BILL Holdings, Inc. (BILL) Q4 2026 Earnings Call Transcript

Hello, everyone. Thank you for joining us and welcome to Bill's fourth quarter and fiscal year 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Jack Andrews, Vice President, Investor Relations. Jack, please go ahead.

Thank you. Good afternoon, everyone. Welcome to Bill's fiscal fourth quarter 2026 earnings conference call. We issued our earnings press release a short time ago and filed the related Form 8K 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 Lassert, Chairman, CEO, and Founder, and Rohini Jain, CFO. Our remarks today include forward-looking statements about our business, products, and expectations that involve many assumptions, risks, and uncertainties. Actual results could differ materially from those expressed or implied by such statements. On today's call, we will also refer to both GAAP and non-GAAP financial measures. Please refer to our earnings press release and investor presentation posted today and our periodic reports filed with the SEC for additional information about such risks and uncertainties and for reconciliations of non-GAAP measures to GAAP. With that, let me turn the call over to Rene.

Thanks, Jack. Good afternoon, everyone, and thank you for joining us. Q4 was one of the most significant quarters in the history of Bill. We completed the significant organizational changes required to accelerate our transformation to be an AI-native company. We sharpened our view of the highest impact actions that power our growth, and at the same time, we drove good overall business performance in the quarter. Core revenue grew 16% year-over-year, while our non-GAAP operating margin exceeded 23%. With increased activity in the industry, it's clear that Bill's value proposition of an integrated platform continues to resonate with SMBs. I'll first recap the highlights from Q4, then provide an update on our new organizational structure, and then introduce our key priorities for FY2027. As I shared on our last earnings call, innovating with AI represented our top priority during the past fiscal year. We continue to see strong momentum and adoption of our AI capabilities among our customer base. To date, we have had over 175,000 businesses using our agents to improve their financial operations across S&E and AP. The number of organizations using our W9 agents tripled sequentially to over 40,000. As a result, we have collected over 240,000 W9s with zero work from our customers. This agent handles outreach, collection, and validation with the IRS without anyone touching it, eliminating a job nobody wanted in the first place. Next up, Bill's invoice coding agent, which launched in February, has already been used by over 60,000 companies to eliminate around 90 percent of the coding steps for a multi-line invoice. This has generated significant time savings, reducing the processing time across our AP customers by nearly half. In addition, our touchless transactions agent became generally available at the end of April to all of our spend and expense customers. Already, it has automated more than 7 million transaction fields for 30,000 customers. Lastly, our pay-for-e agent became generally available at the end of Q3 and completed over 30,000 card transactions without any human interaction during Q4. These examples are just some of the many AI capabilities we have and are building for customers. Given these successes, we are excited to launch major new AI-powered functionality over the coming months. The value to Bill and its customers from this technology will come from better business outcomes with greater speed, control, and efficiency. AI success is all about this, period. It is easy to drive agent creation and code completion, but it takes great domain expertise to build products that customers never knew they wanted or needed. Our domain expertise and scale is long established. Customers know that we have built our platform to deliver better business outcomes, and that has built a brand trusted by businesses everywhere. We are making these AI investments to extend the significant value creation for SMBs that we are known for. It will help them save more time, maximize financial performance, and leverage AI with confidence. As a result, customers will spend more time on strategic work, catch risks that would otherwise have been missed, and focus on growing their businesses. Our commitment to constantly innovating and delivering software that optimizes and executes the workflows and decisions that run the financial operations for our customers has a real impact. They trust us. Let me share a customer quote from Matthew May, National Accounting Manager Partner at Soarin, a large accounting firm. We handle some of the world's most sensitive data, so our philosophy is always security first. Rather than using generic AI tools, we trust solutions from vetted tech partners like Bill, who've proven their security with our clients' financial information. AI is an enabler, but only with guardrails and the right partnerships, augmenting expertise and trust. When it comes to financial operations, trust is a critical factor in the purchasing decision. That trust is helping our integrated platform gain strong traction among the fastest growing segments of SMB spend, AI-first businesses, technology services, and professional services firms. These firms are scaling quickly and need financial infrastructure that keeps pace. Customer spend on AI through Build grew over 50% year-over-year in Q4, and TPV from our AI-first customers nearly doubled from Q3 to Q4. AI is not only a game-changer for our customers, but it is critical to how we build and operate at scale inside of Build. We are driving more and more internal efficiencies while improving execution across the entire company. One use case is having a direct impact on our financial results. A few quarters ago, we introduced a new AI underwriting model to assist with our invoice financing applications. This new model is built on signals and patterns based on how businesses pay and receive payments within the bill network over time. Relationship-level data allows the model to assess invoice-level risk with the precision, not replicable, from traditional credit bureaus. We are seeing a material impact on our invoice financing business. Both volume and revenue grew approximately 30% year-over-year in FY26, while the expected loss rate has improved by more than 50%. This is a strong illustration of two of Bill's key modes, our massive proprietary data set and our network. As more and more transactions are executed on our platform, our models get smarter, our risk selection improves, and we can extend more credit at better economics for the customer and us. This is a compounding advantage that grows with scale. Next, I'd like to provide an update regarding a number of organizational changes we completed during Q4. Over the last fiscal year, we have been working diligently and intently on structuring Bill for our next phase. We significantly simplified and reduced layers across the entire company. In addition, we moved from a hybrid general manager structure to a functional model. The imperative to become an AI native organization combined with driving speed of execution on the initiatives that drive results across the business is the primary motivation for these changes. We are moving fast, with strong accountability and end-to-end ownership, in order to drive velocity, impact, and growth. Simply stated, we built Bill to achieve what it needs to in the future. During Q4, we made some deliberate leadership changes to support this direction. I was pleased to welcome Jonathan Leith to Bill as our new Chief Revenue Officer. Jonathan has a strong background and track record in scaling revenue organizations to serve lower and mid-market companies. He is responsible for all aspects of our go-to-market organization. In addition, Mike Cherry, who joined Bill last year, has been promoted to Chief Product Officer. He now leads the end-to-end platform experience spanning software solutions, payments, and financial services. This structure reflects how customers use all of Bill's capabilities together across a single integrated platform. Finally, Eric Chan has been appointed Chief Technology Officer. As Bill's founding engineer, former CTO, and Chief Architect, Eric has exceptionally strong knowledge of our technology, the team, the current technology landscape, and operates with the speed this moment requires. We've done the work to assemble the right team, and our focus energized and positioned to win in our market. Entering FY27, we are focused on the following three strategic priorities. Our first and most important priority is to deliver AI-native experiences for our customers. Because this is our top priority, I'd like to spend a moment on what that means for Bill. Achieving an AI-native experience means that AI is so deeply embedded that removing it would make the product no longer work. Our success with over 175,000 customers leveraging AI capabilities is compelling. We are making a strategic pivot to an agentic platform that automates financial operations out of the box by default for nearly half a million customers. We are building new front-end experiences that remove friction so that customers can instantly realized value from ai our knowledge of smb specific pain points and workflows combined with our proprietary data advantage our network of over 9 million members and our robust payments infrastructure creates a powerful foundation to build trusted accurate secure ai solutions specifically aimed at the fortune 5 million our second priority is to acquire higher roi customers one of the key areas of focus here is driving multi-product adoption in q4 the number of joint customers leveraging both of our ap and spend expense solutions grew 35 percent year over year those who were customers both in q4 and a year ago exhibited a net revenue retention of 111 given the success we have seen we have made a change to our go-to-market strategy in fy27 The entire sales team is now trained to sell Bill as a single platform rather than individual components. This is how we will engage with customers and prospects moving forward. Our Embed 2.0 strategy represents an efficient channel opportunity. We believe there's a large market for software companies interested in deploying our embedded finance solutions to support the financial operation needs of their clients. We are gaining traction with our Embed partners. As an example, one of our BED partners' CPV and units more than tripled sequentially from Q3 to Q4. In focusing on higher ROI go-to-market activities, we have made the decision to align our bank channel efforts with Bill's broader embedded strategy. We are investing in scalable, standardized embedded solutions. We need all of our partners to use all of our products and experiences focus here will allow us to leverage one platform across all of our partners versus the multiple versions we support today we do not expect that every existing bank channel relationship will carry forward our third priority is to expand value through bill's platform we aim to achieve this by providing greater value for customers in terms of new product introductions and enhancements this in turn should result in greater value to bill from a monetization perspective. We have a strong track record of introducing new ad valorem payment products over time that have solved specific pain points for our customers while leading to broader monetization opportunities. One example of this is Supplier Payments Plus or SPP. Driving adoption of our SPP offering remains a key area of focus to expand value for both customers and bill. The early progress has not met our initial expectations. The enterprise sales motion required was new to bill in fy26 over the last year we have invested in building out this go-to-market motion and we are now starting to see increased deal momentum and faster implementations our contracts with these large customers lock in new ach monetization and preserve virtual card volume our committed tpv across all of our payment offerings from these early adopted suppliers has reached almost 800 million dollars. Building great products is hard work. It takes vision, execution, listening to customers, and iterating over and over to create a great customer experience. We have been doing that with SPP and the customer response is positive. I'd like to share a case study from one of our early customers describing the value they are deriving from SPP. We recently signed a business services company that is managing over $75 million in annual S&B payment volume through Bill. Prior to adopting SPP, they faced a fragmented receivables operation with hundreds of separate accounts spread across multiple field locations. Half of all incoming payments were invisible to corporate treasury and posted manually with no automation this is a painful way to run a business after deploying bill supplier payments plus the company consolidated 168 accounts into one centralized corporate account in just 10 weeks with zero it involvement and no disruption to customers or field teams the percentage of payment transactions that are processed and settled automatically without any manual intervention jumped from 72% to 98% to 100%. The company has recovered more than 400 hours of manual labor per month, time that is now redirected toward higher-value customer-facing work. The customer summed it up in one word, efficient. AI dramatically expands what is possible, but the requirements of financial operation systems that serve critical functions remain the same. Accuracy, control, and security are paramount. our wealth of proprietary data combined with our infrastructure scale reliability and experience having moved almost two trillion dollars in spend gives bill an advantage in the market that is not easily replicated at scale successfully executing hundreds of millions of transactions for hundreds of thousands of customers gives us invaluable learnings we are uniquely positioned to develop and deliver ai native solutions that are best tailored to address the needs of the customers we serve. A year ago, we set out to do something hard, grow the business, return capital shareholders, and fundamentally reshape how Bill operates, all at the same time. We did that. I couldn't be more proud of the team given the amount of change experienced and the results delivered. The team I have beside me today is smaller, faster, and more aligned. The product we are building is the most compelling it has ever been, and the customers who trust us with their financial operations are telling us it is working. I'm excited and confident in where we are headed, and with that, I'll turn it over to Brighini.

Thanks, Renee. Before getting into the details of our quarterly results, I'd like to make some comments up front regarding how we view the longer-term financial trajectory for Bill. During my first year here, many investor conversations have focused on the importance of providing a financial framework for how we view both growth and margin opportunities over time. There are three key pillars to our framework that I'd like to share now. First, Bill has built a durable business model, and we are well positioned to deliver low double digits to mid-teams or revenue growth with expanding margins over time. Second, we are focused on driving progress towards the Rule of 40. We define this metric as growth in total revenue less rewards plus non-GAAP operating margin. This is a measure we believe better reflects our underlying unit economics and improves comparability to peers. Our actions in FY26 have positioned us to be a rule of 40 company, and we expect to exceed this threshold exiting FY27. Third, Bill is focused on achieving meaningful GAAP profitability in FY27 and expanding from there. Now, let's dive into the financial results for the quarter. In Q4, we delivered $400.5 million in core revenue, growing 16% year-over-year. Non-GAAP operating margin was 23%, expanding 370 basis points sequentially and 860 basis points year-over-year. Non-GAAP net income was $94 million, representing a 22% improvement sequentially and a 53% improvement year-over-year. The large profitability beat this quarter was driven by earlier than planned workforce reduction, timing, and lower fraud and credit losses. Within our integrated platform, we saw double-digit growth in both APAR and spend and expense. APAR core revenue grew 10%, with subscription ARPU increasing by 1.4% year-over-year. Mid-market core ARPU from newly acquired customer cohorts grew 31% year-over-year as we continue to focus on higher-quality customers. In Q4, we added approximately 1,800 net new customers, which is below recent trends. In addition to our decision to deliberately prioritize signing the right customers for Bill, the organizational restructuring impacted this result. We decided to exit salespeople earlier than originally planned in order to familiarize the remaining sales team with their new pipeline and quota opportunities. Under Jonathan's leadership, we have moved quickly to a single-platform selling motion with tighter execution across the team. The early indicators in Q1 are already trending in the right direction, which gives us confidence. APAR transaction revenue was $131 million, up 10% year-over-year. We saw very strong TPV in Q4, exceeding our expectations by approximately 300 basis points. This came mainly from newly acquired larger customers and their ACH volumes. This TPV mix resulted in an APAR take rate of 16.0, which contracted by 0.5 basis points. Normalizing for the large ACH TPV beat, take rate would have been in line with our Q3 guidance. TPV on a same store sales basis grew 6% year-over-year, representing a sequential acceleration of two points and highest since Q1 F by 23. By industry vertical, we saw increased spending in manufacturing, administrative services, information technology, and construction. We saw decreased spending in retail trade and wholesale trade. Customer spend on AI increased over 50% year-over-year in Q4. In spend and expense, Q4 revenue totaled $185 million, up 23% year-over-year. Card payment volume grew 20% year-over-year. Travel, entertainment, and health and services drove that growth, more than offsetting the slight softness in advertising spend. Take rate for the quarter came in at 261 basis points, reflecting a favorable mix of high interchange verticals. Reward rate was 133 basis points, up three basis points sequentially, driven by higher than expected volume in our top rewards tier from a concentrated group of customers. We have renegotiated those commercial contracts moving forward. S&E fraud and credit losses continue to improve over time, driven by AI-enabled enhancements to our fraud platform and underwriting. In Q4, as a percentage of TPV, it improved nearly six basis points sequentially, turning to capital allocation. In the fourth quarter, we repurchased approximately $300 million of stock at an average price of $35.31 per share. We have now retired approximately 15 million shares, representing close to 14% of our common stock outstanding since our Q3 earnings fall. As of today, we have $400 million remaining on our $1 billion repurchase authorization announced in May. Given our confidence in Bill's durable growth profile and free cash flow generation, we expect to execute the remaining authorization within the parameters we have established. Before turning to formal guidance, I want to highlight three factors that are shaping our near-term outlook. First, we are navigating through a lot of change. In our go-to-market organization specifically, we are in our first quarter of a new sales motion under new leadership, unified around a single platform sale. Second, on S&E, we are monitoring a dynamic environment regarding card acceptance that may impact a small number of merchants. Additionally, we are taking proactive commercial actions on certain higher reward tiers and contracts. Third, as Renee noted, we are concentrating our embed channel on new embed 2.0 platform. This means moving away from custom 1.0 solutions we built for a small number of bank partners. This is a deliberate choice to consolidate on a scalable and standardized embedded platform that supports our full product suite. Given these aspects, we believe a measure of prudence is appropriate in our forward outlook i also want to address an accounting presentation change we are making beginning in q1 of fiscal year 2027 we will present revenue net of rewards expense rewards expense will be recognized as a reduction of subscription and transaction fees rather than as a sales and marketing expense this voluntary change better reflects the unit economics of our spend and expense business it will sharpen focus on the right customer segments improve comparability with our peer group, and will help us drive profitable growth. The change has no impact on the operating income or net income. Total revenue and total operating expenses will each be reduced by the same amount. We will begin reporting under this new presentation in Q1. I will now detail our guidance for our first quarter and fiscal year 27. In light of this accounting change, we will guide to our historical presentation of revenue and rewards today. However, beginning with Q1 of Fiscal Year 27, our guidance framework will be presented on a revenue net of rewards basis only. For Fiscal Q1 27, on a historical presentation of revenue basis, we expect total revenue to be in the range of $432.5 to $442.5 million, and core revenue to be in the range of $398 to $408 million, reflecting 11 to 14% year-over-year growth. For fiscal Q1-27, we expect the rewards expense to be $92.5 million, implying a core revenue net of rewards growth rate of 10% to 14%. Here are a few key assumptions that underpin our Q1 revenue guidance. First, on volume, we expect APAR-TPV growth to be in line with FI-26 volume growth. For spend and expense, we are assuming year-over-year volume growth of mid-teens in Q1. Second, turning to monetization, we expect APAR take rate in line with Q4 as we expect higher ACH-TPD growth trends to continue. Moving to spend and expense, we expect the take rate to be approximately 260 basis points. On the bottom line, for Q1, we expect to report non-GAAP operating income in the range of $112.5 to $117.5 million. dollars. We expect non-GAAP EPS to be between 96 cents and one dollar. These EPS figures are based on fully diluted share count assumption of approximately 102 million shares. Turning to full year guidance, for fiscal year 2027, on a historical revenue presentation basis, we expect total revenue in the range of 1.807 billion to 1.857 billion dollars, reflecting 9 to 12 percent year-over-year growth we expect core revenue in the range of 1.669 billion to 1.719 billion dollars reflecting 11 to 14 percent year-over-year growth one modeling point to flag is that q2 fy27 faces our highest prior comparison and we expect this to represent the trough of our growth trajectory for the year our guidance reflects three points of year-over-year growth headwind two points from S&E Dynamics and one point from Bank Channel. For fiscal 27, we expect the rewards expense to be 401.5 million dollars, implying a core revenue net of rewards growth rate of 10 to 14 percent. Turning to bottom line, for fiscal 2027, we expect to report non-GAAP operating income in the range of 421 million to 451 million dollars, which represents a 23 to 24 percent range in non-GAAP operating margin. This implies an ex-float operating margin expansion of approximately 590 basis points at the midpoint. We expect non-GAAP net income in the range of $370.5 million to $394.5 million, and non-GAAP EPS to be between $3.56 to $3.79, representing 33% year-over-year growth. These EPS figures are based on fully diluted share count assumptions of approximately 104 million shares. This accounts for the $600 million share repurchases completed under our $1 billion authorization. As we mentioned, gap profitability is now a key focus area. We expect to generate well over $125 million of gap profits for the full year. Included in this guide is an expectation for stock-based compensation expenses to be approximately $190 million. As a percentage of total revenue, we expect stock-based compensation to represent 10% in fiscal year 27, down from 14% in fiscal year 26. A year ago, we were a company with questions around profitability. Today, that question is answered. We are a leaner organization with a sharper focus. Exiting Q426, we are a Rule of 40 company, driving strong revenue growth and gap profitability. We have made deliberate decisions to trade low-quality revenue for durable, high-quality growth, anchored in AI-led initiatives, stronger unit economics, and a platform our customers trust. FY27 is about executing against that foundation. And now we'll open up the call for Q&A.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. Please pick up your handset when asking a question, and if muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Qianxin Huang with J.P. Morgan. Your line is now opening. Please go ahead.

Thanks a lot. Good afternoon. Good results here. I think I was going to ask on the restructuring charge maybe, and that came in on the higher side. But just to get to that charge, where did everything land versus what we talked about last quarter in terms of headcount reduction, savings run rate, and reinvestments? I know you gave some initial views there.

Where did you land, and what's the assumption and the timeline for realization in fiscal Thank you so much for the question, and let me start by just letting you know the restructuring efforts went exactly as we had planned. So we had given you an initial estimate of about $110 million of gross saving. We came very, very close to that number, so that's good. We had given a range of investments back into the business of about 20 to 30. We are right now anchoring those investments on the number 30. So that puts our net benefit from this at around $80 million.

And then maybe for you, Rene, just thinking big picture here, I heard the go-to-market change and you brought in the CRO as you talked about. Any big learnings worth sharing here from whether it be the employees or the clients that you talk to or your partners, given the reorg? I'd love to hear your thoughts on that.

Thank you, Tianjin. Yeah. It's a great question. I think the way that you're starting to hear us talk and the way that we're executing is really across the platform. We started on day one to build a platform, the platform that makes doing business simple. We started with workflow. We started then adding AP, AR, S&E, but we do so much more than that. And I think, you know, the go-to-market changes that you're referencing and kind of the momentum and energy that we're feeling inside the company is that the platform capabilities we have matter to our customers. They matter to our partners. They matter because that's how you get the most value out of the experience. And so when I look at the last 12 months, we did really, really important work that unified the platform and the organization. They go hand in hand. We've aligned both the products and the go-to-market organizations to specifically sell all of AP and S&E customer experiences. They're now fully integrated across a new modern UI. We are leveraging that customer experience to start selling that platform. You heard me talk about that. And we are seeing results. I mean, 35% growth in the multiproduct adoption is great in the course of the year. And that success has accelerated our change from a go-to-market perspective to really look at the totality of the offering that we have and to make sure that the marketing, the selling, the supporting is thinking about a unified platform approach. The tight organizational changes that we made during the year are both supporting the shift and are in concert with this belief that the platform is the key to driving customer satisfaction and success. You know, and given what we've already seen, you know, the excitement that we have across the impact only increases when we think about the broader platform that we're building. And so, again, when you ask the question, like, what's kind of giving you confidence, momentum, or, you know, energy here, it is really this platform. And just like to step back, you know, we see this really resonating with customers. And it resonates because, you know, financial operations is complex. There's a lot of moving pieces with that. And if you think about a customer doesn't want to have to make a lot of decisions about their financial operations the same way they don't want to have to make the decisions about building their own car. They'd rather buy a fully loaded and finished product. And so we at Bill are the masters at simplifying that complexity behind financial operations. And we are increasingly, increasingly becoming the fully loaded finished product for our customers. So the core products that customers come for, we know that, that's the AP, that's the S&E. But we also know they come for way more than that. They come for all the payment capabilities. And just to give you an example about how the platform just was extended to create more value for our customers in the past year, in the midst of all the restructuring that we've done, we now have SPP, a new product, new platform extension, that really is taking advantage of the multi-sided network that we have with over 9 million connections. close to $400 billion in annual spend and the data that actually allows us to understand what matters to our suppliers and really how to go target those suppliers. That data is what is behind the development of SPP, and nobody else has this data today. And so when we think about the platform play, and again, what's giving me energy, what's giving me confidence, it is seeing that the combined product mindset capabilities that we have in the company and the platform capabilities we have from the shared data capabilities that we have, we're doing stuff that nobody else can do. We have a really interesting opportunity. We see that in invoice financing. You can see from the prepared remarks that we're able to now extend, obviously, into small suppliers to help them get their funds faster. They don't have to wait. We can only do that because of the data graph we have. It's unique. It enables us to make real-time offers based on patterns and documents that we see across the largest B2B payment network that we know of. And simply put, no one else has this capability at this scale today. The third thing I'd like to call out from a platform perspective is more looking forward in how we think about Bill Cash. Again, it's a reminder of how we have built a platform that actually solves the financial complexities that are behind the operations of any business. So payments require speed, they require clarity, and they require a clean audit trail. And Bill Cash delivers that. It's faster same-day payments. We have perfect visibility into every transaction when it's a Bill Cash transaction. No FI has that. No accounting software has that today. And we're in a position to continue to create value for our customers and to really reinforce the trust and confidence that they have in our platform with Bill Cash. Now, it's early days on Bill Cash, and already I think we are seeing strong, good adoption from our early customers. And one of the most important factors that we're seeing in that adoption is that they are moving spend that was offline, spend that was never on the Bill platform before, and it's now becoming online. And so when you combine all the capabilities that we have from a core front end, the front door of AP, S&E, and AR. You add all the payment capabilities and the extensions that we're doing with suppliers and cash management on BuildCash, and the ability for us to now start selling that platform, that's what gets us excited. It's something that we've been building a long time to make happen. And we know that the scale that we have begets scale. And we know that we have got a very large, successful, and profitable business that we can invest from. And we're now 100% aligned, thanks to the restructuring, on how to go make that happen. So a lot of things, you know, that are kind of underneath that go-to-market consolidation, if you will, but it all comes back to the platform. Good.

I can feel the energy, Rene. Thank you.

Your next question comes from the line of Scott Berg with Needham & Company. Your line is open. Please go ahead.

Hi, everyone. Nice order and nice board guide here. He has two questions. And Rene, we'll start off with all the AI usage in the platform. Your adoption rates are impressive, and the real-life use cases are equally impressive in how they're saving your... How do you think about the monetization strategy of your AI efforts so far? And now that you have some, I guess, more concrete usage data and understanding both the existing functionality and the innovation you spoke about in the pipeline coming up.

Thank you, Scott. I think this is obviously a really important part of the strategic direction of the company. The pivot to really becoming AI native gives us lots of opportunities. But the first and foremost thing to think about is that we are sitting on a massive opportunity. There are millions of businesses that need financial operational help, and we are in a position with the platform that we have to go reach them and support them in ways that they never knew was possible. And so the first thing from an AI perspective is going to be building the capabilities to actually drive significant improvement and opportunities around customer retention and adoption in the early stages of their life cycle with us. So one of the ways that you'll see the monetization is that we will be really tracking, hold ourselves accountable to driving better conversion, better retention, if you will, in the first 90 days. But the other thing that you will see us thinking about is the strategic rationale from a pricing perspective. And so the reason I broke these up here is there's obviously customers that matter. And then there's obviously the revenue per customer. And on the revenue per customer, we've been, you know, I would say tactical with some price increases in the last year. But as we roll out these AI capabilities, we're going to really be strategic. And one of the things that we know is that we are going to be inclined to move customers from a per seat basis to really a platform fee, to really understanding the capabilities and the value that we're providing them, as well as a usage consumption fee, if you will. And so those are, I would say, the kind of direction that we're moving towards. Agents will be grouped into different subscription tiers based on the value that they're creating for our customers. And obviously, we will have some consumption based as we roll these out. So a lot of opportunity coming in the future. And obviously, it's predicated on us getting the agents that actually completely simplify the experience for SMBs, move them from a do-it-yourself approach to the do-it-for-me approach. And we think that's the key thing to the AI strategy.

Very helpful, Rene. Thank you. And then from a follow-up, we've modeled this out a couple times, what your operating kind of margin and structure will look like in this post-reduction in force environment. And your rule of 40 is, I think, a great strategy to be achieving here as you get through the year. But where does incremental leverage in the model come from? Because we look at the model X rewards as well. And we think you'll be exiting this year at an already relatively high rate. There's always some additional room to move those margins up over time. But where does that incremental kind of next step come from now that this phase is kind of in the background?

Yeah, thank you for the question.

And the way I think about it, we have done a lot of work in expanding the operating margins over the last year.

I think this was the third year in a row that we doubled our operating margin explode. So we want to continue in expanding the margins. We did a lot of work on labor-related OPEX and some on the other OPEX in the last year. Where the additional opportunities will continue to come from is the AI-led productivity. So we're starting out on that journey. We're starting to see some good examples across our risk teams, across CS teams, across engineering teams. But we would expect to see that mature further and drive additional operating leverage.

Additionally, you know, we're going to really move our focus on revenue growth. We have now really taken a very focused approach to durable and profitable revenue prioritization. And you will, you know, continue to see that happen through the year. And the easiest way to grow margin is to grow revenue, really.

So I think driving the right product structure, making sure that the economics behind the product itself are robust. Those would be our next moves.

Your next question comes from the line of Chris Quintero with Morgan Stanley. Your line is open. Please go ahead.

Hey, Rene. Hey, Rene. Thank you for taking the questions here. I want to ask about the TPV upside, especially on the APAR side in the quarter. Could you maybe just unpack a little bit more of the details around what really surprised you to the upside there, the drivers of that outperformance? You know, we heard from the airlines talking about some travel inflation. So curious if that was any impact. And I think, Renee, you talked about AI spend on bill being up 50% year over year in Q4. So just curious if you can unpack all those drivers you gave for us.

Yeah, absolutely. So as I look at Q4 and the large overperformance on TPV, I would come back to, you know, how strong our ACH product is. it's really best in class and we continue to see usage across ACH continuing to increase our product gets better and better so that's where we saw majority of the uptick from now if you compare that to the verticals where we are seeing upside within our APR platform we are seeing construction the manufacturing side some of these verticals that are very tied to the new AI flywheel that we are seeing and spending. So big ticket items, construction, manufacturing type of verticals doing really well, that's impacting the ACH TV growth as well. Additionally, one very interesting dynamic is now emerging, which is, you know, our mid-market customers have some really large ticket size transactions that come on the platform, which, you know, they have more ACH, they have generally lower take rates than the rest of our portfolio, but they're extremely valuable customers to us because their ARCU is three times more than an average customer at Bell. Their TPB is four times more. So as we continue to grow the mid-market segment of our business, we will see some of this dynamic continue to happen. One thing I would like to highlight is this additional TPB that's flowing through the system is actually giving us good benefit in terms of float over performance. You guys saw in Q4, we'd be float by close to $3 million. And this is not due to the rate fluctuations. It's really because of more TPD flowing through the systems. And I think this is just the flywheel of the product that Rene was talking about as well. We have multiple ways to monetize. Hope that helps.

Yes, very helpful. And then I wanted to follow up on subscription revenue, that line item, the growth rate there has been kind of stuck around this mid-single digit type of range for a few quarters now. And in the past two quarters, you've seen it accelerate up to 11% this quarter. So I'm just curious if you can unpack what are some of the drivers there and considerations around that performance.

Yeah, absolutely. On the specifically recently subscription ARPU side over the last couple of quarters, we did see a sequential uptick, which broke the trend of, you know, flattish trend that we had seen in the past. And that's exciting. It was just showing, you know, we're going up market a little bit. We are, you know, we were doing some tactical changes with the pricing as well. So that was starting to show up as a combination. What we continue to also see from a subscription ARPU side is the biggest number of customer ads that we get continue to be from the accounting channel. There's a mixed element that plays out there where we continue to add a smaller set of customers, add a faster clip, and obviously the bigger customers are fewer in numbers, although much higher in ARPU. So there is a little bit of that dynamic that will play out into the subscription number. Having said that, what we really focus on is the core ARPU or the total ARPU of the customer we are bringing in. And as we rethink strategically what our pricing models and frameworks are going forward based on usage and capacity usage, et cetera, this will continue to be more important. How many customers are we getting in and how are we monetizing them, which is the ARPU. So the core ARPU actually sequentially grew again 3% versus the last quarter, which continues to be a good trend.

Excellent. Appreciate the call, Arayne.

Thank you. Your next question comes from the line of Will Nance with Goldman Sachs. Your line is open. Please go ahead.

Hey, thank you for taking the question. I wanted to follow up on some of the commentary on ACH volumes and maybe tie it back to some of the longer-term thoughts on growth that I think you talked about, Randy, in the preparedness marks. When we think about the longer-term growth rate, I think the guidance this year calls for a relatively flat take rate, I think you said. And you called out some drivers there, ACH volume from larger customers, as well as maybe some changes in virtual card acceptance in the near term. So maybe you can help unpack a little bit over the long term. How do you think about monetization and add the lore mix over time? And, you know, is take rate expansion still part of that algorithm over time? or as you think about pricing and the answer that you just gave, are there other ways to kind of monetize, you know, consumption-based pricing beyond explicitly charging for some of the payment volume? Just curious how that thought process goes along. Thanks.

Yeah, thank you. Thank you for that question. There are a couple of things that you mentioned, and some of them actually are APAR dynamics and some of them S&E dynamics. I'm going to try and unpack them one by one. So we've talked, about S&E from a take rate perspective. We talked about some of the acceptance challenges more from an S&E side. We don't see that on the APR side. And from that perspective, we do have a slight reduction in the volume growth rate on S&E. But on S&E, the take rate range we've given to you in the past is 250 to 260. And we expect the quarter and then going forward to be on the higher end of that range. So that's where the revenue growth from an S&E perspective is going to be modeled. From APAR perspective, our ACH TPV continues to do much better than our expectations, which is kind of an isolated variable. Ad valorem TPV continues to grow at a healthy clip as well, as we are seeing some of our established portfolio items are doing well. And the emerging portfolio continues to add to that growth as well. So I feel good about that. Just the math of the take rate because of the outsized ACH performance is compressing the number a little bit. So as we think about it, I would say a lot of the growth in the APAR will be based on the TPV and monetizing that TPV through multiple ways. And a bigger TPV number monetized at the same rate still gives you the growth. So, flat to slightly update rate from what we were at in Q4 is how I would, you know, guide you.

Got it. That's very helpful. And just on the rewards change, you know, obviously, I think that makes a lot of sense. I thought you said being netted against both subscription and transaction revenue. I'm just wondering if you could clarify that. Does it not all go through transactions? And then just separately, how do you think about breaking that out? Like, do you expect to disclose that separately and talk about the rewards rate going forward? Or do you expect to largely talk about F&E dynamics as a kind of just like a net take rate from here on out?

So just to clarify, the way we'll talk about our revenue will be net of what you see today as gross revenue line minus the rewards dollars number. So that will be our net revenue. We use those words just because it's exactly what we externally report. So more of an accounting thing. So it'll be the net revenue. We will give periodic color to the performance of rewards as well. But, you know, the way I think about rewards, it's a really great incentive and a tool for us to drive the right customers onto the platform. We are not in the business of trying to win on rewards basis only. The business we want to bring to our company is one that's profitable or one we are incentivizing our customer to use many products that, you know, again, align with what Renee had said about the platform approach.

I appreciate the end question.

Your next question comes from the line of Andrew Schmidt with KeyBank Capital Markets. Your line is open. Please go ahead.

Hi, Renee. Hi, Rohini. Thank you for taking the questions. I just want to dig into the FY27 core revenue outlook for a moment. I think it's 11 to 14, just how you're reporting today. But I think you called out two points from S&E Dynamics, one point from the bank channel. And then I think you also, it sounds like you're also baking in some prudence from go-to-market and re-arguable locations. Maybe just, you know, help us understand what's recurring, what's non-recurring, and then sort of level set us in terms of how you think about the ongoing rate of growth for the business over the intermediate term, considering some of these things seem transitory. Thanks so much.

Yeah, I can take that question. So as I think about the S&E business overall, right, there are some short-term dynamics. We have the change in the approach that we are taking, both from net revenue perspective as well as the whole team is now selling all of the products. We don't have a separate S&E sales team and a separate AP sales team. So which means that there is training involved, there's ramping, there's structures changing, incentive changing, all of that. So it takes time to ramp some of that up. its full potential. So those are some of the things that are transitionary. I talked a little bit about the impact of, you know, one of the larger platforms and the card acceptance issues. Again, very concentrated towards, you know, some of the bigger customers. So we'll see some impact from that also transitionary. Over time, we, you know, the net approach should help us get back to, you know, strong growth levels and, you know, drive more profitability in the business than we had in the past. So, some of these dynamics that I talked about are, you know, in a shorter term. And that's why as we opened, as I opened my scripted remarks, I had mentioned that the range in the midterm that we think of is low double digits to mid-teens.

Got it. Thank you for that. we need, very helpful. And then if you just ask a follow-up just on the net new ads on Bill APAR, understanding that there was some disruption intracquarter from the reorg and things like that, just want to clarify what you're seeing. Was there any sort of demand dynamics at play, or do you think it was all sort of self-driven? And then as we think about just FY27, the trajectory for net new ads, it sounds like that's improving even intracquarter. Let me just talk about the expectation in terms of how that should trend, understanding there's a lot of changes going on that are working through. Thank you so much.

Happy to talk about that. So just as a reminder, we have been talking for the last couple of quarters that we have a deliberate focus on the ICP or our ideal customer profile. We want to continue to focus on slightly bigger customers that we have in the past, which then is a trade-off between the number of customers we are getting on the platform and the quality of the customers we're getting. So we had indicated in the last earnings or two that we expect the trend to be not, you know, in line with what we had seen in the past and slightly lower. So we continue to be on that path. Nothing has changed in that regard. What has changed was the material organizational restructuring and the sales motion that we are now getting into. So what I mentioned earlier in my remarks also was that in July, we started to see some green fruits and recovery within the numbers, which we're actually quite pleased about. And as I think about the quarter, I could see us land at the range of 2,500 to 3,000, having made a large part of that recovery towards the number that we want to get to, which would be sort of higher than this range over the remaining part of the year. but this is the ring that I'm expecting for the border.

Got it. That makes a lot of sense. Thank you so much.

You're welcome. Your next question comes from the line of Nate Svensson with Deutsche Bank. Your line is open. Please go ahead.

Hi, thanks for the question. Rene, I wanted to ask about the second key priority you laid out in your prepared remarks of acquiring the higher ROI customers. So, I mean, it sounds like the 35% growth you're seeing in the adoption of APAR and spend and expense is coming before all of these go-to-market changes. So I was hoping you could put some guardrails around kind of how to think about these go-to-market changes and how they can help improve the already strong trajectory of growth that you're seeing today. And then just maybe the second one on that topic is just around the bank channel partners. Could you maybe talk a little bit more about the decision to move away from the small number of those bank partners and then maybe beyond that, the success you're seeing with the incremental 2.0 opportunities that can help offset that?

Okay. Thank you. Thank you, Nate, for the question. Yeah, I think the summary I would say is that, you know, we understood our data and, you know, that's why Rini just mentioned we focused on our larger customers, the larger SMBs that are on the platform, ones with more than 20 payments, for example. And that focus means that, you know, we are, I would say, honing the product offerings for those customers as well as the go-to-market motions for those customers. And what we, you know, one of those honing exercises was to sell the platform that we were so hard to build. And we are seeing, you know, like I said, early success. That success, you know, as, you know, under Jonathan's leadership, we are, you know, positioned now to kind of leverage that success across the entire go-to-market team. And so, you know, positioning ourselves to sell the platform, which you heard me talk about at the beginning, I think is a super important part of how we focus on the higher ROI customers that are in the portfolio and, you know, capable of coming into the business. So our focus is always going to be on delivering great customer experiences and driving value for them and extending that. And that focus also applies to our partners. And so, you know, when we looked at the restructuring work that we did, we knew that we needed to create more focus across the business. It's, you know, paramount. It's imperative. of, you know, you named the word, like it is super critical that we have teams aligned and that we leverage the teams and the resources and the attention in a focused path so that we can execute well. And so that exercise led us to look at, you know, individual, you know, I would say product experiences and our approach, you know, with the bank channel over the last dozen or so years has been more custom than we would like and more custom than we would do today. And that means we have multiple platforms that make it challenging to be able to actually offer all of the capabilities that Bill has for all of their customers. And so our decision was really to lean in on this focus initiative across the company and to say, this is where we're going to invest. This is where we're going to spend time analyzing and working how to drive more results to the And that's the Embed 2.0 platform that actually enables the entire platform, you know, for those customers. And so, you know, we are super excited about, you know, leveraging our platform, you know, into our partners. But we know we got to be disciplined in our approach to how we do that. And so as we, you know, made those decisions, we expect that not all of the banks will be able to make it.

Just for a follow-up, I wanted to ask on SPP. I think in the prepared remarks, you said the initial rollout hadn't quite met your expectations. Some of that related to the different enterprise sales motion. So maybe you could talk more about some of the roadblocks you ran into and how you think the recent changes in go-to-market are going to help improve the trajectory for SPP in fiscal 27 and beyond. And I think you also mentioned that the contracts are going to preserve virtual card volumes. I was hoping for more color on kind of what specifically is in those contracts that will allow you to maintain virtual card volume while adding the sort of incremental ACH volumes on top of that.

Yeah, I think probably the most important thing in any customer offering is to get the customer experience right. And so we have spent a lot of time talking with suppliers, analyzing the data, like I mentioned about, you know, our platform, the data we have is unique and understanding the payments and the flows and understanding how we can make their experiences better. The case study I gave somebody with, you know, hundreds of accounts across bill going down to one with no IT involvement, that's actually because of great product work. And so I think from a go-to-market perspective, having the right product is important and that's part of the go-to-market, but then also having the right, you know, sales motion and enterprise sales is different than what we've ever done before. I think we knew that. And I think the learning here is, you know, that it just sometimes takes a little bit more time than you would like. But I feel, you know, very good about what we've learned and the opportunity to kind of extend that. If you look at the number we called out there, $800 million under contract from a TPP perspective, that strong growth from the last time that we, you know, talked about this. And really to your question around the virtual card, the under contract is important. These suppliers have received payments across all of our payment modalities. And so having an experience for them that is consistent is important. And it's also important for us that if the customer wants to use a card, that that card goes through as an example. And so that commitment is an important part of the conversations we have with these suppliers. And it's something that we'll continue to work with them to make sure they're getting the value that they need out of those experiences.

Thanks, Renée.

Your final question comes from the line of Ken Suchoski with Autonomous Research. Your line is open. Please go ahead.

Hey, good afternoon. Thanks for taking the question. I was just wondering if you can give us some more color on the dynamic you mentioned regarding the spend and expense card acceptance that's impacting volume growth. is that just acceptance by the large ad providers like meta and google and i guess do we have four quarters of slightly slower growth and then we're sort of ticking back higher uh once we lap that dynamic um any thoughts there would be great thank you yeah that's uh what we're referring to on the sma side i talked about just to clarify a little bit more we talked about two points of uh had been coming from that piece of the business and this is just a part of it there

There's other dynamics of us moving from gross to net and leading on the table some of the less profitable volume, et cetera, that is playing game and a bigger part of that. That's exactly right. And then, you know, here we would laugh that as it goes through. And the rollout is slow and it's quite concentrated into smaller, small number of customers that have large volume. But if you look at the same impact on a net basis, it will be much smaller because they're also the higher reward customers.

Okay, that makes sense. And maybe just for my follow-up, I think you're expecting to exceed the rule of 40 threshold exiting fiscal year 27. I think if our math is right, we're at the rule of 35 in fiscal 1Q based off of your guidance. So just curious, how do we get to something above that rule of 40 threshold exiting fiscal year 27? Is it mostly on the adjusted EBIT side, or could we see core revenue growth accelerate throughout the rest of the year and into next year?

So in my prepared remarks up front, I actually defined our Rule of 40, and the definition we use is in line with how we will report revenue going forward. So it is the net revenue growth percentage along with the total operating margin of the company. So if you add those two, we were at a rule of 40 math-wise in Q4. And, you know, there will be in-quarter fluctuations, but we will exit FY27, exceeding the 40 number.

Okay. All right. Thank you very much.

You're welcome. We have reached the end of the Q&A session. I will now turn the call back to Renee Lacerde, Chairman, CEO, and Founder, for closing remarks.

Thank you, everyone, for joining. FY26 was a pivotal year for Bill. We accomplished a lot, restructuring the company, executing a significant share buyback, and we are well positioned to drive profitable growth leveraging our platform and AI. All of us at Bill are super excited about the future and look forward to continuing to update you on our progress as we go forward.

This concludes today's call. Thank you for attending. You may now disconnect.