Q3 2021 Bill.com Holdings Inc Earnings Call
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Good afternoon, and welcome to Bill Dot Coms third quarter of fiscal 2021 earnings conference call. Joining us today for today's call are Bill Dot Com CEO, Rene Lessard, CFO, John Rettig, and VP of Investor Relations.
Karen San site at this time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during the session you'll need the press star one on your telephone. Please be advised the today's conference is being recorded with that I would like to turn the call over to Karen same thought for inter.
The doctor of remarks cure.
Thank you operator, welcome to Bill Dotcom fiscal third quarter 2021 earnings Conference call. We issued our earnings press release, the 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 Day, <unk> Dot Com with me on the call today as Renee lesser churn.
<unk> CEO and founder of Bill Dot Com and John Rettig Executive Vice President and CFO. We are also joined by Blake Murray CEO and co founder of <unk> 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 Dot Com that may involve many assumptions risks and uncertainties if any.
Of these risks or uncertainties develop or of 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 Companys press release issued today and to our periodic reports filed with the SEC, including our most recent annual rip.
Of course 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 of the GAAP number.
Please refer to today's press release for the reconciliation of GAAP to non-GAAP financial performance and additional disclosures regarding these measures now I will turn the call over to Rene Rene. Thank you Karen and good afternoon, everyone. Thank you for joining US today I hope that all of you and your families are in good health and doing well and.
I am pleased to report that Q3 was the very strong quarter as a result of our continued focus on the rigorous execution.
I'm also excited to announce that we've entered into a definitive agreement to acquire Debbie the leader in the spend management space.
It cannot be more enthusiastic about this transaction and the significant value of our combined companies can create for our customers.
Thrilled to welcome the talented <unk> to the Dot com family when the transaction closes.
Blake Murray, the cofounder and CEO Debbie is with US today to talk about our shared vision and commitment for helping smbs transform grow and thrive.
We posted the slide deck on our Investor Relations website with an overview of the transaction.
I'll share more about <unk> transaction after recap our fiscal third quarter results.
We delivered record results and accelerated growth in our core revenue transaction fees and total payment volume in the fiscal third quarter core revenue increased 62% year over year transaction fees increased 112% year over year, and TPB increased 44% year over year. These results are only possible because of the passion and dedication of our employees.
I'd like to thank them for their tireless efforts in delivering another excellent quarter.
Every day they are laser focused on how we can help small and midsize businesses simplify and transform their financial operations.
Our mission is to make it simple to connect and do business our platform enables us by helping businesses simplify their back office financial operations connect with suppliers and customers and make payments.
We ended the third quarter with over 115000 customers more than $2 5 million network members and the annualized run rate of $140 billion in PPD.
We believe we are the leading digital BTB payments platform for Smbs and operate one of the largest <unk> networks in the United States.
Throughout the pandemic, we have been inspired by the resilience of innovation of our SMB customers.
More than a year since COVID-19 changed everyone's lives and disrupted business operations.
During this time, we've seen our customers adapt their business models expand their services and embrace digital tools for.
For example, wag the dog walking service expanded into new virtual offerings like Wag health pet care advice and remote training with.
With the help of cloud technology solutions like Bill Dot Com they were able to serve many more pet parents daily through new virtual services and automation.
The dot com empower them with faster insight into their spend and cash flow, which enabled them to reduce expenditures while investing in these new offerings.
Another example is evolution of event solutions the had to quickly pivot from live events to virtual lines when the pandemic hit they needed to be able to analyze their financials on a dime and systems like the dot com help them closely track the daily cash flow and manage the company two of the crisis with Dot com. Their time was freed up the focus on more strategic activities.
Including focusing on their post pandemic plans for integrated live and virtual events.
The scarcity of resource for an SMB is time and our deep understanding of that has driven us to make sure smbs experienced simplicity and ease with every bill dot com interaction.
For example, new customers are able to sign up and actually use the platform to manage documents create invoices make payments and collaborate with coworkers all in the same day. This ease of use is one of the reasons that in February Dot Com was named a <unk> best software winner for the second year in a row.
The quotes from the dotcom customers on GTS website speak for themselves.
The dot com. It saves me time and keeps me organize said one of the best and the easiest to use payable system on the market set another and finally collecting payments paying bills all of it is super easy.
These comments in line with the recent customer survey of over 2000 customers more than 90% of those customers had dot com is easy to implement learn and use and that bill dot com makes them more efficient, 70% or more of said they found the dot com was at least two times faster than traditional accounts payable of methods and the biggest efficiency improvement they've made in the.
Last year.
Delivering for our customers is what motivates all of us at <unk> Dot Com I am extremely grateful for our team's commitment to bringing our mission to life every day for the businesses that drive so much of our economy.
In addition to talking with customers. We also reach out to smbs across the country to understand how they're doing we're hearing that many business owners of optimistic about the year ahead. We recently commissioned a survey of 1000 small and mid sized businesses in the U S and learned the numbers, 80% of businesses began or plan to begin digital transformation during COVID-19, and the MAU.
75% of companies surveyed are planning on introducing new products and services in an effort to drive growth as they navigate year two of the pandemic.
In addition, 85% of the businesses ranked generating revenue as their top priority. This is a significant shift from our survey of year ago, where companies were focused on cost savings and business model adaptation.
These data points from both of our customers and the general SMB population tell us we are and can be an important part of driving digital transformation for the financial back office of Smbs everywhere. We believe that we're at the beginning of a multiyear digital transformation wave that has been accelerated by the COVID-19 pandemic.
Shifting gears I'd like to highlight some of our recent initiatives, which are driving expanded adoption among current customers and attracting new ones.
We continue to enhance our menu of payment offerings for our customers and network members adoption of our newer payment methods such as virtual card and cross border contributed significantly to our transaction fee growth. In Q3. In addition, we've been piloting of real time payments product, which we branded instant transfer.
As we mentioned last quarter, we are building an integration with stripe that will expand the reach of our instant transfer product by enabling vendors to receive funds via debit cards. The strike of integration will be generally available this quarter and will allow us to deliver real time payments to nearly all of our more than $2 5 million network members Bank accounts.
Another focus area has been on simplifying the bill creation process, while enabling straight through processing for supplier payments.
In addition to our work on data entry and capture using our AI capabilities. We are also working with the third party to enable electronic bill presentment for our platform.
This will give us the ability to fetch and automatically enter bills from large enterprises, such as utility companies directly into our platform.
We are also working with this third party to automatically route payments via virtual cards to the same suppliers the.
As of near Autonomous Bill collection and payment process from beginning to end, we expect to introduce this functionality later this calendar year.
We recently launched the feature of that enables accounting firms to upload and onboard up to 200 clients at once instead of individually. This capability enables our accounting from partners to scale much faster and is powerful reason for new firms to join our platform.
Our platform's ability to help accounting firms manage the onboard clients of scale attracts new business opportunities. As an example, one of our accounting firms partners Horne LLP when a contract with several states to process applications and distribute COVID-19 relief funds or in selected Bill Dot com to help and distribute the signs because we make handling large volumes of payments seamless with.
Our platforms in API.
Given our platform's ease of use we continue seeing significant demand from mid market customers.
We recently announced our new two way integration with both Microsoft dynamics, 365 business Central and GP software.
Of this integration increases efficiency ease of use and workflow controls for our customers by creating a real time data sitting between our platform and Microsoft dynamics the.
Of the initial feedback has been very positive. We're excited about the opportunity of this has to extend our reach as tens of thousands of mid market companies rely on Microsoft dynamics ERP systems.
For example, Colin Casper CFO of GMA ventures of real estate investment and development firm said and I quote the bill Dot Com and dynamics 365 think streamlines, our entire AP process from coding invoices collecting approvals to making digital payments, enabling us to have real time visibility and understanding of our cash position.
Both of the accounting team and at the asset management level. This integration of eliminates duplication of work efforts and saves a tremendous time across the entire company.
In summary, the results this quarter are a strong demonstration of the breadth of our platform empowers financial operations for organizations ranging from very small businesses to mid market companies and it serves branded offerings for financial accounting and wealth management partners of all sizes.
We have a large market opportunity and the right platform strategy partnerships and team doing it now I will turn the call over to John to review our financial results. John Thanks, Renee today I'll provide a brief overview of our fiscal third quarter 2021 financial results and discuss our financial outlook for the fiscal fourth quarter.
As a quick 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.
Note that we revised our method for calculating certain non-GAAP financial measures.
The details can be found in today's press release, which includes a reconciliation table that reflects nominal adjustments made to both our Q3 'twenty one in Q3 'twenty results.
We've also included a reconciliation for prior periods in an appendix to the presentation posted on our Investor Relations website.
Now, let me return to our financial results for the quarter, which are based on our updated non-GAAP definitions.
Q3 results exceeded our expectations across all areas of the business driven by strong customer engagement on our platform and solid progress driving adoption of our newer payment offerings for both new and existing customers.
We delivered strong growth in Q3 across all areas of our key financial and operating metrics.
Total revenue for Q3 was $59 7 million up 45% year over year, as new and existing customers leveraged our platform to digitize their financial operations.
Core revenue, which represents subscription and transaction fees was $58 6 million in Q3 up 62% year over year and acceleration from our 59% year over year growth last quarter.
Subscription revenue in Q3 increased to $29 3 million up 32% year over year.
This growth was driven primarily by the increase in the number of customers on our platform.
Transaction revenue increased to $29 3 million in Q3 up of 112% year over year due mainly to higher average revenue per transaction, which increased 79% year over year, driven by the changing composition of payment types used by our customers.
Our 112% growth in Q3 represents the fourth quarter in a row of accelerated transaction revenue growth and transaction revenue now represents 50% of our core revenue up from 38% of year ago.
Transaction revenue growth was driven by strong TPP and the continuation of payment mix shift towards products with variable pricing.
As you recall in Q1, we brought supplier enablement entirely in house, employing our own vendor AI matching logic to automate this initiative.
We also apply our AI capabilities to identify international suppliers, who want to be paid in their local currencies versus U S dollar payments.
Both of these efforts resulted in better than expected traction during Q3 and enhanced our transaction revenue results.
Moving to float we generated $1 1 million of float revenue in Q3.
Our annualized rate of return on customer funds held in Q3 was approximately 23 basis points slightly above our estimated range for the quarter and down from 35 basis points last quarter.
The reduced yield from last quarter reflects the current low interest rate environment, and maturing investments being reinvested at lower rate levels.
Turning to an update on our key business metrics, we ended the quarter with 115600 customers up 27% year over year.
During the quarter, we added 6500, net new customers, which was above our expectations due to better than expected performance from our financial institution channel.
One of our bank partners added over 1000 incremental new customers due to the launch of a program that the implemented in the quarter excluding.
Excluding these incremental new customers or net new customer adds would have been slightly below last quarter and consistent with our expectations.
We're investing for customer growth and strong unit economics, and expect to generate roughly 4000 to 5000 net new customer adds over the next few quarters until our newest financial institutions entered the scaling phase as we've previously discussed.
Moving onto total payment volume, we processed 35 billion and <unk> on our platform in Q3 up 44% year over year, and we processed $7 2 million payment transactions during Q3, which was up 19% year over year.
On a sequential basis, both TPB and transactions were roughly flat, which follows our typical seasonal pattern.
Moving onto gross margin and our operating results our non-GAAP gross margin for the quarter was 76, 9%, which was at the high end of our expected gross margin range of $75 to 77% primarily from strong transaction revenues from variable price products, partially offset by the infrastructure investments, we are making to support our financial.
Institution partners as well as reduce float revenue from the low interest rate environment.
Note that our updated non-GAAP definitions resulted in a reduction in non-GAAP gross margin of 64 basis points in the quarter compared to our prior calculation methodology.
R&D expense was 18 million for the quarter or 30% of revenue consistent with the third quarter of fiscal 2020.
We continue to invest in additional hiring in R&D to support our product roadmap for payments innovation continued investment in our platform and work related to our newer financial institution partnerships.
Sales and marketing expenses were $13 2 million per the quarter or 22% of revenue compared to 27% of revenue in Q3 of the fiscal 2020.
Quarter over quarter sales and marketing spend increased $1 million.
We have been successful in driving adoption of our payment products, mainly through in product discovery and upsell with minimal incremental sales and marketing spend and this has driven an increase in sales and marketing efficiency.
G&A expenses were $16 9 million for the quarter or 28% of revenue compared to 30% in Q3 of fiscal 2020.
Our G&A expenses include investments in risk management, and regulatory compliance, which are a core part of our proprietary payment capabilities and we believe form an important part of our competitive advantage.
Looking ahead, we will continue to invest in our risk and compliance capabilities, but expect to achieve economies of scale over the longer term.
In Q3, our non-GAAP operating loss was $2 1 million versus $3 8 million in Q3 of last year and our non-GAAP net loss was $1 7 million or a loss of <unk> <unk> per share based on 83 million basic weighted shares outstanding.
Note that our updated non-GAAP definition resulted in a modest improvement in non-GAAP net loss of $1 2 million in the quarter or a <unk> <unk> improvement in loss per share compared to our prior calculation methodologies.
Turning to the balance sheet, we ended the quarter with over $1 $7 billion in cash cash equivalents and short term investments.
As of March 31, 2021, we had $1 9 billion in customer funds on our balance sheet.
Now, let's move to our financial outlook. Please.
Please note that our outlook is for bill Dot com on a standalone basis and does not include any contribution from the <unk> transaction.
Based on our solid execution in Q3, and the encouraging trends, we're seeing in our business, we're entering Q4 with momentum.
Of our expanded payment offerings and go to market initiatives and strategic partnerships are driving strong core revenue growth increased platform adoption and a mix shift to higher revenue payments.
Now I'll provide an outlook for the fiscal fourth quarter of 2021.
For fiscal Q4 total revenue is expected to be in the range of 69% to $61 9 million. We expect core revenue in the range of <unk> 64 to $61 3 million, representing our view that the momentum from Q3 will continue in the current quarter.
We expect float revenue in the range of 500 to 600000, and our float revenue outlook assumes that the fed funds target rate will continue to be in the zero to 25 basis points range during the June quarter and that our annualized yield will be in the range of 10 to 15 basis points.
We expect our float yield will remain in that range for the foreseeable future given the low interest rate environment.
Regarding our planned operating expenses, we will continue to develop our platforms capabilities and invest in R&D to support product development work relating to our newer financial institution partnerships and creating new payment products we.
We will continue our vigilant approach with regards to the sales and marketing investment and will increase our investment as opportunities and unit economics warrant.
On the bottom line, we expect to reported non-GAAP net loss in the range of $4 5 million to $3 5 million and of non-GAAP EPS loss of $5 <unk> on a per share basis based on the share count of approximately $83 3 million basic weighted average shares for Q4.
In addition in Q4, we expect stock based compensation expenses of approximately $11 million to $12 million and capital expenditures for our new headquarters and other requirements to be approximately $5 million to $6 million.
We're pleased with the strength of our business driven by the need for Smbs to transform their financial operations and adopt digital solutions.
We're in a strong position with the leading platform that simplifies financial operations and customers Trust us to move their funds efficiently safely and securely.
We're delivering very strong core revenue growth and accelerated transaction revenue growth, we are committed to investing strategically to expand our reach and our platform's capabilities, which we believe will create a durable long term growth runway for <unk> dot com in the SMB market.
Now I'll turn the call over to Renee to talk about our acquisition of Davita Rene. Thanks.
Thank you John earlier today, we announced the definitive agreement to acquire <unk>, which will extend our reach into the spend management space I am very excited about this transaction and thrilled to welcome the <unk> to the <unk> family.
<unk> is of modern extremely innovative solution that combines expense management and budgeting software the smart corporate cards by.
By bringing our companies together, we can provide our customers an expanded platform to manage all of their <unk> spend in one place and create even more value for our customers faster than we could do on our own.
We have always been committed to expanding the value of our platform for our customers and today is a major milestone.
<unk> is in high growth mode and has attractive recurring revenue to give you an idea of their scale exiting the March 2021 quarter <unk> annualized recurring revenue run rate was approximately $100 million, which was up more than 100% from their March 2020 of run rate.
I've watched <unk> since they launched their product three years ago and have always been impressed with the team their solution in their mission to help smbs.
There is incredible strategic alignment between our companies. We both have a similar purpose to help smbs transform and thrive by simplifying their financial operations.
We both have built simple and elegant software that is loved by our customers and our visions are aligned to be the leading platform for smbs to automate financial operations.
We're a leader in AP automation Division is a leader in corporate card spend together will be disrupting the status quo of how SMB business gets done and I believe we can create tremendous value for our customers and employees.
Founded dotcom 15 years ago with the mission to make it simple to connect and do business, having grown up in a family of entrepreneurs and founding companies and my own I know how hard it is to run the business and that the day to day work of managing the back office takes significant time away from focusing on the core business and building relationships with customers.
That is why I founded dot com to be of champion for small and mid size businesses to help them thrive by simplifying and automating their back office financial processes. So they can focus on what's most important to them.
Similarly, Blake found of Davita solve another pinpoint he experience running of small business too, which is card spend I've experienced firsthand the challenges of managing card spend across the company and in fact, one of the most frequent request we get from customers is to add a car expense solution to our platform I really respect and admire the constantly evolving solution. The Debbie team has built.
By combining expense management software and smart corporate cards into a single solution divvy empowers its customers to manage spend.
Spin with the single solution that provides real time insight and has sophisticated budgeting and expense management tools.
No more being surprised by unexpected card expenditures no more having to hunt for information. It's a simple solution that gives businesses control visibility and savings.
It's meaningful to me that both of our companies were founded on the premise that day to day business and growth should be simpler for smbs.
We will keep the shared purpose at the center of our go forward strategy together.
Together with <unk>, we have an opportunity to accelerate our innovation agenda and exceed the expectations of SMB and mid market businesses by bringing together the <unk> experienced an automated payables receivables and workflow capabilities and David's experience with expense management budgeting and corporate card spend.
With the scale of more than 200 dedicated and talented employees along with our combined solutions, we can bring transformational innovation to our customers more quickly.
Customers will be able to manage the have visibility into the vast majority of the <unk> spend and pairing them with real time insights of our spend and cash flow management. The addition of the <unk> platform will also move this further up the transaction lifecycle support more use cases with budgeting and spend management and enable businesses to simplify and transform their financial operations like never before.
And now I'll turn the call over to Blake to share his perspective on the proposed transaction.
Thank you Rene on behalf of the entire DVT I'd like to say how incredibly excited we are to join the build dot com team. When the transaction closes. This is an amazing day for <unk> customers and team members. When we founded <unk>. We had one thing in mind supporting small and medium sized businesses that are the backbone of the economy I wanted to build the company that would give them the <unk>.
Software and access to the financial tools that they needed to run a great business I wanted to help them grow and thrive. Our mission has always been to build an all in one solution for finance teams. We think of significant amount of time is wasted and businesses have the log into lots of different software just to make payments and manage corporate spend.
In the short period of time, we've been very successful scaling our business and as of March. We now have more than 7500 monthly spending customers and more than $4 billion in annualized spend on JV or annualized revenue was up more than 100% growth is our DNA. This is the large part of what has been so exciting for us about bill Dot com.
Rene John and team have built an incredible company they are ambitious and driven their authentic and most importantly, the our fierce advocates for making life simpler for Smbs is a perfect fit.
<unk> dot com, our customers, our true north and everything we do is focused on them.
Our solution has a meaningful impact on the customers for example, one customer recently recounted how during COVID-19. The immediately had to make all employees work remotely the bank couldnt provide them the tools to get money from PPE equipment.
With <unk>, they were able to issue cards with spending limits to quickly enabled their employees to buy equipment they needed to stay safe while staying under budget.
Really excited to be joining forces with bill Dot com to help smbs thrive by modernizing and transforming their financial operations the.
The combination of our two companies will bring our customers a single solution for all of the BTB payment needs.
No more wasting time on manual work no more steam late at the office to close the books no more waiting for the tool that does everything you needed to.
From day, one we have known that finance teams and business owners need of one stop solution together with Bill Dot com will be able to deliver the platform that our customers in the market had been asking for and now I will turn the call back to Rene.
Thank you Blake, we're really excited about the value we can create for our customers and businesses everywhere by bringing our two companies together the.
This transaction supports our commitment to invest for growth and scale and we believe it more than doubles, our domestic total addressable market. This.
This is the result of the corporate card product. The Davita has developed which comes with very attractive monetization rates similar to our vendor direct virtual card offering.
We're excited to be investing in this growth opportunity and we believe a significant portion of our 115000 customers will be interested in adopting <unk> corporate card solutions. So there is a sizeable cross sell opportunity that we will aggressively pursue.
Additionally, we believe that having spend management capabilities will increase the value of our platform for the prospective SMB and mid market customers, bringing these companies together will allow us to more quickly deepen our market penetration our combination of will accelerate our shared vision to be the leading platform for smbs to automate financial operations and make it simple to connect and do business.
We look forward to welcoming the <unk> 400, plus team members when the transaction closes and the Davey team will remain in Utah, expanding our geographic reach for talent and now I will turn the call over to John who will talk about the terms of the transaction.
Thanks, Renee, let me start by saying I share Renee in Blake's enthusiasm for this transaction and the opportunity ahead by combining our companies our shared vision and commitment to serving Smbs with innovative solutions for automating financial operations will only be enhanced by bringing our companies together.
Turning to the transaction under the terms of the definitive agreement Bill Dot Com will acquire <unk> for $2 5 billion, consisting of approximately 625 million of cash and $1 $8 $75 billion in stock based on a bill dot com share price of $157 27.
That's the one question along with the follow up question if.
If we had more time after all the questions. We will open it up for additional questions.
And your first question comes from the line of Josh back from Keybanc. Your line is open.
Thank you so much for taking the question and congratulations on the transaction everyone.
I wanted to ask just a little bit about why you thought did he was such a good fit obviously some.
Some companies do tuck in some companies go for larger deals I'm sure you looked at many many before you decided that did he was you're right partner. So maybe just walk us through a little bit of.
Of the background of why it was such a good fit from your seat.
Thank you Josh good to hear your voice and a great question, you're right, we definitely canvas the market and we think of a lot about how we can add tore apart from them. Both by building New features which we talked about something on the on the script and as well as obviously partnering which would also talked about as well as actually acquiring and really blending and taken.
The the the real opportunity to enhance and expand the platform that we've been working on for 15 years and so when we looked out there and we looked at the really the speed and success that Davies had a sense of their founding it kind of stands out I mean, they're they're growing superfast something that's exciting to see us.
The success they've had but it also comes back the customers, which you know is really important.
And so for for US with everything we do we're always listening the customers were always talking to customers and we're always talking in the prospects and so with the 115000 customers were able to kind of see what's going on in the market in general and so we do have thousands of customers that are doing and using spend management solutions.
And and we have over a thousand that are actually doobie customers and so when we talk to those customers. What we found out was everything that you kind of see.
When you get to know the team of <unk> is just how much their customers love them. It is really powerful thing to kind of see the customer success. It reminds me of kind of the success of we've had with our customers and that the the alignment there really it goes back to this shared purpose that we have which is to really help snb's transfer.
Harm grow in the thrive and it's just part of the DNA the share DNA across both companies goes from both the purpose the vision, which is really to be the leading platform for smbs to automate their financial operations as well as related the people on the values and you.
It's this has been one of the most fun things from me about doing this deal is getting to know Blake and his team I mean, they are phenomenal they have really high.
Hi sense of execution. They are of high vision that is really strong and they have just a lot of fun to be with and so when I think about the team that we built the dot com or the 15 years I've been very focused on making sure that whoever comes into the bill Dot com family that is going to be aligned and be a lot of fun to work with those folks. So so lots of good reasons to do it but.
It started with kind of us taking notice of the business of results been asking customers and then really digging in with the team and being pretty excited about that.
Really good to hear about the the deep alignment there maybe just a quick follow up on the synergies. So when you think about all of your customers that are not did the customers today, maybe what the what are they using generally within this category of the expense management and what is the strategy.
To convert those customers to become deviate users as well.
Yes the of.
For all of them when we look at customer spend on our platform, we think that we have.
Roughly let's say $70 to 75% of the customer spend and the <unk> space and when we look at what's remaining.
25, 30%, we think of lot of that if not all of it is really the corporate card spend and that's what division working on so so a lot of this is customers are and of solution, where they are using manual processes to track you Excel spreadsheets when you talk to Blake will get the.
A chance to kind of your kind of the manual processes that gc's customers doing without they're solution, but it's just a lot of manual processes. The businesses are using the kind of track of the corporate spend that's happening outside of solution. The payable solution like what we have and so it is that type of synergistic opportunity on the on the business that helps us get comfortable.
This is an opportunity for us the double the tan of our business. This is the the.
This is the opportunity when we look at the.
The monetization approach that that did he has it as of variable.
Price from your product essentially the the card spend actually leads to monetization that'd be it's the the revenue for the business and that that type of revenue monetization.
Multiple times are two of what we have and so we just think that gives us confidence that we can double the overall timbre of the business and look forward to doing that.
Great to hear congrats everyone.
Hey, Josh.
Your next question comes from the line of Brides sales from Bank of America. Your line is open.
Oh, great. Thanks, guys for taking my question congratulations on a real nice quarter and on the transaction here.
I wanted to ask a question on <unk> as well please.
Yes, I see that they have a pretty good mix of business between small and mid market. Obviously bill Dot com has been embarking out of move up market already and seeing progress there.
What extent do you think this could accelerate that that move up market is this the view. This is more of of mid market solution or is it more.
More balanced between the ability to cross sell the send to your small business space. In addition to kind of bring bring you guys up market.
One of the things that we've said of.
Along around the the pull into the the mid market is that we serve customers of all sizes and as as we get scale. They ask us to build more functionality and we find better ways to reach them. So.
For us it is a broad cross-section of businesses across the country. Both in industry in size that actually we serve and when we looked at the customer data that we had obviously.
With the <unk> as well as when we talked to Blake and his team and the customer day of that we saw a lot of alignment with the customer base. So this isn't going to change our focus we're going to continue to serve all businesses that one in need of solution to automate their financial operations, which we think is all businesses. We will continue to build features for each of the size of segments that we serve.
That this isn't something that's going to accelerate just going to allow us to continue to monetize and of very meaningful way.
That's great. Thanks for the day, and then wonder if I may on the the.
Transaction revenue this quarter was tremendous.
And you called out of the card in cross border and.
In the past you had the last couple of quarters, you've seen some traction with the supplier enablement capability and really driving adoption of the card.
My question is.
Guys feel like you are hitting your stride here in terms of in product promotion. This is of a relatively new sales motion for for the firm.
What's the priority of on capabilities and really what you're seeing it sounds like it has traction within product promotion seems like you're really hitting your stride there. So.
Where does this go from here and any commentary on kind of that sales motion and how that's tracking.
It's an excellent call out and.
Yes, I would just start with at the beginning of the the script I had talked about how I had to think the employees are just really.
The rigors of execution, and just delivering an amazing quarter and and it's something that that we see every day that we're getting better at everything that we do.
And that is such an important part of scaling of business and serving the Smb's. All of this country is that you have to be able to know that you can get better and demonstrate that you can get better and that's something that we've been doing and having the results that we had this quarter I think the real Testament to the team and everything that they are learning and I would agree that we are learning.
How to essentially cross-sell our own internal products, which is of great lead into the opportunity of that we have a duty.
Once the transaction clothes is we're going to focus very aggressively on how do we cross-sell they're great solution. It's elegant is really simple how do we cross sell that solution into the 115000 customers, we have and make their lives even better and that's something that we're excited about and as we've gotten to know Blake and his team like they.
Have the same passion and thirst for rigorous execution like they love to execute well they love to actually knock it out of the park and that's something that's going to be fun to do together.
Exciting thanks for the day.
Thank you.
Your next question comes from the line of branch briefly from the paper Sandler Your line is open.
Hi, This is the quark jeffries on per brand.
First question, obviously transactional revenue growth.
To be fantastic I think spit out to us is really the strength in dollar per transaction and the revenue you generated on each transaction I just wanted to.
When you think back the 2019 when you when you launch the variable product what has surprised you. The most you said the about replacing pay per checked and it just it feels different now has the willingness per customer to use virtual cards for large transactions been been hold the above your expectation and just trying to understand what's driving the acceleration.
Seven 7.2 million transactions scale.
I think it really comes back to the rigorous execution again. This is we're we're we're building teens and capabilities around how to cross sell our products into our customer base as well as into our supplier network right. So the.
The international payments or something that we need to cross sell into our customers as well as then we need to get their suppliers accepting an FX transaction and so it's a mix of product technology to mix of the product marketing. It's a mix of of sales tools and the same is true on the virtual car, but in that situation. It is with the suppliers focused on.
Getting them excited and wanting and needing to take the virtual car transaction and so it is this success that has got us like I said really excited about the opportunity to cross-sell what the <unk> is built into the customer base and I think it gave us confidence knowing that the teams were really leaning in figuring this out the.
We would be able to do this with the.
The extension of our platform once divvied becomes part of it.
Great and then just a follow up is there any more detail you can share about the composition of the revenue model Protiviti today I mean.
Should we think about the.
$100 million.
Contribution post clothes or.
What portion of the transaction per subscription.
The color of their in terms of how we should think about actually getting the model.
Thanks for the the question Clark. This is John will definitely provide more color on the combined financial profile and some additional information on the components of the of the do of any Doobie revenue amount of once we close the transaction at this point I mean, I can say qualitatively that it's a <unk>.
Hi growth transaction monetization focus business.
And similar to the traction that you've seen in the the growth of we've had from some of our new financial products as of.
Great alignment with customer of the more customers the more of the use our platform the.
More of they pay in similar model is true with <unk> and we will provide more more color after the transaction closes.
Perfect I appreciate it thank you.
Your next question comes from the line of Garen Peller from Wolf Research. Your line is open.
Hey, guys. Thanks, nice job on the quarter and low congrats on baby I still want to focus the on the customer acquisition that we're seeing the trends.
Payment strong and they came in actually above what we expected when considering.
I think you guys mentioned about it you know potential air pocket just the the into the relationship and then banks coming on can you just revisit the cadence we can expect.
Are you seeing any pull forward or demand given the pandemic still carrying forward of the trends on new customers coming on and the accelerated pace.
What we're seeing with customers is that there is the digital transformation of way that's happening and we see more awareness out there both with our direct customers are accountants, and our financial sees the partners and that's something that we referenced in in the hall in the script.
One of our finish the two partners is being more aggressive about how they sell the market the solution and we expect that to be across all of our partnerships as people are continuing the demand and ask for digital solutions. So.
I think it's something that we're excited about we're really happy with the results on the customer acquisition this quarter and again, it's something that I think points to of general trend as well as the execution of that the teams from able to the litter.
Okay, and when we think about the the and just the Crossville I mean, you guys of help with some some examples but.
If you just prioritize what you're most excited about in terms of the acquisition of the offerings. They have that you didn't have it'll be the easiest to really see clients pick up.
And maybe just a little more color on which direction you think he's gonna be cross hold more easily in terms of clients of who the to the other side of the be all phone just timing. Thanks again guys.
Yeah, Yeah. So I'll start and then I'll ask Blake the kind of filling his perspective, because obviously when it comes to spend management, we've kind of got the Guru in the room. So I kind of wanted to have a chance to talk to you guys about that so really what we see is that our customers have been asking for spend managed solutions they've been asking for expense management solutions, they've been asking for.
For these things because they like doing everything.
In one place. This is the one stop shop concept that we've talked about is super important that customers can be able to do it in one place and so now we see customers, making a lot of spend on corporate cards through the bill Dot Com platform. We believe that there is like I said, we've got 70% to 75% of the spend and there's another $25.
The 30%.
See a lot of that go through as of card transaction, but we don't have all of the individual transaction. So.
That's why we believe there's a significant opportunity to cross-sell into our base.
But I think let me, let Blake out a few words, because I know he sees US all the time from his business. Yes. It is a great question and something we obviously, a really strong opinions on and frankly, even as a precursor to kind of my response.
Core to why we feel so comfortable of working with and combining with build dot com is that we have of shared vision here. We work so closely closely with our customers and we know that debt small and midsize businesses that the place the premium on consolidation. This is what they want they want a single platform through which they can make the pain.
<unk>, but then also manage the entirety of their financial back office.
And and spend management, obviously being in the important piece of that.
And spend management really the reason behavior early why it's striking such of nerve now and certainly in the future is that finance teams the simply want to feel in control. They want control of who spends what where when and why they want a free flow of data that's real time, instead of reactive and that's what the <unk>.
[noise] platform in conjunction with Bill Dot com after the clothes and after we're able to integrate will give them that wouldn't stop solution with free flowing data incomplete control.
It's really helpful.
Your next question comes from the line of Scott Burner from need your line is open.
Hi, My Name's, John and Blake <unk>.
Congrats on both the quarter and the transaction I guess.
Two here first.
First question for Blake Blake, you and I've had a chance to meet a couple of times historically what.
One of the things that stood out was your aggressive audit strategy you have for Debbie as you think about this transaction with the functionality to bring together how do you look at that that.
That roadmap your maybe over the next couple of three years in terms of what this transaction can bring you.
Great to speak to you again, it's fun to do on this site at this point.
It's an accelerant to it and that was a clear to us and I hope it's clear to you as well as you have been able to have the peek under the hood and the Doobie platform of our product roadmap.
When thinking about a one stop solution corporate card payments is Renee is already illustrated is a small portion of day. It was 20 to 25 per cent and that was always a very clear to us and.
The big missing piece of what's been the rest it was the rest of the payment modalities of how finance teams need to make payment and vengeance owners would need to make payments and the obviously allows us to accelerate giving them flexibility pay as you want we provide you the tools you make the payments and the way that is the most beneficial to your bill.
<unk> and so yes, we see the is clearly as an accelerant of debt roadmap rather than a hindrance.
Got it wish you luck on and it'll be fun to watch and the.
Then relation of Mahalo of perspective, you, obviously acquire a lot of customers large chunk of your customers through your partners, whether it's the accounting firms of financial institution.
And the others, maybe like Intuit et cetera, how do you think about taking the solution from selling them through those partners. In addition to the occurred.
Apian payment platform that you currently so.
Yes, Scott.
Scott always great to talk to you at the Super important part of our growth strategy right. We first from one of our customers on the platform next bill amount of sell the more and more services and products and so whether that's the direct customer or a partner to a customer through the.
A named partner like the financial institution or an accountant.
We're going to work hard to build a platform that allows us to sell all the way through and it'll be up to the partners and what they choose to do and when they want to do it but we're pretty excited about this we think that this one stop shop. This idea of having one solution for your financial operations is going to be critical it's going to be part of the digital transformation.
Waive that we've been talking about the customers are going to want that and so we think our partners don't want that and I think it's going to be a lot of fun to see execute throughout the the.
Channels.
Good luck and looking forward to watching the same thanks, Okay. Thank you Scott.
Your next question comes from the line of some of <unk> from Jeffries. Your line is open.
Good afternoon, and thanks for taking my questions. Congrats at a very strong quarter, John maybe wanted to start off for you as we think maybe back to the the bill Dot com customer base as the world starts to reopen and when you look at the typical bill customer are you seeing them get back to you free COVID-19 transfer.
Action volume levels on the on kind of an aggregate of customer basis, or how should we maybe bifurcate, which.
Segment is back to normal volume levels vs still lagging behind.
Great question. Thanks, some odd yeah, we've seen most of our metrics on a per customer basis return to near or pre COVID-19 level of so I'd say the one that.
Has continued to evolve throughout the pandemic is just the number of transactions per customer.
That's a little bit lower today and the most recent quarter them the end pre pandemic levels than we think.
Is driven by both consolidation of payments across our platform and actually the ease with which we increasingly allow customers to do that just the simpler product batch mode things like that because we see very strong TPB of if you look at TBB per transaction, our overall total of payment volume.
Per customer it continues to be strong. So it tells us that you know at least our customer base is definitely getting back to business and and were encouraged by by most of the terms of that were soon.
Great and then maybe one day.
If I if I remember correctly, I think I'd heard that the majority of their customers at the.
The end up getting from the corporate card providers like annex and chase and just trying to think about maybe where give the source of it customers vs thinking about bills relationships with some of these financial institution partners and how they all Mary well together.
Sure I'll start and then I'll have Blake add in a few comments so.
One of the things that excited me about working with the <unk> team is that the go to Mark in motion is actually very similar they have inside sales team. Obviously like we do they've got obviously digital marketing capabilities and they have partner and capabilities know their partner capabilities are more junior than ours, but we believe that there is an opportunity for us to.
Kind of.
Fell through the accounts and the cell into the financial institutions and that's something that will work on once we get the deal closed and have a chance to talk to all of the partners. Yes. This was actually one.
One of the pieces that got me comfortable at the deal is that we had invested a significant amount of time and resources specifically in the accounting channel and in the bank channel of.
Working with both of the large and small banks of like.
And the end.
Providing them with a software platform that traditionally they haven't been able to build themselves and so I think we would reinforce each other.
Both buildup common devean that we should be able to continue.
Continue to work with partners and the healthy way going forward.
That's great to hear and congrats again on the success of the quarter. Thanks.
Thanks, a lot.
Your next question comes from the line of Brian Schwartz from Oppenheimer. Your line is open.
Hi, This is Chad shining onto Brian Congrats on the upgrade quite a really strong execution here.
Just one from me I wanted to go back to virtual card if I may.
Just curious if called out this kind of 5% to 10% penetration rate overtime.
And given the success.
The the I'm, just wondering why couldn't that'd be higher than 10 per cent longterm what are kind of of the gating factors to moving beyond that upper bound is it just market readiness or technology enablement on the network just curious on that one.
Yeah.
We support lots of different types of payments and our focus on the AP platform is to make sure the customers can manage their AP spend and and be able to pay all of their suppliers and whichever is easiest for them. So when we look at the virtual card for the supplier payments on the side that's based on looking at.
Data of our merchants that are accepting payments from our customers and looking at the cross section of of how that intersects with with Mastercard and visa and the card networks and what we see is that 5% to 10%. So that's on the payment's going out from the I would say the invoices that.
I'm in what's really powerful about what divvy is bill is this is all of the kind of I think the term that the.
Like use earlier was the proactive spending that businesses are doing without a bill right. There people are just executing whether obviously in TNA, they're out and out in the room, but sometimes it's it's spend on marketing services with the virtual card, but that's the type of program that divvy supports and so this allows us to continue to expand our.
Our our recent transactions and to be able to monetize those transactions as we capture them. So this.
This this doesn't really change the 5% to 10% that we've said on the virtual card program that we have for the traditional payables that are going out the door for the like on but it does bring in.
A lot of TPB opportunity like we said the the <unk> for <unk> has multiple times that a bill dot com because they get all of the CVV is of variable card spend so it'll be an interesting really exciting opportunity for our customers and our business.
Got it very clear thank you.
Thank you.
Your next question comes from the line of Robert Napoli from William Blair. Your line is open.
Thank you and good afternoon, I guess I can take the M&A question off my list for a quote.
13th.
Net congratulations on the strong quarter and acquiring a really exciting company.
Maybe for Blake on.
The your customer base and Rene you talk about 70, 575% of the spend.
Like what percentage of the spend are you getting I think <unk> has been really successful one getting a very high percentage of of all of of companies spend on the.
On the credit card is that is that correct.
That's a really good question.
When you think of how we think about driving wallet share and driving spend with our customers is is that it's software driven our entire focus is to provide software that both delight and provides incredible utility again, saving them time and money and making sure that they're in control.
And that has created a really powerful flywheel effect of been spending behavior. So traditionally we are there dark dominant card program inside of their ecosystem. Once the adoptive me because the the tour inextricable from the corporate card program to the software they work in conjunction with each other.
Again, just providing them with a variety of different cost saving features and budgeting control features so they tend to lean towards the using <unk> is the predominant card program.
So, they're putting virtually close to the 100% of their spending on the card debt.
Okay.
I'm not comfortable giving me an exact number.
Okay, but incredibly high per cent of their wallet share goes through Debbie and for most is an exclusive program.
Obviously, there's always the outliers and the outliers of different from the size of business industry of business, but the the.
The majority of customers user as they are exclusive card program.
And just kind of I think.
Just the help clarify right the.
The the $70 to 75% of the invoices that kind of in the spend that comes in right and then there's this other spend that happens outside of the payables process and that's the the vast majority that the <unk> the salt.
And so I think the combination with dot com and duty that's the home run because now there is one place that busy.
Business can have all of their spend in one place.
Alright, and then just the.
Blake who of your primary competitors since it is it like in the American Express Wars Abraxas, how can I know the focus more on tech companies, but.
Do you overlap with correction.
The companies like Amex of J P. Morgan that have very large it can be plenty of basis.
Really great question by far and away our largest competitor is spreadsheets and manual processes and it is not close.
We serve middle of American businesses small and midsize.
And although they are tech enabled and have an eye to improving the operations. This is a distinct pinpoint and the business spending the expense management, which is still driven by paper and manual processes.
Great. Thank you and congratulations on the very exciting looking.
Looking forward the the combination.
Thank you Bob.
And we have time for one more question and your final question comes from the line of Mac Benfleet from B T. I G. Your line is open.
Yeah. Thanks for taking the question congrats on on the deal maybe first on sort of the legacy of business if you're on the the financial partnerships just.
Curious what what if you have to try to what kind of of the pipe line you have for for additional partnerships here both with sort.
The new partners and as you of Orange sort of the small business of one of your larger Uhm F. Thighs are you having those conversations of expanding.
The partnership yet on on some of the others that are a little more commercial focus.
Yeah.
Thank you Matt so the the thing that's been interesting about COVID-19 for us as it has really put a spotlight on those manual pay per processes and partners, especially large financial institutions and banks really everywhere. They are the ones that had a challenge their businesses or like how do I make these payments and they saw their businesses.
<unk>, if you will from lack of the digital process and enablement and so what we have seen is continued interest from new partners and really great interest from our existing partners about what more we can do together.
It is one of the reasons, we're excited about the transaction with devious that we think there's an opportunity as we combine and expand our platform to be able to enable of that capability into the finished institutions as well so.
The stuff for us to go figure out, but what we've seen is that the digital transformation.
It's real and it's happening at all levels of our channels.
And then I guess following up on sort of the rationale or to the point a little bit of the advocate here of.
What what was the difficult about trying to build the the D V capabilities around the pain management is that something that you've tried the bill.
Filled out a little bit just given the dog such drastic level of of more customers. You have that are already sort of captive on the bill Dot com platform pushing out something that was home grown maybe just just kind of what your thoughts were there what the attempt to build was and how much this really sort of jumpstarts that.
Uhm instead of taking the time took the build it.
I'll be definitely looked at the internal billed vs by decision and what we concluded is that it takes time like you just said in time the market is super important. This this market the spend manage the market is growing rather fast and and you just look at the growth rate that day, we had 100 per cent year over year out of $100 million run right and you can.
See the the market's growing fast and so for us.
When we got a chance to know the D. V team. It was like well this is going to be a lot of fun working with the team building something together, adding that onto our platform and expanding our platform. We built our plan for them to be able to have these types of the add ons. It's highly API driven we have lots of ways to integrate the technology. So we're excited about doing that and we weren't going to say we have the.
Build it here, we're going to always look to what's going to be best for customers. How can we sort of then the fastest and how can we have the biggest impact on their lives and that was this decision. This time and we're super excited about it.
Alright, well thank you congrats.
Thank you Matt.
Okay. Thank you.
And this concludes our question and answer session and I would like to turn the call back over to Renee less Sir C. T. C E O of Bill Dot Com for closing remarks.
Thank you I want to thank everyone for your time and all of the great questions. Today, I would close by thinking our employees customers partners, we would not be here today without the incredible stakeholders. We work with so thank you have a good day everybody.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
[noise] [music].
True.