CFO Interview at B of A Technology Conference Today

Here are my notes from today’s interview with CFO, John Rettig as part of the Bank of America’s Global Technology Conference that ended a few moments ago.

06/06/2023 5:20 Central Time

Middle of the market (SMB) is BILL’s target market. Very early stage

Q Talk about stand alone TPV of 11% growth
A Biggest influence was change in spend pattern that started last June (2022). Typically see 10-13% growth was typical in the past. March is typically flat compared to December quarter and their customers spent at a much higher rate. It’s on the back of the small business partners adjusting quickly to macro.

Q Anticipate TPV to be flat.
A Expect much of the same (normalized) as opposed to a significant pullback like they say in March. Customers are still definitely contracting. Most segments of SMBs are still contracting.

Q Mid teens TPV growth prior to 2022 was typical in the past
A There was a rapid spend amongst SMBs during the pandemic. Stimulus had a very positive impact on As BILL rolls out new payment options, they anticipate increased TPV. Overall, now TPV is sideways.

Q TPV take rate. What drove it up?
A March quarter was much stronger than they typically see. Last quarter was a full basis point increase and December was approx. 0.2 of a basis point for their take rate increase. Real time payments is seeing a lot of demand. More payment choices is desired by customers and this will drive their take rate. There’s probably both headwinds and tail winds. Buyers trying to lower cost of payment methods is the headwind. They tailwind is that the increase in real time payment options.

Q Where do targets from metrics come from?
A International payments: 10-20% of payments. They drive these targets from a deep understanding of how their customers spend money. Not all of their customer’s payment volume is in’s platform. Layer on real time payments, where they haven’t yet established goals for penetration rates. Fast forward a few years re: their ad valorem payments, there’ a lot of growth left for

Q Sweet spot for is in the middle size of SMB’s.
A Overall, 6M customers with employees. BILL’s sweet spot are 10-100 employees. On average they have dozens of payments per quarter. They’re working with lots of suppliers. Multiple employees within the business who have to collaborate. Tools to drive digital transformation, initiates routing, etc. This makes BILL super sticky. They complement accounting tools and systems. Low double digits across all SMBs for payment solutions. BILL hasn’t taken big steps in International and look forward to this.

Q Referral business
A Biggest source of referrals for BILL is from the 6,000 accounting firms, and BILL has tools for these
companies to help whitelist BILL to the accounting firms.

Q Where are you/ seeing partnership transactions.
A Commercial mid-market is where they get great traction. Keeping their product simple mitigates heavy sales and ongoing consulting services. Can onboard customers easily.

Q Divvy is 5% penetration now and perhaps 25% in the future. Corporate card spend is 24% for SMB’s. What are adoption keys?
A Spend and expense category is in its infancy. The magic of Divvy is in the software. Lots of controls and easy to operate. Mid-market customer is more the main focus of Divvy. More than 50% of BILL’s customers are good candidates for Divvy. CFO sees their ability to capture 100% of spend. Most of Divvy customers are net new to the company. In the future, end of this calendar year they’ll start to go to market with Divvy as a stand alone. Divvy requires underwriting.

Q Divvy
A If they can do more of their operations in one place, it’s hugely beneficial. Currently two separate landing pages. As they bring the 2 together to manage all numbers in one place, it’s hugely helpful to the accounts that recommend

Q Invoice to go acquisition. Perspective on what it brings and what’s value proposition?
A Had an AR (accounts receivable) tool and picked invoice to go because it’s an advanced invoice to go for contractors, plumbers, where people are in the field and need to bill the customer from the field. Realizing a significant % aka 30% of customers are passive receivers. Invoice to go gives them monetization, increases ability to upsell and cross sell to these customers.

Q Seeing a nice margin ramp this year. A lot has to do with float.
A It’s definitely a balancing act. Their mindset is around growth with a sharp focus on unit economics. Not building the business to rely on float income. Last 2 quarters they were earnings positive without float.

Q Float
A The positive impact of float has been 100 to 150 basis points of profits. They see themselves at the
peak as it relates to float. BILL’s new ad valorem products are what’s mainly driving their really high

A BILL has been an early adopter of AI. Iva is their product that extracts data and routes through prediction models re: who should approve them. It pushes information to customers, but it’s not truly interactive yet. These are not truly transformational per the CFO. New CTO, Ken Moss has taken the torch re: AI, although there’s not really a near term catalyst re: AI for