Delivered 19% year-over-year revenue growth and 68% year-over-year non-GAAP operating income increase in Q3.
Posted a non-GAAP gross profit of $281 million, up 19% from the previous year, with a non-GAAP gross margin of 87%.
Non-GAAP operating income for Q3 reached $59 million, a 68% increase year-over-year, with an 18% non-GAAP operating margin.
Total revenue for Q3 stood at $323 million, a 17% increase from the previous year, with core revenue at $281 million.
Non-GAAP net income for Q3 was $68.6 million, marking a 42% increase year-over-year, with a non-GAAP net income margin of 21%.
Business Performance and Outlook
Processed nearly 100 million transactions over the past 12 months, representing about 1% of U.S. GDP.
Spend & Expense solution revenue grew 29% year-over-year, with 1,800 net new spending businesses added.
BILL stand-alone transaction revenue increased 20% year-over-year.
Float revenue increased 26% year-over-year to $42 million in Q3.
Raised fiscal Q4 2024 revenue outlook to $320 million to $330 million, reflecting 8% to 11% year-over-year growth.
Full-year 2024 revenue expected to be $1.267 billion to $1.277 billion, representing 20% to 21% year-over-year growth.
Strategic Initiatives and Product Development
Enhanced platform capabilities, including cash flow insight and forecasting with the acquisition of Finmark.
Launched a new mobile app for BILL AP and AR, driving growth in mobile engagement.
Expanded payment infrastructure to 12 payment rails, offering 8 payment modalities, and reaching over 130 countries.
Introduced faster international payment capabilities, reducing delivery times to near real-time.
Partnered with nearly 8,000 accounting channels and some of the largest banks in the country.
Capital Allocation and Financial Management
Repurchased $748 million in aggregate principal amount of 2025 convertible notes, reducing non-GAAP diluted share count by 0.9 million weighted shares.
Transitioned to include a new non-GAAP income tax adjustment beginning in Q3, applying a 20% blended tax rate.
Stock-based compensation expenses expected to be approximately $255 million for fiscal 2024.
Capital expenditures expected to be approximately $23 million for fiscal 2024.
Market Position and Future Outlook
BILL is poised to continue leading the financial operations category for SMBs, with a focus on innovation and sustained long-term growth.
The company aims to help millions of SMBs automate their operations and make trillions of dollars of e-payments.
Question and Answer
Stability of TPV and Business Model
Question
Is the assumption of TPV stability and spend-neutrality still valid for the fourth quarter and fiscal year 2025?
Answer
Yes, the company continues to observe spend-neutrality and stabilization of spend across its customer portfolio, with no significant spend expansion.
This observation remains the basis for the company’s business models and assumptions.
Bank of America Partnership Update
Question
Can you provide an update on the negotiations with Bank of America and the broader context of how the bank fits into the company’s go-to-market strategy?
Answer
The company is actively working with Bank of America, and specific details will be shared when available.
The partnership with Bank of America is part of the company’s three-pronged go-to-market strategy, focusing on near-term, midterm, and long-term initiatives.
The long-term opportunity with financial institutions is growing, and the company is excited about the potential to expand its ecosystem and drive customer acquisition through such partnerships.
Take Rate Expansion and Virtual Card Adoption
Question
Can you quantify the non-recurring benefit from migrating volume between back-end providers and provide an update on the progress of initiatives to drive virtual card adoption and increase the take rate?
Answer
The one-time uptick from volume migration between providers resulted in higher monetization on a small portion of the company’s volume, contributing to the significant expansion in monetization in the third quarter.
Excluding this one-time benefit, the company still expanded monetization in the quarter, consistent with expectations and the progress of programs to improve the product experience for customers and suppliers.
The virtual card program underwent improvements in the quarter, setting the stage for potential future expansion, but it did not drive a significant portion of the monetization growth in the quarter.
Aerobolics Partnership for Cross-Border Payments
Question
How meaningful could the Aerobolics partnership be in driving cross-border payment adoption in local currencies, and are there any updates on the rollout in new markets?
Answer
The partnership with Aerobolics aims to provide international suppliers with the option for close-to-real-time payment clearing through local clearing, enhancing payment choice and driving adoption.
The company has started testing this capability in one country and plans to roll it out globally.
Stand-Alone FI Net Adds and Software Adoption Trends
Question
Were there any residual impacts from the Simple Bill Pay roll-off on the net adds for the stand-alone FI, and what are the trends in software adoption, particularly by channel?
Answer
The company experienced a slight decline in FI customer adds due to the removal of some inactive customers, but it saw an increase in enrollments and the highest-ever rate of active customers within the FI channel.
The company’s realigned teams and focused priorities have driven customer adoption, with a particularly strong acceleration in the Spend & Expense solution.
Embedded Strategy and Partnership Pipeline
Question
What factors have contributed to the recent uptick in embedded distribution partnerships, and how is the company leveraging its scale and platform capabilities to drive partnerships?
Answer
The company’s scale, unique payment capabilities, and regulatory compliance expertise make it an attractive partner for software providers looking to offer financial operations solutions to SMBs.
Partners recognize the complexity of financial operations and look to the company’s scale to drive risk efficiency and effectiveness for their businesses.
The company’s success and scale have increased awareness of the opportunity in financial operations, leading to a growing pipeline of potential partnerships.
Go-To-Market Approach and Customer Add Numbers
Question
Can you provide more details on the go-to-market approach and customer add numbers, including the acceleration in customer adds for Divvy and the FI channel churn?
Answer
The company’s go-to-market efforts have focused on being where SMBs are, delivering the solutions they want, and narrowing the focus to target prospects that are ready to adopt, with a bias towards slightly larger businesses.
The number of customer adds for BILL standalone (4,100) increased from the previous quarter, excluding the attrition associated with the Intuit Simple Bill Pay roll-off, which was minimal.
The acceleration in customer adds was particularly notable for the Spend & Expense solution, driven by a focus on larger businesses, lower attrition, and progress in enhancing the value proposition and scaling teams.
The decline in FI customer adds was mainly due to the removal of some inactive customers by partners, but the company is pleased with the level of engagement and activity within its FI customer partners.
Possible Outcomes of Bank of America Relationship
Question
Is it likely that the Bank of America relationship will continue in some form, or is it possible that they bring everything in-house? What are the potential range of outcomes, including the existence of a minimum commitment from Bank of America?
Answer
The company is actively working with Bank of America, and the potential to extend the ecosystem to serve SMBs across the platform exists.
When more specific details are available, the company will share them.
Drivers of Organic Take Rate and Future Expectations
Question
What are the specific drivers that will contribute to getting the organic take rate back to first quarter levels, and how should we think about the gradual pickup in the take rate as we move into fiscal year 2025?
Answer
The company is making progress with product improvements, such as enhanced data, payment speed, reconciliation, and local clearing on international payments, which will have a positive impact on the value proposition and adoption.
Growth in newer ad valorem products and the onboarding of larger businesses are also influencing the numbers.
The company is laying a strong foundation to return to consistent expansion and drive adoption across all ad valorem products, but it’s too early to comment on the specific dynamics in fiscal year 2025.
Monetization of Integrated Platform Capabilities
Question
How is the company monetizing the capabilities of the integrated platform, and what are the benefits in terms of payment volume, customer adds, and cross-sell opportunities?
Answer
The primary reason for integrating the two platforms was to drive simplicity for SMB customers, and the company has observed great progress in active activations, engagement, and cross-sell opportunities.
The integration enables a unified platform for managing financial operations, and the company is rolling out cash flow insights and forecasting capabilities into the platform, further enhancing its value proposition.
Clarification on Take Rate Dynamics
Question
Can you clarify the take rate dynamics in the quarter, particularly in relation to the $6 million benefit to gross profit and the potential for a one-time step-up or enduring uplift in the take rate?
Answer
The $6 million benefit referenced earlier is a positive impact on cost of revenues and gross margins, not on revenue or monetization.
The company did make progress and expanded the take rate without including a separate one-time step-up, which was related to AR volume transitioning between providers.
The company expects some near-term headwinds on higher-monetizing products due to seasonality and the growth of check and ACH payments, which will limit volume expansion across those products.
The improvement in Q4 versus Q1 or reaching Q1 levels represents the company’s expectations for the take rate.
Channel Mix and Customer Acquisition
Question
What is the current mix of customer acquisition between channel and direct (accounting vs. non-accounting) for the core BILL platform, and how do you envision this mix changing over time? Are there any initiatives to increase the contribution of the direct channel in the near term?
Answer
Historically, the majority of new customer acquisitions for the core BILL platform have come from the accounting channel, and this trend is expected to continue.
The company is investing in and enhancing its presence in the accounting channel to drive long-term customer acquisition.
However, the company is also focusing more on slightly larger businesses with higher propensity to spend in the direct channel and is seeing early signs of success in this area.
Over time, the company expects slightly larger businesses to contribute more to revenue in the direct channel, while the accounting channel will continue to be the primary source of customer acquisition across all business sizes.
BILL Stand-Alone TPV and Neutrality Clarification
Question
Is analyzing the company’s performance based on BILL stand-alone TPV excluding FI still the right approach, and is this what you meant by “neutrality” in your earlier comments?
Answer
The “neutrality” referenced in the earlier comments pertained to the stability of spend and the absence of significant contraction or expansion, rather than the specific approach to analyzing the company’s performance.
The company feels confident in its ability to drive share of wallet by adding more capabilities around payments and acquiring more customers across the platform.
Impact of Potential Interchange Changes
Question
Can you comment on the potential impact of interchange changes, or is it too early to provide specific details?
Answer
It’s early for the company to have any specific commentary on potential interchange changes, as they are not expected to take effect until the fourth quarter of fiscal year 2025.
Progress on Integration and Mobile Functionality
Question
How significant is the progress on integrating receivables with payables and the mobile functionality, and could this contribute to the flywheel effect of customer acquisition?
Answer
Having an integrated mobile app with AP, AR, Spend & Expense, and cash flow insights and forecasting capabilities is crucial for driving adoption and the long-term value proposition.
The company is seeing increased usage from suppliers using the mobile app for Instant Transfer and creating invoices on the BILL platform.
The integration and mobile functionality contribute to the company’s overall strategy of driving simplicity and leveraging its scale to drive further scale and product innovation.
Potential for TPV Per Customer Metric Improvement
Question
Are there any signs of improvement in the TPV per customer metric, particularly in certain categories, that could potentially accelerate in the future?
Answer
The TPV per customer metric showed a slight increase in the quarter, and the seasonal effect observed in the March quarter is consistent with historical patterns for the core BILL platform.
While there are no large-scale signals indicating near-term expansion per customer, the company is observing strength in the T&E category, which is consistent with broader industry trends.
The potential for significant near-term expansion may be influenced by factors such as inflation, interest rates, and overall economic conditions impacting small business confidence.
Modeling Considerations for Slower Growth
Question
Where might slower growth occur within the business, and are there any specific areas to consider when modeling, such as TPV growth assumptions or the potential for a sequential decline in take rate?
Answer
The company’s core revenue guidance implies about 10% year-over-year growth at the midpoint, which is ahead of previous expectations.
The slower growth is expected to be most pronounced in TPV and take rate in the very short term, and these factors are incorporated into the assumptions for the fourth quarter.
Full-year revenue growth for the Spend & Expense solution is expected to be slightly higher than the previous guidance range of 20% to 25%, driven by volume growth.
