BigCommerce Holdings, Inc. — Q2 2020 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2020. The filing identifies the registrant as BigCommerce Holdings, Inc.; this differs from the company name in the request metadata. Figures below are in U.S. dollars unless noted.
Business context
BigCommerce provides a subscription-based ecommerce software platform, serving approximately 60,000 online stores in about 150 countries. It reports one operating segment. Management said COVID-19-related shifts from physical retail to online shopping benefited existing customers’ sales and increased subscriptions, but warned that these trends may not continue.
Financial performance
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $36.3m | $27.2m | $69.5m | $52.8m |
| Gross profit | $28.5m | $21.0m | $54.2m | $40.7m |
| Gross margin | 78.4% | 77.1% | 78.0% | 77.0% |
| Operating loss | $(7.4)m | $(10.6)m | $(14.8)m | $(21.0)m |
| Net loss | $(8.5)m | $(11.0)m | $(12.5)m | $(21.6)m |
| Adjusted EBITDA (non-GAAP) | $(5.4)m | $(9.3)m | $(11.2)m | $(18.5)m |
Q2 revenue rose 33.3% year over year. Subscription solutions revenue increased 18.9% to $23.9m; partner and services revenue increased 74.3% to $12.4m, primarily from higher partner revenue-sharing activity and improved monetization. Six-month revenue grew 31.6%. Q2 net loss attributable to common stockholders was $10.4m, or $0.54 per share, including preferred dividends.
Q2 operating expenses were $35.9m: sales and marketing $16.8m, research and development $11.3m, and general and administrative $7.7m. G&A rose 47.7% year over year, substantially reflecting IPO preparation costs and increased staffing. The six-month results included a $4.4m non-cash gain from the fair-value change of an embedded put option on the 2020 convertible loan; this reduced reported net loss.
Cash, liquidity and debt
- At June 30, cash and cash equivalents were $25.4m; restricted cash was $1.1m. Working capital was $18.2m, compared with negative $2.2m at year-end 2019. The company reported no availability under its amended revolving credit facility at quarter-end.
- For the first six months, operating cash use was $17.0m, investing cash use was $1.0m, and financing provided $35.4m, mainly from $40.7m of borrowings. Cash, cash equivalents and restricted cash totaled $26.5m at June 30.
- Debt principal outstanding at quarter-end included $20.0m on the revolving line, $2.4m on the 2018 term loan, $18.9m on the 2017 convertible loan and $35.0m on the 2020 convertible loan. The $10.0m mezzanine facility was undrawn. The revolving line was scheduled to be reduced from $20.0m to $10.0m on September 30, 2020.
- After quarter-end, the August 4 IPO generated $175.8m net proceeds for the company. The 2017 and 2020 convertible loans converted to common stock, reducing debt principal by $53.9m; the company reported no balance remaining on those convertible loans after the IPO. It also paid approximately $12.8m of accumulated Series F dividends from IPO proceeds.
Changes, outlook and risks
Growth accelerated amid pandemic-driven ecommerce demand: Q2 ARR was $151.8m, up from $114.8m a year earlier, and management reported a 33.3% Q2 ARR growth rate. Enterprise-account ARR grew 44% year over year to $79.8m. Q2 operating loss narrowed compared with 2019, while gross margin improved. Management attributed lower expense ratios partly to revenue growth and pandemic-related reductions in travel and event spending, and expected those ratios to return toward historical levels as restrictions ease.
The filing gives no specific revenue or earnings guidance. Management expected continued operating losses and negative operating cash flows, but said existing cash, operating cash flows and borrowing capacity were expected to cover working capital, capital expenditure and debt-service needs for at least 12 months. It cautioned that COVID-19’s duration and economic effects could make near-term revenue variable and materially affect the business.
Other notable risks include intense competition, dependence on technology and referral partners, customer retention and growth, cybersecurity and service availability, privacy regulation, and the ability to manage rapid growth. The company had $10.1m of unconditional purchase obligations and $20.4m of minimum operating lease payments at June 30. Management reported no pending or unasserted claims expected to have a material adverse effect and no material off-balance-sheet arrangements. Disclosure controls were assessed as effective; no material changes in internal control were reported during Q2.
Investor facts to verify
- Whether post-IPO proceeds and conversion of the convertible loans materially changed liquidity, debt service and dilution after June 30.
- Whether the pandemic-related lift in subscriptions and partner revenue persists as retail activity and consumer behavior change.
- How partner revenue concentration and receivables exposure develop; one strategic partner represented 17% of six-month revenue and 23% of June 30 receivables.
- Whether loss and cash-burn trends improve after accounting for IPO-related expenses, stock-based compensation and the non-cash loan valuation gain.
- How the September 30 reduction in revolving credit capacity and associated covenants affect available liquidity.