BILL - NYSE

Good afternoon, and welcome to BILL's First Quarter Fiscal 2025 Earnings Conference Call. Joining us today 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?

Thank you, operator. Welcome to BILL's fiscal first 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 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 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. Note, that we revised our key metrics presentation beginning this quarter to reflect our evolving product solution set as we previewed on our last earnings call. This new presentation provides investors with an enhanced view of our integrated platform, which includes BILL AP/AR and Spend & Expense, excluding the financial institution channel. It also provides an enhanced view of our embedded and other solutions, which includes the financial institution channel, Invoice2go, and other solutions. The appendix of our fiscal Q1 2025 investor deck reflects this new presentation. Now, I'll turn the call over to Rene. Rene?

Thank you, Karen. Good afternoon, everyone. In Q1, we delivered very strong financial results, innovated at a rapid pace, and executed well across the company. We made substantial progress on our most important initiatives to expand the depth and breadth of our platform and enhance our go-to-market motion to further serve small and mid-sized businesses. These actions drove increased customer acquisition and higher payment volume per customer among newer cohorts of our integrated platform. Our success this quarter highlights the significant growth runway ahead for BILL. We're moving aggressively to capitalize on the market as we extend the essential financial operations category to more SMBs. In Q1, we drove strong core revenue growth of 19% year-over-year, which was above our expectations and reflects acceleration from 16% growth last quarter. We are executing on our commitment to balance growth and profitability and achieved a non-GAAP operating income margin of 19% in the quarter, which increased 8 percentage points from last year. We also expanded free-cash-flow margin to 23%, reflecting a 7 percentage point increase from last year. Our increasing scale demonstrates that our value proposition resonates with SMBs. During the quarter, we empowered over 475,000 businesses to automate their financial operations, and we managed $80 billion in total payment volume across $29 million payment transactions. We took care of their financial operations so they could take care of serving their customers and growing their business. Our platform is mission-critical for SMBs as they digitize their back office. For example, FairWave, a BILL customer since 2023, empowers other SMBs by providing small local coffee shops with scalable infrastructure such as coffee bean sourcing, loyalty programs, and a tech stack to drive growth. FairWave does all this while observing the independence and uniqueness of local coffee brands across the country. Derek Braun, Director of FP&A, said, and I quote, "BILL is the technology foundation that supports our growth. FairWave grows fast, adding a new brand every few months. What comes with it is the need to understand and operate each brand's finances. With BILL, we can integrate each brand's financial operations, their accounts payable, and card spend, and as soon as possible, create standardized processes and controls. Additionally, BILL allows us to manage card spend by category, build budgets, and eliminate surprises. We were able to get twice the amount of work done without hiring an additional AP clerk, saving us at least $75,000 a year. BILL really brings us the efficiencies we need to focus on adding more brands." We are the leaders in financial operations automation for SMBs. There's a vast market opportunity ahead of us. Customer stories like FairWave are what inspires us at BILL as we focus on supporting many more SMBs on their automation journey. 99.9% of the businesses in the U.S. are small businesses with fewer than 500 employees, and the power over 40% of the U.S. GDP and employ nearly half of the workforce. Yet given the fragmented and highly diverse nature of the SMB market, small businesses are underserved by technology, and their needs are often neglected. Their adoption of technology solutions for financial operations is still nascent. In fact, only 5% of larger SMBs have fully automated both their AP and AR processes according to a recent survey by Payments Intelligence. When it comes to financial operations for small and mid-sized businesses, we are very well-positioned to serve this large greenfield opportunity. We have the platform, the ecosystem, and the team to empower millions of businesses, and we will continue to aggressively drive market adoption and deliver on our commitment to helping SMBs succeed. One of BILL's key product differentiators is our integrated platform. We provide SMBs with accounts payable, accounts receivable, spend management, business insights, and working capital solutions. Our platform digitizes and transforms their financial operations and eliminates complex disconnected manual paper-based processes that burden SMBs. Our powerful platform automates the B2B payment life-cycle from the creation of a purchase order all the way through reconciling the transactions. Our tools automate workflow and drive effortless approvals, making it simple to manage cash in and out of the business. We provide a wide range of payment and funding choices for the very critical payment last mile. These tools and capabilities were designed end-to-end and built from the ground up by working with hundreds of thousands of small businesses. Our platform uniquely enables SMBs to save significant time while gaining more visibility and control of their cash flow. We are always innovating to make our all-in-one platform for SMBs even more valuable by giving them more choice and flexibility in how they manage their finances. For example, as part of our priority to enrich existing payment offerings and provide new payment options, we delivered new payment innovations for both funding and disbursement. We recently enabled real-time funding options. This means that customers can now fund their payments with credit cards or ACH or real-time payments. Additionally, on the disbursement side, we are making our BILL Divvy card available to accounts payable customers as an alternative to making check and ACH payments. In addition to driving more spend on the BILL Divvy card, this will also create a simpler and easier upgrade path for our BILL AP customers to the full Spend & Expense platform. These examples are part of our initiatives to further integrate our solutions, provide more card options, and drive more awareness of the robust capabilities of our platform. We also broadened the availability of international payment and local transfer to more than two dozen countries. Our new capability enables businesses to receive their international payments days faster with less FX volatility while saving on transaction fees. We are working to extend this value to additional countries. Beyond funding and payment capabilities, we are scaling our working capital solutions, solving one of the biggest pain points for SMBs. With our invoice financing offering, suppliers are getting paid weeks in advance of when they would typically get paid. We have proven product market fit and are seeing recurring usage with 70% of borrowers being repeat users of invoice financing. We have a long history of leveraging our proprietary data and AI to enhance our platform and offerings, such as automated bill entry, payment acceleration, and network matching. As part of our priorities to continue to simplify and enhance our platform experience, we are applying AI to more use cases to further simplify and personalize the user experience on our platform for SMBs. As an example, recently, we introduced an AI-powered guide, Sync Assist, which creates a more seamless experience when syncing with accounting systems. Our open platform allows businesses to work with any accounting software and automatically syncs with the top accounting systems that are used by over 80% of the SMB market. And for accounting firms that support clients with multiple different accounting systems, our Sync is an invaluable tool. Tens of thousands of organizations have adopted our Sync Assist functionality to simplify the experience. One of them is EisnerAmper, a global accounting tax and advisory firm. Rod Nealey, Manager of Application Success Team said and I quote, "Sync Assist is absolutely fantastic. Our staff loves this new functionality. It does the work for you by generating actionable responses to empower our team to quickly resolve any sync issues on their own without leaving the BILL platform. BILL Sync Assist saves our staff so much time and headaches. With hundreds of our clients on BILL, this is an absolute game-changer." Another important point of significant differentiation for BILL is the large and diverse distribution ecosystem we have built, which includes direct sales, partnerships with accounting firms, top financial institutions and more than 7 million network members. Within our direct channel, our heightened focus on high propensity-to-spend businesses is producing stronger engagement among new cohorts of customers, particularly new Spend & Expense customers. And our dedicated programs focused on accountants attracted more accounting firms to BILL. In the past year, more than 1,000 accounting firms joined the BILL platform to expand their business and simplify their customers' lives. We now partner with more than 8,500 accounting firms in the U.S., and together, we serve tens of thousands of SMBs. Our platform and ecosystem are foundational to the category leadership and scale we have today. As we look ahead, we remain focused on expanding our lead and continuing to drive durable profitable growth. Given the strength of our balance sheet, improving cash-flow generation, we are continuing to make targeted investments to bolster our competitive advantages and expand our market opportunity. We believe that investing toward areas of the business where we expect to see a high ROI will enable BILL to extend our competitive moat while simultaneously unlocking meaningful long-term value for shareholders. A key area of investment is building our team for the next phase of growth and to expand our category leadership. We recently added Mary Kay Bowman to our executive team as EVP of Payments and Financial Services. Mary Kay is a world-class leader with significant experience driving innovation and growth at Fortune 500 companies. She brings a wealth of expertise from 20 years of experience building solutions in fintech, managing hundreds of products, and serving millions of customers at leading companies, including Visa, Block, formerly Square, and Amazon. We believe Mary Kay's proven track record in driving innovation and connecting buyers and sellers will be highly additive to the evolution of our payment and financial services offerings. We are aggressively taking steps to extend our lead and expand the financial operations category. As we do this, we are being very thoughtful and intentional about balancing investments for the future with return of capital to shareholders. To that end, during the quarter, we repurchased $200 million of shares under the $300 million share repurchase program announced in August. These purchases reflect the conviction that the Board and management have in our growth potential and in BILL as an investment opportunity with significant upside. In conclusion, BILL has meaningful and expanding scale. Our strong leadership in a highly compelling market enables us to focus on capitalizing on the significant opportunities ahead. The consistent execution of our strategy to help hundreds of thousands of businesses reimagine how financial operations can be done has both changed the game for our customers and built an exceptionally strong business that generates strong cash flows and drives durable profitable growth. Looking ahead, we remain focused on strategically investing in areas of the business that we believe will further our category leadership and executing on our planned growth and profitability initiatives. We are deeply committed to supporting our customers and partners and realizing our vision to be the essential financial operations platform for SMBs. Now, I'll turn the call over to John.

Thanks, Rene. Before talking about our financial results, I'd like to start with an update on the progress we are making on our targeted investments through the first quarter of fiscal 2025. As we discussed in our last earnings call, we are making incremental investments in fiscal 2025 to accelerate our strategic priorities and win the large greenfield market opportunity ahead. We believe these investments position us to deliver sustainable revenue growth and margin expansion over many years. The pacing of these investments will continue to scale over the year as we execute on incremental hiring plans. Our key investments include enhancing our virtual card, international payments, and working capital solutions, augmenting the experience and go-to-market capabilities for suppliers, delivering new capabilities and deepening relationships with accounting firms, and driving expansion of our embedded solutions. We are making progress executing against these investment priorities. A good example is our expansion of international payment local transfers to more than two dozen countries. The annual growth rates for both international FX payment volume and revenue increased by 10 percentage points compared to last quarter. Another example is our invoice financing offering, where we've been iterating on the product and customer experience since our controlled launch last fiscal year. We're seeing strong demand from suppliers in our network for the product, and through Q1, we have funded nearly 200,000 loans since launch. Additional highlights of progress made in our investment priorities include the recent introduction of real-time funding options and enabling the BILL Divvy card for AP payments. In addition, we've added leadership talent to our payments and accounting channel teams and launched our embedded solution with Xero, which is currently in beta. These early proof points add to our conviction in our ability to execute and capture the large market opportunity. We believe the investments we are making will accelerate our pace to bring financial operations mainstream for millions of SMBs and position us to deliver significant sustainable revenue growth and margin expansion over the long term. Now moving on to a discussion of our Q1 results. We executed diligently against our top priorities in Q1 as we scaled our platform and drove strong market penetration. BILL stands out as an essential technology partner for SMBs. And in Q1, this showed up in our strong customer acquisition numbers and growing payment volume per customer among newer cohorts. The profile of these newer cohorts is a direct result of our go-to-market focus on larger businesses, and we're driving very good early results. Our targeted approach in driving growth led to revenue and profitability results that exceeded the top end of our guidance range. We delivered strong profitable growth in Q1. As core revenue increased 19% year-over-year, non-GAAP operating income margin was 19% and free-cash-flow margin was 23%. Our operating income and free-cash-flow margins both expanded more than 700 basis points year-over-year. On the back of this momentum, we are investing in the foundation to drive core revenue growth acceleration and widen our leadership position in the market. Now for some more details about the quarter. Total revenue was $358 million in Q1, up 18% year-over-year. Core revenue, which includes subscription and transaction fees, was $315 million, up 19% year-over-year. Float revenue was $44 million. Turning to an update on our integrated platform, which includes our BILL AP,AR, and Spend & Expense solutions, but excludes the financial institution channel, revenue from our integrated platform was $295 million in Q1, up 18% year-over-year. Within our integrated platform, revenue from our Bill AP/AR solution was $162 million, up 13% year-over-year. TPV grew 12% year-over-year, and TPV per customer grew 2% year-over-year, slightly above recent quarters. Monetization or take rate was consistent with last quarter. During the quarter, we added 4,800 net-new BILL AP/AR customers and now have more than 156,000 customers using the solution. Also within our integrated platform, revenue from our BILL Spend & Expense solution was $133 million, up 25% year-over-year, driven by 26% card payment volume growth. As discussed in recent quarters, our go-to-market focus is on larger, higher propensity-to-spend businesses, and we're seeing this focus lead to spending strength among newer cohorts of businesses. For example, we saw a step-up of more than 40% in card spend among the spending businesses we acquired in the last two quarters compared to the preceding two quarters. Spend & Expense interchange fees were 260 basis points in the quarter. Rewards were 47% of Spend & Expense revenue. We added 1,600 net-new spending businesses and had more than 36,000 spending businesses on our Spend & Expense solution at the end of the quarter, making us one of the largest providers of software-powered corporate card solutions. Revenue from our embedded and other solutions, which includes the financial institution channel, Invoice2go and other solutions was $20 million, up 28% year-over-year. Moving on to additional financial highlights. Non-GAAP gross profit in Q1 was $307 million, up 17% year-over-year, and non-GAAP gross margin was 86%, which is above our targeted range for the low 80s due to float revenue and favorable product mix. Our highly efficient business model enables us to consistently deliver a gross margin that is among best-in-class for software and fintech companies. Non-GAAP operating income was $67 million, representing a 19% non-GAAP operating margin and an expansion of 8 percentage points year-over-year. We've created operating leverage from our core business as non-GAAP operating margin, excluding float revenue, expanded 10 percentage points year-over-year to 8%. Non-GAAP net income was $69 million, up 33% year-over-year, representing a 19% non-GAAP net income margin and an expansion of two percentage points year-over-year. Non-GAAP net income per fully diluted share was $0.63, up 43% year-over-year. Non-GAAP diluted share count declined 8.2 million shares or 7% year-over-year, primarily due to our initiatives to repurchase convertible notes and shares over the past 12 months. During the first quarter, we repurchased $200 million worth of stock, retiring 3.7 million shares. Given the timing of stock repurchases during the quarter, our non-GAAP diluted share count was reduced by approximately 1.2 million shares related to these recent purchases. Shifting to our outlook. Our guidance continues to assume the macro and B2B spend environment will remain consistent with recent quarters and that ad valorem payment volume growth and overall monetization rates increased modestly in the latter part of the fiscal year. Now moving on to guidance. For fiscal Q2, we expect total revenue to be in the range of $355.5 million to $360.5 million. We expect core revenue to be in the range of $316 million to $321 million in Q2, which reflects 15% to 17% year-over-year growth. Float revenue is expected to be $39.5 million in Q2, which assumes our yield on FBO funds will be approximately 420 basis points. Turning to our profitability outlook. We expect a sequential increase in operating expenses as we accelerate the pace of hiring. For Q2, we expect to report non-GAAP operating income in the range of $47.5 million to $52.5 million and non-GAAP net income in the range of $48 million to $52 million. We expect non-GAAP net income per diluted share in the range of $0.44 to $0.48 in Q2 based on a share count of 109 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%. Moving on to full-year guidance. For fiscal 2025, we expect total revenue to be in the range of $1.439 billion to $1.464 billion. We expect core revenue to be in the range of $1.291 billion to $1.316 billion, which reflects 15% to 17% year-over-year growth. We expect float revenue to be approximately $148 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 $182.5 million to $207.5 million, and non-GAAP net income in the range of $181.5 million to $201.5 million. We expect non-GAAP net income per diluted share to be $1.65 to $1.83 based on a share count of 110 million diluted weighted-average shares outstanding. Note that our Q2 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 less than 20% of total revenue. In closing, we are unlocking a vast market potential to automate financial operations for millions of SMBs. We believe that BILL is uniquely positioned to capture this opportunity with our platform, large and expanding distribution ecosystem, and talented team. We've built a durable business with multiple levers to drive growth, profitability, and cash flow. We believe the investments we are making today will support years of strong growth and an attractive long-term profitability profile, which will lead to sustained shareholder value creation. And now we'll open up the call for Q&A.

[Operator Instructions] Our first question comes from Andrew Schmidt from Citigroup. Andrew, your line is now open. Please go ahead.

Hi, Rene. Hi, John. Thanks for taking my questions and great results here. I wanted to dig in on just BILL AP/AR. It sounds like you're having some success moving upmarket there. If you could just drill down on the strategy and talk about what's working? And then just from a model perspective, maybe a little bit about how that should manifest in terms of TPV or TPV per customer moving forward? Thanks so much.

Thank you, Andrew. Yes, we really - our focus the past quarter on driving lots more functionality per customer, driving a lot more value for them has actually delivered results. And so we take seriously our commitments and our ability to accelerate revenue and profitability and kind of hit the Rule of 40 is something that we're excited about. It's because of what we're able to do for our customers. So in particular with AP and AR, what we were able to do is we focused on the priorities that we talked about last year, last quarter, I should say, and one of those was go-to-market and really focusing the team on driving more concentration on onboarding customers that are larger and helping them get success with the platform early. And that was one of the examples we quoted in the reported remarks, which was 40% increase in new spend for customers. So definitely, our focused efforts on go-to-market have made a difference. Our focused efforts around the platform made a difference, and we think there is a lot of opportunity to continue to drive adoption across the SMB landscape. Just as a reminder, we have 4% of the AP/AR customers across the country, and we gave the stat there that roughly 5% of the larger businesses have adopted an AP/AR solution. So there's a lot more room to go, and we feel really good about the opportunities that we have in front of us.

Got it.

Yes. In terms of that AP/AR per customer part of the question, Andrew. So in the first quarter for the BILL AP/AR platform, the integrated platform excluding FIs, we did about 433K per customer, which was up about 2% year-over-year and quarter-to-quarter. For the rest of the year, we're expecting that to be flattish, so pretty consistent with current results. And that actually just reflects some of the uncertainty that exists in the external environment. We are making progress, as Rene mentioned, attracting and retaining and growing with slightly larger businesses over a longer period of time. Or in a more certain or more favorable economic environment, we would expect to see some expansion on that number, but short-term, we're thinking that will be flattish.

Got it. Thank you so much for that. And then maybe just on take rate, you could just talk about just vendor acceptance trends. It looks like, obviously, the take rate came in pretty stable up sequentially and year-over-year, but maybe you could talk about just what you're seeing on that front? Thanks so much.

Yes. We've had a very focused effort over the last few quarters on engaging with suppliers and understanding how they're using the platform, how they want to use the platform. And we've had a number of different initiatives around that. The first, I would say, would be on kind of the go-to-market. And what we've done there is working with new suppliers and helping them onboard and get value out of the experience from day one. And that has helped us when you look at the overall kind of ad valorem across the platform, we were able to grow that quarter-to-quarter for the last few quarters, and that feels really good. I think the other area that we focused on is going to be to continue to really drive automation for those suppliers. And so we - if we look forward, this is not so much what we just did, but when we look forward for the rest of the year, we have automation capabilities that we're working on. One that we have just launched in this quarter is more straight-through processing for suppliers. So they get easier reconciliation and get to save time. In our conversations with suppliers, there's a number of other things that we know that we can do that will help their experience. And those are things that we've worked on an innovation roadmap for the latter part of the year. I think that the teams are working on today, and we expect we'll be able to continue to drive more growth across our ad valorem products in general because of that.

Thank you very much, Rene. Appreciate the comments.

Yes, thank you, Andrew.

Our next question comes from Bryan Keane from Deutsche Bank. Bryan, your line is now open. Please go ahead.

Hi guys, congrats on the progress here. Good to see some of the volume pick up. I did want to follow up on take rate, John. It sounded like it came in kind of where you expected it to be. I assume, just thinking about the pluses and minuses going into next quarter, probably more stable. And then a little bit of a pickup, I think, in the second half is what you reiterated. Maybe you can just go through the cadence of the quarter and remind us what causes that pickup in the second half of the year for the volume take rate? Thank you.

Sure. Thanks, Bryan. Yes, we're expecting transaction monetization to be in the ballpark of Q1 as we get into Q2 here. It could be slightly up or slightly down, but this is mainly driven by the seasonally strong TPV volume that we see in the December quarter, which comes at a time when we are growing, as Rene mentioned, our ad valorem volume overall, but it's at a slower-growth rate than that seasonal uptick will present. So we feel good about the opportunity to grow that volume. And as that increases in the second half of the year, we are expecting a modest uptick in that take rate in monetization. Another, I think, point worth making is that we are continuing to grow transaction yields. So our transaction monetization is increasing. So transaction revenue per transaction per BILL AP/AR was up 5% year-over-year and 3% quarter-to-quarter in the first quarter, even though take rate was actually flat quarter-to-quarter. So I think a lot of the things that we're investing in, the levers that we have, will start to show an uptick in the second half of the year.

Got it. And then can you just talk about the new client growth and what to expect with that? It looked like it beat our expectations even though you are - have a focus on larger clients, but the amount of total client count continues to show healthy growth.

Yes. Thanks, Bryan. We have a ton of focus on different go-to-market teams across the business. The highlight of the larger businesses was just - it was easy to kind of demonstrate the success of those teams on driving more spend on the platform. So that's why we talked about that. But as a reminder, when you think back about the overall go-to-market motion that we have, we have direct, we have accountants, and we have our partners embed strategy. And so on the direct effort with accountants and our SMBs, we continue to have a lot of opportunity there. This is the, roughly we have 4% of SMBs that have employees across the country. We think there's a tremendous opportunity to drive that significantly higher. And what the teams work on every day is, okay, how do you reach them on digital marketing, how do you reach them and serve them when it comes to serving the sales process? And we continue to have, like I said, good traction there. So we know we have no shortage of opportunity and the team's execution is what I'm excited about.

Thank you.

Thank you.

And our next question comes from the line of Tien-Tsin Huang from JPMorgan. Your line is now open. Please go ahead with your question.

Hi, thanks so much. Good afternoon here, Rene and John. Just great results, of course. The $45 million investments, I just wanted to maybe get a little bit more there. Are you spending on time, on track with your plan and any learnings so far that's worth sharing?

Yes, thanks for the question. We are making progress with our investments, and we're starting to see some of the interesting business results that we highlighted a little bit earlier in the prepared remarks. We do expect that the spend profile associated with that $45 million pull-forward to be a little more back-end loaded throughout the fiscal year. And this has just to do with the timing of hiring and getting people on the ground. We do expect to fully spend that incremental investment amount, and we'll grow into that, and with an increase in the pace of hiring as we get from Q2 to Q4 here. So we feel good about the progress we're making and the cadence of those investments and especially positive about the early signs of progress that we're seeing.

All right, great. And then I heard the comments on invoice financing. It sounds like that's doing well and Spend & Expense is holding up very well. I was just curious if you're - how you're thinking about your risk appetite and willingness to promote those products? Any change there? It does sound like TPV is getting better. So I'm not sure if you're feeling a little bit better about risk taking. Thank you.

Yes, I'll start and then I'll let John fill in if he has any additional comments. I mean, I think the first thing I would start with Tien-Tsin, is that we have massive scale. We've got $320 billion a year on the platform. We've got a breadth and depth of payment products, 12 different payment products across the platform that nobody else has. And that gives us a unique opportunity to leverage data, whether that's offering new products like invoice financing or managing the risk around new products like invoice financing. And so we think that no one really comes close to our scale or our continuous innovation and that we are the leader, and everybody else is playing catch-up. So we really are going to continue to invest behind these new products. And from a risk perspective, it really comes back to the leveraging of the data that we have and the ability for us to really use the scale that we've developed in ways that are meaningful for our customers.

I'd just add that we do take a targeted approach on credit products, who we offer them to, the terms, the structure of our offers. We know that in scaling new products such as our invoice financing solution, there is some testing and learning along the way, and early in the life-cycle of those products, it's pretty normal to see maybe higher loss rates than we will at scale. And so we're investing in automation, in our data asset, as Rene mentioned, and we feel good about the progress we're making. We're not at scale yet. So there's a way to go - a ways to go in both growing our credit capabilities, optimizing losses, and scaling revenue growth, but we feel good about the trajectory that we're on.

Thank you, both.

Thank you.

Our next question comes from James Friedman from SIG. Your line is now open. Please go ahead.

Hi, let me echo the congratulations here. I'll just ask my two upfront. Where it's always helpful when you guys can characterize the health of small business. We see the increase in the TPV per business. Just wondering how durable you're thinking that is? That's the first one. And then, Rene, in your prepared remarks, you talked about the release of the integrated platform, and now you're adding the analytics layer. So if you could give us kind of an update on the product side, how important that may be? Those are the two. Thank you.

Okay. Thank you. I think on the health of SMBs, one of the things I love about serving SMBs is that they're just resilient, and they find ways to make things happen and to obviously serve their customers. And so the last year or so has required lots of resilience from SMBs. And what we've seen is that the - while it's still more of a wait-and-see economy versus a growth economy, it is one that seems to be turning more positive, and that's something that we feel good about. And it's because that we're able to really give them a lot of value back. I mean telling - hearing from customers, which we hear all the time that we saved them over 50% or $75,000 a year because of our platform, that's meaningful, and that allows them to grow their business in ways that they couldn't do without us. So I think the platform enables resilience, and yet SMBs are resilient on their own, and they're going to continue to find ways to grow the business. On the second question, a lot of what we've been investing behind is really driving more functionality for our customers. And we've highlighted that obviously last quarter and this quarter. But just to kind of give you some of the ways we think about that investment. We've done investment in go-to-market to drive adoption. We've been investing in go-to-market around helping new customers get the spend on the platform sooner rather than later. That was the 40% increase in new spend for the SMB customers. It compared to two quarters prior. We've been driving increased spend for accountant customers as they come on. And this is all kind of go-to-market activities that have changed in the last six months where we've had that more heightened focus. In addition, we've been focused on supplier experiences. Supplier experiences are super important, and it's not something that we were focused on prior to several quarters ago. And what we've been able to do with supplier experiences is drive a 10-point increase in FX revenue growth rate. That's in large part because of just the attention to onboarding those suppliers and customers with an FX need as well as having capabilities in the product like local currency. In addition, we've been engaged with the virtual car suppliers in understanding what they need and understanding how to help onboard them and to drive automation with straight-through processing. In addition, on that front, we have lots of opportunity to drive card payments across the platform. We talked in general about ad valorem, the opportunity that BILL has with the spend across the platform is something that we're always focused on. And so when it comes to driving ad valorem for suppliers, one of the ways that we are thinking about doing that is really driving this product that's inside of BILL which lets customers use Spend & Expense capabilities at Divvy inside of the BILL AP products so they can actually pay suppliers with the card. Because the supplier - you need a card, and the customer is able to influence that experience there. So that will give us the opportunity in the future to drive more cross-sell with the Spend & Expense platform. So the highlight for me is that we have a rapid pace of innovation. We are growing in all of the different ways that we need to grow while we're investing aggressively behind maintaining and expanding our leadership capabilities. When I think about what I hear in the market, others are investing to catch up, and we're investing to get ahead. We're widening the gap, and that really comes from a product and go-to-market perspective.

Thank you for the color.

Thank you.

Our next question comes from Brad Sills from Bank of America. Brad, your line is now open. Please go ahead.

Oh, great. Thank you so much. I wanted to ask a question around where you saw the strength this quarter, incremental strength that is. Rene, early in the call, you had mentioned enhanced go-to-market was already having an impact. I mean, there's a lot that you're doing right now in the partner channel, in the direct channel. So would love to get your perspective on what went well this quarter, any color on that? And then maybe for John, if you could help articulate a little bit where you saw or what did you see within the spend volume? Obviously, TPV per customer contributed to some of the upside this quarter, but if you could just comment on like the broad spend categories in your base and what you're seeing there on the - just the environment? Thank you.

Thank you, Brad. We had I think talked about this last quarter. We have three main priorities across the business. One is to enhance the platform, make it simpler. Another is to expand payments across the platform, and the third is to deepen the ecosystem. And so when you asked the question about what went well, I would say things went well in all of those areas. On the enhancing the platform, the ability that I just talked about enhancing the capability of local FX transfers for customers and suppliers that are receiving an FX transaction. That was important. Enhancing the onboarding process for suppliers receiving a virtual card, that was important. I think adding the capabilities of the Spend & Expense platform into the BILL platform so we can get the customers involved in influencing how the suppliers receive payment. That's important. These are all things that are early stages, if you will, but we wanted to highlight them, and they had an impact on the quarter. On the go-to-market, I think the increased focus across the teams in understanding the segments that really drive different parts of growth and how we talk to them. That's just something that we're going to continue to get better at. That's again because of the scale we have. And then lastly, the ecosystem. We got to beta with our partner Xero. As a reminder, it's been less than a year since we've even talked about that partnership. We're moving fast. We're executing well. There's a lot of opportunity with other partners in the ecosystem. And we're just in a very unique spot. So I think across-the-board, I think having clearer strategies about what we're doing and executing on them, that's what's going well for the company right now, and it's something we're super focused on.

To the - Brad, to the spend volume part of the question, we've really seen stable volume for the last several quarters, if you think about the commentary, especially amongst larger customers. And I'd say now we're starting to see some green shoots. Again, also true with the larger businesses. In the past, we've talked about spend contraction in certain categories that are leading indicators like real estate and facility spend, physical footprint, things like that. Now we're starting to see expansion in those same categories on a same-store sales basis after four consecutive quarters of contraction. So that feels like a positive signal. By itself, it's not needle-moving for the BILL business overall, just the percentage of total payment volume that represents. But we think it speaks to the psychology and perhaps the positive outlook that SMBs have if they're expanding their fiscal footprint. So the spend volume trends seem positive to us and definitely more stable than a while back.

Great to hear. Thanks, John. Thanks, Rene.

Thank you, Brad.

Our next question comes from Keith Weiss from Morgan Stanley. Keith, your line is now open. Please go ahead.

Thank you, guys, for taking the question, and congratulations on the really solid quarter. Maybe expanding a little bit on Brad's question. Core revenue growth 19% in Q1, you guys are guiding for a deceleration into Q2. Anything in particular in Q1 that you don't expect to be repeated, like as we go through the year like why would you see that deceleration? Or is that just you guys embedding conservatism within an environment that's still, as you put John, not in growth mode yet?

Yes, I'll start, and then I'll let John maybe give more specifics if I don't catch them. I mean, the main thing is that we still see uncertainty in the economy, right? There is - we just finished the election. And now that's behind us, and businesses have less to kind of be distracted by, meaning that a week ago, there were two vectors that could have gone either way for the economy. And now there's more clarity around the economy and the direction. And that will - I think we are waiting for the clarity in the economy for SMBs to be able to make decisions about how to invest and grow. And so we're just going to be prudent until we see that clarity because we don't want to obviously get in front of anything that we haven't seen yet. And so we're just being prudent, and I think the opportunity for us is continue to execute on the core things that drive the business. So anything else, John?

No.

Okay.

Got it. So it would be fair to say that you guys - yes, would it be fair to say you guys are still believers in that sort of longer-term path back to a 20% plus growth rate?

We absolutely are believers in the conviction that we have around driving growth for multiple years ahead. And I think this is something that we're - we've demonstrated that we have those capabilities. And I'll let John speak with respect to the discussion we had at the end of FY '24.

Yes. I mean, look, we're obviously a growth company going after a large emerging market, and we expect to accelerate revenue growth from where we are today. If you look at our prepared remarks, we provided a handful of updates on key initiatives and the early impact that we're seeing from those initiatives. This only increases our confidence and conviction in our ability to accelerate growth. As we talk about the implications for FY '26, we'll get into specifics on that as we end FY '25. Obviously, we wanted to provide some early thinking on that as we did in our last call, in part to give some insights into how we're thinking about justifying incremental investments and the impact that we think those will have, and we'll obviously provide additional details as we exit this year.

Outstanding. Thanks for taking the question, guys.

Thank you.

[Operator Instructions] Our next question comes from Taylor McGinnis from UBS. Taylor, your line is now open. Please go ahead.

Yes, hi. Thanks so much for taking the questions, and congrats on the quarter. Maybe just on the core revenue guide, if I look at the full-year guide, it looks like you guys raised it by more than the upside that you saw in 1Q. So in terms of what the drivers are of that, it sounded like take rate maybe was more in line with 1Q. Maybe you guys are seeing some green shoots on the TPV side. But could you just maybe talk about what you guys are seeing that drove that upside and what's giving you guys that visibility or feeling a little bit better? Thanks.

Yes. I think the - we've talked about a few of these things already, but just to highlight them, the success we've seen in driving go-to-market adoption, the success we've seen in driving payment and usage across the platform, we saw that in the quarter, and we have a lot more innovation opportunities in front of us. So the innovation machine that BILL is, is on fire right now, and I'm super excited about what we're doing and believe that we have a lot more opportunity to drive that, so.

Yes, just some additional color on that, Taylor. We beat core revenue by $7.3 million in the first quarter. Our full-year '25 raise was $16 million at the midpoint, 17% year-over-year growth at the high end of that range. And it speaks to the stability that we see with the customer base, the success that we're having with slightly larger businesses, the continued growth in card spend across our platform, all forms of ad valorem payments we're seeing growth. So we just - we feel like the setup is good for us to continue to scale this year. And I'd say so far in our expectations for the year, we're doing exactly what we said we'd do in fiscal '25, increasing our investments, driving progress in the year on a path towards acceleration over a multi-year period.

Perfect. And then maybe last one would just be on margins, like the outperformance in the quarter was really strong. So could you maybe talk about, I know, John, you made comments about as you look into 2Q, accelerating hiring. So was some of the outperformance just a function of you guys maybe didn't like hit the hiring plans in 1Q, how much of that maybe was finding other areas of efficiency within the business? Maybe any additional color there and how we think about that going forward would be helpful.

Sure. We do take the balance between growth and profitability seriously. So we are always looking for efficiencies in the business and creating operating leverage as we go. The incremental investments that we planned for fiscal '25, as I think I mentioned earlier, are a little bit backloaded in terms of the hiring plan. So we didn't see the full effect of hiring in the first quarter. We obviously had a nice revenue beat, and we flowed that through to operating income. We beat by $12.6 million. We did increase the full-year by a little bit more than that, $13.8 million at the mid-point. So growth and increasing profitability are both things that we're trying to accomplish and feel good about the Q1 results being able to support that.

Perfect. Thanks a bunch.

Thank you.

And we have time for one more question. So the next question comes from Ian Black from Needham & Company. Ian, your line is now open. Please go ahead.

Hi guys, congrats on the strong accounting partner adds. I know you're making improvements to better serve Spend & Expense users in that channel. What traction are you seeing? Thank you.

Thank you, Ian. We are seeing a lot of focus in general internally on our accountants. So we have brought in new leadership. We've focused the teams on connecting with accountants more regularly. We've obviously highlighted the success with the Sync Assist, which really is for accountants that are supporting lots of different accounting platforms out there. So what I would say is the success we're seeing on Spend & Expense is that it's early days, but accountants are very interested. They're adopting, and there's a lot of opportunity for us to continue to drive adoption across all the accounting partners that we have.

Great. Thank you.

And there are no further questions, so, I'd like to turn the call back over to Rene Lacerte, the CEO.

Thank you, everyone. Thanks for joining us today. I just want to thank the team for driving innovation at a really fast pace while executing with strong rigor across the business. We believe the initiatives and investments we are making today will lead to strong market adoption and years of profitable growth. Have a great evening.