Bill.com Holdings, Inc. (NYSE:BILL) Q3 2025 Earnings Call Transcript

Bill.com Holdings, Inc. (NYSE:BILL) Q3 2025 Earnings Call Transcript May 8, 2025

Bill.com Holdings, Inc. beats earnings expectations. Reported EPS is $0.5, expectations were $0.37.

Operator: Good afternoon, and welcome to BILL’s Third Quarter Fiscal 2025 Earnings Conference Call. Joining us for today’s call are BILL’s CEO and Founder, Rene Lacerte; President and CFO, John Rettig; and Vice President of Investor Relations, Karen Sansot. With that, I would like to turn the call over to Karen Sansot for introductory remarks. Karen?

Karen Sansot: Thank you, Operator. Welcome to BILL’s fiscal third quarter 2025 earnings conference call. We issued our earnings press release a short time ago and furnished the related Form 8-K to the SEC. The press release can be found on the Investor Relations section of our website at investor.bill.com. With me on the call today are Rene Lacerte, Chairman, CEO and Founder of BILL; and John Rettig, President and CFO. Before we begin, please remember that during the course of this call, we may make forward-looking statements about the future business, operations, targets, products and expectations of BILL that involve many assumptions, risks, and uncertainties. If any of these risks or uncertainties develop or if any of the assumptions prove incorrect, actual results could differ materially from those expressed or implied by our forward-looking statements.

For additional discussions, please refer to the text in the company’s press release issued today and to our periodic reports filed with the SEC, including our most recent Annual Report on Form 10-K and quarterly reports on Form 10-Q. We disclaim any obligation to update any forward-looking statements. On today’s call, we will refer to both GAAP and non-GAAP financial measures. Please refer to today’s press release for the reconciliation of GAAP to non-GAAP financial performance and additional disclosures regarding these measures. Now, I’ll turn the call over to Rene.

Rene Lacerte: Thank you, Karen. Good afternoon, everyone. We delivered strong financial results in Q3 driven by disciplined execution of our strategy, investments in our powerful platform and strength of our efficient go-to-market approach. Core revenue grew 14% year-over-year. Non-GAAP operating income margin was 15% and was well ahead of the expectation we set at the beginning of the quarter as we continue to drive efficiency across the business. In addition, free cash flow grew 44% year-over-year in Q3 representing a 25% margin. During the quarter, we made strong progress against our strategic priorities. We expanded our capabilities for larger businesses, enhanced our payment portfolio, extended our lead in the accounting channel and added a new distribution channel to our ecosystem.

In addition, we are accelerating our AI growth strategy to change the game again for SMBs. In Q3, our solutions automated the financial operations for over 488,000 businesses and are critical to their everyday financial management. They trusted us to process $79 billion in total payment volume across our intelligent platform. With over 1% of GDP transacted on our platform, we believe our platform ecosystem and scale uniquely position us to serve SMBs everywhere. The fact remains that a majority of businesses still use manual legacy processes to manage their back office. At BILL, we are seizing the opportunity to transform the financial operations for the more than 6 million small and midsized businesses in the U.S. who make trillions of dollars in B2B payments annually.

In addition to extending our reach, we continue to expand the solutions we offer SMBs and suppliers in our network. Our value proposition is clear, making us the essential financial operations platform for SMBs. BILL is a trusted partner to SMBs across all types of industries. Our platform simplifies financial operations for businesses from a small family owned business to fast growing startups to establish and expanding mid-market companies. By removing complexity, providing more visibility and enhancing control, we free businesses from their back office headaches to focus on what they care about most. We are investing from a position of strength to make our platform smarter and more powerful. Today, I’ll cover how we are creating tangible value for our customers, suppliers and partners in four key areas: first, our advanced product suite for larger customers; second, progress on our supplier experience offerings; third, ecosystem expansion and the unlock of a new distribution channel; and fourth, our accelerated AI growth strategy.

To start, we recently launched a suite of new advanced solutions for large businesses to help them with their more complex needs such as multi-entity management, procurement and mass payments. Our advanced product suite creates ease, visibility, and control across these processes. These innovations will not only free our customers from clunky and inefficient financial processes, it will also scale with their business expansion. These innovations solidify BILL as the financial operations platform that empowers businesses to grow and scale. For example, AdvicePeriod, a Los Angeles based firm with offices in five states is reinventing wealth management and using our new multi-entity functionality to drive efficiency. Christine Remington, Accounts Payable Manager said, “We provide a range of financial services to our clients including bill pay, oftentimes we serve clients with multiple entities, with some clients having over 30 active entities across the U.S. BILL’s multi-entity function increases our efficiency, thus multiplying our productivity.

This upgraded function provides visibility across our clients businesses and enables us to prioritize and manage payments from a single location. We can do much more with fewer clicks. The enhanced multi-entity function has been one of the most impactful releases since I’ve worked with BILL”. BILL was already providing significant productivity gains for AdvicePeriod. And our increased focus on serving larger businesses created another significant increase in time savings and accuracy. This solution not only strengthens our position with existing customers, but that it also opens doors to serve larger mid-market companies. We also recently expanded our platform to include procurement solutions. We leverage our experience with more complex customers and adapted our smart AP and AR workflows to design a streamlined procurement solution for all SMBs. Rehmann a top 100 accounting firm is leveraging this new capability to further transform the financial operations of their clients.

Michelle Hodges, Principal of Finance and Accounting Solutions said, and “BILL has been a great technology partner for us. It is supporting us to evolve our role to provide more strategic advice to our clients. We are excited about the new innovations coming from BILL. With BILL Procurement, we are now able to drive significant value by leveraging procurement services to solve another pain point for our clients. BILL’s procure-to-pay solution provides efficiency, accuracy and compliance.” Our expansion into procurement is an important step on our product innovation roadmap. We are bringing the same simplicity and ease of use that redefine the core AP processes for hundreds of thousands of businesses to the painful, disconnected procurement process that most SMBs use today.

This new capability gives businesses the ability to manage, approve and track purchase orders with speed, precision and control, while at the same time providing a new module to increase the value of our platform beyond payments. Our one-stop-shop platform delivers leading solutions for accounts payable, accounts receivable, spend and expense management, forecasting, working capital solutions and now procurement, so businesses can gain control of their cash flow in one seamless experience. Now, I would like to focus on our evolving supplier experience. As the scale and reach of our network has grown, we are increasingly focusing on the value proposition we offer suppliers. We have launched a series of solutions focused on the supplier side of B2B transactions.

Through our automated tools, we have made it simple for over 7 million members in our network to connect with their trading partners. In addition to simplifying the connection process, we create a variety of payment options and financial services for both sides of transactions. With our core AP solution, we transformed the way buyers pay. Now we are transforming how suppliers receive funds. Some suppliers in our network receive payments from thousands of their customers via the BILL platform. This puts us in a unique position to solve the challenges of delivering enterprise grade solutions that streamline the receipt of payments, enhance cash application processes and provide valuable insight for these large suppliers. We recently introduced a beta offering of an advanced ACH solution for large suppliers, which addresses an important need, simplifying the process of getting paid by thousands of small businesses.

We expect to roll this solution out more broadly over the next several quarters. Processing and reconciling large volumes of transactions from customers of all sizes and multiple payment methods is complex, time consuming and error prone for these organizations. Our purpose-built solution significantly simplifies payment reconciliations by delivering consolidated daily remittance and payments. In addition, our advanced ACH solution automatically converts checks and ACH payments across our platform to advance ACH for these suppliers, which removes yet another layer of complexity in their acceptance process. With the value proposition of this solution, we believe, we can scale it to serve large suppliers across the country with billions of dollars in payment volume over time.

Our platform also makes it easy for smaller suppliers within our network to optimize their cash flows. Smaller suppliers manage their cash flow day-to-day, transaction by transaction and often have limited access to working capital solutions. We provide solutions that enable these suppliers to get paid faster, sometimes weeks in advance. Instant transfer and invoice financing continue to show strong receptivity with suppliers and together have reached approximately $10 billion in cumulative payment volume since their launches. While we are still early in the adoption cycle, we are excited by the strong volume and high VP usage for both offerings. Turning to our ecosystem expansion. We made great progress in Q3 broadening our diverse ecosystem, which enables us to efficiently reach and serve SMBs wherever they are.

Accountants are among our most important partners as they are an SMB’s most trusted advisor. Over 9,000 accounting firms have chosen BILL to be their platform for client advisory services and that has driven significant client adoption for BILL. Our initiative to double down on accountants is paying off. In Q3, net adds from the accounting channel grew sequentially and increased over 60% year-over-year. As we have discussed previously, our strategy with financial institution partners involves embedding multiple ad valorem payment offerings in our white label solutions. We are happy to report that we now have six banks that utilize at least one of our ad valorem products with one institution adopting four distinct offerings. We are leveraging this learning from our FI partnerships to unlock new distribution partners with our Embed platform.

I’m pleased to share that Xero is now GA with our new Embed platform. Together we are helping small businesses to streamline their accounts payable and make cash flow management even easier and more accessible. Part of our strategy and investment behind our Embed capabilities is to enable our larger customers to easily build the experiences they need with our APIs. We continue to see strong adoption momentum of our spend and expense API. Larger businesses value the simplicity and seamless integration of our solution. Notably, businesses utilizing the API have a spend level that is much higher than what we see on average. The examples shared today highlight the innovation progress across the company on supporting our FY2025 strategic priorities of enhancing our platform, expanding our payment capabilities and deepening our ecosystem.

Finally, I would like to focus on our AI initiatives. This year, we significantly increased our investment in AI for both internal and customer-facing experiences. We believe these investments will continue to drive efficiency and change the game for SMBs and how they manage their finances. We envision a future where even the smallest businesses can access the same financial operation capabilities as the Fortune 500, except without the large teams of people they employ. We are building a team of AI powered finance agents. We are uniquely positioned to direct these agents at the payables, receivables, procurement, and cash management processes that have always been a challenge for SMBs from both a time and accuracy perspective. We believe these agents will be a significant unlock for SMBs as it will free them to spend more time on the things that matter and provide them with additional insight to run their business.

Our scale, deep experience, and diverse payments ecosystem, will provide SMBs with a competitive advantage on day one. This vision is realized through two foundational assets inherent to our scale, an advanced data driven understanding of customer behavior and the rich granular data context we possess across the entire customer supplier ecosystem. The extensive and proprietary data asset derived from our platform comprising billions of dollars in payments and millions of invoices and receipts will be the backbone our AI models rely on, providing critical insights into operational workflows, supplier relationships, payment preferences, and risk management protocols. Our data foundation enables the robust deployment of AI agents driving highly contextual automation to redefine the efficiency of SMB financial operations.

Since pioneering this category, we’ve continuously reinvented how we serve SMBs with innovative solutions. Now AI is accelerating our ability to transform financial operations and further eliminate the mundane tasks that burden SMBs. We’re excited to share more AI driven updates in the quarters ahead. I am also very pleased about the caliber of talent we continue to attract to our team. We are thrilled to welcome Mike Cherry as our EVP of Software Solutions. Mike is a world class innovation leader with extensive experience in scaling product portfolios. He brings over 20 years of valuable expertise in building for SMBs including at Square and Gusto. We are confident that Mike’s proven track record in driving innovation, product expansion and adoption will significantly contribute to the expanding growth of our platform.

Before I turn the call over to John to talk more about our results and outlook, I want to touch on the macroclimate and provide some context on what we are observing. SMBs are adapting to the dynamic macro environment. Changes in behavior are emerging. We are seeing signals that businesses are managing their spend more closely by making fewer transactions and slightly decreasing their overall spend. We know that SMBs are agile and resilient and they are looking to build to help them manage the current environment. We do that by transforming their financial back office from a source of frustration into a powerful and insightful command center. SMBs need for automation and control will only increase from here. The opportunity for BILL is vast and with our leading platform, diverse ecosystem and proven scale, we are very confident in our ability to capture this market and spearhead the adoption of agentic financial operations for SMBs. In conclusion, in Q3 we accomplished what we said we would do and more.

We delivered strong revenue growth, strong profitability, and significant cash flow. In addition, we invested in driving more innovation to expand the value we create for our customers and suppliers in our network. With our market leadership, we are driving and pushing the category forward. BILL is the essential financial operations platform for SMBs. Now I’ll turn the call over to John.

John Rettig: Thanks, Rene. In Q3, we delivered profitable growth and meaningfully exceeded our non-GAAP operating income expectations. Our disciplined execution drove healthy monetization expansion, strong customer acquisition, and significant free cash flow in the quarter. At the end of fiscal 2024, we identified key investment areas across our platform, supplier network and distribution ecosystem to drive long-term growth and capture the large market opportunity ahead. We have made significant progress on these priorities through the first three quarters of fiscal 2025 and we’re seeing positive trends on customer adoption and payment adoption. I’ll provide a few examples. We enabled local transfer capabilities in dozens of countries, which is a notable enhancement to our international payment solution.

This new feature allows near real time delivery of cross border payments. We are observing solid adoption of local transfer, which is driving wallet share gains with customers leveraging our international payment product for their cross border transactions. This gives us confidence for the next wave of international payment innovations and our ability to drive adoption and growth. In the quarter, we enhanced our card portfolio capabilities. We are deploying our comprehensive card portfolio to drive broader adoption, in addition to traditional virtual cards; we are enabling the BILL Divvy card for use by our AP customers to drive growth in virtual card acceptance, leveraging the existing relationships between buyers and suppliers. Our AP customers are getting the tremendous value of improved efficiency and reporting as well as lower transaction fees.

We are seeing early signals of good adoption for this solution. On the supplier experience front, we expanded our product offerings and go-to-market team to better enable enterprise suppliers to process large volumes of payments from their customers who use the BILL platform. Since BILL has substantial scale as an SMB payment aggregator for many large suppliers, they’ve asked for more tools tailored to the enterprise and we’re delivering rapidly. Our new advanced ACH solution enables suppliers to reconcile payments at scale and with ease. We are excited by the potential of this product to drive value creation for suppliers and BILL through an ad valorem pricing model. In support of this opportunity, we are also building a supplier focused sales team to expand and convert our pipeline.

Shifting to our distribution ecosystem, we are broadening our reach with accounting firms. In addition to driving accelerated customer adoption of our AP and AR solution, our concerted efforts from both product and go-to-market are unlocking the accounting channel as a cross-sell engine. In Q3, accounting firms accounted for nearly half of spend and expense cross-sells. In our Embed channel, we expanded our ability to seamlessly integrate BILL, AP, AR workflows into the core tech stack of our customers and partners leveraging our APIs, similar to our earlier initiative with spend and expense. This allows businesses to develop integrations customized to their operations and enables partners to build new offerings for their clients. Thousands of customers and accounting partners are already taking advantage of our APIs. This new capability leads to volume growth as on average; we experience higher TPB per customer when our APIs are used.

In summary, we are enhancing the value proposition of our platform for SMBs and partners and expanding our target market as we execute diligently against our strategic priorities. We believe the progress we’re making in fiscal 2025 will become material sources of value creation for customers, partners, and suppliers and position us to deliver sustainable revenue growth and margin expansion over the long-term. Now, shifting to our Q3 results. We delivered profitable growth in Q3 with core revenue increasing 14% year-over-year. We drove efficiency in our business and produced a non-GAAP operating margin of 15%. Additionally, we generated $91 million in free cash flow and our free cash flow margin was 25%. Now for some more details about the quarter.

Total revenue was $358 million in Q3, up 11% year-over-year. Core revenue, which includes subscription and transaction fees, was $320 million, up 14% year-over-year. Float revenue was $38 million and our yield on FBO funds was 423 basis points in the quarter. Revenue from our integrated platform which includes our BILL, AP, AR and spend and expense solutions but excludes the financial institution channel was $302 million in Q3, up 15% year-over-year. Within our integrated platform, revenue from our BILL, AP, AR solution was $164 million, up 10% year-over-year. Total payment volume grew 10% year-over-year, which was slightly below our expectations. TPV per customer was 2% lower than the year ago period due to the leap year effect and SMBs proactively managing their expenses.

In Q3, customers scaled back their spend on some purchases and resulting in lower TPV per customer and transactions per customer. Customers began to moderate spend in the wholesale trade, real estate, payroll and PEO and construction categories. We delivered solid BILL, AP, AR payment monetization expansion in Q3, primarily fueled by the strength of our emerging ad valorem products including instant transfer, pay by card and invoice financing. In addition, monetization benefited from payment mix due to seasonally softer TPV in the March quarter. Our payment portfolio strategy is proving effective. The newer ad valorem offerings are contributing to monetization and are important levers as we navigate virtual card acceptance friction and cross border trade uncertainty with international payments.

During the quarter, FX losses abated as we increased our FX trading frequency to minimize currency volatility exposure. In March, we raised prices on checks and ACH payments for new customers, though this had minimal impact on Q3 given the timing of the price change. These updated prices will be applied to our existing customer base starting in May. In Q3, we continued our momentum penetrating the market, adding 4,200 net new BILL, AP, AR customers driven by strength in our accountant channel. We now have 164,800 customers using our BILL, AP, AR solution. Also within our integrated platform, revenue from our BILL spend and expense solution was $138 million, up 21% year-over-year driven by 22% card payment volume growth. Card spend per customer increased 3% year-over-year.

We observed good growth in card spend on travel, entertainment and retail in Q3, though we are somewhat cautious that near-term uncertainty could introduce headwinds to these spend categories. Spend and expense interchange fees were 258 basis points in the quarter and rewards expense was 50% of spend and expense revenue. We added 1,800 net new spending businesses to our spend and expense solution in Q3, bringing our total spending businesses to 39,500 as of the end of Q3. Our focus on accountants is working and contributing to growth in net adds. Revenue from our embedded and other solutions, which includes the financial institution channel invoice to go and other solutions, was $19 million. Moving on to additional financial highlights. Our emphasis on driving efficient growth enabled us to deliver non-GAAP gross profit of $304 million in Q3 reflecting an 8% year-over-year increase and a non-GAAP gross margin of 85%.

Furthermore, we generated non-GAAP operating income of $53 million yielding a 15% non-GAAP operating margin. Note that this includes a one-time $5.7 million benefit due to the refinement of our methodology for estimating reserves for credit losses. Non-GAAP operating margin excluding the benefit of float revenue was 5%. Non-GAAP net income was $59 million for the quarter revenue representing a 16% non-GAAP net income margin, while non-GAAP net income per fully diluted share was $0.50, which exceeded the top end of our guidance range by $0.12. We have a strong balance sheet with significant liquidity, which provides us with important optionality to invest behind our growth strategy. We ended the quarter with $2.2 billion in cash, cash equivalents and short-term investments.

Now shifting to our outlook. We are bullish on our prospects to capture a large share of the SMB market and we are investing with discipline to accelerate growth. We believe our leading platform, unique distribution ecosystem, large network and product innovation roadmap will enable BILL to extend our leadership position and set the standard for enabling financial operations automation for SMBs. While we are investing and executing to optimize for long-term growth, we’re also navigating a more challenging near-term business climate, current economic conditions present multiple uncertainties that SMBs are confronting, including the impact of shifts in fiscal and trade policies. In Q3 and in April, we saw SMBs adjust their spend patterns in response to the environment they are operating in.

Taking recent trends and increased uncertainty into consideration, we have adjusted our near-term outlook to account for the more challenging environment. As we expect the early signals of B2B spend pattern changes will translate into constrained near-term TPV per customer growth and monetization expansion. We are confident in our ability to successfully execute in the current environment and that our fiscal 2025 investments provide the levers to accelerate revenue growth as conditions improve. We will continue our approach of balancing growth and profitability through this cycle. We will provide more color on our fiscal year 2026 growth and profitability outlook during our August earnings call. Now on to guidance. For fiscal Q4, we expect core revenue to be in the range of $335 million to $345 million, which reflects 11% to 15% year-over-year growth.

We expect total revenue to be in the range of $370.5 to $380.5 million in Q4. Float revenue is expected to be $35.5 million in Q4, which assumes a yield on our FBO funds of approximately 400 basis points. Turning to our profitability outlook. We are managing the business closely to create efficiency and operating leverage as we scale. For Q4, we expect to report non-GAAP operating income in the range of $43 million to $48 million, which reflects proactive adjustments to operating expenses to increase efficiency, which includes embracing AI tools across the company. We expect non-GAAP net income in the range of $46.5 million to $50.5 million and non-GAAP net income per diluted weighted average share in the range of $0.39 to $0.43 in Q4 based on a share count of $118 million diluted weighted average shares outstanding.

Moving on to full year guidance. For fiscal 2025, we expect core revenue to be in the range of $1.290 billion to $1.300 billion, which reflects 15% to 16% year-over-year growth. We expect total revenue to be in the range of $1.450 billion to $1.460 billion. We expect float revenue to be approximately $160 million in fiscal 2025, which assumes a yield on FBO funds of approximately 435 basis points for the year and an exit fed funds rate of 425 basis points as of June 2025. On the bottom line for fiscal 2025, we expect to report non-GAAP operating income in the range of $226.2 million to $231.2 million and non-GAAP net income in the range of $236.7 million to $240.7 million. We expect non-GAAP net income per diluted weighted average share to be $2.06 to $2.09 based on a share count of 115 million diluted weighted average shares outstanding.

Note that our Q4 and full year guidance for share count and non-GAAP net income per share do not reflect the impact of future purchases under our share repurchase program. For fiscal 2025, we expect stock-based compensation expenses to be approximately 17% of total revenue, which is a reduction of approximately $40 million in expense from our beginning of the year estimates, reflecting our commitment to evolve our equity programs in order to create expense efficiency. In conclusion, we are pleased with our financial and operational results for the quarter. We delivered strong revenue, profitable growth and meaningful cash flows while driving rigorous execution and innovation at scale. There’s a tremendous opportunity ahead for BILL to power SMBs forward.

The progress we’ve been making strengthens our position to capitalize on the market opportunity. As we do so, we believe BILL’s compelling value proposition, strong business model and capital structure will enable us to generate meaningful and sustained growth and value creation for shareholders. And now, we’ll open up the call for Q&A.

Q&A Session

Operator: Thank you. [Operator Instructions]. Our first question today comes from Ian Black with Needham & Company. Please go ahead. Your line is open.

Ian Black: Hi, thank you for taking my question. I know you guys called out success with accountants adopting Divvy post integration. How are you seeing cross-sell now that it’s natively integrated into the solution kind of amongst the broader base?

Rene Lacerte: Thank you, Ian, for the question. We continue to invest behind the platform to make the simplest experience for customers to drive, obviously all the payment products and solutions that we have across the customer base. And the highlight on accounts is that as we continue to put more muscle behind that, both from a go-to-market perspective as well as from a product perspective, accountants are being receptive. We have a significant opportunity inside of the accountant base. As a reminder, we have over 9,000 firms across the country that use our product; they’ve used our product to actually reinvent their practice. They have adopted the client advisory service category and inside of their practices they have many more customers than are just on already the BILL platform.

So we see the ability to actually drive cross-sell as an important indicator as the overall opportunity that we have with accountants as we continue to knit our solutions together and continue to expand the capabilities of our platform. We believe it’s going to be a huge unlock for accountants to be able to drive more business inside of their practice and that’s going to be great for BILL. So super excited about the progress so far.

Operator: Our next question comes from Tien-Tsin Huang with JPMorgan. Please go ahead.

Tien-Tsin Huang: I hope you can hear me okay. I wanted to ask on the investments and if your confidence level has changed in the last 90 days with respect to the return that you’re expecting, including a little bit of take rate expansion, which we saw, as well as the acceleration in revenue. Just what’s the progress report there since we last got together?

Rene Lacerte: Thanks, Tien-Tsin. The confidence across the last 90 days from inside the company continues to increase. Obviously, that’s different than outside the company. But what I see inside the company is the continued execution across the company is actually driving the results that we set out to do. Some of that’s around the organization, the team; we’ve talked about that continuing to add more folks onto the team that can kind of execute across the broad platform that we built. But the thing that we highlighted in the call was the investments we made this year around our key priorities and key initiatives we were executing on. We’re getting things into market, product execution in the market that allows customers and suppliers to experience things differently than what they had before.

And we think as we continue to simplify the experience, as we continue to add to the platforms and continue to really drive more linkage between the front door and the back door, which is the buyer and suppliers, we think that’s going to actually drive the monetization, the material growth that we see over time. So I would say the confidence side of the company is we’re seeing that there’s lots more to go do and we’re super excited about what we’ve delivered today.

Tien-Tsin Huang: Got it. Great. And then just my quick follow-up, just I heard the update on the spending and I’m curious, just any interesting observations from the April trends. If there’s something that you could share. And Rene, I know you’ve seen different cycles and I know I’ve asked you this before, but would you be able to compare what you’re seeing with the questions around tariff and confidence with SMBs? Anything to learn from past cycles that might apply here?

Rene Lacerte: It’s a really great question. And we spend a lot of time thinking about this. And I would say at the highest level, I don’t think SMBs have seen this much uncertainty since the beginning of COVID. Uncertainty brings lots of unknowns. Unknowns actually leads to stifling growth. So instead of folks actually batting down the hatches and setting sail, they’re just batting down the hatches, right? They’re not able to do anything that’s proactive. And so the signals that we’ve seen — that we saw at the end of Q3 that informed how we looked into the future is we saw fewer transactions per customer and we saw slightly decreased spend per customer. And so the opportunity for us, obviously, is to continue to make sure that our platform is the thing that actually makes it easy for businesses to do just that, manage their business and so when I think about the uncertainty that’s out there, I also think about the knowns that we have.

And there are a lot of knowns across the business that are super valuable and really kind of indicate the confidence that we have in the business, first is that we just have a massive market in front of us. We know SMBs better than anybody from a financial operations perspective. We’ve been doing this longer than anybody and we’ve got the expertise internally and the scale from customers to be able to learn at a very fast pace. And we also know that SMBs are resilient. So for them, this is a speed bump, it’s not a roadblock. And we’re just at the beginning of developing this market with 4% roughly penetration across the employed base in this country. There’s lots of opportunity to do. And so another known we have is that we’ve built a platform and we are a platform company.

We have pioneered a category that nobody else has done yet. And our ability to kind of leverage that, that learning from pioneering and that learning from all the data that comes together on the scale of moving 1% of GDP, that creates opportunities for results. And so the data set we have is another known. Our ability to leverage our robust and diverse ecosystem is another known when it comes to BILL and our opportunity to kind of make our platform the choice platform for SMBs, so they can manage their business in these times or any times. That’s a known and that’s proven. And so I feel really good about obviously what we’re able to do to help SMBs understanding though that this is the greatest amount of uncertainty that they’ve seen since the beginning of COVID.

Tien-Tsin Huang: Yes. Okay. Thank you for the perspective.

Rene Lacerte: Thank you.

Operator: Our next question is from Kenneth Suchoski with Autonomous. Please go ahead.

Kenneth Suchoski: Hey, good afternoon. Thanks for taking the question. Maybe just following-up on the macro, can you give us a sense for how you’re thinking about the impact from tariffs on the cross border transaction revenue? And I guess related to that, I mean, how should we think about, one, I guess, the revenue exposure from cross border transactions? Two, are you seeing any preference between U.S. dollars over local currency payment options? And then, I guess third, how do you think about the mix of that cross border payments business at BILL? Is it 80:20 goods versus services and then any thoughts on the mix of geography? Just I know there’s a lot in there, but we’re getting some questions on it. Thank you.

John Rettig: Yes, thanks for the question, Ken. So let me start with the last part of your question, which is the mix, the vast majority of the transactions that our customers perform with international suppliers are for services. With that said, we do have a portion of spend that happens for goods, and that’s where we’ve seen maybe the beginning of some shifting behaviors associated with some of the U.S. dollar corridors like China and the potential for just movement between countries and different types of transactions. We haven’t necessarily experienced any significant shift between USD and local currency at the moment. And part of that, I think, comes from the introduction that we’ve had recently of our improved international payment product with local transfer capabilities, increased speed, it lowers costs and increased certainty.

And so we’ve seen some positives associated with that, primarily driven or primarily resulting in increased share of wallet. So no signals yet on shifts between those two other than the increased share of wallet. And in terms of overall FX exposure, the primary impact that we’ve seen with the volatility in the U.S. dollar over the last couple of quarters has been FX gains and losses. And in the third quarter, we actually made significant progress on that. We reduced losses by approximately 65% as we implemented new hedging and trading guidelines. And so we’re making positive momentum there. So all in all, there definitely is some uncertainty that, that needs to play out with international payments, but it feels like our product improvements are helping customers.

And where we do have exposure to FX in certain corridors, it’s more contained than being our overall product revenue.

Operator: Next in queue, we have Chris Quintero with Morgan Stanley. Please go ahead.

Chris Quintero: Hey, Rene. Hey, John. Thanks for taking the questions here. I want to — and it’s really great to see all the new capabilities that you’re adding to the platform with Procurement, obviously, Finmark and so. And you’re bringing Mike in here, too, to the leadership team. So just curious how you’re thinking about at a high level, maybe the pricing and packaging of the software platform now that you’ve added on all these capabilities and are adding more value to your customers.

Rene Lacerte: Thank you, Chris. There’s so much opportunity for us across the extension of the platform, which we talked about. And part of what we’ve been doing over the last year is setting the table for us to take action on things like pricing. You’ve seen that we impacted our transactional pricing for checks and ACH. There’s plenty of opportunity there. We’ll talk more about that as we come up with the plans and share the plans with folks on the calls in the coming quarters. But I would agree that the product set that we have becomes more and more valuable to businesses and what we’re seeing inside of the larger businesses that we serve and the examples that we gave with AdvicePeriod and Rehmann accounting firm, these capabilities when it comes to Procurement and multi-entity, these complex things save a tremendous amount of time.

And one of the things that I get totally jazzed about is that we invented a category that saved people a lot of time. We’ve said in the past it saves them 50% to 75% of the time. But when you think about AI and what AI is going to enable us to do, it’s going to be significantly more time and that is going to be a catalyst, I think for adoption across the SMB ecosystem and it is something that’s going to be a catalyst for how we think about pricing inside of the product as well. So thank you for the question.

Operator: Our next question comes from Andrew Schmidt with Citigroup. Please go ahead.

Andrew Schmidt: Hi Rene. Hi John. Thanks for taking the question. A lot of good stuff here. Appreciate all the comments. Maybe we could just ask two questions on just payments monetization within BILL, AP, AR and I’ll ask them both upfront. I guess, the first is whether you could just decompose the take rate expansion in the fiscal third quarter, obviously looks sounds like lower FX losses were part of that ad valorem mix, et cetera, but love to get a better read on that. And then, the second is, clearly you’re rolling out a number of payment modalities here heading into FY2026. Maybe going back to Tien-Tsin’s question a little bit also, maybe talk a little bit about sort of the early reads on some of the high sort of the high potential products, invoice financing, advance ACH, et cetera? And then how the — how those are shaping up to influence your confidence and take rate stability and expansion going forward into next year. Thanks so much.

John Rettig: Thanks for the question, Andrew. Regarding the Q3 take rate expansion, as you know, we have lots of levers at our disposal. We went into the quarter indicating we expected expansion in Q3 and that’s exactly what we delivered. I’d say there’s three main drivers quarter-to-quarter. First and I definitely most important was volume growth on some of our emerging ad valorem payment products. So that portfolio that includes instant transfer, pay by card, invoice financing and our AR payment offering all grew nicely. Second, as I mentioned earlier, we had lower FX losses in the quarter from some of the proactive changes we’ve made. And then third, and finally, I’d say, as we mentioned in prepared remarks, there was also a small positive associated with lower seasonal TPB in the March quarter versus the December quarter.

So these things combined led to the strength in Q3 and it played out pretty much as we were expecting. This portfolio approach that we’re taking, which is a strategy we adopted some time ago, I think positions as well. And to the second part of your question around payment methods and how we think about FY2026 and beyond. It’s obviously early with some of the products that we mentioned in prepared remarks, including our advanced ACH product and other capabilities that we’re launching. We’re pretty far along the path with invoice financing and some of our real time payment capabilities. And I’d say generally speaking, the feedback is very positive. We have a long way to go to drive adoption and see material financial growth and results flow through the P&L.

But our early reads are constructive. It gives us confidence that the investments that we’ve made in fiscal 2025 to set us up for growth in fiscal 2026 and beyond have been working and we’re expecting a good ROI from the incremental investments we made in 2025. And a large part of that has to do with our confidence in some of the payment monetization and payment adoption that we expect to drive in the near future.

Operator: The next question comes from Darrin Peller with Wolfe Research. Your line is open.

Darrin Peller: Hey guys, thanks. So I’ll echo the traction we saw on the payment monetization side was we thought strong sequentially and I understand there’s obviously cyclical in the backdrop now, but when we think of the structural that you’re benefiting off the take rate side. Number one, I guess, is there any reason why that’s not the trajectory is not sustainable from your perspective. And I know you had originally thought the end of the year would be a better or similar or better take rate than the beginning of the year. I think you said flat year-over-year versus the beginning of the year. And so if you could just reiterate whether fourth quarter would be similar to first quarter again and then more importantly when we think of 2026 again you had talked about, I know, hoping to get 20% type growth. Again I understand that it’s a more shaky macro but what are your thoughts there just given what you can control. Thanks, guys.

John Rettig: Yes, thanks for the question, Darrin. So in terms of the BILL, AP AR take rate, you’re right. We were originally expecting expansion on the heels of volume growth in Q4 across the entire ad valorem product portfolio. We have shifted our estimates and our expectation for this fourth quarter to be similar to the third quarter. And this is primarily related to some of the signals that we started to see in Q3 regarding some changing behaviors related to spend across discretionary categories, transactions per customer in certain AP customer industries. And then as we said, some expectation that we have around the implication for trade policy and things like that on the FX portion of our — of our international payment volume.

So all those things considered, we’re expecting similar monetization in Q4 versus Q3. But as it relates to FY2026, obviously there’s many unknowns. There’s a lot of uncertainty as it relates to the current environment. But as we look past the very short-term, we believe we have many levers across the payment portfolio to return to consistent monetization expansion. How that plays out on a quarter-to-quarter basis and relates to payment volume and adoption of our products, we’ll obviously lay that out when we get to August and talk about our FY2026 overall plan.

Darrin Peller: Good. Yes, makes sense. Good execution guys and thank you.

Rene Lacerte: Thank you.

John Rettig: Thanks, Darrin.

Operator: The next question comes from Alexander Markgraff with KeyBanc. Please go ahead.

Alexander Markgraff: Thank you. Hi, Rene. Hi, John. Rene, curious on your comments on deploying agents and across BILL and sort of the agentic AP strategy. Just sort of curious what that looks like for a BILL user and then if you could give some sense of how that could change, how customers are interacting with the platform, whether it’s in the form of higher transaction intensity, better wallet share, speed of onboarding, things like that would be great to understand how that could benefit the BILL model. Thank you.

Rene Lacerte: Great. Thank you. Thank you, Alex, for the question. I think you can hear that. Obviously, we’re excited. I think a lot of folks in the industry are excited about the opportunity that AI delivers to those in software and technology to actually make more of an impact. So we’ve been leveraging AI as part of the company for a while, right? It’s been part of the money movement, part of the data entry that we’ve done and that’s been a great learning point for us to understand how to actually take it to the next level. And understanding how the tools are developed over the last year has really allowed us to think more freely about this agentic experience. And so when I think about what SMBs have to deal with every day.

They have a lot of crap that to deal with. It is hard to actually be an SMB. I’ve lived that life. My parents lived that life. It is super hard. And they have to wear many hats. And if you think about what a large multinational Fortune 500 company has, they’ve got teams of people doing things. And so the employees and the costs are something SMBs can’t have. And we are uniquely positioned to build agents that will be targeted at. How do you simplify the payables process, the receivables process, the procurement process, the S&E process, the cash management processes, these are things that are already part of our platform. But to use agents to actually do the task and to tee up the human in the loop, we think is a unique opportunity to really enable SMBs to be free to get back to what they love.

And that’s what’s so exciting for me about AI is that people get a chance to actually do what they love instead of what they have to do. We eliminate the mundane tasks because of the agents. And so the platform capabilities we have really rest on two unique skills that we’ve built over the years. The first is that we know customers. We — all of us think of customers every day. First thing in, first — last thing out. We walk in their shoes. We think about them, we care about SMBs. We think they’re critical as a glue to our society. And that deep understanding of what their pain points are, whether it comes from accountants, whether it comes from partners, or comes from direct customers, it’s a unique opportunity for us to actually leverage their experiences today and understand the technology, so that we can actually apply agents.

That’s the first thing we have that’s unique. The next thing we have is just the data. We have such an incredible amount of data. We always talk about, hey, 1% of GDP goes through BILL, and that’s a massive number and that represents a lot of transactions. But what supports all those transactions is a significant amount of data underneath that comes in forms of documents whether that document is a bill or an invoice, or a receipt or a cleared payment or a reconciliation or some note that an employee puts on the bill, like these are all things that are sitting on our platform and allow us to build agents that nobody else can go build. We have an opportunity to actually deliver so much freedom for the SMB and that’s what we’re excited about doing.

And obviously the space is moving fast. But what we see is a world that SMBs are free to get back to what they love. You’ve heard me say that before, I’ll say it again. It’s why anyone starts a business; it’s not to do the stuff that we take care of under the hood. So we’re super excited about it. And I think that the world’s going to be much different for SMBs as we roll these out.

Alexander Markgraff: Thanks for the thoughtful response. Appreciate it.

Rene Lacerte: Thank you.

Operator: And our next question comes from Adib Choudhury with William Blair. Please go ahead.

Adib Choudhury: Hey guys, this is Adib for Andrew Jeffrey. Thanks for taking the question. We wanted to ask on advanced ACH. Given this has kind of been an area that monetizing has been challenging for a lot of B2B companies. What do you kind of think is unique about your value prop and selling motion? And can you also kind of remind us of the timeline of the rollout and timeline for expected monetization? Thanks.

Rene Lacerte: Yes. I think the first I’ll start and let John add if there’s any additional comments. But the first thing that we have is back to the last comment just the amount of data we have. So when you think about the large suppliers in our network, they’re receiving thousands of payments from BILL customers today. We are one of the largest aggregators of small business payments in the country. And so when we get a chance to go talk to a supplier, no matter what their size is, we’re already delivering significant number of payments to them. Some of those payments are check, by the way, some of them are ACH, some of them are virtual card. They’re getting payments in multiple forms and they want simplicity and execution of how they manage their receivables process.

And so the opportunity for us with the suppliers is to really change the game, given the volume we have and our deep understanding about building customer experience in this case, the customer would be the supplier, but building experiences that will enable suppliers to really get out of the mundane tasks that they have and really leverage what they need from their customers. So we’re super excited about that. We’ve announced that it’s in beta. The conversations that we continue to have with suppliers are that there is demand and a need for this. We continue to add on to the capabilities that we’ve already put into the beta application and we’ll continue to invest behind this because we know this is something that’s super important. In order for the ecosystem to work well, we have to really fulfill the promise of connecting buyers and suppliers in an ecosystem that delivers seamlessness and simplicity for everybody.

And so we’re definitely looking forward to getting more out in the market and very, very grateful that we have a position to leverage from.

John Rettig: Yes. I would just add regarding the part of the question about the unique selling motion, starting with that we have relationships with suppliers as it exists today, and what we’re really in dialogue with them about is increasing the level of automation and efficiency and reducing complexity that they have and how we can bring those benefits to them quickly. And so we’ve established dedicated teams to work closely with large suppliers. We’ve seen good progress, interest and early results from those interactions and from usage of the product. And it’s that progress that we’re expecting to leverage as we get into FY2026 and we go live with the product to a much larger number of suppliers. So we’re — we have a unique position in that we’re tapping into existing relationships. We’re already a large provider to these suppliers and now we’re going to raise the bar on the capabilities of our product and the value we deliver for them.

Adib Choudhury: Perfect. And if I could sneak in a quick follow-up, could you kind of give an update on spend mix at Divvy just trying to think through higher risk or more discretionary areas of spend and expense. Thanks.

John Rettig: Sure. On spend and expense, we continue obviously to produce good results. Transaction revenue growing 21%. Year-over-year, we had very strong net adds in the quarter acceleration from the prior quarter and overall card spend growth of 22%. So we feel good about the results. I’d say we’ve seen strength in some spend categories around T&E and retail and things like that. There’s obviously a little bit more discretionary spend or variable spend, if you want to describe it that way, within our spending businesses with the S&E card. And so we are cautious about what that looks like in terms of the near-term, going back to some of the uncertainty that we talked about previously. But the value proposition is clear for that business.

We’re not overexposed or indexed to any particular category. Some of the friction that existed early in the year has obviously been reflected in our model. And we’re expecting to go through that as we get into FY2026. So I think we’re starting from a good place there. And we saw some strength in Q3 across a few spend categories and we’re still paying close attention to other spend categories. It could be potentially negatively impacted by some of the macro uncertainty.

Operator: Thank you. And we’ll take our final question from Andrew Harte with BTIG. Please go ahead.

Andrew Harte: Hey, thanks for the question. John, you mentioned how in March you raised price for ACH in check. And I think for the existing customers it goes into or it goes into effect in May. I saw online like the increase is about $0.59 for ACH now from $0.49. So I guess that’s close to 20%. And you’ve talked about ACH in the past being 70% of total AP, AR transactions. So can you just help us think about how impactful some of those price increases can be next year and really what it can ultimately be for the take rate. Thanks.

John Rettig: Sure. Thanks for the question, Andrew. I’d say as it relates to fiscal 2025, our fourth quarter here, we’re not expecting any material change in the numbers just based on the timing of rollout for new and existing customers starting in May. But there should be some positive benefit, obviously, when we look at a full year of fiscal 2026. But I’d say this; we haven’t adjusted pricing for a while now. I would look at this as the beginning of changes with a more sort of holistic approach to optimize the combination of the value we’re delivering for customers and how we’re packaging and bundling our products in order to increase overall ARPU for BILL. So this is one step that I think will help us make some progress there.

But there’s more to come as we think about optimizing pricing and packaging. And this is a combination of transaction and subscription fees. I think the subscription side of our model will be more important going forward as a growth driver than we’ve seen, say, over the last few years where we’ve relied primarily on transaction yield and monetization. But we do feel like there’s still a lot of room to go as it relates to the value we’re delivering versus the value that we’re monetizing as it relates to both transaction and subscription fees.

Operator: Thank you. We’re now at the end of our Q&A session. So I’ll turn the call back over to Rene for any closing comments.

Rene Lacerte: Thank you. Our mission is clear up, BILL. We made the lives of SMBs better by making it simple to connect and do business. We did that this quarter and we are excited about the future. We believe the initiatives and investments we are making today will enable us to change the game again for SMBs, and that will lead to strong market adoption. I want to thank our customers and partners for the trust they place in us and all the work that the team at BILL does driving innovation at scale. Have a great evening.

Operator: Thank you. This concludes today’s call. Thank you for joining. You may now disconnect your line.