BILL Holdings Inc (BILL) 2024 Q4 法說會逐字稿

Good afternoon and welcome to BILL's fourth quarter fiscal 2024 earnings conference call.

Joining us for today's call are BILL CEO, Rene Lacerte; President and CFO, John Rettig; and VP of Investor Relations, Karen Sansot.

With that, I would like to turn the call over to Karen Sansot for introductory remarks.

Karen.

Thank you, operator.

Welcome to BILL's fiscal fourth quarter and full fiscal year 2024 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 are renewables are Chairman and CEO and founder of BILL, and John Rettig, President and CFO.

Before we begin, please remember that during the course of this call, we may make forward looking statements about the future operations, targets and results of BILL that involve many assumptions, risks and and uncertainties.

If any of these risks or uncertainties develop or any of the assumptions prove incorrect, actual results could differ materially from those expressed or implied by our forward-looking statements.

For additional discussion, 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 reports on Form 10-Q.

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.

Please refer to today's press release for reconciliation of GAAP to non-GAAP financial performance and additional disclosures regarding these measures.

Note that at times during this call, we will discuss those standalone results, which exclude our BILL spend and expense management, which was formerly called Divvy, invoice to go accounts receivable and Finnmark financial planning solutions

Note that we will be revising our key metrics presentation beginning in the first quarter of fiscal 2025, to reflect our evolving product solution set.

This new presentation will provide investors with an enhanced view of our integrated platform, which includes BILL-AP, AR and spend and expense, excluding the financial institution channel.

It will also provide an enhanced view of our embedded and other solutions, which includes the financial institution channel and ways to go and other solutions.

The appendix of our fiscal Q4 2024, investor deck previews this presentation and provides a nine quarter looked back for reference.

Now turn the call over to Rene.

Thank you, Karen, and good afternoon, everyone.

Fiscal 2024, was an important year for BILL.

We delivered more innovations SMBs.

We launched our integrated platform, made capital more accessible and empowered small and midsize businesses with insights and control with their cash flow.

In addition, we built type organizational alignment laying the foundation for future growth.

These and future innovations are especially valuable for SMBs as they face an uncertain economic environment.

In a world of change, BILL is the cost of that they can rely on.

The steadfast commitment to raising the bar to serve SMBs led to strong financial results.

During the year, we delivered strong growth and enhanced profitability as we executed on our objective to be the essential financial operations platform for SMBs.

Total revenue for fiscal 2024, was $1.3 billion, up 22% year-over-year, and core revenue exceeded $1 billion for the first time.

Importantly, we delivered substantial profitability expansion as non-GAAP operating income totaled nearly $200 million, growing 68% year-over-year, and we were profitable excluding the benefit of float revenue.

We achieved these results despite economic headwinds and shifting SMB behaviors we experienced during the year.

When challenges arose, we demonstrated our ability to adapt quickly, and we exited the year with a much stronger foundation to scale for the future.

In fiscal 2024, we serve nearly half a million businesses moved and safeguarded nearly $300 billion in volume and facilitated more than $100 million payment transactions.

Many industry leading partners, including more than 8,000 accounting firms and top financial institutions, is BILL as an essential part of the tech stack they provide their clients.

Our network members increased to 7.1 million, up 21% year-over-year, as we further build platform capabilities for suppliers.

This scale as a direct reflection of the incredible value delivered to SMBs through our products and services.

Return to financial back office complexity that drains SMBs of time and money into simple automated tools that provide visibility and control.

We empower SMBs to run better businesses.

In fiscal 2024, we launched our integrated platform, incorporating the combined strength of our category defining BILL AP and spend in expense solutions.

We then added a data and analytics layer to our platform, providing businesses a comprehensive view of their cash flow.

We continue to simplify and personalized user experiences by leveraging AI throughout the platform.

In addition, we redesigned our mobile app from the ground up to leverage our evolving platform, making sure our customers can increasingly operate their business where they're in the office or on the go.

The value of our integrated platform resonates with SMBs, at the end of fiscal 2024, approximately 11,500 businesses use both our AP and spend in expense solutions up from 7,200 a year ago.

We provide SMBs with fast and secure payment experiences and access to capital.

And the past year, we enhanced our foundational infrastructure and unlock new payment capabilities to drive faster payments, speed and more choice.

Since fiscal 2018, our platform process more than $1 trillion of total payments volume making us one of the largest providers of fast affordable B2B payments.

Scale is a powerful advantage we have that enables us to innovate faster and better.

For example, in fiscal 2024, we launched our new payment engine, leveraging our experience and data for moving more than $1 trillion across hundreds of millions of transactions.

This allows us to drive faster payments, speed and better manage risk across a multitude of payment offerings, which is critical as we extend our platform.

We also started activating supplier engagement by establishing direct relationship suppliers and enhancing their user experiences.

For example, we streamlined the onboarding experience for suppliers who accept International payments and made it easier for them to claims a local currency they want through end product experiences.

From day one, we have made breadth of payment choices a key component of our platform.

By each new choice.

There is an innovative offering, rigorous compliance and extensive risk management.

This year, we enable local transfer for international payments and Fed now support for Instant Transfer.

In addition, we executed a controlled launch of invoice financing, which is one of our first working capital solutions and the product exhibited both strong early adoption and repeat usage.

We reach SMBs through our direct channel and our partner ecosystem.

Our constant focus and innovation enables all types of partners to provide value and achieve tangible results.

Accounts have been a core focus areas since the inception of BILL.

Our innovation has been a critical driver of the rapidly expanding client advisory service practice areas.

We partner with accountants to build solutions tailored to their business.

And today, they represent our largest customer acquisition channel.

Our account relationships are very sticky and have a very high retention rate.

The result is that more than half of our customers are from the accounting channel.

A great example of how our platform empowers accounting firms to provide differentiated value is Aprio.

A premier national business advisory and accounting services firm founded in 1952.

Amber well beloved partner of managed services operations shared and I quote.

At Aprio, we cultivate a growth mindset at every level of the firm we adopted build in 2010 and have grown together over the past 14 years.

Today, we have over 25 national locations build as a trusted financial operations leader for over 500 clients and that technology backbone for our client advisory practices, which is a fast-growing part of our business using BILLs, accounts payable and spending expense solutions allow us to expand and provide more value for our clients and having BILL as a regimented part of our clients Tech stack allows us to stay ahead of the game for our clients.

Just like we empower Aprio, we enable thousands of accounting firms to provide strategic and differentiated value to their clients.

We recently held our sixth annual build account and partner council meeting, bringing together industry leaders from some of the most innovative and influential accounting firms from across the country, discuss the state of the profession and financed automation.

These accounting firms were excited by the progress we made in fiscal '24, and are energized for the opportunity to expand their business, leveraging BILLs, growing capabilities.

Together, we are developing joint roadmaps to better serve SMBs, and we are investing behind these opportunities.

Some areas of investment for accountants, in fiscal '25, include additional multi entity functionality, to help them scale growth, providing more tools for cash flow, budgeting, forecasting insights, and increasing our sales and support efforts to partner even more deeply with them.

Our commitment to SMBs means that we work hard to serve them wherever they are using our robust ecosystem.

In addition to accounts, we worked closely with financial institutions and software companies by enabling them with embedded solutions for their customers.

The core of our ecosystem strategy is about expanding our reach and serving SMBs where they want to do business, laying that foundation to serve customers across different channels, over the long term.

We've been creating value for years with scalable embedded solutions for financial institutions.

Recently, one of our large bank partners easily migrate to thousands of customers they acquired through an acquisition onto our white label BILL pay platform.

This bank is also offering our expense management solution to their commercial customers tells them streamline expenses, automate reporting and provide more real time visibility and controls.

Regional Banks are also looking to provide more value to their customers.

One of the largest regional banks recently began to offer our white label platform and our large suite of payment offerings to do more for their clients.

This bank leverages our advanced workflows are many payment offerings, including payback card, virtual card and international payments.

As we have shared with you, we have been working with one of our top three US bank partners to modify our partnership to fit their evolving needs better.

We recently extended our agreement with the bank for an additional three years for them to use our current offering consistent with our embedded strategy, We also made our APR as available as part of this contract amendment.

Our experience and expertise in serving banks over the last decade plus has informed our overall and debt strategy opened up more avenues to amplify the power of our platform and translated into fast time to market with our new software partner zero.

Earlier this year, we announced a strategic partnership with zero to embed our onboarding and build payment capabilities and its software.

I'm excited at the solution will soon be available in beta to zero as US customers, which demonstrates our ability to rapidly on solutions for our partners.

More and more, we are seeing strong interest in the market for embedded finance offerings, and our investments and learnings make us well positioned to support this demand.

In summary, we have built a growing billion dollar business and we're just scratching the surface of the margin potential.

There are [6 million] SMBs in US with employees, and they contribute trillions of dollars of GDP annually.

The opportunity we are pursuing is immense, and we are confident in our ability to capture it.

We are focused on growing into a multi-billion dollar highly profitable business.

In fiscal 2025, we intend to capitalize on the momentum we created in fiscal 2024, and widen our leadership position in the market.

Our top priorities are to continue to simplify and enhance our platform experience to enrich existing payment offerings and deliver new payment options and to diversify and deepen our ecosystem.

In addition to our ongoing platform and ecosystem investments, we are making a number of targeted investments in fiscal 2025, to support these priorities, including enhancing and expanding existing solutions that increase the value proposition for virtual card, International payments and working capital.

Augmenting the experience and go-to-market capabilities for suppliers, delivering new capabilities and deepening relationships with accounting firms and driving expansion adoption of our embedded solutions.

We have a strong and unique business model that generates multiple revenue streams and the track record of driving balanced growth and profitability.

We increased our non-GAAP operating margin every year since our IPO, while driving significant growth, with our proven strong cash generation and balance sheet, we are well capitalized to strategically put resources behind these top priorities that we believe solidify and extend our leadership.

We believe our category leadership and scale are critical for the long term growth and profitability of BILL.

We are playing offense strategically with our strong balance sheet, deferred ties the long-term potential of our business.

As we do this, we are keenly focused on capital allocation and balancing investments in the business with return of capital to shareholders.

Today, we announced that the Board authorized a new $300 million share repurchase program.

This reflects the confidence that the Board management team and I have in our strategy and in BILL as an investment opportunity with significant upside.

We are deeply committed to our success and committed to taking actions that deliver value.

We are all in for SMBs and we are all and to win the market that we created.

I'd like to thank our customers and partners for their continued trust they place in us.

And I also want to thank our employees for their constant dedication to serving SMBs and each other.

Now I'll turn the call over to John.

Thanks, René.

During fiscal 2024, we acted decisively when cyclical headwinds caused moderated B2B spend and a shift in payment method preferences.

We responded quickly by adapting our corporate initiatives, improving product experiences and working diligently with partners.

We focused our resources and execution on our most important priorities and proactively adjusted operating expenses to improve profitability.

These actions enabled us to improve customer acquisition and stabilized payment of monetization, enhanced profitability and position BILL for continued market leadership.

In fiscal 2024, we delivered 22% revenue growth of $196 million in non-GAAP operating income for a non-GAAP operating margin of 15% and $258 million in free cash flow.

In addition, we delivered $31 million in non-GAAP operating income, excluding float revenue, compared to $4 million a year ago.

During fiscal '24, we repurchased [212 million] in common stock and retired [$983 million] in aggregate principal amount of our 2025 convertible notes.

These actions contributed to our full year fiscal 2024, weighted average diluted share count declining by 2% year-over-year.

In addition, and most importantly, in fiscal '24, we strengthened our foundation for the future.

We have a clear vision and strategy centered around the needs of SMBs, and we are executing to capture the large market opportunity ahead of us.

We are laser focused on driving long-term shareholder value through strong profit and free cash flow generation while optimizing our capital structure.

Now, onto a few highlights of our fiscal Q4 results.

We delivered against our goal of profitable growth.

In Q4, total revenue was $344 million, up 16% year-over-year.

Core revenue, which includes subscription and transaction fees, was $301 million, also up 16% year-over-year. [Float] revenue was $42 million, non-GAAP operating income of $60 million and grew 42% year-over-year, reflecting a 17% margin.

Non-gaap operating income, excluding float revenue was $19 million, an increase more than 200% year-over-year.

Turning to updates on our key solutions.

BILL standalone revenue was $161 million in Q4, up 8% year-over-year.

Our enhanced go-to-market initiatives drove higher customer acquisition.

We added 4,600 net new customers and our direct and accounting channels.

In our financial institution or FI channel, we added 6,700 net new customers.

The annual customer retention rate of BILLs standalone customers, which excludes FIs, was a healthy 83%.

Excluding the impact of the sunset of into a simple BILL-pay earlier in the year, customer retention was 86%, consistent with levels over the past several years.

BILL standalone subscription revenue, excluding FI partners, increased 7% year-over-year in Q4.

Overall, BILL standalone subscription revenue declined 1% from last year, which reflects changes in our FI channel.

BILL standalone transaction revenue grew 14% year-over-year.

TPV in Q4 was up 9% over year ago.

In line with recent quarters.

Monetization or take rate exceeded our expectations that we said in Q1 as we scaled newer payment offerings and enhance existing products.

Vendor cost sensitivity on some of our higher monetization products persisted, which impacted TPV penetration rates.

In Q4 instant transfers, 1% of BILL standalone TPV, all virtual cards were 2.9% and cross-border payments were 4.5%.

Foreign currency payments represented 34% of total cross-border payment volume in the quarter.

These penetration rates were slightly lower compared to a year ago, as our overall suite of payment offerings expanded and vendors optimized their cost of acceptance.

As of June 30, 2024, our dollar-based net revenue retention rate for BILL standalone was 92%.

As expected, this was impacted by the lower spend environment, which impacted payment volume, payment choice and subscription fees during the year.

Excluding the impact of a large FI partner contract amendment, our dollar-based net revenue retention rate was 96%.

We expect this to be about 100% as we continue to rollout new offerings and the economy returns to growth mode for SMBs.

As a reminder, our dollar-based net revenue retention rate excludes the impact of our spend and expense offering.

Moving on to BILL spend and expense, formerly known as Divvy, spend and expense revenue totaled $126 million in Q4, up 26% year-over-year, driven by 28% card payment volume growth.

Interchange fees were 261 basis points.

We added 1,300 net new spending businesses, which was in line with our expectations.

We are focusing on businesses with a higher propensity to spend rewards for 48% of spend and expense revenue.

The customer value proposition of leveraging an expanded suite of platform capabilities is resonating with SMBs.

The number of joint customers who use both BILL AP and spend and expense in Q4 increased to 11,500 at the end of fiscal 2024, reflecting an increase of nearly 60% compared to a year ago.

Joint customers are stickier and show strong engagement as reflected in lower attrition rates and strong net dollar-based revenue retention compared to other customers.

For portfolio of payment offerings creates multiple avenues to drive ad valorem payment adoption and penetration.

On a company level, our ad valorem penetration, excluding FI payment volume, was 14% in Q4, up from 13% a year ago.

As our integrated solutions converge, we will provide a consolidated ad valorem payment rate as opposed to individual solution rates on an annual basis.

We believe that over the long term, our portfolio of ad valorem products can be about 20% of our FI, TPV.

Moving on to financial highlights, non-GAAP gross profit in Q4 was $292 million, up 14% year-over-year, and non-GAAP gross margin was 85%.

Our strong business model enables us to consistently deliver a gross margin that is among the best in class for software and fintech companies.

We continue to demonstrate our ability to drive leverage in our business. non -GAAP operating income for Q4 was $60 million, up 42% year-over-year, representing a 17% non-GAAP operating margin and an expansion of three points year-over-year.

Non-GAAP net income was $64 million, reflecting a 19% margin.

Stock based compensation in Q4 of 17% of total revenue, down from 20% a year ago.

Weighted average diluted shares declined by $5.6 million or 5% year-over-year, primarily due to our initiatives to repurchase shares and convertible notes during the year.

Turning to remaining performance obligations or RPO, as Rene discussed, We amended our existing agreement with a top three bank in the US by extending it for an additional three years.

The RPO associated with this partner remain constant but has now spread out over approximately 40 years, causing a shift in timing to fulfill the RPO.

We also expanded the product set available under this agreement to include our newest APIs, consistent with our embedded strategy.

Moving on to capital allocation, we continue to optimize our capital structure.

In Q4, we repurchased $234 million in aggregate principal amount of our 2025 convertible notes, resulting in cash usage of $222 million and a reduction in non-GAAP diluted share count of [0.4 million] weighted shares.

The repurchase of these notes resulted in an $11 million net benefit to other income and expenses, which is reflected in our GAAP results, but excluded from our non-GAAP results, we are well capitalized with $1.6 billion in cash, cash equivalents and short-term investments.

Shifting to our outlook.

As we enter fiscal 2025, we've never been better positioned to capitalize on the opportunity to further penetrate the market and help SMBs succeed.

Our solutions are a critical part of their daily operations and give them the industry's best tools to better run and grow their business.

We are confident that the strong and growing customer value proposition of our platform and ecosystem positions BILL for continued long-term growth and leadership, which will in turn deliver value to our shareholders.

We believe maintaining a dynamic balance between growth and profitability is essential for long-term business success.

With our strong execution capabilities in the market opportunity ahead of us, we are strategically investing for growth acceleration and extension of our category leadership while delivering attractive margins across our business lines.

We generated significant free cash flow and have a strong balance sheet, which enables us to invest which we do with purpose and discipline.

We have a unique business model that includes float revenue, which we view as a key competitive advantage from which to generate significant free cash flow.

These factors enabled us to accelerate our pace of it adjustments opportunistically as well as fund longer-term opportunities.

We view our Board-authorized share repurchase program where we will be deploying [300 million] to buy back shares in the open market has both a great investment opportunity as well as an indication of our optimism for the future.

As Rene discussed, in fiscal 2025, we will be making a number of targeted investments that accelerate our strategic priorities and our ability to capture the large greenfield market opportunity that we are pursuing.

We believe these investments position us to deliver significant sustainable revenue growth and margin expansion over many years, but will moderate our profitability growth in the near term.

We operate our business with the objective to be exploit profitable on a non-GAAP basis and to generate significant free cash flow.

We intend to scale both over time on the road to becoming GAAP profitable.

For fiscal 2025, we will be making incremental investments in our most important initiatives of approximately $45 million throughout the year.

We believe now is the right time to invest as we have seen signs of stabilization in the macro environment and continued strong business momentum from the actions we took last year.

After holding headcount flat for the last three quarters.

We are now hiring additional talent in our R&D and go-to-market teams.

We expect our initiatives and investments today will position BILL to deliver core revenue growth of 20% or greater in fiscal 2026.

The midpoint of our full-year guidance reflects a slight increase in non-GAAP operating income on an ex float basis.

Despite additional planned investments and increased rewards expenses, as our spend and expense solution scales, we are prudently managing our expenses while investing for growth.

As we accelerate revenue growth, we will also be continuing to create operating leverage.

At the time of our IPO, we discussed at our non-GAAP operating income margin could be 20% or more over the long term.

Since then, we have quickly expanded our scale and demonstrated our ability to drive leverage in our business.

And we see no obstacles to prevent us from achieving significantly higher margins over the long term.

Now, moving on to guidance.

Our guidance assumes the macro and B2B spend environment remained consistent with recent quarters and that ad valorem payment adoption and monetization rates increased modestly in the latter part of the fiscal year.

For fiscal Q1, we expect total revenue to be in the range of $346 million to $351 million, which reflects 13% to 15% year-over-year growth.

We expect core revenue to be in the range of $305 million to $310 million in Q1, which reflects 15% to 17% year-over-year growth.

Float revenue is expected to be $41 million in Q1, which assumes our yields on FPO funds will be approximately 470 basis points.

On the bottom line, for Q1, we expect to report non-GAAP operating income in the range of $52 million to $57 million and non-GAAP net income in the range of $53 million to $57 million.

We expect non-GAAP net income per diluted share in the range of $0.48 to $0.51 in Q1 based on a share count of 111 million diluted weighted average shares outstanding.

As a reminder, our guidance for non-GAAP net income included non-GAAP provision for income taxes of 20%.

Shifting to full year guidance for fiscal 2025, we expect total revenue to be in the range of $1,415 million to $1,450 million, which reflects 10% to 12% year-over-year growth.

We expect core revenue to be in the range of $1,270 million to $1,305 million, which reflects 13% to16% year-over-year growth.

We expect float revenue to be approximately $145 million in fiscal 2025, which assumes a yield on FPO funds of approximately 400 basis points for the year and an exit Fed funds rate for 350 basis points as of June 2025.

Our bottom line, for fiscal 2025, we expect to report non-GAAP operating income in the range of $160 million to $195 million and non-GAAP net income in the range of $154 million to $182 million.

We expect non-GAAP net income per diluted share to be $1.36 to $1.61 based on a share count of $113 million diluted weighted average shares outstanding.

Note that our Q1 and full year guidance for share count and non-GAAP net income per share do not reflect the impact of our share repurchase program.

For fiscal 2025, we expect stock based compensation expenses to be approximately 20% of total revenue.

In closing, we are pursuing a large market opportunity to automate financial operations for SMBs, and BILL is perfectly positioned to capture this opportunity with our platform, large and expanding ecosystem and strong dedicated team.

We've built a dynamic business with powerful levers to drive growth, and we are investing now to optimize our results for the long term, which we believe will extend our lead and accelerate the pace of capturing the market opportunity and creating value for shareholders.

And now we'll open up the call for Q&A.

(Operator Instructions) Will Nance, Goldman Sachs.

Hey guys.

I appreciate you taking the question here.

Maybe I'll start on the the FI channel renewal that you mentioned, John, I think you called out that the RPO may remain similar, but spread over additional years, could you just maybe unpack what that means in terms of just the quarterly subscription revenue from the embedded solutions part of the business and just how you're thinking about that.

I know that I take it the step down when you had initially contemplated changes.

So how will that flow through the numbers or the coming year?

Thanks for the question.

Well, our RPO as of the end of the year is about $87 million.

And there is a meaningful percentage of that, by the large FI partner that we've talked about throughout the year where we have finalized the contract amendment and the RPO is consistent for that particular customer, as where we ended the year, and instead of one year left on the contract, we've extended it for three years.

So we recognized net revenue over four years and in addition to that, we're obviously marrying our embedded strategy with our financial institution partners as well and making available our newest APIs to support the bank and their new program and working with them in any way we can to help drive success there.

So that's the kind of the extent of the moving parts on the numbers, there's really not much change from the ending RPO.

Got it.

Appreciate that.

That is helpful.

And just maybe a broader question.

You mentioned the 20% of long-term goal of ad valorem payments revenue, a comment, and that's how you'll be kind of communicating advances in monetization going forward.

Just to help us think about how we should think about the monetization of those volumes and just sort of how the mix of payment methods may impact the ultimate take rate that you get on that 20% of volumes?

Thanks.

Yeah, sure.

It's a good question, I'd say there's a number of investments that we're making near term to improve existing product experiences, drive payment speed, improve reconciliation and those things which I think will help expand volumes and monetization associated with the products that we are already offering customers and suppliers.

And those are relatively short term initiatives.

In addition, to that, we see card payments generally being a larger part of the payment mix in the bill portfolio of payment products.

So beyond what we do with spend and expense and things like that.

And so across all of our payment products, as we see that mix evolving, we sort of view that 20% as more of a fuller to where we're going to be able to take monetization longer term.

And we feel really good about the levers that we have and frankly, the value proposition that we're offering for both buyers and and suppliers with this mix of payment products.

Got it.

Appreciate for taking the questions.

Tien-Tsin Huang, JPMorgan.

Hey, great.

Thanks so much.

I'm just thinking about these investments here.

How quickly do you expect to spend $45 million?

What kind of return or payback do you expect?

I heard the 20% core growth in '26, but curious what else we can build off of that.

And then just also clarify, are these new investments driven by new opportunities or was it driven by competitive changes?

Or is this just a catch-up in spending from a period of pause given the macro uncertainty last two, three quarters?

Thanks, Tien. great question.

Let me just give some background first.

I mean, we made -- we saw a shift in kind of what was happening in the market.

We adapted quickly very agile and the team delivered exceptional results throughout the rest of the year.

So that wouldn't obviously end of last calendar year.

And we had great results through the fiscal year and seeing the efficiency that we're able to drive.

And if you just think about the high level, our operating income less float grew 750% over $31 million or so from last year to increase.

And so just giving you my perspective, seeing the strength that we're able to drive and then seeing the innovation opportunities, again, just more contacts like we've defined this category and at BILL were all bunch of leaders and leaders don't wait.

We're not going to be a market taker.

We're going to be a market maker.

And when we see and interact with our customers, whether they are direct customers, accounting customers or ecosystem partners or suppliers in our network are large, -- larger suppliers.

We hear and understand there's opportunities to expand, but the value that we're providing them.

And so that's the reason to invest because we feel really good about what the team is executing on and the ability for us to deploy capital to drive growth really is I think how I would define everything that we've done is we've been defining this category from day one and we're going to continue to do that, and how we're doing that as we have kind of four specific areas that we're investing in.

The first one, I would say is that we are enhancing and expanding the value proposition for our existing solutions.

So if you think about international payments, we've started some local transfer capabilities.

We're going to roll that out.

John already referenced that we're going to expand card use this across the platform.

We're going to give folks more opportunities to leverage the card.

And then when the next thing, the second thing I would say is that we're going to augment the experience and go-to-market for suppliers.

What we started doing again halfway through the year was having dedicated teams that talk to suppliers that have significant volume on the platform.

We've learned a ton.

There's a lot of opportunity for us to create more value for them, better reconciliation, more automation, even leveraging AI across the experience that they have.

And that's what we're hearing.

And that's what we're developing.

That's where we want to invest.

And then on the third thing that we're going to invest in.

It's going to be deepening our accounting relationships.

We have defined an entirely new line of business for accounts.

We've worked with cpa.com, the ASCPA to create client advisory services cast practices.

You heard a quote from Aprio and an amber.

They're talking about how they started 14 years ago with no customers on the bill platform and now have over 500.

But when you have 500 customers, how you manage to support those customers becomes a lot more challenging.

And so we have an opportunity to actually provide cash flow insights and strategic advisory services through the platform we have, we have an opportunity to create efficiency for the accounts and how they manage their clients.

And we have an opportunity to create better customer experiences around multi entities since many of their clients have that.

And so we're investing behind that.

And the fourth and final area of investment is driving expansion of our ecosystem.

And this is what we've done from the very beginning.

We really believe that the ecosystem is a critical part of our platform and our strategy and what we're going to be doing is investing in go-to-market resources.

We're going to be investing in advancing our APIs.

And I think when you see what we're able to do with zero and roughly six months when we announced we were able to go to beta.

That's something that we're super proud of.

And we know there's an opportunity in the market for us to do more.

So I'll let John maybe answer the rest of your question there and go from there.

Sure.

Just adding on to that part of your question about pacing.

We're expecting it to be spread throughout the year, a little bit more front-loaded than not.

And as we as we look at the impact of these investments, plus the ongoing improvements we're making to our platform efficiency we're driving with go-to-market and things of that nature.

We expect to be able to increase our revenue growth rate in '26, as I mentioned earlier, and that's really the beginning phase of growth expansion.

It's not the end goal that we have.

It's not just '26.

It's multi-year, multiyear improvements in our growth rate, as evidenced by some of our investments, as Rene mentioned, and particularly on the embedded platform, both the technology and our go-to-market capabilities there.

That's a multiyear time horizon that we view as driving growth.

And at the same time, we do expect beginning in FY '26, and beyond to be expanding profitability more so than we've seen in FY '25, as we're pulling forward some of those investment dollars.

And just one more thing I would add is the conviction that both John and I have is so strong that when the market opens up, we're going to be buying shares as well as the company is doing.

No, that was all clear.

(multiple speakers) Think you, both.

Answered it really well.

Just fully quickly to clarify, Rene, it sounds like I think you mentioned these are offenses that defensive investments.

Just wanted to clarify that?

As to early, we're all about offense.

We have defined the category.

We see other people following us and then playing catch up.

And we're going to keep widening the gap that we have because that's the advantage that customers need business, customers need innovation.

SMBs are innovating every day in each of their businesses and they need to count on somebody to innovate.

And that's what they do with us.

So I think it's super important, and we're going to continue to do that when we see opportunities.

Andrew Schmidt, Citigroup

Hey, Rene, hey, John, thanks for taking my questions.

So I wanted to drill down just on the environment for supplier acceptance, maybe John you have some comments, but maybe to put a finer point what you saw in the fiscal fourth quarter and into FY '25?

And then maybe just to tag on to that I know you put some supplier enablement teams in place to fit her, better manage the supply relationships.

Maybe the early reads on that and what you're seeing in terms of the acceptance when you have kind of a question a little bit deeper on this relationship?

Anything on those two fronts would be helpful.

Thanks so much.

Well, yeah, thank you Andrew.

The first thing I would say is as we talk to suppliers is not going to be a surprise, but they don't want checks.

They really don't want check.

We have a tremendous amount of volume that we drive through our platform.

They like getting electronic payments, but they need more help and reconciliation and they need more help in automating all the things that are coming from BILL.

And so as we talk with suppliers, we're hearing that loud and clear, and we're putting R&D dollars as well as go to market around creating services for them so that they actually have a different experience.

But just not at the receiving end, they're engaging with us.

I think one of the examples that we think about is we have a tremendous amount of volume that goes through an ACH, but there's very poor reconciliation on ACH transactions and the ability for suppliers to kind of take those transactions and have an experience where they can obviously understand what the payments are attributed to potentially collaborating with their customers, which would be our customers.

All these things are something they want and we see an opportunity to drive value there.

And that's not a product that we have in market today.

But just give you an example of the learnings that we have that's going on right now.

That gives us the confidence that there's an opportunity to create more value for suppliers to keep them really doing their business job better and to keep us serving our customers better.

Got it.

Thank you so much for that, Rene and John, I think you had some comments on stabilization.

Maybe you can talk about just more broadly your thoughts on the macro environment heading into FY '25, and how that might translate into things like a TPV per customer?

Thank you very much.

Thanks, Andrew.

On we've seen pretty consistent behaviors on the part of small businesses over the last few quarters.

You've seen that play out in our TPV per customer numbers being pretty consistent, maybe down 1% up 1%, but in that same range.

Obviously, our overall TPV growth for the last couple of quarters has been a little bit ahead of our expectations, and we're expecting a similar environment throughout FY '25.

I think, there this stability is showing up in engagement.

We have very healthy transactions for customers, saw a slight uptick in that in the fourth quarter, but still slightly lower dollars per transaction for small businesses was reflective of the environment that everyone's operating.

And so we feel we feel good about the stability and we're not embedded in our assumptions for expectations in FY'25, assuming any rapid rebound in B2B spending or the flip side, any deterioration in and the current level of activity

Got it.

Thank you very much, John.

Scott Berg, Needham & Company.

Rene and John, nice quarter here.

I guess a couple of questions.

I think it was in Rene, free scripted remarks about the supplier financing.

And I guess can you help maybe quantify kind of what you're seeing there early on and we just recently revealed in a release of product, and that seems to be a part of your reacceleration story in this fiscal '26.

I guess how do you maybe setting patience around the impact on business.

Thank you, Scott, for the question.

I think invoice financing is just another example of innovation that we're bringing to the market.

We have a unique set of data and scale.

When you think about what we have with scale and just makes us a learning machine, we have so much data across the platform.

So many opportunities for us to leverage that for our customers.

And what we're seeing in West financing is it's early days and there's lots of work to do around kind of the modeling and risk profiles and stuff like that.

But what we're seeing is customers want it and they use it again and again.

And so what we will continue to do is to refine kind of the experience they had to refine the end system so that we can roll this out more broadly.

And I think it's going to be one of the important drivers of our expansion of ad valorem revenue as we go forward into '26, and beyond.

Got it.

Helpful.

And then you've also made the comments on the number of customers using both APM and expense solutions.

It's up roughly 60% year-over-year.

It is clear now that over the last year, the products have been properly integrated and combined is, I guess is there anything you can take away from those customers outside of better retention rates?

Is there any examples where one plus one equals more than two or is this simply just a one plus one equals better retention rates over time?

It's definitely one plus one is more than two.

But I mean, we're getting obviously the retention makes that true, but I think we're also getting more usage across the platform.

There's more opportunities.

We've talked about the opportunity across our platform to continue to extend the proliferation, if you will, of card payments that comes from all the capabilities we have with the platform that was formerly known as TPV that is now are spending expense platform, so that's an area.

I think maybe a high-level new area to think about that we see is that the proliferation of all these different software and fintech solutions is actually driving in the market a need for more consolidation and unification of platforms.

And so when you think about what we are able to provide customers today from financial operations perspective, we give them the best world-class AP solution.

We didn't have the best world-class [SE] solution.

We're giving them the best cash flow insights and forecasting capabilities.

These are things that we have into the platforms that continue to create more value for the customer experience across their portfolio, usage of ours and something that we're excited about.

So I think that the main thing is we do think one and one is going to be far greater than two.

Excellent.

Thanks for taking my questions.

Samad Samana, Jefferies.

Great.

Good evening, and thanks for taking my questions.

First, maybe the 20% growth comment for 2020 --our fiscal '26, is really encouraging.

And especially as you think about the stabilization that you've highlighted so far decided for you, Rene or John, but as you guys think about the building blocks to that 20%, how much of that is reaccelerating existing pieces of the business and getting new customer acquisition of fire again and getting more adoption of ad valorem versus new revenue streams that you're anticipating that the investments you called out are going to drive.

Can you just maybe help us understand how much you are to have line of sight versus what has to be kind of block and tackle that next year.

That's a great question, Samad.

One of the things I've learned over the last three decades, right businesses that you've got to kind of have a balancing act between obviously what you've got and what you want.

And so what we're doing is actually a balancing act.

There is definitely more clarity across the business as we've consolidated the organizations and have and the teams really aligned about what drives results on the existing business.

But we also have that same clarity being driven around the innovation teams across the company.

And so I think it's a reasonably good balance between the two and we're going to always invest to obviously serve customers with what we have.

But we're also going to invest to innovate.

And so we're balancing that.

Maybe one other area of investment that I didn't call out earlier that I think is important for folks to know is that where I we talked about this.

We're highly committed to being highly profitable.

And part of the investment is we have a lot of internal tools.

This big company now.

It's a trillion dollars of money movement over the last five years to over $300 billion a year.

We've got teams in multiple countries that support customers, they need tools and capabilities to continue to drive efficiency and scale, and we're going to invest behind that because that's the right thing to do for the long-term growth of the business.

Great.

And then, John, maybe just a follow-up on the on the NRR.

I appreciate the disclosure on what it would have been ex the top three bank.

So I was just wondering if you could maybe help us understand from where it was last year to this year that I think 111 to 96, how much of that was due to TPV contraction in the install base versus down selection of payment types.

Just trying to understand the mechanics of maybe what drove the contraction portion of it and and how we should think about the shape of that going forward?

Yeah, thanks for the question, Samad.

Most of the change on a year-to-year basis is really driven by the lower TPV from the spend environment that our SMB customers are operating in, which obviously translates into lower transaction revenue growth, which is a significant contributor to come to that retention dynamic.

The second thing is probably the revenue associated with the large FI partner that we've talked about, maybe to a lesser extent than TPV.

Those two things combined, though, are the vast majority of the change on a year-to-year basis.

It's on things like number of users per customer and on variables like that, that are very small in the grand scheme of of that retention number.

Great.

Thanks for the clarity.

Appreciate taking my questions.

Darrin Peller, Wolfe Research.

Hey, guys, thanks.

First question is just around go-to-market.

I mean, I saw you jumped like you said it was 7,000 or so up to over 11,000 cross-sold customers by the end of last year this fiscal year.

And so that's obviously showing good progress.

Just maybe touch on the go to market and really the cross-sell between AV with those solutions and now the one more unified offering?

And really what's if anything has changed what it will, what kind of what's the approach now and can even accelerate that?

You really still have a long runway when you look at the base size of your customers versus what you've accomplished so far.

And I guess just to add on to that strategy and go to market on the financial side now that financial institutions has that changed at all versus we've seen a lot of focus on the accounting channel be very successful.

Just curious where the focus is on the financial institution side too guys.

Good question, Darren.

Yeah, I would say on the go-to-market approach when it comes to cross-selling, I'm going to use a framing that I've always had and driving business success.

It's kind of a wash, rinse repeat like you innovate, then you adapt and you learn and then innovate again.

And so when we pull together the platforms we have the organizations lined up, the go to market is going to be all of it is going to be iterative and what we're learning from customers as we have more and more customers using the joint solutions enables us to drive that future state that you're talking about, which is far more adoption of customers using both of the core platforms that we have.

And so we see continued learning and alignment within the organizations to kind of listen to customers and drive that success across the customer base.

And I think we're going to continue to drive that.

And I'll let John add anything to that if he wants and now come back and answer the ecosystem question.

Yeah.

I would just add that the progress we've made so far on this cross-sell effort has predominantly come from customers who we've acquired through our direct marketing efforts.

To a much smaller degree, have we seen cross-sell activity within our accounting channel.

So when we talk about doubling down on accountants, it's not just extending our lead in establishing new relationships.

It's also starting to activate this cross-sell motion and working very closely with accounting firms and their clients to provide new solutions in this regard.

So it's a twofold there's lots of opportunity left in.

And one of the biggest spaces for growth is an area we do really well, which is in the [gallon] channel.

Yeah.

And just on the ecosystem.

Just to give you some framing.

Our long-term strategy around the ecosystem has always been that we need to surround the market with distribution channels and be at the center of each.

And what you see with BILL is obviously we are at the center when it comes to direct or meeting there were at the center when it comes to, say counts are 8,000 firms growing 14% year-over-year over half the business.

And then, in the longer term play here is going to be with our financial institution partners and obviously are new accounting partner ship with zero and others to come.

And so the opportunity for us is to make sure that we're in a position to win and that's part of the strategy along all along is that we're always going to place ourselves in a position to win with our partners and with the ecosystem more broadly.

And so I would not say it's a shift.

I would say it's an expansion because there's now more opportunity in the market from a small business aggregators outside of financial institutions.

And we're starting to engage with those like you saw with ZERO.

Very helpful.

John, can I just quickly squeeze in one follow-up is just what's assumed in your guide for take rate or maybe if you can give us any direction on that.

And then maybe B of A also the RPOs, is there an assumption and we can think about that may have been a better credit this year was the last any framing on those would be great.

Thanks again, guys.

Sure, Darren, on the take rate, we're assuming, essentially flattish with an uptick in the second half of the year.

We've made a lot of progress and obviously bringing stability to take rate.

And we think these first couple of quarters will be the point at which we frankly trough for lack of a better, a better term and start to expand in the second half of the year, we would expect to be above, -- at the end of '25, where we are at the end of '24.

In terms of the RPO and dynamics with the one particular partner, there's not a lot of detail we can give there other than as of the end of the year, I think it's approximately 40% of our fuel balances subject to this amended contract that we referred to with the large FI partner, and that will be spread over four years.

Very helpful.

Thanks again, guys.

Bryan Keane, Deutsche Bank.

Hi, guys.

Thanks for taking the question.

I guess, John, just to follow up on that, why would or why are you confident that the second half of the year, we'll see a little bit higher penetration in payment modalities.

And do you think VC and cross border will bounce back and be up this year in particular?

Thanks for the question, Bryan.

I think to the second part of your question, yes, we do.

We do have confidence in additional volumes on those products.

I'd say there's other as Rene.

And I think perhaps I mentioned earlier as well, there's other product improvements that we're making, and we're filling a couple of, I'd say, interesting holes in the product portfolio which will drive additional ad valorem adoption.

And it's these dynamics that when we look at the volume and expectations around very short term penetration rates and adoption from suppliers and customers that give us confidence that we'll start to back on the road of expanding a take rate as we get further into FY '25.

Got it.

That's helpful.

And then the follow-up to that is just that 20% core revenue growth for fiscal year '26, does that assume getting back to more normal?

And maybe you can help us what is normal kind of sequential organic take rate expansion?

And I'd say that the first of all, getting to the 20% growth that we talked about, that's obviously going to be a progression, right?

We're going to make make progress in the second half of '25, and we'll continue that through at FY '26.

We are assuming a better expansion of monetization in '26, than in '25, but that's not the sole driver of our belief that 20 percentage point range for '26, we obviously have a much higher both volume and revenue growth on our spend and expense product.

We talked about the proliferation of card payments starting to happen within the build ecosystem that will provide incremental growth as well so it's all of the above.

Frankly, that gives us confidence there.

As far as the sequential quarterly upticks, I don't think of it as that in those terms as much as we do on an annual basis, we would expect to start to get back to higher levels of expansion.

Great.

Thanks so much for taking the questions.

Ken Wong, Oppenheimer.

Okay.

Fantastic.

On most of mine have been asked, but I guess the one final clarification, just on the RPO side, did that dollar amount increase with the renewal or was that a static final year number that's now spread over four years?

Or was there an uptick in that number that's now spread over four years?

Just wanted to make sure we understood the mechanics of of kind of how what's playing out there?

Yeah.

The RPO associated with the large FI partner remain roughly the same.

So no significant expansion or contraction as we exited FY '24, and the term on that amended contract is now four years.

Got it.

So there was a sort of pre-existing balance then as you guys renegotiated that remained roughly the same as just across multiple years instead of a single year, right?

So it would be like hypothetically a 10 divided by four?

It's not some number bigger than 10 divided by four?

That's right.

Okay, great.

Thank you very much.

Thank you, everybody.

Just wanted to say appreciate your joining today.

We finished fiscal 2024, with great momentum and a really strong foundation to drive growth in FY '25, and beyond.

We look forward to extending our leadership position, and I'm exceptionally proud of the team's agility and adaptability shown in the last six months of the year.

And all of us are very energized about our future.

So thank you for joining us and have a great evening.

That will conclude today's conference call.

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