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BigCommerce (NASDAQ:BIGC) Misses Q3 Revenue Estimates, Stock Drops

StockStory - Wed Nov 8, 2023

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E-commerce software platform provider BigCommerce (NASDAQ: BIGC) missed analysts' expectations in Q3 FY2023, with revenue up 7.8% year on year to $78 million. On the other hand, next quarter's revenue guidance of $81.8 million came in slightly above analysts' estimates. Turning to EPS, BigCommerce made a non-GAAP profit of $0.01 per share, improving from its loss of $0.41 per share in the same quarter last year.

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BigCommerce (BIGC) Q3 FY2023 Highlights:

  • Revenue: $78 million vs analyst estimates of $78.1 million (small miss)
  • EPS (non-GAAP): $0.01 vs analyst estimates of -$0.03 ($0.04 beat)
  • Revenue Guidance for Q4 2023 is $81.8 million at the midpoint, roughly in line with what analysts were expecting
  • Free Cash Flow was -$32.5 million, down from $13.7 million in the previous quarter
  • Gross Margin (GAAP): 75.6%, in line with the same quarter last year

“In the third quarter, BigCommerce made progress toward long-term growth and profitability,” 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.

E-commerce Software

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 $59.3 million in Q3 FY2021 to $78 million this quarter.

BigCommerce Total Revenue

BigCommerce's quarterly revenue was only up 7.8% year on year, which might disappoint some shareholders. Additionally, its growth did slow down compared to last quarter as the company's revenue increased by just $2.6 million in Q3 compared to $3.7 million in Q2 2023. While we'd like to see revenue increase by a greater amount each quarter, a one-off fluctuation is usually not concerning.

Next quarter's guidance suggests that BigCommerce is expecting revenue to grow 12.9% year on year to $81.8 million, improving on the 11.6% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 13.2% over the next 12 months before the earnings results announcement.

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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 burned through $32.5 million of cash in Q3 , reducing its cash burn by 37% year on year.

BigCommerce Free Cash Flow

BigCommerce has burned through $44.3 million of cash over the last 12 months, resulting in a negative 14.8% 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 Q3 Results

Although BigCommerce, which has a market capitalization of $753.6 million, has been burning cash over the last 12 months, its more than $69.8 million in cash on hand gives it the flexibility to continue prioritizing growth over profitability.

We struggled to find many strong positives in these results. The company continued to burn cash, while the revenue outlook for the next quarter came in roughly in line with Wall Street's expectations. In addition, the company announced a restructuring plan to reduce its current workforce by approximately 7 percent.

Overall, this was a mixed quarter for BigCommerce. The company is down 6.4% on the results and currently trades at $9.4 per share.

So should you invest in BigCommerce 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.

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

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