Bigcommerce Holdings Inc

NASDAQ:BIGC

Earnings Call Transcript 2024-Q3

[Operator]

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the BigCommerce Third Quarter 2024 Earnings Call. [Operator Instructions] After the speaker's 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, Tyler Dunkin, Vice President, Finance and Investor Relations. You may begin.

[Tyler Duncan, executive]

Good morning, and welcome to BigCommerce's Third Quarter 2024 Earnings Call. We will be discussing the results announced in our press release issued today before markets open. With me are BigCommerce's Executive Chair, Ellen Siminoff; Chief Executive Officer, Travis Hess; and Chief Financial Officer, Daniel Lentz. 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, as well as our expected future business and financial performance, financial condition and our guidance for both the fourth quarter of 2024 and the full year of 2024. 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 measure 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 Ellen Siminoff, Executive Chair.

[Unknown Executive]

Good morning, and thank you all for joining our Q3 earnings call. I'm excited to be here as the company's new Executive Chair and share some of the important changes underway to lead BigCommerce into its next phase of growth. I'd like to kick off today by acknowledging Brent's leadership over the last 9 years. Brent's vision and dedication to our team, our partners and our customers have been essential to our success, and we are grateful for his many contributions.

Despite our growth in many achievements over the last several years, our operational performance has fallen short of expectations with the many changes we are making and we'll discuss today, we believe we are well positioned to create the level of shareholder value, of which BigCommerce is fully capable. The entire Board is excited to see Travis Hess lead this company, we are confident he will drive value for shareholders. Travis brings the right mix of industry expertise, operational focus and a fresh perspective on the business that will reignite and bolster our growth.

Now I'd like to introduce Travis, our new CEO, to share his perspective and plans for the future of our business.

[Unknown Executive]

Thank you, Alan, and thanks to everybody joining the call today. This team's hard work and dedication have created a business with tremendous potential, and I'm excited to take the reins at this pebble moment to help lead e-commerce into a new era of growth. We had a solid Q3 with continued momentum in key areas particularly profit and cash flow. Daniel is going to cover the details shortly, but I want to emphasize that while our performance was strong in many areas, this is just the beginning of what I think we can achieve.

I was drawn to e-commerce for a few key reasons, but the biggest 1 is that we are materially underrepresented in the market relative to the strength of our products. Products that effectively meet the demand of organizations, industries and brands with more nuanced use cases and requirements. We have too often tried to be all things to all people, and as a result of unintentionally diluted our broader value proposition.

By focusing on discerning organizations and brands with unique challenges, not met by existing prepackaged monolith, we can help them be successful and drive more shareholder value. Having spent the majority of my career on the services side, I have a proven record of addressing business challenges with clear and measurable outcomes.

My approach here is no different. My role and BigCommerce's role is not to debate commerce features and functions across different platforms instead, we need to be business outcome-oriented and committed to quickly enabling organizations and brands to differentiate in the market, deliver value to their customers across all channels and optimize their revenue while reducing their cost. Through our full suite of products, we can be more transformational to our clients while remaining agile and committed to best-in-class commerce and customer experience capabilities across both owned and non-owned channels.

For example, in addition to our flagship Commerce product, we can help clients optimize product feed indications across different channels and return on ad spend through futons, while also helping marketers and business users build best-in-class commerce and brand websites with no technical expertise or developers with Maxeon. By going to market with a full suite of solutions focused on discerning customers with complex needs, we can solve their challenges and reaccelerate our own revenue growth.

Our market is evolving rapidly. The need for agility, speed and scale has never been more important. We are in a prime position to capitalize on the opportunity, but we have to move fast, and we have to make significant structural changes to align with our goals and help us reach our potential. Efficient revenue growth has been a key strategic focus for BigCommerce. Let me take a moment to explain what efficient revenue growth means to me.

Efficient revenue growth isn't just about expanding our top line. It's about ensuring that every dollar we invest yields greater returns for our customers for the business and for our shareholders. It's about growing in a way that is sustainable, scalable and profitable. For example, we are streamlining our brand architecture with a focus on fully integrating the capabilities of our flagship platform product with both Feedonomics and make swift. Our big commerce offering is powerful on its own and coupling it with Petonomics and/or make Swift provides a more comprehensive and compelling solution to our customers.

We also recognize that these additional capabilities richly serve markets, brands and organizations independent of our flagship platform, and we'll continue to do so. As I mentioned earlier, it's okay for us not to be everything for everyone. Ultimately, organizations and brands need to go where their customers want to engage them and they need to do this with scale, agility and value. This requires technical agility, vision and enablement, and we feel our collection of capabilities and approach uniquely positions us to provide this to both existing and prospective customers at scale.

We will be expanding our efforts in the coming quarters to build greater product adoption and cross-sell or integrated solutions to grow our revenue per customer. We have not yet delivered on the market potential of better integrating these solutions as 1 company. We can and must better integrate these products, brands and teams to deliver leading solutions for our customers. This will also improve our differentiation in market by orienting our collective products towards 3 key offerings. B2C, B2B and small business. Solving our customers' business challenges means listening and responding to what those challenges are.

Our B2C offering will continue to prioritize rapid feature rollouts that solve the challenges our customers encounter. We know that agility, experimentation and speed to market are critical in B2C. So we introduced our catalyst reference architecture and framework earlier this year and continue to rapidly evolve it. Catalyst provides exceptional customer experiences out of the box via Make Swift, pre-integrates with best-in-class technology partners, is natively composable while also being steeped in agility, allowing for incredibly fast implementation time lines for clients to go live.

Catalyst is also providing value for B2B businesses. In Q3, Stronghold safety and industrial safety equipment company switched to big commerce, leveraging Catalyst and B2B addition to launch a fully headless site in just 4 months. Speaking of B2B, we obviously feel this is a massive market for us to compete and win in, and we are continuing to accelerate investment in this area. For clarity, we see 3 specific types of B2B-oriented clients.

First, enterprise and mid-market core B2B organizations consisting primarily of manufacturers and distributors. These organizations want to use BigCommerce to drive organizational transformation and head count reduction via digitalization and broader system standardization. They typically run their business on legacy or homegrown platforms and have a fair amount of technical debt. They also have complex requirements such as custom contractual pricing, configurable and bespoke products that require quoting workflows before purchase, a unique catalog with checkout and purchasing requirements that may be purchase order oriented purchases against credit terms or a combination of alternatives.

The second type of B2B-oriented clients are greenfield, core B2B organizations, consisting of manufacturers and distributors looking to quickly digitize their operations and launch a best-in-class B2B commerce platform and maintain it with a very small internal team that also allows them to scale into the future despite some complicated requirements and use cases.

Lastly, we also service hybrid B2B customers. Essentially, customers who primarily sell direct-to-consumer, but also have wholesale requirements and sell through third-party retailer marketplaces, but are simply too small to warrant EDI connectivity. This last trip is by far the simplest of the 3 examples and is the primary B2B use case for our largest competitor.

Now that I have clarified the B2B target market, I really want to circle back to where we're investing in our B2B capabilities. In Q3, we integrated the next phase of our B2B features into our core platform, giving customers access to all of Big Commerces B2B addition features directly in the control panel. In Q4, we plan to add additional functionality to streamline the complex selling and buying processes of enterprise manufacturers and distributors.

We will continue to focus on solving true B2B use cases, which includes much more than simple wholesale use cases which widens our B2B total addressable market, while distinguishing us from our competition in this market. This can drive both significant value to our B2B customers and our shareholders. Discerning small businesses are also increasingly turning to technology to differentiate and scale.

We believe that providing them with fast, easy-to-use tools that are simple, yet powerful. We can offer a world-class product to this segment of the market. This, along with other features and enhancements, we will discuss on later calls, will enhance our ability to capture businesses early in their growth journey and continue supporting them as they scale.

We will also launch a hosted version of Catalyst and additional fee dynamics tooling and automation that will unlock powerful AI-driven omnichannel revenue optimization for small and midsized businesses alike. Each of these areas represent a significant growth opportunity. And by orienting our offerings to solving business challenges and creating measurable outcomes, we can unlock a greater share of wallet with our customers.

We will also be making significant investments to advance our AI capabilities across our product suite with a strong focus on AI solutions that enhance revenue generation for our clients, boost operational agility and drive cost savings. We've had success in launching AI that automates tactical workflows and tasks with efforts now more tangibly focused on more material value that we feel would be differentiating in market while widening our total addressable market in specific segments.

To support these initiatives, we're making strategic organizational changes that will allow us to scale efficiently and be more agile and responsive to market opportunities. This includes bringing in industry veterans like Doug Hollinger is our Senior Vice President of Strategy; John Huntington is our Senior Vice President of Partnerships and Ryan Means is our Senior Vice President of Services.

Doug joins us from Accenture, where he led B2C commerce strategy with a focus on retail and CPG. He's laser-focused on aligning our product strategy and offerings with enablement and product marketing to make it clear who we best serve and how big commerce solve their business challenges. John is uniquely adept at architecting and monetizing partner programs. He will help us deepen our partnerships to work more with global system integrators to facilitate joint investment as well as curated accelerators that are tied to specific industries, with more opportunities for disruption and transformation such as direct selling and B2B.

Coming most recently for Merkle, Ryan brings incredible background in commerce operations, enterprise architecture and system integration across multiple commerce platforms. Services provide an important opportunity for us to differentiate ourselves in the market via delivery and enablement of best practices and governance, ensuring speed to market. These proven leaders each have over 20 years of deep commerce experience and expertise and know how to scale a business.

With more deliberate and focused investments in our go-to-market efforts, we will drive more authenticity, faster growth, better profitability and cash flow for shareholders. Today, we also announced a series of actions to both reduce cost and reinvest in specific areas to foster growth. Daniel will cover the details later in his remarks, but at a high level, these changes materially improve our cost structure and aim to nearly double our quota-carrying capacity in 2025.

I'm incredibly optimistic about where we're headed. We have the right products, the right team and the right strategy to drive efficient growth and deliver meaningful value to our customers and shareholders alike. We absolutely can meet that challenge, and we will do so with decisive change in accountability I'm confident that the actions we're taking now will set the stage for long-term success. Thank you for your time today, and I look forward to sharing more updates on our progress in the coming quarters. I'll now turn it over to Daniel.

[Daniel Lentz, executive]

Thanks, Travis, and thank you, everyone, for joining us today. During my remarks, I'll cover our Q3 results, including the cost reductions and restructuring announced this morning, provide additional detail on our key areas of operational focus and offer updated guidance for Q4 and the full year 2024. In Q3, total revenue was just under $84 million, up 7% year-over-year. Subscription revenue grew 7% year-over-year to approximately $63 million, while partner and services revenue, or PSR, increased 8% year-over-year to just under $21 million.

Regionally, revenue in the Americas grew 6%, EMEA increased by 12% and APAC was up 9% compared to the prior year. We remain committed to profitable growth. Our Q3 non-GAAP operating income was just over $4 million compared to a loss of $1 million in the same period last year. This reflects the year-over-year improvement of 700 basis points in our non-GAAP operating margin, from approximately negative 2% in Q3 2023 to positive 5% in Q3 2024.

As Travis mentioned earlier, we're investing in and streamlining our go-to-market organization, I'd like to provide more detail on how these actions reaffirm our commitment to the 3 strategic priorities we've discussed over the past 2 earnings calls. First, we remain focused on driving efficient revenue growth. We've significantly reduced our investments in underperforming channels and reallocated those resources towards higher performing areas, and we will nearly double our quota-carrying sales capacity in 2025.

Additionally, we've realigned our sales organization and compensation structure to better match the strategic area as Travis outlined earlier. We now have dedicated go-to-market teams built around our B2C, B2B and small business offerings with incentives focused on driving customer share of wallet across our entire product portfolio. Second, we're focused on driving operating leverage. We've streamlined leadership layers to enhance decision-making, agility and focus, which included the retirement or departure of several senior leaders. These include our Chief Marketing Officer, Chief Operating Officer; and multiple SVPs, VPs and directors across the organization.

We've also taken decisive steps to ensure stability and continuity, bringing in experienced industry veterans to key leadership roles, reinforcing our capabilities in critical areas. These initiatives align the company more closely with our strategic goals, fostering a more agile and focused leadership team and position us to operate more efficiently even as we increase our sales capacity.

Third, we are prioritizing healthy cash flow. The initiatives I just outlined have led to operating cash flow of just under $14 million for the 9 months ended September 30, 2024, a $51 million improvement year-over-year. As we've discussed on previous calls, our focus on prepayment optimization and working capital management, along with our continued commitment to efficient revenue growth and operating leverage positions us to drive further cash flow improvements in the coming quarters.

Now turning to our non-GAAP KPIs. We ended Q3 with an ARR of approximately $348 million, up 5% year-over-year. This represents sequential ARR growth of $2 million. Our enterprise account ARR was approximately $257 million, up 7% year-over-year, with enterprise accounts now representing 74% of our total ARR. Our non-enterprise accounts using exclusively our essentials plans had an ARR of just under $91 million, down 1% year-over-year as we lap the prior year small business plan price adjustments.

Average revenue per account for enterprise accounts was $43,600, up 8% year-over-year. We are not at all satisfied with these results. We are doing a better job prioritizing dollarized retention in our best accounts, but we must do a better job driving efficient growth. I believe we're making decisive changes necessary to drive the long-term growth results our shareholders expect. And to be clear, we are not done. We will continue to look for opportunities to drive focus, efficiency and top line growth reacceleration.

That also includes looking at opportunities to further adjust our product and partner offering in areas that may look different from the past, adjust pricing where that makes sense and pursue other opportunities to drive focus on customer outcomes that will fuel our growth. We will do this in a way that continues to prioritize financial discipline and progress towards a healthy, balanced growth and profit profile. Looking ahead to our guidance. For Q4, we expect revenue in the range of $85.8 million to $87.8 million, reflecting year-over-year growth of 2% to 4%.

For the full year 2024, we expect revenue between $331.7 million and $333.7 million, representing growth of approximately 7% to 8% and and consistent with our previous full year guidance at the midpoint. Non-GAAP operating income for Q4 is expected to be between $4.4 million and $6.4 million, with full year non-GAAP operating income projected to be between $13.8 million and $15.8 million. We are making material changes in this business. We are reallocating and refocusing resources, and we'll have a more detailed perspective on the February earnings call when we issue 2025 guidance.

From an early read perspective, we are building internal plans around mid-single-digit growth rates for the full year 2025, as we execute this transition. We expect growth rates to ramp modestly across 2025, and we consider Q4 2024 growth to be a floor from a planning perspective. We also expect the changes I outlined to deliver meaningful improvement to our operating margins and cash flow.

We're in a great position to further increase our level of investment in top line growth in 2025 and are confident in our investments to double sales capacity even as we remain disciplined about our overall level of go-to-market spending. We are committed to a balanced Rule of 40 framework to deliver profitable and accelerating growth. Our capital allocation decisions will have the right balance of growth and profitability, which is critical to driving increased shareholder value over time.

We plan to discuss this in greater detail and share more about our long-term strategy at our upcoming Investor Day in New York on March 11 as well. In closing, I'd like to thank our team for their dedication and commitment as we execute on this new go-to-market strategy. We believe the path ahead is promising, and we're energized by the opportunities in front of us. Travis and I are now happy to take your questions. Operator?

[Operator]

[Operator Instructions] Our first question comes from Ken Wang with Oppenheimer.

[Unknown Analyst]

Lots of changes, lots of moving pieces here today. Travis, I wanted to start with you on the product side. It sounds like you guys are looking to integrate Petonomics and mix with -- how does that potentially change BigCommerce's open ecosystem approach? And should we expect you guys to more directly compete with ISV partners going forward?

[Unknown Executive]

Ken, thanks for the question. No, I think we're materially committed to a more open approach certainly versus our competition. We feel Make Swift is a real unlock as a visual editor, we feel the best visual editor in the business that's really a business user and marketing facing. that's a real difference maker not only in agility to deliver value to our customers, but also enabling them to drive very immersive experiences with very small teams. Feedonomics is certainly just as complementary. I think the thesis there is we feel like it's the best feed management tool and market, looking to optimize revenue across nonowned channels as well as some owned and that complements the big commerce sweet quite nicely, although we do respect the fact that a large portion of Feednomics revenues will oftentimes be consumed by upmarket brands or alternative brands that would never use e-commerce for whatever reason, just based on legacy platforms and other dynamics.

[Unknown Analyst]

Okay. Got it. And then maybe 1 for maybe it's Ellen or Travis. Back in May, June, the summer time frame, there was some outside interest -- how is the Board and management approaching those considerations going forward?

[Unknown Executive]

This is Ellen. Kate, you couldn't get that from the higher pitch voice. We are here for shareholders. We will do whatever it takes to improve shareholder value, and we continue to talk to partners inside and outside.

[Operator]

Our next question comes from Koji Ikeda with Bank of America.

[Unknown Analyst]

It's Natalie Ho on for Koji. As you guys are working on improving cross-selling by doing like the deeper integrations between all your products, what efforts are you guys most excited about, like in like the R&D division that we can also be excited for? How long until those technical integrations for it to be more streamlined for customers to use or brand familiarity and for salespeople to start selling it more packaged together.

[Unknown Executive]

Great question. Thanks. Part of it is already integrated. So make Swift as an example, is a material part of the catalyst accelerator reference architecture. So you're going to see that kind of its debut around in January in New York that will go to market with the rest of the sales team. Feedonomics we would expect we've got a very robust enterprise offering for upmarket brands. We're in the process of launching a self-serve version of Feedonomics that will widen that addressable market for mid-market and down market brands as well, which would be exciting.

I think the biggest upside you're going to see more materially early on is a more organic cross-sell, upsell, leveraging the portfolio of brands to wedge into clients or increase attach rates and effectiveness of greater wallet share from existing clients as we see tangible traction and applicability from each one of those products.

[Unknown Analyst]

Got it. And a quick second question. With the new administration coming in, a lot of talks about a potential increase in tariffs. How could this play into the demand environment?

[Daniel Lentz, executive]

Yes. Thanks for the question. This is Daniel. I think it's really too early to say. I think we have to see what the administration wants to do. a lot of different things that they've talked about. We'll just have to see how that affects prices, consumer demand and the like. I'd say as we think about next year, we're not really making changes to our plans at this time based on some expectation of change in that area. We'll just have to see how that plays out once the new administration comes in, in Q1.

[Operator]

Our next question comes from DJ Hynes with Canaccord.

[David Hynes, analyst]

So Travis, look, you've said one of the mistakes of the past is that you've tried to be everything to everyone. And then I hear you say you're going to be B2C, B2B, SMB going forward. Just help me flesh that out. What is BigCommerce not going to be going forward that should simplify the organization.

[Unknown Executive]

Yes. I think clearly, we've got a rich installed base across those 3 offering groups. I think within those offering groups, the intention is to narrow the focus and embrace the fact that we're really for discerning customers looking to scale, right? And part of that is higher efficiency expansion across that existing customer base and growth across those 3 offerings, also driving additional authenticity in market.

B2B is a very different engagement, talk track, buying audience and solution, obviously, from B2C. It requires deeper expertise, a bit more of a nuance. It's more of a cost takeout around manual labor versus a conversion and experience play. So by definition, it requires a completely bifurcated approach to go deeper, narrower and deeper. And I think small business has always been a large portion of our existing installed base and will continue to be a focus, although we're recognizing the fact that it's not for all small businesses, it's really for discerning small businesses looking to differentiate and scale as opposed to everyone and anything.

[David Hynes, analyst]

Okay. Okay. Got it. And then, Daniel, one for you. Look, we've had 3 quarters in a row now of declines in the number of enterprise accounts this quarter being more material than the prior 2. Can you just talk about what's happening there? How much of that is folks kind of dropping below a spend threshold? How much of that is outright attrition? Where are those folks going? Any color there would be helpful.

[Daniel Lentz, executive]

Yes. Good question. Obviously, it's not a result that we're happy with. I'd say 2 points. One, we are -- as I said in my prepared remarks, we're making progress in prioritizing dollarized retention that's really been the focus. That said, that's not an okay reason for the count to be not growing. And that's really, I'd say, broadly speaking of 2 areas. One, we haven't seen the pipeline build across the whole business, the way that we wanted to by this point in the year. We are seeing a lot of encouraging results there, particularly in B2B, which is part of the reason we've made some of the changes that we're making and doubling down in that area. But we haven't quite seen the pipeline that we wanted at this point of the year. And that's had part to do with it. It just hasn't been enough in some cases to offset some of the net attrition on some of the lower -- the smaller accounts within the enterprise set. And again, it's an area of focus for us. We're not happy about it, and we're focused on getting the turnaround.

[Operator]

And our next question comes from Matti Schech with KeyBanc.

[Unknown Analyst]

My first one is for Travis. Just curious, now that you've stepped into the CEO role, are there any early learnings or surprises that you've seen so far? And then the second one is for Daniel. Just want to give us some more context around the go-to-market changes that you've done this quarter. I'm curious if there's an update on the time line for where go-to-market needs to be maybe a target date that you guys have set or something like that?

[Unknown Executive]

Thanks for the question, Matti. I would say my original remit here in the first 4 months was exclusively focused on go-to-market. That's where a lot of the challenges, quite frankly, have been, as I've alluded to in kind of the opening remarks and some of the answers here, again, very wide, broad focus, focus on feature and function, lack of integration of some of the other products that we've acquired and integrated I think going forward, you're going to see that more laser focused. But I had a 4-month head start on that to go get that kind of cleaned up and rearchitected.

So no real surprises there. I think really, that was the biggest gap I saw in the business is aligning a go-to-market with more authenticity focus and just more commerce expertise in market against what we feel is a very capable suite of products. So no real surprises, just a nice 4-month head start and what really the largest of our challenges were.

[Daniel Lentz, executive]

And Matti, for the second part of your question, as far as time line, I would say, across this year, we've been making a lot of substantial changes already. Those have been really focused on prioritizing, as I said, dollarized retention of our largest accounts and trying to drive better cross-sell ultimately, we felt to get cross-sell and existing account expansion where it needed to be. We needed to fully integrate all of the different brands under the parent company. And that's what Travis was talking about earlier. As I look at where we're going from here, it really is about specialization and getting depth of expertise in go-to-market to better serve the needs of customers.

That's why we're going to have dedicated selling teams across B2B and B2C. We're adding roles to have as much focus on account expansion as we do on account acquisition. And I think that those changes will be substantially complete by the end of Q4 with ramp on the reps that we're going to be adding across Q1 and Q2. We're really aiming to get to double capacity next year and then have really strong momentum as we exit the year.

[Unknown Analyst]

Just one quick follow-up. You mentioned nearly doubling your quota-carrying sales capabilities in 2025. Just curious if that's going to be reallocating existing employees or going out and hiring new salespeople.

[Daniel Lentz, executive]

Little bit of a combination of the 2, but primarily, it's going to be a lot of folks coming in from the outside where we have folks on the inside that we think have the expertise within the offering areas that Travis outlined we will obviously keep those people there. They're ramped. They're great employees. We're excited about that. We're also really excited to take advantage of a really great time in the market to get a lot of really deep commerce expertise, within B2C and B2B in particular, that we think can really broaden the solutions that we can offer to customers and really have better resonance in those offering groups that we think are really going to help us differentiate in market.

[Operator]

Our next question comes from Josh Baer with Morgan Stanley.

[Unknown Analyst]

Great. This is Katy Kuser for Josh there this morning. A lot of encouraging commentary around operational rigor and focus on efficient growth kind of controlling the things that are under your control. I guess it would be helpful to get an update on what you're seeing in the broader e-commerce demand or kind of consumer spending backdrop and how you think these operational changes will withstand kind of ongoing investilations and this broader backdrop and things that may be more outside of your control?

[Unknown Executive]

Great. Good question. I would say, overall, commerce trends the same as what's been going on. Consumer spend is pretty resilient. Platform spending is okay. not great. We'll see what the election results due to that, if inban,outside of our control. We're not planning on any sort of big macro tailwinds. Certainly, we're most optimistic about B2B. That's been the largest majority of our net new bookings. Certainly, I think it maps well to our differentiation and core expertise. That pipeline has been building quite nicely. But generally speaking, we would expect more of the same of what we've seen in generalized demand going forward.

[Daniel Lentz, executive]

And then this is Daniel. One thing I would add, just in terms of your question about resilience, there is so much opportunity here to really not just get more effective in how we're going about go-to-market, but to end up ultimately with much better momentum coming out of it. And I think that the changes that we're making really give us some durability, no matter the economic conditions. Just 2 examples. We're really moving from kind of a generalist go-to-market motion, where we have the same sellers that are focused on landing new accounts and expanding accounts.

We have the same sellers that are talking to B2B customers and B2C customers. And the changes that we're making are really more about bringing more specialization and expertise into those teams. And the demand conditions are going to be better sometimes than others, but we think that that's going to give us a lot better durability and expertise that's going to help sustain more durable growth over time.

[Operator]

Our next question comes from Mark Murphy with JPMorgan.

[Arti Vula, analyst]

This is Arti on for Mark Murphy. First one, Travis, you guys talked about making significant investments to advance your AI capabilities. You guys also released Google AI tool that helps troffers with real-time personalized recommendations. I guess my question is, is this just a continuation of the AI strategy that was in place? Or is there something that's maybe changed in terms of how you guys are approaching it?

[Daniel Lentz, executive]

I'll answer it a couple of different ways. Good question. There'll be some expansion to what we've already announced. I think a lot of it is very tactically oriented to improve workflows and efficiencies and things like that. There are other things that we are in the process of developing that's going to, as an example, dramatically accelerate the ability for existing clients to move to upgraded versions of our product or clients running on other technologies to migrate to our capabilities, which would be widely interesting. I think -- and then in specific industry segments, most notably B2B, I think you'll see some advancement around AI applicability around CPQ and handling a very complex sort of B2B requirements, particularly around manufacturers and distributors that would dramatically widen our addressable market in those particular use cases.

[Arti Vula, analyst]

Very helpful. And then, Daniel, when we're thinking about this doubling of quota-carrying capacity in 2025. Do you have any sense of how that might look in terms of waiting throughout the year when those hires would happen, and is this going to be the typical ramp time for the sales reps of 3 to 4 quarters?

[Daniel Lentz, executive]

Our ramp time is a little bit better than that. We typically see full ramp within 2, maybe 3 quarters. And we are planning to add those reps quickly to the extent we think that makes sense. But we really want to get the substantial majority of that hiring done in the front half of the year that way we have as much fully ramped momentum with new hires going into the back half of the year as we can next year.

[Operator]

Our next question comes from Scott Berg with Needham.

[Scott Berg, analyst]

I want to go back to a comment that Ellen made. I'm going to paraphrase was operational performance has fallen short from I guess, what your all expectations were. What is the operational performance? Or what should that look like here going forward?

[Daniel Lentz, executive]

This is Daniel. I'll take that question. As we said, we're really looking to get this company to a sustainable, balanced rule of 40 profile. We're going to get into a lot more detail about this at our Investor Day in New York City in March. But I want to reemphasize just a couple of things. Number one, we believe that the company has underperformed based on quality of the products and the brands that we have. And that's due to a lot of factors that are within our control and some of that would be obviously helped by factors outside of our control in a macro context. But we need to see revenue growth rates in the teens minimum, we want to get above that.

And we want to make sure that we're staffing to do that. We want to be accountable to those results. And everything that we're doing from the board through the management team and thinking about how we approach that is in reaccelerating growth where it needs to be and doing it in a way that just throwing off growing profit margin and cash flow in a way that ultimately drives really strong shareholder value.

[Scott Berg, analyst]

Got it. Helpful. And then, Travis, you're going to roughly double your quota-bearing capacity here going forward, as you mentioned a couple of times. But one of your responses to one of the questions is the platform spend is just okay. out in the market right now. I guess if it's just okay, why double the capacity spend kind of right now? Why not wait for that to maybe improve a little bit.

[Unknown Executive]

Well, first of all, we don't have enough period right now just even given current conditions. I think when I'm saying just okay, I'm specifically referring to traditional D2C platforms that have been, again, I think, mediocre at best over the last year or 2. I think part of the challenge for us, too, is we're just not in enough rooms quite frankly. We do well when we're in rooms. There's a lot of factors that go into to -- getting into rooms and to orchestrate that is not just one thing. -- it starts with who your ideal customer profile is, what sort of value you're tangibly bringing to them and what that messaging is in market to generate demand. I think just the uptick in that alone will get us into more rooms. And by definition, despite current market conditions being okay.

I suspect we'll see an uplift from just that alone. On the B2B side, we're way more bullish. I think that is a market that is laggards compared to B2C that's been going on for a long time. It's a much wider addressable market in general. We've got a bigger right to win there against our competition. They tend to be more enriching deals for services providers, and they tend to drive more material cost savings, which is the primary thesis of digitizing B2B, which despite economic headwinds and if you're able to drive out cost, you can artificially create and accelerate demand.

[Operator]

Next question comes from Bert Samana with Jefferies.

[Jeremy Sahler, analyst]

This is Jeremy on for Samana. So you called out early kind of guidance for 2025 of mid single-digit growth. I guess, what's baked into that? And what needs to happen? And I guess what might lead to upside to that early forecast?

[Daniel Lentz, executive]

Great question. As we look into 2025, I think general conditions that get to mid-single-digit growth is just where we are in bookings thus far in the year and where we are in pipeline. As I said, pipeline in B2B, in particular, has some really positive signs. But overall, we haven't gotten to the pipeline growth by back half of the year that we wanted, which is why I think that our expectations are a little bit more moderated going into next year than where we would have wanted them to be at the beginning of this year. Things that would drive improvements to that. There's a lot, and this is why we're making the changes that we are. There are so many opportunities to get that going in a faster direction. Part of it is obviously is just pure sales capacity, but a lot of this is the choices that we're making and how we're building and designing the products to make it easier for customers to grow their share of wallet with us without having to contact the sales rep in the first place.

And there's a lot of things that we're going to be looking at in the business where we think it makes sense to rethink choices that we made in the past that we think can broaden and deepen our relationship with customers that goes from a self-serve version of the Feedonomics product, thinking about how we can take Mix-wift to market as an independent product some of the different partner solutions that we have in place, everything from how we think about our payments offerings and different things that we have in other areas with partners.

And we think that there are a lot of potential tailwinds that we can see from that. And if we get to a place where the economy gets in a better place, that's kind of cherry on top for us, but we think that this is within our control, and we don't need to sit around waiting for the economy to get better for us to see much better growth rates.

[Jeremy Sahler, analyst]

Got you. That's useful color. I guess someone called out the enterprise customer count, but looking at the enterprise ARPU growth, I mean, that's been pretty strong. I think it's been accelerating year-over-year. I guess what's driving the strength there? And I guess how much room is there for that to grind hire?

[Daniel Lentz, executive]

What's been driving the growth on that is us prioritizing growth and expansion with our largest dollarized accounts, which I spoke about earlier. I want us to be doing a better job with unit retention as well as dollarized retention. So I'm not primarily focused -- we are not primarily focused on ARPU by itself. We want to see healthy growth in both ARPU and unit count. We think as we continue to move up market over time, as we continue to offer products which gives abilities for customers to broaden their spend with us over time as we deliver better value to them, we can see continued growth in ARPU over time as well.

[Operator]

Our next question comes from Brian Peterson with Raymond James.

[Brian Peterson, analyst]

So just on the integration efforts you guys hit on a lot, and I know you're starting those today. Is there a rough time line of when we should think about that being fully completed in this cross-sell kind of product dynamic should be really suited from your perspective.

[Unknown Executive]

Yes. Thanks for the question. This is Travis. Target right now is end of Q4. Some of that is really, really far along some of it as it relates specifically to feed anomic is such a difference solution and typically consumed by different stakeholders within larger organizations, there's only going to be so much natural organic integration. As you go down market a bit mid-market, small business, you're going to see more of a self-service model there that will be a bit more automated. The target for that is towards the end of next year.

But Make Swift, like I said, has already been integrated. People are leveraging it today, that official sort of coming out party will be anchored around the NRF show in New York in mid-January.

[Brian Peterson, analyst]

Got it. And maybe just a follow-up. As you guys are looking to be more focused on some opportunities. Any help on trying to understand what you're looking at internationally? Are you still targeting a lot of markets there? Or is there a pullback? I'd love to understand that perspective.

[Unknown Executive]

Yes. Interestingly enough, our actual -- our best performing market in the quarter was EMEA as it relates to quarter-over-quarter growth. So we're seeing a lot of momentum over there for a myriad of reasons. One, I think the we've invested in some markets over there, particularly in Italy and Southern Europe where we've seen a lot of demand and a lot of efficacy. By definition, you have a kind of a more complicated use case in that market, which we feel maps really, really well to our product suite. So I think we'll continue to see some bullish demand there. I'll turn to Daniel, any other specifics.

[Daniel Lentz, executive]

No, I would just say, I mean, we've also seen a lot of strength in the U.K. I think is a really, really strong market. Also, quite frankly, I think we have an exceptional team. in EMEA as well, that's leading that. I think the product lends itself well to growth there. We remain committed to the expansion that we've already done within EMEA. I don't anticipate us opening up a bunch of new markets with a long payback period. We're really focused on efficiency and growth in the markets that we are already in. And we think that EMEA in particular, we're very, very bullish about in that area.

[Operator]

[Operator Instructions] Our next question comes from Gabriela Borges with Goldman Sachs.

[Gabriela Borges, analyst]

For Travis and for Daniel. So by the time we see the improvement on the outside offer, you will have already seen it coming on the inside. And so my question for you is what sort of metrics are you going to be tracking internally to measure and quantify some of the success you're having? And what can we see from the outplay booking in before we see those quarters where you're starting to print the mid-teens revenue growth?

[Daniel Lentz, executive]

Great question. I think the best forward indicator is what we're seeing in sequential growth in total ARR and enterprise ARR maybe perhaps to a slightly lesser extent because of the 3 offering groups that we're going to be focusing on small business is one of those. And so I anticipate seeing healthier growth sustainably over time in small business going forward. the best -- when I look at the business, I'm looking at pipeline, I'm looking at where we are in advancing deals through pipeline and that manifests itself most clearly in ARR and subscription ARR.

And so as those numbers start to turn, I think that's when we're going to start to see a turnaround in the top line. If you look at the numbers on the quarter, we posted an ARR growth of 5% relative to revenue growth, I think, of 7. We need to see ARR growth checking on pace or slightly ahead of revenue. When we start to tip that in that direction, I think, is when we're going to start to see a reacceleration on the revenue line.

[Gabriela Borges, analyst]

Yes. Absolutely. That makes sense. The follow-up is, Travis, on a comment you made a couple of times in the last 4 or 5 minutes around big comes looking for discerning customers looking to scale I wanted to ask you a little bit more on the competitive environment in that segment in particular. If I think 5 some years ago, Shopify wasn't really anywhere in the mid-market and the larger customer space. Today, they've talked about being much more aggressive with Shopify Plus, for example. So a little bit more on the competitive environment and how you see Shopify in particular.

[Unknown Executive]

Yes. Generally speaking, I would say it's hard to start a business. It's harder to scale one. I think our product suite lends itself more to those organizations needing to scale versus start. Arguably, I think Shopify has had a nice market share on doing that. I've certainly spent a lot of time in that ecosystem. We'll give credit where credits do I think from a discerning customer perspective, I think to use an easy analogy, I would argue we are Android versus the iPhone. And we can read deeper into that in the sense that the iPhone by definition is very closed. Apple kind of takes an approach that we've figured it all out for you. Here it is. We know it's best for you. You're not going to jail break it, you're not going to really customize it.

What you see is what you get in for a large portion of the market that's suitable, just like it is for me as an iPhone user. Android, if you ask people to use it, we'll give a myriad of reasons why they can make it more bespoke. They can customize it. It's open. It's got better camera, better hardware, things like that. I think we're very much taking a similar approach to market. It's all about composability, agility, optionality for clients.

We don't believe and someone asked the question earlier, if we're going to start cannibalizing other ISVs into the platform. The answer is, philosophically, no. We believe third-party ISVs bring best-in-class capabilities at a faster rate for our clients than we could ever possibly develop it internally. Our job is to create best-in-class APIs and the ability for customers very quickly. very easily ingest those capabilities to map to their business use cases and arguably how they best want to differentiate and scale.

[Operator]

Our next question comes from Chris Chang with UBS.

[Unknown Analyst]

It's helpful that you give them the early indication in 2025 and also some of the framework you're going to talk about at Master day. I guess at this point, would you be able to share regarding the Rule of 40 framework, what's the time line you're thinking of maybe just reaching as a whole? And then I have a follow-up.

[Daniel Lentz, executive]

I don't think we're in a position where we can share definitively when we're going to get to a rule of 40 profile. I think just with the economic climate where it is and where we are as a business from an execution perspective, we know we have a lot of work to do, and we have a long way to go to get there. we're committed to getting there. We're accountable to getting there. And I think that the Board and the management team has made very clear we're going to decisively take the actions we need to do in order to be there. When we look specifically at next year, really, we're thinking about and approaching this as a transition year of sorts from a go-to-market perspective, and we're trying to get that done as fast as possible so that next year doesn't have as much of a ramp time to deal with for the reps that we're going to be adding.

And so when we look at next year, again, from a planning perspective, when we use that word carefully because that's not guidance. We're trying to share how we're thinking about numbers internally and how we're building our plans. We're exiting the year really well from a profit and a cash flow point of view. I think that we're going to be doing significantly better than, I think, where expectations are right now on profit and cash. We wanted to be clear about this on this call. But we do think that the top line is going to be a little bit tight because we didn't get quite the growth that we wanted this year.

And so I think next year, aiming for mid single-digit growth on a planning basis. We think there's a lot of routes to get there. But we want to get these changes done as quickly as we can so that we can get accelerating and then get to Rule of 40 as fast as we can in a balanced way.

[Unknown Analyst]

That's very helpful. But that's what we look forward to the 2025 guidance and more details on the Investor Day. And I guess maybe just a follow-up on more of the near term on the restructuring could you quantify some of the rate impact on maybe GAAP or non-GAAP OpEx. And I think as you mentioned, there could be additional restructuring costs in 2025. Is that what you're thinking about in terms of further streamline the organization? Or is it all just part of the September 30 restructuring you've announced?

[Daniel Lentz, executive]

Great question. So we had a number of different kind of one-time items on the quarter. We had a material gain on the debt restructuring that we announced actually. Within restructuring, it was a $9.9 million charge, of which $9.8 million of that related to stuff specifically within this restructuring. We had a tail from the restructuring that we took last year. Composition of that really is in, I'd say, 4 primary areas. There's a little bit of asset impairment that we took with respect to some capitalized software. There were some changes with leases.

We're looking to kind of really streamline and downsize where we think it makes sense. The use of our lease assets. We're also going to be making a pretty major effort, as we've talked about on previous calls, to consolidate our software environment and transformed. We're going to 1 consolidated CRM. It's a lot of the background stuff that goes with the integration of Feedonomics and other things we talked about.

The primary item related to severance related to the head count actions that we announced this morning. It is not complete. We still anticipate probably another potentially $3 million to $5 million worth of restructuring costs across 2025. But that's primarily related to non-headcount impacts remaining, whether that is as we take software out of use, if we have to buy out some contracts in order to deprecate some software, we have some additional changes we're anticipating on the real estate side of things, things like that.

[Operator]

This concludes our question-and-answer session. I would now like to turn the conference back over to Travis as the CEO of the company for any closing remarks.

[Unknown Executive]

Just wanted to thank everybody for attending and covering us today. I appreciate the questions. One last word, I want to again reiterate our commitment to the plans to growing top line, efficient revenue going forward, making material changes as quickly as possible, and I look forward to chatting with you next quarter.

[Operator]

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