Q2 2022 Bill.com Holdings Inc Earnings Call
As Gus organic or stand alone results, which exclude divvy, an invoice to go which we acquired on June one and September one 2021, respectively to help listeners understand our organic performance now I'll turn the call over to Renee Renee.
Hey, Karen good afternoon, everyone.
Thank you for joining us today.
That all of you and your families are healthy and doing well.
At a time of uncertainty Dot com produced exceptional results total revenue for the quarter nearly tripled year over year.
Dot com organic core revenue increased 85% year over year, while revenue from our <unk> spend management solution grew 188% year over year.
Q2 marks the fifth consecutive quarter of an accelerating core revenue growth as customer adoption of our platform has continued unabated.
We ended the quarter at breakeven from a non-GAAP earnings perspective, well ahead of our expectations, we are well on our way to becoming a profitable multibillion revenue company delivering the all in one platform for small and mid sized business financial operations.
Achieving this goal requires us to continue to enhance our platform, while also expanding the breadth and depth of our go to market ecosystem.
As part of this expansion, we have decided to combine our sales team under single sales leader.
I am happy to announce that Blake Murray, the cofounder and CEO of <unk> has accepted a new role as our chief revenue Officer.
A CRO of our combined organization Blake will be responsible for sales companywide, helping a scaled efficiently across our diverse distribution channels.
I believe Blake's experience innovating to serve Smbs combined with this track record of selling and driving adoption will benefit the entire company and makes him uniquely qualified to lead this expansion.
As part of this change Tom Clayton will be leaving Bill Dot com I'd like to thank Tom for his many contributions to build icon and wishing the best in his future endeavors.
We are helping smb's transform at a significant scale.
As of the end of Q2 more than 350000 businesses, we're leveraging our solutions to simplify and automate their back offices.
These businesses trust our platform to manage their financial operations and process their payments, which in the second quarter totaled more than $55 billion in PPV.
Bill Dot com as a champion of Smbs. Our mission is to make it simple to connect and do business. Most smbs are still encumbered by manual back office processes that are inefficient opaque and are time consuming.
The dotcom platform serves as a digital accelerant for these businesses transforming their financial operations with dotcom Smbs get more visibility and control of their cash flow freeing them up to work on the fun and rewarding part growing their businesses.
In prior earnings calls, we discussed being selected to design, a new payables and receivables solution for one of the top three small business banks in the U S.
Today I am excited to share that the bank is bank of America.
This new partnership came together as a result of our success serving bank of America's commercial customers and extends our reach to support all of the small businesses, including sole proprietors that bank of America serves the new solution was launched in several markets in Q2, and the nationwide rollout will continue throughout calendar year 2022.
We are delighted about the tremendous extension of our reach this opportunity brings to build dot com.
The transformative power of our platform makes bill Dot Com and mission critical tool for Smbs and accounts. This together with our diverse go to market ecosystem, which includes self service inside direct sales and strategic partnerships fuels our growth in an efficient manner.
We have partnerships with six of the top 10 financial institutions and more than 5500 accounting firms, including more than 85 of the top 100 in the U S. The breadth and diversity of our distribution strategy has enabled us to reach more customers and expand our network to more than $3 2 million members.
Bare bones broth, and Ohio based company that has sold nursing bone broth. Since 2014 is a great example, Kathryn and Ryan Harvey the co founders have grown their business from working out of a small commercial kitchen to shipping to all 50 states and generating millions in revenue across five sales channels.
Catherine Harvey said and I quote before built icon payables was my whole job and it used to take me 30 hours a week just managing stacks of paper now.
Now it takes me five hours, a week, which enables me to spend more time, focusing on sales and distribution with.
At the time I saved I was able to find my passion for sales and grow our business to a level, we never would have been able to.
We also have more time now to focus on our mission to create food that helps the body healed and quote.
Accounting firms are also able to transform their businesses and build dot com to digitize and automate their clients' financial operations.
The accounting team to focus on more strategic initiatives for their clients the.
A great example is high line online as an SMB focused and tech enabled accounting firm that relies on bill Dot Com <unk>.
That Gardner CEO and co founder said and I quote with Bill Dot Com, we are able to save two thirds of the time spent on managing paper checks and invoices.
Which give us more time to provide our clients high value services.
This drives growth for high line and it also creates more value for our clients.
They can focus more on scaling their businesses, while having more financial peace of mind and put.
Our ability to transform the AP processes, why accounting firms customers and partners are asking for more comprehensive and complete solution for the back office.
An example is Manhattan soccer clubs, who uses bill Dot com for payables Manhattan Soccer is one of the largest soccer clubs in New York City Dave.
They recently adopted <unk>, our spend management solutions.
With approximately 70 teams and over 1000 players using their personal cars returned related expenses recurring reimbursement process had been manual and time consuming.
Daniel <unk> General manager said and I quote divvy really alleviate our reimbursement process saving time and reducing frustration. Additionally, I also have real time visibility into each transaction and the integration with Quickbooks is seamless.
<unk> of having multiple solutions in one place also adds value for me.
I can count on dotcom for Bill pay and expense management and quote.
Recognizing the need that the Manhattan Soccer club articulated our product teams are building features that enable a more unified bill dotcom and <unk> platform experience.
Recently, we introduced single sign on and simple consistent navigation throughout both solutions.
We also made it easy for Bill dotcom customers to sign up for Debbie and speed up the credit line approval process.
We are in the early stages of digital transformation for businesses, we have a strong track record of introducing new services to meet customer demand and we are accelerating our pace of innovation to capture the tremendous opportunities ahead of us.
For example, we continue to test payment solutions that give our customers more choices.
Our new pay by card product enables payables customers to fund their payments via credit cards.
Recently, we also enhanced invoice that goes payments capabilities with an in platform branded experience for getting paid now.
Now invoiced to customers can receive their funds directly rather than through an intermediary.
Our branded payments experience makes us sign up easier reduces friction and speeds up funds availability.
Continuing on the topic of innovation, we recently launched a host of improvements to our <unk> solution designed to give customers an end to end view of expense management.
Now employees in spending businesses and E mail receipt, which get auto mats to car transactions do better categorization and receive free expense reimbursements via <unk> and.
In addition, we upgraded the <unk> dashboard to provide budget owners enhance cash flow insights.
Looking ahead I continue to be bullish about the opportunity we have to support businesses ranging from sole proprietors to mid market companies and.
In the near term it remains our priority to deliver features that create a more unified and seamless platform experience.
We will also continue to expand our payment offerings extend our network reach via our diverse ecosystem and scale, our relationships with accounting firms and financial institutions.
None of this is possible without growing our people and bringing in great talent across the company in Q2, we welcomed Sarah acting as our Chief marketing Officer.
Sarah brings a wealth of brand and leadership experience from her years at Yahoo and linked in.
She has built leading global brands across both business and consumer markets.
<unk> will accelerate our marketing and brand building efforts and play an important part in our future growth. We are thrilled to have her on the <unk> and.
In closing, we delivered very strong financial growth this quarter as we continue to widen the moat, we've built through our go to market strategies and product innovations.
Want to thank our <unk> employees for driving these great results and for their commitment to our mission customers and each other.
Now, let me turn the call over to John to talk in more detail about our amazing quarter.
Thanks, Renee today ill provide an overview of our fiscal second quarter 2022 financial results and discuss our outlook for the fiscal third quarter and full fiscal year 2022.
As a reminder, today's discussion includes non-GAAP financial measures. Please refer to the tables in our earnings press release for a reconciliation from non-GAAP to the most directly comparable GAAP financial measure.
Both <unk> and Invoiced to go or included in our second quarter results.
Our Q2 results exceeded our expectations across the board with total revenue growth of 190% year over year organic core revenue growth of 85% year over year non-GAAP gross margin of 85% and breakeven on a non-GAAP EPS basis.
We continue to see very strong organic results, including <unk> standalone revenue growth of 188% year over year.
We are energized by our progress creating value for smbs, while at the same time, delivering strong revenue growth and operating leverage.
With our large base of engaged customers network members and our go to market ecosystem, we can quickly build and efficiently scale adoption of new products.
And our R&D investments enable us to create additional growth levers across the business.
Turning to an update on our key metrics given our recent acquisitions, we are providing additional insights on organic metrics for bill Dot com JV and invoice to go.
Customer acquisition during Q2 was strong across Bill Dot Com. We ended the fiscal second quarter with 135000 build dot com organic customers, including 8100 net new customers in the quarter driven by strong customer adoption across all of our channels.
We also had 15500 spending businesses using <unk> and 223000 subscribers using invoice to goes a solution as of the end of Q2.
The slight decline in net new customers added at Davita and invoice to go was expected as we applied Bill Dot coms more robust underwriting and onboarding criteria to their new customer sign up flows.
We believe this application of our proprietary risk logic will yield higher value customers going forward.
We delivered very strong organic total payment volume in Q2 of 56 billion, representing 62% year over year growth and 20% quarterly sequential growth.
Organic TPB significantly outperformed our expectations and exhibited strong seasonal trends similar to the trends observed in the December 2020 quarter.
Our organic TPP growth in recent quarters has been driven by engagement from our customers and expansion and share of wallet given more payment choices and the impact of a slightly larger average customer.
Looking ahead in the fiscal third quarter, we typically experienced some seasonality with TPB slightly down compared to Q2, because many smbs pull spend into the December quarter from January for year end tax planning purposes.
During the quarter, we processed $1 $9 billion in card transactions from spending businesses using our <unk> spend management solution, which is an increase of 145% from last year.
Moving on to the number of transactions, we process $9 8 million payments on the Bill Dot com platform in Q2, reflecting 35% year over year growth.
We also processed $5 $3 million debit card transactions.
Now I'll review, our reported consolidated Q2 results.
Total revenue was $156 5 million up 190% year over year.
Core revenue, which consists of subscription and transaction fees was $155 5 million representing growth of 197% year over year.
Organic build dot com core revenue growth accelerated to 85% year over year compared to 78% growth last quarter.
That's Renee noted fiscal Q2 marked the fifth quarter in a row of accelerating annual core revenue growth, which we believe speaks to the value we create for customers.
In addition to our organic core revenue strength revenue from our spend management solution grew 188% year over year.
<unk> results were driven by seasonally strong card spend and take rate expansion to approximately 260 basis points in the quarter.
As more card spend was processed through higher yielding partners than in the prior quarter.
Subscription revenue increased to $49 2 million up 85% year over year in.
In addition to our growing customer base subscription revenue was driven by the inclusion of invoice to go subscribers for a full quarter.
We also early adopted FASB ASU 2021 dash eight relating to acquisition accounting for deferred revenue, which was issued by FASB in October 2021.
This resulted in recognizing invoice to go subscription revenue from annual contracts that were previously written down as part of the acquisition accounting.
In Q2, we also began recognizing revenue from our new small business solution with bank of America.
Together these items represented a step up in subscription revenue of approximately $10 million in Q2 compared to the prior quarter.
Bill Dot com organic subscription revenue growth was 51% year over year, which accelerated from 39% in Q1, driven mainly by the impact of a slightly larger average customer size in the new Bank of America revenue.
Transaction revenue increased to $106 3 million up 313% year over year due to strong PPV growth increased adoption of our AD valorem products and increased usage of our spend management card solution, which totaled $48 7 million in revenue for Q2.
Bill Dot com organic transaction revenue growth was 121% year over year.
Float revenue was approximately $1 million in Q2, an increase of 200000 from last quarter as a result of the significant growth in our <unk> balances.
Looking ahead, we do not expect material growth in float revenue in the short term, but further out there is an opportunity for accelerating growth given the rising interest rate environment.
Turning to gross margin and our operating results for Q2.
non-GAAP gross margin was 85, 3% up from 83, 6% last quarter driven by the invoice to go deferred revenue benefit and a higher mix of AD valorem transaction revenue.
In addition, our non-GAAP gross margin improved due to the impact of optimizing the routing between our foreign exchange providers, resulting in lower FX conversion cost per cross border payments.
For the remainder of fiscal 2022, we expect our non-GAAP gross margin to be in the range of 79% to 81%.
non-GAAP operating expenses were $130 1 million, an increase of $22 million from Q1.
R&D increased $5 7 million from Q1, as we continue investing in our platforms workflow and payment capabilities.
Sales and marketing increased $13 3 million from Q1, primarily due to increased go to market expenses due to our cross sell efforts the inclusion of invoice to go for the full quarter and increased rewards expense associated with our spend management solution.
G&A expenses increased $3 million from Q1, reflecting a full quarter of invoice to go and increase fraud and credit losses associated with the growth in TPB in card spend.
With estimated loss rates being consistent with historical trends.
For Q2, we delivered a non-GAAP operating profit of $3 4 million and our non-GAAP net loss was 220000 or a breakeven net loss per share based on $102 9 million basic weighted shares outstanding.
Our non-GAAP operating profit and breakeven non-GAAP net loss were both significantly better than our expectations in part due to the additional subscription revenue recognized during the quarter.
Now moving onto the balance sheet cash cash equivalents and short term investments at the end of Q2 were $2 8 billion flat quarter over quarter.
We continue to be well capitalized, enabling us to invest in scaling our business.
As of December 31, we had $3 4 billion in customer funds on our balance sheet, which was up $948 million or 39% from the end of Q1 due to the significant increase in TPB, we processed during Q2 as well as slightly longer check transit times.
Now moving onto our financial outlook for the fiscal third quarter and full fiscal year 2022.
With the recent acquisitions of Davita and invoice to go we have already transitioned to managing one consolidated business do we are providing additional information on organic revenue growth expectations for comparability purposes.
We've never been more excited about the large global SMB market opportunity, we are pursuing and our leadership position.
Our results have clearly demonstrated the significant momentum, we have creating value for smbs and driving financial results.
Looking at the macro environment, there is uncertainty regarding the impact of omicron inflation and supply chain constraints being experienced by businesses.
While we don't see an impact on our overall SMB base at the moment, we continue to monitor the situation closely.
Our fiscal 2022 outlook update assumes there won't be a material negative impact to our business from pandemic.
Pro economic or supply chain issues faced by our customers.
For fiscal Q3, we expect our total revenue to be in the range of 157% to $158 million.
Note that sequential revenue growth in Q3 will be influenced by seasonality as well as the step up in revenue recognized in Q2 that I referenced earlier for invoice to go and bank of America subscription fees.
Both these items are additive to our full year results and contribute to year over year growth in Q3 and Q4.
For Q3, Bill Dot Com organic core revenue annual growth is expected to be approximately 67% on a standalone basis.
<unk> spend management revenue growth is expected to be approximately 132%, which reflects lower seasonal card spend in Q3 for the advertising and travel categories and an estimated take rate closer to the top end of the 230 to 250 basis points previously discussed.
We expect short term interest rates to increase beginning as early as March but do not expect a material impact on float revenue in fiscal 2022.
Note that while our float revenue will increase with rising interest rates, there will be a timing lag as we reinvest maturing securities and higher yielding securities over time, we expect higher interest rates will become a tailwind to our overall model to give you. Some perspective, if the federal funds rate was 100 basis points today. This would translate into approximately 30% to 30.
$5 million of annual float revenue, which carries a very high margins.
In terms of operating expenses, we expect to continue the strategic investments, we're making in R&D for platform integration with Davita and invoice to go scaling activities with financial institution partners, and bringing new payment products to market.
In addition, we expect to continue being vigilant regarding our sales and marketing investments.
On the bottom line for Q3, we expect to report a non-GAAP net loss in the range of $16 nine to $15 9 million and a non-GAAP loss per share of <unk> 16 to 15.
Based on a share count of $103 5 million basic weighted shares outstanding.
Moving to our outlook for fiscal 2022, we expect total revenue to be in the range of $597 million to $600 million with approximately $34 million from invoice to go.
This assumes organic or Standalone bill Dot com core annual revenue growth of approximately 69% in fiscal 2022 up from our previous estimate of 55% annual growth.
<unk>, we expect annual revenue growth of 132% for fiscal 2022 versus our estimate of 115% with guidance last quarter.
On the bottom line for fiscal 2022, we expect to report a non-GAAP net loss in the range of 47, 2% to $44 2 million and a non-GAAP loss per share of <unk> 46 to <unk> 43.
Based on a share count of $101 9 million basic weighted shares outstanding.
We have a track record of creating operating leverage as we grow and we're confident that our strong unit economics and scale will enable us to continue creating efficiency in the future are high growth and strong unit economics empower us to invest in our business.
For over a decade, we have worked to build a leading financial operations platform that helps hundreds of thousands of entities ranging from the smallest of businesses to midsized companies.
We have consistently invested in new ways to create value for Smbs and we have a strong track record of turning these investments into tangible results at the same time, we believe we're still in the early innings of a large market opportunity.
Our platform offers a differentiated value proposition that smbs are increasingly recognizing given the new reality of hybrid work that is here to stay.
With our rapidly growing scale and fast pace of innovation, we are uniquely positioned to become the de facto platform for smbs to manage their financial back office is now and in the future.
I'll now hand, the call back to Karen Karen.
Thanks, John .
Turning up for Q&A, we request that you limit yourself to just one question. So we have enough time to get to everyone on the call today.
You have a follow up question, yes. Thank you jump back in the queue.
Operator, we are now ready for questions.
Thank you for our Q&A, if you would like to ask a question. Please press star followed by one on your telephone keypad now if you change your mind. Please press star followed by two and when preparing to ask a question. Please ensure you'll find us on muted locally.
Our first question today comes from Brent <unk> from Piper Sandler.
Please go ahead.
Thanks for taking the question here with John obviously Super impressive to see the acceleration in the business both organically and the acquisitions. My question. One question here for Renee one of the more interesting aspects of the invoice to go business is the global reach some of our data suggests that.
Half of the application downloads are coming from international so could.
Could you talk maybe a little bit about your <unk>.
Global strategy, how that fits in relative to invoice to go appreciate the the AOR product capabilities. It brings but would love to hear a little bit more about your aspirations to expand globally.
Thank you Brett always good to hear from you.
Part of the reason for the acquisition definitely was the international aspect of the business and voice to go has both the customer and the reach they have over 100 countries that theyre serving.
With customers in.
All of those countries.
40% of the businesses and you add that.
The fact that they have both the international presence in the U S was very attractive to US was also attractive because of the international workforce that they have and the folks in Sydney and in other countries and as we think about our global aspirations. We are very focused on delivering value for smbs everywhere and the way we have started that process with the <unk> product is.
Through the international payments and the ability to do cross.
<unk> border payments for those customers and the suppliers that are out there and so when we think of the opportunity with respect to invoice to go it is to leverage all of the experience that they have.
Simplicity, and the product simplicity and go into market and to leverage that with the bill dotcom payment rails and software capabilities that we have so we're excited about it and look forward to extending that reach as we continue to integrate the application.
Sounds great. Thank you.
Thank you.
Our next question comes from Scott Berg from Needham <unk> Company Scott. Please go ahead.
Hey, guys. This is Josh on for Scott Congrats on the strong quarter.
So you had your best quarter of net customer additions maybe ever as a public company.
How should we think about that the source of that growth by channel I know you mentioned that it was broad based strong broad based strength there any more color there would be helpful. And then with the bank of America relationship. You mentioned began to hit the model. This quarter was that a material contributor to that figure as well.
Thank you, Josh we had an exceptional quarter across all of our channels I would say the particular, we are very satisfied and very excited about the progress that the accounting channel a lot of great work was done obviously over the quarter, but over the years. We now have 85 of the top 100, we have over 5000 firms across.
The country.
We launched the aspect of the wealth management, which account is often serve and all of that is working well for us. So that was definitely a callout worth mentioning is that that was a strong driver with respect to the bank of America opportunity. We just started rolling that out in the quarter and it will be rolled out through.
Through the coming quarters by the end of FY <unk> or calendar 'twenty. Two we will expect that to be end market and launched in and starting to drive more meaningful results at that point.
Just add to that.
As we as we look ahead, we're really pleased with the progress we have scaling our net new adds.
It's worth noting that the rollout with bank of America will be throughout the rest of fiscal 'twenty. Two so at this point there isn't a significant contribution to the net new adds we had in the last quarter, but we do expect going forward that will be above the previously discussed range of $4 to 5000, maybe closer to 6000.
Then the most recent quarter of 80 to 100, but we're really pleased with the progress.
Okay, Great and then I was just curious on the invoice to go declining by 3000 sequentially is there a dynamic there with you mentioned a bit of pruning or the process of adding customers.
Got it.
Packed at that in some way.
Hey, Josh we're going to kind of take that and put you back in the queue, we want to be able to get through all the all of the analysts today. So.
Yes, sorry about that.
There is time, we'll get to that question.
Okay.
Our next question comes from Ken <unk> from Autonomous Research. Please go ahead.
Hey, Renee and John Thanks.
Taking the question I'll keep it to one.
You mentioned continuing to invest to bring new payment products to market and it's great to see the launch of both pay by card and Bill dotcom balance during the quarter.
So can you provide some kind of framework for how we should think about the potential penetration of these products over time as well as some sense of the revenue model and unit economics of both.
In particular, what monetization opportunities to build dotcom balance open up for you down the line.
Going into working capital finance or are you, creating some sort of venmo for BTB payments.
Thank you Ken we have always been focused on building software solutions that really simplify the financial operations that a business has.
And we've worked hard to become I would say that go to.
In fact, our solution when somebody wants to automate those their operations and part of having a great platform software platform enables us and gives us the opportunity to offer payments and so our focus on payments is really making sure that we serve our customers and having all the different solutions and payments products that they won and when we look.
At <unk> dot com balance or pay by card. This is something that customers are asking for for different reasons at different times and so at this point I would say what we're excited about is continuing to create a solution that drive adoption in the marketplace that really helps smbs and as far as the economics go.
Lots of ways for us to continue to drive.
Financial opportunities with our solutions and we'll continue to do that.
Okay. Thank you very much.
Thank you.
Our next question comes from Darrin Peller from Wolfe Research. Please go ahead.
Thanks, guys and great job on this the sprint.
Can you just talk about where you are in consolidation of the assets you have now between bill and duty and invoice to go and where are you where you are and your hopes for cross selling potential and then maybe just on a related note investments being employed to integrate these relative to your longer term path to profitability you called out earlier in the call.
Just a sense of how much more investing is coming and what the opportunity could be at full run rate of integrated assets. Thanks.
Thanks, guys.
Thank you Darren we feel really good about the integration that we've done to date, we've got the product integration that we talked about in the call. The single sign on similar user experiences and the ability for us to streamline the approval process with Debbie credit applications. We have lots of work that we've just started on it.
<unk> as a reminder, invoice to go close in September quarter. So, it's a quarter behind on the integration so to speak from the <unk> experience and so we have been focused on really delivering great value and what we're starting to see is the experience and we gave some examples in the call.
Customers that are using both bill dot com and the Manhattan club, and Debbie and what Theyre getting in front of it and so as we get comfortable with that experience and the integration that has become more.
<unk> well in the market, whether thats going to market directly or using our in product capabilities. So we feel good about the cross sell with everything that we're doing makes sense.
Feel really good about the opportunity in front of us.
And I think the integration.
With the organizational announcement that we included in the <unk>.
The top of the script of having <unk> come in and be the.
CRO across the company that kind of speaks to how we're thinking about the combined company to be across all three entities.
We're excited about where we're at and what we get to do in the coming quarters.
That's great. Thanks, guys.
Thank you.
Our next question comes from Brad Sills from Bofa Securities. Your line is now open.
Oh, great. Thanks, guys, congratulations on a real strong quarter here.
I wanted to ask about invoice to go to.
223000 subscribers just a great number.
What's your expectation for conversion of those.
Do we when should we expect to see the integration of invoice to go such that you can you really start to capitalize on that opportunity to convert those customers and that flywheel effect with receivables customers coming in that you could upgrade to payables overtime.
Thank you Brad we have a lot of excitement about the invoice to go platform across <unk>.
Both AAP and AAR side of our business as a reminder, we have $3 2 million network members in our platform predominantly those are receivables customers receiving.
Money from a payables customer and so the opportunity for us to drive success across our platform includes both AR and AP opportunities so the opportunity to integrate and to cross sell payables into invoice to go is real.
Also I just want to remind folks that the opportunity to cross sell the AAR capabilities that invoices go has across our base is also real and ultimately there is a payment opportunity with invoicing and that's something that we've been focused on we announced in the script here that we do have.
Beginning of integration with a seamless payment experience for the invoices go customers. So all of this is something that we continue to be excited about and we know will drive success for the business and our customers.
Thanks Renee.
Thank you Brad.
We now go to will Nance from Goldman Sachs. Please.
Please go ahead.
Hey, guys. Thanks for taking my questions.
Echo the congrats on a nice quarter I wanted to follow up on the partnership with Bank of America. I'm wondering if you could help put that into context, how meaningful that could be for customer acquisition once fully ramped.
Maybe in the context of.
What the Fi channel today contributes in terms of what that net adds on a quarterly basis.
Thank you will.
Bank of America is obviously one of the top three banks in the country and so from a.
Opportunity to reach Smbs, we're super excited about the reach they have the scale to have the opportunity for us to support their businesses as they're growing and expanding their business and so for us.
This opportunity just as reflective of our overall bank strategy and the strategy that we've chosen is to make sure that we can support our Fi partners and Thats. The white labeled experience. It is having an ability to kind of understand what their needs are and then as we understand those needs. It as an opportunity to kind of cross sell other services and products, we have and bank of America.
A perfect example of that it started off as a commercial relationship focus on the largest businesses that they have.
And based on our success, there and our ability to serve those customers.
Got.
Interest and discussion around their smallest businesses and so for us when we look at the overall opportunity. It really is around supporting <unk> businesses Trust financial institutions. They have an opportunity to to serve in and do something for their customers that they've never had before which is to really leverage the software to <unk>.
The financial operations that then drive the payments that they all want to be a part of so we are super excited about the opportunity with bank of America, and what that leads to our FY practice.
Our next question comes from Bryan Keane from Deutsche Bank, Brian . Please go ahead.
Hi, guys. Congrats I wanted to ask John maybe about transaction yield that kind of beat our estimates and both organically and.
Total, which includes acquisitions I think you had a callout on Debbie just thinking about the moving pieces there for transaction because it seemed like it was a solid take rate.
Sure Great Great question, and we're really happy with the progress, we're making driving adoption of our products for customers in particular these AD valorem price products that are the ones contributing to expansion of our of our transaction revenue of our revenue per Tran.
<unk>, which was $5 79, just a little below $6 up 63% year over year, you mentioned the take rate on an organic basis above 10 basis points, so significant quarter to quarter expansion and then.
The spend management product with <unk> had great results as well, where the take rate there was a little bit above the range that we were expecting based on some some some good results in the quarter, particularly with AD spend in other categories. So we feel really good about the progress that we're making and as you can see from our organic business there.
Still a long way to go as we continue to drive adoption of some of our newer products and we expect to be able to continue to grow.
<unk> adoption.
Our take rate going forward.
Great. Thanks for the color.
Sure.
Our next question comes from Josh Beck from KBC M. Josh. Please go ahead.
Thanks, Thanks for taking the question and wanted to say congrats to Blake as well it sounds like.
Exciting time to be in that seat.
What I wanted to ask about was instant.
Instant transfer.
It's a product that's very early in its lifecycle for you all and I realized it was a big part of.
The transcript today, but just curious on.
How.
The reception has been just kind of how youre thinking about.
The long term potential of that product.
Yes, Great question, Josh there is a lot of.
A lot of what we do which I talked about earlier is just to make sure that there is a choice for customers and choice for suppliers.
So they can receive payments, how they want when they want and and.
And having a platform that's as robust as what we've done allows us to create these opportunities and so when it comes students and transfer of what we're seeing is that there are definitely suppliers that would like to receive payment instantaneously and those suppliers oftentimes wanted to do that again in the future. So we are encouraged by the repeat usage that we see for <unk>.
And we are encouraged by the opportunity to just keep providing value whether youre on the paying side or the receiving side. So I think it will be something that we see continue to grow and be a part of the overall offering that we have for our customers as a differentiator.
Great to hear thanks for that.
Yes.
Our next question comes from so much silvana from Jefferies.
Please go ahead.
Hi, Thanks for taking my questions guys.
Another stellar quarter.
Great to see it John .
Maybe try to pro forma out the bank of America contribution it still looks like subscription revenue on an organic basis, but it accelerated.
A big part of that would be the implied <unk>.
Growing double digits year over year can you, maybe just help us understand what's driving that that arb umbrella that larger customers.
And the pricing.
How should we unpack maybe does that imply applicable.
Sure. Thanks, Mark Great question.
And with regards to this organic subscription revenue, we have seen expansion <unk> driven mainly by the composition of our customer base skewing to a slightly average custom.
Customer there is no specific subscription related pricing action that we've taken in fact, it's been a couple of years since we've had a price increase but as larger customers.
Get onto the platform they tend to enter at a slightly higher price point.
Packaging and promotion that we do than say, a really small customer in part because they have more users and therefore higher monthly fee. So.
It does support expansion of the organic subscription are separate from the arrangements that we have with our financial institution partners.
Okay.
Okay, great. Thanks for that John .
Yes.
Our next question comes from Ben Bernanke from BT Archie.
<unk> is now open.
Yes, Thanks for taking my question nice job on the quarter.
I guess thinking about the financial institution channel.
Launching them to the SMB world of Bofa, how much does that maybe.
Maybe open up new dialogue with either your existing.
My partners, where you're a little more in the commercial segment and then what.
What does maybe been learned of some of the complexities around the SMB world in terms of this product development that you might be able to leverage into either new relationships or just going after those customers more organically.
Thank you Matt lots.
Lots has been learned right. That's one of the great things about being.
Being in business as you get to learn every day and one of the things that we've learned over the years is how to support our banks and to listen to what they need and offering our services and products that we build is part a reflection of what they are asking for as well as what the Smbs and the accountants are asking for it and so I think the success of any offering that we do.
Does lead to others, asking how they can kind of.
Do more for their customers with some of the products and services we have so.
We believe that the opportunity to extend our reach with our <unk> Israel. That's why we invest behind the products that we do and the teams that we do that are going after the market.
And I think the opportunity.
Only increases as digital transformation increases across the SMB space. So lots of businesses are stuck in the mess the back office and we're here to clean it up and that's what we're doing with our partners is what we do directly with accountants. So what we do directly for the SMB and mid market companies we serve.
Okay. Thank you.
Thank you.
We now turn to Sanjay Shah Corona from K VW Sanjay. Please go ahead.
Thanks.
Maybe a question for RNA, which is a follow up to one that was asked earlier.
Obviously, you mentioned earlier in the call that Youre well on your way to towards profitability.
And the momentum is really strong and obviously the investor expectation landscape is changing to any updated thoughts on sort of timing and directions.
Thank you Sanjay we have focus for years.
About the future and when we think of the future. We think in terms of years and decades, not months or quarters and our focus on the success of the business is predicated on our ability to drive penetration into the market that we have this is a massive opportunity in front of US. We've got just over 2% of the Smbs in this country that have employees that are on our core dotcom.
And when you look at that across the scale that we can deliver on the value that we can provide for our customers. We're going to continue to invest diligently thoughtfully and with discipline.
That said, we're super excited when we have our revenue beat like we just did that drives the kind of the numbers that we just had.
Our next question comes from John Coffey from Canaccord Genuity.
Go ahead.
Hey, guys good afternoon.
My congratulations here just wondering if we get an update here on the product roadmap, obviously valuations are down.
<unk>.
<unk> invoice to go are integrating nicely and you've done such a good job on cross sell with when you're bringing things in.
Feels like.
Sooner rather than later, maybe the right time to <unk>.
Focus on on maybe its more M&A here Tony.
What are the thoughts on that would be helpful. Thank you.
Thank you Joe we have lots of capital on the books and that allows us to think about the build by partner relationship and it's always a discussion that we are focused on internally, we're evaluating what we feel our customers need what we feel our partners need and we continue to listen to the market and see what others are doing to see if theres an.
<unk> to bring that in house. So when we think about M&A, it's not really thinking about M&A. It's about how do we add value for our customers and how do we add value for shareholders and so we have lots of interest about.
<unk> and the platform you've talked about working capital in the past we've talked about.
And payroll opportunities I don't know if we mentioned this but business insights and analytics I mean, there is lots of things that we can do that will continue to drive and automate financial operations for our customers and that's ultimately the goal that we have when we can save customers, 50% of the time on their back office mess, that's super powerful and the more customers we can reach.
The happier that makes me.
We now turn to.
From William Blair.
Please go ahead.
Hey, guys. Thanks for taking the question.
Obviously, there is a ton of opportunity left in the SMB segment of business right. I think you mentioned 2% of.
Employer Smbs are on the platform youre, saying into sold the fires and things like that but in terms of the move upmarket, we'd love to get kind of an update on the mid market traction.
The impact that had in the quarter and how you see that going forward and I know that John you mentioned that in house kind of providing some upward lift to the average subscription revenue per customer.
We will look to maybe dig into that a little bit more and understand the trajectory of that going forward.
Okay. Thank you Matt lots of.
Goodness on the platform happens because we have a horizontal approach and that allows us to attract customers of all sizes and in all segments right and what we're seeing and what we've talked about in the past with mid market is that because of our horizontal approach and having a breadth of product we were able to bring midmarket companies and then understand things that they needed.
<unk> that were specific to them and so we've been doing that over the last couple of years, whether that's in product or whether thats focused on specific marketing and sales activities. We've been doing that and we feel that we're getting better and better at that opportunity to reach those customers and to make a difference for them and the success that we're seeing and the reason John mentioned.
The <unk> increase is that we are able to attract those customers and they do have a higher <unk> and they do really impact the overall scale of the business when it comes to <unk> and the things that they do on a per unit basis. So so we're going to continue to listen to customers are going to continue to drive focus to make them successful and we believe that.
The mid market is something that's super valuable and important to us.
Great. Thanks again.
Thank you.
As a reminder to ask any further questions. Please press star followed by one on your telephone keypad now.
We now turn to Mark Clark from <unk> Nikko America's incorporates at Nomura.
Your line is now open.
Hello, Sorry, this is actually Andrew from HSBC.
I wanted to talk about yields again, I mean, you've had this year over year progression in yields.
$2 seven bps on the core Bill's side.
When you have a big influx of new customers 80 to 100 that you did this year or this quarter.
I would assume that a lot of those are still in the early innings of their AP automation journeys and may have a higher mix of manual annual payment. So is there any reason that the year over year trajectory that we've seen could slow down with this big influx of new customers.
Andrew Thanks for the question. This is John we're really happy with the progress as you as you noted very significant growth and increased monetization year over year.
Youre, absolutely right that there's a lifecycle to customers go through when they're automating their financial operations, including on our platform. So when they first.
Subscribed to the Buildout com platform. They tend to have many more check payments versus electronic payments. They tend to have some of their suppliers on the network, but not all in over the course of several quarters as they as they get further.
Engaged with the platform, we see the electronic payments go up and as a result of that we see higher adoption of some of the newer AD valorem products that we have that has the effect of increasing our overall transaction monetization. So we are still early in the adoption cycle with some of the newer products, whether it's virtual cards or instant <unk>.
For or even cross border payments, where their FX and feel like there's still a long way to go it's not going to happen in a perfect linear fashion quarter to quarter, but nevertheless over the longer term, we think there's a long way to go.
Understood, Thanks, guys and congrats on the quarter.
Thank you.
We now turn to Brian Schwartz from Oppenheimer <unk> Company, Brian . Please go ahead.
Oh, Hi, Rene and John Thanks for taking my question John just following up I think you made the comment that you saw an increase in average customer size in the core build dot com business.
I guess my assumption is I would assume that that would come with the financial institutions channel, but the question I wanted to ask you is are you seeing those upward pressures across all your distribution channels or is one really driving that upward momentum to our average customer size.
Great. Thanks, Brian .
I think it's really across the board.
Just to clarify I mean, we are all about serving from the smallest of businesses through mid market. There's there is tens of millions of businesses globally that we think are candidates for the build out com platform. So we're not necessarily moving upmarket, but we do see increasing demand from mid sized and mid market.
And we see that come to the platform really across all of our distribution channels. Some in some cases, we were marketing to them directly through digital demand gen or through our accounting firm partners or as you mentioned, our financial institution relationships as well so it's really broad based demand in and to the extent there.
Our platform works for those larger customers just like the really small ones were.
Were obviously motivated to serve them.
Thanks, John .
Sure.
Our last question comes from Ken's Petrowsky from Autonomous Research. Please go ahead.
Hey, guys. Thanks for squeezing me in again here.
I just wanted to ask about the <unk> per customer I mean, it looks like it continues to move higher.
Quarter over quarter, I mean, we've seen two out of the last three quarters, it's been up double digit. So just trying to get a sense for the sustainability of that just because when we look at your incremental TPB per customer year over year, Amit Youre tracking at.
Figure, that's north of $3 million on an annualized basis. So could you just love any any comments on that TBB per customer and the sustainability there.
Sure. Thanks, Ken I mean, one of the things that we've realized in the last couple of years as the more payment choices that we offer two businesses the more they consolidate their financial operations activity on our platform that translates into a higher share of wallet, we're able to serve more of their payment.
And that flows through to the payment volume and then payment volume for customers. So we're north of on an organic basis $400000 in the quarter up significantly from from last year, and we've actually seen I think it's six plus quarters in a row of expansion in TPP per customer and I think that just speaks to the fan.
The customers realize.
A lot of value by doing more of their financial operations activity in one place versus point solutions and I think we've been the beneficiary of that.
Makes sense, thanks, guys great job.
Thank you.
Thanks, everyone for joining us today, we delivered strong growth as we help smbs transform their financial operations and we look forward to communicating our progress as we pursue the tremendous opportunity ahead. Thank you.
This concludes today's call. We thank you for joining you may now disconnect your lines.
Okay.
Yes.
Yeah.