BILL - NYSE

Good afternoon, and welcome to BILL's Fourth Quarter Fiscal 2024 Earnings Conference Call. Joining us for today's call are BILL's CEO, Rene Lacerte; President and CFO, John Rettig, and VP of Investor Relations, Karen Sansot. With that, I would like to turn the call over to Karen Sansot for introductory remarks. Karen?

Thank you, operator. Welcome to BILL's Fiscal fourth quarter and full fiscal year 2024 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 operations, targets and results 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 discussion, 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. Note that at times during this call, we will discuss BILL's standalone results, which exclude our BILL's Spend and Expense management, which was formerly called Divvy, Invoice2go accounts receivable and Finmark Financial Planning Solutions. Note that we will be revising our key metrics presentation beginning in the first quarter of fiscal 2025 to reflect our evolving product solution set. This new presentation will provide investors with an enhanced view of our integrated platform, which includes BILL AP, AR and Spend and Expense, excluding the financial institution channel. It will also provide an enhanced view of our embedded and other solutions, which includes the financial institution channel, Invoice2go and other solutions. The appendix of our fiscal Q4 2024 investor deck previews this presentation and provides a nine-quarter look-back for reference. Now I'll turn the call over to Rene.

Thank you, Karen. Good afternoon, everyone. Fiscal 2024 was an important year for BILL. We delivered more innovations to SMBs. We launched our integrated platform, made capital more accessible and empowered small and mid-sized businesses with insights and control with their cash flow. In addition, we built tight organizational alignment, laying the foundation for future growth. These and future innovations are especially valuable for SMBs as they face an uncertain economic environment. In a world of change, BILL is the constant that they can rely on. The steadfast commitment to raising the bar to serve SMBs led to strong financial results. During the year, we delivered strong growth and enhanced profitability as we executed on our objective to be the essential financial operations platform for SMBs. Total revenue for fiscal 2024 was $1.3 billion, up 22% year-over-year and core revenue exceeded $1 billion for the first time. Importantly, we delivered substantial profitability expansion as non-GAAP operating income totaled nearly $200 million, growing 68% year-over-year, and we were profitable excluding the benefit of float revenue. We achieved these results despite economic headwinds and shifting SMB behaviors we experienced during the year. When challenges arose, we demonstrated our ability to adapt quickly and we exited the year with a much stronger foundation to scale for the future. In fiscal 2024, we served nearly half a million businesses, moved and safeguarded nearly $300 billion in payment volume and facilitated more than $100 million payment transactions. Many industry-leading partners, including more than 8,000 accounting firms and top financial institutions used BILL as an essential part of the tech stack they provide their clients. Our network members increased to 7.1 million, up 21% year-over-year as we further built platform capabilities for our suppliers. This scale is a direct reflection of the incredible value delivered to SMBs through our products and services. We turn the financial back office complexity that drains SMBs of time and money into simple automated tools that provide visibility and control. We empower SMBs to run better businesses. In fiscal 2024, we launched our integrated platform, incorporating the combined strength of our category defining BILL AP and Spend and Expense solutions. We then added a data and analytics layer to our platform providing businesses a comprehensive view of their cash flow. We continue to simplify and personalize user experiences by leveraging AI throughout the platform. In addition, we redesigned our mobile app from the ground up to leverage our evolving platform making sure our customers can increasingly operate their business whether in the office or on the go. The value of our integrated platform resonates with SMBs. At the end of fiscal 2024, approximately 11,500 businesses used both our AP and Spend and Expense Solutions, up from 7,200 a year ago. We provide SMBs with fast and secure payment experiences and access to capital. In the past year, we enhanced our foundational infrastructure and unlocked new payment capabilities to drive faster payment speed and more choice. Since fiscal 2018, our platform has processed more than $1 trillion of total payment volume, making us one of the largest providers of fast, affordable B2B payments. Scale is a powerful advantage we have that enables us to innovate faster and better. For example, in fiscal 2024, we launched our new payment engine, leveraging our experience and data for moving more than $1 trillion across hundreds of millions of transactions. This allows us to drive faster payment speed and better manage risk across a multitude of payment offerings, which is critical as we extend our platform. We also started activating supplier engagement by establishing direct relationships with suppliers and enhancing their user experiences. For example, we streamlined the onboarding experience for suppliers who accept international payments and made it easier for them to claim the local currency they want through end-product experiences. From day one, we have made breadth of payment choices a key component of our platform. Behind each new choice, there is an innovative offering, rigorous compliance and extensive risk management. This year, we enabled local transfer for international payments and FedNow support for instant transfer. In addition, we executed a controlled launch of invoice financing, which is one of our first working capital solutions and the product exhibited both strong early adoption and repeat usage. We reach SMBs through our direct channel and our partner ecosystem. Our constant focus and innovation enables all types of partners to provide value and achieve tangible results. Accountants have been a core focus area since the inception of BILL. Our innovation has been a critical driver of the rapidly expanding client advisory service practice areas. We partner with accountants to build solutions tailored to their business and today, they represent our largest customer acquisition channel. Our accountant relationships are very sticky and have a very high retention rate. The result is that more than half of our customers are from the accounting channel. A great example of how our platform empowers accounting firms to provide differentiated value is Aprio, a premier national business advisory and accounting services firm founded in 1952. Ambra Wellbeloved, partner of Managed Services Operations, shared and I quote. At Aprio, we cultivate a growth mindset at every level of the firm. We adopted BILL in 2010 and have grown together over the past 14 years. Today, we have over 25 national locations. BILL is a trusted financial operations leader for over 500 clients and the technology backbone for our client advisory practices, which is the fastest growing part of our business. Using BILL's accounts payable and spend and expense solutions allows us to expand and provide more value for our clients and having BILL as a recommended part of our client's tech stack allows us to stay ahead of the game for our clients. Just like we empower Aprio, we enable thousands of accounting firms to provide strategic and differentiated value to their clients. We recently held our 6th annual Build Account and Partner Council meeting, bringing together industry leaders from some of the most innovative and influential accounting firms from across the country to discuss the state of the profession and financial automation. These accounting firms were excited by the progress we made in fiscal '24 and are energized for the opportunity to expand their business, leveraging BILL's growing capabilities. Together, we are developing joint roadmaps to better serve SMBs and we are investing behind these opportunities. Some areas of investment for accountants in fiscal '25 include additional multi-entity functionality to help them scale growth providing more tools for cash flow budgeting, forecasting and insights, and increasing our sales and support efforts to partner even more deeply with them. Our commitment to SMBs means that we work hard to serve them wherever they are using our robust ecosystem. In addition to accountants, we work closely with financial institutions and software companies by enabling them with embedded solutions for their customers. The core of our ecosystem strategy is about expanding our reach and serving SMBs where they want to do business, laying the foundation to serve customers across different channels over the long-term. We've been creating value for years with scalable embedded solutions for financial institutions. Recently, one of our large bank partners easily migrated thousands of customers they acquired through an acquisition onto our white label build pay platform. This bank is also offering our expense management solution to their commercial customers to help them streamline expenses, automate reporting and provide more real-time visibility and controls. Regional banks are also looking to provide more value to their customers. One of the largest regional banks recently began to offer our white label platform and our large suite of payment offerings to do more for their clients. This bank leverages our advanced workflows and our many payment offerings, including pay by card, virtual card and international payments. As we have shared with you, we have been working with one of our top three U.S. bank partners to modify our partnership to fit their evolving needs better. We recently extended our agreement with the bank for an additional three years for them to use our current offering. Consistent with our embedded strategy, we also made our APIs available as part of this contract amendment. Our experience and expertise in serving banks over the last decade plus has informed our overall embed strategy, opened up more avenues to amplify the power of our platform, and translated into fast time to market with our new software partner, Xero. Earlier this year, we announced a strategic partnership with Xero to embed our onboarding and bill payment capabilities in its software. I'm excited that the solution will soon be available in beta to Xero's U.S. customers, which demonstrates our ability to rapidly launch solutions for our partners. More and more, we are seeing strong interest in the market for embedded finance offerings, and our investments and learnings make us well positioned to support this demand. In summary, we built a growing billion dollar business and we're just scratching the surface of the market potential. There are 6 million SMBs in the U.S. with employees and they contribute trillions of dollars of GDP annually. The opportunity we are pursuing is immense and we are confident in our ability to capture it. We are focused on growing into a multi-billion dollar, highly profitable business. In fiscal 2025, we intend to capitalize on the momentum we created in fiscal 2024 and widen our leadership position in the market. Our top priorities are to continue to simplify and enhance our platform experience to enrich existing payment offerings and deliver new payment options, and to diversify and deepen our ecosystem. In addition to our ongoing platform in ecosystem investments, we are making a number of target investments in fiscal 2025 to support these priorities, including enhancing and expanding existing solutions that increase the value proposition for virtual card, international payments and working capital, augmenting the experience in go-to-market capabilities for suppliers, delivering new capabilities and deepening relationships with accounting firms and driving expansion and adoption of our embedded solutions. We have a strong and unique business model that generates multiple revenue streams and a track record of driving balanced growth and profitability. We increased our non-GAAP operating margin every year since our IPO while driving significant growth. With our proven strong cash generation and balance sheet, we are well capitalized to strategically put resources behind these top priorities that we believe solidify and extend our leadership. We believe our category leadership and scale are critical for the long-term growth and profitability of BILL. We are playing offense strategically with our strong balance sheet to prioritize the long term potential of our business. As we do this, we are keenly focused on capital allocation and balancing investments in the business with return of capital to shareholders. Today, we announced that the board authorized a new $300 million share repurchase program. This reflects the confidence that the board, management team and I have in our strategy and in BILL as an investment opportunity with significant upside. We are deeply committed to our success and committed to taking actions that deliver value. We are all in for SMBs and we are all in to win the market that we created. I'd like to thank our customers and partners for the continued trust they place in us and I also want to thank our employees for their constant dedication to serving SMBs and each other. Now, I'll turn the call over to John.

Thanks, Rene. During fiscal 2024, we acted decisively when cyclical headwinds caused moderated B2B spend and a shift in payment method preferences. We responded quickly by adapting our go-to-market initiatives, improving product experiences and working diligently with partners. We focused our resources and execution on our most important priorities and proactively adjusted operating expenses to improve profitability. These actions enabled us to improve customer acquisition and stabilize payment monetization, enhance profitability and position BILL for continued market leadership. In fiscal 2024, we delivered 22% revenue growth, $196 million in non-GAAP operating income for a non-GAAP operating margin of 15% and $258 million in free cash flow. In addition, we delivered $31 million in non-GAAP operating income, excluding float revenue compared to $4 million a year ago. During fiscal '24, we repurchased 212 million in common stock and retired 983 million in aggregate principal amount of our 2025 convertible notes. These actions contributed to our full-year fiscal 2024 weighted-average diluted share count declining by 2% year-over-year. In addition, and most importantly, in fiscal '24, we strengthened our foundation for the future. We have a clear vision and strategy centered around the needs of SMBs and we are executing to capture the large market opportunity ahead of us. We are laser-focused on driving long-term shareholder value through strong profit and free cash flow generation while optimizing our capital structure. Now on to a few highlights of our fiscal Q4 results. We delivered against our goal of profitable growth. In Q4, total revenue was $344 million, up 16% year-over-year. Core revenue, which includes subscription and transaction fees was $301 million, also up 16% year-over-year. Float revenue was $42 million. Non-GAAP operating income was $60 million and grew 42% year-over-year, reflecting a 17% margin. Non-GAAP operating income, excluding float revenue was $19 million and increased more than 200% year-over-year. Turning to updates on our key solutions. BILL standalone revenue was $161 million in Q4, up 8% year-over-year. Our enhanced go-to-market initiatives drove higher customer acquisition. We added 4,600 net new customers in our direct and accounting channels. In our financial institution or FI channel, we added 6,700 net new customers. The annual customer retention rate of BILL standalone customers, which excludes FIs was a healthy 83%. Excluding the impact of the sunset of Intuit simple bill pay earlier in the year, customer retention was 86%, consistent with levels over the past several years. BILL standalone subscription revenue, excluding FI Partners, increased 7% year-over-year in Q4. Overall, BILL's standalone subscription revenue declined 1% from last year, which reflects changes in our FI channel. BILL standalone transaction revenue grew 14% year-over-year. TPV in Q4 was up 9% over a year ago, in line with recent quarters. Monetization or take rate exceeded our expectations that we set in Q1, as we scaled newer payment offerings and enhanced existing products. Vendor cost sensitivity on some of our higher monetization products persisted, which impacted TPV penetration rates. In Q4, instant transfer is 1% of BILL standalone TPV, while virtual cards were 2.9% and cross-border payments were 4.5%. Foreign currency payments represented 34% of total cross-border payment volume in the quarter. These penetration rates were slightly lower compared to a year ago as our overall suite of payment offerings expanded and vendors optimized their cost of acceptance. As of June 30, 2024, our dollar-based net revenue retention rate for BILL standalone was 92%. As expected, this was impacted by the lower spend environment, which impacted payment volume, payment choice and subscription fees during the year. Excluding the impact of a large FI partner contract amendment, our dollar-based net revenue retention rate was 96%. We expect this to be above 100% as we continue to roll out new offerings and the economy returns to growth mode for SMBs. As a reminder, our dollar-based net revenue retention rate excludes the impact of our Spend and Expense offering. Moving on to BILL Spend and Expense, formerly known as Divvy. Spend and Expense revenue totaled $126 million in Q4, up 26% year-over-year, driven by 28% card payment volume growth. Interchange fees were 261 basis points. We added 1,300 net-new spending businesses, which was in line with our expectations, as we are focusing on businesses with a higher propensity to spend. Rewards were 48% of Spend and Expense revenue. The customer value proposition of leveraging an expanded suite of platform capabilities is resonating with SMBs. The number of joint customers who used both BILL AP and Spend and Expense in Q4 increased to 11,500 at the end of fiscal 2024, reflecting an increase of nearly 60% compared to a year ago. Joint customers are stickier and show strong engagement as reflected in low attrition rates and strong net dollar-based revenue retention compared to other customers. Our portfolio of payment offerings creates multiple avenues to drive ad valorem payment adoption and penetration. On a company level, our ad valorem penetration, excluding FI payment volume was 14% in Q4, up from 13% a year ago. As our integrated solutions converge, we will provide a consolidated ad valorem payment rate as opposed to individual solution rates on an annual basis. We believe that over the long term, our portfolio of ad valorem products can be above 20% of our ex-FI TPV. Moving on to financial highlights. Non-GAAP gross profit in Q4 was $292 million, up 14% year-over-year and non-GAAP gross margin was 85%. Our strong business model enables us to consistently deliver a gross margin that is among the best-in-class for software and fintech companies. We continue to demonstrate our ability to drive leverage in our business. Non-GAAP operating income for Q4 was $60 million, up 42% year-over-year, representing a 17% non-GAAP operating margin and an expansion of 3 points year-over-year. Non-GAAP net income was $64 million, reflecting a 19% margin. Stock-based compensation in Q4 was 17% of total revenue, down from 20% a year ago. Weighted-average diluted shares declined by 5.6 million or 5% year-over-year, primarily due to our initiatives to repurchase shares and convertible notes during the year. Turning to remaining performance obligations or RPO. As Rene discussed, we amended our existing agreement with a top three bank in the US by extending it for an additional three years. The RPO associated with this partner remained consistent but is now spread out over approximately four years, causing a shift in timing to fulfill the RPO. We also expanded the product set available under this agreement to include our newest APIs, consistent with our embedded strategy. Moving on to capital allocation. We continue to optimize our capital structure. In Q4, we repurchased $234 million in aggregate principal amount of our 2025 convertible notes, resulting in cash usage of $222 million and a reduction in non-GAAP diluted share count of 0.4 million weighted shares. The repurchase of these notes resulted in an $11 million net benefit to other income and expenses, which is reflected in our GAAP results, but excluded from our non-GAAP results. We are well-capitalized with $1.6 billion in cash, cash equivalents and short-term investments. Shifting to our outlook, as we enter fiscal 2025, we've never been better positioned to capitalize on the opportunity to further penetrate the market and help SMB succeed. Our solutions are a critical part of their daily operations and give them the industry's best tools to better run and grow their business. We are confident that the strong and growing customer value proposition of our platform and ecosystem positions BILL for continued long-term growth and leadership, which will in turn deliver value to our shareholders. We believe maintaining a dynamic balance between growth and profitability is essential for long-term business success. With our strong execution capabilities and the market opportunity ahead of us, we are strategically investing for growth acceleration and extension of our category leadership, while delivering attractive margins across our business lines. We generate significant free cash flow and have a strong balance sheet, which enables us to invest, which we do with purpose and discipline. We have a unique business model that includes float revenue, which we view as a key competitive advantage from which we generate significant free cash flow. These factors enable us to accelerate our pace of investments opportunistically as well as fund longer-term opportunities. We view our board-authorized share repurchase program, where we will be deploying $300 million to buy BILL shares in the open market as both a great investment opportunity as well as an indication of our optimism for the future. As Rene discussed, in fiscal 2025, we will be making a number of targeted investments that accelerate our strategic priorities and our ability to capture the large greenfield market opportunity that we are pursuing. We believe these investments position us to deliver significant sustainable revenue growth and margin expansion over many years, but will moderate our profitability growth in the near term. We operate our business with the objective to be ex-float profitable on a non-GAAP basis and to generate significant free cash flow. We intend to scale both over time on the road to becoming GAAP profitable. For fiscal 2025, we will be making incremental investments in our most important initiatives of approximately $45 million throughout the year. We believe now is the right time to invest as we have seen signs of stabilization in the macro-environment and continued strong business momentum from the actions we took last year. After holding headcount flat for the last three quarters, we are now hiring additional talent in our R&D and go-to-market teams. We expect our initiatives and investments today will position BILL to deliver core revenue growth of 20% or greater in fiscal 2026. The midpoint of our full-year guidance reflects a slight increase in non-GAAP operating income on an ex-float basis despite additional planned investments and increased rewards expenses as our Spend and Expense solution scales. We are prudently managing our expenses while investing for growth. As we accelerate revenue growth, we will also be continuing to create operating leverage. At the time of our IPO, we discussed that our non-GAAP operating income margin could be 20% or more over the long term. Since then, we have quickly expanded our scale and demonstrated our ability to drive leverage in our business. And we see no obstacles to prevent us from achieving significantly higher margins over the long term. Now moving on to guidance. Our guidance assumes the macro and B2B spend environment remain consistent with recent quarters and that ad valorem payment adoption and monetization rates increased modestly in the latter part of the fiscal year. For fiscal Q1, we expect total revenue to be in the range of $346 million to $351 million, which reflects 13% to 15% year-over-year growth. We expect core revenue to be in the range of $305 million to $310 million in Q1, which reflects 15% to 17% year-over-year growth. Float revenue is expected to be $41 million in Q1, which assumes our yield on FBO funds will be approximately 470 basis points. On the bottom line, for Q1, we expect to report non-GAAP operating income in the range of $52 million to $57 million and non-GAAP net income in the range of $53 million to $57 million. We expect non-GAAP net income per diluted share in the range of $0.48 to $0.51 in Q1, based on a share count of 111 million diluted weighted-average shares outstanding. As a reminder, our guidance for non-GAAP net income includes a non-GAAP provision for income taxes of 20%. Shifting to full year guidance. For fiscal 2025, we expect total revenue to be in the range of $1.415 billion to $1.450 billion, which reflects 10% to 12% year-over-year growth. We expect core revenue to be in the range of $1.270 billion to $1.305 billion, which reflects 13% to 16% year-over-year growth. We expect float revenue to be approximately $145 million in fiscal 2025, which assumes a yield on FBO funds of approximately 400 basis points for the year and an exit Fed funds rate of 350 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 $160 million to $195 million and non-GAAP net income in the range of $154 million to $182 million. We expect non-GAAP net income per diluted share to be $1.36 to $1.61 based on a share count of 113 million diluted weighted-average shares outstanding. Note that our Q1 and full-year guidance for share count and non-GAAP net income per share do not reflect the impact of our share repurchase program. For fiscal 2025, we expect stock-based compensation expenses to be approximately 20% of total revenue. In closing, we are pursuing a large market opportunity to automate financial operations for SMBs and BILL is perfectly positioned to capture this opportunity with our platform, large and expanding ecosystem and strong dedicated team. We've built a dynamic business with powerful levers to drive growth and we are investing now to optimize our results for the long-term, which we believe will extend our lead and accelerate the pace of capturing the market opportunity and creating value for shareholders. And now, we'll open up the call for Q&A.

[Operator Instructions] Our first question today comes from William Nance with Goldman Sachs. Your line is now open.

Hey, guys. I appreciate you taking the question here. Maybe I'll start on the FI channel renewal that you mentioned. John, I think you called out that the RPO may remain similar, but spread over additional years. Could you just maybe unpack what that means in terms of just the quarterly subscription revenue from the embedded solutions part of the business and just how you're thinking about that? I know that it’s taken a step down when you'd initially contemplated changes. So how will that flow through the numbers over the coming year?

Yeah. Thanks for the question, Will. We -- our RPO as of the end of the year is about $87 million. And there's a meaningful percentage of that by the large FI partner that we've talked about throughout the year where we have finalized the contract amendment. And the RPO is consistent for that particular customer as where we had ended the year. And instead of one year left on the contract, we've extended it for three years. So we'll be recognizing that revenue over four years. And in addition to that, we're obviously marrying our embedded strategy with our financial institution partners as well, and making available our newest APIs to support the bank in their new program and working with them in any way we can to help drive success there. So that's the kind of the extent of the moving parts on the numbers. There's really not much change from the ending RPO.

Got it. I appreciate that. That is helpful. And just maybe a broader question. You mentioned the 20% kind of long term goal of ad valorem payments revenue. I hear the commentary on. That's how you'll be kind of communicating advances in monetization going forward. Just help us think about how we should think about the monetization of those volumes and just sort of how the mix of payment methods may impact the ultimate take rate that you get on that 20% of volumes. Thanks.

Yeah. Sure. It's a good question. I'd say there's a number of investments that we're making near term to improve existing product experiences, drive payment speed, improve reconciliation, and those things which I think will help expand volumes and monetization associated with products that we are already offering customers and suppliers, and those are relatively short term initiatives. In addition to that, we see card payments generally being a larger part of the payment mix in the bill portfolio of payment products. So beyond what we do with Spend and Expense and things like that, and so across -- across all of our payment products, as we see that mix evolving, we sort of view that 20% as more of a floor to where we're going to be able to take monetization longer term. And we feel really good about the levers that we have and frankly, the value proposition that we're offering for both buyers and suppliers with this mix of payment products.

Got it. Appreciate you taking the questions.

You bet.

Our next question comes from Tien-Tsin Huang with JP Morgan. Your line is now open.

Hey, great. Thanks so much. Just thinking about these investments here, how quickly do you expect to spend the $45 million? What kind of return or payback do you expect? I heard the 20% core growth in '26 but just curious, what else we can build off of that? And then just to also clarify, are these new investments driven by new opportunities, or is it driven by competitive changes? Or is this just a catch-up in spending from a period of pause given the macro uncertainty in last two, three quarters. Thanks.

Thanks, Tien-Tsin. Great question. Let me just give some background first. I mean, we made -- we saw a shift in kind of what was happening in the market. We adapted quickly, very agile, and the team delivered exceptional results throughout the rest of the year. So that would have been obviously end of last calendar year, and we had great results through the fiscal year and seeing the efficiency that we were able to drive. And if you just think about the high level, our operating income less float grew 750% over $31 million or so from last year increase. And so just giving you, in my perspective, seeing the strength that we were able to drive and then seeing the innovation opportunities again just more context like we've defined this category and that BILL, we're all a bunch of leaders, and leaders don't wait. We're not going to be a market taker. We're going to be a market maker. And when we see and interact with our customers, whether they're direct customers, accountant customers, or ecosystem partners or suppliers in our network or large -- larger suppliers, we hear and understand there's opportunities to expand the value that we're providing them. And so that's the reason to invest because we feel really good about what the team's executing on. And the ability for us to deploy capital to drive growth really is, I think, how I would define everything that we've done is we've been defining this category from day one and we're going to continue to do that. And how we're doing that is we have kind of four specific areas that we're investing in. The first one I would say is that we are enhancing and expanding the value proposition for our existing solutions. So if you think about international payments, we started some local transfer capabilities. We're going to roll that out. John already referenced that. We're going to expand card uses across the platform. We're going to give folks more opportunities to leverage the card. And then the next thing, the second thing I would say is that we're going to augment the experience and go to market for suppliers. What we started doing again halfway through the year was having dedicated teams that talk to suppliers that have significant volume on the platform. We've learned a ton. There's a lot of opportunity for us to create more value for them, better reconciliation, more automation, even leveraging AI across the experience that they have. And that's what we're hearing and that's what we're developing and that's where we want to invest. And then on the third thing that we're going to invest in, it's going to be deepening our accounting relationships. We have defined an entirely new line of business for accountants. We've worked with CPA.com and AICPA to create client advisory services, cast practices, and you heard a quote from Aprio and Ambra. They're talking about how they started 14 years ago with no customers on the BILL platform and now have over 500. But when you have 500 customers, how you manage and support those customers becomes a lot more challenging. And so we have an opportunity to actually provide cash flow insights and strategic advisory services through the platform we have. We have an opportunity to create efficiency for the accounts and how they manage their clients. And we have an opportunity to create better customer experiences around multi-entities since many of their clients have that. And so we're investing behind that. And the fourth and final area of investment is driving expansion of our ecosystem. And this is what we've done from the very beginning. We really believe that the ecosystem is a critical part of our platform and our strategy and what we're going to be doing is investing in go-to-market resources, we're going to be investing in advancing our APIs. And I think when you see what we were able to do with Xero, roughly six months from when we announced, we were able to go to beta, that's something that we're super proud of. And we know there's an opportunity in the market for us to do more. So I'll let John maybe answer the rest of your question there and go from there.

Sure. Just adding to the part of your question about pacing. We're expecting it to be spread throughout the year a little bit more front-loaded than not. And as we look at the impact of these investments, plus the ongoing improvements we're making to our platform efficiency, we're driving with go to market and things of that nature, we expect to be able to increase our revenue growth rate in '26, as I mentioned earlier and that's really the beginning phase of growth expansion. It's not the end goal that we have. It's not just '26. It's multi-year, multi-year improvements in our growth rate. As evidenced by some of our investments, as Rene mentioned, particularly on the embed platform, both the technology and our go-to-market capabilities there, that's a multi-year time horizon that we view as driving growth. And at the same time, we do expect, beginning in FY ‘26 and beyond to be expanding profitability more so than we've seen in FY ‘25 as we're pulling forward some of those investment dollars.

And just one more thing I would add is the conviction that both John and I have is so strong that when the market opens up, we're going to be buying shares as well as the company is doing.

All clear.

Yes. And I'll second that comment.

I think you both answered it really well. Just really quickly to clarify, Rene, it sounds like, I think you mentioned these are offensive, not defensive investments. Just wanted to clarify that.

Absolutely. We're all about offense. We have defined the category. We see other people following us and them playing catch up, and we're going to keep widening the gap that we have because that's the advantage that customers need. Customers need innovation. SMBs are innovating every day in each of their businesses, and they need to count on somebody to innovate, and that's what they do with us. So I think it's super important and we're going to continue to do that when we see opportunities.

Thank you, Rene. Thank you, John.

Thank you.

Our next question comes from Andrew Schmidt with Citigroup. Your line is now open.

Hey, Rene. Hey, John. Thanks for taking my questions. So I wanted to drill down just on the environment for supplier acceptance. Maybe. I know, John, you have some comments, but maybe you could put a finer point on what you saw in the fiscal fourth quarter and into FY ‘25. And then maybe just to tab onto that, I know you put some supplier enablement teams in place to better -- have better manage the supplier relationships. Maybe the early reads on that and what you're seeing in terms of the acceptance when you have kind of pushed a little bit deeper on those relationships, anything on those two fronts would be helpful. Thanks so much.

Well, yeah, thank you, Andrew. The first thing I would say is, as we talk to suppliers, it's not going to be a surprise, but they don't want checks. They really don't want checks. We have a tremendous amount of volume that we drive through our platform. They like getting electronic payments, but they need more help in reconciliation, and they need more help in automating all the things that are coming from BILL. And so as we talk with suppliers, we're hearing that loud and clear. And we're putting R&D dollars as well as go-to-market dollars around creating services for them so that they actually have a different experience, just not at the receiving end. They're engaging with us. I think one of the examples that we think about is we have a tremendous amount of volume that goes through on ACH, but there's very poor reconciliation on ACH transactions. And the ability for suppliers to kind of take those transactions and have an experience where they can obviously understand what the payments are attributed to potentially collaborating with their customers, which would be our customers, all these things are something they want and we see an opportunity to drive value there, and that's not a product we have in market today. But I'm just giving you an example of the learning that we have that's going on right now that gives us the confidence that there's an opportunity to create more value for suppliers, to keep them really doing their business job better and to keep us serving our customers better.

Got it. Thank you so much for that, Rene. And John, I think you had some comments on stabilization. Maybe you can talk about just more broadly your thoughts on the macro environment heading into FY ‘25 and how that might translate into things like TPV per customer. Thank you very much.

Yeah. Thanks, Andrew. We've seen pretty consistent behaviors on the part of small businesses over the last few quarters. You've seen that play out in our TPV per customer numbers being pretty consistent, maybe down 1%, up 1%, but in that same range. Obviously, our overall TPV growth for the last couple of quarters has been a little bit ahead of our expectations, and we're expecting a similar environment throughout FY ‘25. I think there -- this stability is showing up in engagement where you have very healthy transactions per customer. Saw a slight uptick in that in the fourth quarter, but still slightly lower dollars per transaction for small businesses was reflective of the environment that everyone's operating in. So we feel good about the stability and we're not embedded in our assumptions for expectations in FY ‘25, assuming any rapid rebound in B2B spending or the flip side, any deterioration in the current level of activity.

Got it. Thank you very much, John.

Thank you.

Our next question comes from Scott Berg with Needham and Company. Your line is now open.

Hi, Rene and John, nice quarter here. I guess couple of questions. I think it was in Rene's pre-scripted remarks about the supplier financing. I guess, can you help maybe quantify kind of what you're seeing there early on and I know, you just recently kind of released the product and that seems to be a part of your reacceleration story into fiscal '26. I guess, how do we may be set expectations around the impact on the business?

Thank you, Scott for the question. I think invoice financing is just another example of innovation that we're bringing to the market. We have a unique set of data and scale. When you think about what we have with scale, it just makes us a learning machine. We have so much data across the platform, so many opportunities for us to leverage that for our customers. And what we're seeing in invoice financing is its early days and there's lots of -- lots of work for us to do around kind of the modeling and risk profiles and stuff like that. But what we're seeing is customers want it and they use it again and again. And so what we will continue to do is to refine kind of the experience they have to refine the back end system so that we can roll this out more broadly. And I think it's going to be one of the important drivers of our expansion of ad valorem revenue as we go forward into '26 and beyond.

Got it. Helpful. And then you both made the comment on the number of customers using both AP and the Spend and Expense solutions. It's up roughly 60% year over year. Is now that the -- over the last year the products have been properly integrated and combined. Is -- I guess, is there anything that you can take away from those customers outside of better retention rates? Is there any examples where one plus one equals more than two? Or is this simply just a one plus one equals better retention rates over time?

It's definitely one plus one is more than two. I mean, we're getting, obviously, the retention makes that true, but I think we're also getting more usage across the platform. There's more opportunities. We've talked about the opportunity across our platform to continue to extend the proliferation if you will of card payments. That comes from all the capabilities we have with the platform that was formerly known as Divvy, that is now our Spend and Expense platform. So that's an area. And I think maybe a high-level area to think about that we see is that the proliferation of all these different software and fintech solutions is actually driving in the market a need for more consolidation and unification of platforms. And so when you think about what we are able to provide customers today from financial operations perspective, we give them the best world-class AP solution, we give them the best world-class SME solution, we're giving them the best cash flow insights and forecasting capabilities. These are things that we add into the platform that continue to create more value for the customer experience across their portfolio usage of ours, and it's something that we're excited about. So I think that the main thing is we do think one and one is going to be far greater than two.

Excellent. Thank you for taking my questions.

Thanks, Scott.

Our next question comes from Samad Samana with Jefferies. Your line is now open.

Great. Good evening. Thanks for taking my questions. First, maybe the 20% growth comment for 2020 or fiscal '26 is really encouraging and especially as you think about the stabilization that you've highlighted so far. This side for you, you Rene or John, but as you guys think about the building blocks to that 20%, how much of that is reaccelerating existing pieces of the business and getting new customer acquisition to fire again and getting more adoption of ad valorem versus new revenue streams that you're anticipating that the investments you called out are going to drive? Can you just maybe help us understand how much you already have line of sight to versus what has to -- it has to be kind of blocked and tackled over the next year?

That's a great question, Samad. And one of the things I've learned over the last three decades running businesses is that you've got to kind of have a balancing act between obviously what you've got and what you want. And so what we're doing is actually a balancing act. There is definitely more clarity across the business as we've consolidated the organizations and have the teams really aligned about what drives results on the existing business. But we also have that same clarity being driven around the innovation teams across the company. And so I think it's a reasonably good balance between the two. And we're going to always invest, obviously serve customers with what we have, but we're also going to invest to innovate. And so we're balancing that. Maybe one other area of investment that I didn't call out earlier that I think is important for folks to know is that we talked about this, we're highly committed to being highly profitable. And part of the investment is we have a lot of internal tools. This is a big company now. It's $1 trillion in money movement over the last five years to over $300 billion a year. We've got teams in multiple countries that support customers. They need tools and capabilities to continue to drive efficiency and scale, and we're going to invest behind that because that's the right thing to do for the long term growth of the business.

Yeah. Great. And then John, maybe just to follow up on the NRR, I appreciate the disclosure on what it would have been ex the top three banks. So I was just wondering if you can maybe help us understand from it going where it was last year to this year, I think 111 to 96, how much of that was due to TPV contraction in the installed base versus down selection of payment type. Just trying to understand the mechanics of maybe what drove the contraction portion of it and how we should think about the shape of that going forward.

Yeah. Thanks for the question, Samad. Most of the change on a year-to-year basis is really driven by the lower TPV from the spend environment that our SMB customers are operating in, which obviously translates into lower transaction revenue growth, which is a significant contributor to that retention dynamic. The second thing is probably the revenue associated with a large FI partner that we've talked about, maybe to a lesser extent than TPV. Those two things combined though are the vast majority of the change on a year-to-year basis. It's things like number of users per customer and variables like that are very small in the grand scheme of that retention number.

Great. Thanks for the clarity. I appreciate you taking my questions.

Thank you.

Our next question comes from Darrin Peller with Wolfe Research. Your line is now open.

Hey, guys. Thanks. First question is just around go to market. I mean, I saw you jumped like you said from it was 7,000 or so up to over 11,000 cross sold customers by the end of last year, this fiscal year. And so that's obviously showing good progress. Just maybe touch on the go to market of really the cross-sell between Divvy and the BILL solutions and now the one more unified offering. And really what's -- if anything has changed, look, kind of what's the approach now and can you even accelerate that? You've really still have a long runway when you look at the base and size of your customers versus what you've accomplished so far. And I guess just to add on to that, the strategy on go to market on the financial side, now the financial institutions, has that changed at all versus we've seen a lot of focus on the accounting channel be very successful. Just curious where the focus is on the financial institution side too guys. Thank you.

Cool. Good question, Darrin. I would say on the go-to-market approach, when it comes to cross-selling, I'm going to use a framing that I've always had in driving business success. It's kind of a wash, rinse, repeat. Like you innovate, then you adapt and you learn, and then you innovate again. And so when we pull together the platforms, we have the organizations lined up, the go to market is going to be, obviously, it's going to be iterative. And what we're learning from customers as we have more and more customers using the joint solutions enables us to drive that future state that you're talking about, which is far more adoption of customers using both of the core platforms that we have. And so we see continued learning and alignment within the organizations to kind of listen to customers and drive that success across the customer base. And I think we're going to continue to drive that. And I'll let John add anything to that if he wants, and I'll come back and answer the ecosystem question.

Yeah. I would just add that the progress we've made so far on this cross-sell effort has predominantly come from customers who we've acquired through our direct marketing efforts. To a much smaller degree, have we seen cross-sell activity within our accounting channel? So when we talk about doubling down on accountants, it's not just extending our lead and establishing new relationships, it's also starting to activate this cross-sell motion, working very closely with accounting firms and their clients to provide new solutions in this regard. So it's a twofold. There's lots of opportunity left, and one of the biggest spaces for growth is an area we do really well, which is in the account channel.

Yeah. And just on the ecosystem, just to give you some framing, our long term strategy around the ecosystem has always been that we need to surround the market with distribution channels and be at the center of each. And what you see with BILL is obviously we are at the center when it comes to direct. We're leading there. We're at the center when it comes to accountants. Over 8,000 firms growing 14% year over year, over half the business and then in the longer term play here is going to be with our financial institution partners and obviously our new accounting partnership with Xero and others to come. And so the opportunity for us is to make sure that we're in a position to win. And that's part of the strategy along -- all along is just that we're always going to place ourselves in a position to win with our partners and with the ecosystem more broadly. And so I would not say it's a shift, I would say it's an expansion, because there's now more opportunity in the market from small business aggregators outside of financial institutions. And we're starting to engage with those like you saw with Xero.

Very helpful. John, can I just quickly squeeze in one follow-up is just what's assumed in your guide for take rate or maybe if you can give us any direction on that, and then maybe BofA also the RPOs. Is there an assumption on dollars we can think about that may have been included this year wasn't last? Any framing on those would be great. Thanks again, guys.

Sure, Darrin. On the take rate, we're assuming essentially flattish with an uptick in the second half of the year. We've made a lot of progress in obviously bringing stability to take rate. And we think these first couple of quarters will be the point at which we frankly trough, for lack of a better term and start to expand in the second half of the year. And we would expect to be above at the end of '25 where we are at the end of '24. In terms of the RPO and dynamics with the one particular partner, there's not a lot of detail we can give there other than as of the end of the year, I think it's approximately 40% of our RPO balance is subject to this amended contract that we referred to with a large FI partner, and that'll be spread over four years.

Very helpful. Thanks again, guys.

Thanks, Darrin.

Our next question comes from Bryan Keane with Deutsche Bank. Your line is now open.

Hi, guys. Thanks for taking the question. I guess, John, just to follow up on that. Why would or why are you confident that the second half of the year will see a little bit higher penetration and payment modalities? And do you think VC and cross-border will bounce back and be up this year in particular?

Yeah. Thanks for the question, Bryan. I think to the second part of your question, yes, we do have confidence in additional volumes on those products. I'd say there's other, as Rene and I think perhaps I mentioned earlier as well, there's other product improvements that we're making and we're filling a couple of, I'd say, interesting holes in the product portfolio which will drive additional ad valorem adoption. And it's these dynamics that when we look at the volume and expectations around very short term penetration rates and adoption from suppliers and customers that give us confidence that we'll start to back on the road of expanding take rate as we get further into FY ‘25.

Got it. That's helpful. And then the follow-up to that is just in that 20% core revenue growth for fiscal year '26. Does that assume getting back to more normal and maybe you can help us what is normal kind of sequential organic take rate expansion?

I'd say that first of all getting to the 20% growth that we talked about, that's obviously going to be a progression, right. We're going to make progress in the second half of '25 and we'll continue that through FY ‘26. We are assuming better expansion of monetization in '26 than in '25. But that's not the sole driver of our belief that 20% is in range for '26. We obviously have much higher both volume and revenue growth on our Spend and Expense product. We talked about the proliferation of card payments starting to happen within the BILL ecosystem that will provide incremental growth as well. So it's all of the above frankly that that gives us confidence there. As far as the sequential quarterly upticks, we don't think of it as that in those terms as much as we do on an annual basis, we would expect to start to get back to higher levels of expansion.

Great. Thanks so much for taking the questions.

Thank you.

Yeah. And thank you, operator. We're, yeah, we have time for one more question.

Of course, our final question comes from Ken Wong with Oppenheimer. Your line is now open.

Okay. Fantastic. Most of mine have been asked, but I guess the one final clarification just on that RPO side, did that dollar amount increase with the renewal or was it a static final year number that's now spread over four years or was there an uptick in that number that's now spread over four years? Just wanted to make sure we understood the mechanics of kind of how -- what's playing out there.

Yeah. The RPO associated with the large FI partner remain roughly the same. So no significant expansion or contraction as we exited FY ‘24. And the term on that amended contract is now four years.

Got it. So there was a sort of pre-existing balance and as you guys renegotiated, that remained roughly the same, it's just across multiple years instead of a single year. So it'd be like, hypothetically, a ten divided by four, not some number bigger than ten divided by four.

That's right.

Okay. Great. Thank you very much.

Thank you.

Okay. Thank you, everybody. Thank you, everybody. I just wanted to say, I appreciate you joining today. We finished fiscal 2024 with great momentum and a really strong foundation to drive growth in FY ‘25 and beyond. We look forward to extending our leadership position, and I'm exceptionally proud of the team's agility and adaptability they've shown in the last six months of the year and all of us are very energized about our future. So thank you for joining us and have a great evening.