BILL Holdings Inc (BILL) 2022 Q1 法說會逐字稿

Good afternoon, and welcome to Bill.com's First Quarter of Fiscal 2022 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference call is being recorded. (Operator Instructions)

With that, I would like to turn the call over to Karen Sansot, Vice President of Investor Relations, for introductory remarks. Karen?

Thank you, operator. Welcome to Bill.com's Fiscal First Quarter 2022 Earnings Conference Call. We issued our earnings press release a short time ago and furnished the related Form 8-K to the SEC. The press release can be found on the Investor Relations section of our website at investor.bill.com. With me on the call today is René Lacerte, Chairman, CEO and Founder of Bill.com; and John Rettig, Executive Vice President and CFO.

Before we begin, please remember that during the course of this call, we may make forward-looking statements about the operations and future results of Bill.com that involve many assumptions, risks and uncertainties. If any of these risks or uncertainties develop or if any of the assumptions prove incorrect, actual results could differ materially from those expressed or implied by our forward-looking statements.

For a discussion of the risk factors associated with our forward-looking statements, please refer to the text in the company's press release issued today and to our periodic reports filed with the SEC, including our most recent annual report on Form 10-K and quarterly report on Form 10-Q filed with the SEC and available on the Investor Relations section of our website. We disclaim any obligation to update any forward-looking statements.

On today's call, we will refer to both GAAP and non-GAAP financial measures. The non-revenue financial figures discussed today are non-GAAP, unless stated that the measure is a GAAP number. Please refer to today's press release for the reconciliation of GAAP to non-GAAP financial performance and additional disclosures regarding those measures.

In addition, our acquisition of Invoice2go closed on September 1, 2021, and therefore, our reported fiscal first quarter results include 1 month of Invoice2go's results. At times during this call, we will discuss organic or stand-alone results, which exclude Invoice2go and also exclude Divvy, which we acquired on June 1, 2021, to help listeners understand our organic performance.

Now I'll turn the call over to René. René?

Thank you, Karen. Good afternoon, everyone. Thank you for joining us today. I hope that all of you are healthy and doing well.

We kicked off our fiscal year with momentum. In the first quarter, we delivered strong revenue growth, acquired Invoice2go and helped hundreds of thousands of businesses simplify and automate their operations so they can focus on what they do best.

Our results demonstrate the strength of our organic business and the expansion of our platform's capabilities. Total revenue for the quarter increased 152% year-over-year. Bill.com's organic core revenue growth increased 78% year-over-year, driven by strong adoption of our platform and payment solutions. Revenue from our Divvy spend management solution continued its trajectory of strong growth above 100% year-over-year. Our performance in the quarter demonstrates the significant demand in the market for digital solutions to transform financial operations.

During the quarter, we acquired Invoice2go, a leading mobile-first AR solution. The acquisition enhances our AR capabilities, expands our TAM to include serving sole proprietors and gives us an international footprint with subscribers in more than 150 countries. The acquisition will strengthen our 2-sided network by bringing advanced AR capabilities, including invoicing and payments to our network members.

I'm excited to welcome Invoice2go's 100-person team to Bill.com, which includes team members in the Bay Area and Sydney. With the acquisition of Invoice2go, Bill.com ended the quarter with more than 350,000 businesses on our platform.

Our vision is to be the all-in-one financial operations platform for SMBs. We know that small and midsized businesses are looking for a single solution, and we are uniquely positioned to meet those needs with our comprehensive AR, AP and spend management offerings. We are making it easier for companies to go digital, realize efficiencies and have more time to devote to their true passion, growing their business.

For example, Wilbur Labs, a Bay Area-based start-up studio that has built and invested in 15 companies since 2016, turned to Bill.com and Divvy for onboarding ease, faster bill processing enabled by our AI technology and API integration with the company's ERP system.

Nicole Fiore, Controller of Wilbur Labs, said and I quote, "Before Bill.com, we would either do manual checks or wires from our bank account and collect approvals off-line. Our process has been streamlined to cut time by at least 50%. In addition, Divvy is an awesome free and easy-to-use tool for all-in-one expense reporting that's out of the box, ready to go and doesn't take a lot of set-up time.

As a smaller F&A team, we do not have the time for a time-intensive setup or integration. Both Bill.com and Divvy have allowed us to scale with ease. As a start-up studio, we are constantly creating, acquiring or partnering to launch new ideas. Thus having an all-in-one solution as our foundational system with easy customization offerings is ideal as we grow and launch new companies."

Our platform enables businesses of all types to digitally transform their operations, including nonprofit organizations where collaboration and automation are especially important. For example, the Meridian Library District, which has 5 locations and serves as the second largest city in Idaho, uses both Bill.com and Divvy. As I've said before, the SMBs and organizations that we serve act as the heart of local communities, and this is a prime example.

The Library District serves thousands of users, has hundreds of volunteers and offers many enriching programs for the community. During COVID, they expanded their services to deliver books and PPE, and they reimagined their outreach programs to stay connected to seniors, child care centers and low-income families.

Jennie Gerwig, Finance Manager said, "We use Bill.com and Divvy and have been very happy. The integration of both with QuickBooks Online has streamlined our accounting process and reduced the time I spent processing payments and credit card charges. Using both removes the need for a process-intensive input while providing excellent transactional visibility and budget to actual information. The Bill.com and Divvy combination allows me to step into the role of reviewer, which frees up my time to apply for grants that will benefit library programs and expansion."

Since our founding, we have partnered with accounting firms to provide the best quality of services that small and midsized businesses expect from their most trusted advisers. Bill.com's platform is the go-to mission-critical solution for accountants. It eliminates the manual aspects of their work, allowing them to focus on their strategic advisory services. More than 5,500 accounting firms use our platform to grow their practice and automate operations.

To gauge how Bill.com helps them, we recently surveyed our accounting firm customers. Based on more than 500 responses, we learned that approximately 90% of accounting firms believe that Bill.com makes their firm more efficient. And Bill.com saved them at least 50 hours of work per client every year. And most importantly, they were likely to recommend Bill.com to their clients.

An example of how accountants use our platform is UHY, a top 30 accounting firm in the U.S. UHY leverages Bill.com for their growing client accounting advisory services, CAAS, practice. Kane Polakoff, the firm's National CAAS Practice Leader said, "Bill.com makes it easy to engage with our clients and provide them with a great experience. With its intuitive and easy-to-use platform, we were able to help our clients save time and be more strategic. Bill.com is a valuable component of UHY's technology stack and is integral to our growth road map."

On our last earnings call, we outlined our top strategic priorities in fiscal 2022, which move us closer to achieving our one-stop shop vision. Our first priority is to integrate the go-to-market and product offerings of Divvy and Invoice2go. Our sales teams are driving strong organic growth of our solutions while also cross-selling Divvy to Bill.com customers through in-product discovery and personalized credit offers.

Our product teams are working on early integration features such as simple, consistent navigation throughout both solutions, single sign-on and accounting software integration. We are also working on longer-term initiatives to provide a seamless platform experience, including integrated budgeting, reporting and analytics.

Our second priority is to expand our payment offerings. We continue to see strong adoption of our virtual card and cross-border payment solutions, which we attribute to 3 factors: first, building awareness through direct sales, outreach and targeted marketing campaigns; second, promoting solutions prominently inside core product workflows; and third, leveraging our homegrown network business directory to match card-accepting suppliers with outgoing bill payments.

Our Instant Transfer solution is now widely available, and we've seen good customer adoption, demonstrating that businesses have a need to receive funds faster. When signing up to be in the network, new members can choose Instant Transfer as their default way to get paid. Early results are encouraging, and we believe many network members will elect this option.

Our third priority is to scale our relationships with our financial institutions and accounting firms. We have developed a simplified version of our white label platform, which will be the default payment and invoicing solution for SMB customers of a top 3 U.S. bank. This bank is in the beginning stages of piloting this service, and we will share more insight with you as we progress to general availability in calendar 2022.

Within the accounting channel, we recently made adding new clients to our platform easier and faster which enabled accountants to onboard them more quickly. For example, Ketel Thorstenson, a top 300 accounting firm, adopted the Bill.com platform. By leveraging our accountant-focused features, Ketel Thorstenson was able to create repeatable, standardized workflows for their team and add nearly 100 clients out of the gate.

In closing, we are making great progress on building the all-in-one financial operations platform for SMBs of all sizes. Our success is possible because of the commitment our 1,500 employees have to each other and to our customers. We continue to bring top talent to our team, including new Board members with extensive and diverse experience.

In Q1, we welcomed Scott Wagner as a Director. Scott's experience building and scaling GoDaddy to serve millions of customers around the world will be invaluable as we expand our platform's capabilities and enter new markets. All of us at Bill.com are energized by what we are doing to help SMBs.

I'd like to thank all of our employees, partners and shareholders for supporting us on this journey. And now I'll turn the call over to John to review our financials. John?

Thanks, René. Today, I'll provide an overview of our fiscal first quarter 2022 financial results and discuss our outlook for the fiscal second quarter and full year 2022.

As a reminder, today's discussion includes non-GAAP financial measures. Please refer to the tables in our earnings press release for a reconciliation from non-GAAP to the most directly comparable GAAP financial measure. In addition, the Invoice2go acquisition closed on September 1, and therefore, our reported fiscal first quarter results include 1 month of Invoice2go.

I'll also provide insight about our stand-alone or organic performance for the fiscal first quarter, which excludes Divvy and Invoice2go, given that these acquisitions closed recently.

Our Q1 results exceeded our expectations across the board, including organic core revenue growth of 78% year-over-year, non-GAAP gross margin over 83% and a non-GAAP net loss significantly lower than our expectations. Our strategy to enable Divvy to maintain their strong momentum in the near term, while at the same time investing in product integration and cross-selling, is paying off as reflected by Divvy's Q1 stand-alone revenue growth of 187% year-over-year.

We continue to believe we are in the early innings of a global digital transformation that is disrupting the legacy methods of managing the financial back-office. These trends show no signs of slowing as small businesses are increasingly embracing the need to evolve from analog, paper-based processes to digital solutions that simplify and automate their operations.

Our progress shows we're successfully turning our investments into results, creating significant value for our customers and driving strong revenue growth. Our $2 billion capital raise in September, combined with our track record of product innovation and proven execution capabilities, positions us well to capture the large market opportunity we're pursuing.

Turning to an update on our key metrics, note that today we are providing additional insights on Bill.com organic, Divvy and Invoice2go results for clarity given our recent acquisitions. We expect to begin providing consolidated metrics later this fiscal year as we transition to managing one consolidated P&L.

We ended the fiscal first quarter with 126,800 Bill.com organic customers. including 5,600 net new customers in the quarter. We also had 13,500 spending businesses using our Divvy card solution, representing growth of 2,800 net new adds in the quarter and 226,000 subscribers using Invoice2go's AR solution for the month of September.

Looking at payment volume for the quarter, we processed $47 billion in organic TPV, representing 63% year-over-year growth. We've experienced significant organic TPV growth in recent quarters, driven in part by new customers scaling faster on our platform and increased payment activity from our customer base, including from larger mid-market businesses. Looking ahead, we expect lower TPV growth rates as we're assuming the seasonal spike in TPV we experienced in Q2 last year doesn't occur this year.

During the quarter, we also processed $1.5 billion in card spend from Divvy's spending businesses, which is an increase of 160% from last year and nearly $100 million of TPV from Invoice2go's customers. While Invoice2go's payment volume is small, customers leverage the solution to send more than $2.5 billion in invoice volume in the month of September, which represents a significant opportunity for us to drive greater adoption of payments.

Moving on to the number of transactions, we processed 8.8 million payments on the Bill.com platform in Q1, reflecting 35% year-over-year growth. We also processed 4.6 million Divvy card transactions and over 100,000 Invoice2go payment transactions.

Now I'll review our reported Q1 results. Total revenue was $116.4 million, up 152% year-over-year, which includes $1.3 million of revenue from Invoice2go for the month of September. Core revenue, which represents subscription and transaction fees, was $115.6 million, growth of 164% year-over-year. Organic Bill.com core revenue growth accelerated to 78% year-over-year compared to 73% growth last quarter. In addition, we experienced very strong card revenue growth from Divvy of 187% versus last year.

Subscription revenue increased to $35 million, up 43% year-over-year, driven by an increase in the number of businesses using our platform, expansion of organic ARPU and fees from Invoice2go subscribers. Bill.com organic subscription revenue growth was 39% year-over-year, which accelerated from the prior quarter, driven mainly by a slightly larger average customer size due to our success with attracting and growing mid-market customer relationships.

Subscription revenue includes $1 million from Invoice2go for the month of September. Note that the majority of Invoice2go revenue is from subscription fees on a per month, per user basis with minimal transaction fee revenue. In addition, approximately 67% of subscription fees are from annual contracts with customers.

Invoice2go subscription revenue reflects adjustments from the acquisition purchase price accounting for deferred revenue on annual contracts that existed as of the acquisition date. The annual contracts were remeasured to reflect their current fair market value, and the impact to revenue from the adjustment was approximately $2 million in Q1 and will be approximately $10 million for fiscal 2022.

As annual contracts renew over their regular course, we will see an increase in revenue based on the full annual value. Without this accounting adjustment, Invoice2go subscription revenue would have been approximately $3 million in September. Transaction revenue increased to $80.6 million, up 319% year-over-year driven mainly by interchange revenue from our Divvy card solution, payment mix shifts towards ad valorem products and strong TPV growth.

Bill.com organic transaction revenue growth was 127% year-over-year. Divvy transaction fee revenue for fiscal Q1 was $36.6 million. As a reminder, the majority of revenue from our Divvy solution is transaction-based, with minimal subscription fee revenue.

Turning to gross margin and our operating results for Q1, non-GAAP gross margin was 83.3%, up from 79.7% last quarter, driven by a higher mix of interchange and variable transaction revenue. As a reminder, we manage a portfolio of payment offerings, each having a different gross margin profile. And in the first quarter, our gross interchange revenue was above our expectations, resulting in a higher non-GAAP gross profit margin. In the near term, we expect our non-GAAP gross margin to be slightly above the range of 77% to 79% provided previously.

Non-GAAP operating expenses were $108.1 million, an increase of $39.5 million from Q4. R&D increased $8 million from Q4 as we are investing to enhance our platform, integrate our acquisitions and scale our relationships with financial institutions and payment processors. Sales and marketing increased $23.1 million from Q4, reflecting increased go-to-market expenses and a full quarter of card reward expenses for Divvy. G&A increased $8.5 million from Q4 due mainly to the inclusion of a full quarter of Divvy expenses.

Non-GAAP operating loss was $11.1 million, and our non-GAAP net loss was $14.1 million or a net loss per share of $0.15 based on 95.9 million basic weighted shares outstanding. Our loss profile was significantly better than our expectations due primarily to strong revenue and gross margin results.

Now moving on to our balance sheet, cash, cash equivalents and short-term investments at the end of Q1 were $2.8 billion, up from $1.2 billion in Q4. In September, we raised approximately $2 billion of new capital through a concurrent offering of $1.4 billion of common stock and $575 million of convertible notes due in 2027. Net proceeds from the 2 transactions totaled approximately $1.9 billion after offering costs.

Also in September, we used approximately $144 million in net cash for the acquisition of Invoice2go. We are well capitalized to invest in scaling our business given the many growth opportunities we see. As of September 30, we had $2.4 billion in customer funds on our balance sheet, which was up 10% from the end of Q4 due to the significant increase in TPV we processed during Q1.

Now moving on to our financial outlook for the fiscal second quarter and full fiscal year 2022. Note that we are providing additional disclosure on Bill.com organic revenue growth given recent acquisitions. On a go-forward basis, we don't expect to provide details of Bill.com, Divvy or Invoice2go separately as we are managing one consolidated business.

We are investing to capture this significant market opportunity and extend our leadership position in the SMB market. Our momentum creating value for SMBs with a greatly expanded set of features gives us confidence in continuing our bias towards investing for growth.

There is significant uncertainty regarding the next phase of the pandemic, and many businesses are experiencing supply chain challenges. And while we haven't seen any material impact to our business to date, we are monitoring the situation closely. For purposes of our fiscal 2022 outlook, we have assumed that there won't be a material negative impact to our business from macroeconomic or supply chain issues faced by our customers.

For fiscal Q2, we expect our total revenue to be in the range of $130 million to $131 million, which assumes organic core revenue growth of approximately 60% for Bill.com on a stand-alone basis. We expect revenue from Invoice2go to contribute approximately $5 million, reflecting the accounting adjustment I mentioned earlier.

In terms of operating expenses, we expect to increase investments associated with R&D for platform integration with Divvy and Invoice2go, scaling activities with financial institution partners and payments innovation. In addition, we expect to opportunistically accelerate investments in our joint go-to-market initiatives.

On the bottom line, for Q2, we expect to report a non-GAAP net loss in the range of $18 million to $17 million and a non-GAAP loss per share of $0.18 to $0.17 based on a share count of 102.8 million basic weighted shares outstanding.

Turning to our outlook for fiscal 2022, we expect total revenue to be in the range of $538 million to $541 million, with $24 million from Invoice2go. This assumes organic or stand-alone Bill.com core revenue growth of approximately 55% in fiscal 2022.

On the bottom line, for fiscal 2022, we expect to report a non-GAAP net loss in the range of $81 million to $78 million and a non-GAAP loss per share of $0.80 to $0.77, based on a share count of 101.9 million basic weighted shares outstanding. We have been driving the digitization of the financial back office for the past 15 years.

As we look ahead, we've never been more excited about the large market opportunity we're pursuing. We were built for this moment in time, and we're at the center of a massive transformation that is happening in the way businesses run financial operations. SMBs are increasingly realizing that investments in digital capabilities for the financial back-office are mission-critical.

With our leadership position in the SMB market and the expanded reach and capabilities of our Divvy and Invoice2go solutions, we are well positioned to address a large and growing TAM. We are building the all-in-one financial operations platform for entities ranging from the smallest of businesses to midsized companies. We are confident that we can use this opportunity to drive sustained long-term revenue growth by leveraging our track record of innovation, large base of engaged SMBs and massive network.

I'll now hand the call back to Karen.

Thanks, John. (Operator Instructions) Operator, we are now ready for questions.

Your first question comes from the line of Samad Samana with Jefferies.

Congrats on just another blowout quarter. So maybe, René, I want to ask you, when the company acquired Divvy, it had about 7,500 customers. You've almost already doubled that. I want to maybe understand how much -- I know it's crazy given that they were a stand-alone company for many years before that.

How much of that is the cross-selling motion or just customers even associating the 2 together from a brand perspective that's driving that strong momentum for Divvy?

Samad, good to talk to you. So I'd say, first of all, that our relentless focus on helping SMBs is paying off across the board across all 3 companies. SMBs are embracing digital transformation and frictionless payments. And I think that's some of what we're seeing.

We're uniquely positioned across all the assets that we've built and acquired to really solve the problem for SMBs. And so what you're seeing to date is us actually all executing on our organic growth strategies. We have started to introduce cross-selling opportunities to the customers to Bill.com. But those -- it's kind of early days on that.

So all of the successes that -- SMBs want digital transformation. They want frictionless payments. They want it to be easy. This moment in time, I think the company has been built for this, and we're excited about being able to serve and support SMBs in their passions and as they move forward in the business.

Great. And I apologize in advance for breaking the rules right away. But John, I have a follow-up for you where TPV per customer is it's up more than 30% year-over-year. And that's just really impressive considering what's going on kind of more broadly in the world.

Is that more of a sign of larger customers signing up with Bill? Or just different seasonality, that 30% plus growth in average TPV per customer is just really impressive.

Yes. Thanks, Samad. It's a combination of a slightly larger average customer size for Bill.com as we have success in the mid-market segment where we've seen a lot of demand. I think we're also pretty consistently increasing our share of wallet with our customers by having more capabilities, features and payment types in the platform that allows our customers to do more in one place.

That could mean that we're increasing the TPV per customer by serving them better as opposed to just relying on those businesses growing their TPV. So we're really happy with the results.

Your next question comes from the line of Darrin Peller with Wolfe Research.

I just want to touch on the momentum we're seeing on the core organic business for a minute because, again, I mean we're coming out of COVID, I know some investors and just really thought that there was a pandemic that helped demand.

But can you just revisit the demand you're seeing, given another quarter of over 5,000 customer adds with volume growth, the kind of levels we're seeing? And if you think there's something different about the kind of demand. Also the channels, accounting versus the banks or direct that you're getting a lot of these new customers from.

Sure. Thank you, [Brent]. So lots of really great, I'd say, traction across all segments and across all channels, right? So we've been really, really helpful in kind of supporting customers and really meeting their needs. And so the growth that we're seeing, I think, is somewhat a pandemic tailwind that we talked about.

But it really is this move to digitization, digital transformation and frictionless payments. So -- and apologies, I think I got your name wrong, sorry, I'm just looking at so many names in front of me. But Darrin, thank you for the question.

Your next question comes from the line of Brent Bracelin with Piper Sandler.

And I continue to be impressed here with the momentum in the business. My one question, I wanted to go back to Divvy. And obviously, this is kind of the first card offering that you have. There is a big gap between the 126,000 customers that Bill.com has, the 13,500 customers that have now a Divvy card. René, in your opening remarks, you did talk about a handful of customers that are using both.

So help us kind of longer term bridge the gap between Divvy customers using the card today and what that potential cross-sell potential could be looking out 3, 5 years across the broader Bill.com base? What's been the feedback? And what could that cross-sell potential look like in a few years?

Yes. Yes, Brent, it was -- one of the things in the diligence that was exciting for us is just the fact that we had a large cross-section of customers that were using both products. And so now we're able to kind of talk to those customers more openly about why they use both products and what they're excited about.

And so we wanted to feature that because we do believe that that is this -- if you go with the one platform mentality that we have, this all-in-one shop for financial operations, we think it's super important to make it easy. Businesses want digital transformation. They want the frictionless payments. They want to be able to manage their business from their back pocket. They want to be able to do these things, and I think the pandemic has taught them that they have to be able to do these things with technology.

And so the reluctance for technology is going down and the acceptance of technology and the desire for technology is going up. And so for us, part of the reason for showcasing those joint customers is that is the vision. That's why we did the deal. It's what we're excited about.

And we're going to continue to introduce products and understand the exact pain points that need to be messaged to drive adoption into the customer base. But I'd say everything we keep learning is that we're really excited about the opportunity to make life simpler for businesses.

Your next question comes from the line of Brad Sills with BofA Securities.

I'll echo the congratulations on an outstanding quarter. Great to see. I guess my question is also on Divvy here. Obviously, the integration work is kind of ahead of you, yet you're seeing this real strong results already.

Could you just help us understand the road map there? When should we expect a lot of that heavy lifting done on integration, single sign-on, where you can start to get into that end product promotion? Because at that point, I would imagine there could be another leg up in growth here from Divvy.

Yes. We -- thank you, Brad. We've started the conversation introduction with the customers with some in product placements already. I would agree with you that once we have the single sign-on capabilities, the simplified, consistent navigation across the 2 software experiences that a customer might have, as well as the accounting software integration that that will drive more synergies and more opportunities to go forward.

So the teams are busy working hard on that right now, and we are confident that we'll be able to get that to market and be able to start understanding what else we need to do to drive the cross-sell that we think is ultimately a part of the business.

Your next question comes from the line of Josh Beck with KBCM.

And John, thank you for the disclosure, very clear. I just wanted to go back to some of your comments on mid-market. It seemed like that was an area where you had quite good momentum this quarter, perhaps was a source of upside. So maybe just give us a little update there about the momentum and where you see that opportunity headed?

Sure. Well, thank you, Josh. We've been focused on understanding all segments of the customers that we serve and across all the channels. And one of the things we started saying, probably a couple of years ago, we started focusing -- realizing that we had a lot of mid-market companies that were coming to us.

And so we have fine-tuned the sales process, if you will, and the go-to-market process, if you will, through the organic business. I think Divvy naturally was kind of already in a larger customer segment. And so as we have continued to scale and grow the businesses, that is driving some additional TPV, if you will, because those customers are larger. And that helps the business as we add ad valorem products that obviously helps the business.

So the -- I would say that the technology enables businesses in a way that they really need. And maybe mid-market companies are a little bit more ready to adopt, but we see it across all segments and all verticals.

Your next question comes from the line of Ken Suchoski with Autonomous Research.

I just wanted to dig into Invoice2go a little bit. I think most of this business is software, more than 90%. I just wanted to ask about the payment side of the business. And I think Invoice2go is only processing $1 billion of the $25 billion in invoice activity. So where does -- where do you guys think that 4% penetration rate can go over time? And then just what's the revenue model for this business and the revenue opportunity in a couple of years?

Thank you, Ken. Great question. I think one of the things that we have learned about our customers, and I've mentioned it already, is that frictionless payments is something that businesses want. And we see it on all sides.

One of the examples of this, and this kind of indirectly gets to kind of the market potential with Invoice2go is, we did put out Instant Transfer in the last couple of quarters. We've been kind of going to market and learning more about that. And what we have seen in some of the early data of Instant Transfer is that some of the suppliers receiving Instant Transfer, they sign up for a default solution to be paid via the Instant Transfer method versus others.

And so the reason I bring that data up is when you look at Invoice2go and the $25 billion and growing number of invoices that they process. We believe SMBs and the people that are acting as SMBs in that case, more likely a sole prop or SOHO, that they're going to want frictionless payments. They're going to want -- and they're going to be willing to kind of get involved in technology to make that happen for them. So I think we're in the early days, but we really believe and that was part of the thesis to do the deal.

Your next question comes from the line of Scott Berg with Needham & Company.

René and John, great looking quarter here. I guess kind of a 2-part question here evolving sales and marketing. First of all, your sales and marketing expense is up, we'll call it 100% quarter-over-quarter, which is much larger than the additional revenues that you're getting from Divvy and Invoice2go. I wanted to try to understand maybe the sales motion. Is there something maybe that's a little less efficient there relative to the Bill model?

But within your sales and marketing motion, obviously, the FI channel has been a strong one for you, René. You talked about the joint white-labeled solution with AR and AP. Does Divvy become part of that white label solution going forward?

Thank you, Scott, and I'll answer the second question and let John take the first one. When we did the deals with both Invoice2go and Divvy, the idea really gets back to this one platform mentality, the all-in-one solution for SMBs. And we believe that's across all channels and across all segments.

And so it is going to take time to obviously make those integrations happen. So it's easy, and our partners will have the option to kind of opt into that capability. But it is something that we believe in and something that we're going to continue to work hard to understand their needs as well as to make the integration so easy that it's hard to refuse.

So John, I'll let you take it from there.

Sure. On the -- Scott, on the quarter-to-quarter increase in sales and marketing expense, the vast majority of that is driven by the inclusion of Divvy for a full quarter and then Invoice2go for the 1 month. We've obviously consolidated their marketing programs with the Bill.com marketing programs.

We continue to have great unit economics and customer acquisition efficiency and feel good about how we're set up combined across all of the solutions to continue that track record.

Your next question comes from the line of Matt VanVliet with BTIG.

Great job on the quarter. I guess looking at some of the bank partnerships, I know there's been a lot going on since you announced some of the more recent updates on those. But wanted to maybe get an update in terms of how some of those are ramping. And are all the products on each of those now generally available? Or is there still some development time on a couple of them?

Thank you, Matt. We are always working with our partners to understand how we can accelerate adoption across their base. And so I would say the example of -- or the disclosure we had on the top 3 bank, and that being in pilot and be generally available across the entire business that they have in calendar '22, that's all stuff that is super important.

But I would say every bank has specific conversations and discussions with our teams about how to drive more adoption because what they find is that their customers love it. Customers end up saving time, which we give the customer quotes on that. But more importantly, the banks have more insight into how the customers are growing and using the business.

And it's kind of back to Scott's questions. It's one of the things that we're excited about with the other products that we can offer, the financial institutions over time is to really help them take advantage of the one-stop shop that we are building and we'll continue to build.

Your next question comes from the line of Brian Schwartz with Oppenheimer.

I just got 2 on Invoice2go. One real quick one. Those 0.25 million plus subscribers, just wondering what percentage, if any, are already on the Bill.com platform? Or if it's just all greenfield?

And then the second question I wanted to ask about Invoice2go. You mentioned that they're in 150 countries. It sounds like that's pretty much worldwide. Just wondering, does that accelerate how you think about penetrating the global SMB market?

Thanks, Brian. Great question. And when we look at the 225,000 on the Invoice2go platform, we see that as, I think to use your term, greenfield. We see those as mostly the smaller businesses. While we run the gamut, there is some overlap. The vast majority are going to be businesses that are really acting independently, and they might be in our network. So there's going to be overlap there, but as a paying subscriber, we think it's going to be greenfield.

And so that kind of points into the second question of kind of the international opportunity with Invoice2go. There's a couple of things about that. One, they're operating internationally. So that's awesome. That's great for us. We're getting insights and learning about how to do that. They have customers in 150 countries. That's also awesome for us.

And it ties very nicely into our strategy to date has been to leverage the payments that are going out of U.S.-based businesses into international countries to understand the markets that are out there, what types of suppliers, what types of businesses? What is the commerce that's happening between the U.S. and other countries? And we see Invoice2go as being something that kind of help accelerate that understanding and that learning and ultimately help us drive new products for those countries.

Your next question comes from the line of John Coffey with SIG.

So my question is really a modeling question. So if you define the transaction take rate as the transaction revenues divided by the TPV, since the IPO, this will seem like a pretty straightforward calculation and analysts could make their own assumptions on payment sources and how that would go into the take rate.

Broadly speaking, how should we think about the impact to the take rate now due to the acquisitions of Divvy and Invoice2go? Just kind of thinking broadly about what those big moving pieces are and how they affect the numerator and denominator here.

Sure. Thanks, John. I'll take that. Yes, we have had significant expansion in our take rate, as you defined it, since the IPO as we've seen a pretty steady progress with a changing payment mix, more adoption of these ad valorem-priced products that increases our transaction revenues.

And I'd say the Divvy card product continues that trend. It improves upon our monetization because they're spending businesses, the gross fees that we receive on those transactions is much, much higher than average Bill.com kind of take rate today.

With that said, we don't optimize or manage the business to try to produce a take rate result. What we try to do is drive customers to adopt electronic payments. And the measure that we look at more often around our progress is just how are we growing overall transaction revenue per transaction. Which was approximately $5 in the quarter, $4.97, up about 69% year-over-year, and you've seen pretty steady growth in that.

And I think both Invoice2go and Divvy and obviously, the portfolio of Bill.com products positions us pretty well to continue to drive expansion in that metric.

Your next question comes from the line of Joseph Vafi with Canaccord Genuity.

Gentlemen, great results from me as well. Just maybe one on the strategic side here. You've done a couple of key strategic acquisitions to kind of build out, as you say, provide a one-stop shop for the SMB and the FP&A function. I was just wondering what we should think about in the road map from here? I mean some of the obvious ones may be more in payroll, working capital management. Just some thoughts on what you may be focusing on next? Obviously, you've got a lot of strategic momentum and the balance sheet to do it.

Thank you, Joseph. We don't look at M&A as a discrete opportunity from an investment perspective. We think about investing across the entire business. And ultimately, the opportunities can be adjacent, which could be through acquisitions or can be internal.

Some of the adjacencies that we think about, which we have been working on, for example, is extending and expanding our share of wallet by offering payment products that continue the move to frictionless payments for SMBs. And we will continue to do that. There's lots of ways to innovate there.

Others that are maybe a little bit more adjacent that could be a bill by partner would be working capital, like you talked about. We think that's a very interesting area for businesses. They need the ability to be able to make -- extend as well as receive credit. And so that's an opportunity for us.

And then ultimately, we do look at HR and payroll as, again, part of the overall one-stop shop. So lots of ways to kind of think about where we can extend. But first and foremost, we're going to continue to focus on making the 3 businesses work together as one, and to have the one-stop shop that we've been building over the last decade or more.

And we have time for one more question, and your question comes from the line of Andrew Bauch with SMBC.

I wanted to touch upon a headline that we saw last week, in which Marqeta will be powering Bill's AP and single-use virtual cards. I guess the question is, could you give us a sense of what you have planned here? Is it going to be an augmented type of experience versus your existing product? And how could this kind of translate to increased adoption of virtual card?

Yes. The -- thank you, Andrew. The opportunity with virtual cards across all segments and across all channels. And so the deal that we announced with Marqeta is really supporting the FI channel and being in a position to go build a product and a solution that our FI partners could take advantage of the supplier network that we're building and enabling right now.

We've been investing in that over the last year. Our ability to kind of drive the virtual card business has been really something that we've -- appreciate that the team's been able to do and I also know that it helps suppliers get paid faster.

So we want to extend that into the FI business and having the ability to kind of brand it for them is super important. And that was the genesis, if you will, for the partnership with Marqeta, and we're excited to do that with them.

Great. So I just wanted to say thanks, everyone.

Ladies and gentlemen, I'd like to turn the call back over to René Lacerte, CEO of Bill.com, for any closing remarks.

Okay. Great. Well, thank you, everyone, for joining us today. We're off to a strong start in the new fiscal year and looking forward to communicating our progress as we pursue the tremendous opportunity ahead of us. Thank you, and have a great day.

Ladies and gentlemen, we thank you for your participation. This does conclude today's conference call. You may now disconnect.