BigCommerce Holdings, Inc. Price & Performance (BIGC)

During the call, we will also discuss certain non GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. A reconciliation of these non GAAP financial measures to the most directly comparable GAAP financial measure as well as how we define these metrics, other metrics is included in our earnings press release. Which has been furnished to the SEC and is also available on our website at investors.bigcommerce.com Bigcommerce. With that, let me turn the call over to Travis. Good morning, everyone, and thank you for joining us today. I'm excited to share our progress and outline our plans for 2025. I joined BigCommerce in May Bigcommerce I believe in its potential to lead [indiscernible] And when the Board asked me to take on the CEO role, was excited to lead the company and do just that. While we haven't yet achieved the growth this company is capable of, we're taking bold steps to improve our performance. Today, I'll focus on the specifics of those changes. First, We finished 2024 with non GAAP operating income exceeding $19,000,000 a $25,000,000 improvement over 2023 and nearly double our original forecast. Our non GAAP operating margin expanded by seven sixty seven basis points and we generated $26,000,000 in operating cash flow, a $50,000,000 improvement from last year.

We made these gains by cutting ineffective sales and marketing spend, by reducing headcount approximately 10% and by focusing on high quality bookings with our customers. This last year was a reforming one. We made major changes to our management team, rearchitected our go to market organization and implemented an operating model for profitable growth. It was a year of progress, but not nearly enough to meet our potential. We did not achieve our revenue growth targets and that remains our number one priority today. We finished 2024 with $333,000,000 in revenue, up 8% year over year Our ARR ended at nearly $350,000,000 a 4% increase and average revenue per enterprise account rose by 9%. We can and must do better. To get there, step one, we must improve the efficiency and the efficacy of our sales, marketing, customer service and strategic partnerships. This is crucial to unlock the company's full growth potential. Net revenue retention for enterprise accounts finished at 99% which is below past performance and also below what I'm confident we can achieve. Non GAAP sales and marketing expenses were 36% of revenue a notable improvement from 41% in 2023 and forty six percent in 2022. We want growth, but it has to be efficient and the changes we have been implementing have set us up to do now I want to talk about the decisive actions we are taking in three key areas.

One, recruiting top leaders with SaaS and Bigcommerce expertise. Two, revamping our go to market organization. Sales, [indiscernible] strategic partnerships, customer success, [indiscernible] [indiscernible] transforming our product and market positioning to drive growth. Let's address each First, our leadership team In the last few months, we've added exceptional leaders to drive BigCommerce's next growth phase. Michelle Suzuki joined as Chief Marketing Officer in January. Bringing expertise from Glassbox and Instructure. Rob Walter joined as Chief Revenue Officer in late January bringing extensive experience from Ouro, Salesforce Commerce Cloud, and ChannelAdvisor. Marcus Groff, our new SVP of Engineering joined in January from AWS and formerly Salesforce Commerce Cloud and Demandware. And Tracy Turner, our new SVP of Revenue Operations, joined in November from Hootsuite. Together, they bring expertise that will be instrumental in transforming our business. Over the last year, we have replaced the majority of senior executive roles in our sales, [indiscernible] operations and customer success teams. The new team is in place and I'm excited about the talent and enthusiasm this team has brought to our transformation efforts. Second, we have completely re architected our sales, marketing, strategic partnerships customer success, and operations organizations. We have three owned products in our portfolio today our flagship commerce product Bigcommerce our AI based product data feed management platform, Feedonomics, and our brand and commerce site builder and visual editor, MakeSwift.

Prior to the fourth quarter of twenty twenty four, teams, systems and operational processes for these three products functioned largely in separate silos. We have integrated all three products both operationally and commercially and have organized the teams around three offering groups. B2C, B2B, small business. We have a dedicated general manager over each of these three offerings and our sales and marketing teams are now aligned with these offerings rather than exclusively by product. We are leveraging AI to enhance sales efficiency, enabling sellers and account managers to identify opportunities and create targeted outreach. Specifically AI analyzes customer and prospect attributes, use cases, patterns and market needs and aligns them to capabilities our products have in market. AI is also improving product support and core features from commerce site migration and development in BigCommerce to optimizing inventory availability, product data, and order routing in Foodonomics for more profitable and frictionless customer experiences In short, by predicting what our customers want and what barriers they may be facing in their particular market or segment, AI is enabling us to service them better faster We are ramping up our sales team adding experienced B2C and B2B sellers to target key opportunities increasing the number of account managers to drive expansion among existing customers.

We are on track to double our quota carrying sales team by mid-twenty twenty five. Finally, are transforming our product and market positioning. The recent launch of Catalyst at the National Retail Federation in New York in January is a prime example. Catalyst is our accelerated reference architecture, which leverages best in class components, and tech partners. Taking advantage of the scale and agility of composability at a fraction of the cost [indiscernible] and complexity typically associated with composable architectures. This means robust capabilities scale industry leading agility for brands, retailers, manufacturers and distributors with significantly reduced total cost of ownership Catalyst also provides best in class visual editing via MakeSwift for business users and marketers without the need of developers. We are planning a hosted version of Catalyst later this year, which will also include [indiscernible] targeted at lower mid market and small business B2C and B2B customers. The overall response from customers partners, And commerce industry analysts has been overwhelmingly positive and we plan to introduce more bundled solutions like Catalyst in 2025 tailored to specific markets and industries. As we move into 2025, we remain committed to our three strategic priorities. One, reaccelerating revenue growth profitably. Our top priority. [indiscernible] operate with discipline and focus, eliminating non core and three, execute our sales and marketing transformation We've set the strategy, aligned the teams and recruited critical leaders.

Now it's time to deliver. Transformations are challenging. But I believe in BigCommerce's potential to lead the future of commerce. We have the right team, a differentiated approach and an immense market opportunity. I remain confident in our path forward I'm excited to continue this journey with all of you. With that, I'll turn it over to Daniel. Thank you, Travis, and good morning, everyone. I'm pleased to walk through our Q4 and full year 2024 financial results. Highlight key progress areas, and outline our 2025 expectations. In Q4, we delivered revenue growth in line with expectations and Q4 revenue reached $87,000,000 up 3% year over year while full year revenue grew 8% to $333,000,000 Non GAAP operating income, which excludes stock based compensation, restructuring costs, acquisition related costs and amortization of intangible assets was just over $10,000,000 in Q4 and $19,000,000 for the year. A strong improvement from $5,000,000 in Q4 twenty twenty three and a $6,000,000 loss for the full year 2023. Our non GAAP operating margin improved to nearly 6% in 2024 up from negative 2% in 2023, and negative 17% in 2022. Cash flow also improved meaningfully Operating cash flow hit $12,000,000 in Q4 $26,000,000 for the year, a $50,000,000 swing from twenty twenty three's $24,000,000 loss.

We reduced stock based compensation as a percentage of revenue by two fifty four basis points for the full year and we'll continue prioritizing minimal net dilution in our equity program. For the twelve months ended, basic shares outstanding were 77,600,000.0 up 3% year over year and fully diluted shares outstanding were $79,500,000 down 4% year over year. We closed Q4 with annual revenue run rate or ARR of nearly 3,000,000 up 4% year over year. 7% to $262,000,000 now representing 75% of total company ARR. Non enterprise ARR declined 4% to $88,000,000 Profitable revenue growth remains our top priority. And 2024 marked a transformation across the business. We instilled greater discipline and rigor delivering significant We streamlined operations, restructured go to market teams and reduced headcount by approximately 10% as of the end of the year. We also repurchased a portion of our 2020 convertible notes by an additional $59,000,000 in early Q1 twenty twenty five. Leaving us with $154,100,000 in total convertible debt. Dollars 4,100,000.0 maturing in 2026, and $150,000,000 maturing in 2028. And $126,000,000 in cash, cash equivalents and marketable securities at these repurchases. Net debt now stands at roughly $28,000,000 Our financial position is strong and our outlook supports servicing and repaying the stat.

For Q1 twenty twenty five, we expect revenue of 81,200,000.0 to $83,200,000 We expect non GAAP operating income of $4,000,000 to $5,000,000 For the full year 2025, expect revenue of $342,100,000 to $350,100,000 and non GAAP operating income of $20,000,000 to $24,000,000 While we expect an improving pipeline as a result of our go to market early twenty twenty five growth will likely mirror Q4 twenty twenty four as our transformation actions take root. We are targeting mid single digit growth rates for the full year with ARR growth gradually accelerating. We're pleased with our better than expected margin expansion in Q4 and are aiming for additional low to mid single digit operating margin expansion in 2025. We plan to reinvest where ROI is strong, balancing continued margin expansion and reaccelerating revenue. Our outlook assumes consumer spending and business investment trends remain Given macroeconomic uncertainties, we're taking a conservative stance. But to be clear, we are not satisfied with these projected growth rates. Transformations like the one we are undertaking take time. But we are laser focused on unlocking this company's full potential and excited about what lies ahead. I look forward to sharing more at our Investor Day in New York on March 11.

Operator, let's move to Q and A. Yes. Thank you. We will now begin the question and answer session. And the first question comes from Ken Wong with Oppenheimer. Time to execute. Realizing that revenue will lag some of the progress you make Any [indiscernible] kind of benchmarks KPIs that you would steer us to kind of gauge success? And any thoughts on a timeline for when we might see some of these improvements Hey, Ken, I apologize. You broke up at the beginning part of your question.

Would you mind repeating that for us?

Yes, I was just saying that you mentioned that It's now time to execute now that you have leadership in place. Just wondering kind of what are the right KPIs, the goalpost we should be keeping an eye on to gauge that success and what that timeline could look like before we start to see some of those improvements?

Hey, Ken. Thanks for the question.

Yes, I think the leading indicator initially is going to be obviously pipeline. Starting to see some of those signs now. As we've kind of articulated in previous earnings, we would expect that to translate into improved bookings obviously. And expect that to hit kind of halfway through the year. But yes, the infrastructure is in place. External messaging is going to start changing here first and probably mid March around the ShopTalk Show. And then we think that will help accelerate obviously pipeline, but pipeline would be the first leading indicator of efficacy.

One thing I would add on to that, Ken, is just from a metrics point of view as we go throughout the year, going to spend a fair amount of time talking about where we are both in a revenue growth rate, but also in an ARR growth rate. We're being pretty deliberate in the commentary that we're putting out there about where we see pace of acceleration. We expect to see modest acceleration across the year We'd like to see ARR growth rates tipping slightly ahead of revenue, which we think from a metrics perspective is going to be the best leading indicator that we'll be able to talk about on calls. Internally, first focus is pipeline and I think everything else will flow out from there. But as we said, we expect the front half of the year to look fairly similar to what we saw in Q4 as we kind of finish the last piece is on transformation. We're in full execution mode at this point. We just expect it to take a few months as we execute this and start getting the pipeline build that we want Perfect. And then just a quick follow-up for you.

You, Daniel. The operating margin you guys are guiding kind of roughly consistent with where you closed out fiscal twenty twenty four As we think about the path forward is Will we need revenue upside in order to Great question. The endpoint we're aiming for from a expecting and planning when we had our last earnings call. Only thing that's a little different from a growth rate perspective is that we brought forward some of the improvements that we wanted to make ahead early into Q4. So we just got to some of those improvements a little earlier than we expected. I don't think that we need to see material revenue growth beyond what we're guiding in order to get to the margin expansion that we're talking about. I think if we end up beating the guidance that we're talking about, I think that gives us upside on margin expansion, but we're also pretty deliberate to call out that, our priority this year is reaccelerating our growth rates. We want to show balance in that and healthy margin expansion at the same time. But as we are starting to see building pipelines, strong ROI on our sales and marketing investments, we intend to reinvest some of that growth back into further growth rate acceleration but doing it in a prudent way so that we still see the type of margin expansion that we've called out in our guidance.

Perfect. Thanks a lot guys.

Thank you. And the next question comes from Koji Ichida with Bank of America.

Hey guys, thanks so much for taking the questions. I wanted to ask a question on sales capacity. I think in the prepared remarks, you said you're on track to double your quota sales team by mid-twenty twenty five. So my first thought there was that, that really sounds like it's a 2026 event.

With those new quota carrying reps from a pipeline conversion perspective. So the question here is how to think about sales capacity ramp to pipeline creation and then conversion with your sales team going forward?

Yes, great question. It's actually fully loaded. I think I mentioned in last earnings. We started with the reorganization with folks that had internal experience and tenure here. For exactly that purpose to obviously shrink the ramp time We've also been leveraging a ton of AI as it relates to training and enablement, which has been wildly surprising and how effective that's been not only enabling folks cross selling products that maybe they didn't have previous experience with, but also as we onboard folks just making it a bit more effective and accelerated as we onboard But this was all planned and I'll let Daniel add some color here, but was fully loaded. I would not expect this trail into 2026. This was all deliberately done to go drive efficacy in H2 of this year. What I would add to that from a timing perspective, the vast majority of the resources that we're adding to roughly double capacity is already complete. Matter of fact, it was largely complete by the end of Q4. We still have some trailing roles that we're going to be recruiting in some cases specific to B2B and B2C where we're bringing in a lot of expertise in those areas that we think is going to be really, really good for growth.

But we base the timing of the hiring plan such that it we expect to see acceleration in the back half of the year and we're really aiming for acceleration that shows a strong rule of 40 profile as we're exiting the year. It's not going to be where we think the business is capable on a going basis, but we think we can show signs of progress. But it's not such that capacity gets ramped up by the end of Q2 and then you've got another two quarters of ramp after that. We're going through that ramp period now such that we we can start building momentum in the back half of this year.

Got it. That is very helpful. Thank you for that. And just a follow-up here. On the guidance, How should we be thinking about tariff risk?

Maybe not so much on PSR volumes, but more so on customer spending priorities. So what sort of considerations are in place in the guide to account for potential tariff risks.

I wouldn't make it a specific tariff risk from my point of view at least. I would just say that contributes to our overall conservatism from a macroeconomic point of view. There's a lot of things that are in flight right now that are in motion on the macro side of things. That's part of why we called out in our prepared remarks. We're taking a conservative view and saying we're expecting [indiscernible] I'm sorry, Bruce, reverse. We expect 2025 to look similar to 2024. That said, we are are seeing encouraging signs of optimism within the prospect community. We're seeing deals that went on pause shortly after the pandemic that have started to come back, especially some larger deals. So I would say we're taking a cautiously optimistic view, but we think it's reasonable and prudent for exact reasons that you cited to just not get ahead of our skis from a tailwind perspective and building out our outlook in [indiscernible] Thank you. And the next question comes from D. J. Hynes with Canaccord.

Hey, good morning guys. Travis, you've had a couple of questions on direct sales investments. Let me take the other side of that and ask about How has the engagement been with those folks as you've kind of reshuffled the leadership team? And what are they asking for from BigCommerce Bigcommerce? [indiscernible] Been very bullish on the partner side, obviously leading with composability, by definition as in accepting the fact that more disruption in innovation will come by way of third party ISVs and partners. And so our job is really to make the ingestion of those capabilities easier, more consumable, operationally, technically, [indiscernible] And so, I think it's enriched a lot of those partnerships. Now, as I alluded to, in last earnings, we're going to be way more focused about who we double down with. So we've seen an intentional sort of concentration on both the agency and GSI side as to where we're partnering up as well as the ISV side. So that's probably been the most material change. And I think to the extent we're going deeper and more credibly with them, The response thus far has been been really positive and I would continue lean into that going forward. [indiscernible] And then Daniel, what's the right threshold for enterprise NRR in your view?

And what needs to happen to get you there?

Everything that we are doing from a transformation perspective ultimately is designed to bring NRR to levels that we think are best in class and where the business is capable of.

Results in 2024 were very similar to 2023 and not where we need to be as a business. During the pandemic years, we kind of averaged, I think, 113% roughly in NRR. I think it's going to take us some time to get back there. But if you look at the investments that we're making [indiscernible] product, the leaning in on additional ways to bring monetization paths to our base, whether that's a self serve version of Feedonomics, looking at what we're doing with bundling, MakeSwift, looking at what we're doing with payments and checkout stack. We'll talk about a lot of these things in more detail when we get to our And I think that all of those things can provide tailwinds to NRR in a way that raises the floor growth rate of the business. And ultimately yields a lot better profitability as well. And again, this is a lot of things we want in detail in New York next month. We have a lot of things that are in motion that we're excited to share at that point.

Yes. Look forward to that event. Thank you guys.

Thank you. And the next question comes from Parker Lane with Stifel.

Hey, guys. Thanks for taking the question this morning. Daniel, you referenced ARR as being the guidepost for you into this year and expecting it to track ahead of overall revenue growth Looking at that non enterprise piece, declining exiting the quarter, what is the expectation around that in the framework of your commentary for the first half of the year?

I expect the non enterprise or small business portion of our business to be relatively flat on a full year basis There's a lot of things we're looking at and growth factors in that part of the business, a self serve version of Edenomics as an example. Is very much focused actually on small business customers and mid market customers, some of which happen to be buying enterprise plans, many of which do not.

When we look at where we are from a pipeline perspective, we expect that to be flat, maybe slightly down in the front half of the year. We're aiming for that to be large is remains moving up market and focusing on enterprise accounts. But we think that we have a lot of room to stabilize and then further grow that portion of the business over time. We have tens of [indiscernible] small business customers and we really want to find ways to expand that further.

Yes, I would say just to add some color on that. I think self-service speedonomics make Swift in particular are two meaningful ways we feel could drive end payment potentially meaningful ways to drive more wallet share and more differentiation for that particular segment. Target for that is probably mid year. Maybe into Q3. And so we're being a little conservative in how the excitement level there of how much that's going impact especially with holiday season kind of coming up shortly thereafter. But I think longer term, certainly an important part of our base but also recognizing that there's an opportunity to add a tremendous amount of value there for that core customer base and widen our TAM and create a bit more stickiness with the existing installed base and small business.

Understood. Thanks for the feedback there. And then Travis, quick one for you. On the strategic priorities you did reference, operating with disciplined focus, maybe eliminating other non core initiatives. Have there been things that you've identified that you'll [indiscernible] throughout this year or is a lot of that work largely been done here and we should think about this [indiscernible] more of a clean slate approach as we progress through 25.

Very much a clean slate. I think Q1 will be the last of sort of some of the cleanup. We had a couple of sort of initiatives that probably don't align to the longer term vision, not that they were deleterious to the business, but certainly preventing us from leaning more aggressively into things we feel map to our ideal customer profiles and our differentiation in market. So I think the goal was to have that wrapped up by end of Q1 in a clean slate. Got it. Thank you. Next question is from Matti Sprague with KeyBanc.

Hey, guys. Thanks for taking the question. My first one is touching on sales and marketing efficiencies again. Could you give some specifics about what areas you cut to improve efficiency if you're taking those savings and putting those into the quota bearing reps that you added this year? [indiscernible] Great question. Philosophically, we rearchitected that entire marketing organization and in parallel re centralized it more into a matrix model as opposed to running it compartment to decrease some duplicity in efforts and costs certainly organically. And at the same time, kind of level set best in class standards that we can then scale on Matrix globally. That was part of Michelle's vision as well kind of coming in and kind of a key requirement of that criteria. So that was probably philosophically the biggest thing that we did. On the back office side around data and there's still in flight stuff around duplicity around CRMs and things like that we've talked about as part of our broader systems transformation, but being really deliberate and focused of integrating all three product marketing teams within one group having a single source of truth and really driving the business very objectively off of the metrics as opposed to in theory operating a bit more in arrears.

Our kind of our legacy state. By the time we kind of saw what we were doing, it was kind of a quarter late. We're in a much better position now to react in real time and I'll let Daniel add any additional color.

Yes, Matty, I could give you two specific examples of changes we've made specifically on the spend side as well. First, from an events perspective, we've been doing many events, sometimes smaller events with really, really high frequency We're reducing the absolute number of events that we're doing so that we can really, really double down on presence and resonance in a fewer number of much larger events. Which we think just gets better scale and pipeline build for the dollars we're putting in. Another example I would throw out there is even on our relationships with partners, and the GSI community. Our program in the past really focused on having referral generation from a really large group of partners. We've changed the way that program is really set up to encourage depth of relationship with maybe a slightly smaller number of partners, but really rewarding the partners that are delivering the best implementations and ongoing experience with our customers. So that we are generating better leads and sending more referral commissions frankly to the agencies that are making our customers the most successful. I could give you other examples as well, but these things they're not dramatic cuts. They're more like reorientations that allow us to have better efficacy at a ultimately a smaller dollar amount.

I'll add one I'll ask a bit of color on the partnership side too. I think because of the depth of those partnerships and how material they are to our strategic approach around composability. And we'll talk more about this at our Investor Day in New York. We're able to share some of those costs around MDF and other sort of not only outreach, but triangulation around accounts and targeted accounts and events to actually have a lot of those partners help subsidize some of those costs while also driving additional efficacy, which was something that we just weren't able to take advantage of in the past. So that's allowing us to be more effective with less cost and investment there. That's helpful. Yes, very helpful. And I think obviously that should add some cross sell motion as well. So it seems like you guys are in a good place And just a quick follow-up, In terms of the net revenue retention for enterprise accounts, obviously ninety nine percent I'm curious to know [indiscernible] What's people's main reason for churn? And how are you guys going to be addressing that?

Daniel and I can kind of ham and egg that. One, I think deliberately integrating our two other products and being intentional about a better together story of being able to cross sell and up sell by definition will create more value and more stickiness and greater wallet share per customer. I think not having that just made it very challenging to tell a bigger broader story in and differentiate. So I think that alone going to make a big difference.

And quite frankly, just not being effect in general, which we've talked about exhaustively in the past that we feel we've cleaned up materially, we're in a much better spot to be able to address that better together story and from a data perspective, from a strategy perspective and Dan, you want anything?

No, I think you you answered it well. Thank you, guys.

Thank you. Next question comes from Randall Lin Shaw with Barclays. Thanks for squeezing me in.

How dependent are their whole plans on the macro and what are you thinking out there? [indiscernible] I would say, from an overall outlook perspective, As we always have or at least have over the last two or three years, we have not baked into our outlook a big change in macro trend. We tend to take a pretty conservative outlook in how we think about building guidance and building our internal plans because we don't want to be beholden things that are outside of our control and hitting our commitments to shareholders. So as I said, we're taking the view that we're expecting this year to look a lot like last year. I would say overall that sentiment, I'd summarize it as cautiously optimistic.

We're starting to see projects starting to resurface. We're starting to see signs of encouraging pipeline build. We're starting to see buyers start to be a little bit more open to making replatforming decisions, especially if they put off those decisions. That said, we are expecting Nimi to get to our number through really, really good tact [indiscernible] their territories that are outbounding and building their own pipeline and increasing efficacy on the marketing side. And if we start to see materially different improvements on the macro side, great. That's a tailwind to us that I think gives us upside. But that's not something that we are going to set expectations on when it's not ultimately that we can control. Perfect.

Okay. That's really helpful. And then on the partner side, like on the one hand, you want to do more with partners. On the other hand, there's probably areas that you kind of want to do more like you mentioned How does that dynamic change for you guys? Because where we've seen it like with Shopify where the partners at some point went like, okay, well, do I really want to work to do that much? How do you kind of handle that balance? Thank you. [indiscernible] we think it's a big strategic advantage. I mean, obviously, Shop is a monolith. I think concern in market is more and more capabilities will be native within that platform and eliminate or make some of those partners today partner. Superfluous going forward. I think for us, we're embracing the opposite. That partners can far outpace us from a disruption and innovation perspective than we could ever possibly do ourselves. Think customers want optionality now and in the future and the best thing that we could do is create a more affordable and ingestible capability to pre compose and bundle those partner capabilities oriented to specific markets and specific industry segments. And by easier, I mean commercially, operationally and technically.

So you'll see more and more of us in market bundling pre composed capabilities oriented to certain markets, certain industries, as accelerators to drive TCO and efficacy And I think it's encouraging and we're getting a lot of enthusiasm from those partners because essentially we're creating our own marketplace with them and going much deeper with them within spaces they can also differentiate in market by way of us. So I see the partner aspect of this business only getting deeper and stronger going forward. We're philosophically aligned materially with doing that.

Okay. Thank you.

Thank you. The next question comes from Josh Baier with Morgan Stanley. Great. Thank you for the question. Wanted to unpack enterprise account number a little bit. If you could just maybe discuss the competitive landscape impacting that number. Just wondering if you could break down are some of the challenges around the gross adds? Is there any change to churn? We can start there. Thanks.

Yes.

Thanks for the question, Josh.

I would say we've seen stabilization in that over the course of the last couple of quarters. But we're not aiming for stabilization. We're aiming for growth. We've seen some positive trends obviously on average revenue per account it was up about 9% last year. It's good. It's not as good as it can be. Want to see growth both in the average size of deal as we've been moving at market, I've said often I would be okay having slightly fewer number of a lot bigger customers because ultimately what we're after is dollarized growth and dollarized net revenue retention. That said, we're not pleased with the fact that the numbers been relatively flat over the course of the last few quarters. I don't think that the chain that there there's been a change in trend from a churn perspective over the course of the last year, year and a half, half probably. It's looked fairly similar. We expect that to get incrementally better the year again, we're building our plans assuming that it's going to continue to be tough competitively. That we need to take really good care of our customers and we need to do a good job building pipeline Okay, got it.

So you're saying within the enterprise account number, within that definition, you're moving up market Yes, that's correct.

There within that account number. Got it. And then on the margin side, I think I think in your prepared remarks, you mentioned low to mid single digit operating margin expansion.

In 2025, but I don't think that's reflected in the guidance. If you could kind of help to clarify Yes, that's a great point. Our opening guide, I think we're taking a little bit of a conservative [indiscernible] where we expect this to ramp across the year. But we wanted to be clear for what we're ultimately shooting for as a business. And if you look at last year going into the year in our opening guidance, we said we were aiming for mid single digit margin expansion. We ended up at seven seventy basis points of expansion across the year and beat what we were aiming for. What we wanted to communicate are two things. First, taking a conservative outlook going into the year because we wanted to make sure it was clear we have de risked the guidance and we feel that this is a number that we can hit. But we also want to be clear that we're not settling for the guidance because we think and know that we need to do better. Both where we are in a revenue growth rate on an expansion basis. We need to reaccelerate growth and we need to do so profitably.

And so as we get across the year, if we execute according to plan, I expect to take up our profit guidance as we proceed throughout the year.

Got it.

Thanks.

Thank you. And the next question comes from Murphy with JPMorgan.

This is Ardi on for Mark Murphy. Thanks for taking the question.

Travis, as you mentioned in your remarks, been successful in bringing in a lot of leaders and rank and file personnel across multiple functional areas. Can you talk about how those new people are settling in and whether you feel like there's been any disruption to the business as you've been going through this process? Great question. The settlement has been fantastic. I mean, this has been deliberate in the the order by which we've added folks very deliberately as part of the transformation Obviously, we've been very transparent about where we are in market. We're fortuitous in the sense that there's a lot of talent out there in the street right now due to consolidation in adjacent areas. And so we've been very fortunate to have access to really experience folks that are coming in that share the vision. And see the potential that certainly I saw and why I took a job originally and the upside here which has been fantastic. Obviously, several of them are recent and both Rob and Michelle joined in January. We just came out of both our Ameris and EMEA SKOs over the last couple of weeks. So that was nice to get everyone together in a lot of shared the external facing changes primarily around web assets and messaging and things like that You'll start seeing that here in mid March.

I think will be the most tangible visible sign outside the four walls of the business. We're excited to share some of that stuff with you all and in New York at our Investor Day and then continue to trickle that out across the remainder of of H1, which we're really encouraged by. But yes, we feel really good about the folks here and how they're adjusting.

And Daniel, when you can you talk about the assumptions that are going into your expectation for ARR growth to gradually accelerate throughout the year? And maybe what levers or factors could cause that ARR growth to kind of accelerate even further than we you're currently contemplating? Thank you.

Yes, good question. I would say from a lever perspective, if you look at what we're doing from a transformation point of view, we are effectively doubling our quota carrying sales capacity on the very high end of our customer account set and also creating teams focused on driving net revenue retention within our base. Which is also a much more cost effective way of growing than I think we have in the past. When we've been I think a little bit over focused on new account growth as a primary means of driving growth. Which we've talked about several times before on previous calls. So if I think about levers, We're staffing to grow. Staffing to grow at a far faster rate than what our outlook currently provides because we're taking a prudent approach to the ramp But we're looking at this as a growth business. We think this is a growth business. We're leaning into do it that way. And I think if you take it from a staffing perspective, add in the changes investments that we're making on the product side, whether that's whether it's catalyst or other future bundles, feed anomic self serve, a lot of things related to payments in that stack, which we'll talk about at our Investor Day, to Travis' point, most of which have not yet been seen in market.

There's a lot that we have going on that we are working on getting out into market, to be really clear, this is not the same team. This is not the same operating motion. This looks very, very different than how we've operated before. We have replaced the lion's share of the senior executive team across sales, marketing, operations, customer success, we're really enthused about the team that we have. We just need to go off and execute and show that we can do that.

Yes. And I'll add one bit of color on that. Like as an example, B2B we've got nearly 12,000 accounts on the platform today. Arguably, we're one of the largest, if not the largest B2B SaaS player in market.

Over half of our net new bookings in 2024 were B2B oriented as well.

You would never know that. By going to our publicly available site and information Historically, we've treated B2B as some additional features and functions as opposed to bifurcating our sales team, our account management team, our customer service team, and our go to market team to target that industry and industries adjacent to it with its own value proposition that's never existed before. And so you're going to see a lot of things like that that presumption is we're going to drive a lot more authenticity, a lot more efficacy, and we'll be able to speak to things in the spirit around kind of those three core offerings small business B2B and B2C going forward across our whole suite of products.

Perfect. Thank you.

Thank you.

The next question comes from Scott Berg with Needham.

Everyone. Thanks for taking my questions here. I got two. Travis, let's start with the new CRO Ron, that just came in and I think it was late January. Oftentimes we see CROs come in and make some of their own changes You of course were brought in last year to revamp sales go to market efforts and I guess you've obviously made a lot through our discussions there, but we expect Ron to make further changes in creating disruption in kind of what you've all done? Or just run-in the playbook that's already been Yes, it's a great question. I think it was a unique it's a unique remit in the sense that I kind of came in and made a lot those changes. So largely Rob is going to execute against it. However, I would argue Rob's got a lot of skill sets bigger and greater than mine. Quite frankly, I find them to be very complementary to what it is that I do What's unique about him is he actually has quite tangible experience across all three of our product lines with a channel advisor, with an ambulance for a long time, was at Salesforce Bigcommerce Cloud and most recently in RO.

Organization. And also philosophically aligned with the motion we had already put in place starting last summer and the strategy that we're kind of executing again. So all of that kind of perfectly aligned. It was a I'd love to have had them two months prior. Yes, selfishly, of course. But really fortunate to have him. He's excited to be here. And yes, I would not expect any disruptive changes or things like that. The infrastructure and the framework is in place. It's all about accelerated execution at this point.

Understood. And then from a follow-up, Daniel, I saw the announcement on the the Klarna partnership.

Didn't see if there's any kind of economic relationship or benefit to you all. Can you maybe help explain I guess, what that is? And if there is any sort of benefit, if that's fruitful going forward?

Sorry, Scott, real quick clarifying question. You broke up just a little bit. You saw which announcement?

That Klarna announcement in the press release about your partnership with them.

Yes.

I mean, it's it's obviously something we're really excited about and I think it's something we'll probably talk about in a lot more detail at our Investor Day in New York.

Got it. Thank you.

And the next question comes from Brian Peterson with Raymond James.

Hey, guys. Thanks for taking the question.

So Travis, I wanted to follow-up on the stat you gave on B2B being half of new bookings this year. I'd be curious what you're seeing in terms of the inertia in that market, maybe what you guys are displacing? And as you think about incremental B2B investments, how quickly can that kind of ramp up into 2025 and 2026? Thanks, guys.

No, great question. And just for clarity, that 12,000 accounts that is obviously a combination of retail or small business accounts along with enterprise accounts, just for those doing the math behind the scenes. The trends we're seeing there are pretty encouraging.

I would say it's a spectrum of opportunities. On the smaller side, you're seeing a lot of greenfield manufacturers and distributors looking to digitize their operation very quickly with smaller budgets We feel we've played really, really well there. So we've got certainly capabilities for them to grow into over time, but something they can take advantage of really quickly. So we're not really displacing anyone in that model other than their own either homegrown sort of operational model or their lack of technical acumen and addressing inappropriately. And then on the other extreme, you're seeing displacement of obviously legacy Adobe and Magento stuff. Seeing legacy SAP stuff. Depending on the nature and the complexity of that business, you're seeing one of two approaches either a straight rip out and replacement. We're seeing that more in mid market, upper mid market. The big meaty sort of global enterprise opportunities. We're seeing very, very very, very targeted replacement typically starting within a certain line of business or within a certain market starting there, building it out and then evangelizing it kind of a land and expand strategy within those larger global organizations. The days of the big bang rip something out and replace it with something else are long over.

I think our approach with composability has lent us to be able to be very effective in doing it, but as you all know B2B is really more of a cost savings dynamic of eliminating FTE labor making field sales teams more effective, driving out call center costs and also automating and synthesizing back office operations typically centered around multiple sources of truth, while also serving as a framework through future M and A to kind of ingest new businesses onto that same framework. So very transformational in nature very meaty for services providers. So it actually is really exciting for a lot of our agency and GSI partners as well. And certainly a place we feel we've got material differentiation and a right to win. Obviously, if you can't tell from my tone of voice, despite the caffeine, very enthusiastic about that space.

Appreciate the color.

Thanks guys. Thank you. Next question comes from Gabriel Borges of Goldman Sachs.

Hey, good morning. Thanks for taking the question. Travis, I wanted to follow-up on some of your comments on Shopify from earlier and competition more broadly. Maybe just give us the lay of the land as you've gotten dug in over the last several months and you look at the pipeline in enterprise, level set us as to where you think you're winning versus your enterprise competitors more broadly? I know you already mentioned the Cloudera versus Open versus Shopify. And then maybe as part of that, the new logos in your enterprise pipeline, where are they coming from versus some of your competitors or homegrown home wealth solutions? Great question, Gabriela.

I would say let's delineate between B2B and B2C. I just kind of talked about the B2B side where we're seeing that, we're seeing it up market. You're seeing both kind of mid market B2B taking advantage [indiscernible] [indiscernible] on the enterprise side, the big meaty stuff, you're seeing it very, very targeted on these global sort of opportunities. These are folks that are typically running custom homegrown or they're running something big. Like SAP and they've got to be really deliberate about what that approach is. Usually and what we're doing this year around the product is kind of expanding our capability can be, the more robust that capability gets, the wider ultimately your TAM is. And so we're seeing those sorts of opportunities in market right now, those that are looking to drive efficiency costs, and agility, but they're being very deliberate about how it is that they're approaching it. And then you're still seeing a fair amount of greenfield B2B. They've never digitized anything within the business before. They want to take advantage of it. It's kind of a healthy mix of both. On the B2C side, I would say to Daniel's points earlier, we are seeing an uptick in larger transformational deals around larger global brand and manufacturers less so retail, although we've seen some of that and really the embracement there is around composability.

They want the scale, the flexibility, the agility of composability, but without the downsides of cost time and risk. And they're really starting to embrace this concept around pre composed or curated composability, orient [indiscernible] [indiscernible] Obviously, those deals are very big and they take a long time to nuance and sort of sell. And we're just now in the last couple of months seeing those sorts of trends. But generally speaking, that's who we see. Definitive need or embracement of composability There's nuances to their business. There are more complicated requirements that can't be achieved. Through other competitors and what their capabilities are and would lend themselves to look at us. Hopefully that's helpful. And then just briefly, the answer on the logos. It's across a lot of different competitors. I mean, obviously, we spend a lot of time competing with Shopify Plus, Salesforce Bigcommerce Cloud, Magento, and a number of other platforms depending upon the region. I'd say from a new logo win perspective, it's across multiple competitors. I wouldn't say it's concentrated specifically with one. [indiscernible] Travis, I think you're also uniquely positioned to give you a perspective here on what in the macro in any given year makes them more likely versus less likely for a lot larger enterprise to want to change.

What I'm getting at is we've heard when consumer environment is strong, that's when enterprises might be less likely to change, but as well. Transaction volume is high, but on the flip side, well, when consumers lose their then you don't become more reverse in making changes. But we'll just love to hear what are the factors that have to align to get enterprises more excited about Lot by for 2025.

Yes. I think the biggest thing upmarket to me is around risk mitigation. Quite frankly, I think these are large organizations independent of market that are going to lead with mitigating risk. And so a comfort level that we or anyone else can address their current and future needs and use case and requirements. I would think that's the biggest determinant. Certainly, there are cyclical things around being locked into a contract with an incumbent and what the timing of that looks like. I think what what folks are starting to realize Gabriela is how much faster you can actually implement the technology today versus four years ago, maybe the last time they went about doing this, that might have been a twelve to eighteen month cycle You're starting to see that cut in half now and getting them comfortable with that thought process of being able to accomplish what they did five years ago in a fraction of the time and cost. I think you're going to see that trend continue and become more normalized. And as you see that happen organically, I think you're going to see increased demand, but it all centers around risk mitigation. Do they feel comfortable of being able to accomplish that because in the old way, like eighteen months, two years to implement a platform is wildly distracting and disruptive to a large brand and manufacturer or retailer.

So as that cost and time has come down, I think you're going to see demand [indiscernible] If that's helpful. [indiscernible] Thank you. Next question comes from Chris Zhang with UBS.

I have a question on the catalyst.

And maybe just can you talk about the customer feedback since the January launch in NRF and [indiscernible] functionality is resonating to your B2B and B2C customers. Thank you. [indiscernible] the broader audience, I mean, Catalyst is our accelerated reference architecture that we launched around NRF In mid January, we had, I don't know, a dozen or more clients early on embracing it in all shapes or sizes. Listen, philosophically, they love the agility and the speed. To be able to turn things on very, very quickly. They like the optionality and they like the freedom to be able to compose in a way that maps to their specific use cases and needs now and in the future. I mean, it is it's not for everyone, not everyone views the world that way and that that's okay and we're certainly not producing it in a way that it assumes that 80% of the market is going to go run to it. Certainly a subset of the market will go run to it. I think the bigger unlock and where you'll see us take it [indiscernible] some version of catalyst pre composed, curated specifically to industries and markets. And that accelerated reference architectural orient itself to market to allow very specific industries, especially those we feel are underserviced today or in need of transformation, that can take advantage of composability and all the benefits without the risk of the cost and the timeline and complexity usually associated with doing it.

So bundling that commercially bundling it operationally and bundling it technically and you all can probably connect the dots of what the benefits of that would be obviously to us. That's where we're kind of taking everything on the CaliZet.

I appreciate the color. And I'll definitely look to hear more at the Investor Day. And then just a second as a follow-up. The financial side. Maybe can you share some of the FX assumption if that's important? For your guide or if that's How much of that is safety and maybe just if you can give some color on the cadence that would be helpful. Yes. The FX exposure for us is very small.

From a long exposure point of view, it's almost exclusively U. S. Dollars. We have short exposures in payroll and others.

Other areas from an FX point of view. But the exposures are so small, we don't even report results on a constant currency basis.

As we continue to grow and develop more sophisticated billing capabilities and we'll we will eventually end up with more foreign exchange exposure. It's just not material to the business at this time.

Thank you.

This concludes our question and answer session.

I would like to turn the conference back over to Travis Hess, CEO for any closing comments.

I really want to thank everyone for joining the call today. I'm certainly excited for where we are and the changes that we've made to date. And now it's time to get to work in X [indiscernible] [indiscernible] [indiscernible] Excited for things to come. Thank you for joining.

Thank you.

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

You may now disconnect your lines.