Summary of BILL Holdings (BILL) FY Conference Call - September 12, 2024 Company Overview - **Company**: BILL Holdings (BILL) - **Industry**: Payments Fintech Key Points and Arguments Economic Environment and Business Adaptation - The company has navigated significant changes in the economy over the past year, leading to lower B2B spending among small businesses [4][10] - BILL has launched product integrations and revised branding to adapt to cost sensitivity among suppliers, resulting in improved net additions in the second half of fiscal 2024 [4][5] - Confidence in future execution is supported by strong demand, a proven value proposition, and visibility into product volumes [6] Payment Volume Trends - Total Payment Volume (TPV) per customer has remained relatively flat, with expectations for mid-single-digit growth in a stable economy [8][9] - The company anticipates slightly higher growth than mid-single digits due to its strong market position and wallet share [9][12] - Small and medium-sized businesses (SMBs) are currently cautious due to high interest rates and labor costs, impacting their B2B spending [10][11] Product and Service Enhancements - BILL is focusing on acquiring larger businesses and expanding wallet share through products like international payments [12] - The company is working on automating payment processes to reduce costs for suppliers, which is seen as a key value proposition [23][30] - There is an ongoing effort to enhance the payment experience for suppliers, including the introduction of various payment methods [24][32] Financial Institution (FI) Channel - The transaction yield in the FI channel is currently low, primarily due to a skew towards lower-margin ACH and check payments [54][55] - The company is optimistic about expanding monetization in the FI channel as it introduces higher-yield products [55] Subscription and ARPU Trends - Subscription Average Revenue Per User (ARPU) growth has slowed due to an influx of smaller customers at lower price tiers [62][64] - The company plans to evolve its platform to include more modular pricing, which could enhance subscription ARPU over time [66] Cross-Sell Opportunities - There is strong interest from accounting firms in BILL's spend and expense management products, with efforts underway to enhance integration and user experience [70] Gross Margins and Payment Mix - Non-GAAP gross margins have declined, primarily due to a shift in payment mix towards lower-margin products like pay by card [71][74] - The company is migrating some AR volume to a new service provider, which will impact gross revenue recognition and margins [74] Future Outlook - The management expresses confidence in the long-term growth potential of the company, citing a significant market opportunity and a leadership position in the evolving payments landscape [79][80] - The company is focused on building a generational business with substantial room for growth in both payment and subscription monetization [80] Additional Important Insights - The company is exploring incentive plans to drive virtual card adoption among customers [75] - There is a recognition that suppliers may benefit from different bin rates, although this has not been widely implemented yet [77] - The management emphasizes the importance of understanding supplier needs and reducing process friction to enhance value [31][32] This summary encapsulates the key insights and strategic directions discussed during the conference call, highlighting the company's adaptability, growth potential, and focus on enhancing supplier and customer experiences.

Financial Data and Key Metrics Changes - The company's revenue decreased by 23.5% from RMB2.1 billion in H1 2023 to RMB1.6 billion in H1 2024 due to macroeconomic volatility impacting payment GPV [24] - Gross profit decreased to RMB300 million, but the overall gross profit margin increased from 17.7% in H1 2023 to 19% in H1 2024, attributed to a higher proportion of non-payment revenue [25][26] - Net profit in H1 2024 was RMB32.6 million, exceeding three times the annual net profit of RMB10.1 billion in 2023 [27] Business Line Data and Key Metrics Changes - Revenue from merchant solutions grew by 21.2% year on year in H1 2024, with gross profit margin increasing to 90.9% [15][26] - In-store e-commerce services saw gross profit margin rise from 76.9% in H1 2023 to 81.5% in H1 2024 [26] - The contribution ratio of non-payment business revenue to overall revenue increased from 11% in H1 2023 to 14.6% in H1 2024 [25] Market Data and Key Metrics Changes - GPV in Singapore grew over 50% year on year, indicating strong overseas market performance [13][37] - The company maintained peak daily transaction counts at nearly 60 million, demonstrating robust transaction activity [11][33] Company Strategy and Development Direction - The company aims to be a comprehensive commerce enablement services provider, expanding beyond payments into other business lines and international markets [4][5] - Focus on higher quality and more profitable customers, with a strategic shift towards serving large and mid-sized merchants [12][36] - Continued integration of AI for revenue generation and cost optimization, enhancing service offerings and operational efficiency [21][22] Management's Comments on Operating Environment and Future Outlook - Management noted that macroeconomic conditions in China have impacted consumption patterns, leading to a decrease in average transaction value [32] - The company remains confident in its market share and pricing power, with expectations for improved profitability in the second half of 2024 [33][36] - Regulatory changes are viewed positively, providing a healthier environment for capable service providers [51] Other Important Information - The company has been recognized for its ESG efforts, ranking first in its industry in China according to S&P Global's 2024 sustainability yearbook [8] - The company has reduced sales and administrative expenses by over 10% year on year, contributing to improved profitability [22] Q&A Session Summary Question: Impact of the microenvironment on payment business - Management acknowledged that macroeconomic volatility has affected consumption patterns, leading to a decrease in average transaction value, but transaction counts and fee rates remain stable [32][33] Question: Future strategy on loan book services - The company is focusing on higher quality and more profitable customers, phasing out less profitable ones, and increasing upfront fees to enhance project profitability [36] Question: Latest update on overseas business - Significant progress in overseas markets, with GPV in Singapore growing over 50% year on year and expansion of product offerings to meet local demands [37][39] Question: Fee rate trend and competition landscape - Fee rates are expected to remain stable in the low teens, with a competitive landscape favoring service providers offering comprehensive solutions [44][45] Question: Trend of regulation and impact on offline post payment business - Regulations are seen as beneficial for the industry, providing a healthier environment for capable service providers [51] Question: Midterm strategy for overseas payment business - The strategy focuses on leveraging existing products and experience in new regions, providing comprehensive services beyond just payment solutions [54] Question: Revenue and GMV contribution from overseas - The company is deriving revenue from various countries and sees significant growth opportunities in developed markets [60] Question: Employee reduction and operating costs - Employee reductions are largely due to AI implementation, which has improved customer service efficiency and reduced the need for manual labor [61][62]

Financial Data and Key Metrics Changes - Total revenue reached RMB 400 million in 2022, an increase of 11.8% year on year from RMB 359 million in 2021 [22] - Gross profit increased by 26.6% year on year to RMB 1.3 billion in 2022, with gross profit margin expanding from 26.6% to 30.2% [22][23] - Adjusted EBITDA rose 73% year on year to RMB 230 million in 2022, with significant half-on-half growth of 106% in the second half [24] Business Line Data and Key Metrics Changes - Payment business GPV grew over 5% year on year to RMB 2.2 trillion, with app-based GPV increasing by 21% year on year [14][16] - In-store e-commerce GMV increased more than seven times to RMB 3.3 billion, with revenue rising 139% to over RMB 1 billion [17] - Merchant solutions gross profit margin improved from 57% in the first half to 75% in the second half of 2022 [19] Market Data and Key Metrics Changes - Active payment merchants increased to 8.1 million, with daily transactions exceeding 50 million [13] - The company maintained a leading position in the QR code payment industry, capturing over 30% market share [56] - The total GPV in January and February 2023 grew by 34.1% year on year, indicating a strong recovery in offline consumption [16] Company Strategy and Development Direction - The company aims to create value for merchants and expand its ecosystem by leveraging partnerships with local media platforms like Douyin and Kuaishou [10][20] - A focus on profitability and operational efficiency is emphasized, particularly in the in-store e-commerce segment [19] - The company is exploring overseas markets and has obtained payment licenses in Singapore, Hong Kong, and the US [16][98] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of offline consumption and provided a full-year GPV guidance of RMB 2.7 trillion to RMB 2.9 trillion for 2023 [29] - The competitive landscape is evolving, with a focus on maintaining market share and profitability amidst increasing competition [96] - The company is optimistic about achieving breakeven in the in-store e-commerce business soon [67] Other Important Information - The company has developed over 10 functions based on AI-generated content (AIGC) to enhance operational efficiency [45] - ESG ratings were highlighted, with the company scoring an industry-leading 48 on the S&P Global ESG ratings [20] Q&A Session Summary Question: Can management share more about the offline consumption recovery trend? - Management noted significant recovery in Tier 1 cities, particularly in retail and restaurant sectors, with similar trends observed in March [28] Question: What is management's view on the competition landscape in the Douyin ecosystem? - Management acknowledged the complexity of the competitive landscape and emphasized a dual model strategy to address different city tiers [32][36] Question: Can management provide insights on the applications of AIGC in the merchant solutions business? - Management detailed three applications of AIGC, including content creation for marketing and customer service automation [48][50] Question: What are the growth drivers for payment GPV in 2023? - Management identified joint merchant acquiring services with banks and partnerships with SaaS providers as key growth drivers [80] Question: How does management view the competition between Douyin and Meituan? - Management believes the competition will not negatively impact their business model due to the different approaches of the platforms [84] Question: What is the outlook for the in-store e-commerce gross margin? - Management explained that gross margin improvements were driven by accounting policy changes and increased scale [90][92]