Earnings call transcript: Bill Com Q1 2026 beats EPS expectations, stock dips

Bill Com Holdings Inc. (BILL) reported its financial results for the first quarter of fiscal year 2026, showcasing a notable earnings per share (EPS) beat. The company reported an EPS of $0.61, surpassing the forecasted $0.51, marking a 19.61% surprise. Revenue reached $395.7 million, slightly ahead of the $390.75 million forecast. Despite these strong results, shares of Bill Com fell 4.62% to $46.52 in regular trading hours, although they saw a slight uptick of 0.82% in aftermarket trading.

Key Takeaways

• Bill Com’s EPS exceeded forecasts by 19.61%.
• Revenue slightly beat expectations, reaching $395.7 million.
• Stock declined by 4.62% during regular trading, with a slight recovery in aftermarket.
• Strong growth in core revenue and customer base.
• Continued focus on AI and operational efficiency.

Company Performance

Bill Com demonstrated robust performance with a 14% year-over-year growth in core revenue, amounting to $358 million. The company added 4,000 net new customers, indicating a solid expansion of its user base. Additionally, the spend and expense card payment volume increased by 21% year-over-year, highlighting the company’s growth in transaction processing.

Financial Highlights

• Revenue: $395.7 million, slightly above the forecast of $390.75 million.
• Earnings per share: $0.61, beating the forecast of $0.51.
• Non-GAAP operating income: $68 million, exceeding guidance by $10 million.
• Non-GAAP operating margin expanded over 250 basis points sequentially.

Earnings vs. Forecast

Bill Com’s EPS of $0.61 surpassed the forecast of $0.51, reflecting a 19.61% positive surprise. This performance marks a significant achievement compared to previous quarters, where the company has consistently met or slightly exceeded expectations. The revenue surprise was modest at 1.27%, but it reinforced the company’s steady growth trajectory.

Market Reaction

Despite the earnings beat, Bill Com’s stock fell 4.62% to $46.52 during regular trading hours, possibly due to broader market trends or investor concerns about future growth. However, the stock experienced a slight recovery of 0.82% in aftermarket trading, reaching $46.9. This movement reflects a mixed sentiment among investors, balancing the strong earnings with cautious optimism.

Outlook & Guidance

Looking ahead, Bill Com provided a fiscal 2026 core revenue guidance of $1.46-$1.49 billion and a non-GAAP operating income guidance of $257-$277 million. The company aims for a non-GAAP operating margin of 16-17%, with a continued focus on profitability and compliance with the Rule of 40. Bill Com plans to expand its AI capabilities and optimize pricing strategies to drive future growth.

Executive Commentary

CEO René Lacerte emphasized the company’s vision, stating, "The future for SMB finance is touchless, and BILL is delivering it." CFO Rohini Jain highlighted the company’s growth ambitions: "Our focus continues to be on scaling BILL into a much larger and more profitable business." These statements underscore the company’s commitment to innovation and expansion.

Risks and Challenges

• Market saturation in the SMB segment could limit growth.
• Economic downturns may impact customer spending and transaction volumes.
• Increased competition from other financial technology firms.
• Potential challenges in executing cost management and restructuring plans.
• Reliance on successful AI integration and monetization.

Q&A

During the earnings call, analysts inquired about Bill Com’s mid-market strategy and customer acquisition efforts. Executives detailed the monetization approach for AI agents and discussed the revenue potential of the BILL Cash Account. The company’s spend and expense rewards strategy was also addressed, highlighting its plans to enhance customer incentives.

Bill Com’s strong Q1 performance and strategic initiatives signal a promising future, though market reactions indicate cautious investor sentiment. As the company continues to innovate and expand, its ability to navigate market challenges will be crucial in maintaining growth momentum.

Full transcript - Bill Com Holdings Inc (BILL) Q1 2026:

Lydia, Conference Operator: Good afternoon. My name’s Lydia, and I’ll be your conference operator today. At this time, I’d like to welcome everyone to BILL’s Fiscal First Quarter 2026 conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there’ll be a question-and-answer session. Thank you. I’ll now turn the call over to Jun Wang, Director, Investor Relations. You may begin your conference.

Jun Wang, Director, Investor Relations, BILL: Thank you. Good afternoon, everyone. Welcome to BILL’s Fiscal First Quarter 2026 earnings conference call. We issued our earnings press release a short time ago and filed the related Form 8-K with the SEC. The press release can be found on our Investor Relations website, at investor.bill.com. Joining me on the call today are René Lacerte, Chairman, CEO, and Founder; John Rettig, President and COO; and Rohini Jain, CFO. Before we begin, please remember that during the course of this call, we may make forward-looking statements about the future business, operations, targets, products, and expectations of BILL that involve many assumptions, risks, and uncertainties. Actual results could differ materially from those expressed or implied by our forward-looking statements.

In addition to our prepared remarks, please refer to the information in the company’s press release issued today, our Q1 26 investor deck, and our periodic reports filed with the SEC, including our most recent annual report on Form 10-K and quarterly reports on Form 10-Q. 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. Please refer to today’s press release for reconciliation of GAAP to non-GAAP and additional information regarding these measures. With that, let me turn the call over to René. René?

René Lacerte, Chairman, CEO, and Founder, BILL: Thanks, Jun. Good afternoon, everyone, and thank you for joining us today. We’re off to a strong start in Fiscal 2026, delivering first-quarter results at the top end of our guidance range for core revenue and achieving a substantial beat on profitability. Our focus on driving business results while expanding the value of our platform is working. The Fortune 5 million need BILL to help them operate more efficiently, manage cash with greater confidence, and navigate an increasingly complex financial environment. Our focus on intelligent automation and efficient operations is driving real impact for customers and strengthening our business. We’ve made significant progress on our strategic priorities since our last call. Here are a few key highlights. First. Our strong execution and disciplined investment delivered solid financial results. Our core revenue grew to $358 million at 14% year-over-year.

Additionally, we posted a non-GAAP operating margin of 17%, a significant expansion as a result of our continued focus on profitability. Second, we signed three broad-reaching embed partnerships with category-leading software providers, significantly extending BILL’s reach and positioning our platform directly within the tools where millions of SMBs already work. Third, we advanced our AI leadership with BILL’s new intelligent AI agents, which deliver automation capabilities that are transforming financial workflows from manual to touchless. We continue to enhance the value delivered through BILL’s platform with features that simplify financial operations and deepen customer engagement. BILL exists to empower the Fortune 5 million. Our momentum is anchored in the trust of nearly half a million businesses and over 9,000 accounting firms. Trust that fuels growth, unlocks opportunity, and uniquely differentiates BILL in the market.

In today’s environment, where every dollar and hour matter, that trust enables us to reshape financial operations for SMBs, replacing friction and complexity with simplicity, speed, and confidence. Powered by our platform’s strength and the network we’ve built, BILL is transforming how SMBs manage their finances and move money, setting the standard for intelligent, scalable financial operations. As more and more software solutions become available, we think it is critical to meet the customer where they are. That is why we have always had a focus on developing our platform with partners in mind. Last year, we launched our Embed 2.0 strategy to remove friction for partners to quickly and easily leverage our unique size and capabilities for their customers. This focus allows us to accelerate our ability to efficiently and effectively expand BILL’s reach and creates a compelling long-term growth opportunity.

Since last quarter, we’ve taken a major step forward with three new embedded partnerships across top-seeded software providers. These partners collectively serve almost 1 million small and mid-sized customers, representing an estimated $1 trillion in annual payment volume. In October, we announced a strategic partnership with NetSuite. The new BILL-powered payment automation capability, which is embedded in NetSuite’s Intelligent Payment Automation, helps customers accelerate accounts payable processes, increase efficiency, and reduce risk. It’s available to all US NetSuite customers, meaning that tens of thousands of businesses can access BILL’s leading AP automation and payment solution directly inside NetSuite’s number one AI cloud ERP. Additionally, we’re also excited to announce our new embedded partnership with Paychex, one of the largest payroll and HR providers in the US, paying one out of every 11 American private sector workers and serving hundreds of thousands of SMB customers.

With unmatched distribution through a vast accounting network and dedicated sales force for SMBs, Paychex further extends BILL’s ability to reach and support millions of small and mid-sized businesses nationwide. Our next and most recent embed partner is Acumatica, one of the fastest-growing ERPs that serves a large and growing base of mid-market businesses across industries like construction, manufacturing, distribution, and professional services. By embedding BILL’s AP capabilities natively into Acumatica’s system, thousands of SMBs gain direct access to BILL when they need it most. Industry-leading software companies are choosing BILL to enhance the value they provide to their customers. These partners selected BILL to leverage our scale, data, and payment capabilities, enabling them to efficiently diversify their customer relationships, deliver greater efficiency, and drive more revenue. As a result, we’re able to expand the market and accelerate BILL’s reach to businesses large and small.

In addition to scaling BILL’s reach through our Embed 2.0 initiative, we’re also expanding the delivery of strategic finance capabilities to SMBs, deepening the value we provide, and helping businesses manage and move money more intelligently. In Q1, we launched BILL Cash Account, which is a high-yield, fully integrated operating bank account that lets businesses do more than track their money. It helps them manage their money by optimizing their cash flow, enabling faster payments, earning interest, and providing seamless control and visibility across all of their transactions, all within the platform they already use for payables, receivables, and spend and expense. In addition, we continue to expand the capabilities across our core platform, adding advanced reporting in the accountant console, new self-service global payment tools, a more extensible API platform, and new third-party integrations.

Our new Gmail and Lyft integrations for spend and expense are great examples of how we’re embedding BILL into the tools businesses already use every day. Receipts now flow automatically, saving customers time and eliminating friction from expense management. This is another example of extending our reach to meet businesses where they work. BILL’s platform is increasingly intelligent, increasingly autonomous, and increasingly essential to how BILL’s customers manage their finances. As a leader in delivering predictive and generative AI, BILL is once again redefining our platform in the category with agentic AI. Our new AI agents represent a paradigm shift in automation at the operational level, building the foundation for a new era of touchless B2B transactions. Our vision goes beyond simply speeding up existing workflows. We are eliminating unnecessary busy work and friction.

While Fortune 500 companies have enjoyed automation for years, the Fortune 5 million still face paperwork, policy gaps, and costly trade-offs because no one has ever built the workflows they need. We are rapidly changing that. Through the BILL network, we’ve created one of the most comprehensive real-time financial maps of the SMB economy. Our network grows, our data advantage grows as well, increasing both the scale of our insights and the depth of our understanding we have into how SMBs operate and what they need most. We have the unique capability to see how SMBs move money across industries in real time, revealing patterns and connections that no one else can see. This visibility is powered by the reach of our network. 1% of US GDP flows through BILL. It was more than half of that between members of our network.

Having processed over $1 trillion in transaction volume and 1.3 billion documents, we built the richest verified financials dataset in our category. As a highly trusted company, BILL upholds the highest financial regulatory and privacy standards. We’re now leveraging this combination of scale, data, and trust to power BILL’s agentic AI, purpose-built agents that go beyond traditional automation to deliver strategic finance capabilities and enable a future of truly touchless B2B transactions. Here are a few examples of how our new agents are already making it easier to connect and do business. One of the biggest pain points for SMBs during tax season is managing 1099s and collecting the required W-9s. Our new W-9 agent automatically requests, collects, and pre-validates W-9s on behalf of customers for all of their new suppliers throughout the year, making what no business wants to touch, touchless.

This agent eliminates over 80% of the manual steps and is now generally available for BILL’s AP customers. By eliminating this workflow, we estimate that we can help save more than 80,000 days of unnecessary work that is collectively spent by BILL’s AP customers annually on W-9s. This is a game changer and enables SMBs to focus on strategy and growing their business. Next, we believe expense processing should also be touchless. We’ve introduced a new agent that automatically codes transactions, eliminating the need for data entry and reconciliation. Initial results show this agent dramatically decreasing the need for manual work, saving our customers time while increasing accuracy. Building on the same agentic foundation, we’re simplifying user onboarding for spend and expense, automatically creating virtual cards and permissions so our customer employees can be enabled even more quickly and spend compliantly from day one.

We’ve also introduced our new agentic BILL Assistant to provide personalized, instant answers to customer inquiries and troubleshoot common issues. This means customers spend less time managing the back office and more time growing their business. These new agents are just the beginning of our agentic journey. We’re excited for customers to use them and to continue to leverage our scale and unparalleled expertise around SMB financial operations to develop more agents that eliminate workflows and the friction of doing business. The future for SMB finance is touchless, and BILL is delivering it. As we look ahead, we have strong momentum and a clear path for creating value delivery for customers through AI, which positions BILL for durable growth. This quarter, we introduced important products to help small and mid-sized businesses operate more efficiently and unlock new opportunities.

At the same time, we are building a more efficient and agile organization. The steps we’ve taken to align our cost structure, streamline operations, and invest in high-impact areas are positioning BILL for sustainable success and long-term profitability expansion. We’re strengthening our foundation for the future with the addition of two new independent directors. We recently appointed Peter Feld, Managing Member, Portfolio Manager, and Head of Research at Starboard Value, and Lee Kirkpatrick, former Chief Financial Officer of TriNet, to our board. Their combined and deep expertise in finance, digital transformation, fintech, and operational excellence will help BILL as we execute our strategy, accelerate innovation, and drive long-term value creation. We’d also like to thank Steve Fischer for his service and invaluable contributions to BILL’s growth and success. We’re focused on executing our strategy and continuing to build on the strong and differentiated foundation we’ve established.

In the quarters ahead, we’ll share a deeper view of BILL’s long-term vision and financial framework, highlighting how our scale, data, and platform innovation position us to redefine intelligent finance for SMBs, drive sustained growth, and create lasting value for our shareholders. I’ll now turn it over to John to share more on our Q1 fiscal 2026 performance and key initiatives. Thanks, René. Our Q1 results exceeded our expectations as a result of focused execution and strong operational rigor. As you heard from René, we made great progress on our strategic priorities. To start, we expanded our ad valorem payment portfolio to deliver increased value for both buyers and suppliers. In Q1, we introduced BILL Cash Account, the first step of a broader treasury capability.

It serves as an operating bank account that enables fast payment speed, integrates seamlessly with BILL and accounting software, and generates revenue for both customers and for BILL. Early feedback from customers is very positive. Steve Chaney, CEO of accounting firm Chaney & Associates, has scaled his firm to serve more than 1,300 clients on BILL since 2019. Steve said, and I quote, "The BILL Cash Account makes the platform we rely on even more powerful. Now I have a one-stop shop to manage payables, card spend, and cash all in one place. Many of our clients are churches and nonprofits, and this integration simplifies how money moves in and out of their organizations, helping them manage cash flow more efficiently and maximize their funds in a single, trusted place," end quote.

The combination of BILL Cash Account and our broader financial operations platform is a powerful flywheel that enables customers to manage more of their funds and transactions within the BILL platform. This drives TPP per customer expansion and creates an opportunity for transaction monetization growth. Our Supplier Payments Plus solution, or SPP, is our newest advanced ad valorem payment product, and it entered the commercial scaling phase in the first quarter. SPP is designed for the largest suppliers in our diversified, two-sided network and advances how we serve them by unifying payments, workflows, and dedicated account management into a comprehensive, purpose-built offering. Suppliers today often navigate dozens of disconnected portals to submit invoices and track different types of payments, which consumes time and increases the cost of payment acceptance.

We are solving this pain point with an integrated software and payment offering that serves as a single destination for suppliers to track and manage receivables and access rich remittance data. The strong value proposition of this solution is resonating with large suppliers in our network. While it’s early in the commercial phase, suppliers are leveraging this new capability to complement virtual card payments with enhanced ACH, and some are leaning in with annual or multi-year agreements. We see an opportunity to engage suppliers at a broader payment portfolio level by providing them with tools to optimize receivables for convenience, flexibility, and control. As with many enterprise solutions, the sales cycle is longer than our historical SMB trials, and we are building out our enterprise go-to-market capabilities to accelerate prospect conversion.

Shifting to our progress in mid-market, our spend and expense solution continued strong traction with higher spend businesses who typically have a large volume of transactions and complex business rules. In Q1, card spend per customer reached a record high of $145,000. In support of these larger businesses, we recently introduced a set of new functionality that enables businesses to integrate with their vendors and automatically collect, match, and categorize receipts. We also rolled out upgraded budget workflows that allow businesses to configure and customize based on their business policies, increasing the depth of our solution and driving stronger engagement. As we move up market, we’re adapting our approach on balancing customer unit economics with market penetration. We are shifting more direct go-to-market resources towards larger APAR and spend and expense prospects, where we see strong unit economics and greater monetization opportunities.

On spend and expense specifically, we are prioritizing customer segments where we can improve rewards efficiency over time, aligning our sales and marketing objectives with incentive structures that support higher quality, more durable revenue. Our accounting channel is a key foundation of our distribution strategy, a durable advantage that enables us to expand our ecosystem, acquire customers efficiently, and drive multi-product adoption. Accountants rely on BILL as a core technology component of their CAS practices, and we are making progress extending our distribution reach. In Q1, we added more than 250 accounting firms, bringing our total to over 9,300 firms. We’re now replicating our playbook with the new Embed 2.0 partnerships. As René mentioned, we recently signed three important partners: NetSuite, Paychex, and Acumatica. These partnerships will accelerate our ability to drive adoption of the BILL platform among small and mid-sized businesses.

Importantly, we will roll out the full portfolio of our payment solutions to these partners over time, enabling them to deliver more value to their customers while deepening the value we realize in return. In October, NetSuite Intelligent Payment Automation powered by BILL was announced, and customers are already using it, representing a significant proof point of our Embed 2.0 strategy in action. We are now working closely with our other partners as they progress towards general availability in the coming quarters. Turning to our progress on AI innovation, we introduced new AI agents in onboarding, support, and workflows such as vendor management, payments, and receipt management. These new agents allow SMBs to bypass step-by-step processes and complete tedious tasks instantly. Furthermore, we are also scaling the use of AI internally to drive meaningful productivity gains across all BILL internal teams.

For example, within our front-end modernization workstream, our engineering teams are leveraging AI to automate code generation, testing, and refactoring. In the areas where AI was applied, we’re seeing significant improvement in developer productivity, empowering our engineers to accelerate delivery while maintaining quality. In summary, in Q1, we executed well on our fiscal 2026 priorities with a simultaneous focus on profitability expansion. In October, we made progress on further aligning our organization with our strategic priorities and increasing operational efficiency, which Rohini will cover in more detail. We are executing with clarity and speed, positioning us to continue leading the financial operations category while delivering greater shareholder value over time. I’ll now hand the call over to Rohini to provide more details on our financial performance. Thank you, John. We started the year with significant momentum and continued our track record of delivering on our commitments.

As we shared on the last earnings call, our focus continues to be on scaling BILL into a much larger and a more profitable business. Our Q1 results underscore that focus with strong revenue growth and profitability expansion. In Q1, we delivered $358 million in core revenue, growing at 14% year over year, hitting the top end of our guidance range. Non-GAAP operating income was $68 million, $10 million ahead of the high end of our guidance, driven by disciplined expense management and some deferred investment timing. Let me share some key highlights of our Q1 performance. Within our integrated platform, BILL APAR revenue grew 10% year over year. Subscription revenue grew 6%. We added 4,000 net new customers during the quarter. This level of net adds is lower sequentially and reflects our enhanced focus on higher ROI customer acquisition and ARPU expansion.

BILL APAR transaction revenue was $123 million, up 12% year over year. TPP per customer saw a slight decrease, which was in line with our expectations. APAR transaction monetization increased 0.3 basis points year over year. BILL spend and expense card payment volume increased 21% year over year, driven by strength in retail spend. Spend and expense revenue totaled $157 million in Q1, reflecting a 19% growth year over year. Rewards increased to 132 basis points as a percentage of payment volume, up 10 basis points compared to Q1 2025. We are now scrutinizing and actively adjusting our reward structure. We expect this will result in rewards flattening and over time declining as a percentage of TPP. Moving on to profitability, non-GAAP operating margin expanded over 250 basis points sequentially, or approximately 300 basis points excluding the benefit of float revenue.

These strong profitability results reflect our ongoing focus on operating efficiency, a temporary pause in hiring, and a deferral of certain investments. Shifting to our business update. As you heard from John, we began the year with strong momentum driven by focused investment and execution approach. We are carrying this principle forward and applying a strong profitability lens across operational and investment decisions. On our last earnings call, we noted that our fiscal 2026 profitability guidance reflected this disciplined approach, one that emphasized continued expense management and further structural efficiencies. As a part of this initiative over the last two months, we have finalized and executed a reduction in force of approximately 6%. In connection with this action, we incurred $9 million of restructuring charges in Q1. These charges, which are excluded from our non-GAAP results, consisted primarily of cash expenditures of severance payments, employee benefits, and related costs.

As we pursue more meaningful operating income expansion over the next few years, we are undertaking additional initiatives across our revenue profile and expense base, including the following. On the top line, we are taking actions to enhance the quality of revenue. For example, prioritizing higher value customers and ARPU expansion over net adds growth, ROI-based approach to rewards, and evolving our pricing to better reflect the value we deliver. On the expense side, we plan to expand our talent footprint strategically in low-cost geographies. In addition, we have partnered with a third party to perform a comprehensive outside-in assessment of our cost structure. This work, combined with the internal efficiency actions already underway, will support continued improvement in profitability. Before we get into the detailed guidance, here are a few key assumptions. First, I want to reiterate our fiscal 2026 APAR volume and take rate expectations.

We are assuming flat volume per customer and a similar level of take rate expansion as we did in fiscal 2025. On spend and expense, we expect card payment volume to grow in the high teens year over year in fiscal 2026, and the take rate for fiscal 2026 to be slightly above 250 basis points. Second, we updated our float yield assumption to be in line with the current consensus. That now includes one additional rate cut anticipated in calendar 2025. The updated float yield assumption reflects the Fed Funds rate exiting fiscal 2026 at approximately 325 basis points. Third, on the cost side, as I mentioned last quarter, our full-year guidance reflected structural changes aimed at driving efficiencies. The recent 6% reduction in force was a direct outcome of these initiatives and was already incorporated into our prior fiscal 2026 guide. Now, turning to guidance.

For fiscal Q2 2026, we expect total revenue to be in the range of $395-$405 million, and core revenue to be in the range of $359-$369 million, reflecting 12%-15% year over year growth. On the bottom line, for Q2, we expect to report non-GAAP operating income in the range of $63-$68 million. We expect non-GAAP net income in the range of $63-$67 million, and non-GAAP EPS to be between $0.54 and $0.57. Shifting to full-year guidance. For fiscal 2026, we expect core revenue to be in the range of $1.46-$1.49 billion. We expect float revenue of $134 million, $5 million lower than the prior guidance, bringing total revenue to the range of $1.6-$1.63 billion.

Turning to the bottom line, we expect non-GAAP operating income in the range of $257-$277 million, or 16%-17% in non-GAAP operating margin. Our updated operating income guidance implies an ex-float margin expansion of more than 290 basis points compared to fiscal 2025. Relative to our prior guidance, the updated outlook reflects a $16 million increase in ex-float profitability, or 106 basis points of additional margin improvement. We expect non-GAAP net income in the range of $249-$265 million, and non-GAAP EPS to be between $2.11 and $2.25. For fiscal 2026, we expect stock-based compensation expenses to be approximately $260 million, which is $30 million, or 10% lower than we previously communicated. This implies SVC at approximately 16% of revenue. In closing, we executed with rigor and discipline and delivered a strong Q1.

We made significant progress executing our strategic priorities and driving greater efficiency across the organization. Looking ahead, we see tremendous opportunity to deepen the value we deliver for SMBs, extend our market leadership, and position the company for sustainable, best-in-class financial performance. Now, we’ll open up the call for Q&A. Thank you. Please press star followed by the number one if you’d like to ask a question, and ensure your device is unmuted locally when it’s your turn to speak. We kindly ask that you limit yourself to one question and one follow-up to allow everyone to get an opportunity. Our first question comes from Andrew Schmidt with Ebank. Please go ahead. Your line is open. Hi, René, John, Rohini. It’s great to see the product advancements and all the integrations you guys have rolled out. Good job on that.

If I could ask about the move-up market, if we could talk about whether you’re seeing that in your customer numbers yet or if that’s to come. Obviously, it’s a nice needle mover once you get that going. If we could also, as a corollary to that, talk about the payback periods, unit economics, sales, and marketing intensity as you kind of shift up market that we should expect. I know you’ve already kind of been moving up already, but it seems to obviously be a little bit more of a concerted shift now. Thank you very much. Yeah. Thanks for the question, Andrew. Our focus on mid-market has been a bit of an evolution where it started as an organic pull where we saw increased demand in the market from larger businesses. That’s now become a deliberate strategy where we’re proactively investing in our go-to-market.

Resources and capabilities and tactics, as well as product capabilities where we’re rolling out new features for procurement, multi-entity, bulk pay, supplier payments, and things like that. Demand has been good. I think we’re making steady progress at evolving the composition of the new customers that we acquire. We continue to see good results with acquiring mid-market businesses. To move the needle on the business overall is going to still take a little bit of time, just given the size of the installed base that we have in terms of customers and revenue. As we’ve said previously, a typical mid-market customer is probably 2X the size in terms of TPP than the average SMB, and they’re much more likely to adopt multiple products. This translates into much higher ARPU, TPP, ADVAL payments, all of which will improve our unit economics.

That’s really one of the main drivers of this area of focus for us. Got it. Thank you so much, John. Maybe I could ask about AI. Obviously, on everyone’s mind these days, it’s great to see the agent rollout. Maybe just discuss the pipeline when you think about just the role that Agentic plays for BILL, and then also just anything on how the monetization might evolve. There’s a lot of questions about how you monetize or if this is just a retention factor. Anything there would be great. Thank you so much. Thank you, Andrew. Yeah, we’re very excited about what we can do with AI and what the impact it’ll have for our customers. I think when we step back and look at the assets that we’ve built at BILL, we have a unique data set.

I mean, we’ve got 1% of GDP, and half of that flows between network nodes on the BILL platform. We’ve got great SMB expertise about financial operations, understanding the workflow that really matters to them, what’s going to save them time ultimately is what’s going to save them money. We’ve very much been focused on that since day one. When you combine that data and that expertise, our ability then to kind of leverage that into agents that make meaningful impact, it’s real. I’ll just take one to call out, which is the W-9 agent. It’s a workflow that is obviously a painful process for folks.

When we talk to customers and we talk to many, one of the examples of this impact for one of our customers is that it’s going to save them a quarter of the time in annual fiscal year for them when it comes to processing these W-9s. They have over 1,500 W-9s they need to collect and work on. It’s an iterative process getting those suppliers to come in for their client. This is an accounting firm High Line where they’ve been able to quantify already just in the early days that it’s a meaningful impact. That’s the type of impact we’ve always looked to do at BILL. Our mission is to make it simple to connect and do business. That’s a great example of doing business more efficiently.

That leads to opportunities for us to actually drive additional price effectiveness, if you will, value for our customers. We are in the early days of actually rolling out these agents, as we talked about. We have a broader pricing strategy, which I think John could talk to a little bit here, but the monetization you are talking about would be part of the broader strategy. Yeah. It is actually a really interesting time in the evolution of our platform and our capabilities and the value that we are able to deliver to our small business customers and how that influences our pricing strategy. We have obviously added a ton of capabilities lately. We have made a couple of near-term pricing changes, things like adjusting some transaction pricing last quarter, some pricing tier changes more recently.

These are really just short-term actions we have taken, but they are in the context of a much broader pricing optimization effort that we have. That is where we think AI actually becomes an additional tailwind as we think about optimization over time. What we are trying to accomplish is creating strong alignment between the value we are delivering and the value that BILL also generates from these customer relationships. That should have a positive impact on customer ARPUs and revenue per customer over time. We do not have a specific timeline for the impact of this pricing initiative, but I can say that it is an important priority and initiative at BILL in fiscal 2026. All great to hear. Thank you so much. Thank you. Our next question comes from Darren Peller with Wolfe Research. Please go ahead. Hey, guys. Thanks. Good start to the fiscal year.

Can we just start off by talking about what obviously came up a lot during the quarter with different investor involvement and board changes that you alluded to earlier and the rule of 40 that you called out agreeing to? And just to help us understand, first of all, the definition in your mind of rule of 40 in terms of, I’m assuming it’s core revenue growth. Is it include or exclude any items? And is it on operating income? Just a little more specificity would be great. And then, more importantly, just your thought process of what you think it takes to do it from a cost standpoint and an investment standpoint. Thank you, Darren, for the question. I’ll start, and then I’ll let Rohini kind of get into some of the details there.

I mean, the first thing I would say is that I just want to make sure folks understand that profitability is a part of the DNA of our company. It’s kind of who we are, it’s how we built the company from day one. It’s being an accountant at heart. My grandmothers were accountants. It’s just who we are. This focus on profitability, while we’ve shifted from kind of focusing on the growth to also add the profitability focus in these conversations with investors, it’s not a new thing for us. We have been steadily increasing profitability over the past few years. We have a lot of opportunity to continue to do that. That’s why we are comfortable and believe that the rule of 40 is the right target for us. I’ll let Rohini start to talk about kind of the timeline for us, sharing more on that.

Yeah, absolutely. There are so many ways of calculating the rule of 40, but the spirit of all of those is largely the same. We are being very thoughtful about how we define it for our business. Because the goal is not just to choose a formula, but really to ensure that we’re truly reflecting how we create the durable value for the business, right? The idea is to be able to balance growth and margin. We look forward to sharing our framework and the rationale that we adopted for the rule of 40 during the investor day in the first half of the calendar year 2026. This is still a work in progress. You’ll see it soon. Okay. Okay. All right. Guys, quick follow-up. You beat the quarter in terms of beating your own guidance on top line.

Maybe just help us understand what looked like some spend trends on some of the SME side, but perhaps a little more color on what you thought was the driving force of the upside and sustainability of that as we see going forward. Thanks again, guys. Yeah, absolutely. Let me start with the beat on operating income excluding float. Float has some other assumptions that I can talk through later. On the excluding float OI, we had a beat of roughly $11 million. I would categorize $5 million of that as what I would call timing. As we were contemplating reduction in force, we decided to pause and slow down not only hiring, but also the other investment spend as we settled the organization a little bit. That drove a little bit of in-quarter.

Benefit that we expect to spend into the rest of the year. The rest of, I would say, $5 or $6 million of float through is a combination of. We had a small one-time goodness that came in through losses, which quarter to quarter fluctuates, and we had a bit of a goodness there. But about, I would say, $45 million were still good flow-through of the efficiency efforts that we’ve been executing on as we go through the year. That is the part that we flowed through, which resulted in a $16 million increase in the operating income ex-float guidance. If you look at the OI at a total level, including float, we always follow the guidance of the consensus. There was one more rate cut that was added to the consensus, which we have incorporated into our guidance now.

This impacted our OI by about $5 million, as I think stated in my script. That is offsetting impact to the $16 million, and the rest was flowing through. I hope that helps answer your question. Okay. All right. Thank you very much. Thank you, Darren. Our next question comes from Keith Weiss with Morgan Stanley. Please go ahead. Excellent. This is Keith Weiss with Morgan Stanley on for Chris Quintero. Thank you guys for taking the question, and congratulations on a solid start to the fiscal year. I was hoping to dig into the Embedded 2.0 initiative a little bit further. Maybe particularly when it comes to a vendor like NetSuite. Three kind of parts of the relationship I’d love to get more detail on. One, product functionality. What’s the incremental functionality that BILL is bringing? And is there overlap?

Because I know NetSuite has an AP module, and they do payments. Is there overlap, and how does that get resolved? Number one. Number two, on the go-to-market side of the equation, is this just a technical integration, or is there a go-to-market component from the NetSuite or the embedded sellers, if you will? Are they helping to sell the solution? Number three would be on the monetization. Should we think of this more as an OEM relationship of where the customer’s NetSuite and they’re selling the solution to the customer, or is this just a way for you guys to address existing NetSuite customers directly with a solution that’s already embedded into something that they’re using already? That’d be amazing. Thank you. Okay. Great. Thank you, Keith, for the question. Good to hear your voice. So.

I think I’ll answer your question, and I’ll probably go into a little bit more detail about embedded because it’s a super important part of our strategy and a differentiator for us. I think the first thing on the product overlap and how it’s going to work inside of NetSuite, the Embed 2.0 platform enables us to extend the APIs into the experience that our partner is developing. If you’re a NetSuite customer, you obviously have a full ERP to be able to manage lots of your P&L, all of your P&L, and now you’ll be able to make payments courtesy of BILL inside of that. Those payments will start with the existing obvious payment choices of check and ACH and soon follow virtual card and eventually all the other payment types that we have.

The experience is you’re inside of the application, the ERP, and now you can make payments. It takes full advantage of the network and the payment products that we’ve built. From a go-to-market perspective, the second part of the question, it’s really one of the things we’ve learned of being partners for lots of FIs and other companies in the past is that we have a ton of market expertise about how to sell this. We are working with NetSuite and the team there on their go-to-market and how to extend this. Obviously, in product, it’s going to be a key part of the experience. There are opportunities, and we just take the launch. It was announced on the center stage, first announcement that they did at SuiteWorld where Evan and I had a fireside chat.

There are going to be lots of ways for us to continue to leverage what we know about our products and how to sell them through the customers and what they know about their products and how to sell through customers. It is going to be a joint effort, and we will be a part of that. The third thing around monetization and just kind of the opportunity for BILL, ultimately, these partnerships are set up where it is going to be a revshare relationship. Opportunity for us to, incentive for them to have as much volume as possible on the platform. The same is true for us. As we develop and extend the payment products we have, that is going to be good. It is pretty, I would say, simple from that perspective, and we are aligned.

That is the focus of a good partnership, to make sure everybody’s aligned. Let me just step back now for a little bit on really just what sets us apart in the market. Our philosophy from day one has been to meet customers where they are. I know SMBs and mid-market companies are hard to reach. Awareness is hard. It’s a busy world. We have always worked hard to make sure that we can be where customers are looking for opportunities to improve their lives. You think about what we have done with accounts, over 9,300 firms. That is because we have a partnership that we started with CPA.com, a division of the AICPA, in 2008. That type of capability enables us to actually have customers like Steve Chaney, who has 1,300 clients on. That is a partnership. We get to learn from that.

We’ve built a two-sided network in this effort to actually meet customers where they are. We have partnerships that leverage that, whether they’re FIs or now software partners. It’s that success and that belief in meeting customers where they are that has driven and actually attracted these premier partners and NetSuite, Paychex, and Acumatica. Again, I think it’s super important for folks to understand. Those customers alone, these partners that we just brought in this past quarter, they reached close to a million SMBs with over $1 trillion in spend, approximately. That’s just an amazing opportunity for us to continue to meet customers where they are. You have to ask, why did they pick us? Why did they pick BILL?

I think it’s really important to understand that that’s a key advantage of the platform that we’ve been building over the last few decades. It comes down to five things. The first thing, our platform ease of use. The Embed 2.0 platform is very easy to use. You can inject APIs. You can inject elements. You can do all the things that a partner wants to do with our platform that’s been built with 500,000 businesses in mind and serving. They can do that day one. That’s the first point they pick us. The second point is the scale of the data. That really matters because our ability to leverage the risk and the payment timing benefits that we get from understanding the risk, that means their customers get a better experience day one.

The third thing would be the breadth of the payments that we have. We have more payment products and capabilities than anybody else in the market. We enable all these payments for our partners. They have to adopt them, but that’s what they’re attracted to. They want their customers to stay inside of their application. They don’t want their customers to go outside to make international wires or to make card payments. They want them all inside of their application. We do that, the breadth of payments. The fourth thing is we have financial operations expertise. We have an amazing amount of knowledge and know-how around how SMBs, mid-market companies, how they want to work, and how their financial operations impact their lives. They want access to that so they can build the experiences exactly the way that they need to inside of their application.

The fifth thing, which I think is super important, is the DNA of this company includes a partnership lens. We always focus on making sure our partners win. We do a great job of that. When you combine all of that, there is nobody in the market that’s offering an approach to serving partners the way we do with the scale we have. I appreciate the beginning of the question, but I wanted to make sure that folks understood how important and valuable this is to BILL, and we’re super excited about it. It definitely sounds exciting. Maybe just as a quick follow-up, how expansive could Embed 2.0 be? Should we expect to see, would this be dozens of partnerships like this, or would it be a more narrow focus on a group of key partners?

The capability of the platform can support as many partners as are out there. Our focus is going to be to make sure the partners we have really can drive value for BILL and our shareholders. We are starting with partnerships that make a lot of sense. There are going to be opportunities and opportunities that even some of our existing customers, for example, use the APIs we have as part of the Embed 2.0. I think I would think of the platform as being scalable and capable to support whatever the market really wants to do. We are going to maintain that laser focus on driving value for our business and for our shareholders. Outstanding. Thank you so much for the detail. Thank you, Keith. Thank you. Our next question comes from Spencer Anson with SIG. Please go ahead. Great. Thanks for taking my question, guys.

I was just hoping to get an update on your invoice financing initiative. How has the program been scaling, and what are the key levers you have for driving expansion there? Thank you, James, for the question. We are super excited about the full portfolio of products we have. This one, invoice financing, is great for suppliers, especially smaller suppliers that are on the network. We continue to see strong growth. I think one of the ways that we define our growth is in the emerging payment portfolio products, and this would be a part of that. I’ll let Rohini kind of give some of the specifics on that category as a whole, but we continue to see strong growth, and we think it’s an important part of the overall product suite we offer. Yeah. I can add a couple of things on invoice financing.

As René mentioned, it is a really important part of what we call our emerging ad valorem portfolio, which is now becoming a material part of our APAR transaction overall offering from a revenue perspective. We discussed last quarter as well that we’re not going to discuss individual pieces of the portfolio and each one of the products, but overall, this emerging portfolio nearly grew at 40% last quarter in Q1 year over year. Very exciting growth in that portfolio as the rest of the ad valorem portfolio continues to stabilize. The other thing that we are keeping in mind is the profitability balance with the growth. We want to continue to be thoughtful of which risk tiers we take on with the invoicing portfolio, and we are pricing them appropriately to cover for the risk and the cost that comes with it.

That’s going to be a real focus. There may be some places we do trade-offs and just not follow rapid growth, but balance it with the profitability outcomes. Great. Thank you. And congrats on a strong start to the year. Thank you. Thank you, James. Our next question comes from Brian Keane with Citi. Your line’s open. Yeah. Hi, guys. Congrats on the solid results. I’m going to ask on the AR/AP, kind of that take rate. Look kind of flattish sequentially, but you guys are kind of reiterating, kind of expect kind of the same kind of improvement that you saw last year. Can you just talk about some of the initiatives that are going to drive that take rate forward and how you feel about it after the first quarter going into the second, what we can expect? Yeah. I can take that. Absolutely.

We had said last quarter that the APAR take rate will be similar expansion to last year, which was roughly 0.4 basis points of expansion. We continue to reiterate that guide. In Q1, you saw very similar expansion as well. In Q4 last year, we had mentioned that the APAR take rate was strong, and some of that was driven by the increased activity in international FX, where we saw some initial volume from pull-ins due to tariffs that were expected to happen. We saw that normalize as we came into Q1. The numbers were very close to where we expected. Going into Q2, the only part of seasonality that I want to point out is that we see additional TPV coming into Q2 in the APAR portfolio, and that is largely as people are closing the December year.

We see increase in TPV, largely driven by the ACH volume and checks in some cases, which is lower monetization. The take rate in Q2 goes down sequentially, but overall, it does not have an impact on the revenue. It is increase in TPV and lowered math of the take rate. As I look forward, we are seeing some green shoots. Our emerging portfolio, as I mentioned, continues strong momentum. The revenue there grew nearly at 40%, and that will continue to drive the take rate expansion. In addition, we are in early stages of SPP, which is an important strategic addition to our portfolio as well. As we are seeing, the value is resonating with the large suppliers. As we exit this fiscal year, we expect it to start contributing to the take rate expansion as well. Great. Thanks for taking the question. Yeah. Thank you, Ryan.

Our next question comes from Tianxin Huang with J.P. Morgan. Please go ahead. Hey, appreciate it. Good afternoon, everyone. Just thinking about the shift to larger clients, it feels like maybe you’re leaning a little bit harder into that. Correct me if I’m wrong there. Just overall, how might that impact the P&L and some of the KPIs? And also for the smaller clients that you were previously going after, are you going to assume that the partner channel will pick up some of the slack there? I’m just curious how those will be addressed looking ahead. Yeah, thanks for the question. Yeah, our mid-market focus, ultimately, we think has the impact of driving stronger engagement, retention, and growth from clients who adopt more of our solutions. So we’re increasingly rolling out products in support of larger businesses.

I think we had several comments in prepared remarks that talked about quality of revenue and how we’re making investment prioritization decisions based on improving the quality of revenue. Where there are trade-offs that we need to consider, we’re going to prioritize revenue growth, quality revenue growth over just pure customer acquisition, number of customers. That shift to increasing investment in this mid-market segment ultimately supports our pool expansion and other areas of revenue growth. The economics typically work out for us very good. We have strong unit economics. We have very good lifetime values because of multi-product adoption and higher TPV per customer from this mid-market segment. We think, as Rohini mentioned, our focus on balancing profitability and growth, it’s additive to that priority that we have. Got it. Thanks, John. Yeah. I didn’t mean to—I just wanted to clarify. That helps.

Maybe as my quick follow-up, thinking about the agent question again, I know it was asked a couple of times differently around monetization and whatnot, but if there is so much in the way of savings that you’re presenting back to the clients, including the W-9s, etc., it does feel like you can participate in some of those savings. So is that how you’re thinking about some of the pricing around that, or is it really more about just lowering the cost of delivery? And then one more point, sorry to ramble, is there a pipeline of more agents that we can expect this fiscal year or maybe even sooner than that? Thank you. Yeah. At the highest level. The agentic.

Approach is really what we’ve been doing all along, which is to make things simple for businesses, to save them time, to save them money because time is money for them. The first thing we want to do is make sure we create a great experience. Creating a great experience actually gives you the opportunity to reach more customers as well as to charge appropriately for the value you’re creating. Tanjen, I think that you will see both. I think we will see these agents help us. One of the agents we talked about was onboarding for S&E customers, the ability for an S&E customer to get the cards, the virtual cards across their suppliers automatically just by uploading and looking at prior expenses to be able to drive volume real-time for those customers in the early days.

I think that you will see that the agents will both drive activity on the platform as well as opportunities for us to charge appropriately for the value that we’re creating. I think we are early days in that, and there’s a broader pricing strategy work that we are doing that John is leading that will incorporate that as we roll them out. As far as to the pipeline of agents, I’ll just step back. I think in the May quarter, we talked about—actually, it was actually August we talked about the ability for AI platform that we’d worked on all last year to create a platform for our teams to be able to execute quickly around ideas and opportunities they see. We will see, I think, lots of agents. I think we will try to make sure they are bucketed, if you will, into the appropriate.

Parts of the product because it could be overwhelming if you think about all the things we’re going to do. But there’s a lot of opportunity for us to leverage the expertise that we’ve developed across a couple of decades and all the payments and volume that we’ve done to be able to drive even more efficiency for S&B. So we’re super excited about it. The teams are excited about it, and we look forward to rolling them out as we continue to leverage the data and the capabilities that we have. Yeah. Can I add some more color here? So, Tanjen, we are also thinking about a two-pronged approach here, right? There are some agents that are very key to our products and are essential agents to what we do, and they will be included and sort of given to all of the users of the product.

That will provide us opportunity to create more pricing on the same subscription plans because we’re now adding more value. Additionally, we also will have higher value agents that will be priced based on access and how much you use it. This will be a two-pronged approach that we are pursuing right now. No, that’s great. Thank you so much. Thank you, Tanjen. The next question is from Nate Svenson with Deutsche Bank. Please go ahead. Hey, thanks for the question. I was hoping to get a little more detail on the BILL Cash Account. Sounds super, super interesting. John, I think you had that one quote from a customer, but we’d love to hear a little bit more about the earlier feedback that you’ve gotten. You also mentioned revenue benefits both to customers and to BILL.

We’d love to hear about both sides of those coins, especially with regards to how your revenue generation might benefit from this. Thank you, Nate, for the question. I’ll start, and then I’ll let John cover anything I miss. I mean, I think the first thing that, as a reminder for folks that haven’t been following BILL as long as I have, obviously, the original name of the company was Cashview. It was Cashview because the pain point I felt running my prior startup was I needed help managing cash flow, which involved payables, receivables, spend and expense, and obviously the treasury services that come with the cash account. This is a strategic part of our mission of making it simple to connect and do business and getting the product in motion from a regulatory and product-fit perspective.

All of that has been work that the teams have been working on now for a little bit. We’re super excited because with this, it means that customers are going to save a tremendous amount of time and have more clarity about what they’re doing. The reason I say they have more clarity is if you think about kind of this as being the first step to world-class treasury services, having an operating account where you can see all the details of the transactions inside the account, that’s not something businesses have today. You will be able to see with the BILL Cash Account exactly who you paid, when you paid them, how much you paid them, and link back into the information that was the supporting information for that transaction. That’s a unique advantage when you’re trying to understand your cash flow.

The other thing that this product gives you, because when the cash is in the BILL Cash Account, we are able to make faster payments. Faster payments matter to SMBs every day. Our ability to do that goes up with this. We think that leads to us bringing offline payments into the BILL ecosystem. That is super important because we know there is spend that happens outside of BILL, and we want to make sure it happens in the BILL platform because of all the capabilities we give our customers to track, to manage, to do workflow, to have efficiency gains. All of that is super important. The fact that you have the Cash Account means now you can pay, leveraging the BILL platform. Across 10 different payment vehicles that we have anywhere in the world, pretty much next-dated real-time, depending on the service you are doing.

That is a real customer benefit. What you heard from Steve Chaney, which I just love hearing about, is a customer that six years ago did not have any customers on the platform. This was a new business for him. Now he has 1,300. This is a critical part of how he is thinking about supporting the nonprofits and the churches he supports across this country. All of that is because we built a great product. To your business question, the opportunity from a revenue perspective is real for both BILL and for our customers, giving them interest income, an operating account that you do not normally get. This is an opportunity for businesses to get something on their working capital account. It is an opportunity for us because typically, with our payments that happen on the platform, we have the funds for two to three days.

If a customer uses the BILL Cash Account, those funds will be in the account for however long they want to manage their account. That could be two weeks. It could be a month. Who knows? We are starting to learn that experience, and that will give us an opportunity to earn revenue that’s different than the float revenue we get today. Super exciting to get this in market. It’s strategic, and we’re looking forward to rolling this out to more customers, and we’ll give you an update as that happens. Yeah. And John, go ahead. Yeah. Just one thing to add on the economics, the monetization associated with the product. One of the things that we’re seeing with the early adoption of the rollout here is that having the integrated cash account is likely to bring more TPV onto the platform.

As René said, it stays within our ecosystem for longer. That additional TPV from offline to online in the BILL platform creates an opportunity for incremental ad valorem adoption. That is the primary monetization method. The secondary one that René mentioned is by having balances in our system for longer, which creates an incremental float revenue or transaction revenue stream for us as well. That is super interesting stuff. I appreciate the detailed answer. I guess for a quick follow-up, just on the spend and expense rewards, continues to tick up a little bit. Rohini, I think you talked about scrutinizing the structure there and then that eventually flattening out. Maybe we would love to hear some specifics on what you are doing in terms of that scrutiny. Is it specific client contracts? Is it more broad-based changes to the reward structure?

Maybe it is the front book, just any details there, and then how long it takes for us to kind of level out with where we are at on rewards. Yeah, absolutely. I will make this quick. We have demonstrated a strong track record of expanding profitability. We are looking at all the levers at our disposal right now, and this is one of the critical pieces of our overall spend portfolio. What we are thinking of doing is evolving the reward structure to tie in more directly to the revenue and the overall economics that we get from the customer and not just spend. We are being very selective in how we will, going forward, use the rewards as an acquisition tool for high-quality and high-monetization customers. If we have to, we will make disciplined trade-offs to drive that profitability growth.

We believe that this will result in rewards flattening out over time and then declining as a percentage of TPV as we exit the year. Thanks, Rohini. Of course. Thank you, Nate. I think we’re at time, so I’ll go ahead and. Thank you, Lydia. Thank you, everyone, for joining us today. I want to thank our teams for executing with strong rigor and discipline while continuing to innovate. The initiatives we are taking are driving meaningful profitability improvements and position us well for durable, profitable growth in the years ahead. Have a great evening. Thank you. This concludes today’s call. Thank you very much for joining. You may now disconnect your line.

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