FinTech practice here at Citi, and we're excited to have Rohini Jain, who's the CFO at BILL, to go through the latest and greatest at BILL. With that, Rohini, maybe you could first, before you dive into the business, you're obviously relatively new as a CFO. Can you talk a little bit about your background and what brought you to BILL?
Absolutely. As I always say, I grew up in GE. That was my first job. What a wonderful place to start a finance career. Great grounding from an operational finance perspective, analytics-based, very, you know, rigorous training ground for a lot of us finance professionals. Value that. Went over to the tech world with eBay. After that, did a short stint with Walmart, and then nine years at PayPal, from which now I joined BILL. Over the nine years at PayPal, got a deep understanding of FinTech, and before that, some technology as well. You know, BILL was just the right spot, and especially given the transition and a pivotal point in their journey, it just seemed to be a great time to walk into the CFO position. That was obviously the next step in my career as well.
Great team, great business model, diversified portfolio, along with, you know, very sticky business model. You know, was really attracted to that and really excited to be here.
. Yep. Thanks for being here. Can you talk a little bit about, in the fourth quarter, BILL discussed getting back to 20%, or fourth quarter of 2024, sorry, BILL discussed about getting back to the 20% core revenue growth. BILL's doing 14% core revenue growth as of last quarter. What needs to happen for BILL to get back to that 20% plus? Is it a better economy, better software growth, higher payment penetration? Is it macro only? Just trying to think about the drivers of where we are today at 14, given last quarter's results versus the 20% plus that you guys aspire to.
. No, great question. The way I think about it is the purpose for us is really to drive holistic shareholder value. That comes in two components: to drive growth and to drive profitability expansion. We are very focused on both of them at the moment. As you think about growth specifically, that seems to be, you know, all of us can vouch to that as the easiest way to drive profitability. If you're growing, profitability happens to you. You know, we need to just continue to be focused on the initiatives that we outlined in the Q4 earnings call, setting out our, you know, guidance and priorities.
John talked about things that we are focused on, and there are some very specific things that I think are really the key building blocks of how we demonstrate growth over the next, you know, three to five years. SPP, we've talked about a lot. The embedded partnerships that we've announced. On top of that, overlaying the AI components and the agents that we are releasing really add value to the customers. We're also continuing to go upmarket, driving higher RPU and the value of the customers and, you know, the cross-sell. All of these things in combination take us to our path to a robust growth. You know, are big. Some of these new things, even if they're growing very rapidly, the contribution to growth starts to be meaningful over time just because they start from a smaller number, right?
As we think about that, we want to focus our efforts on driving profitability as well in parallel. There are several initiatives that we are undertaking now and have planned for the next several months to also undertake to make sure that we are, while we are growing, we are expanding profitability, we are getting revenue from durable, sustainable sources that add to the shareholder value. That is the overall context of how we think about it.
How would you guys, or how do you think about the macro situation today? Does the volumes feel depressed still? It does not seem to be getting worse, but maybe at a depressed level?
I would say there was a definite step down from the robust growth that SMB was seeing during the pandemic and such. What's encouraging in Q4 and now seeing the Q1 trends as well, getting into Q2, that the SMB's spend is starting to look stable. And we monitor a couple of metrics like TPV per customer, same-store sales, and things like that. They continue to be stable, robust, now not growing at the elevated levels they were. So there's definitely that, you know, step down that happened kind of sustains itself in a way. But it's promising that, you know, they're resilient and they continue to be roughly stable. If you go down a level or two deeper, you see different growth rates for different industries. And we follow that fairly closely as well to see how discretionary spend versus more of the necessary spend is coming along.
I want to ask about pricing opportunities. I know BILL has taken a deeper look at its pricing model. Where are the biggest opportunities that BILL sees to potentially raise price for the value given?
. Over the last several months, we have actually added a lot of feature and functionality to our products. We have added a lot of, you know, new things like, you know, procurement, the multi-entity, and things like that, which we have not yet, we had not priced in at the beginning of the year. What we are trying to do over the last three years, we have not raised any prices. What we are trying to do now is to make sure that the value that we have given to our customers, we are starting to price to that value that we have delivered. There are two components of it, right? There is one bit of pricing that we baked into our guidance. It is more, I think of it as run the business. Okay, we are kind of tweaking things here and there.
There is a bigger effort of what we call the more strategic pricing view that we are taking and stepping away and saying, you know, what is the market at? What is the value we're delivering overall? How would we ideally bundle these products rather than do very singular motions of pricing? That is something that is going to really help us drive the right pricing for the value that we add. Some of that work takes time. There are notice periods involved. There are different cohorts that need to be dealt with. There are contracts that are already in place. The way I think about it is a lot of that work that we're doing now will set us up to exit the year in a way where we can start to see expansion well into the next year of our pool.
Pricing is one thing, and then more product offerings, attachment, and then moving up market is another, which we will talk about in a second. Just overall, when you think about RPU expansion, which is on the play sheet for BILL, where do you see the biggest opportunity?
All of those, right? We're very focused on all of those three, and you articulated them really well. The pricing I talked about, there are short-term actions we're taking, as well as the overall look at the strategic implications of the overall pricing structure for us. The second piece is going up market in a more deliberate fashion. When I say deliberate, it means that we're really trying to tie our resource allocation not only across the products that will then create the products and make the product most efficient and effective for that segment, as well as the sales and marketing resources that, excuse me, are also geared to driving customer adoption in that segment. Having said that, excuse me, you can see I've been talking a lot today. . The other side of it is, you know, we have the product, the sales.
We are not going to leave behind the smaller customers that are on the platform. We just do not want to apply all of our resources and direct sales motions for those smaller customers. For them, you know, partnerships like Paychex with the embed channel, that is one of the ways we will reach the smaller customers in the future as well, as well as our accounting channel continues to be a very strong mode for us. They continue to bring the customers more at the smaller end, who then all of them will grow with us and get to scale.
, I was going to ask a little bit about the go-to-market. I know the strategy for the last couple of years has been to move up market, but now it seems a little more deliberate. Can you just talk about the differences of what you were doing before versus what you're doing now, and a little bit about the embedded 2.0 strategy?
No, absolutely. The way I would describe the efforts before now were more about how, as our customers were growing, their demands of certain features and functionality were increasing, and we were trying to cater to them as they grew. It was more of how we describe as a pull. Now what we are doing differently is what we describe as a push in terms of, you know, we are aligning our go-to-market resources in a very specific way and building the muscle to go get the lower mid-market, the higher side of the SMBs into the portfolio. Part of the reason for that is that these mid-market customers, as we look at our book of work, they drive three times the TPV of the other customers. It is products on the platform. The demand for international payments, et cetera, is high from that segment.
Overall, it's a much more valuable segment for us to focus on. And our product anyways is a very nice fit for the smaller customers who will, you know, through marketing motions, continue to come through embedded partnerships, as I said, and also accounting channel.
That is all part of the embedded 2.0 strategy.
. The embedded 2.0 strategy is really to get scale faster and, you know, get a bigger part of the TAM in a more rapid fashion. What I mean by that is, Rick, this is an attempt to meet the customers where they already are. They're already integrated into certain ERP systems. You know, Paychex is another way where there are customers already there, and it'd be so much simpler for them to just have a very simple integration into one point and get all access to the BILL services. I'm excited about embedded 2.0 much more than one also is because of two reasons. One is, you know, in embedded first version that we did with the FIs, we had to do a lot of custom work to get that product working for the customers and for the banks itself.
In 2.0, we have built this platform that's much more of a plug and play. The ability to get customers more rapidly and scale more rapidly is great. On the second side, you know, the transaction portfolio is a larger part of our revenue today. As we think about the FI channel that we did embedded 1.0 with, they were more keen on the software that we provided because they have their own capabilities on the transaction side. The partners we are going with in terms of 2.0 will have full access to, you know, the potential to grow the transaction revenue is quite high. I think of that as the overall BILL ecosystem, and we will have all of that potential of growth with all the products that we have today. That's exciting.
I think BILL signed 4,000 net new clients, maybe a little over 4,000 in the previous quarter. What's the right number of new accounts to think about new client accounts? I know you're moving up market, so we're just trying to figure out what's the right number to think about. Is it that 4,000 on a quarterly basis?
, it's not going to be a very steady number. There'll be, as they've always been, some fluctuation around that, but I think it's the right ballpark. The more important thing I wanted to point out was that, and I think I had it in my commentary in the earnings call as well, is that we really want to get focused on acquiring the high-value units that are driving revenue and RPU. Less focused on units, want to drive focus on RPU so that we are really getting the most out of the customers that we have and that we invest in appropriately. Over time, I feel like we're at least this year, the units in isolation is going to be a less relevant number for us to work through.
Spend management was up 21%, and I think rewards grew at a faster pace. It sounds like you guys are scrutinizing the rewards paid out. What's the process there?
, so really excited about the growth in S&E business within BILL. It's, you know, 21% year-over-year growth in Q1 on the spend. Expect to continue to grow in high teens over the rest of the year as well. It's on a great trajectory. Now, the rewards have been ticking up. One of the key reasons for that reward tick-up is as we go up market within the S&E business, there's higher propensity of rewards being given to those bigger merchants or bigger customers. What we are doing is actually a twofold approach. There are some quick wins and a short-term plan and trying to kind of get that cost a little bit to plateau as a percentage of TPV, and then as we exit the year, even start to tick down a little bit.
In the short term, we want to scrutinize the type of customers we have. Are we really extracting the value in terms of the rewards that we are giving? Then selectively start to think about the contracts that we have are a win-win for both the customer and for us. Secondly, we are also starting to think through the incentives that were initially for the sales teams based much more so on the spend overall. Now we are moving towards the incentives for sales teams to be more focused on what we call the, you know, overall revenue minus the rewards. You know, the net outcome or some form of contribution margin, we could describe it as. Every day when salespeople get up, they know which number to focus on.
I think those are some of the things that we are in the short term focused on. As a longer term strategy, it's really important to make sure that you're using rewards and an investment and a tool to get the right type of customers. It's tied to the economics. In this case, in S&E business, the economics is really the interchange. If you have categories of spend that are higher interchange, better economics for us, we would want to incentivize higher spend in those areas. That's the capability that we want to really build up to be able to do that in an automated way.
Another popular topic when talking about BILL is the payment take rate expansion. I think the APAR take rate is expected to expand. I think it's 0.4 basis points this year. I guess first, what's included in the emerging portfolio? I know that's growing at 40%, and maybe what percentage of volume is it today?
, absolutely. So overall, the way we think about our portfolio now from an ad valorem perspective is in two categories. One is the more established products, which is like international payments, and the other one is virtual cards. In the emerging portfolio, we have products like Instant Pay, Instant Payments, Working Capital, the newly launched product SPP out for four months now, and Working Capital or invoice financing. All of these products together comprise, you know, what we call the emerging portfolio. It has been growing at a very nice clip, 40% year-over-year growth rate in Q1. As we think about this overall portfolio, it is starting to become a meaningful portion of the ad valorem portfolio now. It is approaching the size of the virtual card portfolio, which is the largest of the ad valorem.
I think as that happens, we continue to diversify, you know, the growth that's coming from the ad valorem portfolio and will be a contributor to the take rate accretion that we will see now at the back half of the year. Again, I want to point out there will be some seasonality in Q2 take rate, but back half normalizes and grows back up with these emerging portfolios.
Ad valorem is what percentage? What was the last disclosure of volume?
Did we disclose the volume?
14.
Okay. . . I just could not remember the 14% is ad valorem. You mentioned the profitability balance for some of the emerging payment products. What are the risk profiles for products like instant transfer and invoice financing?
, great question. On instant payments, it's actually a really great product. It is a very high margin product for us. The customers love it because they are able to, you know, manage their cash flow and get the payments faster. We do not have much of a risk. The loss rates are almost nothing for this portfolio, but that's because we already have extracted, like taken the payment from the payer, and we are just expediting the payment to the receiver by a day or two, which really adds to their cash flow situation and they pay for it. It is a win-win on both sides. On the working capital or invoice financing side, it is a new product like all credit products.
There is a little bit of a J curve in how, you know, the costs or losses mature and the models learn and the risk model gets more tuned. We have seen very promising performance overall from risk and fraud basis points as a percentage of TPV compared to when we launched it to now. We continue to see, and you guys will see in our financials quarter over quarter, the loss rate continues to go down. We are expanding the contribution margin meaningfully for that product. You know, every quarter we fund about $250 million of volume through that portfolio.
Got it. Got it.
Promising.
How big was the major online advertising platform that stopped taking virtual card? I think that kind of anniversary in one quarter just as we can think about the go forward.
. We had disclosed last year, I think in Q2 earnings, that this was impacting the revenue of the S&E side of the portfolio by about 4% or so. You know, Q1 was the last time we lapped the remains of that impact, and Q2 is now agnostic of the lapping. We are through that in Q2.
Should we just, we'll see a little bit of a, how do we think about this?
Normalization of the report.
, the normalization of the fourth quarter. You'll see a little bit of a pickup naturally in the second quarter.
Correct.
Got it. And it was 4% of just the SMB revenue or volume?
4% of revenue.
Of revenue.
Because it's a take rate adjustment with that spend change. What I do want to call out is that there will be an uptick because of that. There are other factors that will play into it. You may or may not see a sequential increase to that amount, right? Half of that impact was Q4, half Q1. It's like, you know, not the full four is sequential improvement.
Can you talk about the price increases that you guys implemented for check and ACH? How big were they? Was that across the board?
Yes. We get that question a lot. I'd love to put that in context. Overall, the TPV that we see on that channel is, or payment method is, quite high, but the revenue composition is fairly low as a part of our total revenue. Just for context, it's in low single digits. Small price increases or changes that we do to that portfolio do not really add anything meaningful to the portfolio. We did make that change, but it's not material enough for us to talk about.
Got it. Got it. The Supplier Payments Plus, which is the old enhanced ACH, can you just talk about, I think it entered the commercial phase this quarter, just focusing on mid-term pipeline?
, absolutely. Supplier Payments Plus was initially thought of, the way we envisioned it, as advanced ACH. Having additional features of reconciliation, providing data, and making it much simpler for the large suppliers to take multiple payments in the right way, which helps them with their efficiency on their side of the work, right? As we were talking about Supplier Payments Plus or the enhanced ACH with our largest suppliers, this conversation has started to become much bigger in terms of, you know, them needing help in understanding the overall portfolio of payments in the sense that, you know, we are able to now, within this construct of conversations, we are locking in the virtual card payment because they want faster payments on cards on certain types of payments.
We are able to say, okay, here is how much volume would be on advanced ACH and the rest would be ACH. We're also converting a lot of the manual payments into electronic payments for them. It is much more holistic than just an advanced ACH feature. To answer your specific question on how do we monetize it, the advanced ACH specifically, you know, in the market right now, we are seeing anywhere between 50 basis points-120 basis points of range on the take rate. The initial deals that we are doing are somewhere in that range as well, so fairly consistent. Additionally, the way we think the value of SPP to us comes from is also from not only protection, but increasing the virtual card adoption by the suppliers as well and increasing monetization in other ways. Holistic relationship.
The GTM strategy around that is to go after the top 10,000 sellers or suppliers first and, you know, then follow up with the rest. We're right now focused on the top 10,000, which really have this issue of a lot of different payments that are received and reconciliation becomes quite a manual exercise for them.
Are you mostly going after those suppliers that are doing ACH and check versus virtual card with this SPP product?
The way we think about it is our largest suppliers on the network, that's what we are going after. When they're really large, they're taking a lot of different types of payments. We are trying to sit down with them and say, okay, what does the portfolio look like? Then trying to, you know, work through all of the solutions that we have for them and try to monetize. It is not a type of ACH or not, but it is holistic. If you were to step away, it is probably a similar subset. People who have very large, you know, just pure ACH manual payments, they would probably also be larger suppliers.
What's the adoption like and when does it move the needle for BILL? Is that this fiscal year or not till fiscal year 2027?
No. This is, again, as I said, geared to very large suppliers. The motion is very different than our general small businesses and medium-sized or lower medium-sized businesses. It is a much longer sales cycle. It is different types of customers that we are dealing with. We are setting up the sales force to target very specific conversations with the suppliers who are different people in the organization than we are generally used to dealing with. All of that is starting to happen now. We have had some really good wins and feedback as well from them. It continues to mature. The sales cycles are long. The expectation is that next year would be meaningful to the growth of the company.
To wrap up the kind of the whole payments business, when we talk about the 0.4 basis points of expansion this year, is that an, do you hope to expand beyond that going forward in 2027 and 2028? Or is that the normalized kind of level of adoption you think you expect?
I would like to defer that question till the investor day, which we are actually excited to share not only the numbers and the financial construct and all of that, but, you know, our strategy. What is the segment of customers that we are really going after? What is the strategy in terms of the software and the payments and the S&E business coming together as one platform? What is the value that we add? How do we price for it? And then how does all of that come together in a model that you guys can use to, you know, then think about take rate expansion over longer term, et cetera? Right now, unfortunately, I'm bound by the in-year guide that I have put out there.
Got it. Got it. . We'll look forward to that. I'll ask him maybe something about the analyst day at the end.
I want to ask about the cash treasury business. I think you guys just launched a cash account treasury capability. What's that product and how do you get paid for it?
. Love that product. First of all, very excited about it. It is, I would say, our first step for going into the overall treasury solutions enhancements that we want to do. What this does is really an operating cash account that you as a business could have and yet earn interest on that. There are not that many of them that could earn a healthy interest rate for the customer. That is a win for them and incentivizes them to put money into that account that is now fully integrated with BILL platform so that the transactions are really much easier to do. From our side, how do we monetize it? It is two different ways. One is, which is why we actually launched the product, is the flywheel we expect.
If you are moving money into your BILL account, the ability to do transactions seamlessly, very quickly is enhanced for the customers. We expect a higher velocity of transactions that happen on the system. We monetize those. The second piece is that we earn interest on that funds that the customer holds with us. That interest that we provide to the customers is different and a little bit lower than what we get. There is a delta in the monetization of the balance as well. Those are the two ways. Primarily, it is really about driving the transaction flywheel and just having those customers, you know, use BILL much more.
Okay. Great. I want to ask about the AI agents. What efficiencies can BILL's AI agents bring to customers? Is there a revenue model there or is it just more retention and efficiency?
All of that. We talked about some of the agents that we have released. We spent Q4 primarily on building the platform of AI. Why that is important is because we have a variety of portfolio products that sit on top of a platform. If we have the appropriate controls on the AI platform built in, it kind of unifies all of the product offerings. Also, you know, we are in a payment business. Regulation control and all those things are really important. Getting the foundation right in the AI platform was important. Now our velocity to be able to release those agents effectively has been enhanced because of that.
As I think about the agents we've released, the philosophy really is to go towards the biggest pain points that our customers have, the biggest pieces of manual work that they have to engage in. That's what we want to completely eliminate. A great example is the W9 agent that we released. We'd heard from so many customers that it takes so much work to get all of those or actually reach out to the suppliers for the W9 forms, make sure they're right, reconcile them, and do all of the work for the taxation. That's one of the things that our customers are really which automatically grabs the receipts from your inboxes. June actually had a great experience yesterday with her flight tickets that were automatically taken from her email, attached to the spend and expense account, and she had to do nothing.
Customers are excited about that as well. As we solve those pains for the customers, we have, you know, a two-step approach to monetizing those AI agents. Of course, there's the additional benefit of these customers being more sticky, loving the product, having less churn, which will show up in the financials. We also have plans to monetize them. The first type of agents are the ones that are very fundamental to our product, like the receipts agent and such, which will be available to all of our customers who are using spend and expense. What that does is then gives us the ability to price appropriately for the offering that we have because we are giving them that enhanced value. That could be over time taken care of through the pricing.
The second piece is pay-per-use type of agents where they are adding much more value. And if you want access to those, there will be more, you know, there were specific charges for that. Those would be the two ways we monetize the agents.
BILL's obviously focused on driving profitability. We've seen the margins start to grow here. Where are the opportunities to lower costs and raise margins? Is there any, as you think about it as a CFO, any target margins out there you think BILL can get to?
I always tell everybody that the easiest way to grow profitability is through revenue. You grow revenue, it falls to the bottom line. That's the easy, robust way to do it. In parallel, we also want to continue to make sure that, you know, our operating cost structure is efficient. It's driving the right outcomes. You know, we are lean and fast. Those expenses that we think about as discretionary OPEX, which are what people generally think about, what the operating expenses of a business are, like sales and marketing, R&D, and G&A. There are some volume-related expenses, you know, which we need to spend on to drive the volume that we have. It's the nature of the business. Those are like rewards and fraud and losses that we talked about.
In those two categories, we are focused on both and want to make sure that we are growing our revenues with optimized value for the rewards that we are extracting, as well as fraud and losses, I think, continue to do great from a performance perspective. On the discretionary OPEX side, we actually talked about having a consulting company come in. What we are using them for for this short project is really to give us a very outside-in view of how our cost structure stacks up against some similar comparative companies and where we have opportunities to streamline, simplify, et cetera. We are working very closely with them to see what those opportunities are. We combine it with the efforts we are already internally doing to have more outsized impact as we exit the year.
We want to set ourselves up for this expansion over the next three to five years.
I want to ask before I let you go about the analyst day and some thoughts around that. I guess first, there were some press reports talking about BILL looking at strategic opportunities. Anything you can add to that?
You know, as a policy, we do not address rumors. There are always rumors coming in and out in the market. What I would say, though, is that we are always, the board, the management team, Rohini as the CEO, focused on driving shareholder value. And we would entertain things, you know, as they come up to drive that value for the shareholders. Now, there is nothing to talk about right now, but, you know, we will keep you updated as things evolve.
Great. On the analyst day, I think you guys talked about the first half of calendar year 2026. Talking about that, what other things do you guys plan to discuss at the analyst day?
. I mean, Rule of 40 is really interesting because it gives you a framework of how to measure success and give an anchor on where we are walking towards. I think overall, the idea is to really hone in on the strategy of the business and share it with the investors, with the shareholder community on where we are headed, what is important to us, what is the segment that we are really working towards, and what differentiates us from the competition. We would love to introduce the CEO staff members to the community as well, just as they refine their vision of their strategy and how they want to evolve it.
I'd love to get a really robust financial model out of it, three to five years, to understand where the business is going and be able to talk to you guys, not in incremental quarters and one year at a time, but also say, how are we making progress towards our longer-term goal? We've not had an investor day since we did the IPO. The business has evolved quite a bit. We've had an acquisition. We've done, you know, a whole bunch of new product introductions. I think this is time for us to just step away also and look at what is a simplistic growth algorithm that we need to describe to the investor community and, you know, measure our progress with the right metrics that help us get to our growth rates.
Will it be here in New York City, or will it be in the West Coast where we're at?
Stay tuned.
Hasn't been decided. Okay. With that, we'll leave it there. Thanks so much, Rohini.
Thank you very much. Thanks.