BILL Holdings Inc

(Unaudited)

NOTE 1 –THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES

Bill.com, Inc. was incorporated in the State of Delaware in April 2006. Bill.com Holdings, Inc. was incorporated in the State of Delaware in August 2018 (and renamed BILL Holdings, Inc. in February 2023). In November 2018, Bill.com, Inc. consummated a reorganization with BILL Holdings, Inc., resulting in the latter becoming the parent entity of Bill.com, Inc. BILL Holdings, Inc. and its wholly-owned subsidiaries are collectively referred to as the “Company”.

The Company is a provider of software-as-a-service, cloud-based payments, and spend and expense management products, which allow users to automate accounts payable and accounts receivable transactions, enable businesses to easily connect with their suppliers and/or customers to do business, eliminate expense reports, manage cash flows, and improve back-office efficiency.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and were prepared in conformity with U.S. generally accepted accounting principles (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect all normal and recurring adjustments that are, in the opinion of management, necessary to state fairly the Company’s financial position, results of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows for the periods presented. The results of operations for the three months ended September 30, 2024 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2025 or for any other future annual or interim period. The unaudited condensed consolidated balance sheets as of June 30, 2024 included herein was derived from the audited financial statements for the year ended June 30, 2024, but does not include all disclosures including certain notes required by GAAP on an annual reporting basis. All intercompany accounts and transactions have been eliminated.

These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024 (2024 10-K).

Segment Reporting

The Company operates asone operating segment because its chief operating decision maker, who is the Chief Executive Officer, reviews its financial information on a consolidated basis for purposes of making decisions regarding allocating resources and assessing performance. The Company's long-lived assets are located in the United States (U.S.) and revenue is mainly generated in the U.S. Total revenue from external customers outside of the U.S. was approximately 2% and 3% of consolidated total revenue during the three months ended September 30, 2024 and 2023, respectively.

Reclassification

Certain accounts in the prior period condensed consolidated statements of cash flows were reclassified to conform with the current year presentation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make various estimates and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and the accompanying notes. Management regularly assesses these estimates, including, but not limited to useful lives of long-lived assets; capitalization of internal-use software costs; the estimate of expected credit losses on accounts receivable, acquired card receivables, and loans held for investment; accrual for rewards; benefit periods used to amortize deferred costs; reserve for losses on funds held for customers; and valuation of deferred tax assets. The Company evaluates these estimates and assumptions and adjusts them accordingly. Actual results could differ from those estimates, and such differences may be material to the condensed consolidated financial statements.

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents

Cash and cash equivalents consist of cash in banks, highly liquid investments with maturities of three months or less at the time of purchase.

Restricted cash consists of (i) amounts restricted under deposit account control agreements, (ii) minimum cash balances that are required to be maintained by certain banks, (iii) cash collateral required by the Company’s lessors to satisfy letter of credit requirements under its lease agreements, (iv) cash collateral required by a bank in connection with the Company’s money transmission activities, and (v) cash in bank and cash deposits held by payment processing companies included in funds held for customers.

Restricted cash equivalents consist of highly liquid investments with maturities of three months or less at the time of purchase that are included in funds held for customers.

Except for the restricted cash included in funds held for customers, the current and non-current portion of the restricted cash is included in prepaid expenses and other current assets and in other assets, respectively, in the accompanying condensed consolidated balance sheets.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, restricted cash, restricted cash equivalents, short-term investments, accounts receivable, acquired card receivables, and loans held for investment (collectively referred to as Financial Assets). The Company maintains its cash, cash equivalents, restricted cash, restricted cash equivalents, and short-term investments with large multinational financial institutions that may at times exceed federally insured limits. Management believes that the financial institutions with which the Company does business are financially sound with minimal credit risk. Management further believes the associated risk of concentration for the Company’s investments is mitigated by holding a diversified portfolio of highly rated investments consisting of money market funds and short-term debt securities.

The Company performs credit evaluations to verify the credit quality of its Financial Assets and determine any at-risk receivables. As of September 30, 2024 and June 30, 2024, the allowance for expected credit losses related to accounts receivable, acquired card receivables, and loans held for investment totaled approximately $31.3 million and $25.8 million, respectively. These amounts do not include the immaterial allowance for expected credit losses on the card receivables that have been authorized but not cleared at the end of the periods.

There wereno customers that exceeded 10% of the Company’s total revenue during each of the three months ended September 30, 2024 and 2023.

Foreign Currency

The functional currency of the Company's foreign subsidiaries is the U.S. dollar, which is the Company's reporting currency. Gains and losses from the remeasurement of transactions denominated in foreign currencies other than the functional currency of the foreign subsidiaries are included in other income, net in the accompanying condensed consolidated statements of operations.

Significant Accounting Policies

There have been no changes to the Company’s significant accounting policies described in the 2024 10-K.

New Accounting Pronouncements and Disclosure Rules Not Yet Adopted

There have been no changes to the Company’s new accounting pronouncements and disclosures not yet adopted as described in the 2024 10-K, except as noted below:

In November 2024, the Financial Accounting Standards Board issued ASU 2024-03, Disaggregation of Income Statement Expenses (Topic 220), which requires additional disclosures, for interim and annual reporting, of expenses by nature, such as employee compensation, depreciation and amortization, and selling expenses. The updated standard will be effective for annual periods beginning in fiscal 2027 and interim periods beginning in the first quarter of fiscal 2028. Early adoption is permitted.This ASU will result in the required additional disclosures being included in the consolidated financial statements on a prospective basis, with the option for retrospective application, once adopted.

NOTE 2 –REVENUE

The Company generates revenue primarily from subscription and transaction fees. The table below shows the Company’s revenue from subscription and transaction fees, which are disaggregated by solutions, and revenue from interest on funds held for customers (in thousands). For the purpose of disaggregating revenue by solutions, the Company defines BILL AP/AR as transaction and subscription revenue derived from businesses that use its core BILL accounts payable and receivable platform; BILL Spend and Expense as interchange revenue derived from BILL Divvy Corporate Card transactions; and Embedded and Other Solutions as transaction and subscription revenue from businesses that access the Company's solutions through its embedded partners' platforms and other indirect sales channels (including financial institution partners), and Invoice2go revenue.

Deferred revenue

Fees from customers with which the Company has annual or multi-year contracts are generally billed in advance. These fees are initially recorded as deferred revenue and subsequently recognized as revenue as the performance obligation is satisfied. During the three months ended September 30, 2024, the Company recognized approximately $13.3 million of revenue that was included in the deferred revenue balance as of June 30, 2024.

Remaining performance obligations

The Company has performance obligations associated with commitments in customer contracts for future services that have not yet been recognized as revenue. As of September 30, 2024, the aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied), including deferred revenue, was $82.2 million. Of the total remaining performance obligations, the Company expects to recognize approximately 35% over the next year,20% between one to two years and 44% over the next three to five years thereafter. The Company determines remaining performance obligations at a point in time based on contracts with customers. The Company evaluates its customer relationships on an ongoing basis, and may selectively renegotiate certain terms of its agreements with financial institutions, accounting firms and SMBs. There were no subsequent events that would materially impact the amount of the remaining performance obligations as of September 30, 2024. However, actual amounts and timing of revenue recognized may differ due to subsequent contract modifications, renewals, and/or terminations.

Unbilled revenue

Unbilled revenue consists of revenue recognized that has not been billed to the customers yet. The unbilled revenue amounted to $17.0 million and $16.7 million as of September 30, 2024 and June 30, 2024, respectively.

NOTE 3 –FAIR VALUE MEASUREMENT

The Company measures and reports its cash equivalents, short-term investments, funds held for customers that are invested in money market funds and marketable debt securities at fair value. Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

The fair value hierarchy defines a three-level valuation hierarchy for disclosure of fair value measurements as follows:

Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 — Inputs other than quoted prices included within Level 1 that are observable, unadjusted quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity for the related assets or liabilities and typically reflect management’s estimate of assumptions that market participants would use in pricing the assets or liabilities.

In determining fair value, the Company utilizes quoted market prices, or valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, and also considers counterparty credit risk in its assessment of fair value.

The following table summarizes the fair values of the financial assets and liabilities, determined using quoted market prices of identical assets or market prices of similar assets from active markets as of the dates presented (in thousands):

(1)These liabilities are carried at par value, less the unamortized issuance costs in the accompanying condensed consolidated balance sheets.

There were no transfers of financial instruments between Level 1, Level 2, and Level 3 during the periods presented.

The Company's financial instruments that are not measured and recorded at fair value, including cash, restricted cash, acquired cards receivables, loans held for investment, interest receivable, incentive receivables and borrowings from revolving credit facility, are carried at amortized cost, which approximates their fair value. If these financial instruments were measured at fair value in the financial statements, cash would be classified as Level 1; restricted cash, interest receivables, incentive receivables and borrowings from revolving credit facility would be classified as Level 2 and the acquired card receivables and loans held for investment would be classified as Level 3 in the fair value hierarchy.

NOTE 4 –SHORT-TERM INVESTMENTS AND FUNDS HELD FOR CUSTOMERS

The following table summarizes the assets underlying short-term investments and funds held for customers as of the dates presented (in thousands):

(1) Represents interest income, accretion of discount (offset by amortization of premium), and net unrealized gains on customer funds that were invested in money market funds and short-term marketable debt securities. The Company contractually earns interest income on these investments, which is expected to be transferred into the Company’s corporate deposit account upon sale or settlement of the associated investment, and is not considered funds held for customers.

The following table summarizes the estimated fair value of available-for-sale debt securities included within short-term investments and funds held for customers as of the dates presented (in thousands):

The amortized cost and fair value amounts for short-term investments include interest receivables of $4.0 million and $4.9 million as of September 30, 2024 and June 30, 2024, respectively. The amortized cost and fair value amounts for funds held for customers include interest receivable of $10.7 million and $6.8 million as of September 30, 2024 and June 30, 2024, respectively.

The following table summarizes fair value of the Company's available-for-sale debt securities, included within short-term investments and funds held for customers, by remaining contractual maturity as of the dates presented (in thousands):

As of September 30, 2024, approximately 100 out of approximately 640 investments in available-for-sale debt securities were in an unrealized loss position. The following table shows gross unrealized losses and fair values for those investments that were in an unrealized loss position as of the dates presented (in thousands):

Unrealized losses have not been recognized into income as the Company neither intends to sell, nor anticipates that it is more likely than not that the Company will be required to sell, the securities before recovery of their amortized cost basis. The decline in fair value is due primarily to changes in market interest rates, rather than credit losses.

There have beenno significant realized gains or losses on the short-term investments and funds held for customers during the three months ended September 30, 2024 and 2023.

NOTE 5 –ACQUIRED CARD RECEIVABLES

As of September 30, 2024, approximately $142.3 million of the acquired card receivables balance served as collateral for the Company’s borrowings from the Revolving Credit Facility (see Note 7).

The Company incurred losses related to card transactions disputed by spending businesses. The amounts were not material during the three months ended September 30, 2024 and 2023.

The acquired card receivables balances do not include purchases of participation interests in card receivables from the Company's card issuing partner banks (Issuing Banks) that have not cleared at the end of the reporting period. Purchases of participation interests in card receivables that have not cleared as of

September 30, 2024 totaled $76.3 million. The Company recognized an immaterial amount of expected credit losses on the card receivables that have not cleared yet as of September 30, 2024.

Credit Quality Information

The Company regularly reviews collection experience, delinquencies, and net charge-offs in determining allowance for expected credit losses related to acquired card receivables. Historical collections rates have shown that days past due is the primary indicator of the likelihood of loss. The Company uses the delinquency trends or past due status of the acquired card receivables as the credit quality indicator. Acquired card receivables are considered past due if full payment is not received on the bill date or within a grace period, which is generally limited tofive days. Below is a summary of the acquired card receivables by class (i.e., past due status) as of the dates presented (in thousands):

Allowance for Expected Credit Losses

Below is a summary of the changes in allowance for expected credit losses (in thousands):

Purchases of acquired card receivables from the Issuing Banks during the three months ended September 30, 2024 and 2023 were $5.2 billion and $4.1 billion, respectively. The provision for expected credit losses related to acquired card receivables and charge-off amounts increased during the three months ended September 30, 2024 compared to the same prior year period due to portfolio growth.The increase in the allowance for expected credit losses as of September 30, 2024 compared to June 30, 2024 was due to an increase in delinquencies.

NOTE 6 –LOANS HELD FOR INVESTMENT

Loans held for investment represent funds advanced under either a term loan or line of credit agreement, through a partnership with a third-party bank (the Originating Bank Partner). Loans held for investment are included in prepaid expenses and other current assets in the accompanying consolidated balance sheets and consisted of the following as of the dates presented (in thousands):

(1) The outstanding balance of term loans, originated during fiscal 2024, was $11.2 million and $24.2 million as of September 30, 2024 and June 30, 2024, respectively. There wereno term loans originated during the three months ended September 30, 2024.

Credit Quality Information

The Company conducts an eligibility assessment prior to loan origination by the Originating Bank Partner. This process is performed at the invoice level and involves evaluating the invoice repayment likelihood by the respective network members associated with each invoice. Subsequently, the credit quality of these loans is monitored based on the delinquency trends or past due status of the loans held for investment, which are considered the credit quality indicators. Loans held for investment are considered past due if payment is not received within the terms set by the term loan or line of credit agreement. The outstanding balance of loans held for investment considered past due was not material as of September 30, 2024 and June 30, 2024.

NOTE 7 –DEBT AND BORROWINGS

Debt and borrowings consisted of the following (in thousands):

(1)Unamortized debt issuance costs balance for the Revolving Credit Facility was $0.5 million and $0.6 million as of September 30, 2024 and June 30, 2024, respectively, and is included in other assets on the condensed consolidated balance sheets.

Convertible senior notes

On November 30, 2020, the Company issued $1.15 billion in aggregate principal amount of its 0% convertible senior notes due on December 1, 2025, in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the 2025 Notes). The 2025 Notes are subject to the terms and conditions of the indenture governing the 2025 Notes between the Company and Wells Fargo Bank, N.A., as trustee (in its respective capacity as the trustee for each of the 2025 Notes and the 2027 Notes (as defined below), as applicable, the Notes Trustee). The net proceeds from the issuance of the 2025 Notes were $1.13 billion, after deducting debt discount and debt issuance costs totaling $20.6 million. In fiscal 2024, the Company repurchased $982.7 million aggregate principal amount of the 2025 Notes in privately- negotiated transactions. As of September 30, 2024, $167.3 million aggregate principal amount of the 2025 Notes remained outstanding.

On September 24, 2021, the Company issued $575.0 million in aggregate principal amount of its 0% convertible senior notes due on April 1, 2027, in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the 2027 Notes, and together with the 2025 Notes, the Notes). The 2027 Notes are subject to the terms and conditions of the indenture governing the 2027 Notes between the Company and the Notes Trustee. The net proceeds from the issuance of the 2027 Notes were $560.1 million, after deducting debt discount and debt issuance costs totaling $14.9 million.

The "if-converted" value of the Notes did not exceed the principal amount of $0.7 billion as of each of September 30, 2024 and June 30, 2024.

Capped Call Transactions

In conjunction with the issuance of each of the 2025 Notes and the 2027 Notes, the Company entered into capped call transactions (collectively, the Capped Calls). In fiscal 2024, the Company terminated the Capped Calls previously entered into in connection with the issuance of the 2025 Notes.

Revolving Credit Facility

The Company's Revolving Credit and Security Agreement (as amended from time to time, the Revolving Credit Facility) was initially executed in March 2021, amended in August 2022 to finance the acquisition of card receivables and increase the borrowing capacity, and further amended in March 2024 to extend the maturity date and further increase the borrowing capacity. The Revolving Credit Facility matures in June 2026 or earlier pursuant to the agreement and has a total commitment of $300.0 million. Total outstanding borrowings were $180.0 million as of September 30, 2024. The Company is required to comply with certain restricted covenants, including liquidity requirements. As of September 30, 2024, the Company was in compliance with those covenants.

The amortization of the debt issuance costs and debt premium is recorded in other income, net in the accompanying condensed consolidated statement of operations and during each of the three months ended September 30, 2024 and 2023 was not material.

NOTE 8 –STOCKHOLDERS’ EQUITY

Stock Based Compensation

Stock-based compensation by award type (in thousands):

Stock-based compensation was included in the following line items in the accompanying condensed consolidated statements of operations and condensed consolidated balance sheets (in thousands):

Share Repurchase Program

In August 2024, the Company's Board of Directors approved a new share repurchase program, pursuant to which the Company announced its intention to purchase up to $300 million of its outstanding shares of common stock (the August 2024 Share Repurchase Program). Under the August 2024 Share Repurchase Program, the Company may repurchase shares from time to time through open market purchases, in privately negotiated transactions, or by other means, including through the use of trading plans. The timing and total amount of stock repurchases will depend upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. The August 2024 Share Repurchase Program has no mandated end date, may be suspended, discontinued or modified at any time, and does not obligate the Company to acquire any amount of common stock.

During the three months ended September 30, 2024, the Company repurchased and subsequently retired 3,711,246 shares for $201.7 million under the August 2024 Share Repurchase Program, including the immaterial amount of accrued excise tax. The total price of the shares repurchased and related transaction costs are reflected as a reduction of common stock and an increase to accumulated deficit on the Company's condensed consolidated balance sheets. As of September 30, 2024, approximately $100.0 million remained available for future share repurchases under the August 2024 Share Repurchase Program.

NOTE 9 –OTHER INCOME, NET

Other income, net consisted of the following for the periods presented (in thousands):

NOTE 10 –INCOME TAXES

The Company’s provision for income taxes during the interim periods is determined using an estimate of the Company’s annual effective tax rate, which is adjusted for certain discrete tax items during the interim period. For the three months ended September 30, 2024 and 2023, the Company's income tax provision was approximately $1.3 million and $0.5 million, respectively.

The Company’s effective tax rate differs from the federal statutory rate primarily due to its federal, state and foreign valuation allowance positions. The income tax provision during the three months ended September 30, 2024 pertained mainly to an estimated cash tax liability resulting primarily from the capitalization of R&D costs for federal and certain state tax purposes for the year ending June 30, 2025.

The Company has subsidiaries in the U.S, Canada, and Australia and may be subject to income tax audits in those jurisdictions. The Company records liabilities related to uncertain tax positions, which provide adequate reserves for income tax uncertainties in all open tax years. Due to the Company’s history of tax losses, all years remain open to tax audit. The Company’s management evaluates the realizability of the Company’s deferred tax assets based on all available evidence, both positive and negative. The realization of net deferred tax assets is dependent on the Company’s ability to generate sufficient future taxable income during the foreseeable future.

NOTE 11 –COMMITMENTS AND CONTINGENCIES

Unused Credit Arrangements

As of September 30, 2024, the Company, in partnership with the Issuing Banks and the Originating Bank Partner, had approximately $3.1 billion in unused credit available to spending businesses and borrowers using the invoice financing product. While this balance represents the total unused credit available, historical trends and current expectations indicate that the unused credit will likely not be fully utilized by spending businesses and borrowers using the invoice financing product at any one time.

The Company manages credit risk exposure by limiting total credit for each spending business and borrowers using the invoice financing product. The Company periodically reviews credit lines to assess different factors, including account usage and creditworthiness of spending businesses and borrowers using the invoice financing product. The credit lines can be terminated by the Company at any time, and they do not necessarily represent future cash requirements. The Company does not record a liability for expected credit losses for unused lines of credit as they are unconditionally cancellable.

Commitments

During the three months ended September 30, 2024 there have been no material changes to the Company's contractual obligations or commitments from those disclosed in Note 15 to the financial statements in the 2024 10-K.

Litigation

From time to time, the Company is involved in lawsuits, claims, investigations, and proceedings that arise in the ordinary course of business. The Company records a provision for a liability when management believes that it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. As of each of September 30, 2024 and June 30, 2024, the Company’s reserve for litigation is immaterial. The Company reviews these provisions periodically and adjusts these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case. Litigation is inherently unpredictable.

NOTE 12 –NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS

The following table presents the calculation of basic and diluted net income (loss) per share attributable to common stockholders (in thousands, except per share amounts):

(1)For the three months ended September 30, 2024, the dilutive effect of outstanding equity awards is reflected in diluted earnings per share by application of the treasury stock method and if-converted method, respectively.

Potentially dilutive securities, which were excluded from the diluted net income (loss) per share calculations because they would have been antidilutive were as follows as of the dates presented (in thousands):

Shares issuable under the Notes is subject to adjustment up to approximately 3.6 million shares if certain corporate events occur prior to the maturity date of the Notes or if the Company issues a notice of redemption. As of September 30, 2024, no conversion was triggered for either the 2025 Notes or the 2027 Notes.