Bigcommerce Holdings Inc

NASDAQ:BIGC

Earnings Call Transcript 2023-Q1

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the BigCommerce First Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers presentation there will be a question and answer session. Please be advised that today's conference is being recorded.

I would now like to turn the conference over to your first speaker today, Daniel Lentz, Head of Investor Relations. You may begin.

[Daniel Lentz, Head of IR]

Good afternoon, and welcome to BigCommerce's first quarter 2023 earnings call. We will be discussing the results announced in our press release issued after today's market close. With me are BigCommerce's President, CEO and chairman, Brent Bellm; and CFO, Robert Alvarez. Today's call will contain certain forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning financial and business trends, our expected future business and financial performance and financial condition and our guidance for the second quarter of 2023 and the full-year 2023.

These statements can be identified by words such as expect, anticipate, intend, plan, believe, seek, committed, will or similar words. These statements reflect our views as of today only and should not be relied upon as representing our views at any subsequent date, and we do not undertake any duty to update these statements. Forward-looking statements, by their nature, address matters that are subject to risks and uncertainties that could cause actual results to differ materially from expectations.

For a discussion of the material risks and other important factors that could affect our actual results, please refer to the risks and other disclosures contained in our filings with the Securities and Exchange Commission. During the call, we will also discuss certain non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, as well as how we define these metrics and other metrics is included in our earnings press release, which has been furnished to the SEC and is also available on our website at investors.bigcommerce.com.

With that, let me turn the call over to Brent.

[Brent Bellm, CEO]

Thanks Daniel, and thanks everyone for joining us. On today’s call, I will walk through our first quarter results and share my perspective on our progress thus far in 2023. RA will later share greater detail on our financial results and conclude the call with a discussion on updated guidance.

Let’s discuss the details. In Q1, total revenue was $71.8 million, up 9% year-over-year. Our Q1 non-GAAP operating loss was $6.4 million, which was well ahead of our quarterly guidance and a strong step toward our goal of reaching breakeven on an adjusted EBITDA basis in Q4 of this year. We concluded Q1 with an annual revenue run rate, or ARR, of $316.7 million, up 13% year-over-year. That represents a sequential growth in ARR of $5.0 million.

Enterprise account ARR was $228.8 million, up 21% year-over-year. Enterprise accounts now represent slightly over 72% of our total company ARR. On our previous earnings call, we noted that we are aiming for enterprise ARR growth in 2023 at or above 20% year-over-year, which we believe will be offset by non-enterprise account ARR contraction in the mid-single digits. Q1 results met this goal. Non-enterprise account ARR was $87.9 million, up slightly on a sequential basis compared to Q4 and down slightly year-over-year as expected as we take action to build a scalable, more self-serve small business segment.

I’d like to elaborate on a few areas in particular that demonstrate our progress. Our shift of go-to-market focus from small business to the enterprise segment is showing positive results. Sales pipeline as of the start of Q2 for this segment is approximately 20% higher than where we were at this time last year. Win rates remain strong. Sales cycle times in the lower end of this segment are largely unchanged, while larger enterprise opportunities have seen an increase of approximately 50 days between first engagement with the merchant and close compared to this time last year.

Before I elaborate on how we are responding to these dynamics, I’d like to clarify what we mean by “enterprise accounts” and the parts of the market we serve. We sell four different ecommerce plan types to merchants. The first three - Standard, Plus, and Pro - are collectively our Essentials plans geared towards small businesses.

Our Enterprise plans have richer feature sets, customized pricing and terms, and are typically sold to merchants in what we deem the midmarket and enterprise customer segments. We consider merchants doing between $1 million to $50 million per year in online gross merchandise value, our mid-market segment, and merchants doing more than $50 million in online GMV per year our large enterprise segment.

We consider any account buying at least one enterprise plan an enterprise account, and we include select financial metrics from these accounts in our quarterly results. As a result, our “enterprise account” metrics reflect a mixture of mid-market and large enterprise segment merchants.

We are responding to the sales cycle time dynamics I mentioned previously by further prioritizing channels and products that deliver strong ROI with faster time to close. We are increasing our investment in lead generation with our agency partners and in the mid-market segment, as these opportunities tend to have shorter sales cycle times and a strong LTV to CAC.

Finally, we are seeing strong success with Feedonomics, which offers our customers incredible ROI with fast time to merchant value and also high ROI for BigCommerce. All merchants are actively seeking ways to increase revenue and improve their return on ad spending, and Feedonomics can help merchants running on many different platforms see strong results without the need to replatform.

Feedonomics continues to win accolades in customer satisfaction and deepen BigCommerce’s relationship with key partners and merchants. 30% of the top 1000 internet retailers trust Feedonomics to optimize their product catalog and expand their market reach. In Q1, G2 issued their Spring Grid Reports that measure overall customer satisfaction and market presence. Feedonomics was in the leadership position in three ecommerce software categories, Multichannel Retail, Catalog Management, and Online Marketplace Optimization Tools.

Feedonomics also rolled out its own native integration into Amazon Multi-Channel Fulfillment during the quarter, enabling thousands of merchants to take advantage of Amazon's fulfillment services for orders that originate on non-Amazon channels. Feedonomics also continues to support merchant adoption of key global channel programs, including Macys.com, Meta’s Facebook and Instagram Shops Ads, and TikTok Shop.

Our platform and omnichannel products drive scalable, cost-effective growth for our merchants. We are confident that we will continue to broaden our mid-market base even as we invest in expansion further into the enterprise segment as well. We also saw healthy stabilization in our non-enterprise or retail accounts. While this portion of our business was down 4% year-over-year, it showed sequential growth for the first time since Q4 2021.

As we have shifted focus towards more established small businesses, adjusted plan pricing to encourage prepayment, and decreased the volume and depth of sales promotions, we have seen improved net retention results in this portion of our business and encouraging signs of stabilization in ARR. We expect results from this portion of the business to benefit from our recent pricing changes as well. We will not see the full effect of the February pricing action on our base retail accounts until June, but early results are strong. New merchant bookings remain consistent, and we are also seeing a higher mix of pre-paid annual plans as well.

Finally, our Q1 results reflect progress on our path towards profitability. To be clear, adjusted EBITDA breakeven in Q4 is not a finish line. It is a starting line in our business from which we will drive profitable growth for our shareholders. Q1 was a strong step toward that goal.

Despite the prevailing caution among businesses regarding the near-term economic outlook, established mid-market and enterprise merchants continue to demonstrate interest in long-term investments in our ecommerce platform and omnichannel capabilities. Although acquiring these larger merchants may come at a greater financial cost and require a longer time to close deals, they offer significantly higher long-term value.

These merchants have impressive retention rates, greater cross-selling potential, and healthier unit economics. They are also more likely to adopt technologies and omnichannel integrations that help sustain and accelerate their growth, which drives significant revenue for us. These merchants are central to our strategic and financial success, and we will continue to balance the need to invest in winning these segments while also improving profitability and cash flow.

Our average revenue per account or ARPA for enterprise accounts was a little over $39,000 in Q1, which was up steadily from $35,000 in Q1 2022 and $32,000 in Q1 2021. The consistent growth we have seen in this metric reflects our progress moving up from our historical base in small business into the mid-market segment and now early progress in the enterprise segment as well. This move into enterprise is succeeding, as is evident by merchants such as Curology, Conn’s Home Plus, and Harley Davidson launching with us in Q1 as I’ll discuss more later, and also by merchants such as Coldwater Creek picking us as their new ecommerce provider.

This go-to-market focus on the mid-market and enterprise segments does not mean that we are walking away from small business merchants. We continue to acquire and serve small businesses on our platform, and we are committed to helping them build their business with BigCommerce. But we have optimized our go-to-market approach to small businesses to be more self-serve with less sales and marketing demand generation investment.

The goal is to build a small business segment with a scalable LTV to CAC. Our recent Standard, Plus, and Pro pricing action and prioritization of annual prepayment is an example of the adjustments we are making to build this segment into a profitable and more scalable business.

Our ecommerce and omnichannel solutions are designed to be flexible, composable, and scalable, providing unmatched versatility for both B2C and B2B clients alike. Earlier this week, we announced the latest update to B2B Edition, our comprehensive suite of B2B functionalities that enhance the online selling experience for suppliers, manufacturers, distributors and wholesalers. The new release introduces Multi-Storefront compatibility, a brand-new B2B buyer portal, and headless support. Next-level B2B Edition functionalities allow merchants to manage quotes, invoices, and buyer approval workflows. B2B Edition’s open and intuitive solution transforms the way sellers and buyers do business, turning legacy B2B practices into a modern, agile, and nimble digital operation with a composable foundation ready to scale with the business.

These enterprise-grade capabilities provide B2B brands with the flexibility and customization they need to elevate online selling experiences, launch new brands, and expand into new regions.

In addition to strengthening B2B Edition, BigCommerce continues to release features and product enhancements that resonate with our target market. In March, we launched Buy Online Pick Up In Store functionality, also known as Click & Collect, giving merchants more options to meet shoppers where they are and provide frictionless shopping experiences.

Previously only available for enterprise merchants, we expanded our Multi-Storefront offering in Q1 as a self-service feature accessible to small and midsize BigCommerce merchants running on our retail plans. BigCommerce merchants of all sizes now have the advantage to manage multiple storefronts to grow sales in new regions, streamline operations for multiple brands and customize various customer segments to drive global growth.

In Q1, we announced a new strategic partnership with WPP to offer omnichannel solutions to help WPP clients drive growth and maximize sales across hundreds of advertising channels and marketplaces. This innovative partnership will give WPP priority access to new product tools on both BigCommerce and Feedonomics, in addition to providing APIs and data sets that will enable WPP agencies to develop unique insights for clients across product, trend and purchasing data.

Given the attractiveness of the joint BigCommerce and Feedonomics value proposition to enterprise brands, we continue to be focused on engaging, activating and enabling many other Global Agency partners to serve mutual merchants with these market-leading capabilities across advertising, marketplace and branded commerce channels.

We also announced a new global partnership with InfoTrax Systems, a leading provider of commissions software and distributor tools for direct sales companies. The new “InfoTrax Powered by BigCommerce” solution will give thousands of direct-selling customers access to more innovative and sophisticated commerce capabilities, including the ability to launch omnichannel sales strategies using Feedonomics.

In addition, THG Ingenuity, the complete commerce division of THG plc, and BigCommerce intend to develop a US and EMEA-focused complete commerce solution that would bring together BigCommerce's composable ecommerce storefront with Ingenuity's fully integrated technology stack and operational capabilities.

Earlier in Q1, in partnership with Amazon, we launched the Buy with Prime app for BigCommerce, a new self-service integration for US merchants to easily enable Buy with Prime on their BigCommerce storefront with no coding required. With shopping benefits that millions of Prime members know and trust, including fast, free shipping, Buy with Prime is shown to increase conversion by 25% on average.

This week, we also announced that we have expanded our global footprint into Poland, Romania, India, the UAE and South Africa with an expanded engineering team in Poland, two partner-led entities in Eastern and Central Europe, and a new country leader in India.

In Q1, we continued to grow our roster of leading, notable brands and merchants on our platform. Innovative health and beauty brand Curology launched a beautiful new storefront leveraging our NetSuite ERP partnership to connect Curology’s store with its ERP for product and inventory data syncing. Conn’s Home Plus, a leading retailer of furniture, appliances, and electronics with more than 160 stores across 15 U.S. states, recently launched on BigCommerce using a natively-hosted Stencil storefront and a custom BigCommerce checkout, taking advantage of integrations with custom financing solutions and location based pricing.

Tottenham Hotspur, one of the world's top football clubs, is leveraging BigCommerce’s platform to further enhance its popular online store’s capabilities and fan experience not only at home in the UK, but also in APAC and North America where the club has a significant and growing fanbase. ASSA ABLOY, a global leader in door-opening solutions used in many of the world's locks and security installations, is revolutionizing its customers' experience by integrating its broad product catalog and using our B2B Edition solution to customize the shopping experience.

Iconic motorcycle brand Harley-Davidson launched a new line of lifestyle apparel utilizing BigCommerce’s APIs to build a full suite of custom integrations with back-end systems and leveraging BigCommerce’s stencil framework to build a chic front-end. Diamonds Direct, a worldwide leader in diamond sourcing, selection, education and value, launched a new store with a headless digital experience front-end and BigCommerce back-end to deliver a seamless, intuitive shopping experience, including custom “ring builder” options.

Feedonomics also signed many new customers on the quarter as well, with highlights including Chico’s, Findel, Rappi and Tiendamia as well as signing new agreements with existing BigCommerce customers such as Solo Brands, Diono, Houzer, and Badgley Mischka among many others.

To conclude, our 2023 plan is focused on three primary goals. First, continued top line growth in the mid-market and enterprise segments. Second, breakeven in Q4 on an adjusted EBITDA basis. And third, further efficiencies in our business to improve operating cash flow. We are laser-focused on delivering these commitments. These set up our business for strong, profitable growth in 2024.

We are operating from a position of strength in the mid-market segment and building momentum in the enterprise segment as well. We have a winning product in a growing market with a diverse partner ecosystem vested in our success. We are encouraged by results thus far in 2023, and we are committed to deliver healthy returns to our shareholders.

Next, I’d like to turn it over to RA to discuss our financial results in more detail and conclude with our updated guidance for Q2 and 2023.

[Robert Alvarez, CFO]

Thanks, Brent, and thank you, everyone, for joining us today. During my prepared remarks, I’ll cover our Q1 results in detail, provide additional commentary on some of our key goals for the year, and finally conclude with updated guidance.

In Q1, total revenue was $71.8 million, up 9% year-over-year. Subscription revenue grew 12% year-over-year to $53.8 million, while Partner and services revenue, or PSR, was down 1% year-over-year to $17.9 million. Revenue in the Americas was up 7%, while EMEA revenue grew 27% and APAC revenue was up 1% compared to prior year.

As I mentioned on the last earnings call, we built our 2023 financial plan assuming conservative net bookings growth, particularly in the front half of the year. We also assumed further moderation in consumer spending, which would impact volume-driven pricing upgrades and PSR. Q1 results were largely in line with these assumptions, and I am encouraged by the progress that we showed in the quarter.

I’ll now review our non-GAAP KPIs. Our ARR grew to $316.7 million, up 13% year-over-year. That represents a sequential growth in total ARR of $5.0 million. Enterprise account ARR was $228.8 million, up 21% year-over-year. Subscription ARR was up $5.1 million vs Q4 and up 15% year-over-year. As we mentioned last quarter, we are aiming for enterprise ARR growth in 2023 at or above 20% year-over-year, which we believe will be offset by non-enterprise account ARR contraction in the mid-single digits. Q1 non-enterprise results exceeded our expectations.

We believe improving cohort health and recent pricing changes will offset the degree of contraction risk we outlooked at the beginning of the year.

At the end of Q1, we reported 5,828 enterprise accounts, up 463 accounts or 9% year-over-year. ARPA, or average revenue per account, for enterprise accounts was $39,260, up 11% year-over-year.

I’ll now shift to the expense portion of the income statement. As a reminder, unless otherwise stated, all references to our expenses, operating results and per share amounts are on a non-GAAP basis. Q1 total cost of revenue was $16.3 million, down approximately $1 million sequentially from Q4. Q1 total operating expenses were $61.9 million, down $2.7 million sequentially from Q4. Q1 gross margin was 77%, up 192 basis points from the previous year, while gross profit was $55.5 million, up 11% year-over-year. This gross margin expansion is notable, in that we drove healthy margin expansion even while growth in high gross margin PSR was challenged.

We are making deliberate decisions on automation, staffing, and other cost drivers to drive sustainable margin improvements over time. In Q1, sales and marketing expenses totaled $31.2 million, up 2% year-over-year. This represented 43% of revenue, down 297 basis points compared to last year. Research and development expenses were $17.3 million or 24% of revenue, down 366 basis points from a year ago and down $1.7 million sequentially from Q4.

General and administrative expenses were $13.4 million or 19% of revenue, down 121 basis points from a year ago. In Q1 2023, we reclassified certain costs that we had previously included in general and administrative expense into sales and marketing expense. To maintain consistency between comparable periods, we reclassed $1.5 million from general and administrative expenses to sales and marketing expense for the period ending March 31, 2022. This change in classification had no effect on the reported results of our operations or cash flow.

In Q1, we reported a non-GAAP operating loss of $6.4 million, a negative 9% operating margin. This compares with an operating loss of $12.4 million or a negative 18.7% operating margin in the prior year and an operating loss of $9.4 million or a negative 13% operating margin in the prior quarter.

Adjusted EBITDA was negative $5.5 million, a negative 7.6% adjusted EBITDA margin, compared to negative $11.6 million and a negative 17.5% adjusted EBITDA margin in the prior year. Non-GAAP net loss for Q1 was negative $4.9 million or negative $0.07 per share, compared to negative $13.2 million or negative $0.18 per share last year.

We ended Q1 with $283.5 million in cash, cash equivalents, restricted cash, and marketable securities. For the three months ended March 31, 2023, operating cash flow was negative $20.8 million, compared to negative $22.0 million a year ago. We reported free cash flow of negative $21.9 million or a negative 31% free cash flow margin. This compares to negative $23.3 million and a negative 35% free cash flow margin in Q1 2022.

Q1 operating cash flow results included a number of one-time impacts that contributed to the difference between cash flow and our non-GAAP operating loss results. These differences included approximately $4 million between severance related to our December restructuring and normal year-end bonus payments and $6 million in Q1 revenue from a payments technology partner which was paid in early April and will be reflected in Q2 operating cash flow. Apart from these timing-related impacts, operating cash flow would have been between negative $10 million to $11 million on the quarter. I’d also note that Q1 is the quarter in which we have the most prepaid software obligations as well, which also contributes to a difference between operating cash flow and underlying operating results during the period as well.

As Brent mentioned, our 2023 plan is focused on three primary goals. First, we are investing to continue to win in the mid-market and enterprise segments. Top line revenue results and net bookings in Q1 were a positive first step. We saw strong growth from the mid-market segment and Feedonomics, and we are encouraged by the sales pipeline heading into Q2. We continue to see strong win rates in our key segments as well.

However, we are also seeing fewer volume-driven pricing upgrades and additional conservatism with respect to software spending from our existing merchants, which is in line with the expectations on which we built our plans.

Second, we are operating with discipline to reach breakeven by the end of Q3 on an adjusted EBITDA basis, and remain confident in our ability to deliver positive EBITDA for the full quarter in Q4 of this year. Q1 results reflect our continued progress and are a strong indicator that we are on track to meet this goal. We are also highly focused on driving operating leverage further as we scale the business.

One important item to note with respect to GAAP net loss is how the August 2021 $145 million acquisition of Feedonomics is accounted for in our financial statements. Our Q1 net loss includes over $6 million in expenses from third party acquisition costs and intangible asset amortization from that transaction. We expect the majority of third party acquisition costs to be fully recognized by the end of Q2 of this year.

Our focus is scaling this business while balancing top line and bottom-line growth, and we will continue to manage our spending in a financially disciplined way to accomplish that - including costs to run the business, careful evaluation of potential acquisitions and partnerships, and equity grants to employees.

Third, we are taking steps to prioritize cash flow improvements to drive healthy, consistent cash flow generation. As I mentioned before, apart from one-time impacts on the quarter, operating cash flow would have finished between negative $10-11 million. We are taking numerous actions to drive cash flow improvements, such as prioritizing advance billing on new subscriptions, investing in our quote to cash systems and processes, and maintaining tight discipline around accounts receivable and collections.

We will see the full effect of our February pricing action on our base of customers on retail plans beginning in June, so we expect to see further improvements in operating cash flow from annual payments from our base of merchants in June through the end of the year. We believe these initiatives will ultimately yield a better customer experience, higher deferred revenue, and long-term improvements to DSO as well.

I’ll now conclude with an updated view on our outlook and guidance for the second quarter and full year 2023. For the second quarter, we expect total revenue in the range of $72.1 million to $74.1 million, implying a year-over-year growth rate of 6% to 9%. Note that we expect subscription revenue and PSR to grow in the mid-single digits, similar to the growth reflected in the guidance range for the quarter. For the full year 2023, we expect total revenue between $303.0 million to $311.0 million, translating to a year-over-year growth rate of approximately 9% to 11%.

For Q2, our non-GAAP operating loss is expected to be between $5.5 million and $9.5 million. For the full year, we expect a non-GAAP operating loss between $14 million and $20 million. While we are encouraged by progress thus far on the year, we intend to remain conservative in our guidance based on the macroeconomic uncertainty in our industry. We believe this is a reasonable approach at this time.

Note that the midpoint of this guidance range for Q2 non-GAAP operating loss is sequentially down slightly compared to Q1 results. This is primarily due to some one-time expense benefits in Q1 and select investments planned for Q2. Let me elaborate on this just for a moment.

Q1 non-GAAP operating loss saw approximately $2.1 million of one-time expense benefits to the quarter from two primary sources. First, we regularly reserve for doubtful accounts under our normal practice, and we made good progress in collections on a number of outstanding accounts in Q1. That contributed a $1 million expense benefit to the quarter.

Second, our increased sales and marketing spending towards the mid-market and enterprise segments ramped a little more slowly than expected as we added resources and new marketing channels, which contributed approximately a $1.2 million benefit to the quarter. We also plan to make small investments in select initiatives in sales and marketing in Q2 to capitalize on opportunities we are seeing in the marketplace and continue to build a strong sales pipeline for the back half of the year.

Apart from the effect of those Q1 items and this small investment increase in Q2, our non-GAAP operating loss outlook at the midpoint would have been sequentially better as we work towards breakeven by the end of Q3. While we may make additional changes or investments as the year progresses, we plan to keep spending relatively flat across the remainder of the year. Our aim is to reach breakeven in late Q3 with full quarter positive adjusted EBITDA in Q4. We remain incredibly bullish about the potential of this business.

We have the product, market opportunity, and partner ecosystem to build our presence further in the mid-market and expand up market into the enterprise segment. We have many paths for growth, including B2C, B2B, composable commerce and headless, international growth, cross-sell with our existing customers, and omnichannel expansion across merchants using both BigCommerce and other ecommerce platforms. We also have the organizational focus necessary to win in these segments while driving the operational improvements necessary to profitably scale the business and generate strong returns for our shareholders.

With that, Brent and I are happy to take any of your questions. Operator?

[Operator]

[Operator Instructions] Okay, this question will come from Terry Tillman with Truist. Please go ahead.

[Unidentified Analyst]

Oh, great. Thanks. This is actually Connor Passerelle [ph] on for Terry, appreciate you taking the questions. Maybe just to start, we'd love to kind of dig deeper into the progression of Feedonomics, it sounds like it's continued to do really well. Some nice ones with large versions. I'm just curious if you could share anything directional on what the growth expectations are of Feedonomics and maybe the size of that business versus B2C as a whole. And then also maybe one of the puts and takes on the sales cycles here, as well. What does a typical sales cycles look like for Feedo?

[Brent Bellm, CEO]

Yes, I'll jump in here. As we always thought Feedonomics would grow at or above the pace of our enterprise business. And, I think in terms of performance, they've definitely done that. We've also integrated Feedonomics in a lot of different ways with the launch of our omnichannel Certified Partner Program. Our agency partners, tech partners have definitely embraced Feedonomics. And we're seeing really great demand signals, in terms of interest from their merchants is highlighted with WPP. I think we're just now they're really enabling our ecosystem, to sell Feedonomics across their base of merchants, whether they're on BigCommerce or not.

And if you think about the selling cycle, or go-to-market motions for e-commerce versus what Feedonomics does, I think that 90% 95% of merchants out there are looking for ways to increase top line revenue, increase their return on ad spend. And so I think collectively between big commerce, now really exposing our ecosystem to Feedonomics. We're seeing really great brands signing up. New accounts, gross, new sales are strong. And sales cycles are actually less than our enterprise sales cycles, which is good. And we couldn't be more excited and more bullish about Feedonomics going into this year.

[Unidentified Analyst]

Great, that's, that's really helpful. Appreciate the color, maybe just a quick follow up on International. So just wanted to ask around the recent entries into Poland, Romania, India few others. What did you see in these regions kind of gives you the confidence to invest there was that kind of partners pulling you towards them, or maybe just low hanging fruit in terms of being able to get in there with an open SaaS platform for some of the enterprise sellers there?

[Brent Bellm, CEO]

Yes, that clarify, as we launch in these markets, we're launching a marketing presence, not a headcount, folks focused sales. Presence in those markets. We're relying especially on partners and organic traffic. But the reason we picked these markets is that they are among the very top performing markets in the world for us that did not already have their own dedicated country, landing pages, and websites.

So Poland, Romania had been top performing countries for us, the Middle East, particularly UAE, a top performing country, for us, and India as well. So putting now marketing presence in those countries where we can better coordinate, lead volume in conjunction with our best partners, is really a ROI, no brainer to help further accelerate growth in those countries. So the biggest thing is just organic. Preexisting business tells us that they're very attractive markets for BigCommerce. And of course, that helps as well that India, the UAE, and South Africa can all be supported with English language websites.

[Unidentified Analyst]

Great, thank you.

[Operator]

Thank you. And the next question will come from Rob Murali [ph] from Needham and Company. Please go ahead.

[Unidentified Analyst]

Hey, thanks for taking my question on for Scott Berg here. Just two, I carry on with that question. What's the pace of this new country entry you know with those new country entry, with those recently announced, expansions are? Are there any other regions and markets that you see an opportunity in nearby?

[Brent Bellm, CEO]

In the long term, absolutely. We really want to be competing effectively, in every country around the world in the long run, where our differentiated open SaaS platform can serve a meaningful part of the market. But for this year, priority number one is achieving profitability on an adjusted EBITDA basis in Q4. So whereas in prior years, we had full market entries that included, a meaningful build out of sales solutioning, business development, in countries that we enter. This year, we're focused on those markets that were already established, and not adding a lot -- not really adding headcount into new markets.

What we're excited to see is just how much we can accelerate countries where we don't have a big human presence with marketing support, like these five. And if that works, then conceivably, there are quite a few other countries around the world that will look to in 2020 core to expand in a similar way. Thanks for the question.

I think the other thing I would add, I mean, just while we're on the international topic, in case nobody else asked about it, it was notable that if you break out the growth rates for the various regions, we saw an increase in the quarter on quarter -- the year on year growth rate in Q1 relative to Q4 in all of our non U.S. geographies. You know, APAC improved by 7%, EMEA, growth rate improved by roughly 5%, non-U.S. Americas by roughly 12%. So it was very strong quarter and strong momentum continuing around the world for us.

[Operator]

And the next question will be from Parker Lane from Stifle, please go ahead.

[Parker Lane, Stifel]

Hi, guys, thanks for taking the question. Brent, I know self-serve small businesses a smaller part of the business from an ARR perspective. But with the changes you've been making, what are some of the signals you see from this channel? And what are your growth expectations that are going forward under this new model?

[Brent Bellm, CEO]

The price change has not had a seemingly negative impact on volume of new business coming in on our small business plans, since we turned off the heavy marketing and sales they get in Q4. So what we are seeing is a very positive trend that a higher percentage of folks signing up for the plans are picking annual prepay so that their price doesn't change relative to before and of course, those ticking monthly are now paying meaningfully more.

And so we get the benefit on ROI from the small business segment on both ends, we're both making more money off each new sign up and getting more upfront pre payments, where we don't get that and we're spending less money to acquire the plan. So the business is much healthier on an LTV to CAC standpoint than ever before. And so we're very encouraged by that, as we as we love to continue to grow it around the world.

[Parker Lane, Stifel]

Got it understood. And then touching on multi storefront real quickly. Saw that you expanded that beyond the enterprise merchants now to small and medium sized merchants. I think about the enterprise is obviously a lot more complexity there, given their size and scale. How do I think about the addressable opportunity and the adoption patterns you're seeing in multi storefront outside of that enterprise market where you've we've brought this tool to?

[Brent Bellm, CEO]

Well, as you mentioned, it's less than a quarter new for the small business plans. But there are plenty of businesses that have complexity historically, they would have been faced with the choice of either not launching additional stores or having them on their own completely independent account with a separate set of integrations, et cetera. That's a lot more work.

So we make it easier to add additional brands and sub brands, additional geographies and or additional segments like B2B plus B2C than any other platform and have democratized that all the way down. A nice thing is that each time a small business customer clicks a button and adds another storefront their revenue to us goes up very substantially relative to what they were paying before so it's real entropy nice functionality of great benefit even to small businesses with a value for value for the customer and a big revenue boost for us every time it's chosen.

[Parker Lane, Stifel]

Understood, thanks for the color. Appreciate it.

[Operator]

And the next question is from Raimo Lenschow from Barclays, please go ahead.

[Unidentified Analyst]

Hi, this is [indiscernible], on for Raimo. Thanks for taking the question. Could you speak a little bit to what you're seeing with the new changes in the B2B segment rollout and any increased traction or early feedback based on these new functionalities? Thank you.

[Brent Bellm, CEO]

Yes, you're referencing the updated release for our B2B edition that only went out a couple business days ago. And there are very few product releases in our history that are as exciting as this one. So just to let everybody know, the new updated version of B2B edition includes full compatibility with our multi storefront and headless capabilities, which are really market leading capabilities built into the BC core.

But very importantly, we have now created a buyer portal set of capabilities that we're getting a lot of feedback from agency partners and early adopters saying that it is really the best buyer experience on the market that has fully customized purchasing experience where the region, the industry vertical, and the needs are basically delivered into the buyer. They can -- customers can preset prices and shopping lists for their individual company purchasers, incorporate configure price and quote into it and have easy reordering.

So it's a super slick, very B2C like user interface, but meets all the complex needs of B2B buyers. We think it's a game changer. We think it's the best on the market. And we're optimistic that there will be a lot of excitement in the industry as customers and agency partners take a close look. Thanks for the question.

[Unidentified Analyst]

And then if I could just follow up with one more quickly can you speak a little bit to the pipeline for new deals comparing to last quarter and you know what the trajectory for that is looking like moving forward?

[Brent Bellm, CEO]

Yes, I can say through Q1 and into Q2, our pipeline for enterprise is roughly 20% higher than it was last year. I'd also say month one of Q2 has been stronger than of Q1. But when we look at the pipeline for enterprise opportunities, really, we're seeing strength in mid-market. And we're really starting to build pipeline in those large enterprise opportunities, feedback from the launch of B2B edition this week, has been overwhelmingly positive with strong presence at B2B online where we got a ton of great feedback and deal registrations from really large prospects and partners.

So we would that launch we expect that pipeline to continue to grow. And once we factor in some of the longer sales cycles, we see we feel pretty confident in the reacceleration that we're forecasting and planning for in the second half of this year.

[Unidentified Analyst]

Great, appreciate the color. Thank you.

[Operator]

And the next question will be from Josh Baer from Morgan Stanley. Please go ahead.

[Josh Baer, Morgan Stanley]

Great, thank you for the question. I was just hoping Brent to get your take on Shopify as commerce components, on the one hand completely validates your open SaaS strategy. On the other hand, just wondering how you think or if you think it changes, BigCommerce’s a competitive environment?

[Brent Bellm, CEO]

I don't want to comment on their product, I will comment on ours. We've been doing headless, and composable, since our first major customers, including Harvard Business Publishing, went live in 2016. They're still with us proud to serve them. We were the second platform to enter the mock Alliance, which is basically an alliance of the leading advocates and providers of composable nurse, I'm on the board of the mock Alliance. And it's a big part of our business, we serve 1000s of headless and composable customers across all popular front and frameworks and content management system.

So it's a very material part of what we do. But it's also consistent with our open commerce, philosophy and commitment. From the very beginning. It's not a new way of doing business for us. It's a natural competitive advantage that extends off our commitment to openness. And why are we so committed to open? It's because that is what enables us to best serve the world's complex, mid-market and enterprise businesses.

Instead of telling them, Hey, here's how we prescribe that you do ecommerce, we have the best API's and the best flexibility for you to optimize your stack around your business requirements. So we're really committed to it. We're a leader in headless in composable ecommerce have been recognized as such for years and believe, more than any other platform, we take the headache away from composable is a more complex approach for businesses it requires more coordination across individual components. And there's no platform that makes that easier to accomplish across a wide range of front ends and frameworks in BigCommerce.

[Josh Baer, Morgan Stanley]

Perfect. Thank you. I wanted to dig in a little bit on the comments on the stronger pipeline. Is there any way to give more context around how strong is lead generation qualified leads that are moving into the pipeline versus just like, the pipeline could be getting bigger as a function of elongating sales cycles? How did those two or how did those all work together? Thank you.

[Robert Alvarez, CFO]

I would characterize it is high quality, I think the quality is getting better as we go. But also remember where we get a lot of our leads from in when you think about the initiatives that we're really leaning into and getting great demand signals from whether it's omnichannel or B2B. A lot of those leads are coming from our agency partners, agency and tech partners are really embracing the differentiation that we have around omnichannel and B2B and every month that goes by we're seeing even larger and larger opportunities come our way. I know Brent, if you want to add anything.

[Brent Bellm, CEO]

I agree. Got it.

[Operator]

Thank you. The next question will be from Brian Peterson from Raymond James. Please go ahead.

[Unidentified Analyst]

Thanks for taking the question. This is John for Brian. I'm curious, you maybe speak to the growth algorithm here. So enterprise ARR growth has been really good. It's outpaced enterprise accounts. Sure needs to be committed to quantify how the growth has been split between land versus expand. Are you seeing new merchants come on the platform may be larger than you expected. And in a similar vein, I realize we're early in the year. But how is like enterprise NRR track versus your cxpectations? Than I have a quick follow up.

[Brent Bellm, CEO]

Yes, I would say definitely larger in Q1, and we expect that trend to continue. We have opportunities for sure on expansion and we're working towards that, especially around Feedonomics, there's definitely ways for us to really improve our cross sell motions with genomics. And we're doing that not just in the U.S., but in all of our markets, where we have go-to-market teams, and I'll say the recent the reception around Feedonomics in that offering in markets like EMEA, and APAC has been incredibly strong. So higher quality, probably much larger in terms of opportunities. And in terms of cross sell, I think that's just a big opportunity in front of us.

[Unidentified Analyst]

Thanks, it's great color there. And then I'm curious on social commerce, it's obviously been a point of emphasis in the past, I think you announced a Snap integration back late last year. Can you give any insights into sort of attach rates you're seeing there increase conversion, or GMV, uplift from merchants that integrate big commerce with social networks like Snap and Meta? Thank you.

[Brent Bellm, CEO]

We don't have statistics to share. But I would really emphasize the takeaway that for a business wanting to do social commerce, and especially do it the optimal way, with purchasing enabled on those platforms, or to do it across many platforms, Feedonomic is the best solution on the market. It has incredible integrations into Facebook, Instagram, into Snap into TikTok into all the leading channels. And what it lets businesses do is not just integrate and optimize their products for sale in those channels, but also track the ordering and the inventory across the channel so they can have one view into orders and one view into fulfillment. So Feedonomic is a market leader in this area, especially in the enterprise segment and a prime partner of each of the major social networks.

[Unidentified Analyst]

Thank you very much.

[Operator]

And the next question is from Daniel Reagan from Canaccord Genuity. Please go ahead.

[Daniel Reagan, Canaccord Genuity]

Hey, guys, thanks for taking my question. Maybe I'll start with RA. So it's, it's great to see stabilization in non-enterprise retail accounts. I'm wondering, are we out of the woods yet, do you think? And what are your expectations in terms of retail accounts being an anchor to growth from here, especially as we think about the full pricing effects hitting in June?

[Robert Alvarez, CFO]

Yes, it’s a great question. Listen, I think we're very pleased with the cohort health of the non-enterprise segment. Like you mentioned, I think we're going to know a lot more in early June. Again, our expectation and assumption that is that most folks are going to want to keep their prices same. So we'll probably get a real benefit from for cash flows. But if that makes changes, I think, we'll have a positive lift to revenue.

But in terms of like the health of that cohort, I would say that we feel like it's stronger today than we thought it was even three months ago. And I think that with the pricing action we took and with what we're seeing, we have a chance to have that being even better as the year progresses, but we're really going to have to see how the impact of that June 1 rollout goes. So I'll know -- we'll know a lot more, as the next time we speak.

[Daniel Reagan, Canaccord Genuity]

Excellent. And then maybe just one for Brent. As we think about the setup for 2023 in the second half, we're expecting non-enterprise to be less of an anchor to growth. And then the mounting enterprise pipeline from the ship and resources should hopefully begin converting at a higher level. So my question is, where would you say you are compared to your initial expectations when you set out on this strategic pivot? And then how are you thinking about close rates of the enterprise pipeline in the second half? Thanks very much, guys.

[Brent Bellm, CEO]

I think we're on track. The changing mix in our business, the impact on gross new sales, and then the quarterization of it is roughly in line with what we anticipated. And we know that our platform has really strong competitive advantages relative to our competition in the enterprise segment. But historically, that's not where we spent the lion's share of our marketing and lead generation.

And so we have a lot of confidence that as our enterprise marketing and sales generation motions gain maturity, we're doing more field marketing in Q1 than we've ever done before, by a longshot. We're really getting the word out our agency and tech partner ecosystems are rallying around that, because they like the enterprise business, a lot more to in general.

And so we're quite optimistic about how things can pull out not just in the second half of this year, which is when we start to see this maturing, but especially in 2024. The only part of the whole equation that we wish were healthier in, especially in the Americas right now is the sales cycle time. For enterprise in the U.S., as RA has mentioned, we're seeing mid-market deals, continue to close at a normal pace, but the large enterprise deals are still being delayed in a relatively soft economy right now. And at some point that's going to come around and return to normal. We look forward to that, because that'll be an additional accelerator, though, we really didn't build that expectation into our plans for H2.

[Operator]

Thank you. And the next question will come from Mark Murphy from JP Morgan, please go ahead.

[Unidentified Analyst]

Thanks. This is Hardy on for Mark Murphy. First question, you guys said that you're still aiming for the 20% growth for enterprise ARR, just kind of looking at a little bit of deceleration in the customer had been about 42 for that category. What is the level of confidence? Are you still feeling the same way? Or has that changed the direction?

[Robert Alvarez, CFO]

No, I mean, we're feeling pretty confident that, we'll be able to deliver that, again, it's 20%, for the full year, some quarters could be slightly less, some could be more, but for the full year, we feel really good about our ability to deliver that. And also, I'll say that I think that we're on track to exit this year, really with a quarter where we're positive and adjusted EBITDA, our margins will be in the high 70s. And we'll have reaccelerating growth rates for both subscription and PSR as we exit this year, and all of that is tied to our confidence to deliver those growth rates in enterprise.

[Unidentified Analyst]

Great, that's really good to hear. And then just one quick, last one, in terms of linearity, anything changed from Q4 into Q1, and if it did, is it something that you expect to continue through Q2 and beyond?

[Robert Alvarez, CFO]

The only thing is what we called out with the path to profitability, we had some one-time items in Q1. When you factor that in, and I think we're -- we've got that kind of nice path to that breakeven point by the end of Q3. I'll also mention PSR, we had some one-time items in our base period. If you remove that our PSR would have been kind of in line with U.S. ecommerce growth. And we're past those, I think one-time items into Q2, if you look at Q2 last year, the base period effect won't be there, this coming quarter. And so anyway, I just wanted to call that out for you in terms of trends.

[Unidentified Analyst]

Thanks. That’s helpful.

[Operator]

[Operator Instructions] The next question will be from Ken Wong from Oppenheimer and Company. Please go ahead.

[Unidentified Analyst]

Hi, thanks for taking the question. This is Nancy on for Ken. So your enterprise ARR mix has been increasing over the past several quarters, but I saw it stagnated here in 1Q. Is there any color you can provide on why that occurred? Or how we should think about the cadence of the mix shift going forward?

[Robert Alvarez, CFO]

Yes, it's interesting, since our non-enterprise segment performed better than we thought, that mix remained kind of at that 72% mark. Had it kind of played out like we thought, enterprise would have been roughly 73%. I still think throughout the year, that mix is going to trend up to the high 70s. And I think Q1 was just a matter of the non-enterprise ARR performing much better.

[Operator]

And ladies and gentlemen, that concludes our question and answer session, I would like to turn the conference back over to Brent Bellm, President, CEO and Chairman for closing remarks.

[Brent Bellm, CEO]

Thanks, everybody for joining. That wraps up the call for Q1 quarter that we feel very good about, most particularly the strong progress that we made toward our goal of achieving positive adjusted EBITDA in Q4, while continuing to successfully execute an organizational focus and growth in the mid-market and enterprise segments. So we feel good about the quarter, and we look forward to our next conversation a quarter from now. Till then, thanks.

[Operator]

Thank you. The conference has now concluded thank you for attending today's presentation. You may now disconnect.