Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- BILL Holdings Inc reported strong revenue growth of 19% year-over-year, with total revenue reaching $323 million in Q3.
- Non-GAAP operating income saw a significant increase of 68% year-over-year, demonstrating effective cost management and operational efficiency.
- The company's platform processed nearly 100 million transactions in the past 12 months, representing approximately 1% of U.S. GDP, highlighting its substantial scale and impact.
- BILL's customer base expanded with the addition of 450,000 small businesses using the platform to automate their financial operations, emphasizing strong market adoption.
- The company successfully integrated new capabilities into its platform, such as cash flow insight and forecasting, enhancing the value proposition for SMBs.
Negative Points
- Despite overall growth, BILL Holdings Inc noted a decline in stand-alone subscription revenue from financial institution partners, indicating potential challenges in this segment.
- The company experienced increased credit and fraud loss rates, particularly among smaller customer cohorts, suggesting vulnerabilities in risk management.
- BILL's net new customer adds in the financial institution channel declined due to the removal of inactive customers, raising concerns about customer engagement and retention.
- There was a one-time benefit that artificially boosted non-GAAP gross profit, which may not be indicative of ongoing financial health.
- The company faces ongoing macroeconomic uncertainties, including high inflation and interest rates, which could negatively impact SMB spending and overall market conditions.
Q & A Highlights
Q: Good results here. Maybe I'll start with just a macro question. I know last quarter, you said you're looking for more consistent signals around TPV. It sounds like you're seeing more stability. Is that the ongoing assumption from here, thinking about the fourth quarter and as we extend into fiscal '25? Any other call-outs?
A: (Rene A. Lacerte - BILL Holdings, Inc. - Founder, CEO & Chairperson of the Board) Thank you for the question, Tien-Tsin. I would say you've got a good summary of it. We see, in general, spend neutrality, that the stabilization of spend is consistent across the portfolio of customers that we have. We have not yet seen spend expansion. And so that is how we are building our business models.
Q: Nice job on the take rate. Maybe I'll start there. I think you said there were some nonrecurring -- there's a nonrecurring benefit from migrating some of the volumes from -- across your back-end providers. So can you just quantify the revenue benefit from that in the quarter?
A: (John R. Rettig - BILL Holdings, Inc. - President & CFO) Yes. Thanks, Ken. Let me unpack that a little bit for you. First, we feel like we made great progress in the third quarter. Obviously, a significant expansion in monetization. And that was driven both by increased volume on our ad valorem products as well as the onetime uptick that we mentioned earlier. And that was really the movement of volume between processing providers that resulted in just higher monetization on a small portion of our volume.
Q: Rene, John, good results here. I want to dig into the net adds for BILL stand-alone ex FI. I'm wondering if there was any impact there from the -- residual impact from the Simple Bill Pay roll-off and if there was, what the organic adds look like. And then just at a higher level, obviously, some mixed signals in terms of software adoption out there, what you're seeing in terms of adoption trends and things like that in the market and if there's any sort of distinctions, any differences by channel.
A: (Rene A. Lacerte - BILL Holdings, Inc. - Founder, CEO & Chairperson of the Board) Well, thank you, Andrew. We had, I think, a very strong team that executes exceptionally well over the last, I guess, a little bit more than the last quarter. We have realigned teams to really focus on a couple of different priorities to drive the adoption that we're seeing. And one of the things that we've done is we wanted to make sure that we met customers where they were. And if they wanted to have a stand-alone spend and expense, that would be great. And if they wanted to have the combined package, that would be great. If they want a stand-alone AP, that would be great.
Q: Maybe we could just touch a little further on the go-to-market approach you have now going forward. And maybe just more color on the customer add numbers. I know somebody touched on it a second ago, but more detail on -- I mean, you had acceleration in your customer adds in Divvy with good volume with it, too. And so obviously, it seems like the strategy there is kicking in, in a bigger way. And then on the direct side also, 3,500. There was a bit of FI churn, it looked like, on the FI channel. Maybe you could just explain that, too, and the go-forward expectations for customer adds more broadly, guys.
A: (John R. Rettig - BILL Holdings, Inc. - President & CFO) Yes. Thanks, Darrin. I'll start and Rene can add color here. If you recall in February, we discussed a number of priorities to adapt our go-to-market efforts in light of just changing conditions both externally and with SMBs. And so as Rene said, one of the big areas of focus was being where SMBs are, delivering them the solutions that they want, whether it's individual solutions or unified, narrowing our focus to be more targeted on prospects that are ready to adopt versus are still thinking about the journey, along with a bias towards slightly larger businesses. And we saw good progress in the quarter. And that was definitely driven by an incredibly talented leadership and teams across our sales and market -- entire go-to-market organization.
Q: Congrats on these results. Rene, just following up on BofA. Is the BofA relationship likely to continue in some form? Or is it still possible they bring everything in-house? I'm just trying to get a sense of what are the range of outcomes still out there because I know there is -- or at least there was some kind of minimum commitment from BofA. So does that still exist as well?
A: (Rene A. Lacerte - BILL Holdings, Inc. - Founder, CEO & Chairperson of the Board) Thanks for the question, Bryan. So we are actively working with our partners at the bank. And like we said, when we have more to share, we will. The opportunity to extend the ecosystem to serve SMBs wherever they are exists across our platform, and we think there's an opportunity to do that with the bank.
Q: I was wondering if we could delve into the enriched integrated platform capabilities. And hopefully -- I was hoping you could give us a little bit more color on how you're monetizing some of those capabilities. Is it coming through more payment volume, better customer adds? Like how should we think about the benefits extending from that?
A: (Rene A. Lacerte - BILL Holdings, Inc. - Founder, CEO & Chairperson of the Board) Okay. Thanks, Keith. It's -- one of the reasons and the primary reason that we integrated the 2 platforms together was to drive simplicity for our SMB customers. It's what we think about every day is how do we simplify their lives. And what we have seen so far in, I would still say, the early days of an integrated platform is that we've seen great progress in active -- activations and engagement and just driving more cross-sell opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
