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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2022

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

Commission File Number: 001-39423

 

 

BigCommerce Holdings, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

46-2707656

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

11305 Four Points Drive
Building II, 3rd Floor

Austin, Texas

78726

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (512) 865-4500

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Series 1 common stock, $0.0001 par value per share

 

BIGC

 

The Nasdaq Global Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☒    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No  

As of March 31, 2022, the registrant had 72,673,269 shares of Series 1 common stock, $0.0001 par value per share outstanding.

 

 

 

 


 

 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Index to Financial Statements

2

 

Condensed Consolidated Balance Sheets

3

 

Condensed Consolidated Statements of Operations

4

 

Condensed Consolidated Statements of Comprehensive Loss

5

 

Condensed Consolidated Statement of Stockholders’ Equity (Deficit)

6

 

Condensed Consolidated Statements of Cash Flows

7

 

Notes to Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

35

PART II.

OTHER INFORMATION

37

Item 1.

Legal Proceedings

37

Item 1A.

Risk Factors

37

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

40

Item 3.

Defaults Upon Senior Securities

40

Item 4.

Mine Safety Disclosures

40

Item 5.

Other Information

40

Item 6.

Exhibits

41

Signatures

43

 

 

 

i


 

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

 

Index to Financial Statements

BigCommerce Holdings, Inc.

 

 

 

2


Table of Contents

 

 

 

BigCommerce Holdings, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

250,934

 

 

$

297,561

 

Restricted cash

 

 

1,156

 

 

 

1,143

 

Marketable securities

 

 

125,175

 

 

 

102,315

 

Accounts receivable, net

 

 

40,995

 

 

 

39,806

 

Prepaid expenses and other assets

 

 

10,570

 

 

 

9,710

 

Deferred commissions

 

 

4,412

 

 

 

4,013

 

Total current assets

 

 

433,242

 

 

 

454,548

 

Property and equipment, net

 

 

7,980

 

 

 

7,429

 

Right-of-use-assets

 

 

11,652

 

 

 

9,515

 

Prepaid expenses, net of current portion

 

 

778

 

 

 

831

 

Deferred commissions, net of current portion

 

 

5,932

 

 

 

5,673

 

Intangible assets, net

 

 

32,995

 

 

 

35,032

 

Goodwill

 

 

42,432

 

 

 

42,432

 

Total assets

 

$

535,011

 

 

$

555,460

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

7,924

 

 

$

8,211

 

Accrued liabilities

 

 

3,495

 

 

 

2,941

 

Deferred revenue

 

 

13,220

 

 

 

12,752

 

Current portion of operating lease liabilities

 

 

2,957

 

 

 

2,653

 

Other current liabilities

 

 

37,210

 

 

 

36,254

 

Total current liabilities

 

 

64,806

 

 

 

62,811

 

Deferred revenue, net of current portion

 

 

905

 

 

 

1,359

 

Long-term debt

 

 

336,025

 

 

 

335,537

 

Operating lease liabilities, net of current portion

 

 

11,941

 

 

 

10,217

 

Other long-term liabilities, net of current portion

 

 

11,457

 

 

 

7,248

 

Total liabilities

 

 

425,134

 

 

 

417,172

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000 shares authorized

at March 31, 2022 and December 31, 2021; 0 shares

issued and outstanding, at March 31, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.0001 par value; 500,000 shares Series 1 and, 5,051 shares Series 2

authorized at March 31, 2022 and December 31, 2021; 72,673, and 72,311 shares Series 1

issued and outstanding at March 31, 2022 and December 31, 2021, respectively,

and 0 shares Series 2 issued and, outstanding at

March 31, 2022, and December 31, 2021, respectively

 

 

7

 

 

 

7

 

Additional paid-in capital

 

 

537,779

 

 

 

528,540

 

Accumulated other comprehensive loss

 

 

(804

)

 

 

(191

)

Accumulated deficit

 

 

(427,105

)

 

 

(390,068

)

Total stockholders’ equity

 

 

109,877

 

 

 

138,288

 

Total liabilities and stockholders’ equity

 

$

535,011

 

 

$

555,460

 

 

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

3


Table of Contents

 

BigCommerce Holdings, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

 

 

 

Three months ended March 31,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

66,050

 

 

$

46,660

 

Cost of revenue

 

 

17,103

 

 

 

9,250

 

Gross profit

 

 

48,947

 

 

 

37,410

 

Operating expenses:

 

 

 

 

 

 

 

 

Sales and marketing

 

 

32,173

 

 

 

20,809

 

Research and development

 

 

20,944

 

 

 

13,535

 

General and administrative

 

 

17,312

 

 

 

11,608

 

Acquisition related expenses

 

 

12,660

 

 

 

 

Amortization of intangible assets

 

 

2,037

 

 

 

 

Total operating expenses

 

 

85,126

 

 

 

45,952

 

Loss from operations

 

 

(36,179

)

 

 

(8,542

)

Interest income

 

 

122

 

 

 

12

 

Interest expense

 

 

(709

)

 

 

 

Other expense

 

 

(156

)

 

 

(14

)

Loss before provision for income taxes

 

 

(36,922

)

 

 

(8,544

)

Provision for income taxes

 

 

115

 

 

 

 

Net loss

 

$

(37,037

)

 

$

(8,544

)

Basic and diluted net loss per share attributable to common

   stockholders

 

$

(0.51

)

 

$

(0.12

)

Weighted average shares used to compute basic and diluted net

   loss per share attributable to common stockholders

 

 

72,476

 

 

 

69,792

 

 

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

 

4


Table of Contents

 

 

BigCommerce Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

 

 

 

Three months ended March 31,

 

 

 

2022

 

 

2021

 

 

 

 

 

Net loss

 

$

(37,037

)

 

$

(8,544

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Net unrealized gain (loss) on marketable debt securities

 

 

(613

)

 

 

 

Total comprehensive loss

 

$

(37,650

)

 

$

(8,544

)

 

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

 

5


Table of Contents

 

 

BigCommerce Holdings, Inc.

Condensed Consolidated Statement of Stockholders’ Equity (Deficit)

(in thousands)

 

 

 

Convertible Preferred

Stock

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2020

 

 

 

 

$

 

 

 

 

69,512

 

 

$

7

 

 

$

530,143

 

 

$

(313,391

)

 

$

 

 

$

216,759

 

Exercise of stock options

 

 

 

 

 

 

 

 

 

784

 

 

 

 

 

 

1,952

 

 

 

 

 

 

 

 

 

1,952

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,171

 

 

 

 

 

 

 

 

 

5,171

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,544

)

 

 

 

 

 

(8,544

)

Balance at March 31, 2021

 

 

 

 

$

 

 

 

 

70,296

 

 

$

7

 

 

$

537,266

 

 

$

(321,935

)

 

$

 

 

$

215,338

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible Preferred

Stock

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

(Deficit)

 

Balance at December 31, 2021

 

 

 

 

$

 

 

 

 

72,311

 

 

$

7

 

 

$

528,540

 

 

$

(390,068

)

 

$

(191

)

 

$

138,288

 

Exercise of stock options

 

 

 

 

 

 

 

 

 

272

 

 

 

 

 

 

277

 

 

 

 

 

 

 

 

 

277

 

Release of restricted stock units

 

 

 

 

 

 

 

 

 

90

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,962

 

 

 

 

 

 

 

 

 

8,962

 

Total other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(613

)

 

 

(613

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(37,037

)

 

 

 

 

 

(37,037

)

Balance at March 31, 2022

 

 

 

 

$

 

 

 

 

72,673

 

 

$

7

 

 

$

537,779

 

 

$

(427,105

)

 

$

(804

)

 

$

109,877

 

 

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

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BigCommerce Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

Three months ended March 31,

 

 

Three months ended March 31,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(37,037

)

 

$

(8,544

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

2,826

 

 

 

706

 

Amortization of discount on debt

 

 

488

 

 

 

 

Stock-based compensation

 

 

8,962

 

 

 

5,171

 

Allowance for credit losses

 

 

1,313

 

 

 

726

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(2,502

)

 

 

(3,899

)

Prepaid expenses

 

 

(806

)

 

 

(582

)

Deferred commissions

 

 

(658

)

 

 

(796

)

Accounts payable

 

 

(287

)

 

 

(1,130

)

Accrued and other liabilities

 

 

5,702

 

 

 

(6,399

)

Deferred revenue

 

 

14

 

 

 

1,989

 

Net cash used in operating activities

 

 

(21,985

)

 

 

(12,758

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of marketable securities

 

 

(32,473

)

 

 

(18,374

)

Purchase of property and equipment

 

 

(1,340

)

 

 

(480

)

Maturity of marketable securities

 

 

9,000

 

 

 

 

Net cash used in investing activities

 

 

(24,813

)

 

 

(18,854

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

184

 

 

 

1,741

 

Net cash provided by financing activities

 

 

184

 

 

 

1,741

 

Net change in cash and cash equivalents and restricted cash

 

 

(46,614

)

 

 

(29,871

)

Cash and cash equivalents and restricted cash, beginning of period

 

 

298,704

 

 

 

220,607

 

Cash and cash equivalents and restricted cash, end of period

 

$

252,090

 

 

$

190,736

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

472

 

 

$

 

Cash paid for taxes

 

$

32

 

 

$

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Changes in capital additions, accrued but not paid

 

$

96

 

 

$

 

Reconciliation of cash, cash equivalents and restricted cash within the condensed consolidated balance sheet to the amounts shown in the statements of cash flows above:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

250,934

 

 

 

189,578

 

Restricted cash

 

 

1,156

 

 

 

1,158

 

Total cash, cash equivalents and restricted cash

 

$

252,090

 

 

$

190,736

 

 

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

 

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BigCommerce Holdings, Inc.

Notes to Condensed 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 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 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 unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

In the opinion of management, the accompanying interim unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting of normal, recurring adjustments, necessary for a fair presentation. Certain information and disclosures normally included in the notes to the annual consolidated financial statements prepared in accordance with GAAP have been omitted from these interim unaudited condensed consolidated financial statements pursuant to the rules and regulations of the SEC. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the accompanying notes for the fiscal year ended December 31, 2021, which are included in our Annual Report on Form 10-K, filed with the SEC on March 1, 2022. The results of operations for the three months ended March 31, 2022, are not necessarily indicative of the results to be expected for the year ending December 31, 2022, or for any other period.

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; the amortization period for deferred commissions; the

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2. Summary of significant accounting policies (continued)

allowance for credit losses; a determination of the deferred tax asset valuation allowance and the valuation of our common stock used to determine stock-based compensation expense prior to our IPO. Because of the use of estimates inherent in the financial reporting process and given the additional or unforeseen effects from the COVID-19 pandemic, actual results could differ from those estimates, and such differences could be material to our consolidated financial statements.

COVID-19, declared a global pandemic by the World Health Organization on March 11, 2020, has caused disruption to the economies and communities of the United States and our target international markets. In the interest of public health, many governments closed physical stores and places of business deemed non-essential. This precipitated a significant shift in shopping behavior from offline to online. Our business has benefited from this shift, both in accelerated sales growth for our existing customers’ stores, and in our sales of new store subscriptions to customers. Nevertheless, we do not have certainty that those trends will continue; the COVID-19 pandemic and the uncertainty it has created in the global economy could materially adversely affect our business, financial condition, and results of operations.

 

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:

 

 

 

Three months ended March 31,

 

(in thousands)

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

Americas – U.S.

 

$

51,500

 

 

$

36,117

 

Americas – other

 

 

2,684

 

 

 

1,734

 

EMEA

 

 

6,284

 

 

 

4,397

 

APAC

 

 

5,582

 

 

 

4,412

 

Total revenue

 

$

66,050

 

 

$

46,660

 

 

Long-lived assets by geographic region, net, was as follows:

 

 

 

March 31,

 

 

December 31,

 

(in thousands)

 

2022

 

 

2021

 

Long-lived assets:

 

 

 

 

 

 

 

 

Americas – U.S.

 

$

7,196

 

 

$

6,847

 

Americas - others

 

$

 

 

 

 

EMEA

 

$

 

 

 

 

APAC

 

 

784

 

 

 

582

 

Total long-lived assets

 

$

7,980

 

 

$

7,429

 

 

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.

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2. Summary of significant accounting policies (continued)

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. Unbilled receivables arise primarily when we provide subscriptions services in advance of billing. 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 March 31, 2022 and December 31, 2021 included unbilled receivables of $14.0 million, $13.1 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. Upon adoption of ASU 2016-13, we analyzed the accounts receivable portfolio for significant risks, historical activity, and an estimate of future collectability to determine the amount that will ultimately be collected. This estimate is analyzed quarterly and adjusted as necessary. Identified risks pertaining to our accounts receivable include the delinquency level, customer type, and current economic environment. Due to the short-term nature of such receivables, 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. Adoption of ASU 2016-13 resulted in an increase in the allowance for credit losses of approximately $0.4 million as of January 1, 2020, primarily related to unbilled receivables.

 

The allowance for credit losses consisted of the following:

 

(in thousands)

 

 

 

 

Balance at December 31, 2021

 

$

3,867

 

Provision for expected credit losses

 

 

1,313

 

Accounts written off

 

 

(637

)

Balance at March 31, 2022

 

$

4,543

 

 

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

 

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2. Summary of significant accounting policies (continued)

 

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. To date, software costs eligible for capitalization have not been significant.

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.

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. 

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.

Acquisition related expenses

Acquisition related expenses consist primarily of cash payments for third-party acquisition costs and other acquisition related expenses. We recognized $12.7 million and $0.0 million in acquisition related expenses during the three months ended March 31, 2022, and 2021, respectively. For the three months ended March 31, 2022, $0.3 million was recognized on acquisition related spend and $12.4 million was recognized in connection with contingent compensation arrangements, as further discussed in Note 5 “Business Combination.” We entered into contingent compensation arrangements, in which payments will be made 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.

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2. Summary of significant accounting policies (continued)

 

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.

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 March 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.

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.

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3. Revenue recognition and deferred costs

Revenue recognition

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.

The following table disaggregates our revenue by major source:

 

 

 

Three months ended March 31,

 

(in thousands)

 

2022

 

 

2021

 

Subscription solutions

 

$

47,987

 

 

$

32,004

 

Partner and services

 

 

18,063

 

 

 

14,656

 

Total revenue

 

$

66,050

 

 

$

46,660

 

 

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, 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. A portion of our 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.

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 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

Our partner and services revenue consists of revenue share, partner technology integrations, and marketing services provided to partners. Revenue share relates to fees earned by our partners from customers using our platform, where we have an arrangement with such partner to share such fees as they occur. Revenue share is recognized at the time the earning activity is complete, which is generally monthly. Revenue for partner technology integrations is recorded on a straight-line basis over the life of the contract commencing when the integration has been completed. Fees for marketing services are recognized either at the time the earning activity is complete, or ratably over the length of the contract, depending on the nature of the obligations in the contract. Payments received in advance of services being rendered are recorded as deferred revenue and recognized when the obligation is completed.

 

We also derive revenue from the sales of website themes and applications upon delivery.

We recognize revenue share, and revenue from the sales of third-party applications, on a net basis as we have determined that we are the agent in our arrangements with third-party application providers. All other revenue is recognized on a gross basis, as we have determined we are the principal in these arrangements.

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3. Revenue recognition and deferred costs (continued)

Contracts with multiple performance obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.

Our subscription contracts are generally comprised of a single performance obligation to provide access to our platform, but can include additional performance obligations. For contracts with multiple performance obligations where the contracted price differs from the standalone selling price (“SSP”) for any distinct good or service, we may be required to allocate the contract’s transaction price to each performance obligation using our best estimate of SSP.

Contracts with our technology solution partners often include multiple performance obligations, which can include integrations and marketing activities. In determining whether integration services are distinct from hosting services we consider various factors. These considerations included the level of integration, interdependency, and interrelation between the implementation and hosting service. We have concluded that the integration services included in contracts with hosting obligations are not distinct. As a result, we defer any arrangement fees for integration services and recognize such amounts over the life of the hosting obligation. To determine if marketing activities are distinct, we consider the nature of the promise in the contract, the timing of payment, and the partner expectations. Additional consideration for some partner contracts varies based on the level of customer activity on the platform. For most of our contracts, we have determined that we meet the variable consideration allocation exception and therefore recognize these variable fees in the period they are earned.

Judgment is required to determine which performance obligations are distinct and the allocation of consideration to each distinct performance obligation. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For certain arrangements, we may be required to allocate the contract’s transaction price to multiple performance obligations based on SSP. The primary method used to estimate SSP is the expected cost-plus margin approach, which considers margins achieved on standalone sales of similar products, market data related to historical margins within an industry, industry sales price averages, market conditions, and profit objectives.

Cost of revenue

Cost of revenue consists primarily of personnel-related costs, including: stock-based compensation expenses for customer support and professional services personnel; costs of maintaining and securing our infrastructure and platform; amortization expense associated with capitalized internal-use software; and allocation of overhead costs. With our acquisition of Feedonomics on July 23, 2021, cost of revenue also includes personnel and other costs related to feed management services along with other customer support personnel.

Deferred revenue

Deferred revenue primarily consists of amounts that have been billed to or received from customers in advance of performing the associated services. We recognize revenue from deferred revenue when the services are performed, and the corresponding revenue recognition criteria are met. We recognized $7.2 million of previously deferred revenue during the three months ended March 31, 2022.

The net increase in the deferred revenue balance for the three months ended March 31, 2022, is primarily due to increases in SaaS related subscriptions. Amounts recognized from deferred revenue represent primarily revenue from the sale of subscription solutions, integration, and marketing services.

As of March 31, 2022, we had $153.5 million of remaining performance obligations, which represents contracted revenue minimums that have not yet been recognized, including amounts that will be invoiced and recognized as revenue in future periods. We expect to recognize approximately 50% of the remaining performance obligations as revenue in the following 12-month period, and the remaining balance in the periods thereafter.

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3. Revenue recognition and deferred costs (continued)

Deferred commissions

Certain sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions are not paid on subscription renewals. We amortize deferred sales commissions ratably over the estimated period of our relationship with customers of approximately three 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. We include amortization of deferred commissions in Sales and marketing expense in the consolidated statements of operations. We periodically review the carrying amount of deferred commissions to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these deferred costs. We did not recognize an impairment of deferred commissions during the three months ended March 31, 2022, and the year ended December 31, 2021.

Sales commissions of $1.6 million and $1.5 million were deferred for the three months ended March 31, 2022, and 2021, respectively; and deferred commission amortization expense was $1.1 million and $0.7 million for the three months ended March 31, 2022, and 2021, respectively.

4. Fair value measurements, cash equivalents and marketable securities

Financial instruments carried at fair value include cash and cash equivalents, restricted cash, marketable securities, and embedded put options. The carrying amount of accounts receivable, accounts payable, and accrued liabilities approximates fair value due to their relatively short maturities.

For assets and liabilities measured at fair value, fair value is the price to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. When determining fair value, we consider the principal or most advantageous market in which it would transact, and assumptions that market participants would use when pricing asset or liabilities.

The accounting standard for fair value establishes a fair value hierarchy based on three levels of inputs, the first two of which are considered observable and the last unobservable. The standard requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The three levels of inputs that may be used to measure fair value are as follows:

 

Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

 

Level 2 – Inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

 

Level 3 – Inputs are unobservable that are significant to the fair value of the asset or liability and are developed based on the best information available in the circumstances, which might include our data.

The following tables summarize the estimated fair value of our cash equivalents, marketable securities and debt.

 

 

 

As of March 31, 2022

 

(in thousands)

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

Total

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

220,362

 

 

$

 

 

$

 

 

$

220,362

 

U.S treasury securities

 

$

40,200

 

 

$

 

 

$

 

 

$

40,200

 

Corporate securities

 

$

 

 

$

84,976

 

 

$

 

 

$

84,976

 

Total financial assets

 

$

260,562

 

 

$

84,976