Commerce.com, Inc. (CMRC) Earnings Call Transcript & Summary

All right. Before we begin, got some disclosures. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. And if you have any questions, please reach out to your Morgan Stanley sales representative. I'm Josh Baer, software analyst here at Morgan Stanley. We are thrilled to have Daniel Lentz, CFO of Commerce, join us for this first session day 1. Great to have you. Thanks for coming.

I want to kick it off with a discussion of all of the strategic transformation that's been going on at Commerce. If you could walk some of the details of the evolution and really how that all the transitions are impacting your company's competitive positioning, the go-to-market approach, value proposition, that would be a great plan.

There's been a lot going on. I think maybe I'll start with talking about kind of broadly what we see happening within Commerce as a whole and where Travis has been taking things since he stepped in as CEO about 1.5 years ago, and I'll kind of then lead into what that means for the company specifically. So Travis' point of view ever since he took over as CEO is that -- and we talked about this in our Investor Day about a year ago, was that Commerce was going to be moving more and more towards data and Commerce orchestration and infrastructure more so than kind of the more human UI storefront interacting way of the past. I think what's happened over the course of the last year with AI and Agentic commerce, which is a buzzword that I don't think really gets explained very well, which we can talk more about in a minute. I think it's gone very much a lot of the ways that Travis saw it going. I just think it's gone a little faster perhaps than certainly what we anticipated maybe some others did. And so what we've been working on essentially is positioning the company to be integrated across all the assets that we have. And over the last year, we came out with new branding. Really the intent behind the new branding was not because we thought that simply changing the company name was going to in and of itself lead to dramatically faster growth or anything like that. It was really about harmonizing and connecting the brands. We have Feedonomics is an asset that does data orchestration and catalog enhancement, which is really key in the AI world. It's a totally platform-agnostic solution. A lot of customers were confused because they thought you would need to switch to BigCommerce as a platform in order to use Feedonomics because we owned Feedonomics. And it actually was kind of impairing our funnel in some ways. So we looked at that and said, okay, we need to kind of harmonize the assets and bring it together under the story of where we believe the market was going with Commerce infrastructure and orchestration beyond just kind of normal storefront. I'm going to launch a website and do a direct thing, which is kind of where the business has been and Commerce has been more in the past. So started with saying, let's harmonize the assets, bring them together and integrate them well. That led to changes that we needed to make on the go-to-market side of things to drive better success in how we were cross-selling assets to our existing base. We had decent success with that, but we really saw a lot of opportunities to really improve cross-sell within the platform as a whole. We needed to get to lower price points in order to do that based on our existing customers, and I'm sure we'll get to this later. But in our most recent quarter, we disclosed where we are for total GMV on the platform, which reached about $32 billion last year. And GMV is growing at a healthy rate. It's growing faster than what we're seeing in revenue, however, because we've got this monetization gap problem that we're working on. And so we've kind of looked at this as a whole and said, all right, well, we need to harmonize the assets, bring them together. We need to match the go-to-market structure around that. We need to bring in new leadership team in a lot of cases that can help us get to that next phase. And that's kind of where we've been over the course of the last year. I think there's areas that have gone well, and there's some areas that we need to continue to get a lot better. I'd say areas where we've done well, company financial health is, I think, very good, very healthy balance sheet. We have almost no net debt remaining. We have no material debt maturities until 2028. Our profit outlook for this year at the midpoint of our guide is up almost 60% year-over-year, and that's despite not getting to the revenue growth rates that the business is capable of. So I would say we're running the business very, very efficiently. We're deploying capital well. The biggest issue though is we're not getting the growth that the business is capable of. And part of that is because we need to make improvements on monetization rates with existing customers, which I'm sure we'll get to.

Yes. Great overview of all the changes, and we will unpack a lot of that. Maybe taking a step back, I want to just get a better sense, this is a giant market, a giant market opportunity. Like where is your focus? How do you balance between B2B versus D2C in your customer mix, SMB versus enterprise? Any thoughts on like your target customer and segmentation?

Yes. So I would classify our sweet spot in 3 areas that we focus. 2, I would say, on the platform side and one on the Feedonomics kind of data enrichment and orchestration area. Feedonomics historically has been very upmarket, very large customers. The IR 1000 like we have huge market share with really large customers on the Feedonomics side, lululemon, Dell, Nike, huge, huge, huge customers. On the platform side of things, there's really 2 areas where we focus the most. That's complex manufacturers and distributors on the B2B side of things. We also sell to just simple kind of more B2C looking wholesale use cases, but we really tend to thrive in true complex B2B and B2B use cases. On the B2C side of things, we have a huge installed base there as well. We tend to do the best in what I would describe as kind of more complex B2C use cases, whether that's multilevel marketing, regulated industries, things like that. Our product has a lot of configurability and customization that we can handle that a lot of our competitors cannot. And so we tend to really do well in merchants that have kind of more complex use cases. Regardless of size, size is not always the best proxy for customer complexity. We can have customers that are doing $20 million in GMV a year, but have a really complex business model and who they need to support, and we tend to do very well in those areas.

Okay. Great. Maybe just jumping into the topic of Agentic and AI. I want to talk through some of the opportunities and then some of the risks. So to start, I mean, you've got partnerships with Perplexity and Google, Stripe, PayPal, OpenAI, Copilot. Just want to help investors understand what Agentic commerce really means for your business model over the next few years? And how do you think about that opportunity and monetization?

Yes. So I think this is the best topic, I think, to really spend time on today, and I think it's most important for investors to understand. My personal opinion over the last 6 months, there's been a lot more press releases than there has been substance and what's going on in this area. I feel like everybody is trying really hard to get things that are out in the market about what everybody is doing in Agentic and Agentic. What does that mean to Commerce from our perspective? Agentic commerce, I would describe as the trend that moves from e-commerce shopping being dominated by human users browsing websites to increasingly more agents doing discoverability, influencing purchase decisions and then eventually transacting on behalf of those shoppers. What ends up changing as a part of that actually is more and more of the Commerce discoverability experience for merchants is based around the actual Commerce infrastructure and the data discoverability just as much as like what traditionally has been more of a content-driven browsing experience on behalf of humans. So what does that mean for our business? We believe this is actually a structural advantage for where things are going in our business. So if you think about what is Commerce as a whole, we've been focused on being the Commerce infrastructure layer because we have both BigCommerce and Feedonomics, we're a platform-agnostic solution that allows customers to get their catalog data discoverable in shopping channels. From our perspective, in a lot of ways, all of the increase in volume in discoverability and transactions eventually that goes to the LLMs that looks like another shopping surface to us. It's a more complex receiving algorithm for sure. But we believe over time that merchants are going to benefit from infrastructure partners that enable them to interact with agents that's API-driven, more than human UI-driven types of experiences. And we believe that over time, LLMs are going to gain share in shopping, but it's not going to be like the exclusive channel. What this means for us from a monetization perspective, I think, is actually a tailwind over time. We monetize our platform through transactions and GMV. We're responsible for all of the compliance requirements, catalog management requirements, security requirements, all of those things. That's all back-end infrastructure fundamentally. The storefront that gets served up in shopping is one of many surfaces that our customers can have their products discovered through. But the focus of our business has always been to kind of agnostically make sure that those products -- that data is enriched and transformed for the needs of the receiving algorithm in each one of those channels. That's the advantage of Feedonomics as an asset, and I think how we are unique and different. We're an open platform that basically can say to merchants, look, we're going to handle all of the back-end infrastructure that's really, really painful for you. And then we are going to integrate the product such that when you are out -- if you have merchants that are shifting discovery from SEO to GEO, that just looks like a different surface that we can help you in discovery with. But the monetization rails remain exactly the same. As GMV goes through the system, we monetize -- we get paid on orders, we get paid rev share on payments. I haven't seen a lot of indications that the LLMs are interested in necessarily getting into that back-end infrastructure because it's pretty hairy. Most of the time, the revenue that they make on that is more front end, almost like the ad channel like aspects of that, like Google's SEO business. That seems to be more and more of the activity is. So I think the back-end infrastructure monetization for the players in the space like us remains very much consistent. It just looks like a new channel. It also, though, for us, I think, opens up new monetization paths for us that are very interesting because now those APIs and the data connections creates new ways for us to monetize that than where we've been in the past. Yes, you can make money on the actual processing of orders. You can also make money through Feedonomics on actually how those products are being discovered in the data transformation so we can actually start to monetize things more and more through the data pipes in addition to the actual transactions.

Really helpful. Can we go a step further on the complexities of this back end and the infrastructure and really wondering if you can answer that, it will really help think about some of the risks that are coming up in some conversations around could large merchants try to build their own Commerce just given the affordability and efficiency around coding? Or to your point, you touched on could the LLM providers be interested in in digging into the back end, creating something there? Like so what is so complex and...

Yes. Said differently, I think the real question that I think everybody is really wrestling with is what is the disintermediation risk? Where does it sit within the sector, right? Does it sit with everybody in software? Does it just simply all of software is facing disintermediation risk for AI? Or is somebody slightly different? The way I would look at this is to say even in how we look at the use of AI in our business, if you are a bespoke front-end solution that is not an infrastructure solution, but you are in customer prospect data enhancement or I don't want to call out specific companies necessarily, but I'd say there are certain things that you can replace much more easily than others. Even in our own business, there's parts of my spend in software where I'm looking to cut things out. And I have people on my team saying, hey, we pay X, Y or Z. I don't think we need them anymore because I can actually just use XYZ tool in order to kind of just do data scrape and kind of do this data enhancement on its own for prospect data as an example. But that's very different than saying, I want to take on tax compliance. I want to manage all the APIs and connections in order to make sure when that product is discovered in a channel that I know the inventory, I know the pricing, I know the availability depending on all those different stores, and I can process all of those orders in a way that's compliant with regulations in all the different countries all over the world. I think it's a lot harder to vide code that than it is something that's purely front-end experience oriented. I think right now, the fear though is to say, well, does this just mean everybody in software is facing disintermediation risk. I think things are going to change, but I think the trend of where things going actually plays itself well to the advantage of folks that are really on the infrastructure side of Commerce like us. The other part of your question though, I think it's at like, well, what level of almost vertical integration could you see either from the merchants themselves or do you see it from the LLMs? Let's start with the LLMs and go to the merchant. Here's how I think about this. And I don't know that I'm right because I think this is all happening so fast. Everybody is still trying to figure some of this out. But even if the LLMs were to start wanting to get into that merchant of record Commerce lane, well, there's 3 ways people primarily make money in e-commerce. It's the processing of orders, it's the processing of payments, and it's monetizing discoverability typically through some sort of ad revenue model, right? For the LLMs, even if they started going more into commerce-like solutions, from the merchant point of view, you still need one infrastructure solution that can handle inbound order volume and routing to your ERP systems and everything else that is agnostic across channels. Like I can't think of a single merchant that is so enamored with any AI surface that they're going to want to completely have 100% of their Commerce solution completely embedded into one AI channel. That would be analogous to like why exactly is it that despite all of the growth and success in marketplace sales and e-commerce for years, whether it's Mercado Libre or Amazon or a whole host of these others, brands have hesitancy in giving all of their volume into a marketplace because in a lot of ways, arguably, you're commoditizing your product by seeding that front-end discovery experience to the marketplace. I would argue in some ways, it could be similar with LLMs. You want the discoverability, you want the volume, but you're not going to want to seed the brand loyalty experience and how you influence payments and all the rest of it. And so you're still going to need one kind of harmonious back-end system that can connect all of these things together, which is really where we're focused. From the merchant perspective, if they want to create their own bespoke Commerce solution and take on the security risk, regulatory risk, processing payments, all the rest of that kind of stuff, good luck. I think that's very, very complicated. I think there's a lot of moats purely in the embedded complexity of that type of business.

So maybe just to round out the conversation around Agentic and AI, what actual products and capabilities do you have? And like where is the market as far as adoption and interest?

It's moving really fast. I would say in terms of products, we have a whole bunch of things that we're working on. Already, you can go to Feedonomics and take your entire catalog, whether you're running on BigCommerce or Salesforce Commerce Cloud or Shopify or whatever, it doesn't matter. And you can take that entire catalog and have that catalog data enriched to optimize your discovery results in channels, whether they're ad channels, marketplace channels or AI-driven LLMs. That's available today. We're also, though, taking that kind of Feedonomics capability and bringing it into the core BigCommerce customer where the kind of the average size of a BigCommerce customer is smaller than the average size of a really large Feedonomics customer. So we had a price point disparity problem there, which is why we launched Feedonomics Surface. It essentially allows you to take that Feedonomics capability and make it available at a lower price point to a larger set of customers. So for example, we're working on things like auto catalog enrichment where customers actually can pay to have their catalogs automatically transformed and push a button to be able to connect it to each one of those different surface channels and say, well, I want to have my catalog now connect to all these channels like I used to, but I want to have the data automatically transformed by Feedonomics, and I'm willing to pay in order to do that so that it's optimized for all those channels. That's stuff we're working on today, and there's a whole host of other additional features that we're bringing in at the same time.

Great. You are the CFO. Maybe we should talk a little bit, well you are also the COO. But...

I stressed in more than one area now, yes.

Yes, but let's talk some number.

Let's talk money, yes.

Yes, some financials. Let's start with growth. And in your opening remarks, you talked about really healthy GMV growth and overall revenue growth profile where there's some gap. I think it's 12% GMV growth and...

3% to 4-ish revenue.

Revenue growth. And so how do you narrow that gap?

Yes. So let me kind of step back a little bit and talk about why we made some of the changes to our reporting metrics because I've gotten a lot of questions about this. And any time you make major changes to the numbers that you're sharing with investors, I think you always need to clarify why you're doing that and make sure people understand the intentions behind it. Our intention was to add transparency and comparability between us and other folks within the space. We look at the platform and what Travis and I have seen for several years now as we've looked at the business is we say, look, when you look at where we are from a total business net revenue retention basis, we think we're 10 points below where we need to be to be best-in-class within SaaS or even good, right? We know we have issues there that I'll get to in a second. That's kind of point one. We have been talking about net revenue retention results, but for a subset of customers that were buying our largest plans, those are still a very important subset of customers. But the underlying economics of what we're seeing from small business customers that are buying self-serve platform plans are much healthier now than at any point in time in the 7 years that I've been at the company doing this, which is -- it created a lot of optionality for us from a competitive perspective because now there's a lot more ways that we can fuel growth in the business than just winning competitive market share and platform displacements upmarket, which is where we've really been focused over the course of the last several years. And so when we looked at the metrics, we said, okay, we want to add transparency about net revenue retention for the business as a whole. I think that that's just best-in-class, even though it's not a number that I think is anywhere close to where it needs to be, I think it's important for transparency. The other issue is where were we on a GMV basis? Why were we not disclosing GMV before historically? Because I've gotten questions about this for years, ever since the IPO. Well, the big reason for that is because historically, the correlation between our revenue growth, particularly partner and services revenue, which is more transactions rev share based, the correlation has strengthened over time over the course of the last probably 2 to 3 years in particular, where now I believe it is more predictive of where things are going as a business. And in addition, because we weren't sharing that number, I think, broadly speaking, in the market, I think our size and scale has been underestimated. We're sitting at $32 billion in GMV that's running through the platform, and it's growing reasonably healthy. The issue that we've been looking at is saying, okay, customers that are staying on the platform are growing quite well. What we don't have is strong enough ways to grow our revenue and wallet share, so to speak, with those customers as they're growing on the platform. That's the core problem that we see driving NRR and the core business -- the core problem that's kind of driven where we've been deploying capital over the course of the last 1.5 years and why we've been so focused on creating products that can create upsell vectors within our existing base that don't require involving salespeople all the time. What I would say broadly speaking, and I know we've talked about this a bit in the past, I may be a little weird among CFOs because I talk as much about the warts as I do the things that are going extremely well because I just want our investors to know what we're working on, right? We have been overly reliant on a sales assist competitive displacement motion to win really large customers in replatforming. When customers are on the platform, because we haven't been very opinionated about which technology partner solutions they use or finding kind of traditional product-led growth vectors to expand once they're already on the platform, we've really been too reliant on new account wins in order to power our growth rate. And I think over the course of the last 2 years, depending on the metrics you see, cost of acquiring new customers has gone up almost 100%. I think some of the benchmark data I've seen is it's gone up about 90% since interest rates kind of became normal. I think that's only going to continue to grow. We really needed to find ways to expand existing customers better. That's the #1 reason why NRR is not where it needs to be. It's not fundamentally a gross retention problem. We don't have enough of a spread between gross and net retention today in the business. That needs to improve. So we are directing capital in that direction in order to lead to kind of that better floor NRR and narrow that gap between GMV growth, which is fundamentally healthy. Customers are doing well on the platform. We're just not capturing enough of that growth and value for our shareholders on the revenue side, which is driving where we're putting capital.

That makes sense. And so one of those levers to narrow that gap could be newly -- relatively newly announced BigCommerce payments. Can you talk a little bit about the decision to roll out BigCommerce payments now and how that can contribute? And anything else to call out from like a specific product perspective with regard to the NRR?

Yes, absolutely. I'm not going to spend a ton of time expounding why it makes sense for Commerce platforms to have a branded payment solution. I think there's plenty of examples of where that's been successful over time. I wish we would have probably moved into it earlier, to be frank. Why now? There's a real opportunity, we believe, to narrow the aperture in where we are focused from a payments and fintech point of view, just in general. We've historically been completely agnostic to whatever payment solution any one of our customers want to use. There's a reason for that. We tend to work with customers, as I said, that have more complex use cases, right, which means if you're in a regulated industry and you are in tobacco or sporting goods or something like that, there are certain payments partners that will work with those merchants, and there's other payments providers that will not. We're not going to turn away business because the payments partner that we happen to have a joint solution with, doesn't tend to work with customer A, B or C. We need to offer all of the payments optionality that customers need with complex use cases in order to be successful on the platform. But what we can do is go from a place where we are investing to maintain 100 different payments partners to say, okay, we're going to narrow the aperture and really focus on 6 or really, really focus on 5 that we think cover the breadth of the use cases and complexity that our customers need. But in kind of narrowing that aperture, we can get a lot deeper in the integration that we have with those partners, so we can have a better technology solution that's more integrated. And then it also will enable us to have more volume on GMV going through more advantageous monetization agreements as well to help narrow the gap. So when I think about what we're doing in terms of our payment strategy, it's not just about the launch of BigCommerce payments. We have multiple partners that we work with, some of whom we're not doing a payment solution with that remain critical partners. I mean I take Adyen as an example, as a fantastic solution for large customers. Many of our customers, especially in Europe, are going to use them and need to use them. I'm not going to turn them away or try to force them into a solution that may not be fit for purpose for what they need in Europe. I'm just going to say Adyen is fantastic, use them or Stripe or Worldpay or many others that I can name that are really fantastic in the areas where they play. But in addition, there's a huge portion of our base where one solution integrated into the control panel and everything built into the core product can get a lot of value and just having an out-of-box payment solution that's just set up and preconfigured that just works. And we think PayPal is a fantastic partner for that. They're really leaning in with us on that and building that out. That's going to be available. It's on track to be launched by the end of this quarter, which I'm really excited about. We're going to be integrating that into how we approach kind of our core packaging and the platform product. I think some of our competitors have done, frankly, a really, really nice job in using payments and other services and differentiation to create better stratification and differentiation between their planned levels, which I think also helps drive upgrades. It can prevent downgrades. And we're looking to do very similar things. Sometimes your competitors do things really well, and it makes a lot of sense to follow them and do it the same way. So we're going to use the launch of BigCommerce payments as a way to build some very, very similar setups in our pricing and packaging as well. That will come out. We'll kind of start talking about that kind of by the end of this quarter, we'll have a lot more to say on that on our next earnings call as well.

So is it too early to talk about expectations for adoption and kind of contribution?

What I would say is, I mean, obviously, built into the guide. That's a canned answer, but it's the truth. We have a lot of customers that are obviously already working with PayPal that we believe we can move into the solution immediately and kind of start with a good critical mass and then grow it from there. We don't really have intentions to go out and try to get them to switch from -- if we had a small subset of embedded partners like I was describing, we're not going to be trying to get everybody to move into that white labeled solution. If the other solution is delivering great value for the merchant and we're really getting good economics from that agreement as well, there's no reason to do so. But some of the more long-tail partners where the integrations aren't as good, it's not really what's best for the customer anyway, and we can drive more volume there. That's what we're going to be focusing on.

And how are your sales reps incentivized around the BigCommerce payments opportunity? And do you have to wait until your merchants come off contracts of their existing payments providers? Like what should we keep in mind on the pace of the...

Yes. So where customers have locked in with existing payments contracts, obviously, you're going to have to wait until some of those expire in order to move them over. So it's not like all of a sudden, $32 billion worth of GMV is going to switch into a branded payment solution. I wish that were the case. Even if you look at some of our competitors, they report on an equivalent of GPV on a branded solution versus GMV on total. We're kind of looking at how we have some similar metrics we can share in the future. But it's always going to be hard to get 100% of it over. We're trying to get as much as we can initially moved over out of our existing base by having as much of the PayPal installed base move over, which I think is a good start. And then really driving as much new account acquisition into that motion as possible. And there will be some motions where we have to try to get merchants that may be on a solution that isn't as good that we think isn't as fit for purpose for what they're doing, we think we can move them into kind of this narrow subset. We'll do that over the course of the next year or so as well -- or year or 2 as well. But it's going to take time. That's why I think I used the phrase in our earnings call that it's incremental benefit. I just -- I don't want to get ahead of ourselves here on the expectations of adoption. Like it's going to take time in order to do this, but we think, obviously, that this is a really good first step. And we're looking at -- and Travis has a very set point of view on this where he just says, look, by driving simplicity with a smaller number of partners, you can have better merchant outcomes. And in so doing, you can narrow the gap between GMV and revenue growth. So we're looking at what we can do in a lot of other areas within the fintech stack where we think we can have similar arrangements that can make a lot of sense. We're starting with payments.

Excellent. Can we come back to the 2026 revenue guidance, which was wider than typical. Could you talk a little bit about why the wider range and what assumptions are embedded at the low end and the high end?

Yes. I think the wideness of the range just reflects kind of where I see the potential range of outcomes, at least the start of the year. We have more new product and features shipping in the next 6 months than probably what I've seen in the last 2 to 3 years combined. And I'm not being hyperbolic. I'm being very literal in looking at our product road map. Part of that is due to increase in investment. Part of it is just -- I'm just seeing a lot of excitement in our product engineering teams and what they can do. And part of it is also efficiencies that we're seeing from use of AI internally and a whole host of tools, which we could get into if we want to. But we're seeing throughput increases that are really exciting. Because we have so many things kind of coming at once, it's hard for me to have a really easy comparative precedent because we have more good things that could happen this year than what I've seen in years past, thus the wideness of the range. That said, there's still a lot of other factors that kind of move the other direction, like we talked about on our call. There's a lot of excitement about what's going on in the AI and Agentic world, like leading into the holiday period, there was much more conversation about with our merchants with them saying, look, I'm seeing a 30% drop-off in Google search volumes. And I've known how to optimize SEO for 20 years. Now all of a sudden, all of this discoverability is shifting into these channels that I don't know how to optimize yet. I don't know that they know how to optimize it yet, to be frank. We talk to them all the time. I mean we were one of only 2 platforms mentioned by Google in the UCP announcement, like we're in all of these conversations all the time. And it's complicated. And I think merchants are looking at saying, look, now especially on the B2C side, I don't know if this is the time I really want to be focusing on a big replatform exercise. I just want to make sure that I understand where my volume is coming from. And so I think that kind of takes a little bit of the air out of the room a little bit on the B2C side of things on replatforming. And so when I was contemplating the range, I just looked at this and said, look, there's a lot of upside that can be here on this business. But I also want to be realistic about what could the lower end of this look like. And I think we'll obviously tighten that range pretty -- a lot as we get through the year.

Great. I want to ask you 1 or 2 on competition and then finish on profitability. Yes. I was hoping you could lay out like given how we started with your segmentation, like who do you see as your core competitors today, but also where do you win? How -- or when do you win against Shopify? Like how big of the opportunity is with the legacy players still? Like how do you think about the competitive landscape and your right to win?

Well, I would say it's fairly different between B2B and B2C. On the B2C side, obviously, at Shopify. We run into them all the time. Magento, obviously as well. The B2B side run into Magento a fair amount. Shopify are more of the simplistic B2B use cases. I would say they have a reasonable solution for more like wholesale. The more it looks like B2C, the better they tend to do is the way I would describe it. And I don't mean that as a knock. There's a lot of volume there. And I think they do a nice job serving a lot of that. So I think it really kind of depends on the segment, but in a lot of ways, it's obviously going to continue to run into Shopify. The second part of your question was what again, sorry?

Just thinking about how much of the opportunity is replacing the legacy vendors.

I think it's obviously still there. But what I would say is we are on the platform side of things, obviously going to continue to focus on those competitors. But I think where things are shifting plays itself a lot more towards thinking about this as an agnostic infrastructure layer, where I think Feedonomics is really, really key. Fundamentally, who is Commerce? Yes, we have a branded Commerce platform solution. But what we're really fundamentally about is we are about merchants need to get product catalog data to surfaces where those products can be discovered and purchased. And then they need to route that order so they can get it to -- at the right price from the right distribution center and do it in a way that's regulatory and compliant. That's fundamentally all our business is. We are platform agnostic with Feedonomics, payments partner agnostic, channel agnostic. Like our whole value proposition would be for a merchant, if you're trying to get the back-end infrastructure layer that allows you to have your products be discoverable wherever customers are shopping, and we handle all of the hairy back-end infrastructure part of that, whether that's data catalog management, data enrichment and optimization for specific receiving algorithms across all these channels to the tax compliance, security, connections to ERP and order processing, all that kind of hairy nasty back-end part of it, that's really where we thrive. And I think that where things are moving in the market actually gives us more and more advantage as we head towards the future in that.

Excellent. So you've done a tremendous job expanding margins over the last several years. Like how should we think about the pace of margin expansion in the next couple of years?

Well, we announced a restructuring recently that essentially took a chunk of what we had been spending in G&A and the go-to-market functions, redeployed a fair amount of that capital on a cash basis into R&D and then just a lot that we just took out to deliver back out to shareholders. Why did we do that? Was it some sort of mission of a gigantic problem? I'd say more so, we're doing the same motion that we announced over a year ago. We just don't need the same number of resources to do it as where we thought a year ago. We're deploying a lot of tools on the go-to-market side, whether it's actively or other tools that just allow us to get more efficiency than where we were and enabled us to kind of free up dollars out of the go-to-market funnel and deploy it back into the core product. And in addition to that, I've been pretty laser-focused on sales and marketing expense efficiency, and it hasn't been anywhere close to where it needs to be for the last year or 2. So this has been an area of focus for all of us for quite a while. What it means for pace of margin expansion? At the midpoint of our profit guide, non-GAAP operating income was up, I think, 57% year-over-year, and that's despite us not getting to the revenue growth rates that we think the business is capable of. Really proud of that. It's a whole lot easier to drive margin expansion when you're growing like crazy than when you're having to just get really, really narrowly focused on how you're delivering the business and operations. I'm really proud of the fact that we -- despite the fact we haven't gotten to the revenue that I think we're capable of, we have gotten to a really, really healthy balance sheet. We've increased profitability in a really big way and freed up a lot of cash to reinvest back in R&D without having any negative consequence on what we're doing on the profitability side. Like on a cash investment capital basis, R&D investment is up like 20%, 20%, 30% year-over-year, which I think is really, really outstanding. To get to the high side of the profit range, I want us to land on the higher side of the revenue range. What we're not going to do is start just plowing taking money out of the business to deliver incrementally a few more basis points in profit at the expense of growth. What I've looked at in the trade-offs is say, look, I believe by investing in the core product and creating more expansion opportunities with the existing base, we can grow net revenue retention, which ultimately I think is the ultimate barometer of a really healthy business, increased kind of that floor growth rate, which is a much more efficient way of doing it from a sales and marketing basis because you're investing in the core product, you're better off on a gross retention basis and you get a much better flywheel effect versus where in the past, I think we've been plowing more of our capital into new account acquisition, which is just a very expensive way of doing it. So I think we can continue to expand margins even with modest revenue growth rates. I think we've demonstrated that clearly in the 3 years or so that I've been CFO. But I'd like us to be growing a lot faster than we are. And then at that point, this is a reinvestment discussion. And I think I am a large shareholder. I think I speak on behalf of all of us. I would much rather have faster growth, but I'd rather have 5 points more growth than an extra 500 basis points of profit margin at the moment. And -- but we are going to be disciplined. We are going to continue to run a disciplined business. We're not going to be dumping capital at things that aren't clearly showing strong ROI.

Excellent. We are out of time. Daniel, thank you so much.

Welcome.

Really appreciate it. Thank you so much for conversation. Thank you so much.