Yahoo Finance BigCommerce's (NASDAQ:BIGC) Q2 Sales Beat Estimates
E-commerce software platform provider BigCommerce (NASDAQ: BIGC) announced better-than-expected results in Q2 CY2024, with revenue up 8.5% year on year to $81.83 million. The company expects next quarter's revenue to be around $83 million, in line with analysts' estimates. It made a non-GAAP profit of $0.05 per share, improving from its loss of $0.25 per share in the same quarter last year.
Is now the time to buy BigCommerce? Find out in our full research report.
BigCommerce (BIGC) Q2 CY2024 Highlights:
Revenue: $81.83 million vs analyst estimates of $81.12 million (small beat)
Adjusted Operating Income: $1.89 million vs analyst estimates of $835,570 (126% beat)
EPS (non-GAAP): $0.05 vs analyst estimates of $0.03 ($0.02 beat)
Revenue Guidance for Q3 CY2024 is $83 million at the midpoint, roughly in line with what analysts were expecting
The company reconfirmed its revenue guidance for the full year of $332.7 million at the midpoint
Gross Margin (GAAP): 75.8%, in line with the same quarter last year
Free Cash Flow of $10.67 million is up from -$4.22 million in the previous quarter
Annual Recurring Revenue: $345.8 million at quarter end, up 4.4% year on year
Market Capitalization: $625.9 million
“The second quarter delivered results consistent with our top- and bottom-line plans,” said Brent Bellm, CEO of 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 decent over the last three years, growing from $49.01 million in Q2 2021 to $81.83 million this quarter.
BigCommerce's quarterly revenue was only up 8.5% year on year, which might disappoint some shareholders. However, its revenue increased $1.47 million quarter on quarter, a strong improvement from the $3.79 million decrease in Q1 CY2024. 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 6.3% year on year to $83 million, slowing down from the 7.8% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 6.9% over the next 12 months before the earnings results announcement.
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Gross Margin & Pricing Power
What makes the software-as-a-service model so attractive is that once the software is developed, it usually doesn't cost much to provide it as an ongoing service.
These costs include servers, licenses, and certain personnel, and leverage on them can decide the winners in competitive markets because they determine how much can be invested into new products, sales, and talent.
BigCommerce's robust unit economics are better than the broader software industry, an output of its asset-lite business model and pricing power. They also enable the company to fund large investments in new products and sales during periods of rapid growth to achieve higher operating profits at scale. As you can see below, it averaged an impressive 76.5% gross margin over the last year. Said differently, roughly $76.49 was left to spend on selling, marketing, and R&D for every $100 in revenue.
BigCommerce's gross profit margin came in at 75.8% this quarter, which is in line with the same quarter last year. Zooming out, BigCommerce's full-year margin has been trending up over the past 12 months, increasing by 1.2 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as servers).
Key Takeaways from BigCommerce's Q2 Results
It was good to see BigCommerce beat analysts' revenue, adjusted operating income, and EPS expectations this quarter. On the other hand, its ARR (annual recurring revenue) and revenue guidance for next quarter came in slightly below Wall Street's estimates. Overall, this was a mediocre quarter for BigCommerce. The stock traded up 1.1% to $8.20 immediately after reporting.
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.
