My name is Josh Beck. I cover the software and fintech space here at KeyBanc Capital Markets. We're thrilled to have CFO from Bill.com, John Rettig, join us for a fireside presentation. I have a few questions to run through. If others have questions during the presentation, just raise your hand and we'll try to work those in as well. Maybe just to start off, high level, obviously, you've been a public company for a few years now. Maybe just, you know, help us understand, you know, a little bit the evolution of the company and maybe a little bit of the evolution of kind of where you're spending your time, just in terms of operational or strategic focus as well. Yeah, that's a great place to start. Since we've been public, we've really expanded the capabilities of the platform to help small businesses succeed. We've added features and functionality and simplified the interface. We've added capabilities around spend management, advanced AR. We've created a bunch of automation. We've grown our footprint in the market. We've doubled the number of accountants that we work with, significantly expanded our customer base. We've also scaled the business a lot. We're north of $250 billion in payment volume now, so we've been able to take advantage of some of that scale to create great margin expansion and things like that. We've rolled out a bunch of products, particularly on the payment side, ad valorem products that we're driving adoption for SMBs on. That's led to a pretty significant expansion in our transaction monetization from, you know, south of 5 basis points to almost 13 now. All that's led to, you know, great transaction revenue growth. We've also obviously transitioned the business to be non-GAAP profitable. We're generating positive free cash flow now, and all this is, I think, set us up well to continue to innovate, you know, for SMBs and further penetrate the market. As we think about what's next, it has a lot to do with continuing to manage the business in a disciplined way, focusing on unit economics, expanding our go-to-market ecosystem. How we reach SMBs through partners, whether that's financial institutions or accountants, continuing to double down there to really help everyone serve SMBs better. We're excited about that journey, given how early it is in the evolution of this market. We're still, you know, single digits, low single digits in terms of penetration on a market that's still evolving rapidly. There's a exciting few years ahead. Yeah. A lot to unpack there. One of the areas you mentioned was doubling the accountant channel. I think that's always been really a bedrock of the go-to-market motion of BILL. I don't think it's necessarily something that's probably on the tip of tongue with investors because it's a little bit uncommon. Just maybe help us understand from the point of view of your accountant partners, maybe how BILL is viewed strategically versus maybe, say, a pure accounting software ledger system. You know, really just help us understand how much more room there is to grow with the accountant channel. Yeah. Our strategy as we thought about the go-to market years ago, is to try to reach SMBs through their trusted partners. Like, who do SMBs rely on when they're thinking about building their business, managing their finances, and things like that? Accountants are at a very important relationship for SMBs. We partner closely with them to create more value for SMBs, and also drive really good unit economics for us. It allows us to efficiently reach SMBs 'cause accountants serve a large part of the market. Our platform, we often talk about the use cases and features and functionality for end customers, but we also have a bunch of tools that accountants use to efficiently manage their relationship with their small business clients. They can create their own leverage and efficiency and ROI by using our tools to interact with and manage the relationship between their clients. We've proven this model out that we really complement accounting systems and other tools that SMBs use, and accountants are driving value for their own practice by leveraging our BILL platform, in addition to obviously helping their SMB clients, run a better business, be more informed, have more visibility into their financial operations. Discussing maybe one of the other channels you mentioned, FI partners. Obviously, you've had really good momentum. I think you've added almost 30,000 customers in the trailing 12 months. You have six of the top 10 banks. You know, help us understand a little bit about just, you know, the conversation that you're having with your banking partners. You know, the way I understood it was a lot of the early relationships were a little bit more commercial bank-oriented, and you've seen some of your large partners really extend that to the SMB segment. Just help us understand how that conversation has evolved and maybe, you know, how meaningful the SMB opportunity could be on top of some of the commercial success you've had. I think we've created a lot of momentum working directly with SMBs, which has opened up opportunities for us to work with these large banks, first with their mid-market or commercial customers, where they just have more complex needs for automation and workflow and things like that played to our strengths. We've done those kinds of process automation and digital on-ramps and things like that really well for businesses. The success that we've had with some of the commercial segments at banks has opened up the opportunity to serve more of the small business long-tail segment. Now, it's early in that journey for us. Some of the increases in financial institution customer acquisition that we've had in the last few quarters has actually been the small business progress that we've made. We've now got a couple of banks who are focused exclusively on the small business segment. That's helping us create a simpler, lower overhead solution for businesses to get up and running really fast while also having an upgrade path for them to leverage the full feature set of BILL as they grow and their needs evolve and become more complex. We're really excited about these kind of new set of capabilities that we're able to sell through our bank partners to reach those smaller businesses. Help us maybe put the unit economic framework on the FI channel, right? I imagine there's a pretty significant CAC efficiency and gain, I would assume, right? There's also probably a little bit lower ARPU because of revenue sharing arrangements or whatever they may be. Yeah, just help us understand, you know, how you think about, you know, the unit economics, which obviously we can't really see all that externally... Yeah but just how you manage it. Metrics that we do look at, things like ARPU, you know, how we should think about that versus maybe, the kind of core non-FI segment over a longer time period. Well, first, we manage unit economics associated with our financial institution partners at the bank level, and then at the portfolio across all of the banks. It's less an individual customer. So we sell to the financial institutions on a wholesale basis, multiyear contractual commitments with minimum guarantees, and that helps align our incentives. Like, we're both incented to drive adoption and ensure customer success on the platform. One of the things we've started to do recently is introduce more of our payment products into the white label solution with banks. That will, over time, have the effect of increasing our transactional ARPUs, will generate higher revenue per customer, while the bank is also able to deliver a broader set of products to their customers. It'll still be lower revenue per transaction than in our non-financial institution channels. We're really excited about how that is evolving and over time, our ability to have really all of our products enabled across all of our partners. That's really the promise that we're shooting for. How would you position that maybe with, say, larger banks versus maybe more mid and small size? You know, I would imagine there's some larger banks that are probably gonna have some of their own payment capabilities that they might wanna bring to bear. How would you know, segment that within the bank? Yeah. That's exactly right. I mean, banks are payment companies. Depending upon the products that they have in the market today to the customer segments that we're serving, we might leverage one of their payment capabilities but enable it inside of our platform. An example might be a virtual card product, that we enable inside of the white label solution, but it could be the bank's virtual card product, not our standalone product. The flip side of that is with smaller banks, and we've had some success recently with a couple of new banks that we've signed, they're taking our whole platform and all of the payment products and rolling that out to customers. That means our virtual card product, our spend management solution, our FX, you know, capabilities. It really depends on, you know, the size of the bank and the existing products that they have in market. We think there's a path to enable all of the products. Sometimes it's gonna be ours, sometimes it's gonna be the banks, and we work out the economics of it. It's a win-win for both us, the banks, and small businesses. Okay. You know, one of the other metrics I think investors look at obviously is RPO for your traditional enterprise software company with, you know, really well-defined commitments. I think it can be a very good leading indicator. When there's more of a minimum component to it really tells you obviously a lot less, and it obviously is amortizing in the last few quarters. You know, how should we think about that? Is that something that's just gonna be lumpy and, you know, if you bring in a significant new customer, or if you hit some, you know, new threshold and you exceed minimums, it could move up. Just how should we think about that number down the road? Well, the RPO, think of it as a floor for the contractual commitments that we have with the existing portfolio of bank partners. Our opportunity to deliver higher revenue than that will be based on, first, customer adoption, driving more success, more penetration in the customer base, and second is increasing transaction monetization. Any amounts over the RPO don't necessarily increase the RPO, except when we get to the stage where success with some of the current banks opens up more market opportunity, and then we bring on new bank partners, and that's how we'll grow the RPO over time. Okay. going back to some of your earlier comments, certainly one of the focus areas has been really adding more capabilities to the platform. Obviously, your roots were in AP, but it's much broader than that. It's AR, it's expense management, it's financial planning. you know, when you think about unifying the experience, there's obviously back-end components architecturally. There's the way that you present customers. Just help us understand how you're bringing it together in a unified fashion, and as you do that, what type of benefits do you expect across the business? Yeah. We've made a lot of progress with some of the back end, less visible parts of the technology integration. This year, this calendar year, we'll start to see the first customer-facing experiences, probably starting with our accountant channel, where there's a need to have a consolidated dashboard instead of tools to help their clients manage spend, no matter what the type of spend is or the product or things like that. Bringing the BILL and Divvy transparency and visibility together in one place is something that we're working on. Over time, it's really just creating more of a one-stop shop for businesses to be able to manage all of their process automation across a simple UI and super efficiently. It'll come out in stages. It's not a binary one-time thing, but we're looking forward to some of the customer-facing milestones happening later this year. How many other elements could you foresee adding to this kind of financial operations experience? Do you feel like you've obviously added a number of capabilities, you're working on rolling out the platform. You know, do you feel like there's many more that you need to add? Do you feel like from this point, it's more of just really refining the go-to-market and the uptake? Strategically, how do you think about that? Yeah. Well, I think go-to-market evolution is an ongoing thing, given the size of the market opportunity. There's tens of millions of businesses, 6 million businesses with employees. We know there's always work to do there, including adapting to the current environment that we're in. This is a little bit different than during the pandemic. In terms of the platform, we've got a huge lead as it relates to AP and AR automation, and we really nailed that combined with payments. There's many more aspects to the transaction life cycle, including the front end of what we do around procurement and sourcing and supplier directories. There's access to cash and cash flow insights. We did a small acquisition of a company called Finmark, which is really around planning and budgeting and consolidated insights. We're working on things like working capital for faster access to cash for customers that we know well or suppliers that we know well. Eventually, we think there's a lot of other core back office workflows that SMBs have, including people and HCM and things like that probably makes sense to be present in our platform somewhere. How that works, whether those are partnerships or build or buy, we don't have that part of the strategy figured out yet. We really think about expanding the surface area of our platform to touch most every back office process that small businesses are using. Wanted to also go back to another comment that you made around ad valorem payments. Obviously, you've introduced a lot of new products. You know, the take rate has gone up meaningfully, as you mentioned, almost 13 basis points. You know, how do you think about, I guess, you know, the cadence of uptake of new products? You know, once you launch a new product, do you generally get a pretty good feel for, you know, the attach rate within a few months, within a few quarters? You know, what can you do to drive adoption of some of these newer payment types higher in the future? Yeah. It's, I mean, it's normally measured over quarters and years, frankly. Our goal is to drive electronic payments first. That, that's the number one priority. We wanna reduce reliance on manual processes, paper-based legacy processes, and check payments. When we do that's what presents us an opportunity to drive ad valorem, you know, products. We've had great success with a recent product introduction called Instant Transfer, which is real-time payments. It's still early in the overall evolution of that, and we think as we improve our ability to surface these new products, create awareness inside the product and through other electronic means, less reliant on maybe sales touches and things like that's what will ultimately help drive adoption of the products. We're on a cycle of continuing to improve the products, make them easier to use, and make both buyers and suppliers much more aware of the portfolio of products we have. At the same time, we're starting to treat suppliers a lot more like customers, where we're engaging with them directly and making sure that they also have choice in electing how they wanna manage payment transactions. Okay. Any questions from the audience? Just wanna pause and see. Looks like. You want me go? Yeah. Can you just maybe address a little bit some of the weakness that I think maybe even caught you a bit by surprise last quarter? You know, what is the sort of confidence versus risk level as we think about the transaction revenue, the two pieces that drive that, you know, in terms of average revenue per user or the number of users that are using it or number of transactions? Where, where can we be? Where, where are you more confident, where are you less confident in terms of the way you look at the model going forward? Well, let me describe how it works. There's three big moving parts. There's the overall spend level of SMBs. Because the standard use case for our platform is businesses run almost all of their volume through our platform, manage it, what we see is a proxy for what's going on with businesses and how they're reacting to the environment. The second component is our share of wallet of our customers' spend. We're not at 100%. We know as we roll out more products, we can address more of their processes. That brings on more volume. The third variable is our monetization, our take rate. I think we are in much more control of the second two of our share of wallet that we can drive with customers and our monetization, our take rate. Those are levers that we can continue to exert over this uncertain period that we're entering now with overall business spend levels, perhaps coming down as many small businesses are sort of getting smaller. They're contracting before we get to some expansion stage. We have a good feel for how our platform's being used. We see continued strong engagement on the platform, so the number of transactions, the number of users, how they're engaging with the platform, which tells us the value proposition for the platform is intact, even though in this macro environment, there's gonna be some uncertainty about how businesses are gonna react. There's another one here. Yeah, you partially answered the question, but, improvement in take rates, can you just talk about what's been driving that trend? Is there a ceiling? Are there diminishing returns? Kind of address that. Yeah. As of the June quarter last year, about 10% of our payment volume was on ad valorem payment. A payment type where the amount of revenue we generate is variable tied to the size of the transaction and obviously the product that is used. It's a good start. We have a long way to go. What that means is the vast majority of our volume is still on check and ACH payments, which are fixed fee. Because most of the suppliers in our network have an account, we can engage with them, we can market to them. We know that there's many years ahead of continuing to expand ad valorem payment adoption. With that expansion comes an increase in take rate and monetization. I think it's a long-term, huge expansion opportunity. Maybe near term, there's less linear growth quarter to quarter given some of the uncertainties in the external environment, but we feel like we're still fairly early in the overall sort of game, if you will, of expanding monetization. Back here. Maybe you just could talk about the rewards piece for Divvy over kind of a longer term, the trajectory of that. I think it's ticked up a little bit maybe over the last six quarters. As you kind of look at the environment, is this something we should continue to expect to kind of tick up a little bit? Would you maybe even drive that up a little bit to be aggressive on the customer acquisition side? Is it something that could kind of decline maybe over time? Well, rewards has been stable the last couple of quarters. It's a present part of card spend for businesses. It's in the market. Our goal is to differentiate with software. How can we get businesses to leverage our tools to improve the way they operate, to create automation, visibility, and control? As long as we feel like there's a good match between the software use case and the customer's use of our card product, which would then trigger rewards, then that's something we're interested in. If somebody's just interested in access to credit and optimizing rewards, but they're not interested in the software, that's probably not a good fit for us. Over time, longer term, I actually expect we'll be able to create some efficiency in rewards because it'll be more of a software value proposition that is supported by, you know, rewards and incentives with card spend, as opposed to the other way around. You get high rewards, and there's some software you may or may not use. I think there are others in the market who might approach, you know, market penetration that way. Our view is, it's an integrated solution, and it's the software that's gonna help really change the way companies operate. We have another one back here. Yeah. Sorry. How do you think about the cross-border and international opportunity? In particular, beyond just sort of facilitating the payment flow, getting deeper into FX or other related solutions that kind of center around that. Yeah. Today, we're obviously, we've done a good job at growing our usage and penetration on cross-border payments. The majority of that is still US dollar. We think there's more that we can do by having a direct relationship with suppliers, as opposed to just being on the buyer side, which is where we started with that product. I think there's some regulatory considerations there. Being licensed in various places allows us to have a direct relationship. We've made progress in Canada and UK, I think over time, you'll hear some other locations where we're gonna do a lot more in working directly with suppliers. Longer term, we do have an aspiration to have a more global operation, so beyond just facilitating cross-border transactions, being able to help businesses in other regions as well, but that's a little bit further out. Yep. You know, going back to the macro topic, I tried to hold that for later in the presentation. I think you all were, you know, probably a little bit on the earlier end of the spectrum about just trends that you're seeing with, you know, SMB and B2B spend. I think others have kind of echoed those comments. You know, I've also seen a wide range of macro scenarios embedded for the year because it's really hard to know. I mean, I think even today there's some different signals from the Fed. I've seen some companies, you know, assume soft landing, hard landing, you know, maybe even no landing. Just kind of curious on, you know, what type of macro stance that you embedded into your outlook. It's a good question. Obviously, there's a lot that's unknown right now. As I mentioned before, like, we feel like the spend that's on our platform is a proxy for actions that SMBs are taking in response to, you know, the impact on their business that they're seeing. In the December quarter, we started to see, softer spend across all customer sizes, so from mid-market to really small customers, and most spend categories, actually. Still concentrated in the variable or more discretionary spend categories like advertising and tech purchases and contractors and outsourcing and things like that. Nevertheless, it's really across most, you know, categories. When as we thought about what does that mean for, you know, updated outlook for 2023 and even beyond, we know that there's two big things happening. One is uncertainty with the macro that's causing businesses to react, and we built in some assumptions about a continuation of the softening trends that we've seen. We have seasonality that normally happens between the March and December quarter, where on a per customer basis, spend is normally down about 7% quarter-to-quarter. That has nothing to do with the macro. That's just typical seasonal patterns. We feel like, by considering those two factors, we've been fairly conservative in how we think about our estimates for Q3, the outlook for spend, which was flat on a year-over-year basis, and that would mean down kinda mid-teens on a quarter-to-quarter basis. What I can say, like, so far what we've experienced in the March quarter, is spend is holding up kind of better than we expected. The trends are consistent, like spend is still being reduced by small businesses, but we're feeling better about the level of activity and what our customers are doing with, in terms of engaging with the platform. Okay. Great. Well, I think that that's exactly on time, exactly 25 minutes. Thank you so much for joining us today, John, and thank you for all the questions and engagement from the audience. Thanks.