BILL Holdings (BILL) Q4 2026 earnings call transcript

I will now hand the conference over to Jack Andrews, vice president investor relations. Jack, please go ahead. Thank you. Good afternoon, everyone. Welcome to Bill's fiscal fourth quarter, 2026 earnings conference call. We issued our earnings press release short time ago that filed the related form 8k 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 Renee LeCert, chairman CEO and founder in Rohini, Jane CFO. Our remarks today include forward-looking statements about our business products and expectations that involve many assumptions, risks and uncertainties. Actual results could differ materially from those expressed or implied by such statements. On today's call, we will also refer to both GAAP and non-GAAP financial measures.

Please refer to our earnings press release and investor presentation posted today into our periodic reports filed with the SEC for additional information about such risks and uncertainties and for reconciliations of non-GAAP measures to GAAP.

With that, let me turn the call over to Renee.

Thanks, Jack. Good afternoon, everyone, and thank you for joining us. Q4 was one of the most significant quarters in the history of bill. We completed the significant organizational changes required to accelerate our transformation to be an AI native company. We sharpened our view of the highest impact actions that power or growth, and at the same time, we drove good overall business performance in the quarter. Core revenue grew 16% year over year, while our non-GAAP operating margin exceeded 23%. With increased activity in the industry, it's clear that bill's value proposition of an integrated platform continues to resonate with SMBs. I'll first recap the highlights from Q4, then provide an update on our new organizational structure and then introduce our key priorities for FY 2027.

As I shared on our last earnings call, innovating with AI represented our top priority during the past fiscal year. We continue to see strong momentum and adoption of our AI capabilities among our customer base. To date, we have had over 175,000 businesses using our agents to improve their financial operations across SNE and AP. The number of organizations using our W9 agents more than triple sequentially to over 40,000. As a result, we have collected over 240,000 W9s with zero work from our customers. This agent handles outreach, collection, and validation with the IRS without anyone touching it, eliminating a job nobody wanted in the first place. Next up, bills and voice coding agent, which launched in February, has already been used by over 60,000 companies to eliminate around 90% of the coding steps for a multi-line invoice.

This has generated significant time savings, reducing the processing time across our AP customers by nearly half. In addition, our touchless transactions agent became generally available at the end of April to all of our spending expense customers. Already, it has automated more than 7 million transaction fields for 30,000 customers.

Lastly, our pay for the agent became generally available at the end of Q3 and completed over 30,000 car transactions without any human interaction during Q4. These examples are just some of the many AI capabilities we have in our building for customers. Given these successes, we are excited to launch major new AI power functionality over the coming months. The value to bill and its customers from this technology will come from better business outcomes with greater speed, control, and status period. It is easy to drive agent creation and code completion, but it takes great domain expertise to build products that customers never knew they wanted or needed. Our domain expertise and scale is long established.

Customers know that we have built our platform to deliver better business outcomes, and that has built a brand trusted by businesses everywhere. We are making these AI investments to extend the significant value creation for SMBs that we are known for. It will help them save more time, maximize financial performance, and leverage AI with confidence. As a result, customers will spend more time on strategic work, catch risk that would otherwise been missed and focus on growing their businesses.

Our commitment to constantly innovating and delivering software that optimizes and executes the workflows and decisions that run the financial operations for our customers as a real impact. They trust us. Let me share a customer quote for Matthew May, National Accounting Manager Partner at Sorin, a large accounting firm. We handle some of the world's most sensitive data. So our philosophy is always security first.

Rather than using generic AI tools, we trust solutions from vetted tech partners like Bill, who've proven their security with our clients' financial information. AI is an enabler, but only with guardrails and the right partnerships augmenting expertise and trust.

When it comes to financial operations, trust is a critical factor in the purchasing decision. That trust is helping our integrated platform gain strong traction among the fastest growing segments of SMB spend. AI first businesses, technology services, and professional services firms.

These firms are scaling quickly and need financial infrastructure that keeps face. Customer spend on AI through Bill grew over 50% year over year in Q4, and TPV from our AI first customers nearly doubled from Q3 to Q4.

AI is not only a game changer for our customers, but it is critical to have we build and operate at scale inside a bill. We are driving more and more internal efficiencies while improving execution across the entire company. One use case is having a direct impact on our financial results. A few quarters ago, we introduced a new AI underwriting model to assist with our invoice financing applications. This new model is built on signals and patterns based on how businesses pay and receive payments within the bill network over time.

Relationship level data allows the model to assess invoice level risk with the precision not replicable from traditional credit bureaus. We are seeing a material impact on our invoice financing business. Both volume and revenue grew approximately 30% year over year in FY26, while the expected loss rate has improved by more than 50%.

This is a strong illustration of two of Bill's key modes, our massive proprietary data set and our network. As more and more transactions are executed on our platform, our models get smarter, our risk selection improves, and we can extend more credit at better economics for the customer and us. This is a compounding advantage that grows with scale.

Next, I'd like to provide an update regarding a number of organizational changes we completed during Q4. Over the last fiscal year, we have been working diligently and intently on structuring Bill for our next phase. We significantly simplified and reduced layers across the entire company. In addition, we moved from a hybrid general manager structure to a functional model.

The imperative to become an AI native organization combined with driving speed of execution on the initiatives that drive results across the business is the primary motivation for these changes. We are moving fast with strong accountability and end-to-end ownership in order to drive velocity, impact, and growth. Simply stated, we built Bill to achieve what it needs to in the future.

During Q4, we made some deliberate leadership changes to support this direction. I was pleased to welcome Jonathan Leith to build as our new Chief Revenue Officer. Jonathan has a strong background and track record in scaling revenue organizations to serve lower and mid-market companies. He is responsible for all aspects of our go-to-market organization. In addition, my chair who joined Bill last year has been promoted to Chief Product Officer. He now leads the end-to-end platform experience spanning software solutions, payments, and financial services. This structure reflects how customers use all of Bill's capabilities together across a single integrated platform.

Finally, Eric Chan has been appointed Chief Technology Officer. As Bill's founding engineer, former CTO, and Chief Architect, Eric has exceptionally strong knowledge of our technology, the team, the current technology landscape, and operates with the speed this moment requires. We've done the work to assemble the right team, and our focus energized the position to win in our market. Entering FY27, we are focused on the following three strategic priorities. Our first and most important priority is to deliver AI native experiences for our customers. Because this is our top priority, I'd like to spend a moment on what that means for Bill. Achieving an AI native experience means that AI is so deeply embedded that removing it would make the product no longer work.

Our success with over 175,000 customers leveraging AI capabilities is compelling. We are making a strategic pivot to an agentic platform that automates financial building new front-end experiences that remove friction so that customers can instantly realize value from AI. Our knowledge of SMB-specific pain points and workflows combined with our proprietary data advantage, our network of over nine million members, and our robust payments infrastructure creates a powerful foundation to build trusted, accurate, secure AI solutions specifically aimed at the Fortune 5 million. Our second priority is to acquire higher ROI customers. One of the key areas of focus here is driving multi-product adoption. In Q4, the number of joint customers leveraging both of our AP and spend expense solutions grew 35% year-over-year.

Those who were customers both in Q4 and a year ago exhibited a net revenue retention of 111%. Given the success we have seen, we have made a change to our go-to-market strategy in FY27. The entire sales team is now trained to sell bill as a single platform rather than individual components. This is how we will engage with customers and prospects moving forward.

Our embed 2.0 strategy represents an efficient channel opportunity. We believe there's a large market for software companies interested in deploying our embedded finance solutions to support the financial operation needs of their clients. We are gaining traction with our embed partners. As an example, one of our bed partners' TPV and units more than tripled sequentially from Q3 to Q4. In focusing on higher ROI go-to-market activities, we have made the decision to align our bank channel efforts with Bill's broader embedded strategy. We are investing in scalable standardized embedded solutions. We need all of our partners to use all of our products and experiences. Focus here will allow us to leverage one platform across all of our partners versus the multiple versions we support today.

We do not expect that every existing bank channel relationship will carry forward. Our third priority is to expand value through Bill's platform. We aim to achieve this by providing greater value for customers in terms of new product introductions and enhancements. This in turn should result in greater value to Bill from a monetization perspective. We have a strong track record of introducing new ad valorem payment products over time that have solved specific pain points for our customers while leading to broader monetization opportunities. One example of this is supplier payments plus for SPP. Driving adoption of our SPP offering remains a key area focus to expand value for both customers and Bill.

The early progress has not met our initial expectations. The enterprise sales motion required was new to Bill and FY26. Over the last year we have invested in building out this go-to-market motion and we are now starting to see increased deal momentum and faster implementations. Our contracts with these large customers lock in new ACH monetization and preserve virtual card volume. Our committed TPV across all of our payment offerings from these early adoption suppliers has reached almost $800 million. Building great products is hard work. It takes vision, execution, listening to customers and iterating over and over to create a great customer experience. We have been doing that with SPP and the customer response is positive. I'd like to share a case study from one of our early customers describing the value they are deriving from SPP.

We recently signed a business services company that is managing over $75 million in annual SMB payment volume through Bill. Prior to adopting SPP, they face a fragmented receivables operation with hundreds of separate accounts spread across multiple field locations. Half of all incoming payments were invisible to corporate treasury and posted manually with no automation. This is a painful way to run a business.

After deploying bill supplier payments plus, the company consolidated 168 accounts into one centralized corporate account in just 10 weeks with zero IT involvement and no disruption to customers or field teams. The percentage of payment transactions that are processed and settled automatically without any manual intervention jumped from 72% to 98% to 100%. The company has recovered more than 400 hours of manual labor per month, time that is now redirected toward higher value customer-facing work. The customer summed it up in one word, efficient. AI dramatically expands what is possible, but the requirements of financial operation systems that serve critical functions remain the same. Accuracy, control and security are paramount. Our wealth of proprietary data combined with our infrastructure, scale, reliability and experience, having moved almost $2 trillion in spend, gives Bill an advantage to the market that is not easily replicated at scale.

Successfully executing hundreds of millions of transactions for hundreds of thousands of customers gives us invaluable learnings. We are uniquely positioned to develop and deliver AI data solutions that are best tailored to address the needs of the customers we serve. A year ago, we set out to do something hard. Grow the business, return capital shareholders and fundamentally reshape how Bill operates, all at the same time. We did that. I couldn't be more proud of the team given the amount of change experience and the results delivered. The team I have beside me today is smaller, faster and more aligned. The product we are building is the most compelling it has ever been and the I'm excited and confident in where we are headed.

And with that, I'll turn it over to Rehini.

Thanks Renee. Before getting into the details of our quarterly results, I'd like to make some comments up front regarding how we view the longer term financial trajectory for Bill. During my first year here, many investor conversations have focused on the importance of providing a financial framework for how we view both growth and margin opportunities over time. There are three key pillars to our framework that I'd like to share now.

First, Bill has built a durable business model and be a well positioned to deliver low double digits to mid teams or revenue growth with expanding margins over time. Second, we are focused on driving progress towards the rule of 40. We defined this metric as growth in total revenue less rewards plus non gap operating margin. This is a measure we believe better reflects our underlying unit economics and improves comparability to peers. Our actions in Fi 26 have positioned us to be a rule of 40 company and we expect to exceed this threshold exiting Fi 27.

Third, Bill is focused on achieving meaningful gap profitability in Fi 27 and expanding from there. Now let's dive into the financial results for the quarter. In Q4, we delivered $400.5 million in core revenue growing 16% year over year. Non gap operating margin was 23% expanding 370 basis points sequentially and 860 basis points year over year. Non gap net income was 94 million representing a 22% improvement sequentially and a 53% improvement year over year. The large profitability beat this quarter was driven by earlier than planned workforce reduction timing and lower fraud and credit losses.

Within our integrated platform, we saw double digit growth in both AP AR and spend and expense. AP AR core revenue grew 10% with subscription ARPU increasing by 1.4% year over year. Mid-market core ARPU from newly acquired customer cohorts grew 31% year over year as we continue to focus on higher quality customers. In Q4, we added approximately 1,800 net new customers which is below recent trends. In addition to our decision to deliberately prioritize signing the right customers for bill, the organizational restructuring impacted this result.

We decided to exit salespeople earlier than originally planned in order to familiarize the remaining sales team with their new pipeline and quota opportunities. Under Jonathan's leadership, we have moved quickly to a single platform selling motion with tighter execution across the team. The early indicators in Q1 are already trending in the right direction, which gives us confidence.

AP AR transaction revenue was $131 million up 10% year over year. We saw very strong PPV and Q4 exceeding our expectations by approximately 300 basis points. This came mainly from newly acquired larger customers and their ACH volumes. This PPV makes resulted in an AP AR take rate of 16.0, which contracted by 0.5 basis points. Normalizing for the large ACH PPV take rate would have been in line with our Q3 guidance.

PPV on a same store sales basis grew 6% year over year, representing a sequential acceleration of two points and highest since Q1-FI 23. By industry vertical, we saw increased spending in manufacturing, administrative services, information technology and construction. We saw decreased spending in retail trade and wholesale trade. Customers spend on AI increased over 50% year over year in Q4.

In spend and expense, Q4 revenue totaled $185 million up 23% year over year. Cart payment volume grew 20% year over year. Travel, entertainment and health and services drove that growth, more than offsetting the slight softness in advertising spend. Paycrate for the quarter came in at 261 basis points, reflecting a favorable mix of high interchange verticals. Reward rate was 133 basis points, up 3 basis points sequentially, driven by higher than expected volume in our top reward tier from a concentrated group of customers.

We have renegotiated those commercial contracts moving forward. SNE fraud and credit losses continue to improve over time, driven by AI-enabled enhancements to our fraud platform and underwriting. In Q4, as a percentage of TPV, it improved nearly six basis points sequentially.

Turning to capital allocation, in the fourth quarter, we repurchased approximately $300 million of stock at an average price of 35.31 per share. We have now retired approximately 15 million shares, representing close to 14% of our common stock outstanding since our Q3 earnings call. As of today, we have 400 million remaining on our $1 billion repurchase authorization announced in May. Given our confidence in Bill's durable growth profile and free cash flow generation, we expect to execute the remaining authorization within the parameters we have established.

Before turning to formal guidance, I want to highlight three factors that are shaping our near-term outlook. First, we are navigating through a lot of change. In our go-to-market organization specifically, we are in our first quarter of a new sales motion under new leadership, unified around a single platform sale.

Second, on SNE, we are monitoring a dynamic environment regarding card acceptance that may impact a small number of merchants. Additionally, we are taking proactive commercial actions on certain higher reward tiers and contracts.

Third, as Renee noted, we are concentrating our embed channel on new embed 2.0 platform. This means moving away from custom 1.0 solutions we built for small number of bank partners. This is a deliberate choice to consolidate on a scalable and standardized embedded platform that supports our full product suite. Given these aspects, we believe a measure of prudence is appropriate in our forward outlook. I also want to address an accounting presentation change we are making. Beginning in Q1 of fiscal year 2027, we will present revenue net of rewards expense. Rewards expense will be recognized as a reduction of subscription and transaction fees rather than as a sales and marketing expense. This voluntary change better reflects the unit economics of our spend and expense business.

It will sharpen focus on the right customer segments, improve comparability with our peer group and will help us drive profitable growth.

The change has no impact on the operating income or net income. Total revenue and total operating expenses will each be reduced by the same amount. We will begin reporting under this new presentation in Q1. I will now detail our guidance for our first quarter and fiscal year 27. In light of this accounting change, we will guide to our historical presentation of revenue and rewards today. However, beginning with Q1 of fiscal year 27, our guidance framework will be presented on a revenue net of rewards basis only. For fiscal Q1 27, on a historical presentation of revenue basis, we expect total revenue to be in the range of 432.5 to 442.5 million dollars and core revenue to be in the range of 390 to 408 million dollars, reflecting 11 to 14% year-over-year growth.

For fiscal Q1 27, we expect the rewards expense to be 92.5 million dollars, implying a core revenue net of rewards growth rate of 10 to 14%.

Here are a few key assumptions that underpin our Q1 revenue guidance. First, on volume, we expect APAR-TPV growth to be in line with Fi26 volume growth. For spend and expense, we are assuming year-over-year volume growth of mid-teens in Q1.

Second, turning to monetization, we expect APAR take rate in line with Q4 as we expect higher ACH-TPV growth trends to continue. Moving to spend and expense, we expect the take rate to be approximately 260 basis points. On the bottom line, for Q1, we expect to report non-gap operating income in the range of 112.5 to 117.5 million dollars. We expect non-gap EPS to be between 96 cents and $1. These EPS figures are based on fully diluted share count assumption of approximately 102 million shares.

Turning to full-year guidance for fiscal year 2027, on a historical revenue presentation basis, we expect total revenue in the range of 1.807 billion to 1.857 billion dollars, reflecting 9 to 12% year-over-year growth. We expect core revenue in the range of 1.669 billion to 1.719 billion dollars, reflecting 11 to 14% year-over-year growth. One modeling point to flag is that Q2 Fi27 faces our highest prior comparison, and we expect this to represent the trough of our growth trajectory for the year. Our guidance reflects three points of year-over-year growth headwind, two points from SNE dynamics, and one point from bank channel. For fiscal 27, we expect the rewards expense to be 401.5 million dollars, implying the core revenue net of rewards growth rate of 10 to 14%.

Turning to bottom line, for fiscal 2027, we expect to report non-gap operating income in the range of 421 million to 451 million dollars, which represents a 23 to 24 percent range in non-gap operating margin. This implies an explode operating margin expansion of approximately 590 basis points at the midpoint. We expect non-gap net income in the range of 370.5 million to 394.5 million dollars, and non-gap EPS to be between $3.56 to $3.79, representing 33% year-over-year growth.

These EPS figures are based on fully diluted share count assumptions of approximately 104 million shares. This accounts for the $600 million share repurchases completed under our $1 billion authorization. As we mentioned, gap profitability is now a key focus area. We expect to generate well over $125 million of gap profits for the full year. Included in this guide is an $90 million. As a percentage of total revenue, we expect stock-based compensation to represent 10% in fiscal year 27 down from 14% in fiscal year 26. A year ago, we were a company with questions around profitability. Today, that question is answered. We are a leaner organization with a sharper focus. Exiting Q426, we are a rule of 40 company driving strong revenue growth and gap profitability.

We have made deliberate decisions to trade low-quality revenue for durable high-quality growth. Anchored in AI-led initiatives, stronger unit economics, and a platform our customers trust. FY27 is about executing against that foundation. And now we'll open up the call for Q&A.

Where did you land and was the assumption in the timeline for realization in fiscal 27? Good afternoon. Thank you so much for the question. And let me start by just letting you know the restructuring efforts went exactly as we had planned. So we had given you an initial estimate of about $110 million of gross savings. We came very, very close to that number. So that's good. We had given a range of investments back into the business of about 20 to 30. We are right now anchoring those investments on the number 30. So that was our net benefit from this at around $80 million.

Yeah, thank you, Jim. That's a great question. I think the way that you're starting to hear us talk and the way that we're executing is really across the platform. We started on day one to build a platform. The platform that makes doing business simple. We started with workflow. We started, you know, then adding AP, AR, S&E. But we did so much more than that. And I think, you know, the go-to-market changes that you're referencing and kind of the momentum and energy that we're feeling inside the company is that the platform capabilities we have matter to our customers. They matter to our partners. They matter because that's how you get the most value out of the experience.

And so when I look at the last 12 months, we did really, really important work that unified the platform and the organization. They go hand in hand. We've aligned both the products and the go-to-market organizations to specifically sell all of AP and S&E customer experiences. They're now fully integrated across a new modern UI. We are leveraging that customer experience to start selling that platform. You heard me talk about that. And we are seeing results. I mean, 35% growth in the multi-product adoption is great in the course of the year. And that success has accelerated our change from a go-to-market perspective to really look at the totality of the offering that we have and to make sure that the marketing, the selling, the supporting is thinking about a unified platform approach.

The tight organizational changes that we made during the year are both supporting the shift and are in concert with this belief that the platform is the key to driving customer satisfaction and success. You know, given what we've already seen, you know, the excitement that we have across the impact only increases when we think about the broader platform that we're building. And so, again, when you ask the question, like, what's kind of giving you confidence, momentum, or energy here, it is really this platform. And just like to step back, you know, we see this really resonating with customers. And it resonates because, you know, financial operations is complex. There's a lot of moving pieces with that.

And if you think about a customer doesn't want to have to make a lot of decisions about their financial operations, the same way they don't want to have to make the decisions about building their own car. They'd rather buy a fully loaded and finished product. And so, we at Bill are the masters at simplifying that complexity behind financial operations. And we are increasingly becoming the fully loaded finished product for our customers. So, the core products the customers come for, we know that, that's the AP, that's the S&E. But we also know they come for way more than that. They come for all the payment capabilities. And just to give you an example about how the platform just was extended to create more value for our customers in the past year.

And the midst of all the restructuring that we've done, you know, we now have SPP, a new product, new platform extension, that really is taking advantage of the multi-sided network that we have with over 9 million connections, you know, close to $400 billion in annual spend. And the data that actually allows us to understand what matters to our suppliers and really how to go target those suppliers. That data is what is behind the development of SPP. And nobody else has this data today. And so, when we think about, you know, the platform play, and again, what's giving me energy, what's giving me confidence, it is seeing that the combined, you know, product mindset capabilities that we have in the company, and the platform capabilities we have from the shared data capabilities that we have.

We're doing stuff that nobody else can do. We have a really interesting opportunity. We see that in invoice financing. You can see from the prepared remarks that, you know, we're able to now extend obviously into small suppliers to help them, you know, get their funds faster. They don't have to wait. We can only do that because of the data graph we have. It's unique. It enables us to make real-time offers based on patterns and documents that we see across the largest B2B payment network that we know of. And simply put, you know, no one else has this capability at this scale today. The third thing I'd like to call out from a platform perspective is more looking forward in how we think about build cash.

Again, it's a reminder of how we have built a platform that actually solves the financial complexities that are behind the operations of any business. So payments require speed. They require, you know, clarity and they require a clean audit trail. And build cash delivers that. It's fast or sane day payments. We have perfect visibility into every transaction when it's a build cash transaction. No Fi has that. No accounting software has that today. And we're in a position to continue to create value for our customers and to really reinforce the trust and confidence that they have in our platform with build cash. Now, it's early days on build cash. And already, I think, you know, we are seeing strong good adoption from our early customers.

And one of the most important factors that we're seeing that adoption is that they're moving spend that was offline, spend that was never on the build platform before, and it's now becoming online. And so when you combine, you know, all the capabilities that we have from a core, you know, front end, you know, the front door of AP, SNE, and AR, you add all the payment capabilities and the extensions that we're doing with suppliers and cash management on build cash, you know, and the ability for us to now start selling that platform, that's what gets us excited. It's something that, you know, we've been building a long time to make happen. And we know that the scale that we have to get scale.

And we know that we have got a very large successful and profitable business that we can invest from. And we're now 100% aligned thanks to the restructuring on how to go make that happen. So a lot of things, you know, that are kind of underneath that go-to market consolidation, if you will, that it all comes back to the platform.

Renee, we'll start off with all the AI uses in the platform. Your adoption rates are impressive. And real life use cases are deeply impressive. And how they're saving your customers time. How do you think about the mining station strategy of your AI efforts and so forth? Now that you have some AF4 time degree in city data, understanding how customers you're using, you have all the existing functionality and the information you spoke about in the pipeline coming up here.

Thank you, Scott. I think this is obviously a really important part of the strategic direction of the company. The pivot to really becoming AI-native gives us lots of opportunities. But the first and foremost thing to think about is that we are sitting on a massive opportunity. There are millions of businesses that need financial operational help. And we are in a position with the platform that we have to go reach them and support them in ways that they never knew as possible. And so the first thing from an AI perspective is going to be building the capabilities to actually drive significant improvement and opportunities around customer retention and adoption in the early stages of their life cycle with us.

So one of the ways that you'll see the monetization is that we will be really tracking older cells accountable to driving better conversion, better retention, if you will, in the first 90 days. But the other thing that you will see us thinking about is the strategic rationale from a pricing perspective. And so the reason I broke these up here is there's obviously customers that matter. And then there's obviously the revenue per customer. And on the revenue per customer, we've been, I would say, tactical with some price increases in the last year. But as we roll out these AI capabilities, we're going to really be strategic. And one of the things that we know is that we are going to be inclined to move customers from a pertsy basis to really a platform fee, to really understanding the capabilities and the value that we're providing them, as well as a usage consumption fee, if you will.

And so those are, I would say, the direction that we're moving towards. Agents will be grouped into different subscription tiers based on the value that they're creating for our customers. And obviously, we will have some consumption based as we roll these out. So a lot of opportunity coming in the future, and obviously it's predicated us, getting the agents that actually completely simplify the experience for SMBs, move them from a do-it-yourself approach to the do-it-for-me approach. And we think that's the key thing to the AI strategy.

Yeah, thank you for the question. And the way I think about it, we have done a lot of work in expanding the operating margins over the last year. I think this was the third year in a row that we doubled our operating margin explode. So we want to continue in expanding the margins. We did a lot of work on labor-related op-x and some on the other op-x in the last year. Where the additional opportunities will continue to come from is the AI-led productivity. So we're starting out on that journey. We're starting to see some good examples across risk themes, across CS teams, across engineering teams. But we would expect to see that mature further and drive additional operating leverage.

Additionally, we're gonna really move our focus on our revenue growth. We have now really taken a very focused approach to durable and profitable revenue prioritization. And you will continue to see that happen through the year. And the easiest way to grow margin is to grow revenue, really. So I think driving the right product structure, making sure that the economics behind the product itself are robust. Those would be our next words.

Yeah, absolutely. So, as I look at Q4 and the large overperformance on TPE, I would come back to how strong our ACH product is. It's really best in class and we continue to see usage across ACH continuing to increase our product gets better and better. So that's where we saw a majority of the update from now. If you compare that to the verticals where we are seeing upside within our APAR platform, we are seeing construction, the manufacturing side. Some of these verticals that are very tied to the new AI fly wheel that we are seeing and spending. So, big ticket items, construction manufacturing type of verticals are doing really well. That's impacting the ACH-TV as well.

Additionally, one very interesting dynamic is now emerging, which is our mid-market customers have some really large ticket size transactions that come on the platform, which they have more ACH. They have generally lower take rates than the rest of our portfolio, but they are extremely valuable customers to us because their ARPU is three times more than an average customer at bill. Their TPE is four times more. So, as we continue to grow the mid-market segment of our business, we will see some of this dynamic continue to happen. One thing I would like to highlight is this additional TPE that's flowing through the system is actually giving us good benefit in terms of floatover performance. You guys saw in people we float by close to $3 million and this is not due to the rate fluctuations.

It's really because of more TPE flowing through the systems. I think this is just the fly wheel of the product that Renee was talking about as well. We have multiple ways to monetize.

And in the past two quarters, you've seen it accelerate up to 11% this quarter. So, just curious if you can unpack what are some of the drivers there and considerations around that performance? Yeah, absolutely. On the specifically subscription ARPUSIDE over the last couple of quarters, we did see a sequential uptick which broke the trend of a flatish trend that we had seen in the past. And that's exciting. It was just showing we were going upmarket a little bit. We were doing some tactical changes with the pricing as well, so that was starting to show up as a combination. What we continue to also see from a subscription ARPUSIDE is the biggest number of customer ads that we get continue to be from the accounting channel.

There's a mixed element that plays out there where we continue to add a smaller set of customers at a faster clip. And obviously, the bigger customers fewer in numbers, although much higher in ARPUS. So, there is a little bit of that dynamic that will play out into the subscription number. Having said that, what we really focus on is the core ARPUSIDE, the total ARPUSIDE of the customer we are bringing in. And as we rethink strategically what our pricing models and frameworks are going forward based on usage and capacity usage, et cetera, this will continue to be more important. How many customers are we getting in and how are we monetizing them, which is the ARPUS?

So, the core ARPUSIDE who actually sequentially grew again 3% versus the last quarter, which continues to be a good credit.

There are a couple of things that you mentioned, and some of them actually are APER dynamics, and some of them SNE dynamics. I'm going to try and unpack them one by one. So, let's talk about SNE from a take rate perspective. We talked about some of the acceptance challenges more from an SNE side. We don't see that on the APER side, and from that perspective, we do have a slight reduction in the volume growth rate on SNE, but on SNE, the take rate range quarter and then going forward to be on the higher end of that range. So, that's where the revenue growth from an SNE perspective is going to be modeled. From APER perspective, our ACH-TPV continues to do much better than our expectations, which is kind of an isolated variable at the lower room of TPV, continues to grow at a healthy clip as well, as we are seeing some of our established portfolio items are doing well, and the emerging portfolio continues to add to that growth as well.

So, I feel good about that. Just the math of the take rate because of the outside ACH performance is compressing the number a little bit. So, as we think about it, I would say a lot of the growth in the APAR will be based on the TPV and monetizing that TPV through multiple ways, and a bigger TPV number monetized at the same rate still gives you the growth.

So, flat to slightly update rate from what we were at MP4 is how I would guide you. God, that's very helpful. And just on the rewards change, obviously, I think that makes a lot of sense. I thought you said being netted against both description and transaction revenue. Just wondering if you could clarify that.

Yeah, so just to clarify, the way we'll talk about our revenue will be net of what you see today as gross revenue line minus the rewards numbers. So, that'll be our net revenue. We use those words just because it's exactly what we externally report. So, more of an accounting thing. So, it'll be the net revenue. We will give periodic color to the performance of rewards as well. But the way I think about rewards, it's a really great incentive and a tool for us to drive the right customers onto the platform.

We are not in the business of trying to win on rewards basis only. The business we want to bring to our company is one that's profitable, or one we are incentivizing our customer to use many products that, you know, again, align with what's bringing inside of our platform approach.

I appreciate your saying question.

I just want to dig into the FY27 core revenue outlook for a moment. I think it's 11 to 14 just, you know, how you're reporting today. But if he called out two points from S&D Dynamics, one point from the bank channel. And then I think you also, it sounds like you're also baking in some prudence from go to market and reorg implications.

Maybe just, you know, help us understand what's recurring, what's non-recurring. And then sort of level set us in terms of how you think about the ongoing rate of growth for the business over the intermediate term, considering some of these things seem transitory. Thanks so much. Yeah, I can take that question. Thank you. So as I think about the S&E business overall, right, we, there are some short-term dynamics. We have the change in the approach that we are taking, both from that revenue perspective, as well as the, you know, the whole team is now selling all of the products. We don't have a separate S&E sales team and a separate AP sales team. So which means that there is training involved, there's ramping, there's structures changing, incentive changing, all of that.

So it takes time to ramp some of that up to its full potential. So those are some of the things that are transitionary. I talked a little bit about the impact of, you know, one of the larger platforms and the card acceptance issues. Again, very concentrated towards, you know, some of the bigger customers. So we'll see some impact from that also transitionary. Over time, we, you know, the net approach should help us get back to, you know, strong growth levels and, you know, drive more profitability in the business than we had in the past. So some of these dynamics that I talked about are, you know, in a shorter term. And that's why, as we opened, as I opened my scripted remarks, I had mentioned that the range in the mid-term that we think of is low-level data to make teams.

Sure. Happy to talk about that. So just as a reminder, we have been talking for the last couple of quarters that we have a deliberate focus on the ICP or our ideal customer profile. We want to continue to focus on slightly bigger customers that we have in the past, which then is a trade-off between the number of customers we're getting on the platform and the quality of the customers we're getting. So we had indicated in the last earnings or two that we expect the trend to be not, you know, in line with what we had seen in the past and slightly lower. So we continue to be on that path. Nothing has changed in that regard.

What has changed was the material organizational restructuring and the sales motion that we are now getting into. So what I mentioned earlier in my remarks also was that in July, we started to see some green fruits and recovery within the numbers, which we're actually quite pleased about. And as I think about the quarter, I could see us land at the range of 2,500 to 3,000 having made large part of that recovery towards the number that we want to get to, which will be higher than this range over the remaining part of the other, but this is the range I expected before.

Thank you, Nate, for the question. Yeah, I think the summary I would say is that we understood our data and that's why Renee just mentioned we focused on our larger customers, the large SMBs are on the platform ones with more than 20 payments, for example. And that focus means that we are, I would say, honing the product offerings for those customers as well as the go-to-market motions for those customers. And what we, one of those honing exercises was to sell the platform that we've supported hard to build. And we are seeing, like I said, early success.

That success has, under Jonathan's leadership, we are positioned now to kind of leverage that success across the entire go-to-market team. And so positioning ourselves to sell the platform, which you heard me talk about the beginning, I think is a super important part of how we focus on the higher ROI customers that are in the portfolio and capable of coming into the business. So our focus is always going to be on delivering great customer experiences and driving value for them, extending that. And that focus also applies to our partners. And so when we looked at the restructuring work that we did, we knew that we needed to create more focus across the business. It's, you know, paramount, it's imperative, you know, you named the word, like it is super critical that we have teams aligned and that we leverage the teams and the resources and the attention in a focused path so that we can execute well.

And so that exercise led us to look at, you know, with the bank channel over the last dozen or so years has been more custom than we would like and more custom than we would do today. And that means we have multiple platforms that make it, you know, challenging to be able to actually offer all of the capabilities that Bill has for all of their customers. And so our decision was really to lean in on this focus initiative across the company and to say this is where we're going to invest, this is where we're going to spend time analyzing and working how to drive more results to the business. And that's the embed to auto platform that actually enables the entire platform, you know, for those customers.

And so, you know, we are super excited about, you know, leveraging our platform, you know, into our partners, but we know we got to be disciplined in our approach to how we do that. And so as we, you know, made those decisions, we expect that not all of the banks will be able to make it.

Yeah, I think the probably the, you know, the most important thing in any customer offerings to get the customer experience right. And so, you know, we have spent a lot of time talking with SPARs, analyzing the data, like I mentioned about, you know, our platform, the data we have is unique and understanding the payments and the flows and understanding how we can make their experiences better. The case study I gave somebody with, you know, hundreds of accounts across bill going down to one with no IT involvement. That's actually because of great product work. And so I think from a go to market perspective, having the right product is important and that's part of the go to market.

But then also having the right, you know, sales motion and enterprise sales is different than what we've ever done before. I think we knew that. And I think the learning year is, you know, that it just sometimes takes a little bit more time than you would like. But I feel, you know, very good about what we've learned and the opportunity to kind of extend that. If you look at the number we called out there, 800 million dollars under contract from the TPP perspective, that strong growth from the last time that we, you know, talked about this. And really to your question around the virtual card, the under contract is important. You know, these suppliers have received payments across all of our payment modalities.

And so having an experience for them that is, you know, consistent is important. And it's also important for us that the customer wants to, you know, use a card that the card goes through as an example. And so that commitment is an important part of the conversations we have with these suppliers. And it's something that will continue to work with them to make sure they're getting the value that they need out of those experiences. Thanks, Renee. Thank you.

Yeah, that's what we're referring to on the SME site. I talked about just to clarify a little bit more. We talked about two points of headwind coming from that piece of the business. And this is just a part of it. There's other dynamics of us moving from gross to net and leading on the table, some of the less profitable volume, et cetera, that is playing in and a little part of that. But that's exactly right. And then, you know, here we would laugh that as it in the rollout is slow and it's quite concentrated into smaller, small number of customers that have large volume. But if you look at the same impact on a net basis, it'll be much smaller because they're also the higher reward customers.

So in my prepared remarks upfront, I actually defined our rule of 40 and the definition we use is in line with how we will report revenue going forward. So it is the net revenue growth percentage along with the total operating margin of the company. If you add those two, we were at a rule of 40 math wise in key four. And you know, there will be in quarter fluctuations, but we will exit FY 27 exceeding the quality number.

All right, thank you very much.

I will now turn the call back to Renee LeCert, chairman, CEO and founder for closing remarks. Thank you, everyone, for joining FY 26 was a pivotal year for Bill. We accomplished a lot. We structured the company executing a shared buyback and we are well positioned to drive profitable growth leveraging our platform and AI. All of us at bill are super excited about the future and look forward to continuing to update you on our progress as we go forward. Thank you.