BigCommerce Holdings, Inc. — Q3 2020 Form 10-Q
Entity note: The filing is for BigCommerce Holdings, Inc. (Nasdaq: BIGC), not an entity identified as Commerce.Com, Inc. It covers the quarter and nine months ended September 30, 2020; comparative periods are 2019. Amounts below are in millions of U.S. dollars unless stated otherwise.
Business context and reporting period
BigCommerce operates a SaaS ecommerce platform serving approximately 60,000 online stores across roughly 150 countries. Revenue comes from subscription solutions and partner and services fees. The company completed its IPO on August 4, 2020.
Financial performance and liquidity
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $39.7 | $28.3 | $109.2 | $81.1 |
| Gross profit | $31.1 | $21.5 | $85.3 | $62.1 |
| Gross margin | 78.4% | 75.9% | 78.1% | 76.6% |
| Operating loss | $(10.1) | $(10.3) | $(24.9) | $(31.2) |
| Net loss | $(10.9) | $(10.7) | $(23.4) | $(32.3) |
| Adjusted EBITDA (non-GAAP) | $(6.6) | $(8.9) | $(17.7) | $(27.4) |
- Q3 revenue grew 40.6% year over year. Subscription solutions rose 26.3% to $26.5 million; partner and services revenue rose 82.1% to $13.2 million.
- For the nine months, revenue grew 34.7%. Gross margin improved in both comparison periods. Q3 net loss was slightly higher than a year earlier, while the nine-month net loss narrowed.
- Nine-month operating cash use was $23.2 million, versus $31.1 million in 2019. Investing activities used $1.4 million; financing provided $195.4 million, principally reflecting IPO proceeds.
- At September 30, cash and cash equivalents were $178.8 million and restricted cash was $1.1 million. Working capital was $160.4 million. Total debt was approximately $21.9 million; the company reported no remaining availability under its SVB credit facility.
- The balance sheet showed total assets of $235.5 million, total liabilities of $77.0 million, and stockholders’ equity of $158.5 million. Cash and cash equivalents were $7.8 million at December 31, 2019.
Material changes versus the prior comparable period
- The IPO generated $171.1 million of net proceeds. Preferred stock and $53.9 million of convertible term-loan principal converted to common stock; the company also paid $12.8 million of cumulative Series F dividends.
- ARR increased to $167.0 million at September 30, 2020, from $121.3 million a year earlier; reported ARR growth was 37.6%. Accounts with ACV above $2,000 represented 81% of ARR, versus 77% a year earlier. Enterprise account ARR grew 48% year over year to $89.8 million.
- Operating expenses increased in dollars. For the nine months, sales and marketing rose 14.2%, research and development 6.9%, and general and administrative 51.9%. General and administrative growth included IPO preparation and public-company costs.
Outlook, commentary, risks, and unusual items
- The filing provides no specific numerical revenue or earnings guidance. Management expected continued operating losses and negative operating cash flows, but believed existing cash, operating cash flows, and borrowing capacity would cover working capital, capital expenditures, and debt service for at least the next 12 months.
- Management said COVID-19 accelerated the shift from physical retail to ecommerce, supporting existing customer sales and new subscriptions, as well as partner revenue. It cautioned that the duration and persistence of these trends were uncertain and that results could become more variable.
- Management expected sales and marketing, research and development, and general and administrative expense percentages to move back toward historical levels as pandemic-related travel and event restrictions eased. It also expected further investment in sales, marketing, R&D, and public-company functions.
- Key risks include the possibility that ecommerce growth slows after the pandemic; continued losses and cash burn; competition and customer retention; reliance on strategic partners and hosting providers; cybersecurity, privacy, service availability, and regulatory risks; and debt covenants. One strategic partner represented 15% of nine-month 2020 revenue and 20% of receivables at September 30.
- A $4.4 million gain from a change in fair value of an embedded loan put option improved nine-month reported results; the option was extinguished when the convertible debt converted at the IPO. The undrawn $10 million mezzanine facility expired and was terminated effective November 6, 2020.
- The company reported compliance with SVB credit-facility covenants at quarter-end and effective disclosure controls. It reported no pending or threatened legal matters expected to have a material adverse effect and no material off-balance-sheet arrangements.
Important facts for investors to verify
- Whether the pandemic-era acceleration in subscription and partner revenue persists, and how much growth reflects recurring customer demand versus temporary conditions.
- ARR definitions and trends alongside GAAP revenue, customer retention, and the growth and concentration of partner revenue.
- Cash burn, IPO-proceeds use, debt maturities and covenants, and the implications of having no availability under the SVB facility.
- The future impact of stock-based compensation, public-company costs, and planned spending on losses and dilution.
- Whether the filing’s reported partner concentration, credit-loss allowance, and operational and cybersecurity risks change in subsequent periods.