Bill.com Holdings, Inc. (NYSE:BILL) Q4 2023 Earnings Call Transcript

Bill.com Holdings, Inc. (NYSE:BILL) Q4 2023 Earnings Call Transcript August 17, 2023

Bill.com Holdings, Inc. beats earnings expectations. Reported EPS is $0.59, expectations were $0.41.

Operator: Good afternoon. Thank you for attending the BILL’s Fiscal Fourth Quarter 2023 Earnings Conference Call. My name is Sierra, and I’ll be your moderator for today’s call. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. I would now like to pass the conference over to Karen Sansot, Vice President of Investor Relations at BILL. Please go ahead.

Karen Sansot: Thank you, operator. Welcome to BILL’s fiscal fourth quarter and full fiscal year 2023 earnings conference call. We issued our earnings press release, a short time ago and furnished the related Form 8-K to the SEC. The press release can be found on the Investor Relations section of our website at investor.bill.com. With me on the call today are Rene Lacerte, Chairman, CEO, and Founder of BILL; and John Rettig, Executive Vice President and CFO. Before we begin, please remember that during the course of this call, we may make forward-looking statements about the future operations and results of BILL that involve many assumptions, risks, and uncertainties. If any of these risks or uncertainties develop or if any of the assumptions prove incorrect, actual results could differ materially from those expressed or implied by our forward-looking statements.

For additional discussion, please refer to the text in the Company’s press release issued today and to our periodic reports filed with the SEC, including our most recent annual report on Form 10-K and quarterly reports on Form 10-Q. We disclaim any obligation to update any forward-looking statements. On today’s call, we will refer to both GAAP and non-GAAP financial measures. Please refer to today’s press release for the reconciliation of GAAP to non-GAAP financial performance and additional disclosures regarding these measures. At times, during this call, we will discuss BILL’s standalone results which exclude our Divvy spend and expense management, Invoice2go accounts receivable, and Finmark financial planning solutions. Now, I will turn the call over to Rene.

Rene?

Rene Lacerte: Thank you, Karen. Good afternoon, everyone. Thank you for joining us today. Before diving into our business results, I would like to share my thoughts on the awful disaster in Maui. I was in Maui just one mile north of the fires in Lahaina when it happened. During the fires, it was scary on so many levels, mostly because of the lack of communication that played all of West Maui. Waking up Wednesday to hear the stories of destruction was devastating. Talking to the Hawaiians who knew they had lost all of their possessions and were unsure they had lost their friends or even worse family members was overwhelming. And then leaving on Thursday and driving through the war zone not just seeing the scorched earth but smelling it.

It is something I will never forget nor should any of us. Well, Lahaina is at the heart of the beautiful people of Hawaii. All of the Lahaina artifacts to remind us of the heritage have been lost, but what not to be lost is a strong sense of community, the Aloha spirit that makes Hawaii so special. Now is the time if you have ever felt the Aloha spirit of love, compassion and respect to give back. The Hawaiian people need to know that their Aloha spirit is going to come back to them when they need it most. Our hearts go out to the Hawaiians in the Lahaina community. We stand ready to assist our customers and all small businesses affected by these fires. Many of us at BILL will be giving to Maui strong. Please give from your heart and let the healing begin.

Thank you for your consideration. Now onto our business results. Fiscal 2023 was a defining year for BILL. The strength of our business model and talent of our team are on full display, as we delivered our commitments to hundreds of thousands of businesses during a year filled with macro challenges and banking turmoil. We delivered more than $1 billion in revenue and 65% year-over-year revenue growth while achieving our first year of non-GAAP profitability. Strong demand for our platform combined with our disciplined investment approach, and rigorous execution led to non-GAAP net income of $194 million, reflecting an 18% margin. Free cash flow for the year was $157 million. We are most proud of the significant number of SMBs we empower each and every day.

At the end of fiscal 2023, more than 460,000 businesses used BILL as their central hub of financial operations. We expanded our network to 5.8 million members that have originated or received an electronic payment through our platform by making it easy for buyers and suppliers to connect and transact payments, we enabled $266 billion in total B2B payment volume across our platform reflecting approximately 1% of US GDP and a significant milestone. Our strong financial performance and significant scale are due to many factors including the messaging critical nature of our platform, the breadth of our strategic ecosystem and constant focus to solve the needs of SMBs. 17 years ago, BILL was founded with the mission to make it simple for SMBs to connect and do business.

We created a category as we set out to help businesses automate their financial back office. Early on, we knew it was important to partner with an SMBs most trusted advisors to develop the market. That is why we built an ecosystem that strategically integrates with accounting firms and the top banks in the country. Driving success for our entire ecosystem is core to our DNA. Together with our partners, we can serve SMBs at a much faster pace. We have big ambitions. Today, we serve hundreds of thousands of SMBs, but we want to serve millions more. There are 30 million small businesses in the US and 70 million globally. The majorities still use manual paper-based processes to manage their financial back office. There is a vast opportunity to help these small businesses automate their financial operations to gain better insight to the company manage their business and cash flow and easily transact trillions of dollars of B2B payments.

As the creator of this category and with our leading platform, payments expertise, large network, partner ecosystem, and scale we are uniquely positioned to capture these large greenfield opportunity. A great example of how we help companies reimagine their financial operations and create efficiency as Talbott Farms. A 100-year-old family farm in Colorado known for sweet Palisade Peaches. Desiree Schuman, bookkeeper of Talbott Farms said, we previously received invoices in the mail and we would manually enter them into our accounting system, and need to print and mail out cheques. BILL’s accounts payable and spend management solutions changed how we do our finances. I can improve BILL’s on the go and have real-time visibility. I save on average two hours a day, which is particularly important during our busiest seasonal harvesting time.

Our large-scale two-sided network serves as a key pillar for frictionless connections and secure payment transactions. It frees our AP and AR customers from the need to share bank information with each other. It acts as a payment choice switchboard enabling both customers and network members to choose their preferred method of payment. Our network doesn’t require a subscription, as accounting software agnostics and even worse when businesses don’t have a general ledger system. With its ease of use, tens of millions of transactions flow through our network each year. This creates a valuable data asset that we apply our AI engine too which enables us to develop better user experiences such as auto-matching customers, and suppliers, auto-populating invoices, no matter how they are received, managing risk and providing payment and funding choices for customers and network members.

An example of how network members benefit from our platform and manage payment choice is Chariots of Fire Transportation, a business that provides door-to-door transportation services to seniors, and disabled adults and use clients include medical, nursing, and rehabilitation centers. Chariots of Fire uses Excel as their accounting system. [indiscernible] the owner said, everyday our drivers help many people get to the important places, they need to go. We process lots of money coming in and going out. Since we pay our drivers daily we need our money from customers quickly. BILL’s instant transfer helps us a lot by getting paid instantly instead of waiting a few days we can better manage our cash flow and pay drivers quickly. This is a great example of how the power and flexibility of our two-sided network and suite of payment choices help SMBs strive.

Our diverse and broad ecosystem enables us to efficiently reach small and midsized businesses. BILL is trusted by more than 85 of the top 100 accounting firms and the largest banks in the US including Bank of America and JPMorgan Chase who all put their brand on our platform to serve their customers. Payments are complex and our partners trust us to do payments on their behalf given our deep expertise. Over 7,000 accounting firms, use our platform to provide financial automation, bill payment and client advisory services forecast to their clients. Our platform empowers accounts with a purpose-built console to collaborate with their staff and clients across multiple workflows, enabling them to be more strategic and serve more clients. GRF, an accounting firm based in Washington, DC is a great example.

Elinor Litwack partnered GRF Outsourced Accounting and Advisory Services said, in an environment where automation is crucial to success of any business, BILL remains a key ingredient in the growth of our accounts practice with roughly 90 clients on our BILL console, we are able to centralize billing selection, staff assignments and bill implementations. Transferring new clients to our BILL console or creating a new BILL instance for them is a breeze and allows us to cross that big piece off of our onboarding checklist with ease. We’ve onboarded dozens of new cash lines over the past three years and our practice has doubled in size. Our partnership with BILL is a critical component of our infrastructure and continued growth. Before I lay out our fiscal 2024 priorities, I will recap our fiscal 2023 accomplishments.

At the start of the year, we set our priorities were to develop a unified platform experience, further scale our ecosystem and drive innovation and adoption of our payment solutions. We take our commitment seriously and have accomplished all of these objectives. We laid the foundation to launch a unified platform experienced this fall bringing our accounts payable and spend and expense management solution seamlessly together. Our tightly woven solution with consolidated insights and unified data enables businesses to manage more of their financial back office in one place than ever before. In parallel, we built our cross-sell plans and capabilities for the unified platform launch. We consolidated our sales teams across channels, created single customer identities, and pre-approved many customers for spend and expense management credit lines.

We developed cross-sell plans that encompass in-product discovery, marketing campaigns, partner enablement, and direct sales outreach. In addition, we acquired Finmark to span our solutions to include financial planning and analysis tools. This is an important step towards evolving our platform to empower SMBs with greater insights to run their business and manage their cash flow. In fiscal 2023, we expanded our distribution ecosystem by acquiring new partners and strengthened our existing partners by bringing more solutions to their customers. For example, in our financial institution channel, we extended our agreement with JPMorgan Chase Commercial Banking’s Cashflow360 powered by BILL for another five years and expanded it to include additional payment capabilities.

With Cashflow360 JPMorgan Chase Commercial Banking clients connect digitally with suppliers, vendors, and BILL network members to automate invoicing, approvals, payments, and reconciliation. Customers can choose from a variety of payment choices today including ACH cheque and virtual card. We are in the process of expanding our relationship with Bank of America to serve more of their SMB customers. Given the success of our solution and serving their new small business customers, we are now working together to extend our solution to serve their much larger installed base of SMB customers. We have started investing behind this exciting long-term initiative. The growth in our relationship with BofA speaks to the strong value proposition of our solutions, deep expertise in payments and the collective success of our strategic partner ecosystem today.

Turning to the accounting channel. We acquired many new partners and now serve approximately 7,000 accounting firms, up from 6,000 a year ago. We continue to enhance the tools we provide accountants to manage their clients. With simplified workflows, more comprehensive reporting and integrated accounts payable and spend and expense management. Now moving on to our agreement with Intuit. Our co-marketing and embedded BILL pay agreement expired in June. The customers served through this partnership represented less than 1% of revenue during fiscal 2023. We believe there is a much stronger opportunity for BILL to serve micro and small business directly and through our strategic partner ecosystem with banks and accountants. We will offer them a richer experience with our defining platform that has a broader suite of workflow and payment capabilities.

Delivering payment innovations and increasing ad valorem payment adoption has been an important priority for BILL and we made significant progress in fiscal 2023. By providing choice and helping customers and network members find the best solutions for their needs, ad valorem penetration, excluding the FI channel, expanded to 13% of our payment volume across solutions, up from 10% a year ago. Our easy and secure payment experience drives growth in our network members now at 5.8 million, up from 4.7 million a year ago. We expanded our ad valorem solutions by broadly rolling out pay-by-card and BILL balance and introducing a beta version of invoice financing to a select group of network members. We are continuing to test the solution and will make it available to more businesses in fiscal 2024.

Our large data asset and risk management expertise provides us a competitive advantage to serve SMBs with working capital and cash flow solutions. Looking ahead to fiscal 2024, we are prepared to operate in a constricted macro environment while executing our top priorities. Our overarching goal is to help small businesses thrive by providing the tools and insights they need to efficiently and confidently manage their financial operations and cash flow. In support of this goal, we have set out these three top priorities for fiscal 2024. First is to drive adoption of our integrated financial operations platform that empowers SMBs to easily manage their AP and spend and expense operations together. Second, we will expand our ecosystem by bringing more innovations to our partners and attracting new partners; and third, we will continue to enrich our payment experiences and drive penetration of our ad valorem solutions.

In closing, we delivered a strong defining year as we surpassed more than $1 billion in revenue and achieved meaningful non-GAAP profitability. This threshold is a reminder that we have built and are building a new category around financial operations for SMB. We are the leader and continue to innovate across our platform and ecosystem. We’ve built this category to bring automation, efficiency and insights around the underlying financial operations that make any business tick. For most of our existence, no other company was doing let alone thinking about how to help SMBs on this front at scale. Our mission has just begun, and we will continue to innovate across our platform and ecosystem of customers, partners and suppliers to serve more and more SMBs. We want to thank our customers, partners and employees who are on this journey with us to help SMBs change the way they do business.

Now I’ll turn the call over to John to talk in more detail about our quarter.

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John Rettig: Thanks, Rene. Today, I’ll provide an overview of our fourth quarter and full fiscal year 2023 financial results and discuss our outlook for the first quarter and full fiscal year 2024. We achieved significant financial milestones in fiscal 2023 while investing to expand our category and extending our lead in serving the financial operations and B2B payment needs of SMBs. Revenue exceeded $1 billion, and we were meaningfully non-GAAP profitable and free cash flow positive for the year. Total revenue for fiscal 2023 was $1.058 billion, reflecting 65% year-over-year growth. Core revenue was $945 million and increased 49% year-over-year. Annual revenue growth for our BILL stand-alone platform and our Divvy spend and expense management solution was 40% and 69%, respectively.

Float revenue was $114 million. Float revenue is an important part of our business model as it gives us the opportunity to invest in our platform and payments innovation and expand our ecosystem through economic cycles. We made significant investments this past year while delivering our first year of non-GAAP profitability. Non-GAAP net income for the year was $194 million, reflecting an 18% margin and free cash flow was $157 million, representing a 15% margin. Importantly, we also delivered profitability for the full fiscal year on a non-GAAP operating income basis, excluding the impact of float revenue. This demonstrates the progress we have made, efficiently scaling our non-GAAP operating expenses. BILL’s durable business model, combined with excellent execution drove these strong results as we carefully navigated macro and banking turmoil challenges.

Now to a few highlights of our Q4 results. The headline is that we delivered strong and profitable growth. Total revenue was $296 million, up 48% year-over-year. Non-GAAP gross margin was 86.9%. Non-GAAP net income was $69 million or 23% of revenue compared to a non-GAAP net loss of $3 million a year ago. In addition, we generated a free cash flow margin of 25% in Q4. Our strong financial performance in Q4 was achieved despite macro headwinds as SMBs continue to moderate their spend during the quarter. In Q4, our TPV results exceeded our expectations, but also showed a continuation of our customer base scaling back spend compared to a year ago. TPV per customer, excluding financial institution channel customers or FIs, increased 4% quarter-over-quarter.

However, it declined 5% year-over-year, demonstrating that SMBs are still facing macro pressures. SMBs use our platform as the center of their financial operations and engagement with our platform remains strong. For example, on our BILL stand-alone platform, excluding FIs, the average number of transactions per customer was 76 in fiscal Q4, up from 74 in the prior quarter. Our annual BILL stand-alone customer retention rate, which excludes FIs, remained consistent compared to a year ago and is at a very healthy level of 86%. Turning to an update on our key metrics and financial results in Q4. As this is our year-end earnings call, I’ll provide additional disclosures on certain metrics beyond our regular quarterly updates. We ended the fourth quarter with 461,000 businesses using our solutions.

BILL stand-alone customers grew to 201,000, up 27% year-over-year. This included 5,300 net adds from the direct and accounting channels, including approximately 700 Bank of America commercial customers who migrated to our direct channel from our FI channel during the quarter. We ended the quarter with 61,600 customers in the FI channel, which declined approximately 2,200 quarter-over-quarter. The decrease was primarily due to the sunset of our legacy platform for BofA’s commercial customers which impacted approximately 6,000 FI customers. For our Divvy spend management solution, we ended the quarter with 29,200 spending businesses, an increase of 2,100 from last quarter. At the end of Q4, approximately 7,200 businesses use both our AP and spend and expense management solutions.

Moving on to payment volume. During the quarter, we managed 69.1 billion in TPV. BILL stand-alone total payment volume was 65.1 billion in Q4, reflecting 7% growth from Q4 of last year and an increase of 7% sequentially. While this was below historical trends, TPV trends in the quarter exceeded our expectations. In addition, in Q4, we had 3.8 billion in card payment volume from our spend and expense management product, representing 42% year-over-year growth. We experienced macro-driven changing customer spend patterns during the year leading to lower TPV growth, which is a key driver for transaction revenue growth. This directly impacts our annual net dollar-based revenue retention rate, which includes subscription and transaction fees. As of June 30th, 2023, our net dollar-based revenue retention rate was 111%, which is a great result considering two consecutive years of outsized expansion.

We made substantial progress driving adoption of variable price payment products as reflected in our annually reported metrics. In Q4, instant transfer crossed 1% of BILL’s stand-alone TPV and virtual cards were 3.2% of BILL’s stand-alone TPV. Cross-border payments totaled 4.7% of BILL’s stand-alone TPV in Q4 with foreign currency payments representing 36% of total cross-border payment volume. For Q4, our total variable price payments, which includes ad valorem payments transacted through our AP/AR and spend management solutions was 13% of BILL consolidated payment volume, excluding TPV from the FI channel, which is up from 10% a year ago. We believe there is a significant runway for ad valorem adoption across our solution in the years ahead.

Moving on to transaction volumes. We processed 23.4 million payments in Q4. This includes 11.6 million payments on the BILL stand-alone platform, of which 72% were electronic payments. In addition, we processed 11.4 million spend management card transactions. Total transaction revenue per transaction, which includes transactions for our BILL stand-alone, Divvy and Invoice2go solutions was $8.23, reflecting growth of 7% year-over-year. For our BILL stand-alone solution, transaction revenue per transaction was $7.88, growth of 20% year-over-year. The gross take rate on card payments processed through our spend management solution in Q4 was approximately 265 basis points. For fiscal 2023, our contribution margin for our Divvy spend and expense management solution increased to approximately 33%, an improvement of approximately three percentage points year-over-year, driven by ongoing improvements in our credit underwriting capabilities.

Now I’ll review our reported Q4 results. Total revenue was $296 million, an increase of 48% from a year ago. Core revenue, which includes subscription and transaction revenue was $259.5 million, representing growth of 33% year-over-year. Subscription revenue increased to $66.9 million, up 21% year-over-year. BILL stand-alone subscription revenue was $57.8 million, reflecting growth of 25% year-over-year driven by our expanding customer base and a price increase implemented in our direct and accounting channels during the fiscal year. Transaction revenue increased to $192.6 million, up 38% year-over-year. BILL stand-alone transaction revenue totaled $91.5 million or growth of 33% year-over-year and Divvy transaction revenue totaled $99.9 million, reflecting growth of 44% year-over-year.

Float revenue was $36.5 million. Our yield on FBO funds was 453 basis points in the quarter. Non-GAAP gross margin was 86.9%, up 2.7 percentage points year-over-year as a result of higher float revenue and increasing variable transaction fee revenue. As discussed previously, we are expecting our non-GAAP gross margin to moderate as our payment type composition matures and float revenue tailwinds subside. For fiscal 2024, we expect non-GAAP gross margin to be in the low to mid-80s. Non-GAAP operating expenses were $214.8 million, an increase of 6% from Q3. Rewards expenses, which are included in sales and marketing expenses, were 49% of spend management card revenue compared to 48% in the prior quarter. Non-GAAP operating income was $42.3 million, representing a margin of 14%.

This was an increase of $45.5 million from a loss of $3.2 million a year ago. Non-GAAP other income, net of other expenses, was $28 million and benefited from higher yields on corporate cash and investment portfolios. Our non-GAAP net income was $69.4 million or 23.5% of revenue resulting in non-GAAP net income per diluted share of $0.59 based on 117 million diluted weighted average shares outstanding. Our non-GAAP net income was significantly ahead of our estimates due to our revenue results combined with proactive expense management. We ended the quarter with $2.7 billion in cash, cash equivalents and short-term investments. Before shifting to our financial outlook for the first quarter and full fiscal year 2024, I’d like to share our latest views on the impact macro conditions are having on SMBs and our business.

The spend patterns we experienced in fiscal Q4 are an indicator that the sharp reduction in spending that occurred in the second half of calendar 2022 has now moderated though our customers are still in contraction mode. The trends pointing to payment volume stabilization are encouraging, that we are expecting continued TPV headwinds throughout the year given higher interest rates, tighter credit conditions and an uncertain macro environment. While we expect approximately mid- to high single-digit growth in TPV in fiscal 2024, we anticipate that BILL’s stand-alone TPV per customer, excluding the FI channel, will decrease low single-digits percentage for fiscal 2024, compared to a year-over-year decline of 5% in Q4. Near term, we expect Q1 to be a continuation of the trend we experienced in Q4.

We also expect that near-term macro distractions will continue to impact SMBs. For the next couple of quarters, we expect BILL stand-alone net adds, excluding the FI channel, to be approximately 4,000 per quarter, excluding the impact of the expiration of our contract with Intuit. As of June 2023, approximately 12,000 of our more than 400,000 customers used our embedded feature in Intuit’s Simple Bill Pay solution. While we expect the majority of these micro businesses to churn over the next two quarters, we expect some of the larger businesses to become BILL-direct customers, where there will be an opportunity to provide them with a more advanced workflow capabilities and a much broader suite of payment solutions, including ad valorem payments.

As Rene discussed earlier, we are enhancing and expanding our solution with Bank of America to serve their large installed SMB customer base in addition to their new SMB customers. Together with BofA, we will both be accelerating our investments to address this very large market opportunity. As a part of this initiative, we are restructuring the contractual minimums to push out subscription fees planned for fiscal 2024 to future years. While this impacts our fiscal 2024 revenue and profitability, we expect it to unlock a significantly larger revenue opportunity in the future and accelerate the adoption of financial operations for SMBs. We believe this strategic partnership is an important step towards driving awareness and accelerating adoption of our solutions.

The market is ripe for SMBs to automate and stop using manual legacy processes. We’re investing in our platform and ecosystem of strategic partners to collectively capture this large opportunity. Even with these stepped up investments, we plan to expand our non-GAAP operating income for the year. Now turning to our outlook. For fiscal Q1, we expect total revenue to be in the range of $295.5 million to $298.5 million, which reflects 28% to 30% year-over-year growth. This assumes our subscription revenue in Q1 will increase a mid-single-digit percentage year-over-year as we factor in our initiatives with BofA in our comparison to the subscription price increase last year. We expect float revenue to be $38 million in Q1, which assumes our yield on FBO funds will be approximately 460 basis points.

On the bottom line, for Q1, we expect to report non-GAAP net income in the range of $56.5 million to $59.5 million and non-GAAP net income per diluted share in the range of $0.48 to $0.50 based on a share count of 118.5 million diluted weighted average shares outstanding. For Q1, we expect other income, net of other expenses, or OIE to be $27 million. We expect stock-based compensation expenses of approximately $70 million in Q1, and we expect capital expenditures of approximately $8 million to $10 million. Moving on to full year guidance. For fiscal 2024, we expect total revenue to be in the range of $1,288.5 million to $1,306.5 million, which represents approximately 22% to 23% year-over-year growth. This assumes our subscription revenue for the full year will increase a mid-single-digit percentage compared to fiscal 2023 as we factor in the temporary impact related to our initiatives with BofA and the lapse of our subscription price increase last year.

We expect float revenue to be approximately $136.5 million in fiscal 2024, which assumes a yield on FBO funds of approximately 415 basis points for the year, reflecting our assumption that the Fed funds rate begins to decline at the beginning of calendar 2024. We expect to report non-GAAP net income for fiscal year 2024 in the range of $217 million to $235 million. We expect non-GAAP net income per diluted share to be $1.82 to $1.97 based on a share count of 119.5 million diluted weighted average shares outstanding. We expect to achieve this profitability while accelerating our investments in our platform and partnerships. In addition, for fiscal 2024, we expect other income net of other expenses to be approximately $90 million. We expect stock-based compensation expenses of approximately $300 million and expect capital expenditures to be approximately $35 million to $40 million for the full year.

In closing, we delivered exceptional financial performance during the year with multiple challenges faced by SMBs. We made significant investments in our platform, expanded our ecosystem and delivered our first year of non-GAAP profitability. Looking ahead, we are accelerating our pace of investments to unlock the significant opportunity to automate financial operations for many more SMBs. With our proven track record of investing in organic and inorganic opportunities, we will continue to invest to pursue this large market opportunity while laying the foundation for long-term profitability. We created a category, and this is just the beginning. We are building our business and ecosystem to bring the transformative experience of our platform to millions of businesses and facilitate trillions of their B2B spend while building a multibillion dollar revenue business.

Operator, we’re now ready to take questions.

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Q&A Session

Operator: [Operator Instructions] Our first question today comes from Scott Berg with Needham & Company. Please proceed.

Scott Berg: Hi, everyone. Congrats on the nice quarter and thanks for taking my questions. I guess a couple. I don’t know if Rene or John, who wants to take the first one. John, you talked about your assumptions for this year are slowing, accelerating TPV growth, which I think we understand. But your core BILL customer adds, quarterly adds guidance for 4,000 in the next couple of quarters is kind of in line with what you’ve seen all year. Help us kind of balance what you’re seeing on the new customer adds versus the TPV because it sounds like your new customer acquisition channels continue to hum along pretty well.

John Rettig: Yes. Thanks for the question, Scott. We’re feeling good about our levers and our ability to penetrate the market and acquire customers and retain and serve them. I think the — some of the influences of the macro environment on SMBs today also have an influence on the timing and the rate of adopting new technology. So while I think we’re well positioned to accelerate net new adds after making a transition from, I think, some changes in the market and dynamics related to macro that we saw in the December quarter, we’re still sort of measured in our estimates about how fast that is going to happen. So I think the setup is good. The multichannel distribution strategy is working well. And I feel like for this year, we’re confident in being able to accelerate. But it’s likely the year has got to progress and the macro environment needs to resolve itself before we see any sort of outsized step up in net new adds.

Scott Berg: Got it. Helpful. And then on the — I think it was the BofA contract, John, you mentioned it’s pushing some subscription revenues out of fiscal ’24 into future periods. You certainly have good relationships with them and other bank FI customers out there, partners. But how should we think about the impact on your ’24 revenue guidance with that change in the contract?

John Rettig: Yes. Good question, Scott. So I mean, we’re actually really excited about this moment in time. We’ve been, I think, building towards an inflection point like this for a long time and the progress that we’ve made working closely with BofA has resulted in the opportunity to bring forward, working with a much larger installed base of customers versus where we’ve been for the last year or so, which was with the new customers to the bank. So we think the trade-off is a no-brainer, simple decision to bring forward the larger opportunity. For fiscal ’24, well, I can’t give specific numbers, I can say our subscription revenue estimates probably would have been in the range of 8% to 10% higher if we hadn’t adjusted some of the contractual terms with BofA. But looking at this opportunity over the next couple of years, we feel really good about where this is headed.

Rene Lacerte: Maybe I’d just add a comment. Yes, just a few comments on the opportunity with financial institutions, right? So in general, when we think about how adoption happens across payment products and payment rails, banks have been instrumental in making that happen over the years. They’ve had — if you think about ACM credit card solutions, debit card solutions, bill pay. On the consumer side, banks have been responsible for kind of driving that adoption. And like John said, this — we see this as an opportunity for an inflection point with adoption across the broader market, not just within the existing customers and partners we have today, but this is an opportunity for us to invest behind that, and we’re super excited about it.

Scott Berg: Thanks so much for all the additional color. Congrats again.

John Rettig: Thank you, Scott.

Operator: Our next question comes from Bryan Keane with Deutsche Bank. Please proceed