.

Reconciliation of net loss to Adjusted EBITDA

Three months ended September 30,

Nine months ended September 30,

Stock-based compensation expense

Payroll tax associated with stock-based compensation expense

Third-party acquisition related costs

Amortization of intangible asset

Interest income

Interest expense

Change in fair value of financial instrument

Provision for income taxes

Adjusted EBITDA

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,

Comparison of the three and three months ended March 31, 2022, and March 31, 2021

Three months ended March 31,

(dollars in thousands)

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Total revenue

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.

Revenue increased $19.4 million, or 41.6%, to $66.1 million for the three months ended March 31, 2022, from $46.7 million for the three months ended March 31, 2021, 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 $16.0 million, or 49.9%, to $48.0 million for the three months ended March 31, 2022, from $32.0 million for the three months ended March 31, 2021, primarily due to growth in mid-market and enterprise activity along with strong overall retention.

Feedonomics contributed $8.8 million in subscription revenue for the three months ended March 31, 2022.

Partner and services revenue increased $3.4 million, or 23.2%, to $18.1 million for the three months ended March 31, 2022, from $14.7 million for the three months ended March 31, 2021, 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 September 30,

Nine months ended September 30,

Three months ended March 31,

(dollars in thousands)

Cost of revenue

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.

Cost of revenue increased $7.9 million, or 84.9%, to $17.1 million for the three months ended March 31, 2022, from $9.2 million for the three months ended March 31, 2021, primarily as a result of higher hosting costs, resulting from increased transactions processed, of $1.1 million, higher personnel costs, including stock-based compensation expense amounting to $2.9 million and expenses as a result of the acquisition of Feedonomics of $3.5 million.

Gross margin decreased to 74.1% during the three months ended March 31, 2022, from 80.2% during the three months ended March 31, 2021.

Operating expenses

Sales and marketing

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

(dollars in thousands)

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Percentage of revenue

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.

Sales and marketing expenses increased $11.4 million, or 54.6%, to $32.2 million for the three months ended March 31, 2022, from $20.8 million for the three months ended March 31, 2021, primarily due to higher staffing costs, including stock-based compensation expense of $4.8 million, additional spend to support revenue growth of $2.9 million and operating expenses as a result of the acquisition of Feedonomics of $2.3 million.

As a percentage of total revenue, sales and marketing expenses increased to 48.7% during the three months ended March 31, 2022, from 44.6% during the three months ended March 31, 2021, primarily due to increased marketing spend and travel costs experienced as COVID-19 pandemic restrictions are lifted.

Research and development

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

(dollars in thousands)

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Percentage of revenue

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.

Research and development expenses increased $7.4 million, or 54.7%, to $20.9 million for the three months ended March 31, 2022, from $13.5 million for the three months ended March 31, 2021, primarily due to higher staffing costs, including stock-based compensation expense of $4.5 million, additional spend to support engineering projects of $0.2 million and expenses as a result of the acquisition of Feedonomics of $2.7 million.

As a percentage of total revenue, research and development expenses increased to 31.7% during the three months ended March 31, 2022, from 29.0% during the three months ended March 31, 2021, primarily due to increased investment in product development.

General and administrative

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

(dollars in thousands)

1 unchanged sentence

Percentage of revenue

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.

General and administrative expenses increased $5.7 million, or 49.1%, to $17.3 million for the three months ended March 31, 2022, from $11.6 million for the three months ended March 31, 2021.

The increase was primarily due to higher staffing costs, including stock-based compensation expense of $3.0 million, costs associated with operating as a public company amounting to $1.5 million and expenses as a result of the acquisition of Feedonomics of $1.0 million.

Acquisition related expenses

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.

Acquisition related expense was $12.7 million for the three months ended March 31, 2022, as a result of acquisition related compensation in conjunction with our business combinations.

Interest income

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

Interest income was insignificant for each of the three-month periods ended March 31, 2022, and 2021.

Interest expense

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 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.

Interest expense increased to $0.7 million for the three months ended March 31, 2022, as a result of the Convertible Notes issued in September 2021.

Other expense

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

Other expense was insignificant for the three months ended March 31, 2022, and 2021.

Provision for income taxes

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

Our provision for income taxes was insignificant in the three months ended March 31, 2022, and 2021.

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.

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.

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

During the year ended December 31, 2021, we issued approximately $335.0 million in convertible debt, net of offering costs and used $35.6 million of the proceeds 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, $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.

We have generated significant operating losses and negative cash flows from operations as reflected in our

accumulated deficit and condensed consolidated statements of cash flows.

We expect to continue to incur operating losses and negative cash flows from operations in the future and may require additional capital resources to execute strategic initiatives to grow our business.

Our future capital requirements will depend on many factors, including our growth rate, levels of revenue, the expansion of sales and marketing activities, market acceptance of our platform, the results of business initiatives, the timing of new product introductions, and the continued impact of the COVID-19 pandemic on the global economy and our business, financial condition, and results of operations .

As the impact of the COVID-19 pandemic on the global economy and our operations evolves, we will continue to assess our liquidity needs.

We believe that our existing cash and cash equivalents will be sufficient to meet our working capital and capital expenditure needs for at least the next twelve months.

We believe that our existing cash and cash equivalents and our cash flows from operating activities will be sufficient to meet our working capital and capital expenditure needs for at least the next twelve months.

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

In 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.

In particular, our 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.

If we choose to issue stock to settle these payments, we will be required to register these shares with the Securities and Exchange Commission on Form S-3.

If we choose to issue stock to settle these payments, we will be required to register these shares with the Securities and Exchange Commission.

The sale of additional equity would be dilutive to our stockholders.

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

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

(in thousands)

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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.

As of March 31, 2022, we had $377.3 million in cash, cash equivalents, and restricted cash, an increase of $168.2 million compared to $209.1 million as of March 31, 2021.

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

Restricted cash consists of security deposits for future chargebacks and amounts on deposit with certain financial institutions.

Our restricted cash balance of $1.2 million at March 31, 2022 and 2021, consists of security deposits for future chargebacks and amounts on deposit with certain financial institutions.

Our marketable securities balance of $125.2 million and $18.4 million at March 31, 2022 and 2021 respectively, consists of investments in debt securities.

We maintain cash account balances in excess of FDIC-insured limits.

Operating activities

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.

Net cash used in operating activities for the three months ended March 31, 2022, and 2021 was $22.0 million and $12.8 million, respectively.

Investing activities

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.

Net cash used in investing activities during the three months ended March 31, 2022, and 2021 was $24.8 million and $18.9 million, respectively.

In the three months ended March 31, 2022, this consists primarily of the purchases of marketable securities of $32.5 million, the purchases of property and equipment of $1.3 million partially offset by the maturity of marketable securities of $9.0 million.

In the three months ended March 31, 2021, this consisted primarily of purchases of marketable securities of $18.4 million and the purchases of property and equipment of $0.5 million.

Financing activities

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 September 30, 2021.

Payments Due by Period

(in thousands)

Lease obligations

Purchase obligations

Total contractual obligations

Net cash provided by financing activities during the three months ended March 31, 2022, and 2021 was $0.2 million and $1.7 million, respectively.

In the three months ended March 31, 2022, this consisted of the proceeds from the issuance of shares of Series 1

common stock pursuant to the exercise of stock options of $ 0.2 million.

In the three months ended March 3 1 , 2021 , this consisted of the proceeds from the issuance of shares of Series 1 common stock pursuant to the exercise of stock options of $1.7 million .

2021 Convertible senior notes

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

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

Bank National Association, as trustee.

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

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

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

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

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

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

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

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

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

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

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

In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Convertible Notes Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

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

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

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

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

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

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

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

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

The Convertible Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the Convertible Notes Indenture), which include the following:

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

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

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

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

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

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

If an Event of Default involving bankruptcy, insolvency or reorganization events with respect to us (and not solely with respect to a significant subsidiary of us) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the Convertible Notes then outstanding will immediately become due and payable without any further action or notice by any person.

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

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

Off-balance sheet arrangements

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

We did not have any off-balance sheet arrangements as of March 31, 2022, or as of December 31, 2021.

Critical accounting policies and estimates

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

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

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

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

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

Actual results may differ from these estimates.

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, 2021.

While our significant accounting policies are described in the notes to our included consolidated financial statements, we believe the following critical accounting policies are most important to understanding and evaluating our reported financial results.

Recent accounting pronouncements

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What changed 10-Q

Item 2. Management’s Discussion and Analysis