Commerce.com, Inc. (CMRC) August 2026 Conference Transcript

All right. I think we're ready to kick things off. I'm DJ Hines. I'm the senior software analyst here at Canaccord. I say it every time, but this is the 46th year we've done this conference. We couldn't do it without the corporates that come and bring the great content and support us, so we appreciate it. Without the investors who come and ask smart questions. we are the last thing between you guys and cocktails and lobster rolls so we'll try and make this as many things as we possibly can it's a big vote of confidence we're thrilled to have the commerce team here we have CEO Travis Hess CFO Daniel Lentz we're going to do this as a fireside chat I have questions that should get us through the 25 minutes but if there's stuff from the audience feel free to raise your hand we can work it into the conversation but with that as background thank you guys maybe we can just kick things off, talking a little bit about Q2 results and kind of what's top of mind coming out of the quarter and what you think investors should understand about the business?

Yeah, I mean, listen, I think we've been pretty open about it. We had obviously earnings last week. I think understandably the market reacted to the guidance adjustment, certainly. But I think what was lost a little bit underneath the covering of that is a lot of really positive foundational signals of the transformation working. NRR consecutively increasing over the last three quarters. I think it's more than a data point at this point, but obviously a hard metric to move, which has been important and a foundational part of the transformation. You saw GMV grow year over year on the platform as well. Arguably, we do a better job monetizing that, but I think it's a decent barometer for the health of the business. And we've been gap profitable for the past two Two quarters, which for the first time in company history. So it doesn't solve all of our problems. Obviously, we're investing in the areas we feel we have a durable right to win and differentiation. We're shipping a lot in the back half of the year. But I think foundationally, a lot of this was stabilizing the base, narrowing the focus, investing in areas that we know we have a right to win that's durable long term. And we're starting to see some of those metrics come to the surface. We've got to go execute in the back half of the year and obviously return the business to growing revenue. That's what the street wants to see. It's what we want to see. It's just it's the last piece of the sequencing that lagging indicators revenue growth. And we're close to close to getting there.

Yeah, that's a great backdrop. I want to talk about the guidance. But before we do that, I'll give you a chance to kind of unpack some of the specifics. Before we do that, I want to talk about the industry. Right. And you said commerce is going through kind of the largest structural shift it ever has, probably. And that means how consumers discover products, how merchants evaluate technology, how they allocate budget. Just kind of set the table for us with the industry shifts and kind of what you're doing to position Congress.com to get in front of us.

Yeah, I think the biggest thing I think everyone can tangibly relate to is discoveries fragmenting, primarily through the LLMs and these contextualized conversations that are leading into further refinement and discovery. And the motions by which that happens is a very different motion than what historically happened. So that's one, that's fragmentation. I think at the same time, you've got sort of an aversion to a monolithic buying cycle. I think most customers, especially merchants upmarket, are looking for optionality. They're looking for interoperability. They're looking for the ability to not be locked in to any one business model or any one system. As you're seeing how quickly all of this stuff is moving. And then at the same time, in parallel, you're seeing AI just kind of disrupt sales cycles a little bit, right? I think it's people are taking longer to make decisions. I think they have big impact. I think for us, it's a nice tailwind for some of the product we're putting out in market. But at the moment, especially around replatforming in general, particularly with B2C, the pain that most merchants are feeling is discoverability pane. It's my traffic's dropped off. I know I'm trying to be discovered in these surfaces. I need to show up with relevance and trust and into these contextualized conversations. And the motion by which to do that is a very different motion. And I would argue, and I've made this argument publicly, the value in commerce is accruing in different parts of the stack now. It always was historically a storefront business. You drive someone to a storefront, you serve up an immersive frictionless experience, you convert in a checkout and Bob's your uncle, so to speak. Now it's starting in some sort of agentic surface with a contextualized conversation that needs to refine a lot of information to serve that up contextually and with trust. And then the orchestration that happens after that is a much different model than what's historically happened. And you're going to have agents at some point buying and transacting on behalf of customers. And so this entire infrastructure has to be set up, whether it's human or it's bot, to actually work through those rails. And so what we tried to do is orient the business. Having been in the space for 20 years, I've seen this for some time now. We've really tried to orient the business around what I would call three control planes with three areas that merchants need to be worried about, their products. If the old storefront was an expression of a product catalog, which is essentially what it is, merchants need their products to be discovered and understood independent of where a customer discovers or understands them or where they're shopped. They need to create and orchestrate experiences for humans specifically on or off property. And they need to be able to transact regardless of where the customer wants to transact, whether that's on an own domain, it's through a marketplace, it's through an agentic service or whatnot. All of that has to happen in coordination so that this is frictionless throughout the process. And any part of that falls down, and the merchant typically bears the burden of that distrust, right, that return going up or calls into call centers and things like that. And so we feel like we've set this up in a way that's going to give us a massive amount of differentiation going forward with the three products. The market just hasn't caught it up yet because of this massive change that's hitting pretty much everybody in the market. And you're seeing it in real time as consumers going in and discovering things.

Yeah, it's a great answer and it's a great perspective on what's happening in the space. Let's get the number stuff out of the way up front because we alluded to it. I think it's been what's partially frustrating the stock. So you cut number, you cut 2026 guidance by 18 million bucks, equally split between two factors. Do you want to talk a little bit about kind of what was behind the guidance change?

Yeah, let me just kind of bridge the guidance from revenue and profit and some of the moving pieces underneath that. We tried our best to articulate this and make this as clear as we could in the prepared remarks of the call, but there's three or four moving parts that were happening at the same time, which I think made it a little bit confusing. So what I'd say is on a full-year basis, we reduced the midpoint of the revenue guide by $18 million, and we reduced the midpoint of profit guidance by $12.5 million. So just foot the algebra, there's a 5.5 net cost improvement, all things equal, just from the flow through from revenue to profit. So let's talk about what's going on in the spend and profit side, and there's some good news going on there after we talk about the revenue side. So at $18 million drop at the midpoint, it was roughly split between two things. One is the kind of mostly B2C-oriented softness and demand that we saw in the front half of We would have liked to have seen better new account bookings in B2C than what we saw in the front half of the year. I think that's pretty consistent with what many other players within the ecosystem are seeing as well. There's softer replatforming demand, I would say, right now than what we've seen over the course of the last few years. The other half of it was a discrete decision that we made to no longer continue focusing on some areas of partner revenue share, especially from what we would describe as more long-tail partners in our ecosystem. Maybe it's market development funds or different ways of accepting fees to get access to the customer base, which it's not that it's inherently bad revenue, but what it was doing actually was causing distraction internally, not just in what we were doing on the roadmap, but also increasing what we were having to spend on the go-to-market side, which was part of what we believe was contributing to customer acquisition costs that we didn't think was really where it needed to be long-term. So there was a little bit of a painful short-term decision. We really felt that we wanted to focus partner revenue on a smaller number of partners that have the most demonstrable effect on customer conversion, GMV growth, and those types of things, and not be trying to drive customers to adopt partner solutions that may not be best for the merchant just because we're getting revenue share from those partners. So it's roughly half and half of the $18 million. So if you switch over to the spend side, we called out that there was two other factors of cost increase that we were facing on the year that we also absorbed. So even though we're net down $5.5 million in cost structure, we're actually down in true underlying cost improvement, kind of high single digit to low double digit millions because we actually have had a lot of offsets to end up net down only five and a half, even though we've had a couple of headwinds. The two headwinds that we mentioned on the call is number one, we're facing a little bit higher hosting costs than what we've seen before. A large driver of that is the fact that the traffic patterns going to merchant websites look a little different now than they did a year ago. It's a lot more now where you can have LLMs and other agents that are actually hitting customer stores to serve up catalog information directly into search results on LLMs. we believe that we can mitigate a lot of those costs in the long run, not just in how we manage our hosting costs, but also in driving adoption of feedonomics, which allows direct connection into those LLM platforms without them having to go scraping websites to get it that way. That was a fairly small impact by comparison. The other cost element that we had was just an increase in R&D a little bit because we have a number of things that are about to come out that we wanted to continue to invest in. We're building a whole new suite of B2B agentic capabilities that allow B2B merchants to operate their stores more effectively. We continue to invest in what we're doing on storefront design and a whole bunch of other areas that we felt it was important to not take our foot off on the gas, quite frankly.

Yeah, makes sense. I want to spend some time on the areas where you're focused, where you're investing, right? Product intelligence, B2B, payments are kind of the three that I think. Hopefully I'm not missing anything. Let's start with product intelligence and feedonomics. I mean, feedonomics, I think you said in the call, you're already in 30% of the Internet Retail 1000, right? So you're serving big, complex, sophisticated customers. Talk a little bit about what that product does, why it becomes more valuable in an agentic world, and kind of what needs to happen for that product, that business line to grow even faster.

Yeah, what it does, in the simplest terms, feedonomics takes disparate data, product data, and eventually will lead into other inputs and data around brand guidelines and other unstructured pieces of data and harmonizes that data, enriches it, harmonizes it for the particular schema or the surface by which you need to send it to. Historically, that would have been an ad channel. It might have been a marketplace. It might be your own owned domain to a PDP, if you will. And obviously, very organically, this is evolving into agentic surfaces, most notably the LLM. So back to what I alluded to earlier, where the value is accruing and how brands are able to be discovered contextually within these surfaces is a result of enriched product data. Like bots can't read things that aren't enriched and mapped to the schema by which they are intended to go and read it. And so arguably that product enrichment and orchestration is probably the most valuable aspect of agentic commerce because that's driving upfront discoverability. is also going to drive orchestration throughout the rest of that customer journey. And to your point, we've been doing this with the largest retailers and brand manufacturers in the world. So you're dealing with very sophisticated, complex catalogs. Enterprise brands tend to worry about how they show up, where they show up, and who they show up next to. So the control mechanisms by which they can control the enrichment, control the syndication, control the orchestration, and control the signal by which they want to bring back to this is massively differentiated. The headwind right now has less to do with us, although we are shipping the product enrichment SKUs, both for feedonomics and big commerce here in Q3, the bigger challenge has just been the gating by the LLMs. So like OpenAI does not have, they didn't grow up in the advertising industry. They don't have a merchant center. They don't have a public API. You can imagine the logistical challenges. Microsoft and Google do. They don't. So you've got a number of different protocols, a number of different schemas, and you've got some immaturity around where a lot of the eyeballs are going. And so they're still getting their sea legs a little bit, as are the larger merchants. They're very hesitant because to participate in these capabilities, you also have to enable shopping, which takes people off surface, which is contrary to how most brands think of themselves. They like to control as much as they possibly can. And now you're going to surfaces where, again, make the argument to a merchant why it would be good for someone to buy something from Nike within an agentic surface if Nike can't control the entire experience or how it is that they're discovered. You can imagine the downstream impacts of that. So that's been a short-term headwind, but that's opening up pretty darn quickly. Maybe it happens by holiday where it's more formidable than last year, but I think certainly going forward, discovery is going to be front and center. How much people shop through these surfaces I think is debatable, although regardless of surface, I think our notion on theonomics, we want to be the agnostic, neutral, product intelligence layer, independent of ecosystem, independent of protocol, independent in surface. Essentially, merchants should have sovereignty. They should be able to participate regardless of protocol, regardless of ecosystem, regardless of surface, without being overly reliant on any one of them. And I think that's going to become more and more prominent as time goes on. They're going to resist the lock-in because the value now within commerce is in that intelligence layer. That is the tip of the spear into everything else that's going to happen in that customer journey. The fact that we're front and center in that, very encouraging. We've got to monetize it. Obviously, we've got some more product to ship, certainly, but we're in a pretty good position to go take that where we've been really active is trying to bring that down market. We launched our self-service version of Theonomics called Surface late last year. That's gone remarkably well. We're in the process of automating more of these things to widen the TAM down in the mid-market, but that's the intention. That's helpful.

And customers pay you based on the number of SKUs that they have, the number of areas to which you're syndicating the content. How does it work? I'm just trying to think about where you play today versus the impact as you go further down market.

SKUs and channels, typically, although with the LLMs, it gets a little bit more nuanced. And then with enrichment, that's going to be depending on how often someone's enriching data. Because what's going to end up happening is this full cycle. You're not just enriching lunch and syndicating. You're going to measure signal. You're going to continuously enrich based on buyer behavior and efficacy. And just round and round and round we go. So you'll see kind of a mix of different pricing models that will evolve over time. And it's why we're, you know, I don't want to say we're taking our time building everything. I mean, we've been very deliberate about it. But you've got to incorporate all of these capabilities, especially when you're delivering it for some of the most demanding retailers and brands in the world. There's a lot of governance that goes into this as well that shouldn't be treated lightly.

To expand on this a little bit, I think the way that we're approaching pricing and the way we have pricing models is evolving in a way that I think is a tailwind to the business. So BigCommerce, which is the platform product, it is monetized based on the number of orders that are going through the platform primarily, and then secondarily based on revenue share that we make on those transactions through various partnership arrangements. That's BigCommerce. Feedonomics is analogous to that in that it's the number of SKUs that are being sent to these surfaces that are having kind of the data transformations occur. It doesn't require transactions in order for us to monetize. So whether or not agentic commerce becomes as big of a boon to actual checkout as it is to discovery doesn't matter to us from a business model point of view. The more disparate all of those discovery surfaces become, the more it's a tailwind for us from a monetization perspective. And the LLM optimizations will charge a little bit more than what we do for basic ad channels, as an example. But in the investment areas that we're spending, especially right now, we're introducing lots of new products with new pricing models that we haven't had before in the business, very much focused on driving up net revenue retention. Some of that will be tied to transaction volume. Some of it will be tied to rev share. Some of it will not. So for example, in the suite of B2B agents that I described that we're building, one of them that we have in beta today is a purchase order agent that allows a B2B merchant to take an inbound PDF of a purchase order, drop it into the tool, and then the agent will auto-map and enter that order information directly into the ERP. Doesn't sound like rocket science, but actually B2B businesses spend hundreds of thousands of dollars manually copying information from fax machine, no joke, POs, and then sending them into the system. We'll monetize that on a per PO basis. So there's a lot of different ways that we're going about this that I think diversifies the pricing levers that we have within the business. But ultimately, the more a Gentic takes over in discovery, ultimately, we think the better off the business will be. Yeah. Okay.

Transition from product intelligence, let's talk a little bit about B2B. You know, you've talked about that business has stronger pipeline growth, higher win rates, better retention, more GMB. What uniquely positions big commerce in this case to win in B2B?

I think it plays more broadly to the value proposition of working with, you know, merchants with complex requirements. B2B by definition has complexity native to their challenges with manufacturers and distributors. Large complicated catalogs, multiple sources of truth on the back end, crazy amounts of account hierarchy complexity and things like that. It's not your traditional direct to consumer brand. And as a result, It's lended itself to what the product has historically provided. It's where we've gravitated. It's where we're doubling down. It's where we've got a bit more durability and a bit more of a right to win. What that hasn't necessarily mapped to in the past is what Fetanomics was historically known for, which was upmarket brand and manufacturing and retailing. So we've had kind of this really wide mix of ICPs within the organization I inherited a couple of years ago when I came in and been really trying to narrow it down, where we would argue now, the majority of our business on platform is B2B. I don't think that happened by accident. I think we bifurcated those sales teams a year and a half ago. We've been very deliberate about it. Pipeline has continued to be strong there. Win rates have been strong. NRR has been strong there. We'll continue to double down there. And I think organically, we'll continue to evolve into like-type industries that may not be labeled B2B. It might be regulated industries. It might be MLM. There's lots of life sciences. There's lots of niches that have, by definition, similar types of requirements and nuances to it that we feel is very defensible and very unique and will orient the other products to those models as well which we're deep in involved in doing as well they may have not started there we're bringing them there which was kind of the challenge here part of the transformation how do you narrow where it is you feel like you've got differentiation durability and then go commit to it invest in it and exceed against it we're in that execution phase at this point and to add some color on this too just thinking about it from the competitive lens and also just some of the numbers.

Some of the other competitors that we have in our space, I would kind of describe them as B2C first with wholesale capabilities as well. That's different from focusing on a B2B customer that then has maybe a DTC offshoot, but what they really, really need are B2B-oriented operational flows. That's really where we're focused. And when you compare one to the other, B2B is now a majority of GMV. It is now the majority of ARR. It is the majority of pipeline. It is the majority of new bookings. It has higher gross retention rates, has higher net retention rates, has higher win rates. I mean, it's a very, very healthy business. And it tends to work in a part of the market that's, in general, very, very sticky and gets less attention because they're just complicated. And there's a lot of B2C adjacencies that look like those use cases where we do very, very well from a competitive point of view. The part that makes it tricky for us as a business as we continue to focus in this direction is just the credit card mix is different. You know what I mean? The amount of volume that goes through credit cards is lower on B2B than it is in B2C. So there's like a monetization spread difference that we have to manage as we're going through and doing it that way. But there's a lot of other ways that we can handle that issue without necessarily having to just continue just to focus on credit cards. There's a lot of other ways that we can improve that monetization rate.

Are there the same discoverability challenges in B2B as there on B2C?

There are. Probably not to the same extent, but sure. There are distributors and manufacturers certainly that want to be discovered depending on their niche and who it is they're selling to or through for sure. I think B2B in general lends itself to agentic principles a bit easier than B2C. Just by definition, the nature of that business historically is taking to Daniel's fax. I saw a lot of younger people in the room today probably like, what the hell is a fax machine? Like FAX, fax. Yeah, exactly. Took me a second there. Yeah, no, a facsimile, I think. Okay, I'm with you now. I remember. I know you do. So do I, unfortunately. You just have a lot of the thesis behind a lot of B2B organizations and digitizing the first time is to eliminate a lot of the manual processes, a lot of the, you know, face-to-face, a lot of the manual FTs and drive it systematically. So I think, you know, a lot of AI is data mapping and things like that. And oftentimes these guys grow inorganically. they buy their way. And with that, they inherit legacy tech, legacy sources of truth and things like that. So yes, I think it plays really well. I think the enrichment side of it will be materially different. I don't think these guys are enriching their data as often as the B2C sort of cohort. So that would probably be a little bit different. But as far as the benefits and the tailwinds, yeah, I think it plays nicely into everything else we're doing. Okay.

Shifting to the third of the drivers we talked about, payments. You alluded to some of the stuff that we're thinking about on the B2B side with respect to payments. Focusing on the B2C side, you guys have rolled out a branded payments offering. I think you said it was tracking 30% ahead of internal targets. Just talk a little bit about what you've learned from the rollout and kind of how investors should think about potential impacts of the model over time.

What we've learned from the rollout is it confirmed what our hypothesis was in that small and medium customers are very, very happy when they are first launching to go with a branded solution if it is more tightly integrated into the product. I don't think that that's an earth-shaking discovery. I mean, I think a lot of other folks in our space have known that for a while. I wish we would have done this earlier, to be quite frank. So I think that that confirmed all the hypotheses, which is good. When I think about the relative mix and what it means from the numbers point of view, today it is still fundamentally a referral model booked on a net revenue basis. We have a little higher spreads than we did before because you essentially have a buy and a sell rate. We're effectively acting as a reseller of a PayPal solution today. Where might this go in the future? We are evaluating whether or not you go to a full PSP model or somewhere in between. If we do that, that comes with some different costs up front as we build that out. We have not made a decision to do that. If we go that direction, we'll talk very openly about that with investors so they understand what to expect and how that would come along. But I think more importantly than the accounting treatment or any of that, I think the key really is it improves retention. It improves stickiness when you are not only the provider of the transaction layer, but also the data layer and also the payments flow. So competitors have demonstrated this, and I think sometimes you can learn from those things, and it's a good thing. We are going to continue to be very, very open for our merchants, though. And I think this is what's different, and I think it's important to call this out. We are not trying to funnel all merchants to our solution. What we are trying to say to our merchants is, look, there's 20 or so different providers that we have seen have higher conversion rates, GMV rates. One may be best for you in Europe. Another may be different for you in Mexico or Latin America or what you're doing in North America. We would love for merchants to use the branded solution where it makes sense. But if you are in one of our, we call them a sales assist plan. If you're in a custom negotiated agreement, you can use whoever you want with no fee structure whatsoever. Because, again, if you go back to the type of merchants where we thrive, these are customers that have complexity. And they have different needs in different areas. And we are always going to continue to be customer first in that respect. And they're free to use whomever they want. And how the model will evolve over time, we think there's a lot of additional monetization that we can capture in fintech in general. This is, I'd say, the first step, but an early step.

We're bumping up on time. I want to ask you one question on margins and then maybe a closing message from you, Travis. On the margin side, you guys have done an exceptional job of driving incremental profitability in the business in a growth-constrained environment while still making investments that we just talked about. We went through three big categories. is how much of a recovering growth do we need to see for margins to continue to go higher, right? Like, where's the ceiling that you can take margins in a growth-constrained environment? Because I think, look, where you are from a profitability standpoint lends support to the stock, right? Keep pushing margins higher. That's interesting if the growth story doesn't play out, right? So just help me think.

Yeah, I would just say the way that we're thinking of, yeah, the way I would say it this way, we need to be growing faster based on the amount that we're spending. There's two ways of going about that. I think one is we need to continue investing in R&D, period. We have a very rich product roadmap that's slated to release in the back half of the year. We don't want to make any decision that takes dollars away from the product, not only for existing customers, but in opening up additional areas where we could gain market share with other areas, particularly in the areas that Travis highlighted. So that's kind of priority one, in my view. Priority two is we need to be driving better growth based on what we're spending in sales and marketing, and that's both an LTV issue and a cost of acquisition issue. We're focused on both. I think from what we're doing in cost of revenue, we can get a lot better scale there. G&A, I think we get a lot better scale. And there's a lot of costs that we could take out of the business if we came to the conclusion alongside the board that we didn't think that there was good line of sight to unlocking a better growth rate. We believe that there is still a line of sight to opening up a much better growth rate, which is ultimately going to generate a lot better long-term shareholder returns. than settling for low single-digit growth, but having a tremendously higher cash flow in the near term. But if we don't get to a place where we're throwing off better growth, then definitely that would be the path we're going to go because we think it would be right for shareholders. We just don't think we're there just yet. You want to talk about areas of focus? I think we should ask questions.

I was just going to say, hopefully we do this again in a year, celebrating all the progress. In the interim, what are the one or two things you think investors should really be focused on that says, hey, we're on the right track here?

Yeah, I think I didn't say it on the call last week, but I'll allude to it here. This is an evolution, not a revolution. We're not in need of another transformation. We've been in the transformation for two years. This is about execution at this point. So this is all aligned with what the plan's been from day one. The way I would look at us, to Daniel's point, we're shipping a lot of product in the back half of the year. I would look at NRR as a metric. I think that's a healthy metric and barometer by which to measure us against. And again, that might fluctuate a little bit. it's a big number to turn, but I think we've been pretty transparent about that being an important metric. I think some of the growth vectors I've alluded to here, a lot of new product that we're shipping. We've set up the ability to cross-sell, up-sell. So much focus on self-service and product-led growth, which never exists in the company before two years ago, which is really exciting. And I think if we can do that at the same time, running the company from a fiscally responsible perspective, those would be the three inputs I would watch and certainly ones that I'm watching internally. We know this is a show-me story. We're not going to get up here and hand wave. We know we've got to go out and execute. We think we've done a really nice job foundationally. It's a big business, and it's complicated in many regards, and the shift in the space is pretty material for everybody. What we've tried to do is run the company as responsibly as possible as we orient it to areas we feel are defensible or durable or differentiating. And you catch the tailwind once you launch some of these things and you return to growth. And we'll be having a different story at that point. These calls will be a lot more fun than they were last week, certainly. But it is what it is. I understand the reaction, but we feel good about the business. We feel good about the trajectory. We feel good about where we are. I would love it to happen faster, but some of this is in our control and some of it's not, but we're doing the best we can.

Very good. I appreciate the transparency I appreciate the support and you guys being here and I look forward to keeping tabs on progress so that's good