BigCommerce (NASDAQ:BIGC) Q2 Sales Beat Estimates

E-commerce software platform provider BigCommerce (NASDAQ: BIGC) announced better than expected results in Q2 CY2024, with revenue growing 8.5% year-over-year to $81.83 million. The company expects revenue in the next quarter to be around $83 million, in line with analyst estimates. The company achieved a non-GAAP profit of $0.05 per share, improving from a loss of $0.25 per share in the same quarter last year.

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“The second quarter delivered results in line with our revenue and net income guidance,” said Brent Bellm, CEO of BigCommerce.

BigCommerce (NASDAQ:BIGC) was founded in Sydney, Australia in 2009 by Mitchell Harper and Eddie Machaalani. It provides software that helps businesses easily create online stores.

E-commerce software

While e-commerce has been around for over two decades and is enjoying significant growth, its overall retail penetration remains low. Only about $1 in every $5 spent on retail purchases comes from digital orders, leaving over 80% of the retail market still ripe for the online revolution. It is these large areas of retail where e-commerce has yet to take hold that are driving demand for various e-commerce software solutions.

Increase in sales

As you can see below, BigCommerce’s revenue growth over the past three years has been decent, rising from $49.01 million in Q2 2021 to $81.83 million this quarter.

BigCommerce’s quarterly revenue grew only 8.5% year-over-year, which may disappoint some shareholders. However, revenue grew by $1.47 million quarter-over-quarter, a significant improvement from the $3.79 million decline in Q1 CY2024. This is a sign of accelerating growth and is really good to see.

Forecasts for the upcoming quarter suggest that BigCommerce is expecting revenue to grow 6.3% year over year to $83 million, a slowdown from the 7.8% year over year growth seen in the same quarter last year. Looking ahead, analysts covering the company had been expecting sales to grow 6.9% over the next 12 months ahead of the earnings announcement.

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Gross Margin and Pricing Power

What makes the software as a service model so attractive is that once the software has been developed, there is typically no significant cost associated with making it available as an ongoing service.

These costs include servers, licenses, and specific staff, and their utilization can be the deciding factor in winning in competitive markets because it determines how much can be invested in new products, sales, and talent.

BigCommerce’s solid unit economics are better than the broader software industry, a result of its asset-constrained 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 achieved an impressive 76.5% gross margin last year. In other words, for every $100 in revenue, it had about $76.49 left over for sales, marketing, and R&D.

BigCommerce’s gross profit margin was 75.8% for the quarter, in line with the same quarter last year. Looking ahead, BigCommerce’s full-year margin has been trending up over the past 12 months, increasing by 1.2 percentage points. If that trend continues, it could suggest improved unit economics due to greater leverage from growing sales on the fixed portion of the cost of goods sold (such as servers).

BigCommerce Q2 Results Highlights

It was good to see that BigCommerce beat analysts’ expectations for revenue, adjusted operating income, and EPS for the quarter. On the other hand, its ARR (annual recurring revenue) and revenue guidance for the next quarter came in slightly below Wall Street estimates. Overall, it was a mediocre quarter for BigCommerce. Shares rose 1.1% to $8.20 immediately after the report was released.

Is BigCommerce worth investing in right now? When making this decision, it’s important to consider its valuation, business features, and what’s happened in the last quarter. We’ve covered that in our full research report, which you can read here , it’s free.