BigCommerce Holdings, Inc. — Q3 2023 Form 10-Q
Entity note: The request identifies Commerce.Com, Inc., but the supplied filing is for BigCommerce Holdings, Inc. The summary below reflects the filing provided. Reporting period: quarter and nine months ended September 30, 2023; amounts below are in U.S. dollars.
Business context and reporting period
BigCommerce operates a single-segment SaaS ecommerce platform, including subscription solutions and partner and services revenue. It reported 5,951 enterprise accounts at September 30, 2023. Management describes its strategy as “Open SaaS” and is emphasizing more efficient growth through mid-market and enterprise customers, while continuing digital-first service to small businesses.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $78.0m | $72.4m | $225.2m | $206.6m |
| Gross profit | $59.0m | $54.9m | $170.0m | $155.2m |
| Gross margin | 75.6% | 75.8% | 75.5% | 75.1% |
| Operating loss | $(22.2)m | $(30.6)m | $(66.8)m | $(105.9)m |
| Net loss | $(20.3)m | $(30.3)m | $(61.5)m | $(106.9)m |
| Net loss per share | $(0.27) | $(0.41) | $(0.82) | $(1.46) |
| Cash used in operating activities | $(31.4)m | $(50.8)m | $(37.5)m | $(86.7)m |
Q3 revenue grew 7.8% year over year; subscription solutions rose 10.3% to $58.7m, while partner and services revenue increased 0.9% to $19.3m. For the nine months, revenue grew 9.0%; subscription solutions increased 10.6% and partner and services 4.5%. Q3 gross margin edged down, primarily from higher transaction-processing and hosting costs; nine-month gross margin improved, which management attributed in part to prior restructuring savings.
At September 30, cash and cash equivalents were $69.8m, restricted cash $1.1m, and marketable securities $195.6m. Current assets were $341.5m against current liabilities of $67.1m. Debt carrying value was $339.8m, including $345.0m principal of 0.25% convertible notes due 2026 and $0.8m of term debt. The notes’ estimated fair value was $272.1m. Total stockholders’ equity was $19.9m. The company had no material off-balance-sheet arrangements.
For the nine months, operating cash outflow improved by $49.1m year over year. Management said 2023 operating cash outflows included the final $32.5m Feedonomics anniversary payment and $4.0m of directors’ and officers’ insurance payments. Investing cash flow was positive $14.0m, reflecting net maturities and purchases of marketable securities; financing cash flow was positive $1.4m. Cash, cash equivalents, and restricted cash decreased $22.1m from year-end 2022 to $70.9m.
Material changes versus the prior comparable period
- Net loss narrowed by $10.0m in Q3 and $45.4m for the nine-month period. Lower operating losses reflected lower general and administrative and acquisition-related expenses, partially offset by new restructuring charges.
- Acquisition-related expense fell to $1.1m in Q3 and $9.3m for nine months, mainly because of lower acquisition-related compensation associated with Feedonomics.
- Q3 general and administrative expense declined 24.2%, with lower bad-debt expense and reduced headcount-related costs. The allowance for credit losses was $7.9m at quarter-end; management cited improved collections and billing processes, as well as write-offs of fully reserved delinquent balances.
- ARR was $332.2m at September 30, up from $305.3m a year earlier; subscription ARR was $256.5m versus $233.1m. Enterprise-account ARR was $240.6m, or 72% of total ARR. Enterprise-account NRR was last reported annually at 111% for 2022; the filing does not report a Q3 NRR update.
- Deferred revenue was $32.1m, versus $19.5m at December 31, 2022. Remaining performance obligations were $157.2m; the company expected to recognize approximately 60% within the following 12 months.
Outlook, management commentary, risks, and unusual items
- Outlook: No specific numerical revenue or earnings guidance is provided in the supplied filing text. Management expects operating losses and negative operating cash flows for full-year 2023, but believes existing cash, cash equivalents, marketable securities, and operating cash flows can meet working-capital and capital-expenditure needs for at least 12 months. Management says additional capital may be needed for strategic growth initiatives; external financing may not be available on acceptable terms.
- Demand and execution: Management reported longer enterprise sales cycles, slower-than-expected enterprise ARR growth, slower ecommerce order and GMV growth, fewer GMV- or order-based pricing upgrades, tighter customer spending, and some smaller customers delaying or cancelling projects. It is increasing focus on mid-market sales generation and a more efficient land-and-expand model.
- Restructuring: A September 2023 plan affects approximately 7% of the global workforce and is intended to support profitable growth. Q3 restructuring expense was $5.8m, including approximately $5.5m for severance, benefits, and professional and legal fees. Actions are expected to be completed by the end of fiscal 2024, subject to employee jurisdictions. No Q3 cash payments were made under the plan; management does not expect further material charges.
- Acquisition: In October 2023, after quarter-end, BigCommerce acquired Makeswift for estimated cash consideration of approximately $9.0m, including working-capital considerations and employee retention agreements. Management expects it to become an optional component of composable builds in 2024 and later part of its hosted visual-editing toolkit.
- Key risks: Competition and rapid technology change, including emerging AI and machine-learning applications; ability to innovate and integrate with evolving platforms; macroeconomic and geopolitical conditions; customer spending and sales-cycle trends; acquisition integration; cybersecurity and regulatory change; and foreign-exchange and credit exposure. The company does not currently hedge foreign-currency exposure. It also holds cash balances above FDIC-insured limits.
- Contingencies and controls: The company stated it was not party to legal proceedings expected to have a material adverse effect. Management concluded disclosure controls were effective as of September 30, 2023, and reported no material changes in internal control over financial reporting during the nine-month period.
Important facts for investors to verify
- Confirm the issuer identity: the supplied filing is BigCommerce Holdings, Inc., not Commerce.Com, Inc.
- Track subscription ARR, enterprise-account ARR, enterprise sales-cycle duration, and the next annual NRR update against management’s growth strategy.
- Assess whether operating cash burn continues to improve after the $32.5m Feedonomics payment, and compare liquidity with the $345.0m convertible-note principal due in 2026.
- Monitor execution and cash costs of the workforce restructuring, including the expected completion timeline and any additional charges.
- Review the Makeswift acquisition’s final purchase terms, integration progress, and contribution to product adoption and revenue.
- Evaluate whether macroeconomic pressures, customer spending reductions, or slower GMV and order growth further affect revenue, pricing upgrades, and partner revenue.