BigCommerce (BIGC)

E-commerce software platform provider BigCommerce (NASDAQ: BIGC) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 2.5% year on year to $82.37 million. On the other hand, next quarter’s revenue guidance of $83 million was less impressive, coming in 1.5% below analysts’ estimates. Its non-GAAP profit of $0.07 per share was 32.5% above analysts’ consensus estimates.

Company Overview

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.

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last three years, BigCommerce grew its sales at a 11.9% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the software sector, which enjoys a number of secular tailwinds.

This quarter, BigCommerce grew its revenue by 2.5% year on year, and its $82.37 million of revenue was in line with Wall Street’s estimates. Company management is currently guiding for a 1.4% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 4.2% over the next 12 months, a deceleration versus the last three years. This projection is underwhelming and suggests its products and services will face some demand challenges.

While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.

BigCommerce’s ARR came in at $350.8 million in Q1, and over the last four quarters, its growth was underwhelming as it averaged 4% year-on-year increases. This performance mirrored its total sales and suggests that increasing competition is causing challenges in securing longer-term commitments.

The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

BigCommerce does a decent job acquiring new customers, and its CAC payback period checked in at 43.5 months this quarter. The company’s relatively fast recovery of its customer acquisition costs gives it the option to accelerate growth by increasing its sales and marketing investments.

For software companies like BigCommerce, gross profit tells us how much money remains after paying for the base cost of products and services (typically servers, licenses, and certain personnel). These costs are usually low as a percentage of revenue, explaining why software is more lucrative than other sectors.

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 outsized profits at scale. As you can see below, it averaged an excellent 77.3% gross margin over the last year. Said differently, roughly $77.27 was left to spend on selling, marketing, and R&D for every $100 in revenue.

This quarter, BigCommerce’s gross profit margin was 79.4%, up 2.3 percentage points year on year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs have been stable and it isn’t under pressure to lower prices.

BigCommerce’s expensive cost structure has contributed to an average operating margin of negative 10.7% over the last year. Unprofitable software companies require extra attention because they spend heaps of money to capture market share. As seen in its historically underwhelming revenue performance, this strategy hasn’t worked so far, and it’s unclear what would happen if BigCommerce reeled back its investments. Wall Street seems to think it will face some obstacles, and we tend to agree.

Over the last year, BigCommerce’s expanding sales gave it operating leverage as its margin rose by 7.2 percentage points. Still, it will take much more for the company to reach long-term profitability.

In Q1, BigCommerce generated a negative 2.9% operating margin. The company's consistent lack of profits raise a flag.

If you’ve followed StockStory for a while, you know 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 has shown mediocre cash profitability over the last year, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 7.1%, subpar for a software business.

BigCommerce burned through $2.87 million of cash in Q1, equivalent to a negative 3.5% margin. The company’s cash burn was similar to its $4.22 million of lost cash in the same quarter last year. These numbers deviate from its longer-term margin, indicating it is a seasonal business.

Over the next year, analysts predict BigCommerce’s cash conversion will slightly improve. Their consensus estimates imply its free cash flow margin of 7.1% for the last 12 months will increase to 9.1%, giving it more flexibility for investments, share buybacks, and dividends.

BigCommerce reported $120.7 million of cash and $159.8 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $28.19 million of EBITDA over the last 12 months, we view BigCommerce’s 1.4× net-debt-to-EBITDA ratio as safe. We also see its $816,000 of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly BigCommerce blew past analysts’ EBITDA expectations this quarter. On the other hand, its revenue guidance for next quarter slightly missed and its full-year revenue guidance was in line with Wall Street’s estimates. Overall, this quarter was mixed. The stock traded up 4.7% to $5.45 immediately following the results.

Updated: May 11, 2025 at 10:13 PM EDT

Are you wondering whether to buy BigCommerce or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

We cheer for all companies solving complex business issues, but in the case of BigCommerce, we’ll be cheering from the sidelines. For starters, its revenue growth was uninspiring over the last three years, and analysts expect its demand to deteriorate over the next 12 months. And while its expanding operating margin shows it’s becoming more efficient at building and selling its software, the downside is its ARR has disappointed and shows the company is having difficulty retaining customers and their spending. On top of that, its operating margins are low compared to other software companies.

BigCommerce’s price-to-sales ratio based on the next 12 months is 1.2x. While this valuation is reasonable, we don’t see a big opportunity at the moment. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $7.75 on the company (compared to the current share price of $5.03).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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