Bill.com Holdings, Inc. (BILL) Q4 2021 Earnings Report, Transcript and Summary

Good afternoon and welcome to Bill.com Fourth Quarter of Fiscal 2021 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to Karen Sansot, Vice President of Investor Relations for introductory remarks. Karen?

Thank you, operator. Welcome to Bill.com's Fiscal Fourth Quarter and Full Year 2021 Earnings Conference Call. We issued our earnings press release a short time ago and furnished the related Form 8-K to the SEC. The press release can be found on the Investor Relations section of our website at investor.bill.com. With me on the call today is; René Lacerte, Chairman CEO and Founder of Bill.com; and John Rettig, Executive Vice President and CFO. We are also joined by Blake Murray, CEO and Co-Founder of Divvy. Before we begin, please remember that during the course of this call we may make forward-looking statements about the operations and future results of Bill.com that involve many assumptions risks and uncertainties. If any of these risks or uncertainties develop or if any of the assumptions prove incorrect actual results could differ materially from those expressed or implied by our forward-looking statements. For a discussion of the risk factors associated with our forward-looking statements please refer to the text in the company's press release issued today and to our periodic reports filed with the SEC including our most recent annual report on Form 10-K and quarterly report on Form 10-Q filed with the SEC and available on the Investor Relations section of our website. 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. The non-revenue financial figures discussed today are non-GAAP unless stated that the measure is a GAAP number. Please refer to today's press release for the reconciliation of GAAP to non-GAAP financial performance and additional disclosures regarding these measures. In addition, our acquisition of Divvy closed on June 1 and therefore our reported fiscal fourth quarter results include one month of Divvy's results. At times during this call we will discuss organic or stand-alone results which exclude Divvy to help listeners understand our organic performance. Now I'll turn the call over to René. René? René Lacerte: Thank you, Karen. Good afternoon everyone. Thank you for joining us today. I hope that all of you and your families are in good health doing well and have been able to enjoy reconnecting with family and friends this summer. I'm incredibly proud of our accomplishments this past fiscal year. We helped SMBs across the country digitally transform their financial operations and adapt quickly to the remote work environment brought on by the pandemic. With our powerful platform our customers and network members we're able to simplify and automate their operations get paid faster and better manage their cash flow. We expanded our footprint enhancing our go-to-market capabilities. We also acquired Divvy a leader in spend management to help businesses better control their spend to budgeting tools expense management software and smart corporate cards. In fiscal 2021 Bill.com helped more than 120000 customers and 3.2 million network members automate their financial operations and made it even easier for them to connect and do business. In the fourth quarter our customers completed $42 billion in TPV on our platform reflecting an annualized run rate of nearly $170 billion. Our customers and network members increasingly adopted our e-payment offerings which enabled them to get paid faster and make payments more conveniently. By helping our customers and network members succeed, we were able to drive strong revenue growth. In the fourth quarter our organic core revenue growth was 73% year-over-year. And for the full fiscal year organic core revenue growth was 63%. Our revenue trajectory accelerated during the year with strong adoption of our platform among small and midsized and mid-market firms. Increasingly businesses are turning to Bill.com as the mission-critical platform that runs their back-office financial operations. Over the last several quarters we have discussed our strategy to enhance our platform with innovative payment solutions expand our go-to-market ecosystem and enter adjacent categories. Exceeding in each of these areas brings us closer to realizing our vision of being the one-stop shop for SMBs to manage their financial operations. In fiscal 2021, we enhanced our e-payment selection by further strengthening our virtual card cross-border and instant transfer offerings. We drove adoption of these e-payment offerings across our customers and network members through in-product marketing, seamless user experiences and supplier enablement initiatives. As a result, e-payments in our organic business represented 55% of our total number of transactions in the fourth quarter compared to 59% a year ago. Continuous innovation on payment offerings is core to our vision and has enabled us to continue to deliver more and more value to our customers. This past year, we also expanded our diverse go-to-market ecosystem with additional strategic partnerships. We now have relationships with six of the top 10 financial institutions in the US and serve 85 of the top 100 accounting firms in the country. In the bank channel, we launched with Wells Fargo and KeyBanc. In the accounting channel, we expanded our offering into wealth management, made it easier for accounting firms to onboard customers faster and recently signed KPMG Spark as a strategic partner, joining PricewaterhouseCoopers' InsightsOfficer as our second top four accounting firm. Early in fiscal 2021, we began our inorganic growth journey by identifying growth and product priorities, while concurrently building our M&A muscle so that we can efficiently identify purchase and integrate acquired companies. Having these foundational elements in place allowed us to identify, perform diligence and close Divvy, our first acquisition within the fiscal year. Divvy has built a sophisticated software solution that combines budgeting and expense management tools with smart corporate cards. Our customers have been asking for this type of solution, and Divvy's spending businesses have also been asking for a bill pay solution. We've been working with the Divvy team for about 90 days now and our belief in the team and the vision of what we can build together only gets stronger. When we are fully integrated, we will provide SMBs with one solution on one platform for all of their B2B spend. I'll now turn the call over to Blake Murray, Divvy's Co-Founder and CEO to share more about Divvy.

Thank you René. On behalf of the entire Divvy team, I'd like to say how excited we are to be a part of Bill.com. Now that we've had a chance to get under the hood of each other's businesses, we're more excited than ever about what we can do for SMBs. Since the close, we've been developing our joint product road map and the integration plan, enabling our sales teams to cross-sell our solution and training our customer support teams to seamlessly help shared users of Bill.com and Divvy. Our teams, SMBs and strategic partners have been very excited about what our combined solution can do for them. We have talked to many longtime Bill.com customers, who expressed excitement about rolling out Divvy. For example, Nicolette Borlaug Masiya, Marketing Director at TurnoverBnB said, we love Divvy, because it allows us to give our team autonomy without too much risk due to each cards defined spending limits. Divvy takes the guesswork out of expense management, no longer sifting through monthly expense reports and submitted receipts. As our geographically dispersed team has grown to over 50 employees, Divvy's virtual cards have provided us with the expense management solution we are looking for. Another example is from Hunter Thompson, Head of Operations at Golden Ratio who told us, Bill.com sold me on the ability to pre-schedule invoices with contractors, vendors and suppliers. With Divvy, I have the ability to control credit limits at the individual level and monitor spending on a dime without banks or mistakes. A key benefit of both products is our ability to have a controlled budget in one place. The result? It saves room in my head and leaves more time for compliance time lines and production schedules. Less falls through the cracks when I can plan ahead. We also recently spoke with many partners who share our vision and excitement. Dan Luthi, COO of Ignite Spot Accounting Services said and I quote "Bringing Bill.com and Divvy together can create an enormous foundation for our customers. Businesses will fully manage their complete expenses, payables and cash outflow in one single system. I love that Bill.com is so simple to use by customers that are not tech savvy. Customers are always looking for super simple value-added tools to help them take the technological leap. Divvy creates the same benefit for expense controls without the client having to know anything about tech or finance. The simplicity is what makes these tools so wonderful." Already our teams have been working side by side to share go-to-market best practices and leverage our combined R&D expertise across the entire organization. We're setting our sights on how we can cross-sell to our installed bases most effectively as well as how joining forces opens up additional opportunities for new customer acquisition. Our combined team is excited to achieve our vision faster to become the default financial operations platform for SMBs. We can deliver innovation in platform payments and adjacencies faster and better together. We're excited that by joining Bill.com, we can provide an even more delightful experience and create more value for the businesses that we serve. I'll now turn the call back to René. René Lacerte: Thank you, Blake. We're excited to have you and the team as part of Bill.com. Together we will accelerate the value we can create for millions of SMBs. In addition to spend management, given the growth in our network, AR represents a large opportunity and has been underrepresented on our platform. Over the last year, we've been evaluating how best to accelerate value creation for our customers. In July, we announced our plans to acquire Invoice2go, a leading mobile-first accounts receivable solution used by more than 225,000 small businesses including sole proprietors and freelancers in the US, Australia, Canada the UK and more than 150 other countries. Invoice2go enables small businesses to develop bid proposals, send invoices and get paid instantly. whether in the office or on the go. They've also built tools to promote engagement with their customers and generate more business, such as reminders, messaging and reviews. We think of it as a mobile-first solution that empowers users to have their business operations in their back pocket. Many of Invoice2go's customers are service-based businesses, such as plumbers, electricians and contractors. The services economy is still in early stages when it comes to digital transformation and the shift to online and mobile payments. Invoice2go and Bill.com are jointly in position to capture share of this large market opportunity. Unlike physical product and brick-and-mortar businesses, many service-based SMBs still require paper checks for payments. But this is quickly changing. Businesses are realizing they need to digitally transform to save time on financial operations, manage their receivables and get paid faster. I followed and respected Invoice2go for years. Like Bill.com, they are a customer-focused, software-led company that makes it easy to connect and do business. The team is passionate about helping small businesses grow, thrive and transact. The acquisition of Invoice2go will bring a talented 100-person team with deep accounts receivable, payments and e-commerce experience. Together, we can more quickly advance our AR offering and accelerate our innovation agenda for small businesses globally. We see unique value in having strong AP and AR solutions on one platform, which will enable customers to have visibility into payments coming and going, providing more control in managing their cash flows. Invoice2go will also give us a footprint for talent and customers beyond the US. They have teams in San Francisco and Sydney, Australia. About 50% of their customers are outside of the US, with the majority being in English-speaking countries. With their international teams and products, we've taken an important step on our journey to expand internationally. There are more than 20 million small businesses globally and millions more sole providers in the markets that Invoice2go serve. In addition, this acquisition opens up significant opportunities for us to transition businesses to electronic payments on our platform. We believe that we can capture a meaningful share of those payments, given our value proposition and the need for businesses to digitize and automate their financial operations. All of us are excited about the value we can create together for millions of small businesses and we look forward to welcoming the Invoice2go team when the acquisition closes. As we head into fiscal 2022, our top priority is integrating and leveraging Divvy and Invoice2go, once the transaction closes. These acquisitions are integral to our vision to be the leading one-stop solution that can help millions of businesses around the world manage their financial operations. In 2022, we will expand our innovative payment offerings, enhance the user experience on our platform and drive monetization of our products and extend our reach. Over the next 12 months, we intend to leverage our leadership position serving SMBs to extend our capabilities to the smallest of businesses. At the same time, we will continue to build additional features and partnerships for the mid-market. We also look forward to the launch of our platform with a small business market of one of the top three banks in the US and are happy to report that we have moved into the testing phase. And as always, we continue working with our current institute partners to enhance their offerings with our expanding platform. In closing, we had a terrific year and have great momentum heading into the new fiscal year. Our continued success is only possible because of the efforts of our 1,400 employees. I'm extremely grateful for the team's dedication to each other and to our customers. All of us here at Bill.com are energized by and look forward to what we are doing to help SMBs transform and grow. Thank you for your support and being with us on the journey. Now, I'll turn the call over to John to review our financials. John?

Thanks, René. Today I'll provide an overview of our fiscal fourth quarter financial results and discuss our outlook for the fiscal first quarter and full year 2022. I'll also review our results and expectations with regard to the Divvy acquisition. As a reminder, today's discussion includes non-GAAP financial measures. Please refer to the tables in our earnings press release for a reconciliation from non-GAAP to the most directly comparable GAAP financial measure. In addition, the Divvy acquisition closed on June 1, and therefore our reported fiscal fourth quarter results include one month of Divvy. Also related to the acquisition, on August 16, we filed an amended Form 8-K with Divvy's stand-alone historical GAAP financials along with pro forma financials for the combined company as of June 2020 and March 2021. Before we discuss our reported financial results, I'll provide an overview of our stand-alone or organic results for the fiscal fourth quarter, excluding Divvy as the guidance that we provided in May was without Divvy. I'll also provide an update on our key metrics. We delivered strong fourth quarter organic financial results with revenue, non-GAAP gross margin and non-GAAP loss per share all well ahead of our expectations. Total revenue for Q4 was $67.9 million and core revenue was $67.2 million. Our core revenue growth in Q4 accelerated to 73% year-over-year driven by 32% growth in subscription fees and 137% growth in transaction fees. Our strong transaction revenue growth was mainly the result of a step-up in TPV growth combined with the ongoing mix shift towards our ad valorem payment products. The core revenue performance demonstrates that our customers are leveraging the platform to automate more of their financial operations. We're very pleased with the progress we're making investing in new platform features, innovating with payments and enhancing our go-to-market capabilities. Our continued focus on operational rigor and solid execution drove our strong results. We also benefited from a strong demand environment, as businesses increasingly prioritize digitally transforming their financial operations. Turning to an update on our key metrics. Note that these figures reflect our organic business excluding Divvy. We ended the quarter with 121,200 customers, representing growth of 24% year-over-year. During the quarter we added 5,600 net new customers, which once again exceeded our expectations as we experienced strong demand across our channels. In addition to strong customer acquisition in recent quarters, we've also seen success improving our customer retention. Excluding customers from our financial institution partners, our annual customer retention rate increased to 85% as of the end of Q4, up from 82% in June of 2020. We've experienced expansion and retention throughout the pandemic and we're also seeing newer customer cohorts with higher retention rates. Bill.com is core to helping SMBs efficiently manage their financial operations and our value proposition resonated well over the last year, as remote and hybrid work environments became the norm. In addition to our growing customer base, we have developed a large network of members who receive or make electronic payments through our platform. As of the end of Q4, we had over 3.2 million network members, an increase of 28% year-over-year from the 2.5 million members we reported at the end of Q4 last year. Network members provide a significant opportunity for e-payment adoption, Bill.com brand awareness and future customer acquisition. As a result, our network creates a virtual flywheel for us to drive additional adoption. Another important metric is our net dollar-based revenue retention rate. As of Q4 2021, our revenue retention rate was 124%, an increase from 121% as of fiscal Q4 2020. This improvement was driven primarily by the increased adoption of variable price transaction products including cross-border FX and virtual card payments as well as the positive customer retention trends I mentioned earlier. Looking at total payment volume for the quarter, we processed $41.7 billion in TPV, an increase of 64% year-over-year and 19% sequentially. We processed over 8.2 million payment transactions during Q4, up 46% from Q4 of last year and an increase of 14% from Q3, as we generally saw customers across all segments increasing their level of activity on our platform. During fiscal 2021, we made substantial progress driving adoption of our variable price payment products. In Q4, cross-border payments represented 4.1% of our TPV. For the full year ending in June, we delivered over $5.4 billion in TPV to international suppliers on behalf of our US customers, more than double the $2.3 billion we delivered in fiscal 2020. We saw a significant increase in both US dollar and FX payment volume. Cross-border foreign currency TPV represented approximately 25% of cross-border volume, similar to our historical trends. Our virtual card payment volume for Q4 was approximately 2.2% of our total TPV and virtual card TPV in fiscal 2021 grew more than 300% from fiscal 2020. We have had ongoing success driving adoption from our supplier enablement investments combined with the value proposition of virtual card payments increasingly resonating with suppliers. We continue to have favorable customer acquisition economics and this guides many of our investment decisions. Our efficient direct and indirect go-to-market strategy combined with our predictable recurring revenue model and strong revenue retention results in a short payback period. This is the metric we primarily use to measure our customer acquisition capital efficiency. For customers acquired during fiscal 2020, the average payback period was approximately five quarters, consistent with our historical performance. Now, I'll review our reported Q4 financial performance which includes Divvy for the month of June 2021. Total revenue for Q4 was $78.3 million, an increase of 86% over Q4 2020. Core revenue which represents subscription and transaction fees was $77.5 million in Q4, up 100% year-over-year. Subscription revenue increased to $31.2 million, up 32% from Q4 2020, driven by an increase in the number of Bill.com customers and expansion in the average subscription revenue per customer. Transaction revenue increased to $46.3 million in Q4, growth of 204% year-over-year driven mainly by increased adoption of ad valorem payments, strong TPV, and Divvy's interchange revenue in June. Note that the vast majority of revenue from Divvy is transaction-based with minimal subscription fee revenue. Moving on to float revenue. We generated $800,000 in float revenue in Q4 and our annualized rate of return on customer funds held in Q4 was approximately 15 basis points. Turning to gross margin and our operating results for Q4, our non-GAAP gross margin for the quarter was 79.7%, up from 76.9% last quarter as our organic margin improved and Divvy generated a higher non-GAAP gross margin than Bill.com on a standalone basis. I'll provide more context on Divvy's business model in a few minutes. Operating expenses for Q4 were $68.6 million an increase of $20.5 million from Q3. We continue to invest in R&D to improve our platform and build integrations with financial institutions. R&D also includes technology and product activities associated with the Divvy integration. We increased sales and marketing expenses by $9.1 million over last quarter, mainly due to increased customer acquisition and card rewards expense associated with Divvy. We will continue to invest here as we are encouraged by the early results at expanding our market penetration. Regarding G&A, our expenses increased by $6.7 million from Q3, due mainly to consulting and related fees for M&A activity as well as additional expenses from Divvy including credit and fraud losses. In Q4, our non-GAAP operating loss was $6.2 million and our non-GAAP net loss was $5.8 million or a loss of $0.07 per share based on 87 million basic weighted shares outstanding. Excluding the Divvy results and the corresponding increase in share count, our non-GAAP net loss per share for Q4 would have been $0.03. Moving on to the balance sheet, ending cash, cash equivalents, and short-term investments were $1.2 billion, down from $1.7 billion at the end of Q3 as a result of using approximately $556 million in net cash for the acquisition of Divvy. As of June 30th, we had $2.2 billion in customer funds on our balance sheet which was up 14% from the end of Q3 due to the significant increase in TPV during Q4. Before I turn to our fiscal 2022 outlook, I'd like to provide an overview of Divvy's business model and also provide some insight into our pending acquisition of Invoice2go. Echoing comments from René and Blake earlier, Divvy is a leader in the spend management space and has developed a sophisticated software solution to help businesses spend smarter, have greater control over card spend, and better manage their cash flow. We believe this merger significantly expands our market opportunity and enhances our long-term growth runway. The foundation of Divvy's business model is transaction monetization through interchange fee revenue on card spend. Similar to Bill.com, Divvy focuses their efforts on serving SMBs with an emphasis on slightly larger businesses. The foundation of Divvy's go-to-market strategy is digital marketing and referrals, supported by inside sales which results in an efficient engine for acquiring spending businesses. We're excited to bring the Divvy spend management capabilities to our Bill.com customers and strategic partners and feel this presents a great opportunity to accelerate customer adoption of spend management. Divvy interchange fee revenue is included in our core revenue. The interchange fees range from 200 to 250 basis points of card spend depending upon the brand of the card issued. Other variables that influence interchange fees on individual transactions include the transaction size as well as the rate the merchant pays to accept cards. Divvy's non-GAAP gross margin is approximately 10 percentage points higher than Bill.com's on a stand-alone basis. In addition Divvy has variable costs tied to card spend that are classified in operating expenses including rewards expense in the sales and marketing line as well as credit and fraud losses that are reflected in the G&A line item. There's also interest expense associated with credit facilities used to fund card purchases, which is classified in other income and expense. In total, these expenses have been between 140 to 150 basis points of card spend over the last year. Over the longer term, we expect to create efficiencies in these expenses as we leverage our combined capabilities, including our data assets, risk management expertise and balance sheet scale. As of the end of Q4, Divvy had 10,700 spending businesses on their solution, of which approximately 1,000 were Bill.com customers and are included in the Bill.com customer count that I shared earlier. In June, these businesses completed $437 million in card spend across 1.4 million transactions and gross transaction revenue yield was approximately 230 basis points. The typical Divvy spending business takes approximately six months to get fully ramped, similar to the ramp time for a new Bill.com customer. Now I'd like to give you some color on our pending acquisition of Invoice2go. Under the terms of the definitive agreement, Bill.com will acquire Invoice2go for $625 million, consisting of approximately 75% Bill.com stock and 25% cash. The transaction is subject to customary closing conditions including regulatory approval. Invoice2go's most recent annualized recurring revenue as of the month of June 2021 was approximately $35 million and more than 90% of its revenue is from subscription fees. Over the last 12 months, Invoice2go's customers sent out approximately $25 billion in invoices of which approximately $1 billion were paid online through their platform. We believe there is a significant opportunity over time to enable Invoice2go's customers to get paid via electronic payments. Invoice2go has an efficient self-service sales model. And when the transaction closes, we don't expect a material impact on our consolidated non-GAAP net loss. Now let's move on to our financial outlook for fiscal Q1 and fiscal 2022. Note that we are providing additional disclosure on Bill.com's stand-alone revenue growth, given the Divvy transaction has just closed and we haven't reported a complete quarter together yet. On a go-forward basis, we don't expect to provide details of Bill.com or Divvy as separate businesses, as we are managing one consolidated P&L. While our guidance is inclusive of Divvy, it excludes our pending acquisition of Invoice2go. As we look ahead, we've never been more excited about the large market opportunity we're pursuing and the momentum we have helping SMBs automate their financial operations. The pandemic has been a wake-up call for businesses of all sizes and SMBs are increasingly realizing that investments in digital capabilities for the financial back office are mission-critical and can no longer be deferred. We plan to capture more of this addressable market by increasing our investment levels and leveraging our strong unit economics to acquire new customers and drive adoption of payment products. Our key investment areas for fiscal 2022 include integrating our technology and go-to-market teams with Divvy scaling our relationships with financial institutions and ramping our newest payment offerings. These investments will increase operating expenses across all line items during the year and also position us to scale further as a company. While there is significant uncertainty regarding the next phase of the pandemic for purposes of our fiscal 2022 outlook, we've assumed no material negative impact on our customer base and business. For fiscal Q1, we expect our total revenue to be in the range of $103.2 million to $104.2 million, which assumes organic core revenue growth of approximately 60% for Bill.com on a stand-alone basis. We expect float revenue to be approximately $500,000 in Q1 given short-term interest rates are near zero. We expect our float revenue results will remain at this level for the foreseeable future. In terms of operating expenses, we expect to increase investments associated with R&D and platform integration with Divvy, as well as our joint go-to-market initiatives. On the bottom line, in Q1 we expect to report a non-GAAP net loss in the range of $20 million to $19 million and a non-GAAP loss per share of $0.21 to $0.20 based on a share count of 95.1 million basic weighted shares outstanding. Turning to our outlook for fiscal 2022. We expect total revenue to be in the range of $476 million to $480 million. This assumes organic or stand-alone Bill.com core revenue growth of approximately 45% in fiscal 2022. For the year, we expect our non-GAAP gross margin to be in the range of 77% to 79%. On the bottom line for fiscal 2022, we expect to report a non-GAAP net loss in the range of $89 million to $85 million and a non-GAAP loss per share of $0.92 to $0.88 based on a share count of 96.9 million basic weighted shares outstanding. Regarding the increased investment levels that I mentioned earlier, we expect this will have the most impact on Q2 and Q3 before we begin to realize synergies and leverage beginning in Q4. In addition for fiscal 2022, we expect stock-based compensation expenses of approximately $30 million to $35 million per quarter and capital expenditures to be approximately $11 million to $13 million for the year. With our leadership position in the SMB market and our expanded capabilities with Divvy, we believe now is the right time to accelerate investments in fiscal 2022 to capture the larger combined Bill.com and Divvy market opportunity, which we believe can result in a multi-billion dollar revenue business. By leveraging our strong unit economics and operational rigor, we're confident we can create operating efficiency over time. We remain committed to running a profitable business in the long term. In summary, we're excited about the opportunity to build the one-stop financial operations platform for SMBs. There's a massive opportunity to help millions of businesses around the world digitally transform and we believe we are creating a durable long-term growth runway for Bill.com in the SMB market. I'll now hand the call back to Karen.

Thanks, John. Before opening up for Q&A, we request that you limit yourself to just one question, so we’d have enough time to get everyone on the call today. If you have a follow-up question, we ask that you jump back in the queue. Thanks. Operator we're now ready for questions.

[Operator Instructions] And our first question comes from Scott Berg with Needham & Company.

Hi, John, Blake and René. Congrats on the fantastic quarter and thanks for taking my questions. I guess, lots of questions here. Is -- John on -- and maybe it's for René, on the transaction volumes in the quarter, they jumped significantly, about 1 billion transactions there. Can you help us understand why the significant increase on a quarter-over-quarter basis? Because it's by far the largest on both a percentage basis and an absolute basis that we've seen in the model in several years.

Yes, I'll take that, Scott. Thanks for the question. And we've generally seen strong activity from our customer base throughout the pandemic. And over the last couple of quarters and as you mentioned, this most recent Q4, an uptick in activity and engagement in the platform. We think that's a really good sign for the health of the small business customer base where we're serving. And we saw similar results with our TPV. So both transactions and TPV, we’re up significantly, both on a year-over-year basis and on a sequential basis. And we think that just has to do with a higher level of economic activity amongst our customer base and the fact that we're gaining a larger share of their spend, share of wallet, if you will, and that's showing up as strong growth in transactions and TPV.

And your next question is from Josh Beck with KBCM.

Thank you for taking the question and my congrats as well on the progress. I really just wanted to zero in on the customer momentum. Obviously, in the -- going back a year or so, you really saw a pickup. And I think there was probably some expectation that it would maybe start to normalize. But, certainly, it seems like there's been ongoing heightened awareness of modernizing the back office. So I'm just curious, how big of a surprise maybe the customer additions was within the quarter and really how you're trying to think and balance that outlook as we go into your fiscal 2022? René Lacerte: Thanks, Josh. Good to hear your voice. We've been working on building this platform to make it simple to connect and do business for 15 years. And so, COVID did provide, I would say, a wake-up call for a number of businesses. But at the same time, the reason I start off that we've been building the platform, we've been building the financial operational platform to manage all of the stuff that happens in the back office for a while. And that enables us to be able to offer services and integrated services that we're getting ready to do with the -- obviously, the integration of Divvy and soon Invoice2go. So what we're seeing across the ecosystem is that, people are quite interested in getting the back office out of the paper-based systems that they're in into a digital system. So we think there's lots of opportunity and we're going to continue to invest behind that to bring those people along and to help them save time and obviously do more with their -- around their passion and what they're doing today.

Thanks, René. René Lacerte: Thank you.

And your next question is from Brent Bracelin with Piper Sandler.

Thank you, and good afternoon. I guess, René, John, Blake, I haven't seen a business model like this since the late '90s, super impressive growth. It begs the question, are you sure this is back-office accounting invoicing software? In all seriousness, we're just not used to seeing this type of growth for a back office software. René, what type of demand pull are you seeing within the existing Bill.com customer base for Divvy corporate cards? And then, could you just talk a little bit about the early uptake in the newest $500 Divvy sign-up promo? It seems like big opportunity to cross-sell here, but would love to get your view on how quickly that could happen? Thanks. René Lacerte: Sure. Thank you, Brent. We -- we're very focused on making accounting in the back office as sexy as it can be, right? So, to your point like, we just really feel like, this is an opportunity to really change the way business gets done. And for us, the financial operations and integrating Divvy is super important. So, we're in the early days of actually making the planning and the integration around the road map that's going to be combined. We have started the cross-selling. And all of this is going well and everything is going as planned. And it's just an opportunity for us to continue to enhance the offering to customers. And then the opportunity for customers to save time and we've said before, it's over 50% of the customers' time that they're able to save when they get on to the Bill.com platform. So, lots of reasons why people are coming on the platform. I think the payment execution is also something that's bringing a lot of people along as well.

Thank you.

Your next question is from Samad Samana with Jefferies.

Hi. Good evening. Thanks for taking the question. Great to see strong results. John, maybe could you unpack the guidance a little bit? Obviously, you get the organic growth outlook for Bill, but are you assuming revenue synergies between the two companies? And if not, when should we start to think about maybe the revenue synergies kicking in between the two?

Yes, sure. Thanks for the question Samad. Yes, we feel really good about the momentum we have. And I think that's reflected in the guidance we provided, including the organic core revenue growth of 60% in the first quarter, 45% for the year. So we have a strong base. And then, with the addition of Divvy, they have great momentum in the market as well and we expect that to continue. On the synergy front, while we've started integrating teams and combined product road maps and go-to-market strategies, I think that takes some time to evolve. As it takes businesses time to change their financial operations, adopt new products and then ultimately ramp similar to when somebody adopts Bill.com. So, we haven't quantified any specific synergy number within the guidance, but we would expect that to take a number of quarters before we start to see an impact on the numbers.

Great. And maybe if I could just squeeze one in for René. I know, you guys want to answer one question, but the company has had a couple of deals that are both transformative. I'm just curious on the M&A philosophy, should we think about this more as a digestion period for maybe the next six to 12 months, or should we think about M&A as something that's kind of core to the flywheel going forward? René Lacerte: So we definitely expect, there will be a future M&A. But at this point, we are very focused on integrating the Divvy team and the great software they've built with our core platform. And soon we'll be focused on doing the same with Invoice2go. So, our focus is going to be to deliver for customers a one-stop shop and to deal with the excellence that we have always done. And we're going to focus on that right now.

Great. Congrats again on the very strong results and outlook. René Lacerte: Thanks, Samad.

Your next question is from Robert Napoli with William Blair.

Thank you. And I'll add my congratulations. Pretty exciting story to continue. Just I guess, maybe for Blake or for René, just the competition in the Divvy market, are you seeing -- I mean are they -- maybe just talk about the runway for the kind of growth that you've been driving. And are you seeing additional competition from the likes of Brex or Ramp or others -- or American Express? I know you -- I think you get a lot of business from American Express. You're also a partner with René on the AP side.

Yes. Robert, this is Blake. Really, really good question. First this is a huge market. And so we don't anticipate slowing down as an independent company that we haven't faced those headwinds historically and we're not facing them now. The short of it though is that businesses love Divvy's solution. It's simple to use. It's easy to use. It's great from a budgeting perspective. Obviously from a spend management perspective they get to control who spends what, where, when and why at any given time. The expense automation certainly the cash flow management as well from a business perspective. And then you add that to the combined and the aggregate effect of what they already love and are attached to what Bill.com brings to the equation and that's powerful. That's -- it's something that we've heard and listened to from the businesses that we work with for years. That they have been clamoring and asking for a consolidated solution, because they're tired of using disparate point systems. And that's what exists, right? That's what -- there's a lot of -- or many different point systems anywhere from the corporate card, from legacy spend management, or legacy expense management. And so we're really excited about the combined effort of what we bring to the table. We know that is what businesses have been asking for. And frankly we're able to accomplish it faster and better together.

Good. Thank you. Appreciate it.

Your next question is from Brad Sills with Bank of America Securities.

Great. Hey guys, I'll echo the congratulations on just an exceptional quarter here and outlook. Congratulations again. So I wanted to ask about the gross retention uptick that you saw this quarter. Is this in your opinion some, kind of, reopening headwind, or tailwinds rather that are helping that metric that you might have seen earlier on in the pandemic, or is this an indication of something else perhaps moving upmarket into that lower end of the mid-market where you tend to see less SMB mortality there? Any color on just what drove that uptick in the gross retention. Thank you so much.

Yeah, great. Thanks for the question Brad. This is John. And if you recall back through the pandemic, we had really strong retention. Right after the start of the pandemic, we saw a recovery and improving retention rates, and that's really continued. I think as much as anything our platform for many of the customers we serve becomes their go-to system for managing financial operations. And once that's in place and customers have adapted how they operate and they've gone digital, it's hard to change and they stick with the solution. So, I think we're seeing that. We're seeing really good strength across our multiple go-to-market channels as well. And so I wouldn't say it's -- that we see anything that suggests a reopening phenomenon as much as a continuation of kind of the mission we've been on to deliver value for customers.

Makes sense. Thanks so much John.

Sure.

Your next question is from Jeff Cantwell with Guggenheim Securities.

Hey, thanks for taking my question. Can you hear me okay? René Lacerte: Yes, we can. Hey Jeff.

Great, great. Congrats on the results. I wanted to have a follow-up if I may on an earlier question on Divvy, now that it's a part of the platform. Can you talk a little bit more about the customer acquisition strategy and the opportunities you see to increase the Divvy customer base as you're looking ahead, meaning how do you plan to grow the Divvy customer base further from here? And what are the underlying reasons why you think there's opportunity and where do you see opportunity? And as far as size and opportunity, are there any particular verticals you think are a nice mesh for the expense management capabilities at Divvy? Just would like to help us think about what could get Divvy's 10,000 customer base to expand from here? I want to see if we can drill down on the operational strategy a bit and how you're thinking about things there? Thanks. René Lacerte: Great. I'll start off and then let Blake chime in with more specific details. But ultimately one of the things that we saw in the acquisition was an opportunity to extend the diverse ecosystem that we've built. So one of the key competitive advantages that we have as a company is that we work with accountants, we work with financial institutions. We work, obviously, with direct, with SMBs from the smallest of businesses to the large mid-market companies. And so there is the cross-sell opportunity, which we think can help obviously the results from Divvy. But Divvy has like Blake has already talked about a great go-to-market story of its own. So, I'll let Blake kind of talk to that -- those points.

Yeah. Not to be overly redundant, but I think there's three primary things that make us comfortable and certainly confident on a go-forward basis. And the first is that, we have an incredibly strong go-to-market motion and team, top down from our marketing teams through our inside and outside sales. So direct sales, is an unmitigated strength of our team. The other though, is really tapping into a different strength. And that's on the Bill.com side. And that's on the channels. René just mentioned the FIs and the accounting channel. And at the beginning there was some overlap already from the accounting side meaning that we speak that language with accountants. We are already servicing many of their needs and building for them. And so we look at that as a really attractive way to scale into and to penetrate more of that market with the Divvy product and certainly garner more spend there. And then, lastly, it's the installed base that we collectively have with the businesses that Divvy already has. You mentioned the greater than 10,000 and over 120,000 on Bill.com that we've already been able to stand up some teams. And it's the early days and that will take some time to scale into that. But the cross-sell is already in motion and we're pretty happy with how that's going so far.

Okay, great. Much appreciated and thanks for all details, and congrats on the results.

Thanks, Jeff.

The next question is from Matt VanVliet with BTIG.

Thanks for taking my question. Great job on the quarter for sure, maybe expanding on the last question a little bit from a little different angle, could you talk about -- in terms of the 10,000-plus customers already on Divvy or I guess maybe the 9,000 or so that weren't already Bill customers. Is there any reason to think that you can't cross-sell the Bill legacy platform across? Is there anything unique about some of those customers from a size or use case perspective, that wouldn't make that correct? And then, conversely, on the 120,000-plus Bill customers are any of them, I guess, sort of too small to embrace the Divvy platform? How should we think about the long-run opportunity across the two existing bases now? Thanks. René Lacerte: Yes. Great question Matt, we think that, businesses small to the mid-market that we serve they need this. They need financial operations in their back pocket. They need to automate the paper processes. They need to get it online. COVID was a wake-up call for them. And the opportunity is across all those businesses. We believe that, there is significant synergy for a business once they get their systems digitized. And so, we have done our own analysis to look at kind of which are the most likely customers to start and that's the cross-selling efforts that we're focused on right now is to start with those. But there's a good opportunity in front of us and we're excited about it.

Very clear. Thank you. René Lacerte: Thank you, Matt.

Your next question is from John Coffey with SIG.

Hi, great. Thank you very much for taking my question. I had one question. It was sort of considering that 8-K that you released about a couple of weeks ago that had the historical Divvy financials. And on the income statement there was a, I think about -- for the whole of the year 2020 there was a provision for losses of about I think $10 million. So my first question is how should we think about the provision expense going forward on the income statement? Which income statement line will that be built? And in general how should we think about what those provision expenses will be? And the second part is related. It looks like when I look at your balance sheet, for this last quarter you added about $147 million of acquired card receivables. Should I understand it right that you would never earn interest income on that that's probably maybe going to go to some kind of balance sheet partner because you didn't mention -- I think you just mentioned the interchange opportunity. So I just want to make sure, I'm not missing any potential revenue sources.

Sure. Thanks for the question, John. I'll take that one, regarding the provision for credit losses that's an item that shows up in G&A expenses. And we have provided an estimate in the prepared remarks around, the combination of rewards expense, credit and fraud losses and interest expense combined being about 140 basis points to 150 basis points in total cost. And of that amount, it's about two-thirds is associated with rewards. And then, the credit and fraud losses, is the next biggest item. And interest expense is the smallest of the three. And to your second question about the balance sheet, I would just view that as transitory, the way transactions flow through the system. There is no interest earning or interest component of the Divvy business model.

Perfect. Thank you very much.

Your next question is from Ken Suchoski with Autonomous Research.

Hey, good afternoon, everyone. Congrats on the solid quarter. And thanks for taking the question here. I just wanted to ask about the transaction take rate. If I exclude Divvy and look at the transaction take rate on a quarter-over-quarter basis, it increased, but it increased at a slower rate than prior quarters. And I just wanted to know, what caused that? I mean, which transaction type saw less momentum this quarter versus prior quarters, or maybe you just had a strong ramp in payment volume and that's impacting it? Thank you.

Sure. Thanks for the question, Ken. Yeah, we're really pleased frankly with the expansion in our monetization. And take rate is one measure of that. We also look at revenue per transaction and the profile of businesses we're driving, really strong year-over-year growth in all of those metrics. You're right about the quarter-to-quarter change in our take rate. It was a little bit lower this quarter than in prior quarters. But generally speaking, there's a different mix of payment types in each quarter, and it's not a perfectly linear expansion that we expect, but we're still very optimistic about our opportunity over time to continue to drive increased monetization particularly on the payment side.

Okay. Thanks a lot. Appreciate it.

Sure.

Your next question is from Joseph Vafi with Canaccord.

Hey, guys. Good afternoon. Obviously, great results echo that. Just a question on guidance for this year, Divvy is a fast-growing company, but obviously a slightly different business model than core Bill. How did you approach guidance relative to incorporating Divvy in versus what you've done in previous years on the core business before Divvy? And then, maybe you could just comment on travel-related volumes that may or may not be in Divvy right now? Thanks.

Sure. Thanks for the question, and I'll take that one. I mean, we approach guidance using all the information that we have, looking at key metrics in the business and trends within the customer base, and an understanding of our unit economics. And as I said previously, we feel good about not only our core business going into the year, but the Divvy business as well. Both all of our products are performing well, and we're seeing increasing customer adoption. So the guidance that we provided, kind of reflects the latest thinking that we have on how the business may evolve this coming year. And I'd say, just at a high level, and I'll hand it over to Blake to add any color that he'd like. But at a high level, the Divvy business the spending business is leveraging the card. It doesn't create any significant concentration in any particular spend type or category. It's a well-diversified set of spending businesses and merchants that, they're spending with. And we've seen pretty consistent results, obviously, growth throughout the pandemic from the early day's rapid growth. But beyond that, I'm not sure, there's any real dynamics to point out. I don't know, Blake, if you want to add anything.

Maybe just to call out kind of the product itself, right? I think historically, you would corner or pigeonhole Divvy as a T&E product. But from the very beginning by design, that's where we were trying to break the mold. We knew that small businesses wanted control over all of their spend and they wanted a singular platform through which they could do that. And so that's where Divvy's budgets, from a software perspective, really come to life and shine is they're dynamic they're agile. You're able to use it from a mobile perspective or a web perspective. And so we really broke out of that mold of a T&E and travel-focused business and have been able to scale really effectively across ad spend different software services, food and normal expenses of a business outside of T&E. So, nothing comes or calls out.

Thanks very much for that.

And we have time for one last question. Our final question comes from Darrin Peller with Wolfe.

Hey, guys. Thanks. When we look at the monetization potential just René, if you could start off reminding us again of the strategy for now -- for the next 12 months going into fiscal 2022 on supplier enablement. And really what -- it was good to see the metrics again at around only 2% to 3% still virtual card. What do you think that can get to over the next 12 maybe 24? And then longer term, as a percentage of your mix, and then also on the international side, and really what you're doing proactively to enable that? Just maybe an update on that. Thanks guys. Nice job. René Lacerte: Thank you, Darrin. We've got a lot of investment going into growing and accelerating the business. You see the results that we just announced and how we feel about the business in the next 12 months. And it's across all segments and across all products. And so the payment offerings are super important. In particular, when we think about virtual card international FX capabilities, we still believe there's a good amount in front of us. So the ranges that we've provided in the past are something that we're going to kind of continue to march towards and to make sure that we develop the right product, the right customer experience and the right go-to-market to bring those customers into the fold. So, that's all the investments that we're doing across the business with respect to that. We're also investing. Obviously the number one thing is to make the integrations with Divvy and soon Invoice2go successful. And that's creating that one-stop shop platform that unique position that we're in to be that one-stop shop for SMBs. And then the third thing that we're investing over the year is going to be strengthening our go-to-market with the financial institution partners that we have and rolling out the SMB solutions that we've talked about. So, lots of investment. The payment products are a part of that, and we feel good about continuing to grow the take that we're getting from both the payment products we have and the ones that we are in the process of adding.

I will now hand the call back over to René Lacerte, CEO. René Lacerte: Great. Thank you. Thanks everyone for joining us today. We're kicking off the new fiscal year with momentum, and looking forward to communicating our progress as we take on the tremendous opportunity ahead of us. Thank you. Goodbye.

Thank you again for joining us today. This does conclude today's presentation. You may now disconnect.