Earnings season is winding down, with the biggest tech companies’ results now comfortably behind us. To ensure that we’re extracting the maximum from the reporting cycle, TechCrunch chatted with a handful of smaller companies after their second-quarter numbers dropped, digging into the data and working to better understand how tech companies are balancing growth and caution in the face of a possible recession.
Today we’re riffling through notes from calls with the CEOs of Appian, Amplitude and BigCommerce, companies that we’ve spoken to and covered on a nearly quarterly basis for some time now — meaning that we have context concerning their risk postures and business results apart from the most recent data. Notably, each has a slightly different take on how to best navigate the present market conditions in terms of investment and caution.
We’ll start with Appian CEO Matt Calkins, who said he may use this period to snag market share for his workflow and automation software business. Amplitude CEO Spenser Skates had a solid second quarter but discussed a more conservative back half of the year. And BigCommerce CEO Brent Bellm is following an investment plan detailed quarters ago, looking to continue beating analyst expectations, e-commerce slowdown be damned. Let’s dig in.
Appian
Anyone speaking with Appian’s Matt Calkins about his company’s performance over any period of time will learn that he’s conservative with guidance. Every company likes to guide to numbers that they can beat. Appian takes it a step further, acting with more caution than most public concerns when it comes to discussing its future results.
But the CEO isn’t as understated when it comes to his economic outlook. The Appian leader made it clear last week that he is not bullish on the economy. Per a transcript from his company’s Q2 earnings call, Calkins said that “Appian is officially bearish on the economy,” that he expects that “inflation will persist and economywide demand will slow, and that the U.S. will probably end up accommodating an unhealthy level of inflation while suffering the penalties of reduced growth as well, essentially the opposite of the soft landing theory.”
In a conversation with TechCrunch, the CEO stressed that his take on the economy and his views on how Appian may perform are distinct. This was also mentioned on the investor call, with Calkins saying that “Appian is not seeing any evidence of a downturn” thus far.
How to square the two data points? Appian views its own market as durable and its product scalable within its target customer cohort. But the macroeconomic conditions — inflation in particular — could matter enough in time to warrant warning investors that the company anticipates economic turbulence.
Inflation is a good example of what he’s talking about. Asked about the impact of inflation on software pricing, which we contrasted to manufacturing and selling rebar, Calkins picked up on our analogy. Inflation is more damaging for software companies than for rebar companies, he explained, because as input prices go up for construction materials, so too can output prices rise. However, the CEO said, as the marginal cost of selling a software license is effectively zero, it’s harder to gauge how prices should change on the other end; inflation doesn’t raise the software-related cost of goods sold (COGS) much, so there is less incoming data on how to change customer pricing.
The resulting uncertainty is dangerous, Calkins explained, as it could lead to incorrect — not profit-maximizing, in economic terms — pricing decisions and becoming “the loser in the inflationary chain.”
So is Appian changing its pricing structure today? Somewhat, but at the negotiation stage, not at the list-price level, per Calkins. We’ll check back in after Q3 to see if that pattern is holding.
Economic matters aside, Appian said during its call that even if there is a downturn, it intends to “grow carefully, cautiously and steadily through it,” which could include both hiring and the opening of new offices. The goal of that work, the company said, is that when “the economy turns back up, [it hopes to] have gained ground relative to our competition.”
But what about cash? Appian’s cash burn in the second quarter (-$29.7 million operating cash flow) compared to its quarter-ending cash balance ($138 million) indicates that it will need more capital. The CEO declined to comment, but we anticipate a bond offering or share sale in the next few quarters, capital that will be put to work in the name of growth.
Amplitude
The strange thing about tech companies today is that boasting is out of fashion. Indeed, Amplitude had a solid quarter, but chatting with CEO Spenser Skates, we were a little surprised at the lack of chest-pounding.
The company bested expectations in Q2 2022 in both top- and bottom-line terms and raised its full-year revenue guidance. Huzzah, right? Well, only kinda. Skates told TechCrunch that his company had a good second quarter, sure, but due in part to some one-time events that won’t be replicable, including some deals pulling forward, to pick an example.
In our chat, Skates said that he wanted to highlight that his company had a good Q2, but that it was also being conservative about the second half of the year. Macro concerns are something that every company has to consider, from either a perspective of their own balance sheet or the cash statements of their existing and potential customers, it appears.
But Amplitude has plans. It intends to invest in product over sales and marketing, with Skates using a workout analogy, saying that product work is like building muscle, while sales and marketing spending bumps generate more near-term impact — perhaps akin to a sugar high. You can infer where Amplitude intends to put capital to work during the rest of the year from that comment.
Arguing that his company has always been efficient, Skates is actually somewhat bullish on his company’s prospects in more difficult economic times, saying that Amplitude doesn’t “have to make massive changes” to survive, even if it will be “more careful on the margins” when it comes to spending. So long as it can keep growing, Skates said, Amplitude will be well set up to “gain share” during an economic misfire.
BigCommerce
Finally, BigCommerce, the Texas-based e-commerce software company that was somewhat overshadowed during Shopify’s epic public-market run amid the earlier part of the pandemic. Now BigCommerce is growing more quickly than Shopify, expanding its top line by 39% in Q2 2022 compared to the year-ago period, while its Canadian rival grew a more modest 16%. (To be fair, Shopify is about 19x as large as its American competitor, looking at comparable Q2 results.)
How is BigCommerce managing to grow faster than Shopify today? It boils down to corporate posture. Shopify grew rapidly during COVID, partly on the back of its in-house work, like Shopify Payments. In contrast, BigCommerce is more focused on supporting third-party tooling for particular customer needs, meaning that it is nearly entirely subscription-based, instead of predicating the majority of its revenues on GMV-based products like Shopify’s Merchant Solutions business group.
I asked CEO Brent Bellm if he felt vindicated by his company’s results in the quarter, raising an implied comparison to Shopify’s second-quarter dataset. He declined the bait, saying instead that companies merely “pick [their] model and [then] make it the best [they] can in the world.”
It’s growing nicely thus far this year — so what’s BigCommerce’s plan for the rest of 2022? Continued investment, which means that the company is not slowing spending as we might expect given the general slowdown in e-commerce growth around the world. Noting that BigCommerce had said after Q4 2021 that it intended to boost investment in its business, it followed through with that in the first half of the year, per Bellm. The vibe we got from the chat was simple: BigCommerce is going to stay the course, even if its CEO did say that it has to manage expenses like any other company.
On the agenda is continued geographic expansion and spending on products that have leverage (Bellm cited his company’s “commerce-as-a-service” effort as one such area).
So what?
If you listen carefully, you can find optimism in each CEO’s commentary about their results, albeit with differences. Appian is macro-bearish but bullish enough on its own business to invest significant cash into growth. Amplitude, despite a strong start to the year, is making the right noises regarding the market and its own pace of spending, but we doubt it is really slowing much because its CEO mentioned gaining market share — even if it wants to broadcast to shareholders that it is being a good steward of cash. And BigCommerce is just investing as it promised it would, downturn be damned.
For startups, the above is a lesson in communication and investor management, and a multipart example of how to keep growth up while not spending money like it is still free.