Awesome. Hello, everyone. I hope you're all enjoying the third day of UBS's Tech Conference. My name is Taylor Reunis. I head up the mid-cap application SaaS coverage here at UBS. And with me, I have Rohini, who's BILL's CFO. So thanks so much for taking the time today.
So nice to be here with you, Taylor.
Perfect. Well, Rohini, let's start at a high level. You've been in the CFO role at BILL for about six months or so.
Five months.
Five months.
Yeah, much longer.
Yeah, approaching six months.
Yes.
So maybe you could just talk to the group. What are your top strategic priorities? Given your past experience, how do you think that uniquely positions you to add value at BILL? And what are you most enthusiastic about coming into the next year plus?
A lot of questions there.
Yeah.
So I'm going to take it piece by piece. So starting out with what excites me, what are my priorities, and all of that stuff, right? So I think about it in two pieces. One is to drive durable growth. And there are some very critical things that BILL has launched over the last, I would say, fiscal year 2025 that we now this year are scaling. So we want to just absolutely put all our execution capabilities and focus into making those three big things successful. For me, the biggest three anchors here are, which, by the way, in my mind, into the next year and in the future, are the inflection drivers for the business. Number one, using AI to drive absolutely amazing frictionless experiences for our customers, really modernizing that experience.
And I'm so excited to see Mike, who's our Software GM, his obsession with customer experience and how he's driving that forward. The second piece is Supplier Payment Plus, which we've talked about a lot. What that does is really helps us monetize a very large TPV that we have on our platform and continue to drive revenue growth in a very durable, profitable way. So opportunities there. The go-to-market teams are in place to go capture that opportunity. It's a longer sales cycle, but super excited about that. And third, and equally important as the other two, is the embed work that we are doing.
So as we start to focus our efforts in product building and GTM into our very specific segment that we go after, like how we define our ideal customer profile, we want channels like accountants and embeds to really start to scale outside of that limited segment as well. So it's going to give us extra feet to be able to run really fast and capture the market opportunity that we have in front of us. So if we are able to execute on those three in a very fundamental way and good way, I think this is going to really set us up for amazing growth in the future years. So that's what I'm really excited about at the revenue side.
Then as I look at the cost base, there is so much opportunity for us to continue to refine that cost structure and make decisions that help us drive further profitability and drive shareholder value. As I think about it, shareholder value is always a combination of driving revenue growth and driving OI growth. All these efforts combined together, I think, are exciting. There's a lot of work to do, and we're very excited about it.
Yeah.
So the other part of your question was, how does my experience position me? I think being in scaled companies, it kind of shows you what scale looks like and what does it take to operate at that scale with discipline and drive execution, accountability, all of that. So I think that is the type of structure I want to bring into BILL in my own way. And additionally, just the thoughtfulness and the discipline around investments and making sure that we are staggering the investments in a way that we want to have the first set be successful, show green shoots, drive growth, reinvest, do that all over again, and continue to have a more durable business. So I think putting that discipline in place is the other thing that I feel very passionate about. There was a third part of the question that I forget.
No, but I think that was a perfect, perfect answer, and maybe just building on that, some of the things that you mentioned is you mentioned a couple of areas that could support durable growth, and then you also talked about wanting to do that in a profitable way.
Yes.
So as you look ahead, I guess, how are you thinking about balancing growth and profitability? Do you see a path to a Rule 40? What does that look like to you? How are you thinking about the level of growth and margin expansion that makes the most sense for Bill? And then just overall, how you're thinking about those pieces longer term?
As we are talking here, the teams are working. I'm working with them on putting together those plans and really clarifying, again, the market we are poised to win, what do we need to do? What are the few building blocks and not like 50 things that we need to do to get there, but what are the few things that we are really going to put our energy and execution behind? What would those building blocks contribute to the overall growth profile? As I always say, the easiest way to get profitability is to drive revenue growth. It just falls to the bottom. But at the same time, the opportunity for us to also look at the cost structure really compounds the ability we have to drive to the Rule of 40, and I feel confident that we can get there.
We will share the time frame in which we will get there and what the trajectory of revenue growth to OM looks like for us. And that would be, again, a combination of all the things that we're driving to find growth and push growth. And then secondly, optimization in a cost structure. And we have so many tools now available for us to drive growth in a profitable way with AI, the latest developer tools we have. We are exploring areas of geolocation diversity within our business as well. That's going to also help with FBC. GAAP profitability is going to be a big focus of what we talked to you guys about as well in investor day. So really looking forward to sharing that with you. Vision, it's coming together really nicely.
Yeah. And of those areas that can drive leverage going forward, I guess, which do you think could be the most needle moving in the medium term?
If you think about near-term being this year, I would say we have a very packed slate of things. We already had a workforce reduction that we did, and that was really tied more to what do we focus on and how do we trim around. This not only helps with the cost situation, but also helps with focus of the organization, and if you do a few things, you do them well, and you get the whole organization behind it, so I think that was more related to that as well as some of the efficiencies we were already seeing internally with AI, especially in the CXO organization. We have a lot of work that we are doing this year on building out our pricing strategy, scaling these three big pieces that I talked about, as well as putting down plans for OpEx optimization.
So in-year benefit for a lot of these things will be minimal in year, but I really expect us to exit the year setting ourselves up for these meaningful expansions that we are looking at for the next two to three years.
Yeah. And one of the big investment areas that BILL has talked about is mid-market, right, and this push up into the mid-market that you guys are taking. So can you talk to how big of an investment is needed in order to support those growth initiatives? And in terms of where that's coming from, is this net new that's being allocated to mid-market initiatives? Are you reallocating resources maybe from down market and shifting them up market? Maybe you could just provide a little bit more color there.
Yeah, absolutely. So it is more of a shift reallocation, again, because I want to continue to bring us back to how do we focus on the areas that we believe are going to help us win. So it's all about that. So we are reallocating resources. We are trying to make sure that, again, it's not a very drastic shift in the market, the size of the customers we're going after. I would say we are kind of refining it and focusing it to the higher end of where we generally end up playing. And that doesn't mean that we don't go after the smaller customers or the bigger ones, but we are going to use other channels like the embed channel where we have partners like Paychex that are going to help us get to the really smaller customers.
But we don't focus our internal GTM resources to go after that. Now, as a result of this change in focus, and we've talked about that in the previous earnings call as well, is you may see in short term some fluctuation in the NNA numbers. But again, I bring everybody to the point that the NNA, our NNAs are the leading indicators that help us understand what the growth trajectory will be, right? So we will continue to be on that growth trajectory for the outcomes like revenue and OI, but there may be some fluctuation in these in the short term, and you will see over time embed starts to kick in and our accounting channel already fairly strong, so that will help us bridge that gap.
Additionally, there's a lot of work we are undertaking in modernizing and making our platform friction-free and absolutely seamless by eliminating a lot of workflows. We add a lot of gross adds, but there is some friction that makes us lose some customers in the first 30-60 days. So there is some onboarding friction that we really want to go after, and use of AI makes it much easier for us to make those improvements. I would say actually they're not improvements, they're step changes in how people experience our product. So that's going to help with the NNA number over time as well as reducing churn.
Yeah, let's dive into that a little bit more. So two questions on the mid-market side, I guess. One, a common question that we get from investors is why now, right? Why does it make the most sense today to make that shift and push up market? And then the second piece to that is as investors are trying to gauge the success that you're having in that transition, what KPIs or revenue line items would you point people to look at to say, if this is starting to materialize the way that you guys want it to, this is where you'll start to see that show up?
Yeah, no, absolutely. I think let me take the second one first. So as we start to think about the metrics that help us get to the revenue and OI outcomes on the SaaS side, the two things that we always watch is NNA and ARPU. And we have focused a lot on NNA. We want to start to balance that focus between NNA and ARPU. So over time, we are doing a bunch of things as we look at mid-market. Our ARPU should go up. That's what you should look at over time. Again, this is not going to be a flip of the switch because there's a transition involved, the scaling of the customers. And I think of ARPU really as a holistic ARPU. You bring in a customer, they have not only SaaS revenue, but also a lot of transaction revenue that attaches to that customer.
And that's where the value of the customer lies for us, right, using a lot of different products. Additionally, periodically, as we said in one of the earnings calls, we will talk about the growth in the mid-market units that we are driving to demonstrate our shift and success in that. But in the end, the proof is it's going to be in the pudding. And over time, you want to start seeing the TPV, revenue per customer, and all of those metrics start to go up. And to your question of why now, so we've been pulled a little bit up market as some of the initially when BILL was launched, we got a lot of the smaller end of the SMBs. They grew with us. They had increasing needs and products. And we have been adding a lot of depth in the product portfolio over time.
So we have now a set of products that service the higher end of the SMB really well. So that's, and when we do the analysis of how people transact with us, how much value we get out of each one of our customers, it's very clear that the mid-market customers use, or it's the lower end of mid-market, and they use us much more. They are able to use a lot of our products, including international and such, which are heavily monetized. So that makes it a right point for us. We have the product set, the customers need us, and it's a perfect coming together at the moment. So now we're going to just make sure that our go-to-market motions are in line with the product that we are selling and what our ideal customer profile is.
Yeah. And I think actually it would be helpful, how do you guys define mid-market, right? Because I'm sure every company has a different definition, but it actually might be helpful. And even too, if you think about the competitive landscape, right, and which areas you guys are starting to focus a bit more on that, maybe you can provide a bit more color there. So then I think it may.
A lot of this conversation I would love to have during the investor day. I don't want to steal Mike's thunder here, but I will give a little bit of a color. We have been working hard on trying to understand what is the size of the customer that really needs us, talking to the customers, understanding their needs, mapping our own products over there, and also looking at our data to say, where do we derive most value from the customers? So there's a very small, I'm not going to give the numbers right now just because there's still more work that's happening around it, but there's a really smaller end where we think that they're good to have those customers, but we don't want to put our dollars towards getting those customers.
If embed channel, accounting channel gets those customers, that's great, and they will hopefully grow with us. There is a middle part, and there is a higher mid-market where we think that there are other players that are actually serving that market fairly well. In that upper mid-market, the customers end up wanting to use multiple suppliers for multiple things. They are more sophisticated. What we want to really target in this middle place is customers who are looking for simplicity, who are looking for one place to plug in, and you get a lot of services, not only all of your software needs of managing the financial backend is met, but also you're able to, in a very seamless way, make transactions. Now we have some start to the treasury services with our BILL Cash Account.
We pay interest on that, and that would be lucrative for these people to just use it as somewhere they keep the money and then easily transact, so, and SNE card, of course, so they can attach their corporate cards or whatever else they want to do, so it's fully plugging into one and getting all those services. That's the customer we want because that's really where the value lies for us and what our platform delivers, and this is what we're going to focus on, all of the focus that we have on giving the best services. We're not going to start to make a product that's perfect for everybody. That doesn't always end well, right, so this is where we want to really find our sweet spot and win the market, and we have a right to win that.
Yeah, and when you're reallocating resources from down market to up market, can you talk about the potential impact that we could see to that customer segment or to some of the KPIs and revenue line items? I know Bill's talked about the potential for net new customer adds, right, to start to moderate a bit, but how, I guess, are you guys thinking about that shift and the potential impact that it could have?
Yeah. And we are watching that super closely, right? The NNA impact in a short term, it will just fluctuate because we are starting to change the focus of the teams. Along with that, there's a lot of changes that need to happen on how people are compensated, what they're focused on, and they have to rev the engine and execute on that. So there's going to be a timing related to that shift. And even though there are fewer net new adds, over time, the ARPU should start to increase as we talked about, right? So there will be some impacts, some more immediate in the short run, the others more. I wouldn't call it longer term. Within the year, we want to start seeing the ARPU start to go up from here on.
I think those are some of the changes that you will. I don't want to be very specific with the numbers I give out, but you should expect those trends.
Super helpful.
It's, again, the situation is where we are turning around, flexing, moving things around. That would lead to some sort of fluctuation.
Yeah, makes sense. And I want to dive into each of the revenue line items, but before we get there, not the most exciting question, but I think given that we mentioned earlier, you've been in the CFO role now for five months, and I think investors are still getting used to your guidance philosophy, your approach. Could you just talk a little bit about the assumptions that you embed in your guide and when you give a revenue guidance range, how you assume some of the variables for the high end of the guide and the low end of the guide? If I reflect on the back of last quarter, revenue came at the high end of the range. When we look into 2Q, the guide assumes a little bit of an acceleration.
A common question that we get from investors is, okay, BILL had this consistency of putting up beats above the high end of the range to get to the 2Q guide and that slight acceleration. What needs to happen and under what scenario? Could that be a more likely outcome?
Yeah, and I think it's very consistent to John before me, how he thought about the guidance as well, right? There are just processes that we have in the system that work. So the midpoint of the guide is where we all anchor to when we say, okay, this is the number that we do not want to miss. This is where we feel very confident that we are going to hit, barring some very systemic changes that happen around us sometimes. And those changes could be either macro or internal execution related or very specific to our customers. So there's a lot of big systemic things that could happen. It's hard to accommodate all of that. Otherwise, I'll never show up, right? But the ideal thing is you have to have enough of positives and negatives that you have thought about and hence the range.
So you should be able to accommodate the small hiccups that you see in the business or small increases or benefits that you see that implies the range. At the end of the day, from a philosophy standpoint, we assume a stable environment as we come into. We do not anticipate based on a wide variety of sources that are externally available that, oh, the second half will see better trends or higher consumer confidence or higher spending from the B2B businesses. We do not assume any of that. We actually anchor on what we are seeing and what do we believe because of very factual reasons that could happen incorporated in the guide and give ourselves the ability to deal with some ups and downs within the range. But that's really flat.
I mean, I don't know if it's worth reiterating what we've said, slight year-over-year increase in line with last year for AP/AR take rate, the roughly similar levels of customer spending and whatnot. We're seeing SMBs start to stabilize now, and we continue to assume that in the rest of the year. Now, if it bounces back, that's going to be a surprise to the positive.
Yeah, perfect. No, I think it was really helpful to unpack that. So I appreciate all those insights. Focusing on 2Q in particular, I think to get to the high end of the range, part of that is being driven by an easier compare for TPV per customer where there was a large advertising company that discontinued card payments last year, and now you're starting to lap that. So can you talk about what is the drivers on that metric specifically to get to the high end of the guide potentially? And then as we look throughout this year and into calendar 2026, I think you made a couple of interesting comments earlier, which is this push-up market, right? You potentially could see some tailwinds to TPV per customer from that.
Obviously, to some degree, it's going to be dependent on what you're hearing from customers in terms of their appetite to spend going into next year. So anything that you can unpack there for the group?
Yeah. Remind me of a question.
On 2Q.
I'm sorry. Hold on a second. On 2Q specifically. So what will it take to hit the high end of the guidance? I think we continue to see strength in the SNE spending in Q1, and if that continues to outperform our expectations, our expectations always reside at the midpoint. So if it's a little bit higher, that's going to help us hit the top end. The mix of the business is really important. So people using one funding method versus the other defines the monetization as well. And we generally take the range of outcomes to be the range of the guide. And if some of the higher monetization vehicles do better, that is a critical component of that. I do not see, this quarter, any material macro-related changes that are happening as of yet. I hope I didn't jinx ourselves. But so far, so good.
I think I continue to feel really good about the guidance that we have set out for Q2. As we exit the year, I think the key growth drivers for us will be, yes, the mid-market customers that we get spend three times more than the other customers that we have on the platform. So those metrics will start to move up. Our pool should look better over time. We are taking pricing actions that align the value that we deliver more with the price that we charge. Again, doing it thoughtfully and slowly, but definitely making strides there. So all of those should help us improve our pool, improve TPV per customer. And as we get into the next year, we are optimistic, continue to be optimistic about SPP driving some accretion as well. So those will be the key things to look out for.
Perfect. Because you brought it up, I'd love to talk about the pricing strategy because I know that that's been more of a focus of late. So could you just talk about when you evaluate how pricing could evolve and the opportunities, what that potentially looks like? I know you guys have started to tinker with pricing on some of the SKUs, like the corporate changes that you made, but I think it would be helpful for the group if you just provide a little bit more color on how you guys are thinking about that.
Absolutely. And as you said before, right, we've over the last three years not really changed prices. And additionally, we have rolled out a lot of feature functionality in our product that customers just get. And now they're starting to see the value there. And what we want to do is take a step back and look at all of that. Now, there are two things we're doing on pricing. One is more of a short-term tactical in-year plan that we have built out, which is also incorporated in the guidance, is how do we, for specific things, match the value that we give? And we did the corporate change.
We're also introducing modular pricing where if you're on a very base price, you should still be able to access some of the features that you may need one-off for your business, and you will be able to pay for that and take advantage of it, like procurement, for example. And then the second big thing is that we're really, if you step away, looking at the overall pricing framework for the whole business as it comes together. So that includes a lot of analysis and work, benchmarking, understanding customer feedback, and all of that. And that work is being led by our pricing team with inputs from the consultant we'd hired. They provided some good inputs to us as well. So we're laying out that strategy that we would actually love to share also on the investor day in terms of how we think about it.
This will enable us to put much clearer structure around our pricing and provide us with the ability to continue to launch agents and price for them at the right value, either through being a part of the base product because it's so fundamental, the improvement we've done, we want all of our customers to have. So that'll flow into the normal pricing, but it gives us to then enhance the pricing over time as we deliver value and then create a structure where we are able to do modular pricing where pay-as-you-go type of agent use as well. So that work is more meaningful in my mind as we get into the next year. It'll really clarify how we price. It puts structure, governance, everything around it, and helps us match the value to the value we get.
Perfect. And on take rate, I think that's the most volatile metric. And in terms of, I think when we look into 2Q, there's an understanding that there's a seasonal component to that. But as we move throughout the year, in order to hit the guide of a similar rate of expansion to what we saw last year, you need to assume the second half of the year take rate starts to tick up a bit more. So in terms of what's giving comfort in that trajectory, could you unpack that a bit more?
Absolutely. So we closed the quarter FY Q1 with the expansion of take rate of 0.3 basis points. And we had guided to similar growth rates for take rate, and that was around roughly 0.4, right? So we are doing that. So Q1 delivered on that. Even though sequentially Q2 is coming down, Q1 to Q2, but year over year, it's still going to be the expansion that we have talked about. And what's really happening is, sorry, I don't know why my phone's ringing. What's happening is we talk about our transaction portfolio in two critical ways, right? One is our emerging portfolio. The other is the established portfolio. The emerging portfolio grew in Q1 at 40%. We expect that growth rate to continue. And now it starts to become meaningful scale where it starts to make a difference in how the take rate pans out, right?
That's a very critical thing. Overall, I think I've mentioned it before that the size of our emerging portfolio is now nearing the virtual card portfolio. Virtual card is one of our biggest portions of the transaction business, right? Now it starts to become meaningful. As we exit the year with this 40% growth rate somewhat continuing next year, this emerging portfolio starts to make a dent. Especially now if you add SPP monetization to that, those are the things that are exciting to me on take rate.
Yeah, that was the next question that I was just going to ask you because there's been a lot of these newer emerging initiatives that have been underway for some time. So you mentioned Supplier Payment Plus. There have been initiatives to work more closely with suppliers, a deepening collaboration there. You've made changes on the virtual card side, like introducing straight-through processing. So what gives comfort that we're finally at that tipping point? And it sounds like you expect that to be more needle-moving next year. Could we start to see that in 4Q of 2026? I guess just how are you thinking about the timeframe for when these really start to impact take rate?
Yeah, I think SPP is more of a next year story. Again, I think we've talked about this a little bit before that when we started out with the advanced ACH feature and monetizing just advanced ACH, it seemed to be like, oh, we can reach out to the suppliers and then talk to them about solving AP problems and then get a cut of the take rate. As we started engaging with some of our biggest suppliers, we realized they want to have a much more holistic conversation with a bunch of people in the conversation where we are now having deeper discussions on how would they want payments, and in some cases, they want to say, okay, X type of volume we want on virtual card because it's quick money for us. We get the money in the bank. It's great information. There is no pain points.
Yes, there is a payment to be made for that, but we feel good about the trade-off. We've had some discussions with suppliers where they're locking in virtual card volume, in some cases increasing virtual card volume. Then separately, we are discussing, okay, here is the volume that should ideally go to ACH, and we are happy to pay for this advanced ACH feature. Monetization or the take rate on that will depend on the complexity of the payments. There could be suppliers who are taking a few big payments, lower monetization. If you have many payments and you need much more data to reconcile, that's a huge problem. There is a bigger take rate associated with that. It really is following the problems we are solving for.
But given a much more holistic conversation, it's a longer cycle for closure where we are really tweaking the best outcome for the supplier and the value we drive. So to me, SPP is more of next year, but this emerging portfolio growing, it continues to grow way faster than our established portfolio, and that continues to help us with the take rate slowly but surely through the year.
Perfect. And we'll end on a fun one, which is the embed opportunity. So you announced three big partners there. How are you thinking about the size of the opportunity potentially and any greater insight you can give on the structure of these partnerships? So is there potentially co-selling opportunities, revenue share opportunities? I guess how are you thinking about the different scenarios with these partnerships?
Yeah. So the things that I feel super excited about is in our version one of embed, we were working on building for each one of our partners a very custom type of solution. And over time, we realized that the faster path to go to market is just build a platform that is plug and play for the most part and really easy for the partners to come in with. So super excited that some big names like NetSuite, Acumatica, Paychex chose us to work with us, right? They obviously find value in what BILL brings to the table for their customers. So we are able to fairly quickly, and when I use quickly contextually in the scheme of these type of partnerships, we can take a lot of our transactional capabilities to these partners as well.
This is the second thing that excites me that it's the full value of the Ad Valorem portfolio that can actually be used by these customers, which in embed one was fairly limited in terms of growth. So without giving you very specific numbers because it's really very early days, we've launched with one, the other two over the next couple of quarters we're going to launch. So it's a little bit too early, but the size of the opportunity is super exciting. And the way it works really is that this augments our feet on the ground, which is going to be focused on certain segments and the type of customer we want to go after.
NetSuite is going to help us with that, our move a little bit towards up market, but also get us customers that are higher than that, whereas Paychex will probably be a little bit lower end of the spectrum where we know our product is great for those customers. And the reason why they would want to do this is they have rev share built into the things. It's a win-win situation for us. It's not us from the background trying to push for an outcome. The rev share is a cost for us, but it is offset by the simplicity of our sales organization, which we then don't have to invest copious amounts of money in. The first line of defense from customer support and all of that gets simplified as we embed our capabilities into their platforms.
So I think it's a really great outcome in terms of a win-win situation. They want us to grow and we want us to grow.
Perfect. Well, we'll leave it there. Rohini, thanks so much for taking the time. We covered a lot, and thanks everyone for joining in. Let's give a round of applause.
Thank you so much.