Good afternoon, and welcome to BILL's Third 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 third quarter 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 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 those standalone results, which exclude our BILL's Spend and Expense management, which was formerly called Divvy, Invoice2go accounts receivable and Finmark Financial Planning Solutions. Now I'll turn the call over to Rene.

Thank you, Karen. Good afternoon, everyone. Thanks for joining us today. In Q3, we delivered very strong financial results, continued our rapid pace of innovation and executed with persistent rigor and effectiveness. Across the company, we delivered on the key initiatives to strengthen our core. We enhanced our platform, enriched our payment experiences and expanded our ecosystem. Both the market opportunity and our ability to shape that opportunity grows each and every day. There is a significant growth runway ahead for BILL, and we continue to position ourselves to be the essential financial operations platform for SMBs. In Q3, we delivered strong revenue growth and exceptional non-GAAP profit growth that were ahead of our expectations. Total revenue grew 19% year-over-year, and non-GAAP operating income increased 68% year-over-year. At BILL, we are energized by the fact that during the quarter, we helped more than 450,000 small businesses automate their financial operations so they could spend more time focused on their mission. With our platform and broad set of solutions, these businesses made more than 25 million transactions during the quarter, totaling more than $70 billion in payment volume. Our performance and scale demonstrate the mission-critical nature of our platform, the strength of our ecosystem and outstanding execution. This is the foundation for our growth and penetration of the large market opportunity. BILL is a leader in innovative financial solutions for SMBs. We created a category and continue to define it as we serve a vast greenfield opportunity to automate and transform financial operations for millions of small and midsized businesses. There are more than 6 million SMBs in the US who have employees and more than 33 million in small businesses in total, including sole proprietors. These businesses make trillions of dollars of B2B payments each year. The vast majority of these businesses are still burdened by paper checks and manual processes. Our track record of innovating and delivering value puts us at the forefront to help millions of small businesses digitize their operations for the first time and drive adoption of e-payments. At BILL, we have a passion for serving SMBs and are dedicated to helping them thrive. SMBs create jobs, drive innovation and are at the heart of their local communities. They deserve dedicated attention, care and technology designed specifically for their needs. BILL paved the way for SMBs to move their financial operations from the analog to the digital world. Our platform offers an integrated suite of solutions that automates and digitizes the financial back office, including accounts payable, accounts receivable, spend and expense management and a variety of payment offerings. Our robust workflows take care of mundane, error-prone tasks and are built to handle exceptions. Our suite of payment solutions give businesses choice based on both their needs and their suppliers' needs, while accelerating payments and simplifying data reconciliation. We've removed the friction in doing business by weaving together a proprietary two-sided network that enables buyers and suppliers to share bank information securely with the ability to collaborate across invoices. The reach and value of our networks have attracted more than 5.8 million members and drive more than one-third of our BILL stand-alone core revenue. Our Artificial Intelligence engine and large scale help us deliver significant value to our customers. AI is deeply embedded across our platform to connect businesses, automate their operations and accelerate their ability to make payments. Our AI engine has been uniquely trained on our proprietary data assets, including more than 300 million transactions across an array of payment modalities and over 0.5 billion documents. Our large and increasing scale naturally drives faster product development and ecosystem expansion as scale begets scale. The virtuous cycle enables us to learn quickly, move fast and accelerate speed to value for our SMBs. With our platform, businesses can save more than 50% of their time on national processes and gain better insight, visibility and control for running their business. This is why our platform serves as a central nervous system of their daily financial operations. And this is what positions BILL as the category leader with a wide moat and an engaged sticky customer base. A great example of how our platform empowers SMBs is Joe, a marketing automation solution for Buddy coffee shops. Joe uses our platform and payment offerings to digitize their manual payables drive and pay suppliers overseas. Brendan Martin, Co-CEO and Co-founder said and I quote, 'We chose BILL because of their best-in-industry solutions and our shared commitment to level the playing field for small businesses.' Joe has a team of 15 employees supporting users of 1,500 small coffee shops. It would not be possible to have this scale without BILL modernizing our financial operations. More importantly, we can concentrate more time and mind share on brewing strategies and products to empower more of the coffee shops. Enabling Joe and all SMBs to achieve their goals is what makes this journey especially rewarding. We bring together and serve hundreds of thousands of customers and millions of network members and simplify their lives. With our platform and ecosystem, we consistently drive strong customer adoption and deeper penetration of the market. Each month, we acquire thousands of customers and tens of thousands of new network members. We simplify and centralize money movement for SMBs at a tremendous magnitude. Since fiscal 2018, our platform has enabled more than $1 trillion of SMB payments. This is only possible because of the combination of our payment engine, money transmitter capabilities and strong risk management expertise. And our scale is increasing. Over the past 12 months, we processed nearly 100 million transactions that represented approximately 1% of U.S. GDP. Underpinning this accomplishment is our demonstrated track record in creating value for SMBs. A great example of how our platform empowers businesses to scale is Tower 28, a fast-growing company that creates beauty and skincare products, utilizing clean ingredients to support sensitive skin. Tower 28 uses our accounts payable, accounts receivable and spend and expense solutions, utilizing the power of our integrated platform. Victor Leu, CFO of Tower 28, said and I quote, 'A fresh approach to beauty deserves a fresh approach to business financial operations. Our company has been scaling fast. In less than two years, our business basically tripled. Being able to scale with all the tools, solutions and services that BILL provides has been phenomenal. BILL saves us 40 hours a week and an entire full-time employee by automating our financial back office. It provides us real-time updates and strong control on card spend. It also enables us to work on the go. We've approved payments from everywhere. With BILL taking care of our financial operations, our team can focus more time and resources on company growth and product development.' Every day, we are dedicated to creating more value for our customers, partners and network members. Being a category leader requires an exceptionally strong innovation roadmap that constantly extends our value to SMBs and their accountant partners. Innovation is in our DNA and is foundational to our platform, payments and ecosystem. We've shared with you our key investment areas for growth, and these include driving adoption of our integrated financial operations platform, expanding our ecosystem by bringing more innovation to our partners and attracting new partners, and enriching our payment experiences and driving penetration of our ad valorem solutions. Our team continues to make very strong progress against these initiatives, which lay the foundation for our next phase of growth. This past quarter, we significantly enriched our integrated platform capabilities. Our platform now includes cash flow insight and forecasting, leveraging the best-of-breed FP&A capability from our acquisition of Finmark. This powerful tool empowers SMBs to predict future cash flow, easily analyze trends and opportunities and make better data-driven decisions faster. They can now optimize, manage and forecast cash flow with a single platform. BILL is uniquely positioned to provide this rich insight as our comprehensive platform can serve all B2B spend and integrates with accounting systems. Given our entrenched role in their day-to-day routine, the analytics and forecasting layer unlocks outsized and unique value for SMBs and accountants. We recently extended our platform's capabilities into a brand-new mobile app for BILL AP and AR that further empowers businesses to manage their operations from anywhere. This new app provides enhanced automation workflows, payment solutions and leverages our mobile-first approach to provide a fresh look and easy navigation. This experience meets customers where they are and is another extension of driving speed and simplicity in financial operations. The new experience is already driving growth in mobile engagement from both our customers and network members, including more bills created and approved and more demand from our network members for Instant Transfer and invoice financing. We are continuing to enhance our payment experiences to drive more convenience for SMBs. We have a sophisticated payment infrastructure fueled by continuous enhancements. Our platform has connectivities to 12 payment rails, offers eight payment modalities, reaches over 130 countries. This level of payment flexibility is extremely complex because the compliance, regulatory and risk management needs differ by payment type and source of the customer. We hide all these complexities to deliver SMBs a simple and fast payment experience. By making the complex look simple, our customers accelerate their transition to digital payments. Speed and choice of payments are critical to SMBs, and this is particularly true when it comes to commerce with international suppliers. Over the years, we have grown the scale and sophistication of our international payment offering, and now we are unlocking greater value by leveraging local clearing capabilities to provide faster payment speed. Our enhanced offering will reduce delivery times from days to near real-time. We introduced this experience in our first country last month, and we will roll out these capabilities more broadly throughout 2024. We knew from day one that an ecosystem was required to make financial operations for SMBs mainstream. We build our platform with a sensibility in mind, allowing multiple models to integrate and embed with our partners. We partner with nearly 8,000 accounting channels in some of the largest banks in the country who trust us to manage their clients' operations and payments. We have nearly two decades of experience in integrated and embedding functionalities into our partners' services. We understand the profound intricacies in creating a cohesive product and go-to-market experience that works for our partners. Our differentiated set of expertise and competencies is enabling our platform to ripple across our ecosystem. Software and payments are converging, and we are leading the charge. A decade ago, the financial operations automation journey for an SMB would start almost exclusively with consumer-based online banking. That's why we were pioneers in partnering with banks to enable them to do more beyond payments. Fast forward to today, and the front door to an SMB's financial journey can start in many different places. It can and does start with all sorts of different software providers. Our focused dedication to SMBs means that we meet customers where they are regardless of the entry point. The industry recognizes our leadership, and inbound interest from software companies is strong. Many software companies are looking to us to help address their customers' payment needs. Consistent themes we hear from partners are that they value BILL for our workflows, payment expertise, risk and regulatory practices, broad network, vast data set and dedication to SMBs. We are moving fast to capitalize on this emerging trend. We are rapidly evolving our technology and making it easy for software companies to plug and play. Our embed strategy is resonating. Most recently, Xero, a leading global small business platform, announced they will embed our onboarding workflows and a suite of ad valorem offerings into their platform. Once available, Xero's US-based customers can pay bills efficiently and connect with our large member network. We are excited about this partnership and are working closely with Xero to bring this offering to market. In closing, we drove great financial results while executing against our innovation roadmap to provide businesses more automation, control and insights. Achieving our leadership and scale did not happen overnight. We will continue to extend our leadership position with careful strategic planning, sustained investments in building capabilities and consistent execution. We are building an enduring company, and we aspire to help millions of SMBs automate their operations and more easily make trillions of dollars of e-payments. At BILL, we have an inspired team that is dedicated to serving SMBs and each other. And this, together with our values and mission, will continue to strengthen our unique competitive advantage that positions us well to serve the large market opportunity we are pursuing. I'll now turn the call over to John.

Thanks, Rene. Today, I'll provide an overview of our fiscal third quarter financial and operating results and discuss our outlook for the fiscal fourth quarter and full year 2024. We delivered strong results for the quarter that reinforce our conviction in the strength of our business, our execution capabilities, and the market opportunity we are pursuing. We are building to strengthen our core while investing with discipline to pave the way for the next phase of accelerated growth. Rigorous execution against our top priorities showed early positive signals in Q3. Net new customer adds for both our Spend & Expense and BILL stand-alone XFi solutions returned to historical levels. The B2B spend environment showed signs of stabilization. And our focus on businesses with a higher propensity to spend drove upside in our Spend & Expense business. BILL stand-alone payment monetization expanded sequentially. All these factors translated into profitable growth in Q3. Total revenue for Q3 was $323 million, an increase of 19% year-over-year. Core revenue, which includes subscription and transaction revenue, was $281 million, up 17% from a year ago. Non-GAAP gross profit in Q3 was $281 million, up 19% year-over-year, and non-GAAP gross margin was 87%. Our gross profit results in the quarter included approximately $6 million in one-time benefits. 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 also significantly expanded profitability in Q3, reflecting our ongoing commitment to investing with discipline. Non-GAAP operating income for Q3 was $59 million, up 68% year-over-year. Non-GAAP operating margin was 18% and expanded more than five percentage points from Q3 last year. Once again, we were non-GAAP operating income-profitable, excluding the benefit of float revenue. In Q3, we expanded Expo profitability by $10 million sequentially, excluding the one-time benefits mentioned earlier, and demonstrating our ability to drive operating leverage as we scale. Moving on to key business highlights. I'll touch on our Spend & Expense solution and BILL stand-alone solutions. The strong growth trends we delivered throughout this fiscal year with our Spend & Expense solution continued in Q3, and our results in the quarter exceeded our expectations. Spend & Expense revenue grew 29% year-over-year, and we added 1,800 net new spending businesses. We are prioritizing our sales and marketing resources towards spending businesses with greater financial strength and the opportunity to capture larger wallet share. Spend & Expense card payment volume was $4.4 billion for the quarter, an increase of 29% year-over-year. Interchange fees were 261 basis points and rewards expense was 47% of Spend & Expense revenue. As expected with the choppy macro environment, we have seen an increase in credit and fraud loss rates, particularly among our smaller customer cohorts. Our proactive efforts over the last year to diligently manage credit exposure have enabled us to maintain strong margins. For our BILL stand-alone solutions, we delivered solid performance in the quarter. BILL stand-alone transaction revenue increased 20% year-over-year driven by our diverse suite of payment solutions and continued enhancements to our payment products and supplier initiatives. BILL stand-alone payment volume was $67 billion, an increase of 9% year-over-year. BILL stand-alone payment monetization in the quarter extended from Q2 driven mainly by increased adoption of our newer ad valorem products as well as a non-recurring increase in transaction fees from migrating TPV between processing providers in the quarter. BILL stand-alone subscription revenue, excluding financial institution partners, increased 9% year-over-year. Overall, BILL stand-alone subscription revenue declined 2% from last year, which reflects changes in our FI channel, as previously discussed. Our solutions continue to drive value for small businesses and accounting firms, and our customer acquisition and retention results are strong. BILL stand-alone net new customer adds in the direct and accounting channel were 4,100 in Q3, excluding attrition related to the sunset of Intuit's Simple Bill Pay solution. BILL stand-alone customer count in the financial institution or FI channel declined quarter-over-quarter. Across our partner portfolio, new enrollments continued at a consistent pace but were offset by the removal of inactive customers, which occurs periodically. A word on float revenue, which increased 26% year-over-year to $42 million in Q3. Float is enabled by our proprietary payment infrastructure and regulatory licenses and serves as a counterbalance to economic trends. Turning to capital allocation. We generate significant free cash flow and have a strong balance sheet. This enables us to fund long-term opportunities while delivering profitable growth. We invest with purpose and discipline and are proactive in optimizing our capital structure. In Q3, we repurchased $748 million in aggregate principal amount of our 2025 convertible notes, resulting in cash usage of $711 million and a reduction in non-GAAP diluted share count of 0.9 million weighted shares. In addition, we unwound a portion of the cap call instrument due to the repurchase. We repurchased these notes to minimize potential future dilution associated with the conversion event and made the purchases at attractive economics. The repurchase of these notes and the unwind of the cap calls resulted in a $34 million net benefit to other income and expense, which is reflected in our GAAP results and excluded from our non-GAAP results. Now turning to a quick update on our non-GAAP net income presentation. Given the significant non-GAAP net income we generated in the past several quarters, we transitioned to include a new non-GAAP income tax adjustment beginning in Q3. Previously, non-GAAP net income included GAAP taxes, which were minimal. In Q3, our non-GAAP provision for income taxes was calculated using a blended tax rate of 20%. Note that this change has no impact on actual cash tax payments. You can refer to our press release and quarterly investor presentation for additional information, including a look back of our prior periods to reflect the adoption of the 20% blended tax rate. Comparing our results on an apples-to-apples basis by incorporating the non-GAAP provision for income tax. Non-GAAP net income in Q3 was $68.6 million. It increased 42% year-over-year. Non-GAAP net income margin was 21%, an expansion of 4 percentage points year-over-year. Please note that our previously provided guidance did not include the non-GAAP tax presentation. Shifting to our outlook. We are raising our fiscal 2024 outlook to reflect our progress in strengthening our core while continuing to be prudent regarding ongoing macro crosswinds that could negatively impact SMB spending. While there have been signs of the B2B spend environment stabilizing, SMBs continue to be pressured by high inflation and interest rates. For fiscal Q4, we expect total revenue to be in the range of $320 million to $330 million, which reflects 8% to 11% year-over-year growth. We expect float revenue to be $40 million in Q4, which assumes a yield on FBO funds to be approximately 480 basis points. We expect non-GAAP gross margin to be approximately 84% in Q4, which reflects a slight shift in payment volume mix and the one-time gross margin benefits we recognized in Q3. As previously discussed, we expect our non-GAAP gross margin to moderate in the low to mid-80s as our payment mix evolves and our float revenue declines with lower interest rates later in this economic cycle. Given our change to apply a non-GAAP tax rate to non-GAAP net income, we are providing guidance for non-GAAP operating income, which we expect to be $40 million to $50 million in Q4. We expect non-GAAP income for Q4 in the range of $46.4 million to $54.4 million, which includes an assumed 20% tax rate for non-GAAP purposes. We expect our actual cash tax payments to continue to be fairly minimal in the near-term. Non-GAAP net income per diluted share is expected to be in the range of $0.41 to $0.49 and based on a share count of 112 million diluted weighted average shares outstanding. Moving on to full year guidance. For fiscal 2024, we expect total revenue to be in the range of $1.267 billion to $1.277 billion, which represents 20% to 21% year-over-year growth. We expect float revenue to be $165 million in fiscal 2024, assuming a yield on FBO funds of 490 basis points. We expect non-GAAP operating income for fiscal 2024 to be $176 million to $186 million, which reflects 51% to 59% year-over-year growth. We expect non-GAAP net income for fiscal 2024 in the range of $227 million to $235 million, which includes an assumed 20% tax rate, and non-GAAP net income per diluted share to be $1.96 to $2.03 based on a share count of 115.5 million diluted weighted average shares outstanding. We expect stock-based compensation expenses of approximately $255 million for fiscal 2024, which is approximately $45 million lower than the guidance we provided at the start of the fiscal year. In addition, we expect capital expenditures to be approximately $23 million for fiscal 2024. In closing, we delivered a strong quarter with balanced growth and profitability, and we executed vigilantly against our key business initiatives to build the foundation for sustained long-term growth. At BILL, we are all in to help SMBs succeed and thrive. We lead the financial operations category. With our distinct moat, rigorous execution and innovation momentum, we stand poised to expand this category and be the de facto financial operations platform for millions of SMBs. Operator, we're now ready to take questions.

Thank you. Our first question comes from Tien-Tsin Huang of JPMorgan. Please go ahead, your line is open.

Thanks for the update and good results here. Maybe I'll start with just a macro question. I know last quarter, you said you're looking for more consistent signals around TPV. It sounds like you're seeing more stability. Is that the ongoing assumption from here, thinking about the fourth quarter and as we extend into fiscal 2025? Any other call-outs?

Thank you for the question, Tien-Tsin. I would say you've provided a good summary. We notice that the stabilization of spending is generally consistent across our customer portfolio. However, we haven't observed any expansion in spending yet. That is how we are structuring our business models.

Okay, we'll assume stability moving forward. As a follow-up, Rene, can you provide an update on the negotiations with Bank of America? I know this was a major focus during the last call. Where do we stand with those discussions?

Thank you. Yes, we are working very closely with the bank. And when we have specifics to share, we will definitely get back to all of you. I think it is worth kind of maybe just sharing the broader context of how the bank fits into the overall go-to-market strategy that we have. We have a three-pronged approach where we focus on both near-term and medium and long-term initiatives. And on the near-term, that's the opportunity for us to influence our direct and accountant. Mid-term is also accounting because they bring customers of the accountants. But the longer term really has been our FI and partner strategy. And when we think about the long-term, just as context, right, the long term today is around 2% of the overall revenue of the business, which is what you would expect because this is how we're focused on building the businesses to be where customers are, to meet them where they are and to actually drive customer acquisition wherever we can. And you saw a good expansion in the ecosystem this quarter with the addition of Xero and the overall software platform that they delivered businesses all over the world, but in particular to businesses in the US. And so we see the long-term opportunity just continuing to increase, and we're excited about what we see happening in the market.

Yes. That was nice to hear the Xero. Thank you for the update, Rene. Good to hear from you.

Yes. Thank you.

Our next question comes from Kenneth Suchoski of Autonomous. Your line is open.

Good afternoon. Thank you for the questions. Great job on the take rate. I'll start with that. You mentioned there was a non-recurring benefit from migrating some of the volumes across your back-end providers. Can you quantify the revenue benefit from that in the quarter? Also, could you update us on the initiatives to promote more virtual card adoption? Please remind us of the timing for this, as it seems the take rate progress might include some non-recurring revenue, but it appears to be mainly driven by the new ad valorem payments rather than the actions you're taking on the virtual card side.

Yes. Thanks, Ken. Let me unpack that a little bit for you. First, we feel like we made great progress in the third quarter. Obviously, a significant expansion in monetization. And that was driven both by increased volume on our ad valorem products as well as the one-time uptick that we mentioned earlier. And that was really the movement of volume between processing providers that resulted in just higher monetization on a small portion of our volume. And the priorities we talked about last quarter to improve the product experience for customers and suppliers are beginning to show good signals. There are positive signals, which for us is a good indicator of the foundation we're building to expand monetization on a more consistent basis going forward. Excluding the one-time uptick in the quarter, we also expanded monetization. So that was consistent with our expectations. We felt like we had the programs in place to expand from Q2, and we did that. We expect our Q4 monetization to be at or above Q1, which is what we said previously. So it's consistent with our expectations. And I'd say in the quarter, in Q3, our virtual card program in particular underwent a number of improvements. And we saw stable volume there by itself, but didn't necessarily drive a significant portion of the expansion that we put up. But we feel like we're setting the table for that to be the case down the road.

Yes. Okay. Great. Thanks, John. And then I wanted to ask about the Airwallex partnership that came out recently. Congrats on that. My sense was that this could open up maybe dozens of currency payout options in local currencies versus just the couple that you have today in terms of GBP and Canadian dollar. That would obviously come in at lower price points, better speed. So how meaningful could this be to cross-border payment adoption in local currency over the next couple of years? And I think you guys are actually rolling that out across new markets like Australia, New Zealand and Europe. So any update there would be really helpful.

Yeah. Thanks, Ken. One of the things that we predicated our entire platform on is payment choice matters. And choice has to be there for both the buyer and the supplier. And what we have heard from international suppliers is they sometimes want and need close to real-time payment clearing, and the only way to get that is with local clearing. And so the partnership with Airwallex is to give us the capabilities where we can roll that out across the globe. Like we said, we've started doing that in one country just to test out and make sure it's working as expected. But we do think it will drive adoption because, again, it's back to choice. That's why we have 12 payment rails and over eight different modalities of how we execute payments. We're unique in how we do that. And we think that choice is what's going to drive success for the platform and not just for the FX but also for the overall usage of our platform.

Thanks, Rene.

Thank you.

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

Hi, Rene, John, great results here. I appreciate you taking my questions. I want to focus on the net additions for BILL stand-alone financial institutions. I'm curious if the residual effects from the BILL Pay roll-off had any impact, and if so, what the organic additions will be. Additionally, at a broader level, there seem to be some mixed signals regarding software adoption. What trends are you observing in terms of adoption and any differences by channel? Thank you, everyone.

Well, thank you, Andrew. We had, I think, a very strong team that executes exceptionally well over the last, I guess, a little bit more than the last quarter. We have realigned teams to really focus on a couple of different priorities to drive the adoption that we're seeing. And one of the things that we've done is we wanted to make sure that we met customers where they were and that they wanted to have a stand-alone spend and expense, that would be great. And if they wanted to have a combined package, that would be great. If they want a stand-alone AP, that would be great. And so the teams are aligned around that. And I think that clarity of ownership inside the company and the clarity of messaging is making a difference. And so we see that the market opportunity in front is massive. We have hundreds of thousands businesses where there are millions of businesses that could use a product like ours, that need a product like ours. I know that firsthand because I am a small business at heart, have always been, always will be. And so that ability to meet them where they are and to deliver the functionality that we do is what drives the success that we had. So we feel very good about the capabilities that we've built onto the platform and the go-to-market skills that we have. So it is nice to see it happen across the board.

Got it. Thanks for that Rene. And then maybe I could dig into the embedded strategy a little bit. It was good to hear about the pipeline of software partners. What was the unlock for that? Was it strategic? Was it technical? Was it some lanes between BILL and Intuit? What's driving the uptick in terms of the embedded distribution? Thank you.

I believe a lot of this boils down to our presence in the market. Over the past 18 years, we’ve been developing this platform, achieving a unique scale with over $1 trillion in transactions handled in the past 5 to 6 years and over 1 billion opportunities. This scale is crucial for us to support our partners. The requirements for regulatory compliance vary based on the customer and how they are approached. Our capability to enhance risk management and efficiency across our platform is significant. When we engage with partners, whether they are software providers in accounting or serve other sectors for small and medium-sized businesses, we consistently hear that the complexity involved in financial operations, especially in fund transfers, poses challenges they find difficult to navigate. They seek our scale to facilitate this aspect of their business. Consequently, there is a growing recognition that financial operations can provide substantial opportunities. Our successes have heightened awareness about the potential for time savings and enhancing support for SMB customers. People are starting to understand the implications of our scale, particularly given that we manage over 1% of GDP and have processed more than $1 trillion since 2018. All these factors contribute to the systems we are capable of building, and we have shown that we can do this effectively.

Got it. Thank you for answering. Appreciate the comments.

Thank you.

Next in queue, we have Darrin Peller of Wolfe Research. Please go ahead. Your line is open.

Thank you for the opportunity to discuss the go-to-market strategy moving forward. I’d like to get more details on the customer acquisition numbers. It's clear there has been an acceleration in customer additions, particularly in Divvy, accompanied by strong volume. This indicates that our strategy is becoming more effective. Additionally, I noticed there were about 3,500 new customers on the direct side, but there seemed to be some turnover in the financial institution channel. Could you elaborate on that and provide your expectations for future customer additions overall? Thank you.

Thanks, Darrin. I'll begin, and Rene can provide additional details. In February, we highlighted several priorities to adjust our market approach in response to changing conditions both externally and within small and medium-sized businesses. One significant focus has been on being present where SMBs are and providing the solutions they seek, whether individually or as part of a unified offering. We aimed to target prospects who are ready to adopt rather than those merely considering their options, with a preference for slightly larger businesses. We observed positive progress this quarter, largely due to the exceptional leadership and teams across our sales and marketing and overall go-to-market organization. Specifically for BILL, we added 4,100 customers this quarter, reflecting an increase from the previous quarter and aligning with our focused priorities. This figure excludes the minor attrition from the Intuit Simple Bill Pay service, which saw only 600 customers lost, meaning we retained most of the initial 12,000 Simple Bill Pay customers. The most notable growth was seen in our Spend & Expense solution, which added 1,800 customers this quarter, benefiting from our focus on larger businesses and reduced attrition in the smaller business segment, along with improvements in our value proposition. As we previously mentioned, we have various strategies under our control to regain market momentum, and this was evident in both BILL and Spend & Expense this quarter. Regarding the financial institution channel, we noted a decrease in customer additions primarily due to the removal of inactive customers. However, we recorded an increase in enrollments and achieved our highest-ever number of active customers in the FI channel. As is common at times, some partners chose to remove inactive customers, which affected the overall numbers, but we are optimistic about the engagement and activity levels with our FI customer partners.

That's great to hear, guys. Nice job.

Thanks.

Our next question comes from Brian Keane of Deutsche Bank. Please go ahead.

Hi, everyone. Congratulations on these results. Rene, I wanted to follow up regarding the Bank of America relationship. Is it likely to continue in some capacity, or is there still a chance they might bring everything in-house? I'm trying to understand the possible outcomes at this stage. I know there was some sort of minimum commitment from Bank of America. Does that still apply?

Thanks for the question, Brian. So we are actively working with our partners at the bank. And like we said, when we have more to share, we will. The opportunity to extend the ecosystem to serve SMBs wherever they are exists across our platform, and we think there's an opportunity to do that with the bank.

Got it. And John, regarding organic take rate, it seems like we are on track to return to first quarter levels. What specific factors do you see contributing to this recovery in organic take rate? It appears that some initiatives are beginning to take effect, and so far everything seems to be progressing as planned. Looking ahead to the next fiscal year, do we anticipate a gradual increase in the organic take rate as we move into fiscal year 2025?

Yes, thanks, Brian. I think you’re spot on regarding Q4. We are making headway with the product improvements we've discussed, which will positively impact our value proposition. This includes enhancements in data, payment speed, reconciliation, and local clearing for international payments that Rene mentioned. We've seen an uptick in adoption and growth in some of our newer ad valorem products. While these products are smaller compared to our virtual card or national payment offerings, they are beginning to make a difference in our numbers. We're on track with our previous expectations for Q4 and feel confident about the foundation we’re establishing for consistent growth. Although it can vary each quarter, we are focused on increasing adoption and payment volume across all of our ad valorem products. It's too early to comment on how this will specifically affect fiscal 2025, but we will share our assumptions with you in August.

Great. Thanks so much for taking the questions.

Thank you.

The next question comes from Keith Weiss of Morgan Stanley. Please go ahead.

Thank you for taking my question. I would like to explore the enhanced integrated platform capabilities. Could you provide more details on how you are monetizing these capabilities? Are you seeing this through increased payment volume or improved customer acquisition? How should we understand the benefits arising from this?

Thank you, Keith. One of the main reasons we integrated the two platforms was to simplify things for our SMB customers. We focus daily on how to make their lives easier. So far, in the early stages of the integrated platform, we've seen significant progress in activations, engagement, and increased cross-sell opportunities. What we observe aligns with our expectations, and we're building the platform to simplify their experiences, as indicated by the customer usage data we have. Additionally, we announced the integration of cash flow insights and forecasting capabilities into the platform. Our vision for SMBs is to provide them with a single place to manage their financial operations. This is a common challenge for SMBs, and until BILL began developing these tools, there were no comprehensive solutions available. We believe that serving customers with this wide range of capabilities is distinctive. The integration between the two platforms has enabled us to engage customers at levels that were not possible before.

Got it. Super helpful. Thank you.

Thank you.

Our next question comes from William Nance of Goldman Sachs. Your line is open.

Hey, guys. Appreciate taking the question. Nice to see some of the acceleration on the Spend and Expense platform today. At the risk of beating the dead, I just wanted to come back to the take rate dynamics in the quarter. John, I thought you said in the script, there was a $6 million benefit to gross profit. And if I kind of pull that out of the transaction revenues, it looks like the take rate was a little bit more stable sequentially. And so, I feel like I'm missing something given the commentary around take rate expansion. I was wondering if you could help me with that. And then just kind of more broadly, when you talk about getting take rate back to first quarter levels next quarter, I guess, is this a onetime step-up or a one-time benefit to the take rate?

Yes. Thanks for the question. Well, just to clarify on the $6 million benefit that we referenced earlier, that's really a positive impact on cost of revenues, cost of sales that improved gross margins. It's not a revenue and monetization impact. So that has no real bearing on our take rate, which is a function of transaction revenues and the appropriate segment of TPV, in this case, Bill. So we did make progress, we grew. We were at 14.2, I think, last quarter and expanded without including a separate one-time step-up, which was around some AR volume that transitioned between providers. That volume will continue at a higher rate. But as we look at like seasonality in Q4 and how payment volume falls, we're expecting some of the near-term headwinds on some of the higher-monetizing products to continue. And that serves to kind of mute volume expansion across those products, and we know that we'll have expansion seasonally in the quarter associated with check and ACH payments. So those are some of the dynamics that are all at play in our expectations for the Q4 monetization. So it will be, as we said previously, an improvement by Q4 versus Q1 or at least at the Q1 level with limited opportunity for volume growth in the very short term. And that's how we get to those assumptions.

Okay. That's super helpful. So the $6 million is not in revenue, it's in COGS. And there's a separate one, but that one is going to be an enduring uplift in the take rate?

That's correct.

Awesome. Appreciate it. All right. And then just, I guess, a separate topic on just go-to-market. I'm just wondering if you could talk around the net adds that we're seeing across, I guess, really more the core BILL platform. What is the mix of sort of channel versus direct these days? I guess more accounting versus kind of not talking about the FI channel. And I guess specifically, how do you kind of envision that changing over time? And is there anything you're doing to kind of get the next more towards the direct channel in the near term?

Got it. Historically, most of our new customers have come from our relationships with accounting firms, and that trend continues. I won't provide specific numbers between the channels, but we are investing in building and enhancing our presence in the accounting channel to ensure long-term growth in customer acquisition. Recently, we've also been focusing more on slightly larger businesses, especially those with a greater likelihood to spend and quickly get up and running on our platform. We can more effectively target our sales and marketing resources in our direct channel, and we are starting to see positive results from this strategy. Over time, I expect that larger businesses in our direct channel, along with all sizes from the accounting channel, will continue to make up the majority of our customer acquisition.

Got it. Super helpful. Appreciate taking the questions and appreciate the clarification.

Yeah. Thank you.

The next question comes from James Friedman of SIG. Please go ahead.

Hi. Thank you for taking the question. I wanted to ask about this BILL stand-alone TPV ex FI. First of all, do you think that that's still the right way to analyze the company? And Rene, in your earlier answer, when you were using that language neutrality, is that what you're referring to?

Thank you, James. When I mentioned neutrality, I was specifically talking about same-store sales. The businesses are managing their spending without reducing or increasing it, and there is no expansion happening. This means that, unlike previous quarters, we are not seeing any contraction. We would like to see expansion, but we have not yet observed that. To clarify, my reference to spend-neutrality versus spend expansion reflects this situation. Overall, in terms of BILL's total payment volume, we feel very positive about our capabilities. We are continually enhancing our payment offerings to capture a larger share of wallet and are adding more customers across the platform, which we believe is crucial. This success is largely due to our strong execution. I have been developing online software solutions for automating financial operations since 1992, and over the years, I’ve learned that while having a vision is essential, the will, grit, and passion to execute consistently are even more critical. That’s the essence of BILL. It’s ingrained in our culture, and it’s what we are committed to doing. When you merge that vision with our determination, it creates an unstoppable combination. We are very pleased with our current position and our capacity to achieve the go-to-market results we are experiencing.

Okay. Thanks for that. And then if I could just ask maybe for a one-liner around the interchange change. Is that something you're prepared to comment on yet or you're going to wait for fiscal 2025?

Yeah. I think it's early for us to have any specific commentary on that. From a timing perspective, it appears that would first potentially come in to be in our fiscal Q4 2025. So it's a little ways out there. We're obviously aware and paying close attention to that, but there's a little bit more information needed for, I think, us to understand exactly what the impact is.

The next question comes from Brad Sills of Bank of America. Please go ahead. Your line is open.

Oh, great. Thank you so much. Wanted to ask about the integration, the progress you've made on integrating receivables with payables and the mobile functionality. How significant is this? In other words, could we start to see this kind of add to the flywheel effect of customer acquisition in your business and how so might that play out?

Thank you for the question. We believe that simplicity is essential to the value proposition that businesses need. Having an integrated mobile app that encompasses accounts payable, accounts receivable, along with features for spend and expense management, as well as cash flow insights and forecasting, will be crucial for adoption both in the near term and the long term. It's important to note that the mobile app is also beneficial for suppliers, and we've observed increased usage from them, particularly for Instant Transfers and generating invoices through the BILL platform. This aligns with our overall strategy. Additionally, we emphasize our scale because the volume of funds we move and the number of transactions we handle demonstrate that scale promotes further growth. Therefore, our ability to enhance simplicity for customers is informed by their usage across a vast network of hundreds of thousands of businesses and millions of participants. When we consider our scale more broadly, it allows us to identify the payment products they need and leverage AI capabilities in our platform. Fortunately, our scale enables better product innovation, which remains a core focus of our daily work at BILL.

Great. Thank you. One more, if I may, please, just on the macro. Maybe I'll just ask it a little differently to you, John. The TPV per customer metric is one we all kind of follow here as a gauge there. Are there any signs of improvement, whether it's in certain categories, for that metric to potentially accelerate? I think it grew 1% this quarter, which is kind of similar to last quarter in the core business. Thank you.

Thank you, Brad. This quarter showed a slight increase. Historically, the core BILL platform experiences a seasonal effect in the March quarter, and we observed that again. However, we haven't detected any significant signals across various spending categories that would suggest immediate expansion per customer. This aligns with Rene's earlier comments indicating that the spending environment feels relatively neutral in the short term. On the card side, our Spend & Expense solution performed better than expected, with card volume surpassing our predictions. There is notable strength in the travel and entertainment category, which is consistent with reports from other companies and airlines. However, it isn't widespread enough for us to assume significant near-term expansion. We still have some time before inflation, interest rates, and other factors give small businesses the confidence to expand.

Great. Thank you, John.

Thank you.

Thank you. We have time for one more question. Our last question is from Taylor McGinnis at UBS. Please go ahead.

Yes. Hi. Thanks so much for taking the question. So it looks like the 4Q core growth guide assumes a bit of a deceleration compared to how you guided last quarter. So when we think about where slower growth might be occurring, anything you would flag as we think through our model? So for instance, I don't believe you guided to TPV, but is it fair to assume the old guide of 7% to 8% TPV growth this year still holds? It sounds like earlier you were messaging maybe the potential for take rate to be down sequentially. So maybe that is the area. But just any additional color from a modeling perspective you could help us with? Thanks.

Yes, our core revenue guidance suggests approximately 10% year-over-year growth at the midpoint, which exceeds our previous projections. Several factors contribute to this, including customer dynamics and pricing plans that influence subscriptions and transactions, as well as total payment volume and monetization rates. Overall, we anticipate subdued growth in the short term, particularly regarding total payment volume and take rate, and this is reflected in our fourth-quarter assumptions. Regarding Spend & Expense, we expect full-year revenue growth to surpass the upper end of our earlier expectations, which ranged from 20% to 25%. This indicates a stronger performance, primarily driven by volume, while our interchange remains relatively stable.

Great. Thank you so much.

Thank you.

Thank you. This concludes the Q&A session. So I'll turn the call back to Rene Lacerte for any closing comments.

Thank you. Thanks, everyone, for joining us today. As we celebrate BILL's 18th anniversary, we are all proud of the incredible transformational value that our platform provides SMBs. And I'd especially, like to call out and thank all of our employees who stepped it up this quarter and continue to drive innovation that empowers our customers to thrive. Thank you.

This concludes today's call. Thank you for joining. You may now disconnect your lines.