Good afternoon, and welcome to BILL's Fourth Quarter Fiscal 2024 Earnings Conference Call. Joining us for today's call are BILL's CEO, Rene Lacerte; President and CFO, John Rettig, and VP of Investor Relations, Karen Sansot. With that, I would like to turn the call over to Karen Sansot for introductory remarks. Karen?

Thank you, operator. Welcome to BILL's Fiscal fourth quarter and full fiscal year 2024 earnings conference call. We issued our earnings press release a short time ago and furnished the related Form 8-K to the SEC. The press release can be found on the Investor Relations section of our website at investor.bill.com. With me on the call today are Rene Lacerte, Chairman, CEO and Founder of BILL, and John Rettig, President and CFO. Before we begin, please remember that during the course of this call, we may make forward-looking statements about the future operations, targets and results of BILL that involve many assumptions, risks and uncertainties. If any of these risks or uncertainties develop or if any of the assumptions prove incorrect, actual results could differ materially from those expressed or implied by our forward-looking statements. For additional discussion, please refer to the text in the company's press release issued today and to our periodic reports filed with the SEC, including our most recent annual report on Form 10-K and quarterly reports on Form 10-Q. We disclaim any obligation to update any forward-looking statements. On today's call, we will refer to both GAAP and non-GAAP financial measures. Please refer to today's press release for the reconciliation of GAAP to non-GAAP financial performance and additional disclosures regarding these measures. Note that at times during this call, we will discuss BILL's standalone results, which exclude our BILL's Spend and Expense management, which was formerly called Divvy, Invoice2go accounts receivable and Finmark Financial Planning Solutions. Note that we will be revising our key metrics presentation beginning in the first quarter of fiscal 2025 to reflect our evolving product solution set. This new presentation will provide investors with an enhanced view of our integrated platform, which includes BILL AP, AR and Spend and Expense, excluding the financial institution channel. It will also provide an enhanced view of our embedded and other solutions, which includes the financial institution channel, Invoice2go and other solutions. The appendix of our fiscal Q4 2024 investor deck previews this presentation and provides a nine-quarter look-back for reference. Now I'll turn the call over to Rene.

Thank you, Karen. Good afternoon, everyone. Fiscal 2024 was an important year for BILL. We delivered more innovations to SMBs. We launched our integrated platform, made capital more accessible and empowered small and mid-sized businesses with insights and control with their cash flow. In addition, we built tight organizational alignment, laying the foundation for future growth. These and future innovations are especially valuable for SMBs as they face an uncertain economic environment. In a world of change, BILL is the constant that they can rely on. The steadfast commitment to raising the bar to serve SMBs led to strong financial results. During the year, we delivered strong growth and enhanced profitability as we executed on our objective to be the essential financial operations platform for SMBs. Total revenue for fiscal 2024 was $1.3 billion, up 22% year-over-year and core revenue exceeded $1 billion for the first time. Importantly, we delivered substantial profitability expansion as non-GAAP operating income totaled nearly $200 million, growing 68% year-over-year, and we were profitable excluding the benefit of float revenue. We achieved these results despite economic headwinds and shifting SMB behaviors we experienced during the year. When challenges arose, we demonstrated our ability to adapt quickly and we exited the year with a much stronger foundation to scale for the future. In fiscal 2024, we served nearly half a million businesses, moved and safeguarded nearly $300 billion in payment volume and facilitated more than $100 million payment transactions. Many industry-leading partners, including more than 8,000 accounting firms and top financial institutions used BILL as an essential part of the tech stack they provide their clients. Our network members increased to 7.1 million, up 21% year-over-year as we further built platform capabilities for our suppliers. This scale is a direct reflection of the incredible value delivered to…

Thanks, Rene. During fiscal 2024, we acted decisively when cyclical headwinds caused moderated B2B spend and a shift in payment method preferences. We responded quickly by adapting our go-to-market initiatives, improving product experiences and working diligently with partners. We focused our resources and execution on our most important priorities and proactively adjusted operating expenses to improve profitability. These actions enabled us to improve customer acquisition and stabilize payment monetization, enhance profitability and position BILL for continued market leadership. In fiscal 2024, we delivered 22% revenue growth, $196 million in non-GAAP operating income for a non-GAAP operating margin of 15% and $258 million in free cash flow. In addition, we delivered $31 million in non-GAAP operating income, excluding float revenue compared to $4 million a year ago. During fiscal '24, we repurchased 212 million in common stock and retired 983 million in aggregate principal amount of our 2025 convertible notes. These actions contributed to our full-year fiscal 2024 weighted-average diluted share count declining by 2% year-over-year. In addition, and most importantly, in fiscal '24, we strengthened our foundation for the future. We have a clear vision and strategy centered around the needs of SMBs and we are executing to capture the large market opportunity ahead of us. We are laser-focused on driving long-term shareholder value through strong profit and free cash flow generation while optimizing our capital structure. Now on to a few highlights of our fiscal Q4 results. We delivered against our goal of profitable growth. In Q4, total revenue was $344 million, up 16% year-over-year. Core revenue, which includes subscription and transaction fees was $301 million, also up 16% year-over-year. Float revenue was $42 million. Non-GAAP operating income was $60 million and grew 42% year-over-year, reflecting a 17% margin. Non-GAAP operating income, excluding float revenue was $19 million and…

[Operator Instructions] Our first question today comes from William Nance with Goldman Sachs. Your line is now open.

Hey, guys. I appreciate you taking the question here. Maybe I'll start on the FI channel renewal that you mentioned. John, I think you called out that the RPO may remain similar, but spread over additional years. Could you just maybe unpack what that means in terms of just the quarterly subscription revenue from the embedded solutions part of the business and just how you're thinking about that? I know that it’s taken a step down when you'd initially contemplated changes. So how will that flow through the numbers over the coming year?

Yeah. Thanks for the question, Will. We -- our RPO as of the end of the year is about $87 million. And there's a meaningful percentage of that by the large FI partner that we've talked about throughout the year where we have finalized the contract amendment. And the RPO is consistent for that particular customer as where we had ended the year. And instead of one year left on the contract, we've extended it for three years. So we'll be recognizing that revenue over four years. And in addition to that, we're obviously marrying our embedded strategy with our financial institution partners as well, and making available our newest APIs to support the bank in their new program and working with them in any way we can to help drive success there. So that's the kind of the extent of the moving parts on the numbers. There's really not much change from the ending RPO.

Got it. I appreciate that. That is helpful. And just maybe a broader question. You mentioned the 20% kind of long term goal of ad valorem payments revenue. I hear the commentary on. That's how you'll be kind of communicating advances in monetization going forward. Just help us think about how we should think about the monetization of those volumes and just sort of how the mix of payment methods may impact the ultimate take rate that you get on that 20% of volumes. Thanks.

Yeah. Sure. It's a good question. I'd say there's a number of investments that we're making near term to improve existing product experiences, drive payment speed, improve reconciliation, and those things which I think will help expand volumes and monetization associated with products that we are already offering customers and suppliers, and those are relatively short term initiatives. In addition to that, we see card payments generally being a larger part of the payment mix in the bill portfolio of payment products. So beyond what we do with Spend and Expense and things like that, and so across -- across all of our payment products, as we see that mix evolving, we sort of view that 20% as more of a floor to where we're going to be able to take monetization longer term. And we feel really good about the levers that we have and frankly, the value proposition that we're offering for both buyers and suppliers with this mix of payment products.

Got it. Appreciate you taking the questions.

You bet.

Our next question comes from Tien-Tsin Huang with JP Morgan. Your line is now open.

Hey, great. Thanks so much. Just thinking about these investments here, how quickly do you expect to spend the $45 million? What kind of return or payback do you expect? I heard the 20% core growth in '26 but just curious, what else we can build off of that? And then just to also clarify, are these new investments driven by new opportunities, or is it driven by competitive changes? Or is this just a catch-up in spending from a period of pause given the macro uncertainty in last two, three quarters. Thanks.

Thanks, Tien-Tsin. Great question. Let me just give some background first. I mean, we made -- we saw a shift in kind of what was happening in the market. We adapted quickly, very agile, and the team delivered exceptional results throughout the rest of the year. So that would have been obviously end of last calendar year, and we had great results through the fiscal year and seeing the efficiency that we were able to drive. And if you just think about the high level, our operating income less float grew 750% over $31 million or so from last year increase. And so just giving you, in my perspective, seeing the strength that we were able to drive and then seeing the innovation opportunities again just more context like we've defined this category and that BILL, we're all a bunch of leaders, and leaders don't wait. We're not going to be a market taker. We're going to be a market maker. And when we see and interact with our customers, whether they're direct customers, accountant customers, or ecosystem partners or suppliers in our network or large -- larger suppliers, we hear and understand there's opportunities to expand the value that we're providing them. And so that's the reason to invest because we feel really good about what the team's executing on. And the ability for us to deploy capital to drive growth really is, I think, how I would define everything that we've done is we've been defining this category from day one and we're going to continue to do that. And how we're doing that is we have kind of four specific areas that we're investing in. The first one I would say is that we are enhancing and expanding the value proposition for our existing solutions. So if…

Sure. Just adding to the part of your question about pacing. We're expecting it to be spread throughout the year a little bit more front-loaded than not. And as we look at the impact of these investments, plus the ongoing improvements we're making to our platform efficiency, we're driving with go to market and things of that nature, we expect to be able to increase our revenue growth rate in '26, as I mentioned earlier and that's really the beginning phase of growth expansion. It's not the end goal that we have. It's not just '26. It's multi-year, multi-year improvements in our growth rate. As evidenced by some of our investments, as Rene mentioned, particularly on the embed platform, both the technology and our go-to-market capabilities there, that's a multi-year time horizon that we view as driving growth. And at the same time, we do expect, beginning in FY ‘26 and beyond to be expanding profitability more so than we've seen in FY ‘25 as we're pulling forward some of those investment dollars.

And just one more thing I would add is the conviction that both John and I have is so strong that when the market opens up, we're going to be buying shares as well as the company is doing.

All clear.

Yes. And I'll second that comment.

I think you both answered it really well. Just really quickly to clarify, Rene, it sounds like, I think you mentioned these are offensive, not defensive investments. Just wanted to clarify that.

Absolutely. We're all about offense. We have defined the category. We see other people following us and them playing catch up, and we're going to keep widening the gap that we have because that's the advantage that customers need. Customers need innovation. SMBs are innovating every day in each of their businesses, and they need to count on somebody to innovate, and that's what they do with us. So I think it's super important and we're going to continue to do that when we see opportunities.

Thank you, Rene. Thank you, John.

Thank you.

Our next question comes from Andrew Schmidt with Citigroup. Your line is now open.

Hey, Rene. Hey, John. Thanks for taking my questions. So I wanted to drill down just on the environment for supplier acceptance. Maybe. I know, John, you have some comments, but maybe you could put a finer point on what you saw in the fiscal fourth quarter and into FY ‘25. And then maybe just to tab onto that, I know you put some supplier enablement teams in place to better -- have better manage the supplier relationships. Maybe the early reads on that and what you're seeing in terms of the acceptance when you have kind of pushed a little bit deeper on those relationships, anything on those two fronts would be helpful. Thanks so much.

Well, yeah, thank you, Andrew. The first thing I would say is, as we talk to suppliers, it's not going to be a surprise, but they don't want checks. They really don't want checks. We have a tremendous amount of volume that we drive through our platform. They like getting electronic payments, but they need more help in reconciliation, and they need more help in automating all the things that are coming from BILL. And so as we talk with suppliers, we're hearing that loud and clear. And we're putting R&D dollars as well as go-to-market dollars around creating services for them so that they actually have a different experience, just not at the receiving end. They're engaging with us. I think one of the examples that we think about is we have a tremendous amount of volume that goes through on ACH, but there's very poor reconciliation on ACH transactions. And the ability for suppliers to kind of take those transactions and have an experience where they can obviously understand what the payments are attributed to potentially collaborating with their customers, which would be our customers, all these things are something they want and we see an opportunity to drive value there, and that's not a product we have in market today. But I'm just giving you an example of the learning that we have that's going on right now that gives us the confidence that there's an opportunity to create more value for suppliers, to keep them really doing their business job better and to keep us serving our customers better.

Got it. Thank you so much for that, Rene. And John, I think you had some comments on stabilization. Maybe you can talk about just more broadly your thoughts on the macro environment heading into FY ‘25 and how that might translate into things like TPV per customer. Thank you very much.

Yeah. Thanks, Andrew. We've seen pretty consistent behaviors on the part of small businesses over the last few quarters. You've seen that play out in our TPV per customer numbers being pretty consistent, maybe down 1%, up 1%, but in that same range. Obviously, our overall TPV growth for the last couple of quarters has been a little bit ahead of our expectations, and we're expecting a similar environment throughout FY ‘25. I think there -- this stability is showing up in engagement where you have very healthy transactions per customer. Saw a slight uptick in that in the fourth quarter, but still slightly lower dollars per transaction for small businesses was reflective of the environment that everyone's operating in. So we feel good about the stability and we're not embedded in our assumptions for expectations in FY ‘25, assuming any rapid rebound in B2B spending or the flip side, any deterioration in the current level of activity.

Got it. Thank you very much, John.

Thank you.

Our next question comes from Scott Berg with Needham and Company. Your line is now open.

Hi, Rene and John, nice quarter here. I guess couple of questions. I think it was in Rene's pre-scripted remarks about the supplier financing. I guess, can you help maybe quantify kind of what you're seeing there early on and I know, you just recently kind of released the product and that seems to be a part of your reacceleration story into fiscal '26. I guess, how do we may be set expectations around the impact on the business?

Thank you, Scott for the question. I think invoice financing is just another example of innovation that we're bringing to the market. We have a unique set of data and scale. When you think about what we have with scale, it just makes us a learning machine. We have so much data across the platform, so many opportunities for us to leverage that for our customers. And what we're seeing in invoice financing is its early days and there's lots of -- lots of work for us to do around kind of the modeling and risk profiles and stuff like that. But what we're seeing is customers want it and they use it again and again. And so what we will continue to do is to refine kind of the experience they have to refine the back end system so that we can roll this out more broadly. And I think it's going to be one of the important drivers of our expansion of ad valorem revenue as we go forward into '26 and beyond.

Got it. Helpful. And then you both made the comment on the number of customers using both AP and the Spend and Expense solutions. It's up roughly 60% year over year. Is now that the -- over the last year the products have been properly integrated and combined. Is -- I guess, is there anything that you can take away from those customers outside of better retention rates? Is there any examples where one plus one equals more than two? Or is this simply just a one plus one equals better retention rates over time?

It's definitely one plus one is more than two. I mean, we're getting, obviously, the retention makes that true, but I think we're also getting more usage across the platform. There's more opportunities. We've talked about the opportunity across our platform to continue to extend the proliferation if you will of card payments. That comes from all the capabilities we have with the platform that was formerly known as Divvy, that is now our Spend and Expense platform. So that's an area. And I think maybe a high-level area to think about that we see is that the proliferation of all these different software and fintech solutions is actually driving in the market a need for more consolidation and unification of platforms. And so when you think about what we are able to provide customers today from financial operations perspective, we give them the best world-class AP solution, we give them the best world-class SME solution, we're giving them the best cash flow insights and forecasting capabilities. These are things that we add into the platform that continue to create more value for the customer experience across their portfolio usage of ours, and it's something that we're excited about. So I think that the main thing is we do think one and one is going to be far greater than two.

Excellent. Thank you for taking my questions.

Thanks, Scott.

Our next question comes from Samad Samana with Jefferies. Your line is now open.

Great. Good evening. Thanks for taking my questions. First, maybe the 20% growth comment for 2020 or fiscal '26 is really encouraging and especially as you think about the stabilization that you've highlighted so far. This side for you, you Rene or John, but as you guys think about the building blocks to that 20%, how much of that is reaccelerating existing pieces of the business and getting new customer acquisition to fire again and getting more adoption of ad valorem versus new revenue streams that you're anticipating that the investments you called out are going to drive? Can you just maybe help us understand how much you already have line of sight to versus what has to -- it has to be kind of blocked and tackled over the next year?

That's a great question, Samad. And one of the things I've learned over the last three decades running businesses is that you've got to kind of have a balancing act between obviously what you've got and what you want. And so what we're doing is actually a balancing act. There is definitely more clarity across the business as we've consolidated the organizations and have the teams really aligned about what drives results on the existing business. But we also have that same clarity being driven around the innovation teams across the company. And so I think it's a reasonably good balance between the two. And we're going to always invest, obviously serve customers with what we have, but we're also going to invest to innovate. And so we're balancing that. Maybe one other area of investment that I didn't call out earlier that I think is important for folks to know is that we talked about this, we're highly committed to being highly profitable. And part of the investment is we have a lot of internal tools. This is a big company now. It's $1 trillion in money movement over the last five years to over $300 billion a year. We've got teams in multiple countries that support customers. They need tools and capabilities to continue to drive efficiency and scale, and we're going to invest behind that because that's the right thing to do for the long term growth of the business.

Yeah. Great. And then John, maybe just to follow up on the NRR, I appreciate the disclosure on what it would have been ex the top three banks. So I was just wondering if you can maybe help us understand from it going where it was last year to this year, I think 111 to 96, how much of that was due to TPV contraction in the installed base versus down selection of payment type. Just trying to understand the mechanics of maybe what drove the contraction portion of it and how we should think about the shape of that going forward.

Yeah. Thanks for the question, Samad. Most of the change on a year-to-year basis is really driven by the lower TPV from the spend environment that our SMB customers are operating in, which obviously translates into lower transaction revenue growth, which is a significant contributor to that retention dynamic. The second thing is probably the revenue associated with a large FI partner that we've talked about, maybe to a lesser extent than TPV. Those two things combined though are the vast majority of the change on a year-to-year basis. It's things like number of users per customer and variables like that are very small in the grand scheme of that retention number.

Great. Thanks for the clarity. I appreciate you taking my questions.

Thank you.

Our next question comes from Darrin Peller with Wolfe Research. Your line is now open.

Hey, guys. Thanks. First question is just around go to market. I mean, I saw you jumped like you said from it was 7,000 or so up to over 11,000 cross sold customers by the end of last year, this fiscal year. And so that's obviously showing good progress. Just maybe touch on the go to market of really the cross-sell between Divvy and the BILL solutions and now the one more unified offering. And really what's -- if anything has changed, look, kind of what's the approach now and can you even accelerate that? You've really still have a long runway when you look at the base and size of your customers versus what you've accomplished so far. And I guess just to add on to that, the strategy on go to market on the financial side, now the financial institutions, has that changed at all versus we've seen a lot of focus on the accounting channel be very successful. Just curious where the focus is on the financial institution side too guys. Thank you.

Cool. Good question, Darrin. I would say on the go-to-market approach, when it comes to cross-selling, I'm going to use a framing that I've always had in driving business success. It's kind of a wash, rinse, repeat. Like you innovate, then you adapt and you learn, and then you innovate again. And so when we pull together the platforms, we have the organizations lined up, the go to market is going to be, obviously, it's going to be iterative. And what we're learning from customers as we have more and more customers using the joint solutions enables us to drive that future state that you're talking about, which is far more adoption of customers using both of the core platforms that we have. And so we see continued learning and alignment within the organizations to kind of listen to customers and drive that success across the customer base. And I think we're going to continue to drive that. And I'll let John add anything to that if he wants, and I'll come back and answer the ecosystem question.

Yeah. I would just add that the progress we've made so far on this cross-sell effort has predominantly come from customers who we've acquired through our direct marketing efforts. To a much smaller degree, have we seen cross-sell activity within our accounting channel? So when we talk about doubling down on accountants, it's not just extending our lead and establishing new relationships, it's also starting to activate this cross-sell motion, working very closely with accounting firms and their clients to provide new solutions in this regard. So it's a twofold. There's lots of opportunity left, and one of the biggest spaces for growth is an area we do really well, which is in the account channel.

Yeah. And just on the ecosystem, just to give you some framing, our long term strategy around the ecosystem has always been that we need to surround the market with distribution channels and be at the center of each. And what you see with BILL is obviously we are at the center when it comes to direct. We're leading there. We're at the center when it comes to accountants. Over 8,000 firms growing 14% year over year, over half the business and then in the longer term play here is going to be with our financial institution partners and obviously our new accounting partnership with Xero and others to come. And so the opportunity for us is to make sure that we're in a position to win. And that's part of the strategy along -- all along is just that we're always going to place ourselves in a position to win with our partners and with the ecosystem more broadly. And so I would not say it's a shift, I would say it's an expansion, because there's now more opportunity in the market from small business aggregators outside of financial institutions. And we're starting to engage with those like you saw with Xero.

Very helpful. John, can I just quickly squeeze in one follow-up is just what's assumed in your guide for take rate or maybe if you can give us any direction on that, and then maybe BofA also the RPOs. Is there an assumption on dollars we can think about that may have been included this year wasn't last? Any framing on those would be great. Thanks again, guys.

Sure, Darrin. On the take rate, we're assuming essentially flattish with an uptick in the second half of the year. We've made a lot of progress in obviously bringing stability to take rate. And we think these first couple of quarters will be the point at which we frankly trough, for lack of a better term and start to expand in the second half of the year. And we would expect to be above at the end of '25 where we are at the end of '24. In terms of the RPO and dynamics with the one particular partner, there's not a lot of detail we can give there other than as of the end of the year, I think it's approximately 40% of our RPO balance is subject to this amended contract that we referred to with a large FI partner, and that'll be spread over four years.

Very helpful. Thanks again, guys.

Thanks, Darrin.

Our next question comes from Bryan Keane with Deutsche Bank. Your line is now open.

Hi, guys. Thanks for taking the question. I guess, John, just to follow up on that. Why would or why are you confident that the second half of the year will see a little bit higher penetration and payment modalities? And do you think VC and cross-border will bounce back and be up this year in particular?

Yeah. Thanks for the question, Bryan. I think to the second part of your question, yes, we do have confidence in additional volumes on those products. I'd say there's other, as Rene and I think perhaps I mentioned earlier as well, there's other product improvements that we're making and we're filling a couple of, I'd say, interesting holes in the product portfolio which will drive additional ad valorem adoption. And it's these dynamics that when we look at the volume and expectations around very short term penetration rates and adoption from suppliers and customers that give us confidence that we'll start to back on the road of expanding take rate as we get further into FY ‘25.

Got it. That's helpful. And then the follow-up to that is just in that 20% core revenue growth for fiscal year '26. Does that assume getting back to more normal and maybe you can help us what is normal kind of sequential organic take rate expansion?

I'd say that first of all getting to the 20% growth that we talked about, that's obviously going to be a progression, right. We're going to make progress in the second half of '25 and we'll continue that through FY ‘26. We are assuming better expansion of monetization in '26 than in '25. But that's not the sole driver of our belief that 20% is in range for '26. We obviously have much higher both volume and revenue growth on our Spend and Expense product. We talked about the proliferation of card payments starting to happen within the BILL ecosystem that will provide incremental growth as well. So it's all of the above frankly that that gives us confidence there. As far as the sequential quarterly upticks, we don't think of it as that in those terms as much as we do on an annual basis, we would expect to start to get back to higher levels of expansion.

Great. Thanks so much for taking the questions.

Thank you.

Yeah. And thank you, operator. We're, yeah, we have time for one more question.

Of course, our final question comes from Ken Wong with Oppenheimer. Your line is now open.

Okay. Fantastic. Most of mine have been asked, but I guess the one final clarification just on that RPO side, did that dollar amount increase with the renewal or was it a static final year number that's now spread over four years or was there an uptick in that number that's now spread over four years? Just wanted to make sure we understood the mechanics of kind of how -- what's playing out there.

Yeah. The RPO associated with the large FI partner remain roughly the same. So no significant expansion or contraction as we exited FY ‘24. And the term on that amended contract is now four years.

Got it. So there was a sort of pre-existing balance and as you guys renegotiated, that remained roughly the same, it's just across multiple years instead of a single year. So it'd be like, hypothetically, a ten divided by four, not some number bigger than ten divided by four.

That's right.

Okay. Great. Thank you very much.

Thank you.

Okay. Thank you, everybody. Thank you, everybody. I just wanted to say, I appreciate you joining today. We finished fiscal 2024 with great momentum and a really strong foundation to drive growth in FY ‘25 and beyond. We look forward to extending our leadership position, and I'm exceptionally proud of the team's agility and adaptability they've shown in the last six months of the year and all of us are very energized about our future. So thank you for joining us and have a great evening.

That will conclude today's conference call. Thank you all for your participation. You may now disconnect your line.