E-commerce software platform provider BigCommerce (NASDAQ: BIGC) reported results in line with analyst expectations in Q1 FY2023 quarter, with revenue up 8.64% year on year to $71.8 million. Guidance for the full year also exceeded estimates, however the guidance for the next quarter was less impressive, coming in at $73.1 million, 1.17% below analyst estimates. BigCommerce made a GAAP loss of $22.1 million, improving on its loss of $37 million, in the same quarter last year.
Is now the time to buy BigCommerce? Access our full analysis of the earnings results here, it's free.
BigCommerce (BIGC) Q1 FY2023 Highlights:
- Revenue: $71.8 million vs analyst estimates of $71.5 million (small beat)
- EPS (non-GAAP): -$0.07 vs analyst estimates of -$0.13
- Revenue guidance for Q2 2023 is $73.1 million at the midpoint, below analyst estimates of $74 million
- The company reconfirmed revenue guidance for the full year, at $307 million at the midpoint
- Free cash flow was negative $21.9 million, compared to negative free cash flow of $3.68 million in previous quarter
- Gross Margin (GAAP): 75.7%, up from 74.1% same quarter last year
“We’re encouraged by our start to 2023,” 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.
As you can see below, BigCommerce's revenue growth has been very strong over the last two years, growing from quarterly revenue of $46.7 million in Q1 FY2021, to $71.8 million.
BigCommerce's quarterly revenue was only up 8.64% year on year, which might disappoint some shareholders. But the revenue actually decreased by $674 thousand in Q1, compared to $40 thousand increase in Q4 2022. We'd like to see revenue increase each quarter, but a one-off fluctuation is usually not concerning and the management is guiding for growth to rebound in the next quarter.
Guidance for the next quarter indicates BigCommerce is expecting revenue to grow 7.18% year on year to $73.1 million, slowing down from the 39.2% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 11.8% over the next twelve months.
In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.
Cash Is King
If you have followed StockStory for a while, you know that we put an emphasis on cash flow. Why, you ask? We believe that in the end cash is king, as you can't use accounting profits to pay the bills. BigCommerce burned through $21.9 million in Q1, reducing the cash burn by 6.11% year on year.
BigCommerce has burned through $93.1 million in cash over the last twelve months, a negative 32.7% free cash flow margin. This low FCF margin is a result of BigCommerce's need to still heavily invest in the business.
Key Takeaways from BigCommerce's Q1 Results
Since it has still been burning cash over the last twelve months it is worth keeping an eye on BigCommerce’s balance sheet, but we note that with a market capitalization of $524.8 million and more than $282.3 million in cash, the company has the capacity to continue to prioritise growth over profitability.
It was nice that BigCommerce improved their gross margin, even if just slightly. That feature of these results really stood out as a positive. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations and that revenue decreased quarter on quarter. Overall, this quarter's results could have been better. The company is up 2.96% on the results and currently trades at $7.49 per share.
BigCommerce may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable 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 70% 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.