Bill.com Holdings, Inc. (BILL) Earnings

Management highlights

• Strong Q3 results with core revenue growth 16% and non-GAAP operating margin approaching 20%, achieving GAAP profitability. • Accelerating AI transformation across the company, with over 100,000 customers using AI agents, automating invoices, executing card payments, and scoring customer interactions. • Integrated platform growth with over 20,000 businesses leveraging AP and spend and expense solutions, joint customers grew 39% y/y. • Expanding addressable market through product enhancements, partner channel relationships, and deepening sync capabilities, launching new international capabilities and Bill Travel. • Workforce optimization planned to reduce workforce by up to 30% by end of Q4, with ~$110 million in gross annualized savings and ~$20 - $30 million reinvested in growth areas in FY27.

Guidance

• Fiscal Q426: Total revenue expected $425 - $435 million, core revenue $392 - $402 million (13% - 16% y/y growth). APAR TPD growth in line with Q3, spend and expense volume growth ~20% y/y. Non-GAAP operating income $81.5 - $86.5 million, non-GAAP net income $78 - $82 million, non-GAAP EPS $0.69 - $0.72. • Fiscal 26: Core revenue $1.496 - $1.506 billion (15% - 16% y/y growth). Float revenue $145.7 million, total revenue $1.642 - $1.652 billion. Non-GAAP operating income $303.6 - $308.6 million (non-GAAP operating margin ~19%), non-GAAP net income $298.7 - $302.7 million, non-GAAP EPS $2.61 - $2.64. Stock-based compensation expenses below $250 million.

Segment performance

Core revenue grew 16%. Non-GAAP operating margin approached 20%. GAAP profitability was achieved. In the integrated platform, APAR core revenue grew 12% y/y, added ~4,100 net new customers in Q3. APAR transaction revenue was $122 million, up 13% y/y. Spend and expense Q3 revenue totaled $167 million, up 21% y/y. Card payment volume grew 23% y/y. Take rate for spend and expense was 254 basis points, rewards rate was 130 basis points.

Risks & headwinds

• Risks associated with forward-looking statements as actual results could differ materially. • Risks related to the AI transformation execution, including ensuring successful adoption and integration across the company. • Risks associated with workforce optimization, such as potential negative impact on employee morale and execution of the restructuring plan.

Analyst Q&A

• Q: Hi, thanks so much for taking the question. Just, guys, I wanted to ask on the workforce optimization. I know Rene, it's not an easy decision, like you said. I'm curious, can you just comment on why is 30% the right magnitude? What should we track to see if the restructuring is working beyond the cost savings that you laid out? And then, you know, what are the risks in doing this? I know it's been a theme for the group. You talked about AI, but just love to hear a little bit more on the decision and where you landed.

  A: Appreciate the question. This is a pivotal moment, an opportunity for Bill. Been working a long time building financial solutions that solve the operational problems that businesses have from top to bottom. We've got tremendous scale. We've got tremendous assets, which I'll talk about. And there's an opportunity with AI to extend that to the Fortune 5 million in ways we've never seen. And I'll get to that. why AI is a part of it, because I want to answer your question first. But the summary is that building in an AI world where the distance in time between ideation and execution is shrinking rapidly and compressing requires a different organizational structure. We have to drive focus and clarity across the organization at a speed that we haven't had to do in the past. And AI enables that, and it also requires a different structure for that. And so when we look at what it is that we want to accomplish with AI, we have big dreams. We understand the reality in these dreams because we've been successfully rolling out agents and seeing strong adoption. Over 100,000 customers have adopted some of our agents already, and we're just getting started. We see efficiencies across the organization, which you see in the bottom line results that we produce quarter in and quarter out. And those dreams require that we align the organization with where it is that we're going. And so you're right, this is an exceptionally hard decision. These are colleagues that I care deeply about and having to part ways with people that have contributed to our success today is not easy. And so when we get to the size, this is all about what is the structure of the organization that's required to execute in an AI world? What is the investment that we think we need to put back into the company? And it's also a combination of just understanding where we are in our journey as a company. So we, you know, we have It's been public now for a few years. We are driving strong profitability. But we also know that balancing growth and profitability is central to the success of any company. And when we look at the opportunity for us to drive that, to help ensure the success of the company going forward in such a transformative period, we know and decided that we needed to have more profitability as part of the overall financial picture for Bill. So I think in summary, I would say like this is us leaning into AI. It's us seeing the successes that AI has already enabled inside of Bill. And it's getting the structural components of how you build product, which will be very different. It already is different. We already see that in an AI world and having that align with the team that we have. So, you know, I think it's, you know, it's what we'll be able to do is exciting. And like you said, it's a hard decision.

• Q: Hey, guys. Congrats on these solid results here. Rene, obviously the lean-in on AI is apparent here, and we can think about the productivity gains, obviously, that will help the bottom line. What about the top line? Any call-outs that AI could help accelerate the core revenue growth of the business?

  A: Great question, Brian. And the short answer is absolutely. There's a couple of ways that we see AI leveraging the overall business that we've built. First would be just in building amazing, great products. We have a massive market in front of us. And you just look at the adoption that we've had, that the market has, it's still in the very early days. And I think one of the key things there is that the market if you will, that we've taken to date in building our solution has been what I would call a do it with you approach. We help customers figure out their financial operations. We guide them through the process. AI is going to change that from a guide to actually a do. It's going to become a do it for you. And we think that will dramatically expand the market. So one way is we will drive more customers onto the platform because of AI. The other way is we will be creating more value and that will create more monetization opportunities that we haven't even put out there yet. So it's not just going to be subscription and transaction revenue. As we move from task-based kind of capabilities to jobs and roles, there will be opportunities to kind of monetize those agents differently than we've seen before. But let me just step back. I think it's super important to think about how it is that Bill's going to win in this space. And the first thing I would just say is we invented this category. And we are disruptors at heart. AI represents an opportunity to accelerate that disruption in ways others can't easily replicate. We're playing offense here. And the SMBs that we care about, they're tired of managing their back office. They want the work to get done and they want it to get done better. And so our ability to kind of go serve that market, to be able to deliver that promise to the SMBs is predicated on two critical factors. One is knowing what to build and how to build it. Those are the two things. How to build it comes down to the assets that we as a company have built carefully and methodically over the last few decades here. And I think there are some unique advantages that we have in an AI world that others don't have readily. And so those advantages divide into kind of three key pillars. The first I would say is we have proprietary context. We have a data repository that has tremendous amounts of data, whether you think of that as transactions or documents or collaboration or connections to your network members. And that data provides a depth of insight that nobody else has at this point. The second thing we have is we productized the operational complexity that is across the financial operations of every SMB in this country. We make it so that it's essentially click wrap. You sign, click, and you point buttons. We have dozens of payment capabilities. We have obviously the 8 million entities in our network that we connect to. This is and represents the last mile execution that's required to actually move to a do it for you environment. And again, nobody else has what we have. Finally, In an AI world, in any new technology, the thing that is, I think, the linchpin for adoption is trust. We are trusted across our partners, across close to half a million customers, and that trust is because of the things that we do around money movement. It's a regulated area. It should be, in my opinion. Customers need to be able to trust how their money moves, when it moves, and where it's going. And our ability to prioritize the decisions that involve AI because we have the trust of our customers, of our partners, and of our providers at the size and scale that we have, again, nobody else has that. So, you know, we have these capabilities that generic AI has that nobody else has. And we use that in how we build the capabilities. So this is the second point that I was making. which is knowing what to build. So knowing what to build comes down to great product management. And to me, great product management is all about falling in love with the customer and then obsessing over their pain points and especially the ones that nobody else cares about or even understands. And then you have to persistently build solutions that address those pain points. We've been doing that. We've been doing that a long time. 20 years. And that persistence is something that leads to knowledge and understanding of what the customer's experience is and their pain points. And that allows us to build solutions that nobody else is even thinking about yet. So we have advantages with the data that we have and the platform we build, but we also have an advantage in really understanding our customer and the SMBs and the mid-market customers we serve so that we can build the best AI capabilities that will help them move into the do it for you world that is coming. AI is going to accelerate the market. Like I said, it's going to dramatically shrink the time it takes to actually move between idea to execution. And we know that this is a game changer, which is why we've made these decisions today. These are big decisions and they weren't taken lightly. But when you see what we see across our customers, you see the opportunities, you see the complexity and solutions that we've built that solve that complexity for our customers, You get pretty energized about extending this to everybody out there that needs it. And so that is the source of our decision. And Brian, you're right. There will be plenty of opportunities to drive revenue because of AI, whether it's bringing customers in or adding monetization capabilities for the agents we release for our customers.

• Q: Hey, Renee, Rohini, John, thanks for taking the question here. I wanted to ask on the restructuring, just curious where within the organization you're really making these changes? And within that 20, 30 million that you are reinvesting back into the business, could you provide a bit more color on what exact areas you're looking to double down on?

  A: Thank you, Chris. The first thing that I would say is that as we become an AI native company, AI is going to be a part of every role and every job that's inside of Bill. And so to your first question, we will be looking across all teams, all levels to actually drive the right structure so that we can move faster. And so what we would say is if you step back and think about what I was sharing earlier on AI and how you develop software and AI, it's much faster. The time compression, the distance between ideation, execution, vision, execution, it requires a leaner, flatter organization. And so to your first question, it will be across the organization. It definitely obviously makes it hard, but it is something that we believe is the right structure for the company. I think on the second question, I'll let Rohini take that one. Absolutely. So as Rene had fairly emphatically mentioned, the number one priority for us is going to be the AI native experience build, which we have to do most efficiently, effectively, and fast. That is going to be one of the key areas of our investment, getting the right talent, the tools, the infrastructure around it. So, Chris, that's where we will invest most in.

• Q: Hey, guys. This is Josie on for Darren. Thank you for taking my question. I just wanted to ask, on your APR customer net ads, so that came in a little bit better than we had expected at 4,000. I know you mentioned that as you kind of move up market, this may come down. So just wondering how we should think about that metric versus, you know, TP for customer or ARPU. as you move up market.

  A: Yeah, I can take that question. Thank you for the question. We had earlier in the prior earnings said that we'd given some color on the NNAs. It'll be slightly below 4,000. We actually got some good results with the wealth management firms as the teams went after that set of the customers and got some uptake in Q3, which got us to the 4,100. Now, those are lumpy acquisitions and not as consistent quarter over quarter. So what we are saying now is we continue to believe we will be a little below 4,000 number, and that's the color we'd like to add for the NNAs. And on the TPV per customer and TPV metrics, we're fairly stable where we are in Q3. We expect to see similar results going forward in Q4.

• Q: um, we had seen a couple of changes in, um, virtual card acceptance from some bigger. Online advertise, uh, advertise online advertisers. Um, just wondering if. You know, will that impact take rates and on the side, or the expense side, um, either this year, or maybe as we think about, you know, the beginning of 27.

  A: Yeah, the latest things that we're hearing on that side don't seem to be very material and largely focusing on the very large customers, which we have limited exposure to from our side. So I would say at this point, it's incorporated within our guidance range and not very material for our numbers