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BigCommerce (NASDAQ:BIGC) Beats Q2 Sales Targets, Stock Soars

StockStory - Thu Aug 3, 2023

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E-commerce software platform provider BigCommerce (NASDAQ: BIGC) announced better-than-expected results in Q2 FY2023, with revenue up 10.6% year on year to $75.4 million. Revenue guidance for the full year also exceeded analysts' estimates but next quarter's guidance of $77.8 million was less impressive, coming in 1.42% below expectations. BigCommerce made a GAAP loss of $19.1 million, improving from its loss of $39.6 million in the same quarter last year.

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BigCommerce (BIGC) Q2 FY2023 Highlights:

  • Revenue: $75.4 million vs analyst estimates of $73.4 million (2.84% beat)
  • EPS (non-GAAP): -$0.02 vs analyst estimates of -$0.09
  • Revenue Guidance for Q3 2023 is $77.8 million at the midpoint, below analyst estimates of $78.9 million
  • The company reconfirmed revenue guidance for the full year of $307 million at the midpoint
  • Free Cash Flow of $13.7 million is up from -$21.9 million in the previous quarter
  • Gross Margin (GAAP): 75.1%, in line with the same quarter last year

“We hit two big milestones in the second quarter. We reached profitability on an adjusted EBITDA basis in June, and we delivered full-quarter positive free cash flow for the first time,” said Brent Bellm, CEO at BigCommerce.

Founded in Sydney, Australia in 2009 by Mitchell Harper and Eddie Machaalani, BigCommerce (NASDAQ:BIGC) provides software for businesses to easily create online stores.

While e-commerce has been around for over two decades and enjoyed meaningful growth, its overall penetration of retail still remains low. Only around $1 in every $5 spent on retail purchases comes from digital orders, leaving over 80% of the retail market still ripe for online disruption. It is these large swathes of the retail where e-commerce has not yet taken hold that drives the demand for various e-commerce software solutions.

Sales Growth

As you can see below, BigCommerce's revenue growth has been strong over the last two years, growing from $49 million in Q2 FY2021 to $75.4 million this quarter.

BigCommerce Total Revenue

This quarter, BigCommerce's quarterly revenue was once again up 10.6% year on year. On top of that, its revenue increased $3.69 million quarter on quarter, a strong improvement from the $674 thousand decrease in Q1 2023. This is a sign of acceleration of growth and very nice to see indeed.

Next quarter's guidance suggests that BigCommerce is expecting revenue to grow 7.47% year on year to $77.8 million, slowing down from the 22.1% year-on-year increase it recorded in the same quarter last year. Ahead of the earnings results announcement, the analysts covering the company were expecting sales to grow 12.5% over the next 12 months.

While most things went back to how they were before the pandemic, a few consumer habits fundamentally changed. One founder-led company is benefiting massively from this shift and is set to beat the market for years to come. The business has grown astonishingly fast, with 40%+ free cash flow margins, and its fundamentals are undoubtedly best-in-class. Still, its total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.

Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. BigCommerce's free cash flow came in at $13.7 million in Q2, turning positive over the last year.

BigCommerce Free Cash Flow

BigCommerce has burned through $63.4 million of cash over the last 12 months, resulting in a negative 22.1% free cash flow margin. This low FCF margin stems from BigCommerce's poor unit economics or a constant need to reinvest in its business to stay competitive.

Key Takeaways from BigCommerce's Q2 Results

Although BigCommerce, which has a market capitalization of $748.1 million, has been burning cash over the last 12 months, its more than $297.4 million in cash on hand gives it the flexibility to continue prioritizing growth over profitability.

It was good to see BigCommerce beat analysts' revenue expectations this quarter. That really stood out as a positive in these results. In addition, the company hired technology industry veteran and experienced e-commerce sales leader Steven Chung as its president and announced it will add new AI-powered features to its platform, leveraging Google Cloud’s AI technologies. However, its underwhelming revenue guidance for next quarter was disappointing. Overall, this was a mediocre quarter for BigCommerce but the market seems excited about the company's long-term prospects. The stock is up 7.56% after reporting and currently trades at $10.25 per share.

BigCommerce may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 50% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned in this report.

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