Everybody, I am delighted to be welcoming BILL to the conference. We are very fortunate to have CFO John Rettig here with us. John, thank you for joining. Yeah, you bet. I'm Brad Sills, Senior Analyst on Large Cap Software, and looking forward to the discussion here, John. I've got some prepared questions we'll go through. We'll leave a little bit of time if you all have some questions at the end. So, thanks again, John. Yeah. Great to have you here. Great to be here. I think this might be our fourth or fifth consecutive appearance at the conference— Oh, great. -by BILL. Yeah, it's great to have you over the years. Why don't we just start with your recent Q3 results? It was only a month ago. It seems like a long time ago, but anything you want to highlight from the earnings report? What's been the investor feedback? Yeah. Yeah. That's a good place to start. We had a strong quarter, delivered growth, strong profitability, revenue up 19%, non-GAAP operating margin of 18%, 68% year-over-year growth. Yep. Continued to be ex-float profitable which is an important, you know, measure for us, as we've continued to create operating leverage as we grow the business. Added thousands of customers, accelerated, customer adds quarter to quarter on the core, you know, BILL platform. I think the performance is just speaks to the business model. We have diversification, and we continue to scale the business. I think the top investor focus areas have been really around payment monetization and expansion of take rate, around the health of SMBs, generally and how that translates into spend patterns and payment volumes and things like that. Yep. And then lots of discussions around our broader embed strategy, where we're starting to do more with software companies and enabling them to serve customers with payment capabilities, in addition to whatever their core value proposition is. Wonderful. Great. The, the TPV number was a little bit below your guidance, so if you wanna just touch on the macro. You know, I know this has been a big focus area. We always focus on TPV per customer as that gauge, but maybe you look at something else, that's been at this 1% level, low single digits now. Yep. You know, historically, you were—y ou know, before the macro slowed down, you were in kinda mid, mid-high teens even. So maybe you just wanna touch on, you know, the puts and takes in the macro, how that's affecting the business, and what are your observations there? Yeah, I'd say the Q3, the March quarter TPV held up well. It was pretty consistent with our expectations. It's clear that SMBs are operating in a tough environment. There's high inflation, interest rates are high, labor costs are high, and they've had to make adjustments to figure out how to make it through this particular, you know, macro environment. We saw about four quarters in a row of declining TPV per customer, ex-FI. In the last two quarters, December and March quarters, just up slightly. So flat. That is actually a really positive sign. It means that small businesses have adjusted to the current environment. They're figuring out how, how to make things work, and I think they're waiting for more clarity around the interest rate environment, more clarity around the economy, looking for their business to turn a corner in terms of the demand that they see before they start expanding, spending into that demand. The variables that drive TPV per customer for us, obviously, are customer growth as we further penetrate the market. Our share of wallet with customers, so how do our products help address their payment flows and their needs? And then third, which has been the most impactful lately, is the overall macro environment and how that is influencing you know, influencing the spend levels of SMBs. I'd say comparisons to prior periods during the pandemic are probably less relevant to pre-pandemic where we also saw TPV per customer increases driven more by expanding our footprint inside of customers and gaining wallet share, and I'd say that's still a very real opportunity for us. And as we continue to work through this particular external environment, macro situation, we would expect to see TPV per customer, ex-FI, grow on the other side of this faster than you know GDP, faster than inflation. Given we're continuing to add to the breadth of our payment products and serving more of the needs of our small business customers. Wonderful. Thank you for that. Despite the TPV pressure, you did report a nice monetization ramp in the quarter, seven-tenths of a basis point in the core BILL business up quarter on quarter. So that did exceed your expectations for, I think, flat heading into the quarters. And I know there was a one-time benefit, so maybe we could talk about the one-time benefit. But beyond that, I think there was also some strength you saw in ad valorem. And so— Yeah Do you— do you wanna touch on those two things? What was the impact from the one-time benefit? What was that? And then how did the other areas of strength kinda contribute there? Yeah. So payment monetization expansion has been one of the key growth drivers over the last few years for BILL. It's been more challenging in recent quarters, but we expect it to continue to be a driver over the intermediate and longer term. Our take rate expanded in the March quarter faster than we expected. In part, that was driven by a step-up in AR monetization as we moved some of our existing customer AR customer volume to a new processing provider at a higher rate. In addition, we saw more stable payment volume flows around some of the higher monetizing products like virtual card payments and IPFX. Over the prior few quarters, there had been pretty significant headwinds on those products that helped constrain monetization expansion, and so there wasn't as much of a headwind in the quarter. And then we saw expansion on some of the newer products, so things like Pay By Card and, maybe to a lesser extent, working capital, which we're still getting on the board on. It's small, but nevertheless, growing o ver time, though, just given the breadth of the payment capabilities that we have—w e have 8 different payment modalities, 12 different rails. This is going to help us address more and more of the needs of small businesses, increase that wallet share. As we do that, we think that's where we start to get more leverage to be able to reaccelerate payment monetization and have more consistent expansion, at least on an annual basis, you know, going forward. Wonderful. Thank you. Why don't we talk—maybe step back a little bit and kind of think through kind of where you are in penetration of some of the ad valorem products. Where is it today? You've set some targets, I think, longer term for cross-border virtual card. So maybe if you just want to provide some context as to kind of where you are in, in that effort to, you know, drive more adoption of, you know, ad valorem products like cross-border and the virtual card offering. Yeah. I'd say we're, we're still in the fairly early innings. If you look at our penetration rates, as last reported, we're a little above 3%, for virtual cards, a little below 5% for international payments, with the majority of that still being US dollar payments. So there's, there's lots of opportunities to expand further. Our prior longer-term targets for virtual cards were a penetration of 5%-10% of TPV and 10%-20% for international payments with potentially up to 50% of international payments being FX. As of the last reported number, that was about 36% FX. So we have a long way to go, and I think our focus has really been on increasing the value proposition associated with some of these payment types in order to make penetration and consistent adoption and increases in volume m uch more likely. So we're increasing the speed of payments. We're increasing the ease with which suppliers can reconcile transactions. We're lowering, in some cases, the absolute cost of payments, as it relates to—t he example there would be international payments and FX. As we're moving money faster by using local clearing accounts and things like that, it lowers our risk, our effectively cost associated with foreign currency translation, and that allows us to offer a more competitive cost to large buyers of FX. All these things combined, I think, we still believe that there's a big monetization opportunity ahead on payments. It, as you've seen in our recent results, it'll be a little less linear getting there than we had been the last couple of years, but w e feel good about the setup from here. Wonderful. And where do those, I guess, targets come from? Are these actual volumes you see on the network that you have visibility to? Yeah. These are less theoretical and more based on the visibility we have into the suppliers and the network. Got it. In the case of virtual cards, which ones are card accepting? What type of transactions do they have? What is the average ticket size per transaction? And therefore, which subset of the overall, you know, payment volume is addressable through certain payment types? A similar story with international payments. The standard use case for the BILL Platform is that customers use the solution to manage all of their processes, do approvals and workflows and things like that. Even if they're going outside of their bank to do a wire for the FX transaction, we still see the volume. Yeah. So we know that, without acquiring any more customers, on the BILL Platform, we still have a long way to go to convert international payment volume to our solutions. The estimates we provided have obviously been informed by a really close look at the volumes and as we continue to evolve our products, I think that's how we'll make progress against achieving some of those targets longer term. Wonderful. Thank you. And I know there's been an effort in the company to integrate spend management with core BILL. Maybe if you want to touch on that effort, what is this new platform about? I think it's more than just integrating spend management, but other services as well. You've talked about some of these services, like reconciliation, making it easier— Yeah For customers. I think just maybe a step back, and what, what have you done to revamp the platform, and what does this mean for not just spend management, but we can start there, but just the broader suite and, and how you can, you know, upsell? Sure. Starting with spend management, in the fall, we launched our unified platform, which is the integration of all of our capabilities into one place. And that was a step forward towards our eventual strategy of all-in-one financial operations in one comprehensive suite of solutions. And since that time, we've gotten lots of valuable customer feedback. One point of which is sometimes they have a context that they come to BILL with and they really want to pursue a particular pain point. So we're enabling them to do that. Maybe they just want a card program, or they want just an AR solution. They don't want the whole, the whole suite. Two, we know that there's some best-of-breed, like, world-class capabilities we have in each of our solutions that aren't yet unified and available in everything we do. Examples would be on the BILL side, we do great with workflows l ike advanced workflow capabilities that can be adapted to any business. We don't have that on the Spend & Expense side yet. With Spend & Expense, we do a really good job with budgeting to enable controls and visibility and transparency in how they're managing those programs. We want to bring that to the BILL side as well. So over time, really bringing an equivalent experience to every component of what we do and how we offer that to, you know, to small businesses. And as we're talking to customers and collecting feedback, we're seeing really good signs of increasing cross-sell opportunities. So new customers coming to the BILL solution, the integrated platform, we see a higher percentage of them adopting more than one solution from moment one. We see really good engagement. They're getting up to speed a little bit faster. They're doing more with us. That should have eventually the impact of being a higher lifetime value customer as they're doing more with us from the beginning. At the same time, we're seeing other opportunities that previously were very difficult for us to execute on, such as the average Spend & Expense customer per BILL is much larger than the average BILL core SMB AP automation customer. By and large, they have much larger international payment needs. Yeah. One of the motions we're starting to look at is cross-selling international payment capabilities to all mid-market companies in our ecosystem, regardless of which product they're using now. These are things that over time, I think will get us to where the cross-sell motions, regardless of which direction and which product, will be a much bigger part of our overall growth algorithm than it's been historically. And that was only made possible by what we were able to do in the fall in terms of the first steps in rolling out the integrated platform. That's great. That's great. So there's the integration side. Anything about just go-to-market and, and in-product promotion that, that's new, that is, is also enabling this? Yeah, we've gone through some transition with our branding that has had an impact on the go-to-market side. We have primarily adopted the BILL brand across all of our solutions. Our card program is still branded Divvy, but not the software solution, and that caused some interruption to the optimization that we had in the go-to-market system, if you will, in the fall. We adapted to that very quickly, so our customer numbers improved significantly in the March quarter, both on the BILL and Spend & Expense side. As we started to meet customers wherever they are with our solutions, and so I'd say we're still cautious given the external environment, but we're focused on really good unit economics and getting back to these consistent historical levels of customer acquisition, and we don't see obstacles to scaling that further. And as we continue to make progress in selling multiple solutions to customers that will actually increase our unit economics and I think allow us to go deeper and further with penetrating the market. Okay, wonderful. Thank you. Why don't we talk about the channel? We think historically of the BILL channel as the accounting firm partners. You recently announced a partnership with Xero, you know, for accounting and so, for accounting software. How, if in any way, is the partner, you know, strategy, channel strategy changing here? Yeah. Should we look to more of these types of accounting software partnerships in the future? Just curious what's- Yeah, it's a great question, and I'd say, the core of our go-to-market strategy that was created to efficiently acquire small businesses, which is really hard to do, has been the accounting firm relationships that we have. 8,000 firms overall, and more than half of our customers come from the accounting firms. We added financial institutions after that, and then a direct motion, direct go-to-market capabilities. Our proving ground with enabling others to serve their customers with our capabilities has really been in that financial institution channel. So we've taken those learnings, combined with the partnering approach we have for accountants, and we've created some embedded solutions that in the first opportunity that we've announced is with Xero, where they are taking our APIs and some widgets that we have created to embed some of our payment and workflow capabilities inside of the Xero ERP system. We're very familiar with the Xero customer base. First, it's a US-focused deal to start, and we have thousands of Xero customers who are also BILL customers. So we know what they look like, we know how they behave, we know the types of payment volume they have. We think this is an interesting opportunity to significantly grow, in the case of Xero, our penetration with much smaller SMBs that are way more difficult for us to go acquire directly through accounting firms and/or direct go-to-market motions. So we'll enable a company like Xero to serve those customers through our embedded capabilities. I would look at Xero as kind of the first of many partners over, you know, the short and intermediate term. Not just in the accounting software space, but across multiple verticals. There's, as you know, convergence between software and payments is happening, right? And it's across almost every vertical. Procurement companies, payroll companies, e-commerce, like there's—a nywhere there's an opportunity to attach, process automation and payments, there's an interest in doing so. What we've learned from a lot of the inbound dialogue that we've been having is, most software companies, if they're not already in payments are probably not gonna build it. It's pretty complicated. Our own infrastructure around risk and compliance and regulatory management that becomes a service unto itself that we enable for third parties from day one. We have a network of 5.8 million members that the Xero customer base in the U.S. gets access to from day one. It's not something that needs to be built. So we have some inherent points of significant differentiation and advantage in helping enable others. And so we're excited about, you know, that particular strategy. Wonderful. Thank you. Why don't we just pull back a little bit and just think more broadly about just general trends in the industry? What are some of those that you see that are affecting the payments and payables industry and the SMB? What are some key trends and secular themes that you'd like to point out, and how is BILL kind of, you know, driving forward to kinda meet the needs of some of those secular trends? Yeah, I'd say, small businesses, in particular, are usually not very far up the sophistication curve around technology and optimizing internal operations. They tend to be more reliant on, like, legacy analog tools and, and systems. They often have many different solutions that aren't integrated. And so we know that there's, in this environment, where cost and efficiency and automation is more important, as important or more important than ever w e try to position ourselves to support small businesses doing more with less, right? Doing more capabilities to manage their operations digitally in one solution versus multiple solutions. Being able to do more per employee than they could otherwise do. So create efficiency, time savings, dollar savings with the back office that can then be reapplied to other parts of their business that create more value, help them grow faster and whatnot. And one of the ways we're doing that most recently is we've added a whole insights layer to our platform. We did an acquisition a while back of a small company called Finmark, which is in the FP&A forecasting, budgeting, planning space, and what we've done is take the kernel of that product and enable it across the entire BILL solution, applying to anything we do. We also ingest data from every system that a small business uses, whether that's a payroll, or e-commerce, or other system, in order to give really easy, quick access to small businesses to understand what's happening with their business. So this moves our platform from just a transaction system, which becomes mission-critical for that, into something that really helps small business owners run their business, and this is something that's more important now than ever. Wonderful. Thank you, John. We've got about five minutes left, so if there are any questions, please feel free to raise your hand and pose a question. State of understanding and of the SMB, and people are keeping that in view that there is some degree of stability that has developed since the December quarter. Maybe this aggregating between the micro businesses and the upper end of the SMB, what are you seeing that lends you the comfort to say that? Yeah, we look at lots of different segments of spend across our customer base, and then there's also the size of business and how their behavior might be different. We saw small businesses, think of 50 employees or less, adjust their spend to the current environment pretty fast. That happened within, you know, a couple of quarters. The larger businesses, they have more financial resources, more reserves, more flexibility, and much larger discretionary spend. They took much longer to adjust, and they're probably still going through some adjustments as it relates to this current environment. They're also gonna be very fast to pivot when the external environment changes. So one of the things we're most excited about is the stability that we've seen is a significant improvement over the contraction that existed across the small business space not many quarters ago. And so if we identify, say, a couple more quarters of that type of stability, we're starting to get to the point where we also might be seeing a decline in interest rates. And those two things combined, you know, continued stability and adjustment cycle that's already done, maybe a lower interest rate environment and improvement in the macro, we feel like that sets us up really well to accelerate growth. Wonderful. Thanks, John. Any other questions? If not, I can keep going. Okay. Well, why don't we pivot to AI? You know, a key topic here with all that's going on in the industry. What do you view as the opportunity for BILL, and what are you doing to address that? Yeah. So we've been working with AI and ML and data extraction and automation for a long time, first of all. It's part of the core of our technical capabilities to help small businesses move from paper to digital. We ingest documents, we ingest invoices, we extract data, we expose it to people for decision-making and automation. And that will only get better in this current environment. At the same time, we have done a lot of auto-matching and prediction around buyers and suppliers. You mentioned asked about, like, which—h ow do we know, like, what penetration targets might be? That's through prediction around what type of payment, you know, modalities and whatnot that buyers and suppliers are likely to use. And then we've also leveraged some of these capabilities with risk management and fraud detection and helping manage exposure for the business. I'd say going forward, over time, we've developed this pretty amazing data asset both in terms of payment, transaction data, things like that, as well as conversational data as it relates to interactions with our customers, which for BILL, because we're a small business, that's been predominantly chat-based or email-based interaction for more than a decade now. So we have an asset that will allow us to deliver things like, you know, enhanced automated customer support experiences, as well as some of the, maybe in the future, table stakes, AI capabilities around internal productivity and efficiency and improvements whether that's coding or operational efficiency. I think over the intermediate term, actually bringing, you know, automation to the accounting layer so that transactional accounting and development of forecasts and financial visibility can be much more machine-driven than human-driven going forward. These are things that we're looking at as it relates to enhancements to our platform. Wonderful. And maybe just last one, we've got just a few minutes or less than a minute. Can you give us a sense for the underlying data that's underpinning that effort, and how are you maintaining, you know, governance and security and data privacy, you know, for customers while— Yeah. While you're leveraging that data set for some of the things you're talking about? Yeah, it's a great question, and we've been in the sensitive data area for a long time because we deal with bank account credentials across, actually millions of entities. So we have a multi-tenant architecture. We have a risk and data and compliance subcommittee on our board that provides oversight over our internal practices, and it's something we take, you know, super seriously. Wonderful. Well, John, thank you so much for joining us. Great discussion. Thanks, everybody. Thank you.