Q3 2022 Bill.com Holdings Inc Earnings Call
[music].
Hello, and welcome to Bill don't comes third quarter fiscal year 2022 earnings Conference call. My name is Alex and I'll be coordinating the call today, if you would like to ask a question at the end of the presentation you compress star one on your telephone keypad. If you would like to withdraw your question you May Press Star two.
I'll now hand over to your highest carbon Samsung Vice President of Investor Relations.
Karen.
Thank you operator, welcome to build Dot Com fiscal third quarter 2022 earnings conference call.
Issued our earnings press release, a short time ago and furnished the related form 8-K to the SEC.
Press release can be found on the Investor Relations section of our website at Investor <unk> Dot com.
With me on the call today, as Renee will start chairman CEO and founder Phil Dot Com and John <unk> Executive Vice President and CFO .
Before we begin please remember that during the course of this call. We may make forward looking statements about the operations and future results of Bill Dot com that involve many assumptions risks and uncertainties.
Any of these risks or uncertainties develop or any of the assumptions prove incorrect actual results could differ materially from those expressed or implied by our forward looking statements.
For a discussion of the risk factors associated with our forward looking statements. Please.
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 report on Form 10-K, and quarterly report on Form 10-Q filed with the SEC and available on the Investor Relations section of our website.
We disclaim any obligation to update any forward looking statements.
On today's call, we will refer to both GAAP and non-GAAP financial measures.
Non revenue financial figures discussed today are non-GAAP unless stated that the measure is a GAAP number. Please refer to today's press release for the reconciliation of GAAP to non-GAAP financial performance and additional disclosures regarding these measures.
At times during this call, we will discuss organic for Standalone results, which exclude divvy, an invoice to go which we acquired on June one 2021 and September one 2021, respectively to help listeners understand our organic performance now I will turn the call over to Renee Renee.
Thank you Karen and good afternoon, everyone. Thank you for joining us today.
On produce great results in the third quarter total revenue increased 179% year over year.
Dotcoms organic core revenue grew 74% year over year and revenue from our <unk> spend management solution increased 155% year over year.
Additionally, our non-GAAP gross margin was 85% and our non-GAAP net loss was much lower than we expected.
We are delivering meaningful growth at scale, while continuing our track record of efficient operational execution.
We are the leader in helping small and mid sized businesses transform and automate their financial operations. So they can easily gain control of their spend and cash management.
Our growth this quarter demonstrates that demand for our solution continues to be robust.
As of the end of fiscal Q3 more than 380000 businesses trusted dot com to manage their financial operations and we processed over $55 billion of total payment volume on our platform.
We know that an inflationary times businesses increasingly seek cost effective solutions that provide cash management control and increased visibility.
<unk> combination of our platform and go to market ecosystem delivered more than 11000, net new bill Dot com organic customers in the third quarter.
We experienced strong demand across all channels, particularly among financial institutions, where our white label platform for Bank of America small business customers continue to roll out to new regions in the U S.
During the quarter, we reorganized fully integrating the dv an invoice to go employees into the Bill Dot Com organization, we are.
Now one team focused on building an integrated easy to use solution for customers.
We are combining dot coms platform powerful distribution capabilities and significant scale with Debbie spend management expertise customer success initiatives and modern design and with invoice that goes account receivables capabilities mobile experiences and global reach.
The combined team will enable us to move faster.
With remote work capabilities now being essential for businesses of all sizes smbs increasingly need to reduce the complexity of their businesses. They want fewer solutions and tools to run their back office.
A great example of how we help companies streamline their operations is influenced logic and online marketing platform that helps smbs grow.
Samantha <unk> director of Finance said and I quote prior to adopting bill Dot Com, our international payment process was manual and time consuming.
We had to go to a bank for international payments and track AP with an excel spreadsheet.
Dot com really simplified our process and improve the timeliness of our payments. We also adopted <unk>, which has become our go to program for all payments outside of that the accounts payable process.
Having AAP and spend management in one place makes managing and tracking payments and spend way more efficient.
It reduces the amount of time spent toggling between different solutions and gives me more confidence in our financial operations and quote.
Every employee at Bill Dot Com is energized by the value we create for our customers and the very large market opportunity ahead of us with $30 million micro small and mid sized businesses in the U S and more than 70 million globally.
A key component of our go to market as the relationships, we have built with strategic partners.
These partners enable us to efficiently reach the long tail of Smbs, who do not have the time or the resources to keep up on the latest trends and back office automation.
Accountants and banks are the most trusted advisors smbs and Thats trusted advisors F&B has looked to them first to recommend new tools and technologies that can help improve their businesses.
We have been investing in our relationships with accounting professionals since bill Dot coms insertion.
Our platform enables accounting firms to automate routine manual task Green staff to offer value added client advisory services called Caf to their clients.
Counting firms that have embraced Cas and strengthens our relationships with clients expanding far beyond bookkeeping in tax preparation to become strategic advisors.
This quarter, we expanded our longstanding exclusive partnership with CPA Dot Com business and technology arm of the American Institute of CPA is known as the CPA the world's largest member association, representing the CPA profession.
CPA Dot com serves more than 400000 members of the AICPA by identifying emerging trends and technologies and providing education training and other resources and recognition of <unk> leadership position in the spend management Arena CPA Dot Com has selected <unk> as its exclusive partner for expense management corporate cards and spend.
Management, Eric <unk>, President and CEO of <unk> Dot Com said and I quote we are thrilled to build upon our long history of success with Bill Dot Com, who has been instrumental in the evolution and broad adoption of cast by accounting firms and now with the powerful combination of Bill Dot Com and Debbie we will continue to help firms expand their role as the most trusted.
The advisors as we define the next generation of cash.
<unk>.
Moving on to financial institutions during the quarter. We continued our planned rollout with bank of America. The service is now available in all 50 states for new small business customers within the online banking experience.
We are excited that this new white label platform extends our reach beyond bank of America's commercial customers. We will continue to support <unk> rollout throughout calendar 'twenty two to drive awareness and adoption of the new platform.
In addition to strengthening our strategic partnerships. We have continued our rapid pace of innovation as we broadened the portfolio of payment and funding options our customers have to choose from.
During the quarter, we introduced an early version of enhanced ACA, H, which provides large vendors with faster payments speed enrich remittance data this offering complements our menu of AD valorem payment offerings, including virtual card cross border instant transfer and pay by card. These offerings enable us provide more value to customers and as a result increase.
Share of wallet for their payment flows.
We're scaling our organization to address the large global opportunity ahead of us and to build a solid foundation for becoming a multibillion dollar company as.
As we do so our people continued to be the key to our success I.
I am happy to announce two new additions to the bill Dot com team.
First we have a new chief people officer, Michael Dangelo, I'm excited to work with Michael to tap his global experience scaling teams and organizations from startups to large public companies, including Pinterest, Google and Microsoft.
His experience aligns with our global ambitions, Michael takes over from Jackie Handy, who has led our people team for the last eight years.
I would like to thank Jackie for all of her contributions to our success and for being a wonderful partner to me and the team.
Second we have added Aida Alvarez to our board of directors Aida brings a wealth of experience from large public boards like Walmart and HP and having served in the first cabinet level position for the small business administration under President Bill Clinton, She brings deep knowledge of Smbs.
In addition, mark Leonard the CEO of invoice ago and dotcom.
<unk> will be leaving the company in September market has helped US quickly complete organizational integration across the three companies and the one year anniversary of the invoice to go acquisition marched the right timing for mark to pursue his entrepreneurial interests.
In closing we delivered another strong quarter of results driven by focused execution against our objectives. Each of our 2000 employees is inspired by the opportunity to help hundreds of thousands of businesses transform their financial operations. So they can focus on their passion the reasons they started their businesses.
I'll now turn the call over to John to talk in more detail about our quarter.
Thanks Renee.
Today I'll provide an overview of our fiscal third quarter 2022 financial results and discuss our outlook for the fiscal fourth 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.
We delivered strong Q3 financial results with total revenue growth of 179% year over year and non-GAAP gross margin of 84, 6%.
In Q3 organic core revenue grew 74% year over year.
<unk> Standalone revenue growth was 155% year over year.
Our revenue performance in Q3 led to a non-GAAP net loss per share that was significantly better than our expectations.
We have excellent organic momentum across our solutions and we are excited by our vision for a unified platform experience to enhance our market opportunity.
We continue to invest behind opportunities with strong unit economics, which creates operating efficiency as we scale.
Before we jump into a discussion of our results I'd like to comment on to top of mind macro factors and how they impact our business inflation and interest rates.
Regarding inflation, we have heard from customers that price increases for goods services and employee salaries are collectively creating pressure in their businesses.
The magnitude of the impact obviously varies by company.
<unk> Dot com provides visibility into spend and cash flow our platform gives businesses looking for cost efficiencies the tools to redirect resources, where they're needed most in the current environment.
It is likely that inflation to date has had a positive impact on our total payment volume growth, but we believe the impact is immaterial overall.
And like most businesses no dot com is also experiencing cost increases and we're diligently managing this trend.
On the topic of interest rates, we generate float revenue from interest earned on funds held for customers.
<unk> recent <unk> balances of three to $3 5 billion every 100 basis points increase in the fed funds rate would result in approximately $30 million to $35 million in incremental annual float revenue. So there will be a lag effect until current FBR investments mature and are reinvested in higher yielding securities.
We also earn interest income on our corporate cash balances.
While rising interest rates resulted in increased interest expense related to funding a portion of <unk> card program. We expect this additional expense to be more than offset by increasing interest income.
Net of these moving parts is that rising interest rates has a significant tailwind for bill Dot com.
Now turning to an update on our key metrics.
We delivered a record quarter for customer acquisition in Q3, we ended the fiscal third quarter with 146600, Bill Dot com organic customers with net new adds of 11600 in the quarter.
New customers in the quarter exceeded our expectations driven by robust demand across channels and significant strengthen our financial institution channel.
Several of our financial institution partners added new customers at a much faster rate than Q3, driven by both faster rollout of the product across markets and new marketing initiatives that led to a step up from Q2.
Without the step up from financial institution partners net new customer adds in Q3 exceeded the upper end of our expectations.
We ended Q3 with 18100 spending businesses using our <unk> spend management solution representing growth of 2006 hundred net new adds in the quarter.
This is more than double the total number of spending businesses from a year ago, when we announced the <unk> acquisition.
In addition, we ended fiscal Q3 with 221400 subscribers using our invoice to go AAR solution.
The slight decline in invoice to go subscribers was due to the continued implementation of buildout costs more rigorous onboarding flows that we discussed on our last call.
We believe the application of Bill Dotcoms flows will yield higher value customers that generate more payment volume and revenue overtime.
We delivered strong organic total payment volume of $55 billion in Q3, representing 57% year over year growth and reflecting the expected seasonality that we shared with you on our last earnings call.
During the quarter, we processed $2 $1 billion in card transactions from spending businesses using our <unk> spend management solution, which is an increase of 118% year over year.
Moving on to the number of transactions, we process $9 5 million payments on Adobe Com platform in Q3, reflecting 32% year over year growth.
We also processed $5 9 million debit card transactions.
Now I'll review, our reported consolidated Q3 results.
Total revenue was $166 9 million up 179% year over year.
Core revenue, which consists of subscription and transaction fees was $165 5 million representing growth of 182% year over year.
Organic build dot com core revenue was $102 1 million, an increase of 74% year over year due to strong demand across channels and.
And increased customer adoption of our AD valorem payment products.
In addition to our organic core revenue stream revenue from our spend management solution grew 155% year over year.
These results were driven by stronger than expected spend given typical Q3 seasonality and interchange income at approximately 260 basis points in the quarter.
Subscription revenue increased to $52 2 million up 78% year over year, driven by our growing customer base across all segments and the inclusion of invoice to go subscribers.
<unk> dot com organic subscription revenue growth was 48% year over year.
Transaction revenue increased to $113 3 million up 286% year over year due to TPB strength increase adoption of our AD valorem products and increasing spend on duty, which totaled $53 6 million in transaction revenue for Q3.
Go Dot com organic transaction revenue growth was 101% year over year.
Turning to gross margin and our operating results for Q3.
non-GAAP gross margin was 84, 6% well above our expectations driven by a higher mix of interchange and variable transaction revenue.
As a reminder, we manage a portfolio of payment offerings that have a range of margins and are in various stages of adoption and we currently have a very favorable payment mix.
In the short term, we expect non-GAAP gross margin to be slightly above the 79% to 81% range. We discussed previously.
non-GAAP operating expenses were $146 8 million, an increase of $17 million from Q2 with.
We increased our R&D investments related to integrating the products and technology from our recent acquisitions. In addition to enhancing our platform capabilities, including development of new payment offerings.
Our sales and marketing expenses increased primarily due to expanding our go to market initiatives and increased rewards expense associated with our spend management solution.
non-GAAP operating loss was $5 $7 million and our non-GAAP net loss was $8 7 million.
Or a net loss per share of <unk> <unk> based on $103 8 million basic weighted shares outstanding.
Our non-GAAP net loss was significantly better than our expectations given our strong revenue performance.
Moving on to the balance sheet cash cash equivalents and short term investments at the end of Q3 were $2 8 billion flat quarter over quarter.
We continue to be well capitalized, enabling us to invest in our platform expand our go to market capabilities and extend our market leadership.
As of March 31, 2022, we had $3 billion in customer funds on our balance sheet, which was down $337 million from the end of Q2 due to the previously mentioned <unk> seasonality in Q3.
Shifting to our financial outlook for the fiscal fourth quarter and full fiscal year 2022 as discussed earlier, we are closely monitoring the macro environment and our fiscal 2022 outlook assumes that macro factors do not have a material negative impact on our business for.
For fiscal Q4, we expect total revenue to be in the range of $182 three to $183 3 million for Q4 build dot com organic core annual revenue growth is expected to be approximately 60% on a standalone basis, while <unk> spend management revenue is expected to grow approximately 120% year over year.
From approximately $29 million in fiscal Q4 of 2021, we are beginning to see yields to increase in our <unk> funds, which should lead to float revenue of approximately $2 $5 million in Q4.
In terms of operating expenses, we expect to continue our rapid pace of innovation by investing in our platform scaling with accounting and financial institution partners and enhancing our go to market capabilities.
On the bottom line for Q4, we expect to report a non-GAAP net loss in the range of 14, 9% to $13 9 million and a non-GAAP loss per share of 14% to 13.
Based on a share count of 104 million basic weighted shares outstanding.
<unk>.
For fiscal 2022, we expect total revenue to be in the range of $624 million to $625 million. This assumes organic or standalone build dot com core revenue growth of approximately 73% in fiscal 2022.
We expect to report a non-GAAP net loss for fiscal 2022 in the range of $35 9 million to $34 9 million.
And a non-GAAP loss per share of <unk>, 35% to 34.
Based on a share count of $101 7 million basic weighted shares outstanding.
We are diligently executing against our fiscal 2022 strategic priorities, including integrating <unk> and invoice to go expanding our payment offerings and our platform driving monetization of our products and extending our reach.
We've made substantial progress investing in these priorities. This combined with our efficient go to market motion and strong unit economics means. We're also on track to deliver a net loss less than half of our initial outlook for fiscal 2022.
We believe there is a significant greenfield opportunity ahead of us to help millions of businesses manage their cash flows and transform their financial operations.
Our broad platform capabilities diverse distribution ecosystem, and increasing scale uniquely position us to be the de facto financial operations platform for companies ranging from sole proprietors and freelancers to mid market companies.
Operator, we're now ready to take questions.
Thank you if you would like to ask a question you compressed star one on your telephone keypad. If you would like to withdraw. Your question you May press star two piece.
Please show your Unmetered locally when asking your question.
First question for today comes from Darrin Peller of Wolfe Research.
Your line is now open.
Hey, Thanks, guys I wanted to touch on the customer adds given the magnitude of the numbers coming out of quarters, where you were anywhere from five to 6000, you're at 8000 last time, but had guided around six.
Ended up with 10, plus I think it was 10 to 11000 net adds so very strong and I'm curious what if you could just give us more granularity on what's really driving that beyond.
Including the financials and others.
Maybe a little bit more color on the revenue pass through from those incremental lives.
Thank you Darren it was definitely a great quarter, we've been building. This multichannel distribution strategy for a long time, we're unique in the way that we go to market with our direct account and financial institution partners in all channels delivered great results this quarter, but specifically we had a really strong.
<unk> quarter in the financial institution and that's in part because the bank of America offering where we are the default solution for their new small business customers. When it comes to Bill pay that is now in pilot in all 50 states. So theres more to roll out there through the year, but that started coming on in this quarter and that was great and then we also have.
Another regional bank that did some marketing efforts to consolidate multiple bill pay solutions onto our platform. So couple of callouts for the <unk>, but in general it goes back to that great distribution strategy that we built over the coming years.
Alright, so it sounds broad with EFI is obviously, helping out quite a bit just to remind us the.
The revenue model with these <unk>, if you don't mind, just explaining that once more into one more time, just given how much they're contributing now.
And then also on the <unk> side is there I mean are we seeing the benefit of cross sell in terms of customer numbers, either on the <unk> side or even on the build side to some degree.
Yes, Darrin, let me take the first part of that question on the <unk> and the model and how the revenue flow through works.
I mentioned, we had great performance from the channel in the quarter and the.
The 11000, plus net adds was in.
A large part from the success there.
Pretty significant lag effect before those adds actually contribute to revenue growth our arrangements with most of our financial institution partners are.
Under sort of minimum guarantees with commitments to certain customer and adoption levels and it takes many quarters in some cases, a year or two to grow into those those minimums. So it is a great indicator.
How the platform is working and being successful in the market and then over time, we expect that to produce.
Revenue results.
The second part of the question, maybe I'll start and see if Renee has anything to add on the <unk> Cross sell.
As noted on the prepared remarks, we had great organic growth from <unk> and the vast majority of that is actually still there organic momentum selling into the market. It's really early in the adoption cycle of spend management expense management and the smart corporate card and they are having great success in the market driving growth.
We are starting to make progress with cross sell and introducing the product to the bill Dot com customer base, but I wouldn't say, that's a significant contributor to the growth at this point and do you have anything to add I think that's great.
Great great. Thanks, a lot guys.
Thank you Darren.
Thank you our next.
Next question comes from Bryan Keane of Deutsche Bank, Brian Your line is now open.
Yeah, Hi, guys just wanted to ask about instant transfer and that rollout first enhance ECH and the target markets for that and then how that all is going to roll up for maybe higher yields for you guys going forward. Thanks.
Hey, Brian part of the unique source of Bill Dot Com is robust.
Robust payment platform that we have the ability to serve customers that are paying their bills and suppliers that are receiving those payments and what you've seen over the last couple of years is us investing in payment options for the suppliers and instant transfer is one of those examples where the supplier is able to say hey, I'd like to have my money now versus.
In the coming days via check or maybe even a week if it's a check and so that option is something that we obviously think is important the enhanced ACTH is also for suppliers, where there are some suppliers that we prefer to have more data on the transaction then it's able to go through our normal transactions on the ASR.
Trails, and so having the ability to kind of provide the data and potentially accelerate the hh payment for those suppliers is important so I think what youre seeing is just kind of the broad capabilities of our platform to continue to serve customers that are interested in us from a payables perspective and customers suppliers. If you will that need assist.
<unk>.
Accepting payments and accelerating their payment timing so all in all it's.
That we feel is going to be important for the business model and something that we work hard to provide the optionality of that businesses need when they need it.
Got it and then John any thoughts just on yields than on how that all rolls up.
Sure both both.
Both instant transfer or real time payments and the enhanced hgh product.
Monitor monetize at a similar level it should be.
Additive to our overall monetization and.
I think theres as Rene mentioned, a big opportunity to get the right payment method in front of the right supplier or buyer and so I think over time both of them will contribute to continued expansion of our monetization versus our overall monetization, where we are today, which is still quite low.
Great. Thanks for taking the questions.
Thank you.
Thank you. Our next question comes from Josh Beck of Keybank, Josh Your line is now open.
Thank you so much for taking the question I wanted to ask a little bit of a macro ingalls certainly.
<unk> is really rearing its head so I'm just curious with respect to some of your customers do you see them, maybe delaying purchases in some cases or maybe just trying to be more.
Prudent with some of their expenses just curious if there's any factors like that that came into play this quarter or that we should be mindful of.
As we think about the future.
Thank you Josh.
We've seen very minimal immaterial impact from inflation environment, what I would note is that in an inflationary environment businesses and small businesses. We know are resilient and they will look to ways to be more efficient in their business, our business and platform enables businesses to say, 50% of the time it takes to me.
Managed those financial operations that we talk about and when that means you can save resources and allocate them to other parts of the business save time for yourself for your team. So they can do more with the time that they have we believe that this is a counter effect.
Basically counteracts the inflationary pressures that our product enables a much better experience for our customers. So we've not seen any pullback and I believe that this is something that will.
Continue to be part of the transformation digital transformation.
Okay very helpful. And then maybe to follow up I think on <unk> question about the synergies theres lots of <unk>.
Different avenues, if you will when you think about obviously the build outcome core customers the suppliers customers and once it goes.
Many different.
Passed between them, where you could obviously do a cross sell.
Just wondering as we start to think about next fiscal year.
There are certain ones out of the gate, where maybe there is a.
Clearer or stronger path to realizing those synergies or will.
Will they all kind of surgeon materialize at a similar cadence just curious if there's any other color you can share on that topic.
I think in general one of the things that you see from US is that we are a business that is at scale we move.
Over $200 billion $20 billion on a run rate basis from the TPB perspective.
146000 businesses now using the <unk> platform 380000 across all three offerings that we have and what I see is that there are synergies as we continue to scale and grow that there are opportunities to lean in into the network. The last number we discussed was over $3 million in the network the opportunity to lean in in App search.
Mrs for them such as the payment products, we talked about that's one thing, but there is opportunities on the core services that we have that we expect will be able to make progress on as we continue to scale and grow the business. So they are definitely our synergies is something that we're starting to see is something that we're working on to enhance the experience for our customers.
Thanks for that.
Thank you Josh.
Thank you.
Next question comes from Brent price Lin of Piper Sandler.
Your line is now open.
Thank you good afternoon, maybe we'll start with John quick follow up for <unk>.
Hey, John on the guidance for June It does look like you are.
We're guiding to a very strong quarter here it looks like June could actually be stronger than the March quarter can you just talk a little bit about the monthly TPS the trends youre seeing.
As you see travel will come back is that helping either the bill dot com kind of business. So far this quarter, just any sort of color around TPB trends and what's giving you optimism for that June quarter. Thanks.
Sure. Thanks, Brent Yeah.
I think.
Excited about the growth prospects ahead and feel good about the.
The fourth quarter in our in our fiscal year and as expected the Q3 seasonality and TPB did materialize.
With our <unk> solution, we are able to get.
Insights into <unk>.
Travel and entertainment spend relative to other categories now, it's not a huge category for <unk>, but we have seen some some increases there throughout this calendar year. So it looks like there is the beginning of additional <unk> spend flowing through to both <unk> and small businesses at large.
Generally speaking that doesn't move the needle for bill Com's numbers overall, but I would expect.
C <unk>.
Progress with continuing to drive growth drive growth with TPB and in our next quarter as suggested by our by our guidance.
Super Helpful. And then Renee I'll ask a follow up on the macro as you can tell from this call.
All of the inbound and engagement with investors is really trying to understand the macro and how you're navigating. It. So my question for you is do you think this multi channel strategy can help somewhat insulate the business as you think about some of the headwinds going forward.
The step up of new customer adds this quarter huge just trying to think through the logic of.
Can that continue going forward as we should we think of it.
As a potential offset.
Some of these macro headwinds out there.
Or do you think there is an environment where.
More small businesses will turn to software in a challenging environment, just trying to understand that the huge step up and how you plan to navigate this does these.
These macro challenges.
Thank you Brian the short answer is I think it's both right. We've worked hard to build this multichannel strategy is unique our approach to being able to serve customers at the smallest businesses to large mid market businesses.
All of that and any particular vertical that a customer might be in across all the channels thats hard stuff to do but it does mean that in any market, there's lots of opportunity for resiliency and so we saw with Covid that smbs were resilient and we were able to show growth through that we see that the opportunity for the Mac.
So environment in general is that the channels and the numbers that we have delivered this quarter show the.
Kind of the indicator in the power of having a multi distribution channel strategy and so so yes. I think there is that I also think that there is going to be plenty of.
More I guess, if you well tailwind, which we've talked about the digital transformation coming out of Covid being a tailwind is going to be more.
Interest and potentially pressure from an inflation perspective on businesses thinking about efficiency and then thinking about how do you operate in.
Britain environment and thinking about how to manage their costs and we know that customers can double their business without increasing their staff on our platform. So if the business is not growing as much. Then you are looking for ways to save money and we know we can help businesses with that as well.
Helpful color. Thank you.
Thank you.
Thank you. Our next question comes from William <unk> of Goldman Sachs. William Your line is now open.
Hey, guys. Thanks for taking the question.
Wanted to ask a question actually on the comment on the competitive environment, we've gotten a number of questions from a few different angles on what competition in this space. It looks like over time as you get more new entrants in the space, particularly around some of the partners that you guys actually work with Quickbooks and Intuit. So I'm wondering if you could just maybe talk about the barriers to enter.
Sorry, and maybe the head start that you guys have and how you think about the space getting kind of more competitive over time.
Thank you Ian.
Most.
Important thing about the market as it is just a massive market right and people today are using paper as the primary form of managing their financial operations and so competitively that's what we're dislodging and having a platform that is robust and has the ability to do what we do across multiple like I said earlier any <unk>.
<unk> business essentially up to the the large mid market companies that we serve all the way down to the smallest businesses that are so those having that ability does provide we think unique advantage in this go to market solution.
Think the.
Competitive environment broadly is going to be focused on people switching from paper to digital.
And I think our channel approach will allow us to get the awareness out.
To businesses of all sizes, and all industries and I think our headstart on scale allows us to be able to really deliver value for customers at a very reasonable price.
Got it I appreciate the color.
Thank you Ron.
Thank you. Our next question comes from sales of Securities. Brad. Your line is now open.
Oh, great. Thanks, guys for taking my question.
Yes, nice nice results in the quarter.
I wanted to ask about just the magnitude of upside in the past we've seen a bigger bigger upside to your guidance is there any change in guidance philosophy, John that we should be thinking about going forward.
Thanks, Brad Yeah, no no change in guidance.
We will work hard to let everyone know what we're seeing with the business and then follow through with trying to do better on those results, it's reasonable to expect as we get bigger.
We're going to come in closer to our expectations. The business is healthy the fundamentals are strong we're really happy with the growth that we delivered in the quarter in particular, the organic strength and I think our guidance implies going forward that we expect additional growth.
Great to hear thanks, John and then one more if I may please just any any color on virtual card cross border. It looks like a nice result, again this quarter and Youre in your step up.
And your continued monetization of the take rate there for transaction against PPV, just any color on those two in particular it looks like the <unk> number was very strong as well.
Yes with regards to.
The virtual card product and cross border payments, we continue to see.
Incremental adoption from customers and suppliers that is adding to our.
Monetization expansion and we feel really good about that we've been growing revenue per transaction in north of 50% every quarter since we've been public our annual growth rate.
And we still have a long way to go frankly, and driving adoption of some of those products relative to our longer term penetration targets that we've talked about on the last few calls so they continue to be good drivers are TPB.
Growth this quarter was a little bit lower than last quarter.
And we would expect though that with continued adoption of those products and growing TPB that there's good things ahead.
Okay.
Thank you. Our next question comes from Andrew bulk of Nbc's America's Andrew Your line is now open.
Hello, everyone and thank you for taking my question I wanted to drill into the CPA dot com and JV relationship a little bit further I mean, obviously CPA dot com has been.
Patients on top of already being the exclusive provider for bill payment and we think that allow us focus from an awareness perspective and building the market the way it needs to be built so the conversations with the top firms the conversations at any of the conferences, having all of that be focused on how to help firms actually add clients and support.
Their clients with more robust tools that enable efficiency and enable the firms to actually drive more revenue for them. That's the alignment that we have in CPA dot com and that's what we've shown that we were able to do to date and this is just going to be another quiver in the.
But whatever the phrases I'm missing that up but.
I mean.
Yes.
Pretty effective mousetrap.
My follow up would be looking at slide number seven.
<unk> done a really great job executing in the United States, but I continue to think about that global opportunity in expanding the reach of the platform, particularly now as you have been voiced ago, what are the real obstacles to to your business.
In regards to expanding internationally.
What kind of things are you looking at that that may accelerate that that push.
Yes, one of the things that we were excited about with invoice to go is the fact that they do operate customers in over 150 countries you combine that with the international payments that we do.
As also in the hundreds of countries that we support and move money to it gives us an opportunity to kind of.
Think more aggressively in the long term about an international presence and I would say the obstacles arent so much obstacles as much as we just acquired two companies in the last year uniting the platform. We have a team now that is unified across the entire company to create the synergies and the product offering and the go to <unk>.
<unk> experience for our customers to really drive we think a different experience around financial operations for Smbs, So thats going to be our first focus and once we have that focus then obviously money movements different in all the countries. We can focus on the details and logistics of executing on our broader international strategy, but the fact is we are international today.
We just take Bofa right now they have redesigned their go to market experience for SMB that joined the bank.
We are part of that solution, but theres a lot of work on both teams to actually execute on that and to make sure that it's the right experience for customers.
And we feel good about the ability to do what we've done to date and Thats why youre seeing some of the numbers that we were able to put up today and I think over the long term. This is the power of the distribution strategy that we have we have multiple channels multiple partners multiple ways to continue to add and grow our customer base were at 2% market.
<unk> out of the 6 million businesses in the U S that have employees. There is so much opportunity in front of us and having the multichannel approach. We think is going to continue to drive the type of success, we saw this quarter from quarter to quarter.
Great helpful. And then a question for you John .
Talked earlier.
<unk> question was maybe it was Brian about.
Maybe the upside to guidance going forward probably starts to narrow.
As the company scales in size, which I think we would certainly all understand.
The profitability range, you guys have been super impressive and your ability to drive leverage.
And create operational efficiencies given the growth rate, but as you start to get to what might be an eight or $900 million revenue range over the next 12 to 18 months is can you still continue to grow up the scale and we kind of burn cash or operated pretty much breakeven level or do we see some maybe additional leverage in the <unk>.
Model coming here going forward.
Yes, thanks for the question Scott.
Feeling really good about our ability to balance.
Growth driving driving revenue adoption penetrating the market with creating efficiency as we grow in particular, we've done a good job since we've been public with expanding gross margins and as you pointed out we've operated with minimal losses, that's a recipe that we think.
Works really well for us.
We have had minimal losses, we reduced actually our non-GAAP net loss expectations. This year as reflected in our guidance for Q4 and fiscal 2022, we will have more to say about obviously fiscal 'twenty three and beyond in August when we deliver guidance for that year, but our our continued commitment is to ban.
<unk>.
The size of the market opportunity with our growth and investments and the efficiency with which we are delivering these results.
Great. Thanks for taking my questions.
Thanks Scott.
Thank you. Our next question comes from Samad Samana from Jefferies.
Your line is now open.
Hi, good afternoon and.
Guys I just wanted to step back and say I think it's pretty great to see 74% organic growth I don't think any of US thought this around the time of the IPO that you'd still be putting this type of grad. So congrats on that and so Rene maybe that brings me to when I think about the core business and I know it's been touched upon but how are you seeing maybe lead.
Flow.
Top of the funnel has that changed has that increased our how is that trending and maybe same question around conversion. So far in may as well just as bill has gotten bigger you've deployed more sales and marketing dollars and the brand is more well known and what are you seeing in terms of inbounds to your funnel.
Great Great questions, Matt that as part of the reason why.
<unk> said that we have had great success across all our channels the ability of the direct team to be able to drive more funneled leads at the top of the funnel and the sales team to close more all of that is round good rigorous execution, which the team is doing it also is around awareness like you said some of our partners provide awareness obviously being pub.
Provide some awareness and the network provides awareness and so the network.
Well over 3 million network members today and opportunity for us to continue to grow that and to really create more opportunities for those entities to come into the fold as well so.
Thank you.
When we look at the success that we're having it is going to be this multichannel approach is going to drive success from quarter to quarter and I think the.
Ultimately the awareness.
Capabilities continuing to scale, obviously as we have more customers.
Great and then John maybe a question for you.
And maybe this also includes your perspective as a CFO of a company yourself, but when you think about times, where businesses are getting kind of let's call. It more constrained are feeling pressure like they are doing with from inflation do you think that products like virtual card and cross border in local currency that have variable fees are there.
More valuable because they kind of accelerate the cash conversion cycle or do you think that businesses are more sensitive to that just what are you seeing or hearing from your customers in that regard.
Great question somewhat I think it really depends on the business and what their model is but I think for almost all businesses.
Managing working capital and having quick access to cash in a way that can also create efficiency in the back office. So easy reconciliation, which means good data those things are always in demand probably more so in an environment where.
Companies might be.
And to create more efficiency or need cost savings or things like that so I don't.
It's the absolute say cost of a transaction or something like that that's the big driver of decisions as much as the overall profile of the business and the way that they run their operations and create efficiency.
Great I appreciate you taking my questions.
Thank you.
Thank you. Our next question comes from Jeff Cantwell of Wells Fargo, Jeff. Your line is now open.
Okay. Thank you thanks for taking my question.
Let's just maybe take a step back and think about where we are in this macro environment right now and think about your capabilities. The company that you built.
Can you tell us how you feel and how about your ability going forward to penetrate that SMB. Tam you guys know, we could see that 147000, golar com customers and the customer growth has really been there over the past several quarters now and payment volumes with 55 billion this quarter.
Cross sell we've got anymore. So maybe can you help us think a little bit here any color in terms of what we should expect to see in terms of dotcom customer adds as we think further out maybe.
Maybe talk about your confidence thinking through the next year, perhaps any color there would be great. Thank you.
Well first thank you Jeff first I would just focus on that where at the beginning of the digital transformation of how business gets done business has been using paper, it's 80% to 90% predominantly used by smbs across the country as to how they manage and.
And that's just not sustainable it's not efficient it's not.
And obviously in a hybrid environment, it's really not even possible to have paper in one place and be working someplace else. So we think that tailwind that maybe potentially started with COVID-19. It was probably there beforehand.
<unk> to grow just because more and more businesses are going to be on the platform. Examples of this is just more and more transactions happen on our network than they've ever happened before so more and more transactions are happening together between dot com entities and so that's going to continue to grow and so when I look at the long term, we're just at the beginning.
2% as a customer the employers market out there is on our platform. There is a lot of opportunity ahead of us and we're going to focus on executing to deliver solutions for those businesses.
Yes, John I think you probably have something else that I would just add in addition to that confidence for being able to scale customer acquisition over the long term given our investments in our go to market distribution in the near term, we're still comfortable with net adds being around that 6000 level.
Mainly because of our current investment programs and the incremental step ups that we've seen the success that we've driven from our financial institution partners and accounting firms. So we don't necessarily control the timing of those so there could be some incremental upside associated with that but given our current trajectory, we still feel like the closer to 6000 is the.
Recurring net new AD engine that we have at the moment with some opportunity for upside.
Okay. Great appreciate that and then secondly can you talk a little more about that.
Expectations for future profitability.
What are your thoughts on time frame et cetera.
We can see <unk> layering in now.
I have a couple of strong quarters in a row on the bottom line. So yes.
Anything that you can talk about there to help us think through for next year and so forth would be great.
Thank you.
Sure Yeah, we're very pleased with where we're at from a margin profile perspective, we focus in managing and balancing the investments in growth of the business, we focused predominantly on unit economics, and making sure that we have.
Short payback periods.
Deploy capital and get a return on that on that quickly we have been operating for a number of years now with with very small non-GAAP net losses, and I can't speak specifically to our fiscal 'twenty three at this point about the profitability profile, but we look forward to coming back to you with specifics in August on that.
Okay understood. Thanks, very much and congrats on the results.
Thank you.
Thank you next question comes from Brian Schwartz of Oppenheimer, Brian Your line is open.
Thank you very much hi, Rene and John Thanks for taking my questions Renee I thought I'd just ask you for an update on the enablement and maybe any rolling out or cross selling initiatives with invoice to go.
I'm just wondering if that is still ahead or if.
If you've begun maybe.
Maybe targeting that that new base that that I think you talked about that you've cleaned up in terms of the quality of opportunities with them.
Yes. Thank you Brian for the question. The first thing that just to call out is this quarter, we announced that we fully integrated the teams.
Pretty much probably faster than we expect it to do but we saw the synergies. We saw the teams are working well together and we aligned all of the teams into one organizational structure. So that we could more quickly unite.
I should say unified create a unified platform experience for businesses across all experiences that they're having and so with that.
That being in the motion I would say that we're in the beginning days of understanding how to kind of do that cross selling you are saying with invoice ago. We've obviously started that with <unk> the opportunity for US is with this unique opportunity with having one platform that serves the financial operations for Smbs.
And having that in place to be able to go to market is what I would look for from us in the future.
Thank you and then Renee I wanted to ask you if it was possible and update on the machine learning.
Where the company is and if you see there is a monetization opportunity. The reason I ask is that your company has always been a technology leader in terms of machine learning and then when you just think about all.
The data on the invoice things and now that all of the transaction processing volume that you are doing they are we hear complaints from the finance department of not being able to get data on being as predict fast enough and really kind of slows down their work. So just wanted I was curious if you could maybe update where the company is in term.
<unk>.
The machine learning Cape.
Capabilities and then if you think that there is a differentiation competitively or maybe even monetization opportunity then one quick follow up for John .
Sure. Thank you, Brian Yes from the machine learning AI capability, we have been working on this and building it into the platform for a number of years the capabilities gets stronger and stronger in every release and what the example that we give you is the ability for us to auto connect to network members has gotten better.
And better and the ability for us to really read the information not the invoices that are coming to the platform. So there is no data entry has gotten better and better then the next step will be to continue to read detailed line items across the invoices and to use that data as you're suggesting and other ways to support our customers help them understand their business better and potentially to Mont.
<unk>, we are going to focus first on building the right capability and the right experiences to get rid of paper. That's the number one thing that we have focused on at the company. We're a mission driven about making it simple to connect and do business and having that focus means we're going to focus on the experience of getting rid of that that burden that is out there today, but youre right. There is a <unk>.
Ada monetization opportunity going forward.
Thank you and then the one follow up I had for John I, just wanted to double check on the on the.
The better than expected performance and then that loss that you delivered in Q3 I just want to make sure was that all from the revenue upside or did any of the spend that maybe you had planned either on hiring or other investments did that all get done in Q3.
<unk>.
Thanks, Brian Yeah, it's primarily the revenue performance and our strong non-GAAP gross margins that flowed through to the bottom line performance that we delivered.
Okay. That's all I have good job on the quarter. Thanks for taking my questions.
Thanks, Brian .
Thank you we have time for one more question today and that comes from Ken <unk> from Autonomous Research. Your line is now open.
Thank you Renee and Jon Good afternoon, Thanks for squeezing me in and taking the questions.
Nice to see you rolling out new products like enhanced CCH I guess, just a multipart question on that product.
Can you talk about where you price that.
And maybe talk about it relative to instant transfer.
And then maybe you could talk about some of the steps you're taking to drive adoption on that team and type of either on the customer side or the supplier side.
And then just any thoughts on long term penetration. Thank you.
Thank you Ken.
Just to step back when you think about the millions of transactions that we do every quarter. The billions of dollars that we do every quarter theres lots of different sizes of suppliers in the network that are getting paid through the dotcom solution and when you think about the experiences they need they are all going to be different. So they are probably so hose if you will small.
All our businesses that might take the instant transfer as the best way to get paid to manage their cash flow like John talked about the working capital needs that they might have for our business, but there might be a larger businesses that prefer to have more of a minutes information more streamline and thats, what the enhanced opportunities for and yes, there might be other businesses that prefer the verge.
<unk> card offering because of the alignment they already have with their card processing capabilities. So our goal here is to create solutions that allow businesses, whether they are paying or getting paid.
That they wanted to be able to do that and on the time and they want to be able to do that so we feel good about the product offering we think that the diverse capability. We have enhances the overall network and platform that we built and we think it's an opportunity for us to continue to drive value for suppliers and for customers.
I would just add in terms of the monetization model for those products.
Order of magnitude between 75, and 100 basis points occur.
Across instant transfer of real time payments and enhanced ECH there a similar model delivered differently potentially to different suppliers as Rene mentioned, but in that ballpark.
Okay, Alright, Thats really helpful. And then just as my follow up and.
And then I'll, let you guys go I just wanted to ask you about the new customers that are coming on given that more of them are from the Fi channel can you just talk about the <unk> and the TPB per customer that you expect from these newer customers relative to the.
The rest of your customer base.
That would be really helpful.
Sure. Thanks, Ken.
The uptick in new customers, we've seen over the last couple of quarters much of that has come from success with the financial institution partners, just like with a direct bill dot com customer or through an accounting firm.
It takes a number of months, we say about six to nine months, usually for those customers to fully get up and running on the platform. So there is a little bit of a lag in.
I'm getting to steady state I would say on an average with some of the newer bank relationships. We have now where we're starting to see customers adopt there they are about.
The average bill Dot com small business. So it's similar in size to a small business customer for for Bill Dot Com and we will as.
As we get a little bit further into driving adoption within the financial institution channel I think have more details to share about the demographics and profile as it relates to <unk> and <unk> of those customers, but at this point I can say they kind of look like the average small business customer for bill.
Okay, Alright, thank you very much.
Thank you. Thank you. Thank you.
That concludes the Q&A for today I will now hand back to run a lesser for any closing remarks.
Thanks, everyone for joining us today, we delivered another quarter of very strong growth as we helped F&B transform their financial operations.
Forward to communicating our progress as we pursue the tremendous opportunity ahead. Thank you.
Thank you for joining today's call you may now disconnect.
Okay.
Yes.
Okay.
Okay.
Sure.