BILL Holdings Inc

Previous wording

We have grown rapidly and scaled our business operations in recent periods. Our revenue was $318.5 million and $260.0 million during the three months ended December 31, 2023 and 2022, respectively, an increase of $58.5 million, and $623.5 million and $489.9 million during the six months ended December 31, 2023 and 2022, respectively, an increase of $133.6 million. We generated net losses of $40.4 million and $95.1 million during the three months ended December 31, 2023 and 2022, respectively, and $68.3 million and $176.7 million during the six months ended December 31, 2023 and 2022, respectively.

Current wording

We have grown rapidly and scaled our business operations in recent periods. Our revenue was $323.0 million and $272.6 million during the three months ended March 31, 2024 and 2023, respectively, an increase of $50.5 million, and $946.5 million and $762.5 million during the nine months ended March 31, 2024 and 2023, respectively, an increase of $184.0 million. We generated net income of $31.8 million and net loss of $31.1 million during the three months ended March 31, 2024 and 2023, respectively, and net loss of $36.5 million and $207.9 million during the nine months ended March 31, 2024 and 2023, respectively.

Previous wording

Recent interest rate increases and persistent inflation in the U.S. and other markets globally have increased economic volatility and led to tightening in credit markets in the U.S. and globally. The SMBs we serve are particularly susceptible to changes in overall economic and financial conditions, and certain SMBs may cease operations in the event of a recession or inability to access financing. The macroeconomic environment has caused our BILL standalone customers and spending businesses using BILL Spend and Expense (formerly Divvy) to moderate their expenditures and, in certain cases, shift to lower-cost methods of payment, resulting in lower payment volume growth and lower transaction fee growth than historical trends. Moreover, the rate of growth in the number of businesses using our solutions has and may continue to be impacted by the current macroeconomic environment. In addition, increased interest rates have led to an increase in interest on funds held for customers. Certain of these business impacts have accelerated in recent periods and we anticipate that they will persist in the near-term. Moreover, there can be no assurance that, in the event of a recession, demand for our products would not be adversely affected. We intend to continue to monitor macroeconomic conditions closely and to take appropriate financial or operational actions in response to such conditions.

Current wording

Elevated interest rates and recent inflation in the U.S. and other markets globally have increased economic volatility and led to tightening in credit markets in the U.S. and globally. The SMBs we serve are particularly susceptible to changes in overall economic and financial conditions, and certain SMBs may cease operations in the event of a recession or inability to access financing. The macroeconomic environment has caused our BILL standalone customers and spending businesses using BILL Spend and Expense (formerly Divvy) to moderate their expenditures and, in certain cases, shift to lower-cost methods of payment, resulting in lower payment volume growth and lower transaction fee growth than historical trends. Moreover, the rate of growth in the number of businesses using our solutions has and may continue to be impacted by the current macroeconomic environment. In addition, increased interest rates have led to an increase in interest on funds held for customers. Certain of these business impacts have accelerated in recent periods and we anticipate that they will persist in the near-term. Moreover, there can be no assurance that, in the event of a recession, demand for our products would not be adversely affected. We intend to continue to monitor macroeconomic conditions closely and to take appropriate financial or operational actions in response to such conditions.

Previous wording

Our subscription revenue is primarily based on a fixed monthly or annual rate per user charged to our customers. Our transaction revenue consists of transaction fees and interchange fees on a fixed or variable rate per transaction. Transactions primarily include card payments, real-time payments, check payments, ACH payments, cross-border payments, and creation of invoices. Much of our revenue comes from repeat transactions, which are an important contributor to our recurring revenue.

Current wording

Our subscription revenue is primarily based on a fixed monthly or annual rate per user charged to our customers. Our transaction revenue consists of transaction fees and interchange fees on a fixed or variable rate per transaction. Transactions primarily include card payments, real-time payments, check payments, ACH payments, cross-border payments, pay-by-card, invoice financing and creation of invoices. Much of our revenue comes from repeat transactions, which are an important contributor to our recurring revenue.

Previous wording

(1)As of December 31, 2023, the total number of BILL standalone customers was approximately 215,600; the total number of spending businesses that used our BILL Spend and Expense solution was approximately 31,600; and the total number of Invoice2go subscribers was approximately 226,300.

Current wording

(1)As of March 31, 2024, the total number of BILL standalone customers was approximately 210,700; the total number of spending businesses that used our BILL Spend and Expense solution was approximately 33,500; and the total number of Invoice2go subscribers was approximately 220,700.

Previous wording

(2)During the three months ended December 31, 2023, the total payment volume (TPV) transacted by BILL standalone customers was approximately $70.4 billion; the total card payment volume transacted by spending businesses that used BILL Divvy Corporate Cards was approximately $4.2 billion; and the TPV transacted by Invoice2go subscribers was approximately $257.9 million. During the six months ended December 31, 2023, TPV transacted by BILL standalone customers was approximately $136.3 billion; the total card payment volume transacted by spending businesses that used BILL Divvy Corporate Cards was approximately $8.3 billion; and the TPV transacted by Invoice2go subscribers was approximately $546.1 million.

Current wording

(2)During the three months ended March 31, 2024, the total payment volume (TPV) transacted by BILL standalone customers was approximately $66.8 billion; the total card payment volume transacted by spending businesses that used BILL Divvy Corporate Cards was approximately $4.4 billion; and the TPV transacted by Invoice2go subscribers was approximately $239.1 million. During the nine months ended March 31, 2024, TPV transacted by BILL standalone customers was approximately $203.1 billion; the total card payment volume transacted by spending businesses that used BILL Divvy

Previous wording

(3)During the three months ended December 31, 2023, the total number of transactions executed by BILL standalone customers was approximately 12.0 million; the total number of transactions executed by spending businesses that used BILL Divvy Corporate Cards was approximately 13.2 million; and the total number of transactions executed by Invoice2go subscribers was approximately 0.3 million. During the six months ended December 31, 2023, the total number of transactions executed by BILL standalone customers was approximately 23.6 million; the total number of transactions executed by spending businesses that used BILL Divvy Corporate Cards was approximately 26.0 million; and the total number of transactions executed by Invoice2go subscribers was approximately 0.6 million.

Current wording

(3)During the three months ended March 31, 2024, the total number of transactions executed by BILL standalone customers was approximately 11.8 million; the total number of transactions executed by spending businesses that used BILL Divvy Corporate Cards was approximately 13.5 million; and the total number of transactions executed by Invoice2go subscribers was approximately 0.3 million. During the nine months ended March 31, 2024, the total number of transactions executed by BILL standalone customers was approximately 35.5 million; the total number of transactions executed by spending businesses that used BILL Divvy Corporate Cards was approximately 39.6 million; and the total number of transactions executed by Invoice2go subscribers was approximately 0.9 million.

Previous wording

To grow revenue from businesses using our solutions, we must deliver a product experience that helps them automate their back-office financial operations. The more they use and rely upon our product offerings to automate their operations, the more transactions they process on our platform. This metric provides an important indication of the aggregate value of transactions that businesses using our solutions are completing on our platform and is an indicator of our ability to generate revenue from businesses using our solutions. We define TPV as the total value of transactions that we process on our platform during a particular period, comprised of transactions from BILL standalone customers, BILL Divvy Corporate Card transactions, and transactions executed by Invoice2go subscribers. Our calculation of TPV includes payments that are subsequently reversed. Such payments comprised less than 2% of TPV during each of the three and six months ended December 31, 2023 and 2022.

Current wording

To grow revenue from businesses using our solutions, we must deliver a product experience that helps them automate their back-office financial operations. The more they use and rely upon our product offerings to automate their operations, the more transactions they process on our platform. This metric provides an important indication of the aggregate value of transactions that businesses using our solutions are completing on our platform and is an indicator of our ability to generate revenue from businesses using our solutions. We define TPV as the total value of transactions that we process on our platform during a particular period, comprised of transactions from BILL standalone customers, BILL Divvy Corporate Card transactions, and transactions executed by Invoice2go subscribers. Our calculation of TPV includes payments that are subsequently reversed. Such payments comprised less than 2% of TPV during each of the three and nine months ended March 31, 2024 and 2023.

Previous wording

We define transactions processed as the total number of payments initiated and processed through our platform during a particular period. Payment transactions include checks, ACH payments, card payments, Invoice2go subscriber transactions, real-time payments, and cross-border payments.

Current wording

We define transactions processed as the total number of payments initiated and processed through our platform during a particular period. Payment transactions include checks, ACH payments, card payments, Invoice2go subscriber transactions, real-time payments, pay by card, invoice financing, and cross-border payments.

Previous wording

Subscription fees are fixed monthly or annually and charged to customers for the use of our platform to process transactions. Subscription fees are generally charged either on a per user or per customer account per period basis, normally monthly or annually. Transaction fees are fees collected for each transaction processed, on either a fixed or variable fee basis. Transaction fees primarily include processing of payments in the form of checks, ACH, card payments, real-time payments, and cross-border payments, and the creation of invoices. Transaction fees also include interchange fees paid by suppliers accepting card payments. Fixed transaction fees are set at a fixed charge per payment transaction, while variable transaction fees are generally calculated based on a percentage of the dollar amount of the payment transaction.

Current wording

Subscription fees are fixed monthly or annually and charged to customers for the use of our platform to process transactions. Subscription fees are generally charged either on a per user or per customer account per period basis, normally monthly or annually. Transaction fees are fees collected for each transaction processed, on either a fixed or variable fee basis. Transaction fees primarily include processing of payments in the form of checks, ACH, card payments, real-time payments, pay by card, invoice financing and cross-border payments, and the creation of invoices. Transaction fees also include interchange fees paid by suppliers accepting card payments. Fixed transaction fees are set at a fixed charge per payment transaction, while variable transaction fees are generally calculated based on a percentage of the dollar amount of the payment transaction.

Previous wording

Restructuring – Restructuring costs consist primarily of employee severance and other employment termination benefits, including commission, and stock-based expense. Additionally, these costs include contract termination expenses and other costs related to the execution of our Restructuring Plan.

Current wording

Restructuring – Restructuring costs consist primarily of employee severance and other employment termination benefits, including commission, as well as stock-based expense. Additionally, these costs include contract termination expenses and other costs related to the execution of our Restructuring Plan.

Previous wording

Other income (expenses), net – Other income (expenses), net consists primarily of interest income on our corporate funds, interest expense on our borrowings (including amortization issuance costs) and the lower of cost or market adjustment on card receivables sold and held for sale.

Current wording

Other income, net – Other income, net consists primarily of interest income on our corporate funds, gain on debt extinguishment, change on mark to market derivatives, interest expense on our borrowings (including amortization issuance costs) and the lower of cost or market adjustment on card receivables sold and held for sale.

Previous wording

Provision for (benefit from) income taxes – Income tax expense consists of U.S. federal, state and foreign income taxes. We maintain a full valuation allowance against our U.S. federal, state and Australian net deferred tax assets, as we have concluded that it is more likely than not that we will not realize our net deferred tax assets.

Current wording

Provision for income taxes – Income tax expense consists of U.S. federal, state and foreign income taxes. We maintain a full valuation allowance against our U.S. federal, state and Australian net deferred tax assets, as we have concluded that it is more likely than not that we will not realize our net deferred tax assets.

Previous wording

(2)Includes stock-based compensation charged to revenue and expenses as follows (in thousands):

Current wording

(2)Includes stock-based compensation charged to revenue and expenses as follows (amounts in thousands):

Previous wording

(3) Three and six months ended December 31, 2022 includes $52.2 million of stock-based compensation expense related to separation and advisory agreements with our former Chief Revenue Officer.

Current wording

(3) Three and nine months ended December 31, 2022 includes $52.2 million of stock-based compensation expense related to separation and advisory agreements with our former Chief Revenue Officer.

Previous wording

(4) Consists of acquisition related equity awards (Acquisition Related Awards), which include equity awards assumed and retention equity awards granted to certain employees of acquired companies in connection with acquisitions, modified equity awards in connection with the Restructuring Plan (Restructuring Awards), and non-acquisition related equity awards (Non-Acquisition Related Awards), which include all other equity awards granted to existing employees and non-employees in the ordinary course of business. The following table summarizes stock-based compensation recorded for the periods presented and as a percentage of total revenue:

Current wording

(4) Consists of acquisition related equity awards (Acquisition Related Awards), which include equity awards assumed and retention equity awards granted to certain employees of acquired companies in connection with acquisitions, modified equity awards in connection with the Restructuring Plan (Restructuring Awards), and non-acquisition related equity awards (Non-Acquisition Related Awards), which include all other equity awards granted to existing employees and non-employees in the ordinary course of business. The following table summarizes stock-based compensation recorded for the periods presented and as a percentage of total revenue (amounts in thousands):

Previous wording

Revenue consists mainly of subscription and transactions fees. Subscription revenue increased by $1.8 million, or 3% and $6.1 million, or 5%, during the three and six months ended December 31, 2023, respectively, as compared to the prior year periods, primarily due to an increase in customers. Transaction fee revenue increased by $42.1 million, or 25% and $88.3 million, or 27% during the three and six months ended December 31, 2023, respectively, as compared to the prior year periods, primarily due to increased total payment volume driven by the increase in customer adoption of our products. In addition, interest on funds held for customers increased by $14.6 million, or 50% and $39.1 million, or 88%, during the three and six months ended December 31, 2023, respectively, as compared to the prior year periods, primarily due to an increase in yield earned from investing customer funds as interest rates have increased.

Current wording

•a $43.0 million and $131.3 million increase, respectively, in transaction fee revenue primarily due to increased total payment volume driven by the increase in customer adoption of our products;

Previous wording

Cost of revenue, gross profit, and gross margin during the three and six months ended December 31, 2023 and 2022 were as follows (amounts in thousands):

Current wording

Cost of revenue, gross profit, and gross margin during the three and nine months ended March 31, 2024 and 2023 were as follows (amounts in thousands):

Previous wording

Service costs increased by $10.3 million and $20.4 million during the three and six months ended December 31, 2023, respectively, as compared to the prior year periods, primarily due to:

Current wording

Service costs increased by $5.9 million and $26.3 million during the three and nine months ended March 31, 2024, respectively, as compared to the prior year periods, primarily due to:

Previous wording

•a $7.7 million and $13.6 million increase, respectively, in direct costs associated with the processing of payments made by businesses using our solutions, use of software applications and equipment, bank fees for funds held for customers, and data hosting services, which were driven by the increase in the number of customers, increased adoption of new product offerings, and an increase in the volume of transactions; and

Current wording

•a $6.1 million and $19.7 million increase, respectively, in direct costs associated with the processing of payments made by businesses using our solutions, use of software applications and equipment, bank fees for funds held for customers, and data hosting services, which were driven by the increase in the number of customers, increased adoption of new product offerings, and an increase in the volume of transactions;

Previous wording

•a $2.6 million and $6.8 million increase, respectively, in costs for consultants and temporary contractors, shared overhead, and other costs.

Current wording

•a $3.4 million and $9.0 million increase, respectively, in costs for consultants and temporary contractors, shared overhead, and other costs; offset by

Previous wording

Gross margin remained flat at 82% during the three months ended December 31, 2023. Gross margin increased to 82% during the six months ended December 31, 2023, from 81% during the prior year period, primarily due to an increase in interest on funds held for customers and a higher mix of variable-priced transaction revenue.

Current wording

Gross margin increased to 83.0% and 82.1% during the three and nine months ended March 31, 2024, from 82.1% and 81.5% during the prior year period, primarily due to an increase in interest on funds held for customers, a higher mix of variable-priced transaction revenue and the decrease in personnel-related costs.

Previous wording

Research and development expenses increased by $7.6 million and $21.5 million during the three and six months ended December 31, 2023, respectively, as compared to the prior year periods, primarily due to a $7.6 million and $21.6 million increase, respectively, in personnel-related costs, including stock-based compensation expense, resulting from the hiring of additional personnel, who were directly engaged in developing new product offerings.

Current wording

Research and development expenses increased by $2.8 million and $24.4 million during the three and nine months ended March 31, 2024, respectively, as compared to the prior year periods, primarily due to a $2.6 million and $24.2 million increase, respectively, in personnel-related costs, including stock-based compensation expense.

Previous wording

Our research and development expenses decreased to 26% and 28% as a percentage of revenue during the three and six months ended December 31, 2023, respectively, from 30% and 31% during the prior year periods, respectively, primarily due to a higher revenue growth rate but a relatively lower increase in personnel-related expenses as a percentage of revenue.

Current wording

Our research and development expenses decreased to 24% and 26% as a percentage of revenue during the three and nine months ended March 31, 2024, respectively, from 30% and 31% during the prior year periods, respectively, primarily due to a higher revenue growth rate but a relatively lower increase in personnel-related expenses, including stock-based compensation, as a percentage of revenue.

Previous wording

Sales and marketing expenses decreased by $46.4 million and $46.6 million during the three and six months ended December 31, 2023, respectively, as compared to the prior year periods, primarily due to the following:

Current wording

Sales and marketing expenses decreased by $43.9 million during the nine months ended March 31, 2024 as compared to the prior year period, primarily due to the following:

Previous wording

•a $56.6 million and $72.3 million decrease during the three and six months ended December 31, 2023, respectively, in personnel-related costs as a result of higher stock-based compensation expense related to former executives in the prior year period, including $52.2 million recognized during the three months ended December 31, 2022, related to the separation and advisory agreements with our former Chief Revenue Officer; offset by

Current wording

•a $82.7 million decrease in personnel-related costs mainly as a result of higher stock-based compensation expense of $72.9 million related to former executives in the prior year period, including the separation and advisory agreements with our former Chief Revenue Officer, and a decrease in sales and marketing personnel from our reduction-in-force announced in December 2023; offset by

Previous wording

•a $2.8 million increase during the six months ended December 31, 2023, in advertising spend and various marketing initiatives and activities, such as engaging consultants and attending marketing events, as we intensified our efforts in promoting our products and services and increasing our brand awareness.

Current wording

•a $4.9 million increase during the nine months ended March 31, 2024, in advertising spend and various marketing initiatives and activities, such as engaging consultants and attending marketing events, as we intensified our efforts in promoting our products and services and increasing our brand awareness.

Previous wording

Our sales and marketing expenses decreased to 37% and 38% as a percentage of revenue during the three and six months ended December 31, 2023, respectively, from 63% and 58% during the prior year periods, respectively, primarily due to a higher revenue growth rate and lower stock-based compensation expense.

Current wording

Our sales and marketing expenses decreased to 37% as a percentage of revenue during each of the three and nine months ended March 31, 2024 from 42% and 52% during the prior year periods, respectively, primarily due to a higher revenue growth rate and decreases in personnel-related expenses, including stock-based compensation.

Previous wording

General and administrative expenses increased by $16.2 million and $34.8 million during the three and six months ended December 31, 2023, respectively, as compared to prior year periods, primarily due to the following:

Current wording

General and administrative expenses increased by $9.9 million and $44.6 million during the three and nine months ended March 31, 2024, respectively, as compared to prior year periods, primarily due to the following:

Previous wording

•a $7.2 million and $15.1 million increase, respectively, in provision for expected credit losses and fraud losses mainly due to increase in acquired card receivables during the period;

Current wording

•a $9.4 million and $24.5 million increase, respectively, in provision for expected credit losses and fraud losses mainly due to increase in acquired card receivables and loans held for investment during the period;

Previous wording

•a $4.0 million and $9.8 million increase, respectively, in consulting fees, primarily resulting from outside services fees, and temporary contractors who provided general and administrative services;

Current wording

•a $0.8 million and $10.6 million increase, respectively, in consulting fees for outside services, and temporary contractors who provided general and administrative services;

Previous wording

•a $3.0 million and $7.6 million increase, respectively, in personnel-related costs resulting from the hiring of additional general and administrative personnel; and

Current wording

•a $7.2 million increase during the nine months ended March 31, 2024 in personnel-related expenses resulting from the hiring of additional general and administrative personnel and higher average cost per employee; and

Previous wording

•a $2.0 million and $2.3 million increase, respectively, in software subscription and computer-related expenses, shared overhead and other costs.

Current wording

•a $2.4 million increase during the nine months ended March 31, 2024 in software subscription and computer-related expenses, shared overhead and other costs.

Previous wording

Our general and administrative expenses remained flat at 27% as a percentage of our total revenue during the three months ended December 31, 2023. Our general and administrative expenses decreased to 27% as a percentage of revenue during the six months ended December 31, 2023 from 28% during the prior year period, primarily due to a higher revenue growth rate but a relatively lower increase in personnel-related costs as a percentage of revenue.

Current wording

Our general and administrative expenses decreased to 25% as a percentage of our total revenue during the three months ended March 31, 2024 from 26% during the prior year period, primarily due to a higher revenue growth rate but a decrease in personnel-related costs as a percentage of revenue. Our general and administrative expenses remained flat at 27% as a percentage of revenue during the nine months ended March 31, 2024 and March 31, 2023.

Previous wording

Depreciation and amortization of intangible assets increased by $0.9 million and $2.6 million during the three and six months ended December 31, 2023, respectively, as compared to the prior year periods, primarily due to depreciation of capitalized software projects in fiscal 2024 and intangible assets acquired in fiscal year 2023.

Current wording

Depreciation and amortization of intangible assets increased by $0.4 million and $2.9 million during the three and nine months ended March 31, 2024, respectively, as compared to the prior year periods, primarily due to depreciation of capitalized software projects and intangible assets acquired in fiscal second quarter of 2023.

Previous wording

Restructuring increased by $25.1 million during each of the three and six months ended December 31, 2023 due the Restructuring Plan announced on December 5, 2023. Refer to Note 11 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information on the Restructuring Plan.

Current wording

Restructuring expenses increased by $2.1 million and $27.2 million during the three and nine months ended March 31, 2024, respectively, due to the Restructuring Plan announced on December 5, 2023. Refer to Note 11 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information on the Restructuring Plan.

Previous wording

Other income, net increased $11.9 million and $35.3 million during the three and six months ended December 31, 2023, respectively, as compared to prior year periods, primarily due to the following:

Current wording

Other income, net increased $36.2 million and $71.4 million during the three and nine months ended March 31, 2024, respectively, as compared to prior year periods, primarily due to the following:

Previous wording

•a $12.9 million and $35.8 million increase during the three and six months ended December 31, 2023, respectively, in interest income due to higher interest rates earned on corporate funds;

Current wording

•a $2.6 million and $38.4 million increase during the three and nine months ended March 31, 2024, respectively, in interest income due to higher interest rates earned on corporate funds;

Previous wording

•a $1.5 million decrease during the six months ended December 31, 2023, in discount associated with the measurement of cards receivable sold and held for sale at a lower of cost or market as we ceased selling acquired card receivables in August 2022; and partially offset by

Current wording

•a $1.5 million decrease during the nine months ended March 31, 2024 in expense related to a discount associated with the measurement of cards receivable sold and held for sale at a lower of cost or market as we ceased selling acquired card receivables in August 2022; and partially offset by

Previous wording

•a $1.2 million and $3.1 million increase during the three and six months ended December 31, 2023, respectively, in other expenses mainly due to interest expense primarily as the result of higher interest rates and increased borrowings under the Revolving Credit Facility.

Current wording

•a $0.5 million and $3.6 million increase during the three and nine months ended March 31, 2024, respectively, in other expenses mainly due to interest expense primarily as the result of higher interest rates and increased borrowings under the Revolving Credit Facility.

Previous wording

Provision for income taxes during the three and six months ended December 31, 2023 pertained mainly to an estimated cash tax liability resulting from the capitalization of R&D costs for federal and certain state tax purposes for the year ending June 30, 2024, offset, in part, by a reduction to the net deferred tax liability, as a result of our current year losses.

Current wording

Provision for income taxes during the three and nine months ended March 31, 2024 pertained mainly to an estimated cash tax liability resulting from the capitalization of R&D costs for federal and certain state tax purposes for the year ending June 30, 2024, offset, in part, by a reduction to the net deferred tax liability, as a result of our current year losses.