BigCommerce Holdings (BIGC) intends to raise $100 million in an IPO of its Series 1 common stock, according to an S-1 registration statement.

The firm provides online retail stores with an integrated e-commerce software platform.

BIGC has grown markedly and is well positioned to benefit from the continued transition of businesses to online revenue generation.

I’ll provide an update when we learn more about the IPO from management.

Austin, Texas-based BigCommerce was founded to develop e-commerce software delivered as a SaaS platform for online retailers.

BIGC has provided its software to 60,000 online stores in 120 countries worldwide.

Management is led by president, CEO and Chairman Mr. Brent Bellm, who has been with the firm since June 2015 and was previously president and COO of HomeAway, a vacation rental online marketplace.

Below is a brief overview video of BigCommerce:

Source: BigCommerce

The firm has developed a robust partner program for both Agency partners and Technology partners.

The firm's primary uses cases include:

  • Headless Commerce
  • B2B
  • Wholesale
  • Multi-Channel
  • International

Industries the company’s software serves include:

  • Apparel & Fashion
  • Health & Beauty
  • Food & Beverage
  • Manufacturing
  • Automotive

BigCommerce has received at least $225 million from investors including Revolution Growth, General Catalyst Group, GGV Capital and SoftBank.

The firm originally launched with a focus on the SMB market, with a self-serve website-based service.

Since then, the firm has transitioned to a much wider approach, expanding its focus to include larger enterprises.

Sales & Marketing expenses as a percentage of total revenue have been uneven as revenues have increased.

The Sales & Marketing efficiency rate, defined as how many dollars of additional new revenue are generated by each dollar of Sales & Marketing spend, rose to 0.5x in the most recent reporting period.

Management disclosed the firm’s recent net revenue retention rate as, “NRR for accounts with ACV greater than $2,000 was 108% and 106% for 2018 and 2019, respectively.”

A figure of greater than 100% is considered good as it means the firm is generating increasing revenue (negative net churn) from the same cohort of customers over time.

According to a 2020 market research report by Grand View Research, the global market for e-commerce software was valued at $6.2 billion in 2019 and is expected to reach $18 billion by 2027.

This represents a forecast very strong CAGR of 16.3% from 2020 to 2027.

The main drivers for this expected growth are an increase in e-commerce capabilities to assist enterprises in automating core business functions while increasing the leverage firms have as consumers increasingly adopt online shopping for goods and services.

Also, firms that utilize APIs (Application Programming Interface) enable companies to employ low code solutions to quickly modernize their existing systems.

Major competitive or other industry participants include:

  • Magento
  • Salesforce (CRM)
  • Shopify (SHOP)
  • WooCommerce
  • Numerous smaller platforms

BigCommerce’s recent financial results can be summarized as follows:

  • Growing topline revenue
  • Increasing gross profit
  • Variable gross margin
  • Fluctuating operating losses
  • Increasing cash used in operations

Below are relevant financial results derived from the firm’s registration statement:

bigcommercepl

Source: Company registration statement

We intend to use a portion of the net proceeds from this offering to pay in cash the Series F Dividend[...]. We intend to use the remainder of the net proceeds from this offering for working capital and general corporate purposes, including sales and marketing, research and development, general and administrative matters, and capital expenditures.

Management’s presentation of the company roadshow is available.

Listed bookrunners of the IPO are Morgan Stanley, Barclays, Jefferies, KeyBanc Capital Markets, Canaccord Genuity, Needham & Company, Raymond James, and SunTrust Robinson Humphrey.

Commentary

BigCommerce is seeking to go public to pay off its Series F dividend, an odd use for a tech company IPO proceeds.

The firm’s financials indicate the company is growing revenue quickly but has produced uneven operating and net results.

Cash used in operations continues to be high.

Sales & Marketing expenses have fluctuated as revenues have increased, but its Sales & Marketing efficiency rate has improved most recently.

The market opportunity for providing a SaaS e-commerce solution is large and likely to grow at a significant rate in the coming years, so the company enjoys a robust industry growth dynamic.

That growth potential will no doubt be assisted further by the Covid19 pandemic and its effects on businesses seeking to produce more of their revenue from digital sources.

Morgan Stanley is the lead left underwriter and IPOs led by the firm over the last 12-month period have generated an average return of 73.2% since their IPO. This is a top-tier performance for all major underwriters during the period.

BigCommerce is well positioned to take advantage of the continued shift toward online commerce.

I look forward to learning more details about the IPO’s pricing and valuation assumptions.

Expected IPO Pricing Date: To be announced.

Glossary Of Terms

(I have no position in any stocks mentioned as of the article date, no plans to initiate any positions within the next 48 hours, and no business relationship with any company whose stock is mentioned in this article. IPO stocks can be very volatile in the days immediately after an IPO. Information provided is for educational purposes only, may be in error, incomplete or out of date, and does not constitute financial, legal, or investment advice.)

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