BILL Holdings, Inc. Q2 FY2026 Earnings Call

Good afternoon. My name is Lydia, and I will be your conference operator today. At this time, I'd like to welcome everyone to BILL'S Fiscal Second Quarter 2026 Conference Call. Thank you. I'll now turn the call over to Jack Andrews, Vice President, Investor Relations. You may begin.

Thank you. Good afternoon, everyone. Welcome to BILL's Fiscal Second Quarter 2026 Earnings Conference Call. We issued our earnings press release a short time ago and filed the related Form 8-K with the SEC. The press release can be found on our Investor Relations website at investor.bill.com. Joining me on the call today are Rene Lacerte, Chairman, CEO and Founder; John Rettig, President and COO; and Rohini Jain, CFO. Before we begin, please remember that during the course of this call, we may make forward-looking statements about the future business operations, targets, products and expectations of BILL that involve many assumptions, risks and uncertainties. Actual results could differ materially from those expressed or implied by our forward-looking statements. In addition to our prepared remarks, please refer to the information in the company's press release issued today, our Q2 '26 investor deck and 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 a reconciliation of GAAP to non-GAAP and additional information regarding these measures. With that, let me turn the call over to Rene.

Thanks, Jack. Good afternoon, everyone, and thank you for joining us. During Q2, we continued to build on the strong momentum of Q1 and delivered a meaningful beat on both core revenue and profitability. Our consistent and disciplined execution against our strategic priorities drove 17% core revenue growth versus last year and an 18% non-GAAP operating margin in Q2. Additionally, we're seeing encouraging signs of SMB resilience with increasing spend volumes across the platform. Our innovation defines the broad category of how businesses manage their financial operations. We are introducing new products and partnerships that extend our capabilities and reach while delivering durable growth and expanding margins. Nearly 500,000 customers trust BILL and use our software solutions to run and grow their businesses with speed, confidence and clarity. More than 9,500 accounting firms rely on our platform, and over 8 million businesses are now part of our proprietary B2B payment network. This unmatched scale enriches our data, gives us broad visibility across the SMB economy and positions us to both grow and expand the intelligent financial operations category. We are seeing our massive scale and the deep trust we've built across our ecosystem translate directly into value creation. By spanning the critical workflows our customers rely on every day, we are driving higher engagement and more transaction volume across the entire platform. We've also continued to strengthen our position with accounts through new offerings such as procurement, multi-entity support and advanced reporting in the accountant council. These tools are increasingly important as AI reshapes accounting and, more specifically, the accounting profession. As the profession adapts to a rapidly changing technology landscape, our foundational knowledge of the back office for SMBs and the accounts that serve them is unique. This capability, combined with the breadth of our platform, is enabling firms to transform their mundane transactional work into high-value automated advisory services. We are deeply integrated across many of the largest firms and are best positioned to support this evolution by combining modern workflows, scale, and continuous innovation. AI is prompting more firms to adopt and embrace automation so that they can provide more strategic value to their clients. With BILL already trusted by nearly 90 of the top 100 firms, we're leading this transformation through innovation by rapidly deploying new agentic capabilities to eliminate workflows for accounts and their clients. A significant part of the value we provide customers is through our world-class money moving capability. We are a regulated provider that moves over 1% of U.S. GDP and supports over a dozen payment modalities. Importantly, for customers, we also optimize payment speed as a direct result of our proprietary data models and risk engine. Our ongoing investment in integrating software and payments enables us to give businesses a unified real-time view of their financial health while helping them maximize their capital and make better strategic decisions. As businesses increase their use of BILL, they unlock more from the platform. Our momentum with multi-product adoption demonstrates this. The number of businesses using both AP/AR and Spend & Expense grew 28% year-over-year in Q2. These customers drive significantly more revenue per customer and become stickier as they realize more combined value from the platform. We leverage our world-class payment and risk management capabilities to give SMBs what they want, the ability to maximize cash flow. Invoice financing is a fast-growing emerging payment solution that provides flexible capital exactly when it's needed, addressing a critical operating need for many SMBs. In Q2, customers using invoice financing grew by nearly 50% year-over-year and the origination volume increased by more than 30%. We increased adoption while improving unit economics at the same time. This outcome is a direct result of our powerful AI models and our evolving capability to safely underwrite a wider range of suppliers. BILL cash account is another important extension of the overall value we create to help SMBs maximize cash flow. At the core, it is an integrated operating account that makes it easier for SMBs to optimize cash flow and gain greater control and flexibility over their financial operations. We see cash accounts as an opportunity to bring billions of dollars of monthly offline spend onto our network, increasing our wallet share. Early indications since launching in Q2 showed that more than 70% of cash account users have increased their spend volumes on our network. Our Embed 2.0 growth strategy continues to show great progress and potential. Last quarter, we announced new partnerships with NetSuite, Acumatica and Paychex, and within 3 months, all are in market, demonstrating the strength of our platform and the ability to move quickly. Our Embed 2.0 strategy is purpose-built to extend our reach with SMBs and complement our other go-to-market channels. It allows us to meet growing businesses inside the systems they already use, reduce friction as complexity increases, and deliver a more unified technology stack. With these 3 partnerships alone, we've unlocked the potential to reach close to 1 million businesses, showing how embedded capabilities scale our ecosystem efficiently. As businesses grow, complexity compounds. Large enterprises solve that complexity by adding layers of people, processes, and systems. But for the small and medium-sized businesses that power the economy, growth too often means more manual work, more risk, and more friction. That imbalance has defined this category for decades and is exactly what we are aiming to change. Agentic AI is live across our platform today. Agents are actively running core financial workflows, eliminating manual work, reducing risk, and improving reliability and accuracy. To date, we have focused on 3 areas with unnecessary friction: vendor management, transaction entry, and operational efficiency and risk management. First, let me discuss vendor management. Running a business requires spend and spend requires vendors, yet managing vendors remains one of the most manual and fragmented parts of finance. BILL's W-9 agent and our new Smart Response agent autonomously collect tax documents and manage routine vendor communications, helping customers stay compliant, build trust and keep money moving without adding overhead. Since launching in Q2, nearly 10,000 customers have turned on the W-9 agent, and 40,000 W-9s have been collected. We recently added new mobile capabilities, enabling real-time compliance control from anywhere, and expect our W-9 agent to collect and automate 3 million W-9s by the end of the year, saving thousands of weeks of manual work for our customers. Second, turning to transactions. BILL sits at the center of how money flows for our customers, and our agents are making those transactions increasingly touchless and intelligent. We are eliminating the manual work required to code, match, and reconcile transactions. Leveraging RAI, our invoice coding agent can now fully code complex invoices, which reduces the steps required by 90%. We have also expanded our transactions agent with auto-generated receipts and email capture, improving visibility while further reducing daily friction. Third, operational efficiency and risk management is critical for both us and our customers. Secure financial operations are core to our platform and a key reason customers trust us to run their workflows. As businesses scale, risk grows alongside complexity. Our AI-powered fraud and risk systems apply deep domain expertise and network-level intelligence to protect customers at scale while reducing operational burden. In the first half, our system stopped 5.3 million fraudulent attempts and reduced manual fraud reviews by 40%. We are also reducing operational complexity for our customers through the BILL Assistant agent. This agent provides customers with real-time automated support. Prior to its introduction, 13% of customer contacts were self-serve. For customers enabled with this new agent, self-serve rates have more than tripled and now represent 40% of customer contacts. We have unique capabilities to advance agentic Finance. We are embedded in the financial operations of nearly 0.5 million businesses. Our models are trained on insights from more than $1 trillion in payment volume and billions of processed documents. Our network gives us unmatched visibility into vendor behavior, transaction patterns, and operational risk protection across millions of workflows. This combination of these assets positions us to significantly amplify time savings and efficiency gains for our customers. We're seeing strong early momentum. And as we continue to launch more agents, we believe the impact will compound from saving weeks and months of work to creating the capacity of entire finance teams. We're redefining how financial operations scale, enabling SMBs to expand capability and capacity without adding costs. This is the future we are building. So every small to medium-sized business, regardless of size, can operate with the power of a full finance organization. BILL holds a leading highly advantaged position in a large and growing market. We built a deeply differentiated platform at scale, powered by proprietary data, established and expanding partnerships, and mission-critical workflows that are difficult to replicate. We are simplifying the financial lives of businesses in a meaningful way. And as a result, we are capturing the economic returns of our differentiation. We are very excited about our future. We are executing and delivering against our commitments while proving the durability of our model. And with that, I'll turn it over to John.

Thanks, Rene. Q2 results exceeded our expectations with strong execution, operational leverage, and improving volume trends across our platform, all having a positive impact on performance. As a reminder, we outlined 3 strategic priorities for this fiscal year on our Q4 earnings call last August. They are drive growth from our integrated platform, expand and penetrate our addressable market, and innovate with AI to create incremental value for customers and productivity for employees. We are making good progress against these strategic priorities. In Q2, we delivered accelerated growth from our integrated platform, most notably in the transaction revenue stream. We are providing highly differentiated payment offerings that customers and their suppliers are adopting. Here's one great example: Customers are leveraging our BILL Divvy card as an alternative to ACH and checks to make traditional AP payments, and the adoption is growing rapidly. In Q2, volume for these AP card payments grew more than 160% year-over-year. The reason behind such strong growth is simple. AP customers are realizing more value from this integrated solution, including improved efficiency, enhanced reporting, and better economics. This offering is also adding to our overall card portfolio growth. In addition, we continue driving awareness and adoption of Supplier Payments Plus, or SPP, from the largest suppliers in our network. Since its introduction 2 quarters ago, early adopting suppliers have committed to approximately $400 million in annual TPV. Several of these suppliers are multibillion-dollar revenue enterprises, such as a Fortune 500 company that provides workplace and safety products and services as well as one of the largest waste management companies in North America. These enterprises adopted our SPP solution for one key reason: We enable automation at scale. Our large AP footprint gives suppliers a single connection into their SMB customer base, and SPP provides a secure, trusted and efficient payment receiving experience. We expect SPP volume to be an excellent complement to virtual card payments and also address a significant portion of our ACH volume over the intermediate term. Turning to our second priority, expanding and penetrating our addressable market. On the AP side, we scaled our multi-entity capability, so larger businesses can efficiently onboard and manage hundreds of subsidiaries within a single Bill environment. We also saw encouraging signals of improving core ARPU among the most recent cohorts within our direct channel, which reflects our increased focus on larger businesses. As we continue to innovate and create more value from our integrated platform for customers, we are also implementing measures to better align pricing with the value our AP customers realize. As a recent example, we have implemented targeted subscription price increases for new and existing direct channel customers. On the Spend & Expense side, we're balancing market penetration with focus on customer unit economics. Our go-to-market execution drove consistent customer acquisition velocity and yielded a record high card spend per business of $148,000 in the second quarter. We believe the differentiated experience of our Spend & Expense software solution positions us well to win in our targeted segment. For example, we consistently hear positive customer feedback on the depth and flexibility of our 2-way sync capability, our strong controls to manage cards and types of transactions, and the ability to track and categorize expenses. Moving on to our partner channels. We believe our established accounting firm channel and emerging Embed 2.0 channel are highly complementary to our direct go-to-market strategy. Today, we partner with more than 9,500 accounting firms, which collectively drive a material number of our quarterly AP/AR net adds. As we provide an expanded set of solutions to accountants, we believe together we can further unlock market adoption. On our Embed 2.0 channel, we're pleased the solution is live and available to customers for all 3 of our newly signed partners. Over time, we expect this channel to meaningfully expand our distribution footprint and enhance our overall Embed monetization through an ad valorem payment option. To illustrate, one of these partners has recently activated both virtual card and instant transfer payment methods. Over the next several quarters, we are focusing on enabling and scaling these partnerships. Turning to our third priority, innovate with AI. In addition to customer-facing agents, we are investing and deploying agentic capabilities to improve internal efficiency. We recently introduced a pay-for-you agent, which autonomously executes card payments based on each supplier's preferences. This is streamlining what was previously a multistep human workflow into a single agent-driven process. In transactions where the agent has been deployed, we are already seeing significantly lower per-transaction costs. We believe this agent will also enable payments beyond cards, leading to a higher adoption of our ad valorem portfolio over time. In summary, we delivered a very strong quarter. We're concentrating our investments on the priorities that will meaningfully improve outcomes for our customers and drive durable value for BILL. With clear strategic focus and strong execution, we're well-positioned to deliver the next phase of profitable growth and expand the opportunity ahead. I'll now hand the call over to Rohini to provide details on our financial performance.

Thanks, John. We are pleased with our business momentum in Q2. These results mark another step forward in growing BILL into a larger, more profitable enterprise. In Q2, we delivered $375 million in core revenue, growing 17% year-over-year, exceeding the top end of our guidance range. This represents an acceleration of 370 basis points sequentially, driven by broad-based strength across the business. Non-GAAP operating margin was 18%, expanding both sequentially and year-over-year. The efficiency initiatives we identified this year are yielding results. Let me share some key highlights of our Q2 performance. Within our integrated platform, growth in both Bill AP/AR and Spend & Expense accelerated in Q2. AP/AR core revenue grew 11% year-over-year. In Q2, we added approximately 4,000 net new customers. We expect this number to trend down slightly in the short term as we enhance our focus on larger customers and take steps to better align pricing with the value we deliver. Early indicators of these actions are positive as subscription ARPU grew 1% sequentially. AP/AR transaction revenue was $128 million, up 14% year-over-year. TPV per customer increased modestly, which was ahead of our expectations. TPV on the same-store sales basis grew 4% year-over-year, above the Q1 level. We saw continued spend strength in manufacturing and an uptick in construction, reversing the trend in recent quarters. Transaction monetization increased 0.4 basis points year-over-year. Spending expense revenue totaled $166 million in Q2, representing 24% year-over-year growth. The revenue upside was primarily driven by accelerated card volume growth and better-than-expected take rate. Card payment volume increased 25% year-over-year, driven by meaningful spend uptick in advertising, retail, and healthcare services industries. Take rate was 255 basis points, driven by volume and higher interchange verticals such as advertising and healthcare services. Rewards rate as a percentage of payment volume was 133 basis points, up 9 basis points compared to Q2 '25. As the initiatives to optimize rewards started to kick in, we saw the rate of increase moderating this quarter. We have updated our go-to-market incentive plan to better align rewards programs with our unit economics. Additionally, we are evaluating the contribution margin across the portfolio at the spending business level, making deliberate trade-offs as appropriate. Moving on to profitability. Non-GAAP operating margin, excluding the benefit of float, expanded 70 basis points sequentially and 290 basis points year-over-year. This margin expansion reflects our ongoing focus on driving operating efficiencies. Turning to the balance sheet. We remain well capitalized to fund strategic investments while returning value to shareholders. During the quarter, we repurchased $133 million of stock as we pursue a disciplined approach to share repurchases. Now turning to guidance. As always, we would like to provide a few assumptions upfront that underpin our guidance. First, on the AP/AR side, we are now assuming modest growth in payment volume per customer in fiscal '26. We are reiterating our previous expectation for take rate to increase from the Q2 level in the second half of fiscal '26. For the year, we are reiterating a 0.4 basis points expansion. Second, on Spend & Expense, we now expect card payment volume to grow in the low 20% range year-over-year. We continue to expect the take rates to be slightly above 250 basis points for the year. For fiscal Q3 '26, we expect total revenue to be in the range of $397.5 million to $407.5 million and core revenue to be in the range of $364.5 million to $374.5 million, reflecting 14% to 17% year-over-year growth. On the bottom line for Q3, we expect to report non-GAAP operating income in the range of $62.5 million to $67.5 million. We expect non-GAAP net income in the range of $60.5 million to $64.5 million and non-GAAP EPS to be between $0.53 and $0.57. Shifting to full-year guidance. For fiscal '26, we now expect core revenue to be in the range of $1.490 billion to $1.510 billion, reflecting 15% to 16% growth year-over-year. This is approximately 170 basis points higher than our previous guide. We expect float revenue of $141.5 million, an increase of $7.5 million compared to prior guidance driven by higher expected yields on funds held for customers. We now expect total revenue to be in the range of $1.631 billion to $1.651 billion. Turning to the bottom line, we expect non-GAAP operating income in the range of $274.0 million to $286.5 million. This represents a non-GAAP operating margin of approximately 17%. Our updated operating income guidance implies a year-over-year margin expansion of more than 320 basis points, excluding the benefit of float. Relative to our initial fiscal '26 guidance, this updated outlook reflects more than 130 basis points of additional margin improvement. We expect non-GAAP net income in the range of $267.5 million to $277.5 million and non-GAAP EPS to be between $2.33 and $2.41. For fiscal '26, we now expect stock-based compensation expenses to be approximately $255 million, below our previous guidance as we diligently manage the use of equity to attract and retain talent. In closing, we accelerated core revenue growth and strengthened our margin profile, proving that our disciplined investment approach and improved execution are delivering tangible results. We are extending our differentiation across mission-critical financial operation solutions. This will enable us to both price to value and deepen customer relationships. The breadth of our platform and scale of our payments network reinforce our position as a trusted long-term partner, and we are highly confident in our strategy to extend BILL's category leadership and deliver an attractive financial profile. And now we'll open up the call for Q&A.

Our first question comes from Chris Quintero with Morgan Stanley.

Congrats on a solid quarter here. I wanted to ask the main question I think all of us have been getting from investors recently is how at risk is BILL from AI disruption from your perspective, at a very high level, what is your competitive moat? And how is that defensible against AI startups?

Thank you, Chris, for the question. It's always good to talk to you. Happy to talk about this. I think it's a little bit overplayed out there. The impact of AI and software really comes down to it's just another tool to accelerate the democratization of software development. I've been building financial software for SMBs now for over 35 years. And every evolving language, if you will, has just made more and more people able to develop software. And that's been a great thing. That means we have a lot more capabilities for customers today than we had before. When we think about developing solutions to solve real pain points and real problems for our customers, it requires expertise combined with creativity. Our understanding of the problem that SMBs face today is rooted in a deep level of expertise with technology. That foundational understanding of the financial operations underlying the transactions that we drive today for our business positions us uniquely in the market. The deep expertise that we have at BILL actually comes through, obviously, in the fact that we've created a category. Nobody was thinking or talking about financial operations before BILL came along. Now we have this category that we continuously redefine and add agentic capabilities to, and that means that AI can't replace that expertise; instead, it will bring it to life. We have built a unique company. We operate where software means money movement. We've married software and payments seamlessly, automating more B2B payments than anyone else. Our scale in B2B transactions is unmatched and we have an advantaged position that will continue to grow with agentic AI. The 3 differentiating factors are critical for folks to understand. First, I would say there's a large quantum of highly contextual data that we have. Nobody else has done $1 trillion in spend in payments across our network, hundreds of millions of transactions, and over 1 billion documents that we've digested and supported our customers on. This gives us a unique data set to understand customer behavior and to build risk models around how to move money. This is not something that can be easily replicated. It takes time, scale, and growth. The second differentiating factor for BILL is trust. Customers trust BILL. We talk about 9,500-plus accounts across the country that trust BILL to actually build their business on our platform. It's a critical intangible that allows money to move freely and quickly in society. The precision for money movement is 100%, as it has to be, and failure can be catastrophic for an SMB. Our track record of having moved more than $1 trillion speaks for itself. The third area that differentiates us is the network effects. We have a unique set of 8 million entities on our network. No one connects and understands how buyers and suppliers transact better than BILL. Our network enables intelligence to cross an ecosystem, not just within a single business. We'll continue to leverage this to help businesses get done across the ecosystem. To sum it up, our assets are scarce and unique. Our platform is at the intersection of both software and payments, carefully built and owned with expertise. These assets are not easy to replicate and may even be impossible. This will allow us to create significant opportunities with agentic AI, and I am confident in the depth of expertise and vigorous execution we demonstrate, knowing that it will unlock the power of SMBs going forward.

Awesome, super helpful answer there, Rene. Maybe just as a follow-up to that, on the opportunity front with AI, I think your agent strategy is really interesting because it seems to be going after more specific use cases to ultimately just reduce the amount of work that SMBs are doing. I'm curious to get your thoughts on that strategy? Why that's the right one? And what's been the feedback from SMBs?

That's another great question, Chris. What happens when you have a foundational understanding of what drives the business is significant. This business was born out of processing and managing payments in my family and my businesses. This understanding means that we can actually develop capabilities that haven't been thought of before. Agentic AI allows us to dive deeper into the stack of transactional confusion and simplify it. We see an opportunity to create roles that manage different transaction levels that businesses encounter. For instance, we're developing an agent for W-9 collection. Nobody was considering W-9 collection as a need; it involves gathering, entering, storing, and driving at 1099. We've built an agent to do that. Nobody is thinking about the difficulty in invoice coding. That's why we have documents at the source of our platform, starting with our inbox virtual assistant, and now adding our coding agent that can take 90% of the steps out of coding bills. We provide tremendous time savings. Our Bill Assistant agent that we just launched is still in its early stages, but we've gone from a self-serve rate of 13% to over 40%. Customers are getting back to what they love, and getting their questions answered quickly. Everything at BILL revolves around helping businesses get back to work and pursue their passions. Our approach focuses on understanding foundational challenges businesses face, which will differentiate us in the market. We have a lot more to explore, and we are excited about how AI will empower us to tackle these challenges.

Our next question comes from Tien-Tsin Huang with JPMorgan.

Yes, nice to see the growth acceleration and the upside to the guidance. I'm just curious, from an attribution standpoint, what would you assign to this in terms of what did a little bit better? I heard the improving volume. I've been getting questions around how much of that is macro versus the return on the investments you put in?

Sure, I’ll start, and then I’ll have Rohini jump in. The first thing you're seeing is the durability of building a great business. We are constantly focused on actually building solutions for our customers that deliver long-term value. We're also very attuned to how SMBs move through cycles. We see the resilience of SMBs kick in, creating opportunities to drive and grow their business with our platform. The innovation we've been bringing is creating more stickiness and value opportunities. Rohini, would you like to add something?

Yes, absolutely. To add some color, if you have a strong platform, a robust business, and the right product for customers, increases in spend will benefit us. The same-store sales on the AP/AR platform grew 4%, which accelerated from the last quarter. This is really encouraging, especially in foundational industries. We’re seeing strength in manufacturing and construction, which had a positive turnaround. So overall, we see green shoots that imply a combination of execution, product strategy, and the spending environment.

Good. That's encouraging. For my follow-up, I'll ask about Spend & Expense as you mentioned it. I'm thinking about how it is growing at 2x the market. There’s some consolidation in the space and is it truly sustainable? What's preventing faster growth given the shift to larger clients and your large installed base?

Sure. I think we saw reversals of trends this quarter, particularly in advertising and retail. I wouldn’t want to rely solely on those trends just yet and would like to see them play out longer before we fully bake them into our guidance. The range is thoughtful, as we consider all the factors that could impact outcomes.

Our next question is from Nate Svensson with Deutsche Bank.

I wanted to follow up on the AI question regarding pricing. I know you've discussed the targeted actions. But in context of AI and LLMs for writing tools or creating software solutions, do you see risks to pricing algorithms long-term?

Thank you, Nate. First, I'll start off, and then I think Rohini can add some commentary. At the highest level, pricing comes from the value you create for your customers. AI will continue to unlock friction that may prevent more businesses from using our solutions. We believe there are plenty of opportunities to create greater value inside applications that will attract more customers. Additionally, we’re seeing opportunities for new services we can offer. AI will also be a significant ally in driving consolidation of expenses and improving efficiency across the business, enhancing both our top-line and bottom-line. Rohini, do you want to add?

Yes, to reinforce that pricing aligns with the value delivered to customers, presenting growth potential here. About 80% of our revenue comes from transaction-based businesses, and the remaining is subscription-based. The pricing strategy affects subscription-based services. AI features that reduce friction for SMBs give us the advantage to price our premium offerings effectively. The targeted price changes we implemented have shown progress, and we perceive less churn than expected with positive stickiness on the platform.

That was super helpful, I appreciate all the detail there. On invoice financing metrics, customers grew 50%, origination volume over 30%. What verticals or customer groups are seeing product/market fit, and how do you see adoption influencing the P&L moving forward?

Thank you, Nate. Invoice financing leverages our data and network of 8 million entities connected. This service allows them quicker access to funds, substantially impacting cash flow management, and there's considerable demand for it. The repeat usage indicates success, making it crucial for us to maintain momentum. The growth patterns across varying verticals can fluctuate month to month, and while demand is strong, we remain focused on maximizing its rollout. John may want to add more comments here.

The invoice financing product complements our existing offerings, enabling suppliers to be paid quickly, which is vital for upholding cash flow, particularly across smaller suppliers with limited customer bases. This solution holds significant upside for BILL, though we’re approaching it with caution to perfect our underwriting and risk models while ensuring customer experience and favorable economics for BILL as we scale.

Our next question comes from Darrin Peller with Wolfe Research.

About 4 or 5 months ago when different investors got involved, we discussed a strategic process review. I’d like to hear updates on what findings you've had since then regarding revenues, costs or any part of the business.

Thank you, Darrin, for the question. I'll start, then let John address specifics. When you build a durable business, you have various levers to pull. Six months ago, we recognized the need to activate efficiency across the business, a focus that's reflected in our results. We consistently balance growth and profitability by managing the levers we have. While there are more opportunities we can explore, I'm pleased with our progress. John, feel free to elaborate.

Over the first half of this fiscal year, we examined the business from the ground up to identify cost optimization opportunities. We’ve developed focus areas with assistance from external consulting, including geographical diversification, AI-driven productivity, and go-to-market customer economic optimization. We feel we have a robust roadmap ahead, but this will require time and is a multi-year effort; initial benefits are expected to manifest in fiscal '27, with no significant impacts anticipated in fiscal '26 as we plant the seeds for continued improvement.

One more on the move-up market, your view on winning in that space?

We believe we can win due to our unique differentiated platform built squarely around U.S. businesses of all sizes. Larger businesses derive even more value than smaller ones. Our data suggests that our solutions drive more adoption among larger businesses. The opportunity is promising. We’ve seen strong adoption of both our AR and Spending Expense solutions, indicating our platform's strength. John, want to add on metrics?

We've learned that our platform’s depth and sophisticated workflows resonate with established small and lower mid-market customers. This segment represents a significant market opportunity—2 million to 3 million such businesses exist in the U.S. Currently, we've been rolling out new capabilities to support this segment, focusing on multi-entity features, expanded two-way sync, and procurement solutions. As we refine our go-to-market strategy for this larger audience, we expect higher ARPU and increased multiproduct adoption over time. This will take time to show up in the numbers given our customer base size, but we believe it positions us well to win in this slightly larger market segment.

Our next question comes from Scott Berg with Needham & Company.

I want to start with the pricing impact for the core AP/AR solution. What are you seeing around win rates or customer feedback regarding that pricing change?

There are two factors impacting ARPU: customer size and pricing strategies. We're executing on previously discussed plans for transaction and subscription pricing adjustments, which are relatively small in the grand scheme but we're aligning the value we offer and the value BILL realizes. This process will take a bit longer for full optimization, reaching its full impact in fiscal '27, but we have begun.

Those adjustments have been good learning experiences since we haven't revised pricing in almost three years, assessing customer reactions, stickiness, and trends. Our actions align with the plans we outlined earlier and reflect positively in our guidance.

Unclear on the sustainability of spending on the platform, especially with Spend & Expense in response to macro sentiment in recent years. Can you clarify confidence this can continue into the balance of the calendar year?

For sure, a strong quarter in Q2 with trends that feel enduring and continuous. Despite beating our guidance, a portion of that trend should translate into the backend as we cautiously optimistic. Early trends in this quarter support that guidance.

Our next question comes from Andrew Schmidt with Key Corp.

When discussing Embed, how does this growth compare to other channels like direct and accounting?

Just to clarify, revenue numbers at Embed are tied to our original Embed 1.0. The 2.0 is nascent, thus early stages showing variability between banks. The Embed 2.0 initiative has just launched with our new partners, and we're confident in the opportunity and scalability ahead.

Just to add, Embed 2.0 is now live with three new partners. The pace of launch has been rapid, and interest is growing among large and mid-market customers in various sectors. We are excited about this strategic expansion of our ecosystem and market penetration.

Core revenues seem to suggest growing impatient metrics, but what considerations should we ponder while looking at FY '27?

That's correct, the metrics provided will guide you in building models and assumptions for the year.

Our next question comes from Kenneth Suchoski with Autonomous.

Regarding SPP, early adoption has committed $400 million in annual TPV. How should we think about ramping commitments and the impact on monetization rates?

SPP is a critical solution adding depth to our payment portfolio, providing value over traditional ACH payments with lower costs. Early traction is promising, but the sales cycle is longer for larger suppliers. We expect substantial growth as we fine-tune our strategies over coming quarters.

We are now out of time for any further questions, so I'll pass you back over to Rene for any closing comments.

Thank you, Lydia. Okay. Thank you for joining us today. I want to thank our team for their focused execution during the quarter. We delivered accelerated growth and expanded margins, reflecting the strength of our operating model and the compounding advantage of our platform. We believe this positions us well for sustained profitable growth over the long term. Thank you, and hope you have a great evening.

This concludes our call today. Thank you very much for joining. You may now disconnect your lines.