E-commerce software firm Demandware reports a 43% revenue increase in Q4

February 20, 2015 01:53 PM

E-commerce technology and platform provider Demandware Inc. has reported a nearly 53% year-over-year increase in subscription revenue along with a 31% increase in customers. Demandware sells e-commerce platform services to 31 e-retailers in the Internet Retailer Top 500 Guide and eight in the Second 500 Guide, according to data compiled at

For the fourth quarter ended Dec. 31, the vendor reports:

• Total revenue of $52.5 million, up 43.4% from $36.6 million for the same period in 2013.

• Subscription revenue of $49.2 million, up 46.9% from $33.5 million in the fourth quarter of 2013. “In 2014, we generated 36% of our revenue outside North America, and the majority of that is denominated in the euro,” chief financial officer Tim Adams said on a conference call with analysts this week. “The stronger dollar lowered our subscription revenue by approximately $1 million.”

• Operating expenses of $46.33 million, up 79.0% from $25.88 million.

• A net loss of $3.824 million compared with net income of $2.888 million for the same period in 2013.

Demandware, whose stock trades on the New York Stock Exchange under the symbol DWRE, ranks No. 9 among provides of e-commerce platform technology to Top 1000 online retailers in North America, based on the online sales of its clients. The company is particularly strong in providing e-commerce software to apparel brands and retailers, which make up 22 of its 39 Top 1000 clients. They include VF Corp. (No. 110), Tory Burch (No. 157), Brooks Brothers (No. 168), Barneys New York Inc. (No. 186) and Crocs Inc. (No. 219).

Demandware earlier this year announced it would pay at least $60 million for Tomax, a vendor of software to manage store payments, inventory and staffing. Retailer clients of Tomax include L.L. Bean Inc., No. 32 in the Internet Retailer 2014 Top 500, Hallmark Cards Inc., No. 215, and Party City Corp., No. 222.

“During the year, we signed enterprise scale customers including Charles Tyrwhitt, Panasonic, GoPro and Jack Wills and large clients such as 1-800 CONTACTS, Payless ShoeSource, Jack Wolfskin, and Wolverine Worldwide went live on the platform,” says CEO Tom Ebling. “We expanded deeper into the Asia-Pacific region, bolstered our European operations and enriched our omnichannel capabilities with distributed order management and the Digital Store solution. The execution of our strategy in 2014 and our acquisition of Tomax in early 2015 puts Demandware in a strong position to drive the transformational change in retail from ecommerce to in-store operations.”

The company also announced a change in how it reports revenue. “Historically, we've recorded implementation services as deferred revenue and recognize the revenue ratably over the estimated life of the customer relationship, which we estimate is just over six years,” Adams said. “We will now record the revenue in the period in which the services are delivered.”

He added that the change affected the company’s financials. “The change in our services revenue recognition policy reduced our services revenue, and increased our net loss in the fourth quarter of 2014 by approximately $170,000. For the fourth quarter of 2013, the change in our services revenue recognition increased our services revenue, and increased our net income by approximately $1.1 million.”

Adams also noted to analysts that Demandware, which launched its initial public offering of stock in 2012, continues to invest in growth: “This year, and in the fourth quarter, we made significant investments in growth and innovation, particularly hiring in sales and marketing and R&D,” he said.

For the full year 2014, Demandware reports:

• Total revenue of $160.6 million, up 50.7% from $106.6 million in 2013.

• Subscription revenue of $145.9 million, up 52.5% from $95.7 million for last year.

• Operating expenses increased 51.6% to $146.3 million from $96.5 million a year ago.

• 590 employees, a 54.0% increase from 383.

• A net loss of $27.060 million compared to a net loss of $18.002 million in 20913.

• 267 customers at year’s end, up 30.9% from 204. “We signed 10 customers with seven-figure commitments, double what we signed in 2013,” Ebling said this week in a conference call with analysts, according to a Seeking Alpha transcript. “This year, we extended our relationships with clients like Adidas, Barneys and Tory Burch.”

• Average revenue per customer of $578,000, an increase of 12.2% from $515,000 in 2013.

• 22 customers that “generated more than $100 million in gross merchandise value over the Demandware platform in 2014, up from 17 customers in 2013.”

• 1,143 live sites using Demandware, up 39.4% from 820.

• Subscription dollar retention rate exceeded 100% in 2014 and customer churn was less than 5%.



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