Q2 2024 BILL Holdings Inc Earnings Call

February 8, 2024

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Operator: Holdings Inc. Holdings Inc., www.bradleyhynes.com www.holdingsinc.com Holdings Inc. Good afternoon and welcome to Bill's second quarter fiscal 2024 earnings call. Joining us for today's call is Bill's CEO, Renee Lazar. President and CFO, John Ratig, and VP of Investor Relations, Karen Sansot. With that, I would like to turn the call over to Karen Sansot for an introduction. Care should be taken.

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Speaker Change: Good afternoon, and welcome to Bill second quarter fiscal 'twenty 'twenty four earnings conference call.

Bill: Joining us for today's call is Bill C O when they lose our.

President and CFO, John Rettig, and VP of Investor Relations Karen Samsung.

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

Karen Samsung: Sure.

Karen Sansot: Thank you, Operator. Welcome to Bill's Fiscal Second Quarter 2024 Earnings Conference Call. We issued our earnings press release a short time ago and have furnished the related Form 8K to the SEC. The press release can be found on the Investor Relations section of our website at investor.bill.com.

Thank you operator, welcome to Bill fiscal second quarter 2024 earnings Conference call.

Karen Sansot: 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> Dot com.

Bill O: With me on the call today are enabled <unk>, chairman and CEO, and Sandra Bell and John <unk>, President and CFO.

Karen Sansot: With me on the call today are Rene Blissert, Chairman, CEO, and Founder of Bill, and John Reddick, President and CFO. Before we begin, please remember that during the course of this call, we may make forward-looking statements about the future operations and results of Bill that involve many assumptions, risks, and uncertainties. If any of these risks or uncertainties develop, or if any of the assumptions prove incorrect, actual results could differ materially from those expressed or implied by our forward-looking statements. For additional discussion, please refer to the text in the company's press release issued today and to our periodic reports filed with the SEC, including our most recent annual report on Form 10-K and quarterly reports on Form 10-Q. We disclaim any obligation to update any forward-looking statements.

Bill O: Before we begin please remember that during the course of this call. We may make forward looking statements about the future operations and 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.

Bill O: <unk> by our forward looking statements.

Bill O: For additional discussion 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 reports on Form 10-Q, we disclaim any obligation to update any forward looking statements on today's call we will.

Karen Sansot: On today's call, we will refer to both GAAP and non-GAAP financial measures. Please refer to today's press release for the reconciliation of GAAP to non-GAAP financial performance and additional disclosures regarding these measures. Note that at times during this call, we will discuss bill stand-alone results, which exclude our bill spend and expense management, which was formerly called DIBI, invoice-to-go accounts receivable, and SIN mark financial planning solutions. Now, I'll turn the call over to Renee. Renee?

Bill O: Refer to both GAAP and non-GAAP financial measures. Please refer to today's press release for the reconciliation of GAAP to non-GAAP financial performance and additional disclosures regarding these measures.

Bill O: Note that at times during this call, we will discuss bill Standalone results, which exclude our bill spend and expense management, which was formerly called Debbie and voice to grow accounts receivable and Sinn Mark Financial planning solutions now I will turn the call over to Renee Renee.

Renee Lazar: Thank you, Karen. Good afternoon, everyone. Thank you for joining us today. We delivered strong profitable growth in the second quarter as we continue to advance on our strategy to be the essential financial operations platform for SMBs. In Q2, we grew revenue 22% year-over-year, generated non-gap net income growth of 48% year-over-year, and produced a 23% non-gap net income margin. We achieved a strong combination of growth and profitability in a challenging macro environment as SMBs continue to carefully manage their spend. Our performance demonstrates the strength of our business model, the value of our platform to our customers, and our commitment to deliver profitable growth. These results reinforce our conviction that when the macro environment improves and SMBs start spending for expansion, Bill is well positioned to drive strong growth across our business. The Bill platform serves as the center of financial operations for our customers. At the end of Q2, more than 470,000 businesses used our solution.

Renee: Thank you Karen good afternoon, everyone. Thank you for joining us today.

Renee: We delivered strong profitable growth in the second quarter as we continued to advance on our strategy to be the essential financial operations platform for Smbs.

Renee: In Q2, we grew revenue 22% year over year generated non-GAAP net income growth of 48% year over year and produced the 23% non-GAAP net income margin.

Renee: We achieved a strong combination of growth and profitability in a challenging macro environment as smbs continued to carefully manage their spend.

Renee: Our performance demonstrates the strength of our business model the value of our platform to our customers and our commitment to deliver profitable growth.

Renee: These results reinforce our conviction that when the macro environment improves in F&B start spending for expansion Bill is well positioned to drive strong growth across our business.

Renee: The Bill platform serves as the center of financial operations for our customers.

Renee: At the end of Q2 more than 470000 businesses use our solutions.

Renee Lazar: During the quarter, these businesses completed more than $75 billion in payment volume on our platform. Our scale and experience uniquely position us to continue to redefine how SMBs everywhere automate their financial operations. We are an innovation leader, and we are continually expanding the breadth and depth of our solution. As we do this, my confidence grows about our ability to help SMBs everywhere transform their payments and financial operations. Today, there are millions of SMBs transacting trillions of dollars in payments using manual legacy processes and paper checks. This is terribly inefficient, and it will change.

Renee: During the quarter. These businesses completed more than 75 billion in payment volume on our platform.

Renee: Our scale and experience uniquely positions us to continue to redefine how smbs everywhere automate their financial operations.

Renee: We are the innovation leader and we are continually expanding the breadth and depth of our solutions.

Renee: As we do this my confidence grows about our ability to help smbs everywhere transform their payments and financial operations.

Renee: Today, there are millions of Smbs transacting trillions of dollars of payments using manual legacy processes and paper checks.

Renee: This is terribly inefficient and it will change.

Renee Lazar: Our platform was purpose-built to help SMBs modernize and streamline their financial operations. We hear increasingly about the gains in efficiency, visibility, and financial controls that we provide. In short, we eliminate the friction of doing business.

Renee: Our platform was purpose built to help smbs modernize and streamline their financial operations.

Renee: We hear increasingly about the gains and efficiency visibility and financial controls that we provide.

Renee: In short, we eliminate the friction of doing business.

Renee: An example of the business transforming their operations with our platform as enlightened equipment and ultra light hiking gear company based in Minnesota, Jeff.

Renee Lazar: An example of a business transforming its operations with our platform is Enlightened Equipment, an ultralight hiking gear company based in Minnesota. Jessica Sonek, their Director of Finance, said, and I quote, Bill has been a huge time saver, establishing strong internal controls and generating operational efficiency. Every single payment that runs through any of our bank accounts goes through Bill, from the electric bill and rent to raw material purchases from abroad.

Renee: Sonic the director of Finance said and I quote Bill has been a huge time saver, establishing strong internal controls and generating operational efficiency.

Renee: Every single payment that runs through any of our bank accounts goes through bill.

The electric bill and rent to raw material purchases from abroad.

Renee Lazar: The increased control with the spend and expense capability has been a game changer in terms of budgeting for different departments and managing spend for each vendor. Bill really empowered me to transform the manual and time-consuming financial operations process into something that was simply beautiful and efficient. End quote

Renee: The increase control would spend and expense capability has been a game changer in terms of budgeting for different departments and managing spend for each vendor.

Renee: Bill really empowered me to transform the manual and time consuming financial operations process, and Thats something that was simply beautiful and efficient.

Renee: <unk>.

Renee: Smbs are difficult to reach at scale.

Renee Lazar: S&Bs are difficult to reach at scale. The diverse and broad ecosystem we have developed that enables us to reach them efficiently is a core competitive advantage. We know how to partner and bring this transformative experience to S&Bs at the touch points where they prefer to do business. Our go-to-market ecosystem includes direct sales and our large network, as well as accounting firms and financial institutions who are among an SMB's closest advisors. Bill is trusted by more than 7,000 accounting firms who recommend and use our platform across tens of thousands of clients. We have a successful track record of partnering with accounting firms, which includes having developed a platform that enables them to provide more strategic and operational value-added services to their clients. There are firms now that base their entire practice on client advisory services. Before Bill, this was nearly impossible.

Renee: The diverse and broad ecosystem redeveloped that enables us to reach them efficiently as a core competitive advantage.

Renee: We know how to partner and to bring this transformative experience smbs at the touch points, where they prefer to do business.

Renee: Our go to market ecosystem includes direct sales in our large network as well as accounting firms and financial institutions, who are among smbs closest advisors.

Renee: Bill is trusted by more than 7000, accounting firms, who recommend and use our platform across tens of thousands of clients.

Renee: We have a successful track record of partnering with accounts, which includes having developed a platform that enables them to provide more strategic and operational and value added services to their clients.

Renee: There are firms now that base their entire practice on client advisory services before Bill this was nearly impossible.

Renee Lazar: Our platform empowers accountants with a suite of features to enable collaboration between their staff and clients across multiple workflows. With Bill, accountants help their clients simplify their operations and have more time to focus on growing their business. It's a win-win for all.

Renee: Our platform empowers accounts with a suite of features to enable collaboration between their staff and clients across multiple workflows.

Renee: With Bill accounts help their clients simplify their operations and have more time to focus on growing their business.

Renee: A win win for all.

Renee Lazar: A good example is Highline, an SMB-focused and tech-savvy accounting firm. Matt Gardner, founder and CEO, said, and I quote, combining AP, AR, and spend and expense management into a central hub has been a great change for us. At Hyline, we give our customers a competitive edge by getting them on to best-of-breed cloud tools like Bill. This gives them full operational transparency and 24-7 online access, which modern business owners expect.

Renee: The Good example is highlighted in F&B focus and tech savvy accounting firm.

Renee: Matt Gardner founder and CEO said, and I quote combining AP AR and spend and expense management into a central hub has been a great change for us.

Renee: Hi line, we gave our customers a competitive edge by getting them onto best of breed cloud tools like Bill.

Renee: This gives them full operational transparency and $24 seven online access, which modern business owners expect.

Renee Lazar: Bill allows us to streamline our workflows to increase speed and work quality and focus more time on providing strategic advice to our clients. We also partner with some of the largest financial institutions in the U.S. Similar to accounting firms, financial institutions leverage a white-labeled, embedded version of our platform to help their business banking customers modernize their financial operations. The F.I.

Renee: Bill allows us to streamline our workflows to increase speed and work quality and focus more time on providing strategic advice to our clients.

Renee: We also partner with some of the largest financial institutions in the U S.

Similar to the accounting firms financial institutions leverage a white label embedded version of our platform to help their business banking customers modernize their financial operations.

Renee Lazar: Channel positions us to tap large numbers of S&Bs as they transform their financial operations via their online banking experience. Traditionally, most FI partners have offered just ACH and checks to their customers through our platform. Given our payments expertise, large network, and extensive experience in driving payment adoption, we are making early progress in bringing our ad valorem offerings to our FI partners. For instance, six financial institution partners have started leveraging more of our payment modalities, such as virtual card, instant transfer, and pay-by-card. Regarding Bank of America, a couple of quarters ago, I discussed that given our success in serving B of A's new small business customers, we were now working together to extend our solution to serve their installed base of SMB customers.

Renee: <unk> channel positions us to tap large numbers of smbs as they transform their financial operations via their online banking experience.

Renee: Traditionally most EFI partners have offered just Acs and checks to their customers through our platform.

Renee: Given our payments expertise large networks and extensive experience in driving payment adoption, we are making early progress in bringing our AD valorem offerings to our Fi partners.

Renee: <unk> financial institution partners have started leveraging more of our payment modalities, such as virtual card instant transfer and payback car.

Renee: Regarding bank of America, a couple of quarters ago, I discussed that given our success in serving bofa as new small business customers.

Renee: We were now working together to extend our solution to serve their installed base of SMB customers.

Renee Lazar: Since then, we have been working with them to define and build the experience needed to reach their existing customers. Separate from this effort, the bank recently shared with us that they have been evolving their firm-wide payment strategy, and that evolution will impact the solutions they offer to their existing customers. We will continue to work side by side with the bank to determine how to best leverage what we have currently deployed to support their broader payment strategy. We are in the early days of understanding the impact on our expansion opportunities with the bank.

Renee: Since then we have been working with them to define and build the experience needed to reach their existing customers.

Renee: Separate from this effort the bank recently shared with us that they had been evolving their firm wide payment strategy and that evolution will impact the solutions they offer to their existing customers.

Renee: We will continue to work side by side with the bank to determine how to best leverage what we have currently deployed to support their broader payment strategy.

Renee: We are in the early days of understanding the impact on our expansion opportunity with the bank.

Renee Lazar: Our experience serving nearly 500,000 businesses, more than 7,000 accounting firms, and leading financial institutions in the U.S. gives us strong foundational competencies for extending our reach through more embedded offerings. The core competencies underneath this level of trust are our flexible ways to integrate with software systems, our payment risk management and regulatory expertise, our large data asset and network, and our ability to serve businesses and transact payments at scale. We move 1% of GDP and are licensed to move money in all 50 states and Canada.

Renee: Our experience serving nearly 500000 businesses more than 7000 accounting firms and leading financial institutions in the U S gives us strong foundational competencies for extending our reach through more embedded offerings.

Renee: The core competencies underneath this level of trust, our flexible ways to integrate with software systems are payment risk management and regulatory expertise, our large data asset and network and our ability to serve businesses and transact payments at scale.

Renee: We moved 1% of GDP and our license to move money in all 50 States and Canada. This set of foundational capabilities and expertise places us at the center of the convergence of software and payments and positions us well to extend our capabilities to other software companies.

Renee Lazar: This set of foundational capabilities and expertise places us at the center of the convergence of software and payments and positions us well to extend our capabilities to other software companies. As the market unfolds, we see opportunities to expand our ecosystem to include embedded offerings beyond the account and FI channels. The convergence of software and payments is increasing the needs for more embedded financial operations.

As the market unfolds, we see opportunities to expand our ecosystem to include embedded offerings beyond the account and <unk> channels.

Renee: The convergence of software and payments is increasing the need for more embedded financial operations.

Renee Lazar: We have built our platform and ecosystem to support partners across the S&B landscape. We believe our Agile platform model incorporates various capabilities into our partner solutions and can accelerate this convergence. In addition to our financial institution and accounting embedded solutions, we have enabled API capabilities with embedded solutions for a number of different use cases. Hundreds of developers have created integrations using our APIs to support thousands of customers. For example, an accounting firm leveraged our API to automatically create email and collect invoices for over 1,000 clients using the data from their practice management software. The potential use cases are vast, and we are just beginning to increase our focus in this area.

Renee: We have built our platform and ecosystem to support partners across the SMB landscape. We believe our agile platform model incorporates various capabilities into our partner solutions and can accelerate the convergence.

Renee: In addition to our financial institution and accounting embedded solutions. We also have enabled API capabilities with embedded solutions for a number of different use cases.

Renee: Hundreds of developers have created integrations, using our API to support thousands of customers.

Renee: For example, an accounting firm leveraged our API to automatically create E mail and collect invoices forever 1000 firm clients using the data from their practice management software.

Renee: The potential use cases are vast and we are just beginning to increase focus in this area.

Renee Lazar: We are excited about the scale of the market opportunity we are going after and our position for the next chapter in Bill's growth. In preparing for the road ahead, we are doubling down on our core strengths, evolving our strategy, expanding our offerings, and scaling operationally. As part of our focus, we have made some hard choices. In December, we made the very difficult decision to right-size our organization by reducing our workforce by 15% and closing our Sydney office.

Renee: We are excited about the scale of the market opportunity, we're going after and our position for the next chapter of <unk> growth.

Renee: In preparing for the road ahead, we are doubling down on our core strengths evolving our strategy expanding our offerings and scaling operationally as part of our focus we have made some hard choices.

Renee: In December we made the very difficult decision to rightsize, our organization by reducing our workforce by 15% and closing our Sydney office.

Renee Lazar: We made this decision in order to streamline our operations and further balance growth and profitability while we concentrate resources on our most important priorities. As we build the foundation for our next phase of growth, I have asked John to take on broader operational responsibilities in his new role as President and CFO. The senior team under John's leadership recently completed a thorough assessment of our business operations and growth priorities, and I would now pass the call to John to provide an update on this important effort. Thanks, Renee.

Renee: We made this decision in order to streamline our operations and further balanced growth and profitability, while we concentrate resources on our most important priorities.

Renee: As we build the foundation for our next phase of growth I ask John to take on broader operational responsibilities in his new role as president and CFO.

Renee: The senior team under John's leadership recently completed a thorough assessment of our business operations and growth priorities and I will now pass the call to John to provide an update on this important effort.

John: Thanks, Renee today, I will start with an overview of our key operational focus areas over the next 12 to 18 months and then discuss our financial results and outlook.

John Coffey: Today, I'll start with an overview of our key operational focus areas over the next 12 to 18 months and then discuss our financial results and outlook. The market we are pursuing is large and evolving rapidly. With our wide moat and talented team of employees, we are well positioned to capture the market as it matures and for Bill to become the essential financial operations platform for SMBs. In my new role as president, the senior team and I recently performed an assessment of our capabilities and readiness to scale our business in preparation for our next phase of growth. We identified several key focus areas to support execution on our top priorities that we outlined at the beginning of the fiscal year, which I'll briefly recap.

John: The market, we are pursuing is large and evolving rapidly with our wide moat and talented team of employees, we are well positioned to capture the market as it matures and for bill to become the essential financial operations platform for Smbs.

Renee: In my new role as President and the senior team and I recently performed an assessment of our capabilities and readiness to scale our business in preparation for our next phase of growth.

Renee: We identified several key focus areas to support execution on our top priorities that we outlined at the beginning of the fiscal year, which I will briefly recap.

John Coffey: Our first priority for Fiscal 2024 is to drive adoption of our integrated financial operations platform. We launched our new integrated platform last fall, which brought together our Bill AP and Divi spend and expense solutions to create a unified customer experience. Initial customer feedback has been positive, and we've also identified incremental improvements that will help us scale further. For context, in support of this launch, we revised our go-to-market activities around the new solution and made many changes to our direct sales process, rebranded spend and expense from Divvy to bill, and revised customer onboarding flows. All these moving parts created inefficiencies in our acquisition funnel, so we continued the pullback on marketing spend that we referenced last quarter. This had an impact on acquisition and attrition, mainly for smaller, lower credit quality prospects, and led to lower net new customers for the quarter compared to historical averages.

Renee: Our first priority for fiscal 2024 is to drive adoption of our integrated financial operations platform.

Renee: We launched our new integrated platform last fall, which brought together, our bill AP and <unk> spend and expense solutions to create a unified customer experience initial.

Renee: Initial customer feedback has been positive and we've also identified incremental improvements that will help us scale further.

Renee: For context in support of this launch we revised our go to market activities around the new solution.

Renee: Made many changes to our direct sales motion rebranded spend and expense from Davita build and revised customer Onboarding flows. All these moving parts created inefficiencies in our acquisition funnel. So we continue to pull back on marketing spend that we referenced last quarter.

Renee: This had an impact on acquisition and attrition mainly for smaller lower credit quality prospects and led to lower net new customers for the quarter compared to historical averages.

Renee: We expect these trends to continue in the near term.

John Coffey: We expect these trends to continue in the near term. As a result, we are adapting our go-to-market approach and processes to offer individual or unified solutions as appropriate to accelerate the pace of customer adoption of our solutions. Over time, we expect the unified experience will benefit all of our customers. But in the meantime, we will deliver to customers the immediate solutions they need most.

Renee: As a result, we are adapting our go to market approach and processes to offer individual or unified solutions as appropriate to accelerate the pace of customer adoption of our solutions.

Renee: Over time, we expect the unified experience will benefit all of our customers, but in the meantime, we will deliver to customers. The immediate solutions. They need. Most additionally, we are prioritizing our go to market towards businesses with a higher propensity to spend which should translate into increasing penetration within higher <unk> customer segments.

John Coffey: Additionally, we are prioritizing our go-to-market strategy towards businesses with a higher propensity to spend, which should translate into increasing penetration within higher ARPU customer segments. Our second priority is to expand our ecosystem by bringing more innovations to our partners and attracting new partners. In support of this priority, we are continuing to grow our footprint with accountants and financial institution partners and invest further in our embedded strategy. Accountants have been at the center of our ecosystem strategy to reach SMBs from the very beginning. And we are focused on continuing to expand our reach within the industry. We added approximately 600 accounting firms in the first half of fiscal 2024.

Renee: Our second priority is to expand our ecosystem by bringing more innovation to our partners and attracting new partners.

Renee: In support of this priority, we are continuing to grow our footprint with accountants and financial institution partners and invest further in our embedded strategy.

Renee: The counts have been at the center of our ecosystem strategy to reach Smbs from the very beginning and we are focused on continuing to expand our reach within the industry. We.

Renee: We added approximately 600 accounting firms within the first half of fiscal 2024.

John Coffey: As Renee discussed, we are seeing the convergence between payments and software and the emergence of embedded finance play out as we receive early inbound interest from other software companies for our AP, AR, and card solutions. Leveraging our deep expertise and architecting embedded solutions to serve and expand the ecosystem, we are investing in our platform to create new ways for our capabilities to be leveraged by third parties who serve SMBs. Our third priority is to enrich our payment experiences and drive the penetration of our ad valorem solutions.

Renee: As <unk> discussed we are seeing the convergence between payments and software and the emergence of embedded finance play out as we receive early inbound interest from other software companies for our AP AR and card solutions.

Renee: Leveraging our deep expertise in architecture embedded solutions to serve and expand the ecosystem. We are investing in our platform to create new ways for our capabilities to be leveraged by third parties, who serve smbs.

Renee: Our third priority is to enrich our payment experiences and drive penetration of our AD valorem solutions.

John Coffey: To this end, we are doubling down on our investments in card offerings and international payments. As we discussed on our last call, we continue to operate in an environment where customers and their suppliers are increasingly focused on costs and are being more selective with their payment choices to minimize costs. As expected, this translated into a slight decline in transaction monetization in the second quarter as a result of muted payment volume growth for some of our highest monetizing products. Our card portfolio today includes virtual cards and our Bill-Dibby ChargeCard. To capture more wallet share and drive payment adoption, we are improving the automation and reconciliation features of our virtual card supplier experience and creating a dedicated sales channel to serve large customers and suppliers in our network. In addition, we are beginning to roll out a unique card experience that enables AP customers to use a bill divvy card for traditional AP or offline payments.

Renee: To this end, we are doubling down on our investments for card offerings and international payments.

Renee: As we discussed on our last call. We continue to operate in an environment, where customers and their suppliers are increasingly focused on cost and are being more selective with their payment choices to minimize cost.

Renee: As expected this translated into a slight decline in transaction monetization in the second quarter as a result of muted payment volume growth for some of our highest monetizing products.

Renee: Our current portfolio today includes virtual cards, and our ability to recharge Kurt to capture more wallet share and drive payment adoption. We are improving the automation and reconciliation features of our virtual card supplier experience and creating a dedicated sales motion to serve large customers and suppliers in our network.

Renee: In addition, we are beginning to rollout a unique card experience that enables customers to use a bill debit card for traditional AP or offline payments.

John Coffey: We believe these actions will support expanding payment volumes on card offerings and drive improved monetization. We are also enhancing and scaling our newer AdWarm offerings, such as Instant Transfer and Invoice Finance. We believe our portfolio approach provides choice and flexibility to SMBs and our network members and creates balance and growth for our business. Turning to international payments, in order to capture more offline payments and drive further FX payment adoption, we are planning to introduce our enhanced international payment supplier experience to more countries and increase payment speed by leveraging local payment routes. Recently, the strength of the U.S. dollar has negatively impacted adoption of our FX payments.

Renee: We believe these actions will support expanding payment volumes on card offerings and drive improved monetization.

We are also enhancing and scaling our newer AD valorem offerings, such as instant transfer and invoice financing. We believe our portfolio approach provides choice and flexibility to Smbs and our network members increased balancing growth to our business.

Renee: Turning to international payments in order to capture more offline payments and drive further FX payment adoption, we are planning to introduce our enhanced international payment supplier experience to more countries and increased payment speed by leveraging local payment routes <unk>.

Renee: Recently, the strength of the U S. Dollar has negatively impacted adoption of our FX payments.

John Coffey: Given our scale, we are able to optimize our costs, which will allow us to provide more attractive FX pricing. We believe these actions to adapt our go-to-market approach, grow our footprint with partners, invest in our embedded strategy, and double down on our card offerings and international payments are the right focus areas for Bill. We expect to strengthen our core capabilities and enhance the foundation of our business, which will pave the way for the next phase of growth. Now, a discussion of our second quarter fiscal 2024 financial results. In Q2, we delivered strong, profitable growth. Total revenue for Q2 was $318 million, up 22% year-over-year.

Renee: Given our scale, we are able to optimize our costs, which will allow us to provide more attractive FX pricing.

Renee: We believe these actions to adapt our go to market approach grow our footprint with partners and invest in our amended strategy and double down on our card offerings and international payments are the right focus areas for bill.

Renee: We expect to strengthen our core capabilities and enhance the foundation of our business, which will pave the way for the next phase of growth.

Renee: Now turning to a discussion of our second quarter fiscal 2024 financial results.

Renee: In Q2, we delivered strong profitable growth.

Total revenue for Q2 was $318 million up 22% year over year.

John Coffey: Core revenue, which includes subscription and transaction revenue, was $275 million, representing growth of 19% year-over-year. Non-GAAP gross margin was 86%, and non-GAAP net income was $73 million, growth of 48% year-over-year. Non-GAAP net income margin was 23% of revenue and expanded four percentage points year over year. Pre-cash flow was $74 million, reflecting a 23% margin.

Renee: Core revenue, which includes subscription and transaction revenue was $275 million representing growth of 19% year over year.

Renee: non-GAAP gross margin was 86% and non-GAAP net income was 73 million growth of 48% year over year.

Renee: non-GAAP net income margin was 23% of revenue and expanded four percentage points year over year.

Renee: Free cash flow was $74 million, reflecting a 23% margin.

John Coffey: Importantly, we were non-GAAP operating income profitable, excluding the benefit of float revenue. Now, I'd like to dive deeper on revenue and key revenue drivers. Subscription revenue in Q2 was $63 million, up 3% year-over-year, and transaction revenue was $212 million, up 25% year-over-year. This growth in transaction revenue was driven by overall payment volume growth and higher ad valorem payment volume. Total payment volume, or TPV, for Bill Consolidated, which also includes card processing volume, was $75 billion in Q2, reflecting 11% year-over-year growth.

Renee: Importantly, we were non-GAAP operating income profitable, excluding the benefit of float revenue.

Speaker Change: Now I'd like to dive deeper on revenue and key revenue drivers.

Speaker Change: Subscription revenue in Q2 was $63 million up 3% year over year and transaction revenue was $212 million up 25% year over year.

Speaker Change: This growth in transaction revenue was driven by overall payment volume growth and higher AD valorem payment volume.

Speaker Change: Total payment volume or <unk> for Bill consolidated which also includes card processing volume was $75 billion in Q2, reflecting 11% year over year growth.

John Coffey: Bill's stand-alone TPB growth improved in the second quarter, representing an increase of 10% year-over-year compared to 7% in the first quarter, which was above our expectations. However, it's too early to call a trough in B2B spend, and we expect the current interest rate environment will continue to depress overall spend growth. Bill's spend and expense card payment volume was $4.2 billion in Q2 and increased 28% year-over-year. Turning to customer acquisition, Bill's stand-alone customers increased 18% year-over-year. Net new ads for the quarter were 10,100, including 3,900 net ads in the direct and accountant channels and 6,200 in the FI channel.

Speaker Change: Bill Standalone TPB growth improved in the second quarter, representing an increase of 10% year over year compared to 7% in the first quarter, which was above our expectations.

Speaker Change: It's too early to call a trough and BW spend and we expect the current interest rate environment will continue to depress overall spend growth.

Speaker Change: Bill spend and expense card payment volume was $4 2 billion in Q2 and increased 28% year over year.

Speaker Change: Turning to customer acquisition.

Speaker Change: <unk> standalone customers increased 18% year over year net new adds for the quarter were 10100, including 3900 net adds in the direct and accounting channels and 6200 in the Fi channel.

John Coffey: This excludes attrition related to the sunset of Intuit's Simple Bill Pay solution, which was approximately 3,800 in Q2. To date, we have retained the majority of the customers who used Simple Bill Pay prior to the payment integration being discontinued. The number of bill spend and expense spending businesses grew 28% year over year, and net new ads for the quarter were 900. In addition to the items mentioned earlier, we also took further action to manage our credit exposure and tighten credit for smaller businesses and prospects, which impacted both existing and new customer acquisitions. Float revenue was $44 million, an increase of 50% year-over-year. Our yield on FBO funds was 490 basis points in the quarter.

Speaker Change: This excludes attrition related to the sunset of Intuit simple Bill pay solution, which was approximately 3800 in Q2 to.

Speaker Change: To date, we have retained the majority of the customers who used simple bill pay prior to the payment integration being sunset.

Speaker Change: The number of bill spend and expense spending businesses grew 28% year over year and net new adds for the quarter were 900.

Speaker Change: In addition to the items mentioned earlier, we also took further action to manage our credit exposure and tightened credit for smaller businesses and prospects, which impacted both existing and new customer acquisition.

Speaker Change: Float revenue was $44 million, an increase of 50% year over year, our yield on FPL funds was 490 basis points in the quarter.

John Coffey: Now turning to a discussion of our Q2 Profitability Performance. Non-GAAP gross margin was 86%, which was above our target range due to favorable float revenue. As previously discussed, we expect our non-GAAP gross margin to moderate to the low to mid-80s as our payment mix evolves and our float revenue declines with lower interest rates later in this economic cycle. Non-GAAP operating expenses were $229 million, flat sequentially.

Speaker Change: Now turning to a discussion of our Q2 profitability performance.

Speaker Change: non-GAAP gross margin was 86%, which was above our target range due to favorable float revenue.

Speaker Change: As previously discussed we expect our non-GAAP gross margin to moderate to the low to mid eighties, as our payment mix evolves and our float revenue declines with lower interest rates later in this economic cycle.

Speaker Change: non-GAAP operating expenses were $229 million flat sequentially rewards expenses, which are included in sales and marketing represented 49% of spend and expense card revenue.

John Coffey: Rewards expenses, which are included in sales and marketing, represented 49% of spend and expense card revenue. G&A expenses remain slightly elevated due primarily to an increase in our provision for credit losses given the macro environment. Non-GAAP operating income was $44 million, or 14% of revenue. Non-GAAP net income was $73 million, or 23% of revenue, up 48% year over year.

Speaker Change: G&A expenses remained slightly elevated due primarily to an increase in our provision for credit losses, given the macro environment.

Speaker Change: non-GAAP operating income was $44 million or 14% of revenue.

Speaker Change: non-GAAP net income was $73 million or 23% of revenue up 48% year over year.

John Coffey: Pre-cash flow grew 56% to $74 million for a free cash flow margin of 23%. Before turning to guidance, I want to provide a bit more context regarding our recent organizational changes. As Renee noted, in December, we made the difficult decision to reduce our workforce by nearly 400 employees and close our Sydney office as we right-size our organization, enhance profitability, and reallocate resources towards the most impactful initiatives. In connection with this reduction in force, we incurred $25 million of restructuring charges in Q2. These charges, which are excluded from our non-GAAP results, consisted primarily of cash expenditures for severance payments, employee benefits, and related costs, in addition to non-cash charges for stock-based compensation expenses.

Speaker Change: Free cash flow grew 56% to $74 million for a free cash flow margin of 23%.

Speaker Change: Before turning to guidance I want to provide a bit more context regarding our recent organizational changes.

Speaker Change: As Rene noted in December we made the difficult decision to reduce our workforce by nearly 400 employees and close our Sydney office as we right size, our organization enhanced profitability and reallocate resources towards the most impactful initiatives.

Speaker Change: In connection with this reduction in force, we incurred $25 million of restructuring charges in Q2.

Speaker Change: These charges, which are excluded from our non-GAAP results consisted primarily of cash expenditures for severance payments employee benefits and related costs. In addition to noncash charges for stock based compensation expenses.

John Coffey: These actions, Mark, are enhanced efforts to drive efficient and profitable growth. Organizationally, we are raising the bar on the ROI of the initiatives we are investing in and proactively deprioritizing lower impact projects. We are adjusting our level of investments with the goal to generate more operating profit, excluding the benefit of float revenue.

Speaker Change: These actions Mark our enhanced efforts in driving efficient and profitable growth organization wide. We are raising the bar on the ROI of the initiatives, we are investing behind and proactively de prioritizing lower impact projects. We are adjusting our level of investments with the goal to generate more operating profit excluding the benefit of float revenue.

John Coffey: We believe the tough choices and prioritization decisions we are making today will make Bill a stronger company in the future. Now, turning to our outlook. While SMB spending trends showed an early sign of improvement in Q2, we are looking for more consistent signals of spend growth recovery. Taking this into account, we expect bill standalone total payment volume for Q3 to be up roughly 10% year-over-year and for fiscal 2024 to increase approximately 7 to 8% year-over-year. Now turning to our financial outlook, for fiscal Q3, we expect total revenue to be in the range of $299 to $309 million, which reflects 10% to 13% year-over-year growth. We expect float revenue to be $36 million in Q3, which assumes our yield on FBO funds to be approximately 450 basis points, which takes into consideration a seasonal FBO balance decline and a lower-yielding portfolio mix.

Speaker Change: We believe the tough choices and prioritization decisions, we are making today will make build a stronger company in the future.

Speaker Change: Now turning to our outlook.

Speaker Change: While SMB spending trend showed an early sign of improvement in Q2, we are looking for more consistent signals of spend growth recovery.

Speaker Change: Taking this into account, we expect bill Standalone total payment volume for Q3 to be up roughly 10% year over year and for fiscal 2024 to increase approximately 7% to 8% year over year.

Speaker Change: Now turning to our financial outlook for fiscal Q3, we expect total revenue to be in the range of 299% to $309 million, which reflects 10% to 13% year over year growth, we expect float revenue to be $36 million in Q3, which assumes our yield on FBR funds to be approximately 450 basis points.

Speaker Change: <unk>, which takes into consideration a seasonal <unk> balanced decline and a lower yielding portfolio mix.

John Coffey: On the bottom line, for Q3, we expect to report non-GAAP net income in the range of $56 to $66 million and non-GAAP net income per diluted share in the range of $0.48 to $0.57 based on a share count of 116.1 million diluted weighted average shares outstanding. Additionally, for Q3, we expect other income, net of other expenses, or OIE, to be $24 million. We expect stock-based compensation expenses to be approximately $65 million in Q3, and we expect capital expenditures of approximately $7 to $9 million.

Speaker Change: On the bottom line for Q3, we expect to report non-GAAP net income in the range of 56 to 66 million and non-GAAP net income per diluted share in the range of 48 to <unk> 57.

Speaker Change: Based on a share count of $116 1 million diluted weighted average shares outstanding.

Speaker Change: For Q3, we expect other income net of other expenses or E to be $24 million, we expect stock based compensation expenses to be approximately $65 million in Q3, and we expect capital expenditures of approximately $7 million to $9 million move.

John Coffey: Moving on to full-year guidance, for fiscal 2024, we expect total revenue to be in the range of $1,226,000,000 to $1,251,000,000, which represents 16 to 18% year-over-year growth. We expect float revenue to be 151 million in fiscal 2024, assuming a yield on FBO funds of 450 basis points, which reflects our assumption that interest rates will begin to decline in Q4. We expect non-GAAP net income for fiscal 2024 in the range of $245 to $270 million and non-GAAP net income per diluted share to be $2.09 to $2.31 based on a share count of 117 million diluted In addition, for fiscal 2024, we expect OIE to be approximately $107 million, up approximately $11 million from our estimate last quarter, as a result of a reclassification of off-balance sheet financing assumptions. We expect stock-based compensation expenses of approximately $260 million, and capital expenditures to be approximately $26 to $30 million for the full year.

Speaker Change: Moving on to full year guidance for fiscal 2024, we expect total revenue to be in the range of $1 billion $226 million to $1 billion 251 million, which represents 16% to 18% year over year growth.

Speaker Change: We expect float revenue to be $151 million in fiscal 2024, assuming a yield on FPL funds of 450 basis points, which reflects our assumption that interest rates will begin to decline in Q4.

Speaker Change: We expect non-GAAP net income for fiscal 2024 in the range of 245 million to $270 million and non-GAAP net income per diluted share to be $2 nine to.

Speaker Change: To $2 31.

Speaker Change: Based on a share count of $117 million diluted weighted average shares outstanding.

Speaker Change: In addition for fiscal 2024, we expect <unk> to be approximately $107 million up approximately $11 million from our estimate last quarter as a result of a reclassification of off balance sheet financing assumptions.

Speaker Change: We expect stock based compensation expenses of approximately $260 million and capital expenditures to be approximately $26 million to $30 million for the full year.

Speaker Change: I will now pass the call back to Rene for closing remarks.

Speaker Change: Thank you John.

Rene: This quarter was going to be challenging given the macro environment, our platform and team delivered a strong quarter with profitable growth and significant scale.

Rene: The work we do every day is focused on taking the complexity and guesswork out for Smbs as they manage their financial back office with these results. We know we are closer to our vision for the future our financial operations as simple and powerful central hub built on our enhanced payment infrastructure and powered by automation and AI.

Renee Lazar: I will now pass the call back to Renee for her closing remarks. Thank you, John. We knew this quarter was going to be challenging, given the macro environment.

Renee Lazar: Our platform and team delivered a strong quarter with profitable growth and significant scale. The work we do every day is focused on taking the complexity and guesswork out of the equation for SMBs as they manage their financial back office. With these results, we know we are closer to our vision for the future of financial operations, a simple and powerful central hub built on our enhanced payment infrastructure, empowered by automation and AI. We have many growth drivers and are tightly aligned to bring that blueprint into reality. These growth drivers will position as macro conditions improve and B2B spend rebounds.

Rene: We have many growth drivers and are tightly aligned to bring that blueprint into reality these growth drivers position as well as macro conditions improve and <unk> spend rebounds I'd.

Rene: I'd like to thank our customers and partners for the trust they place in US I'd also like to thank the bill team for their focused execution and commitment to serving smbs.

Speaker Change: Operator, we are now ready to take questions.

Speaker Change: Thank you.

Speaker Change: If you would like to ask a question. Please press star followed by one on your telephone keypad.

Speaker Change: Chairman with your question Press Star followed by <unk>.

Operator: I'd like to thank our customers and partners for the trust they place in us. I'd also like to thank the Build team for their focused execution and commitment to serving SMBs. Operator, we are now ready to take questions. Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. To remove your question, press star followed by one.

Speaker Change: Again to ask a question press star one.

Speaker Change: A reminder, if you are using a speakerphone. Please pick up your handset before asking your question.

Speaker Change: Yeah.

Speaker Change: Our first question today comes from Brent <unk> with Piper Sandler.

Brent: Please proceed.

Brent: Thank you and good afternoon.

Brent: You are certainly encouraging here to see spend growth for Smbs pick up after a two year slowdown my question was really around expectations when we trough John.

Brent Bracelin: Again, to ask a question, press star 1. As a reminder, if you're using a speaker, please pick up your handset before asking your question. Our first question today comes from Brent Bracelin with Piper Sandler. Please proceed. Thank you. And good afternoon.

Brent: The guide implies here slowed down to 12% revenue growth in March implied 5% revenue growth in the December quarter. Do you think that December quarter is is really the trough from a planning standpoint, and Renee on a similar vein can you talk about maybe what are the one or two levers.

John Coffey: Certainly encouraging here to see spend growth for SMBs pick up after a two-year slowdown. But my question is really around expectations when we get through this. John, the guide implies here that slow down to 12% revenue growth in March and implied 5% revenue growth in the December quarter. Do you think that the December quarter is really the trough from a planning standpoint? And Rene, on a similar vein, can you talk about maybe what are the one or two levers that could accelerate growth exiting this year going into fiscal 25? Thanks, Brent.

Brent: It could reaccelerate growth.

Brent: Exiting this year going into fiscal 'twenty five.

Renee: Yes, Thanks, Brent I'll take the first part of the question.

Renee: In the end, we think are conservative framework is warranted given the signs that we've seen so far in this macro environment.

John Coffey: I'll take the first part of the question. In the end, we think a conservative framework is warranted, given the signs that we've seen so far in this macro environment, that the TPV results in the second quarter were ahead of our expectations, which is encouraging, but it feels a little bit early to suggest that this is an expansion from here, so we're expecting some choppiness ahead. Our estimates for the rest of the year suggest that, where we still have muted TPV growth and in an environment where we have short-term limited expansion on monetization, we put all those things together and feel like for the rest of this year, it's appropriate to have a somewhat more conservative approach. Hey, Brent.

Renee: <unk> results in the second quarter were ahead of our expectations, which is encouraging but it feels a little bit early to <unk>.

Renee: Suggests that its expansion from here. So we're expecting some some choppiness ahead, our estimates for the rest of the year suggest that where we have still muted TPB growth in an environment, where we have short term.

Renee: Limited expansion on monetization, we put all those things together and feel like the rest of this year.

Renee: It's appropriate to have a somewhat more conservative approach.

Renee: Hey, Brent Thanks for the question.

Renee Lazar: Thanks for the question. We've got three key priorities that we're working on right now that we'll definitely carry out into FY25. The three priorities are driving adoption across our integrated platform, expanding our ecosystem, and enhancing the payment experiences. And so when we think about driving adoption, there are a lot of things that we pulled together in the last year. We've created one product, one organization, and one brand, and we are adapting our go-to-market strategy to really take advantage of all those things as we go into the customer that we serve. And so that's the top area of focus for the team right now.

We've got three key priorities that we're working on right now that will definitely carry out into FY 'twenty five ESG priorities are driving adoption across our integrated platform, expanding our ecosystem and enhancing that payment experiences and so when we think about driving adoption. There has been a lot of things that we've pulled together in the last year we.

Renee: We've created one product one organization and one brand and we are adapting our go to market to really take advantage of all of those things as we go.

The customer.

Renee: We serve and so thats the top area of focus for the team right now.

Renee Lazar: When we think about expanding the ecosystem, we referenced in our prepared remarks the indications that we're seeing in the market for an embedded solution across multiple different types of software providers that reach SMBs. So we're seeing increased interest. We have capabilities that we've built over the last 10 years serving financial institutions, embedding our solutions inside of the financial institutions and our 7,000 accounting partners across the country.

Renee: When you think about expanding the ecosystem, we referenced on our prepared remarks.

Renee: Indications that we're seeing in the market for an <unk> solution across multiple different types of software providers.

Renee: At reach Smbs. So we're seeing increased interest we have capabilities that we've built over the last 10 years, serving financial institutions embedding our solutions inside of the financial institutions, and our 7000 accounting partners across the country and we're leveraging that capability to extend the Apis that we have to really create embedded solutions.

Renee Lazar: And we're leveraging that capability to extend the APIs that we have to really create embedded solutions everywhere when it comes to financial operations. So we think that's something that can start to drive opportunities in FY25 and, obviously, into the future. And something we've been working on since we started launching our Avalor and Payment products is really just continuing to enhance those experiences. And what we've seen in the last maybe quarter or so is the opportunity to really focus on supplier experiences and how do we drive the suppliers to use and adopt and have more value creation from the experience they have with Bill. And so the teams are working hard to do that so that we can continue to drive adoption from suppliers.

Renee: Where when it comes to financial operations. So we think thats something that can start to drive opportunities in FY 'twenty, five and obviously into the future and something we've been working on since we started launching our Avalon payment products is really just continuing to enhance those experiences and what we've seen in the last maybe quarter or so as the.

Renee: Opportunity to really focus on supplier experiences and how do we drive the suppliers to use and adopt and have more value.

Renee: Creation from the experience they have with bill and so the teams are working hard on doing that so that we can continue to drive adoption from suppliers. We are also continuing to drive and added capabilities across our platform. The ability that we've always focused on is giving our customers choice in how they fund their payments and choice in how they make their pain.

Renee Lazar: We are also continuing to drive and add capabilities across our platform. The capability that we've always focused on is giving our customers choice in how they fund their payments and choice in how they make their payments. And that's true for both our customers and their suppliers. And so some of the capabilities that we have been working on and driving are really around that type of capability where, for example, invoice financing is something that we see suppliers want. We see the ability of our customers to be able to spend on a card is something that's important to them. So lots of drivers to drive the business forward, pretty comfortable and excited about all the opportunities that we have in front of us. Thank you, Brett. Very helpful. Thank you. Our next question today comes from Andrew Schmidt with Citigroup. Hey, Renee.

Renee: And that's true for both our customers and their suppliers and so some of the capabilities that we have been working on and driving are really around that type of that type of capability, where for example, invoice financing is something that we see suppliers, what we see the ability of our customers to be able to spend on our card is.

Renee: Something that's important to them so lots of drivers to drive the business forward pretty comfortable and excited about all the opportunity that we haven't front of us.

Speaker Change: Hey, Brett.

Brett: Thank you.

Brett: Our next question today comes from Andrew Schmidt with Citigroup. Please proceed.

Brett: Yes.

Andrew Schmidt: Hey, John. Thanks for taking my questions. I want to dig in on the take rate trajectory a little bit here. I'm curious what you're seeing into the March quarter in terms of just management of payment acceptance costs and how you're thinking about just, I always think the overall take rate should trend from here. Thanks a lot, guys.

Brett: Sure.

Andrew Schmidt: Hey, Renee Hey, John Thanks for taking my questions I wanted to dig in on the take rate trajectory a little bit here I'm curious, what you're seeing into the March quarter in terms of just the math.

Speaker Change: Management of payment acceptance costs and.

Speaker Change: And how youre thinking about just.

Speaker Change: How we should think the overall take rate should trend from here. Thanks, a lot guys.

John Coffey: Thanks, Andrew, for the question. We continue to operate in an environment where it's clear that customers and their suppliers are increasingly focused on costs and are being more selective with payment choices, really with an eye toward minimizing costs. And that's a trend that we spoke about previously. It's one that I think has put some pressure on increasing volumes across some of our higher monetizing products like virtual cards and FX payments and things like that. So those trends have continued, albeit less pervasive in the second quarter than perhaps we anticipated, a little bit ahead of our expectations.

John: Thanks, Andrew for the question, we continue to operate in an environment, where it's clear that customers and their suppliers are increasingly focused on costs and are being more selective with with payment choices really with an eye towards minimizing costs and thats a trend that we spoke about.

John: Previously, it's one that.

John: I think there has put some pressure on increasing volumes across some of our higher monetizing products like virtual cards and <unk>.

John: <unk> payments and things like that so those trends have continued albeit.

John: Less pervasive in the second quarter than perhaps we anticipated.

John: A little bit ahead of our expectations and I'd say some of the actions that.

John Coffey: And I'd say some of the actions that we're taking to improve product experiences, increase payment timing and speed, as Renee suggested, are starting to have a positive impact. So I would say that's, I think we're set up well. Our prior expectations about being able to make progress in this fiscal year continue to be what we believe, and we'll keep rolling out product enhancements that we think will have a positive impact on ad floor and volumes throughout the rest of the fiscal year. Thank you so much for that. And then if I could ask a question just on the distribution Strategy, Renee, I think you mentioned API access and embedded finance, for lack of a better word, embedding bills and third-party software, et cetera. Could you talk about how that might evolve and just how that might augment your current skills? Anything there would be helpful.

John: We are taking to improve product experiences increase payment timing and speed as Renee suggested are starting to have a positive impact.

John: So I would say that I think we're set up well.

John: Our prior expectations about being able to make progress in this fiscal year continue to be.

John: What we believe and we will keep rolling out product enhancements that we think will have a positive impact on AD valorem volumes throughout the rest of the fiscal year.

John: Okay.

Speaker Change: Perfect. Thank you so much for that and then if I could ask a question just on the distribution strategy Renee I think you mentioned.

Speaker Change: API access and embedded.

Speaker Change: <unk> finance for lack of a better word embedding bill and third party software et cetera could you talk about how that is.

Speaker Change: Distributions might evolve.

Speaker Change: Just how that might augment your existing distribution channels anything there would be helpful. Thanks, a lot guys.

Renee Lazar: Thanks a lot, guys. Sure. Thanks, Andrew.

Renee: Sure. Thanks, Andrew.

Renee Lazar: Well, when I started the company, I was very, very committed and focused on how you serve SMBs. And the learning that I had over the prior couple decades of serving SMBs was that they're hard to reach and that to reach them, you have to be where they are. And so we have a direct channel, which we talked about. We have an accountant channel because accountants are one of the most trusted advisors that SMBs have. And then we have a partner channel, which to date has been primarily focused on financial institutions. Partners are an opportunity for us to support the experience that they have with their customers in an indirect and direct fashion so that we can actually drive more adoption of the platform across the overall ecosystem.

Speaker Change: I started the company I was very very committed and focused on how do you serve smbs and my learning.

Speaker Change: That I had over the prior couple of decades of serving SMB was that they are hard to reach and that need to reach them you have to be where they are and so we have a direct channel, which we talked about we have an accountant channel because accountants are one of the most trusted advisors that Smb's App and then we have a partner channel, which to date has been primarily focused on financial institutions, but partners are in <unk>.

Speaker Change: <unk> for us to.

Speaker Change: Support.

Speaker Change: The experience that they have with their customers in an indirect and direct fashion. So that we can actually drive more adoption of the platform across the overall ecosystem and so what we've learned in the last 10 years with the financial institution partners is how to go to market how to embed how to serve how did manage a regulated environment, which obviously what we do is.

Renee Lazar: And so what we've learned in the last 10 years with the financial institution partners is how to go to market, how to embed, how to serve, how to manage a regulated environment, which obviously, what we do is regulated, and what our financial institution partners do is heavily regulated. And we're able to take all of those learnings and use that as the seed, if you will, the fuel for a broader embed strategy.

Speaker Change: Regulated and what our financial institution partners do is heavily regulated and we're able to take all of those learnings and use that as the sea. If you will the fuel for our broader and bad strategy.

Renee Lazar: At the same time, you know, we've been working on this at the same time for the last six months to a year, and we've seen increasing interest from third parties, whether they're payroll companies or software companies, accounting companies, finance, working capital, FinTech. These are all types of companies that we're seeing interest in having the financial operations that we deliver for SMBs inside of their platforms. And so our opportunity is to leverage what we've learned, take that seed, and use that as fuel to really enhance SMBs and their experience everywhere, no matter where they go. It's definitely an opportunity that we're uniquely positioned for, and we look forward to sharing more as the market develops. Thank you very much, Renee.

Speaker Change: Same time, we've been working on this at the same time the last six months to a year, we've seen increasing interest.

Speaker Change: From third parties, whether their payroll companies are software companies accounting companies.

Speaker Change: Finance working capital Fintech. These are all types of companies that were seeing interest and having the financial operations that we deliver for smbs inside of their platforms and so are our opportunity is to leverage what we've learned take SCE to use that as fuel to really enhance smbs and their experience everywhere no matter where they go.

Speaker Change: And so we're super interested in this is definitely an opportunity that were uniquely positioned for and we look forward to sharing more as the market develops.

Speaker Change: Great. Thank you very much Renee.

Speaker Change: Thank you Andrew.

Andrew Schmidt: Thank you, Andrew. Our next question comes from Scott Berg with Medium & Company. Please proceed. Hi, Rene and Bill. Nice to meet you. Excuse me, Rene and John.

Our next question comes from Scott Berg with Needham <unk> Company.

Scott Berg: These proceed.

Scott Berg: Okay.

Scott Berg: Hi, Rene and Bill Nice excuse me here and he and John Congrats on the nice quarter here.

Scott Berg: Congratulations on a nice quarter here. Rene, I want to talk about the lower marketing spend in the quarter. Not surprised given what's going on in the macro there.

Scott Berg: Rene I wanted to talk about the lower marketing spend in the quarter not surprise, given what's going on in the macro there driving some lower net new customer additions there, but how should we think about those customers being brought on is the profile of those customers, maybe a little bit better because youre not reaching for some of the low quality customers or would you say the distribution of those additions maybe are no different.

Renee Lazar: Hynes.com, I'm going to say the distribution of those additions. Hey, Scott. Thanks for the question. There's a lot of stuff going on in the business, right? It's a complex business. And one of the things that we started with last year was talking about how we were creating one organization across the company to be able to, you know, align internally on initiatives that need to happen. And then we focused on executing and delivering one unified product to our customers. And at the same time, we focused on having one brand across all of our products. Well, all of that came together in the fall.

Scott Berg: And what you've seen recently.

Rene: Hey, Scott Thanks for the question, there's a lot of stuff.

Scott Berg: Going on in the business right, it's a complex business and one of the things that we started with last year. We first talked about how we were creating one organization across the company to be able to.

Speaker Change: Align internally on initiatives that need to happen and then we focused on executing and delivering one unified product to our customers and at the same time, we focused on having one brand across all of our products. While all of that came together in the fall and that like I said.

Renee Lazar: And that, like I said, you know, did introduce some inefficiencies in our go-to-market process. And so part of this was getting more clear about, okay, where do we want to spend our money? And so that impacts marketing dollars. But it's also being more clear about which types of customers we want. At the same time, when we, you know, think about the, you know, the divvy spend and expense capabilities that we have in this particular market, the credit environment is something that we're very thoughtful about, and we're very careful about who we extend these credit lines to. And so with that, you know, you saw some, you know, tightening, if you will, on the smallest customers, and that impacted kind of customer growth there.

Speaker Change: It did introduce some inefficiencies and our go to market.

Speaker Change: <unk> and so part of this was getting more clear about okay, where do we want to spend and so that impacts the marketing dollars, but it's also being more clear about which types of customers. We want at the same time, when we think about the.

Speaker Change: The <unk> spend and expense capabilities that we have in this particular market. The credit environment is something that we're very thoughtful about and we're very careful in who we extend these credit lines two and so with that you saw some tightening if you will on the smallest customers and that impacted kind of at the customer growth there so and gen.

Renee Lazar: So, in general, I would say that we are focused on delivering very strong growth in customers as well as revenue per customer. And we're aligning our initiatives now that we are kind of one company, one product, one brand, and adjusting to those strategies as well. And then, John, from a follow-up perspective, you mentioned you've embedded some lower assumptions around yield. How do you think about the opportunity in the types of investments that you're making right now? Are you able to stretch the duration by maybe investing in a company that's a little bit more expensive? etc. That can hold yield up for a longer period of time, or will this always be the case?

Speaker Change: I would say that we are focused on delivering very strong growth in customers as well as the revenue per customer and we're aligning our initiatives now that we are kind of one company one product one brand and adapting to those strategies as we speak.

Speaker Change: Got it very helpful and then John from a follow up perspective.

Speaker Change:

John: You mentioned, you've embedded some lower assumptions around yield on your float here going forward to the back half of the year I think thats, probably the right for you I'm sure all in agreement on that but how do you think about the opportunity and the.

Types of investments that you're making right now are you able to stretch duration through maybe investing in some different different I don't know securities et cetera that can hold yields up for a longer period of time, where we will always continue to be something more on a quick overnight basis. Thank you.

John Coffey: Yeah, thanks, Scott, for the question. It's a good point. It's clear that at some point, we're likely to see lower interest rates than higher, and this is the moment at which those types of opportunities present themselves to extend our maturities and lock in a little bit higher for longer rates. We obviously haven't had the need to do that over the last 18 months or so as short-term rates have been very high, but our portfolio mix will evolve as we get further into this macro environment, and we should have an Our next question today comes from Kenneth Zukosky with Autonomous. Please proceed. Hey, good afternoon.

Speaker Change: Yes, Thanks, Scott for the question.

Speaker Change: It's a good point.

Speaker Change: It's clear that at some point.

Speaker Change: We're likely to see lower interest rates and higher and this is the moment at which those types of opportunities present themselves to extend our.

Speaker Change: Our maturities and lock in a little bit higher for longer rates, we obviously haven't.

Speaker Change: Had the need to do that over the last 18 months or so as short term rates have been very high but our portfolio mix will evolve as we get further into this macro environment and we should have an opportunity to.

Speaker Change: To do plenty of yield optimization as rates begin to fall a little bit later in this cycle.

Speaker Change: Okay.

Speaker Change: Our next question today comes from Kenneth Lukowski with Autonomous. Please proceed.

Speaker Change: Okay.

Kenneth Lukowski: Hey, good afternoon. Thanks for taking the question I wanted to ask about Bank of America I think.

Kenneth Lukowski: I heard you say that they are evolving their payment strategy and thinking about the solutions to offer to their customers and it sounded like there was a bit of a change of tone. There. So could you just provide some more detail on what happened with Bofa and can you talk about how.

Kenneth Zukosky: Thanks for taking the question. I wanted to ask you about Bank of America. I heard you say that they're evolving their payment strategy. Ken Hynes, Robert Napoli, Brent Bracelin, Toshiya Hari, Karen Sansot, Scott Berg, Bradley Sills, Matthew Stotler, John Coffey, Bill.com, Thanks Ken for the question.

Kenneth Lukowski: Some of those conversations evolved over the last few quarters and I guess, what do you think the probability is that bill can service that.

Kenneth Lukowski: The back book of customers.

Renee Lazar: You know, the opportunity that we have with the bank started with serving their new small businesses on their digital platform. And we, like I said on the last August call, we had done a very strong job, so the opportunity to serve their existing customers presented itself. And so we had an agreement and a plan that we were working on with the bank, and we were executing on that over the last six months. And then just last month, things changed.

Speaker Change: Thanks, Ken for the question.

Speaker Change: The opportunity that we haven't started with serving their new small businesses on their digital platform and we like I said in the last.

Ken: <unk> call that we had done a very strong job and so thats the opportunity to serve their existing customers presented itself and so we had an agreement and a plan that we're working on with the bank and we are executing across that over the last six months.

Ken: And then just last month things change the bank.

Renee Lazar: The bank shared their recent decision to broaden their firm-wide strategy around payments. And so we are now, you know, working through how this will impact the serving of those existing customers. So we are in the early days.

Ken: Shared their recent decision to broaden their firm wide strategy around payments and so we are now together working through how this will impact.

Ken: The serving of those existing customers. So we are in the early days.

Renee Lazar: And I would say what I would just maybe focus on is that the bank serves millions of customers, and the opportunity to serve those millions of customers is super important. We are always going to lean on our strong partnership capabilities to support our bank partners, or any partner for that matter, in how we support their strategies and their go-to-market. So we are in the early days on that, and we'll have more to share. Thanks, Renee.

Ken: And I would say, but I would just maybe focus on is the bank serves millions of customers.

Ken: And the opportunity to serve those millions of customers is super important we are always going to lean on our strong partnership capabilities to support our bank partners are and any partner for that matter on how we support their strategies and their go to market. So we are in the early days on that and we'll have more to share in the future.

Speaker Change: Okay. Thanks for that and then I wanted to ask about the recently announced partnership with Audi and could you provide some more detail on this partnership initiatives.

Renee Lazar: And then I want to ask about the recently announced partnership with Audi, and could you provide some more detail on this partnership? Diversify Backend Providers of Virtual Card Issuance, Holdings Inc. Processing type of, Thanks for that follow-up question, Ken. The partnership with Audion is super important to the business. They have amazing, strong capabilities across their platform. What we look forward to them, first and foremost, is supporting our accounts receivable customers with the ability to collect via card. And so that's across the entire POS platform and ecosystem that we have. In addition, as you referenced, they have strong virtual card capabilities.

Speaker Change: Initiatives simply to diversified backend providers, the virtual card issuance or is there something more to this meeting are you trying to get closer to straight through processing, where you can onboard suppliers. They have sub accounts and you can do more of a straight through processing type of transaction.

Speaker Change: Thanks for that follow up question, Ken the partnership with audiences is super important to the business.

Speaker Change: Amazing strong capabilities across their platform, what we look forward to them first and foremost has been supporting our accounts receivable customers with the ability to collect via card and so that's across the.

Speaker Change: The entire <unk> platform and ecosystem that we have in addition raw.

Speaker Change: Referenced they have strong virtual card capabilities, and so having them as a.

Renee Lazar: And so having them as a second source, if you will, a third party to be able to support our virtual card payments is important. When you move 1% of GDP, you do need to make sure that you have redundancy across the platform. And there will always be opportunities to continue to leverage their capabilities as we extend our offering into the future. Thanks, Ken.

Speaker Change: A second source, if you will third party to be able to support our virtual card payments is important when you move 1% of GDP you do need to make sure that you have redundancy across the platform and there will always be opportunities to continue to leverage their capabilities as we extend our offering into the market.

Speaker Change: Okay. Thank you.

Speaker Change: Thanks, Ken.

Brian King: Our next question comes from Brian King with Deutsche Bank. Please proceed. Hi guys, just a couple of clarifications. Rene, on B of A, has the rollout stopped, or is that continued? And then what about the existing clients you're working with B of A? Has there been any change there? And then I'm just kind of wondering about the whole minimums.

Speaker Change: Our next question comes from Bryan Keane with Deutsche Bank. Please proceed.

Bryan Keane: Hi, guys, just a couple of clarifications.

Bryan Keane: Renee on on Bofa has the rollout stopped or has that continued and then.

Bryan Keane: What about the existing clients Youre working with Bofa has there been any change there and then I'm just kind of wondering about the whole minimums does that is that off the table now until we figure out where we're going with the relationship.

Renee Lazar: Is that off the table now until we figure out where we're going with the relationship? Thanks, Brian, for the question. So the initial relationship here with the small business team at the bank was to serve new small businesses. And if you looked at the overall total ads for Bill for the quarter, we were over 10,000 customer ads, net new ads in the quarter, of which financial institution partners were 6,200.

Thanks, Brian for the question so the the.

Speaker Change: So relationship here with the small business team at the bank was asserted that new small businesses and if you've looked at the overall.

Speaker Change: Total ads for bill for the quarter.

Speaker Change: Our over 10000 customer adds net new adds in the quarter of which financial institution partners, where 6200 so.

Renee Lazar: So Bank of America was definitely a part of that, and we are definitely an important part of serving their new small business customers. So the nuance here is the existing installed base that Bank of America has, the millions of customers they have across their platform that are not yet on this new digital platform. How are we going to support them?

Speaker Change: <unk> of America was definitely a part of that and they are definitely an important part of we are an important part of their serving their new small business customers. So the nuance here is the existing installed base that bofa has the millions of customers. They have across their platform that are not yet on this new digital platform.

Speaker Change: Are we going to go support them and so we had an agreed upon approach with the bank we were executing across that and then as they evolve their payment strategy last month things change and they let us know that they were expanding their payment strategy firm wide and so we're now working on what that means and so this will impact that expansion.

Renee Lazar: So we had an agreed upon approach with the bank, and we were executing on that. And then as they evolved their payment strategy last month, things changed, and they let us know that they were expanding their payment strategy firm-wide. And so we're now working on what that means. And so this will impact that expansion opportunity, and we are working now to understand how it will. When it comes to the overall contract terms, we have a contract, and we are going to continue to work on that contract until we have something different. Got it. No, that's helpful.

Speaker Change: <unk> and we are working.

Speaker Change: Now to understand how how it well.

Speaker Change: When it comes to kind of the overall.

Speaker Change: Contract terms, we have a contract and we're going to continue to.

Speaker Change: Working against that contract until we have something different.

Speaker Change: Got it no. That's helpful and then John just following up on on the organic take rate.

John Coffey: And then, John, just following up on the organic take rate, I think it was a little better than your expectations. It was down sequentially. Should we model it flattish to up this quarter, and then the fourth quarter was going to be similar to the first quarter? I don't know if you can just help us for modeling purposes exactly how to model that organic take rate going forward. Thanks for the question, Brian. You know, for the second half of the year, if you just take a look at our revenue estimates and the TPV estimates that we provided, you'll get to a slightly increasing monetization rate. We're still in a range, though, that's not far from where we are today and where we started the year, and we think that's appropriate given the visibility we have and some of the headwinds on the higher monetizing products. We are working hard to improve the product experience across a couple of our important revenue growth drivers, and we think that will probably provide more monetization upside as we look at FY25 and beyond. That's helpful. Thanks, guys. Thank you.

John: It was a little better than your expectations it was down sequentially.

John: Should we model it flattish to up this quarter and then the fourth quarter was going to be similar to the first quarter. I don't know if you can just help us for modeling purposes, exactly how to how to model that organic take rate going forward. Thanks, so much.

Speaker Change: Thanks for the question Bryan the second half of the year, if you just take.

Speaker Change: Take a look at our revenue estimates and the TPB.

Speaker Change: Estimates that we provided you will get to a slightly increasing.

Bryan Keane: Monetization rate, we're still in a range though.

Bryan Keane: Not far from where we are today and where we started the year and we think thats appropriate given the visibility we have in some of the headwinds on the higher monetizing products. We are working hard to improve the product experience across a couple of our important.

Bryan Keane: Revenue growth drivers and we think that we'll provide probably more monetization upside as we look at FY 'twenty five and beyond.

Speaker Change: That's helpful. Thanks, guys.

Speaker Change: Thank you.

Our next question comes from Taylor Mcguinness with UBS. Please proceed.

Taylor McGinnis: Our next question comes from Taylor McGinnis with UBS. Please proceed. Yeah, hi, thanks so much for taking my question. So you talked about some restructuring that you did in the go-to-market motion that led to softer net ads. So can you provide just some color on how we should think about the trajectory of net ads from here? So could this metric get worse over the next couple quarters, maybe before it gets better? And then, as a second part of the question, how could it focus on, you know, businesses with a higher propensity to spend serve as an offset and, you know, higher TPP per. Thanks for the question, Taylor. So in terms of net ads, I'd first start with Bill where we're pretty close to our initial estimate for the quarter, even with some challenges and additional friction associated with some of the changes that we've made to the platform and the branding and our approach. And I'd say we're going to be kind of in that range for the rest of the year, maybe in the three to four versus four.

Taylor Mcguinness: Yeah, Hi, thanks, so much for taking my question. So you talked about some restructuring that you did in the go to market notion that led to softer net adds but can you provide just.

Taylor Mcguinness: Some color on how we should think about the trajectory of net adds from here. So could this metric gets worse over the next couple of quarters, maybe before it gets better and then the second part of the question how could you focus on businesses with a higher propensity to spend service and offset higher.

Taylor Mcguinness: Higher TBB per customer for instance.

Taylor Mcguinness: Okay.

Speaker Change: Thanks for the question Taylor So in terms of net adds.

Speaker Change: Start with Bill, where we're pretty close to our initial estimate for the quarter, even with some challenges and additional friction associated with some of the changes that we've made to the platform and the branding and our approach and I would say, we're going to be kind of in that range for the rest of the year maybe in the three years.

Speaker Change: Four versus four but nevertheless.

John Coffey: But nevertheless, it's more of an impact on the spend and expense side of the business. Bill spent an amount where not only did all the moving parts move to one platform, consolidating our brands, and one organization, but we've also had a heightened level of scrutiny on the credit side of smaller businesses. So, as we saw performance on some of our marketing initiatives decline and we created some inefficiency, we continue to hold back on marketing spend.

Speaker Change: It's more of an impact on the spend and expense side of the business Bill spend and expense where.

Speaker Change: Not only did all the moving parts moving to one platform consolidating our brands one organization. We've also had a heightened.

Speaker Change: Level of scrutiny on the credit side of smaller businesses. So as we saw performance on some of our marketing initiatives decline and we created some inefficiency. We've continued to hold back on marketing spend the impact that hedges on really the smaller businesses. In fact in Q2, if you look at our larger spend and expense businesses.

John Coffey: The impact that has is really on really smaller businesses. In fact, in Q2, if you look at our larger spend and expense businesses, the demand, the top of the funnel from those was actually up from Q1. So we feel good about that.

Speaker Change: The demand the top of the funnel from those was consistent actually up from Q1. So we feel good about that it's really in the net as a result of the smaller businesses. So in the very near term, we would expect to be a bit lower than we have been historically, but from a revenue and revenue per customer standpoint.

John Coffey: It's really in the net as a result of the smaller businesses. So, in the very near term, we would expect to be a bit lower than we have been historically. But from a revenue and revenue per customer standpoint, we feel really good about that setup because that ties into the second part of your question about moving to higher-propensity-to-spend customers, which is a direct correlation to larger businesses that are more financially stable and likely to have an effect of increasing ARPUs for us. And this is across both Bill and our spend and expense products. It was awesome.

Speaker Change: We feel really good about that setup because that ties into the second part of your question about moving to higher propensity to spend customers, which is a direct correlation to larger businesses that are more financially stable and likely to have an effect of increasing <unk> for us and this is across both bill and our spend and expense product.

Speaker Change: Yeah.

Interviewer: Awesome and then just as a follow up so you started to mention that in response to Brian's question, but when you think about the rollout of more automation things like straight through processing working closer with suppliers can you just help us think through the timeline.

John Coffey: And then just as a follow-up, so you started to mention it in response to Brian's question, but when you think about the rollout of more automation, things like straight through processing, working closer with suppliers, can you just help us think through the timeline of when those are going into place, maybe some of these initiatives have already gone into place, and how that influences how you're thinking about, you know, the second half and improvement and into 2025. Yeah, I mean, it's pretty – when we talked about this last quarter, we already had some of the activities and initiatives that we mentioned in flight, working with suppliers, making changes. We certainly have a pipeline of improvements that we'll be rolling out over the next several quarters.

Speaker Change: When those are going into place maybe some of these initiatives have already gone into the play in place and how that influences how youre thinking about the second half an improvement into 2025.

Speaker Change: Yes, I mean, it's pretty.

Speaker Change: We when we talked about this last quarter.

Speaker Change: I already had some of the activities and initiatives that we mentioned in flight working with suppliers, making changes we certainly have a pipeline of improvements that we'll be rolling out over the next several quarters.

John Coffey: Our expectation is that we will start to move the needle more materially on driving volume across these higher monetizing products into fiscal 25 versus fiscal 24, but we have also seen some good progress with other products beyond virtual cards and FX payments. In the most recent quarter, we saw a good uptick in working capital. We saw a contribution from both augmented reality and instant transfer, real-time payments that were providing support for the take rates, so we think those will continue in the second half of the year as well. Great, thanks so much.

Speaker Change: Our expectation is that we start to move the needle more materially.

Speaker Change: On driving volume across these higher monetizing products into fiscal 'twenty five versus <unk> 24, but we have also seen some good progress with other products beyond virtual cards and FX payments in the most recent quarter.

Speaker Change: We saw a good uptick in working capital we saw a contribution from both <unk> and instant transfer of real time payments that were providing support for the take rates. So we think those will continue in the second half of the year as well.

Speaker Change: Great. Thanks, so much.

Darren Peller: Thank you. The next question comes from Darren Peller with Wolf's Research. Please proceed. Guys, hey, um, let me just follow up on the first of the volume trends that you saw were clearly stronger. I think that we anticipated this, and I think it's flowing through to some degree in your guidance for the current quarter. So it was great to see if you could just give a little more expansion. You know what you're actually seeing among your customer base in terms of behavior, and you know, obviously, you took a bit of a conservative stance and what you're expecting for the remainder of the year, but is that just conservatism, or is there something going on?

Speaker Change: Thank you Taylor.

Speaker Change: Our next question comes from Darrin Peller with Wolfe Research. Please proceed.

Speaker Change: Yes.

Darrin Peller: Guys Hey.

Darrin Peller: Let me just follow up on the first the volume trends that you saw were clearly stronger I think than we anticipated and I think then it's flowing through to some degree is in your guidance was for the current quarter. So that was great to see if you could just give a little more expansion on.

Speaker Change: What you actually are seeing among your customer base in terms of behavior, and obviously you took a bit of a conservative stance and what youre expecting for the remainder of the year, but is that just conservatism or is there anything going on in terms of what you're seeing with customers and just very quickly to follow on again, just one more time on the on the model.

Renee Lazar: Customers, and just very quickly to follow on again, you know, just one more time on the monetization opportunity because I think what we're seeing is the evidence that, you know, you're convinced that the second half improvement will occur. I think the questions we're still getting are just whether or not there's a magnitude of it being impactful in 25 in the next fiscal year, and beyond that, we should be on a steady state. It's, you know, so if you could just give it a little more color on whether or not you believe these fixed should lead to a resumption of a steady state improvement, or is this not going to be more volatile? Thanks, Darren, for the question. I'll start and then let John add in a bit.

Speaker Change: Monetization opportunity because I think what we're seeing is the evidence that you are convicted that the second half improvement will occur I think the questions. We're still getting is whether or not theres a magnitude of it being impactful in 'twenty five in the next fiscal year and beyond that we should be on a steady state.

Speaker Change: And so if you could just give a little more color on whether or not you believe these fixes.

Speaker Change: Should lead to a resumption of a steady state improvement or is it just not going to be more volatile.

Speaker Change: Thanks, Thanks, Darren for the question I'll start and then let John add a bit. So the first thing I would just say across the customer base.

Renee Lazar: So the first thing I would just say across the customer base, when we kind of look at all the different segments, we definitely see a holding pattern for all but the largest of businesses, which are still declining, just not as much as they were. So if you look at the overall TBV, while we had good growth year over year, it was not what it should have been because the largest businesses are still spending less than they were a year ago. And so that declining rate is less than it has been in prior quarters.

Speaker Change: When we kind of look at all the different segments, we definitely see a holding pattern for all but the largest of businesses, which are still declining just not as much as they were so if you look at the overall TBD, while we had good growth year over year. It was not what it should have been because the the largest businesses are still spending.

Speaker Change: Less than they were a year ago.

Speaker Change: So that declining rate is less than it has been in prior quarters. So that gives us confidence in the ability to kind of weather the storm well and to be able to see that as they start spending we will have an opportunity to grow and serve that part of the spend that they have so that's kind of.

Renee Lazar: So that gives us confidence in the ability to kind of weather the storm, if you will, and to be able to see that as they start spending, we will have an opportunity to grow and serve that part of the spend that they have. So that's kind of the first thing I would say is that, maybe, we are happy to see that all but the largest businesses seem to be more in a holding pattern and not declining. And then with monetization, just kind of give you an example of some of the conviction we have. There are a lot of different payment products we have, and there are lots of different activities across those payment products to be able to drive adoption and customer success and happiness.

Speaker Change: The first thing I would say is that the.

What were maybe happy to see is that all but the largest businesses seem to be more in a holding pattern and not declining right now.

Speaker Change: Then with the monetization just kind of give you. One example of some of the conviction. We have it is a lot of different payment products. We have and there is lots of different activities across those payment products to be able to drive adoption and customer success and happiness and so one of the things for example international payments. That's Super important is that we get a bigger share of it.

Renee Lazar: And so one of the things, for example, on international payments that's super important is that we get a bigger share of wallet. And so if you were to, you know, look internally across the platform, we are continuing to increase the share of wallet on international payments. Now, one thing that's going counter to that in the last year has been that there's been an increase in adoption of U.S. dollar payments versus FX dollar payments. Particularly if you looked at, I think, broader economic data, you would see that euros are less favorable to dollars these days for some reason.

Speaker Change: Wallet and so if you were to look internally across the platform. We are continuing to increase the share of wallet of international payments now one thing thats going counter to that in the last year has been that there's been an increase in adoption of U S dollar payments versus FX dollar payments, particularly if you looked at I think broader economic data you would see that.

Speaker Change: At euros or less favorable to dollars. These days for some reason.

Renee Lazar: And, you know, we could all speculate on the geopolitical reasons as to why, but that impacts all the goodness that we're doing in driving FX adoption inside of our customers. So we have strong wallet share growth, and we have strong FX adoption where we have some more influence with Canada and the U.K. and the portal we have. But the opportunity and conviction we have about the future are because of those underlying facts. So that just gives you one highlight.

Speaker Change: And we could all speculate on the geopolitical reasons as to why but that impacts all of the goodness that we're doing on driving FX adoption inside of our customers. So we have strong wallet share growth and we have strong FX adoption, where we have some more influence with Canada and the UK in the portal, we have but the opportunity and conviction we have around the <unk>.

Speaker Change: Future is because of those underlying facts. So that just gives you one highlight I don't know John if you have anything you want to add to that sure. So just on the TPB volumes. We were at about 450 K in TPP per customer excluding <unk> in the quarter, which was certainly ahead of our expectations and I think reflected some.

John Coffey: I don't know, John, if you have anything you want to add to that, sure. So just on the TPV volumes, we were at about 450K in TPV per customer, excluding the FIs, in the quarter, which was certainly ahead of our expectations and which I think reflected some, you know, small seasonal uptick in spending. Unlike what we'd seen, you know, the prior year, our assumptions for the second half are that we're reverting, certainly for the March quarter, to more of a seasonal pattern.

John: Small seasonal uptick in spending unlike we'd seen the prior year, our assumptions for the second half or that we're reverting certainly for the March quarter to more of a seasonal pattern and were expecting some some declines as you.

John Coffey: And we're expecting some declines, as you can see in our numbers. And in terms of monetization improvement, we do have a lot of levers, as Renee mentioned. And I think we're, you know, working hard to, if you will, recover to our prior monetization level in fiscal 24. And as we've talked previously, going back quite a while, we feel like there's a multi-year opportunity in front of us in terms of monetization expansion. Exactly how that plays out in terms of, you know, linear starting in FY25 or not, we'll certainly have more to say about that trajectory as we get through fiscal 24. Thanks, John. Let me just, not to beat up a topic again, but just on B of A, we're getting questions. I think there's a, it's worthwhile clarifying this. People are wondering if they are losing the entire opportunity on the existing cost earlier or is this just a change?

John: You can see in our numbers and in terms of the monetization improvement we do have a lot of levers as Rene mentioned and I think we are.

John: We're working hard to if you will recover to our prior monetization level in in fiscal 'twenty, four and as we've talked previously going back quite a while we feel like there is a multi year opportunity in front of us in terms of monetization expansion exactly how that plays out in terms of linear starting in FY 'twenty five.

John: Not we'll certainly have have more to say about that trajectory as we as we get through fiscal 'twenty four.

Speaker Change: Thanks, Jonathan.

Jonathan: Not to beat up a topic again, but just on Bofa, we're getting questions I think theres a its worthwhile clarifying. This people are wondering if youre, losing the entire opportunity on the existing customer base that you would've read too earlier.

Renee Lazar: Maybe just if you could clarify that a little bit, because we're getting a lot of questions. Thanks, sir. Yeah, so again, just dividing the customer base to new customers versus the installed customer base at the bank has We continue to serve the new customers, and on the existing installed base, the opportunity with them is to look at how we deploy what we've developed and the other capabilities that the bill platform has inside of the new payment strategy that's now been broadened inside of the bank. So it's early days. Unfortunately, you know, I can't say more Thank you, Darren.

Jonathan: Or is this just a change maybe just if you can clarify that a little bit because we're hearing a lot of questions on it.

Speaker Change: Thanks, Darren yes so.

Darren: Just dividing the customer base to new customers versus the installed customer base at the bank as we continue to serve the new customers.

Darren: And on the existing installed base the opportunity with them is to look at how do we deploy what we've developed and the other capabilities that the bill platform has inside of the new payment strategy. That's now been broadened inside of the bank. So it's early days. So unfortunately, I can't say more.

Darren: That because were just like literally last month as when we kind of understood that this was a change on their side.

Speaker Change: Got it.

Got it thank you guys.

Speaker Change: Thank you Darren.

Speaker Change: Our next question comes from William <unk> with Goldman Sachs. Please proceed.

William Nance: Our next question comes from William Nance of Goldman Sachs. Please proceed. Hey guys, appreciate you taking the questions. You know, I just maybe wanted to take a step back and ask about maybe the structural versus cyclical aspects of what's been happening in the business. I think, you know, on the cyclical impact, it sounds like you started to see some green shoots on volume, the take rates came in slightly better. I can't really tell if your outlook on the take rate going forward is better, worse, or kind of the same as it was last quarter. And then if we think about some of the longer-term sort of structural tailwinds that people have been focused on, you know, the cross-sell It sounds like that could be impacted by some of the challenges in the go-to-market that you mentioned. And then, John, I think you mentioned something like three to four of the core benefits of Bill Nettad's XFI. I think previously we were talking closer to four, so maybe a little bit lower there.

Hey, guys.

Speaker Change: Kate you taking the questions.

William: I, just maybe wanted to take a step back and ask about maybe the structural versus cyclical aspects of what's been happening over the business.

William: On the cyclical impact it sounds like you're starting to see some green shoots on volume that take rates came in slightly better.

William: I can't really tell us your outlook on the take rate going forward is better or worse or kind of the same than it was last quarter.

William: And then if we think about some of the longer term sort of structural tailwind that people have been focused on the cross sell of Debbie.

William: Was a huge strategic initiatives and it sounds like that could be impacted by some of the challenges in the go to market that you mentioned.

William: And then John I think you mentioned something like three to four of core build net adds X F. I think previously you were talking closer to four so maybe a little bit lower there. So just maybe putting it altogether I get that uncertainty is still high.

Renee Lazar: Maybe, putting it all together, I get that uncertainty is still high. But, you know, I think the questions that we've gotten over the past three months have been, you know, increasing uncertainty around some of the long-term structural tailwinds in the business. So maybe you could talk about what you're seeing in the market and if anything has sort of changed, you know, near or longer term, you know, over the last three months? Yeah, I'll start.

William: I think the questions that we've gotten over the past three months have been.

William: Increasing uncertainty around some of the long term structural tailwind in the business. So maybe can you talk about what youre seeing in the market and if anything has sort of changed near or longer term over the last three months.

William: Okay.

Speaker Change: Yeah I'll start thank you will.

Renee Lazar: Thank you, Will. From a structural perspective, some of the examples I just gave with international payments, I could give you other examples inside of the virtual card initiatives that we're doing. I could give you examples inside of invoice financing, instant transfer, all the different payment initiatives.

Speaker Change: From a structural perspective some of the examples I just gave with international payments I could give you. Other examples inside a virtual card initiatives that we're doing I can give you examples inside of invoice financing and transfer all of the different payment initiatives and so when we think about the confidence we have and the ability to kind of continue to drive more.

Renee Lazar: And so when we think about the confidence we have and the ability to kind of continue to drive more payment volume and more dollars going through our platform that are positively economical to bill, we have high confidence in that just because we have lots of initiatives. Now, what I do know is that I've been building software companies now for over 25 years, and what I do know is that there is a cycle that you go through in building. You build, and then you adapt, and then you iterate, and then you build, and then you adapt, and then you iterate.

Speaker Change: Payment volume and more dollars going through our platform.

Speaker Change: Our positive economic to Bill we have high confidence in that just because we have lots of initiatives now what I do know I have been building software companies now for over 25 years and what I do know is that there is a cycle that you go through and building your build and then you adapt and then you iterate and then you build and then the adapt and then iterate now all of our products have different <unk>.

Renee Lazar: Now, all of our products have different stages of where they're at, but I have a lot of experience in this kind of cycle that you need to actually sometimes take two steps forward to be able to really make this opportunity happen, and that's what we did the last year. It was a lot to pull together, and we're looking forward to continuing to improve the offerings we have and enhance the capabilities that we've built. Let me just add, Will, on the cyclical comments around volumes. We agree with you, things are a little bit better than expected. That could be the beginning of sustained improvement. It's not something that we are expecting at the moment.

Speaker Change: Stages of where they're at but I have a lot of experience in this.

Speaker Change: This kind of cycle that you would need to actually sometimes take two steps forward to be able to really make this opportunity happen and that's what we've just done in the last year was a lot to pull together and we're looking forward to continuing to adapt.

Speaker Change: Adapt the offerings, we have an enhanced capabilities that we've built.

Speaker Change: Let me just add will on the on the cyclical comments around volumes, we agree with you things are a.

Speaker Change: A little bit better than expected that could be the beginning of a sustained improvement its not something that we are expecting at the moment.

John Coffey: And there's no real change to our expectations around monetization and take rate for the second half of the year. We're not calling a return to normal quarterly expansion at this point, something we'll obviously come back to in fiscal 25. Got it. That's helpful. And then maybe just a question on the restructuring. Could you, is there any way you could quantify just the savings that resulted from the restructuring? And then, you know, as you think about the remainder of the year, you know, is there a portion of those savings that will be reinvested? Or kind of how much are you thinking about letting fall to the bottom?

Speaker Change: And there is no real change to our expectations around monetization and take rate for the second half of the year, we're not calling a return to.

Speaker Change: Normal quarterly expansion at this point something will.

Speaker Change: As we come back to in fiscal 'twenty five.

Speaker Change: Got it that's helpful. And then maybe just a question on the restructuring could you is there any way you could quantify just the savings that resulted from the restructuring and then.

As you think about the remainder of the year is there a portion of those savings that will be reinvested or kind of how much are you thinking about letting fall to the bottom line there.

John Coffey: Sure, so as a part of our reduction in the workforce, we generated approximately $60 million in annualized non-GAAP operating expense savings. Obviously, for half of the year, that's $30 million, and this is related to compensation and benefits, related expenses, and the closure of our Sydney office. We realized approximately $5 million in non-GAAP op-ex savings in Q2, and we expect to reinvest, if you will, about 50% or so of that $30 million into some of the both near-term and longer-term growth initiatives that Rene mentioned earlier.

Speaker Change: Sure so.

Speaker Change: As a part of our reduction in workforce, we generated approximately $60 million in annualized non-GAAP operating expense savings obviously for half of the year, that's $30 million and this was related to comp.

Speaker Change: Compensation and benefits related expenses and the closure of our of our Sydney office, we realized approximately $5 million and non-GAAP Opex savings in Q2, and we expect to reinvest if you will about 50% or so of that of that $30 million into some of the.

Speaker Change: Both near term and longer term growth initiatives that Randy mentioned earlier.

John Coffey: All right. Appreciate it. Appreciate you taking the time to ask the question. Thanks a lot.

Speaker Change: Got it I appreciate I appreciate you taking the questions.

Speaker Change: Yes, Thanks, a lot. Thank you.

Bradley Hartwell Sills: Our next question comes from Brad Sills of Bank of America. Please proceed. Okay.

Speaker Change: Our next question comes from batch sales of Bank of America. Please proceed.

Speaker Change: Oh, great. Thanks, guys.

Renee Lazar: Thanks guys. Wanted to ask a question about, http://TheBusinessProfessor.com www.youtube.com, In other words, that better integrated platform....better on-ramp and cross-cell for cross...

Speaker Change: Wanted to ask a question about the new platform here it sounds like if I'm not mistaken that might have been.

Speaker Change: In areas like kind of source some of the upside this quarter in other words that better integrated platform enabled.

Speaker Change: Better on ramp and cross sell for cross border virtual card is that correct.

Renee Lazar: Thanks, Brad, for the question. So the new platform with the Unified Platform, we've seen from the customers that are adopting it, a lot of strong synergies, and that's why I think the quote we had in the prepared remarks, the customer said that it was simply beautiful. So the capabilities we have, we're very excited about, but actually rolling all of this out at the same time, the one brand, the one platform, and the one organization, has actually created some inefficiencies in our go-to-market. So we have not yet seen the uplift that we would like to see from the new platform. We have seen uplift, just not as much as we'd like to see yet on the expanding. There's a lot there.

Speaker Change: Thanks, Brad for the question.

Speaker Change: The new platform with the unified platform.

Speaker Change: Seeing from the customers that are adopting a lot of strong synergies and Thats why I think the quote we had in the prepared remarks.

Speaker Change: <unk> said that it was simply beautiful so the capabilities. We have we're very excited about that actually.

Speaker Change: Rolling all of this out at the same time, the one brand the one platform into one organization.

Speaker Change: <unk> actually created some inefficiencies in our go to market. So we have not yet seen.

Speaker Change: The uplift that we would like to see from the new platform. We have seen uplift just not as much as we'd like to see it.

Speaker Change: Okay. Thanks for that clarification, and then on the expanding ecosystem here.

Speaker Change: <unk> Fi embedded there theres a lot there where is the focus and how does that map to your you plan to go target.

Renee Lazar: Where is the focus, and how does that... Yeah, no, it's a great question, something we're excited about the. You know, from day one, we built the platform to be able to serve SMBs wherever they come from. And we have had great success with accountants, 7000 firms across the country. And we are continuing to build on that platform, so there are more capabilities that we will be enabling. We were the kind of first platform, if you will, that helps businesses and accountants actually work together in a unique way. And that category is now called client advisory services, CAS, and, you know, and there are whole practices that build their practice around it.

Speaker Change: Businesses that have a higher propensity for upgraded perhaps larger spend thank you.

Speaker Change: Yeah, No. It's a great question and something we're excited about the from day, one we built the platform to be able to serve smbs wherever they come from and we have great success with accountants, the 7000 firms across the country and we are continuing to build on that platform. So theres more capabilities that we will be <unk>.

Tabling, we were the kind of the first platform. If you will that helps businesses and accounts actually worked together in a unique way and that category is now call client advisory services Cas.

Speaker Change: And.

Speaker Change: And there are a whole practices that build their practice around bill.

Renee Lazar: We're continuing to expand the capabilities of AP, AR, and spend an expense inside of the accounting console. And we're adding dashboards from the FIM work acquisition over the next year. So these capabilities will enhance the account platform, which is one of the questions. But then if you take the the learnings that we've had from the accountants, as well as the financial institutions, we have strong learnings around how to embed our capabilities inside of others, so they can serve their customers. And what we're seeing in the market is that there is strong demand for other software providers to embed financial operations to be able to serve their customers. And so the capabilities that we referenced on the call with respect to APIs, we have, you know, hundreds of developers across thousands of customers that are, you know, taking advantage of the APIs, we're just extending those capabilities and what we've done with the FIs and what we've done with accounts to create a more unified experience, if you will, inside of that embed approach so that others can take advantage of the capabilities that bills build. So we're excited about that. That's a long term opportunity for us, just like, you know, the FIs are a long term opportunity. It's something that we think is super important. Thanks for.., www. TheBusinessProfessor.com, Great.

Speaker Change: Sure.

Speaker Change: To expand the capabilities of AP, AR and spend and expense inside of the accounting console and we're adding dashboards from the <unk> acquisition over the next year. So these capabilities will enhance the account platform, which is one of the questions. But then if you take the learnings that we've had from the accounts as well as the financial institutions, we have strong learnings.

Speaker Change: How to embed our capabilities inside of others. So they can serve their customers and what we're seeing in the market is that there is strong demand for other software providers to embed financial operations to be able to serve their customers and so the capabilities that we referenced on the call with respect to API, we have hundreds of developers across.

Speaker Change: Thousands of customers that are taking advantage of the API, we're just extending those capabilities and what we've done with <unk> and what we've done with accounts to create a more unified experience. If you will inside of that embed approach. So that others can take advantage of the capabilities that <unk> built. So we're excited about that that's a long term opportunity for us.

Speaker Change: Like the <unk> are a long term opportunity is something that we think is super important.

Speaker Change: Thanks Renee.

Renee: Great. Thank you Brad so thank you everyone for joining us today, and we built a great business over the years because of our commitment to Smbs and we look forward to bringing that transform their finance operations experience to them. Thanks again for joining us take care.

Bradley Hartwell Sills: Thank you, Brad. So, thank you, everyone, for joining us today. We've built a great business over the years because of our commitment to S&Bs, and we look forward to bringing the transformative financial operations experience to them. Thanks again for joining us. Take care. That concludes today's conference call. Thank you all for your participation. You may now disconnect your line.

Okay.

Speaker Change: That concludes today's conference call. Thank you all for your participation you may now disconnect your line.

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