Commerce.com, Inc. (CMRC) Earnings Call Transcript

Ladies and gentlemen, thank you for standing by, and welcome to the BigCommerce First Quarter 2023 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to your first speaker today, Daniel Lentz, Head of Investor Relations. You may begin.

Good afternoon, and welcome to BigCommerce's First Quarter 2023 Earnings Call. We will be discussing the results announced in our press release issued after today's market close. With me are BigCommerce's President, CEO and Chairman, Brent Bellm; and CFO, Robert Alvarez. Today's call will contain certain forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning financial and business trends, our expected future business and financial performance and financial condition and our guidance for the second quarter of 2023 and the full year 2023. These statements can be identified by words such as expect, anticipate, intend, plan, believe, seek, committed, will or similar words. These statements reflect our views as of today only and should not be relied upon as representing our views at any subsequent date, and we do not undertake any duty to update these statements. Forward-looking statements, by their nature, address matters that are subject to risks and uncertainties and that could cause actual results to differ materially from expectations. For a discussion of the material risks and other important factors that could affect our actual results, please refer to the risks and other disclosures contained in our filings with the Securities and Exchange Commission. During the call, we will also discuss certain non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures as well as how we define these metrics and other metrics is included in our earnings press release which has been furnished to the SEC and is also available on our website at investors.bigcommerce.com. With that, let me turn the call over to Brent.

Thanks, Daniel, and thanks, everyone, for joining us. On today's call, I will walk through our first quarter results and share my perspective on our progress thus far in 2023, R.A. will later share greater detail on our financial results and conclude the call with a discussion on updated guidance. Let's discuss the details. In Q1, total revenue was $71.8 million, up 9% year-over-year. Our Q1 non-GAAP operating loss was $6.4 million, which was well ahead of our quarterly guidance and a strong step toward our goal of reaching breakeven on an adjusted EBITDA basis in Q4 of this year. We concluded Q1 with an annual revenue run rate, or ARR, of $316.7 million, up 13% year-over-year. That represents a sequential growth in ARR of $5.0 million. Enterprise account ARR was $228.8 million, up 21% year-over-year. Enterprise accounts now represent slightly over 72% of our total company ARR. On our previous earnings call, we noted that we are aiming for enterprise ARR growth in 2023 at or above 20% year-over-year, which we believe will be offset by nonenterprise account ARR contraction in the mid-single digits. Q1 results met fiscal. Non-enterprise account ARR was $87.9 million, up slightly on a sequential basis compared to Q4 and down slightly year-over-year as expected as we take action to build a scalable, more self-serve small business segment. I'd like to elaborate on a few areas in particular that demonstrate our progress. Our shift of go-to-market focus from small business to the enterprise segment is showing positive results. Sales pipeline as of the start of Q2 for this segment is approximately 20% higher than where we were at this time last year. Win rates remain strong. Sales cycle times in the lower end of this segment are largely unchanged, while larger enterprise opportunities have seen an increase of approximately 50 days between first engagement with a merchant and close compared to this time last year. Before I elaborate on how we are responding to these dynamics, I'd like to clarify what we mean by enterprise accounts and the parts of the market we serve. We sell four different e-commerce plan types to merchants. The first three, Standard, Plus and Pro are collectively our essentials plans geared towards small businesses. Our enterprise plans have richer feature sets, customized pricing and terms and are typically sold to merchants in what we deem the mid-market and enterprise customer segments. We consider merchants doing between $1 million to $50 million per year in online gross merchandise value, or GMV, our mid-market segment; and merchants doing more than $50 million in online GMV per year, our large enterprise segment. We consider any account buying at least one enterprise plan and enterprise accounts and we include select financial metrics from these accounts in our quarterly results. As a result, our enterprise account metrics reflect a mixture of mid-market and large enterprise segment merchants. We are responding to the sales cycle time dynamics I mentioned previously by further prioritizing channels and products that deliver strong ROI with faster time to close. We are increasing our investment in lead generation with our agency partners and in the mid-market segment as these opportunities tend to have shorter sales cycle times and a strong LTV to CAC. Finally, we are seeing strong success with Feedonomics, which offers our customers incredible ROI with fast time to merchant value and also high ROI for BigCommerce. All merchants are actively seeking ways to increase revenue and improve their return on ad spending and Feedonomics can help merchants running on many different platforms see strong results without the need to replatform. Feedonomics continues to win accolades in customer satisfaction and deepen BigCommerce's relationship with key partners and merchants. 30% of the top 1,000 Internet retailers trust Feedonomics to optimize their product catalogs and expand their market reach. In Q1, G2 issued their spring grid reports that measure overall customer satisfaction and market presence. Feedonomics was in the leadership position in three e-commerce software categories: multichannel retail, catalog management and online marketplace optimization tools. Feedonomics also rolled out its own native integration into Amazon multichannel fulfillment during the quarter, enabling thousands of merchants to take advantage of Amazon's fulfillment services for orders that originate on non-Amazon channels. Feedonomics also continues to support merchant adoption of key global channel programs, including Macys.com, Meta's Facebook and Instagram Shop ads and TikTok shop. Our platform and omnichannel products drive scalable, cost-effective growth for our merchants. We are confident that we will continue to broaden our mid-market base even as we invest in expansion further into the enterprise segment as well. We also saw healthy stabilization in our nonenterprise or retail accounts. While this portion of our business was down 4% year-over-year, it showed sequential growth for the first time since Q4 2021. As we have shifted focus towards more established small businesses, adjusted plan pricing to encourage prepayment and decrease the volume and depth of sales promotions, we have seen improved net retention results in this portion of our business and encouraging signs of stabilization in ARR. We expect results from this portion of the business to benefit from our recent pricing changes as well. We will not see the full effect of the February pricing action on our base retail accounts until June but early results are strong. New merchant bookings remain consistent and we are also seeing a higher mix of prepaid annual plans as well. Finally, our Q1 results reflect progress on our path towards profitability. To be clear, adjusted EBITDA breakeven in Q4 is not a finish line. It's a starting line in our business from which we will drive profitable growth for our shareholders. Q1 was a strong step toward that goal. Despite the prevailing caution among businesses regarding the near-term economic outlook, established in mid-market and enterprise merchants continue to demonstrate interest in long-term investments in our e-commerce platform and omnichannel capabilities. Although acquiring these larger merchants may come at a greater financial cost and require a longer time to close deals, they offer significantly higher long-term value. These merchants have impressive retention rates, greater cross-selling potential and healthier unit economics. They are also more likely to adopt technologies and omnichannel integration that help sustain and accelerate their growth, which drives significant revenue for us. These merchants are central to our strategic and financial success, and we will continue to balance the need to invest in winning these segments while also improving profitability and cash flow. Our average revenue per account, or ARPA, for enterprise accounts was a little over $39,000 in Q1, which was up steadily from $35,000 in Q1 2022 and $32,000 in Q1 2021. The consistent growth we have seen in this metric reflects our progress moving up from our historical base in small business into the mid-market segment and now early progress in the enterprise segment as well. This move into enterprise is succeeding as is evident by merchants such as Curology, Conn's Home Plus and Harley-Davidson, launching with us in Q1, as I'll discuss more later, and also by merchants such as Coldwater Creek picking us as their new e-commerce provider. This go-to-market focus on the mid-market and enterprise segments does not mean that we are walking away from small business merchants. We continue to acquire and serve small businesses on our platform, and we are committed to helping them build their business with BigCommerce. But we have optimized our go-to-market approach to small businesses to be more self-serve with less sales and marketing demand generation investments. The goal is to build a small business segment with a scalable LTV to CAC. Our recent Standard, Plus and Pro pricing action and prioritization of annual prepayment is an example of the adjustments we are making to build this segment into a profitable and more scalable business. Our e-commerce and omnichannel solutions are designed to be flexible, composable and scalable, providing unmatched versatility for both B2C and B2B clients alike. Earlier this week, we announced the latest update to B2B addition our comprehensive suite of B2B functionalities that enhance the online selling experience for suppliers, manufacturers, distributors and wholesalers. The new release introduces multi-store front compatibility, a brand-new B2B buyer portal and hello support. Next Level B2B addition functionalities allow merchants to manage quotes, invoices and buyer approval workflows. B2B additions open an intuitive solution transforms the way sellers and buyers do business turning legacy B2B practices into a modern, agile and nimble digital operation with a composable foundation ready to scale with the business. These enterprise-grade capabilities provide B2B brands with the flexibility and customization they need to elevate online selling experiences, launch new brands and expand into new regions. In addition to strengthening B2B addition, BigCommerce continues to release features and product enhancements that resonate with our target market. In March, we launched Buy Online Pickup in Store functionality, also known as click and collect, giving merchants more options to meet shoppers where they are and provide frictionless shopping experiences. Previously only available for enterprise merchants, we expanded our multi-store front offering in Q1 and as a self-service feature acceptable to small and midsized BigCommerce merchants running on our retail plans. The commerce merchants of all sizes now have the advantage to manage multiple storefronts to grow sales in new regions, streamline operations for multiple brands and customize various customer segments to drive global growth. In Q1, we announced a new strategic partnership with WPP to offer omnichannel solutions to help WPP clients drive growth and maximize sales across hundreds of advertising channels and marketplaces. This innovative partnership will give WPP priority access to new product tools on both BigCommerce and Feedonomics in addition to providing APIs and data sets that will enable WPP agencies to develop unique insights for clients across product, trend and purchasing data. Given the attractiveness of the joint BigCommerce and Feedonomics value proposition to enterprise brands, we continue to be focused on engaging, activating and enabling many other global agency partners to serve mutual merchants with these market-leading capabilities across advertising, marketplace and branded commerce channels. We also announced a new global partnership with InfoTrax Systems, a leading provider of commission software and distributor tools for direct sales companies. The new InfoTrax powered by BigCommerce solution will give thousands of direct selling customers access to more innovative and sophisticated commerce capabilities, including the ability to launch omnichannel sales strategies using Feedonomics. In addition, THG Ingenuity, the complete commerce division of THG Plc and BigCommerce intend to develop a U.S. and EMEA-focused complete commerce solution that would bring together BigCommerce's composable e-commerce storefront with Ingenuity's fully integrated technology stack and operational capabilities. Earlier in Q1, in partnership with Amazon, we launched the Buy with Prime app for BigCommerce, a new self-service integration for U.S. merchants to easily enable Buy with Prime on their BigCommerce storefront with no coding required. With shopping benefits that millions of Prime members know and trust, including fast free shipping, Buy with Prime has shown to increase conversion by 25% on average. This week, we also announced that we have expanded our global footprint into Poland, Romania, India, the UAE and South Africa with an expanded engineering team in Poland to partner-led entities in Eastern and Central Europe and a new country leader in India. In Q1, we continued to grow our roster of leading notable brands and merchants on our platform. Innovative Health and beauty brand, Curology launched a beautiful new storefront leveraging our NetSuite ERP partnership to connect Curology store with its ERP for product and inventory data syncing. Conn's Home Plus a leading retailer of furniture appliances and electronics with more than 160 stores across 15 U.S. states, recently launched on BigCommerce using a natively hosted stencil storefront and a custom BigCommerce checkout, taking advantage of integrations with custom financing solutions and location-based pricing. Tottenham Hotspur, one of the world's top football clubs is leveraging BigCommerce's platform to further enhance its popular online stores capabilities and fan experience, not only at home in the U.K., but also in APAC and North America, where the club has a significant and growing fan base. ASSA ABLOY a global leader in door opening solutions used in many of the world's blocks and security installations is revolutionizing its customers' experience by integrating its broad product catalog and using our B2B addition solution to customize the shopping experience. Iconic motorcycle brand, Harley-Davidson, launched a new line of lifestyle apparel utilizing BigCommerce's APIs to build a full suite of custom integrations with back-end systems and leveraging BigCommerce's stencil framework to build a chic front-end. Diamonds Direct, a worldwide leader in diamond sourcing, selection, education and value, launched a new store with a headless digital experience front end and BigCommerce back-end to deliver a seamless, intuitive shopping experience including custom ring builder options. Feedonomics also signed many new customers on the quarter as well, with highlights including Chico's, Findel, Rappi, Tiendamia as well as signing new agreements with existing BigCommerce customers such as Solo brands, Diono, Houzer and Badgley Mischka, among many others. To conclude, our 2023 plan is focused on 3 primary goals: First, continued top line growth in the mid-market and enterprise segments; second, breakeven in Q4 on an adjusted EBITDA basis; and third, further efficiencies in our business to improve operating cash flow. We are laser-focused on delivering these commitments. These set up our business for strong profitable growth in 2024. We are operating from a position of strength in the mid-market segment and building momentum in the enterprise segment as well. We have a winning product in a growing market with a diverse partner ecosystem vested in our success. We are encouraged by our results thus far in 2023, and we are committed to deliver healthy returns to our shareholders. Next, I'd like to turn it over to R.A. to discuss our financial results in more detail and conclude with our updated guidance for Q2 and 2023.

Thanks, Brent, and thank you, everyone, for joining us today. During my prepared remarks, I'll cover our Q1 results in detail, provide additional commentary on some of our key goals for the year and finally conclude with updated guidance. In Q1, total revenue was $71.8 million, up 9% year-over-year. Subscription revenue grew 12% year-over-year to $53.8 million, while partner and services revenue, or PSR, was down 1% year-over-year to $17.9 million. Revenue in the Americas was up 7% while EMEA revenue grew 27% and APAC revenue was up 1% compared to prior year. As I mentioned on the last earnings call, we built our 2023 financial plan, assuming conservative net bookings growth particularly in the front half of the year. We also assume further moderation in consumer spending, which would impact volume-driven pricing upgrades and PSR. Q1 results were largely in line with these assumptions and I am encouraged by the progress that we showed in the quarter. I'll now review our non-GAAP KPIs. Our ARR grew to $316.7 million, up 13% year-over-year. That represents a sequential growth in total ARR of $5 million. Enterprise account ARR was $228.8 million, up 21% year-over-year. Subscription ARR was up $5.1 million versus Q4 and up 15% year-over-year. As we mentioned last quarter, we are aiming for enterprise ARR growth in 2023 at or above 20% year-over-year, which we believe will be offset by nonenterprise account ARR contraction in the mid-single digits. Q1 nonenterprise results exceeded our expectations. We believe improving cohort health and recent pricing changes will offset the degree of contraction risk we outlooked at the beginning of the year. At the end of Q1, we reported 5,828 enterprise accounts, up 463 accounts or 9% year-over-year. ARPA, or average revenue per account, for enterprise accounts was $39,260, up 11% year-over-year. I'll now shift to the expense portion of the income statement. As a reminder, unless otherwise stated, all references to our expenses, operating results and per share amounts on a non-GAAP basis. Tier 1 total cost of revenue was $16.3 million, down approximately $1 million sequentially from Q4. Q1 total operating expenses were $61.9 million, down $2.7 million sequentially from Q4. Q1 gross margin was 77%, up 192 basis points from the previous year, while gross profit was $55.5 million up 11% year-over-year. This gross margin expansion is notable in that we drove healthy margin expansion even while growth in high gross margin PSR was challenged. We are making deliberate decisions on automation, staffing and other cost drivers to drive sustainable margin improvements over time. In Q1, sales and marketing expenses totaled $31.2 million, up 2% year-over-year. This represented 43% of revenue, down 297 basis points compared to last year. Research and development expenses were $17.3 million or 24% of revenue, down 366 basis points from a year ago and down $1.7 million sequentially from Q4. General and administrative expenses were $13.4 million or 19% of revenue down 121 basis points from a year ago. In Q1 2023, we reclassified certain costs that we had previously included in general and administrative expenses into sales and marketing expenses. To maintain consistency between comparable periods, we reclassed $1.5 million from general and administrative expenses to sales and marketing expenses for the period ending March 31, 2022. This change in classification had no effect on the reported results of our operations or cash flow. In Q1, we reported a non-GAAP operating loss of $6.4 million, a negative 9% operating margin. This compares with an operating loss of $12.4 million or a negative 18.7% operating margin in the prior year and an operating loss of $9.4 million or a negative 13% operating margin in the prior quarter. Adjusted EBITDA was negative $5.5 million to negative 7.6% adjusted EBITDA margin compared to negative $11.6 million and a negative 17.5% adjusted EBITDA margin in the prior year. Non-GAAP net loss for Q1 was negative $4.9 million or negative $0.07 per share compared to negative $13.2 million or negative $0.18 per share last year. We ended Q1 with $283.5 million in cash, cash equivalents, restricted cash and marketable securities. For the 3 months ended March 31, 2023, operating cash flow was negative $20.8 million compared to negative $22 million a year ago. We reported free cash flow of negative $21.9 million or a negative 31% free cash flow margin. This compares to negative $23.3 million and a negative 35% free cash flow margin in Q1 2022. Q1 operating cash flow results included a number of onetime impacts that contributed to the difference between cash flow and our non-GAAP operating loss results. These differences included approximately $4 million between severance related to our December restructuring and normal year-end bonus payments and $6 million in Q1 revenue, from the payments technology partner, which is paid in early April and will be reflected in our Q2 operating cash flow. Apart from these timing-related impacts, operating cash flow would have been between negative $10 million to $11 million in the quarter. I'd also note that Q1 is the quarter in which we have the most prepaid software obligations as well, which also contributes to a difference between operating cash flow and the underlying operating results during the period as well. As Brent mentioned, our 2023 plan is focused on three primary goals: first, we are investing to continue to win in the mid-market and enterprise segments. Top line revenue results and net bookings in Q1 were a positive first step. We saw strong growth from the mid-market segment and Feedonomics, and we are encouraged by the sales pipeline heading into Q2. We continue to see strong win rates in our key segments as well. However, we are also seeing fewer volume-driven pricing upgrades and additional conservatism with respect to software spending from our existing merchants, which is in line with the expectations on which we built our plans. Second, we are operating with discipline to reach breakeven by the end of Q3 on an adjusted EBITDA basis and remain confident in our ability to deliver positive EBITDA for the full quarter in Q4 of this year. Q1 results reflect our continued progress and are a strong indicator that we are on track to meet this goal. We are also highly focused on driving operating leverage further as we scale the business. One important item to note with respect to GAAP net loss is how the August 2021 $145 million acquisition of Feedonomics is accounted for in our financial statements. Our Q1 net loss includes over $6 million in expenses from third-party acquisition costs and intangible asset amortization from that transaction. We expect the majority of third-party acquisition costs to be fully recognized by the end of Q2 of this year. Our focus is scaling this business while balancing top line and bottom line growth, and we will continue to manage our spending in a financially disciplined way to accomplish that, including costs to run the business, careful evaluation of potential acquisitions and partnerships and equity grants to employees. Third, we are taking steps to prioritize cash flow improvements to drive healthy, consistent cash flow generation. As I mentioned before, apart from onetime impacts in the quarter, operating cash flow would have finished between negative $10 million to $11 million. We are taking numerous actions to drive cash flow improvements such as prioritizing advanced billing on new subscriptions investing in our quote-to-cash systems and processes and maintaining tight discipline around accounts receivable and collections. We will see the full effect of our February pricing action on our base of customers on retail plans beginning in June. So we expect to see further improvements in operating cash flow from annual payments from our base of merchants in June through the end of the year. We believe these initiatives will ultimately yield a better customer experience, higher deferred revenue and long-term improvements to DSO as well. I'll now conclude with an updated view on our outlook and guidance for the second quarter and full year 2023. For the second quarter, we expect total revenue in the range of $72.1 million to $74.1 million implying a year-over-year growth rate of 6% to 9%. Note that we expect subscription revenue and PSR to grow in the mid-single digits, similar to the growth reflected in the guidance range for the quarter. For the full year 2023, we expect total revenue between $303 million to $311 million, translating to a year-over-year growth rate of approximately 9% to 11%. For Q2, our non-GAAP operating loss is expected to be between $5.5 million and $9.5 million. For the full year, we expect a non-GAAP operating loss between $14 million and $20 million. While we are encouraged by progress thus far in the year, we intend to remain conservative in our guidance based on the macroeconomic uncertainty in our industry. We believe this is a reasonable approach at this time. Note that the midpoint of this guidance range for Q2 non-GAAP operating loss is sequentially down slightly compared to Q1 results. This is primarily due to some onetime expense benefits in Q1 and select investments planned for Q2. Let me elaborate on this just for a moment. Q1 non-GAAP operating loss saw approximately $2.1 million of onetime expense benefits to the quarter from two primary sources. First, we regularly reserve for doubtful accounts under our normal practice and we made good progress in collections on a number of outstanding accounts in Q1. And that contributed a $1 million expense benefit to the quarter. Second, our increased sales and marketing spending towards the mid-market and enterprise segments ramped a little more slowly than expected as we added resources and new marketing channels, which contributed approximately $1.2 million of benefit to the quarter. We also plan to make small investments in select initiatives in sales and marketing in Q2. to capitalize on opportunities we are seeing in the marketplace and continue to build a strong sales pipeline for the back half of the year, apart from the effect of the Q1 items and the small investment increase in Q2, a our non-GAAP operating loss outlook at the midpoint would have been sequentially better as we work towards breakeven by the end of Q3. While we make additional changes or investments as the year progresses, we plan to keep spending relatively flat across the remainder of the year. Our aim is to reach breakeven in late Q3, with full quarter positive adjusted EBITDA in Q4. We remain incredibly bullish about the potential of this business. We have the product, market opportunity and partner ecosystem to build our presence further in the mid-market and expand upmarket into the enterprise segment. We have many paths for growth, including B2C, B2B, composable commerce and headless, international growth, cross-sell with our existing customers and omnichannel expansion across merchants using both BigCommerce and other e-commerce platforms. We also have the organizational focus necessary to win in these segments while driving the operational improvements necessary to profitably scale the business and generate strong returns for our shareholders. With that, Brent and I are happy to take any of your questions. Operator?

[Operator Instructions] First question will come from Terry Tillman with Truist.

Great. This is actually Connor Passarella on for Terry. Maybe just to start, I would love to kind of dig deeper into the progression of Feedonomics. It sounds like it's continued to do really well. It's nice wins with some large versions. I'm just curious if you could share anything directional on what the growth expectations are around Feedonomics and maybe the size of that business versus pets a whole? And then also, maybe what are the puts and takes on the sales cycles here as well, what does the typical sales cycles look like for Feedo?

Yes, I'll jump in here. As we always thought Feedonomics would grow at or above the pace of our enterprise business and I think in terms of performance, they've definitely done that. We've also integrated Feedonomics in a lot of different ways with the launch of our omnichannel certified partner program. Our agency partners, tech partners have definitely embraced Feedonomics, and we're seeing really great demand signals in terms of interest from their merchants as highlighted with WPP. I think we're just now really enabling our ecosystem to sell Feedonomics across their base of merchants, whether they're on BigCommerce or not. And if you think about the selling cycle or go-to-market motions for e-commerce versus what Feedonomics does, I think that 90%, 95% of merchants out there are looking for ways to increase top line revenue, increase their return on ad spend. And so I think collectively, between BigCommerce now really exposing our ecosystem to Feedonomics. We're seeing really great brands signing up new accounts. Gross new sales are strong. Sales cycles are actually less than our enterprise sales cycles, which is good, and we couldn't be more excited and more bullish about Feedonomics going into this year.

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

Yes. To clarify, as we launch in these markets, we're launching a marketing presence, not a headcount-focused sales presence in those markets, we're relying, especially on partners and organic traffic. But the reason we picked these markets is that they are among the very top performing markets in the world for us that did not already have their own dedicated country landing pages and websites. So Poland, Romania had been top-performing countries for us. the Middle East, particularly UAE, a top-performing country for us and India as well. So putting now marketing presence in those countries where we can better coordinate lead volume in conjunction with our best partners is really an ROI no-brainer to help further accelerate growth in those countries. So the biggest thing is just organic preexisting business tells us that they're very attractive markets for BigCommerce. And of course, it helps as well that India, the UAE and South Africa can all be supported with English language websites.

And the next question will come from Rob Marelli from Needham & Company.

Scott Berg here. With -- just to -- you carry out with that question, what's the pace of this new country entry with those recently announced expansions? Are there any other regions in markets that you see an opportunity and -- nearby?

In the long term, absolutely. We really want to be competing effectively in every country around the world in the long run where our differentiated open SaaS platform can serve a meaningful part of the market. But for this year, priority #1 is achieving profitability on an adjusted EBITDA basis in Q4. So whereas in prior years, we had full market entries that included a meaningful build-out of sales solutioning, business development in countries that we entered. This year, we're focused on those markets that were already established and not adding a lot -- not really adding headcount into new markets. What we're excited to see is just how much we can accelerate countries where we don't have a big human presence with marketing support like these five. And if that works, then conceivably, there are quite a few other countries around the world that we'll look to in 2024 to expand in a similar way. So I think the other thing I would add, I mean, just while we're on the international topic in case nobody else asked about it, it was notable that if you break out the growth rates for the various regions. We saw an increase in the quarter-on-quarter -- sorry, the year-on-year growth rate in Q1 relative to Q4 and all of our non-U.S. geographies. APAC improved by 7%, EMEA growth rate improved by roughly 5%, non-U.S. Americas by roughly 12%. So it was very strong quarter and strong momentum continuing around the world for us.

And the next question will be from Parker Lane from Stifel.

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

The price change has not had a seemingly negative impact on volume of new business coming in on our small business plan since we turned off the heavy marketing and sales they get in Q4. So what we are seeing is a very positive trend that a higher percentage of folks signing up for the plans are picking annual prepay so that their price doesn't change relative to before. And of course, those picking monthly are now paying meaningfully more. And so we get the benefit on ROI from the small business segment on both ends. We're both making more money off each new sign-up and getting more upfront prepayments where we don't get that and we're spending less money to acquire the plan. So the business is much healthier on an LTV to CAC standpoint than ever before. And so we're very encouraged by that as we look to continue to grow it around the world.

Got it. Understood. And then touching on multi-store front real quickly. So you expanded that beyond the enterprise merchants down to small and medium-sized merchants. When I think about the enterprise, there's obviously a lot more complexity there given their size and scale. How do I think about the addressable opportunity and the adoption patterns you're seeing in multi-store front outside of that enterprise market where you brought this tool to.

Well, as you mentioned, it's less than a quarter new for the small business plans. But there are plenty of businesses that have complexity historically, they would have been faced with the choice of either not launching additional stores or having them on their own completely independent account with a separate set of integrations, et cetera. That's a lot more work. So we make it easier to add additional brands and sub-brands, additional geographies and/or additional segments like B2B plus B2C than any other platform and have democratized it all the way down a nice thing is that each time a small business customer clicks a button and adds another storefront, their revenue to us goes up very substantially relative to what they were paying before. So it's real enterprise functionality of great benefit even to small businesses with a value for the customer and a big new boost for us every time it's chosen.

Our next question is from Raimo Lenschow from Barclays.

This is Isac Pelion on for Raimo. Could you speak a little bit to what you're seeing with the new changes in the B2B segment rollout and any increased traction or early feedback based on these new functionalities.

Yes. You're referencing the updated release for our B2B addition that only went out a couple of business days ago, and there are very few product releases in our history that are as exciting as this one. So just to let everybody know, the new updated version of B2B Edition includes full compatibility with our multi-store front and headless capabilities, which are really market-leading capabilities built into the BC core. But very importantly, we have now created a buyer portal set of capabilities that we're getting a lot of feedback from agency partners and early adopters saying that it is really the best buyer experience on the market. It has a fully customized purchasing experience, where the region, the industry vertical and the needs are basically delivered into the buyer. They can -- customers can preset prices and shopping lists for their individual company purchasers, incorporate configure price and quote into it and have easy reordering. So it's a super slick very B2C-like user interface, but meets all the complex needs of B2B buyers. We think it's a game changer. We think it's the best in the market, and we're optimistic that there will be a lot of excitement in the industry as customers and agency partners take a close look at it.

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

Yes, I can say -- go ahead, Brent.

No, you go ahead.

Yes, I can say through Q1 and into Q2, our pipeline for enterprise is roughly 20% higher than it was last year. I'd also say month 1 of Q2 has been stronger than month 1 of Q1. But when we look at the pipeline for enterprise opportunities, really, we're seeing strength in mid-market, and we're really starting to build pipeline in those large enterprise opportunities. Feedback from the launch of B2B edition this week has been overwhelmingly positive with strong presence at B2B online where we've got a ton of great feedback in deal registrations from really large prospects and partners. So with that launch, we expect that pipeline to continue to grow. And once we factor in some of the longer sales cycles we see, we feel pretty confident in the reacceleration that we're forecasting and planning for in the second half of this year.

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

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