CMRC - NASDAQ

Ladies and gentlemen, thank you for standing by, and welcome to the Commerce Second Quarter 2025 Earnings Call. [Operator Instructions] 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 Commerce's, formerly BigCommerce's Second Quarter 2025 Earnings Call. We will be discussing the results announced in our press release issued before today's market open. With me are Commerce's Chief Executive Officer, Travis Hess; and Chief Financial Officer, 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 third 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, and good morning, everyone. I'll open my remarks today by providing a quick update on our second quarter results, and then I'll transition into some details behind the company branding and name change we announced this morning. Given the announced changes, we are going to have a number of partners and industry analysts on our call today as well, so there will be some unavoidable technical jargon we will cover related to changes in our industry. First, let's start with a quick overview on the quarter. Q2 represented solid progress for the business in a number of areas. We delivered non-GAAP operating income of nearly $4.8 million, a 335 basis point margin improvement year-over-year. Annual revenue run-rate or ARR reached nearly $355 million, a year-over-year improvement of 3%. Revenue reached $84.4 million in the quarter, growing 3% year-over-year, and operating cash flow came in at approximately $13.6 million, an improvement of nearly $2 million year-over-year. Both revenue and non-GAAP operating income exceeded the high side of our guidance range. While these results are encouraging in a number of areas, the business is capable of much more. I will spend the majority of my remarks today discussing where we're taking the business and why the changes we announced today will help us get there. eCommerce as we know it today is about to undergo a radical change. The advent and rise of answer engines and generative AI is driving an unprecedented evolution in consumer behavior, shifting search and browse to conversational queries that surface contextual shopping intent. Answer engines like Perplexity, ChatGPT, Gemini, and Copilot are profoundly reshaping how we search, get things done, and how we shop. This significant shift is redefining how consumers discover and engage with businesses of all kinds, but most especially the brands, retailers, and B2B companies out there competing for traffic, customers, and conversions every day. Merchants of all sizes and across all industries must rethink how they show up in the era of AI-driven, agentic commerce. To remain competitive in this new paradigm, merchants must leverage partners who can help them harness their data for enhanced visibility, relevance, and performance across AI-driven channels. We are uniquely suited to serve the market through this transformation. Q2 was a defining period, the strategy, product, and go-to-market engine we have built over the past year came together behind a singular focus: powering an AI-driven commerce ecosystem at scale. Our transformation phase is over. We have moved fully into execution and growth, and we are proud to reintroduce our company as Commerce. This rebrand as Commerce marks the culmination of a year spent rebuilding the company for where the commerce industry is going for the agentic future. Digital commerce is no longer organized around a single search box or a closed ecosystem. Shopping will be orchestrated by answer engines and other evolving AI-driven experiences that favor an open, composable approach to support these new buyer behaviors. In this new world, it is structured data such as title, description, size, and color, and unstructured data such as size guides, brand guidelines, spec sheets, video content, reviews, customer service transcripts, and articles synthesized, optimized and orchestrated across owned and third-party channels that will help businesses adapt and succeed in this dynamic landscape. We have spent the last year deliberately rebuilding the company around this future. Our new brand also reflects our broader market position: a flexible, open, partner-led ecosystem with infrastructure that powers everything from full-stack commerce to data optimization and syndication, working alongside platforms with whom we sometimes compete to enable those customers to meet challenges we are uniquely positioned to solve. Our ability to operate across the stack and ecosystem, sometimes as the platform, other times agnostically as the data, orchestration, or experience layer is what makes our position in the market so unique and valuable. We help shape how commerce happens, wherever it takes place, and most importantly, however it best serves merchants and shoppers. I want to be clear about the intention behind this change. Commerce is more than a parent company rebrand, it's a deliberate signal that we intend to shape the future of commerce. It reflects our current identity and anticipates the market's direction, driven by a wave of AI-powered agentic transformation. We recently announced a series of high impact partnerships that reflect our market-leading position in this area, which will help B2B and B2C businesses thrive in the era of AI-powered shopping, or agentic commerce. We've launched our partnership with Perplexity, a leading AI answer engine, to deliver optimized product data directly impacting its AI-driven contextual responses. This in turn improves discoverability and visibility for major brands, because their data is providing the foundation for trusted answers. Our expanded relationship with Google Cloud is helping merchants stand out across sales channels with AI-enriched product data. This delivers richer and more seamless experiences for customers and greater discoverability for merchants. This includes innovations leveraging Google Cloud with Gemini within Commerce's data enrichment offerings. Today, we also announced a new partnership with PROS, a market leader in AI-driven pricing optimization and configure-price-quoting. We will enable merchants to dynamically optimize pricing, automate complex quotes, and deliver real-time pricing offers to customers. This partnership will enable us to support more complex use cases, particularly in B2B, and expand our addressable market. Many of the world's top brands have selected Commerce to deliver these capabilities today. Adventure brand Revelyst, the parent company of Bell, Bushnell, CamelBak and Giro, global consumer brand URBN, the parent company of Urban Outfitters, Anthropologie, and many others, and Tapestry, the parent company of fashion brands such as Coach and Kate Spade New York, and Dell Technologies, are already leveraging Commerce's data integrations to improve visibility, protect brand consistency, and boost performance across AI-driven search experiences. These are all exciting customer wins, partnerships, and product developments. Operationally, we remain focused on the execution of our go-to-market transformation plan. We see clear traction from the changes we began in late 2024. Our pipeline conversion rates are improving as our sales teams are now selling bundled products aligned to specific use cases and verticals across the product portfolio. This is a go-to-market engine that looks very different from a year ago, and it is now structurally aligned to the market for which we have been building. We need to improve the efficiency of our sales and marketing spending, and the changes we have made are focused on that outcome. Let me finish with a few other quick highlights from Q2. We were proud to be awarded 24 out of 24 medals in the 2025 Paradigm B2B Combine for the third year in a row, and we also advanced our rankings in 5 key categories and earned more gold medals in the Midmarket Edition than any other platform. This quarter, we welcomed top B2B brands such as Global Experience Specialists, Spear Education, and Arrow Fastener. In B2C, we saw great wins with LifeWave and Belami. I am encouraged by the progress that I see, and I am confident we can build on our momentum. Q2 was a pivotal quarter for us, not just in terms of execution, but in how we define and present who we are to the world. Commerce is the culmination of the work we have done to transform our products, go-to-market, leadership, and architecture. It reflects our belief that the future of commerce is intelligent, composable, and AI-driven. And we are uniquely positioned to lead in that future. After a year of bold, foundational change, we are now in execution mode. With that, I'll turn it over to Daniel to walk through our financials and outlook. Daniel?

Thanks, Travis. Our Q2 results demonstrate continued momentum across our key business performance metrics. Commerce currently serves over 5,800 enterprise accounts and tens of thousands of small businesses. ARR reached nearly $355 million at quarter-end, a 3% increase year-over-year, while average revenue per enterprise account rose to $46,403, a 9% increase year-over-year. We delivered $84.4 million in revenue in the quarter, up over 3% year-over-year, and non-GAAP operating income of $4.8 million. Profitability metrics strengthened significantly. Non-GAAP gross margin strengthened to 80%, up 280 basis points year-over-year, while non-GAAP operating income margin finished Q2 at 6%, improving 335 basis points from Q2 2024 and 1,013 basis points from Q2 2023. We closed Q2 2025 with a solid balance sheet, including $136 million in cash, cash equivalents, and marketable securities. Our operating efficiency gains also continue to improve, with quarterly operating cash flow reaching approximately $14 million, up $2 million from Q2 2024. We have reduced our net debt position to $18 million, a 73% decrease year-over-year. Our debt maturity profile remains manageable with approximately $4 million due in 2026 and $150 million due in 2028. For the 3 months ended June 30, 2025, we had approximately 80 million common shares outstanding and 81 million fully diluted shares outstanding. Let me provide a brief update on the progress of our other core growth initiatives from our Investor Day. We are on track to release an integrated, self-serve version of Feedonomics within the BigCommerce control panel by this holiday season. Our self-serve version of Makeswift within the BigCommerce platform and our branded payments solution are also on track to be released in the front half of 2026. These releases will improve customers' core commerce platform capabilities while also creating new revenue growth opportunities for the business. Our partner bundling strategy is progressing well. This strategy enables additional revenue and profit opportunity through reselling core partner products, and it also creates an opportunity to increase distribution of our products through select partners without the burden of associated go-to-market costs on our side. We anticipate the inclusion of Noibu's leading error monitoring platform in our go-to-market teams' sellable product portfolio later this year. Our partnership with PROS will enable them to offer a combined solution to the verticals in which they have deep expertise, while also enabling Commerce to offer PROS to our core customers as well. We are also excited to partner with Accenture to create and scale joint Commerce and Accenture solutions for customers, particularly focused on AI and agentic commerce. Before moving to guidance, I'd like to explain how the shift to AI-driven commerce will help accelerate our revenue model. Commerce generates revenue in 3 ways: First, BigCommerce platform subscription revenue, tied to merchant order volume. Second, Feedonomics subscription revenue, based on product SKU volume going through our data feed optimization models. And third, partner and services revenue, including certain implementation services and technology partner revenue share. What's important to understand is that all 3 of these revenue streams benefit from AI's acceleration of change in the commerce industry. For us at Commerce, the growth of answer engines and agentic shopping is the equivalent of a new channel or a new buyer, driving order growth and technology partner revenue share. It also makes data optimization more important to customers than before, as answer engines and AI-powered shopping require even more sophisticated product data than existing search engines. This, in turn, leads to more account opportunities and SKU volume growth to our data feed optimization models and the associated pricing and revenue growth. Agentic search is also a monetizable channel offering and represents a direct revenue opportunity in its own right. As demand increases for product data conditioned specifically for agentic surfaces, we intend to offer paid AI features as well. As AI reshapes how consumers discover and buy, we intend to meet that change head on with value for our merchants and monetization for Commerce. In AI-powered shopping, data is the new storefront. Our ability to structure and syndicate product catalog data into answer engines is increasingly mission critical for merchant success. As AI agents become the front door to product discovery, merchants who deliver clean, enriched product data will appear more frequently, earlier in the buyer journey, and with greater contextual relevance. This drives higher quality traffic, better conversion rates, and increased GMV. And as that GMV scales, ultimately so does our revenue. Now, let me close with guidance. For Q3, we expect revenue between $85 million and $87 million and non-GAAP operating income between $2.3 million and $3.3 million. For the full year 2025, we expect revenue between $339.6 million and $346.6 million and non-GAAP operating income between $19 million and $25 million. Travis and I will now take your questions. Operator?

[Operator Instructions] The first question comes from Raimo Lenschow with Barclays.

Great to see the progress here. Travis, can you talk a little bit about like what you're seeing in the field? Obviously, when we talked 90 days ago after Q1, the world was very, very uncertain, consumers were really uncertain and then commerce businesses kind of suffered from that one. How has the world evolved since? And what are you seeing from your customers in terms of living in this new tariff world?

Raimo, thanks for the question. Yes, we're not seeing a lot of impact thus far from tariffs, to be honest with you, at least nothing that's obvious. I think Daniel can provide some color there as well. I think we're continuing to see success, obviously, in demand, particularly on the B2B side, I think we've been pretty transparent about that trend over the last year. And then obviously, with the answer engine proliferation and angst with merchants in space knowing they need to do something. They're seeing search traffic drop off and obviously, want to optimize for that. There's a tremendous amount of demand and sense of urgency around particularly discoverability right now. And obviously, a lot of discussion and conjecture around where this is going to evolve to as it relates to actual shopping. But right now, it's primarily around discoverability and transformation to align to being discovered going forward.

And then Daniel, if you think about the rebranding, like how -- I mean, since we don't have a lot of experience like -- but you're kind of dependent on kind of being found by new customers, et cetera. Like, can you talk a little bit the puts and takes? Like, obviously, you spent some money on it. There's going to be like an in-between period. Like, do we need to think about disruption in terms of new customer adds, et cetera? Like how is that going to play out for you? Congrats from me again.

No problem. That's a great question. What I would say is it's really important to understand that we are not rebranding the individual products themselves. This is a corporate parent brand change, and it really better represents where we already are playing in the market. In a lot of ways, for example, a lot of customers are not familiar with the fact that we have Feedonomics as a core product, which is specifically built to help merchants optimize for where things are going with AI no matter what platform you're on. And the fact that the corporate name was associated with one of the products and a platform product in particular, I think it led to some confusion and sometimes it can limit opportunities that we saw on the sales side. And so I don't think that it's really going to affect deal volume or pipeline build because, again, this is not impacting the branding of the individual products themselves. What I think it does is it gives us an opportunity to have a much more cohesive message. And one that's much more true -- truly represents what the business is and what exactly it is that we do, in a way that I think broadens our TAM specifically with respect to Feedonomics, and that's really key to why we did this.

The next question comes from Ken Wong with Oppenheimer.

Somewhat piggybacking off of Raimo's question. Travis, this past year saw BigCommerce prioritize the reshaping of your exec team, go-to-market alignment. With this rebrand as Commerce, do you think the product portfolio is in a place for us on the outside to properly measure success? Or is that going to have to wait until '26?

I think -- it's a great question, Ken. I think you're going to see leading indicators certainly as we build pipe and we announce new, obviously, efficacy with some of the existing clients that we have. Part of the challenge on the agentic stuff, A, you're buttoned up against holiday. And obviously, we're dealing with a lot of large branded manufacturers and retailers coming in, so there'll be some sensitivity there. But we're also playing with the pace of these answer engines as well and where they are in their journey of how they're optimizing, how they're ingesting data and things like that. So all 3 are kind of coming together, where the brand itself is, where the answer engines are in particular and then how we're helping them. But I would expect to see material signs of optimism and signs of growth that would most notably turn into revenue probably more so in the early part of next year materially versus second half of this year. But we'll see other indicators that would be organic and natural that you'd probably see from the outside in as well.

Perfect. Super helpful. And then lots of mentions of new partnerships, and it sounds like that is potentially going to be a more important revenue path going forward. I mean, should we anticipate that the pace of new software service partnerships are going to pick up relative to what we've seen from BigCommerce historically?

I think you're going to see more transformative type partnerships, right? I think the models are shifting. I think we were fairly -- I was fairly verbose about that in my opening remarks. I think it's changing the entire dynamic of where folks are placing their bets and how organizations, regardless of size or market, need to adapt to do that. And that, by definition, will require transformation. So the services side of this, I would expect to shift more broadly into helping these organizations transform and take advantage of that. And for us, that partnership is a combination of obviously software and services and the services handling the transformation piece. We feel like we've got capabilities that would act as more of a catalyst to help spark that transformation and service and help brands get into a better spot to take advantage of, obviously, the sense of urgency around discoverability right now. And certainly, shortly thereafter, this is going to get deeper and more agentic where this is going to turn into shopping. And then that's going to launch monetization models that, again, depending on the answer engine might be slightly nuanced and different that organizations and service providers are also going to need to adjust to. So this is kind of the tip of the spear of what we see as a massive paradigm shift in the space.

The next question comes from Natalie Howe with Bank of America.

You talked a little bit about your B2B offering. So I wanted to dig in a little more on that, especially as the pillar of ARR reacceleration. So what has been the biggest improvement in the adoption of B2B? And how has it been integrating with the rest of the platform? And what's the ideal customer for that, whether it's new logos or customers already in the base?

Yes. We -- it's a great question, Natalie. We've seen a lot of momentum there for some obvious reasons and maybe some less obvious reasons, just the pure capabilities of the platform and just the nature of what we define as B2B, which is more so traditional manufacturing and distribution, which tends to have some complexity innately to that business, large complex catalogs, pricing schemas, contractual pricing, punch outs, a lot of back-office technology challenges. Oftentimes, these large organizations grow inorganically and buy their way to growth and with that inherit a bunch of a tangled mess on the back end. So a lot of the capabilities in the core platform have lended itself to transformation in that capacity, and I think drawn a lot of folks to us. Where we've seen the really biggest opportunity short-term to expand that TAM is really through CPQ or configure price quote. As you get more complex in these products, obviously, you're needing to configure them sometimes with tens of thousands of SKUs. And it's why we partnered with PROS. Obviously, they live and breathe in this space. They dominate some very innately complicated industries, and it was just a natural extension. They've got far more advanced capabilities than we could ever possibly build ourselves. And it's just a great use case and example of where partnering and being open makes a lot more sense to accelerate value to our customer base and widen our TAM as opposed to waiting to go build it over time. The challenge is historically, we've got to make that easy. And so we've been very deliberate about who we're partnering with, why we're partnering with. We got to make that easy commercially, operationally and technically. That's the spirit behind all of these things.

Got it. And then a quick question on the payment solution. I know it's not until 2026. You guys want to provide more optionality for your customers. But what gives you the confidence that some customers will end up using your guys as payment solution? And what's like the reasoning behind providing it yourselves?

This is Daniel. I'll take that one. I think it's important to understand that we're going to be offering an optional solution that's going to be really focused on small businesses and mid-market customers. For a lot of customers within our base, they really are looking for simple solutions that have easy out-of-box integrations with competitive pricing. And by having a native payment solution that's fully integrated into our platform, we can make that easy for those customers that don't need the type of -- they don't have multi-region complexity. They don't need to have a different payment solution depending upon the region. But we're also going to make sure that, again, we work with a lot of really large complex businesses that do not want to be shoehorned into one payment solution that may benefit us but not benefit them. And so we want to make sure that we've got the optionality for customers to pick and choose partners that make sense for them. They may need to work with partner A in Europe and partner B in South America. That's completely fine for us. But there's also a big chunk of our base that would benefit from having a simple out-of-box solution that's fully integrated, and we can capture some incremental spread on the pricing that we're offering and deliver that value back to our shareholders without taking on all of the associated complexities on underwriting risk and capital commitments and things like that.

The next question comes from David Hynes with Canaccord.

So Travis, look, as the commerce space continues to evolve towards agentic or answer engines, do you still think BigCommerce's best opportunity is as platform? Or do you now see a better path to market as that data orchestrations experience layer? And I guess if it's the latter, like how does that change how you think about the economics of the business?

Yes, it's a great question. Listen, the reality of it is both. The platform is not going to go away for anyone. I mean people are still going to go to branded sites and shop. I think there's still a dopamine rush. People talk about agents buying on behalf of people. Yes, there's plenty of use cases where that will be very applicable, but people still get a dopamine rush from buying stuff. I don't particularly enjoy it as much as some others, but a lot of people do. That being said, I think the key here, and I said this when I took this gig, there's a better together story here. There is a time and a place for the platform. And I think having an open composable approach, which I felt was paramount to why I took this job was not by accident. It's -- again, I think the acceleration of where we are now and the adoption of AI in these answer engines has probably happened at a pace faster than probably all of us expected, but no doubt it was going to get complicated. So you're going to need the data layer to ultimately drive a lot of this. The data is going to end up driving a lot more innovation as it relates to the platform as well and as a lot more as it relates to experiences on and off sort of owned channels. So the mix might change over time. I think there's an advantage to having more than just the data layer and being able to optimize that. And there's, obviously, more to than just having a platform and component capabilities, mixing and matching that will be very deliberate and orienting to specific industries. But to Daniel's point earlier, I think clients want optionality and they want agility. They don't want vendor lock-in. They want to be with you because they want to be with you, not because they have to be with you. And I think our challenge is providing best-in-class capabilities that allow that to happen. And if it's just the data piece, so be it. It allows us to widen the TAM without forcing everyone to move to our platform, which, again, isn't for everyone. I would be naive to think that it is and vice versa. So that's the thesis behind it. What that mix is 6 months from now, a year from now, maybe it's different, and we'll adjust accordingly, but hard to predict at this point because there's still so many things in motion. Even the commercialization of the agentic stuff hasn't been figured out or hammered out yet by the answer engines themselves. So this will continue to evolve as we move forward.

Well, one point I would add to this, this is Daniel. And I talked about this in my prepared remarks at length because I think it's really critical to make sure that our shareholders understand this as we're making this change. The trends that we are seeing with respect to AI and commerce hit all elements of our revenue model in a positive way. We don't need to -- like I would anticipate in the future that the Feedonomics product would grow at a disproportionate rate relative to the platform product. That's been true for a while. I would continue to expect that to be more so in the future. What that does is it gives us a great opportunity to drive value for merchants no matter what platform they're on, and that's really, really key. As AI gains share and how it influences commerce, that puts more SKUs going to our data transformation engines, which drives more volume. For the customers where it makes sense to cross-sell the platform, we will do that. And then that ends up looking like a mix shift and it drives more volume, which we capture revenue on order growth and associated revenue share through payments in a whole host of other areas. So from my perspective, from a revenue model, this may change the mix of maybe which product is growing faster than another, but this benefits everything we have within the portfolio.

Yes. Okay. I think that makes sense. And then, Daniel, just based on how you're modeling the business, like when do you think we might see a return to positive enterprise customer count?

That's a great question. I'd like to see that happening towards the back half of this year, but we don't know for sure that's going to happen. I mean there's a lot of things that I see in the business right now that I think are really, really positive. We beat the high side of the guidance range on revenue and profit. The revenue growth rate has stabilized. We have line of sight to acceleration. I'm excited about that. Importantly, enterprise ARPA, or average revenue per account, it was up to 9%, which I think is like our seventh consecutive quarter of accelerating growth in ARPA. And we also had the strongest sequential growth in ARR and bookings that we've seen in over a year. I mean our deferred revenue was up 31% on the quarter. So there's a lot of signs I'm seeing that are really good. As I've said when this comes up on each of our calls over the last few quarters, I'm a CFO. I'm never going to be happy until count and dollar per account are growing together. We're seeing new account growth that's really good, really large accounts that we're really excited about. We're also just continuing to invest and need to make progress on gross retention with some of our smaller accounts, which is why you're seeing that in the unit count number. So it's not the core of our revenue model. I'm much more concerned about dollarized retention, as I've said before, than I am unit count, but it's obviously something that we're focusing on as well.

The next question comes from Parker Lane with Stifel.

In the prepared remarks, you specifically called out improving pipeline conversion rates. And just wondering, if you look now that we've made those changes to the sales org in late '24, how the pipeline build is developing? And how much of that is being driven by this proliferation of agentic commerce versus just blocking and tackling normal course of business?

Parker, I would say the pipeline build has been healthy, not exactly where we would want it to be. We're never satisfied with what we're seeing, but we've seen really good indications. The win rates improving are definitely encouraging, and I think that's because we're doing a better job positioning the brand and positioning the products. We -- and that's without being able to be out in the market with the change in what we're doing at the parent company level and all of the changes behind that, which is part of why we kind of anticipated the front half of the year being a little bit of a challenge. And it's very much as what we expected. So we're really encouraged by what we see. I think reps are doing a better job pitching as a bundle. I think they're also doing a better job being able to kind of get in the door with accounts regardless of what platform they're on with the Feedonomics product, and we think that the changes we've made here will bolster that.

Understood. And then I know you gave a model framework back at the Analyst Day in the spring, not explicitly guiding to '26. But with some of the sales changes and build behind us now and the rebrand behind us, how should we think about the cadence of margin expansion over sort of the midterm? Is there an opportunity to drive a little bit more margin than would be implied in this year?

There is. What I would say, though, is we are prioritizing growth acceleration. I think we said going into the year that we're aiming for margin expansion in the low to mid-single digits. I think that's certainly still possible. But Travis and I are also prioritizing investments in the product, not just in features related to AI. We want to be really clear about this. This isn't chasing shiny objects, like we're really investing in our core products, core features and functionality while also building in advancements in AI offerings that we think are important. And so we want to continue to see healthy margins and expansion. I think you see that also even just in the cash flow results. I mean we had almost $14 million in operating cash flow in the quarter, which I think is outstanding. But where we see opportunities to invest back in the product, we are going to definitely do that. We're also investing a little bit more right now in sales and marketing expense, which you'll see in the numbers, which makes sense given the rebrand. But that said, we also are kind of laser-focused on where we are from an efficiency perspective because clearly, that's not where we want it to be from a growth relative to spend, and that's going to be something we're going to be focusing on as we go into next year. I'll have a lot more to say on this as we get into our next call once we get through kind of early rounds of planning for next year. It's a little bit early at this point, Parker, for us.

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

I just wanted to hit on B2B a little bit. Could you maybe talk about maybe the amount of new net adds that are joining the platform, that are joining for B2B functions and kind of where you see that going this next year? And then my second question for you is just on ARPA. Obviously, we've seen a good step up, kind of sequentially or I was going to say year-over-year for a while now. Can you talk to the upside that you're seeing there kind of what folks are taking more of or maybe any changes in pricing that are kind of leading to ARPA increasing continually?

Well, Dan and I will ham and egg this one. Maddie, great question. As it relates to B2B, a disproportionate amount of net new bookings has been oriented to B2B, I think, for a myriad of reasons. I've talked about this on the last couple of calls. Beginning of the year, we bifurcated that entire go to market team to B2B. I think, historically, have been critical of the org in treating B2B as like additional features and functions as opposed to a completely different consumption model, business model and ICP, which we've been very deliberate about since the beginning of the year. So not so much the added headcount there that's led to the efficacy. I just think the focus and the depth, and to Daniel's point earlier, the investments we continue to make within that product. I think the PROS relationship is just an accelerated way to drive more value and widen our TAM. Because as you go upmarket in B2B, in particular, where it gets really hairy is around CPQ. And obviously, PROS doing this in their sleep, just naturally extends that. And then there's also a fortuitous sort of distribution model there as well where them being able to kind of push our product, us being able to push theirs. So we feel like that's a natural sort of organic way of doing this. And then obviously, we've just been heralded in the B2B paradigm again. So we get a lot of credibility there, a lot of juice. And I just -- I feel like there's a lot of urgency now for particularly manufacturers and distributors to digitize a lot of pressure to leverage AI. We see a lot of applicability around agentic and AI, possibly disrupting that market faster than maybe B2C just in less obvious ways that we're, obviously, chomping at the bit to take advantage of. So I think you'll continue to see that momentum on B2B. I don't see that changing anytime soon specific to platform. It just it tends to be a little less mature as it relates to B2C, and we're just seeing way more momentum. And I'll turn it to Daniel for the second question.

Yes. To the question on growth in average revenue per account, this is one that honestly kind of makes me smile because we're seeing these improvements in average pricing per customer when we haven't even been able to get to market yet a lot of initiatives that we have in the hopper that are specifically focused on improving that number further. So I'd say we've done a better job with pricing discipline with our sales teams. We're winning larger and more complex customers, which is good. We're doing a better job cross-selling Feedonomics and platform customer accounts, as an example. But we've got a number of things coming that can provide a tailwind to this that are part of why we feel confident that we can reaccelerate growth -- whether we can accelerate growth. We have a self-serve version of Feedonomics called Feedonomics Surface that we're planning to have come out by holiday, which gives us a chance to increase monetization of existing customers, specifically providing them a way to optimize their data for ads and marketplaces and AI channels. And this is exactly where we need to be, and we can do this with existing products. We're not having to reinvent the wheel in many cases in order to do that. We're going to be adding additional offerings within Feedonomics to optimize for LLMs and those types of models. We've got a self-serve version of Makeswift with paid features that are coming plus a branded payment solution. And even on the partnership side, we're close to being able to sell Noibu as a part of our existing offering. We want to be able to get to the same place with PROS. We're excited about partnership with Accenture and what that means from a distribution perspective. Like there's a lot of really exciting things that are coming that give us a lot of bullishness on where we're going. It doesn't mean that all of it is going to pan out in the next quarter. I mean we've still got a lot of work to do to finish getting this rolled out, but we think it provides some really good potential tailwinds to our average deal size that we can see with our merchants, both new and existing.

The next question comes from Brian Peterson with Raymond James.

Congrats on the quarter. Just one for me. So Travis, if we think about the AI impacts, I'm curious actually what you're hearing from customers in terms of how big of an impact that's actually making on decisions? And is that impacting sales cycles at all? And I'd also love to understand, what are you hearing from your competitors? Because there's a lot of legacy solutions out there, and I'm curious if they're innovating at the pace of BigCommerce right now.

Great question. I can't speak to the level of innovation with our competitors. Certainly, I think as it's noticed to everybody, everybody is in the AI game now. It's a lot of hand waving and things like that. The fortunate thing for us is, Feedonomics in its current state, let's go back 5 months ago, was already doing a lot of this work. We weren't very handwavy about this. We were very deliberate about trying to bundle this all up and come out with it at once as opposed to kind of trickling it out. So like for us, the angst in market, the demand in market right now, particularly with B2C merchants of varying shapes and sizes is around discoverability. It's almost a Y2K type urgency for those on the call old enough to remember the urgency leading up to that. People needed -- they know they need to do something. They didn't know exactly what it was, and it facilitated just a tremendous amount of transformation and service streams. I think there's more validity to what this represents. This is certainly one of the fastest adapted technology in the history of mankind, and people are racing to adapt to it. So the demand and pipe and sort of engagement is, how do I become discoverable in this new world order of how customer -- consumer behavior is changing. And again, this is nuanced differently across all of these different answer engines, right? The way that Gemini does it is differently than Perplexity and ChatGPT is different as well. So for us, the -- already doing this, optimizing and synthesizing both structured and unstructured data and syndicating it bespokely across different channels at scale to optimize results was already in place. This is a natural extension of that. And there's a lot of work that's been going on kind of behind the scenes we haven't been handwavy about, that naturally fits us. And we're also doing it with 30% of the IR, [ Internet Realtor 1000 ]. So large enterprise branded manufacturers and retailers. So that already existed. This is an expansion. That's where most of the demand is coming. I think everyone is trying to infuse AI. This was not an attempt to be buzzy. It sounds buzzy just because it's AI, but the practicality of it and the applicability of it is, obviously, very organic given where we were in the business. And I think you're going to start seeing that efficacy come out over the next couple of quarters. It's going to start with discoverability. It's then going to quickly move into orchestration, which is going to be wildly complicated as folks are able to shop across these channels, which then again serves up inventory challenges, personalization, all sorts of things on the back end to maintain or exceed customer expectations that's going to get wild. And wild in a good way for us. To Daniel's point, we feel like these plays ideally into our hands with the 3 assets that we have in the product. So we're excited about it. I think you'll see it organically take deeper shape where we have this call 6 months ago or 6 months from now, I think it will make more sense to the public, for all of us as this continues to mature in front of our eyes.

[Operator Instructions] The next question comes from Gabriela Borges with Goldman Sachs.

I find this dynamic around agentic search particularly interesting. Travis, maybe tell us a little bit more about, A, are you already seeing customers see a negative impact from agentic search such that it's catalyzing them to engage with your product suite? B, you mentioned AI-powered shopping requires even more sophisticated product data. Maybe just give us some examples there. In what ways does the product data need to be more sophisticated.

You bet, Gabriela. To answer your first question, the answer is yes, substantially. And it's not just us. I talked to -- obviously, I have lots of friends in the service industry, having spent a large part of my career there. They're getting the same questions. There is a dire need and angst amongst large branded manufacturers and retailers in getting ahead of this. And many of them aren't necessarily set up to do this at scale per se, which is also creating a fair amount of angst and demand in markets. So obviously, like I alluded to earlier, both us on the Feedonomics side as well as the services side, this is facilitating a lot of transformation, which I think is good for the industry. Where we're seeing it nuanced, listen, I mean, historically, we've been synthesizing and optimizing and syndicating structured data, like data enrichment, think about that and syndicating it across hundreds of channels, with the answer engines, with the LLMs. Not all of them yet, but some of them now have the ability to synthesize both structured and unstructured data. So there's still a tremendous through AI, tremendous amount of extension of structured data that we're optimizing. But where this gets really interesting is when you're combining it with unstructured data and synthesizing that and not to mention the data we already have on behalf of customers. So we are sitting in the kind of epicenter with access to some of the most valuable data in the world as it relates to improving these queries and improving those experiences in partnership with these LLMs. So you can imagine why that would be a natural fit for us. We're also not abided to try to get this through our checkout rails either. So as this moves into shopping, we are very agnostically supportive of supporting whatever mechanism and whatever rails make the most sense for our merchants, which gives us, I think, an added advantage to go commercialize this and take it at scale. And that's kind of the heart of a lot of these conversations. It's still early days. I think for those that play in the engines, and I know I do all the time, the shopping piece is not there. It's, obviously, very immature. The results are spotty at best. That will materially get better, and this will move into more of those conversations. But the discoverability is top of mind right now. It's starting there, then it will evolve into experiences and inventory orchestration and back-office type stuff that's going to get wild and interesting. I think this is the biggest change to this industry since responsive design, which was probably less sexy, but facilitated a lot, as you know, a lot of transformation, a lot of change.

And so do you already have customer examples that you can train your salespeople with where customers has seen traffic or conversion or top of funnel getting hit. They then go and buy Feedonomics and then -- and some of the more interesting price to quote options that you've been talking about and then see sort of -- well, kind of well, like a before and after from a statistic standpoint.

Yes. I think we alluded to it in both the press release and my opening remarks with, I think, 4 or 5 of the brands that we mentioned -- large recognizable brands. And those are existing clients, by the way. So we're in closed beta and some fairly sophisticated stuff with a handful of clients right now. That will evolve into something more publicly available. And yes, this is all going to be about evangelizing the efficacy. Obviously, I think it's a pretty easy thing to measure, but it's also fluid, right? As these answer engines become more nuanced, as they add more capabilities, because, again, to my point earlier, they don't all operate the same way. And some have advantages over others. Like you look at Google for the obvious answer, they have consumer-facing apps that have AI embedded in a lot of behavior. They also have a fairly popular browser that they track a lot of behavior on as well. You're seeing some of the other answer engines launch browsers now. So again, you're going to see more and more of this sort of evolution and disruption that's going to slightly change how these things are handled. But it just, again, I think, maps back to our existing relationships and our ability to go synthesize and optimize and syndicate this data. We're just in a very natural position to take advantage of it and proven. And we're doing it with some of the largest brands in the world. So it's not like we're just down market trying to come up. To Daniel's point, what's also exciting is we want to bring these same capabilities in a self-service capacity to our installed base and smaller merchants, because they're going to need just as much help as the big guys. They, obviously, don't spend as much. Their catalogs aren't as big or as complex, but they still need to be discovered. People are still going to the answer engines, independent of brand size. They're not discriminating based on size. So that is just as important, and you can kind of play that forward, that addressable market, independent of Commerce platform is massive. We feel this as a nice catalyst to start having those conversations, obviously.

The next question comes from Chris Kuntarich with UBS.

Can you hear me?

Please go ahead. We can hear you now.

Yes, I just wanted to stick with the agentic theme. Just, I wanted to focus on the B2C side here. I think I kind of understand that we're seeing this acceleration in this trend. But anything you could do to further dimensionalize the amount of discovery today coming from the agentic engines versus either like the start of the year or this time last year? And just how is that differing versus either brands that have leaned into this theme and ones that haven't or across certain verticals? Just anything you could share there to help further dimensionalize this?

Yes. No, it's a great question. The general percentage that I've heard in multiple corners is 20% drop-off in organic search for a lot of brands. Now don't quote me on that in the sense that it may vary based on brand and what it is that they're doing. We're not quite at a point yet where you're going to be able to see, where that was 6 months ago versus now, and where it's going to be in 3 months. I think a large majority of folks have seen a drop-off, obviously, with folks. I think it depends on who you ask again. I think what 1 billion weekly users now, I think, or more leveraging these answer engines on a weekly basis and growing exponentially. I think you're going to see this come more and more front and center as more and more capabilities are available within them. So I would expect in the next quarter probably to have maybe a bit more data as it relates to what we're seeing tangibly from these folks. Right now, it's a -- we've seen a drop-off. We know we need to do something. We need to optimize our data around discovery right now. And in parallel, behind the scenes, we also need to prepare for the orchestration complexities that are going to come by way of shopping through these channels. And then obviously, there's a future state where you're going to have agents negotiating with other agents and buying and things like that. And again, I don't want to get all handwavy on that. That's fine. There's use cases. But again, I think this is top of mind for a lot of organizations. Doesn't mean they're going to solve it all right now. I think more importantly, they need to stem the bleeding on the discovery drop off and they, at the same time, need to prepare themselves as an organization to take advantage of where this goes now and in the future. And that's where we're seeing most of the conversations around, less around like, what it's already done in some of the efforts that they've made.

Got it. Maybe just one quick follow-up. Just thinking about it versus other sources of traffic, is it now larger than maybe e-mail or SMS? Just curious kind of where it's falling within the stack rank for BigCommerce customers.

Yes. I wouldn't know an actual number. It's certainly growing at a faster pace than the others. And I think a lot of this is going to be as a result of trust, right? Obviously, that's the thesis behind a lot of these answer engines and the companions is how much do you trust the answers. And trust, last time I checked is built over time. So I think as it gets better, I think the adoption will get deeper, and I think more efficacy will be driven. But we've got a ways to go there. I think the focus -- I would think of this in phases. Right now, it's really around discoverability. As people have conversations with these answer engines, as they're contextually asking things, how do brands remain relevant and front and center as part of those contextual conversations? And then this will move into more of an experience conversation of, okay, now that I've been discovered, where does shopping take place? Are we sending them back to an own channel? Are we sending them to a marketplace? Are they checking out in line within that experience, within that particular answer engine? And if so, what's happening behind the scenes is what we're serving up as it relates to SKUs and availability based on customer expectations, right? As an easy example, am I willing to take a discount to receive such product 2 weeks later? Or am I willing to pay a premium to receive it today? And in what channel or mechanism do I expect to go interface with that product? So all of that stuff also is being figured out kind of behind the scenes, but it's going to begin and end with the data. The data is going to be the most valuable aspect of this, and then it will be in combination with some of the other assets.

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

Listen, I want to thank everybody, obviously, for showing up. We're clearly excited. This has been a long time coming. We've obviously orchestrated and metabolized a tremendous amount of change over the last year. I certainly appreciate the patience for those that follow us. We'll continue to lead and communicate in a transparent way. I appreciate the questions. We're excited to move into the execution phase and get out of transformation. I think we're all a little fatigued from all of the change, obviously. And listen, long story short, I said this early on taking this job, there was an obvious better together story here. We needed to build that comprehensively to scale and authentically, we feel like there's a really inexpensive AI play here with the product suite that we already have. That's the thing that we're most excited about here in the near term. I've talked about getting into more rooms and communicating in a more articulate way and focus. We feel like combining these elements into this brand and articulating that in a clear and concise way and now measuring sort of those success factors going forward, we're excited to share more with you guys going forward. So thank you all. Look forward to talking to you next quarter.