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Ladies and gentlemen, thank you for standing by, and welcome to the BigCommerce first quarter 2025 earnings call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your first speaker today, Tyler Duncan, Vice President, Finance and Investor Relations. You may begin.

Good morning, and welcome to BigCommerce's first quarter 2025 earnings call. We will be discussing the results announced in our press release issued before today's market open. With me are BigCommerce's Chief Executive Officer, Travis Hess, and Chief Financial 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 2025 and the full-year 2025. 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 measures, 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.bigcommerce.com. With that, let me turn the call over to Travis.

Thanks, Tyler, good morning, everyone, and thank you for joining us today. I’ll open my remarks today by providing an update on our first quarter results, then I’ll finish by outlining our progress against the key initiatives driving our operational transformation in 2025. For those of you new to our business, we offer three core owned-products in our portfolio today, our flagship commerce platform, BigCommerce, our AI-based product data feed management platform, Feedonomics, and our brand commerce site builder and visual editor, Makeswift. Our 2025 transformation plans touch each of those core products. As I outlined last quarter, I’ve set three strategic priorities for the business in 2025. Number one, accelerating revenue growth profitably. Number two, disciplined and focused operational execution. Number three, execution of our go-to-market transformation plan. I’m pleased to report that Q1 reflects a solid start. Let’s start with the numbers. In Q1, we delivered non-GAAP operating income of $7.6 million, a 530-basis point margin improvement year-over-year. Annual revenue run-rate, or ARR, reached $351 million, a year-over-year improvement of 3%. Revenue reached $82.4 million, growing 3% year-over-year, and operating cash flow came in at approximately $400,000, an improvement of nearly $4 million year-over-year. We delivered revenue within our previously reported guidance range and profitability well above the high side of our range. Even still, these growth rates do not reflect the potential of this business, and accelerating growth is our top priority. We see encouraging signs of progress behind our go-to-market transformation efforts. We reduced headcount by approximately 10% in Q4, and we reinvested savings to roughly double our quota-carrying sales capacity, which is now substantially complete. We saw a strong increase in pipeline across Q1 behind this effort, B2B in particular. To be clear, we still expect 2025 to be challenging, but the opportunity that lies ahead of us is tremendous. We are continuing to act quickly and boldly to transform the company. This type of change is not easy. Current macroeconomic uncertainty adds complexity, which Daniel will discuss in more detail shortly. Regardless, we are focused on what we can control, and I see solid leading indicators that the decisive actions we have taken are progressing as planned. I want to provide an update on four key areas of focus. One, recruiting top leaders with SaaS and commerce experience. Two, investing in our core offerings in B2C and B2B. Three, creating new revenue growth opportunities through key initiatives we introduced at our recent Investor Day. And lastly, four, driving value to our customers and shareholders through AI. I’ll start with recent leadership changes that strengthen our focus on product and innovation. Following the departure of our former CTO, Marcus Groff, our Senior Vice President of Engineering, has assumed full leadership of our engineering organization. Marcus joined BigCommerce in January and brings a wealth of experience from Amazon, Salesforce Commerce Cloud, and Demandware. In addition, we recently welcomed Vipul Shah as our new Chief Product Officer. Vipul joined us in April and brings an extensive background of driving product strategy and innovation, with prior leadership roles at Google, JPMorgan, and PayPal, among others. We’re excited to have both Marcus and Vipul in these critical roles, both of which now report directly to me. I’m confident they will further elevate our product and engineering capabilities. Our senior leadership team is now in place, and I believe we have the exact right team of experienced commerce and SaaS professionals to lead our organization forward. Second, we are continuing to invest in both B2B and B2C. B2B continues to grow as a percentage of our overall business, underscoring our leadership in digital commerce for manufacturers, distributors, and wholesalers. We welcomed onto our platform industry leaders such as Superfeet and Van De Velde Packaging, while also celebrating standout launches from Sealy Tools and ISG Enterprises. We also delivered new capabilities tailored to complex B2B needs. In Q1, we released two major enhancements, multi-company hierarchy support, and an upgraded configure-price-quote tool. These features help large enterprises manage complex organizational structures and quoting workflows more efficiently. For example, our new configure-price-quote system reduces the steps required to respond to a quote request by up to 75%. This is creating efficiencies by freeing up time for teams to focus on driving revenue. In B2C, we are driving focus and discipline on our core target customers, including our strategic focus on businesses outside the traditional fashion, beauty, and apparel verticals traditionally prioritized by legacy platforms. Our momentum is particularly strong with brands in underserved, operationally complex categories such as direct selling, regulated industries, home décor, and others. These complex use cases will remain a strategic priority for our business. We proudly celebrated the successful launch of EuroOptic, a leading online retailer specializing in high-quality sporting optics, ensuring compliance with strict regulatory requirements. We also launched Kittery Trading Post, a prominent retailer dedicated to outdoor activities, hunting, and adventure gear. UK-based fashion brand EGO, known for its trendy women’s footwear, clothing, and accessories, also faced unique challenges with its legacy platform. They have now successfully launched several international storefronts on a composable architecture with BigCommerce. Additionally, we welcomed exciting new brands such as KONG, a trusted pet brand known for its durable toys and treats. Third, we are on track to deliver the initiatives we announced at our recent Investor Day. We have a big opportunity to drive growth by more cost-effectively cross-selling Feedonomics to the tens of thousands of customers on the BigCommerce platform. This initiative is in beta stage with select customers now, and a broader rollout with new paid features will be available to existing customers ahead of the holiday season. We are building a self-serve version of Makeswift into the BigCommerce platform, with key product milestones and paid features expected late this year or early next year. This will deliver a step-change improvement in storefront design capabilities to our customer base and create new upsell opportunities behind paid features as well. As part of our bundling strategy, we announced our intention to partner with one of the leading providers of platform performance and error monitoring, Noibu, to help customers maximize conversion and revenue, with availability in the second half of the year. Several additional bundle offerings are currently in development. These product bundles aim to simplify the commercial requirements of customers’ adoption of best-in-breed commerce architectures. This will build stronger relationships with our partners while creating new revenue opportunities with our customers. Our new BigCommerce Payments offering remains on track for an early 2026 launch, which will be an optional payments offering for small and medium-sized customers looking for a streamlined, integrated offering with strong payments processing rates. This offering aims to improve our overall monetization and retention rates in the business. Finally, AI remains a key area of focus. We are leveraging AI to deliver major improvements to sales and support efficiency. We have also built internal tools to design tailored architectural recommendations to customers. We’ve also automated developer docs and onboarding operational tasks, while partnerships with OpenAI, Gemini, and Forethought drive agility and innovation. Feedonomics continues to lead, embedding AI into workflows to improve data matching and channel performance. More AI-driven enhancements are coming across CX, partner integrations, and merchant enablement. For our customers, leveraging AI advancements in commerce isn’t just about having product and inventory data. It’s about having that data optimized for the right medium and use cases. This is Feedonomics’ sweet spot, powering product data syndication for over 30% of the Internet Retailer 1000. As tools like OpenAI and Perplexity drive the next wave of agentic shopping, we're making sure our customers are in a position to lead while driving frictionless customer experiences. We're actively partnering with the platforms shaping this space, so our customers’ products are not only easy to find, but easy to buy. Looking ahead, we remain focused on creating measurable value for our customers and our shareholders. The changes we’ve made are working, and we believe they set the foundation for renewed growth in the quarters to come. We’re encouraged by our progress, but we know we still have work to do. As we said at our Investor Day, this is a crucial transformation year for the business. We have the leadership team in place to execute our plans. We’re focused on customer outcomes, not just features. We’re aligning everything we do to efficient revenue growth, and we remain confident in our ability to accelerate performance as the year progresses. With that, I’ll hand it over to Daniel to walk through the financials.

Thanks, Travis. Before we dive into my commentary on the quarter, I want to highlight a few key areas that demonstrate our market position and improving financial profile. BigCommerce serves 5,825 enterprise accounts, alongside tens of thousands of small business accounts. ARR is $351 million as of the end of Q1 2025, a 3% increase year-over-year, while average revenue per enterprise account finished just over $45,000, a 9% increase year-over-year. Our non-GAAP gross margin strengthened to 80.3%, up 240 basis points year-over-year, and non-GAAP operating income margin finished Q1 at 9.2%, up 530 basis points from Q1 2024, and 1,820 basis points from Q1 2023. We closed Q1 2025 with a solid balance sheet, including $121.9 million in cash, cash equivalents, and marketable securities. Our operating efficiency continues to improve, with quarterly operating cash flow of approximately $400,000, up $3.8 million from Q1 2024, and up $21.2 million from Q1 2023. We have reduced our net debt position to $32.2 million, a 59% decrease year-over-year, with maturities of approximately $4 million due in 2026, and $150 million due in 2028. As of the end of Q1, we had approximately 78.8 million common shares outstanding, and 80.5 million shares of fully diluted shares outstanding, including unvested shares of restricted stock units, options, and our convertible notes, as outlined in our latest Form 10-Q. We are making measurable progress on our go-to-market transformation. Our realigned sales organization is now fully structured around our B2B, B2C, and small business offerings. Hiring to double our quota-carrying sales capacity is substantially complete, and early signs from pipeline conversion rates are encouraging. As Travis outlined previously, we are on track for the key initiatives we discussed in our recent Investor Day, including the launch of a BigCommerce Payments solution, launching self-serve versions of Feedonomics and Makeswift to our existing platform customers, and building bundled solutions with key partners to make it easy for customers to design and deploy solutions with leading technology partners in our industry. These initiatives are key to our wallet share expansion goals and a focus area for Q2 and beyond. Before turning to guidance, I want to briefly address recent developments related to global trade and tariffs. While BigCommerce is not directly involved in the manufacturing or physical movement of goods, many of our customers operate across borders and within affected supply chains. We are closely monitoring how shifting trade policies and increased tariffs may influence our customers’ operating environments, particularly for international sellers and brands sourcing from impacted regions. Our most direct exposure to the potential impacts of macroeconomic uncertainty and change in this area would be in partner and services revenue, or PSR, which constitutes approximately 25% of our total revenues and is driven by revenue share on transaction volumes from various technology partners. Potential effects on business sentiment may affect pipeline generation and conversion rates over time as well. While we have not yet seen a material impact from increasing macroeconomic uncertainty on our performance or pipeline, we are maintaining a cautious view and partnering with our customers to provide thoughtful support and flexible solutions in this environment. Let me transition to related impact on guidance. Broadly speaking, we believe the current environment increases the potential range of revenue growth results we may see in 2025. To be clear, we built plans expecting 2025 to be a challenging year as we execute transformational change. We are encouraged by results so far, and we see potential upside to our previous revenue growth guidance. That said, we also believe increased macroeconomic uncertainty could have a downside impact on growth expectations as well. For Q2, we expect revenue between $82.5 million and $83.5 million, and non-GAAP operating income between $2.7 million and $3.7 million. For the full year 2025, we are widening the revenue guidance range to $335.1 million to $351.1 million to reflect both the underlying strength we continue to see in the business on the high end and macroeconomic uncertainty’s potential downside on the low end. We expect non-GAAP operating income between $16 million and $28 million for the full year. From a profit perspective, we are managing spending carefully to account for macroeconomic risk and also to maintain optionality to reinvest in the business throughout the year to drive growth. We believe this balanced guidance adjustment reasonably represents the range of possible outcomes at this time, given the dynamic economic environment. Our commitment to operational discipline remains unchanged. We will continue to invest in high-ROI areas that deliver durable value, specifically our sales capacity expansion, AI innovation initiatives, and core product initiatives to fuel growth in the business. We have an experienced leadership team that’s excited to drive growth and carefully manage our transformation amidst an uncertain environment. We will continue to provide transparent updates throughout the year as conditions change as well. In closing, we’re pleased with our Q1 performance and encouraged by the early momentum in our business transformation efforts. We remain committed to delivering profitable, sustainable growth that creates lasting value for our shareholders. We look forward to sharing further progress with you in the quarters ahead. With that, Travis and I are happy to take your questions. Operator?

[Operator instructions] The first question today comes from Raimo Lenschow with Barclays. Please go ahead.

Perfect. Thank you, and congrats from a - of good solid quarter here. I was really encouraged on the signs that you kind of mentioned in terms of early progress. Can you kind of discuss that in a little bit more in detail in terms of what you mentioned here on the pipeline side, et cetera? And then also maybe as part of that, put it into context in terms of obviously you're trying to control the controllable. There's tariffs coming in there. Like, how do you kind of get visibility on either end then? Thank you.

So, great question. Yes, as far as encouraging signs, I mean, the most notable is obviously size of pipeline sequentially, quarter-over-quarter and year-over-year. And as I highlighted in the opening remarks, we've seen that particularly within B2B, which has been consistent momentum-wise in what we've seen in net new bookings over the last 12 months. So, that's probably the largest indicator. Certainly, seating of the larger leadership team, which just concluded over the last couple of weeks, is also obviously an internal sign for us, but from a productivity perspective, having folks in place and aligned and operating in seat obviously is something internally that you feel day in and day out. And then on the tariff side, I'll let Daniel add color. Certainly, it's hard. We're keeping a close eye on the macros certainly, and it's hard to understand the supply chains of many of our customers. Some may presume to be more obvious than others. We've not seen obvious tangible signs yet where we feel comfortable pining on it, but certainly, are very consciously aware that that there's some exposure there given some of the macro trends.

And Daniel, if you think about it, like how do you think about your investment levels in terms of cost, et cetera, as macro changes one way or the other? How flexible are you there? Thank you.

I would say, when you look at where we are on the guidance range on non-GAAP operating income for the year, we widened that a little bit compared to where we were before. I'd say there's specific reasons for that. It's because there's really opportunity that we see in the business to invest in the areas we see specifically related to AI, what that can mean for commerce in particular. We want to have dry powder available in order to capitalize on those opportunities throughout the year. And it's moving and changing really quickly in exciting ways, which I'm sure we'll get to later on in Q&A. So, part one is, we want to make sure that we have spending available to make bets that can pay off we think in a big way and accelerating growth in the medium term. But on the flip side, we're also going to be very cautious about how we're spending money so that we protect margins in a reasonable way with the amount of uncertainty that we have right now in the market. I mean, and as we said in the prepared marks, we haven't seen a lot of signs of this yet in the numbers, so to speak, in terms of what we saw up until now and either GMV or what we're seeing in terms of pipeline build. We've seen good signs there actually, but I think we'd be relatively foolish if we didn't consider that to be a downside risk at this point. So, we felt it was prudent to widen our range to account for that and just err on the side of transparency and authenticity with our investors throughout the year what we see. There's a lot still up in the air and we'll just have to see where it goes.

Perfect. Thank you.

The next question comes from Ken Wong with Oppenheimer. Please go ahead.

Great. Thanks for taking my question. Travis, it sounds like pipelines are holding in fine. As you engage customers this quarter, April, May, any color in terms of how those conversations, how close rates trended from kind of January through May to help help us get a sense for how the exit was starting to look?

Yes, thanks for the question, Ken. Good one. Nothing worth calling out. One of the big trends that we've seen, obviously, particularly in the B2C side, we're in much larger deals. So, we've seen probably a half dozen or so big global deals in the mix over the last couple of months. Obviously, those deals have different dynamics to them. They're typically contractually obligated to legacy partners with timeframes and things like that. So, we would expect a slower sort of conversion timeframe on those larger ones. So, we're seeing that in a subset of the pipeline. That's probably been the most notable change we've seen. But to what Daniel kind of alluded to earlier, if you didn't read the press and pay attention to what was going on in the macro, there's nothing obvious in the business that jumps out where you're like, wow, there's uncertainty or any sort of perceived volatility here. Pipeline is probably better than expected, but given the investments we've made there and the strategy this year, I wouldn't say that we're surprised by that. It was an expected outcome. We're pleased to see it. Everything else is sort of as normal, but hard to ignore some of the volatility and some of the presumed headwinds folks might have with supply chains within tariff-impacted territories.

Got it. Perfect. Thanks for the color. And Daniel, definitely - like understandable on the widening of the range. Positively surprised that you guys actually raised the upper end. As we think about kind of how to get there, is it simply a matter of kind of status quo and you would see the upper end or does something need to happen to get to that upper end?

I would say there's some things that need to not happen, and there's some things that need to happen. The things that need to not happen is a recessionary shift or inflationary pressures as a result of change in tariff policy. If that really starts to manifest itself, then I think it would be challenging for anybody that's moving goods, particularly with concentrated supply chains, particularly from China. And so, I think if that really plays itself out, that creates a headwind that would be difficult. And what we talked about this at our Investor Day, we expected the year to be challenging. We did not bake in some sort of macroeconomic tailwind into our assumptions when we built our financial plans for the year. So, we just needed to not become a headwind. To get to the high end of the range, I'd say it's two things. One, we need to continue to see building pipeline behind the investments that we've made in sales and marketing. Number two, we want to see some really good returns on some step ups that we plan on increasing on marketing spend, particularly in Q2 and Q3 behind some of the branding work that we're doing. And number three, we need to see those play out in good conversion rates on what we're doing, particularly in the area of B2B. So, look, as we thought about the guidance and the range, it's not all downside. I mean, I think it's wise and prudent to account for that because that's frankly out of our control, but largely speaking, when we look at where we are versus our internal plans, we're kind of where we expected to be at this point. We thought this was going to be a challenging year. We have a lot of change that we're metabolizing, that we're excited about, but so far, so good. But there's just a lot of uncertainty that I would say has even escalated since the Investor Day due to factors outside of our control. We wanted to be transparent and prudent and account for that in our guidance range.

Great. Thank you, Daniel.

Next question comes from Koji Ikeda with Bank of America. Please go ahead.

Yes. Hey, good morning. Thanks so much for taking the questions. I wanted to ask a question on payments. And so, really great to hear the payment strategy is on track here for a 2026 launch. But I also saw a press release earlier from you guys about Klarna becoming a global preferred payments partner. And so, the question here is how do you think about your guys' plan for pushing payment options in 2025 to your customers and partners, knowing that a new payment offering is coming next year?

Yes, no, great question. Listen, I think directionally, we want to provide optionality to customers. We've been pretty open about this in the technical approach and strategic approach, we want to be able to bring best-in-class capabilities to customers across all three of our core offerings. That being said, Klarna, obviously a longstanding buy now pay later partner with us. They've moved to a preferred partner status, and we know statistically BigCommerce customers that use buy now pay later, have higher conversion rates. That’s certainly goodness that we're going to evangelize out to our customer base where that makes sense. On the BC payment side, the thesis there is we believe that there is a large subset of customers that would benefit from a BC - an ABC payment option. We've talked timeframe on that. Really now it's targeted really early next year for optimized customer experience, something that's easy and also lucrative for our customers that will be optional. Certainly, we won't force them into that, that could garner them a better experience and better rates. So, I view them to be complementary to one another, not competitive in nature. And as we see other financial vehicles that would benefit our install base, certainly we will continue to roll that out in short order as well.

Got it. Thank you, Travis. And maybe a follow up here for you or Daniel. I appreciate all the color in the prepared remarks about guidance and PSR and the current macro. I was also wondering on how you guys are planning to treat potential tier downgrades this year, just knowing that GMV is a component of subscription tiers. And so, how do you think about it if GMV is not reaching those certain thresholds and downgrades could potentially happen with your clients?

I think we need to see, again, how it plays out in the macro. For folks on the call that may be new to us or unfamiliar with how we handle pricing, a little bit of background may be helpful here because it's different than how other folks in our space do this. What's sometimes common among some of our larger competitors is their pricing is basis points on GMV. And there's advantages to that model. There's downsides to that model. It tends to make pricing more elastic to short-term sudden changes in volumes, consumer volumes in particular. We saw this in the pandemic. Hope it does not happen to the economy now, but that is not how we do pricing. The way that we do pricing is based on order volume and it's sold in blocks and calculated on a trailing 12-month basis. So, when there's sudden changes in order volumes, to your point, we could see downgrade pressure on pricing, but it's more moderated in how it hits us and how fast it hits us. Now, that's good for us as a company because it makes our revenue line item, I would argue, perhaps a little bit more durable and less prone to sudden shocks and swings, but also makes pricing more predictable for our customers because they don't see month to month changes in their pricing. If we do see recessionary pressures that are sustained, then over time that could definitely contribute to downgrade pressure. We have factored that into our guidance and how we thought about the range. At this point, I think we're in a wait-and-see mode. We said very deliberately in the prepared remarks, we think that range reflects what we see right now. But we need to see how this plays out. If I knew how to predict what was going to happen in this area of the macro economy, there's a lot of other ways that I could be trading options and making money different from what I do today.

Got it. Thank you.

The next question comes from David Hynes with Canaccord. Please go ahead.

Hey guys. Travis, congrats on making quite a bit of headway on the sales force growth. Nice to see the investments largely complete there. I'd be curious to get some commentary on kind of the profile and the experience of the reps that you've added. And how long do you think it will take to tell if the new reps you've onboarded are a good fit for BigCommerce?

Yes, we've got - that's a great question, David. Listen, the profile of reps obviously varies based on the line of business and the market. Clearly, I've been pretty public in hedging towards more experienced folks having come out of commerce myself in 20 years. I think the market is such that, yes, there are aspects of it. They're commoditized around features and functions. It's now very business outcome-oriented. And I think experience is an added advantage as we kind of navigate the proliferation of channels and the inventory orchestration and distribution in the back office and lots of really interesting things that are happening with AI in particular. So, that's been - on the enterprise side, there's a lot of - the good news is, there's a lot of talent on the Street. So, a lot of experienced folks have been in this space for a long time. There's been a couple of trip ups with some of our competitors, so that's fortuitously made some other folks available that align to to our value proposition. That's been the model there. We've also been intentional about bringing on younger talent too, particularly in our mid-market ranks as well. We feel like there's a really interesting opportunity to incubate younger talent and scale in more efficient ways, combined with a lot of stuff we've been doing with AI around enablement and training. It's, it's enabled us to onboard folks faster and more effectively than we probably would've had in the past. As far as the onboarding, again, I would expect an experienced rep to onboard and hit stride faster than maybe a less experienced rep. Daniel has quite credibly built all of this into kind of the model as we've staggered folks, but generally speaking, we look at roughly a six-month tops onboarding for folks to be kind of in-market in their accounts. It depends on the role, certainly in the market, but yes, I think generally speaking that's been the approach on the new business front, if that's helpful.

Yep. No, it is. Thank you. And then Daniel, maybe one for you. Look, I understand kind of the optimism, the progress with some of the changes that you guys have implemented, but I look at the number of enterprise accounts and it's declined again more significantly in Q1. It's five straight quarters of kind of sequential declines. For us to see a re-acceleration revenue growth, do we need to see the number of enterprise accounts growing on a sequential basis before that happens?

I would say it's a mixed story on that, and let me describe what I mean by that. We have had five quarters of very slight but sequential decline in the number of enterprise accounts. You'll never hear Travis, or I, say we are okay with that. So, let's just start with that. We're not okay with that. On the flip side, we've also had six consecutive quarters of accelerating growth in average revenue per account, and our focus is very much on the dollarized aspect of growth, more so than the unit count. As we've said before, we want to see both. We expected the front half of the year in particular to be challenging. You're bringing on a bunch of new reps, you're asking them to work territories differently than we have in the past. We've got a significantly different marketing team in terms of size, remit, leadership group. We expected the front half to be challenging, so I'm not surprised at all on where that landed. And certainly, the economic noise doesn't help. It doesn't make it any easier. But in order to accelerate growth the way that we want, yes, that number needs to increase. We need to see unit numbers increasing, but I don't think it needs to increase quite as much as you may think. Again, if you get back to the fact we've got six consecutive quarters of accelerating average revenue per account, and we don't even have in-market yet. All the initiatives that we're working on intended to grow wallet share and net revenue retention with our existing accounts. We're working on a self-serve version of Feedonomics that can go to our base where they get some of the benefits of Feedonomics on a free version with the paywall features behind it. Same thing for Makeswift, a BigCommerce payment solution working on bundles. I mean, there's so many things that we're looking at that I think can provide a tailwind to the dollarized number that I don't think unit count has to increase as much as people think, but I will never be satisfied until both are growing.

Yes, perfect. Thank you, guys.

The next question comes from Parker Lane with Stifel. Please go ahead.

Yes, hi guys. Good morning and thanks for taking the question. Daniel, looking at quarter-over-quarter, year-over-year gross margins, pretty solid improvement there. I know you've been making a lot of changes in the types of customers you're targeting, the different solutions you're selling and internal structure of this business. Just wondering if this is kind of a new low watermark, how we should think about the rest of the year from a gross margin standpoint because looking at 2Q operating income guidance, just trying to understand how much of the improvement year-over-year is going to come from gross margin gains versus some OpEx leverage.

Gross margins are definitely healthy. I'm pleased with where they are. It's important to call out, we also have some expenses that we used to classify in cost of revenue that we needed to move into sales and marketing starting this quarter. That's not why margins by themselves were improving, but we called that out in our Q. That just has to do with some sales enablement stuff and some stuff that we felt we needed to move around. But overall, like we're seeing good results in what we're spending in hosting. We're seeing strong results in what we're spending in support. I think that the improvements in gross margin are sustainable throughout the year. If I look at where we would see growth in operating margins overall, I think more so that'll be driven by revenue growth acceleration and continued discipline on what we're doing in operating expenses. We are expecting, and the guidance reflects that we're going to see a step-up in OpEx and Q2. We do our annual merit - like salary and merit increase in Q1. So, you see the effect of that in Q2, which is why there's a sequential step-up in OpEx for us in Q2 every year. But we also have planned investments in go-to-market, particularly in marketing that are stepping up in Q2 and Q3 as well. So, I am really encouraged by what we're doing. I think structurally we're in a good place. We just, we need to get to the revenue targets and manage through an uncertain macro, but I feel good about where we are overall.

Understood. Appreciate that feedback. And then on partner and services, you mentioned that would be an area that you see any potential cracks from the macro more quickly than in subscription. Just looking at this particular quarter Q1, was that just normal seasonality in line with your expectations, or was there anything that was influencing that number quarter-over-quarter, whether it be specific partner agreements, et cetera, that would drive that performance?

I would say what we saw in Q1 was pretty normal. I think where the noise started kicking in more was after the announcements on all of the different specific changes in tariff rates. We saw kind of little noisy during that week on a day-to-day basis. Some days were up quite a bit compared to year-over-year. There are other days that were down. It kind of settled back into what I would consider normal after the noise of that first week. But it's only been a few weeks and that's a lot of choppiness to manage, which is why I think we're just being cautious about how we're thinking about this for the rest of the year. So far so good, but we need to see how people adjust supply chains. Does this end up inflationary? We'll see.

Alrighty. Appreciate it. Thanks, guys.

The next question comes from Maddie Schrage with KeyBanc Capital Markets. Please go ahead.

Hey guys, thank you for taking my question. Daniel, you kind of touched on this a little bit earlier, but I'm wondering if you guys could talk about the progress that you've made on your freemium offerings with Makeswift and Feedonomics, and maybe how far away you are from launching those. And then my second question is about gross margin upside. Obviously, you kind of just touched on moving some of those expenses into sales and marketing, and I'm wondering if that changes kind of your 80% target that you guys have previously set for where you think gross margin should shake out. Thanks.

Thanks for the question, Maddie. I'll handle the first one, then turn over to Daniel. On the Feedonomics and Makeswift front, progress has been great. We're in beta right now with self-serve Feedonomics with a small subset of customers. I would expect to see that out in the wild here sooner rather than than later. And lots of other AI enhancements coming there as well across that broader product suite and partnerships we've been actively engaged with around OpenAI and Perplexity, Microsoft, Google, and others as we continue to enhance and surface both catalog data and inventory data for clients. The Makeswift is - Makeswift self-service is a bit farther down the road. We've, I think, announced late this year, early next year, which we feel really good about. That's progressing as intended and we'll continue to keep, obviously, everybody updated as we progress quarter-over-quarter, but both those are on track as expected since the beginning of the year. And Daniel, I'll turn it to you for the other.

Yes. from a margin basis, Maddie, we factored this into our discussions on margins when we were at our Investor Day. I think that we can sustain high 70s, low 80s. I think 80 is a good kind of long-term point. We've got some efficiencies that we still think we can get in cost of revenue. As we introduce payments, depending on the attach rate of that, that would be slightly dilutive to gross margins, depending on the mix. But still obviously, a really good result from an earnings per share basis and overall profitability. So, you've just got some different things moving in a couple of different directions, but I do think that that is still very much consistent with what we set out at our Investor Day and what we think we can sustain. We'll, just - again, the thing is we'll just see how - if payments is as successful as we think it can be, there may be a little bit of dilution that comes on the gross margin side, but we are not going to end up with a P&L that looks like FinTech or some of our competitors that have a lot more revenue from that type of area.

Great. And then just one quick follow-up. You guys kind of touched on what it would take to get to the high end of guidance, and I'm just curious what you've baked into the low end. I'm guessing from a macro perspective, how bad do things have to get to get to the low end?

We would need to see increases in churn rates in particular beyond what we are seeing right now in order to get there. Our plans bake in assumptions that we are going to make improvements in gross retention, even as we are making efforts to expand wallet share. Again, if you go back to what I said about our pricing model, you'd have to see not just a downturn, but a fairly sustained one in order for that to really play itself out in downgrades and what we see in subscription revenue. If we see a sharp macroeconomic downturn, I would - I think there's two areas that we would see it, obviously, PSR being the first. The second would actually be in conversion rates on new deals and new opportunity. If that bleeds over into business sentiment and their willingness to pursue either business with Feedonomics or the BigCommerce platform product, then it would affect more of the growth side with new customers. And again, we haven't seen that to this point, so I don't want to overemphasize the downside because again, we haven't seen it at this point, but I just think it's wise to call that out given the climate.

Totally understand. Thank you, guys.

The next question comes from Josh Baer with Morgan Stanley. Please go ahead.

Thanks for the question. Daniel, you were alluding to some areas of potential investment for which you wanted to keep some dry powder. Just hoping you could review some of those, what's most exciting as far as opportunities. And then the follow-up, like what would it take for you to go forward with those investments, something you'd be looking for from a demand perspective or a growth perspective before ramping those investments? Thanks.

Yes, I would say the largest area of opportunity right now we feel really bullish about is AI. I just alluded to it a few minutes ago in Maddie's question around Feedonomics. I think in the new world order, obviously a lot of buzz around AI and what the industry refers to as agentic commerce, which is agent-driven. There's two big components of that that feeds almost everything, and it's really catalog data and inventory data being surfaced. So, optimizing product and catalog data for ingestion into AI and LLMs, and then obviously being able to surface realtime inventory availability across markets, across different channels by which customers expect and want to receive things. And we are already doing that today with Feedonomics across 30% of the internet retailer 1,000. So, there's a lot of, obviously, enthusiasm through the top partners in the space. I mentioned OpenAI. Obviously, we're already feeding Perplexity today. Active partnerships with Microsoft and Google and many of our premier payment partners. That is by and large the largest area of potential increased investment as quickly as all of that is progressing. So, excited to share more about that as it progresses. Certainly, wanted to at least touch on it in this call. And Daniel, I don’t know if you want to add any color to that.

Yes, all I would just elaborate on a little bit is just to Travis's point, this isn't just about go-to-market investment. This is about product investment. And if we - where we do this, it will be moderated and wise. We're not going to have huge swings of what we're talking about in profitability. There's a reason why we set guidance the way that we do, but I'm really excited about the possibilities in this business and how we can power AI as it takes on commerce. I think there's a huge opportunity in this area, and we're already in active conversations with all the leading players in this area, as Travis talked about. So, I think that's part of it. Part of it also is we've got a lot of good, exciting things coming with respect to branding, what we're doing in go-to-market. In a lot of ways, as we kind of contemplated the front half of the year, we knew going into the front half of the year that it was going to be challenging in many ways, and we haven't been able to bring to market yet a lot of the things that we're so excited about that folks haven't seen. And so, I think there's a lot of investments that we have planned and we're excited about with our team in marketing, what we can do in product. We just need to be disciplined and choiceful about how we do that. What do we choose to build, what we choose to partner? I think that's good for our customers because we're trying to make it commercially easier for customers to have best-of-breed architectures. And I think our model is uniquely positioned to power what's happening in AI because we also don't have some of the financial incentives to force people onto certain payments rails or other things that we're really excited about. And we want to keep our options open in that, but continue to be obviously wise and disciplined, as we've shown in the last quarter about where we're going to spend our money. And I think we can do both. I think we've demonstrated that type of discipline around profitability over the course of the last two to three years in a good way.

Great. Thank you.

The next question comes from Mark Murphy with JPMorgan. Please go ahead.

Hey, Travis and Daniel. this is Arti on for Mark Murphy. Thanks for taking the question. Travis, to start off, you kind of mentioned the complex category with companies that include direct selling, regulated industry and home decor. Can you describe a little bit about what's giving you guys the success in that space? And when you talk about the strong momentum there, is that kind of a continuation of a trend, or are you seeing kind of a picked up traction? Thanks.

It's a great question. I would say it's a continuation. I think we've historically had success in some of these niches for a myriad of reasons, the most notable of which is they oftentimes require some semblance of customization and openness and flexibility to appease reasonably complex use cases. The thing we're focused on is making those use cases easier to deal with, more efficient to deal with over time. And we think just that the nature and architecture of the platform and the product suite maps quite nicely to those types of industries. So, we've been there before. We haven't talked about it at the level that we're talking about it now. We're being much more deliberately focused and going deeper within those respective areas and trying to create more tangible examples and use cases. So, it's a bit more obvious to to folks on the call and investors out there as to why it's a great fit because there is a massive market there. And also lends itself into the B2B side of the business as well, which is also by definition, a very complicated sort of use case as far as what people need relative to the platform. So, I would expect us to do more there, more around pre-composed accelerators and industry-specific solutions that will come with bundles of other technology partners pre-bundled commercially, operationally, and technologically. So, as we go deeper into these markets, we're able to deliver more value, less expensively and faster, which we feel is a massive differentiator. And there's a subset of those industries too that are having to digitize and digitally transform now just given more macro environments where that becomes just an essential barrier of entry that obviously will widen our TAM as we continue to progress down that road.

Very helpful. Thank you. And then Daniel, I know you talked about not seeing any material impact to your business right now from tariffs or the macro in general, but curious, are you seeing customers talk about it more, or do they kind of seem more and more resilient? And from your perspective, are you surprised that there's kind of been no impact from what I'd characterize as pretty volatile macro and tariffs? Thanks.

Where we hear about it is from customers that have supply chain challenges based on how diverse their sourcing is. So, I'm very optimistic about where the business is, but I'm also very cautious about a wait-and-see on how this can play out. Until folks get through their inventories and figure out how they're going to replenish those inventories in a high tariff environment, we're not out of the woods, and I think anybody who would say different is being a little bit maybe not as cautious as maybe they should be. So, I think that's kind of the wait-and-see aspect of this is that I don't know that we've really seen the full effect of how that can affect inventories, and that's not something we see very clearly on our side. We see finished goods transactions to consumers. We don't have great visibility into where people are sourcing that inventory from, and I just think it's going to take still a few weeks to see how that plays out.

That's super helpful. And just to one very quick follow-up there, are you saying that perhaps some of the inventory levels that customers have is what's giving them some resiliency, like, at least in the short term?

I mean, I'm not an economist. I only want to go so far out on a limb on this. I just think - I mean, I've worked in CPG. I've worked in other industries. I've looked at how you have to move inventories around. You can't move supply chains on a dime. And so, I think that's really the question for me is how much stock did folks have? How successful are they in moving inventory around? And can we get some resolution on some of these outstanding questions before we start to see that in the numbers? I don't think we're there yet. We'll see.

I appreciate it. Thank you.

[Operator instructions]. The next question comes from Scott Berg with Needham. Please go ahead.

Hi, everyone. Thanks for taking my question. I didn't really hear anyone ask this in particular, Travis, but as you look at your kind of new sales pipelines here in April after all the tariff commotion started to fire up, are you seeing any change in behavior specifically on your net new customers in the last 30 days? Or is that still maybe yet to play out in this quarter?

Too early to play out. No, we haven't seen - I mean, I think, again, this is somewhat conjecture, obviously I alluded to earlier, we've seen obviously B2B notably increase. We've seen that trend for a while. And if someone asked me why I thought that was, I would argue oftentimes in the B2B focused areas, it tends to be a cost savings thesis. So, I would assume there'd be a sense of urgency there as smaller folks looking to digitize those capabilities to drive costs out, particularly around FTE-type labor and moving that into more of a digitized solution or consolidating oftentimes complex backends and back offices. So, I suspect just with the macro environment, when there's a cost savings thesis and a need to transform, the presumption would be, there'd be a sense of urgency there to increase pipeline. Too early to tell if that's a real trend. But we're also starting to see some of these larger deals that I alluded to earlier, many of those are also looking to create some semblance of cost savings. To Daniel's point earlier, they really like our commercial model. It tends to be more capable and more flexible, more durable and creative in ways, particularly across larger clients and industries. And so, the downside to those larger clients is they just take a little bit more time to materialize across pipelines. So, we'll keep, obviously, folks updated across earnings next quarter and what trends that we're seeing. But we are operating as expected, as we've alluded to. We're seeing nice trends in the business, but too soon to really tell on any sort of granular trends that we could share more.

Great. Helpful. And then Daniel, as you think of your guidance for the year, I know you talked about impact number one would be PSR in Q1 in that new business. Just wanted to clarify on the guidance, the increased range. Is that all unexpected variances or potential variances around PSR or within that, was there contemplated anything on the net new side?

I'd say it's in both, Scott. I think that, like I said, the two areas we would see it is consumer spending, how it plays through in PSR in the short term. But second would be if we start to see big changes in consumer spending, I would expect it to affect sales cycle times and conversions on new business as well. So, when I think about the range, if we were to end up on the downside of the range, I would expect to see the effect in both subscription and PSR over time.

Excellent. Thank you.

The next question comes from Brian Peterson with Raymond James. Please go ahead.

Hi gentlemen. Thanks for taking the question. So, one theme that's come outta earnings so far over the last couple weeks has been the idea of search traffic and how that's changed. As you've talked to your customer base, have they talked about any changes in traffic coming to their websites? And as you think about how you can add value to these customers, is there anything that you're doing in the product portfolio to really help address that?

Yes, I can't speak tangibly to specific clients coming to us on those specific challenges, but I can tell you yes, proactively I kind of alluded to it a couple of times around obviously more search traffic going through AI chatbots and things like that. Obviously, we are very actively involved in optimizing those capabilities for discoverability for our merchants across those mechanisms by which people are searching against versus the traditional mechanisms. Or also as I've alluded to before, seeing this giant proliferation of channels and where customers want to discover product independent of industry or market. And so, this is a fundamental element of our product strategy and product suite strategy of allowing organizations or merchants basically to go to customers independent of channel with immersion and value and allowing them to experience the brand, the product, the service across which channels they want, regardless of how they order it or buy it. And so, yes, there are nuances to that. It oftentimes does come down to the optimization of product and catalog data and having that optimized across those particular mediums and channels, which we do day in and day out through Feedonomics. And then also looking at surfacing obviously inventory availability where we ultimately want to service the most profitable available inventory based on where a customer wants to or expects to receive a certain product service or good, and then orchestrate that on the back end. So, you're going to see more and more of that come up as folks start optimizing for these AI LLMs. It's going to be a different motion, and a lot of it is going to come down to the cleanliness and optimization around the product and feed data. So, we'll continue to share more about that as it evolves, but yes, that is a heavy investment area, heavy trend and heavy efforts. I just don't have any tangible information on specific use cases and clients coming to us asking for things.

Appreciate the color. Thanks, guys.

This concludes our question-and-answer session. I would like to turn the conference back over to Travis Hess, CEO, for any closing remarks.

Thanks so much. I want to thank everyone for joining today. Appreciate the involvement and the questions. We feel really good about where we are. We are on track against our broader plan that we've outlined over the last couple of quarters, including our Investment Day. We are starting to see really encouraging signs and shoots within pipeline and access to business that we've not yet seen previously at rates. We're really pleased about seating the entire senior leadership team most recently over the last couple of weeks. So, the team is in place, the plan is in place. We're executing against our strategy, again, as Daniel and I have both alluded to. We expected this to be a challenging year, particularly the first half, and we're excited to continue to see encouraging signs and efforts to accelerate growth across the business going forward. So, look forward to chatting with you all, certainly next quarter and keeping everybody posted on our progress.