Commerce.com, Inc. (CMRC) Q3 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call presents a mixed picture: while financial metrics show slight improvements and strong cash flow, the guidance remains uncertain, particularly for the holiday season. Product development appears promising, but reliance on partnerships poses risks. The Q&A reveals concerns about declining enterprise ARR and vague management responses, offset by optimism in AI and new product launches. The balanced positives and negatives suggest a neutral sentiment, with no strong catalysts for significant stock movement.

Key Financial Performance

Revenue $86 million, a 3% increase year-over-year. The increase was consistent with the guidance range.

Non-GAAP Operating Income $8 million, which exceeded the high end of profitability guidance by nearly $5 million. This represents a 413 basis point improvement year-over-year.

Operating Cash Flow Approximately $11 million, marking the second consecutive quarter of double-digit operating cash flow margin. This demonstrates operating leverage in the model.

Annual Revenue Run-Rate (ARR) $356 million, up 2% year-over-year. Enterprise ARR represented 76% of total ARR compared to 74% in the prior year, with average revenue per enterprise account reaching $46,806, a 7% increase from Q3 of last year.

Non-GAAP Gross Margin 79%, maintained cost discipline even as reinvestments were made in product development and sales enablement.

Partner and Services Revenue Just above $21 million, up 2% year-over-year.

Net Debt Position Just under $11 million, reflecting an 86% decrease since Q3 of 2023.

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Operating Highlights

AI-driven product discovery: Commerce is leveraging AI to reshape how customers discover, evaluate, and purchase products. New products anchored by Feedonomics are being launched to meet this shift, enabling merchants to surface their catalogs in AI-driven contexts.

Feedonomics Surface: A feed management product launched for BigCommerce merchants, allowing them to connect and optimize product feeds across Google and Meta. Future upgrades will include AI-powered feed optimization features.

Makeswift: Empowers marketers to build and update AI-optimized site experiences in real-time without coding. Planned launch on Stencil in 2026.

Feedonomics order orchestration: Now available a la carte to pilot merchants on BigCommerce and Shopify, enabling optimized fulfillment across locations.

BigCommerce Payments powered by PayPal: A new embedded payments offering launching in early 2026, providing full-stack payment capabilities directly within the BigCommerce control panel.

B2B momentum: Commerce continues to attract major brands like ADI Global, Big Ass Fans, and Pantone. IDC validated a 391% 3-year ROI for B2B Edition customers.

Partnerships: Strategic partnerships with PayPal, Perplexity, Microsoft, Google, and Stripe reinforce Commerce's leadership in AI-driven commerce.

Revenue and profitability: Q3 revenue reached $86 million, with non-GAAP operating income of $8 million, exceeding guidance. Annual revenue run-rate is $356 million.

Cost discipline: Non-GAAP gross margin at 79%, with reinvestments in product development and sales enablement. Operating cash flow was $11 million.

Balance sheet: Closed Q3 with $143 million in cash and reduced net debt to $11 million, an 86% decrease since Q3 2023.

Rebranding and bundling strategy: Rebranded to Commerce and unified product portfolio to align with an AI-led future. Bundling strategy aims to deliver measurable results for customers and shareholders.

Efficiency focus: Plans to improve sales and marketing expense efficiency through partner-led distribution, simplified product packaging, and tighter resource alignment.

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Risk or Challenges

AI-driven commerce transformation: The shift to AI-driven commerce requires significant adaptation by merchants to remain visible and relevant in a market where product discovery begins with AI prompts rather than traditional e-commerce flows. This transformation poses challenges in terms of data quality, integration, and merchant readiness.

Scaling profitable growth: The company acknowledges the need to grow faster and more profitably, which indicates potential challenges in achieving operational efficiency and market expansion simultaneously.

Sales and marketing expense efficiency: The company aims to improve sales and marketing expense efficiency, which may involve risks related to resource allocation, partner-led distribution, and simplified product packaging.

Economic uncertainties: The company’s financial performance and growth are subject to broader economic uncertainties, which could impact customer spending and adoption of its services.

Competitive pressures: The company faces competitive pressures from other e-commerce platforms and technology providers, particularly in the AI-driven commerce space.

Regulatory and compliance risks: As the company expands its offerings and partnerships, it may face increased regulatory and compliance risks, especially in payments and data management.

Dependence on partnerships: The company’s strategy heavily relies on partnerships with major players like PayPal, Microsoft, and Google. Any disruption or changes in these partnerships could adversely affect its operations.

Product development and innovation: The company’s success depends on its ability to innovate and launch new products, which involves risks related to development timelines, market acceptance, and technological feasibility.

Customer retention and acquisition: The company’s growth strategy includes expanding its customer base and increasing share of wallet within its installed base, which may be challenging in a competitive market.

Supply chain and operational risks: The company’s ability to deliver its services effectively may be impacted by supply chain disruptions or operational inefficiencies.

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Guidance & Outlook

Revenue Expectations for Q4 2025: Revenue is expected to be between $87.8 million and $92.8 million.

Revenue Expectations for Full Year 2025: Revenue is projected to be between $340.6 million and $345.6 million.

Non-GAAP Operating Income for Q4 2025: Expected to range between $4.3 million and $9.3 million.

Non-GAAP Operating Income for Full Year 2025: Projected to be between $24.7 million and $29.7 million, with a midpoint of $27.2 million.

AI-Driven Monetization Opportunities: Feedonomics Surface starts as a free product for BigCommerce merchants with a scalable monetized upgrade path. BigCommerce Payments powered by PayPal, launching in early 2026, will generate monetization upside through payment economics and deeper merchant engagement.

Product Launches and Strategic Plans: Feedonomics Surface launched in Q3 2025, with future upgrades planned for additional paid features. BigCommerce Payments powered by PayPal is set to launch in early 2026. Makeswift on Stencil is on track for a 2026 launch.

Focus Areas for 2026 Planning: The company aims to grow faster and more profitably by improving sales and marketing expense efficiency, leveraging partner-led distribution, simplifying product packaging and pricing, and aligning resources across key verticals.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:What is causing the sequential decline in enterprise ARR and the downtick in enterprise customers?

A:The decline is attributed to slower progress in bookings than expected, with net revenue retention remaining around 98%-99%. The platform side has been tougher, while there is momentum in AI and agentic areas.

Q:What are the expectations for the holiday season, including Black Friday and Cyber Monday?

A:Momentum is expected around AI readiness, with large branded manufacturers and retailers in closed beta. Efforts are focused on B2C data and AI, with strong momentum on the B2B platform side. More updates will be shared in the next quarter.

Q:What are the competitive dynamics of discoverability in answer engines?

A:The quality of data, both structured and unstructured, is key. The company believes its enriched data and agnostic approach provide a competitive advantage. Partnerships with payment providers like PayPal also add value.

Q:Why is the Q4 guidance range wider than usual, and what factors influence it?

A:The wider range reflects uncertainty in consumer behavior during the holiday season. While macroeconomic signals are resilient, some caution is warranted. The company is optimistic about stable revenue growth, new product launches, and improved profit margins.

Q:Which new product rollouts are most exciting for 2026, and what are the plans for Feedonomics Surface?

A:Feedonomics Surface is a highlight, being the most downloaded app. It is currently limited to BigCommerce customers but may be extended to other platforms in the future. Makeswift will also see significant updates, including availability on Stencil and other surfaces.

Q:What is the impact of the PayPal partnership on RPO and the P&L?

A:The PayPal partnership includes elements like slotting and development fees that will impact RPO. The company does not plan to fully adopt a fintech P&L model but sees high-margin revenue opportunities.

Q:How does unbundling Feedonomics order orchestration drive adoption, and what is the broader pricing and packaging strategy?

A:Unbundling allows for targeted adoption and cost savings for merchants. The company is focusing on product-led growth, bundling, and partnerships to improve cross-sell opportunities and expand adoption.

Q:What is the demand environment for 2025, and how are AI initiatives affecting merchant investments?

A:B2B demand remains consistent, while B2C demand has shifted focus to AI and data strategies. Replatforming is less of a priority as merchants address challenges in discovery and shopping through AI.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on the monetary investment levels of merchants in AI initiatives, stating only that it is a significant focus area. Additionally, updates on certain product rollouts and partnerships were deferred to future calls, leaving some questions partially unanswered.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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