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What changed in BILL Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of BILL Holdings, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+569 added−528 removedSource: 10-K (2023-08-29) vs 10-K (2022-08-22)

Top changes in BILL Holdings, Inc.'s 2023 10-K

569 paragraphs added · 528 removed · 424 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

89 edited+28 added−22 removed42 unchanged
Biggest changeOur culture centers on our company values: • Humble – No ego; • Fun – Celebrate the moments; • Authentic – We are who we are; • Passionate – Love what you do; and • Dedicated – To each other and the customer Our values are core to who we are and who we hire, guide how we operate, define how we treat each other every day and ultimately make our teams strong cohesive units.
Biggest changeWe center our culture around five values which are core to who we are, guide how we operate, define how we treat each other, and help make our teams strong, cohesive units: • Humble – No ego; • Authentic – We are who we are; • Passionate – Love what you do; • Accountable – To each other and our network; and • Fun – Celebrate the moments.
When a business applies for a Divvy card, we utilize, on behalf of the card Issuing Bank, proprietary risk management capabilities to confirm the identity of the 5 business, and perform a credit underwriting process to determine if the business is eligible for a Divvy card pursuant to our credit policies.
When a business applies for a Divvy card, we utilize, on behalf of the Issuing Bank, proprietary risk management capabilities to confirm the identity of the business, and perform a credit underwriting process to determine if the business is eligible for a Divvy card pursuant to our credit 5 policies.
Rather than building a business budgeting strategy using outdated numbers in a static spreadsheet, Divvy’s budgeting software syncs automatically with the employee's Mastercard or Visa cards, while also facilitating reimbursements and vendor spend. With Divvy’s intuitive web and mobile applications, budget owners can drill down into spending by department, team, project, or individual.
Rather than building a business budgeting strategy using outdated numbers in a static spreadsheet, our budgeting software syncs automatically with the employee's Mastercard or Visa cards, while also facilitating reimbursements and vendor spend. With Divvy’s intuitive web and mobile applications, budget owners can drill down into spending by department, team, project, or individual.
Suppliers use that email address to send invoices to the customer’s dedicated Bill.com inbox. Alternatively, scanned invoices can be uploaded directly through our application. Once uploaded, we store the bills securely, linking them to the associated supplier. With a single click, customers can use our search feature to scan documents quickly and resolve open questions.
Suppliers use that email address to send invoices to the customer’s dedicated BILL inbox. Alternatively, scanned invoices can be uploaded directly through our application. Once uploaded, we store the bills securely, linking them to the associated supplier. With a single click, customers can use our search feature to scan documents quickly and resolve open questions.
Whether on-the-go or in the office, an SMB can view up-to-date spend against budgets, so they always know where they stand. We market Divvy cards to potential spending businesses and issue business-purpose charge cards through our partnerships with card issuing banks (Issuing Banks).
Whether on-the-go or in the office, an SMB can view up-to-date spend against budgets, so they always know where they stand. We market Divvy cards to potential spending businesses and issue business-purpose charge cards through our partnerships with Issuing Banks.
These programs are also designed to manage terrorist financing risks and to comply with sanctions requirements to prevent our products from being used to facilitate business in certain countries, or with certain persons or entities, including those on designated lists promulgated by OFAC and relevant foreign authorities.
These programs are also designed to manage terrorist financing risks and to comply with sanctions requirements to prevent our products from being used to facilitate 11 business in certain countries, or with certain persons or entities, including those on designated lists promulgated by OFAC and relevant foreign authorities.
Data Protection and Information Security We receive, store, process, and use a wide variety of personal, business and financial information from prospective customers, customers, their vendors, and other users on our platform, as well as personal information about our employees and service providers. Our handling of this data is subject to a variety of laws and regulations.
Data Protection and Information Security We receive, store, process, and use a wide variety of personal, business, and financial information from prospective customers, existing customers, their vendors, and other users on our platform, as well as personal information about our employees and service providers. Our handling of this data is subject to a variety of laws and regulations.
Anti-corruption laws generally prohibit offering, promising, giving, accepting, or authorizing others to provide anything of value, either directly or indirectly, to or from a government official or private party in order to influence official action or 11 otherwise gain an unfair business advantage, such as to obtain or retain business.
Anti-corruption laws generally prohibit offering, promising, giving, accepting, or authorizing others to provide anything of value, either directly or indirectly, to or from a government official or private party in order to influence official action or otherwise gain an unfair business advantage, such as to obtain or retain business.
We also employ regular 8 system monitoring, logging, and alerting to retain and analyze the security state of our corporate and production infrastructures. We take steps to help ensure that our security measures are maintained by the third-party suppliers we use, including conducting annual security reviews and audits.
We also employ regular system monitoring, logging, and alerting to retain and analyze the security state of our corporate and production infrastructures. We take steps to help ensure that our security measures are maintained by the third-party suppliers we use, including conducting annual security reviews and audits.
For example, Bill.com allows administrators and payors to remind approvers to act, or delegate payment authority when a key employee is unavailable. Our platform creates a clear audit trail that becomes invaluable in the event of an audit, or for tax compliance.
For example, BILL allows administrators and payors to remind approvers to act, or delegate payment authority when a key employee is unavailable. Our platform creates a clear audit trail that becomes invaluable in the event of an audit, or for tax compliance.
Here are some highlights of this service: • Easy invoicing – Using a simple template, customers can easily create electronic invoices on our platform and insert their own logos to customize them. If required, our platform also enables the printing and mailing of paper invoices.
Here are some highlights of our service: • Easy invoicing – Using a simple template, customers can easily create electronic invoices on our platform and insert their own logos to customize them. If required, our platform also enables the printing and mailing of paper invoices.
We are also subject to foreign laws and regulation governing the handling of personal data, including the European Union's General Data Protection Regulation (GDPR), the United Kingdom's GDPR, Australian and Canadian privacy laws and the privacy laws of other foreign jurisdictions. Regulatory scrutiny of privacy, data protection, cybersecurity practices, and the processing of personal data is increasing around the world.
We are also subject to foreign laws and regulations governing the handling of personal data, including the European Union's General Data Protection Regulation (GDPR), the United Kingdom's GDPR, Australian and Canadian privacy laws, and the privacy laws of other foreign jurisdictions. Regulatory scrutiny of privacy, data protection, cybersecurity practices, and the processing of personal data is increasing around the world.
Regulatory Environment We operate in a rapidly-evolving regulatory environment. Payments and Banking Regulation In order to conduct the payment services we offer we are required to be licensed to offer money transmission services in most U.S. states.
Regulatory Environment We operate in a rapidly-evolving regulatory environment. 10 Payments and Banking Regulation In order to conduct the payment services we offer, we are required to be licensed to offer money transmission services in most U.S. states.
The customer's Accounts Payable staff can review the result and make any adjustments required, and our platform routes the bill internally for approval. • Digital workflows and approvals – Our platform speeds approval processes through policy-driven workflows.
The customer's Accounts Payable staff can review the result and make any adjustments required, and our platform routes the bill internally for approval. 4 • Digital workflows and approvals – Our platform speeds approval processes through policy-driven workflows.
In the U.S. we are subject to privacy and information safeguarding requirements under the Graham Leach Bliley Act and state laws relating to privacy and data security, including the California Consumer Privacy Act. Additionally, the U.S.
In the U.S. we are subject to privacy and information safeguarding requirements under the Graham Leach Bliley Act and state laws relating to privacy and data security, including the California Consumer Privacy Act and the California Privacy Rights Act. Additionally, the U.S.
The contents of the websites provided above are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC. Further, our references to the URLs for these websites are intended to be inactive textual references only. 14
The contents of the websites provided above are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC. Further, our references to the URLs for these websites are intended to be inactive textual references only. 15
As a Money Services Business and a licensed money transmitter we are subject to U.S. anti-money laundering (AML) laws and regulations, including under the Bank Secrecy Act (BSA) and similar U.S. state laws and regulations, and as a Foreign Money Service Business in Canada we are subject to various AML laws and regulations in Canada.
As a Money Services Business and a licensed money transmitter we are subject to U.S. anti-money laundering (AML) laws and regulations, including under the Bank Secrecy Act, as amended (BSA), and similar U.S. state laws and regulations, and as a Foreign Money Service Business (MSB) in Canada we are subject to various AML laws and regulations in Canada.
Our platform integrates with accounting software, banks, card issuers, and payment processors, enabling our customers to access all of these mission-critical partners easily. Because we provide a comprehensive view, customers can more easily find inconsistencies and inaccuracies, and fix them quickly. • Digital and Secure.
Our platform integrates with accounting software, banks, card issuers, and payment processors, enabling businesses using our solutions to access all of these mission-critical partners easily. Because we provide a comprehensive view, customers can more easily find inconsistencies and inaccuracies, and fix them quickly. • Digital and Secure.
For example, when a supplier of an accounts payable customer receives an invitation to join our network, the supplier can accept and securely share their bank account details once with Bill.com. From that point onward, all payments to that supplier will be electronic.
For example, when a supplier of an accounts payable customer receives an invitation to join our network, the supplier can accept and securely share its bank account details once with BILL. From that point onward, all payments to that supplier will be electronic.
We make available free of charge, on our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
We make available free of charge, on our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (Exchange Act), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (SEC).
Examples include: ◦ the positive pay feature we employ to ensure only authorized payment transactions are processed; 6 ◦ a streamlined void and reissue function when an in-process payment needs to be cancelled; and ◦ the cleared check images we make available to enable our customers to confirm payment receipt and facilitate research. • Custom User Roles – Our platform enables customers to define custom user roles.
Examples include: ◦ the positive pay feature we employ to ensure only authorized payment transactions are processed; ◦ a streamlined void and reissue function when an in-process payment needs to be cancelled; and ◦ the cleared check images we make available to enable businesses using our solutions to confirm payment receipt and facilitate research. • Custom user roles – Our platform enables customers to define custom user roles.
Under the card rewards program, spending businesses can earn rewards based on transaction volume on the cards issued to them and can redeem those rewards mainly for cash, travel, and gift cards. Customer Success SMBs have unique needs and customer support contact expectations.
Under the card rewards program, spending businesses can earn rewards based on transaction volume on the cards issued to them and can redeem those rewards mainly for statement credits or cash, travel, and gift cards. Customer Success SMBs have unique needs and customer support contact expectations.
Our document management capabilities help our customers make payment decisions, answer supplier questions and provide support to accountants and auditors. • Intelligent bill capture – We have automated the capture of data from bills by leveraging our proprietary AI capabilities. Incoming bills are machine-read, and critical data fields, including due date, amount, and supplier name, are prepopulated.
Our document management capabilities help businesses using our solutions make payment decisions, answer supplier questions, and provide support to accountants and auditors. • Intelligent bill capture – We have automated the capture of data from bills by leveraging our proprietary AI capabilities. Incoming bills are machine-read, and critical data fields, including due date, amount, and supplier name, are prepopulated.
Through our workflow progress bars on each page, our customers can see who has approved an invoice and what approvals remain, the status of each payment, and the date transactions are expected to clear. • Treasury Services – Our platform integrates advanced treasury services tools that are normally either not offered to or are costly for SMBs.
Through our workflow progress bars on each page, businesses using our solutions can see who has approved an invoice and what approvals remain, the status of each payment, and the date transactions are expected to clear. • Treasury services – Our platform integrates advanced treasury services tools that are normally either not offered to or are costly for SMBs.
We use what we learn to continuously improve the platform and the customer experience. We provide onboarding implementation support, as well as ongoing support and training. We periodically contact our customers to discuss their utilization of our platform, highlight additional features that may interest them, and identify any additional tools that may be needed.
We use what we learn to continuously improve the platform and the customer experience. We provide onboarding implementation support, as well as ongoing support and training. We periodically contact businesses using our solutions to discuss their utilization of our platform, highlight additional features that may interest them, and identify any additional tools that may be needed.
Much of this activity takes place while our customers are on-the-go: one of 4 the top three uses of our mobile app is bill approvals. Our platform proactively suggests payment dates based upon a bill’s due date, helping customers avoid late payment penalty fees. Our customers assign each user a role: administrator, payor, approver, clerk, or accountant.
Much of this activity takes place while people are on-the-go: one of the top three uses of our mobile app is bill approvals. Our platform proactively suggests payment dates based upon a bill’s due date, helping customers avoid late payment penalty fees. Businesses using our solutions assign each user a role: administrator, payor, approver, clerk, or accountant.
This eliminates the need to switch between systems for two-way matching and reduces the back-and-forth communication between PO creators and AP managers. • Frequent Status Updates – We provide timely status updates of financial inflows and outflows by providing timely status of all transactions on a regular basis.
This eliminates the need to switch between systems for two-way matching and reduces the back-and-forth communication between PO creators and accounts payable managers. 6 • Frequent status updates – We provide timely status updates of financial inflows and outflows by providing status updates of all transactions on a regular basis.
We have procured and maintained money transmitter licenses in 50 U.S. jurisdictions and actively work to comply with new license requirements as they arise. We are also registered as a Money Services Business with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).
We have procured and maintain money transmitter licenses that are required in 50 U.S. jurisdictions and actively work to comply with new license requirements as they arise. We are also registered as a Money Services Business with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).
We believe that the key competitive factors in our market include: • Product features, quality, and functionality; • Data asset size and ability to leverage artificial intelligence • Ease of deployment; • Ease of integration with leading accounting and banking technology infrastructures; • Ability to automate processes; • Cloud-based delivery architecture; • Advanced security and control features; • Regulatory compliance leadership, as evidenced by having been granted money transmitter licenses in all required U.S. jurisdictions and in Canada; • Brand recognition; and • Pricing and total cost of ownership.
We believe that the key competitive factors in our market include: • Product features, quality, and functionality; • Data asset size and ability to leverage AI; • Ease of deployment; • Ease of integration with leading accounting and banking technology infrastructures; • Ability to automate processes; • Cloud-based delivery architecture; • Advanced security and control features; 9 • Regulatory compliance leadership, as evidenced by our money transmitter licenses in all required U.S. jurisdictions and in Canada; • Brand recognition; and • Pricing and total cost of ownership.
Our Solution Our platform automates the SMB back office and enables our customers to pay their suppliers and collect payments from their clients, in effect acting as a system of control for their accounts payable, accounts receivable and spend and expense management activities.
Our Solution Our platform automates the SMB back office and enables businesses using our solutions to pay their suppliers and collect payments from their clients, in effect acting as a system of control for their accounts payable, accounts receivable, and spend and expense management activities.
We differentiate ourselves from our competitors by offering a financial back-office solution that handles all of these core cash flow activities end-to-end. Our extensive investment in building a fully-integrated two-way sync with popular accounting software providers is well-regarded in the industry.
We differentiate ourselves from our competitors by offering a portfolio of financial back-office solutions that handle all of these core cash flow activities end-to-end. Our extensive investment in building a fully-integrated two-way sync with popular accounting software providers is well-regarded in the industry.
We provide tools that streamline the transaction lifecycle by automating data capture and entry, routing bills for approval, and detecting duplicate invoices. • Integrated and Accurate. We provide an end-to-end platform that connects our customers to their suppliers and clients.
We provide tools that streamline the transaction lifecycle by automating data capture and entry, routing bills for approval, and detecting duplicate invoices. • Integrated and Accurate. We provide an end-to-end platform that connects businesses using our solutions to their suppliers and clients.
Each role has its own entitlements to ensure appropriate checks and balances in the back office. • Collaboration and engagement – Our platform promotes collaboration. Our in-app messaging capabilities make communications between our customers and their employees, vendors, and clients, easy.
Each role has its own entitlements to ensure appropriate checks and balances in the back office. • Collaboration and engagement – Our platform promotes collaboration. Our in-app messaging capabilities make communications between businesses using our solutions and their employees, vendors, and clients, easy.
We have used, and intend to continue to use, our website, investor relations website (accessible via our website), and social media accounts, including our Twitter account (@billcom) and our Facebook account (@billcom), as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.
We have used, and intend to continue to use, our website, investor relations website (accessible via our website), and social media accounts, including our Twitter/X feed (@billcom), our LinkedIn page and our Facebook page , as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.
As a result, our platform frees our customers from cumbersome legacy financial processes and provides the following key benefits: • Automated and Efficient. Our AI-enabled platform helps our customers pay their bills efficiently and get paid faster.
As a result, our platform frees businesses using our solutions from cumbersome legacy financial processes and provides the following key benefits: • Automated and Efficient. Our AI-enabled platform helps businesses using our solutions pay their bills efficiently and get paid faster.
We offer employees equity at the time of hire and through annual equity refresh grants, and provide an employee stock purchase plan, to foster a strong sense of ownership and engage our employees in our long-term success.
The majority of our employees are awarded equity at the time of hire and through annual equity refresh grants. We also offer an employee stock purchase plan to foster a strong sense of ownership and engage our employees in our long-term success.
Customers who use other types of systems use our advanced file import/export capabilities to minimize data entry activities. • Purchase Order (PO) Matching – We sync POs directly from accounting software systems, including Oracle NetSuite, Sage Intacct, and Microsoft Dynamics Great Plains into our platform.
Customers who use other types of systems use our advanced file import/export capabilities to minimize data entry activities. • Purchase order (PO) matching – We sync POs directly from accounting software systems, including Oracle NetSuite and Sage Intacct, and QuickBooks Desktop into our platform.
Our customers utilize this feature when deciding whether to pay a given bill, re-issue an invoice, or determine who authorized a certain payment. • Integrated, Robust Mobile Functionality - Our mobile-native apps, available in both iOS and Android, are easy to adopt and use.
Businesses using our solutions utilize this feature when deciding whether to pay a given bill or re-issue an invoice, or in determining who authorized a certain payment. • Integrated, robust mobile functionality – Our mobile-native apps, available in both iOS and Android, are easy to adopt and use.
Once in the network, other Bill.com customers can easily link to that same supplier without the supplier having to repeat this process again. This approach to connecting businesses has allowed us to build a robust 7 and growing business-to-business payments directory, which includes approximately 4.7 million Bill.com network members as of June 30, 2022.
Once in the network, other BILL customers can easily link to that same supplier without the supplier having to repeat this process again. This approach to connecting businesses has allowed us to build a robust and growing business-to-business payments directory, which includes approximately 5.8 million network members as of June 30, 2023.
Our system continues to learn with each document processed and payment made. This virtuous cycle of learning powers a network effect that facilitates customer satisfaction, offers intelligent insights, improves trust and safety, and will fuel further growth. Our Network Through our AI-enabled platform, our customers can easily connect with existing network members.
Our system continues to learn with each payment made and document processed. This virtuous cycle of learning powers a network effect that facilitates customer satisfaction, offers intelligent insights, improves trust and safety, and fuels further growth. Our Network Through our AI-enabled platform, businesses using our solutions can easily connect with existing network members.
In addition, we are required to comply with U.S. economic and trade sanctions administered by the U.S. Department of Treasury's Office of Foreign Assets Control (OFAC), as well as similar requirements in other jurisdictions, including, among others, the Canadian Proceeds of Crime and Terrorist Financing Act and the Australian Sanctions Regime.
In addition, we are required to comply with U.S. economic and trade sanctions administered by OFAC, as well as similar requirements in other jurisdictions, including, among others, the Canadian Proceeds of Crime and Terrorist Financing Act and the Australian Sanctions Regime.
With more than a decade of experience supporting our product, our customer success team has a deep understanding of their needs and has developed our support model accordingly. We recognize and understand patterns that our customers may not, because we see the aggregate – millions of transactions per month.
With more than a decade of experience supporting our product, our customer success team has a deep understanding of their needs and has developed our support model accordingly. We recognize and understand deep customer spending and behavior patterns because we see the aggregate – millions of transactions per month.
When both trading partners are in the network, our customer can see when their invoices are delivered, opened, authorized to be paid and when payment was received.
When both trading partners are in the network, businesses using our solutions can see when their invoices are delivered, opened, authorized to be paid, and when payment was received.
As a percentage of total card payment volume transacted by spending businesses that use Divvy cards, fraud and credit loss rate was approximately 37 basis points for fiscal 2022. See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations - Key Business Metrics ” for a detailed discussion of our business metrics.
As a percentage of total card payment volume transacted by spending businesses that use Divvy cards, fraud and credit loss rate was approximately 0.28% for fiscal 2023. See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics ” for a detailed discussion of our key business metrics.
Through dedicated connections with banks and payment processors, we issue checks, initiate card-based transactions, originate ACH-based payments, and execute wire transfers. Our payments engine handles all aspects of payment file transfers, exception file handling, and required payment status reporting.
Through dedicated connections with banks and payment processors, we issue checks, initiate card-based transactions, originate ACH-based payments, including real-time payments, through our instant transfer feature, and execute wire transfers. Our payments engine handles all aspects of payment file transfers, exception file handling, and required payment status reporting.
These compliance programs include policies, procedures, reporting protocols, and internal controls designed to address these legal and regulatory requirements and to assist in managing the risk associated with money laundering. Our United States (U.S.) compliance program includes the designation of a BSA compliance officer to oversee the program.
These compliance programs include policies, procedures, reporting protocols, systems, training, testing, independent audits, and internal controls designed to address these legal and regulatory requirements and to assist in managing the risks associated with money laundering. Our United States (U.S.) compliance program includes the designation of a BSA compliance officer to oversee the program.
Our security program is aligned to the NIST-800-53 standards and is regularly audited and assessed by third parties as well as our partners. The focus of our program is working to prevent unauthorized access to the data of our customers and network members.
Our security program is aligned to the NIST-800-53 standards and is regularly audited and assessed by third parties as well as our partners, including some of the largest banks in the world. The focus of our program is working to prevent unauthorized access to the data of our customers and network members.
We define network members as our customers plus their suppliers and clients, who pay and receive funds electronically via our platform. These network effects promote greater adoption of our platform, higher levels of engagement, and increased value across our ecosystem. Payment and Risk Management Services Our payments engine powers our payment services.
We define network members as our BILL standalone customers plus their suppliers and clients, who have paid or received funds electronically via our platform. These network effects promote greater adoption of our platform, higher levels of engagement, and increased value across our ecosystem. Payment and Risk Management Services Our payments engine powers our payment services.
Here are some highlights of our service: • Visibility at a Glance – Through our platform, our customers gain a comprehensive view of their cash in-flows and outflows. • Document Management – Bill.com automatically assigns a dedicated email address to each customer to provide to its suppliers.
Here are some highlights of our service: • Visibility at a glance – Through our platform, businesses using our solutions gain a comprehensive view of their cash inflows and outflows. • Document management – BILL automatically assigns a dedicated email address to each customer to provide to its suppliers.
This is an advantage that we expect to continue to grow over time. Our success in managing the risk inherent in moving funds for business customers is proven. As a percentage of our TPV, fraud and credit loss rates for our Bill.com based payment services were nominal, less than one basis point for each of fiscal 2022, 2021 and 2020.
This is an advantage that we expect to continue to grow over time. Our success in managing the risk inherent in moving funds for business customers is proven. As a percentage of our 8 TPV, fraud and credit loss rates for our BILL standalone payment services were nominal, less than 0.01% for each of fiscal 2023, 2022, and 2021.
We focus our efforts on developing new functionality and further enhancing the usability, reliability, and performance of existing applications. Sales and Marketing We distribute our platform through direct and indirect sales channels, both of which we leverage to reach our target customers in an efficient manner.
We focus our efforts on developing new functionality and further enhancing the usability, reliability, and performance of existing applications. Sales and Marketing We distribute our platform through direct and indirect sales channels, both of which we leverage to reach our target customers in an efficient manner. Our direct sales are driven by a self-service process and an inside sales team.
Our direct sales are driven by a self-service process and an 9 inside sales team. Our inside sales team augments our direct sales capabilities by targeting potential customers that have engaged with us on their own. We also reach customers indirectly through our partnerships with accounting firms, financial institutions, and accounting software providers.
Our inside sales team augments our direct sales capabilities by targeting potential customers that have engaged with us on their own. We also reach customers indirectly through our partnerships with accounting firms, financial institutions, and accounting software providers.
Through card issuing partners, Divvy provides both physical and virtual Mastercard and Visa debit and credit cards to companies that enroll in its business spend and expense management program. • Real-time Payments (RTP) – Through The Clearing House’s RTP ® network, a real-time payments platform, we disburse funds rapidly to meet urgent customer funding needs.
Through card issuing partners, Divvy provides both physical and virtual Mastercard and Visa cards to companies that enroll in its business spend and expense management program. • Real-time payments (RTP) – Through The Clearing House’s RTP ® network, a real-time payments platform, we offer an instant transfer service to allow businesses using our solutions to disburse funds rapidly to meet urgent funding needs.
Divvy provides businesses full visibility into their spend, by issuing every employee their own Divvy card. Every card provides access to credit lines originated through our card issuing partner banks and is linked to proactive spend controls: managers control their budgets by team through the assignment of individual permissions.
Every card provides access to charge card lines originated through our card issuing partner banks (Issuing Banks) and is linked to proactive spend controls: managers control their budgets by team through the assignment of individual permissions.
Our network makes it simple to make the switch from paper checks. • Card Payments – Through a third party, we offer accounts receivable customers the convenience of accepting credit and debit card payments. In addition, we enable our accounts payable customers to make virtual card payments.
Our network makes it simple to make the switch from paper checks. • Card payments – Through a third party, we offer businesses using our accounts receivable solutions the convenience of accepting credit and debit card payments.
Payments can be issued in either U.S. or foreign currency, and our platform synchronizes with customers’ accounting software for a consolidated view of domestic and international outflows. We offer our U.S.-based customers the ability to disburse funds to over 130 countries worldwide.
Payments can be issued in either U.S. or foreign currency, and our platform synchronizes with customers’ accounting software for a consolidated view of domestic and international outflows.
These licenses and registrations subject us, among other things, to record-keeping requirements, reporting requirements, bonding requirements, minimum capital requirements, limitations on the investment of customer funds, and regulatory examinations by state and federal regulatory agencies.
These licenses and registrations subject us, among other things, to anti-money laundering and anti-terrorist financing requirements, the U.S. Department of Treasury's Office of Foreign Assets Control (OFAC) sanctions obligations, record-keeping requirements, reporting requirements, bonding requirements, minimum capital requirements, limitations on the investment of customer funds, and regulatory examinations by state and federal regulatory agencies.
We rely on trade secrets and confidential information to develop and maintain our competitive position. It is our practice to enter into confidentiality and invention assignment agreements (or similar agreements) with our employees, consultants, and contractors involved in the development of intellectual property on our behalf.
It is our practice to enter into confidentiality and invention assignment agreements (or similar agreements) with our employees, consultants, and contractors involved in the development of intellectual property on our behalf. We also enter into confidentiality agreements with other third parties in order to limit access to, and disclosure and use of, our confidential information and proprietary information.
Through our APIs, developers can: • interact with business entities, like suppliers and clients; • obtain summary-level reports, such as payables and receivables reports; and • interact with accounting details, such as the general ledger codes of the chart of accounts.
Through our APIs, developers can: • interact with business entities, like suppliers and clients; • obtain summary-level reports, such as payables and receivables reports; and • interact with accounting details, such as the general ledger codes of the chart of accounts. 7 Our Unique Data Asset BILL's total payment volume and number of documents processed for businesses using our solutions provides us with a unique data asset.
We are also subject to the examination and enforcement authority of the FDIC under the Bank Service Company Act in our capacity as program manager to the CPMBs for our card product offerings. 10 In addition, we are subject to FDIC oversight through the provision of FDIC insured business deposit accounts provided by a regulated bank in relation to certain Invoice2Go products.
We are also subject to the examination and enforcement authority of the FDIC under the Bank Service Company Act in our capacity as program manager to the CPMBs for our card product offerings.
We define network members as our customers plus their suppliers and clients. See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations - Key Business Metrics ” for a detailed discussion of our business metrics.
See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Business Metrics ” for definitions and a detailed discussion of our key business metrics.
We also own a U.S. trademark registration for the name Invoice2Go and the Invoice2Go logo, along with a registration in Canada for the logo, and an application to register the mark GETGO, also in Canada. We own one registration in Australia for the Invoice2Go logo along with an application to register GETGO.
We also own a U.S. trademark registration for the name Invoice2Go and the Invoice2Go logo. We own a pending application for BILL.COM plus design in Canada, along with a registration in Canada for the Invoice2Go logo. We own one registration in Australia for the Invoice2Go logo, along with additional registrations internationally 14 for the mark INVOICE2GO or the Invoice2Go logo.
For reference purposes, the client has ongoing access to bills and associated payments within the portal. Just like our accounts payable service, our in-app collaboration tools make communications between the accounts receivable customer and its clients easy and trackable. Spend and Expense Management With Divvy, spending businesses gain robust spend and expense management tools, helping them spend smarter.
From this portal, the client can make a payment via ACH or credit card within seconds. For reference purposes, the client has ongoing access to bills and associated payments within the portal. Just like our accounts payable service, our in-app collaboration tools make communications between the accounts receivable customer and its clients easy and trackable.
While we believe our patents and patent applications in the aggregate are important to our competitive position, no single patent or patent application is material to us as a whole. We intend to pursue additional patent protection to the extent we believe it would be beneficial and cost effective.
These patents and patent applications seek to protect proprietary inventions relevant to our business. While we believe our patents and patent applications in the aggregate are important to our competitive position, no single patent or patent application is material to us as a whole.
We take this commitment seriously and endeavor to provide transparent disclosures on the progress of this work through both our internal and external communications. 13 Intellectual Property We seek to protect our intellectual property rights by relying upon a combination of patent, trademark, copyright, and trade secret laws, as well as contractual measures.
Intellectual Property We seek to protect our intellectual property rights by relying upon a combination of patent, trademark, copyright, and trade secret laws, as well as contractual measures.
We believe our culture enables us to attract and retain exceptional talent. As of June 30, 2022, we had a total of 2,269 employees across three offices in the U.S.: San Jose, CA, Houston, TX, and Draper, UT; one office in Sydney, Australia; and others working remotely.
As of June 30, 2023, we had a total of 2,521 employees working across three offices in the U.S.: San Jose, CA, Houston, TX, and Draper, UT; one office in Sydney, Australia; and others working remotely. We also employ individuals on a temporary basis and use the services of contractors as necessary.
We have built a unique culture that resonates with employees, as evidenced by our highly-competitive low attrition rates.
Our management team has deep experience with SMBs, software-as-a-service companies, AI, accounting firms, and financial institutions. We have built a unique culture that resonates with employees, as evidenced by our highly competitive, low attrition rates.
Accounts Payable Automation Our accounts payable automation service streamlines the entire payables process, from the receipt of a bill, through the approvals workflow, to the payment and synchronization with the accounting system.
Our platform also expands the ability of businesses using our solutions to budget for, monitor, and approve employee expenses across organizations of all sizes, all in real-time. Accounts Payable Automation Our accounts payable automation service streamlines the entire payables process, from the receipt of a bill, through the approvals workflow, to the payment and synchronization with the accounting system.
As of June 30, 2022, in the U.S. we had three trademark registrations covering the “Bill.com” logo and two trademark registrations related to the “Divvy” name, along with three additional trademark registrations filed by Divvy.
We intend to pursue additional patent protection to the extent we believe it would be beneficial and cost effective. As of June 30, 2023, in the U.S. we had two trademark registrations covering the “Bill.com” logo and three trademark registrations for DIVVY or the Divvy logo, along with registrations for Divvy slogans.
For additional information about our intellectual property and associated risks, see the section titled “Risk Factors—Risks Related to our Business and Industry.” Available Information Our internet address is www.bill.com.
Even if any such third-party technology was not available to us on commercially reasonable terms, we believe that alternative technologies would be available as needed. For additional information about our intellectual property and associated risks, see the section titled “ Risk Factors—Risks Related to our Business and Industry .” Available Information Our internet address is www.bill.com.
In addition, we own three International Registrations for the marks GETGO, Invoice2Go and the Invoice2Go logo, with protection extended to multiple countries, primarily in Europe. We will pursue additional trademark registrations to the extent we believe it would be beneficial and cost-effective. We also own several domain names, including www.bill.com, www.getdivvy.com and www.invoice2go.com.
We will pursue additional trademark registrations to the extent we believe it would be beneficial and cost-effective. We also own several domain names, including www.bill.com, www.getdivvy.com, and www.invoice2go.com. We rely on trade secrets and confidential information to develop and maintain our competitive position.
Our two-way synchronization capabilities virtually eliminate double data-entry, as our platform and the customer’s accounting software continuously keep each other updated.
We are integrated with several of the most popular business accounting software applications, including QuickBooks, Oracle NetSuite, Sage Intacct, Xero, and Microsoft Dynamics 365 Business Central. Our two-way synchronization capabilities virtually eliminate double data-entry, as our platform and the customer’s accounting software continuously keep each other updated.
Item 1. BUSINESS Overview Our mission is to make it simple to connect and do business. We are champions of small and midsize businesses (SMBs). As a leading provider of cloud-based software that simplifies, digitizes, and automates financial operations for SMBs, we create efficiencies and free our customers to run their businesses.
Item 1. BUSINESS Overview Our mission is to make it simple to connect and do business. We are a leader in financial automation software for small and midsize businesses (SMBs). As a champion of SMBs, we are automating the future of finance so businesses can thrive.
We also enter into confidentiality agreements with other third parties in order to limit access to, and disclosure and use of, our confidential information and proprietary information. We further control the use of our proprietary technology and intellectual property through provisions in our terms of service.
We further control the use of our proprietary technology and intellectual property through provisions in our terms of service. From time to time, we also incorporate certain intellectual property licensed from third parties, including under certain open source licenses.
Our Unique Data Asset Bill.com's total payment volume and number of documents processed for our customers provides us with a unique data asset. This asset has allowed us to build powerful artificial intelligence capabilities. The data provides a view into customer transactions and operational status of various payment processes, which enables us to effectively manage risk exposure.
This asset has allowed us to build powerful AI capabilities. The data provides a view into customer transactions and operational status of various payment processes, which enables us not only to effectively manage risk exposure but also to provide businesses using our solutions with enhanced tools, such as automatically populating drafts of bills, to save time and simplify their operations.
Leveraging our data, our proprietary risk engine has trained upon millions of business-to-business ACH, check, card, and wire transactions enabling us to keep our customers’ funds secure. • Experienced Management Team and Vibrant Culture. Our management team has deep experience with SMBs, software-as-a-service companies, accounting firms, and financial institutions.
By leveraging our machine learning capabilities, we generate insights from this data that drive product innovation. • Proprietary Risk Management Expertise. Leveraging our data, our proprietary risk engine has trained upon millions of business-to-business ACH, check, card, and wire transactions, enabling us to keep businesses using our solutions’ funds secure. • Experienced Management Team and Vibrant Culture.
As of June 30, 2022, in the U.S., we had nineteen issued patents that expire between 2028 and 2040, and six pending patent applications along with two pending international patent applications. These patents and patent applications seek to protect proprietary inventions relevant to our business.
As of June 30, 2023, in the U.S., we had 20 issued patents that expire between 2028 and 2040, and seven pending patent applications, two of which have been allowed as of the date of this Annual Report on Form 10-K, along with five pending international patent applications.
For an additional discussion on governmental regulation affecting our business, please see the risk factors related to regulation of our payments business and regulation in the areas of privacy and data use, under the section titled “Risk Factors – Risks Related to our Business and Industry.” Human Capital Our Culture and Employees We are a people-centric company and actively develop and nurture a positive relationship with our employees.
For additional discussion on governmental regulation affecting our business, please see the risk factors related to regulation of our payments business and regulation in the areas of privacy and data use, under the section titled “ Risk Factors—Risks Related to our Business and Industry .” Environmental, Corporate Governance, and Social (ESG) Oversight and Initiatives ESG Management We are committed to helping build a more sustainable future for businesses using our solutions, as well as for their communities, and stakeholders.
Customers use our platform to generate and process invoices, streamline approvals, make and receive payments, manage employee expenses, sync with their accounting systems, and manage their cash. We have built sophisticated integrations with popular accounting software solutions, banks, card issuers and payment processors, enabling our customers to access these mission-critical services quickly and easily.
We have built sophisticated integrations with popular accounting software solutions, banks, card issuers, and payment processors, enabling our customers to access these mission-critical services quickly and easily. Divvy, a BILL company, provides a solution for businesses to have smart corporate cards, build budgets, manage payments, and eliminate the need for manual expense reports.
Total Rewards We are committed to providing a fair and equitable compensation and benefits program that supports our diverse workforce. We provide competitive pay and benefits to attract and retain talent, including offering market-competitive base salary, bi-annual bonuses and sales commissions, and equity.
We leverage data and analytics to align the recruiting function to business growth and revenue drivers. We are committed to providing a fair and equitable compensation and benefits program that supports our diverse workforce. BILL offers market-competitive base salaries, semi-annual bonuses, and sales incentives.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSummary of Risk Factors Some of the material risks that we face include: • We have a history of operating losses and may not achieve or sustain profitability in the future; • Our recent rapid growth, including growth in our volume of payments, may not be indicative of our future growth, and if we continue to grow rapidly, we may not be able to manage our growth effectively; • We expect fluctuations in our financial results, making it difficult to project future results, and if we fail to meet the expectations of securities analysts or investors with respect to our operating results, our stock price and the value of your investment could decline; • If we are unable to attract new customers or convert trial customers into paying customers, our revenue growth and operating results will be adversely affected; • If we are unable to retain our current customers, increase customer adoption of our products, sell additional services to them, or develop and launch new payment products, our revenue growth will be adversely affected; • We are exposed to credit risk and other risks related to spending businesses' ability to pay the balances incurred on their Divvy cards and in relation to several other product offerings; • Our risk management efforts may not be effective to prevent fraudulent activities by our customers, subscribers, spending businesses or their counterparties, which could expose us to material financial losses and liability and otherwise harm our business; • A significant portion of our revenue comes from small and medium-sized businesses, which may have fewer financial resources to weather an economic downturn; • The markets in which we participate are competitive, and if we do not compete effectively, our operating results could be harmed; • We transfer large sums of customer funds daily, and are subject to numerous associated risks, which could result in financial losses, damage to our reputation, or loss of trust in our brand, which could harm our business and financial results; • Our business depends, in part, on our relationships with accounting firms; • Our business depends, in part, on our partnerships with financial institutions; • We are subject to numerous risks related to partner banks and financing arrangements with respect to our Divvy solution; • Payments and other financial services-related regulations and oversight are material to our business.
Biggest changeSummary of Risk Factors Consistent with the foregoing, we are exposed to a variety of risks, including the following: • We have a history of operating losses and may not achieve or sustain profitability in the future; • Our recent rapid growth, including growth in our volume of payments, may not be indicative of our future growth, and if we continue to grow rapidly, we may not be able to manage our growth effectively; • A significant portion of our revenue comes from small and medium-sized businesses, which may have fewer financial resources to weather an economic downturn, and volatile or weakened economic conditions in the U.S. and globally may adversely affect our business and operating results; • If we are unable to attract new customers or convert trial customers into paying customers or if our efforts to promote our charge card usage through marketing, promotion, and spending business rewards are unsuccessful, our revenue growth and operating results will be adversely affected; • If we are unable to retain our current customers, increase customer adoption of our products, sell additional services to our customers, or develop and launch new payment products, our business and growth will be adversely affected; • Our Divvy card offering exposes us to credit risk and other risks related to spending businesses' ability to pay the balances incurred on their Divvy cards.
Our subsidiary, Bill.com, LLC, maintains licenses, as applicable, to operate as a money transmitter (or its equivalent) in the U.S., in the District of Columbia, the Commonwealth of Puerto Rico, and, to the best of our knowledge, in all the states where such licensure or registration is required for our business.
Our subsidiary, Bill.com, LLC, maintains licenses, as applicable, to operate as a money transmitter (or its equivalent) in the U.S., the District of Columbia, the Commonwealth of Puerto Rico, and, to the best of our knowledge, in all the states where such licensure or registration is required for our business.
As a public company, we will incur significant legal, accounting, and other expenses that we did not incur as a private company, which we expect to further increase. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the NYSE, and other applicable securities rules and regulations impose various requirements on public companies.
As a public company, we will incur significant legal, accounting, and other expenses that we did not incur as a private company, which we expect to further increase. Sarbanes-Oxley, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the NYSE, and other applicable securities rules and regulations impose various requirements on public companies.
Government agencies may impose new or additional rules on money transmission, including regulations that: • prohibit, restrict, and/or impose taxes or fees on money transmission transactions in, to or from certain countries or with certain governments, individuals, and entities; • impose additional customer and spending business identification and customer or spending business due diligence requirements; • impose additional reporting or recordkeeping requirements, or require enhanced transaction monitoring; • limit the types of entities capable of providing money transmission services, or impose additional licensing or registration requirements; • impose minimum capital or other financial requirements; • limit or restrict the revenue that may be generated from money transmission, including revenue from interest earned on customer funds, transaction fees, and revenue derived from foreign exchange; • require enhanced disclosures to our money transmission customers; • require the principal amount of money transmission originated in a country to be invested in that country or held in trust until paid; • limit the number or principal amount of money transmission transactions that may be sent to or from a jurisdiction, whether by an individual or in the aggregate; and • restrict or limit our ability to process transactions using centralized databases, for example, by requiring that transactions be processed using a database maintained in a particular country or region.
Government agencies may impose new or additional rules on money transmission, including regulations that: • prohibit, restrict, and/or impose taxes or fees on money transmission transactions in, to, or from certain countries or with certain governments, individuals, and entities; • impose additional customer and spending business identification and customer or spending business due diligence requirements; 40 • impose additional reporting or recordkeeping requirements, or require enhanced transaction monitoring; • limit the types of entities capable of providing money transmission services, or impose additional licensing or registration requirements; • impose minimum capital or other financial requirements; • limit or restrict the revenue that may be generated from money transmission, including revenue from interest earned on customer funds, transaction fees, and revenue derived from foreign exchange; • require enhanced disclosures to our money transmission customers; • require the principal amount of money transmission originated in a country to be invested in that country or held in trust until paid; • limit the number or principal amount of money transmission transactions that may be sent to or from a jurisdiction, whether by an individual or in the aggregate; and • restrict or limit our ability to process transactions using centralized databases, for example, by requiring that transactions be processed using a database maintained in a particular country or region.
There has also been significant recent government enforcement and litigation challenging the validity of such arrangements, including disputes seeking to re-characterize lending transactions on the basis that the non-bank party rather than the bank is the “true lender” or “de facto lender”, and in case law upholding the “valid when made” doctrine, which holds that federal preemption of state interest rate limitations are not applicable in the context of certain bank - non-bank partnership arrangements.
There has also been significant recent government enforcement and litigation challenging the validity of such arrangements, including disputes seeking to re-characterize lending transactions on the basis that the non-bank party rather than the bank is the “true lender” or “de facto 26 lender”, and in case law upholding the “valid when made” doctrine, which holds that federal preemption of state interest rate limitations are not applicable in the context of certain bank—non-bank partnership arrangements.
Our restated certificate of incorporation and restated bylaws include provisions that: • authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our common stock; • require that any action to be taken by our stockholders be affected at a duly called annual or special meeting and not by written consent; • specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, or our chief executive officer; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; • establish that our board of directors is divided into three classes, with each class serving three-year staggered terms; • prohibit cumulative voting in the election of directors; • provide that our directors may be removed for cause only upon the vote of sixty-six and two-thirds percent (66 2/3%) of our outstanding shares of common stock; • provide that vacancies on our board of directors may be filled only by a majority vote of directors then in office, even though less than a quorum; and • require the approval of our board of directors or the holders of at least sixty-six and two-thirds percent (66 2/3%) of our outstanding shares of common stock to amend our bylaws and certain provisions of our certificate of incorporation.
Our amended and restated certificate of incorporation and second amended and restated bylaws include provisions that: • authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our common stock; • require that any action to be taken by our stockholders be affected at a duly called annual or special meeting and not by written consent; • specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, or our chief executive officer; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; • establish that our board of directors is divided into three classes, with each class serving three-year staggered terms; • prohibit cumulative voting in the election of directors; • provide that our directors may be removed for cause only upon the vote of sixty-six and two-thirds percent (66 2/3%) of our outstanding shares of common stock; • provide that vacancies on our board of directors may be filled only by a majority vote of directors then in office, even though less than a quorum; and • require the approval of our board of directors or the holders of at least sixty-six and two-thirds percent (66 2/3%) of our outstanding shares of common stock to amend our bylaws and certain provisions of our certificate of incorporation.
In the event of a major earthquake, hurricane or catastrophic event such as fire, flooding, power loss, telecommunications failure, vandalism, cyber-attack, war, or terrorist attack, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our application development, lengthy interruptions in our products, breaches of data security, and loss of critical data, all of which could harm our business, operating results, and financial condition.
In the event of a major earthquake, hurricane, or catastrophic event such as fire, flooding, power loss, telecommunications failure, vandalism, cyber-attack, war, or terrorist attack, we may 36 be unable to continue our operations and may endure system interruptions, reputational harm, delays in our application development, lengthy interruptions in our products, breaches of data security, and loss of critical data, all of which could harm our business, operating results, and financial condition.
If any of the accounting software providers change the features of their APIs, discontinue their support of such APIs, restrict our access to their APIs, or alter the terms governing their use in a manner that is adverse to our business, we may be restricted or may not be able to provide synchronization capabilities, which could significantly diminish the value of our platform and harm our business, operating results, and financial condition.
If any of the accounting software providers change the features of their APIs, discontinue their support of such APIs, restrict our access to their APIs, or alter the terms or practices governing their use in a manner that is adverse to our business, we may be restricted or may not be able to provide synchronization capabilities, which could significantly diminish the value of our platform and harm our business, operating results, and financial condition.
Any failure or perceived failure to comply with 39 existing or new laws, rules, regulations, licensing schemes, industry standards, or orders of any governmental authority (including changes to or expansion of the interpretation of those laws, regulations, standards or orders), may: • subject us to significant fines, penalties, criminal and civil lawsuits, license suspension or revocation, forfeiture of significant assets, audits, inquiries, whistleblower complaints, adverse media coverage, investigations, and enforcement actions in one or more jurisdictions levied by federal, state, local or foreign regulators, state attorneys general, and private plaintiffs who may be acting as private attorneys general pursuant to various applicable federal, state, and local laws; • result in additional compliance and licensure requirements; • increase regulatory scrutiny of our business; and • restrict our operations and force us to change our business practices or compliance program, make product or operational changes, or delay planned product launches or improvements.
Any failure or perceived failure to comply with existing or new laws, rules, regulations, licensing schemes, industry standards, or orders of any governmental authority (including changes to or expansion of the interpretation of those laws, regulations, standards, or orders), may: • subject us to significant fines, penalties, criminal and civil lawsuits, license suspension or revocation, forfeiture of significant assets, audits, inquiries, whistleblower complaints, adverse media coverage, investigations, and enforcement actions in one or more jurisdictions levied by federal, state, local, or foreign regulators, state attorneys general, and private plaintiffs who may be acting as private attorneys general pursuant to various applicable federal, state, and local laws; • result in additional compliance and licensure requirements; 41 • increase regulatory scrutiny of our business; and • restrict our operations and force us to change our business practices or compliance program, make product or operational changes, or delay planned product launches or improvements.
We face risks, including to our reputation as a trusted 23 brand, in the handling and protection of this data, and these risks will increase as our business continues to expand to include new products and technologies. Cybersecurity incidents and malicious internet-based activity continue to increase generally, and providers of cloud-based services have frequently been targeted by such attacks.
We face risks, including to our reputation as a trusted brand, in the handling and protection of this data, and these risks will increase as our business continues to expand to include new products and technologies. Cybersecurity incidents and malicious internet-based activity continue to increase generally, and providers of cloud-based services have frequently been targeted by such attacks.
For example, laws relating to the liability of providers of online services for activities of their users and other third 35 parties are currently being tested by a number of claims, including actions based on invasion of privacy and other torts, unfair competition, copyright and trademark infringement, and other theories based on the nature and content of the materials searched, the ads posted, or the content provided by users.
For example, laws relating to the liability of providers of online services for activities of their users and other third parties are currently being tested by a number of claims, including actions based on invasion of privacy and other torts, unfair competition, copyright and trademark infringement, and other theories based on the nature and content of the materials searched, the ads posted, or the content provided by users.
An inability to purchase participation interests from our Issuing Banks, whether funded through financing or corporate cash, could result in the banks’ limiting extensions of credit to Divvy spending businesses or ceasing to extend credit for our cards altogether, which would interrupt or limit our ability to offer our card products and materially and adversely affect our business.
An inability to purchase participation interests from our Issuing Banks, whether funded through financing or corporate cash, could result in the banks’ limiting extensions of credit to spending businesses or ceasing to extend credit for our cards altogether, which would interrupt or limit our ability to offer our card products and materially and adversely affect our business.
We are required, pursuant to Section 404 of the Sarbanes-Oxley Act (Section 404), to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. Effective internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud.
We are required, pursuant to Section 404 of Sarbanes-Oxley (Section 404), to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. Effective internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud.
Section 404(b) of the Sarbanes-Oxley Act requires our independent registered public accounting firm to annually attest to the effectiveness of our internal control over financial reporting, which has, and will continue 42 to, require increased costs, expenses, and management resources. An independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment might not.
Section 404(b) of the Sarbanes-Oxley Act requires our independent registered public accounting firm to annually attest to the effectiveness of our internal control over financial reporting, which has, and will continue to, require increased costs, expenses, and management resources. An independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment might not.
If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes or make cash payments upon conversions thereof. The conditional conversion feature of the Notes, when triggered, may adversely affect our financial condition and operating results.
If the repayment of the related indebtedness were to be accelerated after any applicable notice or 48 grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes or make cash payments upon conversions thereof. The conditional conversion feature of the Notes, when triggered, may adversely affect our financial condition and operating results.
Any prolonged service disruption affecting our platform 28 for any of the foregoing reasons could damage our reputation with current and potential customers, expose us to liability, cause us to lose customers, or otherwise harm our business. Also, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur.
Any prolonged service disruption affecting our platform for any of the foregoing reasons could damage our reputation with current and potential customers, expose us to liability, cause us to lose customers, or otherwise harm our business. Also, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur.
Our spend and expense management products are dependent on our relationship with our Issuing Banks, Cross River Bank and WEX Bank. The extensions of credit facilitated through our platform are originated through Cross River Bank and WEX Bank, and we rely on these Issuing Banks to comply with various federal, state and other laws. There has been significant recent U.S.
Our spend and expense management products are dependent on our relationship with our Issuing Banks, Cross River Bank and WEX Bank. The extensions of credit facilitated through our platform are originated through Cross River Bank and WEX Bank, and we rely on these entities to comply with various federal, state, and other laws. There has been significant recent U.S.
Future restrictions on the collection, use, sharing, or disclosure of data, or additional requirements for express or implied consent of our customers, partners, or end users for the use and disclosure of such information could require us to incur additional costs or modify our platform, possibly in a material manner, and could limit our ability to develop new functionality.
Future restrictions on the collection, use, sharing, or disclosure of data, or additional requirements for express or implied consent of our customers, partners, or users for the use and disclosure of such information could require us to incur additional costs or modify our platform, possibly in a material manner, and could limit our ability to develop new functionality.
Our renewal and expansion rates may decline or fluctuate as a result of several factors, including customer spending levels, customer satisfaction with our platform, decreases in the number of users, changes in the type and size of our customers, pricing changes, competitive conditions, the acquisition of our customers by other companies, and general economic conditions.
Our renewal and expansion rates may decline or fluctuate as a result of several factors, including customer spending levels, customer satisfaction with our platform and customer service, decreases in the number of users, changes in the type and size of our customers, pricing changes, competitive conditions, the acquisition of our customers by other companies, and general economic conditions.
If we are unable to meet the stated service level commitments or suffer extended periods of unavailability for our platform, we may be contractually obligated to provide these partners with service credits, up to 10% of the partner’s subscription fees for the month in which the service level was not 33 met.
If we are unable to meet the stated service level commitments or suffer extended periods of unavailability for our platform, we may be contractually obligated to provide these partners with service credits, up to 10% of the partner’s subscription fees for the month in which the service level was not met.
We rely on assumptions and estimates to calculate certain of our performance metrics, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business. We calculate and track certain customer and other performance metrics with internal tools, which are not independently verified by any third-party.
We rely on assumptions and estimates to calculate certain of our performance metrics, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business. 38 We calculate and track certain customer and other performance metrics with internal tools, which are not independently verified by any third party.
Holders of the Notes have the right to require us to repurchase their notes upon the occurrence of a fundamental change (as defined in the Indentures governing the 2025 Notes and 2027 Notes, respectively) at a 46 repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid special interest, if any.
Holders of the Notes have the right to require us to repurchase their notes upon the occurrence of a fundamental change (as defined in the indentures governing the 2025 Notes and 2027 Notes, respectively) at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid special interest, if any.
The non-payment rate among Divvy spending businesses may increase due to, among other factors, changes to underwriting standards, risk models not accurately predicting the creditworthiness of a business, a decline in economic conditions, such as a recession, high inflation or government austerity programs.
The non-payment rate among spending businesses may increase due to, among other factors, changes to underwriting standards, risk models not accurately predicting the creditworthiness of a business, or a decline in economic conditions, such as a recession, high inflation or government austerity programs.
Our business depends, in part, on our business relationships with financial institutions. We enter into partnering relationships with financial institutions pursuant to which they offer our services to their customers. These relationships involve risks that may not be present or that are present to a lesser 25 extent with sales to our direct SMB customers.
Our business depends, in part, on our business relationships with financial institutions. We enter into partnering relationships with financial institutions pursuant to which they offer our services to their customers. These relationships involve risks that may not be present or that are present to a lesser extent with sales to our direct SMB customers.
As a licensed money transmitter in the U.S., we are subject to obligations and restrictions with respect to the investment of customer funds, reporting requirements, bonding requirements, 29 minimum capital requirements, and examinations by state and federal regulatory agencies concerning various aspects of our business.
As a licensed money transmitter in the U.S., we are subject to obligations and restrictions with respect to the investment of customer funds, reporting requirements, bonding requirements, minimum capital requirements, and examinations by state and federal regulatory agencies concerning various aspects of our business.
In addition, some acquisitions may require us to spend considerable time, effort, and resources to integrate employees from the acquired business into our teams, and acquisitions of companies in lines of business in which we lack expertise may require considerable management time, oversight, and research before we see the desired benefit of such acquisitions.
In addition, some acquisitions may require us to 30 spend considerable time, effort, and resources to integrate employees from the acquired business into our teams, and acquisitions of companies in lines of business in which we lack expertise may require considerable management time, oversight, and research before we see the desired benefit of such acquisitions.
Any litigation may also involve patent holding companies or other adverse patent owners that have no relevant product revenue, and therefore, our patents may provide little or no deterrence as we would not be able to assert them against such entities or individuals.
Any litigation may also involve patent holding 46 companies or other adverse patent owners that have no relevant product revenue, and therefore, our patents may provide little or no deterrence as we would not be able to assert them against such entities or individuals.
The local, state, and federal laws, rules, regulations, licensing schemes, and industry standards that govern our business include, or may in the future include, those relating to banking, deposit-taking, cross-border and domestic money transmission, foreign exchange, payments services (such as licensed money transmission, payment processing, and settlement services), lending, anti-money laundering, combating terrorist financing, escheatment, international sanctions regimes, and compliance with the Payment Card Industry Data Security Standard, a set of requirements designed to ensure that all companies that process, store, or transmit payment card information maintain a secure environment to protect spending business data.
The local, state, and federal laws, rules, regulations, licensing requirements, and industry standards that govern our business include, or may in the future include, those relating to banking, deposit-taking, cross-border and domestic money transmission, foreign exchange, payments services (such as licensed money 39 transmission, payment processing, and settlement services), lending, anti-money laundering, combating terrorist financing, escheatment, international sanctions regimes, and compliance with the Payment Card Industry Data Security Standard, a set of requirements designed to ensure that all companies that process, store, or transmit payment card information maintain a secure environment to protect spending business data.
Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure, and security of various types of data, including data that identifies or may be used to identify an individual, such as names, email addresses, and in some jurisdictions, Internet Protocol (IP) addresses.
Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure, and security of various types of data, including data that identifies or may be used to identify an individual, such as names, email addresses, and in some jurisdictions, internet protocol addresses.
We believe that maintaining and enhancing our brands are important to support the marketing and sale of our existing and future products to new customers and partners and to expand sales of our platforms to new and existing customers and partners. Our ability to protect our Bill.com brand is limited as a result of its descriptive nature.
We believe that maintaining and enhancing our brands are important to support the marketing and sale of our existing and future products to new customers and partners and to expand sales of our platforms to new and existing customers and partners. Our ability to protect our BILL brand is limited as a result of its descriptive nature.
Responding to such claims, regardless of their merit, can be time consuming, costly to defend, and damaging to our reputation and brand. 38 Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement, data protection, and other losses.
Responding to such claims, regardless of their merit, can be time consuming, costly to defend, and damaging to our reputation and brand. Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement, data protection, and other losses.
We can provide no assurance as to the financial stability or viability of the option counterparties. Risks Related to Ownership of Our Common Stock The stock price of our common stock has been, and will likely continue to be volatile, and you may lose part or all of your investment.
We can provide no assurance as to the financial stability or viability of the option counterparties. 49 Risks Related to Ownership of Our Common Stock The stock price of our common stock has been, and will likely continue to be volatile, and you may lose part or all of your investment.
In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.
In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it 50 could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.
We also cannot be certain that our insurance coverage will be adequate for 24 data handling or data security liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.
We also cannot be certain that our insurance coverage will be adequate for data handling or data security liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.
Additionally, we rely upon certain banking partners and third parties to originate payments, process checks, execute wire transfers, and issue virtual cards, which could be similarly affected by a liquidity shortage and further exacerbate our ability to operate our business.
We rely upon certain banking partners and third parties to originate payments, process checks, execute wire transfers, and issue virtual cards, which could be similarly affected by a liquidity shortage and further exacerbate our ability to operate our business.
Although we have recently experienced significant growth in our revenue and payment volume, even if our revenue continues to increase, we expect our growth rate will decline in the future as a result of a variety of factors, including the increasing scale of our business.
Although we have recently experienced significant growth in our revenue and total payment volume, even if our revenue continues to increase, we expect our growth rate will decline in the future as a result of a variety of factors, including the increasing scale of our business.
Our risk management policies, procedures, techniques, and processes may not be sufficient to identify all of the risks to which we are exposed, to enable us to prevent or mitigate the risks we have identified, or to identify additional risks to which we may become subject in the future.
Our risk management policies, procedures, techniques, and processes may not be 22 sufficient to identify all of the risks to which we are exposed, to enable us to prevent or mitigate the risks we have identified, or to identify additional risks to which we may become subject in the future.
If we fail to comply with requirements applicable to us by law or contract, or if audits by 26 our Issuing Banks were to conclude that our processes and procedures are insufficient, we may be subject to fines or penalties or our Issuing Banks could terminate their relationships with us.
If we fail to comply with requirements applicable to us by law or contract, or if audits by our Issuing Banks were to conclude that our processes and procedures are insufficient, we may be subject to fines or penalties or our Issuing Banks could terminate their relationships with us.
In addition, if an acquired business fails to meet our expectations, our business, operating results, and financial condition may suffer. 32 If we fail to offer high-quality customer support, or if our support is more expensive than anticipated, our business and reputation could suffer.
In addition, if an acquired business fails to meet our expectations, our business, operating results, and financial condition may suffer. If we fail to offer high-quality customer support, or if our support is more expensive than anticipated, our business and reputation could suffer.
If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt, or obtaining additional debt financing or equity capital on terms that may be onerous or highly dilutive.
If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, 47 restructuring debt, or obtaining additional debt financing or equity capital on terms that may be onerous or highly dilutive.
If the prices we charge for our services are unacceptable to our customers, our operating results will be harmed. We generate revenue by charging customers a fixed monthly rate per user for subscriptions as well as transaction fees.
If the prices we charge for our services are unacceptable to our customers, our operating results will be harmed. 31 We generate revenue by charging customers a fixed monthly rate per user for subscriptions as well as transaction fees.
In response to Wayfair, or otherwise, states or local governments may enforce laws requiring us to calculate, collect, and remit taxes on sales in their jurisdictions. We may be obligated to collect and remit sales and use taxes in states where we have not collected and remitted sales and use taxes.
In response to Wayfair, or otherwise, states or local governments may enforce laws requiring us to calculate, collect, and remit taxes on sales in their jurisdictions. We may be obligated to 35 collect and remit sales and use taxes in states where we have not collected and remitted sales and use taxes.
If we fail to develop and maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.
If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.
Our operating results have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, our past results may not be indicative of 17 our future performance.
Our operating results have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, our past results may not be indicative of our future performance.
These risk models may not accurately predict creditworthiness due to inaccurate assumptions, including assumptions related to the particular spending business, market conditions, economic environment, or limited transaction history or other data, among other factors.
These risk models may not accurately predict 21 creditworthiness due to inaccurate assumptions, including assumptions related to the particular spending business, market conditions, economic environment, or limited transaction history or other data, among other factors.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Operating Results—Critical Accounting Policies and Estimates.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and equity, and the amount of revenue and expenses that are not readily apparent from other sources.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “ Management’s Discussion and Analysis of Financial Condition and Operating Results—Critical Accounting Policies and Estimates. ” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and equity, and the amount of revenue and expenses that are not readily apparent from other sources.
Our growth is subject to many factors, including our success in implementing our business 43 strategy, which is subject to many risks and uncertainties. Accordingly, our forecasts of market growth should not be taken as indicative of our future growth.
Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, our forecasts of market growth should not be taken as indicative of our future growth.
In addition to the factors discussed in this report, the market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including: • overall performance of the equity markets; • actual or anticipated fluctuations in our revenue and other operating results; • changes in the financial projections we may provide to the public or our failure to meet these projections; • failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • recruitment or departure of key personnel; • the economy as a whole and market conditions in our industry, such as high inflation, high interest rate and recessionary environments; • the global macroeconomic impact of the COVID-19 pandemic; • negative publicity related to the real or perceived quality of our platform, as well as the failure to timely launch new products and services that gain market acceptance; • rumors and market speculation involving us or other companies in our industry; • announcements by us or our competitors of new products or services, commercial relationships, or significant technical innovations; • acquisitions, partnerships, joint ventures, or capital commitments; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • lawsuits threatened or filed against us, litigation involving our industry, or both; • developments or disputes concerning our or other parties’ products, services or intellectual property rights; 48 • changes in accounting standards, policies, guidelines, interpretations, or principles; • interpretations of any of the above or other factors by trading algorithms, including those that employ natural language processing and related methods to evaluate our public disclosures; • other events or factors, including those resulting from war (such as the war in Ukraine), incidents of terrorism, or responses to these events; • the expiration of contractual lock-up agreements; and • sales of shares of our common stock by us or our stockholders.
In addition to the factors discussed in this report, the market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including: • overall performance of the equity markets; • actual or anticipated fluctuations in our revenue and other operating results; • changes in the financial projections we may provide to the public or our failure to meet these projections; • failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • recruitment or departure of key personnel; • the economy as a whole and market conditions in our industry, such as high inflation and high interest rate and recessionary environments; • the global macroeconomic impact of the COVID-19 pandemic; • negative publicity related to the real or perceived quality of our platform, as well as the failure to timely launch new products and services that gain market acceptance; • rumors and market speculation involving us or other companies in our industry; • announcements by us or our competitors of new products or services, commercial relationships, or significant technical innovations; • acquisitions, partnerships, joint ventures, or capital commitments; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • lawsuits threatened or filed against us, litigation involving our industry, or both; • developments or disputes concerning our or other parties’ products, services, or intellectual property rights; • changes in accounting standards, policies, guidelines, interpretations, or principles; • interpretations of any of the above or other factors by trading algorithms, including those that employ natural language processing and related methods to evaluate our public disclosures; • other events or factors, including those resulting from war (such as the war in Ukraine), incidents of terrorism, or responses to these events; • instability in the U.S. and global banking systems; • the expiration of contractual lock-up agreements; and • sales of shares of our common stock by us or our stockholders.
Our ability to sell additional services or increase customer adoption of new or existing products may 19 require more sophisticated and costly sales and marketing efforts, especially for our larger customers.
Our ability to sell additional services or increase customer adoption of new or existing products may require more sophisticated and costly sales and marketing efforts, especially for our larger customers.
In addition, the market for our Divvy spend and expense management solution is new and fragmented, and it is uncertain whether we will achieve and sustain high levels of demand and market adoption.
In addition, the market for our spend and expense management solution is new and fragmented, and it is uncertain whether we will achieve and sustain high levels of demand and market adoption.
Our effective tax rate could increase due to several factors, including: • changes in the relative amounts of income before taxes in the various U.S. and international jurisdictions in which we operate due to differing statutory tax rates in various jurisdictions; • changes in tax laws, tax treaties, and regulations or the interpretation of them, including the 2017 Tax Act as modified by the CARES Act; • changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies, and the economic and political environments in which we do business; • the outcome of current and future tax audits, examinations, or administrative appeals; and • limitations or adverse findings regarding our ability to do business in some jurisdictions.
Our effective tax rate could increase due to several factors, including: • changes in the relative amounts of income before taxes in the various U.S. and international jurisdictions in which we operate due to differing statutory tax rates in various jurisdictions; • changes in tax laws, tax treaties, and regulations or the interpretation of them, including the 2017 Tax Act as modified by the CARES Act, and the Inflation Reduction Act of 2022; • changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies, and the economic and political environments in which we do business; • the outcome of current and future tax audits, examinations, or administrative appeals; and • limitations or adverse findings regarding our ability to do business in some jurisdictions.
If we fail to maintain our company culture, our business and competitive position may be adversely affected. We are exposed to foreign currency exchange risk relating to our Australian operations 45 We are exposed to foreign currency exchange risk relating to our Australian operations and Australian subsidiary.
If we fail to maintain our company culture, our business and competitive position may be adversely affected. We are exposed to foreign currency exchange risk relating to our Australian operations. We are exposed to foreign currency exchange risk relating to our Australian operations and Australian subsidiary.
Any of the foregoing could, individually or in the aggregate, harm our reputation as a trusted provider, damage our brands and business, cause us to lose existing customers, prevent us from obtaining new customers, require us to expend significant funds to remedy problems caused by breaches and to avert further breaches, expose us to legal risk and potential liability, and adversely affect our results of operations and financial condition.
Any of the foregoing could, individually or in the aggregate, harm our reputation as a trusted provider, damage our brands and business, cause us to lose existing customers, prevent us from obtaining new customers, require us to expend significant funds to remedy problems caused by breaches and to avert further breaches, expose us to legal risk and potential liability, and adversely affect our business, operating results, and financial condition.
The challenges and costs of integrating and achieving anticipated synergies and benefits of transactions, and the risk that the anticipated benefits of the proposed transaction may not be fully realized or take longer to realize than expected, may be compounded where we attempt to integrate multiple acquired businesses within similar timeframes, as is the case with the concurrent integration efforts related to our acquisitions of the Divvy and Invoice2go businesses.
The challenges and costs of integrating and achieving anticipated synergies and benefits of transactions, and the risk that the anticipated benefits of the proposed transaction may not be fully realized or take longer to realize than expected, may be compounded where we attempt to integrate multiple acquired businesses within similar timeframes, as was the case with the concurrent integration efforts related to our acquisitions of the Divvy and Invoice2go businesses.
You should consider carefully the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our consolidated financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K before deciding whether to invest in shares of our common stock.
You should consider carefully the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ,” our consolidated financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K before deciding whether to invest in shares of our common stock.
If our performance metrics are not accurate representations of our business, customer base, or payment or transaction volumes; if we discover material inaccuracies in our metrics; or if the metrics we rely on to track our performance do not provide an accurate measurement of our business, our reputation may be harmed, we may be subject to legal or regulatory actions, and our business, financial condition, results of operations, and prospects could be adversely affected.
If our performance metrics are not accurate representations of our business, customer base, or payment or transaction volumes, if we discover material inaccuracies in our metrics, or if the metrics we rely on to track our performance do not provide an accurate measurement of our business, our reputation may be harmed, we may be subject to legal or regulatory actions, and our business, operating results, financial condition, and prospects could be adversely affected.
Our profitability each quarter is also impacted by the mix of our revenue generated from subscriptions, transaction fees, including the mix of ad valorem transaction revenue, and interest earned on customer funds that we hold for the benefit our customers, respectively. Any changes in this revenue mix will have the effect of increasing or decreasing our margins.
Our profitability each quarter is also impacted by the mix of our revenue generated from subscriptions, transaction fees, including the mix of ad valorem transaction revenue, and interest earned on funds that we hold for the benefit of our customers. Any changes in this revenue mix will have the effect of increasing or decreasing our margins.
If we are unable to increase our revenue at a rate sufficient to offset the expected increase in our costs, or if we encounter difficulties in managing a growing volume of payments, our business, financial position, and operating results will be harmed, and we may not be able to achieve or maintain profitability over the long term.
If we are unable to increase our revenue at a rate sufficient to offset the expected increase in our costs, or if we encounter difficulties in managing a growing volume of payments, our business, financial condition, and operating results will be harmed, and we may not be able to achieve or maintain profitability over the long term.
In addition, the current regulatory environment related to immigration is uncertain, including with respect to the availability of H1-B and other 31 visas.
In addition, the current regulatory environment related to immigration is uncertain, including with respect to the availability of H1-B and other visas.
Any expansion in the markets in which we operate depend on a number of factors, including the cost, performance, and perceived value associated with our platforms and those of our competitors. Even if the markets in which we compete meet the size estimates and growth forecasted, our business could fail to grow at similar rates, if at all.
Any expansion in the markets in which we operate depends on a number of factors, including the cost, performance, and perceived value associated with our platforms and those of our competitors. Even if the markets in which we compete meet the size estimates and growth forecasted, our business could fail to grow at similar rates, if at all.
Prior to the close of business on the business day immediately preceding September 1, 2025, in the case of the 2025 Notes, and January 1, 2027, in the case of the 2027 Notes, the holders of the applicable Notes may elect to convert their Notes during any calendar quarter (and only during such calendar quarter) if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day (the “Conversion Condition”).
Prior to the close of business on the business day immediately preceding September 1, 2025, in the case of the 2025 Notes, and January 1, 2027, in the case of the 2027 Notes, the holders of the applicable Notes may elect to convert their Notes during any calendar quarter (and only during such calendar quarter) if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day (Conversion Condition).
Any of these factors could harm our business, results of operations, and financial condition. In addition, if we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase. We are also required to comply with the covenants set forth in the Indentures governing the Notes.
Any of these factors could harm our business, operating results, and financial condition. In addition, if we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase. We are also required to comply with the covenants set forth in the indentures governing the Notes.
These cybersecurity challenges, including threats to our own IT infrastructure or those of our customers or third-party providers, may take a variety of forms ranging from stolen bank accounts, business email compromise, customer employee fraud, account takeover, check fraud, or cybersecurity attacks, to “mega breaches” targeted against cloud-based services and other hosted software, which could be initiated by individual or groups of hackers or sophisticated cyber criminals.
These cybersecurity challenges, including threats to our own information technology infrastructure or those of our customers or third-party providers, may take a variety of forms ranging from stolen bank accounts, business email compromise, customer employee fraud, account takeover, check fraud, or cybersecurity attacks, to “mega breaches” targeted against cloud-based services and other hosted software, which could be initiated by individual or groups of hackers or sophisticated cyber criminals.
We also expect to grant additional equity awards to employees and directors under our 2019 Equity Incentive Plan and rights to purchase our common stock under our 2019 Employee Stock Purchase Plan. Any such issuances could result in substantial dilution to our existing stockholders and cause the trading price of our common stock to decline. Item 1B.
We also expect to grant additional equity awards to employees and directors under our 2019 Equity Incentive Plan and rights to purchase our common stock under our 2019 Employee Stock Purchase Plan. Any such issuances could result in substantial dilution to our existing stockholders and cause the trading price of our common stock to decline.
The accuracy of these risk models and the ability to manage credit risk related to our cards may also be affected by legal or regulatory requirements, competitors’ actions, changes in consumer behavior, changes in the economic environment, Issuing Bank policies, and other factors.
The accuracy of these risk models and the ability to manage credit risk related to our cards may also be affected by legal or regulatory requirements, competitors’ actions, changes in consumer behavior, changes in the economic environment, policies of Issuing Banks, and other factors.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. It may require significant resources and management oversight to maintain and, if necessary, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard.
Sarbanes-Oxley requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. It may require significant resources and management oversight to maintain and, if necessary, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard.
The BSA requires, 44 among other things, money services businesses (MSBs) to develop and implement risk-based anti-money laundering programs, to report suspicious activity, and in some cases, to collect and maintain information about customers who use their services and maintain other transaction records.
The BSA requires, among other things, MSBs to develop and implement risk-based anti-money laundering programs, to report suspicious activity, and in some cases, to collect and maintain information about customers who use their services and maintain other transaction records.
Significant delays in the deployment of our platform to our partners’ customers could cause us to incur significant expenditures for platform integration and product launch without generating anticipated revenue in the same period or at all and could adversely impact our results of operations.
Significant delays in the deployment of our platform to our partners’ customers could cause us to incur significant expenditures for platform integration and product launch without generating anticipated revenue in the same period or at all and could adversely impact our operating results.
For example, the accuracy and consistency of our performance metrics may be impacted by changes to internal assumptions regarding how we account for and track customers, limitations on system implementations, and limitations on third party tools’ ability to match our database.
For example, the accuracy and consistency of our performance metrics may be impacted by changes to internal assumptions regarding how we account for and track customers, limitations on system implementations, and limitations on the ability of third-party tools to match our database.
Typically, we immediately sell a portion of the participation interests we have purchased to a warehousing subsidiary which funds the purchases through loans provided by our financing partners, and we may sell a portion of the participation interests to a third-party institution pursuant to a purchase arrangement.
Typically, we immediately sell a portion of the participation interests we have purchased to a warehousing subsidiary which funds the purchases through loans provided by our financing partners, and we may sell a portion of the participation interests to a third-party institution pursuant to a purchase arrangements.
We have grown rapidly and seek to continue to grow, and although we maintain a robust and multi-faceted risk management process, our business is always subject to the risk of financial losses as a result of credit losses, operational errors, software defects, service disruption, employee misconduct, security breaches, or other similar actions or errors on our platform.
Accordingly, we have grown rapidly and seek to continue to grow, and although we maintain a robust and multi-faceted risk management process, our business is highly complex and always subject to the risk of financial losses as a result of credit losses, operational errors, software defects, service disruption, employee misconduct, security breaches, or other similar actions or errors on our platform.
Moreover, certain financial institutions may elect to focus on other market segments and decide to terminate their SMB-focused services. If we are unsuccessful in establishing, growing, or maintaining our relationships with financial institution partners, our ability to compete in the marketplace or to grow our revenue could be impaired, and our results of operations may suffer.
Moreover, certain financial institutions may elect to focus on other market segments and decide to terminate their SMB-focused services. If we are unsuccessful in establishing, growing, or maintaining our relationships with financial institution partners, our ability to compete in the marketplace or to grow our revenue could be impaired, and our operating results may suffer.
If a new or revised visa program is implemented, it may impact our ability to recruit, hire, retain or effectively collaborate with qualified skilled personnel, including in the areas of artificial intelligence and machine learning, and payment systems and risk management, which could adversely impact our business, operating results and financial condition.
If a new or revised visa program is implemented, it may impact our ability to recruit, hire, retain, or effectively collaborate with qualified skilled personnel, including in the areas of AI and machine learning, and payment systems and risk management, which could adversely impact our business, operating results, and financial condition.
The market for SMB software financial back-office solutions is relatively new and subject to ongoing technological change, evolving industry standards, payment methods and changing regulations, and changing customer needs, requirements, and preferences.
The market for SMB software financial back-office solutions is relatively new and subject to ongoing technological change, evolving industry standards, payment methods, and changing regulations, as well as changing customer needs, requirements, and preferences.
If not utilized, the federal tax credits will expire at various dates beginning in 2028. The state tax credits do not expire and will carry forward indefinitely until utilized. In general, under Sections 382 and 383 of the U.S.
If not utilized, the federal tax credits will expire at various dates beginning in 2039. The state tax credits do not expire and will carry forward indefinitely until utilized. In general, under Sections 382 and 383 of the U.S.
For a substantial majority of extensions of credit to Divvy spending businesses facilitated through our platform, we purchase from our Issuing Banks participation interests in the accounts receivables generated when Divvy spending businesses make purchases using Divvy cards and we bear the entire credit risk in the event that a spending business fails to pay card balances.
For a substantial majority of extensions of credit to Divvy spending businesses facilitated through our spend and expense management platform, we purchase from our Issuing Banks participation interests in the accounts receivables generated when spending businesses make purchases using Divvy cards, and we bear the entire credit risk in the event that a spending business fails to pay card balances.
In addition, any of these accounting software providers may seek to develop a payment solution of its own, acquire a solution to compete with ours, or decide to partner with other competing applications, any of which its SMB customers may select over ours, thereby harming our growth prospects and reputation and adversely affecting our results of operations.
In addition, any of these accounting software providers may seek to develop a payment solution of its own, acquire a solution to compete with ours, or decide to partner with other competing applications, any of which its SMB customers may select over ours, thereby harming our growth prospects and reputation and adversely affecting our business and operating results.
Non-performance, or even significant underperformance, of the account receivables participation interests that we own could have an adverse effect on our business. Moreover, the funding model for our Divvy card product relies on a variety of funding arrangements, including warehouse facilities and purchase arrangements, with a variety of funding sources.
Non-performance, or even significant underperformance, of the account receivables participation interests that we own could have an adverse effect on our business. Moreover, the funding model for our Divvy card product relies on a variety of funding arrangements, including warehouse facilities and, from time-to-time, purchase arrangements, with a variety of funding sources.
We are also subject to the examination and enforcement authority of the FDIC under the Bank Service Company Act and state regulators in our capacity as a service provider for these banks.
We are also subject to the examination and enforcement authority of the FDIC under the Bank Service Company Act and state regulators in our capacity as a service provider for our Issuing Banks.
If we are unable to maintain access to, or to expand, our network and diversity of funding arrangements, our business, results of operations, financial condition, and future prospects could be materially and adversely affected.
If we are unable to maintain access to, or to expand, our network and diversity of funding arrangements, our business, operating results, financial condition, and future prospects could be materially and adversely affected.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. PROPERTIES We lease our office facilities, which consisted of the following as of June 30, 2022: ▪ Approximately 138,000 square feet of offices located in San Jose, California. This leased property, which is being used as our corporate headquarters, expires in June 2031. ▪ Approximately 155,000 square feet of offices located in Draper, Utah.
Biggest changeItem 2. PROPERTIES We lease our office facilities, including approximately 138,000 square feet in San Jose, California for our corporate headquarters. This lease agreement expires in June 2031. We also maintain offices in Draper, Utah, Houston Texas, and Sydney, Australia.
This leased property, which is being used as office space for our employees located in Draper, Utah, expires in March 2030. Approximately 20,000 square feet is being subleased for a period of 5 years expiring in December 2025. ▪ Approximately 25,000 square feet of offices in Houston, Texas.
Our leased facilities in Draper, Utah consist of 155,000 square feet of office space for our employees located in Draper, Utah, approximately 20,000 square feet of which is being subleased for a period of 5 years expiring in December 2025. The lease for our Draper, Utah property expires in March 2030.
Removed
This leased property, which is being used as office space for our employees located in Houston, Texas, expires in March 2025. ▪ Approximately 3,000 square feet of offices in Sydney, Australia. This leased property, which is being used as office space for our employees located in Sydney Australia, expires in September 2022.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe are not currently a party to any legal proceedings that we believe to be material to our business or financial condition. 51 The results of any future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
Biggest changeThe results of any future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. Item 4. MINE SAFETY DISCLOSURES Not applicable. 53 PART II
In addition, third parties may from time to time assert claims against us in the form of letters and other communications.
In addition, third parties may from time to time assert claims against us in the form of letters and other communications. We are not currently a party to any legal proceedings that we believe to be material to our business or financial condition.
Removed
Item 4. MINE SAFETY DISCLOSURES Not applicable. 52 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our capital stock in the foreseeable future.
Biggest changeWe currently intend to retain future earnings for use in the operation of our business and do not anticipate paying any dividends on our capital stock in the foreseeable future.
The graph assumes an initial investment of $100.00 at the close of trading on December 12, 2019 and that all dividends paid by 53 companies included in these indices have been reinvested. The performance shown in the graph below is not intended to forecast or be indicative of future stock price performance. Recent Sales of Unregistered Equity Securities None.
The graph assumes an initial investment of $100.00 at the close of trading on December 12, 2019 and that all dividends paid by companies included in these indices have been reinvested. The performance shown in the graph below is not intended to forecast or be indicative of future stock price performance. 54 Recent Sales of Unregistered Equity Securities None.
The following graph depicts the total cumulative stockholder return on our common stock from December 12, 2019, the first day of trading of our common stock on The New York Stock Exchange, through June 30, 2022, relative to the performance of the S&P 500 Index and S&P 500 IT Index.
The following graph depicts the total cumulative stockholder return on our common stock from December 12, 2019, the first day of trading of our common stock on the NYSE, through June 30, 2023, relative to the performance of the S&P 500 Index and S&P 500 IT Index.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock trades on The New York Stock Exchange under the symbol “BILL.” Holders of Record As of June 30, 2022, there were 148 holders of record of our common stock.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock trades on The New York Stock Exchange under the symbol “BILL”. Holders of Record As of June 30, 2023, there were 181 holders of record of our common stock.
Removed
Issuer Purchases of Equity Securities None. Item 6. RESERVED 54
Added
Purchase of Equity Securities by the Issuer In January 2023, our board of directors approved our Share Repurchase Program of up to $300 million of shares of common stock. The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities.
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Under the Share Repurchase Program, repurchases can be made from time to time using a variety of methods, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans, in compliance with the rules of the SEC and other applicable legal requirements.
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The Share Repurchase Program has a term of 12 months and does not obligate us to acquire any particular amount of shares, and it may be suspended or discontinued at any time at our discretion.
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The following table provides share repurchase activity during the quarter ended June 30, 2023: Period Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of publicly announced plans or programs (1) Approximate dollar value of shares that may yet be purchased under the plans or programs (1) April 1 - April 30, 2023 372,254 $ 76.56 372,254 $ 244,500,240 May 1 - May 31, 2023 346,244 $ 92.76 346,244 $ 212,382,647 June 1 - June 30, 2023 — $ — — $ 212,382,647 Total 718,498 718,498 $ 212,382,647 (1) See Note 11, in Notes to Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K. 55 Item 6.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

108 edited+50 added−47 removed52 unchanged
Biggest changeBenefit from income taxes – Benefit from income taxes consists primarily of the tax benefit of the net loss incurred during the period, reduction of valuation allowance in connection with the acquisitions of Invoice2go and Divvy, and change in deferred tax liability relating to our 2025 Notes. 60 Results of Operations The following table sets forth our results of operations together with the dollar and percentage change for the periods presented (amounts in thousands): Year ended June 30, Change (2022 compared to 2021) Change (2021 compared to 2020) 2022 (1) 2021 (2) 2020 Amount % Amount % Revenue $ 641,959 $ 238,265 $ 157,600 $ 403,694 169 % $ 80,665 51 % Cost of revenue Service costs (3) 105,496 56,576 37,049 48,920 86 % 19,527 53 % Depreciation and amortization of intangible assets (4) 39,508 5,230 2,095 34,278 655 % 3,135 150 % Total cost of revenue 145,004 61,806 39,144 83,198 135 % 22,662 58 % Gross profit 496,955 176,459 118,456 320,496 182 % 58,003 49 % Operating expenses Research and development (3) 219,818 89,503 52,996 130,315 146 % 36,507 69 % Sales and marketing (3) 307,151 67,935 45,070 239,216 352 % 22,865 51 % General and administrative (3) 241,174 128,116 53,450 113,058 88 % 74,666 140 % Depreciation and amortization of intangible assets (4) 45,630 4,872 1,138 40,758 837 % 3,734 328 % Total operating expenses 813,773 290,426 152,654 523,347 180 % 137,772 90 % Loss from operations (316,818) (113,967) (34,198) (202,851) 178 % (79,769) 233 % Other income (expense), net (13,861) (25,370) 3,160 11,509 (45) % (28,530) (903) % Loss before (benefit from) provision for income taxes (330,679) (139,337) (31,038) (191,342) 137 % (108,299) 349 % (Benefit from) provision for income taxes (4,318) (40,617) 53 36,299 (89) % (40,670) (76736) % Net loss $ (326,361) $ (98,720) $ (31,091) $ (227,641) 231 % $ (67,629) 218 % (1) Includes the results of Invoice2go from the acquisition date on September 1, 2021.
Biggest changeWe maintain a full valuation allowance against our U.S. federal, state and Australian net deferred tax assets as we have concluded that it is not more likely than not that we will realize our net deferred tax assets. 63 Results of Operations The following table sets forth our results of operations together with the dollar and percentage change for the periods presented (amounts in thousands): Year ended June 30, Change (2023 compared to 2022) Change (2022 compared to 2021) 2023 2022 (1) 2021 (2) Amount % Amount % Revenue Subscription and transaction fees (4) $ 944,710 $ 633,365 $ 232,255 $ 311,345 49 % $ 401,110 173 % Interest on funds held for customers 113,758 8,594 6,010 105,164 1224 % 2,584 43 % Total revenue 1,058,468 641,959 238,265 416,509 65 % 403,694 169 % Cost of revenue Service costs (4) 151,010 105,496 56,576 45,514 43 % 48,920 86 % Depreciation and amortization of intangible assets (3) 42,967 39,508 5,230 3,459 9 % 34,278 655 % Total cost of revenue 193,977 145,004 61,806 48,973 34 % 83,198 135 % Gross profit 864,491 496,955 176,459 367,536 74 % 320,496 182 % Operating expenses Research and development (4) 314,632 219,818 89,503 94,814 43 % 130,315 146 % Sales and marketing (4)(5) 515,858 307,151 67,935 208,707 68 % 239,216 352 % General and administrative (4) 281,278 241,174 128,116 40,104 17 % 113,058 88 % Depreciation and amortization of intangible assets (3) 48,496 45,630 4,872 2,866 6 % 40,758 837 % Total operating expenses 1,160,264 813,773 290,426 346,491 43 % 523,347 180 % Loss from operations (295,773) (316,818) (113,967) 21,045 (7) % (202,851) 178 % Other income (expense), net 72,856 (13,861) (25,370) 86,717 (626) % 11,509 (45) % Loss before provision for (benefit from) income taxes (222,917) (330,679) (139,337) 107,762 (33) % (191,342) 137 % Provision for (benefit from) income taxes 808 (4,318) (40,617) 5,126 (119) % 36,299 (89) % Net loss $ (223,725) $ (326,361) $ (98,720) $ 102,636 (31) % $ (227,641) 231 % (1) Includes the results of Invoice2go from the acquisition date on September 1, 2021.
When a business applies for a Divvy card, we utilize, on behalf of the card Issuing Bank, proprietary risk management capabilities to confirm the identity of the business, and perform a credit underwriting process to determine if the business is eligible for a Divvy card pursuant to our credit policies.
When a business applies for a Divvy card, we utilize, on behalf of the Issuing Bank, proprietary risk management capabilities to confirm the identity of the business, and perform a credit underwriting process to determine if the business is eligible for a Divvy card pursuant to our credit policies.
If the note holders exercise their right to convert, our current intent is to settle such conversion through a combination settlement involving a repayment of the principal portion in cash and the balance in shares of common stock.
If the note holders exercise their right to convert, our current intent is to settle such conversion through a combination settlement involving a repayment of the principal portion in cash and the balance in shares of common stock.
Sales and marketing – Sales and marketing expenses consist primarily of personnel-related expenses, including stock-based compensation expenses, for our sales and marketing teams, rewards expense in connection with our card rewards programs, sales commissions, marketing program expenses, travel-related expenses, and costs to market and promote our platform through advertisements, marketing events, partnership arrangements, direct customer acquisition, and allocated overhead costs.
Sales and marketing – Sales and marketing expenses consist primarily of personnel-related expenses, including stock-based compensation expenses, for our sales and marketing teams, rewards expense in connection with our card rewards programs, sales commissions, marketing program expenses, travel-related expenses, and costs to market and promote our platform through advertisements, marketing events, partnership 62 arrangements, direct customer acquisition, and allocated overhead costs.
We believe that these non-GAAP financial measures provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects and allow for greater transparency with respect to important metrics used by our management for financial and operational 67 decision-making.
We believe that these non-GAAP financial measures provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects and allow for greater transparency with respect to important metrics used by our management for financial and operational decision-making.
The bank then sells a 100% participation interest in the receivable to us. Pursuant to our agreements with the banks, we are obligated to purchase the participation interests in all of the receivables originated through our platform, and our obligations are secured by cash deposits.
The Issuing Bank then sells a 100% participation interest in the receivable to us. Pursuant to our agreements with the Issuing Banks, we are obligated to purchase the participation interests in all of the receivables originated through our platform, and our obligations are secured by cash deposits.
We are responsible for all fraud and unauthorized use of a card and generally are required to hold the bank harmless from such losses unless claims regarding fraud or unauthorized use are due to the sole gross negligence of the bank.
We are responsible for all fraud and unauthorized use of a card and generally are required to hold the Issuing Bank harmless from such losses unless claims regarding fraud or unauthorized use are due to the sole gross negligence of the Issuing Bank.
Based on our agreements with the Issuing Banks, we recognize the interchange fees as revenue gross or net of rebates received from the Issuing Bank based on our determination of whether we are the principal or the agent under the agreements.
Based on our agreements with the Issuing Banks, we recognize the interchange fees as revenue gross or net of rebates received from the Issuing Banks based on our determination of whether we are the principal or the agent under the agreements.
Additionally, we evaluate whether to include qualitative reserves to cover losses that are expected but may not be adequately represented in the quantitative methods or the 73 economic assumptions.
Additionally, we evaluate whether to include qualitative reserves to cover losses that are expected but may not be adequately represented in the quantitative methods or the economic assumptions.
Free Cash Flow Free cash flow is defined as net cash used in operating activities, adjusted by purchases of property and equipment and capitalization of internal-use software costs.
Free Cash Flow Free cash flow is defined as net cash provided by (used in) operating activities, adjusted by purchases of property and equipment and capitalization of internal-use software costs.
Service Costs and Expenses Service costs – Service costs consists primarily of personnel-related costs, including stock-based compensation expenses, for our customer success and payment operations teams, outsourced support services for our customer success team, costs that are directly attributed to processing customers’ and spending businesses' transactions (such as the cost of printing checks, postage for mailing checks, fees associated with the issuance and processing of card transactions, fees for processing payments, such as ACH, check, and cross-border wires), direct and amortized costs for implementing and integrating our cloud-based platform into our customers’ systems, costs for maintaining, optimizing, and securing our cloud payments 59 infrastructure, amortization of capitalized internal-use developed software, fees on the investment of customer funds, and allocation of overhead costs.
Service Costs and Expenses Service costs – Service costs consist primarily of personnel-related costs, including stock-based compensation expenses, for our customer success and payment operations teams, outsourced support services for our customer success team, costs that are directly attributed to processing customers’ and spending businesses' transactions (such as the cost of printing checks, postage for mailing checks, fees associated with the issuance and processing of card transactions, fees for processing payments, such as ACH, checks, and cross-border wires), direct and amortized costs for implementing and integrating our cloud-based platform into our customers’ systems, costs for maintaining, optimizing, and securing our cloud payments infrastructure, amortization of capitalized internal-use developed software related to our platform, fees on the investment of customer funds, and allocation of overhead costs.
Research and development – Research and development expenses consist primarily of personnel-related expenses, including stock-based compensation expenses, for our research and development teams, incurred in developing new products or enhancing existing products, and allocated overhead costs. We expense a substantial portion of research and development expenses as incurred.
Research and development (R&D) – R&D expenses consist primarily of personnel-related expenses, including stock-based compensation expenses, for our R&D teams, incurred in developing new products or enhancing existing products, and allocated overhead costs. We expense a substantial portion of R&D expenses as incurred.
We capitalize certain software development costs that are attributable to developing new products and adding incremental functionality to our platform and amortize such costs over the estimated life of the new product or incremental functionality, which is generally three years.
We capitalize certain software development costs that are attributable to developing new products and adding incremental functionality to our platform and amortize such costs into service costs over the estimated life of the new product or incremental functionality, which is generally three years.
Under our arrangements with these banks, we must comply with their respective credit policies and underwriting procedures, and the banks maintain ultimate authority to decide whether to issue a card or approve a transaction.
Under our arrangements with our Issuing Banks, we must comply with their respective credit policies and underwriting procedures, and the Issuing Banks maintain ultimate authority to decide whether to issue a card or approve a transaction.
We calculate our net dollar-based retention rate at the end of each fiscal year. We calculate our net dollar-based retention rate by starting with the revenue billed to Bill.com customers in the last quarter of the prior fiscal year (Prior Period Revenue).
We calculate our net dollar-based retention rate at the end of each fiscal year. We calculate our net dollar-based retention rate by starting with the revenue billed to BILL standalone customers in the last quarter of the prior fiscal year (Prior Period Revenue).
In the future, we may attempt to raise additional capital through the sale of equity securities or through equity-linked or debt financing arrangements to fund future operations or obligations, including the repayment of the principal amount of the Notes in the event that the Notes become convertible and the noteholders opt to exercise their right to convert.
In the future, we may attempt to raise additional capital through the sale of equity securities or through equity-linked or debt financing arrangements to fund future operations or obligations, including the repayment of the principal amount of the Notes in the event that the Notes become convertible and the note holders opt to exercise their right to convert.
We believe that our cash, cash equivalents, and available-for sale short-term investments will be sufficient to meet our working capital requirements for at least the next 12 months.
We believe that our cash, cash equivalents, and short-term investments will be sufficient to meet our working capital requirements for at least the next 12 months.
Net cash used in operating activities was $18.1 million during fiscal 2022 compared to a net cash provided of $4.6 million during fiscal 2021. The net cash used during fiscal 2022 was due mainly to the timing of the payments for costs of our services and operating expenses, partially offset by the increase in our revenue.
Net cash used in operating activities decreased to $18.1 million during fiscal 2022 from a net cash provided of $4.6 million during fiscal 2021. The net cash used during fiscal 2022 was due mainly to the timing of the payments for costs of our services and operating expenses, partially offset by the increase in our revenue.
We believe non-GAAP gross profit and non-GAAP gross margin provide our management and investors' consistency and comparability with our past financial performance and facilitate period-to-period comparisons of operations.
We believe non-GAAP gross profit and non-GAAP gross margin provide our management and investors consistency and comparability with our past financial performance and facilitate period-to-period comparisons of operations.
When a spending business completes a purchase transaction, the payment to the merchant is made by the card Issuing Bank. Obligations incurred by the spending business in connection with their purchase transaction are reflected as receivables on the bank’s balance sheet from the Divvy card account for the spending business.
When a spending business completes a purchase transaction, the payment to the supplier is made by the cards' Issuing Bank. Obligations incurred by the spending business in connection with their purchase transaction are reflected as receivables on the Issuing Bank’s balance sheet from the Divvy card account for the spending business.
We define “payback period” as the number of quarters it takes for the cumulative non-GAAP gross profit we earn from Bill.com customers acquired during a given quarter to exceed our total sales and marketing spend in that same quarter, excluding customers acquired through financial institutions and the related sales and marketing spend.
We define “payback period” as the number of quarters it takes for the cumulative non-GAAP (as defined below) gross profit we earn from BILL standalone customers acquired during a given quarter to exceed our total sales and marketing spend in that same quarter, excluding customers acquired through financial institutions and the related sales and marketing spend.
Excluding those customers of our financial institution partners, approximately 86% of customers as of June 30, 2021 were still customers as of June 30, 2022. Net Dollar-Based Retention Rate Net dollar-based retention rate is an important indicator of customer satisfaction and usage of our platform, as well as potential revenue for future periods.
Excluding those customers of our financial institution partners, approximately 86% of BILL standalone customers as of June 30, 2022 were still customers as of June 30, 2023. Net Dollar-Based Retention Rate Net dollar-based retention rate is an important indicator of customer satisfaction and usage of our platform, as well as potential revenue for future periods.
Once approved for a Divvy card, the spending business is provided a credit limit and can use the Divvy software to request virtual cards or physical cards. The majority of cards on our platform are issued by Cross River Bank, an FDIC-insured New Jersey state chartered bank, and WEX Bank, an FDIC-insured Utah state chartered bank.
Once approved for a Divvy card, the spending business is provided a credit limit and can use the Divvy software to request virtual cards or physical cards. 58 The majority of cards on our platform are issued by Cross River Bank, a Federal Deposit Insurance Corporation (FDIC)-insured New Jersey state chartered bank, and WEX Bank, an FDIC-insured Utah state chartered bank.
Our principal commitments to settle our contractual obligations consist of our 2027 Notes, 2025 Notes, and outstanding borrowings from our line of credit as further discussed below. For additional discussion about our senior convertible notes and line of credit borrowings, refer to Note 10 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Our principal commitments to settle our contractual obligations consist of our 2027 Notes, 2025 Notes, and outstanding borrowings from our Revolving Credit Facility as further discussed below. For additional discussion about our Notes and Revolving Credit Facility, refer to Note 10 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Our models use past loss experience to estimate the probability of default and exposure at default by aged balances. We also estimate the likelihood and magnitude of recovery of previously written off card receivables based on historical recovery experience.
Our 73 models use past loss experience to estimate the probability of default and exposure at default by aged balances. We also estimate the likelihood and magnitude of recovery of previously written off ca rd receivables based on historical recovery experience.
We expect our research and development expenses to increase in absolute dollars, but they may fluctuate as a percentage of revenue from period to period as we expand our research and development team to develop new products and product enhancements.
We expect our R&D expenses to increase in absolute dollars, but they may fluctuate as a percentage of revenue from period to period as we expand our R&D team to develop new products and product enhancements.
Customer Rewards We offer a promotion program whereby users of our spend and expense management products can earn rewards based on the volume of their card transactions. Users can redeem those rewards for cash, travel, and gift cards, among other things. We establish a rewards liability that represents management’s estimate of the cost for earned rewards.
Spending Businesses Rewards We offer a promotion program whereby users of our spend and expense management products can earn rewards based on the volume of their card transactions. Users can redeem those rewards for statement credits or cash, travel, and gift cards, among other things. We establish a rewards liability that represents management’s estimate of the cost for earned rewards.
Key Business Metrics We regularly review several metrics, including the metrics presented in the table below, to measure our performance, identify trends affecting our business, prepare financial projections, and make strategic decisions. We periodically review and revise these metrics to reflect changes in our business.
Key Business Metrics We regularly review several metrics, including the key business metrics presented in the table below (as well as the additional metrics described in "Our Business Model "), to measure our performance, identify trends affecting our business, prepare financial projections, and make strategic decisions. We periodically review and revise these metrics to reflect changes in our business.
Service costs increased by $19.5 million during fiscal 2021 compared to fiscal 2020, primarily due to the following: • a $9.2 million increase in direct costs associated with the processing of our customers’ payment transactions, use of software applications and equipment, bank fees for funds held for customers, and data hosting services, which were driven by the increase in the number of customers, increased adoption of new product offerings, and an increase in the volume of transactions; • a $7.5 million increase in personnel-related costs, including stock-based compensation expense and amortization of increased deferred service costs, due to the hiring of additional personnel who were directly engaged in providing implementation and support services to our customers; and • a $2.9 million increase in costs for consultants, temporary contractors, and shared overhead and other costs.
Service costs increased by $45.5 million during fiscal 2023 as compared to fiscal 2022, primarily due to: • a $22.4 million increase in direct costs associated with the processing of our customers’ payment transactions, use of software applications and equipment, bank fees for funds held for customers, and data hosting services, which were driven by the increase in the number of customers, increased adoption of new product offerings, and an increase in the volume of transactions; • a $16.2 million increase in personnel-related costs, including stock-based compensation expense and increased deferred service costs amortization, due to the hiring of additional personnel, who were directly engaged in providing implementation and support services to our customers; and • a $6.9 million increase in costs for consultants, temporary contractors, shared overhead, and other costs.
Our key business metrics track our Bill.com products and exclude Divvy and Invoice2go products. Relevant metrics for Divvy and Invoice2go are set forth in the footnotes to the table. The calculation of the key metrics and other measures discussed below may differ from other similarly-titled metrics used by other companies, securities analysts or investors.
The relevant metrics for each of BILL standalone, Divvy, and Invoice2go, respectively, are set forth in the footnotes to the table. The calculation of the key business metrics and other measures discussed below may differ from other similarly-titled metrics used by other companies, securities analysts, or investors.
Stock-based Compensation Stock-based compensation expense related to stock option awards and purchase rights issued under our Employee Stock Purchase Plan (ESPP) is measured at fair value on the date of grant using the Black-Scholes option-pricing model. Stock-based compensation expense related to market-based RSU awards is measured at fair value on the date of grant using the Monte Carlo simulation model.
Stock-based Compensation Stock-based compensation expense related to stock option awards and purchase rights issued under our ESPP is measured at fair value on the date of grant using the Black-Scholes option-pricing model.
Risk-free interest rate – The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of stock option awards for periods corresponding with the expected term of the option. Expected dividend yield – We have never paid dividends on our common stock and have no plans to pay dividends on our common stock.
Treasury zero coupon issues in effect at the time of stock option awards for periods corresponding with the expected term of the option. Expected dividend yield – We have never paid dividends on our common stock and have no plans to pay dividends on our common stock.
If an organization has multiple entities billed separately for the use of our platform, each entity is counted as a customer. The number of customers in the table above represents the total number of customers at the end of each fiscal year.
If an organization has multiple entities billed separately for the use of our solutions, each entity is counted as a business using our solutions. The number of businesses using our solutions in the table above represents the total number of businesses using our solutions at the end of each fiscal year.
The following table presents a reconciliation of our free cash flow to net cash provided by (used in) operating activities for the periods presented (in thousands) : Year ended June 30, 2022 (1) 2021 (2) 2020 Net cash (used in) provided by operating activities $ (18,093) $ 4,623 $ (4,430) Purchases of property and equipment (5,377) (18,902) (11,437) Capitalization of internal-use software costs (10,259) (2,304) (639) Free cash flow $ (33,729) $ (16,583) $ (16,506) (1) Includes the results of Invoice2go from the acquisition date on September 1, 2021.
The following table presents a reconciliation of our free cash flow to net cash provided by (used in) operating activities for the periods presented (in thousands) : Year ended June 30, 2023 2022 (1) 2021 (2) Net cash provided by (used in) operating activities $ 187,768 $ (18,093) $ 4,623 Purchases of property and equipment (7,589) (5,377) (18,902) Capitalization of internal-use software costs (23,614) (10,259) (2,304) Free cash flow $ 156,565 $ (33,729) $ (16,583) (1) Includes the results of Invoice2go from the acquisition date on September 1, 2021.
Our research and development expenses decreased to 34% as a percentage of revenue during fiscal 2022 from 38% during fiscal 2021, primarily due to a higher revenue growth rate but a relatively lower increase 63 in personnel-related expenses and consulting services as a percentage of revenue during fiscal 2022 compared to fiscal 2021.
Our research and development expenses decreased to 30% as a percentage of revenue during fiscal 2023 from 34% during fiscal 2022, primarily due to a higher revenue growth rate but a relatively lower increase in personnel-related expenses as a percentage of revenue and decrease in consulting costs during fiscal 2023 compared to fiscal 2022.
Our sales and marketing expenses increased to 48% as a percentage of revenue during fiscal 2022 from 29% during fiscal 2021, primarily due to the increase in rewards expense and a higher stock-based compensation expense recognized during fiscal 2022.
Our sales and marketing expenses increased to 49% as a percentage of revenue during fiscal 2023 from 48% during fiscal 2022, primarily due to higher rewards expense and stock-based compensation expense recognized during fiscal 2023.
As of June 30, 2022, our partners included some of the most trusted brands in the financial services business, including 85 of the top 100 accounting firms and six of the top ten largest financial institutions in the U.S., including Bank of America, JPMorgan Chase, Wells Fargo Bank and American Express.
As of June 30, 2023, our partners included some of the most trusted brands in the financial services business, including more than 85 of the top 100 accounting firms and seven of the top ten largest financial institutions for SMBs in the United States (U.S.), including Bank of America, JPMorgan Chase, Wells Fargo Bank, and American Express.
We acquire customers directly through digital marketing and inside sales. We also acquire customers indirectly by partnering with leading companies that are trusted by our current and prospective customers, including accounting firms, financial institutions, and software companies. Our revenue from our existing customers is visible and predicta ble.
We acquire them directly through digital marketing and inside sales and indirectly by partnering with leading companies that are trusted by SMBs, including accounting firms, financial institutions, and software companies. Our revenue from existing businesses using our solutions is visible and predicta ble.
Other than our expected credit loss exposure on the card transactions that have not cleared, we had no other off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures, or capital resources as of June 30, 2022.
Other than our expected credit loss exposure on the card transactions that have not cleared, we had no other off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures, or capital resources as of June 30, 2023. 72 Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with GAAP.
Net Cash Provided by Financing Activities 70 Our cash proceeds from our financing activities consist primarily of proceeds from public offerings of our common stock, issuance of convertible notes, exercises of stock options, and employee purchases of our common stock under our Employee Stock Purchase Plan (ESPP).
Net Cash Provided by Financing Activities Our cash proceeds from our financing activities consist primarily of proceeds from line of credit borrowings, exercises of stock options, increase in prepaid card deposits, employee purchases of our common stock under our Employee Stock Purchase Plan (ESPP) and proceeds from public offerings of our common stock and issuance of convertible notes.
W e are unable to predict the full impact that the COVID-19 pandemic will have on our future results of operations, liquidity and financial condition due to numerous uncertainties, including the duration of the pandemic, the actions that may be taken by government authorities across the U.S. or other countries, the impact to our customers, partners, and suppliers, and other factors described in the section titled “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.
W e are unable to predict the full impact that macroeconomic factors, banking sector dynamics or the ongoing impacts of the COVID-19 pandemic will have on our future results of operations, liquidity, and financial condition due to numerous uncertainties, including the duration of the pandemic, the actions that may be taken by government authorities across the U.S. or other countries, changes in central bank policies and interest rates, rates of inflation, the impact to our customers, spending businesses, subscribers, partners, and suppliers, and other factors described in the section titled “ Risk Factors ” in Part I, Item 1A of this Annual Report on Form 10-K.
We have a total borrowing commitment of $75.0 million from our line of credit and have drawn the maximum amount as of June 30, 2022. Our principal uses of cash are funding our operations and other working capital requirements, including the contractual and other obligations discussed below.
We have a total borrowing commitment of $225.0 million from our Revolving Credit Facility and have drawn $135.0 million as of June 30, 2023. Our principal uses 69 of cash are funding our operations and other working capital requirements, including the contractual and other obligations discussed below.
Other expenses, net – Other expenses, net consist primarily of the lower of cost or market adjustment on card receivables sold and held for sale, and interest expense on our borrowings (including amortization of debt discount and issuance costs in connection with our Notes), partially offset by interest income on our corporate funds.
Other income (expenses), net – Other income (expenses), net consists primarily of interest income on our corporate funds, interest expense on our borrowings (including amortization issuance costs) and the lower of cost or market adjustment on card receivables sold and held for sale.
The following table presents a reconciliation of our non-GAAP gross profit and non-GAAP gross margin to our gross profit and gross margin for the periods presented (amounts in thousands) : Year ended June 30, 2022 (1) 2021 (2) 2020 Revenue $ 641,959 $ 238,265 $ 157,600 Gross profit $ 496,955 $ 176,459 $ 118,456 Add: Depreciation and amortization of intangible assets (3) 39,508 5,230 2,095 Stock-based compensation and related payroll taxes 5,599 3,309 1,296 Non-GAAP gross profit $ 542,062 $ 184,998 $ 121,847 Gross margin 77.4 % 74.1 % 75.2 % Non-GAAP gross margin 84.4 % 77.6 % 77.3 % (1) Includes the results of Invoice2go from the acquisition date on September 1, 2021.
The following table presents a reconciliation of our non-GAAP gross profit and non-GAAP gross margin to our gross profit and gross margin for the periods presented (amounts in thousands) : 68 Year ended June 30, 2023 2022 (1) 2021 (2) Revenue $ 1,058,468 $ 641,959 $ 238,265 Gross profit $ 864,491 $ 496,955 $ 176,459 Add: Depreciation and amortization of intangible assets (3) 42,967 39,508 5,230 Stock-based compensation charged to expenses and related payroll taxes 9,428 5,599 3,309 Non-GAAP gross profit $ 916,886 $ 542,062 $ 184,998 Gross margin 81.7 % 77.4 % 74.1 % Non-GAAP gross margin 86.6 % 84.4 % 77.6 % (1) Includes the results of Invoice2go from the acquisition date on September 1, 2021.
Estimates used in the Monte Carlo simulation model include (i) expected volatility, (ii) risk-free interest rate, and (iii) performance period of the market-based RSU award.: We recognize the compensation costs for stock option awards, purchase rights issued under our ESPP, market-based RSUs over the requisite service period of the awards, which is generally the vesting term, reduced for estimated forfeitures at the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
We recognize the compensation costs for stock option awards, purchase rights issued under our ESPP, and market-based RSUs over the requisite service period of the awards, which is generally the vesting term, reduced for estimated forfeitures at the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
In estimating expected credit losses, we use models that entail a significant amount of judgment. The primary areas of judgment used in measuring the quantitative components of our reserves relate to the attributes used to segment the portfolio, the determination of the historical loss experience look-back period, and the weighting of historical loss experience by monthly cohort.
The primary areas of judgment used in measuring the quantitative components of our reserves relate to the attributes used to segment the portfolio, the determination of the historical loss experience look-back period, and the weighting of historical loss experience by monthly cohort.
Research and Development Expenses Research and development expenses increased by $130.3 million during fiscal 2022 as compared to fiscal 2021, primarily due to the following: • a $111.3 million increase in personnel-related costs, including stock-based compensation expense, resulting from the hiring of additional personnel and added headcount from our acquisitions of Divvy and Invoice2Go, who were directly engaged in developing new product offerings; • a $13.2 million increase in costs for engaging consultants and temporary contractors who provided product development services, and increase in computer-related expenses and software costs; and • a $5.8 million increase in shared overhead and other costs.
Research and Development Expenses Research and development expenses increased by $94.8 million during fiscal 2023 as compared to fiscal 2022, primarily due to the following: • a $95.4 million increase in personnel-related costs, including stock-based compensation expense, resulting from the hiring of additional personnel and added headcount from our acquisition of Invoice2Go, who were directly engaged in developing new product offerings; • a $5.8 million increase in computer-related expenses and software costs and increase in shared overhead and other costs; and partially offset by 66 • a $6.4 million decrease in costs for engaging consultants and temporary contractors who provided product development services, which have now been replaced by full-time employees.
(2) Includes the results of Divvy from the acquisition date on June 1, 2021. 68 Liquidity and Capital Resources As of June 30, 2022 , our principal sources of liquidity were our cash and cash equivalents of $1.6 billion, our available-for-sale short-term investments of $1.1 billion, and our lines of credit, of which we borrowed the maximum amount of $75.0 million.
(2) Includes the results of Divvy from the acquisition date on June 1, 2021. Liquidity and Capital Resources As of June 30, 2023 , our principal sources of liquidity were our cash and cash equivalents of $1.6 billion, our available-for-sale short-term investments of $1.0 billion, and our available undrawn Revolving Credit Facility (as defined below) of $90.0 million.
Subscription revenue increased by $81.9 million, or 73%, during fiscal 2022 as compared to fiscal 2021, primarily due to the increase in customers and average subscription revenue per customer due to an increase in the number of users.
Revenue Revenue consisted mainly of subscription and transactions fees. Subscription revenue increased by $59.8 million, or 31%, during fiscal 2023 as compared to fiscal 2022, primarily due to the increase in customers and average subscription revenue per customer due to an increase in the number of users.
For fiscal 2022, over 82% of our subscription and transaction revenue from Bill.com customers came from customers who were acquired prior to the start of the fiscal year. See " -- Key Business Metrics — Number of Customers " below for the definition of customer.
For fiscal 2023, over 87% of ou r subscription and transaction revenue from BILL standalone customers came from customers who were acquired prior to the start of the fiscal year. See "— Key Business Metrics—Businesses Using Our Solutions " below for the definition of BILL standalone customers .
We define TPV as the value of Bill.com customer transactions that we process on our platform during a particular period. Our calculation of TPV includes payments that are subsequently reversed. Such payments comprised of less than 2% of TPV during fiscal 2022, 2021, and 2020.
We define TPV as the total value of transactions that we process on our platform during a particular period, including transactions from BILL standalone customers, Divvy card transactions, and transactions executed by Invoice2go subscribers. Our calculation of TPV includes payments that are subsequently reversed. Such payments comprised less than 2% of TPV during each of fiscal 2023, 2022, and 2021.
Our net cash provided by financing activities increased to $2.9 billion during fiscal 2022 from $1.6 billion during fiscal 2021 due primarily to the proceeds from the public offering of our common stock and increase in customer funds liability.
Our net cash provided by financing activities increased to $2.9 billion during fiscal 2022 from $1.6 billion during fiscal 2021 due primarily to the proceeds from the public offering of our common stock and increase in customer funds liability. 71 2027 Notes On September 24, 2021, we issued $575.0 million in aggregate principal amount of our 0% convertible senior notes due on April 1, 2027.
As a result, we expect that our general and administrative expenses will increase in absolute dollars but may fluctuate as a percentage of revenue from period to period. Depreciation and amortization of intangible assets - Depreciation and amortization of intangible assets expenses consist of depreciation of property and equipment, and amortization of developed technology, customer relationship, and trade names.
As a result, we expect that our general and administrative expenses will increase in absolute dollars but may fluctuate as a percentage of revenue from period to period.
Our cash usage for our investing activities consists primarily of purchases of corporate and customer fund available for-sale investments, business acquisitions, capitalization of internal-use software, and purchases of property and equipment. Additionally, the increase or decrease in our net cash from investing activities is impacted by the net change in acquired participation interests in card receivable balances.
Our cash proceeds from our investing activities consist primarily of proceeds from the maturities and sale of corporate and customer fund available-for-sale investments. Additionally, the increase or decrease in our net cash from investing activities is impacted by the net change in acquired card receivable balances.
We then calculate the revenue billed to these same customers in the last quarter of the current fiscal year (Current Period Revenue), excluding interest earned on customer funds held in trust. See " Key Business Metrics — Number of Customers " below for the definition of customer.
We then calculate the revenue billed to these same customers in the last quarter of the current fiscal year (Current Period Revenue). See "— Key Business Metrics—Businesses Using Our Solutions " below for the definition of BILL standalone customer.
See " -- Key Business Metrics — Number of Customers " below for the definition of customer . For customers acquired during fiscal 2021, the average payback period was approximately four quarters.
See "— Key Business Metrics—Businesses Using Our Solutions " below for the definition of BILL standalone customer . For BILL standalone customers acquired during fiscal 2022, the average payback period was approximately five quarters.
Our transaction revenue is comprised of transaction fees on a fixed or variable rate per type of transaction. Our primary uses of cash in our operating activities include payments for employee salary and related costs, payments to third parties to fulfill our payment transactions, payments to sales and marketing partners, payments for card rewards expenses, and other general corporate expenditures.
Our primary uses of cash in our operating activities include payments for employees' salaries and related costs, payments to third parties to fulfill our payment transactions, payments to sales and marketing partners, payments for card rewards expenses, and other general corporate expenditures.
(2) Includes the results of Divvy from the acquisition date on June 1, 2021. (3) Consists of depreciation of property and equipment and amortization of developed technology, excluding amortization of capitalized internal-use software costs.
(2) Includes the results of Divvy from the acquisition date on June 1, 2021. (3) Depreciation expense does not include amortization of capitalized internal-use software wage costs.
We charge our SMB and accounting firm customers subscription fees to access our platform either based on the number of users or per customer account and the level of service. We generally also charge these customers transaction fees based on transaction volume and the category of transaction.
These contracts are either monthly contracts paid in arrears or upfront, or annual arrangements paid up front. We charge our SMB and accounting firm customers subscription fees to access our platform either based on the number of users or per customer account and the level of service.
The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the stock-based awards. Expected volatility – represents the historical volatility of our common stock.
The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the stock-based awards. Expected volatility – The expected volatility was estimated based on the historical volatility of the Company’s common stock. Risk-free interest rate – The risk-free interest rate is based on the U.S.
We typically fund some portion of these participation interest purchases by borrowing under our credit facilities, although we may also fund purchases using corporate cash.
We typically fund some portion of these participation interest purchases by borrowing under our credit facilities, although we may also fund purchases using corporate cash. Our Business Model We efficiently reach SMBs through our proven direct and indirect go-to-market strategies.
We have off-balance sheet credit exposures with these authorized but not cleared transactions; however, our expected credit losses with respect to these transactions was not material as of June 30, 2022.
The transactions that have been authorized but not cleared totaled $68.6 million as of June 30, 2023 and have not been recorded on our consolidated balance sheets. We have off-balance sheet credit exposures with these authorized but not cleared transactions; however, our expected credit losses with respect to these transactions were not material as of June 30, 2023.
Our cash equivalents are comprised primarily of money market funds and investments in debt securities with original maturities of three months or less at the time of purchase. Our short-term investments are comprised primarily of available-for-sale investments in corporate bonds, certificates of deposit, asset-backed securities, municipal bonds, and U.S. treasury securities with original maturities of more than three months.
Our cash equivalents are comprised primarily of money market funds and investments in debt securities with original maturities of three months or less at the time of purchase.
Subscription fees are generally charged either on a per user or per customer account per period basis, normally monthly or annually. Transaction fees are fees collected for each transaction processed, on either a fixed or variable fee basis. Transaction fees primarily include processing of payments in the form of checks, ACH, cross-border payments, and the creation of invoices.
Subscription fees are fixed monthly or annually and charged to customers for the use of our platform to process transactions. Subscription fees are generally charged either on a per user or per customer account per period basis, normally monthly or annually. Transaction fees are fees collected for each transaction processed, on either a fixed or variable fee basis.
The more they use the product and rely upon our features to automate their operations, the more transactions they process on our platform. This metric provides an important indication of the value of transactions that customers are completing on the platform and is an indicator of our ability to generate revenue from our customers.
This metric provides an important indication of the aggregate value of transactions that businesses using our solutions are completing on our platform and is an indicator of our ability to generate revenue from businesses using our solutions.
General and Administrative Expenses General and administrative expenses increased by $113.1 million during fiscal 2022 as compared to fiscal 2021, primarily due to the following: • a $73.9 million increase in personnel-related costs, including stock-based compensation expense, resulting from the hiring of additional general and administrative personnel, and added headcount from our acquisitions of Divvy and Invoice2go; • a $24.3 million increase in provision for card and fraud losses mainly due to recording a full-year of credit card and fraud losses from card receivables related to our spending businesses that used Divvy cards during fiscal 2022, compared to one month of losses recorded during fiscal 2021; and • a $14.9 million increase in software subscription and computer-related expenses, temporary contractors, shared overhead and other costs.
General and Administrative Expenses General and administrative expenses increased by $40.1 million during fiscal 2023 as compared to fiscal 2022, primarily due to the following: • a $30.7 million increase in personnel-related expense, including stock-based compensation expense, resulting from the hiring of additional general and administrative personnel; • a $15.2 million increase in provision for expected credit losses and fraud losses mainly due to increase in acquired card receivables during the year; • a $3.7 million increase in software subscription and computer-related expenses, temporary contractors, shared overhead and other costs; and partially offset by • a $9.6 million decrease in professional and consulting fees, primarily resulting from the reduction of integration costs of acquired businesses.
Transaction fees also include interchange fees paid by suppliers accepting card payments. Our contracts with SMB and accounting firm customers provide them with access to the functionality of our cloud-based payments platform to process transactions. These contracts are either monthly contracts paid in arrears or upfront, or annual arrangements paid up front.
Transaction fees primarily include processing of payments in the form of checks, ACH, card payments, real-time payments, and cross-border payments, and the creation of invoices. Transaction fees also include interchange fees paid by suppliers accepting card payments. Our contracts with SMB and accounting firm customers provide them with access to the functionality of our cloud-based payments platform to process transactions.
Additionally, the increase or decrease in our net cash from financing activities is impacted by the change in customer fund deposits liability.
Our cash usage for our financing activities consists primarily of repurchases of shares, and payments on line of credit and bank borrowings. Additionally, the increase or decrease in our net cash from financing activities is impacted by the change in customer fund deposits liability.
For such arrangements, we allocate revenue to each performance obligation based on its relative standalone selling price. 72 Business Combinations We account for acquisitions using the acquisition method of accounting, which requires assigning the fair value of purchase consideration to the assets acquired and liabilities assumed by the acquiree at the acquisition date.
The attribution method used involves judgment and impacts the timing of revenue recognition. Business Combinations We account for acquisitions using the acquisition method of accounting, which requires assigning the fair value of purchase consideration to the assets acquired and liabilities assumed by the acquiree at the acquisition date.
For additional discussion about our operating leases and other commitments, refer to Note 15 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 69 Cash Flows Below is a summary of our consolidated cash flows for the periods presented (in thousands): Year ended June 30, 2022 (1) 2021 (2) 2020 Net cash provided by (used in): Operating activities $ (18,093) $ 4,623 $ (4,430) Investing activities (1,127,302) (1,426,890) (249,487) Financing activities 2,878,566 1,639,583 863,126 (1) Includes the results of Invoice2go from the acquisition date on September 1, 2021.
Cash Flows Below is a summary of our consolidated cash flows for the periods presented (in thousands): Year ended June 30, 2023 2022 (1) 2021 (2) Net cash provided by (used in): Operating activities $ 187,768 $ (18,093) $ 4,623 Investing activities $ 259,285 $ (1,127,302) $ (1,426,890) Financing activities $ 235,110 $ 2,878,566 $ 1,639,583 70 (1) Includes the results of Invoice2go from the acquisition date on September 1, 2021.
Our net cash used in investing activities increased to $1.4 billion during fiscal 2021 from $249.5 million during fiscal 2020 due primarily to the increase in purchases of corporate and customer fund short-term investments, payment made to acquire Divvy, increase in acquired participation interests in card receivables, and increase in purchases of property and equipment; partially offset by the increase in proceeds from the maturities and sale of corporate and customer short-term investments.
Our net cash provided by investing activities was $259.3 million during fiscal 2023 compared to net cash used of $1.1 billion during fiscal 2022 due primarily to the increase in proceeds from maturities of corporate and customer short-term investments, partially offset by the increase in acquired card receivables.
Gross margin increased to 77% during fiscal 2022 from 74% during fiscal 2021, primarily due to a higher mix of variable-priced transaction revenue.
Gross margin increased to 82% during fiscal 2023 from 77% during fiscal 2022, primarily due to the increase in interest on funds held for customers and a higher mix of variable-priced transaction revenue.
Transaction fee revenue increased by $319.2 million, or 265%, during fiscal 2022 as compared to fiscal 2021, primarily due to increased adoption of new product offerings and the mix of transaction revenues shifting to variable-priced products.
Transaction fee 65 revenue increased by $251.5 million, or 57%, during fiscal 2023 as compared to fiscal 2022, primarily due to increased total payment volume and the mix of transaction revenue shifting to variable-priced products.
In addition, during fiscal 2021 we partially reversed the deferred tax liability established in connection with our issuance of the 2025 Notes. Non-GAAP Financial Measures To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance.
Non-GAAP Financial Measures To supplement our consolidated financial statements, which are prepared and presented in accordance with U.S. generally accepted accounting principles (GAAP), we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance.
We recognize compensation costs for performance-based awards over the vesting period if it is probable that the performance condition will be achieved. 74 Recent Accounting Pronouncements See Note 1 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of June 30, 2022.
Recent Accounting Pronouncements See “The Company and its Significant Accounting Policies” Note 1 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of June 30, 2023. 74
We efficiently reach SMBs through our proven direct and indirect go-to-market strategies. We acquire customers directly through digital marketing and inside sales, and indirectly through accounting firms and financial institution partnerships.
We acquire new businesses to use our solutions directly through digital marketing and inside sales, and indirectly through accounting firms and financial institution partnerships.
Sales and Marketing Expenses Sales and marketing expenses increased by $22.9 million, primarily due to the following: • an $11.4 million increase in personnel-related costs, including stock-based compensation expense, due to the hiring of additional personnel, who were directly engaged in acquiring new customers and in marketing our products and services, and the acquisition of Divvy; • a $5.2 million increase in advertising spend and various marketing initiatives and activities, such as engaging consultants and attending marketing events, as we increased our effort in promoting our products and services and in increasing brand awareness; • a $4.5 million increase in rewards expense in connection with our rewards programs, whereby spending businesses earn rewards when they spend using cards issued to them; and • a $1.8 million increase in shared overhead and other costs.
Sales and Marketing Expenses Sales and marketing expenses increased by $208.7 million during fiscal 2023 as compared to fiscal 2022, primarily due to the following: • a $106.3 million increase in personnel-related costs, including stock-based compensation expense of $52.2 million recognized during the year related to the separation and advisory agreements with our former Chief Revenue Officer, and due to the hiring of additional personnel, who were directly engaged in acquiring new customers and in marketing our products and services; • a $78.7 million increase in rewards expense in connection with the rewards program through our Divvy cards as a result of increased transaction volume and higher rewards rates; • a $21.1 million increase in advertising spend and various marketing initiatives and activities, such as engaging consultants and attending marketing events, as we increased our efforts in promoting our products and services and in increasing brand awareness; and • a $2.6 million increase in software subscription and computer-related expenses, shared overhead, and other costs.
Customer Acquisition Efficiency Our efficient direct and indirect go-to-market strategy, combined with our recurring revenue model, results in our short payback period.
The increase in fiscal 2022 was primarily attributable to increase in the number of users, more transactions per customer, and sales of additional products to those customers. 59 Customer Acquisition Efficiency Our efficient direct and indirect go-to-market strategy, combined with our recurring revenue model, results in our short payback period.
We establish an allowance for credit losses based on an estimate of uncollectible balances resulting from credit losses and such allowance could fluctuate depending on certain factors. An estimate of lifetime expected credit losses is performed by incorporating historical loss experience, as well as current and future economic conditions over a reasonable and supportable period beyond the balance sheet date.
An estimate of lifetime expected credit losses is performed by incorporating historical loss experience, as well as current and future economic conditions over a reas onable and supportable period beyond the balance sheet date. In estimating expected credit losses, we use models that entail a significant amount of judgment.
We facilitate the extension of credit to spending businesses through our Divvy product in the form of Divvy cards, which are originated through our agreements with our Issuing Banks. The agreements with the Issuing Banks allow for card transactions on the Mastercard and Visa networks.
The spending businesses utilize the credit on Divvy cards as a means of payment for goods and services provided by their suppliers. Virtual card payments and Divvy cards are originated through agreements with our Issuing Banks. Our agreements with the Issuing Banks allow for card transactions on the Mastercard and Visa networks.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeInflation Risk We do not believe that inflation had a material effect on our cash flows and operating results during fiscal 2022. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through increase in prices of our product offerings. 77
Biggest changeIf our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through increase in prices of our product offerings. The Inflation Reduction Act was enacted on August 16, 2022 and includes a number of provisions that may impact us in the future.
Unrealized gains or losses on our marketable debt securities are due primarily to interest rate fluctuations from the time the securities were purchased. We account for both fixed and variable rate securities at fair value with unrealized gains and losses recorded in accumulated other comprehensive income since we classify our marketable debt securities as available for sale.
Unrealized gains or losses on our marketable debt securities are due primarily to interest rate fluctuations from the time the securities were purchased. We account for both fixed and variable rate securities at fair value with unrealized gains and losses recorded in accumulated other comprehensive income (loss) since we classify our marketable debt securities as available for sale.
We limit credit risk by investing in investment-grade securities as rated by Moody’s, Standard & Poor’s, or Fitch, by investing only in securities that mature in the near-term, and by limiting concentration in securities other than U.S. Treasuries. Investment in securities of issuers with short-term credit ratings must be rated A-2/P-2/F2 or higher.
We limit credit risk by investing in investment-grade 75 securities as rated by Moody’s, Standard & Poor’s, or Fitch, by investing only in securities that mature in the near-term, and by limiting concentration in securities other than U.S. Treasuries. Investment in securities of issuers with short-term credit ratings must be rated A-2/P-2/F2 or higher.
Our investments in marketable debt securities are generally held through maturity with minimal sales before maturity barring unforeseen circumstances, and thus unrealized gains or losses on fixed-income securities from market interest rate decreases or increases are not realized as the securities mature at par. We are also exposed to interest-rate risk relating to borrowings from our line of credit.
Our investments in marketable debt securities are generally held through maturity with minimal sales before maturity barring unforeseen circumstances, and thus unrealized gains or losses on fixed-income securities from market interest rate decreases or increases are not realized as the securities mature at par. We are also exposed to interest-rate risk relating to borrowings from our Revolving Credit Facility.
Our transaction fees to our customers are not adjusted for changes in foreign exchange rates between the initiation date of the transaction and the date the funds are converted. We are also exposed to foreign currency exchange risk relating to the operations of our subsidiary in Australia.
Our transaction fees to our customers are not adjusted for changes in foreign exchange rates between the initiation date of the transaction and the date the funds are converted. We are also exposed to foreign currency exchange risk relating to the operations of our subsidiaries in Australia and Canada.
Any material increases in delinquencies and losses beyond our current estimates could have a material adverse impact on us. Although we make estimates to provide for credit losses in our outstanding portfolio of card receivables, these estimates may not be accurate.
Any material increases in delinquencies and losses beyond our current estimates could have a material adverse impact on us. Although we make estimates to provide for credit losses in our outstanding portfolio of card receivables, these estimates may differ from actual losses.
The annualized interest rate earned on our corporate investment portfolio and funds held for customers slightly increased to 0.29% during fiscal 2022 compared to 0.27% during fiscal 2021 due primarily to the changes in the short-term interest rate environment during fiscal 2022.
The annualized interest rate earned on our corporate investment portfolio and funds held for customers increased to 3.51% during fiscal 2023 compared to 0.29% during fiscal 2022 due primarily to the changes in the short-term interest rate environment during fiscal 2023.
A change in foreign currency exchange rate, particularly the Australian dollar, can affect our financial results due to transaction gains or losses related to the remeasurement of certain monetary asset and monetary 76 liability balances that are denominated in currencies other than the functional currency of our Australian subsidiary, which is U.S. dollars.
A change in foreign currency exchange rate can affect our financial results due to transaction gains or losses related to the remeasurement of certain monetary asset and monetary liability balances that are denominated in currencies other than the functional currency of our Australian and Canadian subsidiaries, which are both in U.S. dollars.
If the value of the U.S. dollar weakens relative to the foreign currencies, this may have an unfavorable effect on our cash flows and operating results. We do not believe that a 10% change in the relative value of the U.S. dollar to other foreign currencies would have a material effect on our cash flows and operating results.
We do not believe that a 10% change in the relative value of the U.S. dollar to other foreign currencies would have a material effect on our cash flows and operating results. 76 Inflation Risk We do not believe that inflation had a material effect on our cash flows and operating results during fiscal 2023.
These assets are available for corporate operating purposes and mature within 24 months from the date of purchase. Our customer funds assets are invested with safety of principal, liquidity, and diversification as the primary objectives. As a secondary objective, we seek to maximize interest income.
Our customer funds assets are invested with safety of principal as the primary objective. As secondary objectives, we seek to provide liquidity and diversification and maximize interest income.
As of June 30, 2022, we borrowed the maximum commitment amount of $75.0 million from our line of credit. Because the interest rate on our borrowings is indexed to LIBOR, which is a floating rate mechanism, our interest cost may increase if market interest rates rise.
As of June 30, 2023, we borrowed $135.0 million from our Revolving Credit Facility. Because the interest rate on our borrowings is indexed to SOFR, which is a floating rate mechanism, our interest cost may increase if market interest rates rise. A hypothetical 1% increase or decrease in interest rates would not have a material effect on our financial results.
For example, a change in regulations that restricts the permissible investment alternatives for customer funds would reduce our interest earned revenue. We are exposed to credit risk in connection with our investments in securities through the possible inability of the borrowers to meet the terms of the securities.
We are exposed to credit risk in connection with our investments in securities through the possible inability of the borrowers to meet the terms of the securities.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Our overall investment portfolio is comprised of corporate investments and customer fund assets that have been collected from customers, but not yet remitted to the applicable supplier or deposited into our customers’ accounts. Our corporate investments are invested in cash and cash equivalents and highly liquid, investment-grade fixed income marketable securities.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Our overall investment portfolio is comprised of corporate investments and funds held for customers. Our corporate investments are invested in cash and cash equivalents and investment-grade fixed income marketable securities. These assets are available for corporate operating purposes and mature within 24 months from the date of purchase.
A hypothetical 100 basis point increase or decrease in interest rates would not have a material effect on our financial results. 75 In addition to interest rate risks, we also have exposure to risks associated with changes in laws and regulations that may affect customer fund balances.
In addition to interest rate risks, we also have exposure to risks associated with changes in laws and regulations that may affect customer fund balances. For example, a change in regulations that restricts the permissible investment alternatives for customer funds would reduce our interest earned revenue.
Added
If the value of the U.S. dollar weakens relative to the foreign currencies, this may have an unfavorable effect on our cash flows and operating results.
Added
We have assessed these impacts for the current reporting period, and conclude that the new law does not have a material impact on our fiscal 2023 financial statements. 77

Other BILL 10-K year-over-year comparisons