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DATE

Thursday, May 7, 2026 at 8 a.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Christopher Hess
  • Chief Financial Officer and Chief Operating Officer — Daniel Lentz
  • Vice President, Investor Relations — Tyler Duncan

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TAKEAWAYS

  • Revenue -- $86.8 million, up 5% year over year and above the $82.5 million to $83.5 million guidance range.
  • GMV (Gross Merchandise Volume) -- $8.3 billion, reflecting 14% year-over-year growth and an acceleration from 12% in full year 2025.
  • Non-GAAP Operating Income -- $12.4 million, above the $9.3 million to $10.3 million guidance range and yielding a 14.3% non-GAAP operating margin.
  • GAAP Net Income -- $3.7 million, marking the company’s first GAAP-profitable quarter as a public company.
  • Operating and Free Cash Flow -- $18.4 million and $14.1 million, respectively, generated in the quarter.
  • Ending Cash, Cash Equivalents, and Marketable Securities -- Approximately $157 million, with no material debt maturities until 2028.
  • Annual Recurring Revenue (ARR) -- $359.8 million at quarter end, up sequentially from $359.1 million at year-end 2025.
  • Dollarized Net Revenue Retention (NRR) -- 95.4%, up from 95.2% sequentially.
  • Subscription Solutions Revenue -- $63.7 million; Partner and Services Revenue -- $23.2 million (does not sum due to breakdown across different lines).
  • Stock-Based Compensation as a Percent of Revenue -- Ran at 5.4%, compared to the industry peer average of 13.2% in Q4 2025.
  • Pricing and Packaging Changes -- Effective June, legacy plans replaced with new "core," "growth," "scale," and "performance" plans, with fee applied only on non-embedded payment providers; enterprise clients see only a plan name change.
  • B2B and Enterprise Client Momentum -- Manufacturers, distributors, and wholesalers such as StatLab, Helix, Grainger, Petco, and H&M adopted Commerce solutions for enhanced product visibility and digital channel performance.
  • BigCommerce Payments Launch -- Embedded payment solution with PayPal, offering multiple payment options and unified merchant financial views, launched in the quarter and exceeding early adoption expectations.
  • AI Product Investments -- Launched AI-driven tools (Commerce Companion, Feedonomics AEO, BigCommerce Model Context Protocol) and agentic commerce integrations with Google, Meta, Perplexity, Copilot, and OpenAI.
  • Product Feature Improvements -- Achieved 37% faster checkout, multi-language support, advanced promotions, backorder controls, improved catalog management, and B2B agentic features (purchase order agent, cascading price lists).
  • Forward Guidance -- Q2 revenue expected between $84.5 million and $85.5 million; Q2 non-GAAP operating income expected between $4 million and $5 million; reaffirmed full-year outlook for revenue ($347.5 million to $369.5 million) and non-GAAP operating income ($34 million to $53 million).

SUMMARY

The earnings call highlighted Commerce.com (CMRC +23.61%)'s transition to profitability, operational discipline, and strategic positioning in AI-driven multi-channel e-commerce. Management reported that remaining performance obligations and deferred revenue increased year over year, suggesting enhanced bookings and forward visibility. The Board's rejection of an external acquisition proposal was explicitly framed as protecting shareholder value in light of a significant valuation discount. Leadership emphasized a continued focus on interoperability and open architecture, positioning the company as a partner rather than competitor to merchants’ existing technology stacks.

  • BigCommerce Payments, launched in partnership with PayPal, is exceeding initial GMV adoption expectations among both new and existing customers, with management prioritizing feedback, retention, and attach rates as key metrics for assessing its success.
  • AI-driven initiatives, including Feedonomics and Makeswift integrations, are cited as critical levers to capture value as commerce surfaces expand and agentic workflows mature, driving both B2C and B2B customer adoption.
  • Dollarized net revenue retention sequentially improved, indicating initial momentum in upselling and cross-selling products across the installed base, with management targeting further improvement through product integration and monetization of payments solutions.
  • Guidance reflects normal seasonal dynamics, with a Q2 sequential revenue dip attributed by management to the earlier-than-expected launch of BigCommerce Payments and standard annual payroll adjustments impacting margin guidance.
  • Stock-based compensation remains well below industry norms, signaling continued cost discipline relative to software peers as the company drives both margin expansion and growth investments.

INDUSTRY GLOSSARY

  • GMV (Gross Merchandise Volume): Total dollar value of merchandise transacted through the platform in a given period, regardless of revenue recognition.
  • ARR (Annual Recurring Revenue): Subscription-based recurring revenue expected over a 12-month period, excluding non-recurring fees or services.
  • NRR (Net Revenue Retention): Metric measuring revenue retained from existing customers, including expansion, contraction, and churn, over a defined period.
  • Agentic Commerce: E-commerce model in which AI agents orchestrate product discovery, selection, and purchasing across digital surfaces, requiring structured data, experience, and transaction orchestration.
  • Feedonomics: Commerce.com’s product intelligence and data enrichment platform, facilitating product data normalization and syndication across marketplaces and ad channels.
  • Makeswift: Company’s experience orchestration layer, governing multi-surface UI, content, and personalization across digital touchpoints.
  • UCP (Universal Commerce Protocol): Google-driven protocol enabling commerce transaction orchestration and direct buying experiences within AI environments.
  • MCP (Model Context Protocol): Commerce.com’s protocol for secure, agentic interaction with BigCommerce stores by third-party AI agents.
  • PSR (Payments Service Revenue): Revenue derived from payment services attached to the core commerce platform.

Full Conference Call Transcript

Tyler Duncan: Good morning, and welcome to Commerce's first quarter 2026 earnings call. We will be discussing the results announced in our press release issued before today's market open. With me are Commerce's Chief Executive Officer, Travis Hess; and Chief Financial Officer and Chief Operating Officer, Daniel Lentz. Today's call will contain certain forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning financial and business trends as well as our expected future business and financial performance, financial condition and our guidance for both the second quarter of 2026 and the full year 2026.

These statements can be identified by words such as expect, anticipate, intend, plan, believe, seek, committed, will or similar words. These statements reflect our views as of today only and should not be relied upon as representing our views at any subsequent date, and we do not undertake any duty to update these statements. Forward-looking statements, by their nature, address matters that are subject to risks and uncertainties that could cause actual results to differ materially from expectations. For a discussion of the material risks and other important factors that could affect our actual results, please refer to the risks and other disclosures contained in our filings with the Securities and Exchange Commission.

During the call, we will also discuss certain non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure as well as how we define these metrics and other metrics is included in our earnings press release, which has been furnished to the SEC and is also available on our website at investors.commerce.com. With that, let me turn the call over to Travis.

Christopher Hess: Thanks, Tyler. Q1 2026 was a strong start to the year. We delivered revenue of $86.8 million, non-GAAP operating income of $12.4 million and GMV of $8.3 billion, growing 14% year-over-year, an acceleration of GMV growth from the 12% we reported for full year 2025. We also delivered positive GAAP net income of $3.7 million, which is a milestone that reflects the sustained operational discipline this team has applied over the past several years. We also generated operating and free cash flow of $18.4 million and $14.1 million, respectively, and ended Q1 with approximately $157 million in cash, cash equivalents and marketable securities, with no material debt maturities until 2028.

Historically, most investors and operators have described Commerce as storefront-centric, traffic, conversion, checkout. Platform value tied to owning the destination and the transaction. That model isn't wrong. It's just no longer sufficient to explain where value in the Commerce ecosystem is actually accruing. Commerce is now better understood as data-centric, distributed and orchestrated. Product data needs to be structured, enriched and understood. Discovery and engagement happen across many surfaces, not just via an owned website. And multiple systems need to coordinate customer experience, pricing, inventory management and transaction optimization. More simply, Commerce is shifting from a destination to a system. We have deliberately transformed and rebranded this business to lead this change.

By bringing together Feedonomics, Makeswift and our core BigCommerce platform, we believe we have built a highly differentiated solution that provides 3 integrated control planes across product intelligence, experience and transaction. That flexibility is increasingly valuable as AI reshapes how Commerce works. We are not replacing the storefront. We are extending it into every product discovery and shopping surface where Commerce is happening, and those surfaces are multiplying fast. Feedonomics is our product intelligence layer. It creates clean, enriched, structured understanding of products. It owns normalization, enrichment, attribute modeling, taxonomy and syndication across marketplaces, ad channels and AI search and shopping channels. In an agentic world, AI does not browse. It queries, structured data and returns confident answers.

If merchants' product data is not clean, correctly categorized and enriched, those products do not get surfaced. They end up invisible to the customers that merchants seek to reach. Feedonomics makes merchants visible in the places that matter, and that job gets harder and more valuable with every new AI surface and protocol that emerges. Makeswift is our experience layer. It composes and governs what the customer sees across web, mobile and emerging AI interfaces. It owns UI composition, content, personalization and experience orchestration across channels. AI can produce content, but it still needs to be governed to ensure it's on-brand and consistent across surfaces at scale.

AI does not solve this problem, but Makeswift does and its importance only grows as the number of surfaces multiplies. BigCommerce is our transaction layer that executes transactions and commerce logic. It owns cart, checkout, orders, pricing, promotions and APIs for Commerce operations. As Agentic Commerce matures, the question of which systems can be trusted to execute transactions reliably and at scale becomes more important, not less. This layer is the system of record, and the systems of record become more crucial to merchants as Commerce complexity grows. What is important, and often underappreciated is how this also plays out in B2B. In B2C, agentic search and shopping capabilities are changing how products are discovered and in certain categories, shopped.

In B2B, it is currently changing how they're specified, priced and ordered across systems. That is a more complex problem and one where data, orchestration and flexibility matter even more than checkout. We also have real momentum here. Manufacturers, distributors and wholesalers require multi-company hierarchies, complex quoting workflows and pricing logic that few closed ecosystems can handle cleanly. We can. And critically, in B2B, the cost of bad data or a failed transaction is not a lost sale, it's a broken business relationship. There is a version of the story where some believe that AI threatens Commerce infrastructure. We believe the opposite.

AI answer engines and agentic workflows do not bypass the need for structured product data, governed experience layers and reliable transaction systems, they depend on them. What materially changes is that the bar for each of those layers gets higher, and our architecture reflects exactly that. Modular but integrated. Open, API-first and channel agnostic. Our largest competitor built a transaction layer and closed an ecosystem around it. We built across all 3 layers and did it openly, which means we can be a merchant's full stack or we can be the data and orchestration layer running alongside Commerce platforms they are already on. The intention is to work interoperably with a merchant's architecture, not against it.

That is not a positioning statement. It's a structural decision we made deliberately, and it aligns to where Commerce is going. Now let me walk through what we accomplished in Q1. At launch, Commerce was 1 of only 2 platforms to endorse Google's Universal Commerce protocol. We have fully built to the UCP protocol, connecting BigCommerce and Feedonomics, enabling enhanced discovery, orchestration and direct buying within Google's AI experiences with merchants retaining merchant-of-record status and full ownership of their customer data. Two weeks ago, at Google Cloud Next, we took the stage with Accenture and demonstrated their prebuilt agentic operating system, which incorporates Commerce's capabilities natively on GCP and GECX, handling discovery, personalization, checkout and fulfillment end-to-end.

Agentic Commerce is not a notional product launch on our road map. It is already running. Beyond Google, our Agentic Checkout is now live on Perplexity, Copilot and Meta via our PayPal StoreSync integration. When a shopper completes the purchase in this model on an LLM chat surface, the order lands in BigCommerce. Enterprise organizations like Dell are using Feedonomics to make their products discoverable on OpenAI and other LLMs, while our Feedonomics Enrichment tools are driving agentic engine optimization or AEO performance across channels. We also released BigCommerce model context protocol, otherwise known as MCP to make it easier than ever for agents to securely interact with BigCommerce stores. We advanced AI capabilities directly within the core BigCommerce platform.

Commerce Companion, our AI assistant built into the admin experiences, helps merchants analyze business data, automate routine tasks and accelerate time-to-value. This is AI that works inside the merchant's daily workflow, not just in discovery channels. We launched BigCommerce Payments built with PayPal in Q1, an embedded payment solution that gives merchants a unified view of their finances, and flexible payment options, including PayPal Pay Later, Venmo, Apple Pay, Google Pay, and cards, all from within the BigCommerce control panel. We expanded the number of channels available within Surface, our self serve version of Feedonomics, to now include Meta, Google Ads, Pinterest ads, TikTok ads and Microsoft ads.

We are laying the groundwork for additional agentic and AI channel integrations, which will roll out in the coming months. On the customer side, H&M, The RealReal, Petco, and Grainger adopted Feedonomics to enhance product visibility and performance across digital channels. We also added new industrial manufacturing, and distribution customers like StatLab, a leading supplier of histology and pathology consumables and launched brands such as Helix, Linear, a precision motion components manufacturer servicing industrial automation, robotics, aerospace and defense. These customers are examples of where our B2B capabilities resonate most strongly and where the depth of our platform is compelling. On the core platform, we shipped 37% faster checkout.

We added advanced promotions with coupon stacking, margin-protective caps and bulk coupon code generation as well as multi-language support with automatic URL subfolders and end-to-end translated storefronts. And we introduced backorder controls and improved catalog management. On storefronts, Makeswift on Stencil is in beta, and native hosting for Catalyst moves to open beta soon, deploying to Cloudflare at no additional cost to merchants. In B2B, we launched our purchase order agent. The agent extracts, validates and routes POs to check out automatically. We also shipped cascading price lists, expanding the complexity of pricing use cases we can handle in B2B. Finally, we recently announced some updates to our pricing and packaging on the BigCommerce platform.

Effective June 1, we've replaced our prior standard, plus, pro, and enterprise plans with core growth, scale and performance plans. The vast majority of platform ARR comes from our enterprise plans. Those are sales-assisted plans on defined contract duration and terms. Customers formally using enterprise plans will see no change whatsoever beyond the name change to performance. We are also introducing a fee that applies to orders processed through payment providers, not on our embedded payment provider list. I want to be clear about what this is and what it is not. Contracted customers on our new performance plan, formerly our enterprise plan, pay no additional fees, no matter what payment partner they select.

For the vast majority of our remaining merchants, their fee will also be zero, because their orders already run through one of the many providers on our embedded list. We are talking about more than a dozen deeply integrated payment partners: Stripe, PayPal, Braintree, Adyen, Amazon, Klarna, Worldpay, Afterpay, BigCommerce Payments and more, not just a single proprietary gateway. Our merchants have real choice, and that choice comes with 0 fees. This change is not a broad-based price increase. It is a deliberate decision to go narrower and deeper with our payment partners, investing more meaningfully in fewer relationships to deliver better integrations, better checkout experiences, more local payment methods and better conversion for our merchants.

We have completed the core elements of our transformation, a unified platform and brand, a clear investment thesis, a leadership team aligned around execution and a strong financial profile give us the leverage and flexibility to deliver on the growth potential of this platform. You are starting to see our product velocity increase meaningfully as a result of these changes over the past 18 months. Our product agenda is in motion, the monetization levers are in place, and our focus is squarely on execution for the remainder of 2026. We are delivering healthy GMV growth, cash flow and profitability, and the business is well positioned for growth. With that, I will turn it over to Daniel.

Daniel Lentz: Thanks, Travis. Q1 was a good start to the year across many facets of the business. Q1 revenue was $86.8 million and up 5% year-over-year, above the high end of our guidance range of $82.5 million to $83.5 million. Subscription Solutions revenue was $63.7 million, and partner and services revenue was $23.2 million. Non-GAAP operating income was $12.4 million, above the high end of our guidance range of $9.3 million to $10.3 million. Our non-GAAP operating margin in Q1 was approximately 14.3%, reflecting continued leverage in our operating model. Total ARR ended the quarter at $359.8 million, up sequentially from $359.1 million at year-end 2025.

GMV of $8.3 billion grew 14% year-over-year, an acceleration of GMV growth from the 12% we reported for full year 2025 and reached nearly $33 billion across the prior 4 quarters. We also achieved positive GAAP net income in Q1 2026. This was our first quarter of GAAP profitability in our history as a public company. This margin improvement is the direct result of the strong operational discipline that we've shown over the last several years, simplifying our cost structure, driving leverage and reinvesting savings into our highest impact product initiatives. We also expect to deliver GAAP earnings profitability for the full year 2026.

As Travis said, in Q1, we generated operating and free cash flow of $18.4 million and $14.1 million, respectively. And we ended Q1 with approximately $157 million in cash, cash equivalents and marketable securities with no material debt maturities until 2028. Our strong balance sheet is a direct result of our operating cash flow improvements and disciplined capital management. We said we would eliminate our remaining net debt by mid-2026, and we delivered that result a quarter early in Q1. Our cash, cash equivalents and marketable securities now exceed our total long-term debt outstanding. This balance sheet position gives us meaningful financial flexibility to invest in our products and growth and to pursue strategic opportunities from a position of strength.

Remaining performance obligations and deferred revenue increased year-over-year in Q1. This is an important forward-looking indicator that reflects healthy bookings activity, customer commitments that have been contracted but not yet recognized, and strong demand visibility for the second half of the year. We continue to handle dilution and stock-based compensation responsibly as well. According to a recent Needham research note, stock-based compensation as a percentage of revenue for public software companies was 13.2% in Q4 2025. We ran at approximately 5.4% in the same period, less than half the peer average. That's not an accident. It reflects the same operational discipline that's driven our margin expansion and GAAP profitability.

As I mentioned earlier, we facilitated $32.7 billion in GMV over the prior 4 quarters, and we have delivered consistent double-digit growth in this metric for multiple years. GMV captures the economic activity flowing through Commerce infrastructure across B2C and B2B, BigCommerce and Feedonomics, and it gives investors a clearer picture of the scale of our business. Many of our product investments and organizational changes are focused on narrowing the gap between GMV growth and revenue growth. This gap reflects primarily our strong B2B growth, where credit card transactions represent a smaller share of the payments. As we scale BigCommerce payments and drive higher payments monetization, we expect that gap to narrow.

Dollarized net revenue retention, or NRR, improved sequentially in Q1, increasing from 95.2% to 95.4%. Driving sustained improvement in NRR is one of the most important operational priorities that we have as a company. And this quarter's sequential improvement is an early but meaningful signal that our product investments are translating into better customer outcomes. NRR improvement is fundamentally a cross-sell and retention story. We are focused on driving higher attach rates for Surface, Feedonomics and BigCommerce payments within our existing customer base, improving time to value and tighter integration across our entire platform to make the full Commerce ecosystem stickier. Each of these levers has a direct impact on expansion and churn.

We have more work to do here, but the trajectory is moving in the right direction. For Q2 2026, we expect revenue between $84.5 million and $85.5 million. We expect non-GAAP operating income between $4 million and $5 million. And for the full year 2026, we are reaffirming our overall outlook. That is revenue between $347.5 million and $369.5 million and non-GAAP operating income between $34 million and $53 million. This outlook represents between 2% and 8% full year growth rates with non-GAAP operating margins of 10% to 14%. On a Rule of 40 basis, our non-GAAP guidance implies combined growth plus margin performance of approximately 11% to 22%, depending on how we execute within our ranges across the year.

Now let me close with the core reasons why we believe Commerce is well-positioned to deliver long-term value for our shareholders. We facilitated $32.7 billion in GMV over the prior 4 quarters with 14% growth in Q1, clear evidence of our platform scale and its continued momentum. We operate at approximately $359.8 million in ARR, with non-GAAP gross margins in the high 70s, generating meaningful non-GAAP operating income and cash flow. We achieved positive GAAP net income in Q1, and we are on track for full year GAAP profitability for the first time in our history.

Our strong balance sheet gives us financial flexibility to invest and operate with confidence, and we are executing on the product investments, payments, agentic infrastructure, surface and B2B, all of which we believe will drive durable ARR growth and expanding monetization in 2026 and beyond. The business has never been better positioned. We have the scale, infrastructure, financial profile and product momentum to deliver on the full growth potential of this platform. With that, Operator, let's open it up for questions.

Operator: [Operator Instructions] Okay, so your first question comes from the line of DJ Hynes with Canaccord.

David Hynes: Travis, I want to start with BigCommerce payments. I'm curious what success with that effort would look like to you and how investors should measure your progress and kind of key milestones against this goal as it continues to mature.

Christopher Hess: Thanks for the question. I'm measuring it in a couple of different ways. One was actually delivering it, delivering it on time and within scope, which was accomplished, obviously, by the end of the quarter, which was exciting. I'm also measuring it by the feedback of the merchants that have been participating, which has been overwhelmingly positive. As that offering evolves, obviously, the monetization of it becomes more and more important. But the real thesis here was to remove friction, create a better experience for our merchants based on feedback and do that in partnership, at least initially with PayPal and kind of go from there. I'll turn it to Daniel as it relates to the financial aspects of it.

Daniel Lentz: Yes. From the financial side, DJ, I think number one is just what's the adoption that we're driving, both amongst the existing base, but also for new account sign-ups where that's really kind of the default in the onboarding flow for small businesses and even maybe medium-sized businesses as well. And I think another success criteria really paying attention to is kind of what's the relative retention rate and GMV growth that those merchants are seeing. And the #1 thing that we're focused on is whether or not that product is helping our customers be more successful and grow faster. We believe that it can. We believe that it will. So far, we're doing well.

We're ahead of our expectations in the first month or so in terms of GMV adoption. In the long run, I think if it's going well, not only will we see it in retention, we'll also see better PSR attach rates as well over time because obviously, not only do we think it can be better for merchants, but we also think it can pick up some incremental revenue share for us in that part of the business.

David Hynes: Yes. Makes sense. That's helpful color. Maybe as a follow-up, I don't know if we've talked about this publicly before, but can you just address the resolve proposal from your perspective and why the company decided to invoke a stockholder rights plan?

Christopher Hess: Got you. Yes, I appreciate the question. Listen, the Board and management teams are focused on maximizing value. And obviously, we're going to carefully review any serious offer we receive. This particular proposal implied a 50% discount to the current trading price, which is not a serious proposal from a financial point of view. So as we've stated quite publicly and multiple times, we don't believe this warrants any further engagement.

Daniel Lentz: Yes. And then I'll address the shareholder rights plan. So the Board determined that adopting a limited duration rights plan is the right next step to protect stockholder interest. And it's a very normal thing, I would think, under the circumstances for us to do. Under that plan, rights become exercisable if a person or a group acquires, I think, 10% of shares of the company's stock or 20% if it's for passive investors. The intent of that is just to discourage accumulations of shares in control without protections for stockholders and providing the Board time to evaluate proposals in kind of a prudent and careful manner. So ultimately, we think it's about making sure that shareholders are treated equitably.

And as Travis said, our position on this has not changed. The proposal really undervalues the company. It's not attractive to stockholders, and we don't think it warrants any further engagement.

Operator: Your next question comes from the line of Ken Wong with Oppenheimer.

Hoi-Fung Wong: I wanted to ask about the pricing changes to BigCommerce subscription plans. When should we expect the impact of non-enterprise customers to hit top line? And then for the enterprise customers, what's the path to potentially true up those contracts?

Daniel Lentz: Ken, thanks for asking this question. Let me take a little bit of time to kind of walk through what this is. So just to be really, really clear about what we've done on the pricing and packaging side on the platform side. We've done a name change of all of our core products, and we've changed kind of what's included in each of those bundles. For your second question on Enterprise plans, it's really a name change to Performance, and there's no other change associated with that nor are we contemplating any further changes with those customers as well. We introduced a fee associated with using payments providers outside of our embedded payment provider list.

To be very clear, all customers on kind of negotiated term agreements, formerly Enterprise plans are completely exempt from that. There is no charge that they receive that's incremental no matter what payments provider that they choose. What we are wanting to do, though, for the other 3 plan types, core growth and scale, we really wanted to drive better concentration of resources into a smaller group of payment providers where, to be very clear, we see better GMV growth and results for customers on those providers than we see on what I would call kind of the long tail of partners that we have in the business.

And so customers have complete freedom to choose among a list of, I think, like 20 different payments providers, including BC Payments in that list with no fee structure whatsoever. So it's actually a very small amount of volume that we would expect to be impacted by this. To be really clear, we're not trying to create a new revenue line item out of that in particular. Really, this is about trying to drive volume towards payments providers that just see much better GMV growth and service delivery for customers. And that will take effect in June when we make those changes. We've also made some minor changes to service offerings in a couple -- in areas like that.

But Travis has talked a lot in the past about the fact that we want to be a little bit more opinionated about what we think is the right architecture and the right selection of partners that we think our customers should be using. We are fundamentally, though, there's no change. We are an open platform. People can use whatever partners they want to use, but we'd like to try to concentrate volume a little bit more on the smaller list.

This is also very different from our largest competitor where, yes, there's a fee structure that's similar, but that fee applies unless you use their proprietary payment solution, just one, where we're saying you can use up to 20 with no fee whatsoever, no matter what size the customer is.

Hoi-Fung Wong: Understood. And then second, I just wanted to touch on guidance. So very solid first quarter reiterated the full year, but 2Q does tick down sequentially. Can you just walk us through the seasonal dynamics there?

Daniel Lentz: Yes, there's just a small timing difference actually. We expected originally to ship BC payments in Q2, and we had some revenue associated with the go-live on that with a partner. We actually shipped it earlier than what we expected. So it actually went out the door at the end of March, which is a good thing. So we end up with a little bit of extra revenue in Q1 associated with that, that we had originally anticipated actually to come through in Q2. Once you account for that timing, it's actually a very normal kind of period-to-period seasonality for what we're seeing in Q1 and Q2. That's really the main driving reason behind that.

It's kind of a no news item from my perspective, honestly. In terms of the sequential step down you referred to, Ken. Yes.

Operator: Your next question comes from the line of Brian Peterson with Raymond James.

Brian Peterson: So maybe a follow-up to Ken's, but more on the margin side. So Daniel, if we think about the investments, was there any timing differences or margin aspects as we think about the first quarter outperformance and how we're thinking about margins for the rest of the year?

Daniel Lentz: Nothing major. I would say Q2 sequentially always has -- is going to have a little bit of a step-up in OpEx for us because we actually have our kind of annual salary increase cycle occurs at the end of Q1. So Q2 is the first time that we actually see like the full effect of like merit promotions within our cost structure. That's the major difference that you see actually in the guide from period to period on the profit side. In addition, it's that issue. The profit also is affected a little bit in Q2 by the timing difference I mentioned. on the revenue side.

And then finally, we said on our last call that we were planning to step up investments in R&D on kind of like a cash investment basis, about 30% on a full year basis. And we're continuing to ramp up engineering hiring. We're kind of almost the full hiring that we intended behind that reinvestment, but we're seeing a little bit more carrying cost on that step up as you would -- as you see in Q2, and that's reflected in the guide. We're really encouraged by what we're seeing in that investment, by the way.

I think if you just look at what Travis covered in his prepared remarks, the volume efficacy, quality of the stuff that we're seeing shipped, going out the door right now is really encouraging. And it's equally focused on retention and expansion of the base as it is on features that are really speaking to new offerings and new customers, which I'm sure there'll be questions for Travis coming on this. But I'd say I am very encouraged by what I'm seeing from a product quality and velocity behind that investment.

Brian Peterson: No, that's great to hear. And maybe Travis, just a follow-up for you. I know it's kind of early days on Agentic Commerce, but I think there's some debate in the investment community about is that really just an incremental channel that has higher conversion? Or will that lead to a significantly higher growth opportunity for merchants overall? Would love to just kind of weigh in on that and maybe any milestones that you're kind of looking for in 2026.

Christopher Hess: It's a great question. I think it depends on the model. I think in my prepared remarks, I talked about how we were deliberately -- our neutrality was deliberate and modular in nature, knowing that just to be candid, agents don't have a lot of opinions, right? They're going to navigate and surface what's in the best interest of the consumer, at least that's the thesis behind it. And so the neutrality, the openness of how we've done this and how we've architected, we think is a massive advantage. I mean, that's not even touching on the B2B side of this.

I think the use cases for agentic and B2B will actually be more material sooner as it relates to the impact on those customers. I think cost savings in general is a general thesis in those sorts of engagements and stripping out manual labor and obviously optimizing workflows and things like that, we're seeing incredible use cases as well as almost once-in-a-lifetime blending of front office and back office and a lot of ERP upgrades and implementations where a lot of that stuff was done 10, 15, 20 years ago was purely back office. Now with agentic, it's forcing everything to come forward and have that blend. I think that's going to accelerate agentic in that space.

But generally speaking, I think people want optionality. I think partnering with the best of the best in market around payment providers, around hyperscalers, around other ISVs and partners and controlling, again, for us, data experience and transaction. And really, a lot of it's around governance, quite frankly. I think that's where most people have the angst. I don't think governance was a sexy term in the investment community a couple of years ago. It's going to be front and center as we start talking about this complicated orchestration we've led into for a long time. The governance piece of this is what keeps us really durable and really differentiated. So that's my opinion on it.

I would expect it to accelerate mostly upmarket. I think large retail, think large global branded manufacturers, folks that are most directly impacted by the traffic drop-off. I think that will gradually ease into mid-market and eventually become reasonably relevant for SMB. Really depends on the SMB. But I think you're going to see a big push on enterprise B2B here sooner rather than later. They're just not obvious use cases because most of that stuff is behind log-ins and the average general human being doesn't necessarily experience that on a day-to-day basis.

Operator: [Operator Instructions] Your next question comes from the line of Scott Berg with Needham.

Scott Berg: I guess, Travis, I just want to start off coming off your conference event -- company conference event last week. I guess what are you hearing on B2B e-commerce replacement cycles out there? How are you viewing, I guess, calendar '26 here relative to maybe the last couple of years in terms of the activity that might be out in the end market?

Christopher Hess: Yes, we're seeing similar trends, Scott, it's a great question. I've been pretty public about this, too. B2B has been as a platform business for us, has been the majority of net new opportunities have been B2B oriented or hybrid, but mostly B2B. I see that continuing. I think what I just alluded to in the previous question around this ERP movement, front office and back office blend, that has a positive and an indirect negative impact. The positive is it brings everything front and center, and I think there's a lot of prioritizations around optimizing B2B, particularly around agentic.

And what I mean by that for us specifically, Feedonomics and the data layer, so think of what Feedonomics is doing around product intelligence and enrichment for B2C, think of how massively and tangibly relative to that is in a B2B environment. You've got massive catalogs, distributed data. A lot of those guys grow inorganically, so they're acquiring other technologies, other businesses, synthesizing all of that and serving it up in very unique and complex ways is a natural fit. And then we've also, through the release of our MCP tooling recently, right, it's going to make our merchant stores for B2B agent addressable.

So again, you've got all these new use cases that are going to allow these organizations to take faster advantage of speed to market and efficacy, which I think is going to improve the velocity. The one -- and this is just hypothetical, ERP tends to suck a lot of air out of the room. And so I think the danger in this is you're going to have a lot of things going on at once for very large organizations and the sequencing of that transformation is kind of out of our control. I'm not alluding that it's impacted pipeline in this capacity at all. It has not.

I'm just thinking I'm putting my services hat back on and being objective about, there's a sequencing element of this. So for us, I think the sequencing favors us because I think the cost savings from blending front office to back office through agentic is real, and I think that can help fund a lot of the back office stuff that's going to be pretty material as these companies go through these either forced upgrades or reimplementations of ERP. So I think time will tell, but I'm materially encouraged with what's going on in that space, in particular.

Scott Berg: Understood. Helpful. And then, Daniel, as we think about the model in the next couple of years, I know payments is early and at least with the new payment platform, and we certainly don't have much for expectations and contribution this year. But how does it impact gross margins as we start thinking about maybe calendar '27 and '28? Is the new payments infrastructure accretive to your current gross margin profile? Or does it create maybe some headwinds there?

Daniel Lentz: It's actually accretive. So the way that we've set this up, we are acting as a reseller and kind of a partner in building out the tech that's behind that alongside PayPal. We are not taking on the credit risk of merchants, and therefore, we're not taking on a lot of interchange at all that goes along behind that. And so it's still fundamentally the same economic model where we had before. So I'd say it's accretive to margins. Now if we decide in the future to become -- take on more of a PSP role as we build out this solution, that may change.

That will obviously come with different top line revenue recognition treatment and margin structure, but we're not there yet. What I would say, though, and I want to be clear about this, this is kind of the first of many products that we're thinking about within financial technology where we think we can start to build out solutions. We don't have a specific time line or a road map yet on when we're going to add on different things. But -- this is obviously something that we think customers can benefit from by having more integrated solutions, particularly smaller customers, where we have tens of thousands of customers in that size that we want to continue to build out.

But I don't see this being dilutive anytime soon. And if it does, it would come with favorable revenue treatment anyway. And if and when we decide to take a step down that direction, obviously, we would talk about that on earnings call so that everybody can build that into their models. But for now, I think you can just model it as it being accretive and a tailwind in that respect. And if that changes in the future, we'll talk about it then.

Operator: Thank you, everyone. And that concludes our Q&A session for today. I will now turn the call back over to Travis Hess.

Christopher Hess: I want to thank everyone for joining. Obviously, Daniel and I are excited about where the business is right now. Obviously, a lot of execution against our strategy for the remainder of the year, and we look forward to seeing all of you in the interim and next quarter's call.