Summary of BILL Holdings (BILL) FY Conference Call - May 13, 2025 Company Overview - **Company**: BILL Holdings (BILL) - **Industry**: Payments and Financial Services for Small and Medium-sized Businesses (SMBs) Key Points Resilience of SMBs - SMBs have shown resilience through economic cycles, adapting to challenges such as COVID-19 and supply chain issues by innovating and managing cash flow effectively [6][7][10] - BILL's platform helps SMBs save approximately 50% of the time spent managing finances, which is crucial for maintaining cash flow [9][10] Customer Acquisition and Demand - Consistent customer acquisition has been observed over the past 8 to 12 quarters, with approximately 4,000 to 5,000 new customers for the core Accounts Payable and Accounts Receivable (APAR) platform and around 1,500 for spend and expense solutions [13][15] - The company is focusing on expanding its services to accounting firms, with a 60% increase in net adds among accountants in the last year [14] Trends in Transaction Volume - There has been a slight decline in Total Payment Volume (TPV) per customer, down about 2% year-over-year, indicating a more cautious spending approach among SMBs [16][17] - Certain sectors, such as wholesale trade and construction, are experiencing a pause in activity, while travel and entertainment remain strong [17] Industry Consolidation - The company is not surprised by recent industry consolidation, viewing it as an opportunity to reinforce its market position and continue building a comprehensive platform for automating financial operations [19][21] - BILL has a unique scale, managing hundreds of billions of dollars in payments, which positions it well against competitors [22][23] Growth Strategy and Investments - BILL is investing $40 million to accelerate growth, focusing on payments, supplier solutions, and enhancing its accountant partnerships [33][35] - The company aims for a 20% growth target, although macroeconomic uncertainties may impact the timeline for achieving this [38] AI and Technology Integration - AI is seen as a transformative tool for enhancing productivity and creativity within the company and for SMBs [48][50] - BILL plans to leverage its extensive data and understanding of SMB needs to develop AI-driven solutions that can automate financial tasks traditionally handled by larger companies [54][56] Financial Management and Risk - The company maintains a cautious approach to extending working capital loans, focusing on software as the primary value add rather than aggressive credit growth [66] - BILL has a strong balance sheet and free cash flow, allowing for flexibility in managing growth and profitability [60][62] Partner Engagement - There is increasing energy in the partner channel, particularly among accounting firms, as they seek to leverage BILL's capabilities to support their SMB clients [69][71] - The demand for API integrations is growing, indicating a trend towards embedding BILL's services within other platforms [73] Capital Allocation - BILL has executed $400 million in stock buybacks this fiscal year, with an additional $100 million authorized, while also exploring M&A opportunities [75][76] Future Outlook - The leadership team is optimistic about the growth potential and the strategic direction of the company, emphasizing the importance of AI and continued product development to meet SMB needs [78][82] Additional Insights - The company is focused on creating a diversified growth model that includes expanding use cases on its platform and enhancing payment solutions [42][43] - BILL's unique position in the market allows it to capitalize on the growing demand for automated financial solutions among SMBs [21][23]

Core Viewpoint - BILL Holdings reported earnings of 50 cents per share for Q3 fiscal 2025, exceeding the Zacks Consensus Estimate by 35.14%, but down 16.7% year over year. Revenues reached $358.2 million, a 10.9% increase year over year, surpassing the consensus mark by 0.97% [1] Financial Performance - Core revenues, which include subscription and transaction fees, amounted to $320.3 million, reflecting a 14% year-over-year increase. Subscription fees were $68.2 million, up 4% year over year, while transaction fees reached $252.1 million, a 17% increase from the previous year [2] - Total revenues from the Integrated Platform, which includes BILL AP/AR and BILL Spend and Expense, were $301.7 million, growing 14.5% year over year, contributing 94.2% to core revenues and 84.2% to total revenues. Revenues from Embedded and Other Solutions were $18.6 million, a 3.9% year-over-year increase, contributing 5.8% to core revenues and 5.2% to total revenues [3] - Float revenues, consisting of interest on funds held for customers, were $37.9 million, down 9.1% year over year. The company processed a total payment volume (TPV) of $79.4 billion, an 11.2% year-over-year increase, with $72.3 billion from the Integrated Platform (up 10.9%) and $7.1 billion from Embedded and Other Solutions (up 14.5%) [4] Customer Metrics - BILL's solutions served 488.6 thousand businesses at the end of Q3 fiscal 2025, up from 464.9 thousand in the prior year. This included 204.3 thousand customers in the Integrated Platform (up 13.4%) and 284.2 thousand in Embedded and Other Solutions (down 0.2%). The company processed 29.7 million transactions in Q3, a 15.6% year-over-year increase [5] Operating Details - Non-GAAP gross profit was $304 million, an 8% year-over-year increase, with a gross margin of 84.9%, contracting 230 basis points year over year. Non-GAAP research and development expenses totaled $58 million (up 4.4%), sales and marketing expenses rose 18.9% to $126.9 million, and general and administrative expenses increased 18.4% to $50.9 million [6] - Non-GAAP operating income was $53.3 million, down 8.9% year over year, with an operating margin contracting 320 basis points to 14.9% [7] Balance Sheet & Cash Flow - As of March 31, 2025, cash, cash equivalents, and short-term investments were $2.17 billion, slightly down from $2.21 billion as of December 31, 2024. Cash flow from operations was $99.5 million in Q3, compared to $78.7 million in Q2 [8] - Free cash flow generated in the reported quarter was $90.5 million, up from $71.6 million in the prior quarter [9] Guidance - For Q4 fiscal 2025, BILL expects revenues between $370.5 million and $380.5 million, indicating year-over-year growth of 8-11%. Non-GAAP earnings are projected between 39 cents and 43 cents per share [10] - For fiscal 2025, the company anticipates revenues between $1.45 billion and $1.46 billion, implying 12-13% year-over-year growth, with non-GAAP earnings expected between $2.06 and $2.09 per share [11]

Core Insights - BILL Holdings reported revenue of $358.22 million for the quarter ended March 2025, reflecting a year-over-year increase of 10.9% and a surprise of +0.97% over the Zacks Consensus Estimate of $354.78 million [1] - The company's EPS was $0.50, down from $0.60 in the same quarter last year, with a surprise of +35.14% compared to the consensus estimate of $0.37 [1] Financial Performance Metrics - Total Payment Volume was reported at $79 billion, slightly below the estimated $80.34 billion [4] - The number of transactions processed was 30 million, compared to the average estimate of 30.79 million [4] - Revenue from interest on funds held for customers was $37.92 million, exceeding the average estimate of $35.26 million, but showing a year-over-year decline of -9.1% [4] - Revenue from subscription and transaction fees reached $320.30 million, slightly above the average estimate of $320.12 million, with a year-over-year increase of +13.9% [4] - Subscription fees contributed $68.20 million, surpassing the estimated $67.49 million, while transaction fees were $252.10 million, slightly below the estimate of $252.79 million [4] Stock Performance - Shares of BILL Holdings have returned +5.6% over the past month, compared to the Zacks S&P 500 composite's +11.3% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Company Performance - BILL Holdings reported quarterly earnings of $0.50 per share, exceeding the Zacks Consensus Estimate of $0.37 per share, but down from $0.60 per share a year ago, representing an earnings surprise of 35.14% [1] - The company posted revenues of $358.22 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 0.97% and up from $323.03 million year-over-year [2] - Over the last four quarters, BILL Holdings has consistently surpassed consensus EPS and revenue estimates [2] Stock Performance - BILL Holdings shares have declined approximately 45.2% since the beginning of the year, in contrast to the S&P 500's decline of 4.3% [3] - The current Zacks Rank for BILL Holdings is 3 (Hold), indicating that the shares are expected to perform in line with the market in the near future [6] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.38 on revenues of $381.45 million, and for the current fiscal year, it is $1.94 on revenues of $1.46 billion [7] - The outlook for the Internet - Software industry, where BILL Holdings operates, is currently in the top 37% of Zacks industries, suggesting a favorable environment for performance [8]

Revenue and Growth - Revenue for the three months ended March 31, 2025, was $358.2 million, an increase of 10.9% from $323.0 million in the same period of 2024 [130]. - Total Payment Volume (TPV) for the three months ended March 31, 2025, was $79.4 billion, representing an 11% increase from $71.4 billion in the same period of 2024 [149]. - The number of businesses using the company's solutions increased by 5% to 488,600 as of March 31, 2025, compared to 464,900 in 2024 [149]. - The company processed approximately 29.7 million transactions in the three months ended March 31, 2025, a 16% increase from 25.7 million in the same period of 2024 [149]. - For the nine months ended March 31, 2025, revenue was $1,079.2 million, up 14% from $946.5 million in the same period of 2024 [130]. - Total revenue for the three months ended March 31, 2025, increased by $35.2 million (11%) to $358.2 million compared to the prior year period, driven primarily by a $36.4 million (17%) increase in transaction fee revenue [177]. Financial Performance - The company generated a net loss of $11.6 million for the three months ended March 31, 2025, compared to a net income of $31.8 million in the same period of 2024 [130]. - Net loss for the three months ended March 31, 2025, was $11,589,000, a significant decrease from a net income of $31,809,000 in the same period of 2024 [174]. - Operating loss for the three months ended March 31, 2025, was $28,946,000, compared to an operating loss of $27,622,000 in the prior year [174]. - Other income decreased by 69% to $18,650,000 for the three months ended March 31, 2025, from $59,801,000 in the same period of 2024 [174]. Expenses and Costs - Service costs rose by 29% to $56,733,000 for the three months ended March 31, 2025, compared to $43,845,000 in the same period of 2024 [174]. - Research and development expenses increased by 6% to $86,540,000 for the three months ended March 31, 2025, from $81,594,000 in the prior year [174]. - Sales and marketing expenses grew by 16% to $136,758,000 for the three months ended March 31, 2025, compared to $118,105,000 in the same period of 2024 [174]. - General and administrative expenses increased by 16% to $73,851,000 for the three months ended March 31, 2025, from $63,858,000 in the prior year [174]. - Total cost of revenue increased by $12.2 million (22%) during the three months ended March 31, 2025, leading to a gross profit of $291.0 million, up from $268.0 million in the prior year [179]. Cash Flow and Investments - Free cash flow for the nine months ended March 31, 2025, was $244.1 million, up from $184.8 million in the prior year, indicating a 32.1% increase [200]. - Cash and cash equivalents as of March 31, 2025, totaled $1.0 billion, with available-for-sale short-term investments of $1.1 billion and an undrawn Revolving Credit Facility of $120.0 million [202]. - Net cash provided by operating activities increased to $266.8 million for the nine months ended March 31, 2025, compared to $200.2 million in the prior year, driven by revenue growth [213]. - Net cash used in investing activities rose to $773.8 million for the nine months ended March 31, 2025, from $366.4 million in the previous year, primarily due to increased purchases of investments [215]. - Net cash provided by financing activities was $326.9 million for the nine months ended March 31, 2025, a significant recovery from net cash used of $722.4 million in the prior year [217]. Debt and Financing - The company issued $1.4 billion in 0% convertible senior notes due 2030, with net proceeds of approximately $1.38 billion after costs, used for share repurchases and debt repayment [205]. - The August 2024 Share Repurchase Program allowed for the repurchase of up to $300.0 million in shares, with $201.3 million spent to repurchase 3,711,246 shares by March 31, 2025 [208]. - The company issued $1.15 billion in 0% convertible senior notes due December 1, 2025, with a conversion price of $160.88 per share [223]. - The company has a total borrowing commitment of $300 million under its Revolving Credit Facility, with $180 million borrowed as of March 31, 2025 [227]. Risks and Economic Conditions - Macroeconomic conditions, including interest rate volatility and inflation, may impact the company's future results and operations [135]. - The company is exposed to interest rate risk from its $180 million borrowings indexed to term SOFR, with potential increases in interest costs if market rates rise [243]. - Credit risk is present from card receivable balances with spending businesses, which may default due to various factors [248]. - The company is exposed to foreign currency exchange risk related to its cross-border payment service, which may affect cash flows and operating results [249][252]. - A 10% change in the value of the U.S. dollar relative to foreign currencies is believed to have an immaterial effect on cash flows and operating results [253].

Financial Data and Key Metrics Changes - Core revenue grew 14% year over year, reaching $320 million in Q3 [38] - Non-GAAP operating income margin was 15%, exceeding initial expectations [5][31] - Free cash flow increased by 44% year over year, representing a 25% margin [6][38] - Total revenue for Q3 was $358 million, up 11% year over year [38] - Non-GAAP net income was $59 million, with a net income margin of 16% [45] Business Line Data and Key Metrics Changes - Revenue from the integrated platform, excluding the financial institution channel, was $302 million, up 15% year over year [39] - Revenue from the Bill APAR solution was $164 million, an increase of 10% year over year [39] - Revenue from the Bill Spend and Expense solution was $138 million, up 21% year over year, driven by a 22% growth in card payment volume [42] Market Data and Key Metrics Changes - Total payment volume (TPV) grew 10% year over year, slightly below expectations [39] - TPV per customer decreased by 2% year over year due to SMBs managing expenses more conservatively [40] - Net adds from the accounting channel grew over 60% year over year, indicating strong market penetration [20] Company Strategy and Development Direction - The company is focusing on expanding capabilities for larger businesses and enhancing its payment portfolio [6][9] - An accelerated AI growth strategy is being implemented to transform financial operations for SMBs [23][24] - The company aims to simplify financial operations for SMBs, positioning itself as an essential platform for financial management [8][29] Management's Comments on Operating Environment and Future Outlook - Management noted that SMBs are adapting to a dynamic macro environment, with signs of reduced spending and transaction volumes [28][46] - The company remains confident in its ability to capture market opportunities despite current uncertainties [46][47] - Future guidance for Q4 expects core revenue to be between $335 million and $345 million, reflecting 11% to 15% year-over-year growth [48] Other Important Information - The company has a strong balance sheet with $2.2 billion in cash and short-term investments, providing flexibility for growth investments [45] - The introduction of new advanced ACH solutions aims to simplify payment processes for large suppliers [18][35] Q&A Session Summary Question: Success with accountants adopting Divvy post integration - Management highlighted the significant opportunity within the accountant base, with over 9,000 firms using their product and potential for cross-selling [54][55] Question: Confidence level regarding investments and expected returns - Management expressed increased confidence in internal execution driving results, with a focus on simplifying customer experiences [60][62] Question: Observations from April trends and comparisons to past cycles - Management noted that SMBs are facing significant uncertainty, leading to fewer transactions and decreased spending, but emphasized the resilience of SMBs [64][66] Question: Impact of tariffs on cross-border transaction revenue - Management indicated that the majority of international transactions are for services, with no significant shift between USD and local currency payments observed [73][75] Question: Pricing and packaging of the software platform - Management acknowledged the opportunity for pricing adjustments as the platform becomes more valuable, with plans to discuss this in future calls [80][82] Question: Payments monetization within Bill APAR - Management detailed the drivers of take rate expansion, including volume growth from emerging payment products and reduced FX losses [89][90]

Financial Data and Key Metrics Changes - Core revenue grew 14% year over year, reaching $320 million in Q3 [38] - Non-GAAP operating income margin was 15%, exceeding expectations [4][38] - Free cash flow increased by 44% year over year, representing a 25% margin [5][38] - Total revenue for Q3 was $358 million, up 11% year over year [38] - Non-GAAP net income was $59 million, with a net income margin of 16% [44] Business Line Data and Key Metrics Changes - Revenue from the integrated platform, excluding the financial institution channel, was $302 million, up 15% year over year [39] - Revenue from the Bill APAR solution was $164 million, up 10% year over year [39] - Revenue from the Bill Spend and Expense solution was $138 million, up 21% year over year [42] - Total payment volume grew 10% year over year, although TPV per customer decreased by 2% [39][40] Market Data and Key Metrics Changes - The accounting channel saw net adds grow over 60% year over year, with 9,000 accounting firms using the platform [20] - Local transfer capabilities were enabled in dozens of countries, enhancing international payment solutions [32] - The company processed $79 billion in total payment volume, representing over 1% of GDP [6] Company Strategy and Development Direction - The company is focusing on expanding capabilities for larger businesses and enhancing its payment portfolio [5][12] - An accelerated AI growth strategy is being implemented to transform financial operations for SMBs [23][24] - The introduction of advanced solutions for procurement and multi-entity management aims to simplify complex financial processes [9][14] Management's Comments on Operating Environment and Future Outlook - Management noted that SMBs are adapting to a dynamic macro environment, with signs of reduced spending and transaction volume [28][46] - The company remains confident in its ability to capture market opportunities despite current uncertainties [29][46] - Future guidance for Q4 expects core revenue to be between $335 million and $345 million, reflecting 11% to 15% year-over-year growth [48] Other Important Information - The company ended the quarter with $2.2 billion in cash and short-term investments, providing liquidity for growth investments [44] - Stock-based compensation expenses are expected to be approximately 17% of total revenue, reflecting a reduction from earlier estimates [50] Q&A Session Summary Question: Success with accountants adopting Divvy post integration - Management highlighted the significant opportunity within the accountant base, with over 9,000 firms using the product and potential for cross-selling [55] Question: Confidence level regarding investments and expected returns - Management expressed increased confidence in internal execution driving results, with ongoing investments in key priorities [62] Question: Observations from April trends and comparisons to past cycles - Management noted that SMBs are facing significant uncertainty, leading to fewer transactions and decreased spending, similar to conditions seen during COVID [66][68] Question: Impact of tariffs on cross-border transaction revenue - Management indicated that the majority of international transactions are for services, with no significant shift between USD and local currency observed [75][76] Question: Pricing and packaging of the software platform - Management acknowledged the opportunity for pricing adjustments as the platform's value increases, with plans to discuss this in future quarters [82] Question: Payments monetization within Bill APAR - Management detailed that take rate expansion in Q3 was driven by volume growth in emerging payment products and reduced FX losses [90][91]

Company Overview - BILL is positioned as a champion for small and midsize businesses, offering an essential financial operations platform[5,9] - The company's mission is to simplify business connections and operations[8] - BILL's platform integrates spend management, accounts payable, and accounts receivable[10] Key Metrics - BILL has 488,000 businesses using its solutions[14] - The platform boasts a network of 71 million members[14] - The net dollar retention rate is 92%[14] - Non-GAAP gross margin stands at 85%[14] Market Opportunity - The U S opportunity includes 34 million SMBs and sole proprietors[21] - The U S SMB software spend is estimated at $75 billion[21] - The global B2B payment volume opportunity is $135 trillion[21] Financial Performance - The trailing 12 months revenue is $1423 million[47] - Core revenue year-over-year growth is 14%[47] - 89% of core revenue comes from existing customers[47]

Revenue Performance - Q3 total revenue was $358.2 million, an increase of 11% year-over-year[6] - Q3 core revenue, consisting of subscription and transaction fees, was $320.3 million, up 14% year-over-year[6] - Subscription fees were $68.2 million, a 4% increase year-over-year, while transaction fees reached $252.1 million, up 17% year-over-year[6] - Guidance for Q4 FY25 total revenue is projected between $370.5 million and $380.5 million, with year-over-year growth of 8% to 11%[7] - Total revenue for the three months ended March 31, 2025, was $358,217,000, representing a 10.9% increase from $323,028,000 in the same period of 2024[32] - Subscription and transaction fees increased to $320,298,000 for the three months ended March 31, 2025, up from $281,294,000 in 2024, marking a growth of 13.9%[32] Profitability Metrics - Gross profit was $291.0 million, representing an 81.2% gross margin, compared to 83.0% in Q3 of fiscal 2024[6] - Operating loss was $28.9 million, compared to a loss of $27.6 million in Q3 of fiscal 2024[6] - Net loss was $11.6 million, or $(0.11) per share, compared to net income of $31.8 million in Q3 of fiscal 2024[6] - Gross profit for the three months ended March 31, 2025, was $291,005,000, compared to $268,016,000 in 2024, reflecting an increase of 8.6%[32] - Operating loss for the three months ended March 31, 2025, was $(28,946,000), slightly higher than the loss of $(27,622,000) in 2024[32] - Net loss for the three months ended March 31, 2025, was $(11,589,000), compared to a net income of $31,809,000 in the same period of 2024[32] Cash Flow and Liquidity - Cash flows from operating activities for the three months ended March 31, 2025, were $99,530,000, an increase from $66,809,000 in 2024[35] - Cash, cash equivalents, restricted cash, and restricted cash equivalents at the end of Q1 2025 totaled $3,171,150, down from $3,335,803 at the end of Q1 2024[36] - Net cash used in financing activities for Q1 2025 was $(105,573), compared to $(801,215) in Q1 2024, showing a significant reduction in cash outflow[36] - The company reported a net decrease in cash and equivalents of $(649,557) for Q1 2025, compared to $(1,352,777) in Q1 2024, indicating improved cash management[36] - Net cash provided by operating activities for Q1 2025 was $99,530 thousand, up 48.9% from $66,809 thousand in Q1 2024[43] Balance Sheet Highlights - Total current assets increased to $6,803,834,000 as of March 31, 2025, compared to $6,314,817,000 as of June 30, 2024, representing an increase of 7.8%[30] - Total liabilities rose to $5,762,175,000 as of March 31, 2025, compared to $5,044,612,000 as of June 30, 2024, indicating an increase of 14.2%[30] - Stockholders' equity decreased to $3,870,461,000 as of March 31, 2025, down from $4,134,201,000 as of June 30, 2024, a decline of 6.4%[30] Research and Development Expenses - Research and development expenses for the three months ended March 31, 2025, were $86,540,000, up from $81,594,000 in 2024, reflecting a growth of 6.0%[32] - GAAP research and development expenses for Q1 2025 were $86,540, an increase from $81,594 in Q1 2024[38] - Non-GAAP research and development expenses for Q1 2025 were $57,987, compared to $55,532 in Q1 2024, reflecting a 4.4% increase[38] Performance Obligations and Share Metrics - Remaining performance obligations to be recognized as revenue total $74,430 thousand as of March 31, 2025, down from $86,845 thousand in the previous year[45] - Shares used to compute GAAP net income per share, diluted, for Q1 2025 were 102,219 thousand, compared to 111,176 thousand in Q1 2024, a decrease of 8.1%[41] - Non-GAAP net income per share attributable to common stockholders, diluted, for Q1 2025 was $0.50, down from $0.60 in Q1 2024, a decline of 16.7%[39] Other Financial Metrics - Non-GAAP net income for FY25 is expected to be between $236.7 million and $240.7 million, with non-GAAP net income per diluted share projected at $2.06 to $2.09[7] - Free cash flow for Q1 2025 was $90,541 thousand, an increase of 43.9% from $62,960 thousand in Q1 2024[43] - Total depreciation and amortization for Q1 2025 was $18,336 thousand, compared to $23,429 thousand in Q1 2024, a decrease of 21.8%[39] - Stock-based compensation and related payroll taxes charged to cost of revenue and operating expenses for Q1 2025 were $63,909 thousand, up from $60,619 thousand in Q1 2024, an increase of 3.8%[39] - Capitalization of internal-use software costs for Q1 2025 was $(7,460) thousand, compared to $(3,833) thousand in Q1 2024, an increase of 94.3%[43]

Core Insights - BILL Holdings is expected to report quarterly earnings of $0.37 per share, reflecting a decline of 38.3% year-over-year, while revenues are forecasted to increase by 9.8% to $354.78 million [1] Earnings Estimates - Over the last 30 days, the consensus EPS estimate has been revised upward by 8.2%, indicating analysts' reassessment of their initial forecasts [2] - Changes in earnings estimates are crucial for predicting investor reactions, as empirical research shows a strong correlation between earnings estimate revisions and short-term stock performance [3] Revenue Breakdown - Analysts estimate 'Revenue- Interest on funds held for customers' to be $35.26 million, a decrease of 15.5% from the prior-year quarter [5] - 'Revenue- Subscription and transaction fees' is projected to reach $320.12 million, representing an increase of 13.8% year-over-year [5] Key Metrics - The consensus estimate for 'Total Payment Volume' is $80.34 billion, up from $71 billion a year ago [6] - Analysts predict 'Transactions Processed' will reach 30.79 million, compared to 26 million in the same quarter last year [6] Stock Performance - Over the past month, shares of BILL Holdings have returned +12.8%, outperforming the Zacks S&P 500 composite's +11.5% change [6] - BILL Holdings currently holds a Zacks Rank 3 (Hold), suggesting its performance may align with the overall market in the near future [6]