Thank you for standing by. My name is Gail, and I will be your conference operator today. At this time, I'd like to welcome everyone to Commerce.com's first quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question- and- answer session. If you would like to ask a question during that time, simply press Star one on your telephone keypad. If you would like to withdraw your question, kindly press Star one again. It is now my pleasure to turn today's call over to Tyler Duncan, Senior Vice President of Finance and Investor Relations. Please go ahead.
Good morning, and welcome to Commerce.com'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.com'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 of 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.
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 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 is tied to owning the destination and the transaction. That model isn't wrong. It is 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. 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 three 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 a 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 serviced. 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. 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. 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 this 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 three 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 the 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 with where commerce is going. Let me walk through what we accomplished in Q1. At launch, Commerce was one of only two 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 pre-built agentic operating system, which incorporates Commerce's capabilities natively on GCP and GCEX, handling discovery, personalization, checkout, and fulfillment end-to-end. Agentic Commerce is not a notional product launch on our roadmap. It is already running. Beyond Google, our agentic checkout is now live on Perplexity, Copilot, and Meta via our PayPal Store Sync integration. When a shopper completes a 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 their 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. BigCommerce 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. 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 checkout 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 have 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 a defined contract duration and terms. Customers formerly 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 12 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 zero 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.
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-$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-$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 four 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. We ended Q1 with approximately $157 million in 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. We delivered that result a quarter early in Q1. Our 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 & Company 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 four 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 payment mix. 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%- 95.4%.
Driving sustained improvement in NRR is one of the most important operational priorities that we have as a company. 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.
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%-14%. On a rule of 40 basis, our non-GAAP guidance implies combined growth plus margin performance of approximately 11%-22%, depending on how we execute within our ranges across the year. Let me close with the core reasons why we believe Commerce.com is well- positioned to deliver long-term value for our shareholders. We facilitated $32.7 billion in GMV over the prior four 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. 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. We are executing on the product investment, 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.
Okay, your first question comes from the line of DJ Hynes with Canaccord. Please go ahead.
Hey, good morning, guys. Thank you. 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, you know, continues to mature.
Hey, good morning. 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. 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. 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 to Daniel as it relates to the financial aspects of it.
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 signups, where that's really kind of the default in the onboarding flow for small businesses and even maybe medium-sized businesses as well. I think another success criterion to really pay attention to is kind of what the relative retention rate and GMV growth that those merchants are seeing. The number one 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 will 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.
Yeah, 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?
Gotcha. Yeah, appreciate the question. Listen, the board and management teams are focused on maximizing value, obviously we're gonna 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. As we've stated, quite publicly and multiple times, we don't believe this warrants any further engagement.
Yeah, I'll address the shareholder rights plan. The board determined that adopting a limited duration rights plan is the right, you know, next step to protect stockholder interest, 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 stock or 20% if it's for passive investors.
The intent of that is just to discourage accumulations of shares and control without protections for stockholders, and provide the board time to evaluate proposals in kind of a prudent and careful manner. Ultimately, we think it's about making sure that shareholders are treated equitably. You know, as Travis said, you know, 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.
Yep, very clear. Thank you, guys.
You bet.
Your next question comes from the line of Ken Wong with Oppenheimer. Your line is open.
Thank you for taking my question. I wanted to ask about the pricing changes to BigCommerce subscription plans. You know, when should we expect the impact of non-enterprise customers to hit the top line? For the enterprise customers, what's the path to potentially true up those contracts?
Ken, thanks for asking this question. Let me take a little bit of time to kind of walk through what this is. 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 payment 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's no charge that they receive that's incremental, no matter what payment provider that they choose. What we are wanting to do, though, for the other three 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. Customers have complete, you know, freedom to choose among a list of, I think, like, 20 different payment providers, including BigCommerce Payments in that list, with no fee structure whatsoever. 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'll take effect in June when we make those changes. We've also made some minor changes to service offerings in areas like that. You know, Travis has talked a lot in the past about the fact that we wanna 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 wanna use, but we'd like to, you know, try to concentrate volume a little bit more on a smaller list. It's, you know, 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 1, where we're saying you can use up to 20 with no fee whatsoever, no matter what size the customer is.
Understood. Thanks for the clarity there. Second, just wanted to touch on guidance. Very solid first quarter, you know, reiterated the full year, but 2Q does tick down sequentially. Can you just walk us through the seasonal dynamics there?
Yeah, there's just a small timing difference, actually. We expected originally to ship BC Payments in Q2; we had some revenue associated with the go-live on that with a partner. We actually shipped it earlier than we expected; it actually went out the door at the end of March, which is a good thing. We end up with a little bit of extra revenue in Q1 associated with that which we had originally anticipated actually to come through in Q2. Once you account for that timing difference, 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.
All right. Thank you very much.
Your next question comes from the line of Brian Peterson with Raymond James. Please go ahead.
Thanks, guys, for taking the question. Maybe a follow-up to Ken's, but more on the margin side. Daniel, if we think about the investments, were there any timing differences or margin aspects as we're thinking about the first quarter outperformance and how we're thinking about margins for the rest of the year?
Nothing major. I would say Q2 sequentially always 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 occur at the end of Q1, so Q2 is the first time that we actually see, like, the full effect of, like, merit increases 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, you know that issue. The profit is also affected a little bit in Q2 by the timing difference I mentioned on the revenue side. Finally, we said on our last call that we were planning to step up investments in R&D on a kind of like a cash investment basis, about 30% on a full- year basis.
We're continuing to ramp up engineering hiring. We're kind of almost to full hiring that we intended behind that reinvestment, but, you know, we're seeing a little bit more carrying cost on that step up, 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, you know, 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. 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 Hess coming on this. I'd say I am very encouraged by what I'm seeing from a product quality and velocity behind that investment.
Daniel, that's great to hear. Maybe Travis, just a follow-up for you. I know it's kind of early days on agentic commerce, but, you know, I think there's some debate in the investment community about whether that's 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. Thanks, guys.
It's a great question. I think it depends on the model. I think in my prepared remarks, I talked about how our neutrality was deliberate and modular in nature, knowing that, you know, 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. 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 in a lot of ERP upgrades and implementations, where a lot of that stuff was done, you know, 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 gonna accelerate agentic in that space. Generally speaking, I think people want optionality.
I think partnering with the best of the best in the market around payment providers, around hyperscalers, around other ISVs and partners, and controlling, you know, 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 this really durable and really differentiated. That's my opinion on it. I would expect it to accelerate mostly upmarket. Think large retail, think large global brand and manufacturers, folks that are most directly impacted by the traffic drop off.
I think that will gradually ease into the mid-market and eventually become reasonably relevant for SMB. Really depends on the SMB, but I think you're gonna see a big push on enterprise B2B here sooner rather than later. They're just not obvious use cases because most of that stuff's behind logins, and the average general human being doesn't necessarily experience that on a day-to-day basis.
Thanks, man.
Once again, if you would like to ask a question, please press star, then followed by one on your telephone keypad. Your next question comes from the line of Scott Berg with Needham. Your line is open.
Hi, everyone. Nice quarter, and thanks for taking my questions. I guess, Travis, I just wanted to start off, you know, 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 2026 here relative to maybe the last couple of years in terms of the activity that might be out in the end market?
Yeah, we're seeing similar trends. Scott, it's a great question. I've been pretty public about this, too. B2B has been a platform business for us; 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, has a positive and an indirect negative impact. The positive is that it brings everything front and center, and I think there's a lot of prioritizations around optimizing B2B, particularly around agentic. What I mean by that is for us specifically, you know, Feedonomics and the data layer. Think of what Feedonomics is doing around product intelligence and enrichment for B2C.
Think of how massively and tangibly relative that is in a B2B environment. You've got massive catalogs, distributed data. A lot of those guys grow organically, 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. We've also, through the release of our MCP tooling recently, it's going to make our merchant stores for B2B agents addressable. Again, you've got all these new use cases that are gonna 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.
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 alleging that it's impacted the pipeline in this capacity at all. It has not. I'm just putting my services hat back on and being objective about there's a sequencing element to this. 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 either forced upgrades or reimplementations of ERP. I think time will tell, but I'm materially encouraged with what's going on in that space in particular.
Understood. Helpful. Then, Daniel, as we think about the model in the next couple of years, I know payments are early and, at least with the new payment platform, we certainly don't have much for expectations and contribution this year. How does it impact gross margins as we start thinking about maybe calendar 2027 and 2028? Is the new payments infrastructure accretive to your current gross margin profile, or does it create a, maybe some headwinds there?
It's actually accretive. 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. It's still fundamentally the same economic model where we had before. 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 would 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, you know, 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 timeline or a roadmap 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.
I don't, I don't see this being dilutive anytime soon, and if it does, it would come with, you know, favorable revenue treatment anyway. If and when we decide to take a step in that direction, obviously, we would talk about that on the earnings call so that everybody can build that into their models. For now, I think you can just model it as being accretive and a tailwind in that respect. You know, if that changes in the future, we'll talk about it then.
Understood. Thank you.
Thank you, everyone, and that concludes our Q&A session for today. I will now turn the call back over to Travis Hess.
I wanna 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, we look forward to seeing all of you in the interim and next quarter's call.