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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in “Risk Factors.” See “Special Note Regarding Forward-Looking Statements.”

Overview

BigCommerce is leading a new era of ecommerce. Our SaaS platform simplifies the creation of beautiful, engaging online stores by delivering a unique combination of ease-of-use, enterprise functionality, composability and flexibility. We allow merchants to build their ecommerce solution their way with the flexibility to fit their unique business and product offerings. We power both our customers’ branded ecommerce stores and their cross-channel connections to popular online marketplaces, social networks, and offline POS systems. Our strategy is to provide the world’s best combination of freedom of choice and flexibility in a multi-tenant SaaS platform. We describe this strategy as “Open SaaS.” As of December 31, 2022, we served 5,786 enterprise accounts.

We provide a comprehensive platform for launching and scaling an ecommerce operation, including store design, catalog management, hosting, checkout, order management, reporting, and pre-integration into third-party services like payments, shipping, and accounting. All our stores run on a single code base and share a global, multi-tenant architecture purpose built for security, high performance, and innovation. Our platform serves stores in a wide variety of sizes, product categories, and purchase types, including B2C and B2B. Our customers include Ben & Jerry’s, Molton Brown, Burrow, SC Johnson, SkullCandy, SoloStove and Vodafone.

We offer access to our platform on a subscription basis. We serve customers with subscription plans tailored to their size and feature needs. For our larger customers, our Enterprise plan offers our full feature set at a monthly subscription price tailored to each business. For SMBs, BigCommerce Essentials offers three retail plans: Standard, Plus, and Pro, priced at $29.95, $79.95, and $299.95 per month when paid annually, or $39, $105, and $399 per month, when paid monthly, respectively. Our Essentials plans include GMV thresholds with programmatic upgrades built in as merchants exceed each plan’s threshold.

Our differentiated Open SaaS technology approach combines the flexibility and customization potential of open source software with the performance, security, usability, and value benefits of multi-tenant SaaS. This combination helps businesses turn digital transformation into competitive advantage. While some software conglomerate providers attempt to lock customers into their proprietary suites, we focus on the configurability and flexibility of our open platform, enabling each business to optimize their ecommerce approach based on their specific needs.

Partners are essential to our open strategy. We believe we possess one of the deepest and broadest ecosystems of integrated technology solutions in the ecommerce industry. We strategically partner with, rather than compete against, the leading providers in adjacent categories, including payments, shipping, POS, CMS, CRM, and ERP. We focus our research and development investments in our core product to create a best-of-breed ecommerce platform and co-market and co-sell with our strategic technology partners to our mutual prospects and customers. As a result, we earn high-margin revenue share from a subset of our strategic technology partners, which complements the high gross margin of our core ecommerce platform.

Our business has achieved significant growth since our inception. We had total revenue of $279.1 million, $219.9 million and $152.4 million for the years ended December 31, 2022, 2021 and 2020, respectively. We plan to continue to invest in our “Open SaaS” strategy, building new partnerships and continuing to develop a platform that offers best-of-breed functionality with the cost-effectiveness of multi-tenant SaaS. As we work to develop and deliver this platform for our customers, we will also invest and grow our business by acquiring additional customers to our platform, growing our revenue with existing customers, cross-selling owned and partner solutions to existing customers, expanding our presence in new segments and geographies, and considering targeted acquisitions that can enhance our service to customers.

Key factors affecting our performance

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

Continued growth of ecommerce domestically and globally

Ecommerce is rapidly transforming global B2C and B2B commerce. B2C ecommerce was nonexistent in the early-1990s and grew from approximately 10% of all global retail spending in 2017 to 18% in 2020, according to eMarketer. eMarketer estimates that by 2025, retail ecommerce sales will comprise 24% of worldwide total retail sales. B2B ecommerce has grown rapidly. Forrester estimates that by 2027, B2B ecommerce will comprise 26% of all B2B transactions in the United States, up from 13% in 2016. The rapid growth in ecommerce is prompting companies to adopt ecommerce platforms like BigCommerce to create compelling branded ecommerce stores and power cross-channel connections to online marketplaces, social networks, and offline POS systems.

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We believe we have a substantial opportunity to serve a larger number of customers as ecommerce continues to grow around the world by extending into new and emerging segments within ecommerce. The following segments are significant areas of potential growth and strategic focus for us:

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

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Omnichannel. This is the ability for merchants to conduct commerce anywhere shoppers are - online and offline. This includes shopping through a merchant’s branded ecommerce store or through online marketplaces and social commerce channels such as Google, Meta (Facebook and Instagram), TikTok, Amazon, Walmart, eBay, Wish and Mercado Libre. Merchants’ product data is made available and may be optimized for these commerce and related advertising channels through BigCommerce and Feedonomics’ product and service offerings. According to eMarketer, US ecommerce and ad channel spending was approximately $19 billion in 2020, representing 12% of digital ad spending. This is expected to grow to more than $41 billion and 15% of digital ad spending by 2024. US retail marketplace ecommerce sales topped $270 billion in 2020, representing 34% of total ecommerce sales. This is expected to grow to more than $420 billion by 2023. BigCommerce and Feedonomics enable merchants to improve and optimize omnichannel shopping and advertising, helping bolster their sales growth.

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B2B. As of December 31, 2022, approximately 19% of our customers use BigCommerce primarily for B2B sales. In many cases, these customers’ needs are met using our native functionality, including B2B features like customer groups and price lists. In other cases, these customers use BigCommerce's purpose-built B2B Edition, which augments our Enterprise plan with dedicated B2B features like invoicing, quotes, and buyer approval workflows. Over time, we intend to add more B2B functionality to both the BigCommerce Apps Marketplace and our native feature set.

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Composable commerce. Composable gives merchants the freedom to mix, match and combine best-in-breed tech vendors to create a customized and robust technology stack. With BigCommerce’s open commerce approach and commitment to MACH Alliance principles. B2C and B2B merchants can make smart technology investments that are agile, functional, and flexible. In an unpredictable economy, flexibility and composability are especially important. Our open platform lets merchants build the technology stack that best serves their needs and delivers an incredible shopping experience for their customers.

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Headless commerce. This refers to businesses whose technology strategy is to decouple their front-end customer experience technology from their back-end commerce platform. In terms of online strategy, these companies are typically brand-, marketing-, or experience-led. We serve headless use cases well due to years of investment in our platform APIs and integration capabilities. Pre-built integrations connect our platform with leading CMSs such as Acquia, Adobe, Bloomreach, Drupal, Sitecore, and WordPress.

Efficient acquisition of new customers

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

We measure the efficiency of new customer acquisition by comparing the lifetime value (“LTV”) of newly-acquired customers to the customer acquisition costs (“CAC”) of the associated time period to get an “LTV:CAC ratio.” We calculate LTV as gross profit from new sales during the four quarters of any given year divided by the estimated future subscription churn rate. We calculate CAC as total sales and marketing expense incurred during the associated preceding four quarters. New SMB, Mid-Market and Enterprise customers were added at an estimated LTV:CAC ratio of 3.8:1 and 4.9:1 for the years ended December 31, 2022 and 2021, respectively.

Retention and growth of our existing customers

We believe our long-term revenue growth is correlated with the growth of our existing customers’ ecommerce businesses. We strive to maintain industry-leading service levels and platform capabilities to maximize customer success and retention. Our revenue grows with that of our customers. As they generate more online sales, we generate more subscription revenue through automated sales-based upgrades on our Essentials plans and order adjustments on our Enterprise plans. Typical Enterprise contracts have terms ranging from 12 to 36 months and do not include the ability to terminate for convenience.

As our customers’ online sales increase, our partner and services revenue generated by revenue-sharing agreements with our strategic technology partners increases as well. Our ability to retain and grow our customers’ ecommerce businesses often depends on the continued expansion of our platform and the capabilities of our strategic technology partners to provide revenue generating services to our customers. We continually evaluate prospective and existing partners’ abilities to enhance the capabilities of our customers’ ecommerce businesses. We add new partners and expand existing partner relationships to enhance the utility of our platform, while creating new opportunities to expand our revenue share in partner and services revenue. As we continue to grow as a platform, we believe our ability to realize more favorable and expansive revenue share agreements will grow as well.

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We also grow by selling additional stores to existing customers. Our larger customers will often first use our platform to build a single online store that serves a single brand within their portfolio. These customers can then expand their usage of our platform by launching additional stores to serve additional brands, geographies, or use cases (e.g., B2B in addition to B2C).

Successful rollout of new geographies

We believe our platform can compete successfully around the world. We enhance usability in new geographies by translating our control panel into local languages and enabling the integration of local payment processors. We support the growth of mid-market and large enterprise customers around the world by expanding our regional sales and marketing capabilities.

We opened our first European office in London, UK in 2018 and expanded it throughout 2022 and 2021, resulting in a 34% and 68% revenue growth rate in EMEA for the years ended December 31, 2022 and 2021. We advanced our international expansion strategy in 2021 through the launch of new country-specific websites in France, Italy, the Netherlands, and more recently in Mexico, Germany and Spain. In 2022, we formally launched in the Nordic countries, and South America, and expanded further in the DACH region. We continue to invest in our global presence and in offering native language web experiences that further strengthen our ability to connect more directly with prospects and customers in each region.

Evolution of our technology partner ecosystem

A key part of our strategy is to build a thriving technology partner ecosystem. We focus on collaborating with, not competing against, partners in our ecosystems. This strategy contrasts with our largest competitors, who operate software stacks with multiple vertically integrated adjacent services that potentially compete with offerings from technology partners in their ecosystems. Our customers benefit from the expertise and best-of-breed offerings of our partners, the flexibility to choose without penalty the best offerings for their needs, and the tailored programs developed with our strategic partners. Through significant investment, we have developed a marketplace of integrated application and technology solutions that is one of the largest of any ecommerce platform. Our partners currently offer more than 1290 pre-built applications and integrations spanning major categories relevant to ecommerce, including shipping, tax, accounting and ERP, marketing, fulfillment, cross-channel commerce, and POS systems, with additional applications and integrations for merchandising, locations, and payments. We intend to grow partner-sourced revenue by expanding the value and scope of existing partnerships, selling and marketing partner solutions to our customer base, and acquiring and cultivating new, high-value relationships. Partner referrals of customers are increasingly becoming an efficient customer acquisition strategy for us as we expand our programs for cross-marketing and cross-selling with our partners.

Realizing operating leverage from our investments

We have made significant investments in our SaaS platform and our global infrastructure, which we believe will yield future operating leverage and profit margin expansion. Research and development has historically been one of our largest operating expense categories. By expanding our lower-cost engineering in lower-cost international locations, we are increasing development capacity while also driving leverage in engineering cost as a percentage of total revenue. In addition, we believe we will achieve operating leverage in marketing by continuing to emphasize lower-cost inbound techniques and growth in customer referrals from our technology and agency partners, especially as our revenue mix continues to shift to our enterprise plans. While we may see changes in margins from one period to another based on our relative pace of expansion and the associated level of investments required, we believe we will be able to run our business more efficiently as we continue to grow our revenue and gain further operating leverage as we scale.

Impact of our cost reduction initiatives

In December 2022, we announced a restructuring plan based on cost-reduction initiatives intended to reduce our cost structure and accelerate our path to profitability (the “2022 Restructure”). The 2022 Restructure included a reduction in force. During the fourth quarter of 2022, we completed the 2022 Restructure, which resulted in total charges of $7.3 million recognized during the fourth quarter of 2022, with a portion thereof to be realized in the first quarter of 2023. Please see Note 8 to the accompanying consolidated financial statements for additional information.

Key business metrics

We review the following key business metrics to measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. Increases or decreases in our key business metrics may not correspond with increases or decreases in our revenue. We have included the activity of Feedonomics in our key business metrics from the acquisition date of July 23, 2021, through December 31, 2022. Our key business metrics, such as annual revenue run-rate, subscription annual revenue run rate, average revenue per account and others are calculated as of the end of the last month of the reporting period. We have excluded any activity pertaining to Feedonomics from our key business metrics for all periods presented that precede its acquisition. As a result, year over year or quarter over quarter metrics will not include Feedonomics’ impact in the base period. Period over period results will be fully comparable for full fiscal periods completed after the one-year anniversary of the acquisition.

Annual revenue run-rate

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

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Subscription ARR

We calculate subscription ARR at the end of each month as the sum of contractual monthly recurring revenue at the end of the period, which includes platform subscription fees, invoiced growth adjustments, product feed management subscription fees, recurring professional services revenue, and other recurring revenue, multiplied by twelve to prospectively annualize recurring revenue.

Average revenue per account

We calculate average revenue per account (“ARPA”) at the end of a period by including customer-billed revenue and an allocation of partner and services revenue, where applicable. We bill customers for subscription solutions and professional services, and we include both in ARPA for the reported period. For example, ARPA as of December 31, 2022, includes all subscription solutions and professional services billed between January 1, 2022, and December 31, 2022. We allocate partner revenue, where applicable, primarily based on each customer’s share of GMV processed through that partner’s solution. Partner revenue that is not directly linked to customer usage of a partner’s solution is allocated based on each customer’s share of total platform GMV. Each account’s partner revenue allocation is calculated by taking the account’s trailing twelve-month partner revenue, then dividing by twelve to create a monthly average to apply to the applicable period in order to normalize ARPA for seasonality.

Enterprise Account metrics

To measure the effectiveness of our ability to execute against our growth strategy, particularly within the mid-market and enterprise business segments, we calculate ARR attributable to Enterprise Accounts. We define Enterprise Accounts as accounts with at least one unique Enterprise plan subscription or an enterprise level feed management subscription (collectively “Enterprise Accounts”). These accounts may have more than one Enterprise plan or a combination of Enterprise plans and Essentials plans.

The chart below illustrates certain of our key business metrics as of the period ended.

Enterprise Account Metrics:

ARR % of Total ARR 72 % 64 % 56 %

Net revenue retention

We use net revenue retention (“NRR”) to evaluate our ability to maintain and expand our revenue with our account base of customers exceeding the ACV threshold over time. The total billings and allocated partner revenue, where applicable, for the measured period are divided by the total billings and allocated partner revenue for such accounts, corresponding to the period one year prior. An NRR greater than 100% implies positive net revenue retention. This methodology includes stores added to or subtracted from an account’s subscription during the previous twelve months. It also includes changes to subscription and partner and services revenue billings, and revenue reductions from stores or accounts that leave the platform during the previous one-year period. Net new accounts added after the previous one-year period are excluded from our NRR calculations. NRR for enterprise accounts was 111% and 118% for years ended December 31, 2022 and 2021, respectively. We update our reported NRR at the end of each fiscal year and do not report quarterly changes in NRR.

Components of results of operations

Revenue

We generate revenue from two sources: (1) subscription solutions revenue and (2) partner and services revenue.

Subsequent to our acquisition of Feedonomics on July 23, 2021, subscription revenue also includes revenue from Feedonomics. Through Feedonomics, BigCommerce provides feed management solutions under service contracts which are generally one year or less and, in many cases, month-to-month. These service types may be sold stand-alone or as part of a multi-service bundle (e.g. both marketplaces and advertising) and are billed monthly in arrears.

We generate partner revenue from our technology application ecosystem. Customers tailor their stores to meet their feature needs by integrating applications developed by our strategic technology partners. We enter into contracts with our strategic technology partners that are generally for one year or longer. We generate revenue from these contracts in three ways: (1) revenue-sharing arrangements, (2) technology

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integrations, and (3) partner marketing and promotion. We recognize revenue on a net basis from revenue-sharing arrangements when the underlying transaction occurs.

We also generate revenue from non-recurring professional services that we provide to complement the capabilities of our customers and their agency partners. Our services help improve customers’ time-to-market and the success of their businesses using BigCommerce. Our non-recurring services include education packages, launch services, solutions architecting, implementation consulting, and catalog transfer services.

Cost of revenue

Cost of revenue consists primarily of: (1) personnel-related costs (including stock-based compensation expense) for our customer success teams, (2) costs that are directly related to hosting and maintaining our platform, (3) fees for processing customer payments, and (4) the allocation of overhead costs. We expect that cost of revenue will increase in absolute dollars, but may fluctuate as a percentage of total revenue from period to period as our mix between business lines change and we build out additional localized support as we expand internationally. With our acquisition of Feedonomics on July 23, 2021, cost of revenue also includes personnel and other costs related to feed management along with other customer support personnel.

Sales and marketing

Sales and marketing expenses consist primarily of: (1) personnel-related expenses (including stock-based compensation expense), (2) sales commissions, (3) marketing programs, (4) travel-related expenses, and (5) allocated overhead costs. We focus our sales and marketing efforts on creating sales leads and establishing and promoting our brand. We plan to increase our investment in sales and marketing by hiring additional sales and marketing personnel, executing our go-to-market strategy globally, and building our brand awareness. Incremental sales commissions for new customer contracts are deferred and amortized ratably over the estimated period of our relationship with such customers. No incremental sales commissions are incurred on renewals of customer contracts. We expect our sales and marketing expenses will increase in absolute dollars, but will decrease as a percentage of total revenue over time.

Research and development

Research and development expenses consist primarily of personnel-related expenses (including stock-based compensation expense) incurred in maintaining and developing enhancements to our ecommerce platform and allocated overhead costs. To date, software development costs eligible for capitalization have not been significant.

We believe delivering new functionality is critical to attracting new customers and enhancing the success of existing customers. We expect to continue to make substantial investments in research and development. We expect our research and development expenses to increase in absolute dollars, but decrease as a percentage of total revenue over time, as we continue to leverage engineers in other low-cost international locations. We expense research and development expenses as incurred.

General and administrative

General and administrative expenses consist primarily of: (1) personnel-related expenses (including stock-based compensation expense) for finance, legal and compliance, human resources, and IT, (2) external professional services, and (3) allocated overhead costs. We incur additional general and administrative expenses as a result of operating as a public company and have increased the size of our general and administrative functions to support the growth of our business. As a result, we expect that general and administrative expenses will increase in absolute dollars but may fluctuate as a percentage of total revenue from period to period.

Acquisition related expenses

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

Amortization of intangible assets

Amortization of intangible assets consist of non-cash amortization of acquired intangible assets which were recognized as a result of business combinations and are being amortized over their expected useful life.

Restructuring charges

Restructuring charges are comprised of costs incurred as a result of our 2022 Restructure as well as an impairment of the right of use asset triggered by our decision to cease using a significant portion of certain leased facilities.

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Other expenses, net

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

Provision for income taxes

Provision for income taxes consists primarily of deferred income taxes associated with amortization of tax deductible goodwill and current income taxes related to certain foreign and state jurisdictions in which we conduct business. For U.S. federal income tax purposes and in certain foreign and state jurisdictions, we have NOL carryforwards. The foreign jurisdictions in which we operate have different statutory tax rates than those of the United States. Additionally, certain of our foreign earnings may also be currently taxable in the United States. Accordingly, our effective tax rate will vary depending on the relative proportion of foreign to domestic income, use of foreign tax credits, changes in the valuation of our deferred tax assets and liabilities, applicability of any valuation allowances, and changes in tax laws in jurisdictions in which we operate.

Results of operations

The following table summarizes our historical consolidated statement of operations data. The period-to-period comparison of operating results is not necessarily indicative of results for future periods.

Year ended December 31,

(in thousands)

Operating expenses:

Restructuring charges 7,332 - -

Amortization of intangible assets 8,078 3,284 -

Change in fair value of financial instrument - - 4,413

Provision for income taxes 495 (34 ) 25

(1) Includes stock-based compensation expense as follows:

Year ended December 31,

(in thousands)

(1) Includes depreciation and amortization as follows:

Year ended December 31,

(in thousands)

Total depreciation and amortization expense $ 3,344 $ 2,867 $ 3,084

Revenue by geographic region

The composition of our revenue by geographic region during the years ended December 31, 2022 and 2021, and years ended December 31, 2021 and 2020 were as follows:

Year endedDecember 31, Change Year endedDecember 31, Change

(dollars in thousands) (dollars in thousands)

Revenue

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Comparison of years ended December 31, 2022 and 2021, and the years ended December 31, 2021 and 2020

Revenue

The following table presents the components of our revenue for each of the periods indicated:

Year endedDecember 31, Change Year endedDecember 31, Change

(dollars in thousands) (dollars in thousands)

Revenue

Revenue increased $59.2 million, or 26.9%, to $279.1 million for the year ended December 31, 2022 from $219.9 million for the year ended December 31, 2021, as a result of increases in both subscription solutions and partner and services revenue as well as revenue pertaining to the acquisition of Feedonomics. Subscription solutions revenue increased $50.9 million, or 32.8%, to $205.8 million for the year ended December 31, 2022 from $154.9 million for the year ended December 31, 2021, primarily due to the increase in mid-market and large enterprise customers and our international expansion efforts. Feedonomics revenue contributed to an increase of $8.4 million, to $22.8 million in subscription revenue for the year ended December 31, 2022 compared to $14.4 million for the year ended December 31, 2021 (this comparable period includes only six months of activity due to the date of acquisition). Partner and services revenue increased $8.4 million, or 12.9%, to $73.3 million for the year ended December 31, 2022 from $64.9 million for the year ended December 31, 2021, primarily as a result of increases in revenue-sharing activity with our technology partners and improved monetization of partner revenue share.

Revenue increased $67.5 million, or 44.3%, to $219.9 million for the year ended December 31, 2021 from $152.4 million for the year ended December 31, 2020, as a result of increases in both subscription solutions and partner and services revenue as well as revenue pertaining to the acquisition of Feedonomics. Subscription solutions revenue increased $51.2 million, or 49.4%, to $154.9 million for the year ended December 31, 2021 from $103.7 million for the year ended December 31, 2020, primarily due to the increase in mid-market and large enterprise customers and our international expansion efforts. Feedonomics contributed $14.4 million in subscription revenue for the year ended December 31, 2021. Partner and services revenue increased $16.3 million, or 33.4%, to $65.0 million for the year ended December 31, 2021 from $48.7 million for the year ended December 31, 2020, primarily as a result of increases in revenue-sharing activity with our technology partners and improved monetization of partner revenue share.

Cost of revenue, gross profit, and gross margin

The following table presents our cost of revenue, gross profit, and gross margin for each of the periods indicated:

Year endedDecember 31, Change Year endedDecember 31, Change

(dollars in thousands) (dollars in thousands)

Cost of revenue increased $21.5 million, or 44.4%, to $70.0 million for the year ended December 31, 2022 from $48.5 million for the year ended December 31, 2021, primarily as a result of higher hosting costs of $4.7 million as a result of increased transactions processed and increases in personnel-related costs of $6.8 million, including stock-based compensation expense, for personnel involved in providing customer support and professional services and Feedonomics related expenses of $10.0 million. Gross margin decreased to 74.9% during 2022 from 77.9% during 2021.

Cost of revenue increased $14.4 million, or 42.1%, to $48.5 million for the year ended December 31, 2021 from $34.1 million for the year ended December 31, 2020, primarily as a result of higher hosting costs of $1.6 million as a result of increased transactions processed and increases in personnel-related costs of $7.2 million, including stock-based compensation expense, for personnel involved in providing customer support and professional services and Feedonomics related expenses of $5.5 million. Gross margin increased to 77.9% during 2021 from 77.6% during 2020.

Operating expenses

The following tables present our operating expenses for each of the periods indicated:

Sales and marketing

Year endedDecember 31, Change Year endedDecember 31, Change

(dollars in thousands) (dollars in thousands)

Sales and marketing expenses increased $35.4 million, or 35.7%, to $134.8 million for the year ended December 31, 2022 from $99.4 million for the year ended December 31, 2021, primarily due to an increase of $14.6 million in personnel-related costs, including stock-based compensation expense, for personnel engaged in acquiring new customers and marketing our products and services. The increase was also attributable to $13.2

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million in additional marketing spend to support revenue growth coupled with $7.6 million in sales and marketing spending attributable to the acquisition of Feedonomics.

Sales and marketing expenses increased $26.9 million, or 37.1%, to $99.4 million for the year ended December 31, 2021 from $72.5 million for the year ended December 31, 2020, primarily due to an increase of $12.9 million in personnel-related costs, including stock-based compensation expense, for personnel engaged in acquiring new customers and marketing our products and services. The increase was also attributable to $10.1 million in additional marketing spend to support revenue growth coupled with $3.3 million in sales and marketing spending attributable to the acquisition of Feedonomics.

Research and development

Year endedDecember 31, Change Year endedDecember 31, Change

(dollars in thousands) (dollars in thousands)

Research and development expenses increased $23.7 million, or 36.7%, to $88.2 million for the year ended December 31, 2022 from $64.5 million for the year ended December 31, 2021, primarily due to higher staffing costs of $15.0 million, including stock-based compensation and bonuses, decreased variable spend of $0.3 million, and expenses related to the acquisition of Feedonomics of $9.0 million; these expenses increased as a percentage of revenue.

Research and development expenses increased $16.2 million, or 33.5%, to $64.5 million for the year ended December 31, 2021 from $48.3 million for the year ended December 31, 2020, primarily due to higher staffing costs of $9.2 million, including stock-based compensation and bonuses, additional spend to support engineering projects of $2.6 million, and expenses related to the acquisition of Feedonomics of $4.1 million; however, these expenses declined as a percentage of revenue.

General and administrative

Year endedDecember 31, Change Year endedDecember 31, Change

(dollars in thousands) (dollars in thousands)

General and administrative expenses increased $19.2 million, or 33.7%, to $76.0 million for the year ended December 31, 2022 from $56.8 million for the year ended December 31, 2021. The increase was primarily due to an increase of $9.8 million in personnel-related expense, including stock-based compensation expense, variable spend associated international expansion growth of $5.7 million and expenses related to the acquisition of Feedonomics of $3.7 million.

General and administrative expenses increased $20.7 million, or 57.3%, to $56.8 million for the year ended December 31, 2021 from $36.1 million for the year ended December 31, 2020. The increase was primarily due to an increase of $10.5 million in personnel-related expense, including stock-based compensation expense, fees associated with operating as a public company of $6.0 million, equipment related costs for personnel of $2.2 million and expenses related to the acquisition of Feedonomics of $1.4 million.

Acquisition related expenses

Acquisition related expense was $35.2 million and $23.3 million for the years ended December 31, 2022 and December 31, 2021, respectively, primarily as a result of acquisition related compensation in conjunction with our business combinations. Acquisition related expenses were insignificant for the year ended December 31, 2020.

Restructuring charges

Restructuring charges were $7.3 million for the year ended December 31, 2022 primarily as a result of the reduction in workforce and the impairment of the right-of-use asset for vacating certain facilities early. Restructuring charges were insignificant for the years ended December 31, 2021 and December 31, 2020.

Interest income

Interest income was $4.2 million for the year ended December 31, 2022 primarily as a result of interest rate increased and was insignificant for the years ended December 31, 2021 and 2020.

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Interest expense

Interest expense increased to $2.8 million, or 250% for the year ended December 31, 2022 from $0.8 million for the year ended December 31, 2021 primarily as a result of a full year impact of interest expense on convertible debt in 2022.

Interest expense decreased $2.3 million, or 73.3%, to $0.8 million for the year ended December 31, 2021 from $3.1 million for year ended December 31, 2020, primarily as a result of paying down our lines of credit.

Change in fair value of financial instrument

The increase of $4.4 million in the fair value of financial instrument for the year ended December 31, 2020 was the result of a change in fair value of the embedded lenders’ put option on our 2020 Convertible Term Loan.

Other expense

Other expense was insignificant in the years ended December 31, 2022, 2021 and 2020.

Provision for income taxes

Our provision for income taxes was not material for the years ended December 31, 2022, 2021 and 2020.

Liquidity and capital resources

We have incurred losses since our inception and may continue to generate negative operating cash flow, however we believe we have sufficient cash and cash equivalents and marketable securities to continue to fund operations. During the year ended December 31, 2021, we issued approximately $345.0 million in convertible debt, and used $35.6 million of the proceeds to enter into capped call transactions.

Our operational short-term liquidity needs primarily include working capital for sales and marketing, research and development, and continued innovation. Additionally, $81.1 million of cash was used to pay for our acquisition of Feedonomics on July 23, 2021. We have generated significant operating losses and negative cash flows from operations as reflected in our accumulated deficit and condensed consolidated statements of cash flows. We expect to continue to incur operating losses and negative cash flows from operations for the full year 2023 and may require additional capital resources to execute strategic initiatives to grow our business. Our future capital requirements will depend on many factors, including our growth rate, levels of revenue, the expansion of sales and marketing activities, market acceptance of our platform, the results of business initiatives, the timing of new product introductions, and the continued impact of the conflict in Ukraine and inflation on the global economy and our business, financial condition, and results of operations.

We believe that our existing cash and cash equivalents and our cash flows from operating activities will be sufficient to meet our working capital and capital expenditure needs for at least the next twelve months. In the future, we may attempt to raise additional capital through the sale of additional equity or debt financing. In connection with our acquisition of Feedonomics we paid $32.5 million paid in cash at the first anniversary of closing and are obligated to make a payment of up to $32.5 million to be paid at the second anniversary of closing or upon the earlier achievement of certain milestones. We may elect to make the second anniversary payment partially or entirely in shares of our common stock in lieu of cash. If we choose to issue stock to settle the remaining payment, we will be required to register these shares with the Securities and Exchange Commission. The sale of additional equity would be dilutive to our stockholders. Additional debt financing could result in increased debt service obligations and more restrictive financial and operational covenants. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results and financial condition could be adversely affected. From time to time, we may seek to repurchase, redeem or otherwise retire our convertible notes through cash repurchases and/or exchanges for equity securities, in open market repurchases, privately negotiated transactions, tender offers or otherwise. Such repurchases, redemptions or other transactions, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors. The amounts involved may be material. We do not have any material off-balance sheet arrangements that we expect would materially affect our liquidity and capital resources.

Cash flows

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

Year ended December 31,

(in thousands)

As of December 31, 2022, we had $305.0 million in cash, cash equivalents, restricted cash, and marketable securities, a decrease of $96.0 million compared to $401.0 million for the year ended December 31, 2021. Cash and cash equivalents consist of highly-liquid investments with original maturities of less than three months. Our restricted cash balance of $1.5 million and $1.1 million at December 31, 2022 and December 31, 2021, respectively, consists of security deposits for future chargebacks and amounts on deposit with certain financial institutions. Our marketable

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securities balance of $211.9 million at December 31, 2022, consists of investments in debt securities and $102.3 million at December 31, 2021. We maintain cash account balances in excess of FDIC-insured limits.

Operating activities

Net cash used in operating activities for the years ended December 31, 2022, 2021 and 2020 was $89.4 million, $40.3 million and $26.5 million, respectively. This consisted primarily of our net losses adjusted for certain non-cash items, including depreciation and amortization, stock-based compensation, debt discount amortization, bad debt expense, and the effect of changes in working capital.

Investing activities

Net cash used in investing activities during the year ended December 31, 2022 was $116.5 million. It consisted primarily of the cash paid for an acquisition of $0.7 million, the purchases of marketable securities of $214.2 million and the purchases of property and equipment of $5.2 million, offset by the maturity of marketable securities of $103.6 million.

Net cash used in investing activities during the year ended December 31, 2021 was $186.9 million. It consisted primarily of the cash paid for an acquisition of $81.1 million, the purchases of marketable securities of $107.0 million and the purchases of property and equipment of $3.3 million, partially offset by the maturity of marketable securities of $4.5 million.

Net cash used in investing activities during the year ended December 31, 2020 was $2.0 million. It consisted primarily of purchases of property and equipment of $2.0 million.

Financing activities

Net cash provided by financing activities during the year ended December 31, 2022 was $0.2 million primarily consisting of issuance of shares of common stock pursuant to the exercise of stock options.

Net cash provided by financing activities during the year ended December 31, 2021 was $305.3 million. In the year ended December 31, 2021, $345.0 million was provided by the issuance of the Convertible Notes and the issuance of shares of common stock pursuant to the exercise of stock options provided $5.9 million, partially offset by the purchase of capped calls of $35.6 million and the payment of debt issuance costs of $10.0 million.

Net cash provided by financing activities during the year ended December 31, 2020 was $240.0 million. In the year ended December 31, 2020, our IPO and Secondary Offering proceeds, net of underwriting discounts, commissions and other offering costs, provided $236.2 million, bank borrowings provided $41.9 million and issuance of shares of common stock pursuant to the exercise of stock options provided $3.3 million, which was partially offset by the payment of dividends and repayment of debt for $12.8 million and $28.6 million respectively.

Indebtedness

2021 Convertible senior notes

In September 2021, we issued $345.0 million principal amount of 0.25% Convertible Senior Notes due 2026 (the “Convertible Notes”). The Convertible Notes were issued pursuant to, and are governed by, an indenture (the “Convertible Notes Indenture”), dated as of September 14, 2021, between us and U.S. Bank National Association, as trustee.

The Convertible Notes are our senior, unsecured obligations and are (i) equal in right of payment with our future senior, unsecured indebtedness; (ii) senior in right of payment to our future indebtedness that is expressly subordinated to the Convertible Notes in right of payment; (iii) effectively subordinated to our future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all future indebtedness and other liabilities, including trade payables, and (to the extent we are not a holder thereof) preferred equity, if any, of our subsidiaries.

The Convertible Notes accrue interest at a rate of 0.25% per annum, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on April 1, 2022. The Convertible Notes will mature on October 1, 2026, unless earlier repurchased, redeemed or converted. Before July 1, 2026, noteholders have the right to convert their Convertible Notes only upon the occurrence of certain events. From and after July 1, 2026, noteholders may convert their Convertible Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. We will settle conversions by paying or delivering, as applicable, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. The initial conversion rate was 13.6783 shares of common stock per $1,000 principal amount of Convertible Notes, which represents an initial conversion price of approximately $73.11 per share of common stock. The conversion rate and conversion price are subject to customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Convertible Notes Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

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

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consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date we send the related redemption notice; and (ii) the trading day immediately before the date we send such notice. The redemption price will be a cash amount equal to the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, calling any Convertible Note for redemption will constitute a Make-Whole Fundamental Change with respect to that Convertible Note, in which case the conversion rate applicable to the conversion of that Convertible Note will be increased in certain circumstances if it is converted after it is called for redemption. Pursuant to the Partial Redemption Limitation, we may not elect to redeem less than all of the outstanding Convertible Notes unless at least $150.0 million aggregate principal amount of Convertible Notes are outstanding and not subject to redemption as of the time we send the related redemption notice.

If certain corporate events that constitute a “Fundamental Change” (as defined in the Convertible Notes Indenture) occur, then, subject to a limited exception for certain cash mergers, noteholders may require us to repurchase their Convertible Notes at a cash repurchase price equal to the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. The definition of Fundamental Change includes certain business combination transactions involving us and certain de-listing events with respect to our common stock.

The Convertible Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the Convertible Notes Indenture), which include the following: (i) certain payment defaults on the Convertible Notes (which, in the case of a default in the payment of interest on the Convertible Notes, will be subject to a 30-day cure period); (ii) our failure to send certain notices under the Convertible Notes Indenture within specified periods of time; (iii) our failure to comply with certain covenants in the Convertible Notes Indenture relating to our ability to consolidate with or merge with or into, or sell, lease or otherwise transfer, in one transaction or a series of transactions, all or substantially all of the assets of us and our subsidiaries, taken as a whole, to another person; (iv) a default by us in our other obligations or agreements under the Convertible Notes Indenture or the Convertible Notes if such default is not cured or waived within 60 days after notice is given in accordance with the Convertible Notes Indenture; (v) certain defaults by us or any of our significant subsidiaries with respect to indebtedness for borrowed money of at least $65,000,000; and (vi) certain events of bankruptcy, insolvency and reorganization involving us or any of our significant subsidiaries.

If an Event of Default involving bankruptcy, insolvency or reorganization events with respect to us (and not solely with respect to a significant subsidiary of us) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the Convertible Notes then outstanding will immediately become due and payable without any further action or notice by any person. If any other Event of Default occurs and is continuing, then, the trustee, by notice to us, or noteholders of at least 25% of the aggregate principal amount of Convertible Notes then outstanding, by notice to us and the trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the Convertible Notes then outstanding to become due and payable immediately. However, notwithstanding the foregoing, we may elect, at our option, that the sole remedy for an Event of Default relating to certain failures by us to comply with certain reporting covenants in the Convertible Notes Indenture consists exclusively of the right of the noteholders to receive special interest on the Convertible Notes for up to 180 days at a specified rate per annum not exceeding 0.50% on the principal amount of the Convertible Notes.

Critical accounting policies and estimates

Our consolidated financial statements have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. We also make estimates and assumptions on the reported revenue generated and reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Except for changes resulting from the acquisition of Feedonomics in July 2021, including purchase price allocation and valuation of acquired intangibles, there have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in “Management's Discussion and Analysis of Financial Condition and Results of Operations” set forth in our Annual Report on Form 10-K for the year ended December 31, 2020.

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

Revenue recognition

We recognize revenue from two sources: (1) subscription solutions revenue and (2) partner and services revenue.

Subscription solutions revenue consists of: (1) platform subscription fees, (2) recurring professional services, and (3) sales of SSL certificates. We generally recognize platform subscription fees and recurring professional services revenue in the month they are earned. We begin revenue recognition on the date that our service is made available to our customers. We recognize SSL certificates revenue ratably over the term of the certificates. Fixed monthly fees and any overage charges related to subscription solutions are recognized as revenue in the month they are earned.

Partner and services revenue is derived from: (1) revenue-sharing arrangements, (2) technology integrations, (3) partner marketing and promotion, and (4) non-recurring professional services. We recognize revenue on a net basis from revenue-sharing arrangements when the underlying transaction occurs. We recognize revenue from technology integration fees ratably over the contractual term because technology integration and platform access are deemed to be a single performance obligation. Revenue from partner marketing and promotion and non-recurring professional services is recognized as the service is performed. Subsequent to our acquisition of Feedonomics on July 23, 2021, subscription revenue also includes

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revenue from Feedonomics. We recognize revenue from Feedonomics’ technology platform and related services under service contracts which are generally one year or less, and in many cases month-to-month. These service types may be sold stand-alone or as part of a multi-service bundle (e.g. both marketplaces and advertising) and constitute a single combined performance obligation. Services are performed and fees are determined based on monthly usage and are billed in arrears.

We adopted Financial Accounting Standards Board (“FASB”), Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“Topic 606”), effective January 1, 2018, using the full retrospective method of adoption. As such, the consolidated financial statements present revenue in accordance with Topic 606 for the period presented. Topic 606 requires us to identify distinct performance obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. When distinct performance obligations exist, we allocate the contract transaction price to each distinct performance obligation. The standalone selling price, or our best estimate of standalone selling price, is used to allocate the transaction price to the separate performance obligations. We recognize revenue when, or as, the performance obligation is satisfied.

Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Also, significant judgment may be required to determine the allocation of transaction price to each distinct performance obligation.

Deferred costs

Deferred costs include deferred sales commissions that are incremental costs of obtaining customer contracts. Sales commissions are not paid on subscription renewal. We amortize deferred sales commissions ratably over the estimated period of our relationship with customers of approximately four years. Based on historical experience, we determine the average life of our customer relationship by taking into consideration our customer contracts and the estimated technological life of our platform and related significant features.

Restructuring charges

Restructuring charges are comprised of costs incurred as a result of our December 15, 2022 reduction in force as well as an impairment of the right of use asset triggered by our decision to cease using a significant portion of certain leased facilities.

Equity-based compensation

We measure stock-based compensation for stock options at fair value on the date of grant using the Black-Scholes option pricing model. We measure stock-based compensation for restricted stock units (RSUs) based on the fair market value of the common stock on the grant date. Compensation cost is recognized on a straight-line basis over the requisite service period. Stock compensation costs are reduced by the estimated forfeitures at the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. We estimate the forfeiture rate based on historical experience. To the extent our actual forfeiture rate is different from our estimate, stock-based compensation expense is adjusted accordingly.

The Black-Scholes Option-pricing model requires the input of highly subjective assumptions, which determine the fair value of stock-based awards. These assumptions include:

•

Expected volatility - As we have a short trading history for our common stock, we estimate volatility for option grants by evaluating the average historical volatility of peer group companies for the period immediately preceding the option grant.

•

Risk-free interest rate - The risk-free interest rate was based on the United States Treasury zero-coupon issues with remaining terms similar to the expected term of the options.

•

Dividend yield - We used an expected dividend yield of zero. We have never declared or paid any cash dividends on our common stock and do not plan to pay cash dividends on our common stock in the foreseeable future.

•

Expected term - We elected to use the simplified method to compute the expected term. We have a limited history of exercise activity and our stock options meet the criteria of “plain-vanilla” options as defined by the SEC. The simplified method calculates the expected term by taking the average of the vesting term and the original contractual term of the awards.

Business combination

We record tangible and intangible assets acquired and liabilities assumed in business combinations under the acquisition method of accounting. We use best estimates and assumptions, including but not limited to, future expected cash flows, expected asset lives, and discount rates, to assign a fair value to the tangible and intangible assets acquired and liabilities assumed in business combinations as of the acquisition date. These estimates are inherently uncertain and subject to refinement. We allocate any excess purchase price over the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed to goodwill. During the measurement period, which may be up to one year from the acquisition date, adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed may be recorded, with the corresponding offset to goodwill.

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Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our condensed consolidated statements of operations.

Recent accounting pronouncements

A discussion of recent accounting pronouncements is included in Note 2 to our included audited consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Interest rate risk

Our cash, cash equivalents and restricted cash, consist primarily of interest-bearing accounts. Such interest-earning instruments carry a degree of interest rate risk. To minimize interest rate risk in the future, we intend to maintain our portfolio of cash equivalents in a variety of investment-grade securities, which may include commercial paper, money market funds, and government and non-government debt securities. Because of the short-term maturities of our cash, cash equivalents, restricted cash, and marketable securities, we do not believe that an increase in market rates would have any significant negative impact on the realized value of our investments. A one-eighth percent change in interest expense would have an annual impact of approximately $0.4 million on cash interest expense.

Foreign currency exchange risk

All of our revenue and a majority of our expense and capital purchasing activities for the year ended December 31, 2022 were transacted in U.S. dollars. As we expand our sales and operations internationally, we will be more exposed to changes in foreign exchange rates. Our international revenue is currently collected in U.S. dollars. In the future, as we expand into additional international jurisdictions, we expect that our international sales will be primarily denominated in U.S. dollars. If we decide in the future to denominate international sales in currencies other than the U.S. dollar, unfavorable movement in the exchange rates between the U.S. dollar and the currencies in which we conduct foreign sales could have an adverse impact on our revenue.

A portion of our operating expenses are incurred outside the United States and are denominated in foreign currencies, which are subject to fluctuations due to changes in foreign currency exchange rates. In particular, in our Australia and UK-based operations, we pay payroll and other expenses in Australian dollars and British pounds sterling, respectively. Our operating results and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates. However, we believe that the exposure to foreign currency fluctuation from operating expenses is relatively small at this time as the related costs do not constitute a significant portion of our total expenses.

We currently do not hedge foreign currency exposure. We may in the future hedge our foreign currency exposure and may use currency forward contracts, currency options, and/or other common derivative financial instruments to reduce foreign currency risk. It is difficult to predict the effect future hedging activities would have on our operating results.

Credit risk

Financial instruments that potentially subject us to concentrations of credit risk consist of cash and cash equivalents, restricted cash, and accounts receivable. Our investment policy limits investments to high credit quality securities issued by the U.S. government, U.S. government-sponsored agencies, and highly rated corporate securities, subject to certain concentration limits and restrictions on maturities. Our cash and cash equivalents and restricted cash are held by financial institutions that management believes are of high credit quality. Amounts on deposit may at times exceed FDIC insured limits. We have not experienced any losses on our deposits of cash and cash equivalents, and accounts are monitored by management to mitigate risk. We are exposed to credit risk in the event of default by the financial institutions holding our cash and cash equivalents or an event of default by the issuers of the corporate debt securities we hold.

Item 8. Financial Statements and Supplementary Data.

The information required by this item is incorporated by reference to the consolidated financial statements and accompanying notes set forth on pages F-1 through F-23 of this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of disclosure controls and procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is processed, recorded, summarized, and reported within the

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time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the disclosure controls and procedures as of December 31, 2022, the end of the period covered by this report. Based on this evaluation, management has concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2022 at the reasonable assurance level.

Management's Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) or Rule 15(d)-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Our management (under the supervision and with the participation of our principal executive officer and our principal financial officer) assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. In making this assessment, management used the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Based on our assessment and those criteria, management concluded that, as of December 31, 2022, our internal control over financial reporting was effective.

Our independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2022, which is included in Item 8 of this Annual Report on Form 10-K.

Remediation of Prior Year Material Weakness in Internal Control over Financial Reporting

In our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, we identified a material weakness in our internal controls related to information technology general controls (“ITGCs”). Specifically, we did not maintain effective controls over program change management for financially significant applications to ensure that IT program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately. As a result, the effective functioning of access management controls, process-level automation and IT-dependent controls could have been compromised, which could result in misstatements potentially impacting financial statement accounts and disclosures that would not be prevented or detected. The material weakness did not result in any financial statement modifications.

During fiscal year 2022, we developed measures designed to address the above-described material weakness and enhance the Company’s internal controls which has included additional controls specific to applications that manage and process IT program changes and expanding the management and governance over IT system controls. We have strengthened our ITGCs to address and successfully remediated the identified material weakness and management has concluded that the remediation plan was implemented, tested, effective and completed as of December 31, 2022.

Changes in internal control over financial reporting

Except for remediation of the prior year material weakness discussed above, there have been no changes in our internal controls over financial reporting that occurred in the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Item 9B. Other Information.

On February 28, 2023, the Compensation Committee of the board of directors of the Company, following deliberation and peer review with Radford/Aon, its external compensation consultant, approved the entry into letter agreements (the “Letters”) with senior executives, including each of our current named executive officers, Brent Bellm, Chief Executive Officer, Robert Alvarez, Chief Financial Officer, Russell Klein, Chief Commercial Officer, Robert Kaloustian, Chief Services Officer, and Brian Dhatt, Chief Technology Officer (collectively, the “Executives”).

Pursuant to the Letters, in the event of an Executive’s termination of employment with the Company by the Company without “cause” or due to the Executive’s resignation for “good reason” (each such term as defined in the Letter), in either case, within three months before or within twelve months (or, for Messrs. Bellm, Alvarez, and Klein, eighteen months) after the consummation of a “change in control” of the Company (as defined in

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the Letter), all of the Executive’s then outstanding and unvested equity awards covering shares of the Company’s common stock shall vest in full and, as applicable, become exercisable on the later of (i) the date on which the Executive’s employment terminates (the “Termination Date”) or (ii) the date on which the “change in control” is consummated. The accelerated vesting and exercisability described above will be subject to the applicable Executive’s execution and non-revocation of a general release of claims in favor of the Company.

The Letter supersedes any prior agreements or arrangements between the Company and an Executive with respect to the accelerated vesting of any equity awards covering shares of the Company’s common stock held by the Executive in connection with a termination of employment (but for clarity does not supersede any existing rights an Executive may, if any to the payment or provision of other types of benefits (excluding equity award acceleration)).

The foregoing description of the Letter is not complete and is subject to and qualified in its entirety by the complete terms of the Letter, a copy of which is included as Exhibit 10.25 to this Form 10-K and is incorporated herein by reference.

For the year ended December 31, 2022, the Company partially attained its performance goals under its 2022 Executive Bonus Plan at 44% of target level. The 2022 Executive Bonus Plan, as originally approved, provided that no bonuses would be payable unless the Company attained its performance goals at a threshold that would result in a payment of 50% or more of target level. However, in light of the Company’s achievements in a challenging sector and macroeconomic environment at a performance that would otherwise have resulted in payment at 44% of target level and in order to promote employee retention and recognize the contributions of the participants to the Company, the Compensation Committee exercised discretion to approve payments of bonuses at 44% of target for all participants (including the Executives).

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Information required by Part III, Item 10, will be included in our Proxy Statement relating to our 2023 annual meeting of stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2022, and is incorporated by reference.

Item 11. Executive Compensation.

Information required by Part III, Item 11, will be included in our Proxy Statement relating to our 2023 annual meeting of stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2022, and is incorporated by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Information required by Part III, Item 12, will be included in our Proxy Statement relating to our 2023 annual meeting of stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2022, and is incorporated by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Information required by Part III, Item 13, will be included in our Proxy Statement relating to our 2023 annual meeting of stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2022, and is incorporated by reference.

Item 14. Principal Accounting Fees and Services.

Information required by Part III, Item 14, will be included in our Proxy Statement relating to our 2023 annual meeting of stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2022, and is incorporated by reference.

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PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)

Documents Filed with Report

(1)

Financial Statements;

Report of Independent Registered Public Accounting Firm F-2

Consolidated Balance Sheets as of December 31, 2022 and 2021 F-4

Notes to Consolidated Financial Statements F-9

(2)

Financial Statement Schedules.

Schedules required by this item have been omitted since they are either not required or not applicable or because the information required is included in the consolidated financial statements included elsewhere herein or the notes thereto.

(3)

Exhibits.

The information required by this Item is set forth on the exhibit index that precedes the signature page of this Annual Report on Form 10-K.

Item 16. Form 10-K Summary

None.

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Exhibit Index

Exhibit Incorporated by Reference

Number Description Form File No. Exhibit Filing Date

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10.25+** Form of Equity Acceleration Letter, dated February 28, 2023

21.1** List of Subsidiaries of the Registrant

23.1** Consent of Independent Registered Public Accounting Firm

101.INS** Inline XBRL Instance Document.

101.SCH** Inline XBRL Taxonomy Extension Schema Document.

101.CAL** Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF** Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB** Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE** Inline XBRL Taxonomy Extension Presentation Linkbase Document.

+ Indicates management contract or compensatory plan.

† The certifications attached as Exhibit 32.1 that accompany this Annual Report on Form 10-K are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of BigCommerce Holdings, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing.

(*) Pursuant to Item 601(a)(5) of Regulation S-K promulgated by the SEC, certain exhibits and schedules to this agreement have been omitted. The Company hereby agrees to furnish supplementally to the SEC, upon its request, any or all of such omitted exhibits or schedules.

** Filed herewith.

(^) Portions of this exhibit have been omitted as we have determined that the information (i) is not material and (ii) would likely cause competitive harm to us if publicly disclosed.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

BIGCOMMERCE HOLDINGS, INC.

Date: March 1, 2023 By: /s/ Brent Bellm

Brent Bellm

President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Name Title Date

/s/ Brent Bellm President, Chief Executive Officer and Director March 1, 2023

Brent Bellm (Principal Executive Officer)

/s/ Robert Alvarez Chief Financial Officer March 1, 2023

Robert Alvarez (Principal Financial Officer)

/s/ Thomas Aylor Vice President, Accounting March 1, 2023

Thomas Aylor (Principal Accounting Officer)

/s/ Lawrence Bohn Director March 1, 2023

Lawrence Bohn

/s/ Donald E. Clarke Director March 1, 2023

Donald E. Clarke

/s/ Sally Gilligan Director March 1, 2023

Sally Gilligan

/s/ Satish Malhotra Director March 1, 2023

Satish Malhotra

/s/ Jeff Richards Director March 1, 2023

Jeff Richards

/s/ Ellen F. Siminoff Director March 1, 2023

Ellen F. Siminoff

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm F-2

Consolidated Balance Sheets as of December 31, 2022 and 2021 F-4

Notes to Consolidated Financial Statements F-9

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of BigCommerce Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of BigCommerce Holdings, Inc. (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, convertible preferred stock and stockholders' equity (deficit), and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 1, 2023, expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2012.

Austin, Texas

March 1, 2023

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Report of independent registered public accounting firm

To the Stockholders and the Board of Directors of BigCommerce Holdings, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited BigCommerce Holdings, Inc.’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, BigCommerce Holdings, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the accompanying consolidated balance sheets of BigCommerce Holdings, Inc. (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, convertible preferred stock and stockholders' equity (deficit), and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”) and our report date March 1, 2023, expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Austin, Texas

March 1, 2023

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BigCommerce Holdings, Inc.

Consolidated balance sheets

(in thousands, except per share amounts)

December 31,

Assets

Current assets

Prepaid expenses and other assets 11,206 9,710

Prepaid expenses, net of current portion 470 831

Deferred commissions, net of current portion 7,037 5,673

Liabilities and stockholders’ equity

Current liabilities

Current portion of operating lease liabilities 2,609 2,653

Deferred revenue, net of current portion 1,759 1,359

Operating lease liabilities, net of current portion 10,008 10,217

Other long-term liabilities, net of current portion 334 7,248

Commitments and contingencies (Note 7)

Stockholders’ equity

Accumulated other comprehensive loss (1,199 ) (191 )

Total liabilities and stockholders’ equity $ 474,056 $ 555,460

The accompanying notes are an integral part of these consolidated financial statements.

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BigCommerce Holdings, Inc.

Consolidated statements of operations

(in thousands, except per share amounts)

Year ended December 31,

Operating expenses:

Restructuring charges 7,332 — —

Amortization of intangible assets 8,078 3,284 —

Change in fair value of financial instruments — — 4,413

Provision for income taxes 495 (34 ) 25

The accompanying notes are an integral part of these consolidated financial statements.

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BigCommerce Holdings, Inc.

Consolidated statements of comprehensive loss

(in thousands)

Year ended December 31,

Other comprehensive income (loss):

Net unrealized gain (loss) on marketable debt securities (1,008 ) (191 ) —

The accompanying notes are an integral part of these consolidated financial statements.

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BigCommerce Holdings, Inc.

Consolidated statements of convertible preferred stock and stockholders’ equity (deficit)

(in thousands)

Shares Amount Shares Amount

Adoption of new accounting standard (See Note 2) — — — — — (364 ) — (364 )

Accumulated dividend—Series F — 918 — — — (918 ) — (918 )

Payment of Series F dividend — (12,814 ) — — — — — —

Accretion of Series F issuance costs — 44 — — (44 ) — — (44 )

Warrants issued in connection with debt — — — — 297 — — 297

Release of restricted stock units — — 337 — 0 — — —

Purchase of capped call — — — — (35,570 ) — — (35,570 )

Total other comprehensive loss — — — — — — (191 ) (191 )

Release of restricted stock units — — 518 — — — — —

Total other comprehensive loss — — — — — — (1,008 ) (1,008 )

The accompanying notes are an integral part of these consolidated financial statements.

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BigCommerce Holdings, Inc.

Consolidated statements of cash flows

(in thousands)

Year ended December 31,

Cash flows from operating activities

Adjustments to reconcile net loss to net cash used in operating activities:

Change in fair value of financial instrument — — (4,413 )

Restructuring charges 7,332 — —

Changes in operating assets and liabilities:

Cash flows from investing activities:

Cash paid for acquisition (696 ) (81,067 ) —

Purchase of property and equipment (5,196 ) (3,304 ) (1,964 )

Cash flows from financing activities:

Payment of debt issuance costs — (10,037 ) —

Purchase of capped calls — (35,570 )

Payment of Series F dividends — — (12,814 )

Proceeds from exercise of stock options and warrants 209 5,881 3,279

Proceeds from issuance of convertible senior notes — 345,000 41,861

Repayment of debt — — (28,617 )

Supplemental cash flow information:

Cash paid for interest $ 903 $ — $ 2,285

Cash paid for taxes $ 32 $ — $ —

Noncash investing and financing activities:

Fair value of shares issued as consideration for acquisition 5,388 2,003 —

Changes in capital additions, accrued but not paid $ — $ — $ —

The accompanying notes are an integral part of these consolidated financial statements.

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BigCommerce Holdings, Inc.

Notes to consolidated financial statements

1. Overview

BigCommerce is leading a new era of ecommerce. Our software-as-a-service (“SaaS”) platform simplifies the creation of beautiful, engaging online stores by delivering a unique combination of ease-of-use, enterprise functionality, and flexibility. We power both our customers’ branded ecommerce stores and their cross-channel connections to popular online marketplaces, social networks, and offline point-of-sale systems.

BigCommerce empowers businesses to turn digital transformation into a competitive advantage. We allow merchants to build their ecommerce solution their way with the flexibility to fit their unique business and product offerings. We provide a comprehensive platform that allows merchants to launch and scale their ecommerce operation, including store design, catalog management, hosting, checkout, order management, reporting, and pre-integration into third-party services like payments, shipping, and accounting. All our stores run on a single code base and share a global, multi-tenant architecture purpose built for security, high performance, and innovation. Our platform serves stores in a wide variety of sizes, product categories, and purchase types, including business-to-consumer and business-to-business.

Our headquarters and principal place of business are in Austin, Texas.

We were formed in Australia in December 2003 under the name Interspire Pty Ltd and reorganized into a corporation in Delaware under the name BigCommerce Holdings, Inc. in February 2013.

References in these consolidated financial statements to “we,” “us,” “our,” the “Company,” or “BigCommerce” refer to BigCommerce Holdings, Inc. and its subsidiaries, unless otherwise stated.

2. Summary of significant accounting policies

Basis of presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Basis of consolidation

The accompanying consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. Our fiscal year ends on December 31.

Use of estimates

The preparation of consolidated financial statements in conformity with GAAP requires certain financial instruments to be recorded at fair value; requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting periods. Significant estimates, judgments, and assumptions in these consolidated financial statements include: allocating variable consideration for revenue recognition, constrained revenue; the amortization period for deferred commissions; the allowance for credit losses and a determination of the deferred tax asset valuation allowance. Because of the use of estimates inherent in financial reporting process actual results could differ and the differences could be material to our consolidated financial statements

Segment and geographic information

Our chief operating decision maker is our chief executive officer. Our chief executive officer reviews the financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. Accordingly, we have determined that we operate as a single operating and reportable segment.

Revenue by geographic region was as follows:

Year ended December 31,

Revenue:

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Long-lived assets by geographic region were as follows:

Year ended December 31,

Long-lived assets:

Americas—other — —

Cash and cash equivalents

We consider all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. Cash equivalents consist of money market funds and investment securities and are stated at fair value.

Restricted cash

We maintain a portion of amounts collected through our online payment processor with the online payment processor as a security deposit for future chargebacks. Additionally, we have amounts on deposit with certain financial institutions that serve as collateral for letters of credit and lease deposits.

Marketable securities

All marketable securities have been classified as available-for-sale and are carried at estimated fair value. We determine the appropriate classification of our investments in debt securities at the time of purchase. Securities may have stated maturities greater than one year. All marketable securities are considered available to support current operations and are classified as current assets.

For available-for-sale debt securities in an unrealized loss position, our management first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value and recognized in other income (expense) in the results of operations. For available-for-sale debt securities that do not meet the aforementioned criteria, our management evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, an allowance is recorded for the difference between the present value of cash flows expected to be collected and the amortized cost basis of the security. Impairment losses attributable to credit loss factors are charged against the allowance when management believes an available-for-sale security is uncollectible or when either of the criteria regarding intent or requirement to sell is met.

Any unrealized losses from declines in fair value below the amortized cost basis as a result of non-credit loss factors is recognized as a component of accumulated other comprehensive (loss) income, along with unrealized gains. Realized gains and losses and declines in fair value, if any, on available-for-sale securities are included in other income (expense) in the results of operations. The cost of securities sold is based on the specific-identification method.

Accounts receivable

Accounts receivable are stated at net realizable value and include unbilled receivables. Agreements with enterprise customers can contain promotional billing periods. Since merchants have full access to the functionality of our platform upon contract execution, and we have enforceable rights to receive payments for the promotional period if the contract is early terminated, revenue is recognized ratably over the contract life. When this occurs, we recognize revenue in advance of invoicing creating an unbilled receivable. In addition, some of our PSR agreements include substantive minimums where the consideration paid varies over the term of the contract and revenue is recognized ratably over the contract term. Accounts receivable are net of an allowance for credit losses, are not collateralized, and do not bear interest. Payment terms range from due immediately to due within 90 days. The accounts receivable balance at December 31, 2022 and December 31, 2021 included unbilled receivables of $19.9 million and $13.1 million, respectively. Unbilled receivables at December 31, 2022 and 2021 includes contract assets related to enterprise subscription solutions and PSR customers of $15.7 million and $4.2 million, and $10.8 million and $2.3 million, respectively.

We assess the collectability of outstanding accounts receivable on an ongoing basis and maintain an allowance for credit losses for accounts receivable deemed uncollectible. The balance of accounts receivable includes accounts that have been invoiced but unpaid, and unbilled amounts, which represents revenue recognized in advance of billing. We analyze both the invoiced accounts receivable portfolio and our unbilled accounts receivable for significant risks, historical collection activity, and an estimate of future collectability to determine the amount that we will ultimately collect. This estimate is analyzed quarterly and adjusted as necessary.

Identified risks pertaining to our invoiced accounts receivable, include the delinquency level, customer type, and current economic environment. The estimate of the amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers, our assessment of the overall portfolio and general economic conditions. Identified risks pertaining to our subscription unbilled accounts receivable include customer type, customer activity on our platform, historical contract termination rates, and customer delinquency. The estimate of the amount of accounts receivable that may not be collected is based primarily on historical contract termination rates, customer delinquency rates and an assessment of the overall portfolio and general economic conditions. The identified risk related to our unbilled accounts related to our PSR business are current partner engagement and activity, the financial wherewithal of the partner, the

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partner’s future plans and the ability to execute on the plans, and their liquidity and overall financial position. The estimate of the amount of accounts receivable that may not be collected is based primarily on the specific evaluation of the partner based on current level of engagement with BigCommerce, their overall financial position and general economic conditions.

The allowance for credit losses consisted of the following:

(in thousands)

Cumulative effect adjustment upon adoption 364

Provision for expected credit losses 1,594

Accounts written off (1,133 )

Provision for expected credit losses 3,474

Accounts written off (1,599 )

Provision for expected credit losses 8,244

Accounts written off (2,116 )

The year over year increase in the provision for credit losses was due to an increase in specific reserves as we implemented stricter revenue collection and reserve policies along with an increase in delinquent accounts due to general economic conditions, which led to an increase in the estimate of our overall loss percentage applied to a portion of our portfolio, including unbilled accounts receivable

Property and equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives or the related lease terms (if shorter).

The estimated useful lives of property and equipment are as follows:

Estimated

useful life

Computer equipment 3 years

Computer software 3 years

Furniture and fixtures 5 years

Leasehold improvements 1-10 years

Maintenance and repairs that do not enhance or extend the asset’s useful life are charged to operating expenses as incurred.

The carrying values of property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, we compare the projected undiscounted future cash flows associated with groups of assets used in combination over their estimated useful lives against their respective carrying amounts. If projected undiscounted future cash flows are less than the carrying value of the asset group, impairment is recorded for any excess of the carrying amount over the fair value of those assets in the period in which the determination is made.

Research and development and internal use software

Research and development expenses consist primarily of personnel and related expenses for our research and development staff, which include: salaries, benefits, bonuses, and stock-based compensation; the cost of certain third-party contractors; and allocated overhead. Expenditures for research and development, other than internal use software costs, are expensed as incurred.

Software development costs associated with internal use software, which are incurred during the application development phase and meet other requirements under the guidance are capitalized. As of December 31, 2022, we have capitalized $2.8 million. As of December 31, 2021, software costs capitalized were $1.7 million.

Concentration of credit risks, significant clients, and suppliers

Financial instruments that potentially subject us to concentrations of credit risk consist of cash and cash equivalents, restricted cash, and accounts receivable. Our investment policy limits investments to high credit quality securities issued by the U.S. government, U.S. government-sponsored agencies, and highly rated corporate securities, subject to certain concentration limits and restrictions on maturities. Our cash and cash equivalents and restricted cash are held by financial institutions that management believes are of high credit quality. Amounts on deposit may at times exceed federally insured limits. We have not experienced any losses on our deposits of cash and cash equivalents. We are exposed to credit risk in the event of default by the financial institutions holding our cash and cash equivalents and bond issuers.

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Accounts receivable, including unbilled amounts, are derived from sales to our customers and our strategic technology partners who operate in a variety of sectors. We do not require collateral. Estimated credit losses are provided for in the consolidated financial statements and historically have been within management’s expectations.

One of our strategic partners accounted for 12%, 14% and 15% of our revenue at December 31, 2022, 2021 and 2020, respectively, and two of our strategic partners accounted for 30% at December 31, 2022 while only one strategic partner accounted for 19% and24% of our accounts receivable balance at December 31, 2021 and 2020, respectively.

Advertising costs

We expense advertising costs as incurred. Advertising expenses were approximately $17.5 million, $16.8 million and $12.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Leases

We determine if an arrangement is a lease or contains a lease at inception. At the commencement date of a lease, we recognize a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. The lease liability is measured at the present value of lease payments over the lease term. As our leases typically do not provide an implicit rate, we use our incremental borrowing rate for most leases. The right-of-use (“ROU”) asset is measured at cost, which includes the initial measurement of the lease liability and initial direct costs incurred and excludes lease incentives.

Lease terms may include options to extend or terminate the lease. We record a ROU asset and a lease liability when it is reasonably certain that we will exercise that option. Operating lease costs are recognized on a straight-line basis over the lease term.

We also lease office space under short-term arrangements and have elected not to include these arrangements in the ROU asset or lease liabilities. In 2022, a lease was impaired under ASC 360, resulting in a loss of $3.7 million as further discussed in Note 8 "Leases".

Business combination

Acquisition related expenses

Acquisition related expenses consist primarily of cash payments for third-party acquisition costs and other acquisition related expenses. We recognized $35.2 million, $23.3 million, and $0.0 million in acquisition related expenses during the years ended December 31, 2022, 2021, and 2020, respectively. For the year ended December 31, 2022, $0.2 million was recognized on acquisition related spend and $35.0 million was recognized in connection with contingent compensation arrangements, as further discussed in Note 5 “Business Combination”. For the year ended December 31, 2021, $1.8 million was recognized on acquisition related spend and $21.5 million was recognized in connection with contingent compensation arrangement. We entered into contingent compensation arrangements, in which payments will be made or have been made, as applicable, after the first and second anniversaries of the closing or upon the earlier achievement of certain product and financial milestones. The compensation arrangements are contingent upon continued post-acquisition employment with us. We account for the cost related to the first and second contingent compensation arrangement payments over the service periods of 12 and 24 months, respectively, beginning on the acquisition date, assuming earlier achievement of product and financial milestones is unlikely to be met.

Goodwill and other acquired intangible, net

We assess goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter, or more frequently if events or changes in circumstances would more likely than not reduce the fair value of a reporting unit below its carrying value. When we elect to perform a qualitative assessment and conclude it is not more likely than not the fair value of the reporting unit is less than its carrying value, no further assessment of that reporting unit is necessary; otherwise, a quantitative assessment is performed and the fair value of the reporting unit is determined. If the carrying value of the reporting unit exceeds the estimated fair value, impairment is recorded.

We evaluate the recoverability of finite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of such asset may not be recoverable. If such review determines the carrying amount of the indefinite-lived asset is not recoverable, the carrying amount of such asset is reduced to its fair value.

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Acquired finite-lived intangible assets are amortized over their estimated useful lives. We evaluate the estimated remaining useful life of these assets when events or changes in circumstances indicate a revision to the remaining period of amortization. If we revise the estimated useful life assumption for any assets, the remaining unamortized balance is amortized over the revised estimated useful life on a prospective basis.

Income taxes

We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax balances are adjusted to reflect tax rates based on currently enacted tax laws, which will be in effect in the years in which the temporary differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period of the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that those assets will be realized. To date, we have provided a valuation allowance against all of our deferred tax assets as we believe the objective and verifiable evidence of our historical pretax net losses outweighs any positive evidence of its forecasted future results. We will continue to monitor the positive and negative evidence, and we will adjust the valuation allowance as sufficient objective positive evidence becomes available.

We recognize the tax effects of an uncertain tax position only if it is more likely than not to be sustained based solely upon its technical merits at the reporting date. The unrecognized tax benefit is the difference between the tax benefit recognized and the tax benefit claimed on our income tax return. All of our gross unrecognized tax benefits, if recognized, would not affect its effective tax rate but would be recorded as an adjustment to equity before consideration of valuation allowances. We do not expect unrecognized tax benefits to decrease within the next twelve months. We recognize accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. As of December 31, 2022, we have not accrued any interest or penalties related to unrecognized tax benefits. We believe that all material tax positions in the current and prior years have been analyzed and properly accounted for and that the risk of additional material uncertain tax positions that have not been identified is remote.

Stock-based compensation

We issue stock options, restricted stock units ("RSUs") and performance based restricted stock units (“PSUs”) to our employees and other eligible service providers. Stock-based compensation related to stock options is measured at the date of grant and is recognized on a straight-line basis over the service period, net of estimated forfeitures. We use the Black-Scholes option-pricing model to estimate the fair value of stock options awarded at the date of grant. Stock-based compensation related to RSUs is measured at the date of grant, net of estimated forfeitures, and recognized ratably over the service period. Stock-based compensation related to PSUs is measured at the date of grant and recognized using the accelerated attribution method, net of estimated forfeitures, over the remaining service period.

Accounting pronouncements

In October 2021, the FASB issued ASU No. 2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” which requires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. We early adopted this standard on January 1, 2022, using the prospective method. There is no material impact to our consolidated financial statements for the year ended December 31, 2022 as a result of the adoption.

Foreign currency

Our functional and reporting currency and the functional and reporting currency of our subsidiaries is the U.S. dollar. Monetary assets and liabilities denominated in foreign currencies are re-measured to U.S. dollars using the exchange rates at the balance sheet dates. Non-monetary assets and liabilities denominated in foreign currencies are measured in U.S. dollars using historical exchange rates. Revenue and expenses are measured using the actual exchange rates prevailing on the dates of the transactions. Gains and losses resulting from re-measurement are recorded within Other expense in our consolidated statements of operations and were not material for all periods presented.

Restructuring charges

3. Revenue recognition and deferred costs

Our sources of revenue consist of subscription solutions fees and partner and services fees. These services allow customers to access our hosted software over the contract period. The customer is not allowed to take possession of the software or transfer the software. Our revenue arrangements do not contain general rights of refund in the event of cancellations.

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The following table disaggregates our revenue by major source:

Year ended December 31,

Subscription solutions

Subscription solutions revenue consists primarily of platform subscription fees from all plans. It also includes recurring professional services and sales of SSL certificates. Subscription solutions are charged monthly, quarterly, or annually for our customers to sell their products and process transactions on our platform. Subscription solutions are generally charged per online store and are based on the store’s subscription plan. Monthly subscription fees for Pro and Enterprise plans are adjusted if a customer’s gross merchandise volume or orders processed are above specified plan thresholds on a trailing twelve-month basis. For most subscription solutions arrangements, excluding enterprise subscription plans, we have determined we meet the variable consideration allocation exception and, therefore, recognize fixed monthly fees or a pro-rata portion of quarterly or annual fees and any transaction fees as revenue in the month they are earned. Enterprise subscription plans include an upfront promotional period in order to incentivize the customer to enter into a subscription arrangement. For these Enterprise arrangements, the total subscription fee is recognized on a straight-line basis over the term of the contract. Revenue recognized in advance of billing is recorded as unbilled accounts receivable. In determining the amount of revenue to be recognized, we determine whether collection of the transaction price is probable. Only amounts deemed probable are recognized as revenue. Key factors in this determination are historical contract termination rates and general economic factors.

Professional services, which primarily consist of education packages, launch services, solutions architecting, implementation consulting, and catalog transfer services, are generally billed and recognized as revenue when delivered.

Contracts with our retail customers are generally month-to-month, while contracts with our Enterprise customers generally range from one to three years. Contracts are typically non-cancellable for convenience and do not contain refund-type provisions. Revenue is presented net of sales tax and other taxes we collect on behalf of governmental authorities.

Subsequent to our acquisition of Feedonomics on July 23, 2021, subscription revenue includes revenue from Feedonomics. Feedonomics provides a technology platform and related services that enables online retailers and other sellers to automate online listings of the sellers’ information across multiple third-party marketplaces and advertisers (such as Amazon, Google, Facebook, etc.). We provide these services under service contracts which are generally one year or less, and in many cases month-to-month. These service types may be sold stand-alone or as part of a multi-service bundle (e.g. both marketplaces and advertising). The service offerings constitute a single combined performance obligation. Services are performed and fees are determined based on monthly usage and are billed in arrears.

Partner and services

CMRC US Equity

CMRC · 10-K · period ended 2022-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 10. Directors, Executive Officers and Corporate Governance.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits, Financial Statement Schedules.

Item 16. Form 10-K Summary

CMRC US Equity☆

CMRC · 10-K · period ended 2022-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 10. Directors, Executive Officers and Corporate Governance.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits, Financial Statement Schedules.

Item 16. Form 10-K Summary

CMRC US Equity