Demandware Inc. said the average value of its client contracts hit a new high in the first quarter as the e-commerce software provider boosted the number of new customers and gained subscription revenue.
The average value of Demandware’s new client contract signings increased about 52% to more than $700,000 in the quarter ended March 31, up from $460,000 in Q1 2015, a spokesman says. The company doesn’t disclose the exact figures. The previous high was $640,000 in Q2 2015. The average value represents the minimum annual subscription payments the customer will make in the first year after going live on Demandware’s platform. Those payments can go up if the customer’s online sales in that 12-month period exceed an amount it committed to in the initial contract, Demandware says.
Demandware is the e-commerce platform services provider to 52 e-retailers in the Internet Retailer 2016 Top 500 Guide and 18 in the 2015 Second 500 Guide, according to Top500Guide.com.
Among the new customers are Belk Ecommerce LLC (No. 97) , BoConcept, Duluth Trading (No. 175), Figleaves, Fragrance Direct, Mitchell Gold + Bob Williams, Sonos, Timex and Wolford, CEO Thomas D. Ebling told investment analysts Wednesday, according to a transcript from SeekingAlpha. The new customers take an average of seven months to go live on Demandware’s platform, Ebling said.
William Blair & Co. LLC analyst Justin Furby said in a note to investors he estimates the gross value of Belk’s online merchandise sales should total roughly $350 million in 2016, while the value for Duluth Trading stands close to $250 million online this year.
The number of clients using Demandware’s software to sell online increased 25.1% to 349 as of March 31, with those companies operating 1,590 e-commerce sites, Demandware said. In the year-ago period, the company’s 279 retail customers operated 1,241 e-commerce sites.
Among the 18 new clients that went live on Demandware’s platform during the quarter are London-based fashion e-retailer Avenue 32 Ltd.; women’s clothing retailer Christopher & Banks Corp. (No. 347 in the Second 500), and Norwegian sports apparel firm Trimtex Sport AS, Ebling said.
The average contract value is growing because Demandware is seeking larger clients and improving its platform, Ebling says. The company had 30 customers with more than $100 million in annual online sales at the end of 2015 compared with 22 at year-end 2014 and 17 at the end of 2013, the spokesman says.
Demandware also said its subscription revenue for the quarter increased 33% when adjusted for currency fluctuations, to $57.4 million from $43.2 million in the year-ago period.
Ebling told analysts he doesn’t anticipate major growth, at least initially, from Demandware’s partnership with Radial, the former eBay Enteprise services unit spun off from eBay Inc. in November and renamed earlier this month. Radial, which manages the online stores for such major retailers as Toys ‘R’ Us Inc. (No. 35 in the Top 500) and Walgreen Co. (No. 37), announced April 19 it planned to phase out its business of operating retail websites on an outsourced basis and would refer retailer clients to Demandware as their contracts near expiration. Radial operates the e-commerce sites for 20 retailers in the Top 500, according to Top500Guide.com.
“The number of potential Radial customer (contracts) to be closed in any given year is probably in the single digits, so it’s helpful. But it probably doesn’t dramatically change our bookings projections,” Ebling told analysts.
Demandware also reported:
- Revenue increased 33.4% to $67.08 million from $50.27 million in the year-ago quarter.
- Services and other revenue increased 47.1% to $10.3 million from $7.0 million.
- Annual revenue per client was $632,000 on a rolling four-quarter basis, up 6.9% from $591,000 a year earlier.
- Net loss of $11.7 million compared with a year-ago loss of $5.2 million. Excluding stock-based executive compensation and costs related to mergers and acquisitions, the company had $2.2 million in net income compared with a comparable net loss of $100,000 a year ago.
Favorite