Bill.com Holdings, Inc. [BILL] Filings

10-Q 1 bill-20221231.htm 10-Q bill-20221231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________

FORM 10-Q

_____________________

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2022


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 001-39149

_____________________

BILL.COM HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

_____________________


Delaware						83-2661725

(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

6220 America Center Drive, Suite 100, San Jose, CA						95002

(Address of principal executive offices)						(Zip Code)

(650) 621-7700


			(Registrant’s telephone number, including area code)

			(Former name, former address and former fiscal year, if changed since last report )

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.00001 par value

BILL

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	x	Accelerated filer	o

Non-accelerated filer	o	Smaller reporting company	o

Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of January 27, 2023, the registrant had 106,385,536 shares of common stock, $0.00001 par value per share, outstanding.

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BILL.COM HOLDINGS, INC.

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		Page
Special Note Regarding Forward-Looking Statements		1

Part 1. FINANCIAL INFORMATION		3
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Loss	5
	Condensed Consolidated Statements of Stockholders' Equity	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
	Note 1 – The Company and Its Significant Accounting Policies	9
	Note 2 – Revenue	11

	Note 3 – Fair Value Measurement	12
	Note 4 – Short-Term Investments	15
	Note 5 – Funds Held for Customers	16
	Note 6 – Acquired Card Receivables	18
	Note 7 – Debt and Borrowings	21
	Note 8 – Stockholders’ Equity	25
	Note 9 – Other Income (Expenses), Net	26
	Note 10 – Income Taxes	26
	Note 1 1 – Leases	27
	Note 1 2 – Commitments and Contingencies	28
	Note 1 3 – Net Loss Per Share Attributable to Common Stockholders	29

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	47

Part II. OTHER INFORMATION		48
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	88
Item 3.	Defaults Upon Senior Securities	88
Item 4.	Mine Safety Disclosures	88
Item 5.	Other Information	88
Item 6.	Exhibits	89

SIGNATURES		90

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, market growth, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “target,” “plan,” “expect,” and similar expressions are intended to identify forward-looking statements.

Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit, operating expenses, including changes in research and development, sales and marketing, and general and administrative expenses (including any components of the foregoing), and our ability to achieve, and maintain, future profitability;

•our business plan and our ability to effectively manage our growth;

•our market opportunity, including our total addressable market;

•our international expansion plans and ability to expand internationally;

•anticipated trends, growth rates, and challenges in our business and in the markets in which we operate;

•beliefs and objectives for future operations;

•our ability to further attract, retain, and expand our customer base;

•our ability to develop new products and services and bring them to market in a timely manner;

•the effects of seasonal trends on our results of operations;

•our expectations concerning relationships with third parties, including partners;

•our ability to maintain, protect, and enhance our intellectual property;

•the effects of increased competition in our markets and our ability to compete effectively;

•the COVID-19 pandemic, economic downturns or recessions, inflation, foreign currency rate and interest rate fluctuations and supply chain shortages, and their impact on our customers, partners, vendors, employees, results of operations, liquidity, and financial condition;

•future acquisitions or investments in complementary companies, products, services, or technologies;

•our ability to stay in compliance with laws and regulations that currently apply or become applicable to our business;

•economic and industry trends, projected growth, or trend analysis;

•our ability to attract and retain qualified talent;

•the increased expenses associated with being a public company; and

•the future market prices of our common stock.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in the section titled “Risk Factors” in Part I, Item 1A of this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q

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may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q or to conform these statements to actual results or to changes in our expectations, except as required by law.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

You should read this Quarterly Report on Form 10-Q and the documents that we reference herein, that we have filed with the SEC as exhibits, with the understanding that our actual future results, performance, and events and circumstances may be materially different from what we expect.

In this Quarterly Report on Form 10-Q, the words "we," "us," and "our" refer to Bill.com Holdings, Inc. (BILL) and its wholly-owned subsidiaries, including Bill.com, LLC (BILL standalone), DivvyPay, LLC (Divvy), Invoice2go, LLC (Invoice2go), and Cimrid Pty, Ltd (Cimrid), unless the context requires otherwise.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BILL.COM HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except per share amounts)


	December 31, 2022		June 30, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	1,616,758	$	1,596,542
Short-term investments	1,066,538		1,108,493
Accounts receivable, net	31,261		24,045
Acquired card receivables, net	380,895		256,392
Prepaid expenses and other current assets	178,688		151,258
Funds held for customers	3,474,048		3,142,660
Total current assets	6,748,188		6,279,390
Non-current assets:
Operating lease right-of-use assets, net	72,725		76,445
Property and equipment, net	69,383		56,985
Intangible assets, net	401,869		432,583
Goodwill	2,396,509		2,362,893
Other assets	49,600		47,730
Total assets	$	9,738,274	$	9,256,026

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	14,262	$	9,948
Accrued compensation and benefits	31,021		29,004
Deferred revenue	30,358		31,868
Other accruals and current liabilities	181,551		120,080
Borrowings from revolving credit facility, net	—		75,097
Customer fund deposits	3,474,048		3,142,660
Total current liabilities	3,731,240		3,408,657
Non-current liabilities:
Deferred revenue	2,013		2,159
Operating lease liabilities	78,207		82,728
Borrowings from revolving credit facility, net	112,570		—
Convertible senior notes, net	1,701,397		1,697,985
Other long-term liabilities	28,970		20,803
Total liabilities	5,654,397		5,212,332
Commitments and contingencies (Note 12)
Stockholders' equity:
Common stock	2		2
Additional paid-in capital	4,811,780		4,598,737
Accumulated other comprehensive loss	(6,361)		(10,217)
Accumulated deficit	(721,544)		(544,828)
Total stockholders' equity	4,083,877		4,043,694
Total liabilities and stockholders' equity	$	9,738,274	$	9,256,026

See accompanying notes to condensed consolidated financial statements.

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BILL.COM HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share amounts)


	Three Months Ended December 31,				Six Months Ended December 31,
	2022		2021		2022		2021
Revenue	$	260,006	$	156,478	$	489,930	$	274,827
Cost of revenue
Service costs	36,965		24,338		71,786		45,051
Depreciation and amortization of intangible assets (1)	10,502		10,048		20,789		19,170
Total cost of revenue	47,467		34,386		92,575		64,221
Gross profit	212,539		122,092		397,355		210,606
Operating expenses
Research and development	78,910		51,377		154,030		93,261
Sales and marketing	164,683		69,896		283,308		123,525
General and administrative	69,381		64,965		136,119		122,480
Depreciation and amortization of intangible assets (1)	12,028		11,929		24,055		21,620
Total operating expenses	325,002		198,167		597,512		360,886
Loss from operations	(112,463)		(76,075)		(200,157)		(150,280)
Other income (expenses), net	17,022		(5,000)		22,970		(8,475)
Loss before benefit from income taxes	(95,441)		(81,075)		(177,187)		(158,755)
Benefit from income taxes	(365)		(635)		(471)		(4,056)
Net loss	$	(95,076)	$	(80,440)	$	(176,716)	$	(154,699)

Net loss per share attributable to common stockholders:
Basic and diluted	$	(0.90)	$	(0.78)	$	(1.68)	$	(1.56)
Weighted-average number of common shares used to compute net loss per share attributable to common stockholders:
Basic and diluted	105,906		102,910		105,494		99,401

(1) Depreciation expense does not include amortization of capitalized internal-use software costs.

See accompanying notes to condensed consolidated financial statements.

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BILL.COM HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited, in thousands)


	Three Months Ended December 31,				Six Months Ended December 31,
	2022		2021		2022		2021
Net loss	$	(95,076)	$	(80,440)	$	(176,716)	$	(154,699)
Other comprehensive income (loss):
Net unrealized gain (loss) on investments in available-for-sale securities	4,126		(1,711)		3,856		(1,750)
Comprehensive loss	$	(90,950)	$	(82,151)	$	(172,860)	$	(156,449)

See accompanying notes to condensed consolidated financial statements.

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BILL.COM HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, in thousands)


	Six Months Ended December 31, 2022
	Common stock			Additional paid-in capital		Accumulated other comprehensive loss		Accumulated deficit		Total stockholders' equity
	Shares	Amount
Balance at June 30, 2022	104,731	$	2	$	4,598,737	$	(10,217)	$	(544,828)	$	4,043,694
Issuance of common stock upon exercise of stock options and release of restricted stock units	835	—		3,901		—		—		3,901
Issuance of common stock under the employee stock purchase plan	67	—		8,494		—		—		8,494
Stock-based compensation	—	—		73,352		—		—		73,352
Other comprehensive loss	—	—		—		(270)		—		(270)
Net loss	—	—		—		—		(81,640)		(81,640)
Balance at September 30, 2022	105,633	$	2	$	4,684,484	$	(10,487)	$	(626,468)	$	4,047,531
Issuance of common stock upon exercise of stock options and release of restricted stock units	663	—		4,316		—		—		4,316
Issuance of common stock as consideration for an acquisition	40	—		3,376		—		—		3,376
Stock-based compensation	—	—		119,604		—		—		119,604
Other comprehensive income	—	—		—		4,126		—		4,126
Net loss	—	—		—		—		(95,076)		(95,076)
Balance at December 31, 2022	106,336	$	2	$	4,811,780	$	(6,361)	$	(721,544)	$	4,083,877

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	Six Months Ended December 31, 2021
	Common stock			Additional paid-in capital		Accumulated other comprehensive income		Accumulated deficit		Total stockholders' deficit
	Shares	Amount
Balance at June 30, 2021	94,504	$	2	$	2,777,155	$	(100)	$	(247,467)	$	2,529,590
Cumulative effect of the accounting change upon the adoption of ASU 2020-06	—	—		(245,066)		—		29,000		(216,066)
Issuance of common stock upon public offering, net of underwriting discounts and other offering costs	5,074	—		1,341,122		—		—		1,341,122
Issuance of common stock as consideration for an acquisition, net of issuance costs	1,788	—		488,263		—		—		488,263
Fair value of replacement awards	—	—		26,710		—		—		26,710
Issuance of common stock upon exercise of stock options and release of restricted stock units	1,033	—		8,644		—		—		8,644
Issuance of common stock under the employee stock purchase plan	40	—		5,726		—		—		5,726
Purchase of capped calls	—	—		(37,893)		—		—		(37,893)
Stock-based compensation	—	—		38,839		—		—		38,839
Other comprehensive loss	—	—		—		(39)		—		(39)
Net loss	—	—		—		—		(74,259)		(74,259)
Balance at September 30, 2021	102,439	$	2	$	4,403,500	$	(139)	$	(292,726)	$	4,110,637
Issuance of common stock upon exercise of stock options and release of restricted stock units	1,022	—		14,140		—		—		14,140
Stock-based compensation	—	—		50,701		—		—		50,701
Other comprehensive loss	—	—		—		(1,711)		—		(1,711)
Net loss	—	—		—		—		(80,440)		(80,440)
Balance at December 31, 2021	103,461	$	2	$	4,468,341	$	(1,850)	$	(373,166)	$	4,093,327

See accompanying notes to condensed consolidated financial statements.

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BILL.COM HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)


	Six Months Ended December 31,
	2022		2021
Cash flows from operating activities:
Net loss	$	(176,716)	$	(154,699)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	191,925		87,571
Amortization of intangible assets	39,763		36,440
Depreciation of property and equipment	5,081		4,350
Amortization of capitalized internal-use software costs	1,901		673
Amortization of debt premium and issuance costs	3,483		1,955
Amortization of premium (accretion of discount) on investments in marketable debt securities	(10,401)		6,638
Provision for losses on acquired card receivables	15,042		9,535
Non-cash operating lease expense	4,718		4,083
Deferred income taxes	(826)		(3,822)
Other	516		—
Changes in assets and liabilities:
Accounts receivable	(7,052)		(3,420)
Prepaid expenses and other current assets	(4,623)		(8,547)
Other assets	(1,880)		(1,099)
Accounts payable	3,511		(2,023)
Other accruals and current liabilities	15,408		(11,430)
Operating lease liabilities	(4,794)		(2,952)
Other long-term liabilities	35		(1,698)
Deferred revenue	(1,709)		4,381
Net cash provided by (used in) operating activities	73,382		(34,064)
Cash flows from investing activities:
Cash paid for acquisition, net of acquired cash and cash equivalents	(28,902)		(144,541)
Purchases of corporate and customer fund short-term investments	(1,641,193)		(1,452,419)
Proceeds from maturities of corporate and customer fund short-term investments	1,683,413		667,854
Proceeds from sale of corporate and customer fund short-term investments	5,088		44,744
Increase in acquired card receivables, net and other	(101,353)		(77,459)
Purchases of property and equipment	(3,161)		(2,467)
Capitalization of internal-use software costs	(10,510)		(5,023)
Proceeds from beneficial interest	2,080		—
Net cash used in investing activities	(94,538)		(969,311)
Cash flows from financing activities:
Proceeds from issuance of common stock upon public offering, net of underwriting discounts and other offering costs	—		1,341,152
Proceeds from issuance of convertible senior notes, net of discounts and issuance costs	—		560,075
Purchase of capped calls	—		(37,893)
Increase (decrease) in customer fund deposits liability and other	332,661		1,171,446
Proceeds from line of credit borrowings	37,500		—
Proceeds from exercise of stock options	8,217		22,784
Proceeds from issuance of common stock under the employee stock purchase plan	8,494		5,726
Net cash provided by financing activities	386,872		3,063,290
Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents	182		(75)
Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents	365,898		2,059,840
Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period	3,542,715		1,809,692
Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period	$	3,908,613	$	3,869,532
Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows above:
Cash and cash equivalents	$	1,616,758	$	1,672,166
Restricted cash included in other current assets	103,809		16,364
Restricted cash included in other assets	6,724		6,724
Restricted cash and restricted cash equivalents included in funds held for customers	2,181,322		2,174,278
Total cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period	$	3,908,613	$	3,869,532

See accompanying notes to condensed consolidated financial statements.

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BILL.COM HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES

Bill.com, Inc. was incorporated in the State of Delaware in April 2006. In November 2018, Bill.com, Inc. consummated a reorganization with Bill.com Holdings, Inc., which resulted in the latter becoming the parent entity of Bill.com, Inc. Bill.com, Inc. was subsequently converted into a limited liability company and renamed Bill.com, LLC. Bill.com Holdings, Inc., which was incorporated in the State of Delaware in August 2018, and its subsidiaries are collectively referred to as the “Company”.

The Company is a provider of software-as-a-service, cloud-based payments, spend, and expense management products, which allow users to automate accounts payable and accounts receivable transactions, enable businesses to easily connect with their suppliers and/or customers to do business, eliminate expense reports, manage cash flows, and improve back office efficiency.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and were prepared in conformity with U.S. generally accepted accounting principles (U.S. GAAP) and applicable rules and regulations of the SEC regarding interim financial reporting. The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect all normal and recurring adjustments that are, in the opinion of management, necessary to present fairly the Company’s financial position, results of operations, comprehensive loss, changes in stockholders’ equity, and cash flows for the periods presented. The results of operations for the three and six months ended December 31, 2022 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2023 or for any other future annual or interim period. The unaudited condensed consolidated balance sheet as of June 30, 2022 included herein was derived from the audited financial statements as of that date, but does not include all disclosures including certain notes required by U.S. GAAP on an annual reporting basis. All intercompany accounts and transactions have been eliminated.

These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022.

Segment Reporting

The Company operates as one operating segment because its chief operating decision maker, who is the Chief Executive Officer, reviews its financial information on a consolidated basis for purposes of making decisions regarding allocating resources and assessing performance. The Company's long-lived assets are mainly located in the United States (U.S.) and revenue is mainly generated in the U.S. Long-lived assets and revenue generated outside the U.S. are not material.

Reclassification

Certain accounts in the prior period condensed consolidated statements of operation were reclassified to conform with the current year presentation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make various estimates and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and the accompanying notes. Management regularly assesses these estimates, including, but not limited to useful lives of long-lived assets; capitalization of internal-use software costs; incremental borrowing rates for right-of-use operating lease assets and operating lease liabilities; the estimate of credit losses on accounts receivable, acquired card receivables, and other financial assets; accrual for rewards; variable consideration used in revenue recognition for certain contracts; benefit periods used to amortize deferred commissions; reserve for losses on funds held for customers; inputs used to

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value certain stock-based compensation awards; and valuation of income taxes. The Company evaluates these estimates and assumptions and adjusts them accordingly. Actual results could differ from those estimates, and such differences may be material to the consolidated financial statements.

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents

Cash and cash equivalents consist of cash in banks, highly liquid investments with maturities of three months or less at the time of purchase, and securities purchased under overnight reverse repurchase agreements.

Restricted cash consists of (i) amounts restricted under deposit account control agreements, (ii) minimum cash balances that are required to be maintained by certain banks, (iii) cash collateral required by the Company’s lessors to satisfy letter of credit requirements under its lease agreements, (iv) cash collateral required by a bank in connection with the Company’s money transmission activities, and (v) cash in bank and cash deposits held by payment processing companies included in funds held for customers.

Restricted cash equivalents consist of highly liquid investments with maturities of three months or less at the time of purchase that are included in funds held for customers.

Except for the restricted cash included in funds held for customers, the current and non-current portion of the restricted cash is included in prepaid expenses and other current assets and in other assets, respectively, in the accompanying condensed consolidated balance sheets.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, restricted cash, restricted cash equivalents, short-term investments, accounts receivable, and acquired card receivables (collectively referred to as Financial Assets). The Company maintains its cash, cash equivalents, restricted cash, restricted cash equivalents, and short-term investments with major financial institutions that may at times exceed federally insured limits. Management believes that these financial institutions are financially sound with minimal credit risk.

The Company performs credit evaluations to verify the credit quality of its financial assets and determine any at-risk receivables. An allowance for potential credit losses on Financial Assets is recognized, if material. As of December 31, 2022 and June 30, 2022, the allowance for potential credit losses related to accounts receivable and acquired card receivables totaled approximately $12.3 million and $5.8 million, respectively. These amounts do not include the immaterial allowance for potential credit losses on purchase of card receivables that have been authorized but not cleared at the end of the periods (see Note 12).

There were no customers that exceeded 10% of the Company’s total revenue during the three and six months ended December 31, 2022 and 2021.

Foreign Currency

The Company has two foreign subsidiaries whose functional currency is the U.S. dollar, which is the Company's reporting currency. Gains and losses from the remeasurement of transactions denominated in foreign currencies other than the functional currency of the foreign subsidiary are included in other income (expense), net in the accompanying condensed consolidated statements of operations.

Significant Accounting Policies

There have been no changes to the Company’s significant accounting policies described in the Annual Report on Form 10-K for the fiscal year ended June 30, 2022, other than those new accounting policies that were implemented as a result of the adoption of new accounting standards as described below.

Recently Adopted Accounting Pronouncements

In March 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. This ASU eliminates the accounting guidance for Troubled Debt Restructurings (TDRs) by creditors

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in Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Additionally, this ASU requires a company to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost. The Company early adopted this ASU on a prospective basis beginning July 1, 2022. See Note 6 for additional disclosures resulting from the adoption of this ASU.

NOTE 2 – REVENUE

The Company generates revenue primarily from subscription and transaction fees. The Company serves small and midsize businesses (SMB), accounting firms, and financial institutions. The table below shows the Company’s revenue from subscription and transaction fees, which are disaggregated by sales channel, and revenue from interest on funds held for customers (in thousands).


	Three Months Ended December 31,				Six Months Ended December 31,
	2022		2021		2022		2021
Small-to-midsize businesses, accounting firms and other	$	220,406	$	147,530	$	425,227	$	261,132
Financial institutions	10,689		7,989		20,479		11,945
Total subscription and transaction fees	231,095		155,519		445,706		273,077
Interest on funds held for customers	28,911		959		44,224		1,750
Total revenue	$	260,006	$	156,478	$	489,930	$	274,827

Deferred revenue

Fees from customers with which the Company has annual or multi-year contracts are generally billed in advance. These fees are initially recorded as deferred revenue and subsequently recognized as revenue as the performance obligation is satisfied.

During the three and six months ended December 31, 2022, the Company recognized $11.4 million and $25.7 million of revenue, respectively, that was included in the deferred revenue balance as of June 30, 2022.

Remaining performance obligations

The Company has performance obligations associated with commitments in customer contracts for future services that have not yet been recognized as revenue. As of December 31, 2022, the aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied), including deferred revenue, was approximately $133.5 million. Of the total remaining performance obligations, the Company expects to recognize approximately 75% within two years and 25% over the next three to five years thereafter. The Company determines remaining performance obligations at a point of time. Actual amounts and timing of revenue recognized may differ due to subsequent contract modifications, renewals and/or terminations.

Unbilled revenue

Unbilled revenue consists of revenue recognized that has not been billed to the customers yet. The unbilled revenue amounted to $12.4 million and $11.4 million as of December 31, 2022 and June 30, 2022, respectively.

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NOTE 3 – FAIR VALUE MEASUREMENT

The Company measures and reports its cash equivalents, short-term investments, funds held for customers that are invested in money market funds and marketable debt securities, and contingent consideration at fair value. Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

The fair value hierarchy defines a three-level valuation hierarchy for disclosure of fair value measurements as follows:

Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 — Inputs other than quoted prices included within Level 1 that are observable, unadjusted quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity for the related assets or liabilities and typically reflect management’s estimate of assumptions that market participants would use in pricing the assets or liabilities.

In determining fair value, the Company utilizes quoted market prices, or valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, and also considers counterparty credit risk in its assessment of fair value.

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The following tables set forth the fair value of assets and liabilities that were measured at fair value on a recurring basis based on the three-tier fair value hierarchy as of the dates presented (in thousands):


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Money market funds	$	1,227,764	$	—	$	—	$	1,227,764
Corporate bonds	—		19,121		—		19,121
U.S. treasury securities	19,950		—		—		19,950
	1,247,714		19,121		—		1,266,835
Short-term investments:
Corporate bonds	—		641,267		—		641,267
U.S. treasury securities	313,704		—		—		313,704
U.S. agency securities	—		26,119		—		26,119
Asset-backed securities	—		31,270		—		31,270
Certificates of deposit	—		54,178		—		54,178
	313,704		752,834		—		1,066,538
Funds held for customers:
Restricted cash equivalents:
Money market funds	29,061		—		—		29,061
Corporate bonds	—		237,682		—		237,682
	29,061		237,682		—		266,743
Short-term investments:
Corporate bonds	—		734,878		—		734,878
Certificates of deposit	—		426,189		—		426,189
Municipal bonds	—		635		—		635
Asset-backed securities	—		81,680		—		81,680
U.S. treasury securities	53,221		—		—		53,221
	53,221		1,243,382		—		1,296,603
Total assets measured at fair value	$	1,643,700	$	2,253,019	$	—	$	3,896,719

Liabilities
Contingent consideration(1)	$	—	$	—	$	10,794	$	10,794
Total liabilities measured at fair value	$	—	$	—	$	10,794	$	10,794

(1) The Company used the probability-weighted discounted cash flow method to estimate the contingent consideration. The significant inputs used in the fair value measurement of the contingent consideration are the probability of payout and discount rate. As these inputs are not based on observable market data, the liability represents a Level 3 measurement within the fair value hierarchy.

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	June 30, 2022
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Money market funds	$	1,435,111	$	—	$	—	$	1,435,111
Corporate bonds	—		11,430		—		11,430
	1,435,111		11,430		—		1,446,541
Short-term investments:
Corporate bonds	—		597,204		—		597,204
U.S. treasury securities	421,728		—		—		421,728
Asset-backed securities	—		51,406		—		51,406
Certificates of deposit	—		38,155		—		38,155
	421,728		686,765		—		1,108,493
Funds held for customers:
Restricted cash equivalents:
Money market funds	34,703		—		—		34,703
Corporate bonds	—		133,557		—		133,557
	34,703		133,557		—		168,260
Short-term investments:
Corporate bonds	—		807,685		—		807,685
Certificates of deposit	—		397,533		—		397,533
Municipal bonds	—		6,516		—		6,516
Asset-backed securities	—		69,912		—		69,912
U.S. treasury securities	3,072		—		—		3,072
	3,072		1,281,646		—		1,284,718
Beneficial interest derivative on card receivables sold	—		—		398		398
Total assets measured at fair value	$	1,894,614	$	2,113,398	$	398	$	4,008,410

There were no transfers of financial instruments between Level 1, Level 2, and Level 3 during the periods presented.

The fair values of the Company’s Level 1 instruments were derived from quoted market prices and active markets for these specific instruments.

The valuation techniques used to measure the fair values of Level 2 instruments were derived from non-binding market consensus prices that were corroborated with observable market data, quoted market prices for similar instruments, or pricing models.

The Company has $575.0 million and $1.15 billion in aggregate principal amount of its 0% convertible senior notes due in 2027 (2027 Notes) and in 2025 (2025 Notes, together with the 2027 Notes, the Notes), respectively, outstanding as of December 31, 2022. The Company carries the Notes at par value, less the unamortized debt discount and issuance costs in the accompanying condensed consolidated balance sheets. As of December 31, 2022, the estimated fair value of the 2027 Notes and 2025 Notes, which is presented for disclosure purposes only, was approximately $451.1 million and $1.18 billion, respectively. The fair value was based on a market approach, which represents a Level 2 valuation estimate. The market approach was determined based on the actual bids and offers of the Notes in an over-the-counter market as of the last day of trading prior to the end of the period.

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NOTE 4 – SHORT-TERM INVESTMENTS

Short-term investments consisted of the following as of the dates presented (in thousands):


	December 31, 2022
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Corporate bonds	$	644,658	$	70	$	(3,461)	$	641,267
U.S. treasury securities	315,325		21		(1,641)		313,705
Asset-backed securities	31,368		10		(108)		31,270
Certificates of deposit	54,178		—		—		54,178
U.S. agency securities	26,079		51		(11)		26,119
Total	$	1,071,607	$	152	$	(5,221)	$	1,066,538


	June 30, 2022
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Corporate bonds	$	601,987	$	3	$	(4,786)	$	597,204
U.S. treasury securities	424,644		1		(2,917)		421,728
Asset-backed securities	51,622		—		(216)		51,406
Certificates of deposit	38,155		—		—		38,155
Total	$	1,116,408	$	4	$	(7,919)	$	1,108,493

The amortized cost and fair value amounts include accrued interest receivable of $3.4 million and $3.0 million as of December 31, 2022 and June 30, 2022, respectively.

As of December 31, 2022, the fair value of the Company’s short-term investments that mature within one year and thereafter was $915.9 million and $150.7 million, respectively, or 86% and 14%, respectively, of the Company’s total short-term investments. As of June 30, 2022, the fair value of the Company’s short-term investments that mature within one year and thereafter was $961.8 million and $146.7 million, respectively, or 87% and 13%, respectively, of the Company’s total short-term investments.

As of December 31, 2022, approximately 210 out of approximately 350 investment positions were in an unrealized loss position. The following table presents gross unrealized losses and fair values for those investments that were in an unrealized loss position as of the dates presented (in thousands):


	December 31, 2022
	Fair value		Unrealized losses
Corporate bonds	$	354,715	$	(3,461)
U.S. treasury securities

Bill.com Holdings, Inc. [BILL] Filings
10-Q	[2023-02-03]
10-Q	[2022-11-04]
10-K	[2022-08-22]
10-Q	[2022-05-06]
10-Q	[2022-02-04]
10-Q	[2021-11-08]
10-K	[2021-08-30]
10-Q	[2021-05-07]
10-Q	[2021-02-05]
10-Q	[2020-11-06]
10-K	[2020-08-31]
S-1	[2020-06-08]
10-Q	[2020-05-08]
10-Q	[2020-02-11]
S-1	[2019-11-15]