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| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
2022
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| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware | 83-2661725 | |||||||
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| 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 | ||||||||||||
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Emerging growth company |
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104,840,348.
•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 • 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, recession, inflation 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 Value-Added Services Frequent Status Updates – We provide timely status updates of financial inflows and outflows by providing timely status of all transactions on a regular basis. 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. 2022. 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 an alternative provider. The focus of our program is working to prevent unauthorized access to the data of our customers and network members. To this end, our team of security practitioners work to identify and mitigate risks, implement best practices, and continue to evaluate ways to improve. solutions; to companies that offer industry-specific payment solutions. We manage the associated financial risk of processing billions in total payment volume through our proprietary risk models and rules. •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 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. 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. Information Security Humble – No ego; their best. We also provide a rigorous program for new people managers. In addition, each year we provide a curriculum of study, linked to business needs, leveraging external learning platforms. The curriculum offers coursework in inclusivity, resiliency and decision-making. We foster a performance and continuous feedback culture including a bi-annual formal feedback cadence in addition to engaging our employees regularly to hear and take action on their sentiment. We have built a unique culture that resonates with employees, as evidenced by our highly-competitive, low attrition rates. www.bill.com, www.getdivvy.com and www.invoice2go.com. •price our platform effectively to attract new customers and increase sales to our existing customers; •maintain the rates at which customers subscribe to and continue to use our platform; •maintain payment volume; •generate interest income on customer funds that we hold in trust; •provide our customers with high-quality customer support that meets their needs; •introduce our products to new markets outside of the U.S.; •serve SMBs across a wide cross-section of industries; •expand our target market beyond SMBs; •sales, marketing and customer success, including an expansion of our sales organization and new customer success initiatives; •our technology infrastructure, including systems architecture, scalability, availability, performance, and security; •product development, including investments in our product development team and the development of new products and new functionality for our AI-enabled platform; •acquisitions or strategic investments; •international expansion; •regulatory compliance and risk management; and 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, our revenue growth and operating results will be adversely affected. Further, in an effort to attract new customers, we may offer simpler, lower-priced products or promotions, which may reduce our profitability. affected. •product features, quality, and functionality; •data asset size and ability to leverage artificial intelligence to grow faster and smarter; •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 money transmitter licenses in all required U.S. and Canadian jurisdictions; •brand recognition; and losses. If we penalties. If we and financial condition. Many of the companies with which we compete for experienced personnel have greater resources than we do and can frequently offer such personnel substantially greater compensation than we can offer. If we fail to identify, attract, develop and integrate new personnel, or fail to retain and motivate our current personnel, our growth prospects would be adversely affected. act as a card program manager. •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 •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 U.S. addition, we or our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities. If we cannot maintain our company culture as we grow, our success and our business may be harmed. are subject to the risk that any or all of them might default under the Capped Calls. Our exposure to the credit risk of the option counterparties will not be secured by any collateral. Past global economic conditions have resulted in the actual or perceived failure or financial difficulties of many financial institutions. If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the Capped Calls with such option counterparty. Our exposure will depend on many factors but, generally, an increase in our exposure will be correlated to an increase in the market price and in the volatility of our common stock. In addition, upon a default by an option counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our common stock. We can provide no assurance as to the financial stability or viability of the option counterparties. •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; •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; •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; •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; future. LEGAL PROCEEDINGS MINE SAFETY DISCLOSURES MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES “BILL.” Year ended June 30, 2020 2019 2018 (in thousands, except per share data) Consolidated Statements of Operations Data: Revenue Subscription and transaction fees $ 136,405 $ 85,951 $ 56,992 Interest on funds held for customers 21,195 22,400 7,873 Total revenue 157,600 108,351 64,865 Cost of revenue (1) 39,144 29,918 19,372 Gross profit 118,456 78,433 45,493 Operating expenses Research and development (1) 53,405 28,924 17,986 Sales and marketing (1) 45,356 30,114 �� 19,290 General and administrative (1) 53,893 29,198 16,034 Total operating expenses 152,654 88,236 53,310 Loss from operations (34,198 ) (9,803 ) (7,817 ) Other income, net 3,160 2,333 632 Loss before provision for (benefit from) income taxes (31,038 ) (7,470 ) (7,185 ) Provision for (benefit from) income taxes 53 (156 ) 10 Net loss $ (31,091 ) $ (7,314 ) $ (7,195 ) Net loss per share attributable to common stockholders: Basic and diluted (2) $ (0.70 ) $ (0.94 ) $ (1.01 ) Weighted-average number of common shares used to compute net loss per share attributable to common stockholders: Basic and diluted (2) 44,106 7,797 7,155 Year ended June 30, 2020 2019 2018 Cost of revenue $ 1,257 $ 331 $ 78 Research and development 5,495 1,128 429 Sales and marketing 2,777 922 508 General and administrative 8,535 1,701 530 $ 18,064 $ 4,082 $ 1,545 June 30, 2020 2019 2018 (in thousands) Consolidated Balance Sheet Data: Cash, cash equivalents and short-term investments $ 697,617 $ 162,275 $ 92,268 Working capital 702,602 163,685 88,131 Funds held for customers 1,644,250 1,329,306 915,013 Total assets 2,404,015 1,526,298 1,029,283 Deferred revenue, current and non-current 8,513 5,255 5,208 Line of credit and bank borrowings 2,300 — 9,500 Customer fund deposits 1,644,250 1,329,306 915,013 Redeemable convertible preferred stock — 276,307 191,147 Accumulated deficit (148,747 ) (117,656 ) (110,342 ) Total stockholders' equity (deficit) 710,719 (102,657 ) (101,904 ) MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS financial operations. easily. fees. purchase arrangement. As of June 30, % Growth as of June 30, 2020 2019 2018 2020 2019 Number of customers 98,100 76,800 63,700 28 % 21 % Year ended June 30, % Growth Year ended June 30, 2020 2019 2018 2020 2019 Total Payment Volume (amounts in millions) $ 96,489 $ 71,282 $ 49,592 35 % 44 % Year ended June 30, % Growth Year ended June 30, 2020 2019 2018 2020 2019 Transactions processed 23,852,000 19,861,000 15,256,000 20 % 30 % year. Spending businesses that use Divvy's spend and expense management products and Invoice2go subscribers, and in each case that do not also use Bill.com products, are not included for purposes of measuring Number of Customers. (TPV) The TPV in the table above does not include transactions made by spending businesses using Divvy cards or by our Invoice2go subscribers. – 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 Year ended June 30, 2020 2019 2018 Non-GAAP gross profit (in thousands) $ 123,248 $ 82,154 $ 47,396 Non-GAAP gross margin 78.2 % 75.8 % 73.1 % Free cash flow (in thousands) $ (16,506 ) $ (8,248 ) $ (10,402 ) Non-GAAP Gross Profit and Non-GAAP Gross Margin Year ended June 30, 2020 2019 2018 Total revenue $ 157,600 $ 108,351 $ 64,865 Gross profit 118,456 78,433 45,493 Add: Stock-based compensation expense 1,257 331 78 Depreciation and amortization expense, amortization of deferred costs, and payroll taxes related to stock-based compensation expense 3,535 3,390 1,825 Non-GAAP gross profit $ 123,248 $ 82,154 $ 47,396 Gross margin 75.2 % 72.4 % 70.1 % Non-GAAP gross margin 78.2 % 75.8 % 73.1 % Year ended June 30, 2020 2019 2018 Revenue Subscription and transaction fees $ 136,405 $ 85,951 $ 56,992 Interest on funds held for customers 21,195 22,400 7,873 Total revenue 157,600 108,351 64,865 Cost of revenue (1) 39,144 29,918 19,372 Gross profit 118,456 78,433 45,493 Operating expenses Research and development (1) 53,405 28,924 17,986 Sales and marketing (1) 45,356 30,114 19,290 General and administrative (1) 53,893 29,198 16,034 Total operating expenses 152,654 88,236 53,310 Loss from operations (34,198 ) (9,803 ) (7,817 ) Other income, net 3,160 2,333 632 Loss before provision for (benefit from) income taxes (31,038 ) (7,470 ) (7,185 ) Provision for (benefit from) income taxes 53 (156 ) 10 Net loss $ (31,091 ) $ (7,314 ) $ (7,195 ) Year ended June 30, 2020 2019 2018 Cost of revenue $ 1,257 $ 331 $ 78 Research and development 5,495 1,128 429 Sales and marketing 2,777 922 508 General and administrative 8,535 1,701 530 $ 18,064 $ 4,082 $ 1,545 Year ended June 30, 2020 2019 2018 Revenue Subscription and transaction fees 87 % 79 % 88 % Interest on funds held for customers 13 % 21 % 12 % Total revenue 100 % 100 % 100 % Cost of revenue 25 % 28 % 30 % Gross margin 75 % 72 % 70 % Operating expenses Research and development 34 % 27 % 28 % Sales and marketing 29 % 27 % 29 % General and administrative 34 % 27 % 25 % Total operating expenses 97 % 81 % 82 % Loss from operations (22 )% (9 )% (12 )% Other income, net 2 % 2 % 1 % Loss before provision for (benefit from) income taxes (20 )% (7 )% (11 )% Provision for (benefit from) income taxes — — — Net loss (20 )% (7 )% (11 )% Year ended June 30, Change 2020 2019 Amount % Subscription and transaction fees $ 136,405 $ 85,951 $ 50,454 59 % Interest on funds held for customers 21,195 22,400 (1,205 ) (5 )% Total revenue $ 157,600 $ 108,351 $ 49,249 45 % Year ended June 30, Change 2020 2019 Amount % Cost of revenue $ 39,144 $ 29,918 $ 9,226 31 % Gross profit $ 118,456 $ 78,433 $ 40,023 51 % Gross margin 75 % 72 % Year ended June 30, Change 2020 2019 Amount % Research and development expenses $ 53,405 $ 28,924 $ 24,481 85 % Percentage of revenue 34 % 27 % Year ended June 30, Change 2020 2019 Amount % Sales and marketing expenses $ 45,356 $ 30,114 $ 15,242 51 % Percentage of revenue 29 % 27 % Year ended June 30, Change 2020 2019 Amount % General and administrative expenses $ 53,893 $ 29,198 $ 24,695 85 % Percentage of revenue 34 % 27 % Year ended June 30, Change 2020 2019 Amount % Other income, net $ 3,160 $ 2,333 $ 827 35 % Year ended June 30, Change 2020 2019 Amount % Provision for (benefit from) income taxes $ 53 $ (156 ) $ 209 134 % Year ended June 30, Change 2019 2018 Amount % Subscription and transaction fees $ 85,951 $ 56,992 $ 28,959 51 % Interest on funds held for customers 22,400 7,873 14,527 185 % Total revenue $ 108,351 $ 64,865 $ 43,486 67 % Year ended June 30, Change 2019 2018 Amount % Cost of revenue $ 29,918 $ 19,372 $ 10,546 54 % Gross profit $ 78,433 $ 45,493 $ 32,940 72 % Gross margin 72 % 70 % 2022. Our principal uses of cash are funding our operations and other working capital requirements, including the contractual and other obligations Year ended June 30, 2020 2019 (1) 2018 (1) Net cash provided by (used in): Operating activities $ (4,430 ) $ (3,949 ) $ (8,356 ) Investing activities (249,487 ) (96,106 ) (417,822 ) Financing activities 863,126 491,655 326,282 Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents $ 609,209 $ 391,600 $ (99,896 ) 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. corporate expenditures. short-term investments. Total Less than 1 year 1 ~ 3 years 3 ~ 5 years More than 5 years Operating lease commitments (1) $ 77,034 $ 1,192 $ 14,273 $ 14,962 $ 46,607 Partnership and other commitments (2) 25,629 13,629 4,500 4,000 3,500 Total $ 102,663 $ 14,821 $ 18,773 $ 18,962 $ 50,107 Off-Balance Sheet Arrangements June 30, 2022. to points earned is determined based on an estimate of the redemption cost and an estimate of expected redemption (net of breakage). Our estimated liability could fluctuate based on the changes on the input used to make our estimate. the market-based RSU award.: Our corporate investments are invested in cash and cash equivalents and highly liquid, investment-grade fixed income marketable securities. These assets are available for corporate operating purposes and mature within 24 months from 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. balances. fiscal 2022. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. June 30, 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 573,643 $ 90,306 Short-term investments 123,974 71,969 Accounts receivable, net 4,252 4,398 Unbilled revenue 6,549 4,795 Prepaid expenses and other current assets 26,781 12,326 Funds held for customers 1,644,250 1,329,306 Total current assets 2,379,449 1,513,100 Property and equipment, net 13,866 6,557 Other assets 10,700 6,641 Total assets $ 2,404,015 $ 1,526,298 LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable $ 3,478 $ 5,063 Accrued compensation and benefits 12,387 4,333 Other accrued and current liabilities 8,541 6,556 Redeemable convertible preferred stock warrant liabilities — 688 Deferred revenue 5,891 3,469 Line of credit borrowings 2,300 — Customer fund deposits 1,644,250 1,329,306 Total current liabilities 1,676,847 1,349,415 Deferred revenue, non-current 2,622 1,786 Other long-term liabilities 13,827 1,447 Total liabilities 1,693,296 1,352,648 Commitments and contingencies (Note 12) Redeemable convertible preferred stock: NaN authorized, issued and outstanding at June 30, 2020; 106,090 shares authorized, and 52,435 shares issued and outstanding at June 30, 2019; liquidation preference of $280,513 at June 30, 2019 — 276,307 Stockholders' equity (deficit): Preferred stock: $0.00001 par value per share; 10,000 shares authorized; NaN issued and outstanding — — Common stock; $0.00001 par value per share; 500,000 and 169,300 shares authorized; 79,635 and 8,154 shares issued and outstanding at June 30, 2020 and 2019, respectively 2 1 No-voting common stock: NaN authorized, issued and outstanding at June 30, 2020; 14,000 shares authorized, and NaN issued and outstanding at June 30, 2019 — — Additional paid-in capital 857,044 14,672 Accumulated other comprehensive income 2,420 326 Accumulated deficit (148,747 ) (117,656 ) Total stockholders' equity (deficit) 710,719 (102,657 ) Total liabilities, redeemable convertible preferred stock and stockholders' equity (deficit) $ 2,404,015 $ 1,526,298 Year ended June 30, 2020 2019 2018 Revenue Subscription and transaction fees $ 136,405 $ 85,951 $ 56,992 Interest on funds held for customers 21,195 22,400 7,873 Total revenue 157,600 108,351 64,865 Cost of revenue 39,144 29,918 19,372 Gross profit 118,456 78,433 45,493 Operating expenses Research and development 53,405 28,924 17,986 Sales and marketing 45,356 30,114 19,290 General and administrative 53,893 29,198 16,034 Total operating expenses 152,654 88,236 53,310 Loss from operations (34,198 ) (9,803 ) (7,817 ) Other income, net 3,160 2,333 632 Loss before provision for (benefit from) income taxes (31,038 ) (7,470 ) (7,185 ) Provision for (benefit from) income taxes 53 (156 ) 10 Net loss $ (31,091 ) $ (7,314 ) $ (7,195 ) Net loss per share attributable to common stockholders: Basic and diluted $ (0.70 ) $ (0.94 ) $ (1.01 ) Weighted-average number of common shares used to compute net loss per share attributable to common stockholders: Basic and diluted 44,106 7,797 7,155 Year ended June 30, 2020 2019 2018 Net loss $ (31,091 ) $ (7,314 ) $ (7,195 ) Other comprehensive income (loss): Net unrealized gain (loss) on investments in available-for-sale securities, before tax 2,094 679 (177 ) Income tax — (176 ) — Comprehensive loss $ (28,997 ) $ (6,811 ) $ (7,372 ) Redeemable Accumulated convertible Additional other Total preferred stock Common stock paid-in comprehensive Accumulated stockholders' Shares Amount Shares Amount capital income deficit equity (deficit) Balance at June 30, 2017 41,408 $ 135,342 6,969 $ 1 $ 6,314 $ — $ (103,147 ) $ (96,832 ) Issuance of Series G redeemable convertible preferred stock, net of issuance costs 5,723 55,805 — — — — — — Issuance of common stock upon exercise of stock options and vesting of early-exercised stock options — — 376 — 755 — — 755 Employee stock-based compensation — — — — 1,545 — — 1,545 Other comprehensive loss — — — — — (177 ) — (177 ) Net loss — — — — — — (7,195 ) (7,195 ) Balance at June 30, 2018 47,131 191,147 7,345 1 8,614 (177 ) (110,342 ) (101,904 ) Issuance of Series H redeemable convertible preferred stock, net of issuance costs 5,304 85,160 — — — — — — Issuance of common stock upon exercise of stock options and vesting of early-exercised stock options — — 809 — 1,702 — — 1,702 Stock-based compensation — — — — 4,082 — — 4,082 Issuance of stock warrants — — — — 274 — — 274 Other comprehensive income, net of tax — — — — — 503 — 503 Net loss — — — — — — (7,314 ) (7,314 ) Balance at June 30, 2019 52,435 276,307 8,154 1 14,672 326 (117,656 ) (102,657 ) Conversion of redeemable convertible preferred stock to common stock upon initial public offering (52,435 ) (276,307 ) 52,435 1 276,306 — — 276,307 Reclassification of redeemable convertible preferred stock warrant liabilities to additional paid-in capital upon initial public offering — — — — 1,405 — — 1,405 Issuance of common stock upon initial public offering, net of underwriting discounts and commissions and other offering costs — — 11,297 — 225,481 — — 225,481 Issuance of common stock upon follow-on public offering, net of underwriting discounts and commissions and other offering costs — — 4,330 — 307,512 — — 307,512 Issuance of common stock upon exercise of stock options and release of restricted stock units — — 3,298 — 13,460 — — 13,460 Issuance of common stock upon exercise of stock warrants — — 121 — 144 — — 144 Stock-based compensation — — — — 18,064 — — 18,064 Other comprehensive income — — — — — 2,094 — 2,094 Net loss — — — — — — (31,091 ) (31,091 ) Balance at June 30, 2020 — $ — 79,635 $ 2 $ 857,044 $ 2,420 $ (148,747 ) $ 710,719 Year ended June 30, 2020 2019 (1) 2018 (1) Cash flows from operating activities: Net loss $ (31,091 ) $ (7,314 ) $ (7,195 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 4,257 3,154 2,314 Stock-based compensation 18,064 4,082 1,545 Accretion of discount on investments in marketable debt securities (3,815 ) (1,319 ) — Revaluation of warrant liabilities and forfeiture of warrants 717 25 182 Issuance of warrants — 274 — Deferred income taxes — (176 ) — Changes in assets and liabilities: Accounts receivable (1,054 ) (2,098 ) (279 ) Unbilled revenue (554 ) (1,748 ) (503 ) Prepaid expenses and other current assets (10,434 ) (5,690 ) (3,477 ) Other assets (4,928 ) (995 ) (2,828 ) Accounts payable (1,596 ) 3,171 (563 ) Accrued and other current liabilities 9,755 4,336 1,642 Other long-term liabilities 12,991 302 35 Deferred revenue 3,258 47 771 Net cash used in operating activities (4,430 ) (3,949 ) (8,356 ) Cash flows from investing activities: Purchases of corporate and customer fund short-term investments (1,088,611 ) (830,622 ) (726,788 ) Proceeds from maturities of corporate and customer fund short-term investments 806,000 694,303 290,828 Proceeds from sale of corporate and customer fund short-term investments 46,159 54,715 16,498 (Increase) decrease in other receivables included in funds held for customers (959 ) (10,203 ) 3,686 Purchases of property and equipment (11,437 ) (2,743 ) (1,313 ) Capitalization of internal-use software costs (639 ) (1,556 ) (733 ) Net cash used in investing activities (249,487 ) (96,106 ) (417,822 ) Cash flows from financing activities: Proceeds from issuance of common stock upon initial public offering, net of underwriting discounts and commissions and other offering costs 225,481 — — Proceeds from issuance of common stock upon follow-on public offering, net of underwriting discounts and commissions and other offering costs 308,176 — — Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs — 85,160 55,805 Increase in customer fund deposits liability 314,944 414,293 263,671 Proceeds from line of credit and bank borrowings 2,300 — 9,500 Payments on bank borrowings — (9,500 ) (3,387 ) Proceeds from exercise of stock options 12,232 1,702 693 Proceeds from exercise of stock warrants 144 — — Payments of deferred debt issuance costs (151 ) — — Net cash provided by financing activities 863,126 491,655 326,282 Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents 609,209 391,600 (99,896 ) Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of year 983,168 591,568 691,464 Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of year $ 1,592,377 $ 983,168 $ 591,568 Supplemental disclosure of cash flow information: Cash paid for interest $ 174 $ 872 $ 436 Noncash investing and financing activities: Payable on purchases of property and equipment $ — $ — $ 1,908 Conversion of redeemable convertible preferred stock into common stock upon initial public offering $ 276,307 $ — $ — Reclassification of redeemable convertible preferred stock warrant liabilities into additional paid-in capital upon initial public offering $ 1,405 $ — $ — Receivable from broker-assisted exercises of stock options $ 1,228 $ — $ — Accrued offering and debt issuance costs $ 664 $ 470 $ — Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents within the consolidated balance sheets to the amounts shown in the consolidated statements of cash flows above: Cash and cash equivalents $ 573,643 $ 90,306 $ 22,401 Restricted cash included in other current assets 35 256 256 Restricted cash included in other assets — 550 — Restricted cash and restricted cash equivalents included in funds held for customers 1,018,699 892,056 568,911 Total cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period $ 1,592,377 $ 983,168 $ 591,568 June 30, 2019 Level 1 Level 2 Level 3 Total Assets Cash equivalents: Money market funds $ 13,718 $ — $ — $ 13,718 Short-term investments: U.S. treasury securities 64,758 — — 64,758 Corporate bonds — 4,787 — 4,787 Asset-backed securities — 2,424 — 2,424 64,758 7,211 — 71,969 Funds held for customers: Restricted cash equivalents 424,219 — — 424,219 Corporate bonds — 302,070 — 302,070 Certificates of deposit — 105,377 — 105,377 U.S. treasury securities 30,960 — — 30,960 455,179 407,447 — 862,626 Total assets measured at fair value $ 533,655 $ 414,658 $ — $ 948,313 Liabilities Redeemable convertible preferred stock warrant liabilities $ — $ — $ 688 $ 688 Total liabilities measured at fair value $ — $ — $ 688 $ 688 approximately $446.4 million and $1.19 billion, respectively, as of June 30, 2022. The June 30, 2020 2019 Fair value, beginning of year $ 688 $ 663 Change in fair value 717 319 Reclassification to additional paid-in capital (1,405 ) — Forfeiture of warrants — (294 ) Fair value, end of year $ — $ 688 June 30, 2020 Amortized cost Gross unrealized gains Gross unrealized losses Fair value U.S. treasury securities $ 28,281 $ 88 $ (1 ) $ 28,368 Corporate bonds 70,781 360 (10 ) 71,131 Asset-backed securities 24,333 142 — 24,475 $ 123,395 $ 590 $ (11 ) $ 123,974 June 30, 2019 Amortized cost Gross unrealized gains Fair value U.S. treasury securities $ 64,683 $ 75 $ 64,758 Corporate bonds 4,787 — 4,787 Asset-backed securities 2,424 — 2,424 $ 71,894 $ 75 $ 71,969 short-term investments. year and thereafter was $495.8 million and $159.5 million, respectively, or 76% and 24%, respectively, of the Company’s total short-term investments. June 30, 2020 Fair value Unrealized losses U.S. treasury securities $ 2,798 $ (1 ) Corporate bonds 9,258 (10 ) Total $ 12,056 $ (11 ) June 30, 2020 2019 Restricted cash and other receivables $ 586,893 $ 470,971 Restricted cash equivalents 433,709 424,219 Corporate bonds 493,879 302,070 Certificates of deposit 85,953 105,377 U.S. treasury securities 48,952 30,960 Total funds held for customers 1,649,386 1,333,597 Less - income earned by the Company included in other current assets (5,136 ) (4,291 ) Total funds held for customers, net of income earned by the Company $ 1,644,250 $ 1,329,306 June 30, 2020 Amortized cost Gross unrealized gains Gross unrealized losses Fair value Corporate bonds $ 491,950 $ 1,936 $ (7 ) $ 493,879 Certificates of deposit 85,841 115 (3 ) 85,953 U.S. treasury securities 48,949 4 (1 ) 48,952 Total $ 626,740 $ 2,055 $ (11 ) $ 628,784 June 30, 2019 Amortized cost Gross unrealized gains Gross unrealized losses Fair value Corporate bonds $ 301,755 $ 327 $ (12 ) $ 302,070 Certificates of deposit 105,297 81 (1 ) 105,377 U.S. treasury securities 30,927 33 — 30,960 Total $ 437,979 $ 441 $ (13 ) $ 438,407 See Note 4 for additional information about the fair value measurement of short-term investments. year and approximately 3% or $31.9 million mature thereafter. June 30, 2020 Fair value Unrealized losses Corporate bonds $ 31,785 $ (7 ) Certificates of deposit 20,006 (3 ) U.S. treasury securities 14,990 (1 ) Total $ 66,781 $ (11 ) June 30, 2019 Fair value Unrealized losses Corporate bonds $ 46,065 $ (12 ) Certificates of deposit 12,027 (1 ) Total $ 58,092 $ (13 ) June 30, 2022 and 2021 because they were not material. June 30, 2020 2019 Computers, software and equipment $ 11,262 $ 10,341 Capitalized software 4,026 3,387 Furniture and fixtures 3,116 1,859 Leasehold improvements 9,257 2,435 Property and equipment, gross 27,661 18,022 Less: accumulated depreciation and amortization (13,795 ) (11,465 ) Property and equipment, net $ 13,866 $ 6,557 June 30, 2020 2019 Accrued sales and use tax $ 2,976 $ 2,881 Deferred rent and lease incentives 1,107 494 Accrued license fees 473 131 Non-sufficient funds reserve 260 147 Current portion of a long-term payable for a purchase of software 613 512 Other 3,112 2,391 Total $ 8,541 $ 6,556 Shares authorized Shares issued and outstanding Liquidation preference Gross proceeds Series A 5,400 2,700 $ 2,106 $ 2,106 Series B 21,733 10,815 15,790 15,790 Series C 9,197 4,599 8,500 8,500 Series D 12,425 6,200 15,500 15,500 Series E 17,512 8,756 35,200 35,200 Series E-1 1,393 697 2,800 2,800 Series F 9,756 4,878 29,750 29,750 Series F-1 82 41 250 250 Series G 16,892 8,446 82,500 82,500 Series H 11,700 5,303 88,117 88,117 Total 106,090 52,435 $ 280,513 $ 280,513 board of directors. , or a number as may be determined by the Company’s board of directors. In addition, the following shares of common stock from the 2016 Plan and the 2006 Plan will be available for grant and issuance under the 2019 Plan: •shares issuable upon the exercise of options or subject to other awards under the 2016 Plan or 2006 Plan that cease to be subject to such options or other awards by forfeiture or after the effective date of the 2019 Plan; and The total number of common shares available for issuance under the Equity Incentive Plans was replaced the outstanding stock options of Invoice2go and Divvy upon their acquisition. The assumed equity awards will be settled in shares of the Company’s common stock and will retain the terms and conditions under which they were originally granted. No additional equity awards will be granted under equity incentive plans of the acquired companies. 2022. Number of shares (in thousands) Weighted average exercise price per share Weighted average remaining contractual term (in years) Aggregate intrinsic value (in thousands) Outstanding at June 30, 2019 10,027 $ 5.90 8.37 $ 75,223 Granted 2,937 $ 18.78 Exercised (3,291 ) $ 4.09 Cancelled / forfeited / expired (654 ) $ 8.83 Outstanding at June 30, 2020 9,019 $ 10.53 8.26 $ 718,563 Vested and expected to vest at June 30, 2020 (1) 8,135 $ 10.34 8.21 $ 649,756 Vested and exercisable at June 30, 2020 2,584 $ 6.23 7.12 $ 217,024 Year ended June 30, 2020 2019 2018 Expected term (in years) 6.25 6.25 6.25 Expected volatility 50.0% to 100.6% 46.0% to 51.0% 45.0% to 55.1% Risk-free interest rate 0.35% to 1.88% 2.19% to 2.89% 2.05% to 2.89% Expected dividend yield 0% 0% 0% Number of shares (in thousands) Weighted average grant date fair value Nonvested at June 30, 2019 — $ — Granted 1,153 $ 66.11 Vested (8 ) $ 62.78 Cancelled / forfeited / expired (4 ) $ 58.83 Nonvested at June 30, 2020 1,141 $ 66.16 million, respectively. Year ended June 30, 2020 2019 2018 Cost of revenue $ 1,257 $ 331 $ 78 Research and development 5,495 1,128 429 Sales and marketing 2,777 922 508 General and administrative 8,535 1,701 530 Total $ 18,064 $ 4,082 $ 1,545 Number of warrants issued and outstanding Weighted average exercise price Expiration date Series B redeemable convertible preferred stock warrants 51 $ 1.46 January 2020 Series D redeemable convertible preferred stock warrants 12 $ 2.50 May 2020 Common stock warrants 63 $ 6.40 �� April 2024 Total 126 June 30, 2019 2018 Expected term (in years) 0.58 1.04 Expected volatility 51.0 % 46.0 % Risk-free interest rate 2.0 % 2.3 % Expected dividend yield 0 % 0 % The Company has an agreement with a customer to issue warrants for up to 5.6 million shares of the Company’s common stock at an exercise price of $4.50 per share over a period of five years, ending in September 2023. Issuance of the warrants is contingent upon certain performance conditions and subject to certain limits. As of June 30, Year ended June 30, 2020 2019 2018 Interest income $ 4,092 $ 3,207 $ 1,058 Interest expense (229 ) (825 ) (427 ) Revaluation of warrant liabilities and forfeiture of warrants (717 ) — — Other 14 (49 ) 1 Total $ 3,160 $ 2,333 $ 632 Year ended June 30, 2020 2019 2018 Domestic $ (31,038 ) $ (7,470 ) $ (7,185 ) Foreign 0 0 0 Total $ (31,038 ) $ (7,470 ) $ (7,185 ) Year ended June 30, 2020 2019 2018 Current: Federal $ 0 $ 0 $ 0 State 53 20 10 Foreign 0 0 0 Total current 53 20 10 Deferred: — — — Federal — (142 ) — State — (34 ) — Foreign 0 0 0 Total current — (176 ) — Provision for (benefit from) income taxes $ 53 $ (156 ) $ 10 Year ended June 30, 2020 2019 2018 Expected benefit at U.S. federal statutory rate $ (6,518 ) $ (1,569 ) $ (1,976 ) Stock-based compensation (31,047 ) 390 297 Federal and state R&D credits, net of unrecognized benefit (6,411 ) (2,111 ) (909 ) Deferred tax asset re-measurement due to Tax Reform — — 12,227 Change in valuation allowance 43,716 3,029 (9,753 ) Other 313 105 124 Provision for (benefit from) income taxes $ 53 $ (156 ) $ 10 June 30, 2020 2019 Deferred tax assets: Accruals and reserves $ 3,933 $ 1,631 Deferred revenue 904 84 Property and equipment 128 — Stock-based compensation 2,542 700 Net operating loss carryforwards 68,694 26,690 Research and development credits 12,226 5,649 Total deferred tax assets before valuation allowance 88,427 34,754 Valuation allowance (85,569 ) (33,253 ) Deferred tax assets $ 2,858 $ 1,501 Deferred tax liabilities: Deferred contract costs $ (2,182 ) $ (1,229 ) Property and equipment — (143 ) Other (676 ) (129 ) Total deferred tax liabilities $ (2,858 ) $ (1,501 ) Net deferred tax assets (liabilities) $ 0 $ 0 foreign subsidiaries. June 30, 2020 2019 2018 Balance at the beginning of the year $ 2,692 $ 1,457 $ 835 Additions based upon tax positions related to the current year 3,078 1,028 — Additions based upon tax positions related to the prior year 17 207 622 Balance at the end of the year $ 5,787 $ 2,692 $ 1,457 Future minimum lease payments Fiscal years ending June 30: Amount 2021 $ 1,192 2022 7,029 2023 7,244 2024 7,458 2025 7,504 Thereafter 46,607 Total $ 77,034 pay fees over the term of the respective agreements. Future payments under these other agreements as of June 30, Fiscal years ending June 30: Amount 2021 $ 13,000 2022 2,000 2023 2,000 2024 2,000 2025 2,000 Thereafter 3,500 Total $ 24,500 Year ended June 30, 2020 2019 2018 Numerator: Net loss attributable to common stockholders $ (31,091 ) $ (7,314 ) $ (7,195 ) Denominator: Weighted-average shares used to compute net loss per share attributable to common stockholders Basic and diluted 44,106 7,797 7,155 Net loss per share attributable to common stockholders: Basic and diluted $ (0.70 ) $ (0.94 ) $ (1.01 ) June 30, 2020 2019 2018 Stock options 9,019 10,027 5,616 Restricted stock units 1,141 — — Warrants to purchase common stock — 63 — Convertible redeemable preferred stock — 52,435 47,131 Warrants to purchase redeemable convertible preferred stock — 63 115 Total 10,160 62,588 52,862 Three months ended June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019 December 31, 2018 September 30, 2018 Revenue Subscription and transaction fees $ 38,801 $ 36,092 $ 32,964 $ 28,548 $ 25,225 $ 22,112 $ 20,444 $ 18,170 Interest on funds held for customers 3,309 5,138 6,116 6,632 6,459 6,132 5,555 4,254 Total revenue 42,110 41,230 39,080 35,180 31,684 28,244 25,999 22,424 Cost of revenue 10,100 10,110 9,787 9,147 8,488 7,914 7,175 6,341 Gross profit 32,010 31,120 29,293 26,033 23,196 20,330 18,824 16,083 Operating expenses Research and development 14,929 13,969 12,992 11,515 9,447 7,899 6,154 5,424 Sales and marketing 11,796 11,802 11,491 10,267 9,949 7,365 6,856 5,944 General and administrative 15,546 15,064 12,748 10,535 8,953 7,904 6,404 5,937 Total operating expenses 42,271 40,835 37,231 32,317 28,349 23,168 19,414 17,305 Loss from operations (10,261 ) (9,715 ) (7,938 ) (6,284 ) (5,153 ) (2,838 ) (590 ) (1,222 ) Other income, net 764 1,397 360 639 596 734 686 317 (Loss) income before provision for (benefit from) income taxes (9,497 ) (8,318 ) (7,578 ) (5,645 ) (4,557 ) (2,104 ) 96 (905 ) Provision for (benefit from) income taxes 1 1 0 51 (59 ) (70 ) (6 ) (21 ) Net (loss) income $ (9,498 ) $ (8,319 ) $ (7,578 ) $ (5,696 ) $ (4,498 ) $ (2,034 ) $ 102 $ (884 ) Net (loss) income per share attributable to common stockholders, basic and diluted $ (0.13 ) $ (0.11 ) $ (0.34 ) $ (0.69 ) $ (0.56 ) $ (0.26 ) $ 0 $ (0.12 ) CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE CONTROLS AND PROCEDURES As permitted by SEC guidance for newly acquired businesses, management’s assessment of our internal control over financial reporting did not include an assessment of internal control over financial reporting of Invoice2go. Invoice2go accounted for approximately 5% of total assets as of June 30, 2022 and 5% of revenues and 6% of net loss for the fiscal year ended on June 30, 2022. Divvy. The material weakness that we identified occurred due to a lack of sufficient precision in the performance of reviews of the analyses supporting the purchase price allocation accounting and other acquisition related entries and a lack of adequate documentation to provide evidence of operating effectiveness of an associated management review control. We maintain a Code of Business Conduct and Ethics that incorporates our code of ethics applicable to all employees (including executive officers), independent contractors, and board of directors of the Company. Our Code of Business Conduct and Ethics is published on our Investor Relations website at investor.bill.com under “Governance.” We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendments to, or waiver from, a provision of our Code of Business Conduct and Ethics by posting such information on the website address and location specified above. EXECUTIVE COMPENSATION SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE PRINCIPAL ACCOUNTANT FEES AND SERVICES See “Index to Consolidated Financial Statements” in Part II, Item 8 of this Annual Report on Form 10-K. (2)Financial Statement Schedules: (3)Exhibits Incorporated by Reference Exhibit Number Description Form File No. Exhibit Number Filing Date Filed Herewith 3.1 10-Q 001-39149 3.1 02/11/2020 3.2 10-Q 001-39149 3.2 02/11/2020 4.1 S-1/A 333-234730 4.1 12/2/2019 4.2 S-1 333-234730 4.2 11/15/2019 10.1† S-1 333-234730 10.1 11/15/2019 10.2† 2006 Equity Incentive Plan, as amended, and forms of equity agreements thereunder. S-1 333-234730 10.2 11/15/2019 10.3† 2016 Equity Incentive Plan, as amended, and forms of equity agreements thereunder. S-1 333-234730 10.3 11/15/2019 10.4† 2019 Equity Incentive Plan, and forms of equity agreements thereunder. S-1/A 333-234730 10.4 12/2/2019 10.5† 2019 Employee Stock Purchase Plan, and forms of subscription agreement thereunder. S-1/A 333-234730 10.5 12/2/2019 10.6† Form of Change in Control and Severance Agreement for executive officers. S-1/A 333-234730 10.6 12/2/2019 10.7† Offer Letter, by and between the Registrant and René Lacerte. S-1/A 333-234730 10.7 12/2/2019 10.8† Offer Letter, by and between the Registrant and John Rettig. S-1/A 333-234730 10.8 12/2/2019 10.9† S-1/A 333-234730 10.9 12/2/2019 10.10 S-1 333-234730 10.10 11/15/2019 10.11 S-1 333-234730 10.11 11/15/2019 10.12 S-1 333-234730 10.12 11/15/2019 10.13 10-Q 001-39149 10.6 2/11/2020 X X 23.1 X 31.1 X 31.2 X 32.1* X 32.2* X 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. X 101.SCH Inline XBRL Taxonomy Extension Schema Document X 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document X 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) X †Indicates management contract or compensatory plan. /s/ René Lacerte (Date) René Lacerte Chief Executive Officer (Principal Executive Officer) /s/ John Rettig (Date) John Rettig (Principal Financial Table of ContentsPagePART IPage Item 1.3154748484849515376112112112Item 9C. 130 PART III113113113113113114116Table of Contents2020, 20192022, 2021, and 20182020 are referred to herein as fiscal 2020,2022, fiscal 20192021, and fiscal 2018,2020, respectively.•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;the COVID-19 pandemic, and its impact on our employees, customers, strategic partners, vendors, results of operations, liquidity, and financial condition; strategic partners;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 employees;the increased expenses associated with being a public company; andthe future market prices of our common stock.1Additionally, the full impact of the COVID-19 pandemic is inherently uncertain at the time of this report. In light of these risks,"our" and "Bill.com""our" refer to Bill.com Holdings, Inc. and its wholly owned subsidiaries, including Bill.com, LLC (Bill.com), DivvyPay, LLC (Divvy), Invoice2go, LLC (Invoice2go), and Cimrid Pty, Ltd (Cimrid), unless the context requires otherwise.offers these value-added services: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.Two-Way Sync with Leading Accounting Systems – Our platform automatically synchronizes customers, suppliers, general ledger accounts, and transactions with an SMB’s accounting system to automate reconciliation. We are integrated with several of the most popular business accounting software applications, including QuickBooks, Oracle NetSuite, and Sage Intacct. Our two-way synchronization capabilities virtually eliminate double data-entry, as our platform and the customer’s accounting software are continuously keeping each other updated. 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 Oracle NetSuite and Sage Intacct into our platform. Users can compare POs and invoices on one screen, then route bills for approval and payment seamlessly in the same workflow. 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.• can see who has approved an invoice and what approvals remain, the status of each payment, and the date transactions are expected to clear.6•Treasury Services – Our platform integrates advanced treasury services functionality from commercial banks, tools that are normally either not offered to or are too costly for SMBs. 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 our customers to confirm payment receipt and facilitate research.•Custom User Roles – Our platform enables customers to define custom user roles that are unique to their organizations. These roles can be used to expand or limit each user’s access to the platform and core financial operations functions. For example, a customer can temporarily enable its auditors or tax preparers to access our platform using a custom role that allows them to view source documents in support of the professional services they are providing, but not have access to other confidential documents, invoices, or payment information.•Document Discovery – With our advanced document management capabilities, a customer can easily search for an uploaded document and search its data elements, regardless of how old it is, or how long it has been in our system. Our customers utilize this feature when deciding whether to pay a given bill, re-issue an invoice, or determine who authorized a certain payment. It’s quick, easy, and eliminates the need for filing cabinets.Our Data AssetThe payment activity of our over 98,000 customers and over 2.5 million network members as of June 30, 2020, paired with hundreds of millions of documents, bills, and invoices processed through our platform, provides us with a unique data asset. This asset has allowed us to enhance the machine learning algorithms that power ourbuild 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. Our system continues to learn with each invoice uploadeddocument processed and each new member that joins our network.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.offrom the need to solicit or share bank account and routing numbers with each trading partner individually. The process of adding bank account details to our platform is easy 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 accounts payable and accounts receivable has allowed us to build a robustover 2.5approximately 4.7 million Bill.com network members as of June 30, 2020. We believe this is the fundamental power of our network.7Technology and ArchitectureWe have built a modern technology platform that serves as the foundation for a highly scalable and extensible SaaS solution. Our foundation is built upon sophisticated infrastructure, app servers, and databases. Additionally, we have integrated a powerful AI-enabled machine learning engine, payment and risk engine, document management services, and workflow management. Together, these services form our platform, which serves our customers and can be adapted to support new strategic partners and future technology integrations.Our proprietary technology includes the following:Artificial Intelligence TechnologyIVA eliminates most manual data entry from invoices received electronically via email or uploaded by customers. Leveraging our machine-learning capabilities, IVA pre-populates the key fields needed to process an invoice in accounts payable, including: supplier name, dollar amount, invoice number, invoice date, and due date. We learn from our customers’ prior transactions and suggest the appropriate general ledger code and the appropriate people to include in approval workflows. As a result, invoices are presented to our customers, pre-populated and pre-processed, ready for a quick confirmation review and then routed through the approval process.IVA reduces a customer’s data entry burden, reduces data entry errors, and delivers additional insights to streamline back-office workflows. By gleaning payment details from the invoice, our intelligent platform can send payments using the most efficient means accepted by their suppliers. Our system continues to learn with each invoice uploaded and each new customer, supplier, or client that joins our network. This virtuous cycle of learning powers a network effect that delivers customer delight, intelligent insights, and business growth.Mobile CapabilitiesIntegrated, robust mobile functionality is a key requirement for business users as more daily back-office tasks migrate away from the office and the desktop. Our mobile-native app, available in both iOS and Android, is easy to adopt and use. Through our app, our customers can manage their transaction workflows, send an invoice, or make payments on-the-go.Partner IntegrationsWe provide our financial institution strategic partners a technology platform that enables a simple, white-label integration with their existing business banking services. We deliver single sign-on, multi-factor authentication, integrated provisioning and entitlement of new accounts, as well as integration with required compliance systems. Transactions are synchronized automatically between the financial institution’s platform and ours, keeping the customer’s view current and consistent.In addition to our white-labeled solution, we support a broad range of partners and customers with our platform APIs. These APIs allow our partners to integrate our platform seamlessly into their solutions, create web or mobile apps that integrate with ours, or leverage our payments capabilities. 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.8ACH files,ACH-based payments, and execute wire transfers. We receive incoming files daily that include cleared check information, check images, and ACH returns. Our payments engine handles all aspects of payment file transfers, exception file handling, and required payment status reporting. We have redundancy across our core payment methods such that if there is an outage with one of our payment providers is unable to process a file on a given day, we have the option to re-route the file to another provider, preventing any interruption in payment processing services.Our operations dashboard provides a full view of the current status of all payment processes, such as disbursement/funding, settlement, voids, returns, and ACH status. Notifications, alerts, and exceptions are sent to our network operations center, payment operations, and customer support teams soprocessor, we can proactively monitor transactions on behalf of our customers throughout the business day and during off-hours. The data provides a view into customer transactions and operational status of various payment processes, enabling usdirect payments to effectively manage risk exposure.customers, users,data and payments to ensure that we are safeguarding our customers, their suppliers and clients, and our company. At new account set-up, we verify that the customer exists, that the person who enrolled the customer exists, and that the customer’s business is in good standing. When a bank account is added to the platform, we validate that the bank account is held at a United States-domiciledU.S.-domiciled financial institution, is associated with the organization adding the account, and is in good standing.95 individualmany unique data elements to score transactions. Those that score above our thresholds are routed to trained risk agents for manual review. Agents have the latitude to contact customers to gather further information, or if a financial risk is imminent, to prevent funds from leaving our system until any suspicious activity can be resolved.accurate and insightful as our datasetdata set gets larger and our AI-enabled risk engine gets smarter. 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 total payment volume, ourTPV, fraud and credit loss rates for our Bill.com based payment services were negligible,nominal, less than one basis point for each of fiscal 2020, 20192022, 2021 and 2018.Infrastructure2020. As a percentage of total card payment volume transacted by spending businesses that use Divvy cards, fraud and OperationsOur technology architecture supports a distributed deployment footprint across multiple data centerscredit loss rate was approximately 37 basis points for fiscal 2022. See “regions in a public cloud environment. We employ enterprise-grade databases with real-time replication between data centers to ensure minimal data lossAnalysis of Financial Condition and maximum availability. We have purposefully engineered for redundancy and fault tolerance; in the eventResults of a production incident, we can failover between data centers with minimal data loss. Since 2017, we have been performing a full-site failover, where we seamlessly move from our primary production site to our hot back-up site, and run in the back-up siteOperations - Key Business Metrics” for a full week, before reverting back todetailed discussion of our primary location.9Table of Contentsbusiness metrics.We designed our platform with multiple layers of redundancy and fault tolerance to guard against data loss while delivering high availability and low latency. Data is replicated in real-time between databases in our two primary data centers. Incremental backups are performed hourly and full backups are performed daily. These backups are transmitted electronically and hosted in a third data center. No tapes are used for transmission or storage, which eliminates a common source of data loss. Data is encrypted during transmission and at rest when stored in our system.We have begun transitioning all production infrastructure to Amazon Web Services, which will enhance our ability to scale quickly and efficiently.strategic partners.Our security program consists of the following:•Organizational security – including personnel security, security and privacy training, a team of dedicated security professionals, policies and standards, separation of duties, regular audits, compliance activities, and third-party assessments;•Secure by design principles – by which we assess the security risk of each software development project according to our secure development lifecycle and create a set of requirements that must be met before the resulting change may be released to production; and•Public bug bounty program – to facilitate responsible disclosure of potential security vulnerabilities identified by external researchers and reward them for their verified findings.enterprises,enterprises; to smaller niche providers of point solutions that focus exclusively on one of the many aspects of our business: document management, workflow management, accounts payable solutions, spend and expense management, card issuance, or accounts receivable solutions, or electronic bill presentment and payment.10unified financial back-office solution that handles accounts payable, accounts receivable, and payment servicesall of these core cash flow activities end-to-end. Our extensive investment in building a robust, fully-integrated two-way sync with popular accounting software providers is well-regarded in the industry. With respect to the domestic payments that comprise the bulk of our business, we disburse and collect funds on behalf of our customers through our proprietary payments engine.•Product features, quality, and functionality;Data asset size and ability to leverage artificial intelligence to grow faster and smarter;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;Brand recognition; andPricing and total cost of ownership.and& Developmentservices through our platform.services. Our research and developmenttechnology organization consists of engineering, product, and design teams. These teams are responsible for the design, development, and testing of our applications. We focus our efforts on developing new functionality and further enhancing the usability, reliability, and performance of existing applications.11TableAs part of Contentsour marketing efforts for our spend and expense management solution, we offer a card rewards program to drive card adoption, incent card usage, and drive card loyalty with spending businesses. Under the card rewards program, spending businesses accounts payable and accounts receivable transactions per month. We use what we learn to continuously improve the platform and the customer experience. We have developed an efficient support model. For instance, we offer online chat support to respond to customers within seconds of their initial outreach. We also leverage our machine learning tools to anticipate customer issues and provide in-app, real-time suggestions and support.rapidly evolvingrapidly-evolving regulatory environment. Most states inUnited States require a licensepayment services we offer we are required to be licensed to offer money transmission services such as the payment services that we offer.in most U.S. states. We have procured and maintainmaintained money transmitter licenses in 5150 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.Network (FinCEN). 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 inspectionregulatory examinations by state and federal regulatory agencies.regulations.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. 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. We have implemented and are expanding an AML and sanctions compliance program designed to prevent our platform from being used to facilitate money laundering, terrorist financing, and other financial crimes. Where we rely on partners for payment services, our partners have implemented AML and sanctions compliance programs. 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 isincludes the designation of a BSA compliance officer to oversee the program. 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 the U.S. Department of the Treasury’s Office of Foreign Assets ControlsOFAC and otherrelevant foreign authorities. Our AMLsanctions compliance programs include policies, procedures, reporting protocols, and internal controls, including the designation of an AML compliance officer to oversee the programs, and is designed to address these legal and regulatory requirements and to assist in managing risk associated with money laundering and terrorist financing risks.collectreceive, store, process, and use a wide variety of personal, business and financial information for various purposes infrom prospective customers, customers, their vendors, and other users on our business, including to help ensure the integrityplatform, as well as personal information about our employees and service providers. Our handling of our services and to provide features and functionality to our customers. This aspect of our business, including the collection, use, disclosure, and protection of the information we acquire in connection with our customers’ use of our services,this data is subject to numerousa variety of laws and regulations inregulations. In the United States. Accordingly,U.S. we publish ourare subject to privacy policies and termsinformation 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. Federal Trade Commission (FTC) and many state attorneys general are interpreting federal and state consumer protection laws as imposing standards for the online collection, use, dissemination, and security of service, which describes our practices concerningdata. We are also subject to foreign laws and regulation governing the use, transmission, and disclosurehandling of information.In addition, several foreign countries and governmental bodies,personal data, including the European Union, haveUnion's General Data Protection Regulation (GDPR), the United Kingdom's GDPR, Australian and Canadian privacy laws and regulations dealing with the collection, use, disclosure,privacy laws of other foreign jurisdictions.information which are more restrictive than thosethese privacy and data protection laws in the United States. While we believe thatU.S., Europe, and elsewhere are often uncertain and in a state of flux.productsU.S. Foreign Corrupt Practices Act, U.S. domestic bribery laws, and services that we currently offer do not subject us to suchother anti-corruption laws or regulations in the foreign jurisdictions in which we operate, including, among others, Australia's anti-bribery laws, the Canadian Criminal Code and the Canadian Corruption of Foreign Public Officials Act. 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 orregulations may be modified or subject to new or different interpretations, new laws and regulations may be enacted, or we may modify our products or services in the future, which may subject us to such laws and regulations.United StatesU.S. and in foreign jurisdictions continue to examine a wide variety of issues which are applicable to us and may impact our business. These issues include identity theft, account management guidelines, privacy, disclosure rules, cybersecurity, and marketing. As our business continues to develop and expand, we continue to monitor the additional rules and regulations that may become relevant.12Employees2020,2022, we had 618 full-time employees.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. We also engageemploy individuals on a temporary employeesbasis and consultantsuse the services of contractors as needed to support our operations.necessary. None of our employees are represented by a labor union or covered by a collective bargaining agreement. in connection with their employment.not experienced any work stoppagesrecruiting and we considerhiring practices that meet business hiring needs while maintaining a high bar for talent. We leverage data and analytics to align the recruiting function to business growth and revenue drivers. Our recruiting function was built to quickly scale with increased growth and expansion. Recruiting champions drive inclusive and equitable practices to engage, attract, and hire diverse talent. We provide two key talent management programs to develop our relations with ourleaders and high potential employees to be good.2020,2022, in the U.S., we had fourteennineteen issued patents that expire between 2028 and 2038,2040, 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. 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.2020,2022, 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 also own a U.S. trademark registration coveringfor the Bill.comname Invoice2Go and the Invoice2Go logo, along with a registration in Canada for the logo, and a notice of allowancean application to register the mark GETGO, also in Canada. We own one registration in Australia for a relatedthe Invoice2Go logo. Our trademark applications along with an application to register GETGO. In addition, we own three International Registrations for certain logos are pending.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.cost-effective. We also own several domain names, including www.bill.com.13Table of ContentsDespite our efforts to protect our intellectual property rights, they may not be respected in the future or may be invalidated, circumvented, or challenged. In addition, the laws of various foreign countries where our products are produced may not protect our intellectual property rights to the same extent as laws in the United States. Our industry is characterized by the existence of a large number of patents and frequent claims and related litigation based on allegations of patent infringement or other violations of intellectual property rights. We believe that competitors will try to develop products that are similar to ours and that may infringe our intellectual property rights. Our competitors or other third-parties may also claim that our solutions infringe their intellectual property rights. In particular, some companies in our industry have extensive patent portfolios. From time to time, third parties have in the past and may in the future assert claims of infringement, misappropriation, and other violations of intellectual property rights against us or our customers or partners, with whom our agreements may obligate us to indemnify against these claims. Successful claims of infringement by a third party could prevent us from offering certain products or features, require us to develop alternate, non-infringing technology, which could require significant time and during which we could be unable to continue to offer our affected products, require us to obtain a license, which may not be available on reasonable terms or at all, or force us to pay substantial damages, royalties, or other fees. Moreover, our products incorporate software components licensed to the general public under open source software licenses. Open source licenses grant licensees broad permissions to use, copy, modify, and redistribute our platform. As a result, open source development and license practices can limit the value of our software copyright assets. For additional information about our intellectual property and associated risks, see the section titled “Risk Factors—Risks Related to our Business and Industry.”14TableContentsdisclosing material non-public information and for complying with our disclosure obligations under Regulation FD.$31.1$326.4 million, $7.3$98.7 million and $7.2$31.1 million for fiscal 2022, 2021 and 2020, 2019respectively. Our net loss for fiscal 2022 includes the results of operations of Invoice2go from the date of acquisition on September 1, 2022 and 2018, respectively.of Divvy. Our net loss for fiscal 2021 includes the results of operations of Divvy from the date of acquisition on June 1, 2021. As of June 30, 2020,2022, we had an accumulated deficit of $148.7$544.8 million. While we have experienced significant revenue growth in recent periods, we are not certain whether or when we will obtain a high enough volume of subscription and transaction fee revenue to sustain or increase our growth or achieve or maintain profitability in the future. We also expect our costs and expenses to increase in future periods, which could negatively affect our future operating results if our revenue does not increase. In particular, we intend to continue to expend significant funds to further develop our platform, including introducing new products and functionality, and to expand our marketing programs and sales teams to drive new customer adoption, expand strategic partner integrations, and support international expansion.expansion, and to continue hiring across all functions to accomplish these objectives. Our profitability each quarter is also impacted by the mix of our revenue generated from subscriptions, and transaction fees, onincluding the one hand,mix of ad valorem transaction revenue, and interest earned on customer funds that we hold in trust, onfor the other.benefit our customers, respectively. Any changes in this revenue mix will have the effect of increasing or decreasing our margins. In addition, we offer promotion programs whereby spending businesses that use our spend and expense management products can earn rewards based on transaction volume on our corporate charge cards, and the cost of earned rewards that are redeemed impacts our sales and marketing expenses. We will also face increased compliance and security costs associated with growth, the expansion of our customer base, and being a public company. Inflationary pressures may also result in increases in many of our other costs, including personnel-related costs. Our efforts to grow our business may be costlier than we expect, and we may not be able to increase our revenue enough to offset our increased operating expenses. We may incur significant losses in the future for several reasons, including the other risks described herein, and unforeseen expenses, difficulties, complications, delays, and other unknown events. If we are unable to achieve and sustain profitability, the value of our business and common stock may significantly decrease.$108.4 millionduring fiscal 2022, 2021 and $64.9 million,2020, respectively. Our revenue for fiscal 2022 includes the revenue of Invoice2go from the date of acquisition on September 1, 2021 and of Divvy for the full fiscal year. Our revenue for fiscal 2021 includes the revenue of Divvy from the date of acquisition on June 1, 2021. Excluding the card payment volume by the spending businesses using Divvy cards and payment volume transacted by Invoice2go subscribers, our Total Payment Volume (TPV)TPV was $219.1 billion, $140.3 billion and $96.5 billion $71.3 billionduring fiscal 2022, 2021 and $49.6 billion for fiscal 2020, 2019 and 2018, respectively. 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. Overall growth of our revenue depends on a number of factors, including our ability to:•price our platform effectively to attract new customers and increase sales to our existing customers;•manage the effects of the COVID-19 pandemic on our business and operations;expand the functionality and scope of the products we offer on our platform;•maintain the rates at which customers subscribe to and continue to use our platform;15Table•expand the functionality and scope of Contentsthe products we offer on our platform;•maintain payment volume;generate interest income on customer funds that we hold in trust;provide our customers with high-quality customer support that meets their needs;introduce our products to new markets outside of the United States;serve SMBs across a wide cross-section of industries;expand our target market beyond SMBs;successfully identify and acquire or invest in businesses, products, or technologies that we believe could complement or expand our platform; andincrease awareness of our brand and successfully compete with other companies.•sales, marketing and customer success, including an expansion of our sales organization and new customer success initiatives;our technology infrastructure, including systems architecture, scalability, availability, performance, and security;product development, including investments in our product development team and the development of new products and new functionality for our AI-enabled platform;acquisitions or strategic investments;international expansion;regulatory compliance and risk management; andgeneral administration, including increased legal and accounting expenses associated with being a public company.The COVID-19 outbreak has materially impactedU.S.expectations of securities analysts or investors with respect to our operating results, our stock price and global economies,the value of your investment could decline.could haveare expected to fluctuate in the future due to a material adverse impact onvariety of factors, many of which are outside of our employees, strategiccontrol. As a result, our past results may not be indicative ofcustomers, which could adverselyaccounting software partners, or identify and materially impact our business, financial condition and results of operations.The World Health Organization has declared the outbreak of the novel coronavirus COVID-19 a pandemic and public health emergency of international concern. In March 2020, the President of the United States (U.S.) declared a State of National Emergency due to the COVID-19 outbreak. In addition, many jurisdictionsattract new partners;the U.S. have limited social mobility and gathering. Many business establishments have closed due to restrictions imposed by the government and many governmental authorities have closed most public establishments, including schools, restaurants and shopping malls. Our customers have been, and may continue to be, negatively impacted by the shelter-in-place and other similar state16and local orders, the closure of manufacturing sites and country borders, and the increase in unemployment. These conditions will continue to have negative implications on demandcustomer preference for goods, the supply chain, production of goods and transportation. As the COVID-19 pandemic persists, governments (at national, state and local levels), companies and other authorities may continue to implement restrictions or policies that could adversely impact consumer spending, global capital markets, the global economy and our stock price. Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our businesscloud-based services as a result of its global economic impact.security breaches in the industry or privacy concerns, or other security or reliability concerns regarding our products;Thehas caused us to modify our business practices (including employee travel and cancellation of physical participation in meetings, events and conferences), almost all ofon our employees, are currently working remotely,customers, partners, vendors, results of operations, liquidity and we may take further actionsfinancial condition, including as may be required by government authorities or that we determine area result of supply chain disruptions and labor shortages;best intereststiming of their budget cycles and purchasing decisions;employees, strategic partners, and customers. In addition, duecompetitors’ products or developing their own solutions in-house;recent emergency interventionsapplication of artificial intelligence-based services;U.S. Federal Reserveadoption or retention of more entrenched or rival services in the international markets where we compete;stabilize control costs, including our operating expenses;U.S. economy,amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses, including commissions;have fallen sharply, which has adversely impacted our revenue fromimpacts interest earned on funds held fromfor customers;and may continue to do soparticipate;future. Furthermore,competitive dynamics of our market;“shelter-in-place” orders inincreased costs of operating as a public company. If our quarterly operating results fall below the stateexpectations of Californiainvestors and insecurities analysts who follow our stock, the San Francisco Bay Area, construction on the buildoutprice of our new facility was temporarily suspended for a period of time. The delay will shift the completion of the project to early calendar 2021.The COVID-19 pandemic may also adversely impact the operations of our strategic partners and accounting firm partners, as well as those of our customers, our employees and our employee productivity. This direct impact of the virus, and the disruption on our employees and operations, may negatively impact both our ability to meet customer demand and our revenue and profit margins. We may experience delays or changes in customer demand, particularly if customer funding priorities change. Additionally, the disruption and volatility in the global and domestic capital markets may increase the cost of capital and limit our ability to access capital. Both the health and economic aspects of the COVID-19 virus are highly fluid and the future course of each is uncertain. For these reasons and other reasons that may come to light if the COVID-19 pandemic and associated protective or preventative measures expand, we may experience a material adverse impact on our business operations, revenues and financial condition as well as some of our underlying business drivers such as customer growth and payment and transaction volumes; however, its ultimate impact is highly uncertain and subject to change. To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.Our risk management efforts may not be effective to prevent fraudulent activities by our customers or their counterparties, whichcommon stock could expose us to material financial losses and liability and otherwise harm our business.We offer software that digitizes and automates back-office financial operations for a large number of customers and executes payments to their vendors or from their clients. We are responsible for verifying the identity of our customers and their users, and monitoring transactions for fraud. We have been in the past and will continue to be targeted by parties who seek to commit acts of financial fraud using techniques such as stolen identities and bank accounts, compromised business email accounts, employee or insider fraud, account takeover, false applications, and check fraud. We may suffer losses from acts of financial fraud committed by our customers and their users, our employees or third-parties.17The techniques used to perpetrate fraud on our platform are continually evolving,decline substantially, and we expend considerable resources to continue to monitor and combat them. In addition, when we introduce new products and functionality, or expand existing products, we may not be able to identify all risks created by the new products or functionality. 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. Furthermore, our risk management policies, procedures, techniques, and processes may contain errors or our employees or agents may commit mistakes or errors in judgment as a result of which we may suffer large financial losses. The software-driven and highly automated nature of our platform could enable criminals and those committing fraud to steal significant amounts of money from businesses like ours. As greater numbers of customers use our platform, our exposure to material risk losses from a single customer, or from a small number of customers, will increase.Our current business and anticipated domestic and international growth will continue to place significant demands on our risk management efforts, and we will need to continue developing and improving our existing risk management infrastructure, policies, procedures, techniques, and processes. As techniques used to perpetrate fraud on our platform evolve, we may need to modify our products or services to mitigate fraud risks. As our business grows and becomes more complex, we may be less able to forecast and carry appropriate reserves in our books for fraud related losses. Further, these types of fraudulent activities on our platform can also expose us to civil and criminal liability, governmental and regulatory sanctions as well as potentially cause us to be in breach of our contractual obligations to our third-party partners.We transfer large sums of customer funds daily, and are subject to the risk of errors, which could result in financial losses, damage to our reputation, or loss of trust in our brand, which would harm our business and financial results.For fiscal 2020, over 98,000 customers processed approximately $96.5 billion in TPV on our platform. 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. As a provider of accounts payable, accounts receivable, and payment solutions, we collect and transfer funds on behalf of our customers. Software errors in our platform and operational errors by our employees may also expose us to losses.Moreover, our trustworthiness and reputation are fundamental to our business. As a provider of cloud-based software for complex back-office financial operations, the occurrence of any credit losses, operational errors, software defects, service disruption, employee misconduct, security breaches, or other similar actions or errors on our platform could result in financial losses to our business and our customers, loss of trust, damage to our reputation, or termination of our agreements with strategic partners and accountants, each of which could result in:
face costly lawsuits, including securities class action suits.•loss of customers;•lost or delayed market acceptance and sales of our platform;•legal claims against us, including warranty and service level agreement claims;•regulatory enforcement action; or•diversion of our resources, including through increased service expenses or financial concessions, and increased insurance costs.Although our terms of service allocate to our customers the risk of loss resulting from our customers’ errors, omissions, employee fraud, or other fraudulent activity related to their systems, in some instances we may cover such losses for efficiency or to prevent damage to our reputation. Although we maintain insurance to cover losses resulting from our errors and omissions, there can be no assurance that our insurance will cover all losses or our coverage will be sufficient to cover our losses. If we suffer significant losses or reputational harm as a result, our business, operating results, and financial condition could be adversely affected.18Customer funds that we hold in trust are subject to market, interest rate, foreign exchange, and liquidity risks, as well as general political and economic conditions. The loss of these funds could have a material adverse effect on our business, financial condition, and results of operations.We invest funds that we hold in trust for our customers, including funds being remitted to suppliers, in highly liquid, investment-grade marketable securities, money market securities, and other cash equivalents. Nevertheless, our customer fund assets are subject to general market, interest rate, credit, foreign exchange, and liquidity risks. These risks may be exacerbated, individually or in aggregate, during periods of heavy financial market volatility. In the event of a global financial crisis, such as that experienced in 2008 and such as that which may result from the COVID-19 or other pandemics, employment levels and interest rates may decrease with a corresponding impact on our business. As a result, we could be faced with a severe constriction of the availability of liquidity, which could impact our ability to fulfill our obligations to move customer money to its intended recipient. Additionally, we rely upon certain banking partners and third parties to originate ACH 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. Any loss of or inability to access customer funds could have an adverse impact on our cash position and results of operations, could require us to obtain additional sources of liquidity, and could have a material adverse effect on our business, financial condition, and results of operations.We are licensed as a money transmitter in all required U.S. states. In certain jurisdictions where we operate, we are required to hold eligible liquid assets, as defined by the relevant regulators in each jurisdiction, equal to at least 100% of the aggregate amount of all customer balances. Our ability to manage and accurately account for the assets underlying our customer funds and comply with applicable liquid asset requirements requires a high level of internal controls. As our business continues to grow and we expand our product offerings, we will need to scale our associated internal controls. Our success requires significant public confidence in our ability to properly manage our customers’ balances and handle large and growing transaction volumes and amounts of customer funds. Any failure to maintain the necessary controls or to accurately manage our customer funds and the assets underlying our customer funds in compliance with applicable regulatory requirements could result in reputational harm, lead customers to discontinue or reduce their use of our products, and result in significant penalties and fines, possibly including the loss of our state money transmitter licenses, which would materially harm our business.We earn revenue from interest earned on customer funds held in trust while payments are clearing, which is subject to market conditions and may decrease as customers’ adoption of electronic payments and technology continues to evolve.For fiscal 2020, 2019 and 2018, we generated $21.2 million, $22.4 million and $7.9 million, respectively, in revenue from interest earned on funds held in trust on behalf of customers while payment transactions are clearing, or approximately 13%, 21% and 12% of our total revenue for such periods, respectively. While these payments are clearing, we deposit the funds in highly liquid, investment-grade marketable securities, and generate revenue that is correlated to the federal funds rate. When interest rates decrease, the amount of revenue we generate from these investments decreases. Additionally, because we process electronic payments faster than checks, we hold customer funds for a shorter time and consequently, earn less revenue. If our customers transition from checks to electronic payments faster than we anticipate, or to new, faster payment rails like The Clearing House’s Real Time Payments Network, our revenue could decrease and our financial results could be adversely affected.19 In late March 2020, we implemented a short-term initiative to help new customers negatively impacted by the COVID-19 pandemic by offering them a three-month free subscription, in addition to our standard 30-day risk-free trial. Additionally, we offered our existing customers a discount on user fees due to the COVID-19 pandemic. Although these initiatives did not materially impact our results of operations for fiscal 2020, we anticipate that our subscription fees may be negatively impacted by these initiatives in the future, which may reduce our profitability. being able to convince decision makers within their organization to convert to a paid version. To the extent that these users do not become, or are unable to convince others to become, paying customers, we will not realize the intended benefits of this marketing strategy, and our ability to grow our revenue will be adversely affected. In addition, it may be necessary to engage in more sophisticated and costly sales and marketing efforts in order to attract new customers, and changes in privacy laws and third party practices may make adding new customers more expensive or difficult. As a result of these and other factors, we may be unable to attract new customers or our related expenses may increase, which would have an adverse effect on our business, revenue, gross margins, and operating results.orincrease customer adoption of our products, sell additional functionality and services to them, or develop and launch new payment products, our revenue growth will be adversely affected.increasing the number of users and incentingincentivizing them to pay for additional functionality.services and driving adoption of new and existing payment products, including ad valorem products. Our ability to retain our customers, drive adoption and increase their usage could be impaired for a variety of reasons, including our inability to develop and launch new payment products, customer reaction to changes in the pricing of our products, general economic conditions or the other risks described in this Annual Report on Form 10-K. As a result,Our ability to sell additional services or increase customer adoption of new or existing products maymay beare unable to retain existing customers or increase the usage of our platform by them, whichit would have an adverse effect on our business, revenue, gross margins, and other operating results, and accordingly, on the trading price of our common stock.Our ability to sell additional functionality to our existing customers may require more sophisticated and costly sales efforts, especially for our larger customers with more senior management and established procurement functions. Similarly, the rate at which our customers purchase additional products from us depends on several factors, including general economic conditions and the pricing of additional product functionality. If our efforts to sell additional functionality to our customers are not successful, our business and growth prospects would suffer.forto our platform after the expiration of their subscription period. For us to maintain or improve our operating results, it is important that our customers continue to maintain their subscriptions on the same or more favorable terms. We cannot accurately predict renewal or expansion rates given the diversity of our customer base in terms of size, industry, and geography. 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. In addition, our customers, most of which are SMBs, may be particularly vulnerable to changes in general economic conditions, such as economic recessions. If our customers do not renew their subscriptions, or if they reduce their usage of our platform, our revenue and other operating results will decline and our business will suffer. IfMoreover, if our renewal or expansion rates fall significantly below the expectations of the public market, securities analysts, or investors, the trading price of our common stock would likely decline.20ContentsOur businessour other current and future product offerings may also subject us to credit risk. in part, on our relationshipsability to effectively manage related risks. The credit decision-making process for our Divvy cards uses techniques designed to analyze the credit risk of specific businesses based on, among other factors, their past purchase and transaction history, as well as their credit scores. Similarly, proprietary risk models and other indicators are applied to assess current or prospective spending businesses who desire to use our cards to help predict their ability to repay. 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. 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.accounting firms.Our relationships with our nearly 5,000 accounting firm partners accountsignificant exposure to losses from credit, we face the risk that spending businesses will default on their payment obligations, creating the risk of potential charge-offs. 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. Spending businesses who miss payments may fail to repay their outstanding statement balances, and spending businesses who file for approximately 51%protection under the bankruptcy laws generally do not repay their outstanding balances. If collection efforts on overdue card balances are ineffective or unsuccessful, we may incur financial losses or lose the confidence of our total customers as of June 30, 2020 and 46%funding sources.We do not file UCC liens or take other security interests on Divvy card balances, which significantly reduces our ability to collect amounts outstanding to spending businesses that file for bankruptcy protection. Any such losses or failures of our total revenuerisk models could harm our business, operating results, and financial condition. Non-performance, or even significant underperformance, of the account receivables participation interests that we own could have an adverse effect on our business.fiscal 2020. We marketour Divvy card product relies on a variety of funding arrangements, including warehouse facilities and sellpurchase arrangements, with a variety of funding sources. Any significant underperformance of the participation interests we own may adversely impact our productsrelationship with such fundingservices through accounting firms. We alsoresult in an increase in our cost of financing, a modification or termination of our existing funding arrangements or our ability to procure funding, which would have a partnershipmaterial adverse effect on our business, results of operations, financial condition, and future prospects.CPA.comwhich we advance funds to market our productscustomers or vendors of our customers based on credit and services to accounting firms, which then enrollrisk profiling before we receive the funds on their customers directly ontobehalf, such as our platform. Although our relationships with accounting firms are independent of one another, if our reputation in the accounting industry more broadly were to suffer, or if we were unable to establish relationships with new accounting firms and grow our relationships with existing accounting firm partners, our growth prospects would weakenInstant Transfer feature and our current and prospective working capital loan products, also expose us to credit risks. Although these offerings are only available to customers that satisfy specific credit eligibility criteria, the credit and risk models we use to determine eligibility may be insufficient. Any failure of our credit or risk models to predict creditworthiness would expose us to many of the credit risks described above and could harm our business, financial position, and operating results, may be adversely affected.Our business depends, in part, on our strategic partnerships with financial institutions.To grow our business, we will seek to expand our relationships with our financial institution partners and to partner with additional banks and financial institutions. Establishing our strategic partner relationships, particularly with our financial institution customers and, to a lesser extent, accounting software providers, entails extensive and highly specific upfront salescondition. with little predictability and various ancillary requirements. For example, our financial institution partners generally require us to submit to an exhaustive security audit, given the sensitivity and importance of storing their customer billing and payment data on our platform. As a result, sales to new strategic partner enterprises involve risks that may not be presenteffective 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.presentresponsible for verifying the identity of our customers and their users, and monitoring transactions for fraud. We have been in the past and will continue to a lesser extent with salesbe targeted by parties who seek to SMB organizations. With strategic partners, the decisioncommit acts of financial fraud using stolen identities and bank accounts, compromised business email accounts, employee or insider fraud, account takeover, false applications, check fraud and stolen cards or card account numbers. We may suffer losses from acts of financial fraud committed by our customers and their users, our employees or third-parties. In addition, our customers or spending businesses may suffer losses from acts of financial fraud by third parties posing as our Company through account takeover, credential harvesting, use of stolen identities and various other techniques, which could harm our reputation or prompt us to subscribereimburse our customers for such losses in order to maintain customer and spending business relationships.frequently requires the approval of multiple management personnelare continually evolving, and more technical personnel than would be typical of a smaller organization. Accordingly, sales to strategic partners may require us to invest more time educating and selling to these potential customers. Purchases by strategic partners are also frequently subject to budget constraints and unplanned administrative, processing, and other delays, includingwe expend considerable efforts to negotiate and document relationships with them. Further, we integrate our platform with our financial institution partners’ own websites and apps, which requires significant time and resources to designcontinue to monitor and deploy even after sales have been processedcombat them. In addition, when we introduce new products and documented. Iffunctionality, or expand existing products, we are unable to increase sales of our platform to strategic partners and manage the costs associated with marketing our platform to such customers and integrating with their systems, our business, financial position, and operating results may be adversely affected.We may not be able to attractidentify all risks created by such new products or functionality. 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 contain errors, or our employees or agents may commit mistakes or errors in judgment as a result of which we may suffer large financial institution strategic partners iflosses. The software-driven and highly automated nature of our potential partners favorplatform could enable criminals and those committing fraud to steal significant amounts of money from businesses like ours.competitors’risk management efforts, and we will need to continue developing and improving our existing risk management infrastructure, policies, procedures, techniques, and processes. As techniques used to perpetrate fraud on our platform evolve, we may need to modify our products or services overto mitigate fraud risks. As our business grows and becomes more complex, we may be less able to forecast and carry appropriate reserves in our books for fraud related losses.or choosecan also expose us to compete withcivil and criminal liability and governmental and regulatory sanctions as well as potentially cause us to be in breach of our contractual obligations to our third-party partners.directly. Further, many of our existing financial institution partners have greater resources than we do and could choose to develop their own solutions to replace ours. Moreover, certain financial institutions may elect to focus on other market segments, and decide to terminate their SMB-focused services. For example, in late 2018, one of our former financial institution partners chose not to renew its relationship with us due to a change in business strategy. As a result, we lost approximately 5,000 customers. Although these customers did not represent a significant amount of revenue for our business, there can be no guarantee that other financial institution partners will not choose to terminate their relationships for strategic or other reasons. If we are unsuccessful in establishing, growing, or maintaining our relationships with strategic partners, our ability to compete in the marketplace or to grow our revenueservices could be impaired, and our results of operations may suffer.Our business depends, in part, on our relationship with Intuit.In addition to our relationship with financial institutions, we rely on our strategic relationship with Intuit Inc., a leading provider of financial, accounting, and tax preparation software, to further expand our business. Our platform is integrated into Intuit’s QuickBooks product, which millions of SMBs rely on for accounting services. Achieving this integration required extensive coordination and commitment of time and resources, and has led to thousands of additional customers for us. We recently amended our agreement with Intuit to extend the term by three years until June 26, 2023, unless earlier terminated in accordance with the agreement. The revised agreement will enable us to continue supporting our platform within QuickBooks; in addition, we will be able to jointly market and promote our standalone offering, which includes advanced payment and workflow automation capabilities, to customers of Intuit’s QuickBooks Online Advanced product. If we are unable to increase adoption of our platform by Intuit’s21customers, however, our growth prospects may be adversely affected. Additionally, if Intuit reconfigures its platform in a manner that no longer supports our integration with QuickBooks, we would lose customers and our business would be adversely affected. Finally, Intuit may seek to develop a solution of its own, acquire a solution to compete with ours, or decide to partner with a competitor and build a new product, which its SMB customers may select over ours, thereby harming our growth prospectsmaterially and adversely affecting our results of operations. solutions is fragmented, competitive, and constantly evolving. Our competitors range from large entities that predominantly focus on enterprise resource planning solutions, to smaller niche suppliers of solutions that focus exclusively on document management, workflow management, accounts payable, accounts receivable, spend and expense management, and/or electronic bill presentment and payment.payment, to companies that offer industry-specific payments solutions. With the introduction of new technologies and market entrants, we expect that the competitive environment will remain intense going forward. Our competitors that currently focus on enterprise solutions may offer products to SMBs that compete with ours. In addition, companies that provide solutions that are adjacent to our products and services may decide to enter our market segment and develop and offer products that compete with ours. Accounting software providers, such as Intuit, as well as the financial institutions with which we partner, may internally develop products, acquire existing, third-party products, or may enter into partnerships or other strategic relationships that would enable them to expand their product offerings to compete with our platform or provide more comprehensive offerings than they individually had offered or achieve greater economies of scale than us. These software providers and financial institutions may have the operating flexibility to bundle competing solutions with other offerings, including offering them at a lower price or for no additional cost to customers as part of a larger sale. In addition, new entrants not currently considered to be competitors may enter the market through acquisitions, partnerships, or strategic relationships. As we look to market and sell our platform to potential customers, spending business or strategic partners with existing solutions, we must convince their internal stakeholders that our platform is superior to their current solutions.•product features, quality, and functionality;data asset size and ability to leverage artificial intelligence to grow faster and smarter;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 money transmitter licenses in all required US jurisdictions;brand recognition; andpricing and total cost of ownership.22ContentsIfcustomer 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 would harm our business and financial results.do nothad over 157,000 customers on our platform as of June 30, 2022. Excluding the card payment volume by the spending businesses using Divvy cards and payment volume transacted by Invoice2go subscribers, the TPV processed by our customers on our platform was $219.1 billion, $140.3 billion and $96.5 billion during fiscal 2022, 2021, and 2020, respectively. For the purposes of measuring our key business metrics, we define customers as entities that are either billed directly by us or cannotfor which we bill our financial institution partners during a particular period. 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 compatibilityrisk 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. As a provider of accounts payable, accounts receivable, spend and expense management and payment solutions, we collect and transfer funds on behalf of our platform with popular accounting software solutions or offerings of our strategic partners, our revenue and growth prospects will decline.To deliver a comprehensive solution, our platform integrates with popular accounting software providers including Intuit QuickBooks, Oracle NetSuite, and Sage Intacct, through application program interfaces (APIs) made available by these software providers. We automatically synchronize customers, suppliers, clients, invoices, and payment transactions betweencustomers. Software errors in our platform and these systems. This two-way sync eliminates duplicate data entryoperational errors by our employees may also expose us to losses.providesreputation are fundamental to our business. As a provider of cloud-based software for complex back-office financial operations, the basis for managing cash-flow through an integrated solution for accounts payables, accounts receivable, and payments.Ifoccurrence of any of the accountingcredit losses, operational errors, software providers change the features of their APIs, discontinue their support of such APIs, restrictdefects, service disruption, employee misconduct, security breaches, or other similar actions or errors on our access to their APIs, or alter the terms governing their useplatform could result in a manner that is adversefinancial losses to our business we will not be ableand our customers, loss of trust, damage to provide synchronization capabilities, which could significantly diminish the value of our platform and harm our business, operating results, and financial condition.The functionality and popularity of our platform depends, in part, on our ability to integrate our platform with the offerings of our strategic partners. Critically, our financial institution strategic partners must be able to integrate our platform into their existing offerings. These strategic partners periodically update and change their systems, and although we have been able to adapt our platform to their evolving needs in the past, there can be no guarantee that we will be able to do so in the future. In particular, if we are unable to adapt to the needs of our strategic partners’ platforms, our strategic partners may terminate their agreements with us and we may lose access to large numbers of customers as a result.We depend upon several third-party service providers for processing our transactions. If anyreputation, or termination of our agreements with our processing providers are terminated, wefinancial institution partners and accountants, each of which could experience service interruptions.We depend on banks, including JPMorgan Chase, The Bancorp Bank,result in:Silicon Valley Bank, to process ACH transactions and checks for our customers. We have entered into treasury services or similar agreements with these banks for payment processing and related services. Those agreements include significant security, compliance, and operational obligations. If we are not able to comply with those obligations or our agreements with the processing banks are terminated for any reason, we could experience service interruptions as well as delays and additional expenses in arranging new services.Similarly, we have an agreement with Cambridge Mercantile Corp., under which Cambridge provides us with cross-border wire transfer capabilities. This arrangement has enabled us to offer our cross-border payments service, which we view as a significant growth opportunity for our business. Finally, we have an agreement with Comdata, Inc., under which Comdata acts as our program manager and card issuer processor for our virtual card program.If anysales of our banking agreements related to ACH transactionsplatform; checks, or our agreements with Cambridge or Comdata are terminated, we may experience business interruptions and delays, and be forced to incur additional expenses, potentially interfering with our existing customer relationships or making us less attractive to potential new customers.Interruptions or delays in the services provided by AWS or other third-party data centers or internet service providers could impair the deliveryplatformresources, including through increased service expenses or financial concessions, and increased insurance costs.business could suffer.We host our platform using third-party cloud infrastructure services, including co-location facilities at Equinix, Iron Mountain, and Digital West. We also use public cloud hosting with Amazon Web Services (AWS). Allterms of our products utilize resources operated by us through these providers. We therefore depend on our third-party cloud providers’ ability to protect their data centers against damage or interruption from natural disasters, power or telecommunications failures, criminal acts, and similar events. Our operations depend on protecting the cloud infrastructure hosted by such providers by maintaining their respective configuration, architecture, and interconnection specifications, as well as the information stored in these virtual data centers and transmitted by third-party internet service providers. We have periodically experienced service disruptions in the past, and we cannot assure you that we will not experience23interruptions or delays in our service in the future. We may also incur significant costs for using alternative equipment or taking other actions in preparation for, or in reaction to, events that damage the data storage services we use. Although we have disaster recovery plans that utilize multiple data storage locations, any incident affecting their infrastructure that may be caused by fire, flood, severe storm, earthquake, power loss, telecommunications failures, unauthorized intrusion, computer viruses and disabling devices, natural disasters, military actions, terrorist attacks, negligence, and other similar events beyond our control could negatively affect our platform. 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. System failures or outages, including any potential disruptions due to significantly increased global demand on certain cloud-based systems during the COVID-19 pandemic, could compromise our ability to perform these functions in a timely manner, which could harm our ability to conduct business or delay our financial reporting. Such failures could adversely affect our operating results and financial condition.Our platform is accessed by many customers, often at the same time. As we continue to expand the number of our customers and products availableallocate to our customers the risk of loss resulting from our customers’ errors, omissions, employee fraud, or other fraudulent activity related to their systems, in some instances we may not be ablecover such losses for efficiency or to scale our technology to accommodate the increased capacity requirements, which may result in interruptions or delays in service. In addition, the failure of data centers, internet service providers, or other third-party service providers to meet our capacity requirements could result in interruptions or delays in accessprevent damage to our platform or impede our abilityreputation. Although we maintain insurance to grow our business and scale our operations. If our third-party infrastructure service agreements are terminated, or there is a lapse of service, interruption of internet service provider connectivity, or damage to data centers, we could experience interruptions in access to our platform as well as delays and additional expense in arranging new facilities and servicesMoreover, we are in the process of gradually migrating our systems from internal data centers and smaller vendors to AWS. AWS provides us with computing and storage capacity pursuant to an agreement that continues until terminated by either party. We have a limited history of operating on AWS. As we migrate our datacover losses resulting from our servers to AWS’ servers, we may experience some duplicationerrors and incur additional costs. If our data migration is not successful, or if AWS unexpectedly terminates our agreement, we would be forced to incur additional expenses to locate an alternative provider and may experience outages or disruptions to our service. Any service disruption affecting our platform during such migration or while operating on the AWS cloud infrastructure could damage our reputation with current and potential customers, expose us to liability, cause us to lose customers, or otherwise harm our business.We operate in an emerging and evolving market, which may develop more slowly or differently than we expect. If our market does not grow as we expect, or if we cannot expand our platform to meet the demands of this market, our revenue may decline or fail to grow, and we may incur additional operating losses.Our primary competition remains the legacy manual processes that SMBs have relied on for generations. Our success will depend, to a substantial extent, on the widespread adoption of our cloud-based back-office solutions as an alternative to existing solutions or adoption by customers that are not using any such solutions at all. Some organizations may be reluctant or unwilling to use our platform for several reasons, including concerns about additional costs, uncertainty regarding the reliability and security of cloud-based offerings, or lack of awareness of the benefits of our platform. Our ability to expand sales of our platform depends on several factors, including prospective customers’ awareness of our platform, the timely completion, introduction, and market acceptance of enhancements to our platform or new products that we may introduce, the effectiveness of our marketing programs, the costs of our platform, and the success of our competitors. If we are unsuccessful in developing and marketing our platform, or if organizations do not perceive or value the benefits of our platform as an alternative to legacy systems, the market for our platform may not continue to develop or may develop more slowly than we expect, either of which would harm our growth prospects and operating results.24Payments and other financial services-related regulations and oversight are material to our business. Our failure to comply could materially harm our business.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 money transmission, payment processing, and settlement services), 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 cardholder data. We do not directly collect or store payment card information; instead, we rely on a third-party payment processor to do so. These laws, rules, regulations, licensing schemes, and standards are enforced by multiple authorities and governing bodies in the United States, including the Department of the Treasury, the Federal Deposit Insurance Corporation, the SEC, self-regulatory organizations, and numerous state and local agencies. As we expand into new jurisdictions, the number of foreign laws, rules, regulations, licensing schemes, and standards governing our business will expand as well. In addition, as our business and products continue to develop and expand, we may become subject to additional laws, rules, regulations, licensing schemes, and standards. We may not always be able to accurately predict the scope or applicability of certain laws, rules, regulations, licensing schemes, or standards to our business, particularly as we expand into new areas of operations, which could have a significant negative effect on our existing business and our ability to pursue future plans.Our subsidiary, Bill.com, LLC, has obtained licenses or made registrations, as applicable, to operate as a money transmitter (or its equivalent) in the United States, in the District of Columbia, 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 licensed money transmitter, we are subject to obligations and restrictions with respect to the investment of customer funds, reporting requirements, bonding requirements, minimum capital requirements, and inspection by state regulatory agencies concerning various aspects of our business. Evaluation of our compliance efforts, as well as the questions of whether and to what extent our products and services are considered money transmission, are matters of regulatory interpretation and could change over time. In the past, regulators have identified violations and we have been subject to fines and other penalties by regulatory authorities due to their interpretations and applications to our business of their respective state money transmission laws. Regulators and third-party auditors have also identified gaps in our anti-money laundering program. In the future, as a result of the regulations applicable to our business, we could be subject to investigations and resulting liability, including governmental fines, restrictions on our business, or other sanctions, and we could be forced to cease conducting certain aspects of our business with residents of certain jurisdictions, be forced to change our business practices in certain jurisdictions, or be required to obtain additional licenses or regulatory approvals. Thereomissions, there can be no assurance that weour insurance will cover all losses or our coverage will be ablesufficient to obtain or maintain any such licenses, and, even if we were able to do so, there could be substantial costs and potential product changes involved in maintaining such licenses, which could have a material and adverse effect oncover our business. In addition, there are substantial costs and potential product changes involved in maintaining and renewing such licenses, certifications, and approvals, and we could be subject to fines or other enforcement action if we are found to violate disclosure, reporting, anti-money laundering, capitalization, corporate governance, or other requirements of such licenses. These factors could impose substantial additional costs, involve considerable delay to the development or provision of our products or services, require significant and costly operational changes, or prevent us from providing our products or services in any given market.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 identification and customer due diligence requirements;•impose additional reporting or recordkeeping requirements, or require enhanced transaction monitoring;25•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.lose our foundersuffer significant losses or key members of our management team or are unable to attract and retain executives and employees we need to support our operations and growth, our business may be harmed.Our success and future growth depend upon the continued services of our management team and other key employees. Our founder and Chief Executive Officer, René Lacerte, is critical to our overall management,reputational harm as well as the continued development of our products, strategic partnerships, our culture, our relationships with accounting firms, and our strategic direction. From time to time, there may be changes in our management team resulting from the hiring or departure of executives and key employees, which could disrupt our business. Our senior management and key employees are employed on an at-will basis. We currently do not have “key person” insurance on any of our employees. Certain of our key employees have been with us for a long period of time and have fully vested stock options or other long-term equity incentives that may become valuable and are publicly tradable now that we are a public company. The loss of our founder, or one or more of our senior management, or other key employees, including due to illness resulting from COVID-19, could harm our business, and we may not be able to find adequate replacements. We cannot ensure that we will be able to retain the services of any members of our senior management or other key employees or that we would be able to timely replace members of our senior management or other key employees should any of them depart.If we fail to offer high-quality customer support, or if our support is more expensive than anticipated, our business and reputation could suffer.Our customers rely on our customer support services, which we refer to as customer success, to resolve issues and realize the full benefits provided by our platform. High-quality support is also important for the renewal and expansion of our subscriptions with existing customers. We primarily provide customer support over chat and email, with limited phone-based support. If we do not help our customers quickly resolve issues and provide effective ongoing support, or if our support personnel or methods of providing support are insufficient to meet the needs of our customers, our ability to retain customers, increase adoption by our existing customers and acquire new customers could suffer, and our reputation with existing or potential customers could be harmed. If we are not able to meet the customer support needs of our customers by chat and email during the hours that we currently provide support, we may need to increase our support coverage and provide additional phone-based support, which may reduce our profitability.26If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, and changing business needs, requirements, or preferences, our products may become less competitive.The market for SMB 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 success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on a timely basis, including launching new products and services. The success of any new product and service, or any enhancements or modifications to existing products and services, depends on several factors, including the timely completion, introduction, and market acceptance of such products and services, enhancements, and modifications. If we are unable to enhance our platform, add new payment methods or develop new products that keep pace with technological and regulatory change and achieve market acceptance, or if new technologies emerge that are able to deliver competitive products and services at lower prices, more efficiently, more conveniently, or more securely than our products,result, our business, operating results, and financial condition wouldcould be adversely affected. Moreover, we may experience delays in the development and introduction of new products due to the effects of the COVID-19 pandemic. Furthermore, modifications to our existing platform or technology will increase our research and development expenses. Any failure of our services to operate effectively with existing or future network platforms and technologies could reduce the demand for our services, result in customer dissatisfaction and adversely affect our business.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. As the market for our platform matures, or as new or existing competitors introduce new products or services that compete with ours, we may experience pricing pressure and be unable to renew our agreements with existing customers or attract new customers at prices that are consistent with our pricing model and operating budget. Our pricing strategy for new products we introduce, including our virtual card and cross-border payment products, may prove to be unappealing to our customers, and our competitors could choose to bundle certain products and services competitive with ours. If this were to occur, it is possible that we would have to change our pricing strategies or reduce our prices, which could harm our revenue, gross profits, and operating results.We typically provide service level commitments under our strategic partner agreements. If we fail to meet these contractual commitments, we could be obligated to provide credits or refunds for prepaid amounts related to unused subscription services or face contract terminations, which could adversely affect our revenue.Our agreements with our strategic partners typically contain service level commitments on a monthly basis. 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. In addition, we could face contract terminations, in which case we would be subject to refunds for prepaid amounts related to unused subscription services. Our revenue could be significantly affected if we suffer unexcused downtime under our agreements with our partners. Further, any extended service outages could adversely affect our reputation, revenue, and operating results.We may not be able to scale our business quickly enough to meet our customers’ growing needs, and if we are not able to grow efficiently, our operating results could be harmed.As usage of our platform grows and we sign additional strategic partners, we will need to devote additional resources to improving and maintaining our infrastructure and computer network and integrating with third-party applications to maintain the performance of our platform. In addition, we will need to appropriately scale our internal business systems and our services organization, including customer support, risk and compliance operations, and professional services, to serve our growing customer base.27Any failure of or delay in these efforts could result in service interruptions, impaired system performance, and reduced customer satisfaction, resulting in decreased sales to new customers, lower subscription renewal rates by existing customers, the issuance of service credits, or requested refunds, all of which could hurt our revenue growth. If sustained or repeated, these performance issues could reduce the attractiveness of our platform to customers and could result in lost customer opportunities and lower renewal rates, any of which could hurt our revenue growth, customer loyalty, and our reputation. Even if we are successful in these efforts to scale our business, they will be expensive and complex, and require the dedication of significant management time and attention. We could also face inefficiencies or service disruptions as a result of our efforts to scale our internal infrastructure. We cannot be sure that the expansion and improvements to our internal infrastructure will be effectively implemented on a timely basis, if at all, and such failures could adversely affect our business, operating results, and financial condition.The failure to attract and retain additional qualified personnel and any restrictions on the movement of personnel could prevent us from executing our business strategy and growth plans.To execute our business strategy, we must attract and retain highly qualified personnel. Competition for executive officers, software developers, compliance and risk management personnel and other key employees in our industry and location is intense and increasing. We compete with many other companies for software developers with high levels of experience in designing, developing, and managing cloud-based software and payment systems, as well as for skilled legal and compliance and risk operations professionals. The current regulatory environment related to immigration may increase the likelihood that immigration laws may be modified to further limit the availability of H1-B and other visas. 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. Many of the companies with which we compete for experienced personnel have greater resources than we do and can frequently offer such personnel substantially greater compensation than we can offer. If we fail to identify, attract, develop and integrate new personnel, or fail to retain and motivate our current personnel, our growth prospects would be adversely affected.Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our products.Our ability to increase our customer base and achieve broader market acceptance of our platform will depend to a significant extent on our ability to expand our sales and marketing organizations, and to deploy our sales and marketing resources efficiently. Although we will adjust our sales and marketing spend levels as needed in response to changes in the economic environment, we plan to continue expanding our direct-to-SMB sales force as well as our sales force focused on identifying new strategic partners. We also dedicate significant resources to sales and marketing programs, including digital advertising through services such as Google AdWords. The effectiveness and cost of our online advertising has varied over time and may vary in the future due to competition for key search terms, changes in search engine use, and changes in the search algorithms used by major search engines. These efforts will require us to invest significant financial and other resources. Our business and operating results will be harmed if our sales and marketing efforts do not generate significant increases in revenue. We may not achieve anticipated revenue growth from expanding our sales force if we are unable to hire, develop, integrate, and retain talented and effective sales personnel, if our new and existing sales personnel are unable to achieve desired productivity levels in a reasonable period of time, or if our sales and marketing programs and advertising are not effective.28We are subject to governmental regulation and other legal obligations, particularly those related to privacy, data protection, and information security, and our actual or perceived failure to comply with such obligations could harm our business, by resulting in litigation, fines, penalties, or adverse publicity and reputational damage that may negatively affect the value of our business and decrease the price of our common stock. Compliance with such laws could also result in additional costs and liabilities to us or inhibit sales of our products.Our customers, their suppliers, customers and other users store personal and business information, financial information and other sensitive information on our platform. In addition, we receive, store, and process personal and business information and other data from and about actual and prospective customers and users, in addition to our employees and service providers. Our handling of data is subject to a variety of laws and regulations, including regulation by various government agencies, such as the U.S. Federal Trade Commission (FTC), and various state, local, and foreign agencies. Our data handling also is subject to contractual obligations and industry standards.The U.S. federal and various state and foreign governments have adopted or proposed limitations on the collection, distribution, use, and storage of data relating to individuals and businesses, including the use of contact information and other data for marketing, advertising, and other communications with individuals and businesses. In the United States, various laws and regulations apply to the collection, processing, disclosure, and security of certain types of data, including the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, the Gramm Leach Bliley Act, and state laws relating to privacy and data security. Additionally, the FTC and many state attorneys general are interpreting federal and state consumer protection laws as imposing standards for the online collection, use, dissemination, and security of data. For example, in June 2018, California enacted the California Consumer Privacy Act, which became operative on January 1, 2020 and broadly defines personal information, gives California residents expanded privacy rights and protections, and provides for civil penalties for violations and a private right of action for data breaches. Many aspects of the California Consumer Privacy Act and its interpretation remain unclear, and its full impact on our business and operations remains uncertain. The laws and regulations relating to privacy, data protection and information security are evolving, can be subject to significant change, and may result in ever-increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions.In addition, several foreign countries and governmental bodies, including the European Union, have laws and regulations dealing with the handling and processing of personal information obtained from their residents, which in certain cases are more restrictive than those in the United States. 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. While we believe that the products and services that we currently offer do not subject us to such laws or regulations in foreign jurisdictions, such laws and regulations may be modified or subject to new or different interpretations, and new laws and regulations may be enacted in the future.Within the European Union, the General Data Protection Regulation (GDPR), significantly increases the level of sanctions for non-compliance from those in existing EU data protection law and imposes direct obligations on data processors in addition to data controllers. EU data protection authorities have the power to impose administrative fines for violations of the GDPR of up to a maximum of €20 million or 4% of the data controller’s or data processor’s total worldwide global turnover for the preceding fiscal year, whichever is higher, and violations of the GDPR may also lead to damages claims by data controllers and data subjects. Such penalties are in addition to any civil litigation claims by data controllers, customers, and data subjects. While we believe that the products and services that we currently offer do not subject us to the GDPR, the GDPR and other laws and regulations relating to privacy, data protection, and information security may be modified or subject to new or different interpretations or may be modified in the future, or modifications or enhancements that we make to our products may subject us to GDPR, or we otherwise may become, or have it asserted that we are, subject to the GDPR or other laws or regulations relating to privacy, data protection, or information security. If we are, or are asserted to be, subject to the GDPR, we may need to take steps to cause our processes to be compliant with applicable portions of the GDPR, but we cannot assure you that we will be able to implement changes in a timely manner or without significant disruption to our business, or that such steps will be effective, and we may face the risk of liability under the GDPR.29The scope and interpretation of the laws that are or may be applicable to us are often uncertain and may be conflicting, as a result of the rapidly evolving regulatory framework for privacy issues worldwide. 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. As a result of the laws that are or may be applicable to us, and due to the sensitive nature of the information we collect, we have implemented policies and procedures to preserve and protect our data and our customers’ data against loss, misuse, corruption, misappropriation caused by systems failures, or unauthorized access. If our policies, procedures, or measures relating to privacy, data protection, information security, marketing, or customer communications fail to comply with laws, regulations, policies, legal obligations, or industry standards, we may be subject to governmental enforcement actions, litigation, regulatory investigations, fines, penalties, and negative publicity, and could cause our application providers, customers and partners to lose trust in us, and have an adverse effect on our business, operating results, and financial condition.In addition to government regulation, privacy advocates and industry groups may propose new and different self-regulatory standards that may apply to us. Because the interpretation and application of privacy, data protection and information security laws, regulations, rules, and other standards are still uncertain, it is possible that these laws, rules, regulations, and other actual or alleged legal obligations, such as contractual or self-regulatory obligations, may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the functionality of our platform. If so, in addition to the possibility of fines, lawsuits and other claims, we could be required to fundamentally change our business activities and practices or modify our software, which could have an adverse effect on our business.Any failure or perceived failure by us to comply with laws, regulations, policies, legal, or contractual obligations, industry standards, or regulatory guidance relating to privacy, data protection, or information security, may result in governmental investigations and enforcement actions, litigation, fines and penalties, or adverse publicity, and could cause our customers and partners to lose trust in us, which could have an adverse effect on our reputation and business. We expect that there will continue to be new proposed laws, regulations, and industry standards relating to privacy, data protection, information security, marketing, and consumer communications, and we cannot determine the impact such future laws, regulations, and standards may have on our business. Future laws, regulations, standards, and other obligations or any changed interpretation of existing laws or regulations could impair our ability to develop and market new functionality and maintain and grow our customer base and increase revenue. 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.If we are not able to comply with these laws or regulations, or if we become liable under these laws or regulations, we could be directly harmed, and we may be forced to implement new measures to reduce our exposure to this liability. This may require us to expend substantial resources or to discontinue certain products, which would negatively affect our business, financial condition, and operating results. In addition, the increased attention focused upon liability issues as a result of lawsuits and legislative proposals could harm our reputation or otherwise adversely affect the growth of our business. Furthermore, any costs incurred as a result of this potential liability could harm our operating results. strategic partners, our customers, and others who use our services obtain and process a large amount of sensitive data. Any real or perceived improper or unauthorized use of, disclosure of, or access to such data could harm our reputation as a trusted brand, as well as have a material adverse effect on our business. strategic partners, our customers, and the third-party vendors and data centers that we use, obtain and process large amounts of sensitive data, including data related to our customers and their transactions, as well as other data of the counterparties to their payments. We face risks, including to our reputation as a trusted30penalties strategic partners conduct regular audits of our cybersecurity program, and if any of them were to conclude that our systems and procedures are insufficiently rigorous, they could terminate their relationships with us, and our financial results and business could be adversely affected. Under our terms of service and our contracts with strategiccertain partners, if there is a breach of payment information that we store, we could be liable to the partner for their losses and related expenses. Additionally, if our own confidential business information were improperly disclosed, our business could be materially and adversely affected. A core aspect of our business is the reliability and security of our platform. Any perceived or actual breach of security, regardless of how it occurs or the extent of the breach, could have a significant impact on our reputation as a trusted brand, cause us to lose existing partners or other customers, prevent us from obtaining new partners and other customers, require us to expend significant funds to remedy problems caused by breaches and implement measures to prevent further breaches, and expose us to legal risk and potential liability including those resulting from governmental or regulatory investigations, class action litigation, and costs associated with remediation, such as fraud monitoring and forensics. Any actual or perceived security breach at a company providing services to us or our customers could have similar effects. Further, as the current COVID-19 pandemic continues to result in a significant number of people working from home, these cybersecurity risks may be heightened by an increased attack surface across our business and those of our partners and service providers. We have heightened monitoring in the face of such risks, but cannot guarantee that our efforts, or the efforts of those upon whom we rely and partner with, will be successful in preventing any such information security incidents.31currentlyinvest funds that we hold for the benefit of our customers, including funds being remitted to suppliers, in highly liquid, investment-grade marketable securities, money market securities, and other cash equivalents. Nevertheless, our customer fund assets are subject to general market, interest rate, credit, foreign exchange, and liquidity risks. These risks may be exacerbated, individually or in the aggregate, during periods of heavy financial market volatility such as that experienced in 2008 and 2022, that may result from the COVID-19 or other pandemics, from high inflation, high interest rate or recessionary environments or from war (such as the war in Ukraine). As a result, we could be faced with a severe constriction of the availability of liquidity, which could impact our ability to fulfill our obligations to move customer money to its intended recipient. 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. Any loss of or inability to access customer funds could have an adverse impact on our cash position and results of operations, could require us to obtain additional sources of liquidity, and could have a material adverse effect on our business, financial condition, and results of operations. In addition to the risks related to customer funds, we are also exposed to interest-rate risk relating to our investments of the Company's corporate cash.cross-border paymentslarge and plangrowing transaction volumes and amounts of customer funds. Any failure to maintain the necessary controls or to accurately manage our customer funds and the assets underlying our customer funds in compliance with applicable regulatory requirements could result in reputational harm, lead customers to discontinue or reduce their use of our products, and result in significant penalties and fines, possibly including the loss of our state money transmitter licenses, which would materially harm our business.offering to new customersnetwork and to make payments to new countries, creating a varietydiversity of operational challenges.A componentfunding arrangements, our business, results of our growth strategy involves our cross-border payments productoperations, financial condition, and ultimately, expanding our operations internationally. Althoughfuture prospects could be materially and adversely affected.currently serveor cannot maintain the compatibility of our platform with popular accounting software solutions or offerings of our partners, our revenue and growth prospects will decline.outsideand their suppliers and clients. This two-way sync saves time for our customers by reducing duplicative manual data entry and provides the United States, startingbasis for managing cash-flow through an integrated solution for accounts payable, accounts receivable, spend and expense management and payments.2018a manner that is adverse to our business, we introduced cross-border payments throughmay be restricted or may not be able to provide synchronization capabilities, which could significantly diminish the value of our relationshipplatform and harm our business, operating results, and financial condition. In addition, if any of these accounting software providers reconfigure their platforms in a manner that no longer supports our integration with Cambridge Mercantile,their accounting software we would lose customers and now offer our United States-based customers the ability to disburse funds to over 130 countries. We are continuing to adapt to and develop strategies to address payments to new countries. However, there is no guarantee that such efforts will have the desired effect.Our cross-border payments product and international operations strategy involve a variety of risks, including:
business would be adversely affected.•changes in financial regulations and our ability to comply and obtain any relevant licenses;•currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions;•reduction in cross-border trade resulting from trade sanctions, other trade regulations, and relations;•potential application of more stringent regulations relating to privacy, data protection, and information security, and the authorized use of, or access to, commercial and personal information;•potential changes in trade relations, regulations, or laws;•exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S. Foreign Corrupt Practices Act (FCPA), U.S. bribery laws, the UK Bribery Act, and similar laws and regulations in other jurisdictions; and•unexpected changes in tax laws. invest substantial time and resources to further expand our cross-border payments offering and are unable to do so successfullyincrease adoption of our platform with customers of these accounting software solutions our growth prospects may be adversely affected. 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.may suffer.The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating, and pursuing suitable acquisitions, whether or not such acquisitions are completed. In addition,However, we have nolimited experience in acquiring other businesses, and we may not successfully identify desirable acquisition targets,targets. Moreover, an acquisition, investment, or business relationship may not further our business strategy or result in the economic benefits or synergies as expected or may result in unforeseen operating difficulties and expenditures, including disrupting our ongoing operations, diverting management from their primary responsibilities, subjecting us to additional liabilities, increasing our expenses, and adversely impacting our business, financial condition, and operating results.additional businesses wewhose operations may not be ablefully compliant with all applicable law, including economic and trade sanctions and anti-money laundering, counter-terrorist financing and privacy laws, subjecting us to potential liabilities and requiring us to spend considerable time, effort, and resources to address.them effectively followingemployees from the acquisition. 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. Therefore, we may be exposed to unknown liabilities and the anticipated benefits of any acquisition, investment, or business relationship may not be realized, if, for example, we fail to successfully integrate such acquisitions, or the technologies associated with such acquisitions, into our company. 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.TableContentsour subscriptions with existing customers. We provide customer support via chat email, and phone. If we do not help our customers quickly resolve issues and provide effective ongoing support, or if our support personnel or methods of providing support are insufficient to meet the needs of our customers, our ability to retain customers, increase adoption by our existing customers, and acquire new customers could suffer, and our reputation with existing or potential customers could be harmed. If we are not able to meet the customer support needs of our customers during the hours that we currently provide support, we may need to increase our support coverage or provide additional support, which may reduce our profitability.brand,brands, our ability to expand our customer base will be impaired and our business, operating results, and financial condition may suffer.the Bill.com brand isour brands are important to support the marketing and sale of our existing and future products to new customers and strategic partners and to expand sales of our platformplatforms to new and existing customers and strategic partners. Our ability to protect our Bill.com brand is limited as a result of its descriptive nature. Successfully maintaining and enhancing our brandbrands will depend largely on the effectiveness of our marketing and demand generation efforts, our ability to provide reliable products that continue to meet the needs of our customers at competitive prices, our ability to maintain our customers’ trust, our ability to continue to develop new functionality and products, and our ability to successfully differentiate our platform and products from competitive products and services. Our brand promotion activities may not generate customer awareness or yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incur in building our brand. If we fail to successfully promote and maintain our brand,brands, our business could suffer.United StatesU.S. and have additional patent applications pending, we may be unable to obtain patent protection for the technology covered in our patent applications. In addition, any patents issued in the future may not provide us with competitive advantages or may be successfully challenged by third parties. Any of our patents, trademarks, or other intellectual property rights may be challenged or circumvented by others or invalidated through administrative process or litigation. There can be no guarantee that others will not independently develop similar products, duplicate any of our products, or design around our patents. Furthermore, legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights are uncertain. Despite our precautions, it may be possible for unauthorized third parties to copy our products and use information that we regard as proprietary to create products and services that compete with ours.No assurance can be given that these agreements will be effective in controlling access to and distribution of our products and proprietary information. Further, these agreements do not prevent our competitors or partners from independently developing technologies that are substantially equivalent or superior to our platform.33strategicfinancial institution partners and some larger customers include indemnification provisions under which we agree to indemnify them for losses suffered or incurred as a result of claims of intellectual property infringement, data protection, damages caused by us to property or persons, or other liabilities relating to or arising from our platform or other contractual obligations. Some of these indemnity agreements provide for uncapped liability and some indemnity provisions survive termination or expiration of the applicable agreement. Large indemnity payments could harm our business, operating results, and financial condition. Although we normally limit our liability with respect to such obligations in our contracts with direct customers and with customers acquired through our accounting firm partners, we may still incur substantial liability, and we may be required to cease use of certain functions of our platform or products, as a result of IP-relatedintellectual property-related claims. Any dispute with a customer with respect to these obligations could have adverse effects on our relationship with that customer and other existing or new customers, and harm our business and operating results. In addition, although we carry insurance, our insurance may not be adequate to indemnify us for all liability that may be imposed, or otherwise protect us from liabilities or damages with respect to claims alleging compromises of customer data, and any such coverage may not continue to be available to us on acceptable terms or at all.feesrules or rulesfees could harm our business.in connection withapplicable to our virtual card payments service and our subscription billing engine.products. We have agreed to reimburse ourcertain service providers for any fines they are assessed by payment card networks as a result of any rule violations by us. We may also be directly liable to the payment card networks for rule violations. The payment card networks set and interpret the card operating rules. The payment card networks could adopt new operating rules or interpret or reinterpret existing rules that we or our processors might find difficult or even impossible to follow, or costly to implement. We also may seek to introduce other card-related products in the future, which would entail compliance with additional operating rules. As a result of any violations of rules, new rules being implemented, or increased fees, we could be hindered or lose our ability to make payments using virtual cards, or such payments could become prohibitively expensive for us or forprovide our customers. Ifcard products, which would adversely affect our business. In addition, we are unablecontractually obligated to make customer paymentscomply with MasterCard and Visa network rules as a card program manager. As a result of any violations of these rules or new rules being implemented, we could lose our ability or rights to vendors using virtual cards, our business would be adversely affected.34United StatesU.S. and in other countries in which we operate.operate and in many of the approximately 150 countries in which Invoice2go has subscribers. These laws, rules, regulations, licensing schemes, and standards govern numerous areas that are important to our business. In addition to the payments and financial services-related regulations, and the privacy, data protection, and information security-related laws described elsewhere, our business is also subject to, without limitation, rules and regulations applicable to: securities, labor and employment, immigration, competition, and marketing and communications practices. Laws, rules, regulations, licensing schemes, and standards applicable to our business are subject to changeschange and evolving interpretations and application, including by means of legislative changes and/or executive orders, and it can be difficult to predict how they may be applied to our business and the way we conduct our operations, particularly as we introduce new products and services and expand into new jurisdictions. We may not be able to respond quickly or effectively to regulatory, legislative, and other developments, and these changes may in turn impair our ability to offer our existing or planned features, products, and services and/or increase our cost of doing business.•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; andrestrict 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.35dilution, and thedilution. In addition, new equity securities could have rights senior to those of our common stock. TheDuring 2022, interest rates have increased and the trading prices for our common stock and other technology companies have been highly volatile, as a result of the COVID-19 pandemic and related governmental actions, which may reduce our ability to access capital on favorable terms or at all. In addition, a recession or depression, high inflation or other sustained adverse market event resulting from the spread of COVID-19 could materially and adversely affect our business and the value of our common stock. Because our decision to issue securities in the future will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future issuances of debt or equity securities. As a result, our stockholders bear the risk of future issuances of debt or equity securities reducing the value of our common stock and diluting their interests.2020,2022, we had net operating loss (NOL) carryforwards of approximately $265.8 million$1.5 billion, $1.1 billion, and $203.5$61.3 million for federal, state and stateforeign tax purposes, respectively, that are available to2026.2027. As of June 30, 2020,2022, approximately $166.0$1.4 billion and $61.3 million of the federal and foreign NOL carryforwards do not expire and will carry forward indefinitely until utilized. As of June 30, 2020,2022, we had research and development tax credit carryforwards of approximately $10.6$40.1 million and $8.7$27.1 million for federal and state tax purposes, respectively. If not utilized, the federal tax credits will expire at various dates beginning in 2027.2028. The state tax credits do not expire and will carry forward indefinitely until utilized. In general, under Sections 382 and 383 of the United StatesU.S. Internal Revenue Code of 1986, as amended or the Code,(the Code), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs and other tax attributes such as research tax credits to offset future taxable income or income tax. If it is determined that we have in the past experienced an ownership change, or if we undergo one or more ownership changes as a result of future transactions in our stock, then our ability to utilize NOLs and other pre-change tax attributes could be limited by Sections 382 and 383 of the Code. Future changes in our stock ownership, many of which are outside of our control, could result in an ownership change under Sections 382 or 383 of the Code. Furthermore, our ability to utilize NOLs of companies that we may acquire in the future may be subject to limitations. For these reasons, we may not be able to utilize a material portion of the NOLs, even if we were to achieve profitability.On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law. The CARES Act changes certain provisions of the 2017 Tax Cuts and Jobs Act (the 2017 Tax Act), which was enacted on December 22, 2017. The CARES Act did not have material impact on our financial statements due to our historical losses and valuation allowance positions. Any36United StatesU.S. recently ruled in South Dakota v. Wayfair, Inc. et al (Wayfair) that online sellers can be required to collect sales and use tax despite not having a physical presence in the buyer’s state. 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 taxtaxes in states in whichwhere we have not collected and remitted sales and use tax.taxes. A successful assertion by one or more states requiring us to collect taxes where we historically have not or presently do not do so could result in substantial tax liabilities, including taxes on past sales, as well as penalties and interest. The imposition by state governments or local governments of sales tax collection obligations on out-of-state sellers could also create additional administrative burdens for us, put us at a perceived competitive disadvantage if they do not impose similar obligations on our competitors, and decrease our future sales, which could adversely affect our business and operating results.•changes in the relative amounts of income before taxes in the various 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; andlimitations or adverse findings regarding our ability to do business in some jurisdictions.or other catastrophic events and man-made problems, such as terrorism, war or economic or trade sanctions related to war (including the 2022 Russian invasion of Ukraine), may cause damage or disruption to our operations, international commerce and the global economy, and thus could harm our business. We have a large employee presence in the San Francisco Bay Area in California, and a smaller presence inDraper, Utah, Houston, Texas and Sydney, Australia, and our data centers are located in California and Arizona. The west coast of the United StatesU.S. contains active earthquake zones, and the Houston area frequently experiences significant hurricanes.hurricanes and Sydney frequently experiences wildfires. 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.37We are obligated to develop and maintain proper and effective internal control over financial reporting, and ifof 2002 (Sarbanes-Oxley Act), the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the listing requirements of the NYSE,New York Stock Exchange (NYSE), and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time consuming, or costly, and increase demand on our systems and resources, particularly after we are no longer an emerging growth company.resources. The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and operating results. 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. As a result, management’s attention may be diverted from other business concerns, which could adversely affect our business and operating results. Although we have already hired additional employees to comply with these requirements, we may need to hire more employees in the future or engage outside consultants, which would increase our costs and expenses. Furthermore, for fiscal 2018, we identified material weaknesses in our internal control over financial reporting relating to our financial statement close process and reconciliation of funds held for customers. While no material weaknesses were identified in fiscal 2019 and 2020, there can be no assurance that we will not experience additional material weaknesses in the future.will also beare 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 commencing with our second annual report on Form 10-K.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. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.will needneeds to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting, as well as a statement that our independent registered public accounting firm has issued an opinion on the effectiveness of our internal control over financial reporting, provided thatreporting. Section 404(b) of the Sarbanes-Oxley Act requires our independent registered public accounting firm will not be required to annually attest to the effectiveness of our internal control over financial reporting, until our first annual report required which has, and will continuebe filed with the SEC following the later of the date we are deemed to be an “accelerated filer” or a “large accelerated filer,” each as defined in the Exchange Act, or the date we are no longer an emerging growth company, as defined in the JOBS Act. We could be an emerging growth company for up to five years.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. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incurrestate our financial statements, which could cause investors to lose confidence in our reported financial information, have a negative effect on the expensetrading price of remediation.our common stock, and result in additional costs to remediate such material weaknesses. We will beare required to disclose changes made in our internal control and procedures on a quarterly basis. To comply with the requirements of being a public company, we may need to undertake various actions, such as implementing new internal controls and procedures and hiring accounting or internal audit staff.38We are in the early stages of the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404. We may not be able to complete our evaluation, testing, and any required remediation in a timely fashion. During the evaluation and testing process, if we identify material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective.is unable to expressissues an adverse opinion on the effectiveness of our internal control, including as a result of the material weakness described above, we could lose investor confidence in the accuracy and completeness of our financial reports, which could cause the price of our common stock to decline, and we may be subject to investigation or sanctions by the SEC. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the NYSE.United States.Results – 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. Significant estimates and judgments involve the identification of performance obligations in revenue recognition, the valuation of the stock-based awards, including the determinationassets acquired and liabilities assumed in a business combination, estimation of fair value of commona reporting unit when assessing goodwill impairment, determination of useful lives of finite-lived intangible assets, present value estimation of operating lease liabilities, valuation of stock option grants, and the period of benefit for amortizing deferred commissions, among others.commissions. Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our common stock.underinsuredunder-insured could result in unanticipated costs, thereby reducing our operating results and leading analysts or potential investors to reduce their expectations of our performance, which could reduce the trading price of our stock.39Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all.Market opportunity estimates and growth forecasts, including those we have generated ourselves, are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The variables that go into the calculation of our market opportunity are subject to change over time, and there is no guarantee that any particular number or percentage of addressable users or companies covered by our market opportunity estimates will purchase our products at all or generate any particular level of revenue for us. Any expansion in our market depends on a number of factors, including the cost, performance, and perceived value associated with our platform and those of our competitors. Even if the market in which we compete meets the size estimates and growth forecasted, our business could fail to grow at similar rates, if at all. 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.operateoffer our payment and card products to customers in the United States,U.S. and Canada, Invoice2go has international subscribers in the futureapproximately 150 countries, including Australia and several EU countries, for which payment activity is conducted through third party payment providers. As we will seekcontinue to expand internationally andwe will become subject to additional laws and regulations, and will need to implement new regulatory controls to comply with applicable laws. We are currently 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) and we have processes in place to comply with the OFAC regulations as well as similar requirements in other jurisdictions.jurisdictions, including the Australian Sanctions Regime, the Canadian Proceeds of Crime and Terrorist Financing Act and, to the extent we expand our offerings into the United Kingdom and the EU, EU money laundering directives. As part of our compliance efforts, we scan our customers against OFAC and other watchlists. While we offer services onlywatch lists and have controls to customers domiciled in the United States, our application could be accessed from anywhere in the world.monitor and mitigate these risks. If our service isservices are accessed from a sanctioned country in violation of the trade and economic sanctions, we could be subject to fines or other enforcement action. We are also subject to various anti-money laundering and counter-terrorist financing laws and regulations in the U.S., Canada, Australia and around the world that prohibit, among other things, our involvement in transferring the proceeds of criminal activities.requires money transmittersservices businesses (MSBs) to develop and implement risk-based anti-money laundering programs, to report large cash transactions and suspicious activity, and in some cases, to collect and maintain information about customers who use their services and maintain other transaction records. Regulators in the United States, Canada, Australia and globallyin many other foreign jurisdictions continue to increase their scrutiny of compliance with these obligations, which may require us to further revise or expand our compliance program, including the procedures we use to verify the identity of our customers and to monitor transactions on our system, including payments to persons outside of the United States.U.S., Canada and Australia. Regulators regularly re-examine the transaction volume thresholds at which we must obtain and keep applicable records or verify identities of customers, and any change in such thresholds could result in greater costs for compliance.laws.laws, including Australia’s anti-bribery laws, the Canadian Criminal Code and the Canadian Corruption of Foreign Public Officials Act. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly to generally prohibit companies, their employees, and their third-party intermediaries from authorizing, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public sector. These laws also require that we keep accurate books and records and maintain internal controls and compliance procedures designed to prevent any such actions. Although we currently only maintain operationsoffer our payment and card products to customers in the United States, asU.S. and payment services in Canada, Invoice2go has international subscribers in approximately 150 countries, including Australia and several EU countries for which payment activity is conducted through third party payment providers. As we increase our international cross-border business and expand operations abroad, we may engage with business partners and third-party intermediaries to market our services and to obtain necessary permits, licenses, and other regulatory approvals. In40Our Senior Secured Credit Facilities Credit Agreement provides our lenders with a first-priority lien against substantially all of our assets, and contains financial covenants and other restrictions on our actions, which could limit our operational flexibility and otherwise adversely affect our financial condition.Our Senior Secured Credit Facilities Credit Agreement (Senior Facilities Agreement) restricts our ability to, among other things:•use our accounts receivable, inventory, trademarks, and most of our other assets as security in other borrowings or transactions, unless the value of the assets subject thereto does not exceed a certain threshold;•incur additional indebtedness;•incur liens upon our property;•dispose of certain assets;•declare dividends or make certain distributions; and•undergo a merger or consolidation or other transactions.Our Senior Facilities Agreement also prohibits us during certain covered time periods from allowing Net Revenue (as defined in the Senior Facilities Agreement) for any fiscal quarter to be less than prescribed minimums. Our ability to comply with this and other covenants is dependent upon several factors, some of which are beyond our control.Our failure to comply with the covenants or payment requirements, or the occurrence of other events specified in our Senior Facilities Agreement, could result in an event of default under the Senior Facilities Agreement, which would give our lenders the right to terminate its commitments to provide additional loans under the Senior Facilities Agreement and to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable. In addition, we have granted our lenders first-priority liens against all of our assets as collateral. Failure to comply with the covenants or other restrictions in the Senior Facilities Agreement could result in a default. If the debt under our Senior Facilities Agreement was to be accelerated, we may not have sufficient cash on hand or be able to sell sufficient collateral to repay it, which would have an immediate adverse effect on our business and operating results.41expect fluctuationsare exposed to foreign currency exchange risk relating to our Australian operationsmaking it difficultdue to project future results,transaction gains or losses related to the remeasurement of certain monetary asset and ifmonetary liability balances that are denominated in currencies other than U.S. dollars, which is the functional currency of our Australian subsidiary. In addition, we failexpect our exposure 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.Our operating results have fluctuated in the past and are expected to fluctuateforeign currency rate risks in the future to increase as our international operations increase.a varietythe consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Our ability to make payments of the principal of, to pay interest on or to refinance our indebtedness, including the 2025 Notes and 2027 Notes (collectively, the Notes), depends on our future performance, which is subject to economic, financial, competitive, and other factors many of which are outside ofbeyond our control. As a result,Our business may not generate cash flow from operations in the future sufficient to service our past resultsdebt and make necessary capital expenditures. 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. Our ability to refinance any future indebtedness will depend on the capital markets and our financial condition at such time. We may not be indicativeable to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. In addition, any of our future performance. debt agreements may contain restrictive covenants that may prohibit us from adopting any of these alternatives. Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of our debt.risks described herein, factorsactions that could have the effect of diminishing our ability to make payments on the Notes when due.results include the following:
results.•fluctuations in demand for or pricing of our platform;•our ability to attract new customers;•our ability to retain and grow engagement with our existing customers;•the impact of the COVID-19 pandemic on our employees, customers, strategic partners, vendors, our results of operations, liquidity and financial condition;•our ability to expand our relationships with our accounting firm partners, financial institution partners, and accounting software partners, or identify and attract new partners;•customer expansion rates;•changes in customer preference for cloud-based services as a result of security breaches in the industry or privacy concerns, or other security or reliability concerns regarding our products;•fluctuations or delays in purchasing decisions in anticipation of new products or product enhancements by us or our competitors;•changes in customers’ budgets and in the timing of their budget cycles and purchasing decisions;•potential and existing customers choosing our competitors’ products or developing their own solutions in-house;•the development or introduction of new platforms or services that are easier to use or more advanced than our current suite of services, especially related to the application of artificial intelligence-based services;•our failure to adapt to new forms of payment that become widely accepted, including cryptocurrency;•the adoption or retention of more entrenched or rival services in the international markets where we compete;•our ability to control costs, including our operating expenses;•the amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses, including commissions;42•the amount and timing of non-cash expenses, including stock-based compensation, goodwill impairments, and other non-cash charges;•the amount and timing of costs associated with recruiting, training, and integrating new employees, and retaining and motivating existing employees;•fluctuation in market interest rates, which impacts interest earned on funds held for customers;•the effects of acquisitions and their integration;•general economic conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers participate;•the impact of new accounting pronouncements;•changes in the competitive dynamics of our market;•security breaches of, technical difficulties with, or interruptions to, the delivery and use of our platform; and•awareness of our brand and our reputation in our target markets.Any of these and other factors, or the cumulative effect of some of these factors, may cause our operating results to vary significantly. In addition, we expect to incur significant additional expenses duePrior to the increased costsclose of operating as a public company. If our quarterly operating results fall belowbusiness on the expectationsbusiness day immediately preceding September 1, 2025, in the case of investorsthe 2025 Notes, and securities analysts who follow our stock,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”). The Conversion Condition for the 2025 Notes was not triggered as of June 30, 2022, but had been triggered in several prior quarters. In the event the Conversion Condition is triggered, holders of the Notes will be entitled to convert the Notes at any time during specified periods at their option. If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could decline substantially,adversely affect our liquidity. In addition, even if holders do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.could face costly lawsuits, including securities class action suits.•overall performance of the equity markets;the global macroeconomic impact of the current COVID-19 pandemic;the economy as a whole and market conditions in our industry;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, strategic partnerships, joint ventures, or capital commitments;43•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, incidents of terrorism, or responses to these events;the expiration of contractual lock-up agreements; andsales of shares of our common stock by us or our stockholders.Concentration of ownership of our common stock among our existing executive officers, directors, and principal stockholders may prevent new investors from influencing significant corporate decisions.As of June 30, 2020, our executive officers, directors, and current beneficial owners of 5% or more of our common stock, in the aggregate, beneficially own approximately 29.5% of our outstanding common stock. These persons, acting together, may be able to significantly influence all matters requiring stockholder approval, including the election and removal of directors and any merger or other significant corporate transactions. The interests of this group of stockholders may not coincide with the interests of other stockholders.•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;44•establish that our board of directors is divided into three classes, with each class serving three-year staggered terms;•prohibit cumulative voting in the•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;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; andrequire 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.We are an “emerging growth company,” and we cannot be certain if the reduced reporting and disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including the auditor attestation requirements of Section 404 reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Pursuant to Section 107 of the JOBS Act, as an emerging growth company, we have elected to use the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies or unless we decide to early adopt selected or all applicable revised accounting standards whereby early adoption is permitted. As a result, our consolidated financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make our common stock less attractive to investors. In addition, if we cease to be an emerging growth company, we will no longer be able to use the extended transition period for complying with new or revised accounting standards.We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of our IPO, (ii) the last day of the first fiscal year in which our annual gross revenue is $1.07 billion or more, (iii) the date on which we have, during the previous rolling three-year period, issued more than $1 billion in non-convertible debt securities, and (iv) the last day of the fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of December 31st, our second fiscal quarter, of such fiscal year.45We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. For example, if we do not adopt a new or revised accounting standard, our future operating results may not be as comparable to the operating results of certain other companies in our industry that adopted such standards. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile.increase after we are no longer an “emerging growth company.”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. Our management and other personnel devote a substantial amount of time to compliance with these requirements. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly compared to when we were a private company.future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock. In addition, our Senior Credit Facilities Agreement contains restrictions on our ability to pay cash dividends on our capital stock. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.Future salesmarketmarkets, particularly sales by our directors, executive officers, and significant stockholders, or the perception that these sales could occur, could cause the market price of our common stock to decline.Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur, could depress the market price of our common stockdecline and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that such sales may have on the prevailing market price of our common stock.46In connection with our follow-on public offering completed in June 2020, subject to certain exceptions, we, all of our directors and executive officers, certain affiliates, and the selling stockholders, agreed not to offer, sell, or agree to sell, directly or indirectly, any shares of common stock without the permission of Goldman Sachs & Co. LLC, (i) for a period of 90 days from the date of our prospectus filed with the Securities and Exchange Commission (SEC), pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended, on June 11, 2020 (prospectus) for us, and (ii) with respect to our directors and executive officers, certain affiliates, and the selling stockholders, if 60 days have elapsed since the date of the prospectus and we have publicly released our earnings results for the quarterly period ended June 30, 2020, the later of the 60th day after the date of prospectus and the date of such public release of our earnings results; provided that in no event will such period exceed 90 days from the date of the prospectus.When the applicable lock-up period described above expires, we and our security holders subject to a lock-up agreement will be able to sell our shares in the public market. In addition, the underwriters may, in their sole discretion, release all or some portion of the shares subject to lock-up agreements prior to the expiration of the lock-up period. Sales of a substantial number of such shares upon expiration of the lock-up agreements, or the perception that such sales may occur, or early release of the agreements, could cause our market price to fall or make it more difficult for you to sell your common stock at a time and price that you deem appropriate.10,160,0697,136,241 shares of common stock issuable upon the exercise of options outstanding and vesting of RSUs as of June 30, 2020. Following our IPO, we2022. We have registered all of the shares of common stock issuable upon exercise of outstanding options or settlement of RSUs or other equity incentives we may grant in the future on a registration statementstatements on Form S-8 for public resale under the Securities Act. The shares of common stock will become eligible for sale in the public market to the extent such options are exercised or such RSUs are settled, subject to the lock-up agreements described above and compliance with applicable securities laws.As of June 30, 2020, the of up to approximately 33,747,138 shares, or 42%, of our common stock will have rights, subject to some conditions, to require us to file registration statements covering the sale of their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.Weissuanceissuances could result in substantial dilution to our existing stockholders and cause the trading price of our common stock to decline.PropertiesIn December 2019, we entered into aPROPERTIESagreement for approximately 132,000our office facilities, which consisted of the following as of June 30, 2022:office spaceoffices located in San Jose, California, forCalifornia. This leased property, which is being used as our principal executive offices. The new lease (as amended) commenced in July 2020 andcorporate headquarters, expires in June 2031. Construction on the buildoutnew facility was temporarily suspendedemployees located in Draper, Utah, expires in March 2030. Approximately 20,000 square feet is being subleased for a period of time due to the shelter5 years expiring in place orders in the San Francisco Bay Area. We anticipate the delay will shift the completion of the project to early 2021.We lease approximately 9,000 square feet in Palo Alto, California for our interim principal executive offices under a lease that expires in January 2021.We also lease approximatelyDecember 2025.for human resources, engineering, customer success, and sales and marketing under a lease that expires in AprilMarch 2025.future, and that, should it be needed, suitable additional space will be availablefuture. We continue to evaluate our real estate strategy to accommodate any such expansion of our operations.Legal ProceedingsMine Safety Disclosures48Table of ContentsMarket for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securitiesbegan tradingtrades on The New York Stock Exchange under the symbol “BILL” on December 12, 2019. Prior to that date, there was no public trading market for our common stock.2020,2022, there were 182148 holders of record of our common stock. This number does not include beneficial owners whose shares are held by nominees in street name.2020,2022, relative to the performance of the S&P 500 Index and S&P 500 IT Index. The graph assumes an initial investment of $100.00 at the close of trading on December 12, 2019 and that all dividends paid by
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From October 1, 2019 through December 12, 2019 (the date of the filing of our registration statement on Form S-8, File No. 333-235459), we issued and sold to our employees an aggregate of 154,916 shares of common stock upon the exercise of options under our 2006 Equity Incentive Plan (2006 Plan) and our 2016 Equity Incentive Plan (2016 Plan), at exercise prices ranging from $0.48 to $8.76 per share, or a weighted-average exercise price of $3.44 per share.From October 1, 2019 through December 12, 2019 (the date of the filing of our registration statement on Form S-8, File No. 333-235459), we granted to our employees and other service providers an aggregate of 1,192,000 shares of stock options under our 2006 Plan, 2016 Plan and 2019 Equity Incentive Plan, at exercise prices ranging from $15.62 to $22.00 per share, or a weighted-average exercise price of $17.37 per share.The offers, sales, and issuances of the securities described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act or Regulation D promulgated thereunder or Rule 701 promulgated under the Securities Act as transactions by an issuer not involving a public offering or under benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited or sophisticated person and had adequate access, through employment, business, or other relationships, to information about us.Use of Proceeds from IPOOn December 16, 2019, we closed our IPO, in which we issued 11,297,058 shares of common stock at a public offering price of $22.00 per share, which included 1,473,529 shares of common stock issued pursuant to the exercise in full of the over-allotment option by the underwriters. We received $225.5 million in net proceeds from the IPO, after deducting underwriting discounts and commissions of $17.4 million and other offering costs of $5.6 million. There has been no material change in the planned use of proceeds from our IPO as described in our final prospectus filed with the SEC on December 12, 2019 pursuant to Rule 424(b)(4). The managing underwriters of our IPO were Goldman Sachs & Co. LLC, BofA Securities, Inc. and Jefferies LLC. No payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates, in connection with the issuance and sale of the securities registered.Selected Financial DataThe following tables present selected historical consolidated financial and other data for our business. We derived the selected consolidated statements of operations data for fiscal 2020, 2019 and 2018 and the consolidated balance sheet data as of June 30, 2020 and 2019 from our audited consolidated financial statements that are included elsewhere in this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any other period in the future. You should read this information in conjunction with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, the accompanying notes, and other financial information included elsewhere in this Annual Report on Form 10-K.(1)Includes stock-based compensation expense as follows (in thousands):51(2)See Note 13 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for an explanation of the method used to calculate basic and diluted net loss per share attributable to common stockholders and the weighted-average number of shares used in the computation of the per share amounts.52Management’s Discussion and Analysis of Financial Condition and Results of Operations leading provider of cloud-based software that simplifies, digitizes, and automates complex back-office financial operations for small and midsize businesses (SMBs). By transforming how SMBsOur mission is to make it simple to connect and do business. We partner with leading U.S. financial institutions, accounting firms, and accounting software providers. Our vision is to become the leading one-stop solution that helps millions of businesses around the world manage their cash inflows and outflows, we create efficiencies and free our customers to run their businesses.sendmake and receive payments, reconcilemanage employee expenses, sync with their books,accounting system, 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 through a single connection. In essence, we sit at the center of an SMB’s accounts payablequickly and accounts receivable operations.strategicfinancial institution partnerships. As of June 30, 2020,2022, our partners included some of the most trusted brands in the financial services business, including more than 8085 of the top 100 accounting firms and severalsix of the top ten largest financial institutions in the United States,U.S., including Bank of America, JPMorgan Chase, Wells Fargo Bank and American Express. As we add customers and partners, we expect our network to continue to grow organically.total revenue was $157.6 million, $108.4and net loss during fiscal 2022, which include the results of Invoice2go from the acquisition date, were $642.0 million and $64.9$326.4 million, respectively. Our revenue and net loss during fiscal 2021, which include the results of Divvy from the acquisition date, were $238.3 million and $98.7 million, respectively. Our revenue and net loss during fiscal 2020 2019were $157.6 million and 2018, respectively. We generated net losses of $31.1 million, $7.3 million and $7.2 million during fiscal 2020, 2019 and 2018, respectively.On December 16, 2019, we closed our initial public offering (IPO) in which we issued 11,297,058 sharesour common stock at a public offering price of $22.00 per share, which included 1,473,529 shares of common stock issued pursuant to the exercise in full of the over-allotment option by the underwriters. The IPO resulted in net proceeds of $225.5 million, after deducting underwriting discounts and commissions of $17.4 million and other offering costs of $5.6 million. Upon the closing of the IPO, all of our outstanding redeemable convertible preferred stock automatically converted into 52,434,505 shares of common stock on a one-for-one basis.On June 15, 2020, we closed a follow-on offering, in which we issued 4,330,000 shares of common stock at a public offering price of $74.25 per share, which included 1,080,000 shares of common stock issued pursuant to the exercise in full of the over-allotment option by the underwriters.COVID-19We received $307.5 million in net proceeds from the follow-on offering, after deducting underwriting discounts and commissions of $12.9 million and other offering costs of $1.1 million.COVID-19In December 2019, a strain of novel coronavirus (COVID-19) was reported in Wuhan, China, and began to be reported in the U.S. in January 2020. Since then, COVID-19 has spread throughout the U.S. and the world. In January 2020, the World Health Organization declared COVID-19 a public health emergency of international concern and in early March 2020, it declared COVID-19 a pandemic.53in some cases, prohibitions of non-essential activities, disruption and shutdown of businessesmandates and greater uncertainty in global financial markets. As the COVID-19 pandemic persists, it has significantly impacted the healthOur customers, spending businesses and economic environment around the world. Manysubscribers, and our business establishments have closed due to restrictions imposed by the government and many governmental authorities have closed most public and commercial establishments, including schools, restaurants and shopping malls. Our customersoperations, have been and may continue to be negatively impactedaffected by the shelter-in-placeCOVID-19 pandemic, variants and other similar stateresponsive government restrictions. For so long as the COVID-19 pandemic persists, restrictions and local orders, the closure of manufacturing sitespolicies implemented bycountry borders, and the increase in unemployment. These conditions willcompanies may continue to have negative implications on demand for goods,business and consumer spending, the supply chain, production of goods, demand for goods, transportation, the labor market, the global capital markets and transportation. the global economy, and could result in inflation, recession and prolonged economic downturn.A negative impact on our customers, spending businesses, and subscribers may cause them to go out of business, request discounts, extension ofextend payment terms, or cancelation of their subscription todiscontinue using our platform.services. Any of these conditions or actions willmay have a negative impact on our future results of operations, liquidity, and financial condition.Our business continues to operate despite the disruption of many business operations in the U.S. and our decision to require our employees to work from remote locations due to the COVID-19 pandemic. Although we have not experienced significant business disruptions thus far from the COVID-19 pandemic, weWe 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, strategic 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.by chargingprimarily from subscription and transaction fees, and by earning interest on funds held in trust on behalf of customers while their payment transactions are clearing.is comprisedconsists of transaction fees and interchange income on a fixed or variable rate per transaction. Transactions primarily include card payments, check issuance,issuances, ACH origination, cross-border payments, virtual card issuance, and creation of invoices. Much of our revenue comes from repeat transactions, which are an important contributor to our recurring revenue.also generate revenue from interest earned on funds held in trustmarket Divvy charge cards to potential spending businesses and issue business-purpose charge cards through our partnerships with card Issuing Banks. When a business applies for a Divvy card, we utilize, on behalf of customers whilethe 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. 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.transactionsto the merchant is made by the card Issuing Bank. Obligations incurred by the spending business in connection with their purchase transaction are clearing.reflected as receivables on the bank’s balance sheet from the Divvy card account for the spending business. 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. When we process payment transactions,purchase the funds flow through our bankparticipation interests, the purchase price is equal to the outstanding principal balance of the receivable.balanceportion of funds held for customers that isour receivables to a function of the volume and the type of payments processed. Interest is earned from interest-bearing deposit accounts, certificates of deposit, money market funds, commercial paper, and U.S. Treasury securities. We hold these funds from the day they are withdrawn fromthird-party institution pursuant to a payer’s account to the day the funds are credited to the receiver. This revenue can fluctuate depending on the amount of customer funds held, as well as our yield on customer funds invested, which is influenced by market interest rates and our investments. We are authorized to hold customer funds and process payments through our bank accounts because we are a licensed money transmitter in all required U.S. states. This allows us to provide advanced treasury services and protect our customers from potential fraud.54predictable from our existing customers.predictable. For fiscal 2020,2022, over 85% 82% of our subscription and transaction revenue which we also refer to as core 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. We expand within our existing customer base by adding more users, increasing transactions per customer, launching additional products, and through pricing and packaging our services. We make it easy for SMBs to try our platform through our risk-free trial program. Should an SMB choose to become a customer after the trial period, it can take several months to adapt their financial operations to fully leverage our platform. Even with a transition period, however, we believe our customer retention is strong. Excluding those fromcustomers of our financial institution partners, over 82%approximately 86% of customers as of June 30, 20192021 were still customers as of June 30, 2020.2022.customer funds held in trust.on behalf of customers. We then repeat the calculation of Prior Period Revenue and Current Period Revenue with respect to each of the preceding three quarters, and aggregate the four Prior Period Revenues (the Aggregate Prior Period Revenue) and the four Current Period Revenues (the Aggregate Current Period Revenue). Our net dollar-based retention rate equals the Aggregate Current Period Revenue divided by Aggregate Prior Period Revenue.dollar-baseddollar-based retention rate was 121%131%, 110%124% and 106%121% during fiscal 2020, 20192022, 2021 and 2018,2020, respectively. These consecutive increases are primarily attributable to increases in the number of users, more transactions per customer, and selling additional products to those customers.quarter.quarter, excluding customers acquired through financial institutions and the related sales and marketing spend. See "-- Key Business Metrics — Number of Customers" below for the definition of customer. For customers acquired during fiscal 2019,2021, the average payback period was approximately fivefour quarters.Key Factors Affecting Our PerformanceAcquiring New CustomersSustaining our growth requires continued adoption of our platform by new customers. We will continue to invest in our efficient go-to-market strategy as we further penetrate our addressable markets. Our financial performance will depend in large part on the overall demand for our platform, particularly demand from SMBs, as well as the impact caused by the COVID-19 pandemic. As of June 30, 2020, we had over 98,000 customers across a wide variety of industries and geographies in the United States.55Expanding Our Relationship with Existing CustomersOur revenue grows as we address the evolving needs of our customers and as our customers increase usage of our platform. As they realize the benefits of our solution, our customers often increase the number of users on our platform. We also experience growth from customers when we introduce new products and services that are adopted by our customers.Our ability to monetize our payments-related services is an important part of our business model. Today, we charge fixed and variable transaction fees for payment transactions initiated, and our revenue and payment volume generally grow as customers process more transactions on our platform. Our ability to influence customers to process more transactions on our platform will have a direct impact on our transaction fee revenue. As payment volume grows, we experience growth in the level of funds held for customers and we also earn interest revenue on these funds while payment transactions are clearing. Our interest earned on customer funds is positively correlated with our interest earnings rate and with customer fund balances. Our interest earnings rate is a function of the market interest rate environment and the mix of our investments across interest bearing accounts, government money market funds, and highly liquid, investment-grade fixed income marketable securities. The fund balances are a function of the amount of money transmitted by our customers and the mix of payment types, with some payment types averaging more days in transit than others.Investing in Sales and MarketingWe will continue to drive awareness and generate demand to acquire new customers and develop new accounting firm and strategic partner relationships; however, we will adjust our sales and marketing spend level as needed in response to changes in the economic environment. We will continue to expand efforts to market our platform directly to businesses through online digital marketing, referral programs and other programs. Our investment in supporting accounting firms and strategic partners has been significant. We support these accounting firms and strategic partners through education and training initiatives like hosting webinars and developing sell-sheet case studies. In late March 2020, we implemented a short-term initiative to help new customers negatively impacted by the COVID-19 pandemic by offering them a free subscription to our platform for three months, in addition to our standard 30-day risk-free trial. Such initiative did not have a significant impact to our total subscription fees during fiscal 2020. Investing in Our PlatformWe intend to increase our investment in our platform to maintain our position as a leading provider of SMB back-office financial software. To drive adoption and increase penetration within our base, we will continue to introduce new products and features. We believe that investment in research and development will contribute to our long-term growth but may also negatively impact our short-term profitability. We will continue to leverage emerging technologies and invest in the development of more features that meet and anticipate SMB needs.As a result, we expect our expenses related to research and development to increase. These efforts will require us to invest significant financial and other resources.56ourthe historical and future operating performance.performance of the Bill.com business. We have presented these key metrics below with respect to the Bill.com business, together with certain supplemental information related to the businesses of Divvy and Invoice2go.As a result of the Divvy and Invoice2goAs of June 30, 2022 2021 2020 2022 2021 157,800 121,200 98,100 30 % 24 % (1)Number of customers as of June 30, 2018 includes approximately 5,000 customers from a strategic partner that did not renew its contract during fiscal 2019. Excluding these customers, our customer growth would have been 31% during fiscal 2019.2022 2021 2020 2022 2021 $ 219,080 $ 140,304 $ 96,489 56 % 45 % 2022 2021 2020 2022 2021 38,560,000 29,159,400 23,852,000 32 % 22 % strategic partners for Bill.com products during a particular period. Customers who are using our platformBill.com products during a trial period are not counted as new customers during that period. 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 oureach fiscal quarter.Total Payment Volume (TPV)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 approximately 1%of less than 2% of TPV during fiscal 2022, 2021, and 2020.payment transactions, such as checks, ACH items, wire transfers and virtual cards,payments initiated and processed through our platform during a particular period. Payment transactions include checks, ACH items, real-time payments, wire transfers and card payments. The transactions processed in the table above do not include transactions made by spending businesses using Divvy cards or by Invoice2go subscribers.57ContentsResults of OperationsYear ended June 30, Change
(2022 compared to 2021)Change
(2021 compared to 2020)2020 Amount % Amount % Revenue $ 641,959 $ 238,265 $ 157,600 $ 403,694 169 % $ 80,665 51 % Cost of revenue 105,496 56,576 37,049 48,920 86 % 19,527 53 % 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 219,818 89,503 52,996 130,315 146 % 36,507 69 % 307,151 67,935 45,070 239,216 352 % 22,865 51 % 241,174 128,116 53,450 113,058 88 % 74,666 140 % 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 % Year ended June 30, Change
(2022 compared to 2021)Change
(2021 compared to 2020)2022 2021 2020 Amount % Amount % Cost of revenue - service costs $ 5,144 $ 2,938 $ 1,257 $ 2,206 75 % $ 1,681 134 % Research and development 54,907 16,091 5,495 38,816 241 % 10,596 193 % Sales and marketing 60,237 8,547 2,777 51,690 605 % 5,770 208 % General and administrative 76,869 44,411 8,535 32,458 73 % 35,876 420 % Total $ 197,157 $ 71,987 $ 18,064 $ 125,170 174 % $ 53,923 299 % Year ended June 30, 2020 Revenue 100 % 100 % 100 % Cost of revenue Service costs 16 % 24 % 24 % Depreciation and amortization of intangible assets 7 % 2 % 1 % Total cost of revenue 23 % 26 % 25 % Gross profit 77 % 74 % 75 % Operating expenses Research and development 34 % 38 % 34 % Sales and marketing 48 % 29 % 29 % General and administrative 38 % 54 % 34 % Depreciation and amortization of intangible assets 7 % 1 % — % Total operating expenses 127 % 122 % 97 % Loss from operations (50) % (48) % (22) % Other income (expense), net (2) % (11) % 2 % Loss before (benefit from) provision for income taxes (52) % (59) % (20) % (Benefit from) provision for income taxes (1) % (17) % — % Net loss (51) % (42) % (20) % Year ended June 30, Change Amount % Cost of revenue: Service costs $ 105,496 $ 56,576 $ 48,920 86 % 39,508 5,230 34,278 655 % Total cost of revenue $ 145,004 $ 61,806 $ 83,198 135 % Gross profit $ 496,955 $ 176,459 $ 320,496 182 % Gross margin 77 % 74 % Year ended June 30, Change 2020 Amount % Cost of revenue Service costs $ 56,576 $ 37,049 $ 19,527 53 % 5,230 2,095 3,135 150 % Total cost of revenue $ 61,806 $ 39,144 $ 22,662 58 % Gross profit $ 176,459 $ 118,456 $ 58,003 49 % Gross margin 74 % 75 % and non-GAAP gross margin as GAAP gross profit and GAAP gross margin, respectively, excluding stock-based compensation expense,minus depreciation and amortization expense, amortization of deferred costs,intangible assets, and stock-based compensation and related payroll taxes related to stock-based compensation expense.recognized in cost of revenue. Non-GAAP gross margin is defined as non-GAAP gross profit, divided by revenue. We believe non-GAAP gross profit and non-GAAP gross margin provide our management and investorsinvestors' consistency and comparability with our past financial performance and facilitate period-to-period comparisons of operations. The following table presents a reconciliation of our non-GAAP gross profit and non-GAAP gross margin to our GAAP gross profit and GAAP gross margin for the periods presented (amounts in thousands):58Components of Results of OperationsRevenueWe generate revenue from two sources: subscription and transaction fees, and (2) interest on funds held for customers.Subscription fees are fixed monthly or annually and charged to our customers for use of our platform to process transactions. Subscription fees are generally charged on a per user per period basis, normally monthly or annually. Transaction fees are fees collected for each transaction processed through our platform, on either a fixed or variable fee basis. Transaction fees primarily include processing of payments in the form of checks, ACH, cross-border payments, virtual cards, and the creation of invoices.Interest on funds held for customers consists of the interest that we earn from customer funds while payment transactions are clearing. Interest is earned from interest-bearing deposit accounts, certificates of deposit, money market funds, commercial paper, and U.S. Treasury securities, until those payments are cleared and credited to the intended recipient.Our contracts with SMB and accounting firm customers primarily consist of cancelable contracts that can be terminated by either party without penalty at any time. In July 2019, we updated our terms of service for our monthly subscription contracts, whereby cancellations become effective at the end of the monthly subscription period in which the last transaction is processed. We recognize subscription revenue for cancelable contracts on a daily basis and transaction revenue on the date we process the transactions. Some of our contracts are non-cancelable annual or monthly contracts. We recognize revenue for non-cancelable annual and monthly contracts as a series of distinct services satisfied over time. We determine the transaction price for such contracts by estimating the total consideration to be received over the contract term from subscription and transaction fees. We recognize the transaction price from annual and monthly contracts as a single performance obligation based on the proportion of transactions processed to the total estimated transactions to be processed over the contract period.We enter into multi-year contracts with financial institution customers that typically include fees for initial implementation services that are paid during the period. Fees for subscription and transaction processing services are subject to guaranteed monthly minimum fees that are paid over the contract term. These contracts enable the financial institutions to provide their clients with access to online bill pay services through the financial institution’s online platform. Implementation services are required up-front to establish an infrastructure that allows the financial institution’s online platform to communicate with our platform. The financial institution’s clients cannot access online bill pay services until implementation is complete and the financial institution has provided acceptance of the implementation services. The fees we earn through these contracts vary based on the number of users and transactions processed. We59have determined these contracts meet the variable consideration allocation exception and therefore we recognize guaranteed monthly payments and any overages as revenue in the month they are earned. We recognize implementation fees based on the proportion of transactions processed to the total estimated transactions to be processed over the contract period.Cost of Revenue and ExpensesCost of revenue– Cost of revenue consists primarily of personnel-related costs, including stock-based compensation expenses, for our customer success and payment operations teams, certain costs that are directly attributed to processing customers’ transactions (such as the cost of printing checks), postage for mailing checks, expenses for processing payments (ACH, check, and cross-border wires), direct and amortized costs for implementing and integrating our cloud-based platform into our strategic partners’ systems, costs for maintaining, optimizing, and securing our cloud payments infrastructure, amortization of capitalized internal-use developed software, fees on the investment of customer funds, and allocation of overhead costs. We expect that cost of revenue will increase in absolute dollars, but may fluctuate as a percentage of total revenue from period to period, as we continue to invest in growing our business.Research and development– Research and development expenses consist primarily of personnel-related expenses, including stock-based compensation expenses, incurred in developing new products or enhancing existing products, and allocated overhead costs. We capitalize certain software development costs that are attributable to developing new products and adding incremental functionality to our platform and amortize such costs in cost of revenue over the estimated life of the new product or incremental functionality, which is generally three years.We expense a substantial portion of research and development expenses as incurred. We believe that delivering new functionality is critical to attract new customers and expand our relationship with existing customers. We expect to continue to make investments in and expand our offerings to enhance our customers’ experience and satisfaction, and to attract new customers. We expect our research and development expenses to increase in absolute dollars, but they may fluctuate as a percentage of total revenue from period to period as we expand our research and development team to develop new products and product enhancements.Sales and Marketing– Sales and marketing expenses consist primarily of personnel-related expenses, including stock-based compensation expenses, 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 commissions that are incremental to obtaining new customer contracts are deferred and amortized ratably over the estimated period of our relationship with new customers.We focus our sales and marketing efforts on generating awareness of our company, platform, and products, creating sales leads, and establishing and promoting our brand. We plan to continue investing in sales and marketing efforts by driving our go-to-market strategies, building our brand awareness, and sponsoring additional marketing events; however, we will adjust our sales and marketing spend level as needed, and may fluctuate from period to period, in response to changes in the economic environment.General and Administrative– General and administrative expenses consist primarily of personnel-related expenses, including stock-based compensation expenses, for finance, risk management, legal and compliance, human resources and information technology, costs incurred for external professional services, losses from fraud and credit exposure, and allocated overhead costs. We expect to incur additional general and administrative expenses as a result of operating as a public company, including expenses to comply with the rules and regulations applicable to companies listed on a national securities exchange, expenses related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, as well as higher expenses for director and officer insurance, investor relations, and professional services. We also expect to increase the size of our general and administrative functions to support the growth in our business. As a result, we expect that our general and administrative expenses will increase in absolute dollars but may fluctuate as a percentage of total revenue from period to period.60Other Income, Net– Other income, net consists primarily of interest income on corporate funds invested in money market instruments and highly liquid, investment-grade fixed income marketable securities, partially offset by interest expense on our bank borrowings and losses on the revaluation of redeemable convertible preferred stock warrant liabilities.Provision for (Benefit from) Income Taxes– Provision for income taxes consists of state income taxes. The benefit from income taxes pertains to the income tax benefit that is reported on the consolidated statements of operations and is offset against the income tax on the unrealized gain on investments in available-for-sale securities that is shown on the consolidated statements of comprehensive loss.Results of OperationsThe following table sets forth our results of operations for the periods presented (in thousands):(1)Includes stock-based compensation expense as follows (in thousands):61The following table presents the components of our consolidated statements of operations for the periods presented as a percentage of total revenue:Comparison of Fiscal 2020 and 2019RevenueThe components of our revenue during fiscal 2020 and 2019 were as follows (amounts in thousands):Subscription and transaction fees increased to $136.4 million during fiscal 2020 from $86.0 million during fiscal 2019, an increase of $50.4 million or 59%. Subscription fees increased to $83.8 million during fiscal 2020 from $59.6 million during for fiscal 2019, an increase of $24.2 million or 41%, driven primarily by the increase in customers and average subscription revenue per customer. Transaction fees increased to $52.6 million during fiscal 2020 from $26.4 million during fiscal 2019, an increase of $26.2 million or 100%, due primarily to increased adoption of new product offerings and the mix of transaction revenues shifting to variable-priced products. Our total customers increased to over 98,000 as of June 30, 2020 compared to over 76,000 as of June 30, 2019, or an increase of approximately 28%. Our average subscription revenue and transaction fees per customer increased by 11% and 58%, respectively, during fiscal 2020 compared to fiscal 2019, driven primarily by the increase in customers’ usage of our platform and payment activities.62Interest on funds held for customers decreased to $21.2 million during fiscal 2020 from $22.4 million during fiscal 2019, a decrease of $1.2 million or 5%. The decrease was due to the decrease in the yield we earned from investing customer funds, partially offset by the increase in the balance of customer funds held while payment transactions clear. The average rate of return earned on customer funds held was 1.55% during fiscal 2020, a decrease of 51 basis points from fiscal 2019. The decrease in yield was due primarily to the U.S. Federal Reserve’s action to cut the federal funds rate during the second half of calendar year 2019 and again in March 2020 in response to the COVID-19 pandemic. The average daily effective federal funds rate decreased by 95 basis points during fiscal 2020 from fiscal 2019. The balance of customer funds held while payment transactions clear increased during fiscal 2020 over fiscal 2019. The average daily balance of customer funds in transit increased to approximately $1.4 billion during fiscal 2020 from approximately $1.1 billion during fiscal 2019, an increase of 25%. Fund balances increased due to growth in TPV. Our TPV increased to approximately $96.5 billion during fiscal 2020 from approximately $71.3 billion during fiscal 2019, an increase of 35%.Cost of Revenue, Gross Profit, and Gross MarginCost of revenue, gross profit, and gross margin during fiscal 2020 and 2019 were as follows (amounts in thousands):Cost of revenue increased to $39.1 million during fiscal 2020 from $29.9 million during fiscal 2019, an increase of $9.2 million or 31%. The increase was due primarily to a $4.8 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. The increase was also due to a $2.4 million increase in personnel-related costs, including non-cash 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. Our average headcount of such personnel during fiscal 2020 increased by 21% compared to fiscal 2019. The increase was also due to a $1.5 million increase in shared overhead costs and a $0.6 million increase in costs for consultants and temporary contractors.Gross margin increased to 75% during fiscal 2020 from 72% during fiscal 2019, an increase of 3%. The increase was driven primarily by higher revenue on increased adoption of new product offerings.Research and Development ExpensesResearch and development expenses during fiscal 2020 and 2019 were as follows (amounts in thousands):63Research and development expenses increased to $53.4 million during fiscal 2020 from $28.9 million during fiscal 2019, an increase of $24.5 million or 85%. The increase was due primarily to a $20.3 million increase in personnel-related costs, including non-cash stock-based compensation expense, resultingInvoice2go from the hiringacquisition date on September 1, 2021.additional personnel who were directly engaged in developing new product offerings, a $2.9 million increase in shared overhead costs, and a $1.0 million increase in costs for engaging consultants and temporary contractors who provided product development services. Our average research and development headcount during fiscal 2020 increased by 55% compared to fiscal 2019.As a percentage of total revenue, research and development expenses increased to 34% during fiscal 2020 from 27% during fiscal 2019 due primarily to the increase in our headcount, which resulted in higher personnel-related costs, including non-cash stock-based compensation expense, relative to the increase in our revenue.Sales and Marketing ExpensesSales and marketing expenses during fiscal 2020 and 2019 were as follows (amounts in thousands):Sales and marketing expenses increased to $45.4 million during fiscal 2020 from $30.1 million during fiscal 2019, an increase of $15.3 million or 51%. The increase was due primarily to a $9.4 million increase in personnel-related costs (after the adjustment to capitalize and subsequently amortize certain sales commissions, which increased on a net basis by $3.7 million), including non-cash 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 a $2.1 million increase in shared overhead costs. Our average sales and marketing headcount during fiscal 2020 increased by 44% compared to fiscal 2019. The increase was also attributed to a $2.0 million increase in advertising spend and a $1.7 million increase in 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.As a percentage of total revenue, sales and marketing expenses increased to 29% during fiscal 2020 from 27% during fiscal 2019, due primarily to the increase in our headcount, which resulted in higher personnel-related costs, including non-cash stock-based compensation expense, relative to the increase in our revenue. General and Administrative ExpensesGeneral and administrative expenses during fiscal 2020 and 2019 were as follows (amounts in thousands):64General and administrative expenses increased to $53.9 million during fiscal 2020 from $29.2 million during fiscal 2019, an increase of $24.7 million or 85%. The increase was due primarily to a $16.0 million increase in personnel-related costs, including stock-based compensation expense, resultingDivvy from the hiring of additional executive employees and administrative personnel, and a $1.8 million increase in shared overhead costs. Our average general and administrative headcount during fiscal 2020 increased by 66% compared to fiscal 2019. The increase was also due to a $2.9 million increase in professional and consulting fees as we obtained additional external assistance before and after we became a public company, a $2.2 million increase in corporate insurance costs (mainly pertaining to director and officer insurance costs) due to the effect of operating as a public company, and a $2.0 million increase in money transfer license fees and credit card processing fees due to the overall growth of our business.As a percentage of total revenue, general and administrative expenses increased to 34% during fiscal 2020 from 27% during fiscal 2019 due primarily to the increase in our headcount, which resulted in higher personnel-related costs, including stock-based compensation expense, relative to the increase in our revenue.Other Income, NetOther income, net during fiscal 2020 and 2019 was as follows (amounts in thousands):Other income, net increased to $3.2 million during fiscal 2020 from $2.3 million during fiscal 2019, an increase of $0.9 million or 35%. The increase was mainly due to a $0.9 million increase in interest income due to the increase in corporate funds that were invested in highly liquid, investment-grade fixed income marketable securities. In addition, other income, net increased due to a $0.6 million decrease in interest expense, offset by a $0.7 million increase in lossacquisition date on revaluation of redeemable convertible preferred stock warrant liabilities.Provision for (benefit from) Income TaxesProvision for (benefit from) income taxes during fiscal 2020 and 2019 was as follows (amounts in thousands):The provision for income taxes during fiscal 2020 pertains primarily to state income taxes. The benefit from income taxes during fiscal 2019 pertains primarily to the income tax benefit that is reported on the consolidated statements of operations and is offset against the income tax on the unrealized gain on investments in available-for-sale securities that is shown on the consolidated statements of comprehensive loss.65Comparison of Fiscal 2019 and 2018The components of our revenue during fiscal 2019 and 2018 were as follows (amounts in thousands):Subscription and transaction fees increased to $86.0 million during fiscal 2019 from $57.0 million during fiscal 2018, an increase of $29.0 million or 51%. Subscription fees increased to $59.6 million during fiscal 2019 from $42.0 million during fiscal 2018, an increase of $17.6 million or 42%, driven primarily by the increase in customers and average subscription revenue per customer. Transaction fees increased to $26.4 million during fiscal 2019 from $15.0 million during fiscal 2018, an increase of $11.4 million or 76%, primarily due to increased adoption of new product offerings and increases in the number of transactions initiated. Our total customers increased to over 76,000 as of June 30, 2019 compared to over 63,000 as of June 30, 2018, or an increase of approximately 21%. Our average subscription revenue and transaction fees per customer increased by 12% and 39%, respectively, during fiscal 2019, driven primarily by the increase in customers’ usage of our platform and payment activity.Interest on funds held for customers increased to $22.4 million during fiscal 2019 from $7.9 million during fiscal 2018, an increase of $14.5 million or 185%. The increase was due primarily to the increase in the yield we earned from strategically investing funds held for customers and the increase in the balance of customer funds while payment transactions are clearing. The annualized rate of return on our average customer funds held was 1.99% during fiscal 2019, an increase of 101 basis points over the annualized yield during fiscal 2018. The increase in yield was primarily due to the short-term interest rate environment as the average daily effective Federal Funds rate increased by 85 basis points during fiscal 2019 over fiscal 2018. Our active management of customer funds during fiscal 2019 also improved the return generated on our funds held. The average balance of customer funds in transit increased to approximately $1.1 billion during fiscal 2019 from approximately $777 million during fiscal 2018, or an increase of 42%. Fund balances increased primarily due to growth in TPV. Our TPV increased to approximately $71.3 billion during fiscal 2019 from approximately $49.6 billion during fiscal 2018, or an increase of 44%.Cost of Revenue, Gross Profit, and Gross MarginCost of revenue, gross profit, and gross margin during fiscal 2019 and 2018 were as follows (amounts in thousands):Cost of revenue increased to $29.9 million during fiscal 2019 from $19.4 million during fiscal 2018, an increase of $10.5 million or 54%. The increase was due primarily to a $4.2 million increase in direct costs associated with the processing of our customers’ payment transactions, use of software applications and equipment, bank fees for holding the funds of our customers, and data hosting services, which were driven by the increase in the number of customers and volume of transactions. The increase was also due to a $4.0 million increase in personnel-related costs, including non-cash stock-based compensation expense and amortization of 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 $1.4 million increase in shared overhead costs. Our average headcount of such personnel during fiscal 2019 increased by 26% compared to fiscal 2018.662020,2022, our principal sources of liquidity were our cash and cash equivalents of $573.6 million,$1.6 billion, our available-for-sale short-term investments of $124.0 million,$1.1 billion, and funds available under our Senior Facilities Agreement (as defined below).lines of credit, of which we borrowed the maximum amount of $75.0 million. Our cash equivalents are comprised primarily of money market funds and investments in debt securities with original maturities of three months or less.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 Senior Facilities Agreement, which expires on June 28, 2022, allows us to borrow up to $50.0 million. Available funds under our Senior Facilities Agreement, after deductingWe have a total borrowing commitment of $75.0 million from our line of credit borrowings of $2.3 million and letter of credit utilization totaling $6.9 million, was $40.8 millionhave drawn the maximum amount as of June 30, 2020. and funds available under our Senior Facilities Agreement will be sufficient to meet our working capital requirements for at least the next twelve12 months. To the extent our existing cash, cash equivalents, available-for sale short-term investments, and funds available under our Senior Facilities Agreement are insufficient to fund future activities or insufficient to fund our requirements to continue operating our business amidst the adverse impact of the COVID-19 pandemic, we may need to raise additional funds. In the future, we may attempt to raise additional capital through the sale of equity securities or through equity-linked or debt financing arrangements.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. We may also seek to raise additional capital from these offerings or financings on an opportunistic basis when we believe there are suitable opportunities for doing so. If we raise additional funds by issuing equity or equity-linked securities, the ownership of our existing stockholders will be diluted. If we raise additional financing by the incurrence ofincurring additional indebtedness, we may be subject to increased fixed payment obligations and could also be subject to additional restrictive covenants, such as limitations on our ability to incur additional debt, and other operating restrictions that could adversely impact our ability to conduct our business. Any future indebtedness we incur may result inhave terms that could be unfavorable to equity investors. There can be no assurances that we will be able to raise additional capital. The inability to raise capital would adversely affect our ability to achieve our business objectives. Year ended June 30, 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)Amounts have been adjusted to reflect the adoption of Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. See Note 1 to the consolidated financial statements included elsewhereinthis Annual Report on Form 10-K for a summary of the adjustments.69Table(1) Includes the results of ContentsInvoice2go from the acquisition date on September 1, 2021.Used inProvided by (Used in) Operating ActivitiesWe also generate cash from the interest earned on funds held in trust on behalf of customers while payment transactions are clearing.from $3.9 million during fiscal 2019 due primarilymainly to the increase in cash paidsubscription and transaction fees revenue; partially offset by the increase in payments for our costcosts of services and operating expenses, primarily employee salary and related costsexpenses. In addition, the net increase was partially due to the increase in headcount and administrative costs as we now operate as a public company; offset by the increase in cash received from subscription and transaction fees revenue.Net cash used in operating activities decreasedtiming of usage of funds to $3.9 million during fiscal 2019 from $8.4 million during fiscal 2018 due primarily to the increase in cash received from subscription and transaction fees revenue, as well as the increase in cash received from interest on funds held for customers; offset by the increase in cash paid forpay our cost of services and operating expenses, primarily employee salary and related costs due to the increase in headcount.Cash provided byconsistsconsist primarily of proceeds from the maturities and sale of corporate and customer fund available-for-sale investments. Cash used inOur cash usage for our investing activities consists primarily of purchases of corporate and customer fund available-for-saleavailable for-sale investments, business acquisitions, capitalization of internal-use software, and purchases of property and equipment,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.capitalizationcustomer short-term investments, partially offset by the increase in purchases of internal-use software.Netcorporate and customer fund short-term investments, and increase in acquired participation interests in card receivables. Additionally, our payment to acquire Invoice2go during fiscal 2022 was lower compared to our payment to acquire Divvy during fiscal 2021. from $96.1 million during fiscal 2019 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 the increase in purchases of property and equipment; partially offset by the increase in proceeds from the maturities of corporate and customer fund available-for-sale investments.Net cash used in investing activities decreased to $96.1 million during fiscal 2019 from $417.8 million during fiscal 2018, due primarily to the increase in proceeds from the maturities and sale of corporate and customer fund available-for-sale investments; offset by the increase in purchases of corporate and customer fund available-for-sale investments, the increase in purchases of property and equipment, and the increase in capitalized internal-use software.Cash provided byproceeds from the issuance of common stock through public offerings, issuance of redeemable convertible preferred stock, line of credit borrowings, and exercises of stock options and stock warrants. Cash used in our financing activities consists primarily of repayments of our bank borrowings and payments of costs related to thepublic offerings of our common stock and issuance of common stock, preferred stock or debt. Additionally, changesthe increase or decrease in our net cash from financing activities is impacted by the change in customer fund deposits liability could increase or decrease our cash from financing activities due the timing and the volume of payment transactions. liability.Net$863.1 million$2.9 billion during fiscal 20202022 from $491.7 million$1.6 billion during fiscal 20192021 due primarily to the proceeds from the issuancepublic offering of our common stock upon the completion of our IPO and follow-on public offering (net of underwriting discounts and other offering costs), an increase in proceeds from the exercise of stock options, and proceeds from our line of credit borrowings; offset by a lower change in customer funds deposits liabilityliability.. Additionally, cash provided during fiscal 2019 included proceeds from the issuance of redeemable convertible preferred stock and none during fiscal 2020. 70NetOur net cash provided by financing activities increased to $491.7$1.6 billion during fiscal 2021 from $863.1 million during fiscal 2019 from $326.3 million during fiscal 2018,2020 due primarily to the increase in customer fund deposits liability, proceeds from the issuance of Series H redeemable convertible preferred stock and the 2025 Notes, increase in proceeds from the exerciseexercises of stock options;options, increase in employee purchases of common stock under our ESPP, and an increase in customer funds liability; offset by the increasepurchase of Capped Calls in repayments of bank borrowings.Credit FacilitiesOn June 28, 2019, we entered into a Senior Secured Credit Facilities Credit Agreement (Senior Facilities Agreement) with Silicon Valley Bank for a revolving credit facility of up to $50.0 million (Total Commitment), which amount may be increased by up to $25.0 million upon request and subject to conditions. Under the Senior Facilities Agreement, Bill.com, LLC is the borrower and Bill.com Holdings, Inc. is the guarantor. The Senior Facilities Agreement expires on June 28, 2022 and is secured by substantially all of our assets.Borrowings under the Senior Facilities Agreement are subject to interest, determined as follows: (a) Eurodollar loans shall bear interest at a rate per annum equal to the Eurodollar rate plus the applicable margin of 1.75% or 2.75%, depending on company cash balances (Eurodollar rate is calculated based on the ratio of Eurodollar Base Rate, which is determined by reference to ICE Benchmark Administration London Interbank Offered Rate (LIBOR), but not less than 0%) or (b) Alternate Base Rate (ABR) loans shall bear interest at a rate per annum equal to the ABR minus the applicable margin of 0.25% or 1.25% depending on company cash balances (ABR is equal to the highest of (i) the prime rate, (ii) the Federal Funds Effective Rate plus 0.50%, and (iii) the Eurodollar rate plus 1.25%).The Senior Facilities Agreement requires us to comply with certain restrictive covenants. As of June 30, 2020, we were in complianceconnection with the loan covenants.Available funds under our Senior Facilities Agreement, after deductingissuance of the 2025 Notes and repayment of our line of credit borrowingsborrowings. Additionally, our cash from financing activities during fiscal 2020 included the net proceeds from our IPO and follow-on offering.$2.3our 0% convertible senior notes due on April 1, 2027. The 2027 Notes are senior, unsecured obligations, will not accrue interest unless we determine to pay special interest, and are convertible on or after January 1, 2027 until the close of business on the second scheduled trading day immediately preceding the maturity date on April 1, 2027. The 2027 Notes are convertible by the holders at their option during any calendar quarter after December 31, 2021 under certain circumstances, including 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 $414.80 per share initial conversion price. 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. For additional discussion about our 2027 Notes and the capped call transactions, refer to Note 10 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.and letterunder the Class A facility of credit utilization totaling $6.9 million, was $40.8the 2021 Revolving Credit Agreement, of which we borrowed the maximum amount of $75.0 million as of June 30, 2020.Contractual Obligations2022. Our 2021 Revolving Credit Agreement matures in June 2023 or earlier pursuant to such agreement and Other CommitmentsOurthe outstanding borrowings are payable on or before the maturity date. For additional discussion about our Credit Agreements,principalcommitmentsconsistofobligationsunderoperatingleasesforofficespace,astrategicpartnershipagreementpromote Note 10 to ourplatform,agreementswithvariousthirdpartiestopurchasesoftwareandmaintenanceservices, and an agreement with a consolidated financial institution partner.Thefollowingtablesummarizesour commitmentstosettlecontractualobligationsstatements included elsewhere incashasofJune30,2020(inthousands):
this Annual Report on(1)Consists of future non-cancellable minimum rental payments under operating leases for ouroffices.
Form10-K.(2)Consistsoffutureminimumpaymentsunderastrategicpartnershipagreement,purchasesofsoftwareandmaintenanceservices with certain vendors, and an amount payable to an existing financial institution partner to fund its implementation activities for a payment services offering.As2020,2022 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 was not material as of June 30, 2022.resources.71Policies and EstimatesGAAP. U.S. generally accepted accounting principles (GAAP). Thepreparationofthesefinancialstatements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsandliabilitiesatthedateoftheconsolidatedfinancialstatements,aswellasthereportedrevenuegenerated,andreportedexpenses incurredduringthereportingperiods.Ourestimatesarebasedonourhistoricalexperienceandonvariousotherfactorsthatwebelieveare reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.policies estimates aremostimportanttounderstandingandevaluatingourreportedfinancial results. – financial institutionsour customers require us to provide multiple services comprising subscription, transactionandimplementationservices.Weidentifyperformanceobligationsinthesecontractsbyevaluatingwhetherindividualservicesare distinct.Weconsideraservicedistinctifitis(i)capableofbeingdistinctand(ii)distinctwithinthecontextoftheagreement.Servicesthatare not distinct are combined into a single performance obligation. The evaluation of whether a service is distinct involves judgment and could impact the timing of revenue recognition. We determine the transaction price in these contracts based on the amount of consideration we expect to be entitled to, which are typically variable. The transaction price is then allocated to each separate performance obligation on a relative standalone selling price basis. We determine the standalone selling prices based on the overall pricing objectives, taking into consideration the adjusted market assessment approach and the expected cost plus margin approach. Each performance obligation is analyzedtodetermineifitissatisfiedovertimeoratapointintime.Ourperformanceobligationsaregenerallyrecognizedasrevenueover the period each performance obligation is satisfied. satisfied using an attribution method that best reflects the measure of progress in satisfying the performance obligation. The attribution method used involves judgment and impacts the timing of revenue recognition.thesecertain contracts with our financial institution customers, consist of the development of interfaces between our online platform and the financial institution’s platform and the development of graphical user interfaces within the financial institution’sinstitutions’ online platform. The financial institution’s customers cannot access online bill pay services until implementation is completecomplete. As a result, initial implementation services are not capable of being distinct from subscription and transaction processing services, and are combined into a single performance obligation. We also evaluate the ability of financial institution has provided acceptanceof theimplementationservices.Asaresult,initialimplementationservicesarenotcapableofbeingdistinctfromsubscriptionandtransaction processingservices,andarethereforecombinedintoasingleperformanceobligation.Theabilityoffinancialinstitutioncustomerstorenew contracts without having to pay up-front implementation fees again to determine if it provides them a material right. Material rights, which have not been significanttodate,aretreatedasseparateperformanceobligationsandarerecognizedovertheexpectedperiodofbenefit.Werecognizerevenueovertimeusinganattributionmethodthatbestreflectsthemeasureofprogressinsatisfyingtheperformance obligation.Theattributionmethodusedinvolvesjudgmentandimpactsthetimingofrevenuerecognition.Werecognizerevenueonannualobligations and monthly subscription contractsare recognized over the expected period of benefit. For such arrangements, we allocate revenue to each performance obligation based on its relative standalone selling price.proportionassumptions management believes a market participant would use in pricing the asset or liability. Amounts recorded in a business combination may change during the measurement period, which is a period not to exceed one year from the date of transactions processed comparedacquisition, as additional information about conditions existing at the acquisition date becomes available.total estimated transactionsattributes used to be processed oversegment the contractperiod.Deferredcosts – Deferredcostsincludedeferredsalescommissionsthatareincrementalcostsportfolio, the determination ofobtainingcustomercontracts. the historical loss experience look-back period, and the weighting of historical loss experience by monthly cohort. We amortizedeferredsalescommissionsratablyoveruse these models and assumptions to determine theestimatedperiodofourrelationshipwithnewcustomersoffour reserve rates applicable tosixyears. the outstanding acquired card receivable balances to estimate reserves for expected credit losses. Basedon historical loss experience,wedeterminetheaveragelifeofourcustomerrelationshipbytakingintoconsiderationourcustomercontractsandthe estimated technological lifeprobability of default decreases over time, therefore the attribute used to segment the portfolio is the length of time since an account’s credit limit origination. 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. 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 theplatformspend 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. The portion of our liability related significantfeatures. – Stock-basedcompensation 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 expense for performance-based awards is measured at fair value on the date of grant using the Black-Scholes valuation option-pricing model or other valuation technique depending on the nature of the award. Awards that are classified as liabilities are remeasured at fair value at the end of each reporting period. These valuation methods require inputs that are based on estimates, which are highly subjective.theBlack-Scholesoption-pricingmodel.Werecognizerepresents the compensationcostsperiod that stock option awards are expected to be outstanding. The expected term for stock option awards is determined using the simplified method. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the stock-based awards.onExpected volatility – represents the historical volatility of our common stock. The expected volatility that we used for stock option awards assumed in an acquisition was estimated based on the average volatility for comparable publicly traded companies over a period equal to the expected term of the stock option grants. The comparable companies were chosen based on their similar size, stage in the lifecycle or area of specialty.straight-lineThe 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.basisWe have never paid dividends on our common stock and have no plans to pay dividends on our common stock.overrequisiteservice Monte Carlo simulation model include (i) expected volatility, (ii) risk-free interest rate, and (iii) performance period72option vesting term, of four years, reduced for estimated forfeitures at the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. We estimate the forfeiture rate based on the historical experienceexperience. We recognize compensation costs for annual grant years where the majority ofperformance-based awards over the vesting terms have beensatisfied.TheBlack-Scholesoption-pricingmodelrequirestheuseofhighlysubjectiveassumptions,whichdeterminethefairvalueofperiod if it is probable that the performance condition will be achieved.stock option awards. These assumptionsinclude:Expectedterm – Theexpectedtermrepresentstheperiodthatstock option awardsareexpectedtobeoutstanding.Theexpectedterm for stock optionawards isdeterminedusingthesimplifiedmethod.Thesimplifiedmethoddeemsthetermtobetheaverageofthe time-to-vesting and the contractual life of the stock-based awards.Expectedvolatility – Since we did nothaveanytradinghistoryforourcommonstock priorIPO, the expected volatility that we used for stock option awards granted prior to our IPO was estimatedbasedontheaveragevolatilityforcomparablepubliclytradedcompaniesoveraperiodequaltotheexpectedtermofthe stockoptiongrants.Thecomparablecompanieswerechosenbasedontheirsimilarsize,stageinthelifecycleorareaofspecialty. Following our IPO, the expected volatility was estimated based on the historical volatility of our common stock.Risk-freeinterestrate – Therisk-freeinterestrateisbasedontheU.S.Treasuryzerocouponissuesineffectatthetimeof stock option awards for periods corresponding with the expected term of theoption.Expecteddividendyield – Wehaveneverpaiddividendsonourcommonstockandhavenoplanstopaydividendsonourcommon stock.73CommonStockValuation – Historically,forallperiodspriortoourIPO,thefairvalueofthesharesofcommonstockunderlyingour share-basedawardswereestimatedoneachgrantdatebyourBoardofDirectorswithinputfrommanagementandcontemporaneousthird-partyvaluations.WebelievethatourBoardofDirectorshastherelevantexperienceandexpertisetodeterminethefairvalueofourcommon stock. Given the absence of a public trading market for our common stock prior to our IPO,our BoardofDirectorsexercisedreasonablejudgmentandconsideredanumberofobjectiveandsubjectivefactorstodeterminethebest estimate of the fair value of our common stock,including:•contemporaneousvaluationsofourcommonstockperformedbyindependentthird-partyappraisers;•our actual operating results and financialperformance;•conditions in the industry and economy ingeneral;•therights,preferencesandprivilegesofourredeemableconvertiblepreferredstockrelativetothoseofourcommonstock;•thelikelihoodofachievingaliquidityeventfortheholdersofourcommonstock,suchasaninitialpublicofferingorasaleofour company, given prevailing marketconditions;•equitymarketconditionsaffectingcomparablepubliccompaniesandthemarketperformanceofcomparablepubliclytraded companies;•the U.S. and global capital market conditions;and,•thelackofmarketabilityofourcommonstockandtheresultsofindependentthird-partyvaluations.Valuationsofourcommonstock were prepared by an unrelated third-party valuation firm in accordance with the guidance provided by the American Institute of CertifiedPublicAccountants2013PracticeAid,ValuationofPrivately-Held-CompanyEquitySecuritiesIssuedasCompensation.Invaluingourcommonstock,ourBoardofDirectorsdeterminedtheequityvalueofourbusinessgenerallyusingtheincomeapproach andthemarketcomparableapproachvaluationmethods.Whenapplicableduetoarecentpreferredstockoffering,thepriorsaleofcompany stock method was alsoutilized.The income approach estimates value based on the expectation of future cash flows that a company will generate – such as cash earnings, cost savings, tax deductions, and the proceeds from disposition. These future cash flows are discounted to their present values usingadiscountratederivedfromananalysisofthecostofcapitalofcomparablepubliclytradedcompaniesinourindustryorsimilarlinesof business as of each valuation date and is adjusted to reflect the risks inherentconsolidated financial statements included elsewhere in our cash flows. In addition, we also considered an appropriatediscountadjustmenttorecognizethelackofmarketabilityduetobeingaclosely-heldentity.Themarketcomparableapproachestimatesvaluebasedonacomparisonofthesubjectcompanytocomparablepubliccompaniesin a similar line of business. From the comparable companies, a representative market value multiple is determined which is applied to the subject company’s operating results to estimate the value of the subject company. In our valuations, the multiple of the comparable companieswasdeterminedusingaratioofthemarketvalueofinvestedcapitallesscashtoeachofthelasttwelve-monthrevenuesandthe forecasted future twelve month revenues. The estimated value is then discounted by a non-marketability factor because stockholders of private companies do not have access to trading markets similar to those enjoyed by stockholders of public companies which impacts liquidity.Todetermineourpeergroupofcompanies,weconsideredpublicenterprisecloud-basedapplicationprovidersandselectthosethat are similar to us in size, stage of lifecycle, and financialleverage.74The resulting equity value is then allocated to each class of stock using an Option Pricing Model (OPM). The OPM treats common stockandredeemableconvertiblepreferredstockascalloptionsonanequityvalue,withexercisepricesbasedontheliquidationpreference ofourredeemableconvertiblepreferredstock.Underthismethod,ourcommonstockhasvalueonlyifthefundsavailablefor distributiontostockholdersexceedthevalueoftheliquidationpreferenceatthetimeofaliquidityevent,suchasamergerorsale,assuming wehavefundsavailabletomakealiquidationpreferencemeaningfulandcollectiblebythestockholders.Thecommonstockisconsideredto beacalloptionwithaclaimatanexercisepriceequaltotheremainingvalueimmediatelyaftertheredeemableconvertiblepreferredstockis liquidated.BeginninginDecember2018,theresultingequityvaluewasallocatedtoeachclassofstockusingaProbabilityWeightedExpected Return Method (PWERM). The PWERM involves the estimation of future potential outcomes of our company as well as values and probabilities associated with each respective potential outcome. The common stock per share value determined using this approach is ultimatelybaseduponprobability-weightedpersharevaluesresultingfromthevariousfuturescenarios,whichcanincludeanIPO,mergeror sale, dissolution, or continued operation as a private company. There was a very wide range of possible future exit events for the “remain privatescenario”inourPWERManalysis,andforecastingspecificprobabilitiesandpotentialvaluesassociatedwithanyfutureeventswould behighlyspeculativeandimpreciseforthisscenario.Assuch,wereliedprimarilyupontheOPMinordertoallocatetheequityvalueamong the stockholders for the “remain private scenario” in our PWERManalysis.Insomecases,weconsideredtheamountoftimebetweenthevaluationdateandthegrantdatetodeterminewhethertousethelatest commonstockvaluationdeterminedpursuanttooneofthemethodsdescribedaboveorastraight-linecalculationbetweenthetwovaluation dates. This determination included an evaluation of whether the subsequent valuation indicated that any significant change in valuation had occurred between the previous valuation and the grantdate.SincethecompletionofourIPO,ourBoardofDirectorsdeterminesthefairvalueofeachshareofunderlyingcommonstockbasedon theclosingpriceasreportedonthedateofgrantontheNewYorkStockExchange.Recent Accounting PronouncementsSeeNote1toourconsolidatedfinancialstatementsincludedelsewhereinthis Annual Report on Form 10-K forrecentlyadoptedaccounting pronouncementsandrecentlyissuedaccountingpronouncementsnotyetadoptedasof June 30, 2020.Emerging Growth Company StatusWe are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adoptingneworrevisedaccountingstandardsissuedsubsequenttotheenactmentoftheJOBSActuntilsuchtimeasthosestandardsapply to private companies. We elected to use this extended transition period for complying with new or revised accounting standards that have differenteffectivedatesforpublicandprivatecompaniesuntiltheearlierofthedatethatwe(i)arenolongeranemerginggrowthcompanyor (ii) affirmativelyandirrevocablyoptoutoftheextendedtransitionperiodprovidedintheJOBSAct.Asaresult,theseconsolidatedfinancial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. The JOBS Act does not preclude an emerging growth companyfromearlyadoptinganeworrevisedaccountingstandardearlierthanthetimethatsuchstandardappliestoprivatecompanies.During fiscal 2020, we early adopted Accounting Standards Update (ASU) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes on a prospective basis effective during the year ended June 30, 2020. During fiscal 2018, we early adopted ASU 2014-09, Revenue from Contracts with Customers (Accounting Standards Codification Topic 606) effective July 1, 2017 using the full retrospective method. We expect to use the extended transition period for any other new or revised accounting standards during the period in which we remain an emerging growthcompany.75timethe date of purchase. All of our investments are classified as available-for-sale securities.CustomerOur customer funds assets are invested in money market funds that maintain a constant market price,net asset value, other cash equivalents, and highly liquid, investment-grade fixed income marketable securities, with maturities of up to 13 months from the time of purchase. Our investment policy reflecting restrictions on permissible investments in applicable state money transmitter laws, governs the types of investments we make. We classify all of our investments in marketable securities as available-for-sale.constant-valueconstant net asset value money market funds that allow for same-day liquidity. The risk of a decline in investment value is minimized by our restrictive investment policy allowing for only short-term, high quality fixed income marketable securities. We also maintain other sources of liquidity including our corporate cash balances and our Senior Facilities Agreement.of ourheld for customers that we process through our bank accounts. Our investments in both fixed rate and floating rate interest earning securities carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely affected due to a rise in interest rates, while floating rate securities may produce less income than predicted if interest rates fall. Our corporate investment portfolio consists principally of interest-bearing bank deposits, money market funds, certificates of deposit, commercial paper, other corporate bonds,notes, asset-backed securities, and U.S. Treasury securities. Funds that we hold for customers are held in non-interest and interest-bearing bank deposits, money market funds, certificates of deposit, commercial paper, and other corporate notes, and U.S. Treasury securities. We recognize interest earned from funds held for customers as revenue. We do not pay interest to customers.decreasedslightly increased to 1.52%0.29% during fiscal 2020 from 2.10%2022 compared to 0.27% during fiscal 20192021 due primarily to the changes in the short-term interest rate environment including actions taken by the U.S. Federal Reserve to lower the federal funds rate during the second half of calendar year 2019 and in March 2020 in response to the COVID-19 pandemic, as the average daily effective federal funds rate decreased by 95 basis points.(loss) untilsince we classify our marketable debt securities as available for sale. 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.sold. Based on current investment practices, a change inalso exposed to interest-rate risk relating to borrowings from our line of credit. As of June 30, 2022, we borrowed the maximum commitment amount of $75.0 million from our line of credit. Because the interest rate ofon our borrowings is indexed to LIBOR, which is a floating rate mechanism, our interest cost may increase if market interest rates rise. A hypothetical 100 basis pointspoint increase or decrease in interest rates would not have changeda material effect on our interest income from our corporate investment portfolio by approximately $3.0 million during fiscal 2020 on average corporate investment balances of76Table of Contentsapproximately $302.0 million. A change in the interest rate of 100 basis points would have changed our interest on funds held for customers by approximately $13.6 million during fiscal 2020 on average funds held for customers of $1.4 billion. We are also exposed to interest-rate risk relating to future bank borrowings. As of June 30, 2020, our available funds under our Senior Facilities Agreement provides for a revolving credit facility of up to $40.8 million, after deducting our outstanding line of credit borrowings of $2.3 million and letter of credit utilization totaling $6.9 million. Because the interest rate on the borrowing is indexed to a floating rate, our interest cost may increase if market interest rates rise. available-for-sale marketable securities through the possible inability of the borrowers to meet the terms of the securities. 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. Investment in securities of issuers with long-term credit ratings must be rated A- or A3, or higher. Investment in asset-backed securities and money market funds must be rated AAA or equivalent. Investment in repurchase agreements will be at least 100102 percent collateralized with securities issued by the U.S. government or its agencies. Securities in our corporate portfolio may not mature beyond two years from purchase, and securities held in our customer fund accounts may not mature beyond 13 months from purchase. No more than 5% of invested funds, either corporate or customer, may be held in the issues of a single corporation.customers. Customers may not have sufficient available balances in their account to fund remittancescustomers and if a customer disputes a transaction after we have maderemit funds on their behalf.behalf, then we could suffer a credit loss. Furthermore, our customers generally have three days to dispute transactions, and if we remit funds in advance of receiving confirmation that no dispute was initiated by our customer, then we could suffer a credit loss. We mitigate this credit exposure by leveraging our data assets to make credit underwriting decisions about whether to accelerate disbursements, managing exposure limits, and various controls in our operating systems.partner,partners, the exchange rate may differ, due to foreign exchange fluctuation, compared tofrom the exchange rate that was initially quoted. 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.77Contentsour product offerings.Financial Statements and Supplementary DataFINANCIAL STATEMENTS AND SUPPLEMENTARY DATATable of ContentsStockholdersShareholders and the Board of Directors of Bill.com Holdings, Inc.20202022 and 2019,2021, the related consolidated statements of operations, comprehensive loss, redeemable convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the three years in the period ended June 30, 2020,2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at June 30, 20202022 and 2019,2021, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2020,2022, in conformity with U.S. generally accepted accounting principles.Public Company Accounting Oversight Board (United States) (PCAOB)PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion./s/ Ernst & Young LLPWe have served asCompany’s auditor since 2018.San Francisco, CaliforniaAugust 28, 202079Tablecurrent period audit of ContentsBILL.COM HOLDINGS, INC.CONSOLIDATED BALANCE SHEETS(In thousands, except per share amounts)See accompanying notesthe financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements.80BILL.COM HOLDINGS, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share amounts)See accompanying notesstatements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to consolidated financial statements.81BILL.COM HOLDINGS, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS(In thousands)See accompanying notes to consolidated financial statements.82BILL.COM HOLDINGS, INC.CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCKAND STOCKHOLDERS’ EQUITY (DEFICIT)(In thousands)See accompanying notes to consolidated financial statements83BILL.COM HOLDINGS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited, in thousands)(1)Amounts have been adjusted to reflectFunds Held for Customers and Customer Fund Deposits Description of the adoption of Accounting Standards Update No. 2016-18, MatterStatement of Cash Flows (Topic 230): Restricted Cash. SeeHow We Addressed the Matter in Our Audit summaryperiod of reclassificationstime prior to and adjustments.subsequent to period end.Valuation of an Acquired Customer Relationships Intangible Asset Description of the Matter How We Addressed the Matter in Our Audit June 30, 2022 2021 ASSETS Current assets: Cash and cash equivalents $ 1,596,542 $ 509,615 Short-term investments 1,108,493 655,314 Accounts receivable, net 24,045 18,222 Acquired card receivables, net 256,392 147,093 Prepaid expenses and other current assets 151,258 67,195 Funds held for customers 3,142,660 2,208,598 Total current assets 6,279,390 3,606,037 Non-current assets: Operating lease right-of-use assets, net 76,445 71,925 Property and equipment, net 56,985 48,902 Intangible assets, net 432,583 417,341 Goodwill 2,362,893 1,772,043 Other assets 47,730 52,925 Total assets $ 9,256,026 $ 5,969,173 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 9,948 $ 11,904 Accrued compensation and benefits 29,004 20,287 Deferred revenue 31,868 12,848 Other accruals and current liabilities 120,080 72,022 Borrowings from credit facilities, net 75,097 — Customer fund deposits 3,142,660 2,208,598 Total current liabilities 3,408,657 2,325,659 Non-current liabilities: Deferred revenue 2,159 2,926 Operating lease liabilities 82,728 86,639 Borrowings from credit facilities, net — 79,534 Convertible senior notes, net 1,697,985 909,847 Other long-term liabilities 20,803 34,978 Total liabilities 5,212,332 3,439,583 Commitments and contingencies (Note 15) 0 0 Stockholders' equity: Preferred stock: $0.00001 par value per share; 10,000 shares authorized; none issued and outstanding — — Common stock; $0.00001 par value per share; 500,000 shares authorized; 104,731 and 94,504 shares issued and outstanding at June 30, 2022 and 2021, respectively 2 2 Additional paid-in capital 4,598,737 2,777,155 Accumulated other comprehensive loss (10,217) (100) Accumulated deficit (544,828) (247,467) Total stockholders' equity 4,043,694 2,529,590 Total liabilities and stockholders' equity $ 9,256,026 $ 5,969,173 84$2.3$5.2 million, $1.4$3.6 million and $1.0$2.3 million during the years ended June 30, 2020, 20192022, 2021 and 2018,2020, respectively. The amortization of deferred service costs, which is included in the service costs in the accompanying consolidated statements of operations, was $0.4$1.6 million, $1.1$0.6 million and $0.4 million during the years ended June 30, 2022, 2021 and 2020, respectively.$ 510,218 Cash 164,087 Total $ 674,305 Cash and cash equivalents $ 19,738 Accounts receivable and other assets 4,518 Intangible assets 91,219 Total identifiable assets acquired 115,475 Accounts payable and other liabilities (26,618) Net identifiable assets acquired 88,857 Goodwill 585,448 Net assets acquired $ 674,305 Preliminary
fair valueWeighted average
useful life
(in years)Customer relationships $ 61,269 10.0 Developed technology 15,908 3.0 Trade name 14,042 3.0 Total $ 91,219 7.7 Year ended June 30, 2022 2021 Revenue $ 648,476 $ 274,842 Net loss $ (327,136) $ (149,003) $ 1,658,818 Cash 664,779 Total $ 2,323,597 2018,were outstanding on the acquisition date. The fair value of these stock options was $55.3 million, which was the amount attributable to the pre-combination requisite service period.Cash $ 108,689 Acquired card receivables 159,784 Accounts receivable 7,435 Card receivables held for sale 12,730 Property and equipment 15,805 Intangible assets 423,000 Prepaid expenses and other assets 57,669 Total identifiable assets acquired 785,112 Accounts payable and other liabilities (153,855) Outstanding borrowings from credit facilities (79,703) Total liabilities assumed (233,558) Net identifiable assets acquired 551,554 Goodwill 1,772,043 Net assets acquired $ 2,323,597 Fair value Weighted average useful life (in years) Customer relationships $ 198,000 10.0 Developed technology 191,000 6.0 Trade name 34,000 3.0 Total $ 423,000 7.6 Year ended
June 30,2021 2020 Total revenue $ 307,618 $ 192,770 Net loss $ (223,470) $ (206,166) 34 – FAIR VALUE MEASUREMENTredeemable convertible preferred stock warrant liabilitiesbeneficial interest derivative on card receivables sold at estimated 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.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 relatedLevel 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.Level 3 –Unobservable inputs that are supported by little or no market activityLevel 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 and typically reflect management’s estimate of assumptions that market participants would use in pricing the assets or liabilities.95June 30, 2021 Level 1 Level 2 Level 3 Total Assets Cash equivalents: Money market funds $ 365,550 $ — $ — $ 365,550 Corporate bonds — 15,499 — 15,499 365,550 15,499 — 381,049 Short-term investments: Corporate bonds — 466,459 — 466,459 U.S. treasury securities 155,674 — — 155,674 Asset-backed securities — 26,406 — 26,406 Certificates of deposit — 6,775 — 6,775 155,674 499,640 — — — 655,314 Funds held for customers: Restricted cash equivalents Money market funds 6,887 — — 6,887 Corporate bonds — 79,435 — 79,435 6,887 79,435 — — 86,322 Short-term investments Corporate bonds — 516,350 — 516,350 Certificates of deposit — 326,927 — 326,927 Municipal bonds — 42,957 — 42,957 Asset-backed securities — 25,085 — 25,085 U.S. treasury securities 3,009 — — 3,009 3,009 911,319 — 914,328 Beneficial interest derivative on card receivables sold — — 2,252 2,252 Total assets measured at fair value $ 531,120 $ 1,505,893 $ 2,252 $ 2,039,265 0no transfers of financial instruments between Level 1, Level 2, and Level 3 during the periods presented.96measurement of the redeemable convertible preferred stock warrant liabilitiesbeneficial interest derivative on card receivables sold is estimated using a discounted cash flow model, which uses Level 3 inputs including a discount rate and a default rate. The default rate estimate is based upon the expected transferred card receivables that will ultimately default. The default rate is calculated using historical trends and ages of the outstanding card receivable balances. The default rate did not have a material impact in the estimation of fair value of the beneficial interest derivative as of June 30, 2019 was based on significant2022 and 2021. Other inputs, not observedsuch as the discount rate and expected repayments, are generally considered but had no material impact in the market and thus represents a Level 3 measurement. The Company estimated theestimation of fair value of the liability usingbeneficial interest derivative as of June 30, 2022 and 2021. A ten percent increase or decrease in the Black-Scholes option-pricing model and any changediscount rate or default rate used would not result in a significantly higher or lower fair value is recognizedmeasurement.either gain or lossof June 30, 2022. The Company carries the Notes at par value, less the unamortized debt discount and included in other income, netissuance costs in the accompanying consolidated statements of operations.Immediately upon the completion of the Company’s IPO, all warrants to purchase shares of redeemable convertible preferred stock were converted into warrants to purchase shares of common stock. As a result, thebalance sheets. The estimated fair redeemable convertible preferred stock warrant liabilities2027 Notes and 2025 Notes, which is presented for disclosure purposes only, was reclassified to additional paid-in capital.table below sets forthfair value was based on a summarymarket approach, which represents a LchangesNotes in the fair value of Level 3 financial liabilitiesan over-the-counter market as of and for the periods presented (in thousands):last day of trading prior to the end of the period.45 – SHORT-TERM INVESTMENTSJune 30, 2022 Amortized
costGross
unrealized
gainsGross
unrealized
lossesFair value Corporate bonds 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 Certificates of deposit 38,155 — — 38,155 $ 1,116,408 $ 4 $ (7,919) $ 1,108,493 June 30, 2021 Amortized
costGross
unrealized
gainsGross
unrealized
lossesFair value Corporate bonds Corporate bonds $ 466,403 $ 111 $ (55) $ 466,459 U.S. treasury securities 155,663 16 (5) 155,674 Asset-backed securities 26,391 16 (1) 26,406 Certificates of deposit Certificates of deposit 6,775 — — 6,775 $ 655,232 $ 143 $ (61) $ 655,314 $0.5$3.0 million and $0.2$2.5 million at June 30, 20202022 and 2019,2021, respectively.97Table See Note 4 for additional information about the fair value measurement of Contents2020, approximately 83% and 17%2022, the fair value of the Company’s short-term investments in marketable debt securitiesthat mature within one year and after one year through two years, respectively.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 June 30, 2019, 100%2021, the fair value of the Company’s short-term investments in marketable debt securities maturedthat mature within one year.forof those investments that were in an unrealized loss position as of June 30, 2020the dates presented (in thousands):June 30, 2022 Fair value Unrealized
lossesCorporate bonds Corporate bonds $ 392,699 $ (4,786) U.S. treasury securities 411,787 (2,917) Asset backed securities Asset backed securities 51,406 (216) Total $ 855,892 $ (7,919) InvestmentsJune 30, 2021 Fair value Unrealized
lossesCorporate bonds $ 152,485 $ (55) U.S. treasury securities 85,466 (5) Asset backed securities 8,089 (1) Total $ 246,040 $ (61) havehad been in a continuous unrealized loss position for less than 12 months. Investments with unrealized losses that had been in a continuous unrealized loss position for more than 12 months have been immaterial. The Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity. Therefore, the Company does not consider those unrealized investment losses as other-than-temporary impairment of the investments. There have been 0no significant realized gains or losses on the short-term investments during the years ended June 30, 2020, 20192022, 2021 and 2018.2020.56 – FUNDS HELD FOR CUSTOMERSJune 30, 2022 2021 Restricted cash Restricted cash $ 1,685,937 $ 1,195,904 Restricted cash equivalents 168,260 86,322 Funds receivable Funds receivable 6,747 12,694 Corporate bonds 807,685 516,350 Certificates of deposit 397,533 326,927 Municipal bonds Municipal bonds 6,516 42,957 Asset backed securities Asset backed securities 69,912 25,085 U.S. treasury securities 3,072 3,009 Total funds held for customers 3,145,662 2,209,248 Less - income earned by the Company included in other current assets (3,002) (650) Total funds held for customers, net of income earned by the Company $ 3,142,660 $ 2,208,598 expected to beeither transferred into the Company’s corporate deposit account or reinvested in the funds held for customers portfolios upon sale or settlement of the associated investment.98June 30, 2022 Amortized
costGross
unrealized
gainsGross
unrealized
lossesFair value Corporate bonds $ 809,113 $ 1 $ (1,429) $ 807,685 Certificates of deposit 397,533 — — 397,533 Municipal bonds Municipal bonds 6,542 — (26) 6,516 Asset backed securities Asset backed securities 70,574 — (662) 69,912 U.S. treasury securities 3,082 — (10) 3,072 Total $ 1,286,844 $ 1 $ (2,127) $ 1,284,718 June 30, 2021 Amortized
costGross
unrealized
gainsGross
unrealized
lossesFair value Corporate bonds $ 516,364 $ 24 $ (38) $ 516,350 Certificates of deposit 326,927 — — 326,927 Municipal bonds Municipal bonds 42,952 5 — 42,957 Asset backed securities Asset backed securities 25,081 4 — 25,085 U.S. treasury securities 3,010 — (1) 3,009 Total $ 914,334 $ 33 $ (39) $ 914,328 $2.9$3.0 million and $1.9 million at June 30, 20202022 and 2019,2021, respectively.2020 and 2019, 100%2022, approximately 95%, or $1.2 billion, of the Company’stotal funds held for customers that wereinvested in marketable debt securities mature within one year and approximately 5% or $69.9 million mature thereafter. As of June 30, 2021, 97%, or $882.4 million, of the funds held for customers invested in short-term marketable debt securities maturematured within one year.forof those investments that were in an unrealized loss position as of June 30, 2020 and 2019the dates presented (in thousands):June 30, 2022 Fair value Unrealized
lossesCorporate bonds $ 301,625 $ (1,429) Municipal bonds Municipal bonds 6,516 (26) Asset backed securities Asset backed securities 64,361 (662) U.S. treasury securities 3,072 (10) Total $ 375,574 $ (2,127) June 30, 2021 Fair value Unrealized
lossesCorporate bonds $ 79,359 $ (38) U.S. treasury securities 2,501 (1) Total $ 81,860 $ (39) 0no significant realized gains or losses on the short-term investments during the years ended June 30, 2020, 20192022, 2021 and 2018.99Contents67 – SIGNIFICANT BALANCE SHEET COMPONENTSPropertyACQUIRED CARD RECEIVABLESJune 30, 2022 2021 Gross amount of acquired card receivables $ 261,806 $ 148,833 Less: allowance for credit losses (5,414) (1,740) Total $ 256,392 $ 147,093 equipmentacquired card receivable balances are collateralized by cash deposits held by the Issuing Banks. Before an account is charged off, the Company obtains any available cash collateral from the Issuing Banks. As of June 30, 2022, approximately $115.8 million of the acquired card receivable balance served as collateral for the Company’s borrowings from the 2021 Revolving Credit Agreement (see Note 10).June 30, 2022 2021 Current and less than 30 days past due $ 257,618 $ 145,993 30 ~ 59 days past due 1,677 1,188 60 ~ 89 days past due 1,199 580 90 ~ 119 days past due 1,186 713 Over 119 days past due 126 359 Total $ 261,806 $ 148,833 June 30, 2022 Balance, beginning $ 1,740 $ — Initial allowance for credit losses on purchased card receivables with credit deterioration 313 2,082 Provision for expected credit losses 19,566 462 Charge-off amounts (18,005) (828) Recoveries collected 1,800 24 Balance, ending $ 5,414 $ 1,740 Purchase price $ 3,855 Allowance for credit losses 2,082 Less: discount attributable to other factors (79) Par value $ 5,858 Year ended June 30, 2022 Initial fair value of consideration received: Cash $ 1,483,481 $ 59,105 Beneficial interest derivative 4,690 187 Total $ 1,488,171 $ 59,292 June 30, 2022 2021 Current and less than 30 days past due $ 56,162 $ 25,098 30 ~ 59 days past due 292 240 60 ~ 89 days past due 375 165 90 ~ 119 days past due 422 301 Over 119 days past due 30 132 Total $ 57,281 $ 25,936 June 30, 2022 2021 Software and equipment Software and equipment $ 20,102 $ 17,508 Capitalized software 21,457 6,794 Furniture and fixtures 10,608 8,926 Leasehold improvements 35,105 34,606 Property and equipment, gross 87,272 67,834 Less: accumulated depreciation and amortization (30,287) (18,932) Property and equipment, net $ 56,985 $ 48,902 2019was $11.5 million, $5.4 million and 2018 was $4.3 million, $3.2respectively.$2.3$3.7 million, respectively.OtherJune 30, 2022 2021 Balance, beginning $ 1,772,043 $ — Addition related to acquisition during the period 585,448 1,772,043 Measurement period adjustments (2,876) — Adoption of ASU 2021-08 8,278 — Balance, ending $ 2,362,893 $ 1,772,043 June 30, 2022 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted average remaining
useful life
(In years)Customer relationships $ 259,269 $ (26,556) $ 232,713 9.0 Developed technology 206,908 (38,909) 167,999 4.7 Trade name 48,042 (16,171) 31,871 2.0 Total $ 514,219 $ (81,636) $ 432,583 6.8 Jun 30, 2021 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted average remaining
useful life
(In years)Customer relationships $ 198,000 $ (2,062) $ 195,938 9.9 Developed technology 191,000 (2,653) $ 188,347 5.9 Trade name 34,000 (944) $ 33,056 2.9 Total $ 423,000 $ (5,659) $ — $ 417,341 7.5 June 30, 2022 2021 Cost of revenue $ 36,256 $ 2,653 Sales and marketing $ 39,721 3,006 Total $ 75,977 $ 5,659 Fiscal years ending June 30: Amount 2023 $ 79,075 2024 78,147 2025 59,425 2026 57,763 2027 55,094 Thereafter 103,079 Total $ 432,583 June 30, 2022 2021 Convertible senior notes: 2027 Notes, principal $ 575,000 $ — 2025 Notes, principal 1,150,000 1,150,000 Total principle amount of convertible senior notes 1,725,000 1,150,000 Credit facilities: 2021 revolving credit agreement (Class A) 75,000 37,500 2021 revolving credit agreement (Class B) — 10,000 2019 credit agreement — 30,000 Total principal borrowings from credit facilities 75,000 77,500 Total principal amount of debt and borrowings 1,800,000 1,227,500 Less: unamortized debt discount and issuance costs (26,918) (238,119) Net carrying value of debt and borrowings $ 1,773,082 $ 989,381 Net carrying value of debt and borrowings consisted of: Current liabilities: Borrowings from credit facilities
(including unamortized debt premium)$ 75,097 $ — Non-current liabilities: 2027 Notes, net 562,127 — 2025 Notes, net 1,135,858 909,847 — 79,534 Total $ 1,773,082 $ 989,381 current liabilities – unpaid special interest to, but excluding, the redemption date. NaN sinking fund is provided for the 2027 Notes.Otherliabilitiesintent is to settle conversions of the 2025 Notes through a combination settlement, which involves a repayment of the principal portion in cash with any excess of the conversion value over the principal amount settled in shares of common stock.June 30, 2022 June 30, 2021 2027 Notes 2025 Notes 2025 Notes Liability component: Principal $ 575,000 $ 1,150,000 $ 1,150,000 Less: unamortized debt discount and issuance costs $ (12,873) $ (14,142) $ (240,153) Net carrying amount $ 562,127 $ — $ 1,135,858 $ 909,847 Amount allocated to equity component, net of issuance costs and tax $ — $ — $ 245,066 NOTE 7 – BANK BORROWINGSSenior Secured Credit FacilitiesOnThe debt discount and issuance costs of the Notes are being amortized using the effective interest method. During the years ended June 28, 2019,30, 2022 and 2021, the Company recognized $6.1 million and $27.7 million, respectively, of interest expense related to the amortization of the debt discount and issuance costs of the Notes. The effective interest rates during the year ended June 30, 2022, which consisted of the 2027 Notes and the 2025 Notes after the adoption of ASU 2020-06 beginning July 1, 2021 were 0.48% and 0.36%, respectively. The effective interest rate during the year ended June 30, 2021, which includes the 2025 Notes and prior to the adoption of ASU 2020-06 was 5.37% and was based on the interest rate of similar debt instruments, at the time of the offering, that do not have associated convertible features.Senior Secured Credit Facilities Credit Agreement (Senior Facilities Agreement)cost of $125.8 million. The Capped Calls are separate transactions and are not part of the terms of the Notes. The total amount paid for the Capped Calls was recorded as a reduction to additional paid-in capital. The Company used the proceeds from the Notes to pay for the cost of the Capped Call premium. The cost of the Capped Calls is not expected to be tax-deductible as the Company did not elect to integrate the Capped Calls into the Notes for tax purposes.Silicon Valley Bank forthe 2027 Notes and 2025 Notes have an initial strike price of approximately $414.80 per share and $160.88 per share, respectively, subject to certain adjustments, which corresponds to the respective initial conversion price of the 2027 Notes and 2025 Notes, and have an initial cap price of $544.00 per share and $218.14 per share, respectively, subject to certain adjustments; provided that such cap price shall not be reduced to an amount less than their respective strike price. The Capped Calls associated with the Notes cover, subject to anti-dilution adjustments, a revolving credit facilitytotal of upapproximately 8.5 million shares of the Company’s common stock. The Capped Calls are expected to $50.0 million (Total Commitment), whichgenerally reduce the potential dilution of the Company’s common stock upon any conversion of the Notes and/or offset any cash payments that the Company is required to make in excess of the principal amount of such converted notes, as the case may be, increased by up to $25.0 million upon request and subject to conditions. On August 15, 2019, Silicon Valley Bank assigned $20.0 million of the Total Commitment to JPMorgan Chase Bank. Under the Senior Facilities Agreement, Bill.com, LLC is the borrower and Bill.com Holdings, Inc. is the guarantor. The Senior Facilities Agreement expires on June 28, 2022. Concurrent with the closing of the Senior Facilities Agreement on June 28, 2019, the Amended and Restated Loan and Security Agreement entered into in October 2017 with Silicon Valley Bank was terminated.Borrowings under the Senior Facilities Agreement aresuch reduction and/or offset subject to a borrowing base.cap.addition,June 2022, the Company paid off the previous balance of $10.0 million under the Class B facility and cancelled the total commitment of $20.0 million. As of June 30, 2022, the Company increased its borrowings under the Senior Facilities AgreementClass A facility to $75.0 million. Borrowings from the Class A facility, which are subject to interest at a rate per annum determined as follows: (a) Eurodollar loans shallsecured by acquired card receivables, bear interest at a rate2.75% per annum equalplus LIBOR (subject to the Eurodollara floor rate plus the applicable margin of 1.75% or 2.75% depending on the Company’s cash balance (Eurodollar rate is calculated based on the ratio of Eurodollar Base Rate, which is determined by reference to ICE Benchmark Administration London Interbank Offered Rate over the Eurocurrency Reserve Requirements, but not less than 0%), or (b) Alternate Base Rate (ABR) loans shall bear interest at a rate per annum equal to the ABR, minus the applicable margin of 0.25% or 1.25%, depending). As of June 30, 2022, the interest rate on borrowings from the Company’s cash balance (ABRClass A facility was 4.35% per annum. The Company is equal to the highest of the (i) prime rate, (ii) Federal Funds effective rate plus 0.50%, and (iii) Eurodollar rate plus 1.25%).100The Senior Facilities Agreement requires the Companyrequired to comply with certain restricted covenants.covenants, including liquidity requirements. As of June 30, 2020 and 2019,2022, the Company was in compliance with those covenants.loan covenants. Borrowingsoutstanding borrowings from the 2019 Credit Agreement was $30.0 million. In June 2022, the Company paid off the total amount outstanding and terminated the 2019 Credit Agreement.Senior Facilities are secured by substantially all of the Company’s assets, and are fully and unconditionally guaranteed by Bill.com Holdings, Inc. Available funds under the Company’s Senior Facilities2021 Revolving Credit Agreement after deducting the line of credit borrowings of $2.3 million and letter of credit utilization totaling $6.9 million, was $40.8 millionwritten off as of June 30, 2020.2022 as a result of the debt prepayment and an immaterial extinguishment gain was recorded and included in other expense, net in the accompanying consolidated statements of operations. The interest rate onunamortized debt premium under the lineClass A facility under the 2021 Revolving Credit Agreement has a remaining amortization period of credit borrowings was 2.0% per annum asapproximately 1 year. Interest income related to the amortization of the debt premium during the years ended June 30, 2020.NOTE 8 – REDEEMABLE CONVERTIBLE PREFERRED STOCKUpon the completion of the IPO, all shares of the Company’s outstanding redeemable convertible preferred stock were converted into 52,434,505 shares of common stock2022 and the carrying value, totaling $276.3 million,2021 was reclassified to common stock and additional paid-in capital.At June 30, 2019, redeemable convertible preferred stock consisted of the following (in thousands):911 – STOCKHOLDERS’ EQUITYdate immediately beforeaward of stock options, restricted stock units (RSUs), restricted stock awards, stock appreciation rights, performance awards, cash awards, and stock bonus awards, as determined by the Company’s Registration Statement on Form S-1 was declared effective by the SEC.performanceperformance-based awards, cash awards, and stock bonus awards. The Company initially reserved 7,100,000 shares of its common stock, plus any reserved shares not issued or subject to outstanding grants under the 2016 Plan, for issuance pursuant to awards granted under ourthe Company’s 2019 Plan. The number of shares reserved for issuance under the 2019 Plan increases automatically on July 1 of each of 2020 through 2029 by the number of shares equal to the lesser of 5% of the total number of outstanding shares of the Company’s common stock as of the immediately preceding June 30101•shares issuable upon the exercise of options or subject to other awards under the 2016 Plan or 2006 Plan that cease to be subject to such options or other awards by forfeiture or after the effective date of the 2019 Plan; and•shares issued pursuant to outstanding awards under our 2016 Plan and 2006 Plan that are forfeited or repurchased after the effective date of the 2019 Plan. 6,187,598, 11,370,068, and 6,337,779 12,332,663shares as of June 30, 2020, 20192022.2018, respectively.2020. The total number of outstanding unvested shares that had been early exercised as of June 30, 2019 was not significant.2020,2022, and changes during the year ended June 30, 2020,2022, is presented below:Number of
shares
(in thousands)Weighted
average
exercise
price
per shareWeighted
average
remaining
contractual
term
(in years)Aggregate
intrinsic
value
(in thousands)Outstanding at June 30, 2021 6,552 $ 13.31 7.87 $ 1,113,025 280 $ 83.40 Exercised (2,747) $ 12.39 Forfeited (227) $ 26.66 Outstanding at June 30, 2022 3,858 $ 18.28 6.97 $ 361,053 3,624 $ 18.22 6.94 $ 339,548 Vested and exercisable at June 30, 2022 2,189 $ 12.59 6.63 $ 213,987 (1)(1) Includes approximately 184,000 shares of outstanding stock options that were assumed upon the acquisition of Invoice2go. The weighted average exercise price of options assumed was $25.60 per share and the weighted average grant date fair value on the date of assumption was approximately $248.43 per share. (2) The expected to vest options are the result of applying the pre-vesting forfeiture rate assumptions to total outstanding options. 1022019was $207.07, $132.04 and 2018 was $11.04 $4.24 and $2.02 per share, respectively. The total intrinsic value of options exercised during the years ended June 30, 2022, 2021 and 2020 2019 and 2018 was $191.3$640.0 million, $3.8$387.1 million and $0.7$191.3 million, respectively. The intrinsic value was calculated as the difference between the estimated fair value of the Company’s common stock at exercise and the exercise price of the in-the-money options.2020, 20192022, 2021 and 20182020 was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:2022 2021 2020 Expected term (in years) 2.00 to 7.05 4.00 to 6.25 6.25 Expected volatility 30.0% to 81.2% 35.0% to 85.1% 50.0% to 100.6% Risk-free interest rate 0.20% to 2.88% 0.38% to 1.03% 0.35% to 1.88% Expected dividend yield 0 % 0 % 0 % The Black-Scholes option-pricing model requires the use of highly subjective assumptions which determine the fair value of stock-based awards. These assumptions include:Expected term–The expected term represents the period that stock-based awards are expected to be outstanding. The expected term for option grants is determined using the simplified method. 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–Since the Company did not have any trading history for its common stock prior to the IPO, the expected volatility was estimated based on the average volatility for comparable publicly traded companies over a period equal to the expected term of the stock option grants. The comparable companies were chosen based on their similar size, stage in the life cycle or area of specialty. Following the IPO, 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. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of option. Expected dividend yield–The Company has never paid dividends on its common stock and has no plans to pay dividends on its common stock. Therefore, the Company used an expected dividend yield of zero.2020,2022, the total unamortized stock-based compensation cost related to the unvested stock options was $40.4approximately $61 million, which the Company expects to amortize over a weighted-average period of 2.91.89 years. The Company received $12.2approximately $34.0 million, $1.7$28.2 million and $0.7$12.2 million from options exercised during the years ended June 30, 2022, 2021 and 2020, 2019 and 2018, respectively.103Table of ContentsIn February 2020, the Company began issuing RSUs to certain employees and nonemployee board members under the 2019 Plan. 20202022, is presented below:below.Number of
shares
(in thousands)Weighted
average
grant date
fair valueNonvested at June 30, 2021 1,176 $ 90.20 Granted 2,929 $ 202.79 Vested (535) $ 122.82 Forfeited (291) $ 164.74 Nonvested at June 30, 2022 3,279 $ 178.85 yearyears ended June 30, 2022, 2021 and 2020 was approximately $118.9 million, $40.0 million and $0.2 million.2020,2022, the total unamortized stock-based compensation expense related to the unvested RSUs was $55.2approximately $413.8 million, which the Company expects to amortize over a weighted-average period of 3.82.9 years.2019 2019, the date the Company’s Registration Statement on Form S-1 was declared effective by the SEC.2019. The ESPP is intended to qualify under Section 423 of the Internal Revenue Code of 1986 (as amended) and will provide eligible employees a means to acquire shares of common stock through payroll deductions. Under the ESPP, the Company initially reserved for issuance 1,400,000 shares of common stock, which will increase automatically on July 1 of each fiscal year during the term of the ESPP by the number of shares equal to 1% of the total number of shares of common stock and preferred stock (on as-converted basis) outstanding as of the immediately preceding June 30th, unless the board of directors elects to authorize a lesser number of shares; provided, that, the total number of shares issued under the ESPP may not exceed 14,000,000 shares of common stock.first business day of each offering periods shall be for a 12-month period is the offering date. No offering period may last more than 27 months. Each offering period is comprised of two six-month purchase periods. The initial offering period of the ESPP started on December 11, 2019, which is the effective date of the ESPP, and will endcommencing on February 14, 2021, with two purchase periods on August 14, 20207th and February 14, 2021. Thereafter, a new 12-month offering period will commence on each subsequent February 15th and August 15th,September 7th, with each such offering period consisting of two separate 6-month purchase periods ending on August 14thSeptember 6th and February 14th,6th, and February 6th and September 6th, respectively.104eachthe offering using the Black-Scholes option-pricing model with the following assumptions during the year ended June 30, 2020:assumptions:Expected term (in years)0.5 to 1.17Expected volatility50.0%Risk-free interest rate1.47% to 1.56%Expected dividend yield0%2022 2021 2020 Expected term (in years) 0.4 to 1.0 0.5 to 1.0 0.5 to 1.17 Expected volatility 76.0% to 77.3% 81.0% to 88.4% 50.0% Risk-free interest rate 0.06% to 0.88% 0.05% to 0.13% 1.47% to 1.56% Expected dividend yield 0 % 0 % 0 % 2020,2022, the total unrecognized compensation expense related to the ESPP was $1.5$3.9 million, which is expected to be amortized over the next 12 months.Stock Based Compensation ExpenseStock-based compensation expense from stock options, RSUs and ESPP was included in the following line items in the accompanying consolidated statements of operations during the periods presented (in thousands):Stock As of June 30, 2020, there were 0 stock warrants outstanding. As of June 30, 2019 the following warrants were issued and outstanding (in thousands except per share amounts):Immediately upon the completion of the Company’s IPO, all warrants to purchase shares of redeemable convertible preferred stock were converted into warrants to purchase shares of common stock. The outstanding redeemable convertible preferred stock warrant liabilities as of June 30, 2019 and 2018 were re-measured to fair value using the Black-Scholes option-pricing model. The key inputs used in the valuation were as follows:1052020,2022, there were 0no warrants issued or issuable under this agreement. The Company has concluded that the performance conditions for the issuance of this warrant are not probable of being met.2022 2021 2020 Cost of revenue - service costs $ 5,144 $ 2,938 $ 1,257 Research and development 54,907 16,091 5,495 Sales and marketing 60,237 8,547 2,777 General and administrative 76,869 44,411 8,535 Total amount charged to expense 197,157 71,987 18,064 Property and equipment (capitalized internal-use software) 4,405 464 — Total stock-based compensation cost $ 201,562 $ 72,451 $ 18,064 1012 – OTHER INCOME (EXPENSE), NET2022 2021 2020 Interest expense Interest expense $ (9,419) $ (28,158) $ (229) Lower of cost or market adjustment on card
receivables sold and held for saleLower of cost or market adjustment on card
receivables sold and held for sale(11,460) (691) — Interest income 6,691 2,992 4,092 Other 327 487 (703) Total $ (13,861) $ (25,370) $ 3,160 1113 – INCOME TAXESthe(benefit from) provision for (benefit from) income taxes were as follows during the periods presented (in thousands):2022 2021 2020 Domestic $ (304,508) $ (139,337) $ (31,038) Foreign (26,171) — — Total $ (330,679) $ (139,337) $ (31,038) (benefit from) income taxes were as follows during the periods presented (in thousands):2022 2021 2020 Current: Federal $ (247) $ — $ — State — — 53 Foreign — — — Total current (247) — 53 Deferred: — — — Federal (1,115) (27,529) — State (2,956) (13,088) — Foreign — — — Total deferred Total deferred (4,071) (40,617) — (Benefit from) provision for income taxes (Benefit from) provision for income taxes $ (4,318) $ (40,617) $ 53 106Table of Contents (benefit from) income taxes consisted of the following during the periods presented (in thousands):2022 2021 2020 Expected benefit at U.S. federal statutory rate $ (69,443) $ (29,261) $ (6,518) State income taxes, net of federal benefit 13,509 (54) — Stock-based compensation (93,705) (70,262) (31,047) Research and development tax credits (22,061) (8,846) (6,411) (2,831) (34,749) — 174,477 94,244 43,716 Unrecognized tax benefit (10,975) 6,766 — Acquisition-related costs 553 1,484 — Foreign rate differential 5,496 — — Other 662 61 313 (Benefit from) provision for income taxes $ (4,318) $ (40,617) $ 53 (1) The rate impact during the years ended June 30, 2022 and 2021 pertains to the income tax benefit recorded as a result of the acquisitions of Invoice2go of Divvy, which allowed the Company to release a portion of its valuation allowance due to the net deferred tax liabilities that were recorded as a result of such acquisitions. (2) The rate impact during the year ended June 30, 2022 and 2021 pertains to (i) an increase in valuation allowance due to the increase in deferred tax assets associated with losses and tax credits generated during the year, (ii) a change in deferred tax liability related to the 2025 Notes, and (iii) a change in deferred tax liability related to the acquisitions of Invoice2go and Divvy. June 30, 2020 and 2019the dates presented (in thousands):June 30, 2022 2021 Deferred tax assets: Accruals and reserves $ 9,325 $ 8,677 Deferred revenue 1,794 1,109 Stock-based compensation 25,897 16,626 Net operating loss carryforwards 410,849 218,783 Research and development credits 46,013 15,864 Accrued rewards Accrued rewards 2,867 1,342 Operating lease liabilities Operating lease liabilities 24,203 25,122 Other Other 3,247 514 Total deferred tax assets before valuation allowance 524,195 288,037 Valuation allowance (384,158) (107,836) Deferred tax assets $ 140,037 $ 180,201 Deferred tax liabilities: Deferred contract costs $ (3,745) $ (2,763) Property and equipment (19,316) (3,133) Intangible assets Intangible assets (99,483) (107,631) Operating right of use assets Operating right of use assets (19,490) (18,551) Convertible notes Convertible notes — (57,213) Total deferred tax liabilities $ (142,034) $ (189,291) Net deferred tax liabilities Net deferred tax liabilities $ (1,997) $ (9,090) $52.3$276.3 million, $3.7$22.3 million and $10.0$52.3 million during the years ended June 30, 2022, 2021 and 2020, 2019 and 2018, respectively, including a decreaserespectively. The increase in the June 30, 2022 valuation allowance is a result of $0.7 million relatedcurrent year losses, offset by a reduction in a deferred tax liabilities.adoptionCompany can make an accounting policy election to either treat taxes due on the GILTI inclusion as a current period expense or factor such amounts into the measurement of ASC 606 duringdeferred taxes. The Company elected the year ended June 30, 2018.107Contents2020,2022, the Company had net operating loss (NOL) carryforwards of $265.8 million$1.5 billion, $1.1 billion, and $203.5$61.3 million for federal, state tax and stateforeign tax purposes, respectively, that are available to reduce future taxable income. If not utilized, the federal and state NOL carryforwards will begin to expire in 2026.2027. As of June 30, 2020,2022, approximately $166.0$1.4 billion and $61.3 million of federal and foreign NOL carryforwards, respectively, do not expire and will carry forward indefinitely until utilized. As of June 30, 2020,2022, the Company also had research and development tax credit carryforwards of approximately $10.6$40.1 million and $8.72027.2028. The state tax credits do not expire and will carry forward indefinitely until utilized.AsJune 30, 2020 and 2019, the Company had $5.8 million and $2.7 million, respectively, of unrecognized tax benefits related to federal and California R&D credits. Below is the reconciliation of the unrecognized tax benefits as ofcredits during the periods presented (in thousands):Year e
ded June 30,2022 2021 2020 Balance at the beginning of the year $ 22,185 $ 5,787 $ 2,692 Add: Add: Tax positions related to the current year Tax positions related to the current year 7,354 8,267 3,078 Increase from business combination Increase from business combination 160 668 — Tax positions related to the prior year Tax positions related to the prior year — 7,463 17 Less: Less: Tax positions related to the prior year Tax positions related to the prior year (12,761) — — Statute of limitations lapse Statute of limitations lapse (214) — — Balance at the end of the year $ 16,724 $ 22,185 $ 5,787 United StatesU.S. federal, California, and other various state income tax returns. All U.S. federal and state net operating losses and tax credits generated to date are subject to adjustments. The Company does not anticipate any material change toon its unrecognized tax benefits over the next twelve months. If the unrecognized tax benefits as of June 30, 2022 is recognized, it will not have an impact to the effective tax rate due to the Company’s valuation allowance. The Company’s U.S. federal and state tax returns for all years remain subject to examination by taxing authorities. The tax years from 2006 to 2019 remain openauthorities as a result of unused tax attributes being carried forward.Year ended June 30 2022 2021 Operating lease expense $ 12,906 $ 7,444 Short-term lease expense 77 382 Variable lease expense, net of credit 2,909 2,252 Sublease income (712) (55) Total lease cost $ 15,180 $ 10,023 1215 – COMMITMENTS AND CONTINGENCIESOperating leases – leases office space underhas non-cancelable operating leases thatfor office and other facilities in various locations, and certain equipment, which expire through June 2031. Rent expense is recognized on a straight-line basis over the lease term. Rent expense, net of sublease income, was $5.3 million, $2.3 million and $1.5 million during the years ended June 30, 2020, 2019 and 2018, respectively.under non-cancelable operating leases as of June 30, 20202022 are as follows (in thousands):Fiscal years ending June 30: Amount 2023 $ 13,987 2024 13,650 2025 13,424 2026 2026 13,292 2027 2027 13,226 Thereafter 49,510 Gross lease payments Gross lease payments 117,089 Less - present value adjustments Less - present value adjustments (22,222) Total operating lease liabilities, net Total operating lease liabilities, net $ 94,867 108TableThe current portion of ContentsOther agreements – The Company has a ten-year strategic partnership agreement with a third party to market and promote the Company’s online bill payment products that expires in June 2027. Expense recognized under this agreement,operating lease liabilities, which wasis included in salesother accruals and marketing expenses,current liabilities in the accompanying consolidated balance sheets, was $2.0 million, $2.3$12.1 million and $2.3$10.8 million during the years ended June 30, 2020, 2019, and 2018, respectively.In May 2020, the Company expanded its service agreement with an existing financial institution partner for a period of 5 years. Under this agreement, the Company agreed to pay this partner a total of $12.0 million, payable ratably over six months from June 2020, in order to fund the partner’s implementation activities before the payment services offering becomes available for its customers. Asas of June 30, 2020,2022 and 2021, respectively. The non-current portion of operating lease liabilities was $82.7 million and $86.6 million as of June 30, 2022 and 2021, respectivelyamount payableminimum lease payments above, the Company has multi-year agreements with certain third parties and financial institution partners, expiring through 2029, which require the Company to this partner was $10.0 million.The Company purchased a software license and maintenance and support services from a vendor that are payable on an installment basis through August 2021 under a non-cancellable service agreement.20202022 are as follows (in thousands).Fiscal years ending June 30: Amount 2023 $ 24,761 2024 11,833 2025 6,969 2026 2026 4,750 2027 2027 4,750 Thereafter 34,250 Total $ 87,313 – 20202022 and 2019,2021, the Company’s reserve for litigation is immaterial. The Company reviews these provisions periodically and adjusts these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case. Litigation is inherently unpredictable.1316 – NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERSyears ended June 30, 2020, 2019 and 2018periods presented (in thousands, except per share amounts):2022 2021 2020 Numerator: Net loss attributable to common stockholders $ (326,361) $ (98,720) $ (31,091) Denominator: Weighted-average shares used to compute net loss per share attributable to common stockholders Basic and diluted 101,753 82,813 44,106 Net loss per share attributable to common stockholders: Basic and diluted $ (3.21) $ (1.19) $ (0.70) 109June 30, 2022 2021 2020 Stock options 3,858 6,552 9,019 Restricted stock units 3,279 1,176 1,141 Total 7,137 7,728 10,160 110Table of ContentsNOTE 14 – Quarterly Results of Operations (Unaudited)The table below presents our unaudited consolidated statements of operations for eachlast eight quartersNotes are not considered in the calculation of diluted net loss per share. Such number of shares issuable under the Notes is subject to adjustment up to approximately 12.7 million shares if certain corporate events occur prior to the maturity date of the Notes or if the Company issues a notice of redemption. The Company’s current intent is to settle conversions of the Notes through a combination settlement, which involves a repayment of the principal portion in cash with any excess of the conversion value over the principal amount settled in shares of common stock. The Company uses the "as-if converted" method for calculating any potential dilutive effect of the conversion option on diluted earnings per share, if applicable. During the period from the issuance of the 2027 Notes on September 21, 2021 through June 30, 2022, the average market price of the Company’s common stock did not exceed the initial conversion price of the 2027 Notes. During the year ended June 30, 2020:111Changes in and Disagreements With Accountants on Accounting and Financial DisclosureControls and Procedureschief executive officerCEO and chief financial officer,CFO, as appropriate, to allow timely decisions regarding required disclosure. Based on such evaluation, our chief executive officerCEO and chief financial officerCFO have concluded that as of such date, our disclosure controls and procedures were effective at a reasonable assurance level.This Annual Report on Form 10-K does not include a report of management's assessment regardingoras defined in Rule 13a-15(f) and 15d- 15(f) under the Exchange Act. Management, with the participation of its CEO and CFO, has assessed the effectiveness of our internal control over financial reporting as of June 30, 2022 based on the 2013 framework established in the “Internal Control-Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has concluded that our internal control over financial reporting as of June 30, 2022 was effective. As permitted by SEC guidance for newly acquired businesses, management’s assessment of our internal control over financial reporting did not include an attestation reportassessment of ourinternal control over financial reporting of Invoice2go. Invoice2go accounted for approximately 5% of total assets as of June 30, 2022 and 5% of revenues and 6% of net loss for the fiscal year ended on June 30, 2022.permittedstated in their report, which appears in Part II, Item 8 of this transition period underAnnual Report on Form 10-K.rulesyear ended June 30, 2021, our management identified a material weakness related to the accounting of the SECbusiness combination for newly public companies.ThereRuleRules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the fiscal quarter ended June 30, 20202022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.chief executive officerCEO and chief financial officer,CFO, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Due to inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.Other Information112Table of ContentsDirectors, Executive Officers and Corporate Governance20202022 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after June 30, 2020.2022.Executive Compensation20202022 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after June 30, 2020.2022.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters20202022 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after June 30, 2020.2022.Certain Relationships and Related Transactions, and Director Independence20202022 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after June 30, 2020. 2022.Principal Accounting Fees and Services20202022 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after June 30, 2020. 113Table of ContentsExhibits,(a)The following documents are filed as a part of this Annual Report on Form 10-K:Statement SchedulesStatements:(a)The following documents are filed as a part of this Annual Report on Form 10-K:(1)Consolidated Financial Statements:Financial Statement Schedules:statementstatements.Exhibits114Incorporated by Reference Exhibit
NumberDescription Form File No. Exhibit Number Filing Date Filed
Herewith2.1 S-3/ASR 333-256709 2.1 06/02/2021 2.2 S-3/ASR 333-259419 2.1 09/09/2021 3.1 10-Q 001-39149 3.1 02/11/2020 3.2 8-K 001-39149 3.1 09/30/2020 4.1 S-1/A 333-234730 4.1 12/2/2019 4.2 S-1 333-234730 4.2 11/15/2019 4.3 10-K 001-39149 4.3 08/30/2021 10.1† S-1 333-234730 10.1 11/15/2019 10.2† S-1 333-234730 10.2 11/15/2019 10.3† S-1 333-234730 10.3 11/15/2019 10.4† S-1/A 333-234730 10.4 12/2/2019 10.5† S-1/A 333-234730 10.5 12/2/2019 10.6† S-1/A 333-234730 10.6 12/2/2019 10.7† S-1/A 333-234730 10.7 12/2/2019 10.8† S-1/A 333-234730 10.8 12/2/2019 10.9† X 10.10† X Table of ContentsExhibits11510.1410.11†+ FirstX10.12 21.110-K 001-39149 10.14 08/30/2021 10.14† S-8 333-259420 99.1 09/09/2021 21.1 ________________Indicates management contract or compensatory plan.
+ Registrant has omitted portions of the exhibit as permitted under Item 601(b)(10) of Regulation S-K.*The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Annual Report on Form 10-K and are not deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference into any filing under the Securities Act of the Exchange Act.FormFORM 10-K SummarySUMMARYAugust 28, 202022, 2022By: By:August 28, 202022, 2022By: By:and Accounting Officer)117August 22, 2022 By: /s/ Germaine Cota (Date) Germaine Cota Senior Vice President, Finance and Accounting (Principal Accounting Officer)