BILL Holdings, Inc.

Good afternoon, and welcome to Bill.com's fiscal third quarter 2020 earnings conference call. Joining us today for today's call are Bill.com's CEO, Renee LeCert, and CFO, John Reddick. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone keypad. If you require any further assistance, please press star 0. Thank you. With that, I would like to turn the call over to John Reddick for introductory remarks. John?

Thank you, Jacqueline. Welcome to Bill.com's fiscal third quarter 2020 earnings conference call. We issued our earnings press release a short time ago and furnished a related form 8K to the SEC. The press release can be found on the investor relations section of our website. With me on the call today is Renee Lacerque, chairman, CEO, and founder of Bill.com. Before we begin, Please remember that during the course of this call, we may make forward-looking statements about the operations and future results of Bill.com that involve many assumptions, risks, and uncertainties. If any of these risks or uncertainties develop, or if any of the assumptions prove incorrect, actual results could differ materially from those expressed or implied by our forward-looking statements. For discussion of the risk factors associated with our forward-looking statements, please refer to the text in the company's press release issued today and to our periodic reports filed with the Securities and Exchange Commission, including our Form 10-Q, dated February 11, 2020. We disclaim any obligation to update any forward-looking statements. On today's call, we will refer to both GAAP and non-GAAP financial measures. The non-revenue financial figures discussed today are non-GAAP, unless stated that the measure is a GAAP number. Please refer to today's press release for the reconciliation of GAAP to non-GAAP financial performance, and additional disclosures regarding these measures. Now I'll turn the call over to Rene.

Thanks, John, and good afternoon, everyone. Thank you for joining us today. Speaking on behalf of everyone here at Bill.com, we want to send our best wishes to all of you, and we want to share our appreciation to all of those on the front line, from the healthcare to the service workers that have kept us going. After a brief comment about Bill.com's response to COVID-19, I'll provide an overview of our fiscal third quarter results and discuss a few highlights, and then later I'll turn the call over to John to cover our financial results in greater detail. He'll also be providing you with our fiscal fourth quarter outlook before opening the call up for Q&A. Our world has changed dramatically since our first earnings call in early February. COVID-19 has been a catalyst for change. To give you an idea of how we've adapted to this new environment, let me give you some examples of changes we have made for our employees and customers. We proactively switched our entire workforce to be 100% remote in less than a week because we had a comprehensive business continuity plan in place and because our tech stack is completely cloud-based. Our employees have done a phenomenal job working from home and have not missed a beat. Bill.com's success is driven by their passion and dedication, and I am grateful for their commitment to each other and to our customers. Our mission is rooted in being champions of small and mid-sized businesses, and we knew they needed help. We've taken the following actions to assist them. We waived subscription fees for three months for new customers financially impacted by COVID-19. For existing customers in distress, we've also offered short-term suspensions and other forms of assistance. We extended our customer support hours to help people who are balancing work and family life within the confines of a remote working environment. We joined Stand for Small, a coalition of more than 40 companies that have banded together to provide support to small businesses as they navigate the impacts of COVID-19. Led by our strategic partner, American Express, the Stand for Small coalition will provide millions of SMBs access to valuable services, offers, tools, and expertise. And finally, Along with our strategic partner Intuit, Bill.com contributed funding to the Small Business Relief Initiative, which was started by GoFundMe to help small businesses that have been affected with the goal of empowering their communities to rally behind them. COVID-19 has created uncertainty that could not have been foreseen. Our focus, along with many of our partners, is to make sure SMBs know they are cared for and supported by all of us. That is the one certainty we can provide at this time. Now let me turn to our third quarter financial performance. Core revenue, which we define as subscription plus transaction revenue, grew by 63% year-over-year to $36.1 million. Total revenue in the quarter grew by 46% year-over-year to $41.2 million. We also delivered strong non-GAAP gross margins of 78.8% in the quarter. At the end of the quarter, We had over 91,000 customers representing 28% year-over-year growth. Our platform also reaches a large number of SMBs through our 1.8 million-plus network members. In fiscal Q3, we processed 6 million payment transactions, representing an increase of 23% over the year-ago period. During the quarter, we processed $24.2 billion in total payment volume, or TPV, on our platform. an increase of 35% over Q3 of the prior year. We've worked hard over the last year to extend our payment rails and capture more of our customers' transactions and are pleased to see this strong growth in TPV. John will discuss our financial results in greater detail in a few minutes, but first, let me share with you how we think about COVID-19's impact on our overall business. Similar to an SMB's accounting system, We believe our platform is a foundational, mission-critical solution for business. We expect SMBs to spend less than a downturn, and we provide the visibility they need to confidently stretch out their payables and accelerate their receivables. Without Bill.com, doing all of this from home is even more challenging. Our platform provides our customers the ability to monitor their finances closely and react quickly. Remote work requirements have exposed the degree to which SMBs still rely on paper-based manual processes. We believe that this crisis could accelerate the move to digital financial operations for companies of all sizes. The inefficiencies inherent in the old way of doing business will not work going forward, and this is not lost on businesses, nor their accountants or financial institutions. Turning now to our resiliency, we believe that Build.com's business model is particularly durable for the following reasons. First, our demand generation is not reliant on in-person events like annual user conferences. We market our platform directly to SMBs through online digital marketing referral programs and strategic partnerships. In fact, in a 2019 customer survey we conducted, half of new customer respondents indicated they first heard about us because they used our platform at a prior company or heard about us through a colleague. Next, Our go-to-market model is not reliant upon feet on the street. Our direct sales motion is 100% inside sales. These first two points lead to a short sales cycle of less than 30 days, which combined with our risk-free trial makes it easy for customers to get on the platform quickly. Once signed up, new customers can start using Bill.com anytime, anywhere, from any device. They sell on board without complicated or time-consuming implementation cycles. With subscriptions starting as low as $39 per month, our price points are affordable for SMBs. Finally, Bill.com has a strong balance sheet with over $382 million in cash, cash equivalents, and short-term investments at March 31, 2020. In summary, we have a unique position in the market and a solid financial foundation in place, We believe that Bill.com is well-positioned to support small businesses through and as they come out of COVID-19. That being said, we want to be transparent and share the recent trends we are seeing. In terms of customer acquisition and retention, we have experienced some COVID-related churns. However, we have also seen some increased inflow from prospective customers looking for solutions that enable continuity for financial operations. Looking at the transaction side of the business, we started to see some impact on both TPV and the number of transactions being processed by our customers during the second half of March. And lastly, float. Obviously, the reduction in the federal funds rate adversely impacts our float revenue. John will discuss these topics in more detail later on. Let me discuss some of the changes we've initiated to address COVID-19 impact on our business. As a SaaS company, the majority of our OpEx spend is related to headcount. In the near term, we have paused new hiring for the quarter except for critical positions. We've also refined our payment risk management policies to mitigate potential increases in credit losses associated with payment flows on our platform. Shifting gears, last quarter we featured use cases from our direct customers. This quarter, I want to showcase how we're helping our accounting partners. Over the past 12 years, we've developed relationships with over 4,000 accounting firms in the U.S. The accounting firm channel is a valuable part of our ecosystem because accountants are trusted advisors to SMBs. Our accountant-specific tools help firms grow their client advisory practices, establish a competitive advantage, and satisfy their SMB clients' needs. With our platform, the same accounting firm staff can serve more clients more strategically and more profitably. With COVID-19, we have seen increased traction in this channel. Let me give you just one example of how our accounting firm partners have leveraged Bill.com's digital payments platform to ease their clients' transition to the new normal. Bookminders, a Pittsburgh-based firm providing outsourced accounting and bookkeeping services for small businesses, has praised the value of our digital workload capabilities. Bookminders Chief Operating Officer Jessica Minkus stated that, and I quote, Bill.com is allowing bookminders to rapidly transform our outsourced bookkeeping service to meet the challenges of working remotely. Bookminders and our clients believe Bill.com is a necessity to safely and securely operate in this new environment. The ability to process, approve, transmit, and deposit payments electronically is imperative in a world where you can't rely on being able to meet with clients, go to the bank, or receive snail mail. End quote. In addition to trusting accountants, businesses trust their financial institutions. SMBs look to their banking partners for digital solutions that provide end-to-end cash flow management. And many of those financial institutions turn to us to meet their customers' needs. By working with us, our financial institution partners can provide their customers with many of the benefits realized by our directly acquired customers. Zill.com is currently integrated with several of the largest financial institutions in the United States. including Bank of America, JPMorgan Chase, and American Express. These partners embed our platform, typically on a white-label basis, into their online banking solution. We continue to have many great conversations with our existing partners about doing more together, and we continue to see opportunities to partner with additional institutions. Today, I'm excited to let you know that we've reached agreement with our newest partner, Wells Fargo. Wells Fargo will power a new digital AP and AR solution for its treasury management clients by integrating bill.com into its commercial electronic office online portal. Wells Fargo shares in our mission of helping small and mid-sized businesses save time and improve their cash flows from anywhere at any time. We expect to launch the service later in 2020, and we will update you with additional information on our next earnings call. This relationship reinforces Bill.com's market position as a leading provider of small and mid-sized business AP and AR workflow solutions for major financial institutions. Next, I want to update you on a few of our latest enhancements to the Bill.com platform. Innovation in payments is core to who we are. Over the past few years, we have launched cross-border and virtual card payments. For the past several months, we've been rolling out same-day ACH payments, Our customers have been making good use of this expedited payment capability, especially now that the transaction limits have been increased to $100,000. We have also begun testing real-time payments with the RTP network from the Clearinghouse. More to come on this later, but using this new payment trail, we foresee being able to offer our customers, independent contractors and vendors, the ability to get paid 24-7. As I mentioned a moment ago, our relationships with our existing partners continue to evolve and grow. Last month, in support of our partner, JPMorgan Chase, we integrated Chase's virtual card offering into Cash Flow 360. Cash Flow 360 is Chase's digital platform for businesses that includes Bill.com. This integration will allow Chase customers another way to pay bills with faster delivery of payment, enhanced spending controls, and simplified reconciliation. We look forward to helping Chase drive more payment volume to its virtual card through this seamless integration. Looking ahead, we will continue to focus on capturing more of the overall business-to-business payment flows of existing and new customers for both our direct and financial institution partners. The expansion of our payment rails and growth in our virtual card program demonstrates our progress against the strategic goal. In conclusion, I want to reinforce our commitment to our mission. We make it simple to connect and do business. We are optimistic that our purpose-built platform will resonate even more with SMBs who are now coping with the reality that the old way of managing back office financial operations just doesn't work anymore. Now, I'll turn the call over to John to discuss our financials in more detail.