Q3 2025 BILL Holdings Inc Earnings Call
Good afternoon, and welcome to both third quarter of fiscal 2025 earnings Conference call.
Bill: Joining us for today's call are bill CEO, and founder and Atlas that.
Bill: President and CFO, John Rettig, Vice President of Investor Relations Conference call.
Kevin: I'd like to turn the call over to consult for introductory remarks, Kevin.
Kevin: Thank you operator, welcome to build fiscal third quarter 2025 earnings Conference call. We issued our earnings press release, a short time ago and furnished the related form 8-K to the SEC.
Kevin: Press release can be found on the Investor Relations section of our website at investors <unk> Com with me on the call today are enable assert chairman CEO and founder Bill and John Rettig, President and CFO.
Kevin: Before we begin please remember that during the course of this call. We may make forward looking statements about the future business operations target products and expectations of bill that involve many assumptions risks and uncertainties. If any of these risks or uncertainties develop or any of the assumptions prove incorrect.
Kevin: Actual results could differ materially from those expressed or implied by our forward looking statements.
Kevin: 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.
Kevin: 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.
Rene: Now I'll turn the call over to Rene.
Rene: Thank you Karen and good afternoon, everyone.
Rene: We delivered strong financial results in Q3, driven by disciplined execution of our strategy investments and our powerful platform and strength of our efficient go to market approach.
Rene: Core revenue grew 14% year over year non-GAAP operating income margin was 15% and was well ahead of the expectations. We set at the beginning of the quarter as we continued to drive efficiency across the business and.
Rene: In addition, free cash flow grew 44% year over year in Q3, representing a 25% margin.
Rene: During the quarter, we made strong progress against our strategic priorities.
Rene: Spaniard our capabilities for larger businesses enhance our payment portfolio extended our lead in the accounting channel and added a new distribution channel to our ecosystem. In addition, we are accelerating our AI growth strategy to change the game again for Smbs.
Rene: In Q3, our solution is automated the financial operations for over 488000 businesses and are critical to their everyday financial management.
Rene: They trusted us to process $79 billion in total payment volume across our intelligent platform.
Rene: With over 1% of GDP transacted on our platform, we believe our platform ecosystem and scale uniquely position us to serve Smbs everywhere.
Rene: The fact remains that the majority of businesses still use manual legacy processes to manage their back office.
Rene: At Bill we are seizing the opportunity to transform their financial operations for more than 6 million small and mid sized businesses in the U S who make trillions of dollars in BTB payments annually.
Rene: In addition to extending our reach we continue to expand the solutions, we offer smbs suppliers in our network.
Rene: Our value proposition is clear.
Rene: US the essential financial operations platform for Smbs.
Rene: Bill is a trusted partner to smbs across all types of industries.
Rene: Our platform simplifies financial operations for businesses from a small family owned business to fast growing startups to established and expanding mid market companies.
Rene: Moving complexity, providing more visibility and enhancing control we free businesses from their back office headaches to focus on what they care about most.
We are investing from a position of strength to make our platform smarter and more powerful.
Rene: Today I'll cover how we are creating tangible value for our customers suppliers and partners in four key areas.
First our advanced product suite for larger customers second progress on our supplier experience offerings third ecosystem expansion and the unlock of a new distribution channel and for our accelerated AI growth strategy.
Rene: To start we recently launched a suite of new advanced solutions for large businesses to help them with their more complex needs such as multi entity management procurement and mass payments.
Rene: Our advanced product suite creates ease visibility and control across these processes.
Rene: These innovations will not only free our customers from clunky and inefficient financial processes.
Rene: We'll also scale with their business expansion.
Rene: These innovations solidified bill is the financial operations platform that empowers businesses to grow and scale.
Rene: For example advice period, Los Angeles based firm with offices in five states is reinventing wealth management and using our new multi entity functionality to drive efficiency.
Speaker Change: Christine Remington accounts payable manager said and I quote we provide a range of financial services to our clients, including Bill pay oftentimes, we serve clients with multiple entities with some clients having over 30 active entities across the U S.
Speaker Change: Those multi entity function increases our efficiency, thus multiplying our productivity.
Speaker Change: This upgraded function provides visibility across our clients' businesses and enables us to prioritize and managed payments from a single location.
Speaker Change: We can do much more with fewer clicks the enhanced multi entity function has been one of the most impactful releases since I've worked with bill and quote.
Speaker Change: Bill was already providing significant productivity gains for advice period, and our increased focus on serving larger businesses created another significant increase in time savings and accuracy.
Speaker Change: This solution not only strengthens our position with existing customers, but it also opens doors to serve larger mid market companies.
Speaker Change: We also recently expanded our platform to include procurement solutions.
Speaker Change: We leverage our experience with more complex customers and adapted our smart AP NAR workflows to designed to streamline procurement solution for all Smbs.
Raymond a tarpaulin entered accounting firm is leveraging this new capability to further transform the financial operations of their clients.
Speaker Change: Michelle Hodges principle of finance and accounting solution said and I quote Bill has been a great technology partner for US It is supporting us to evolve our role to provide more strategic advice to our clients. We are excited about the new innovations coming from Bill with Bill procurement, we are now able to drive significant value by leveraging procurement service.
Speaker Change: As to solve another pain point for our clients.
Speaker Change: Bill's procure to pay solution provides efficiency accuracy and compliance and quote.
Speaker Change: Our expansion into procurement is an important step on our product innovation roadmap.
Speaker Change: We are bringing the same simplicity and ease of use that redefined the core AAP processes for hundreds of thousands of businesses to the painful disconnected procurement process that most smbs use today.
Speaker Change: This new capability gives businesses the ability to manage approve and track purchase orders with speed precision and control while at the same time, providing a new module to increase the value of our platform beyond payments.
Speaker Change: Our one stop shop platform delivers leading solutions for accounts payable accounts receivable spend and expense management forecasting working capital solutions and now procurement so businesses can gain control of their cash flow in one seamless experience.
Speaker Change: Now I would like to focus on our evolving supplier experience as the scale and reach of our network has grown we are increasingly focusing on the value proposition we offer suppliers.
Speaker Change: We have launched a series of solutions focused on the supplier side of <unk> transactions.
Speaker Change: Through our automated tools, we admit it's simple for over 7 million members in our network to connect with their trading partners.
Speaker Change: In addition to simplifying the connection process, we create a variety of payment options in financial services for both sides of transactions.
Speaker Change: With our core AAP solution, we transformed the way buyers pay now we are transforming how suppliers receive funds.
Speaker Change: Some suppliers on our network received payments from thousands of their customers via the <unk> platform.
Speaker Change: This puts us in a unique position to solve the challenges of delivering enterprise grade solutions that streamline the receipt of payments enhanced cash application processes and provide valuable insight for these large suppliers.
Speaker Change: We recently introduced a beta offering of an advanced <unk> solution for large suppliers, which addresses an important need.
Speaker Change: Simplifying the process of getting paid by thousands of small businesses.
Speaker Change: We expect to roll this solution out more broadly over the next several quarters.
Speaker Change: Process thing in reconciling large volumes of transactions from customers of all sizes in multiple payment methods is complex time consuming and error prone for these organizations.
Speaker Change: Our purpose built solutions significantly simplifies payment reconciliations by delivering consolidated daily remittance and payments. In addition, our advance ACTH solution automatically converts checks and <unk> payments across our platform to advance ACTH for the suppliers, which removes yet another layer of complexity.
Speaker Change: And the acceptance process.
Speaker Change: With the value proposition of this solution. We believe we can scale it to serve large suppliers across the country with billions of dollars in payment volume over time.
Speaker Change: Our platform also makes it easy for smaller suppliers within our network to optimize their cash flows.
Speaker Change: <unk> suppliers manage their cash flow day to day transaction by transaction and often have limited access to working capital solutions.
Speaker Change: We provide solutions that enable these suppliers to get paid faster sometimes weeks in advance.
Speaker Change: The transfer an invoice financing continue to show strong receptivity with suppliers and together have reached approximately $10 billion in cumulative payment volume since their launches.
Speaker Change: While we are still early in the adoption cycle. We are excited by the strong volume and high repeat usage for both offerings.
Speaker Change: Turning to our ecosystem expansion, we made great progress in Q3, broadening our diverse ecosystem, which enables us to efficiently reach and serve smbs wherever they are.
Speaker Change: Accountants are among our most important partners as they are in SMB as most trusted advisor.
Speaker Change: 9000, accounting firms have chosen bill to be their platform for client advisory services and that has driven significant client adoption for bill.
Speaker Change: Our initiative to double down on accounts is paying off in Q3 net adds from the accounting channel grew sequentially and increased over 60% year over year.
Speaker Change: As we have discussed previously our strategy with financial institution partners involves embedding multiple AD valorem payment offerings and our white label solutions.
Speaker Change: We are happy to report that we now have six banks that utilize at least one of our Avalon products with one institution adopting four distinct offerings.
Speaker Change: We are leveraging this learning from our Fi partnerships to unlock new distribution partners with our embedded platform.
Speaker Change: I am pleased to share that zero is now GA with our new embedded platform together, we are helping small businesses to streamline their accounts payable and make cash flow management, even easier and more accessible.
Speaker Change: Part of our strategy and investment behind our embedded capabilities is to enable our larger customers to easily build the experiences they need with our Apis.
Speaker Change: We continue to see strong adoption momentum of our spend and expense API larger businesses value the simplicity and seamless integration of our solution, notably businesses utilizing the API of a spend level that is much higher than what we see on average.
Speaker Change: For example share today highlight the innovation progress across the company on supporting our FY 'twenty five strategic priorities of enhancing our platform expanding our payment capabilities and deepening our ecosystem.
Speaker Change: Finally, I would like to focus on our AI initiatives. This year, we significantly increased our investment in AI for both internal and customer facing experiences we.
Speaker Change: We believe these investments will continue to drive efficiency and change the game for Smbs and how they manage their finances.
Speaker Change: We envision a future where even the smallest businesses can access the same financial operation capabilities as the fortune 500, except without the large teams that people they employ.
Speaker Change: We are building a team of AI powered finance agents, we are uniquely positioned to direct these agents at the payables receivables procurement and cash management processes that have always been a challenge for smbs from both a time an accuracy perspective.
Speaker Change: We believe these agents will be a significant unlock for smbs as it will free them to spend more time on the things that matter and provide them with additional insight to run their business.
Speaker Change: Our scale of deep experience and diverse payments ecosystem will provide smbs with a competitive advantage on day one.
Speaker Change: This vision is realized through two foundational assets inherent to our scale and advanced data driven understanding of customer behavior and the rich granular data context, we possess across the entire customer supplier ecosystem.
Speaker Change: The extensive and proprietary data asset derived from our platform comprising billions of dollars in payments millions of invoices and receipts will be the backbone of our AI models rely on provide.
Speaker Change: Providing critical insights into operational workflows supplier relationships payment preferences and risk management protocols.
Speaker Change: Our data foundation enables the robust deployment of AI agents driving highly contextual automation to redefine the efficiency of F&B financial operations.
Speaker Change: Since pioneering this category we've continuously reinvented, how we serve smbs with innovative solutions now.
Speaker Change: Now AI is accelerating our ability to transform financial operations and further eliminate the mundane tasks that burden smbs.
Speaker Change: We're excited to share more AI driven updates in the quarters ahead.
Speaker Change: I am also very pleased about the caliber of talent, we continue to track to our team. We are thrilled to welcome Mike Cherry as our EVP of software solutions.
Speaker Change: Mike is a world class innovation leader with extensive experience in scaling product portfolios.
Speaker Change: He has over 20 years of valuable expertise and building for smbs, including at square and Gusto.
Speaker Change: We're confident that Mike's proven track record in driving innovation product expansion and adoption will significantly contribute to the expanding growth of our platform.
Speaker Change: Before I turn the call over to John to talk more about our results and outlook.
Speaker Change: Want to touch on the macro climate and provide some context on what we are observing.
Speaker Change: Smbs are adapting to the dynamic macro environment changes in behavior are emerging we are seeing signals that businesses are managing their spend more closely by making fewer transactions and slightly decreasing their overall spend.
Speaker Change: We know that Smbs are agile and resilient and they are looking to build to help them manage the current environment.
Speaker Change: We do that by transforming their financial back office from a source of frustration into a powerful and insightful Command center.
Speaker Change: SMB is need for automation and control will only increase from here the opportunity for bill is vast and with our leading platform diverse ecosystem and proven scale. We are very confident in our ability to capture this market has spearheaded the adoption of <unk> financial operations for Smbs.
Speaker Change: In conclusion in Q3, we accomplished what we said we would do and more we delivered strong revenue growth strong profitability and significant cash flow. In addition, we invested in driving more innovation to expand the value we create for our customers and suppliers in our network.
Speaker Change: With our market leadership, we are driving and pushing the category forward Bill is the essential financial operations platform for Smbs now I'll turn the call over to John.
John Rettig: Thanks, Renee and Q3, we delivered profitable growth and meaningfully exceeded our non-GAAP operating income expectations, our disciplined execution drove healthy monetization expansion strong customer acquisition and significant free cash flow in the quarter.
Speaker Change: At the end of fiscal 2024, we identified key investment areas across our platform supplier network and distribution ecosystem to drive long term growth and capture the large market opportunity ahead.
Speaker Change: We've made significant progress on these priorities through the first three quarters of fiscal 2025, and we're seeing positive trends on customer adoption and payment adoption I'll provide a few examples.
Speaker Change: We enabled local transfer capabilities in dozens of countries, which is a notable enhancement to our international payment solution.
Speaker Change: This new feature allows near real time delivery across border payments.
Speaker Change: We are observing solid adoption of local transfer, which is driving wallet share gains with customers leveraging our international payment product further cross border transactions. This gives us confidence for the next wave of international payment innovations and our ability to drive adoption and growth.
Speaker Change: In the quarter, we enhanced our card portfolio capabilities, we are deploying our comprehensive card portfolio to drive broader adoption. In addition to traditional virtual cards, we're enabling the build debit card for use by our E&P customers to drive growth in virtual card acceptance leveraging the existing relationships between buyers and suppliers.
Speaker Change: Our customers are getting the tremendous value of improved efficiency and reporting as well as lower transaction fees.
Speaker Change: We are seeing early signals of good adoption for this solution.
Speaker Change: On the supplier experience front, we expanded our product offerings and go to market team to better enable enterprise suppliers to process large volumes of payments from their customers who are used to build platform.
Speaker Change: Since Bill has substantial scale as an SMB payment aggregators for many large suppliers they've asked for more tools tailored to the enterprise and we're delivering rapidly.
Speaker Change: Our new advanced <unk> solution enables suppliers to reconcile payments at scale and with these we are excited by the potential of this product to drive value creation for suppliers and bill through an AD valorem pricing model.
Speaker Change: In support of this opportunity. We are also building a supplier focused sales team to expand and convert our pipeline.
Speaker Change: Shifting to our distribution ecosystem, we are broadening our reach with accounting firms.
Speaker Change: In addition to driving accelerated customer adoption of our <unk> solution. Our concerted efforts from both product and go to market are unlocking the accounting channel as a cross sell engine in Q3 accounting firms accounted for nearly half of spend and expense cross sells.
Speaker Change: And our and bad channel, we expanded our ability to seamlessly integrate bill AP workflows into the core tech stack of our customers and partners leveraging our Apis similar to our earlier initiatives where spend and expense.
Speaker Change: This allows businesses to develop integrations customized to their operations and enables partners to build new offerings for their clients.
Speaker Change: Thousands of customers and accounting partners are already taking advantage of our Apis.
Speaker Change: This new capability leads to volume growth as an average we experienced higher TPB per customer when our Apis are used.
Speaker Change: In summary, we are enhancing the value proposition of our platform for Smbs and partners and expanding our target market as we execute diligently against our strategic priorities.
Speaker Change: We believe the progress we're making in fiscal 2025 will become material sources of value creation for customers partners and suppliers and position us to deliver sustainable revenue growth and margin expansion over the long term.
Speaker Change: Now shifting to our Q3 results.
Speaker Change: We delivered profitable growth in Q3 with core revenue, increasing 14% year over year.
Speaker Change: We drove efficiency in our business and produced a non-GAAP operating margin of 15%.
Speaker Change: Additionally, we generated $91 million in free cash flow and our free cash flow margin was 25%.
Speaker Change: Now for some more details about the quarter total revenue was $358 million in Q3 up 11% year over year.
Speaker Change: Core revenue, which includes subscription and transaction fees was $320 million up 14% year over year.
Speaker Change: Float revenue was $38 million and our yield on <unk> funds was 423 basis points in the quarter.
Speaker Change: Revenue from our integrated platform, which includes our bill.
<unk> and spend and expense solutions, but excludes the financial institution channel was $302 million in Q3 up 15% year over year.
Speaker Change: Within our integrated platform revenue from our Bill APR solution was $164 million up 10% year over year.
Speaker Change: Total payment volume grew 10% year over year, which was slightly below our expectations.
Speaker Change: TPB per customer was 2% lower than the year ago period, due to the leap year effect and smbs proactively managing their expenses.
Speaker Change: In Q3 customers scaled back their spend on some purchases, resulting in lower TPB per customer and transactions per customer customers.
Speaker Change: Customers began to moderate spend and the wholesale trade real estate payroll in PEO and construction categories.
Speaker Change: We delivered solid bill APR payment monetization expansion in Q3, primarily fueled by the strength of our emerging AD valorem products, including instant transfer pay by card and invoice financing.
Speaker Change: In addition, monetization benefited from payment mix due to seasonally softer TPB in the March quarter.
Speaker Change: Our payment portfolio strategy is proving effective the newer AD valorem offerings are contributing to monetization and are important levers as we navigate virtual card acceptance friction in cross border trade uncertainty with international payments.
Speaker Change: During the quarter FX losses abated, as we increased our FX trading frequency to minimize currency volatility exposure.
Speaker Change: In March we raised prices on checks and ACA payments for new customers. So this had minimal impact on Q3, given the timing of the price change. These updated prices will be applied to our existing customer base starting in may.
Speaker Change: In Q3, we continued our momentum penetrating the market.
Speaker Change: Adding 4200, net new build APR customers driven by strength in our account and channel.
Speaker Change: We now have 164800 customers using our bill APR solution.
Speaker Change: Also within our integrated platform revenue from our Bill spending expense solution was $138 million up 21% year over year, driven by 22% card payment volume growth card spend per customer increased 3% year over year.
Speaker Change: We observe good growth in card spend on travel entertainment and retail in Q3.
Speaker Change: We are somewhat cautious that near term uncertainty could introduce headwinds to the spend categories.
Speaker Change: Spending expense interchange fees were 258 basis points in the quarter and rewards expense was 50% of spend and expense revenue.
Speaker Change: We added 1800, net new spending businesses to our spend and expense solution in Q3, bringing our total spending businesses to 39500 as of the end of Q3.
Speaker Change: Our focus on accountant is working and contributing to growth in net adds.
Speaker Change: Revenue from our embedded and other solutions, which includes the financial institution channel invoice to go in other solutions was $19 million.
Speaker Change: Moving on to additional financial highlights our emphasis on driving efficient growth enabled us to deliver non-GAAP gross profit of $304 million in Q3, reflecting an 8% year over year increase in our non-GAAP gross margin of 85%.
Speaker Change: Furthermore, we generated non-GAAP operating income of $53 million, yielding a 15% non-GAAP operating margin.
Speaker Change: Note that this includes a one time $5 $7 million benefit due to the refinement of our methodology for estimating reserves for credit losses.
Speaker Change: non-GAAP operating margin, excluding the benefit of float revenue was 5%.
Speaker Change: non-GAAP net income was $59 million for the quarter, representing a 16% non-GAAP net income margin, while non-GAAP net income per fully diluted share was <unk> 50.
Speaker Change: Which exceeded the top end of our guidance range by <unk> 12.
Speaker Change: We have a strong balance sheet with significant liquidity, which provides us with important optionality to invest behind our growth strategy.
Speaker Change: We ended the quarter with $2 2 billion in cash cash equivalents and short term investments.
Speaker Change: Now shifting to our outlook we.
Speaker Change: We are bullish on our prospects to capture a large share of the SMB market and we are investing with discipline to accelerate growth.
Speaker Change: We believe our leading platform unique distribution ecosystem large network and product innovation roadmap, we will enable bill to extend our leadership position and set the standard for enabling financial operations automation for Smbs.
Speaker Change: While we are investing and executing to optimize for long term growth. We're also navigating a more challenging near term business climate current economic conditions present, multiple uncertainties that smbs are confronting including the impact of shifts and physical and trade policies.
Speaker Change: In Q3 and in April we saw Smbs adjust their spend patterns in response to the environment, they're operating in.
Speaker Change: Taking recent trends and increased uncertainty into consideration we have adjusted our near term outlook to account for the more challenging environment. As we expect the early signals of BW spend pattern changes will translate into constrained near term TPB per customer growth and monetization expansion. We are confident in our ability to successfully execute and occur.
Speaker Change: Current environment and that our fiscal 2025 investments provide the levers to accelerate revenue growth as conditions improve.
Speaker Change: We will continue our approach of balancing growth and profitability through this cycle.
Speaker Change: We will provide more color on our fiscal year 2026 growth and profitability outlook during our August earnings call.
Speaker Change: Now onto guidance for fiscal Q4, we expect core revenue to be in the range of 335 to 345 million, which reflects 11% to 15% year over year growth. We expect total revenue to be in the range of 375 to $380 5 million in Q4.
Speaker Change: <unk> revenue is expected to be $35 5 million in Q4, which assumes a yield on our <unk> funds of approximately 400 basis points.
Speaker Change: Turning to our profitability outlook, we are managing the business closely to create efficiency and operating leverage as we scale for Q4, we expect to report non-GAAP operating income in the range of 43 to 48 million, which reflects proactive adjustments to operating expenses to increase efficiency, which includes embracing AI tools across the company.
Speaker Change: We expect non-GAAP net income in the range of $46 $5 to $50 5 million and non-GAAP net income per diluted weighted average share in the range of 39 to 43 and Q4 based on a share count of 118 million diluted weighted average shares outstanding.
Speaker Change: Moving on to full year guidance for fiscal 2025, we expect core revenue to be in the range of $1 $290 million to 1.300 billion, which reflects 15% to 16% year over year growth. We expect total revenue to be in the range of $1 $450 million to $1 $460 million.
Speaker Change: We expect float revenue to be approximately $160 million in fiscal 2025, which assumes a yield on FPL funds of approximately 435 basis points for the year and an exit fed funds rate of 425 basis points as of June 2025.
Speaker Change: On the bottom line for fiscal 2025, we expect to report non-GAAP operating income in the range of $226 two to $231 2 million and non-GAAP net income in the range of 236, 7% to $240 7 million.
Speaker Change: We expect non-GAAP net income per diluted weighted average shares to be $2 <unk>.
Speaker Change: To $2 <unk>.
Speaker Change: Based on a share count of 115 million diluted weighted average shares outstanding.
Speaker Change: Note that our Q4 and full year guidance for share count and non-GAAP net income per share do not reflect the impact of future purchases under our share repurchase program.
Speaker Change: For fiscal 2025, we expect stock based compensation expenses to be approximately 17% of total revenue, which is a reduction of approximately $40 million and expense from our beginning of the year estimates, reflecting our commitment to evolve our equity programs in order to create expense efficiency.
Speaker Change: In conclusion, we are pleased with our financial and operational results for the quarter, we delivered strong revenue profitable growth and meaningful cash flows while driving rigorous execution and innovation at scale, there's a tremendous.
Speaker Change: This opportunity ahead for bill to power Smbs forward.
Speaker Change: The progress we've been making strengthens our position to capitalize on the market opportunity as we do so we believe <unk> compelling value proposition strong business model and capital structure will enable us to generate meaningful and sustained growth and value creation for shareholders and now we will open up the call for Q&A.
Speaker Change: Thank you.
Speaker Change: Press Star followed by the number one if you'd like to ask a question and then showing your devices, Amit you likely when it shorts anticipate.
Speaker Change: Biasi limit yourself to one question and one follow up to allow everyone to participate.
Ian Blackley: Our first question today comes from Ian Blackley Needham <unk> company.
Speaker Change: Please go ahead your line is open.
Ian Blackley: Hi, Thank you for taking my question then.
Ian Blackley: I know you guys called out success with accountants adopting very.
Ian Blackley: Those integration how are you seeing cross sell now natively integrated into the solution.
Ian Blackley: Amongst the broader base.
Speaker Change: Thank you you answered the question.
Speaker Change: Okay do you invest behind the platform to make the simplest experience for customers to drive.
Speaker Change: Really all the payment products and solutions that we have across the customer base.
Speaker Change: And the highlight on accounts is that as we continue to put more muscle behind that both from a go to market perspective, as well as from a product perspective accounts are being receptive we have a significant opportunity inside of the account base. As a reminder, we have ever 9000 firms across the country that use our product they have used our product to actually re.
Speaker Change: Their practice they have adopted the client advisory service category and side of their practices. They have many more customers that are just on our ready to build platform. So we see the ability to actually drive cross sell is an important indicator of the overall opportunity that we have accounts as we continue to knit our.
Speaker Change: Solutions together and continue to expand the capabilities of our platform. We believe is going to be a huge unlock for accounts to be able to drive more business inside of their practice and that's going to be great for bill So super excited about the progress so far.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from.
Speaker Change: And Huang with Jpmorgan. Please go ahead.
Speaker Change: Okay.
Speaker Change: I Hope you can hear me okay.
Speaker Change: I wanted to ask on the investments and if your confidence level has changed in the last 90 days with respect to the return that youre expecting including a little bit of a take rate expansion, which we saw.
Speaker Change: As well as the acceleration in revenue just what's the progress report there since we last got together.
Speaker Change: Thanks, Tien tsin, the confidence across the last 90 days.
Speaker Change: Im inside the company continues to increase obviously thats different than outside the company, but what I see inside the company is the continued execution across the company is actually driving the results that we set out to do.
Speaker Change: Some of Thats around the organization the team we've talked about that continuing to add more folks onto the team that can kind of execute across the broad platform that we built but the thing that we highlighted in the call was the investments we made this year around our key priorities and key initiatives. We are executing on we're getting things in the market product execution in a market that is.
Speaker Change: <unk> customers and suppliers to experience things differently than what they had before and we think as we continue to simplify the experience as we continue to add to the platform to continue to really drive more linkage between the front door in the back door, which is the buyer and suppliers, we think thats going to actually drive the.
Speaker Change: The monetization of the material growth that we see over time, so I would say the confidence that the company is we're seeing that there is lots more to go do and we're super excited about what we've delivered to date.
Speaker Change: Yeah.
Speaker Change: Got it great and then just my quick follow up just I heard the update on the on.
Speaker Change: On the spending and I'm curious just any interesting observations from the April trends, if there's something that you could share and really I know you've seen different cycles and I've asked you this before but.
Speaker Change: Would you be able to compare what youre seeing with the questions around tariff in.
Speaker Change: Confidence with Smbs anything to learn from past cycles that might apply here.
Speaker Change: It's a really a great great question and we spent a lot of time thinking about this and I would say at the highest level I don't think SMB is I've seen this much uncertainty since the beginning of Covid.
Speaker Change: Uncertainty brings lots of unknowns unknowns actually leads to stifling growth so instead of folks actually.
Speaker Change: Batting down the hatches and setting sale there just battening down the hatches right theyre not able to do anything that is proactive and so the signals that we've seen that we saw at the end of Q3 that informed how we looked into the future as we saw fewer transactions per customer and.
Speaker Change: And we saw slightly decreased spend per customer and so the opportunity.
Speaker Change: For Us obviously is to continue to make sure that our platform is the thing that actually it makes it easy for businesses to do just that manage their business and so when I think about the uncertainty that's out there I also think about the knowns that we have and there are a lot of unknowns across the business that are super valuable and.
Speaker Change: It really kind of.
Speaker Change: Indicate the confidence that we have in the business first is that we just have a massive market in front of us.
Speaker Change: We know SMB is better than anybody from the financial operations perspective, we've been doing this longer than anybody and we've got the expertise internally and the scale from customers to be able to learn at a very fast pace.
Speaker Change: And we also know that SMB is a resilient so for them. This is a speed bump it's not a roadblock.
Speaker Change: And.
Speaker Change: We're just at the beginning of developing this market with 4% roughly penetration across the employee base in this country theres lots of opportunity to do and so another known we have is that we've built a platform and we are a platform company we.
Speaker Change: We have pioneered a category that nobody else has done yet and our ability to kind of leverage that that learning from pioneering in that learning from all the data that comes together on the scale of nearly 1% of GDP that creates opportunities for results and so the data set we have as another known our ability to leverage our robust and diverse ecosystem.
Speaker Change: Another known when it comes to bill and our opportunity to kind of make our platform. The choice platform for Smbs. So they can manage their business in these times or any times.
Speaker Change: That phenomenon and that's proven and so I feel really good about obviously, what we're able to do to help smbs understanding though that this is the greatest amount of uncertainty that they've seen since the beginning of COVID-19.
Speaker Change: Yeah, Okay. Thank you for the perspective.
Speaker Change: Thank you.
Speaker Change: Our next question is from Jackie <unk> with autonomous. Please go ahead.
Speaker Change: Hey, good afternoon. Thanks for taking the question maybe just following up on the macro can you can you give us a sense for how youre thinking about <unk>.
Speaker Change: The impact from tariffs on the cross border transaction revenue.
Speaker Change: Revenue and I guess related to that I mean, how should we think about it.
Speaker Change: One I guess the revenue exposure from cross border transactions and two are you seeing any preference.
Speaker Change: Between U S dollars over local currency payment options and then I guess third how do you. How do you think about the mix of that cross border payments business that bill is it.
Speaker Change: <unk> 'twenty goods versus services, and then any thoughts on the mix of geography, I know theres a lot in there but.
Speaker Change: Some questions on it thank you.
Speaker Change: Okay.
Speaker Change: Yes, thanks for the question Ken.
Speaker Change: So let me let me start with the last part of your question, which is the mix.
Speaker Change: The vast majority of the transactions that our customers perform with international suppliers are for services.
Speaker Change: With that said, we do have.
Speaker Change: A portion of spend that happens for goods and that's where we've seen maybe the beginning of some shifting behaviors associated with some of the U S. Dollar corridors like like China, and the potential for just movement between countries and different types of transactions.
Speaker Change: Haven't necessarily experienced.
Speaker Change: Any significant shift between USD and local currency at the moment and part of that I think comes from the introduction that we've had recently of our improved international payment product with local transfer capability to increase speed it lowers costs and increased certainty and so we've seen some positives associated with that primarily driven.
Speaker Change: Primarily resulting in increased share of wallet. So no signals yet on shifts between those two other than the increased share of wallet and in terms of overall FX exposure.
Speaker Change: The primary impact that we've seen with the volatility in the U S. Dollar over the last couple of quarters has been FX gains and losses.
Speaker Change: In the third quarter, we actually made significant progress on that we reduced losses by approximately 65% as we implemented new hedging and trading guidelines and so we're making.
Speaker Change: Positive momentum there so all in all there definitely is some.
Speaker Change: Certainty that needs to play out with international payments, but.
Speaker Change: It feels like our product improvements are helping customers.
Speaker Change: Where we do have exposure to FX in certain corridors its more contained than being our overall product revenue.
Speaker Change: Yeah.
Speaker Change: Okay. Thank you John.
Speaker Change: Yep.
Speaker Change: Yeah.
Speaker Change: Next in queue, we have.
Speaker Change: Quinn Cowboy with Morgan Stanley. Please go ahead.
Speaker Change: Hey, Renee Hey, John Thanks for taking the questions here.
Speaker Change: It's really great to see all the new capabilities that you're adding to the platform with procurement, obviously finmark and so when you bring in making here too to the leadership team. So just curious how youre thinking about at a high level and maybe the pricing and packaging of the software platform now that you've added on all of these capabilities and our body more value to our customers.
Speaker Change: I think Chris there is so much opportunity for us across the extension of the platform, which we've talked about.
Speaker Change: And part of what we've been doing over the last year of setting the table for us to take action on things like pricing.
Speaker Change: You've seen that impacted.
Speaker Change: Impacted our transactional pricing protection.
Speaker Change: There's plenty of opportunity there and we'll talk more about that as we come up with the plans and share the plans with folks on the calls in the coming quarters, but I would agree that.
Speaker Change: The product set that we have becomes more and more valuable for businesses and what we're seeing inside of the larger businesses that we serve and the examples that we gave with them advice period end.
Speaker Change: Sure.
Speaker Change: Raman.
Raman: Accounting firm these capabilities when it comes to procurement and multi entity. These complex things save a tremendous amount of time and one of the things that I get totally jazzed about is that we invented the category that save people a lot of time, we've said in the past that stage and 50% to 75% of the time, but when you think about AI and what AI is going to enable.
Raman: To do it's going to be significantly more time and that is going to be a catalyst I think for adoption across the SMB ecosystem and it is something thats going be a catalyst for how we think about pricing.
Raman: Out of the product as well so thank you for the question.
Raman: Okay.
Raman: Excellent thanks for that.
Raman: Thank you.
Andrew Schmidt: Our next question comes from Andrew Schmidt with Citigroup. Please go ahead.
Andrew Schmidt: Hey, Renee Hi, John Thanks for taking the question a lot of good stuff here I appreciate all the comments.
Andrew Schmidt: Maybe I could just ask two questions on just payments monetization within bill AP AR and ask them. Both upfront I guess the first is whether you could just decompose the take rate expansion.
Andrew Schmidt: In the fiscal third quarter, obviously looks sounds like lower FX losses, or part of that AD valorem mix etcetera, but love to get a better read on that and then the second is.
Andrew Schmidt: Clearly you are rolling out a number of payment modalities here heading into FY 'twenty six.
Andrew Schmidt: Maybe going back to <unk> question, a little bit also.
Andrew Schmidt: Maybe talk a little bit about sort of the early reads on.
Andrew Schmidt: Some of the high sort of the high potential products invoice financing advance ECH et cetera and that how.
Andrew Schmidt: <unk>.
Andrew Schmidt: How those are shaping up the influence your confidence in take rate stability and expansion going forward into next year. Thanks, So much.
Speaker Change: Thanks for the question Andrew regarding the Q3 take rate expansion as you know we have lots of levers at our disposal.
Speaker Change: We went into the quarter, indicating we expected expansion in Q3, and that's exactly what we delivered I'd say, there's three main drivers a quarter to quarter first and definitely most important was volume growth on some of our emerging.
Speaker Change: Valorem payment products, so that portfolio that includes instant transfer pay by card invoice financing and are a payment offering.
Speaker Change: All grew nicely second as I mentioned earlier, we had lower FX losses in the quarter from some of the proactive changes we've made and then third and finally I would say.
Speaker Change: As we mentioned in prepared remarks, there was also a small positive associated with lower seasonal TPB in the March quarter versus the December quarter. So these things combined led.
Speaker Change: Led to the strength in Q3 and it played out pretty much as we were expecting this portfolio approach that we're taking which is the strategy. We adopted some time ago I think positions us well into the second part of your question around.
Speaker Change: Payment methods and how we think about FY 'twenty six and beyond.
Speaker Change: Obviously early with some of the products that we mentioned in prepared remarks, including.
Speaker Change: Our advanced ACTH product and and other capabilities that we're launching we're pretty far along the path with invoice financing and some of our real time payment capabilities and I would say.
Speaker Change: Generally speaking the feedback is very positive we have a long way to go to drive adoption and see material financial growth and results flow through the P&L, but our early reads are constructive it gives us confidence that the investments that we've made in fiscal 'twenty five to set us up for.
Speaker Change: Growth in fiscal 2006 and beyond.
Speaker Change: Been working and we're expecting a good ROI from the incremental investments we made in 'twenty five and a large part of that has to do with our confidence in some of the payment monetization and payment adoption do we expect to drive.
Speaker Change: In the near future.
Speaker Change: Very helpful. Thank you John.
Speaker Change: Thanks, Andrew.
Speaker Change: The next question comes from Darrin Peller with Wolfe Research.
Speaker Change: Your line is open.
Speaker Change: Yeah.
Speaker Change: Hey, guys. Thanks.
Speaker Change: So I'll echo the traction we saw in the PMA monetization side was we felt strong.
Speaker Change: Sequentially.
Speaker Change: And I understand there's obviously cycle.
Speaker Change: And the backdrop now, but when we think of the structural that youre benefiting off the take rate side.
Speaker Change: Number one I guess is there any reason why that's not the trajectory is not sustainable from your perspective, and I know you had originally thought at the end of the year would be a better or similar or better take rate in the beginning of the year I think you said flat year over year.
Speaker Change: Versus the beginning of the year.
Speaker Change: So if you could just reiterate where their fourth quarter would be similar to first quarter again, and then more importantly, when we think of 26 again, you had talked about hoping to get 20% type growth again, I understand that it's a more shaky macro but what are your thoughts there just given what you can control great guys.
Speaker Change: Yes, thanks for the question Darrin.
Speaker Change: So in terms of the Bill APR take rate you're right. We were originally expecting expansion.
Speaker Change: On the heels of volume growth in Q4 across the entire AD valorem product portfolio, we have.
Speaker Change: Shifted our estimates and our expectation for this fourth quarter to be similar to the third quarter.
Speaker Change: This is primarily related to some of the signals that we started to see in Q3 regarding some changing behaviors related to spend across discretionary categories transactions per customer and certain AP customer industries, and then as we said.
Speaker Change: Some expectation that we have around the implications for trade policy and things like that on the FX portion of our of our international payment volume. So all those things considered we're expecting similar monetization in Q4 versus Q3, but as it relates to FY 'twenty six obviously there is.
Speaker Change: Many.
Speaker Change: Many unknowns there is a lot of uncertainty as it relates to the current environment, but as we look past the very short term.
Speaker Change: Believe we have many levers across the payment for portfolio to return to consistent monetization expansion, how that plays out on a quarter to quarter basis and relates to payment volume and adoption of our products will obviously lay that out when we get to August and talk about our FY 'twenty six overall plan.
Speaker Change: Okay. Thanks.
Speaker Change: Good execution guys. Thank you.
Speaker Change: Thank you thanks Darren.
Speaker Change: The next question comes from Alexander Mark Craft with Keybanc. Please go ahead.
Speaker Change: Okay.
Rene: Thank you hi, Rene hedge on Rene curious on your comments on deploying agents.
Rene: Cross Bill in sort of the Gen tick AEP.
Rene: Strategy or just sort of curious what that looks like for a for a bill user and then if you could give some sense of how that could change how customers are interacting with the platform whether it's in the form of.
Rene: Higher transaction intensity that our wallet share speed of Onboarding and things like that would be great to understand how that could benefit the bill model. Thank you.
Speaker Change: Great. Thank you. Thank you Alex for the question.
Speaker Change: I think you can hear that obviously, we're excited I think a lot of folks in the industry are excited about the opportunity that AI delivers to those in software and technologies you actually make more of an impact. So we've been leveraging AI as part of the company for a while right it's been part of that.
Speaker Change: Money moving part of the data entry that we've done and that's been a great learning point for us to understand how to actually take it to the next level.
Speaker Change: And understanding how the tools are developed over the last year has really allowed us to think more freely about this <unk> experience and so when I think about what smbs have to deal with every day. They have a lot of crap that to deal with it is hard to actually be an SMB I've lived that life My parents.
Speaker Change: With that life. It is super hard and they have to wear many hats and if you think about what a large multinational fortune 500 company has they've got teams of people doing things and so the employees and the costs are something that F&B has can have and we are uniquely positioned to build agents that will be targeted at.
Speaker Change: How do you simplify the payables process the receivables process the procurement process. The <unk> process to cash management processes. These are things that are already part of our platform, but to use agents to actually do the tasking to tee up the human in the loop. We think is a unique opportunity to really enable smbs.
Speaker Change: Be free to get back to what they love and that's what's so exciting for me about AI is that people get a chance to actually do what they love instead of what they have to do we eliminate the mundane task because of the agents and so.
Speaker Change: The platform capabilities, we have really rest on two.
Speaker Change: Unique skills that we built over the years.
Speaker Change: First is that we know customers, we all of us think of customers everyday firsthand firsthand last thing out we walk in their shoes, we think about them. We care about Smbs. We think they are critical as the glue to our society and that deep understanding of what their pain points are whether it comes from accounts, whether it comes from partners or comes from direct customers.
Speaker Change: It's a unique opportunity for us actually to leverage their experiences today and understand the technology. So that we can actually apply agents. That's the first thing we have that you need. The next thing. We have is just the data we have such an incredible amount of data. We always talk about a 1% of GDP goes through bill and that's a massive number and that represents a lot of trans.
Speaker Change: Actions, but what supports all those transactions is a significant amount of data underneath that comes in forms of documents, whether that documents, a bill or an invoice receipt or a cleared payment or a reconciliation of some note that an employee puts on the bill. These are all things that are sitting on our platform and allow us to build Asia.
Speaker Change: That nobody else can go build we have an opportunity to actually deliver so much freedom for the SMB and that's what we're excited about doing and obviously the space is moving fast, but what we see is a world that smbs are free to get back to what they love you have heard me say that before I'll say it again its why anyone starts.
Speaker Change: Business, it's not to do the step that we take care of under the Hood. So we're super excited about it and I think that the the world is going to be much different for smbs as we've rolled these out.
Speaker Change: Thanks for the thoughtful response I appreciate it.
Speaker Change: Thank you.
Assets Chowdhry: And our next question comes from assets Chowdhry with William Blair.
Speaker Change: Please go ahead.
Speaker Change: Hey, guys. This is <unk> on for Andrew Jeffrey Thanks for taking the question.
Speaker Change: We wanted to ask on advanced ACTH. Given this is kind of been an area that monetizing has been challenging for a lot of BBB companies. What do you kind of think is unique about your value prop and selling motion and can you also kind of remind us of the timeline of the rollout.
Speaker Change: Timeline for expected monetization. Thanks.
Speaker Change: Yes, I think the first I'll start and let John add if there is any additional comments, but the first thing that we have is back to the last comment just the amount of data. We have so when you think about the large suppliers in our network, they're receiving thousands of payments from bill customers. Today. We are one of the largest aggregators of small business payments in the country.
Speaker Change: And so when we get a chance to go talk to a supplier no matter what their sizes, we're already delivering significant number of payments to them. Some of those payments are checked by the way some of them are ECH and some of them are virtual card. There is getting payments in multiple forms and they want simplicity and execution of how they manage their their receivables process and so the opportunity for us with the supply.
Speaker Change: <unk> is to really change the game given the volume we have and our deep understanding about building customer experience in this case, the customer would be the supplier, but building experiences that will enable suppliers to really get out of the mundane task that they have and really leverage what they need from from their customers. So we're super excited about that.
Speaker Change: We've announced that it's in data the conversations that we continue to have the suppliers are that there is demand and the need for this we continue to add onto the capabilities that we've already put into the beta application and we will continue to invest behind this because we know this is something that's super important in order for the ecosystem to work well we have to.
Speaker Change: It really fulfill the promise of connecting buyers and suppliers in an ecosystem that delivers seamlessness and simplicity for everybody.
Speaker Change: So we're <unk>.
Speaker Change: Definitely looking forward to getting more out in the market.
Speaker Change: And very very grateful that we have a position to leverage from.
Speaker Change: Yes, I would just add regarding that part of the question about the unique selling motion starting with that we have relationships with suppliers as it exists today and what we're really in dialogue with them about is increasing the level of automation and efficiency and reducing complexity that they have and how we can bring.
Speaker Change: Those benefits to them quickly and so we've established dedicated teams to work closely with large suppliers, we've seen good progress interest and.
Speaker Change: Early results from from those interactions and from usage of the of the product and it's that progress that we're expecting to leverage as we as.
Speaker Change: As we get into FY 'twenty, six and we go live with the product to a much larger number of of supplier. So we have a unique position in that we're tapping into existing relationships, we're already a large provider.
Speaker Change: The suppliers and now we're going to raise the bar on the capabilities of our product and the value we deliver for them.
Speaker Change: Yeah.
Speaker Change: Perfect.
Speaker Change: And if I could sneak in a quick follow up could you kind of give an update on spend makes sense, just trying to think through higher risk or more discretionary areas of stomach.
Speaker Change: Sure on spend and expense we continue obviously to produce.
Speaker Change: Good results transaction revenue growing 21% year over year, we had very strong net adds in the quarter acceleration from the prior quarter and overall card spend growth of 22%. So we feel good about the results I'd say, we've seen strength in some spend categories around.
Speaker Change: TD and retail.
Speaker Change: And things like that.
Speaker Change: Theres, obviously, a little bit more discretionary spend or a variable spend if you want to describe it that way within our spending businesses with the with the <unk> card and so we are cautious about what that looks like in terms of the near term going.
Speaker Change: Going back to some of the uncertainty that we talked about previously but the value proposition is clear for that business we're not.
Speaker Change: Overexposed or index to any particular category some of the friction that existed early in the year has has obviously been reflected in our model and where we're expecting to grow through that as we get into FY 'twenty six so I think we're starting from a good from a good place there and we saw some some strengthen in Q3.
Speaker Change: Across the few spend categories and we're still paying close attention to other spend categories that could be potentially negatively impacted by some of the macro uncertainty.
Speaker Change: Thank you and we'll take our final question from Andrew Hot with BTG. Please go ahead.
Andrew Hot: Hey, Thanks for the question John You mentioned, Tom in March you raised price for <unk> in check and I think for the existing customers. It goes into.
Speaker Change: It goes into effect in May.
Speaker Change: I saw online like the increase was about 59 cents for ACTH now from 49%. So I guess, that's close to 20% and you've talked about a stage in the past being 70% of total APR transaction. So can you just help us think about how impactful some of those price increases can be next year.
Speaker Change: And really what it can ultimately be for the take rate.
Andrew: Sure. Thanks for the question, Andrew I would say.
Andrew: As it relates to fiscal 2025, our fourth quarter here, we're not expecting any material change in.
And the numbers just based on the timing of rollout for new and existing customers starting in May.
Andrew: But there should be some positive benefit obviously, when we look at the full year of fiscal 2026, but I would say.
Andrew: We haven't adjusted pricing for for a while now I would look at this as the beginning of of changes with a more sort of holistic approach to optimize the combination of the value, we're delivering for customers and how we're packaging and bundling.
Andrew: Our products in order to increase overall ARPA for Bill. So this is one one step that I think will will help us make some progress there, but there's more to come as we think about optimizing pricing and packaging and this is a combination of transaction and subscription fees I think the subscription side of of our model will be more important going forward.
Andrew: <unk> as a growth driver than we've seen say over the last few years, where we've relied primarily on on transaction yield and monetization, but we do feel like there is.
Andrew: There's still a lot of room to go as it relates to the value, we're delivering versus the value that we're monetizing as it relates to both transaction and subscription fees.
Andrew: Okay.
Speaker Change: Very helpful. Thanks.
Andrew: Thank you.
Speaker Change: Thank you, we'll now at the end of vacuum in a session now I'll turn the call back over the key Rene for any closing comments.
Andrew: Thank you.
Speaker Change: Our mission is clear up bill.
Andrew: Made the lives of Smbs, better and making it simple to connect and do business.
Speaker Change: We did that this quarter.
Speaker Change: And we are excited about the future we believe the initiatives and investments we are making today will enable us to change the game again for Smbs and that will lead to strong market adoption.
Speaker Change: I want to thank our customers and partners for the trust they place in us.
Speaker Change: And all the work that the team at Bill does driving innovation at scale.
Speaker Change: Great evening.
Speaker Change: Thank you. This concludes today's call. Thank you for joining you may now disconnect your lines.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Yeah.