Q1 2023 Bill.com Holdings Inc Earnings Call
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Yes.
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Hello, everybody and welcome to the Bel don't come the first quarter of full year 'twenty 'twenty three earnings conference call. My name is Simon and I'll be coordinating your call today.
If you wish to ask a question during the presentation you may do so by pressing star followed by one on your telephone keypad.
I will now hand, you over to your host Carolyne Sohn.
<unk> San salts, Vice President of Investor Relations to begin Cowen. Please go ahead.
Thank you operator, welcome to Bill fiscal first quarter 2023 earnings Conference call. We issued our earnings press release, a short time ago and furnished the related form 8-K to the SEC. The press release can be found on the Investor Relations section of our website at Investor <unk> Com with me on the call.
Today is <unk>, chairman, CEO , and founder, Phil 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 that involve many assumptions risks and uncertainties. If any of these risks or uncertainties develop or any of the assumptions prove incorrect actual results could differ materially from those expressed or.
Our implied by our forward looking statements.
For a discussion of the risk factors associated with our forward looking statements. Please refer to the text in the Companys press release issued today and to our periodic reports filed with the SEC, including our most recent annual report on Form 10-K, and quarterly report on Form 10-Q filed with the SEC and available on the Investor Relations.
Section of our website, we disclaim any obligation to update any forward looking statements.
On today's call, we will refer to both GAAP and non-GAAP financial measures. The non revenue financial figures discussed today are non-GAAP unless stated that the measure is a GAAP number. Please refer to today's press release for the reconciliation of GAAP to non-GAAP financial performance and additional disclosures regarding these measures at times.
During this call we will discuss <unk> standalone results, which exclude our dippy spend management and invoice to go accounts receivable solution now I will turn the call over to Renee Renee.
Thank you Karen good afternoon, everyone.
For joining us today.
<unk> delivered strong financial results in Q1.
With revenue growth of more than 90% year over year in our first quarter of non-GAAP profitability from.
From the beginning we have created a durable business model and have been steadily building towards profitability, while investing in more ways to create value for small and mid sized businesses.
Q1 was another quarter, where disciplined execution led to us achieving several significant performance milestones.
We acquired a record number of net new customers achieved our highest ever non-GAAP gross margin expanded transaction monetization on the bill Standalone platform.
We delivered these results in an increasingly dynamic macro environment.
In today's climate businesses are looking for ways to do more with less while these trends may lead to moderated payment volume growth near term our platform has never been more relevant.
As we've heard from many satisfied customers by digitizing their back offices build increases visibility into cash flow and delivers operational efficiencies, giving.
Giving businesses back time, which they can use to focus on their most pressing priorities.
And in an inflationary world choosing our platform acts as a deflationary force.
We are proud that our platform helps businesses operate more efficiently in both up and down economic cycles.
Today more than 400000 businesses use our solutions to transform their back offices we.
Aspire to serve millions of businesses and are making investments to capture this large opportunity.
There are 30 million small businesses in the U S and 70 million globally and many of them still use manual paper based processes to manage their financial back offices.
With our platform ecosystem and scale. We believe we are uniquely positioned to be the essential financial operation solution for Smbs.
And take care of of expense management for employees.
Additionally, having so many of our vendors on the Bill network helps us reduce payment transit time and gain more control of our cash flow.
Bill is helping to make us even greener and more efficient and quote customers. Like me purpose that are using both bill and our duty solutions had been fantastic sources of inspiration as our product and engineering teams work together to deliver a unified platform experience our number one priority for fiscal 2023.
We are making great progress on the product roadmap to this unified platform.
And just a few weeks ago, we announced that we have become bill, leaving the dotcom behind.
Leveraging the strong design expertise for a combined teams we are modernising, our brand identity and.
In addition to our organic efforts to enhance our platform today, we announced that we find that defendant agreement to acquire Finmark.
Leading cloud based financial planning tool for startups and that's M B's.
Denmark aggregate data from disparate systems, such as payroll sales and accounting.
This is bill budget forecasts future earnings and gain realtime insights too easy to customize dashboards.
When combined with our data will further empower businesses to better manage their cash flow and finish operations.
We believe this new financial planning solution will be especially useful to accountants.
[noise] them to add another valuable offering to their strategic advisory practices.
Capabilities will increase the value proposition of our platform for this important channel.
Our second priority in fiscal 2023 is the furthest scale or go to market ecosystem by offering more of our platform solutions third current partners as well as acquiring new relationships.
And Q1, we expanded our relationships with our financial institution partners driving platform adoption among their S&P's as well as driving overall AD valorem payment adoption in the <unk> channel.
Recently, we entered into a new agreement with the bank partner to bring our spend an expense man just listen to its customers.
This deployment of net new functionality to an existing bank partner is an important milestone, but we are optimistic about the opportunity to extend our reach into the channel through spend management.
Continue on that theme of going deeper into existing bank relationships for the first time, we are now issuing virtual cards on behalf of an existing F partner.
This partner adopted the bill solution because of our supplier enablement momentum and processing expertise.
Finally, we continued to expand our reach in the financial institution channel.
Recently assigned to New Bank partners that will talk more about future calls is implementation progressive.
Accounting firms are another major component of our go to market ecosystem today more than 6000 firms leverage our platform to grow their practices and automate their bookkeeping operations.
Partnership with sepia Dot com, we have already begun to see good interest in our divvy solution and have enabled hundreds of our accounting firm partners to begin offering it to their clients.
A great example of how accountants use our suite of solutions is Bergen KDB, a top 100 accounting firm in the U S.
Bergen KDB Leverages, Bill and Debbie for their growing business Advisory practice, Chris Gallup solution leader, Bergen Kdb's financial accounting Advisory services team said and I quote.
The powerful combination of bill and Debbie drive speed and efficiency.
These are key texts that cool, enabling the successful growth of our financial accounting and advisory services team practice we.
We now have a substantial number of clients using bill and Debbie and they'd be love both.
A third party to drive ongoing payment adoption and innovation across all channels.
Suddenly we made it simpler for Canadian in UK suppliers to choose to receive payments in the preferred currency, they're our network.
Driving higher ethics adoption and more engagement.
In the near term we plan to offer this option to suppliers in other countries that receive cross border payments rough further expanding our reach.
As we enhance the capabilities of our multifaceted platform, we continue to strengthen our competitive boat.
Our proprietary payments technology and the end to end payment visibility afforded us by our network gives our team to tools to be able to quickly incredibly solve SMB pinpoints.
Ah risk management expertise money transmitter licenses and data assets enable us to drive efficiencies the smaller players can't replicate.
We go to market with partners Smb's trust to help them manage their businesses.
Our culture acts as a magnet to attract world class experts in software payments and small businesses.
On the people front, we recently added another season executive with experience developing global multibillion dollar businesses.
And Q1, we welcomed Lauren paddleboard as our Chief commercial officer.
Lauren brings a wealth of sales and leadership experience, including seven years Shopify, whereas team brought shopify products and services to more than 2 million merchants in over 175 countries.
Generating over $4 billion in annual revenue.
We also recently welcomed Alison wagon tell the chief marketing officer of Google Cloud to a board of directors.
Alice Enjoined, Google in 2016, as the first global marketing leader for Google Cloud contributing to the divisions rapid growth over the last six years.
Prior to Google Cloud Alison was an operating partner at emergency capital, where she worked with over 30 staff companies, helping with their strategy and go to market plans.
Her experience scaling fast growing businesses on a global level will be invaluable to bill.
In closing we kicked off physical 2023 with excellent results. We are laser focused on executing against our strategic priorities, but also managing our business to deliver non-GAAP profitability in fiscal 2000, twenty-three and investing for the long run.
All of US that bill are dedicated to helping S&P succeed. We are excited about the many opportunities ahead and I would like to thank our employees customers and partners for the trust they continue to place in us.
Now turn the call over to John to talk in more detail about our quarter.
Thanks for me today I'll provide an overview of our fiscal first quarter of 2023 financial results and discuss our outlook for the fiscal second quarter and focussed school year 2023.
As a reminder, today's discussion includes non-GAAP financial measures. Please refer to the tables and our earnings press release for a reconciliation for non-GAAP to the most directly comparable GAAP financial measure. Please also note that when I refer to Bill Standalone results. They exclude our duty spend management and boards to go accounts receivable solutions.
We delivered strong financial results in Q1 significantly exceeded our expectations.
Revenue increased more than 90% year over year.
[noise] transition to non-GAAP profitability.
Total revenue for Q1 was $230 million, reflecting 94% year over year growth core revenue, which includes subscription and transaction fees was $215 million or 83% year over year.
Boat revenue was $15 million, an increase of nearly 10 million from last quarter as we began to transitioning customer funds to higher yielding investments.
non-GAAP gross margin was 85.8 per cent in Q1, well above are estimated range.
Several factors had a positive impact on gross margin, including favorable payment mixed with volume increases an AD valorem payments payment optimization.
Significantly higher float revenue.
non-GAAP net income was $17 million well above earlier estimates as a result of strong revenue in gross margin performance combined with our disciplined approach to investing for growth.
We're pleased to manage the transition to non-GAAP profitability out of the gate and physical 2023.
During the quarter, we added a record number of new customers to our bill Standalone platform totaling 14200.
Customer retention remained healthy and it was consistent with last quarter. We continue to see strong engagement from customers on the Bill Standalone platform indirect an accountant general customers transacted at a similar rate to coupons.
Throughout two one we also made progress increasing are you an AD valorem payments, which led to a very strong transaction revenue growth of 94% from Q1 of last year for.
Or average revenue per transaction grew 34% year over year, two approximately $8.
The results demonstrate the tools, we have to deliver value to customers and expand monetization even in an environment, where S&P's are increasingly reacting to macro influences by reducing their spending.
During Q1, Bill Standalone TPB per customer excluding me up I channel declined by 3% sequentially due to poor we saw midmarket businesses beginning to moderate their spending and that trend is now visible with our micro and SMP customers as well.
These trends are reflected in our outlook, which I will discuss later.
Now turning to an update on our key metrics.
We ended the fiscal first quarter with 419800 businesses using our solutions.
This includes 172000, Bill Standalone customers and 22800 GB spending businesses among.
Among our bill Standalone customers 45100 from financial institution partners.
New customer adds on our Bill Standalone platform was strong across all of our go to market channels.
And the direction account and channels, we had 5100 net new customers, which was above are expected range of four to 5000.
F. I channel, we had 9100 net ads driven by an increase in the number of small businesses signing up to use our white label platform as well as the impact of a one time migration of customers at an existing bank partner onto our white Liberal platform.
As a reminder, customer net ads and ratify channel fluctuate quarter to quarter, depending upon the timing of each institutions sales and marketing initiatives.
Moving onto payment volume during the quarter, we process 64.9 billion in total payment volume, representing 34% year over year growth.
This includes bill Standalone total payment volume of 61.6 billion in Q1, representing growth with 31% year over year and 3 billion in card payment volume from duty spending businesses, representing 103 per cent growth year over year.
TBB from Bill Standalone customers, excluding our financial institution partners was 55.7 billion.
On a per customer basis, Bill Standalone TPB, excluding customers from our financial institutions increased 8% year over year.
Current payment volume per Doobie spending business increased 21% year over year.
Moving onto transaction volumes, Reprocess 19.6 million payments in Q1, representing 45% year over year growth.
This includes $10 8 million payments on the Bill Standalone platform.
Customer engagement with our solutions remains very strong.
Excluding that by channel Bill Standalone customers average 70 transactions in the quarter similar to last quarter and a year ago.
During the quarter, we also process 8.5 million Doobie car transactions, reflecting 83% year over year growth.
Now I'll review a reported Q1 results total.
Total revenue was $229.9 million, an increase of 94% from a year ago.
Gore revenue was $214 $6 million representing growth of 83% year over year. This.
This includes 9.8 million of revenue from it by partners.
Subscription revenue increased to $58.1 million up 57% year over year, driven by our growing customer base and the inclusion of invoice to go subscribers from the acquisition that closed on September 1st 2021.
Bill Standalone subscription revenue growth was 45% year over year.
Transaction revenue increase to $156 5 million up 94% year over year as a result of strong year over year TPB growth increased adlon product monetization increasing spent on duty.
Bill Standalone transaction revenue totaled $76.3 million, reflecting 75% year over year growth and Doobie transaction revenue totaled 78 million in Q1, reflecting 113% growth from Q1 of last year.
Float revenue was $15.3 million, an increase of approximately $14.5 million from a year ago.
Revenue exceeded our expectations given the magnitude of the recent that guns rate increases and are proactive migration of customer funds into higher yielding investments.
Are you old was 192 basis points in the quarter demonstrating that are scale combined with our proprietary payment technology is proving to be an important differentiator that enables us to create tailwinds. During this period of rising interest rates.
Turning to our gross margin that are operative results for Q1, non-GAAP gross margin with 85.8% up two points year over year as a result of a higher mix a variable transaction fee revenue improving transaction economics and strong float revenue.
As a reminder, we manage our portfolio of payment offerings with a range of margins that are in various stages of adoption and we currently have a very favorable payment mix for fiscal 2023, we have increased our expectation for non-GAAP gross margin to be in the range of 80 to 82 per cent.
non-GAAP operating expenses were $188 million, an increase of $16 million from Q4.
We continue to invest in R&D as we build our unified platform introduced new products and enhance the customer experience.
Sales and marketing expenses increased due to the expansion of our go to market initiatives and rewards expenses associated with our duty spend management solutions.
non-GAAP operating income was 9.1 million and are non-GAAP operating margin was 4% and improvement of 12 percentage points from negative 7.8% last year.
non-GAAP other income net of other expenses was 7.7 million and benefited from higher yields on corporate cash balances.
Or non-GAAP net income was $16.9 million for a non-GAAP net income per diluted share of 14 cents based on $117 2 million diluted weighted average shares outstanding.
non-GAAP net income was significantly better than our expectations due to our revenue performance and are disciplined approach to managing growth.
Moving onto the balance sheet cash cash equivalents and short term investments at the end of Q1, where 2.6 billion.
We continued to be well capitalized, which we believe is an important advantage, enabling us to continue investing and market penetration during this economic cycle.
Before shifting to our financial outlook for the second fiscal quarter and full fiscal year 2023, I'd like to cover how we see the macro environment impacting S&P's and our business and.
In the near term the macro environment appears to be increasingly challenging for businesses. We anticipate the trends we've observed with businesses moderating their spend will continue throughout this with 2023 and we expect that this will translate into lower year over your payment volume growth in the quarters ahead.
At the same time in this environment the value proposition of our platform is resonating more than ever with Snb's and we have seen strong engagement from existing customers continued high retention and healthy new customer demand.
Now more than ever businesses need are solutions to navigate the uncertain environment and we believe this is an opportune time for us to invest in our business.
We believe we can accelerate the positive impact, we're having for S&P's globally, while monitoring the external environment and proactively bouncing growth and non got profitability.
Now turning to our outlook.
A couple of notes upfront first I'll look does not assume a severe economic downturn second we expect our acquisition of Finmark to closed during the fiscal second quarter and therefore, we have included the acquisition integration costs, an incremental investments associated with continuing their product development and or guidance for two two in fiscal year 2023.
Good Mark is not expected to have a material impact on revenue results in fiscal 2023.
For fiscal cute too we expect our total revenue to be in the range of $241.5 million to $244.5 million, which reflects 54% to 56% year over year growth versus a very seasonally strong Q2 last year we.
We expect float revenue to be approximately 18 million in queue, too, which assumes or you have an F. B O funds will be approximately 225 basis points.
On the bottom line for Q2, we expect to report non-GAAP net income in the range of 14.5 to 17 million and non-GAAP net income per diluted share in the range of 12 to 14 cents based on a share count of 118.4 million diluted weighted average shares outstanding.
<unk> you too we expect other income or Hawaii to be $8.5 million none of other expenses.
We expect stock based compensation expenses of approximately 130 million in Q2, which includes the 75 million run rate plus the impact of the gap accounting treatment related to the changing role of our cheap revenue officer to strategic advisor. This accounting treatment requires us to pull forward the stock based compensation expense related to this new rule, although the best thing.
<unk> remains unchanged.
Q too, we expect capital expenditures of approximately $8 million to $9 million.
For fiscal 2023, we expect total revenue to be in the range of 994 million to 1.007 billion at.
At the high end of our revenue range, we reached the billion dollar revenue milestone, which speaks to the value proposition of our solutions, the large market opportunity and the collective efforts of the talented employees that bill.
We expect quote revenue to be approximately $73 million in fiscal 2023, which assumes that you have an F. B O pawns of approximately 235 basis points for the year.
We expect to report non-GAAP net income for fiscal 2023, and the range of $57.5 million to $70 million and non-GAAP net income per diluted share of 48 to 59 cents based on a share count of 119.4 million diluted weighted average shares outstanding.
In addition for fiscal 2023, we expect other income or Hawaii to be $34.5 million net of other expenses <unk>.
For fiscal 2023, we expect total stock based compensation expense at $355 million in capital expenditures of approximately $35 million for the year.
In closing, we have confidence that we're well positioned to successfully navigate the uncertain economic environment because of our multiple recurring revenue streams and diversified business model. We are continuing to invest for efficient growth given the large market opportunity and the increasing adoption a cloud based solutions by Smb's.
Operator, we are now ready to take questions.
[noise]. Thank you if you would like to ask a question <unk> followed by one on your telephone keypad now and if you change your mind you pissed off on a blessing.
Planning to ask you a question <unk> muted lighting.
And our first question comes from will <unk> from Goldman Sachs will you'll <unk>. Please go ahead.
[noise] Hey, guys. Good afternoon match results today, I I wanted to follow up a little bit on some of the commentary around the moderated payment volume among some of the smaller kolar until your customer base I was wondering if there's anything that you can share kinda dimensionalize the sort of flowed out and you guys are seeing and also what you guys are <unk>.
Incrementally to happen and future quarters as you in bed that into your outlook and just maybe you compare and contrast, the assumptions embedded in your outlook versus how payment volume growth in other metrics might fare. If we did enter a deeper kind of economic downturn. Thanks.
Thanks, well first of all let me just say that we're very pleased with the work of all 2400 employees and really not only did we drove 94% in the soft economy that we flipped the non meaningful non-GAAP profitability and that's just because of the ability for our platform to actually meet the needs of businesses and so the first thing I would say is that.
The demand is healthy and you saw that with the net ads on the T. P. V spend we started talking about this and seeing this in the in the queue for call that it was being moderated and so the difference between Q4 and now that it's in queue for we said we saw that in the mid market and now we're seeing that across all businesses of all sizes.
It's not one thing they call out the number of transactions per customer has remained consistent. So what this tells US is that people are pulling back to spend but they are actively engaged in using the product and the platform and really managing their business.
[noise] got it makes it makes it kind of sense and then you had a handful of announcements and the FIA channel related to kind of new partnerships or or in a new AD valorem payment methods issuing virtual cards I'm. Just wondering if you could maybe talk about how you are your expectations about the payment opportunity within.
FYI channel have changed over time, it sounds like you've made some meaningful progress and then maybe just a quick follow up for John I know the FIA channel that had a major impact on some of the kpis that you'll get disclosed any color on how the handful of new new deal that you signed it could impact numbers in future holders. Thanks [noise].
Thanks, Thanks, again, well I think there's a couple of things with the spy.
Partner Channel strategy that we're very happy with this quarter. So as we build our platform at one of the things that we work hard to do is to make it.
Unified platform across all channels across the entire ecosystem and what we saw in this quarter were kind of three things with respect to the <unk> right. So we saw first and foremost that we managed to get one of our App high partners to start focusing on spend management, including that into their offering that sport that will be.
Announcing her rolling out she's saying later in the year.
And then the other thing that we also saw was the ability to drive our vendor card solution through our platform for <unk>. So instead of them using their own virtual card, they're using our virtual card program because of the strength of the supplier enablement that we have and the strength of the overall program that we have and then the third thing we saw the <unk> is that <unk>.
We saw two more additional bank sign up for the platform, which will talk more about it later.
As those rolled out that all in all we'd say the ecosystem is super strong we celebrate growth and the Countess all great growth in the <unk> in great growth in the direct.
And just adding to the second part of the question about the impact on our on our numbers in future quarters. We've made a lot of progress in the financial institution shuttle over the last 18 months or so and I think some of the things that we announced this quarter or just a continuation of that momentum and helps us bring more of our products and more of our monetization.
Model to these partners with that said I think that plays out over a longer period of time versus in the very short term, where as we talked last quarter. Most of our revenue from our FY partners will be derived from what we've already booked in terms of remaining performance obligations versus incremental revenue from some of these new announcements, but we are confident that those will.
Have a positive impact over the course of the call at intermediate term.
That's great I appreciate you guys, taking all my question.
Thank you.
[noise] next question comes from <unk> from within Black Funky one.
[noise] yeah. Thank you good afternoon, nice nice quarter past.
You added quite a few customers through really in court.
Cora Bill Debbie and.
An invoice to go I mean, what is what drove that I think is a record quarter for communications was there was something on the marketing front that accelerated the number of new additions even in now more challenging environment.
Thanks, Bob Good to hear your voice a lot of things that that I love about building a business is building momentum and kind of what I call. The snowball effect to kind of the market and the product and the platform. The people and I think we're just seeing that we have an opportunity to really change the way business gets done to really help businesses manage their financial operations in a way that they haven't done before.
Four and ultimately that means that it's not elect a software customers can't choose not to do this the digital transformation wave is happening and what we're seeing is that we saw this in the beginning with hybrid that as an opportunity for remote work to be done through your back office and what we're also seeing in the soft economy with inflation being high is.
That the deflationary force that our platform provides the ability to do more with less it's real and so we see across the ecosystem that this is driving demand. That's the healthy demand is something that we're excited about something that we believe is an opportunity for us to continue to drive through the unified platform and and all the things that we're doing but all in all I would just say this is.
US building that momentum and that's noble.
Thank you and then you with 172000 core bill customers and the crowd shell just an update how many of those are currently using Debbie what is the opportunity and is the.
Any any color you can give one success in and crossed gathering momentum there would be helpful.
Sure Edward definitely we're very happy with the Cross Hill success that we've had to date, we continued to obviously drive.
<unk> experienced that one thing we did this past quarter, obviously was on the brand announcement that is going to roll into the look and feel of the unified platform that all of that means that we are getting more comfortable with ways that we can attract and drive the cross selling at the platform and so we continue to believe that will.
Do more once we had the unified platform and.
That has continued to go well the integration of the products and solutions that we have and will share more is that becomes available.
Thank you appreciate it.
Thank you Bob.
[noise] next question come from semi it to someone else from Jeffrey <unk>. Please go ahead.
Great. Thank you maybe first question on the acquisition.
Makes that kind of strategic sense, but Renee I was hoping maybe you could help us understand how it how it's the glue that brings the spend management and a P together or maybe how you're seeing this fit into your current portfolio and maybe what other roads. It opens for you as.
As you look to the future as well.
Thanks, Thanks to Ma.
Set for awhile that one of the things that we think is critical for financial operations is that inside and dashboard that help businesses manage their back office, whether that's payables or receivables money in money out and all the things that go with that and if you go back to the roots of the company. The original name of the company was cash view and actually the original name.
Cash bored because I liked the idea of a dashboard so.
The goal here really is to create one place for the business to be able to manage their financial operations to do that in a way that's different than they've ever done before that creates more value more efficiency and what we see with the tool in the platform from the team at Denmark is a very elegant tech solution that really is driving innovation.
And when it comes to pulling together disparate data systems across multiple different tools into one view. So that you can actually manage your financial operations. So super excited about that Super size that had the team joined our team and look forward to delivering those solutions in the future.
Mmk and then maybe John just a follow up for Ya I appreciate the incremental disclosure around that TPB XDA FY channel I think if I heard you correctly, you said is up 8% year over year, how should we think about maybe that trending are you expecting anything about your foreign forecasted that embedding farthest slowdown is that exciting maybe.
Decline in actually same store sales TPB actually think about the the bill Dot Com only X F I.
Yeah. Thanks to mind, we are expecting some of the trends that we've observed over the last call at four months or so a moderating spend from from customers except by channel to continue what that means for us is really lower growth going forward as our current.
<unk>, we factor that into our outlook for the year. There are there are I think.
A handful of opportunities for.
There to be upside to those growth profile numbers, but I was really dependent upon the actual impact on the economic cycle and what's happening with with our Smb's. We've assumed some of the trends that we have seen recently are going to continue.
Great great to see the solid results tough back up and he's a great numbers.
Thanks month.
On that can come from Barron from Wolf research down your lungs out with and please go ahead.
Hey, Thanks, guys. You know it is good to see the customer acquisition trends continuing at this rate, particularly given all the headlines we've heard from competitors and competitive dynamics whether it's.
Into Internet suite or others, So I'd really love your thoughts on just the landscape for a moment.
And really just break it down if you don't mind, a little more in terms of the SMB different different tiers of SNB and what you are seeing.
And if you actually think some of these competitors or partner slash competitors could make some real progress or not because it certainly doesn't look like it's showing up yet in your numbers.
Yeah. Thanks, Daren good to hear your voice into it really just kind of get.
How we think about it we spent the last 16 years defying this category.
And it's very complex the payments to compliance the.
All the things that go rounded financial operations, it's complex and so as a result, we have a strong lead and a large untapped market and so what's working for us as we have a broad horizontal approach across the diverse ecosystem, we can reach smbs either direct or through our account channel. We have 6000 accounting firms that are part of this.
Solution for our customers, we have six of the top 10 banks and we're doing more and more with accounts and with banks to deliver more services to those customers and so it's the combination of the platform that was built from the beginning for S&P's and the ecosystem. That's allowed us to continue to reach Smbs and to really help them and this time I mean, it's a <unk>.
And the ability for us to really drive value and be a debate deflationary force is something that we think is super valuable so ULT.
Suddenly I would say that.
The number one competitor is his pen and paper and it has been for and wellbeing for a long time and that's that's where we're gonna focuses on these manual processes Hattie automate them, how do you actually take the pain out of the small business.
And just stay focused on delivering value for them.
Okay. Thanks, and just for John maybe just one quick follow up as a reminder, I mean, the key sources of the sequential changing to a great has been strong, but if you could just remind us on the opportunities there and again, if you see that being resilient through any kind of macro scenarios.
Scenarios.
Almost regardless of what how volume goes has the potential to change the pay grade and move the.
The payments revenue up those stairs.
Hum.
Sure. Thanks Darren.
We've made great progress expanding the.
Monetization transaction monetization over the last couple of years. In fact this this Q1 was our best ever quarter to quarter growth in terms of transaction monetization driven in part by continued adoption of our AD valorem products as we mentioned last quarter, we're at about 10% AD valorem as a percentage of TBB that continues to <unk>.
So in addition.
Q1, we had the benefit of an ongoing migration between.
Card issuing providers and networks and that led to a step up in our monetization in the near term, we don't necessarily expect the same level of of monetization expansion as our volume between issuers is going to be more stable in the forward quarters and over the next few quarters I'd say the near term really we're expecting law.
<unk> expansion in that take right.
Perhaps even lower than historical averages given the macro environment, but as.
As we've said for a long time, we're very bullish about the long term opportunity to continue to growth or take right in our monetization overtime that remains perfectly intact, but in the near term I would expect just given the environment a lower expansion we've seen historically.
Alright got it thanks Joe.
[noise] next question comes from <unk> from Autonomous region can your line is now open. Please go ahead.
[noise] Hi, Renee.
The name John Lynch quarter, Thanks for taking my questions.
I just wanted to follow up on <unk> question, there the increase in the transaction fee take great. Excluding <unk> really accelerated this quarter versus prior quarters, and you kind of touched on it and the last answer and.
I didn't know if anyone to expect you to provide specific penetration rates this quarter, but can you give us a sense of.
Of which payment types are seeing the most traction I think you've added a few new payment tapes over the last year or so.
Thanks, Ken it's really across the board with our AD valorem products.
We are still in the earlier stages of adoption.
We think there is there is a.
A significant growth runway ahead by allowing suppliers and customers choice and figuring out what the right payment method for their transactions is we launched international payments and virtual cards more than a coupla years ago. So those are the largest dollar contributors to two.
Our growth, but some of the newer products around real time payments, an instant transfer as well as pay by card are doing nicely and that expanding adoption is having a positive impact on our overall consolidated level of monetization on one dollar basis, though those are still pretty small contributors.
Okay. Okay that makes a lotta sense and then I think we tried to run some of the math on the invoice to go revenue specifically that transaction revenue and it looks like that continues to step up nicely and I was just wondering if you could talk about.
What's driving that and I guess, how sustainable that increases.
Yes, we're pleased with the progress that we're making with within boys to go in terms of the profile of the product first it's predominantly subscription revenue and we see a growing transaction revenue stream driven by some of the improvements and changes we've made to the product experience integrating.
Branded payments and that's still in the in the I'd say earlier phases of development, it's not material to our overall business, but our monetization of those payments is significantly above.
Where in voice to go was on a standalone basis, but we still have a long way to go to continue to drive monetization of the existing invoice volume for any ways to go and then secondly, the big opportunity, we think longer term as as we apply the eh, our accounts receivable knowledge and and product capabilities not just to the invoice to go.
Customers, but to bill subscribers and our network members and together, we think that's going to be a big opportunity over the intermediate and longer term.
Okay, great. Thanks, a lot I appreciate it.
Thanks again.
And our next question comes from <unk> from J P. Morgan Tensing your line and I would like.
<unk> I think please go ahead.
Oh. Thank you so much great results here just the.
SMB comments, thank you for that.
I heard the lower payment volumes stable transactions any thoughts on client growth or net ads.
Given your views on adoption investing in this uncertain environment.
Any change versus 90 days ago on that front.
Thanks for the questions and I would say much of what we should talk about in the script is just the.
This softening economy ends up meaning that businesses turn to doing more with less.
And we have a platform that enables businesses to do more with less that really helps them manage their business with efficiency and what we've seen across the entire ecosystem is that that demand is healthy and part is because we have a horizontal approach to the go to market.
Whether it's through any of our direct efforts or accountant partners or financial condition partners as well as that we serve businesses of all sizes up to the large mid market customers and so.
The demand is healthy we think the opportunity to continue to drive more value for businesses and more customer growth.
And the the untapped market that we have ahead as strong.
Okay, Great. If you don't mind I have to ask of you mentioned there.
Renee Youre issuing virtual cards on behalf of existing if I partner I'm curious does that.
Alongside of an incumbent solution, they're using before and kind of speaks to the benefit of selling something integrated through through bill too there.
Two small.
Small business banking partners is trying to better understand that and thank you. If you don't mind me asking about detail.
Yeah, I know that is a good.
Question is one of the things that we are very proud of is that the the broad capability of the platform creates value for our customers and our partners and to your to your point that financial condition partner did have a virtual card product that they were using before but their business customers and they switched to using ours for.
<unk> dot com customers and.
Because of the power that we have of driving transactions and driving value for suppliers that are on the network.
Strength of our supplier enablement team, which we've been working on since we launched the strength of our ability to really help.
Customers suppliers connect that's all something that we've been working on and that's what the financial system partner saw and wanted to take advantage up. So that's why we did it.
Perfect. Thank.
Thank you.
Thank you.
Our next question comes from K to US all smokers tiny Keith your lines now. Please go ahead.
Hey, it's Jonathan on for Keith Thanks for taking our questions I want to start with with TBB trends can you talk through any differentiation you were seeing and deviant core Bill TBB trends in how you expect that to evolve going forward just give him some tobacco commentary.
Thank you Jonathan we have <unk>.
Generally seen.
Businesses all businesses moderate their spend in this economy and so what you see in <unk> is that it is just growing much faster, it's a smaller base to start with and so we've continued to have strong growth in TPB year over year, there, but we do see.
I would say softer spend across all of our customers.
Understood I appreciate that color and you wanted to get into more of the opportunity to work with suppliers and can you talk through that and is there any opportunity to to drive adoption of more monetizable payment modalities through working closer with your suppliers and how should we think about the opportunity to pay something back.
<unk>.
Another good question here, we talked about enabling the suppliers in our network in Canada and now the UK to be able to decide how they want to be paid and what currency that wanted to be paid and so we.
We need an activated both sides of the network so that.
This is I would say a movement for us treating and viewing I should say the suppliers as customers as well and what that leads to is that when somebody who was in the UK or Canada as being paid by U S business that Tom Bill that creates an FX transaction monetization opportunity for us gives them a better.
Monetization FX rate than what they can get from essentially their local bank and that's the value that we create so that's the first example, there'll be other examples of how we think about adding value to both sides of the network and we will continue to and then and innovate on that front.
I appreciate the help of guys. Thank you.
Thank you John .
Our next question comes from <unk> Bank of America Credit line is now I think please go ahead.
Oh, great. Thanks, so much I wanted to ask a question on the <unk> channel another great quarter net ads. There I'm curious is there a different ramp time for those customers when they when they come when they onboard.
From versus your average customer coming in through director accounting from channel.
I'm asking because I'm wondering if there might be some unseen potential ramp and spend coming from some of these these net as coming in through the <unk> channel and the coming quarters.
Thank you Brian for the question.
What we see is that consistent across all of our customers, we make it really easy for them to get on the platform we.
We target and actually build it into the business model that within 30 days you are using the product or you're not and so with our partners. We see that they are able to get up and going obviously, it probably does take three to six months to kind of get to a meaningful activity on the platform, but it doesn't really vary by channel and the opportunity for.
For us is to continue to drive adoption earlier in the experience with Bill and we have teams that work on that every day.
Got it great and then on the macro if I might.
You mentioned, obviously that you're expecting some continued moderation here in TPB.
But TPB.
Transaction volumes for customer you're mentioning is held in nicely.
So where where are you seeing the impact as it is that transaction size.
How would you classify that that headwind that you're referring to on the macro side with regard to T. P V.
Yeah, Thanks, Brad as Renee mentioned.
We're seeing some softness across most of the customer segments now.
It's still appears to be concentrated in some of the discretionary spend categories. We I think we pointed this out last quarter as well, where we started to observe this in the month of June and I think that has continued so things like.
Advertising spend would be a good example, we looked at a lot of the top advertisers that small business is.
Our advertising channels that small businesses use to drive customer acquisition and other things. So we looked on a vendor specific basis and found that.
Across really the whole the whole segment spend is down and that's something that is consistent with other.
Other data points that we've looked at externally. So I think it just says that our small business customers across the size range are reacting to the external environment and being a bit more cautious about.
Their operating expenses and we're seeing that.
Across the spend habits of our customers.
Understood. Thanks, John Thanks for ne.
Thanks, Brad Thank you.
Our next question comes from Cashback from Keybanc Joshua lifestyle Island.
Thank you for taking the question I wanted to ask you just a little bit.
About your risk management philosophy, that's something that you really ingrained in the platform.
Prior decades.
Obviously, dizzy brings card receivables, it's probably a little bit of.
Dynamic so maybe just give us a sense of kind of approach to risk management and maybe how that is is evolving as you folded in T V as well.
Sure. Thanks, Josh for the for the question Yeah, we've been building out proprietary capabilities around risk management underwriting and all those things with the bill platform for over a decade in our in our goal with that is to simultaneously deliver a great customer experience that includes fast payments well.
Appropriately managing the exposure associated with with that payment volume and we've taken the same approach.
DB, combining our risk teams from day, one of the acquisition. It's the first integration thing we did that allows us to leverage the combined consolidated data asset that we have around transactions and entities.
Order to make better more informed risks.
Risk decisions and I think we've we've shown in the time since the acquisition that we've actually been able to improve.
The underwriting and risk capabilities of the combined team and deliver a great experience for customers at the same time. So we feel really good about the progress, we're we're making and it's all about balancing serving customers, but doing so in a way that everyone's able to be successful with with the products that we offer.
Great and then maybe a follow up on Finmark and some of the synergies certainly sounds like.
Important tool for accountants.
Do you envision maybe bringing a new accounting partners or having you work maybe with more of their customers. So it's kind of effective or like an indirect benefit from a revenue point of view just curious how some of the synergies may work there.
Thanks, Josh I'll take this one I think the.
You are right that one of the strategic values is with the gallons Accountants man. It's just as a reminder, manage multiple clients at.
<unk> dozens of clients and so what they're providing in the category that we've really help define there is the client advisory services and so.
What they accounts produce cast and so the ability to be a strategic advisor to your client requires that you actually digest data understand it looked at the dashboard and provide insights that weren't necessarily easily attainable for the small business themselves and so I do think that accounts are going to value. This integration once.
We have it together and it's something that we think will help us drive continued adoption for client adoption as well as for account and adoption.
That's been very helpful. Thanks for that.
Thank you got.
Next question comes from Bryan King of Deutsche Bank brand New line is not with them. Please go ahead.
Hi, guys congrats on the results.
I think it's an important point to talk about transactions holding in verse volume.
Which is moderating a little bit John can you just talk to us about the sensitivity of the model.
If we see that moderation, but transactions hold will it have a material impact to the P&L or will Wilson transactions are holding in it'll only be a slight impact that we'll see.
Alright, Thanks for the question Bryan we do monitor engagement.
With our platform from customers very closely and one of the the metrics. That's important as you mentioned is transactions per customer and and we've seen pretty consistent results. There excluding the <unk> channel, which has a slightly different customer profile the core bill.
Bill customer is pretty consistent with last quarter and last year and that tells us that customers continue to use our platform they leverage to run their financial operations, even if they're spending less in terms of overall operating expenses and TBB through the platform and as we showed with our results in Q1, even spend as a little bit sore.
After that in some other period, we still have the tools to both deliver value for customers as well as monetize that transaction volume so.
We have both fixed and variable price transaction fees and so both contribute to our revenue growth and obviously the foundation of our of our model is in subscription fees, which continues to be healthy growth given the.
The way in which customers use our platform.
Got it and then just maybe the bigger picture just thinking about a slowdown or even a recession.
How long has the model held up or how do would you would expect that the hold up.
For revenues and different kind of scenarios and maybe a shallow recession versus deep one.
You probably do some scenario analysis work, we're just trying to get a sense of of the sensitivity of potential downturn at what the impacts could be to the model.
Yeah. So it's a fair question Bryan and we certainly have spent time on on different scenarios, what what I can say is that our outlook represents kind of all of the information that we have available around recent trends and the health of our of our SMB customer base, which we think is quite strong.
We have assumed if there's going to be some continuing.
Mr moderation of spend that that persists throughout the fiscal year in terms of our outlook set of assumptions, we're not assuming a severe economic downturn. So that's a that's a scenario that's outside the scope of of what we've looked at and beyond that as I think we mentioned the prepared remarks were still monitoring the health of our.
And are based on the situation closely and we think we're well positioned to adapt to serve customers and to continue to scale the business.
Regardless of the external environment that we're operating in.
Okay, great. Thanks for the color.
Thanks Brent.
Our next question comes from <unk> Oppenheimer can you along is now open. Please go ahead.
Great Fantastic. Thanks for taking my question just a quick question on Denmark, you mentioned that the revenue impact is likely negligible, but good call outcome spending Bacon just wondering if there was any qualification in terms of margin earnings impact that that you can call out.
Thanks for the question Ken Yeah, we haven't explicitly quantified the the numbers around Finmark I can tell you. It's a very small transaction talented team great product, we think fits strategically very nicely with wherever taking our platform overtime not only provide.
Being automation around financial operations, but shifting towards helping provide insights for customers to run a better business and finmark is going to be a core capability over time as we do that so we're continuing the investment in.
In the team and building out the product platform. They as a standalone business just got to the revenue generating stage, but at our scale. Obviously, it's very small and over time, we will provide more more color once the transaction closes.
Okay, perfect fair enough and then another R.
Martin Van question given that this is kind of the first quarter you guys are broken into.
non-GAAP profitability should we assume the trajectory fairly linear or are there. Some lumpiness seasonality that we should be thinking about what kind of work that our model.
[noise] well, yeah, we provided the color for Q2 and for the fiscal year I would say some of the historical seasonal patterns.
Around the transition from December to March and what happens with spend during that period were expecting to continue that usually has some impact on on our bottom line results as well, but other than that.
You could probably use some of the past patterns to to get to Q3 Q4 numbers.
Okay fantastic Thank God.
Thanks again.
Our next question comes from Daniel <unk>, <unk>, a new a new line is now open. Please go ahead.
Great. Thanks for Squeaky Man, just just a quick one in a clarification point for the customers that you've noticed that are are reducing for them to spend you call that a couple of times and the call. If you look at their usage of AD valorem payment model on a day going backwards.
Just wondering if that's the way that a man.
Cost for themselves I'm, just trying to take think about how that could evolve from the take rate going forward. Thanks.
Thanks, Dan for further question.
We haven't really seen or witnessed that that trend the commentary around the.
Softening spend is more.
Businesses, particularly in discretionary categories spending less but with a very high rate of repeat transactions with their suppliers. So we still see <unk>.
Proximately, 80% of the transactions on our platform are repeat recurring transaction between buyer and supplier, but they may be transacting and a slightly lower dollar value. It's not really something that we've seen influenced that payment types of the distribution of of Ah payments or add.
Alarm across the across the platform, it's more just the absolute absolute spend at this point.
Great. Thanks very much.
Sure.
And we have one more time.
We have time for only one more question on our next question comes from Andrew Oh Shaw S. M B C.
Entering the line is now open. Please go ahead.
Hey, guys. Thanks for squeezing in here.
Renee you've been talking about the unified platform underway and that build.
Being able to go to market with all three of the <unk>.
And now Finmark really bundled in one product how far away are we from that becoming a pure reality and moving just give us an update on how you expect that translate to an impact on the model one way or another.
Sure. Thank you Andrew.
Yeah.
I think about it and kind of different phases steps I mean, the first thing.
To build anything requires one team and we started that process.
And with the acquisitions and then integrating the organizations last winter.
Then it takes kind of one brand look and feel which we just announced and.
And then obviously takes one platform and where we're at right now is that we have the backends talking to each other and they're integrated and that allows us to start developing the customer experience and obviously, Denmark will be on top of this but we we really see that the importance of having one place for any.
Customer to be able to get the value that we see we see that as being really important and we see customers wanting to continue to save time spend less time, managing their financial operations and more time thinking about the inside so we continued to develop and work on that mission to serve millions of businesses and to be their essential financial operations platform. That's some.
Nothing that will continue to develop over the coming intermediate term.
Great sounds like progress.
I know, it's been asked before but maybe I'll ask you then you can slightly different way.
<unk> delivering six straight quarters, a triple digit growth is just continues to impress.
Is there something about the <unk>.
Or next Gen.
Expense management solutions that are accelerating in the current environment and we've heard from your peers.
That are also seeing it's similar kinds of impressive results.
I'd say per us.
We continue to.
Work hard on honing the go to market and have prioritized the active and engaged customers and as we do that we get results like you're seeing and so everybody on the team is really focus on how do we make sure our customers are getting value in using the product and when they do that they put spend on the cards that we have and that drives obviously opportunities for them to manage their <unk>.
Better and so the focus is always going to be on customers and I think what we're seeing is that the solution is early in the market earlier than you would say the core bill experiences, but there is demand and there is plenty of opportunity for us to keep driving that demand across our platform and across the market in March.
Great and the core Bill platform being a great incubator for it as well thank you guys.
Thank you.
Well I just wanted to say thanks, everyone for joining us today Bill kicked off physical 2023, with a great Q1, delivering high growth and non-GAAP profitability, while making investments to position us for the long run. We're excited about the large opportunity we had to automate the teacher of finance for millions of businesses to help them succeed and thanks again for joining us today. Thank you.
This concludes today's cool. Thank you everyone for joining you may now disconnect.