Q1 2025 BILL Holdings Inc Earnings Call
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Speaker Change: Good afternoon and welcome to Bills first quarter fiscal 2025 earnings conference call. Joining us today are Bills CEO and founder Ren Lacerte, President and CFO John Rettig, and Vice President of Investor Relations Karen Sansot.
Speaker Change: With that, I'd like to turn the call over to Karen Sansot for introductory remarks. Karen?
© transcript Emily Beynon
Karen Sansot: Thank you, Operator. Welcome to Bill's Fiscal First Quarter 2025 Earnings Conference Call. We issued our earnings press release a short time ago and 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.
Karen Sansot: With me on the call today are Renée Lacerte, Chairman, CEO, and Founder of BIL, and John Rettig, President and CFO.
Karen Sansot: Before we begin, please remember that during the course of this call, we may make forward-looking statements about the future operations, targets, and results of bills that involve many assumptions, risks, and uncertainties.
Karen Sansot: 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.
Karen Sansot: 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.
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.
Karen Sansot: Note that we revised our key metrics presentation beginning this quarter to reflect our evolving product solution set as we previewed on our last earnings call.
Karen Sansot: This new presentation provides investors with an enhanced view of our integrated platform, which includes bill APAR and spend and expense,
Karen Sansot: excluding the Financial Institution Channel. It also provides an enhanced view of our Embedded and Other Solutions, which includes the Financial Institution Channel, Invoice2Go, and Other Solutions.
Speaker Change: The appendix of our fiscal Q1 2025 investor deck reflects this new presentation. Now, I'll turn the call over to Renee. Renee?
Thank you, Karen. Good afternoon, everyone.
Renee: In Q1, we delivered very strong financial results, innovated at a rapid pace, and executed well across the company. We made substantial progress on our most important initiatives to expand the depth and breadth of our platform and enhance our go-to-market motion to further serve small and mid-sized businesses.
Renee: These actions drove increased customer acquisition and higher payment volume per customer among newer cohorts of our integrated platform.
Renee: Our success this quarter highlights the significant growth runway ahead for Bill. We're moving aggressively to capitalize on the market as we extend the Essential Financial Operations category to more SMBs. In Q1, we drove strong core revenue growth of 19% year-over-year, which was above our expectations and reflects acceleration from 16% growth last quarter.
Renee: We are executing on our commitment to balanced growth and profitability, and achieved a non-gap operating income margin of 19% in the quarter, which increased 8 percentage points from last year.
Renee: We also expanded free cash flow margin to 23%, reflecting a 7 percentage point increase from last year.
Renee: Our increasing scale demonstrates that our value proposition resonates with SMBs. During the quarter, we empowered over 475,000 businesses to automate their financial operations, and we managed $80 billion in total payment volume across 29 million payment transactions.
Renee: We took care of their financial operations so they could take care of serving their customers and growing their business. Our platform is mission critical for SMBs as they digitize their back office.
Renee: For example, Fairway, a billed customer since 2023, empowers other SMBs by providing small local coffee shops with scalable infrastructure such as coffee bean sourcing, loyalty programs, and a tech stack to drive growth.
Speaker Change: Fairwave does all this while preserving the independence and uniqueness of local coffee brands across the country.
Speaker Change: Derek Braun, director of FP&A, said, and I quote, Bill is the technology foundation that supports our growth. Fairwave grows fast, adding a new brand every few months.
Speaker Change: What comes with it is the need to understand and operate each brand's finances. With Bill, we can integrate each brand's financial operations, their accounts payable, and card spend, and as soon as possible, create standardized processes and controls.
Speaker Change: Additionally, Bill allows us to manage card spend by category, build budgets, and eliminate surprises.
Speaker Change: We were able to get twice the amount of work done without hiring an additional AP clerk, saving us at least $75,000 a year. Bill really brings us the efficiencies we need to focus on adding more brands."
We are the leaders in financial operations automation for SMBs.
Speaker Change: There's a vast market opportunity ahead of us. Customer stories like Fairwave are what inspires us at Bill as we focus on supporting many more SMBs on their automation journey.
Speaker Change: 99.9% of the businesses in the U.S. are small businesses with fewer than 500 employees and they power over 40% of the U.S. GDP and employ nearly half of the workforce.
Speaker Change: Yet, given the fragmented and highly diverse nature of the S&B market, small businesses are underserved by technology, and their needs are often neglected.
Speaker Change: Their adoption of technology solutions for financial operations is still nascent. In fact, only 5% of larger SMBs have fully automated both their AP and AR processes according to a recent survey by Payments Intelligence.
Speaker Change: When it comes to financial operations for small and mid-sized businesses, we are very well positioned to serve this large, green-filled opportunity. We have the platform, the ecosystem, and the team to empower millions of businesses, and we will continue to aggressively drive market adoption and deliver on our commitment to helping SMBs succeed.
Speaker Change: One of Bill's key product differentiators is our integrated platform. We provide SMBs with accounts payable, accounts receivable, spend management, business insights, and working capital solutions.
Speaker Change: Our platform digitizes and transforms their financial operations and eliminates complex, disconnected, manual paper-based processes that burden SMBs. Our powerful platform automates the B2B payment lifecycle, from the creation of a purchase order all the way through reconciling the transactions.
Speaker Change: Our tools automate workflow and drive effortless approvals, making it simple to manage cash in and out of a business.
Speaker Change: We provide a wide range of payment and funding choices for the very critical payment, the last mile. These tools and capabilities were designed end-to-end and built from the ground up by working with hundreds of thousands of small businesses.
Speaker Change: Our platform uniquely enables SMBs to save significant time while gaining more visibility and control of their cash flow.
Speaker Change: We are always innovating to make our all-in-one platform for SMBs even more valuable by giving them more choice and flexibility in how they manage their finances.
Speaker Change: For example, as part of our priority to enrich existing payment offerings and provide new payment options, we delivered new payment innovations for both funding and disbursement.
Speaker Change: We recently enabled real-time funding options. This means that customers can now fund their payments with credit cards or ACH or real-time payments. Additionally, on the disbursement side, we are making our bill divvy card available to accounts payable customers as an alternative to making check and ACH payments.
Speaker Change: In addition to driving more spend on the Bill Divvy card, this will also create a simpler and easier upgrade path for our Bill AP customers to the full spend and expense platform.
Speaker Change: These examples are part of our initiatives to further integrate our solutions, provide more card options, and drive more awareness of the robust capabilities of our platform.
Speaker Change: We also broadened the availability of international payment local transfer to more than two dozen countries. Our new capability enables businesses to receive their international payments days faster with less FX volatility while saving on transaction fees. We are working to extend this value to additional countries.
Speaker Change: Beyond funding and payment capabilities, we are scaling our working capital solutions, solving one of the biggest pain points for SMBs.
Speaker Change: With our invoice financing offering, suppliers are getting paid weeks in advance of when they would typically get paid. We have proven product market fit and are seeing recurring usage with 70% of borrowers being repeat users at invoice financing.
Speaker Change: We have a long history of leveraging our proprietary data and AI to enhance our platform and offerings, such as automated bill entry, payment acceleration, and network matching.
Speaker Change: As part of our priorities to continue to simplify and enhance our platform experience, we are applying AI to more use cases to further simplify and personalize the user experience on our platform for SMBs.
Speaker Change: As an example, recently we introduced an AI-powered guide, Sync Assist, which creates a more seamless experience when syncing with accounting systems.
Speaker Change: Our open platform allows businesses to work with any accounting software and automatically syncs with the top accounting systems that are used by over 80 percent of the SMB market. And for accounting firms that support clients with multiple different accounting systems, our sync is an invaluable tool.
Speaker Change: Tens of thousands of organizations have adopted our SyncAssist functionality to simplify the experience. One of them is Eisner Ampher, a global accounting tax advisory firm.
Speaker Change: Rod Neely, Manager of Application Success Team, said, and I quote, Sync Assist is absolutely fantastic.
Speaker Change: Our staff loves this new functionality. It does the work for you by generating actionable responses to empower our team to quickly resolve any sync issues on their own without leaving the build platform.
Speaker Change: Bill Sync-Assist saves our staff so much time and headaches. With hundreds of our clients on Bill, this is an absolute game-changer." End quote.
Speaker Change: Another important point of significant differentiation for Bill is the large and diverse distribution ecosystem we have built, which includes direct sales, partnerships with accounting firms, top financial institutions, and more than 7 million network members.
Speaker Change: Within our direct channel, our heightened focus on high propensity to spend businesses is producing stronger engagement among new cohorts of customers, particularly new spend and expense customers.
Speaker Change: And our dedicated programs focused on accountants attracted more accounting firms to Bill. In the past year, more than 1,000 accounting firms joined the Bill platform to expand their business and simplify their customers' lives.
Speaker Change: We now partner with more than 8,500 accounting firms in the U.S. and together we serve tens of thousands of SMBs.
Speaker Change: Our platform and ecosystem are foundational to the category of leadership and scale we have today. As we look ahead, we remain focused on expanding our lead and continuing to drive durable, profitable growth.
Speaker Change: Given the strength of our balance sheet and proven cash flow generation, we are continuing to make targeted investments to bolster our competitive advantages and expand our market opportunity.
Speaker Change: We believe that investing toward areas of the business where we expect to see a high ROI will enable Bill to extend our competitive moat while simultaneously unlocking meaningful long-term value for shareholders.
Speaker Change: A key area of investment is building our team for the next phase of growth and to expand our category of leadership.
Speaker Change: We recently added Mary Kay Bowman to our executive team as EVP of payments and financial services. Mary Kay is a world-class leader with significant experience driving innovation and growth at Fortune 500 companies.
Speaker Change: She brings a wealth of expertise from 20 years of experience building solutions in FinTech, managing hundreds of products and serving millions of customers at leading companies, including Visa, Block, Formly Square, and Amazon.
Speaker Change: We believe Mary Kay's proven track record in driving innovation and connecting buyers and sellers will be highly additive to the evolution of our payment and financial services offerings.
Speaker Change: We are aggressively taking steps to extend our lead and expand the financial operations category.
Speaker Change: As we do this, we are being very thoughtful and intentional about balancing investments for the future with return of capital to shareholders. To that end, during the quarter, we repurchased $200 million of shares under the $300 million share repurchase program announced in August.
Speaker Change: These purchases reflect the conviction that the board and management have in our growth potential and in Bill as an investment opportunity with significant upside.
Speaker Change: In conclusion, Bill has meaningful and expanding scale. Our strong leadership and a highly compelling market enables us to focus on capitalizing on the significant opportunities ahead.
Speaker Change: The consistent execution of our strategy to help hundreds of thousands of businesses reimagine how financial operations can be done has both changed the game for our customers and built an exceptionally strong business that generates strong cash flows and drives durable, profitable growth.
Speaker Change: Looking ahead, we remain focused on strategically investing in areas of the business that we believe will further our category leadership and executing on our planned growth and profitability initiatives.
Speaker Change: We are deeply committed to supporting our customers and partners and realizing our vision to be the essential financial operations platform for SMBs. Now, I'll turn the call over to John.
John Rettig: Thanks, Renee. Before talking about our financial results, I'd like to start with an update on the progress we are making on our targeted investments through the first quarter of fiscal 2025.
John Rettig: As we discussed in our last earnings call, we are making incremental investments in fiscal 2025 to accelerate our strategic priorities and win the large greenfield market opportunity ahead.
John Rettig: We believe these investments position us to deliver sustainable revenue growth and margin expansion over many years.
John Rettig: The pacing of these investments will continue to scale over the year as we execute on incremental hiring plans.
John Rettig: Our key investments include enhancing our virtual card, international payments, and working capital solutions.
Augmenting the experience and go-to-market capabilities for suppliers.
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Delivering new capabilities and deepening relationships with accounting firms.
and driving expansion of our embedded solutions.
John Rettig: We are making progress executing against these investment priorities. A good example is our expansion of international payment local transfers to more than two dozen countries.
John Rettig: The annual growth rates for both international FX payment volume and revenue increased by 10 percentage points compared to last quarter.
John Rettig: Another example is our invoice financing offering, where we've been iterating on the product and customer experience since our controlled launch last fiscal year.
John Rettig: We're seeing strong demand from suppliers in our network for the product and through Q1 we have funded nearly 200,000 loans since launch.
John Rettig: Additional highlights of progress made in our investment priorities include the recent introduction of real-time funding options and enabling the bill divvy card for AP payments.
John Rettig: In addition, we've added leadership talent to our Payments and Accounting Channel teams and launched our Embedded Solution with Xero, which is currently in beta.
John Rettig: These early proof points add to our conviction and our ability to execute and capture the large market opportunity.
John Rettig: We believe the investments we are making will accelerate our pace to bring financial operations mainstream for millions of SMBs and position us to deliver significant, sustainable revenue growth and margin expansion over the long term.
John Rettig: Now, moving on to a discussion of our Q1 results, we executed diligently against our top priorities in Q1 as we scaled our platform and drove strong market penetration.
John Rettig: Bill stands out as an essential technology partner for SMBs, and in Q1, this showed up in our strong customer acquisition numbers and growing payment volume per customer among newer cohorts.
John Rettig: The profile of these newer cohorts is a direct result of our go-to-market focus on larger businesses and we're driving very good early results.
John Rettig: Our targeted approach in driving growth led to revenue and profitability results that exceeded the top end of our guidance range.
John Rettig: We delivered strong profitable growth in Q1. As core revenue increased 19% year over year, non-GAAP operating income margin was 19% and free cash flow margin was 23%.
John Rettig: Our operating income and free cash flow margins both expanded more than 700 basis points year-over-year.
John Rettig: On the back of this momentum, we are investing in the foundation to drive core revenue growth acceleration and widen our leadership position in the market.
John Rettig: Now for some more details about the quarter. Total revenue was $358 million in Q1, up 18% year-over-year. Quarter revenue, which includes subscription and transaction fees, was $315 million, up 19% year-over-year. Float revenue was $44 million.
John Rettig: Turning to an update on our integrated platform, which includes our bill, APAR, and spend and expense solutions, but excludes the financial institution channel.
John Rettig: Revenue from our integrated platform was $295 million in Q1, up 18% year-over-year.
John Rettig: Within our integrated platform, revenue from our bill APAR solution was $162 million, up 13% year-over-year.
John Rettig: TPV grew 12% year-over-year and TPV per customer grew 2% year-over-year, slightly above recent quarters.
Monetization, or take rate, was consistent with last quarter.
John Rettig: During the quarter, we added 4,800 net new bill APAR customers and now have more than 156,000 customers using this solution.
John Rettig: Also, within our integrated platform, revenue from our bill, spend, and expense solution was $133 million, up 25% year-over-year, driven by 26% card payment volume growth.
John Rettig: As discussed in recent quarters, our go-to-market focus is on larger, higher-propensity-to-spend businesses, and we're seeing this focus lead to spending strength among newer cohorts of businesses.
John Rettig: For example, we saw a step up of more than 40% in card spend among the spending businesses we acquired in the last two quarters compared to the preceding two quarters.
John Rettig: Spend and expense interchange fees were 260 basis points in the quarter. Rewards were 47% of spend and expense revenue.
John Rettig: We added 1,600 net new spending businesses and had more than 36,000 spending businesses on our spend and expense solution at the end of the quarter Making us one of the largest providers of software powered corporate card solutions
John Rettig: Revenue from our embedded and other solutions, which includes the Financial Institution Channel, Invoice2Go, and other solutions, was $20 million, up 28% year-over-year.
Moving on to additional financial highlights.
John Rettig: Non-gap gross profit in Q1 was 307 million, up 17% year-over-year, and non-gap gross margin was 86%, which is above our targeted range for the low 80s due to float revenue and favorable product mix.
John Rettig: Our highly efficient business model enables us to consistently deliver a gross margin that is among best-in-class for software and FinTech companies.
John Rettig: Non-GAAP operating income was $67 million, representing a 19% non-GAAP operating margin and an expansion of 8 percentage points year-over-year.
John Rettig: We've created operating leverage from our core business as non-GAAP operating margin, excluding float revenue, expanded 10 percentage points year-over-year to 8%.
John Rettig: Non-GAAP net income was $69 million, up 33% year-over-year, representing a 19% non-GAAP net income margin and an expansion of two percentage points year-over-year.
John Rettig: Non-GAAP net income per fully diluted share was 63 cents, up 43% year-over-year.
John Rettig: Non-GAAP Buddha share count declined 8.2 million shares or 7% year-over-year primarily due to our initiatives to repurchase convertible notes and shares over the past 12 months.
John Rettig: During the first quarter, we repurchased $200 million worth of stock, retiring 3.7 million shares.
John Rettig: Given the timing of stock repurchases during the quarter, our non-gap diluted share count was reduced by approximately 1.2 million shares related to these recent purchases.
Shifting to our Outlook.
John Rettig: Our guidance continues to assume the macro and B2B spend environment remain consistent with recent quarters and that ad valorem payment volume growth and overall monetization rates increase modestly in the latter part of the fiscal year.
Now moving on to guidance.
John Rettig: For fiscal Q2, we expect total revenue to be in the range of $355.5 to $360.5 million. We expect core revenue to be in the range of $316 to $321 million in Q2, which reflects 15 to 17 percent year-over-year growth.
John Rettig: Float revenue is expected to be $39.5 million in Q2, which assumes our yield on FBO funds will be approximately 420 basis points.
John Rettig: Turning to our profitability outlook, we expect a sequential increase in operating expenses as we accelerate the pace of hiring. For Q2, we expect to report non-gap operating income in the range of $47.5 to $52.5 million and non-gap net income in the range of $48 to $52 million.
John Rettig: We expect non-GAAP net income per diluted share in the range of $0.44 to $0.48 in Q2 based on a share count of 109 million diluted weighted average shares outstanding. As a reminder, our guidance for non-GAAP net income includes a non-GAAP provision for income taxes of 20%.
John Rettig: Moving on to full year guidance. For fiscal 2025, we expect total revenue to be in the range of $1,439,000,000 to $1,464,000,000.
John Rettig: We expect core revenue to be in the range of $1,291,000,000 to $1,316,000,000, which reflects 15-17% year-over-year growth.
John Rettig: We expect float revenue to be approximately $148 million in fiscal 2025, which assumes a yield on FBO funds of approximately 400 basis points for the year and an exit Fed funds rate of 350 basis points as of June 2025.
John Rettig: On the bottom line, for fiscal 2025, we expect to report non-GAAP operating income in the range of $182.5 to $207.5 million and non-GAAP net income in the range of $181.5 to $201.5 million.
John Rettig: We expect non-GAAP net income per diluted share to be $1.65 to $1.83 based on a share count of 110 million diluted weighted average shares outstanding.
John Rettig: Note that our Q2 and full year guidance for share count and non-GAAP net income for share do not reflect the impact of future purchases under our share repurchase program.
John Rettig: For fiscal 2025, we expect stock-based compensation expenses to be less than 20% of total revenue.
John Rettig: In closing we are unlocking a vast market potential to automate financial operations for millions of Smbs. We believe bill is uniquely positioned to capture this opportunity with our platform large and expanding distribution ecosystem and talented team we have.
John Rettig: In closing, we are unlocking a vast market potential to automate financial operations for millions of SMBs.
John Rettig: We believe that Bill is uniquely positioned to capture this opportunity with our platform, large and expanding distribution ecosystem, and talented team.
John Rettig: Built a durable business with multiple levers to drive growth profitability and cash flow. We believe the investments, we're making today will support years of strong growth and an attractive long term profitability profile, which will lead to sustained shareholder value creation.
John Rettig: We've built a durable business with multiple levers to drive growth, profitability, and cash flow. We believe the investments we are making today will support years of strong growth and an attractive long-term profitability profile which will lead to sustained shareholder value creation.
Speaker Change: And now we will open up the call for Q&A.
Speaker Change: Thank you if you would like to ask a question. Please press star followed by one on your telephone keypad now if you change the one piece that staff and attitude.
And now we'll open up the call for Q&A.
© transcript Emily Beynon
Speaker Change: Thank you. If you would like to ask a question please press star followed by one on your telephone keypad now. If you change your mind please press star followed by two. When preparing to ask your question please ensure your line is unmuted locally.
Speaker Change: When comparing to ask your question. Please ensure your line is on mute legacy.
Speaker Change: Our first question comes true that comes from Andrew Schmidt from Citi Group.
Speaker Change: Andrew Your line is now open. Please go ahead.
Karen Rettig, Karen Sansot, Ren Lacerte
Speaker Change: Our first question comes from Andrew Schmidt from Citigroup. Andrew, your line is now open, please go ahead.
Speaker Change: Hi, Rene Hey, John Thanks for taking my questions and great results here.
Speaker Change: Wanted to dig in on taking it on just APR it sounds like you're having some success moving upmarket Derrick if you could just drill down on the strategy you can talk about what's working and then just from a model perspective may be a little bit about how that should manifest in terms of PPV or TPG for customers moving forward. Thanks, so much.
Andrew Schmidt: Hi, Renee. Hey, John. Thanks for taking my questions and great results here.
Andrew Schmidt: I wanted to dig in on just Bill APAR. It sounds like you're having some success moving up market there. If you could just drill down on the strategy and talk about what's working and then
Andrew Schmidt: Just from a model perspective, maybe a little bit about how that should manifest in terms of PPV.
Andrew Schmidt: Yes.
or TPV per customer moving forward. Thanks so much.
Andrew Schmidt: Thank you Andrew Yeah, we really are focused the past quarter on driving.
Karen Rettig, Karen Sansot, Ren Lacerte
Thank you, Andrew. Yeah, we really...
Andrew Schmidt: Lots more functionality for customers driving a lot more.
our focus the past quarter on driving.
Andrew Schmidt: Value for them is actually delivered results and so.
Lots more functionality for customers, driving a lot more.
Andrew Schmidt: We take seriously our commitments and our ability to accelerate revenue and profitability and kind of.
Andrew Schmidt: you know, value for them is actually, you know, delivered results and so.
Andrew Schmidt: You know, we take seriously our commitments and our ability to accelerate revenue and profitability and, you know, kind of...
Andrew Schmidt: Hit the rule of 40 is something that we're excited about it because of what we're able to do for our customers So and.
Andrew Schmidt: hit the the rule of 40 is something that we're excited about. It's because of what we're able to do for our customers.
Andrew Schmidt: Particular with <unk>, what we were able to do as we focused on the priorities that we talked about last year last quarter I should say in one of those was go to market and really focusing the team on driving more concentration on onboarding of customers that are larger.
Andrew Schmidt: In particular with AP and AR, what we were able to do is we focused on
Andrew Schmidt: the priorities that we talked about last year, last quarter I should say, and one of those was go-to-market, and really focusing the team on driving more concentration on onboarding the customers that are larger and helping them get success with the platform early. That was one of the examples we quoted in the recorded remarks, which was 40 percent increase in new spend for customers. Definitely, our focused efforts on go-to-market have made a difference, our focused efforts around the platform have made a difference.
Andrew Schmidt: And helping them get success with the platform early and that was one of the examples we quoted in the recorded remarks, which was 40%.
Andrew Schmidt: Increase in new spend for customers so.
Andrew Schmidt: Definitely our focused efforts on go to market and made a difference our focused efforts around the platform and made a difference and we think theres a lot of opportunity to continue to drive adoption across the F&B landscape just as a reminder.
Andrew Schmidt: and we think there's a lot of opportunity to continue to drive adoption across the SMB landscape. Just as a reminder, we have 4% of the APAR customers across the country and we gave the stat there that roughly 5% of the larger businesses have adopted an APAR solution. So there's a lot more room to go and we feel really good about the opportunities that we have in front of us.
We have 4% of the AP AR customers across the country and we gave the stat there that roughly 5% of the larger businesses have adopted an APR solution. So there's a lot more room to go and we feel really good about the opportunities that we have in front of us.
Andrew Schmidt: Okay.
Speaker Change: In terms of got NPV per customer part.
Karen Rettig, Karen Sansot, Ren Lacerte
Andrew Schmidt: Part of the question Andrew.
Speaker Change: In terms of the PPP per customer part of the question, Andrew,
Speaker Change: So in the first quarter for the Bill.
Speaker Change: Our platform the integrated platform, excluding <unk>, we did about 433 K per customer, which was up about 2% year over year and quarter to quarter for the rest of the year, we're expecting that to be flattish so pretty consistent with current results in that actually just reflects.
Speaker Change: So, in the first quarter for the bill APAR platform, the integrated platform excluding FIs, we did about $433K per customer, which was up about 2% year-over-year and quarter-to-quarter. For the rest of the year, we're expecting that to be flattish, so pretty consistent with current results. And that actually just reflects...
Speaker Change: Some of the uncertainty that exists in the external environment, we are making progress as I mentioned.
Speaker Change: some of the uncertainty that exists in the external environment. We are making progress, as Renee mentioned, attracting and retaining and growing with slightly larger businesses. So over a longer period of time, or in a more certain or more favorable economic environment, we would expect to see some expansion in that number. But short term, we're thinking that'll be flattish.
Attracting and retaining and growing with slightly larger businesses over a longer period of time or in a more certain or more favorable economic environment, we would expect to see.
Speaker Change: Some expansion on that number but short term, we're thinking that will be flattish.
Speaker Change: Got it. Thank you so much for that and then maybe just on take rate. If you just talk about just.
Karen Rettig, Karen Sansot, Ren Lacerte
Speaker Change: Got it. Thank you so much for that. And then maybe just on take rate, you can just talk about just, you know, vendor acceptance trends. It looks like, obviously, the take rate came in, you know, pretty stable up sequentially over the year, but maybe you could talk about just what you're seeing on that front. Thanks so much.
Speaker Change: Vendor acceptance trends it looks like obviously the take rate came in.
Speaker Change: Pretty stable up sequentially and year over year, but maybe you could just talk about just what youre seeing on that front. Thanks, so much.
Speaker Change: Yes, we've had a very focused effort over the last few quarters on engaging with suppliers and understanding how they are using the platform how they want to use the platform.
Speaker Change: And we've had a number of different initiatives around that.
Speaker Change: First I would say it would be on kind of the go to market and what we've done there is working with new suppliers and helping them onboard and get value out of the experience from day, one and that has helped us when you look at the overall kind of AD valorem across the platform, we were able to grow that quarter to quarter for the last few quarters and that feels really good.
Speaker Change: The other area that we focused on is going to be to continue to really drive automation for the suppliers and so we.
Speaker Change: If we look forward. This is not so much of what we just did but when we look forward for the rest of the year, we have automation capabilities that we're working on one that we have just launched in this quarter is more straight through processing for suppliers. So they get easier reconciliation get to save time.
Speaker Change: We feel good about the progress we're making. We're not at scale yet, so there's a ways to go in both growing our credit capabilities, optimizing losses, and scaling revenue growth, but we feel good about the trajectory that we're on.
Thank you both.
Thank you.
Speaker Change: Our next question comes from James Freedman from SIG, your line is now open please go ahead.
Hi, let me echo the congratulations here
Speaker Change: Just wondering how durable you're thinking that is. That's the first one. And then, Renee, in your prepared remarks you talked about the release of the integrated platform, and now you're adding the analytics layer. So, if you could give us kind of an update on the product side, how important that may be. Those are the two. Thank you.
Okay, thank you
Speaker Change: I think on the health of SMBs, one of the things I love about serving SMBs is that they're just resilient and they find ways to make things happen and to obviously serve their customers. And so the last year or so has required lots of resilience from SMBs and what we've seen is that
Speaker Change: It is, while it's still more of a wait-and-see economy versus a growth economy, it is one that seems to be turning more positive, and that's something that we feel good about. And it's because we're able to really give them a lot of value back.
Speaker Change: hearing from customers, which we hear all the time, that we save them over 50% or $75,000 a year because of our platform. That's meaningful and that allows them to grow their business in ways that they couldn't do without us. So I think the platform enables resilience and yet SMBs are resilient on their own and they're gonna continue to find ways to grow their business.
Speaker Change: On the second question, a lot of what we've been investing behind is really driving
Speaker Change: more functionality for our customers. And we've highlighted that, you know, obviously last quarter and this quarter, but just to kind of give you, you know, some of the ways we think about that investment, you know, we've.
Speaker Change: We've done investment and go-to-market to drive adoption. We've been investing in go-to-market around helping new customers get to spend on the platform sooner rather than later. That was the 40% increase in new spend for the S&E customers.
Speaker Change: compared to two quarters prior. We've been driving increased spend for accountant customers as they come on and this is all kind of go-to-market activities that have changed in the last six months where we've had that more heightened focus. In addition, we've been focused on supplier experiences.
Speaker Change: Supplier experiences are super important and it's not something that we were focused on prior to several quarters ago and what we've been able to do is supplier experiences drive a 10-point increase in FX revenue growth rate.
Speaker Change: That's in large part because of just the attention to onboarding those suppliers and customers with an FX need, as well as having capabilities in the product like local currency.
Speaker Change: In addition, you know, we've been engaged with the virtual car suppliers and understanding what they need and understanding how to help onboard them and to drive automation with straight-through processing.
Speaker Change: In addition, on that front, we have lots of opportunity to drive card payments across the platform.
Speaker Change: We've talked in general about ad valorem, the opportunity that Bill has.
Speaker Change: to spend across the platform is something that we're always focused on. And so when it comes to driving Avalor for suppliers, one of the ways that we are thinking about doing that is really driving this product that's inside a bill, which lets customers use.
Speaker Change: Spend and Expense capabilities of Divi inside of the Bill AP products so they can actually pay suppliers with a card because the supplier may need a card and the customer is able to influence that experience there. So that will give us the opportunity in the future to drive more cross-sell with the Spend and Expense platform.
Speaker Change: The highlight for me is that we have a rapid pace of innovation.
Speaker Change: We are growing in all of the different ways that we need to grow while we're investing aggressively behind you know maintaining and expanding our leadership capabilities. When I think about what I hear in the market others are investing to catch up and we're investing to get ahead. We're widening the gap.
and that really comes from a product and go-to-market perspective.
Thank you for the call.
Thank you.
Speaker Change: Our next question comes from Brad Seales from Bank of America. Brad, your line is now open, please go ahead.
Speaker Change: Oh, great. Thank you so much. I wanted to ask a question around where you saw the strength this quarter, incremental strength that is. Rene, early in the call you you'd mentioned enhanced go-to-market was already having an impact. I mean there's a lot that you're doing right now in the partner channel.
Speaker Change: in the direct channel, so would love to get your perspective on.
Speaker Change: you know what went well this quarter any color on that and then you know uh maybe for john if you could help articulate a little bit um where you saw what did you see within the spend volume obviously tpv for customer contributed to some of the upside this quarter but
Speaker Change: If you could just comment on the broad spend categories in your base and what you're seeing there on just the environment. Thank you.
Thank you, Brad.
We had
Speaker Change: I think talked about this last quarter. We have three, you know, main priorities across the business. One is to enhance the platform, make it simpler. Another is to expand payments across the platform. And the third is to deepen the ecosystem. And so when you ask the question about what went well, I would say things went well in all those areas.
on enhancing the platform.
Speaker Change: The ability that, you know, I just talked about enhancing the capability of local FX transfers for customers and suppliers that are receiving an FX transaction, that was important. Enhancing the onboarding process for suppliers receiving a virtual card, that was important.
Speaker Change: I think adding, you know, the capabilities of the spend and expense.
Speaker Change: platform into the bill platform so that we can get the customers involved in influencing how the suppliers receive payment. That's important. These are all things that are early stages, if you will, but we wanted to highlight them and they had an impact on the quarter. You know, on the go-to-market, I think the increased focus across the teams and understanding the segments that, you know, really drive different parts of growth and how we talk to them. That's just something that we are going to continue to get better at. That's, again, because of the scale we have. And then, you know, lastly, the ecosystem. We got to beta with our partner Xero. As a reminder, it's been, you know, less than a year since we've even talked about that partnership. We're moving fast. We're executing well. There's a lot of opportunity with other partners in the ecosystem and we're just in a
Speaker Change: a very unique spot. So I think across the board I think having clear strategies about what we're doing and executing on them that's what's going well for the company right now and it's something we're super focused on.
Thank you.
Speaker Change: Brad, to the spend volume part of the question, we've really seen stable volume for the last several quarters, if you think about the commentary, especially amongst.
larger customers, and I'd say now we're...
We're starting to see some green shoots.
Speaker Change: Again, also true with the larger businesses. In the past, we've talked about...
Speaker Change: spend contraction in certain categories that are leading indicators like real estate and facility spend, physical footprint, things like that. Now we're starting to see expansion in those same categories on a same store sales basis after four consecutive quarters of contraction. So that feels like a positive signal by itself. It's not needle moving for the bill business overall, just the percentage of the total payment volume that represents, but we think it speaks to the psychology and perhaps the positive outlook that SMBs have if they're expanding their physical footprint. So the spend volume trends seem positive to us and definitely more stable than a while back.
Great to hear. Thanks, John. Thanks, Rene.
Thank you, Brad.
Speaker Change: Our next question comes from Keith Walsh from Morgan Stanley. Keith, your line is now open, please go ahead.
Speaker Change: Thank you guys for taking the question and congratulations on that really solid quarter. It made me standing a little bit on Brad's question.
Speaker Change: Poor revenue growth, 19% in Q1. You guys are guiding for a deceleration into Q2. Anything in particular in Q1 that you don't expect to be repeated as we go through the year of like, why would you see that deceleration? Or is that just you guys embedding conservatism within an environment that's still, as you put it, John?
Not in growth mode yet.
Speaker Change: Yeah, I'll start and then I'll let John maybe give more specifics if I don't catch him. I mean the main thing is that
Speaker Change: We still see uncertainty in the economy, right? There's, you know, we just finished the election and now that's behind us and businesses have less to kind of be distracted by, meaning that, you know, a week ago there were two vectors that could have gone.
Speaker Change: either way for the economy. And now there's, you know, more, you know, clarity around the economy and the direction. And that will, I think,
Speaker Change: We are waiting for the clarity in the economy for SMBs to be able to make decisions about how to invest and grow. And so we're just going to be prudent until we see that clarity because we don't want to obviously, you know, get in front of anything that we haven't seen yet. And so we're just being prudent. And I think the opportunity for us is to continue to execute on the core things that drive the business. So anything else, John? No? Okay.
Thank you.
Speaker Change: Got it, so what do you mean when you say that?
Speaker Change: Yeah, it would be fair to say you guys are still believers in that sort of longer-term path back to a 20% plus growth rate.
Speaker Change: We absolutely are believers in the conviction that we have around driving growth for the multiple years ahead and and I think this is you know something that we're you know we've demonstrated that we have those capabilities and you know I'll let John you know speak with respect to the discussion we had at the end of FY 24.
John Rettig: Yeah, I mean, look, there's obviously a growth company going after a large, you know, emerging market and we expect to accelerate, you know, revenue growth from where we are today. If you look at our prepared remarks, we provided a handful of updates on key initiatives and the early impact that we're seeing from those initiatives.
John Rettig: This only increases our confidence and conviction and our ability to accelerate growth. As we talk about the implications for FY26, we'll get into specifics on that as we end FY25. Obviously, we wanted to provide some early thinking on that as we did in our last call, in part to give some insights into how we're thinking about justifying incremental investments and the impact that we think those will have. And we'll obviously provide additional details as we exit this year.
Thank you.
Yeah.
Outstanding. Thanks for taking the question, guys.
Thank you.
Speaker Change: As a reminder, if you'd like to ask a question on today's call, please press star followed by 1 on your telephone keypad now.
Speaker Change: Our next question comes from Taylor McGuinness from UBS. Taylor, your line is now open, please go ahead.
Taylor Mcguinness: Yeah, hi, thanks so much for taking the questions and congrats on the the quarter
Taylor Mcguinness: Maybe just on the core revenue guide, if I look at the full year guide, it looks like you guys raised it by more than the upside that you saw in 1Q. So in terms of what the drivers are of that, it sounded like take rate maybe was more in line with 1Q. Maybe you guys are seeing some green shoots on the TPB side, but could you just maybe talk about what you guys are seeing that drove that upside and what's giving you guys that visibility or feeling a little bit better? Thanks.
Speaker Change: on fire right now and I'm super excited about what we're doing and believe that we have a lot more opportunity to drive that.
in the first quarter, our full year 25.
Speaker Change: of that range, and it speaks to the stability that we see with the customer base, the success that we're having with slightly larger businesses, the continued growth in card spend across our platform, all forms of Avalor and payments, we're seeing growth. So we feel like the setup is good for us to continue to scale this year. And I'd say so far in our expectations for the year, we're doing exactly what we said we'd do in fiscal 25, increasing our investments, driving progress in the year on a path towards acceleration over a multi-year period.
Speaker Change: perfect and then maybe last one would just be on margins like the out performance and in the quarter was was really strong so could you maybe talk about I know John you made comments about as you look into 2Q accelerating hiring so with some of the out performance just a function of you guys maybe didn't like hit the hiring plans in one cue how much of that maybe was you know fine finding other areas of efficiency within the business maybe any additional color there and how we think about that going forward would be helpful
Sure, we do take
Speaker Change: the balance between growth and profitability seriously. So we are always looking for efficiencies in the business and creating operating leverage as we go. The incremental investments that we plan for fiscal 25 as I think I mentioned earlier are a little bit backloaded in terms of a hiring plan.
see the full effect of hiring in...
Speaker Change: in the first quarter. We obviously had a nice revenue beat and we flowed that through to operating income. We beat by 12.6 million. We did increase the full year by a little bit more than that, 13.8 million at the midpoint. So, you know, growth and increasing profitability are both things that we're trying to accomplish and feel good about the Q1 results, being able to support that.
Perfect. Thanks for the thoughts.
Thank you.
Speaker Change: And we have time for one more question. So the next question comes from Ian Black from Needon & Company.
Speaker Change: Ian, your line is now open, please go ahead. Thank you.
Ian Black: Hey guys, congrats on the show on your accounting partner ads. I know you're making improvements to better serve spend and expense users in that channel. What traction are you seeing? Thank you.
Speaker Change: Thank you, Ian. We are seeing, you know, a lot of focus in general internally on our accountants. So we have brought in new leadership, we've
Speaker Change: focused the teams on, you know, connecting with accountants more regularly. We've obviously, you know, highlighted the success, you know, with the SyncAssist, which really is for accountants that are supporting lots of different accounting platforms out there. So, you know, what I would say is the success we're seeing on Spend and Defense is that it's, you know, it's early days, but accountants are very interested, they're adopting, and there's a lot of opportunity for us to continue to drive adoption across all the accounting partners that we have.
Great, thank you.
Thank you. Thank you.
Speaker Change: And there are no further questions, so I'd like to turn the call back over to Renny Lacerte from the CEO.
Thanks for watching. Bye. Bye.
Speaker Change: Thank you everyone. Thanks for joining us today. I just want to thank the team for driving innovation at a really fast pace while executing with strong rigor across the business. We believe the initiatives and investments we are making today will lead to strong market adoption and years of profitable growth. Have a great evening.
Thank you.
Speaker Change: This concludes today's call. Thank you everyone for joining. You may now disconnect.