Hello, and welcome to Bill.com's third quarter fiscal year 2022 earnings conference call. My name is Alex, and I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star one on your telephone keypad. If you would like to withdraw your question, you may press star two. I will now hand over to your host, Karen Sansot, Vice President of Investor Relations. Over to you, Karen.
Thank you, operator. Welcome to Bill.com's fiscal third quarter 2022 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. 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.
At times during this call, we will discuss organic or standalone results, which exclude Divvy and Invoice2go, which we acquired on June 1, 2021 and September 1, 2021, respectively, to help listeners understand our organic performance. Now I'll turn the call over to René. René?
Thank you, Karen. Good afternoon, everyone. Thank you for joining us today. Bill.com produced great results in the third quarter. Total revenue increased 179% year-over-year. Bill.com's organic core revenue grew 74% year-over-year, and revenue from our Divvy spend management solution increased 155% year-over-year. Additionally, our non-GAAP gross margin was 85%, and our non-GAAP net loss was much lower than we expected. We are delivering meaningful growth at scale while continuing our track record of efficient operational execution. We are the leader in helping small and mid-sized businesses transform and automate their financial operations so they can easily gain control of their spend and cash management. Our growth this quarter demonstrates that demand for our solution continues to be robust.
As of the end of fiscal Q3, more than 380,000 businesses trusted Bill.com to manage their financial operations, and we processed over $55 billion of total payment volume on our platform. We know that in inflationary times, businesses increasingly seek cost-effective solutions that provide cash management control and increased visibility. The powerful combination of our platform and go-to-market ecosystem delivered more than 11,000 net new Bill.com organic customers in the third quarter. We experienced strong demand across all channels, particularly among financial institutions, where our white label platform for Bank of America's small business customers continued to roll out to new regions in the U.S. During the quarter, we reorganized, fully integrating the Divvy and Invoice2go employees into the Bill.com organization. We are now one team focused on building an integrated, easy-to-use solution for customers.
We are combining Bill.com's AP platform, powerful distribution capabilities, and significant scale with Divvy's spend management expertise, customer success initiatives, and modern design, and with Invoice2go's accounts receivable capabilities, mobile experiences, and global reach. Having a combined team will enable us to move faster. With remote work capabilities now being essential for businesses of all sizes, SMBs increasingly need to reduce the complexity of their businesses. They want fewer solutions and tools to run their back office. A great example of how we help companies streamline their operations is InfluenceLogic, an online marketing platform that helps SMBs grow.
Samantha Parsik, Director of Finance, said, and I quote, "Prior to adopting Bill.com, our international payment process was manual and time-consuming. We had to go to a bank for international payments and track AP with an Excel spreadsheet. Bill.com really simplified our process and improved the timeliness of our payments. We also adopted Divvy, which has become our go-to program for all payments outside of the accounts payable process. Having AP and spend management in one place makes managing and tracking payments and spend way more efficient. It reduces the amount of time spent toggling between different solutions and gives me more confidence in our financial operations." End quote. Every employee at Bill.com is energized by the value we create for our customers and the very large market opportunity ahead of us, with 30 million micro, small, and mid-sized businesses in the U.S., and more than 70 million globally.
A key component of our go-to-market is the relationships we have built with the strategic partners. These partners enable us to efficiently reach the long tail of SMBs who do not have the time or the resources to keep up on the latest trends in back-office automation. Accountants and banks are the most trusted advisors to SMBs, and as trusted advisors, SMBs look to them first to recommend new tools and technologies that can help improve their businesses. We have been investing in our relationships with accounting professionals since Bill.com's inception. Our platform enables accounting firms to automate routine manual tasks, freeing staff to offer value-added client advisory services, called CAS, to their clients. Accounting firms that have embraced CAS have strengthened their relationships with clients, expanding far beyond bookkeeping and tax preparation to become strategic advisors.
This quarter, we expanded our long-standing exclusive partnership with CPA.com, the business and technology arm of the American Institute of CPAs, known as the AICPA, the world's largest member association representing the CPA profession. CPA.com serves more than 400,000 members of the AICPA by identifying emerging trends and technologies and providing education, training, and other resources. In recognition of Divvy's leadership position in the spend management arena, CPA.com has selected Divvy as its exclusive partner for expense management, corporate cards, and spend management.
Erik Asgeirsson, President and CEO of CPA.com, said, and I quote, "We are thrilled to build upon our long history of success with Bill.com, who has been instrumental in the evolution and broad adoption of CAS by accounting firms. Now, with the powerful combination of Bill.com and Divvy, we will continue to help firms expand their role as the most trusted advisors as we define the next generation of CAS."
Moving on to financial institutions. During the quarter, we continued our planned rollout with Bank of America. The service is now available in all 50 states for new small business customers within the online banking experience. We are excited that this new white label platform extends our reach beyond Bank of America's commercial customers. We will continue to support BofA's rollout throughout calendar 2022 to drive awareness and adoption of the new platform. In addition to strengthening our strategic partnerships, we have continued our rapid pace of innovation as we broaden the portfolio of payment and funding options our customers have to choose from.
During the quarter, we introduced an early version of enhanced ACH, which provides large vendors with faster payment speed and rich remittance data. This offering complements our menu of ad valorem payment offerings, including virtual card, cross-border, Instant Transfer, and Pay By Card. These offerings enable us to provide more value to customers, and as a result, increase our share of wallet for their payment flows. We are scaling our organization to address the large global opportunity ahead of us and to build a solid foundation for becoming a multibillion-dollar company. As we do so, our people continue to be the key to our success. I am happy to announce two new additions to the Bill.com team. First, we have a new Chief People Officer, Michael DeAngelo.
I am excited to work with Michael to tap his global experience scaling teams and organizations from startups to large public companies, including Pinterest, Google, and Microsoft. His experience aligns with our global ambitions. Michael takes over from Jackie Hendy, who has led our people team for the last eight years. I would like to thank Jackie for all of her contributions to our success and for being a wonderful partner to me and the team. Second, we have added Aida Álvarez to our board of directors. Aida brings a wealth of experience from large public boards like Walmart and HP, and having served in the first cabinet-level position for the Small Business Administration under President Bill Clinton, she brings deep knowledge of SMBs. In addition, Mark Lenhard, the CEO of Invoice2go and Bill.com's COO, will be leaving the company in September.
Mark has helped us quickly complete organizational integration across the three companies, and the one-year anniversary of the Invoice2go acquisition marks the right timing for Mark to pursue his entrepreneurial interests. In closing, we delivered another strong quarter of results driven by focused execution against our objectives. Each of our 2,000 employees is inspired by the opportunity to help hundreds of thousands of businesses transform their financial operations so they can focus on their passions, the reasons they started their businesses. I'll now turn the call over to John to talk in more detail about our quarter.
Thanks, René. Today, I'll provide an overview of our fiscal third quarter 2022 financial results and discuss our outlook for the fiscal fourth quarter and full fiscal year 2022. 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. We delivered strong Q3 financial results, with total revenue growth of 179% year-over-year and non-GAAP gross margin of 84.6%. In Q3, organic core revenue grew 74% year-over-year. Divvy standalone revenue growth was 155% year-over-year. Our revenue performance in Q3 led to a non-GAAP net loss per share that was significantly better than our expectations.
We have excellent organic momentum across our solutions, and we're excited by our vision for a unified platform experience to enhance our market opportunity. We continue to invest behind opportunities with strong unit economics, which creates operating efficiency as we scale. Before we jump into a discussion of our results, I'd like to comment on two top-of-mind macro factors and how they impact our business, inflation and interest rates. Regarding inflation, we have heard from customers that price increases for goods, services, and employee salaries are collectively creating pressure in their businesses. The magnitude of the impact obviously varies by company. Because Bill.com provides visibility into spend and cash flow, our platform gives businesses looking for cost efficiencies the tools to redirect resources where they are needed most in the current environment.
It is likely that inflation to date has had a positive impact on our total payment volume growth, though we believe the impact is immaterial overall. Like most businesses, BILL.com is also experiencing cost increases, and we're diligently managing this trend. On the topic of interest rates, we generate float revenue from interest earned on funds held for customers. Assuming recent FBO balances of $3 billion-$3.5 billion, every 100 basis points increase in the Fed funds rate would result in approximately $30 million-$35 million in incremental annual float revenue, though there will be a lag effect until current FBO investments mature and are reinvested in higher-yielding securities. We also earn interest income on our corporate cash balances.
While rising interest rates result in increased interest expense related to funding a portion of Divvy's card program, we expect this additional expense to be more than offset by increasing interest income. The net of these moving parts is that rising interest rates is a significant tailwind for Bill.com. Now turning to an update on our key metrics. We delivered a record quarter for customer acquisition in Q3. We ended the fiscal third quarter with 146,600 Bill.com organic customers, with net new adds of 11,600 in the quarter. New customers in the quarter exceeded our expectations, driven by robust demand across channels and significant strength in our financial institution channel.
Several of our financial institution partners added new customers at a much faster rate in Q3, driven by both faster rollout of the product across markets and new marketing initiatives that led to a step-up from Q2. Without the step-up from financial institution partners, net new customer adds in Q3 exceeded the upper end of our expectations. We ended Q3 with 18,100 spending businesses using our Divvy spend management solution, representing growth of 2,600 net new adds in the quarter. This is more than double the total number of spending businesses from a year ago when we announced the Divvy acquisition. In addition, we ended fiscal Q3 with 221,400 subscribers using our Invoice2go AR solution.
The slight decline in Invoice2go subscribers was due to the continued implementation of Bill.com's more rigorous onboarding flows that we discussed on our last call. We believe the application of Bill.com's flows will yield higher value customers that generate more payment volume and revenue over time. We delivered strong organic total payment volume of $55 billion in Q3, representing 57% year-over-year growth and reflecting the expected seasonality that we shared with you on our last earnings call. During the quarter, we processed $2.1 billion in card transactions from spending businesses using our Divvy spend management solution, which is an increase of 118% year-over-year. Moving on to the number of transactions, we processed 9.5 million payments on the Bill.com platform in Q3, reflecting 32% year-over-year growth.
We also processed 5.9 million Divvy card transactions. Now I'll review our reported consolidated Q3 results. Total revenue was $166.9 million, up 179% year-over-year. Core revenue, which consists of subscription and transaction fees, was $165.5 million, representing growth of 182% year-over-year. Organic Bill.com core revenue was $102.1 million, an increase of 74% year-over-year, due to strong demand across channels and increased customer adoption of our ad valorem payment products. In addition to our organic core revenue strength, revenue from our spend management solution grew 155% year-over-year.
These results were driven by stronger than expected spend given typical Q3 seasonality and interchange income at approximately 260 basis points in the quarter. Subscription revenue increased to $52.2 million, up 78% year-over-year, driven by our growing customer base across all segments and the inclusion of Invoice2go subscribers. Bill.com organic subscription revenue growth was 48% year-over-year. Transaction revenue increased to $113.3 million, up 286% year-over-year due to TPV strength, increased adoption of our ad valorem products, and increasing spend on Divvy, which totaled $53.6 million in transaction revenue for Q3. Bill.com organic transaction revenue growth was 101% year-over-year. Turning to gross margin and our operating results for Q3.
Non-GAAP gross margin was 84.6%, well above our expectations, driven by a higher mix of interchange and variable transaction revenue. As a reminder, we manage a portfolio of payment offerings that have a range of margins and are in various stages of adoption, and we currently have a very favorable payment mix. In the short term, we expect non-GAAP gross margin to be slightly above the 79%-81% range we discussed previously. Non-GAAP operating expenses were $146.8 million, an increase of $17 million from Q2. We increased R&D investments related to integrating the products and technology from our recent acquisitions, in addition to enhancing our platform capabilities, including development of new payment offerings. Our sales and marketing expenses increased primarily due to expanding our go-to-market initiatives and increased rewards expense associated with our spend management solution.
Non-GAAP operating loss was $5.7 million, and our non-GAAP net loss was $8.7 million, or a net loss per share of $0.08, based on 103.8 million basic weighted shares outstanding. Our non-GAAP net loss was significantly better than our expectations given our strong revenue performance. Moving on to the balance sheet, cash equivalents and short-term investments at the end of Q3 were $2.8 billion, flat quarter-over-quarter. We continue to be well capitalized, enabling us to invest in our platform, expand our go-to-market capabilities, and extend our market leadership. As of March 31, 2022, we had $3 billion in customer funds on our balance sheet, which was down $337 million from the end of Q2 due to the previously mentioned TPP seasonality in Q3.
Shifting to our financial outlook for the fiscal fourth quarter and full fiscal year 2022. As discussed earlier, we're closely monitoring the macro environment and our fiscal 2022 outlook assumes that macro factors do not have a material negative impact on our business. For fiscal Q4, we expect total revenue to be in the range of $182.3 million-$183.3 million for Q4. Bill.com organic core annual revenue growth is expected to be approximately 60% on a standalone basis, while Divvy spend management revenue is expected to grow approximately 120% year-over-year from approximately $29 million in fiscal Q4 of 2021. We are beginning to see yields increase in our FBO funds, which should lead to float revenue of approximately $2.5 million in Q4.
In terms of operating expenses, we expect to continue our rapid pace of innovation by investing in our platform, scaling with accounting and financial institution partners, and enhancing our go-to-market capabilities. On the bottom line, for Q4, we expect to report a non-GAAP net loss in the range of $14.9 million-$13.9 million, and a non-GAAP loss per share of $0.14-$0.13 based on a share count of 104 million basic weighted shares outstanding. For fiscal 2022, we expect total revenue to be in the range of $624 million-$625 million. This assumes organic or standalone Bill.com core revenue growth of approximately 73% in fiscal 2022.
We expect to report a non-GAAP net loss for fiscal 2022 in the range of $35.9 million-$34.9 million, and a non-GAAP loss per share of $0.35-$0.34 based on a share count of 101.7 million basic weighted shares outstanding. We are diligently executing against our fiscal 2022 strategic priorities, including integrating Divvy and Invoice2go, expanding our payment offerings and our platform, driving monetization of our products, and extending our reach. We've made substantial progress investing in these priorities. This, combined with our efficient go-to-market motion and strong unit economics, means we're also on track to deliver a net loss less than half of our initial outlook for fiscal 2022. We believe there is a significant greenfield opportunity ahead of us to help millions of businesses manage their cash flows and transform their financial operations.
Our broad platform capabilities, diverse distribution ecosystem, and increasing scale uniquely position us to be the de facto financial operations platform for companies ranging from sole proprietors and freelancers to mid-market companies. Operator, we are now ready to take questions.
Thank you. If you'd like to ask a question, you can press star one on your telephone keypad. If you'd like to withdraw your question, you may press star two. Please ensure you're unmuted locally when asking your question. Our first question for today comes from Darrin Peller of Wolfe Research. Darrin, your line is now open.
Hey, thanks, guys. You know, I wanted to touch on the customer adds, given the magnitude of the numbers coming out of quarters where you were, you know, anywhere from 5,000 to 6,000 . You had 8,000 last time, but had guided around 6,000, ended up with 10,000+ , I think it was 10,000 to 11,000 net adds. So very strong. I'm curious what, if you could just give us more granularity on what's really driving that beyond, you know, including the financials and others and maybe a little bit more color on the revenue pass through from those incremental adds.
Thank you, Darrin. It was definitely a great quarter. You know, we've been building this multi-channel distribution strategy for a long time. We're unique in the way that we go to market with our direct accountant and financial institution partners, and all channels delivered great results this quarter. Specifically, we had a really strong quarter in the financial institution, and that's in part because the Bank of America offering, where we are the default solution for their new small business customers when it comes to bill pay, that is now in pilot in all 50 states. There's more to roll out there through the year. That, you know, started coming on in this quarter, and that was great. We also had another regional bank that did some marketing efforts to consolidate multiple bill pay solutions onto our platform.
A couple of call outs for the FIs, but in general, it goes back to that great distribution strategy that we've built over the coming years.
It sounds broad, but the FI is obviously helping out quite a bit. Just to remind us, the revenue model with these FIs, if you don't mind just explaining that one more time, just given how much they're contributing now. Also on the Divvy side, I mean, are we seeing the benefit of cross-sell in terms of customer numbers, either on Divvy's side or even on the BILL side to some degree yet?
Yeah, Darrin, let me take the first part of that question on the FIs and the model and how the revenue flow through works. As René mentioned, we had, you know, great performance from the FI channel in the quarter and the 11,000+ net adds was in large part from the success there. There's a pretty significant lag effect before those adds actually contribute to revenue growth. Our arrangements with most of our financial institution partners are under sort of minimum guarantees with commitments to certain customer and adoption levels. It takes many quarters, in some cases, a year or two to grow into those minimums. It's a great indicator of how the platform is working and being successful in the market.
Over time, we expect that to produce, you know, revenue results. The second part of the question, maybe I'll start and see if René has anything to add. On the Divvy cross-sell, as noted on the prepared remarks, we had, you know, great organic growth from Divvy, and the vast majority of that is actually still their organic momentum selling into the market. It's really early in the adoption cycle of spend management, expense management, and the smart, you know, corporate card, and they're having great success in the market driving growth. We are starting to make progress with cross-sell and introducing the product to the Bill.com customer base, but I wouldn't say that's a significant contributor to the growth at this point. René, I don't know if you have anything to add.
I think that's great. Perfect.
Great. Thanks a lot, guys.
Thank you, Darrin.
Thank you. Our next question comes from Bryan Keane of Deutsche Bank. Brian, your line is now open.
Yeah. Hi, guys. Just wanted to ask about Instant Transfer and that rollout, first enhanced ACH and the target markets for that, and then how that all is gonna roll up for maybe higher yields, for you guys going forward. Thanks.
Thank you, Brian. Part of the unique sauce of Bill.com is the robust payment platform that we have, the ability to serve customers that are, you know, paying their bills and suppliers that are receiving those payments. What you've seen over the last couple of years is us investing in payment options for the suppliers. Instant Transfer is one of those examples where the supplier is able to say, "Hey, I'd like to have my money now versus the coming days via a check or maybe even a week if it's a check." That option is something that we, you know, obviously think is important.
The enhanced ACH is also for suppliers, where there are some suppliers that would prefer to have more data on the transaction than what is able to go through our normal transactions on the ACH rails. Having the ability to kind of both provide the data and potentially accelerate the ACH payment for those suppliers is important. I think what you're seeing is just kind of the broad capabilities of our platform to continue to serve customers that are, you know, interested in us from a payables perspective and customers, suppliers, if you will, that need assistance in you know, accepting payments and accelerating their payment timing.
All in all, it's, you know, it's something that we feel is gonna be important for the business model and something that we work hard to provide the optionality that businesses need when they need it.
Got it. John, any thoughts just on yields then on how that all rolls up?
Sure. Both Instant Transfer or real-time payments and the enhanced ACH product monetize at a similar level. It should be additive to our overall monetization. It's, I think there's, as René mentioned, a big opportunity to get the right payment method in front of the right supplier or buyer. I think over time, both of them will contribute to continued expansion of our monetization versus our overall monetization where we are today, which is still quite low.
Great. Thanks for taking the questions.
Thank you.
Thank you. Our next question comes from Josh Beck of KeyBanc. Josh, your line is now open.
Thank you so much for taking the question. I wanted to ask a little bit of a macro angle. Certainly, inflation is really rearing its head. I'm just curious with respect to some of your customers, do you see them maybe delaying purchases, in some cases, or maybe just trying to be more prudent with some of their expenses? Just curious if there's any factors like that that came into play, you know, this quarter or that we should be mindful of, you know, as we think about the future.
Thank you, Josh. To date, you know, we've seen very minimal, immaterial impact from the inflationary environment. What I would note is that in an inflationary environment, businesses and small businesses, we know, are resilient, and they will look to ways to be more efficient in their business. Our business and platform enables businesses to save 50% of the time it takes to manage those financial operations that we talk about. When that means you can, you know, save, you know, resources and allocate them to other parts of the business, save time for yourself, for your team, so they can do more with the time that they have. We believe that this is a counter effect, you know, so that basically counteracts the inflationary pressures that our product enables, you know, a much better experience for our customers.
We've not seen any pullback and believe that, you know, this is something that will continue to be the, you know, part of the transformation, digital transformation.
Okay. Very helpful. Maybe to follow up, I think on Darrin's question about the synergies. There's lots of different avenues, if you will, when you think about, obviously, the Bill.com core customers, the suppliers, Divvy customers, Invoice2go. There's just many different paths between them where you could obviously do a cross-sell. I'm just wondering as we start to think about next fiscal year, are there certain ones out of the gate where maybe there's a clearer or stronger path to realizing those synergies or, you know, will they all kind of start to materialize at a similar cadence? Just curious if there's any other color you can share on that topic.
I think in general, one of the things that you see from us is that, you know, we're a business that is at scale. We move over $200 billion, $220 billion on a run rate basis from a TPV perspective. You know, 146,000 businesses now using the core BILL platform, 380,000 across all three offerings that we have. What I see is that there are synergies as we continue to scale and grow, that there are opportunities to, you know, lean in into the network. You know, the last number we discussed was over three million in the network. The opportunity to lean in and have services for them, such as the payment products we talked about, that's one thing.
There's opportunities on the core services that we have that we expect we'll be able to make progress on as we continue to scale and grow the business. There definitely are synergies. It's something that, you know, we're starting to see and something that we're working on to enhance the experience for our customers.
Thanks, René.
Thank you, Josh.
Thank you. Our next question comes from Brent Bracelin of Piper Sandler. Brent, your line is now open.
Thank you. Good afternoon. Maybe we'll start with John. Quick follow-up for René. John, on the guidance for June, it does look like you're guiding to a very strong quarter here. Looks like June could actually be stronger than the March quarter. Can you just talk a little bit about the monthly TPV trends you're seeing or as you see travel come back, is that helping either the Bill.com kind of business so far this quarter? Just any sort of color around TPV trends and what's giving you optimism for that June quarter. Thanks.
Sure. Thanks, Brent. Yeah, we're, I think, excited about the growth prospects ahead and feel good about the fourth quarter in our fiscal year. As expected, the Q3 seasonality in TPV did materialize. With our Divvy solution, we are able to get, you know, insights into travel and entertainment spend relative to other categories. Now it's not a huge category for Divvy, but we have seen some increases there throughout this calendar year. It looks like there is the beginning of additional T&E spend flowing through to both Divvy and small businesses at large.
Generally speaking, that doesn't move the needle for Bill.com's numbers overall, but I would expect to see, you know, progress with continuing to drive growth with TPV in our next quarter as suggested by our guidance.
Super helpful. René, I'll ask the follow-up on the macro. As you can tell from this call, all of the inbound engagement with investors is really trying to understand the macro and how you're navigating it. My question for you is do you think this multi-channel strategy can help somewhat insulate the business as you think about some of the headwinds going forward? I mean, the step up in new customer adds this quarter is huge. Just trying to think through the logic of can that continue going forward as we think of as a potential offset to some of these macro headwinds out there? Just or do you think there's an environment where more small businesses will turn to software in a challenging environment?
Just trying to understand the huge step up and how you plan to navigate these macro challenges. Thanks.
Yeah. Thank you, Brent. The short answer is I think it's both, right? We've worked hard to build this multi-channel strategy. It's unique, our approach to being able to serve customers at, you know, the smallest businesses to large mid-market businesses. All of that and any particular vertical, you know, that a customer might be in across all the channels, that's hard stuff to do, but it does mean that in any market there's lots of opportunity for resiliency. You know, we saw with COVID that SMBs were resilient and we, you know, we're able to show growth through that.
We see that the opportunity for the macro environment in general is that the channels and the numbers that we have, you know, delivered this quarter show the, you know, kind of the indicator and the power of having a multi-distribution channel strategy. Yes, I think there's that. I also think that there's going to be, you know, plenty of more, I guess, if you will, tailwind, which we've talked about the digital transformation coming out of COVID being a tailwind. There's gonna be more, you know, interest and potentially pressure from an inflation perspective on businesses thinking about efficiency and on them thinking about how do you operate, you know, in a hybrid environment and thinking about how to manage their costs. We know that, you know, customers can double their business without increasing their staff on our platform.
If the business is not growing as much, then you're looking for ways to save money, and we know we can help businesses with that as well.
Helpful color. Thank you.
Thank you.
Thank you. Our next question comes from William Nance of Goldman Sachs. William, your line is now open.
Hey, guys. Thanks for taking the question. I wanted to ask a question actually on the competitive environment. You know, we've gotten a number of questions from a few different angles on, you know, what competition in this space looks like over time as you get more new entrants in the space, particularly around some of the partners that you guys actually work with QuickBooks and Intuit. So I'm wondering if you could just maybe talk about, you know, the barriers to entry and, you know, maybe the head start that you guys have and how you think about, you know, the space getting kinda more competitive over time.
Thank you, William . The most, you know, important thing about the market is it's just a massive market, right? People today are using paper as the primary form of managing their financial operations. Competitively, you know, that's what we're dislodging. Having a platform that is robust and has the ability to do what we do across multiple, you know, like I said earlier, you know, any size business essentially up to the, you know, the large mid-market companies that we serve, all the way down to the smallest businesses that are SOHOs. Having that ability does provide, you know, we think unique advantage in this, go-to-market solution. I think the, you know, the, competitive environment, you know, broadly is gonna be focused on people switching from paper to digital.
I think our channel approach will allow us to get the awareness out to businesses of all sizes and all industries. I think, you know, our head start on scale allows us to be able to really deliver value for customers at a very reasonable price.
Got it. Appreciate the color.
Thank you, William.
Thank you. Our next question comes from Brad Sills of BofA Securities. Brad, your line is now open.
Oh, great. Thanks, guys, for taking my question. Nice result on the quarter. I wanted to ask about just the magnitude of upside. In the past, we've seen a bigger upside to your guidance. Just, is there any change in guidance philosophy, John, that we should be thinking about going forward?
Thanks, Brad. Yeah, no change in guidance. We work hard to let everyone know what we're seeing with the business and then follow through with, you know, try to do better on those results. It's reasonable to expect as we get bigger, you know, we're gonna come in closer to our expectations. The business is healthy. The fundamentals are strong. We're really happy with the growth that we delivered in the quarter, in particular the organic strength. I think our guidance implies going forward that we expect additional growth.
Great to hear. Thanks, John. One more if I may please. Just any color on virtual card cross-border. It looks like a nice result again this quarter in your step up in your continued monetization, the take rate there for transaction against TPV. Just any color on those two in particular. Looks like the Divvy number was very strong as well.
Yeah. With regards to the virtual card product and cross-border payments, we continue to see incremental adoption from customers and suppliers that is adding to our monetization expansion, and we feel really good about that. We've been, you know, growing revenue per transaction north of 50% every quarter since we've been public, our annual growth rate. And we still have a long way to go, frankly, in driving adoption of some of those products relative to our longer term penetration targets that we've talked about on the last few calls. They continue to be good drivers. Our TPV growth this quarter was a little bit lower than last quarter. And we would expect though that with continued adoption of those products and growing TPV that there's good things ahead.
John.
Thank you. Our next question comes from Andrew Bauch of SMBC Nikko America. Andrew, your line is now open.
Hey, everyone, and thank you for taking my question. Wanted to drill into the CPA.com and Divvy relationship a little bit further. I mean, obviously CPA.com has been a key variable to help Bill.com roll out the, you know, the core BILL platform to a lot of these accounting firms. Maybe there's two or three things that you've learned in doing that over the past that you can apply well to Divvy, going forward.
Thank you, Andrew. Yeah, the CPA.com relationship has definitely been a part of our journey and success in reaching accountants, especially top 100 accounting firms and the top 5,000 across the country. With over 5,500 firms on the platform, I do feel the experience, like you referenced, that we've learned in acquiring customers is going to be meaningful as we sell new services into the accountants, such as Divvy. The opportunity with CPA.com was to really look at where accountants are today and to really, you know, think hard about how can we help accountants continue to evolve and adapt in the market as technology is becoming more and more important part of how business is done.
With CPA.com, you know, the partnership is an exclusive partnership where we will be the exclusive provider of spend management, expense management solutions on top of already being the exclusive provider for bill payment. We think that allows focus from an awareness perspective and building, you know, the market the way it needs to be built. The conversations with the top firms at any of the conferences, having all of that be focused on how to help firms actually add clients and support their clients with more robust tools that enable efficiency and enable the firms to actually drive more revenue for them, that's the alignment that we have with CPA.com, and that's what we've shown that we were able to do to date.
This is just gonna be another quiver in the bow, whatever the phrase is. I'm mixing that up, but you know what I mean.
Yeah. It's a pretty effective mousetrap. My follow-up would be looking at slide number seven, you know, you guys have done a really great job executing in the United States, but I continue to think about that global opportunity and expanding the reach of the platform, or particularly now as you have Invoice2go. I mean, what are the real obstacles to your business in regards to expanding internationally and what kind of things are you looking at that may accelerate that push?
One of the things that we were, you know, excited about with Invoice2go is the fact that they do operate customers in, you know, over 150 countries. You combine that with the international payments that we do, which is also in the hundreds of countries that we support and move money to. It gives us an opportunity to kind of, you know, think more aggressively in the long term about an international presence. I would say, you know, the obstacles aren't so much obstacles as much as we just acquired two companies in the last year. We're uniting the platform. We have a team now that is unified across the entire company to create the synergies and the product offering and the go-to-market experience for our customers to really drive, we think, a different experience around financial operations for SMBs.
That's gonna be our first focus. Once we have that focus, then, you know, obviously money movement's different in all the countries. We can focus on the details and logistics of executing on a broader international strategy. The fact is, we are international, today, with Invoice2go and feel good about the opportunity to drive the product experience to, you know, those customers over time.
Got it. Helpful. Thank you.
Thank you.
Thank you. Our next question comes from Scott Berg of Needham & Company. Scott, your line is now open.
Hi, René and John. Congrats on a great quarter, and thanks for taking my questions here. Kind of a little bit of a follow-up. I'm gonna ask it, I guess bluntly, just the way I received it in an email from one of your shareholders, was, "Hey, that was a great net adds quarter. How can they repeat that?" I'll ask you a little bit more eloquently, because I know you don't have the exact crystal ball. Given what the FIs did in the quarter and kinda where those contributions come from, I guess what's the right framework or secret sauce to kinda put together over the next six to maybe 24 months to drive customer adds that are kind of in that range to start getting you over those minimum thresholds?
I think the first thing that I think about is obviously building a great experience. If we just take B of A right now, you know, they have redesigned their go-to-market experience for SMBs that join the bank. We are part of that solution. You know, there's a lot of work on both teams to actually execute on that and to make sure that it's the right experience for customers. You know, we feel good about the ability to do what we've done to date, and that's why you're seeing some of the numbers that we were able to put up today. I think, you know, over the long term, this is the power of the distribution strategy that we have. We have multiple channels, multiple partners, multiple ways to continue to add and grow our customer base.
We're at 2% market penetration out of the six million businesses in the U.S. that have employees. There's so much opportunity in front of us, and having the multi-channel approach, we think is gonna, you know, continue to drive the type of success we saw this quarter, you know, from quarter-to-quarter.
Great, helpful. Then a question for you, John. You talked earlier. I forgot whose question it was, maybe it was Brad's, about maybe the upside to guidance going forward. Probably starts to narrow as the company scales in size, which I think we would certainly all understand. Turn that to the profitability range. You guys have been super impressive in your ability to drive leverage and create operational efficiencies given the growth rate. As you start to, you know, get to what might be an $800 million-$900 million revenue range over the next 12 to 18 months, can you still continue to grow at the scale and will you kinda burn cash or operate at what's pretty much a break-even level?
Do we see some maybe additional leverage in the model coming here going forward?
Yeah. Thanks for the question, Scott. We're feeling really good about our ability to balance, you know, growth, driving revenue, adoption, penetrating the market with creating efficiency as we grow. In particular, we've done a good job since we've been public at expanding gross margins. As you pointed out, we've operated with minimal losses. That's a recipe that we think works really well for us. We have had minimal losses. We reduced actually our non-GAAP net loss expectations this year as reflected in our guidance for Q4 and fiscal 2022. We'll have more to say about obviously fiscal 2023 and beyond in August when we deliver guidance for that year.
Our continued commitment is to balance, you know, the size of the market opportunity with our growth and investments and the efficiency with which we're delivering these results.
Great. That's all I have. Thanks for taking my questions.
Thanks, Scott.
Thank you. Our next question comes from Samad Samana from Jefferies. Samad, your line is now open.
Hi. Good afternoon. You know, guys, I just wanted to step back and say, I think it's pretty great to see 74% organic growth. I don't think any of us thought this around the time of the IPO that you'd still be posting this type of growth. Congrats on that. René, maybe that brings me to, you know, when I think about the core business, and I know it's been touched upon, but how are you seeing maybe lead flow to the top of the funnel? Has that changed? Has that increased? Or how is that trending? And maybe same question around conversion so far in May as well, just as BILL has gotten bigger, you've deployed more sales and marketing dollars and the brand is more well-known.
What are you seeing, in terms of inbounds to your funnel?
Great question, Samad. That is part of the reason, you know, why I said that we've had great success across all our channels. The ability of the direct team to drive more leads at the top of the funnel and the sales team to close more, all that is around good, rigorous execution, which the team's doing. It also is around awareness. Like you said, some of our partners provide awareness. Obviously being public provides some awareness, and the network provides awareness. The network, you know, well over three million network members today, an opportunity for us to continue to grow that and to really create more opportunities for those entities to come into the fold as well.
You know, I think, you know, when we look at the success that we're having, it is gonna be this multi-channel approach that's gonna drive success from quarter to quarter. You know, I think ultimately the awareness, you know, capabilities continue to scale obviously as we have more customers.
Great. John, maybe a question for you, and maybe this also includes your perspective as a CFO of a company yourself, but when you think about times where businesses are getting kind of, let's call it more constrained or feeling pressure like they're dealing with from inflation, do you think that products like virtual card and cross border and local currency that have variable fees, are they more valuable because they kind of accelerate the cash conversion cycle, or do you think that businesses are more sensitive to that? Just what are you seeing or hearing from your customers in that regard?
Great question, Samad. I think it really depends on the business and what their model is. I think for almost all businesses, you know, managing working capital and having quick access to cash in a way that can also create efficiency in the back office, so easy reconciliation, which means good data, those things are always in demand, probably more so in an environment where companies might be trying to create more efficiency or need cost savings or things like that. I don't think it's the absolute, say, cost of a transaction or something like that that's the big driver of decisions as much as the overall profile of the business and the way that they, you know, run their operations and create efficiency.
Great. Appreciate you taking my questions.
Thank you.
Thank you. Our next question comes from Jeff Cantwell of Wells Fargo. Jeff, your line is now open.
Hey, thank you. Thanks for taking my question. Let's just maybe take a step back and think about where we are in this macro environment right now and think about your capabilities, the company that you've built. Can you tell us how you feel right now about your ability going forward to penetrate that SMB TAM you guys have? We can see the 147,000 Bill.com customers, and the customer growth has really been there over the past several quarters now, and payment volumes were $55 billion this quarter. Cross-sell is getting more each time. Maybe can you help us think out a little bit here, any color in terms of what we should expect to see in terms of Bill.com customer adds as we think further out? You know, maybe talk about your confidence thinking through to next year, perhaps.
Any color there would be great. Thank you.
Well, I mean, first, thank you, Jeff. First, I would just focus on that we're at the beginning of a digital transformation of how business gets done. Business has been using paper. It's, you know, 80%-90% predominantly used by SMBs across the country as to how they manage. That's just not sustainable. It's not efficient. It's not, you know, obviously, in a hybrid environment, it's really not even possible to have paper in one place and be working someplace else. You know, we think that tailwind that, you know, maybe potentially started with COVID, was probably there beforehand, continues to grow just because more and more businesses are gonna be on the platform. Examples of this are just more and more transactions happen on our network than they've ever happened before.
More and more transactions are happening, you know, together, between Bill.com entities. That's gonna continue to grow. When I look out the long term, you know, we're just at the beginning, 2% of the customer of the employer's market out there is on our platform. There's a lot of opportunity ahead of us, and we're gonna focus on executing to deliver solutions for those businesses.
I would-
Yeah, John, I think you probably have something else to add.
I would just add, like, in addition to that confidence for being able to scale customer acquisition over the long term, given our investments in our go-to-market distribution. In the near term, we're still comfortable with net adds being around that 6,000 level, mainly because of our current investment programs and the incremental step-ups that we've seen, the success that we've driven from our financial institution partners and accounting firms. We don't necessarily control the timing of those, so there could be some incremental upside associated with that. Given our current, you know, trajectory, we still feel like the closer to 6,000 is the recurring net new add engine that we have at the moment with some opportunity for upside.
Okay, great. Appreciate that. Then secondly, can you talk a little more about expectations for future profitability? What are your thoughts on timeframe, et cetera? You know, because we can see Divvy layering in now, and you obviously have a couple strong quarters in a row on the bottom line. You know, anything that you can talk about there to help us think through, you know, for next year and so forth would be great. Thank you.
Sure. Yeah. We're very pleased with where we're at from a margin profile perspective. We focus in managing and balancing the investments and growth of the business. We focus predominantly on unit economics and making sure that we have a short payback period, so we can deploy capital and get a return on that quickly. We've been operating for a number of years now with very small non-GAAP net losses. I can't speak specifically to our fiscal 2023 at this point about the profitability profile, but we look forward to coming back to you with specifics in August on that.
Okay. Understood. Thanks very much, and congrats on the results.
Thank you.
Thank you. Our next question comes from Brian Schwartz of Oppenheimer. Brian, your line is now open.
Oh, thank you very much. Hi, René and John. Thanks for taking my questions. René, I thought I'd just ask you for an update on the enablement and maybe any rolling out or cross-selling initiatives with Invoice2go. I'm just wondering if that is still ahead or if you've begun maybe targeting that new base that I think you talked about that you cleaned up in terms of the quality of opportunities with them.
Yeah. Thank you, Brian, for the question. The first thing to call out is this quarter, we announced that we fully integrated the teams, and that's pretty much probably faster than we expected to do. We saw the synergies, we saw the teams working well together, and we aligned all the teams into one organizational structure so that we could more quickly create a unified platform experience for businesses across all experiences that they're having. With that being in the motion, I would say that we're in the beginning days of understanding how to kind of do that cross-selling you're saying within Invoice2go. We've obviously started that with Divvy.
The opportunity for us, you know, is with this, you know, unique opportunity with having one platform that serves the financial operations for all SMBs and having that, you know, in place to be able to go to market is what I would look for from us in the future.
Thank you. René, I wanted to ask you if it was possible, an update on the machine learning, where the company is, and if you see there's a monetization opportunity. The reason I ask is that, you know, your company's always been a technology leader in terms of machine learning. When you just think about, you know, all the data and the invoicing and now all the transaction processing volume that you're doing there, we hear complaints from the finance department of not being able to get data and being as predictive fast enough and really kind of slows down their work. I was curious if you could maybe update where the company is in terms of the machine learning capabilities.
If you think that there is a differentiation competitively or maybe even monetization opportunity. One quick follow-up for John. Thanks.
Sure. Thank you, Brian. Yeah, from a, you know, machine learning AI capability, we have been working on this and building into the platform for a number of years. The capabilities get stronger and stronger in every, you know, release. And what the example that I would give you is the ability for us to auto connect to network members has gotten better and better, and the ability for us to really read the information off the invoices that are coming in the platform so there's no data entry, has gotten better and better. The next step will be to continue to read detailed line items across the invoices and to use that data, as you're suggesting, in other ways to support our customers, help them understand their business better, and potentially to monetize.
We are gonna focus first on building the right capability and the right experiences to get rid of paper. That's the number one thing that we have focused on at the company. We're mission driven about making it simple to connect and do business. Having that focus means we're gonna focus on the experience of getting rid of that burden that is out there today. You're right, there's a data monetization opportunity going forward.
Thank you. The one follow-up I had for John, I just wanted to double check on the better than expected performance and the net loss that you delivered in Q3. Just wanna make sure, was that all, you know, from the revenue upside, or did any of the spend that maybe you had planned either on hiring or other investments, did that all get done in Q3? Thanks.
Thanks, Brian. Yeah, it's primarily the revenue performance and our strong non-GAAP gross margins that flowed through to the bottom line performance that we delivered.
Good. That's all I have. Good job on the quarter. Thanks for taking my questions.
Thanks, Brian.
Thank you. We have time for one more question today, and that comes from Ken Suchoski from Autonomous Research. Ken, your line is now open.
Hey, René and John. Good afternoon. Thanks for squeezing me in and taking the questions. Nice to see you rolling out new products like enhanced ACH. I guess just a multi-part question on that product. Can you talk about where you price that, and maybe talk about it relative to instant transfer? And then maybe you could talk about some of the steps you're taking to drive adoption on that payment type, whether on the customer side or the supplier side. And then just any thoughts on long-term penetration. Thank you.
Thank you, Ken. Yeah, you know, just to step back, you know, when you think about the millions of transactions that we do every quarter, the billions of dollars that we do every quarter, there's lots of different sizes of suppliers in the network that are getting paid through the Bill.com solution. When you think about the experiences they need, they're all gonna be different. There are probably SOHOs, if you will, smaller businesses that might take the Instant Transfer as the best way to get paid to manage their cash flow, like John talked about, the working capital needs that they might have for a business. There might be larger businesses that, you know, prefer to have more remittance information, more streamlined, and that's what the enhanced ACH opportunity is for.
Yet there might be other businesses that prefer the virtual card offering because of the alignment they already have with their card processing capabilities. Our goal here is to create solutions that allow businesses, whether they're paying or getting paid, the way that they wanna be able to do that and on the timing they wanna be able to do that. You know, we feel good about the product offering. We think that the diverse capability we have enhances the overall network and platform that we built, and we think it's an opportunity for us to continue to drive value for suppliers and for customers.
I'll just add in terms of the monetization model for those products, Ken, it's order of magnitude between 75 and 100 basis points across Instant Transfer, real-time payments, and enhanced ACH. They're a similar model delivered differently, potentially to different suppliers, as René mentioned, but in that ballpark.
Okay. All right. That's really helpful. Just as my follow-up, and I'll let you guys go. I just wanted to ask about the new customers that are coming on, given that more of them are from the FI channel. Can you just talk about the ARPU and the TPV per customer that you expect from these newer customers relative to the rest of your customer base? That would be really helpful.
Sure. Thanks, Ken. Yeah, the uptick in new customers we've seen over the last couple of quarters, much of that has come from success with the financial institution partners. Just like with a direct Bill.com customer or through an accounting firm, it takes a number of months, we say about 6-9 months usually, for these customers to fully get up and running on the platform. There's a little bit of a lag in them getting to steady state. I'd say on average, with some of the newer bank relationships we have now where we're starting to see customers adopt, they're about, you know, the average Bill.com small business. It's similar in size to a small business customer for Bill.com.
We'll, as we get a little bit further into driving adoption within the financial institution channel, I think have more details to share about the demographics and profile as it relates to TPV and ARPU of those customers. But at this point, I can say they kinda look like the average small business customer for BILL.
Okay. All right. Thank you very much.
Thank you.
Thank you.
Thank you. That concludes the Q&A for today. I will now hand back to René Lacerte for any closing remarks.
Thanks, everyone, for joining us today. We delivered another quarter of very strong growth as we helped SMBs transform their financial operations. We look forward to communicating our progress as we pursue the tremendous opportunity ahead. Thank you.
Thank you for joining today's call. You may now disconnect.