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

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

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

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

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

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

As of ~~January 31, 2020,~~October 28, 2021, the registrant had ~~72,333,573~~102,553,713 shares of common stock, $0.00001 par value per share, outstanding.

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

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

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

These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Additionally, the full impact of the COVID-19 pandemic is inherently uncertain at the time of this report. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

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

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

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

In this Quarterly Report on Form 10-Q, the words "we," "us," ~~"our"~~"our," and "Bill.com" refer to Bill.com Holdings, Inc. and its wholly owned subsidiaries, unless the context requires otherwise.

CONDENSED CONSOLIDATED STATEMENTS OF ~~REDEEMABLE CONVERTIBLE PREFERRED STOCK AND~~ STOCKHOLDERS’ EQUITY ~~(DEFICIT)~~

Three months ended December 31, 2019

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 September 30, 2019

52,435

$
276,307

8,296

$
1

$
17,242

$
128

$
(123,352
)

$
(105,981
)
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

Exercise of stock options

—

—

174

—

607

—

—

607

Exercise of stock warrants

—

—

65

—

144

—

—

144

Employee stock-based compensation

—

—

—

—

3,075

—

—

3,075

Other comprehensive loss, net of tax

—

—

—

—

—

(108
)

—

(108
)
Net loss

—

—

—

—

—

—

(7,578
)

(7,578
)
Balance at December 31, 2019

—

$
—

72,267

$
2

$
524,260

$
20

$
(130,930
)

$
393,352

Six months ended December 31, 2019

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, 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

Exercise of stock options

—

—

316

—

901

—

—

901

Exercise of stock warrants

—

—

65

—

144

—

—

144

Employee stock-based compensation

—

—

—

—

5,351

—

—

5,351

Other comprehensive loss, net of tax

—

—

—

—

—

(306
)

—

(306
)
Net loss

—

—

—

—

—

—

(13,274
)

(13,274
)
Balance at December 31, 2019

—

$
—

72,267

$
2

$
524,260

$
20

$
(130,930
)

$
393,352

Three months ended December 31, 2018

Redeemable

Accumulated

convertible

Additional

other

Total

preferred stock

Common stock

paid-in

comprehensive

Accumulated

stockholders'

Shares

Amount

Shares

Amount

capital

loss

deficit

deficit

Balance at September 30, 2018

47,131

$
191,147

7,645

$
1

$
9,731

$
(72
)

$
(111,226
)

$
(101,566
)
Issuance of Series H redeemable
   convertible preferred stock, net of
   issuance costs

4,214

67,101

—

—

—

—

—

—

Exercise of stock options

—

—

234

—

491

—

—

491

Employee stock-based compensation

—

—

—

—

594

—

—

594

Other comprehensive income,
   net of tax

—

—

—

—

—

21

—

21

Net income

—

—

—

—

—

—

102

102

Balance at December 31, 2018

51,345

$
258,248

7,879

$
1

$
10,816

$
(51
)

$
(111,124
)

$
(100,358
)

Six months ended December 31, 2018

Redeemable

Accumulated

convertible

Additional

other

Total

preferred stock

Common stock

paid-in

comprehensive

Accumulated

stockholders'

Shares

Amount

Shares

Amount

capital

loss

deficit

deficit

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

4,214

67,101

—

—

—

—

—

—

Exercise of stock options

—

—

534

—

949

—

—

949

Employee stock-based compensation

—

—

—

—

1,201

—

—

1,201

Issuance of stock warrants

—

—

—

—

52

—

—

52

Other comprehensive income,
   net of tax

—

—

—

—

—

126

—

126

Net loss

—

—

—

—

—

—

(782
)

(782
)
Balance at December 31, 2018

51,345

$
258,248

7,879

$
1

$
10,816

$
(51
)

$
(111,124
)

$
(100,358
)

NOTE 34 – FAIR VALUE MEASUREMENT

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

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

~~Level 1 —~~	~~Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.~~
~~Level 2 —~~	Inputs other than quoted prices included within Level 1 that are observable, unadjusted quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.
~~Level 3 —~~	Unobservable inputs that are supported by little or no market activity for the related assets or liabilities and typically reflect management’s estimate of assumptions that market participants would use in pricing the assets or liabilities.

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

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

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

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

1314

Table of Contents

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

December 31, 2019

Level 1

Level 2

Level 3

Total

Assets

Cash equivalents:

Money market funds

$
136,873

$
—

$
—

$
136,873

Corporate bonds

—

—

—

—

136,873

—

—

136,873

Short-term investments:

U.S. treasury securities

42,686

—

—

42,686

Corporate bonds

—

17,382

—

17,382

Asset-backed securities

—

8,067

—

8,067

42,686

25,449

—

68,135

Funds held for customers:

Restricted cash equivalents

405,186

72,428

—

477,614

Corporate bonds

—

303,773

—

303,773

Certificates of deposit

—

106,011

—

106,011

U.S. treasury securities

19,191

—

—

19,191

424,377

482,212

—

906,589

Total assets measured at fair value

$
603,936

$
507,661

$
—

$
1,111,597


	September 30, 2021
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Money market funds	$	1,704,202	$	—	$	—	$	1,704,202
U.S. treasury securities		74,998		—		—		74,998
		1,779,200		—		—		1,779,200
Short-term investments:
Corporate bonds		—		580,485		—		580,485
U.S. treasury securities		198,481		—		—		198,481
Asset-backed securities		—		32,019		—		32,019
Certificates of deposit		—		10,569		—		10,569
		198,481		623,073		—		821,554
Funds held for customers:
Restricted cash equivalents		5,150		52,814		—		57,964
Corporate bonds		—		575,327		—		575,327
Certificates of deposit		—		385,097		—		385,097
Municipal bonds		—		14,726		—		14,726
Asset-backed securities		—		35,712		—		35,712
U.S. treasury securities		6,113		—		—		6,113
		11,263		1,063,676		—		1,074,939
Beneficial interest derivative on card receivables sold		—		—		2,693		2,693
Total assets measured at fair value	$	1,988,944	$	1,686,749	$	2,693	$	3,678,386


	June 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		6,887		79,435		—		86,322
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
		9,896		990,754		—		1,000,650
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

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

There were no0 transfers of financial instruments between Level 1, Level 2, and Level 3 during the periods presented.

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

Table of Contents

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

~~Table of Contents~~

The fair value measurement of the redeemable convertible preferred stock warrant liabilities as of June 30, 2019 was based on significant inputs not observed in the market and thus represents a Level 3 measurement. The Company estimated the fair value of the ~~liability~~beneficial interest derivative on card receivables sold is estimated using a discounted cash flow model, which uses Level 3 inputs. Significant input used includes a discount rate of 13.8% and loss rate estimate of 2.5% as of September 30, 2021, which is based upon the ~~Black-Scholes option-pricing model~~expected rate of the transferred card receivables’ payment in default. The loss rate is calculated using historical trends and ~~any~~ages of the outstanding card receivable balances. Other inputs, such as the expected repayments, are generally considered but had no material impact in the estimation of fair value of the beneficial interest derivative as of September 30, 2021. A change in inputs used to a different amount could result in a significantly higher or lower fair value ~~is recognized~~measurement.

The amortized cost and fair value amounts include accrued interest receivable of ~~$0.3~~$2.3 million and ~~$0.2~~$2.5 million as of ~~December 31, 2019~~September 30, 2021 and June 30, ~~2019,~~2021, respectively.

As of September 30, 2021, the fair value of the Company’s short-term investments that mature within one year and thereafter was $625.8million and $195.8 million, respectively, or76% and 24%, respectively, of the Company’s total short-term investments. As of June 30, 2021, the fair value of the Company’s short-term investments that mature within one 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.

As of September 30, 2021, approximately 120of the more than 300 investment positions were in an unrealized loss position. The following table presents gross unrealized losses and fair values for those investments that were in an unrealized loss position as of ~~December 31, 2019~~the dates presented (in thousands):

~~Investments~~Most of the Company investments with unrealized losses ~~have~~had 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 insignificant. 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 no0 significant realized gains or losses on the short-term investments during the three ~~or six~~ months ended ~~December 31, 2019~~September 30, 2021 and ~~2018.~~2020.

The Company has 0t recorded an allowance for credit losses on investments that were in an unrealized loss position as of September 30, 2021 and June 30, 2021 because they were not material.

Investments with unrealized losses have been in a continuous unrealized loss position for less than 12 months. 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 no0 significant realized gains or losses on funds held for customers that were invested in short-term marketable debt securities during the three ~~or six months~~ ended ~~December 31, 2019~~September 30, 2021 and ~~2018.~~2020.

In addition, approximately 8.5 million shares underlying the conversion option of the Notes are not considered in the calculation of diluted net loss per share. Such number ofshares 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 three months ended September 30, 2021, the average market price of the Company’s common stock did not exceed the initial conversion price of the 2027 Notes of $414.80 per share; however, it exceeded the initial conversion price of the 2025 Notes of $160.88 per share.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form ~~10-Q and in 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 December 12, 2019 (Prospectus)~~.10-Q. Some of the information contained in this Quarterly Report on Form 10-Q includes forward-looking statements that involve risks and uncertainties. You should read the sections titled “Special Note Regarding Forward-Looking Statements” and “Risk Factors” for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Our fiscal year end is June 30, and our fiscal quarters end on September 30, December 31, and March ~~31, and June 30.~~31.

We are a leading provider of cloud-based software that simplifies, digitizes, and automates complex back-office financial operations for ~~small and midsize businesses (SMBs).~~SMBs. By transforming how SMBs manage their cash inflows and outflows, we create efficiencies and free our customers to run their businesses. Our vision is to become the leading one-stop solution that helps millions of businesses around the world manage their financial operations.

Our purpose-built, artificial-intelligence (AI)-enabled financial software platform creates seamless connections between our customers, their suppliers, and their clients. Customers use our platform to generate and process invoices, streamline approvals, ~~send~~make and receive payments, reconcile their books, 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~~mission-critical services through a single connection. In essence, we sit at the center of an SMB’s accounts payable and accounts receivable operations.

We efficiently reach SMBs through our proven direct and indirect go-to-market strategies. We acquire customers directly through digital marketing and inside sales, and indirectly through accounting firms and strategic partnerships. As of ~~December 31, 2019,~~September 30, 2021, our partners included some of the most trusted brands in the financial services business, including ~~more than 70~~85 of the top 100 accounting firms and ~~several~~six 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.

On September 1, 2021, we completed our acquisition of Invoice2go, Inc. (Invoice2go), a provider of mobile-first accounts receivable software that empowers SMBs and freelancers to grow their client base, manage invoicing and payments, and build their brand, for an aggregate purchase price of $674.3 million. On June 1, 2021, we completed our acquisition of DivvyPay, Inc. (Divvy), a leading provider of cloud-based spend management application and smart corporate cards to SMBs in the U.S., for an aggregate purchase price of $2.3 billion. Following the acquisitions, Invoice2go and Divvy became our wholly owned subsidiaries. Our condensed consolidated results of operations shown below for the three months ended September 30, 2021 includes the operating results of Invoice2go and Divvy from the dates of the acquisitions. See Note 3 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional discussion about our acquisitions.

We have grown rapidly and scaled our business operations in recent periods. Our ~~total~~ revenue was ~~$39.1~~$116.4 million and ~~$26.0~~$46.2 million during the three months ended ~~December 31, 2019~~September 30, 2021 and ~~2018,~~2020, respectively, an increase of ~~50%, and $74.3 million and $48.4 million during the six months ended December 31, 2019 and 2018, respectively, an increase of 53%~~152%. We generated a net ~~loss~~losses of ~~$7.6~~$75.7 million and ~~net income of $0.1~~$13.0 million during the three months ended ~~December 31, 2019~~September 30, 2021 and ~~2018, respectively, and net losses~~2020, respectively.

Impact of ~~$13.3 million and $0.8 million during the six months ended December 31, 2019 and 2018, respectively.~~COVID-19

On December 16, 2019, we closed an initial public offering (IPO) in which we issued 11,297,058 shares of our 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 inThe full impact of the ~~over-allotment option~~COVID-19 pandemic is inherently uncertain at the time of this report. The COVID-19 pandemic has resulted in travel restrictions and in some cases, prohibitions of non-essential activities, disruption and shutdown of businesses, and greater uncertainty in global financial markets. As the COVID-19 pandemic persists, it has significantly impacted the health and economic environment around the world. Many public and commercial establishments, including schools, restaurants, and shopping malls, have restricted their operations or closed due to restrictions imposed by the ~~underwriters. The IPO resulted in net proceeds of $225.5 million, after deducting underwriting discounts~~government. Our customers have been, and ~~commissions of $17.4 million~~may continue to be, negatively impacted by the shelter-in-place and other ~~offering costs~~similar state and local orders, the closure of ~~$5.6 million. Upon~~manufacturing sites and country borders, and the ~~closing~~increase in unemployment. These conditions may continue to have negative implications on demand for goods, the supply chain, production of goods, and transportation. A negative impact on our customers may cause them to go out of business, request discounts,

extension of payment terms, or cancellation of their subscription to our platform. Any of these actions may have a negative impact on our future results of operations, liquidity, and financial condition.

Although we have not experienced significant business disruptions thus far from the COVID-19 pandemic and there have been positive developments recently in the U.S. and in other countries in combating the COVID-19 pandemic because of vaccinations, we 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 ~~IPO, all~~pandemic, the actions that may be taken by government authorities across the U.S. or other countries, the efficacy of vaccinations, the impact to our ~~outstanding redeemable convertible preferred stock automatically converted into 52,434,505 shares~~customers, strategic partners, and suppliers, and other factors described in the section titled “Risk Factors” in Part II, Item 1A of ~~common stock~~this Quarterly Report on ~~a one-for-one basis.~~Form 10-Q.

We generate revenue ~~by charging~~primarily from subscription and transaction ~~fees, and by earning interest on funds held in trust on behalf of customers while their payment transactions are clearing.~~fees.

Our subscription revenue is primarily based on a fixed monthly or annual rate per user charged to our customers. Our transaction revenue is comprised of transaction fees and interchange income on a fixed or variable rate per transaction. Transactions primarily include card payments, check issuance, ACH origination, cross-border payments, ~~virtual card issuance,~~ and creation of invoices. Much of our revenue comes from repeat ~~transactions; in fact, repeat~~ transactions, ~~by our customers~~which are an important contributor to our recurring revenue.

We ~~also generate revenue from interest earned on funds held in trust on behalf of customers while payment transactions are clearing. When we process payment transactions, the funds flow~~market Divvy charge cards to potential spending businesses and issue business-purpose charge cards through our ~~bank accounts and~~partnerships with card issuing banks. When a business applies for a Divvy card, we ~~have a balance of funds held for customers that is a function~~utilize proprietary risk management capabilities to confirm the identity of the ~~volume~~business, and perform a credit underwriting process to determine if the ~~type~~business is eligible for a Divvy card pursuant to our credit policies. Once approved for a Divvy card, the business is provided a credit limit and can use the Divvy software to request virtual cards or physical cards.

The majority 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 from 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.

Sustaining 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 of December 31, 2019, we had approximately 86,000 customers across a wide variety of industries and geographies in the United States.

Our 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 transactionscards on our platform ~~will~~are issued by Cross River Bank, an FDIC-insured New Jersey state chartered bank, and WEX Bank, an FDIC-insured Utah state chartered bank. Under our arrangements with these banks, we must comply with their respective credit policies and underwriting procedures, and the banks maintain ultimate authority to decide whether to issue a card or approve a transaction. We are responsible for all fraud and unauthorized use of a card and generally are required to hold the bank harmless from such losses unless claims regarding fraud or unauthorized use are due to the sole gross negligence of the bank

When a spending business completes a purchase transaction, the payment to the merchant is made by our bank partner that issued the card. Obligations incurred by the spending business in connection with their purchase transaction are reflected as receivables on the bank’s balance sheet. 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 purchase the participation right in the receivable, the purchase price is equal to the outstanding principal balance of the receivable.

We act as the servicer on all receivables we purchase from our issuing bank partners and earn a servicing fee on loans we sell to our funding sources. We do not sell the servicing rights on any of the loans, allowing us to control the consumer experience end-to-end.

In order to purchase the participation rights in the receivables, we maintain a variety of funding arrangements, including warehouse facilities and other purchase arrangements with a diverse set of funding sources. We typically fund a substantial portion of these receivable purchases by borrowing under our credit facilities, although we may also fund receivables purchases using corporate cash. Typically, we immediately sell a portion of the receivables interests we have purchased to our warehousing subsidiary which funds the purchases through loans provided by our financing partners, and we may sell a ~~direct impact~~portion of our receivables to a third-party institution pursuant to a purchase arrangement. As of September 30, 2021, we had $155.0 million in committed credit facility capacity, with $77.5 million drawn, and this is shown on our ~~transaction fee revenue. As payment volume grows we experience growth~~condensed consolidated balance sheets included elsewhere in ~~the level of funds held for customers, and we also earn interest revenue~~this Quarterly Report on ~~these funds while payment transactions are clearing. Our interest earned on customer funds is positively correlated with~~Form 10-Q. On average, 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 short-term highly liquid securities. The fundspending businesses pay their statement 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.~~approximately 20 days.

We intend to increase our marketing spend to drive awareness and generate demand to acquire new customers and develop new accounting firm and strategic partner relationships. We 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 and will continue. We support these accounting firms and strategic partners through education and training initiatives like hosting webinars, presenting at industry trade shows, and developing sell-sheet case studies.

~~As a result, we expect our expenses related to marketing and sales to increase as we continue to grow. These efforts will require us to invest significant financial and other resources.~~

We will invest 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.

We regularly review several metrics, including the metrics presented in the table below, to measure our performance, identify trends affecting our business, prepare financial projections, and make strategic decisions. We believe that these key business metrics provide meaningful supplemental information for management and investors in assessing our historical and future operating performance. The calculation of the key metrics and other measures discussed below may differ from other similarly-titled metrics used by other companies, securities analysts or investors. The table below excludes the metrics of our recently acquired Divvy and Invoice2go businesses. Relevant metrics for Divvy and Invoice2go are set forth in the footnotes to the table.

(1) As of September 30, 2021, the total number of spending businesses that used Divvy's spend management platform was approximately 13,500 and the total number of Invoice2go subscribers was approximately 226,000.

(2) During the three months ended September 30, 2021, the total card payment volume transacted by spending businesses that used Divvy cards was approximately $1.5 billion and total payment volume transacted by Invoice2go subscribers was approximately $100 million.

(3) During the three months ended September 30, 2021, the total transactions executed by spending businesses that used Divvy cards and by Invoice2go subscribers was approximately 4.6 million and over 100,000, respectively.

For the purposes of measuring our key business metrics, we define customers as entities that are either billed directly by us or for which we bill our strategic partners during a particular period. Customers who are using our ~~platform~~solutions 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 ~~our~~each fiscal quarter.

To grow revenue from customers we must deliver a product experience that helps them automate their back-office financial operations. The more they use the product and rely upon our features to automate their operations, the more transactions they process on our platform. This metric provides an important indication of the value of transactions that customers are completing on the platform and is an indicator of our ability to generate revenue from our customers. We define ~~Total Payment Volume (TPV)~~TPV as the value of 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 TPV ~~for~~ during the three months September 30, 2021 and ~~six months ended December 31, 2019~~2020. The TPV in the table above does not include transactions made by spending businesses on our spend management platform and ~~2018.~~subscribers of recently acquired Invoice2go.

We define transactions processed as the number of customer payment ~~transactions, such as checks, ACH items, wire transfers~~ and ~~virtual cards,~~spend transactions initiated and processed through our platform during a particular period. Payment transactions include checks, ACH items, wire

transfers and card payments. The transactions processed in the table above do not include transactions made by spending businesses on our spend management platform and subscribers of recently acquired Invoice2go.

Subscription fees are fixed monthly or annually and charged to our customers for the 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. Transaction fees also include interchange fees paid by suppliers that accept cards as a means of payment.

Our contracts with SMB and accounting firm customers provide access to the functionality of the Company’s cloud-based payments platform to process transactions. These contracts are either monthly contracts paid in arrears or annual arrangements paid up front. We charge our SMB and accounting firm customers subscription fees to access to our platform based on the number of users and level of service. We also charge these customers transaction fees based on transaction volume and the category of transaction. The contractual price for subscription and transaction services is based on either negotiated fees or the rates published on our website. We account for our annual and monthly contracts as a series of distinct services that are 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 as a single performance obligation based on the proportion of transactions processed to the total estimated transactions to be processed over the contract period. Revenues recognized exclude amounts collected on behalf of third parties, such as sales taxes collected and remitted to governmental authorities.

We maintain agreements with WEX Bank and Cross River Bank for card transactions on the MasterCard and Visa networks, respectively. We facilitate the extension of credit to spending businesses through our Divvy platform in the form of Divvy cards, which are originated through our agreements with WEX Bank and Cross River Bank. The spending businesses utilize the credit on the Divvy cards as a means of payment for goods and services provided by suppliers. On a transaction basis, these suppliers are required to pay interchange fees to the issuer of the credit. Based on our agreement with WEX Bank, we recognize interchange fees net of the rebate we receive from WEX Bank as we are the agent in the card transactions and recognize the interchange fees on the gross amount under our agreement with Cross River Bank, as we are the principal in the card transactions.

We enter into multi-year contracts with financial institution customers to provide access to our cloud-based payments platform to process transactions. These contracts typically include fees for initial implementation services that are paid during the period the implementation services are provided as well as fees for subscription and transaction processing services, which are subject to guaranteed monthly minimum fees that are paid monthly over the contract term. These contracts enable the financial institutions to provide their customers with access to online bill pay services through the financial institutions’ online platforms. Implementation services are required up-front to establish an infrastructure that allows the financial institutions’ online platforms to communicate with our online platform. A financial institution’s customers cannot access online bill pay services until implementation is complete. Initial implementation services and transaction processing services are not capable of being distinct from the subscription for online bill pay services and are combined into a single performance obligation. The total consideration in these contracts varies based on the number of users and transactions to be processed. We determined the variable consideration allocation exception is met for these contracts and therefore recognize guaranteed monthly payments and any overages as revenue in the month they are earned. Implementation fees are recognized based on the proportion of transactions processed to the total estimated transactions to be processed over the contract period.

Cost 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, amortization of developed technology, 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, rewards expense in connection with our card rewards programs, sales commissions, marketing program expenses, travel-related expenses and costs to market and promote our platform through advertisements, marketing events, partnership arrangements, direct customer acquisition, amortization of intangible assets, 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, as the spend 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, provision for credit losses, losses from fraud, and allocated overhead costs. We expect to incur additional general and administrative expenses as we explore various growth initiatives, which include incurring higher 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.

Other (expense) income, net– Other (expense) income, net consists primarily of the amortization of debt discount and issuance costs in connection with our issuance of the Notes, interest expense on our borrowings from credit agreements, and losses on sales of card receivables, interest income on corporate funds invested in money market instruments and highly liquid, investment-grade fixed income marketable securities, accretion of debt premium, and gains or losses resulting from remeasurement of foreign currency transactions.

Benefit from income taxes – Benefit from income taxes consists primarily of a reduction of valuation allowance in connection with the acquisition of Invoice2go.

The following table sets forth our results of operations for the periods presented (in thousands):

The following table presents the components of our consolidated statements of operations for the periods presented as a percentage of total revenue:

Revenue during the three months ended September 30, 2021 and 2020 was as follows (amounts in thousands):

Revenue, which is comprised mainly of subscription and transactions fees, increased to $116.4 million during the three months ended September 30, 2021 from $46.2 million during the three months ended September 30, 2020, an increase of $70.2 million or 152%. The increase was due primarily to the following:

We expect to be affected by fluctuations in foreign currency rates in the future, especially if our revenue through our Australian subsidiary grows as a percentage of our total revenue or our operations in Australia increase.

Cost of revenue, gross profit, and gross margin during the three months ended September 30, 2021 and 2020 were as follows (amounts in thousands):

Cost of revenue increased to $29.8 million during the three months ended September 30, 2021 from $12.1 million during the three months ended September 30, 2020, an increase of $17.7 million or 146%. The increase was due primarily to the following:

Gross margin remained flat at 74% during the three months ended September 30, 2021 compared to the same period in fiscal 2021.

Research and development expenses during the three months ended September 30, 2021 and 2020 were as follows (amounts in thousands):

Research and development expenses increased to $42.5 million during the three months ended September 30, 2021 from $17.8 million during the three months ended September 30, 2020, an increase of $24.7 million or 139%. The increase was due primarily to the following:

As a percentage of total revenue, research and development expenses decreased to 36% during the three months ended September 30, 2021 from 38% during the three months ended September 30, 2020 due primarily to the leveraging of our total research and development spend relative to the increase in our total revenue.

Sales and marketing expenses during the three months ended September 30, 2021 and 2020 were as follows (amounts in thousands):

Sales and marketing expenses increased to $62.3 million during the three months ended September 30, 2021 from $12.9 million during the three months ended September 30, 2020, an increase of $49.4 million or 383%. The increase was due primarily to the following:

As a percentage of total revenue, sales and marketing expenses increased to 54% during the three months ended September 30, 2021 from 28% during the three months ended September 30, 2020 due mainly to the rewards expense and the amortization of acquired intangible assets that were recognized during the current fiscal quarter and none in the same quarter in fiscal 2021. Additionally, the increase was attributed to a higher stock-based compensation expense during the current fiscal quarter.

General and administrative expenses during the three months ended September 30, 2021 and 2020 were as follows (amounts in thousands):

General and administrative expenses increased to $57.9 million during the three months ended September 30, 2021 from $17.2 million during the three months ended September 30, 2020, an increase of $40.7 million or 237%. The increase was due primarily to the following:

As a percentage of total revenue, general and administrative expenses increased to 50% during the three months ended September 30, 2021 from 38% during the three months ended September 30, 2020 due primarily to the increase in

stock-based compensation expense, the increase in professional fees in connection with our acquisitions of Divvy and Invoice2go, and the integration of these acquired entities.

Other (expense) income, net during the three months ended September 30, 2021 and 2020 was as follows (amounts in thousands):

The change in other (expense) income, net during the three months ended September 30, 2021 compared to the same period in fiscal 2021 was due mainly to the following:

Benefit from income taxes during the three months ended September 30, 2021 and 2020 was as follows (amounts in thousands):

Benefit from income taxes during the three months ended September 30, 2021 consisted primarily of a reduction of valuation allowance in connection with the acquisition of Invoice2go.

To supplement our ~~condensed~~ consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance. These non-GAAP financial measures, which may be different than similarly-titled measures used by other companies, are presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We believe that these non-GAAP financial measures provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects and allow for greater transparency with respect to important metrics used by our management for financial and operational decision-making. We are presenting these non-GAAP metrics to assist investors in seeing our financial performance using a management view. We believe that these measures provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry.

We define non-GAAP gross profit and non-GAAP gross margin as ~~GAAP~~ gross profit and ~~GAAP~~ gross margin, respectively, excluding amortization of intangible assets, stock-based compensation expense, depreciation ~~and amortization~~ expense, and ~~amortization of deferred costs.~~payroll taxes related to stock-based compensation expense. We believe non-GAAP gross profit and non-GAAP gross margin provide our management and ~~investors~~investors' consistency and comparability with our past financial performance and facilitate period-to-period comparisons of ~~operations, as these measures eliminate the effects of certain variables unrelated to our overall operating performance.~~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):

Free cash flow is defined as net cash used in operating activities, reduced by purchases of property and equipment and capitalization of internal-use software costs. We believe free cash flow is an important liquidity measure of the cash (if any) that is available, after purchases of property and equipment and capitalization of internal-use software costs, for operational expenses and investment in our business. Free cash flow is useful to investors as a liquidity measure because it measures our ability to generate or use cash. Once our business needs and obligations are met, cash can be used to maintain a strong balance sheet and invest in future growth. The following table presents a reconciliation of our free cash flow to net cash used in operating activities for the periods presented (in thousands):

~~We generate revenue from two sources: (1) subscription and transaction fees, and (2) interest on funds held for customers.~~

Interest on funds held for customers consists of the interest that we earn from customer funds while payment transactions are clearing. We invest these funds in interest-bearing investment securities, primarily money market funds, commercial paper, certificates of deposit, 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. We have 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~~ - 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 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 increase our investment in sales and marketing by hiring additional sales and marketing personnel, driving our go-to-market strategies, building our brand awareness, and sponsoring additional marketing events. We expect our sales and marketing expenses to increase in absolute dollars, but they may fluctuate as a percentage of total revenue from period to period.

~~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.

~~Other Income, Net~~ - Other income, net consists primarily of interest income on corporate funds invested in money market instruments and highly liquid short-term investments, partially offset by interest expense on our bank borrowings.

~~(Benefit from) Provision for Income Taxes~~ - This consists of income tax benefit shown on the condensed consolidated statements of operations that is offset against the income tax on the unrealized gain on investments in available-for-sale securities that is shown on the condensed consolidated statements of other comprehensive loss, as well as state income taxes.

~~The following table sets forth our results of operations for the periods presented (in thousands):~~

⁽¹⁾~~Includes stock-based compensation expenses as follows (in thousands):~~

~~The following table presents the components of our consolidated statements of operations for the periods presented as a percentage of total revenue:~~

~~The components of our revenue during the three months ended December 31, 2019 and 2018 were as follows (amounts in thousands):~~

Subscription and transaction fees increased to $33.0 million during the three months ended December 31, 2019 from $20.4 million during the three months ended December 31, 2018, an increase of $12.6 million or 61%. Subscription fees increased to $19.9 million during the three months ended December 31, 2019 from $14.4 million during the three months ended December 31, 2018, an increase of $5.5 million or 39%, driven primarily by the increase in customers and average subscription revenue per customer. Transaction fees increased to $13.1 million during the three months ended December 31, 2019 from $6.0 million during the three months ended December 31, 2018, an increase of $7.1 million or 114%, due primarily to increased adoption of new product offerings and the increase in the number of transactions initiated. Our total customers increased to approximately 86,000 as of December 31, 2019 compared to over 71,000 as of December 31, 2018, or an increase of approximately 20%. Our average subscription revenue and transaction fees per customer increased by 16% and 78%, respectively, during the three months ended December 31, 2019, driven primarily by the increase in customers’ usage of our platform and payment activities.

Interest on funds held for customers increased to $6.1 million during the three months ended December 31, 2019 from $5.6 million during the three months ended December 31, 2018, an increase of $0.5 million or 10%. The increase was due primarily to the increase in the balance of customer funds held while payment transactions are clearing, partially offset by the decrease in the yield we earned from investing the funds. The average balance of customer funds in transit increased to approximately $1.4 billion during the three months ended December 31, 2019 from approximately $1.1 billion during the three months ended December 31, 2018, an increase of 27%. Fund balances increased due primarily to growth in TPV. Our TPV increased to approximately $24.8 billion during the three months ended December 31, 2019 from

approximately $17.6 billion during the three months ended December 31, 2018, an increase of 41%. The annualized rate of return earned on customer funds held was 1.74% during the three months ended December 31, 2019, a decrease of 27 basis points over the annualized yield during the same period in fiscal 2019. The decrease in yield was due primarily to change in the short-term interest rate environment as the average daily effective federal funds rate decreased by 56 basis points during the three months ended December 31, 2019 over the same period in fiscal 2019.

~~Cost of revenue, gross profit, and gross margin during the three months ended December 31, 2019 and 2018 were as follows (amounts in thousands):~~

Cost of revenue increased to $9.8 million during the three months ended December 31, 2019 from $7.2 million during the three months ended December 31, 2018, an increase of $2.6 million or 36%. The increase was due primarily to a $1.2 million increase in direct costs associated with the processing of our customers’ payment transactions, use of software applications and equipment, bank fees for funds held for customers, and data hosting services, which were driven by the increase in the number of customers, increase in adoption of new product offerings and increase in volume of transactions. The increase was also due to a $0.8 million increase in personnel-related costs, including stock-based compensation expense and amortization of increased deferred service costs, due to the hiring of additional personnel who were directly engaged in providing implementation and support services to our customers, and a $0.4 million increase in shared overhead costs. Our average headcount of such personnel during the three months ended December 31, 2019 increased by 23% compared to the same period in fiscal 2019.

Gross margin increased to 75% during the three months ended December 31, 2019 from 72% during the three months ended December 31, 2018, an increase of 3%. The increase was driven primarily by higher revenue on increased adoption of new product offerings.

~~Research and development expenses during the three months ended December 31, 2019 and 2018 were as follows (amounts in thousands):~~

Research and development expenses increased to $13.0 million during the three months ended December 31, 2019 from $6.2 million during the three months ended December 31, 2018, an increase of $6.8 million or 111%. The increase was due primarily to a $5.7 million increase in personnel-related costs, including stock-based compensation expense, resulting from the hiring of additional personnel who were directly engaged in developing new product offerings, a $0.8 million increase in shared overhead costs, and a $0.3 million increase in costs for engaging consultants and temporary contractors who provided product development services. Our average research and development headcount during the three months ended December 31, 2019 increased by 68% compared to the same period in fiscal 2019.

As a percentage of total revenue, research and development expenses increased to 33% during the three months ended December 31, 2019 from 24% during the three months ended December 31, 2018 due primarily to the increase in our headcount, which resulted in higher personnel-related costs relative to the increase in our revenue.

~~Sales and marketing expenses during the three months ended December 31, 2019 and 2018 were as follows (amounts in thousands):~~

Sales and marketing expenses increased to $11.5 million during the three months ended December 31, 2019 from $6.9 million during the three months ended December 31, 2018, an increase of $4.6 million or 68%. The increase was due primarily to a $2.5 million increase in personnel-related costs (net of increase in capitalized sales commissions of $0.7 million), including stock-based compensation expense, due to the hiring of additional personnel who were directly engaged in acquiring new customers and in marketing our products and services, and a $0.5 million increase in shared overhead costs. Our average sales and marketing headcount during the three months ended December 31, 2019 increased by 53% compared to the same period in fiscal 2019. The increase was also attributed to a $0.9 million increase in advertising spend and a $0.7 million increase in various marketing initiatives and activities, such as engaging consultants and attending marketing events, as we continued to increase 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 the three months ended December 31, 2019 from 26% during the three months ended December 31, 2018, due primarily to the increase in our headcount, which resulted in higher personnel-related costs relative to the increase in our revenue.

~~General and administrative expenses during the three months ended December 31, 2019 and 2018 were as follows (amounts in thousands):~~

General and administrative expenses increased to $12.7 million during the three months ended December 31, 2019 from $6.4 million during the three months ended December 31, 2018, an increase of $6.3 million or 99%. The increase was due primarily to a $4.0 million increase in personnel-related costs, including stock-based compensation expense, resulting from the hiring of additional executive employees and administrative personnel. Our average general and administrative headcount during the three months ended December 31, 2019 increased by 90% compared to the same period in fiscal 2019. The increase was also due to a $0.9 million increase in professional and consulting fees as we obtained additional external assistance in connection with the overall growth of our business and our preparation to operate as a public company, a $0.6 million increase in money transfer license fees and credit card processing fees and a $0.4 million increase in shared overhead costs due to the overall growth of our business.

As a percentage of total revenue, general and administrative expenses increased to 33% during the three months ended December 31, 2019 from 25% during the three months ended December 31, 2018 due primarily to the increase in our headcount, which resulted in higher personnel-related costs relative to the increase in our revenue.

~~Other income, net during the three months ended December 31, 2019 and 2018 was as follows (amounts in thousands):~~

Other income, net decreased to $0.4 million during the three months ended December 31, 2019 from $0.7 million during the three months ended December 31, 2018, a decrease of $0.3 million or 48%. The decrease was due primarily to a $0.8 million loss on revaluation of redeemable convertible preferred stock warrant liabilities, partially offset by a $0.4 million increase in interest earned on corporate funds that we invested in money market instruments and highly liquid short-term investments.

~~(Benefit from) provision for income taxes during the three months ended December 31, 2019 and 2018 was as follows (amounts in thousands):~~

The benefit from income taxes during the three months ended December 31, 2018 pertains primarily to the income tax benefit that is reported on the condensed 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 condensed consolidated statements of comprehensive loss.

~~The components of our revenue during the six months ended December 31, 2019 and 2018 were as follows (amounts in thousands):~~

Subscription and transaction fees increased to $61.5 million during the six months ended December 31, 2019 from $38.6 million during the six months ended December 31, 2018, an increase of $22.9 million or 59%.

Subscription fees increased to $38.0 million during the six months ended December 31, 2019 from $27.4 million during the six months ended December 31, 2018, an increase of $10.6 million or 39%, driven primarily by the increase in customers and average subscription revenue per customer. Transaction fees increased to $23.5 million during the six months ended December 31, 2019 from $11.2 million during the six months ended December 31, 2018, an increase of $12.3 million or 110%, due primarily to increased adoption of new product offerings and the increase in the number of transactions initiated. Our total customers increased to approximately 86,000 as of December 31, 2019 compared to over 71,000 as of December 31, 2018, or an increase of approximately 20%. Our average subscription revenue and transaction fees per customer increased by 15% and 74%, respectively, during the six months ended December 31, 2019, driven primarily by the increase in customers’ usage of our platform and payment activities.

Interest on funds held for customers increased to $12.7 million during the six months ended December 31, 2019 from $9.8 million during the six months ended December 31, 2018, an increase of $2.9 million or 30%. The increase was due primarily to the increase in the balance of customer funds held while payment transactions are clearing. The average balance of customer funds in transit increased to approximately $1.3 billion during the six months ended December 31, 2019 from approximately $1.0 billion during the six months ended December 31, 2018, an increase of 30%. Fund balances increased due primarily to growth in TPV. Our TPV increased to approximately $46.8 billion during the six months ended December 31, 2019 from approximately $33.2 billion during the six months ended December 31, 2018, an increase of 41%. The annualized rate of return earned on customer funds held was 1.90% during the six months ended December 31, 2019, which remained flat compared to the annualized yield during the same period in fiscal 2019.

~~Cost of revenue, gross profit, and gross margin during the six months ended December 31, 2019 and 2018 were as follows (amounts in thousands):~~

Cost of revenue increased to $18.9 million during the six months ended December 31, 2019 from $13.5 million during the six months ended December 31, 2018, an increase of $5.4 million or 40%. The increase was due primarily to a $2.6 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, increase in adoption of new product offerings and increase in volume of transactions. The increase was also due to a $1.7 million increase in personnel-related costs, including stock-based compensation expense and amortization of increased deferred service costs, due to the hiring of additional personnel who were directly engaged in providing implementation and support services to our customers, and a $0.9 million increase in shared overhead costs. Our average headcount of such personnel during the six months ended December 31, 2019 increased by 24% compared to the same period in fiscal 2019.

Gross margin increased to 75% during the six months ended December 31, 2019 from 72% during the six months ended December 31, 2018, an increase of 3%. The increase was driven primarily by higher revenue on increased adoption of new product offerings.

~~Research and development expenses during the six months ended December 31, 2019 and 2018 were as follows (amounts in thousands):~~

Research and development expenses increased to $24.5 million during the six months ended December 31, 2019 from $11.6 million during the six months ended December 31, 2018, an increase of $12.9 million or 112%. The increase was due primarily to a $10.7 million increase in personnel-related costs, including stock-based compensation expense, resulting from the hiring of additional personnel who were directly engaged in developing new product offerings, a $1.3 million increase in shared overhead costs, and a $0.8 million increase in costs for engaging consultants and temporary contractors who provided product development services. Our average research and development headcount during the six months ended December 31, 2019 increased by 65% compared to the same period in fiscal 2019.

As a percentage of total revenue, research and development expenses increased to 33% during the six months ended December 31, 2019 from 24% during the six months ended December 31, 2018 due primarily to the increase in our headcount, which resulted in higher personnel-related costs relative to the increase in our revenue.

~~Sales and marketing expenses during the six months ended December 31, 2019 and 2018 were as follows (amounts in thousands):~~

Sales and marketing expenses increased to $21.8 million during the six months ended December 31, 2019 from $12.8 million during the six months ended December 31, 2018, an increase of $9.0 million or 70%. The increase was due primarily to a $4.7 million increase in personnel-related costs (net of increase in capitalized sales commissions of $1.1 million), including stock-based compensation expense, due to the hiring of additional personnel who were directly engaged in acquiring new customers and in marketing our products and services, and a $0.9 million increase in shared overhead costs. Our average sales and marketing headcount during the six months ended December 31, 2019 increased by 52% compared to the same period in fiscal 2019. The increase was also attributed to a $1.7 million increase in various marketing initiatives and activities, such as engaging consultants and attending marketing events, and a $1.6 million increase in advertising spend, as we continued to increase 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 the six months ended December 31, 2019 from 26% during the six months ended December 31, 2018, due primarily to the increase in our headcount, which resulted in higher personnel-related costs relative to the increase in our revenue.

~~General and administrative expenses during the six months ended December 31, 2019 and 2018 were as follows (amounts in thousands):~~

General and administrative expenses increased to $23.3 million during the six months ended December 31, 2019 from $12.3 million during the six months ended December 31, 2018, an increase of $11.0 million or 89%. The increase was due primarily to a $6.8 million increase in personnel-related costs, including stock-based compensation expense, resulting from the hiring of additional executive employees and administrative personnel. Our average general and administrative headcount during the six months ended December 31, 2019 increased by 77% compared to the same period in fiscal 2019. The increase was also due to a $1.2 million increase in professional and consulting fees as we obtained additional external assistance in connection with the overall growth of our business and our preparation to operate as a public company, a $1.1 million increase in money transfer license fees and credit card processing fees and a $0.8 million increase in shared overhead costs due to the overall growth of our business, and a $0.7 million increase in recruiting fees and temporary staffing costs as we engaged external help to recruit employees or to temporarily fill certain roles within the organization.

As a percentage of total revenue, general and administrative expenses increased to 32% during the six months ended December 31, 2019 from 26% during the six months ended December 31, 2018 due primarily to the increase in our headcount, which resulted in higher personnel-related costs relative to the increase in our revenue

~~Other income, net during the six months ended December 31, 2019 and 2018 was as follows (amounts in thousands):~~

Other income, net, which slightly decreased during the six months ended December 31, 2019, consisted primarily of a $1.0 million loss on revaluation of redeemable convertible preferred warrant liabilities, partially offset by a $0.8 million increase in interest earned on corporate funds that we invested in money market instruments and highly liquid short-term investments.

~~Provision for (benefit from) income taxes during the six months ended December 31, 2019 and 2018 was as follows (amounts in thousands):~~

The provision for income taxes during the six months ended December 31, 2019 pertains primarily to state income taxes. The benefit from income taxes during the six months ended December 31, 2018 pertains primarily to the income tax benefit that is reported on the condensed 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 condensed consolidated statements of comprehensive loss.

On December 16, 2019, we closed our IPO in which we received net proceeds of $225.5 million, after deducting underwriting discounts and commissions of $17.4 million and other offering costs of $5.6 million.

Prior to our IPO, we financed our operations and capital expenditures primarily through sales of redeemable convertible preferred stock, bank borrowings, and utilization of cash generated from operations. As of ~~December 31, 2019,~~September 30, 2021, our principal sources of liquidity ~~are~~were our cash and cash equivalents of ~~$314.9 million,~~$2.0 billion, our available-for-sale short-term investments of ~~$68.1~~$821.6 million, and ~~funds~~our available ~~under our Senior Facilities Agreement (as defined below).~~lines of credit. Our cash equivalents are comprised primarily of money market funds and investments in debt securities with original maturities of three months or less. 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, which was reduced by letter~~lines of credit ~~utilization totaling $6.9 million, was $43.1 million~~are comprised of credit agreements, under which we have a total borrowing commitment of $155.0 million. We can draw funds from these lines of credit to the extent there is sufficient balance of eligible acquired card receivables that serve as collateral.

A significant portion of our cash, cash equivalents and short-term investments as of ~~December 31, 2019. We had no outstanding borrowings~~September 30, 2021 was derived from our ~~Senior Facilities Agreement as~~recent public offering of ~~December 31, 2019.~~our common stock and issuance of 2027 Notes in a private offering on September 24, 2021, in which we received combined aggregate net proceeds of approximately $1.9 billion, after deducting discounts, commissions and other offering costs.

We believe that our cash, cash equivalents, available-for sale short-term investments, and funds available under our ~~Senior Facilities Agreement~~lines of credit will be sufficient to meet our working capital requirements for at least the next ~~twelve~~12 months. To the extent existing cash, cash from operations, and amounts available for borrowing under the Senior Facilities Agreement are insufficient to fund future activities, 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. 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 of~~incurring 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 in~~have 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.

Below is a summary of our consolidated cash flows for the periods presented (in thousands):

Our primary source of cash provided by our operating activities is our revenue from subscription and transaction fees. Our subscription revenue is primarily based on a fixed monthly or annual rate per user charged to our customers. Our transaction revenue is comprised of transaction fees on a fixed or variable rate per type of transaction. ~~We also generate cash from the interest earned on funds held in trust on behalf of customers while payment transactions are clearing.~~

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, and other general corporate expenditures.

Net cash used in operating activities increased to ~~$4.1~~$21.1 million during the ~~six~~three months ended ~~December 31, 2019~~September 30, 2021 from ~~$2.2~~$2.4 million during the ~~six~~three months ended ~~December 31, 2018~~September 30, 2020, due ~~primarily~~mainly to the increase in ~~cash paid~~payments for costs of our ~~cost of~~ services and operating expenses, ~~primarily employee salary and related costs due to the increase in headcount,~~partially offset by 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.~~revenue.

~~Cash provided by~~Our cash proceeds from our investing activities ~~consists~~consist primarily of proceeds from the maturities and sale of corporate and customer fund available-for-sale investments. ~~Cash used in~~Our cash usage for our investing activities consists primarily of purchases of corporate and customer fund ~~available-for-sale~~available for-sale investments, business acquisitions, purchases of property and equipment, and capitalization of internal-use software. Additionally, the increase or decrease in our net cash from investing activities is impacted by the net change in acquired card receivable balances.

~~Net~~Our net cash used in investing activities ~~decreased~~increased to ~~$161.2~~$453.9 million during the ~~six~~three months ended ~~December 31, 2019~~September 30, 2021 from ~~$304.2~~$73.5 million during the ~~six~~three months ended ~~December 31, 2018~~September 30, 2020 due primarily to the ~~decrease in the use of restricted cash and cash equivalents included in funds held for customers and the~~ increase in ~~proceeds from the maturities and sale~~purchases of corporate and customer fund ~~available-for-sale~~short-term investments, payment to acquire Invoice2go, and increase in acquired card receivables; partially offset by the increase in ~~purchases~~proceeds from maturities and sales of ~~property~~corporate and ~~equipment.~~customer short-term investments.

~~Cash provided by~~Our cash proceeds from our financing activities consist primarily of proceeds from public offerings of our common stock, issuance of 2027 debt, exercises of stock options, and employee purchases of our common stock under our ESPP. Our cash usage for our financing activities consists primarily of ~~proceeds from the~~payments of costs related to public offerings of our common stock, and issuance of ~~common stock upon~~debt. Additionally, the ~~completion of~~increase or decrease in our ~~IPO, issuance of redeemable convertible preferred stock, and exercises of stock options and stock warrants, and increase~~net cash from financing activities is impacted by the change in customer fund deposits liability. ~~Cash used in our financing activities consists primarily of repayments of our bank borrowings and payments of costs related to the issuance of common stock, preferred stock or debt.~~

Net cash provided by financing activities increased to ~~$389.9~~$2.1 billion during the three months ended September 30, 2021 from $37.3 million during the ~~six~~three months ended ~~December 31, 2019 from $368.1 million during the six months ended December 31, 2018~~September 30, 2020 due primarily to the proceeds from the public offering of our common stock, issuance of our 2027 Notes, and increase in customer funds liability; partially offset by the purchase of Capped Calls in connection with our issuance of the 2027 Notes.

On September 24, 2021, we issued $575.0 million in aggregate principal amount of our 0% convertible senior notes due on April 1, 2027. The 2027 Notes are senior, unsecured obligations, and will not accrue interest unless we determine to pay special interest.

The 2027 Notes 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 the Company's 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.

In conjunction with the issuance of the 2027 Notes, we entered into Capped Call transactions with certain counterparties. The Capped Calls each have an initial strike price of approximately $414.80 per share, subject to certain adjustments. The Capped Calls have an initial cap price of $544.00 per share, subject to certain adjustments; provided that such cap price shall not be reduced to an amount less than the strike price of $414.80 per share. The purpose of the Capped Calls is to reduce the potential dilution of our common stock upon any conversion of the ~~completion~~2027 Notes and/or offset any cash payments that we are required to make in excess of the principal amount of such converted notes, as the case may be, with such reduction and/or offset subject to a cap.

On November 30, 2020, we issued $1.15 billion in aggregate principal amount of our ~~IPO,~~0% convertible senior notes due on December 1, 2025. The 2025 Notes are senior, unsecured obligations, and will not accrue interest unless we determine to pay special interest. The 2025 Notes are convertible on or after September 1, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date on December 1, 2025. The 2025 Notes are convertible by the holders at their option during any calendar quarter after March 31, 2021 under certain circumstances, including if the last reported sale price of the Company's common stock for at least 20 trading days

~~On June 28, 2019,~~the 2025 Notes, we entered into Capped Call transactions with certain counterparties. The Capped Calls each have an initial strike price of approximately $160.88 per share, subject to certain adjustments. The Capped Calls have an initial cap price of $218.14 per share, subject to certain adjustments; provided that such cap price shall not be reduced to an amount less than the strike price of $160.88 per share. The purpose of the Capped Calls is to reduce the potential dilution of our common stock upon any conversion of the 2025 Notes and/or offset any cash payments that we are required to make in excess of the principal amount of such converted notes, as the case may be, with such reduction and/or offset subject to a ~~Senior Secured~~ cap.

Our credit agreements consisted of(i) Revolving Credit and Security Agreement (2021 Revolving Credit Agreement) and (ii) Warehouse Credit Agreement ~~(Senior Facilities Agreement) with Silicon Valley Bank for~~(2019 Credit Agreement, as amended).

Our 2021 Revolving Credit Agreement has a ~~revolving credit~~total commitment of $95.0 million consisting of a Class A facility ~~of up~~amounting to ~~$50.0~~$75.0 million ~~(Total Commitment),~~and a Class B facility amounting to $20.0 million. The total outstanding borrowings from the Class A and Class B facilities, 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~~2.75% and 10.25% per annum, ~~equal~~respectively, plus LIBOR (subject to a floor rate of 0.25%), were $37.5 million and $10.0 million, respectively, as of September 30, 2021. Our 2021 Revolving Credit Agreement matures in June 2023 or earlier pursuant to such agreement and the ~~Eurodollar rate plus~~outstanding borrowings are payable on or before the ~~applicable margin~~maturity date.

Our 2019 Credit Agreement (as amended) has a total commitment of ~~1.75% or 2.75%, depending on company cash balances (Eurodollar rate is calculated based on~~$60.0 million. The outstanding borrowings from the ~~ratio of Eurodollar Base Rate,~~amended 2019 Credit Agreement, 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~~6.0% per annum ~~equal~~plus LIBOR (subject to ~~the ABR minus the applicable margin~~a floor rate of 2.0%), amounted to $30.0 million as of September 30, 2021. The interest rate drops to 4.5% per annum plus LIBOR (subject to a floor rate of 0.25%) beginning October 2021. Our 2019 amended Credit Agreement matures in January 2023 and the outstanding borrowings are payable on or ~~1.25% depending on company cash balances (ABR is equal to~~before the ~~highest of (i) the prime rate, (ii) the Federal Funds Effective Rate plus 0.50%, and (iii) the Eurodollar rate plus 1.25%).~~maturity date.

The ~~Senior Facilities Agreement requires us to comply with certain restrictive covenants. As of December 31, 2019, we were in compliance with the loan covenants.~~

~~Available~~available funds under our ~~Senior Facilities Agreement, which was reduced by letter of~~ credit ~~utilization~~agreements, after deducting our borrowings totaling ~~$6.9~~$77.5 million, was ~~$43.1~~$77.5 million as of ~~December 31, 2019. We had no outstanding borrowings under the Senior Facilities Agreement as~~September 30, 2021.

~~Effective December 31, 2019,~~As discussed above, we ~~entered into a lease agreement (Lease) for approximately 132,000 square feet~~issued $575.0 million in aggregate principal amount of ~~office space located in San Jose, California, for~~ the ~~Company’s future principal executive offices.~~2027 Notes. The ~~Lease is expected to commence in May 2020~~2027 Notes are senior, unsecured obligations, and ~~to expire in April 2031 (Lease Term), unless terminated earlier.~~will not accrue interest. The ~~initial minimum monthly lease obligation is approximately $500,000 per month, increasing by 3% per year annually over~~2027 Notes are convertible on or after January 1, 2027 until the ~~Lease Term, with a 12-month rent expense abatement. The aggregate minimum lease commitment is approximately $70.0 million, net~~close of ~~abatement.~~

business on the second scheduled trading day immediately preceding the maturity date. For additional discussion onabout our ~~leases and other contractual commitments,~~2027 Notes, refer to Note 119 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Other than the ~~new lease agreement referred to above,~~ ~~there~~2027 Notes, there were no material changes in our contractual obligations and other commitments from those disclosed in ~~the Prospectus.~~our Annual Report on Form 10-K for fiscal 2021. For additional discussion on our leases and other contractual commitments, refer to Notes 13 and 14 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

AsWe are contractually obligated to purchase all card receivables from U.S. based card issuing banks (Issuing Banks) including authorized transactions that have not cleared. The transactions that have been authorized but not cleared totaled $28.7 million as of ~~December 31, 2019,~~September 30, 2021 and have not been recorded on our condensed 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 September 30, 2021.

Other than our expected credit loss exposure on the card transactions that have not cleared, we had no other off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures, or capital ~~resources.~~resources as of September 30, 2021.

Our condensed consolidated financial statements have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported revenue generated, and reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are 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.

There have been no material changes to our critical accounting ~~policies and~~ estimates as compared to the critical accounting ~~policies and~~ estimates described in “Management's Discussion and Analysis of Financial Condition and Results of Operations” set forth in ~~the Prospectus.~~our Annual Report on Form 10-K for fiscal 2021.

See “The Company and its Significant Accounting Policies” in Note 1 of the notes to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Our overall investment portfolio is comprised of corporate investments and customer fund assets that have been collected from customers, but not yet remitted to the applicable supplier or deposited into our customers’ accounts.Our corporate investments are invested in cash and cash equivalents and highly liquid, investment-grade fixed income marketable securities. These assets are available for corporate operating ~~purposes. All~~purposes and mature within 24 months from the date of ~~our investments are classified as available-for-sale securities.~~

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. ~~Customer~~Our 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~~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.

As part of our customer funds investment strategy, we use funds collected daily from our customers to satisfy the obligations of other unrelated customers, rather than liquidating investments purchased with previously collected funds. There is risk that we may not be able to satisfy customer obligations in full or on time due to insufficient liquidity or due to a decline in value of our investments. However, the liquidity risk is minimized by collecting the customer’s funds in advance of the payment obligation and by maintaining significant investments in bank deposits and ~~constant-value~~constant 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.~~balances.

We are exposed to interest-rate risk relating to our investments of corporate cash and funds ~~of our~~held for customers that we process through our bank accounts. Our corporate investment portfolio consists principally of interest-bearing bank deposits, money market funds, certificates of deposit, commercial paper, other corporate ~~bonds, asset- backed~~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.

Factors that influence the rate of interest we earn include the short-term market interest rate environment and the weighting of our balances by security type. The ~~annualized~~ interest rate earned on our corporate investment portfolio and funds held for customers decreased to ~~1.74% and remained flat at 1.91%~~0.13% during the three months ~~and six months~~ ended ~~December 31, 2019~~September 30, 2021 from ~~2.02% and 1.91%~~0.58% during the three months ~~and six months~~ ended ~~December 31, 2018, respectively,~~September 30, 2020 due primarily to the ~~change~~changes in the short-term interest rate ~~environment as the average daily effective Federal Funds rate decreased by 56 basis points and 14 basis points for the corresponding periods~~. 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.environment.

Unrealized gains or losses on our marketable debt securities are due primarily to interest rate fluctuations from the time the securities were purchased. We account for both fixed and variable rate securities at fair value with unrealized gains and losses recorded in accumulated other comprehensive income ~~(loss)~~ until the securities are sold. ~~Based on current investment practices,~~

We are also exposed to interest-rate risk relating to borrowings from our credit agreements. As of September 30, 2021, our available funds under our credit agreements provide for a ~~change in~~revolving credit facility of up to $77.5 million, after deducting our outstanding borrowings of $77.5 million. Because the interest rate ofon the 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 ~~points~~point increase or decrease in interest rates would not have ~~changed~~a material effect on our interest income from our corporate investment portfolio by approximately $0.5 million and $1.0 million during the three and six months ended December 31, 2019 on average corporate investment balances of $212.3 million and $189.9 million, respectively. A change in the interest rate of 100 basis points would also have changed our interest on funds held for customers by approximately $3.7 million and $6.9 million during the three and six months ended December 31, 2019 on average funds held for customers balances of $1.5 billion and $1.4 billion, respectively. financial results.

In addition to interest rate risks, we also have exposure to risks associated with changes in laws and regulations that may affect customer fund balances. For example, a change in regulations that restricts the permissible investment alternatives for customer funds would reduce our interest earned revenue.

We are also exposed to interest-rate risk relating to future bank borrowings. As of December 31, 2019, our Senior Facilities Agreement provides a revolving credit facility of up to $50.0 million that may be increased by up to $25.0 million, subject to conditions, incurring interest expense at a floating market rate plus a contractual spread. However, we had no outstanding borrowings under the Senior Facilities Agreement as of December 31, 2019.

We are exposed to credit risk in connection with our investments in ~~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 ~~100~~102 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.

We are also exposed to credit risk related to the timing of payments made from customer funds collected. We typically remit customer funds to our customers’ suppliers in advance of having good or confirmed funds collected from our ~~customers. Customers may not have sufficient available balances in their account to fund remittances we’ve made~~customers and if a customer disputes a transaction after we remit 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.

We are exposed to credit risk from card receivable balances we have with our spending businesses. Spending businesses may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure or other reasons. Although we regularly review our credit exposure to specific spending businesses and to specific industries that we believe may present credit concerns, default risk may arise from events or circumstances that are difficult to foresee or detect, such as fraud. In addition, our ability to manage credit risk or collect amounts owed to us may be adversely affected by legal or regulatory changes (such as restrictions on collections or changes in bankruptcy laws, and minimum payment regulations). We rely principally on the creditworthiness of spending businesses for repayment of card receivables and therefore have limited recourse for collection. Our ability to assess creditworthiness may be impaired if the criteria or models we use to manage our credit risk prove inaccurate in predicting future losses, which could cause our losses to rise and have a negative impact on our results of operations. Any material increases in delinquencies and losses beyond our current estimates could have a material adverse impact on us. Although we make estimates to provide for credit losses in our outstanding portfolio of card receivables, these estimates may not be accurate.

We are exposed to foreign currency exchange risk relating to our cross-border payment service, which allows customers to pay their international suppliers in foreign currencies. When customers make a cross-border payment, customers fund those payments in U.S. dollars based upon an exchange rate that is quoted on the initiation date of the transaction. Subsequently, when we convert and remit those funds to our customers’ suppliers primarily through our global payment ~~partner,~~partners, the exchange rate may differ, due to foreign exchange fluctuation, ~~compared to~~from 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.

We are also exposed to foreign currency exchange risk relating to the operations of our subsidiary in Australia. A change in foreign currency exchange rate, particularly in Australian dollar, can affect our financial results due to transaction gains or losses related to the remeasurement of certain monetary asset and monetary liability balances that are denominated in currencies other than the functional currency of our Australian subsidiary, which is U.S. dollars.

If the value of the U.S. dollar weakens relative to the foreign currencies, this may have an unfavorable effect on our cash flows and operating results. We do not believe that a 10% change in the relative value of the U.S. dollar to other foreign currencies would have a material effect on our cash flows and operating results.

Our management, with the participation and supervision of our chief executive officer (CEO) and our chief financial officer (CFO), have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Our disclosure controls and procedures are designed to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our ~~chief executive officer~~CEO and ~~chief financial officer,~~CFO, as appropriate, to allow timely decisions regarding required disclosure. Based on such evaluation, our ~~chief executive officer~~CEO and ~~chief financial officer~~CFO have concluded that ~~as of such date,~~ our disclosure controls and procedures were not effective atbecause of a ~~reasonable assurance level.~~material weakness in internal controls over financial reporting identified as of June 30, 2021 that has not been remediated as of September 30, 2021. See Part II, Item 9A "Controls and Procedures" of our Annual Report on Form 10-K for fiscal 2021. We continue to take steps to remediate the material weakness identified as of June 30, 2021. However, we will not be able to demonstrate that this material weakness has been fully remediated or that our controls are operating effectively, until we complete our remediation efforts and both we and our independent registered public accounting firm conduct a year-end assessment of our internal control over financial reporting for the fiscal year ended June 30, 2022, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002.

~~There~~Except for the acquisition of Invoice2go as described below, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by ~~Rule~~Rules 13a-15(d) and 15d-15(d) of the Exchange

Act that occurred during the quarter ended ~~December 31, 2019~~September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial ~~reporting~~reporting.

~~Table~~On September 1, 2021, we completed the acquisition of ~~Contents~~Invoice2go. We are currently integrating Invoice2go into our operations and internal control processes and, pursuant to the Securities and Exchange Commission's guidance that an assessment of a recently acquired business may be omitted from the scope of an assessment for a period not to exceed one year from the date of acquisition, the scope of our assessment of our internal controls over financial reporting at September 30, 2021 does not include Invoice2go.

Our management, including our chief executive officer and chief financial officer, 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 are 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.~~detected.

From time to time, we are party to litigation and subject to claims incident to the ordinary course of business. As our growth continues, we may become party to an increasing number of litigation matters and claims. The outcome of litigation and claims cannot be predicted with certainty, and the resolution of these matters could materially affect our future results of operations, cash flows, or financial position. We are not presently party to any legal proceedings that, in the opinion of management, would individually or taken together have a material adverse effect on our business, operating results, financial condition, or cash flows.

Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information in this Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations” and~~Operations,” our condensed consolidated financial statements and the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q before deciding whether to invest in shares of our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of or that we deem immaterial may also become important factors that adversely affect our business. If any of the following risks actually occur, our business, financial condition, operating results, and future prospects could be materially and adversely affected. In that event, the market price of our common stock could decline, and you could lose part or all of your ~~investment~~investment.

We have a history of operating losses and may not achieve or sustain profitability in the future.

We were incorporated in 2006 and have mostly experienced net losses and negative cash flows from operations since inception. We generated a net ~~loss~~losses of ~~$7.6~~$75.7 million and ~~a net income of $0.1~~$13.0 million during the three months ended ~~December 31, 2019~~September 30, 2021 and ~~2018, respectively, and~~2020, respectively. Our net ~~losses of $13.3 million and $0.8 million during~~loss for the ~~six~~three months ended ~~December 31, 2019~~September 30, 2021 includes the results of operations of Invoice2go from the date of acquisition on September 1, 2021 and ~~2018, respectively.~~of Divvy. As of ~~December 31, 2019,~~September 30, 2021, we had an accumulated deficit of ~~$130.9~~$294.2 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. Our profitability each quarter is also impacted by the mix of our revenue generated from subscriptions and transaction fees, on the one hand, and interest earned on

customer funds that we hold in trust, on the other. Any changes in this revenue mix will have the effect of increasing or decreasing our margins. We will also face increased compliance and security costs associated with growth, the expansion of our customer base, and being a public company. 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.

Our recent rapid growth, including growth in our volume of payments, may not be indicative of our future growth, and if we continue to grow rapidly, we may not be able to manage our growth effectively. Our rapid growth also makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.

Our revenue was ~~$39.1~~$116.4 million and ~~$26.0~~$46.2 million during the three months ended September 30, 2021 and ~~our~~2020, respectively. Our revenue for the three months ended September 30, 2021 includes the revenue of Invoice2go from the date of acquisition on September 1, 2021 and of Divvy. Our TPV was ~~$24.8~~$46.9 billion and ~~$17.6~~$28.8 billion during the three months ended ~~December 31, 2019~~September 30, 2021 and ~~2018, respectively. Our revenue was $74.3 million and $48.4 million, and our TPV was $46.8 billion and $33.2 billion during the six months ended December 31, 2019 and 2018,~~2020, 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:

We may not successfully accomplish any of these objectives, which makes it difficult for us to forecast our future operating results. Further, the revenue that we derive from interest income on customer funds is dependent on interest rates, which we do not control. If the assumptions that we use to plan our business are incorrect or change in reaction to changes in our market, or if we are unable to maintain consistent revenue or revenue growth, our stock price could be volatile, and it may be difficult to achieve and maintain profitability. You should not rely on our revenue from any prior quarterly or annual periods as any indication of our future revenue or revenue or payment growth.

In addition, we expect to continue to expend substantial financial and other resources on:

These investments may not result in increased revenue growth in our business. If we are unable to increase our revenue at a rate sufficient to offset the expected increase in our costs, or if we encounter difficulties in managing a growing volume of payments, our business, financial position, and operating results will be harmed, and we may not be able to achieve or maintain profitability over the long term.

Our risk management efforts may not be effective to prevent fraudulent activities by our customers, subscribers, spending businesses or their counterparties, which could expose us to material financial losses and liability and otherwise harm our business.

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. For example in 2016, an accounts payable customer fraudulently enrolled on our platform using a stolen business identity and bank account, and disbursed approximately $300,000 funded by an unauthorized bank account. While we were able to recover some of the funds, we incurred a loss of approximately $200,000 in connection with that incident. Also, in 2018, we processed payments on behalf of an accounts receivables customer, whose client made approximately $225,000 in payments to our customer with funds from stolen bank accounts. We were able to recover a portion of the funds but incurred a loss of approximately $75,000 in connection with that incident.third-parties.

The techniques used to perpetrate fraud on our platform are continually evolving, 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~~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. ~~Furthermore, our~~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 and 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.

During the three ~~and six~~ months ended ~~December 31, 2019, approximately 86,000~~September 30, 2021, over 126,000 customers processed approximately ~~$24.8 and $46.8~~$46.9 billion ~~respectively,~~ in TPV on our platform. For the purposes of measuring our key business metrics, we define customers as entities that are either billed directly by us or for which we bill our strategic 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 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:

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.

Customer 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 the 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.

During the three months ended December 31, 2019 and 2018, we generated $6.1 million and $5.6 million, respectively, in revenue from interest earned on funds held in trust on behalf of customers while payment transactions are clearing, or approximately 16% and 21% of our total revenue for such periods, respectively. During the six months ended December 31, 2019 and 2018, we generated $12.7 million and $9.8 million, respectively, in revenue from interest earned on funds held in trust on behalf of customers while payment transactions are clearing, or approximately 17% and 20% of our total revenue for such periods, respectively. While these payments are clearing, we deposit the funds in highly liquid short-term investments, 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.

If we are unable to attract new customers or convert trial customers into paying customers, our revenue growth and operating results will be adversely affected.

To increase our revenue, we must continue to attract new customers and increase sales to those customers. As our market matures, product and service offerings evolve, and competitors introduce lower cost or differentiated products or services that are perceived to compete with our platform, our ability to sell subscriptions or successfully increase customer adoption of new payment products could be impaired. Similarly, our subscription sales could be adversely affected if customers or users perceive that features incorporated into alternative products reduce the need for our platform or if they prefer to purchase products that are bundled with solutions offered by other companies. Further, in an effort to attract new customers, we may offer simpler, lower-priced products or promotions, which may reduce our profitability.

We rely upon our marketing strategy of offering risk-free trials of our platform and other ~~inbound,~~ digital marketing strategies to generate sales opportunities. Many of our customers start a risk-free trial of our service. Converting these trial customers to paid customers often requires extensive follow-up and engagement. Many prospective customers never convert from the trial version of a product to a paid version of a product. Further, we often depend on the ability of individuals within an organization who initiate the trial versions of our products ~~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. As a result of these and other factors, we may be unable to attract new customers, which would have an adverse effect on our business, revenue, gross margins, and operating results.

If we are unable to retain our current customers, or sell additional functionality and services to them, or develop and launch new payment products, our revenue growth will be adversely affected.

To increase our revenue, in addition to acquiring new customers, we must continue to retain existing customers and convince them to expand their use of our platform by increasing the number of users and incenting them to pay for additional functionality. To date, a significant portion of our growth has been attributable to customer adoption of new payment products. Our ability to retain our customers 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 or the other risks described in this Quarterly Report on Form 10-Q. As a result, we may be unable to retain existing customers or increase the usage of our platform by them, which 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 new payment products or 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.

While some of our contracts are non-cancelable annual subscription contracts, most of our contracts with customers and accounting firms primarily consist of open-ended arrangements that can be terminated by either party without penalty at any time. Our customers have no obligation to renew their subscriptions ~~for~~to 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. 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. 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.

We expect fluctuations in our financial results, making it difficult to project future results, and if we fail to meet the expectations of securities analysts or investors with respect to our operating results, our stock price and the value of your investment could decline.

Our operating results have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, our past results may not be indicative of our future performance. In addition to the other risks described herein, factors that may affect our operating results include the following:

We may not be successful in our efforts to promote Divvy corporate card usage through marketing and promotion and spending business rewards, which may materially impact our results of operations and financial condition.

The revenue growth of Divvy is dependent on increasing business spending on our cards. We have been investing in a number of growth initiatives, including to capture a greater share of spending businesses’ total spend, but there can be no assurance that such investments will be effective. In addition, if we develop new products or offerings that attract spending businesses looking for short-term incentives rather than displaying long-term loyalty, attrition and costs could increase. Expanding our service offerings, adding acquisition channels and forming new partnerships or renewing current partnerships could have higher costs than our current arrangements and could dilute our brand. In addition, we offer rewards to spending businesses based on their usage of spend management cards. Redemptions of rewards present significant associated redemption costs for our business. We operate in a highly competitive environment and may need to increase the rewards that we offer or provide other incentives to spending businesses in order to grow our business. Any significant change in, or failure by management to reasonably estimate, such costs could adversely affect or harm our business, operating results, and financial condition.

Our relationships with our ~~over 4,000~~more than 5,400 accounting firm partners account for approximately ~~53%~~51% of our total customers as of September 30, 2021 and ~~44%~~approximately 46% of our total ~~subscription and transaction fees as of and~~revenue during the three months ended ~~December 31, 2019, respectively.~~September 30, 2021. We market and sell our products and services through accounting firms. We also have a partnership with CPA.com to market our products and services to accounting firms, which then enroll their customers directly onto 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 weaken and 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~~enter into relationships with our financial institution partners and to partner with ~~additional~~other 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 sales efforts, 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, salesSales to new strategic partner enterprises involve risks that may not be present or that are present to a lesser extent with sales to SMB organizations. With strategic partners, the

decision to subscribe to our platform and then make our services available to their customers frequently requires the approval of multiple management personnel 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, including considerable efforts to negotiate and document relationships with them. ~~Further,~~Even after we have successfully entered into agreements with our strategic partners, the deployment of our platform and its availability to our strategic partners’ customers may be subject to significant delays as a result of changes in the strategic partners’ business or to our strategic partners’ internal resource allocations or other priorities. We integrate our platform with our financial institution ~~partners’~~partners�� own websites and apps, which requires significant time and resources to design and ~~deploy even after sales have been processed~~deploy. Significant delays in the

deployment of our platform to our strategic partners’ customers could cause us to incur significant expenditures for platform integration without generating corresponding revenue in the same period or at all, and ~~documented.~~could adversely impact our results of operations. If we are unable to increase sales of our platform to strategic partners ~~and~~or manage the costs associated with ~~marketing our platform to such customers and~~ integrating with their systems, or the availability of our services to the strategic partners’ customers are delayed, our business, financial position, and operating results may be adversely affected. In addition, if our strategic partners or their customers experience problems with the operation of our platform, such as service outages or interruptions or security breaches or incidents, our relationship with the strategic partner and our reputation could be harmed and our results of operations may suffer.

We may not be able to attract new financial institution strategic partners if our potential partners favor our competitors’ products or services over our platform or choose to compete with our products 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 revenue could be impaired, and our results of operations may suffer.

Our spend management business is dependent on our relationship with our issuing bank partners, Cross River Bank and WEX Bank.

The extensions of credit facilitated through our platform are originated through Cross River Bank and WEX Bank and we rely on these bank partners to comply with various federal, state and other laws. There has been significant recent U.S. Congressional and federal administrative agency lawmaking and rulings in the area of bank - non-bank partnership arrangements involving extensions of credit and the regulatory environment in this area remains unsettled. There has also been significant recent government enforcement action and litigation challenging the validity of such arrangements, including disputes seeking to recharacterize lending transactions on the basis that the non-bank party rather than the bank is the “true lender” or “de facto lender”, and in case law upholding the “valid when made” doctrine, which holds that federal preemption of state interest rate limitations are not applicable in the context of certain bank - non-bank partnership arrangements. If the legal structure underlying our relationship with our issuing bank partners were to be successfully challenged, we may be found to be in violation of state licensing requirements and state laws regulating interest rates. In addition, adverse orders or regulatory enforcement actions against our issuing banks, even if unrelated to our business, could impose restrictions on our issuing banks’ ability to continue to extend credit through our platform or on current terms.

Cross River Bank and WEX Bank are subject to oversight by the FDIC and state banking regulators and must comply with applicable rules and regulations and examination requirements. As a service provider to Cross River Bank and WEX Bank, we are subject to audit by these banks in accordance with FDIC guidance related to management of vendors and other bank specific requirements pursuant to the terms of our agreements with these banks. We are also subject to the examination and enforcement authority of the FDIC under the Bank Service Company Act. If we fail to comply with requirements applicable to us by law or contract, or if audits by our issuing banks were to conclude that our processes and procedures are insufficiently rigorous, we may be subject to fines or penalties or our issuing banks could terminate their relationships with us.

In the event of a challenge to the legal structure underlying our relationships with our issuing bank partners or if one or both of our issuing banks were to suspend, limit, or cease its operations, or were to otherwise terminate for any reason (including, but not limited to, the failure by an issuing bank to comply with regulatory actions), we would need to identify and implement alternative, compliant, bank relationships or otherwise modify our business practices in order to be compliant with prevailing law or regulation, which could result in business interruptions or delays, force us to incur additional expenses and potentially interfere with our existing customer and spending business relationships or make us less attractive to potential new customers and spending businesses, any of which could have a material adverse effect on our business.

We rely on a variety of funding sources to support Divvy’s business model. If our existing funding arrangements are not renewed or replaced, or if our existing funding sources are unwilling or unable to provide funding to us on terms acceptable to us, or at all, it could have a material adverse effect on our business, results of operations, financial condition, cash flows, and future prospects.

In order to support Divvy’s business model and the growth of Divvy’s business we must maintain a variety of funding arrangements, including warehouse facilities and purchase arrangements with financial institutions. In particular, we have financing arrangements in place pursuant to which we purchase from our issuing banks participation interests in the accounts receivables (Receivables) generated when Divvy spending businesses make purchases using our cards. We typically fund a substantial portion of these Receivables purchases by borrowing under credit facilities with our finance partners, although we may also fund Receivables purchases using corporate cash. Typically, we immediately sell a portion of the Receivables we have purchased to a warehousing subsidiary which funds the purchases through loans provided by our financing partners, and we may sell a portion of our Receivables to a third-party institution pursuant to a purchase arrangement.

If our finance partners terminate or interrupt their financing or purchase of our Receivables or are unable to offer terms which are acceptable to us, we may have to fund these purchases using corporate cash, which we have a limited ability to do and would place significant stress on our cash resources. An inability to purchase Receivables from our issuing banks, whether funded through financing or corporate cash, could result in the banks’ limiting extensions of credit to Divvy spending businesses or ceasing to extend credit for our cards altogether, which would interrupt or limit our ability to offer our card products and materially and adversely affect our business.

We cannot guarantee that these funding arrangements will continue to be available on favorable terms or at all, and our funding strategy may change over time, depending on the availability of such funding arrangements. In addition, our funding sources may reassess their exposure to our industry and either curtail access to uncommitted financing capacity, fail to renew or extend facilities, or impose higher costs to access funding. In addition, there can be no assurances that we would be able to extend or replace our existing funding arrangements at maturity, on reasonable terms or at all.

If our existing funding arrangements are not renewed or replaced or our existing funding sources are unwilling or unable to provide funding to us on terms acceptable to us, or at all, we would need to secure additional sources of funding or reduce Divvy’s operations significantly. Further, as the volume of credit facilitated through our platform increases, we may need to expand the funding capacity under our existing funding arrangements or add new sources of capital. The availability and diversity of our funding arrangements depends on various factors and are subject to numerous risks, many of which are outside of our control. If we are unable to maintain access to, or to expand, our network and diversity of funding arrangements, our business, results of operations, financial condition, and future prospects could be materially and adversely affected.

Our Divvy card exposes us to credit risk and other risks related to Divvy spending businesses’ ability to pay the balances incurred on their cards. In addition, if collection efforts on overdue card balances are ineffective or unsuccessful, we may incur financial losses or lose the confidence of our funding sources.

We offer our Divvy card as a credit product to a wide range of businesses in the U.S., and the success of this product depends on our ability 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.

For a substantial majority of extensions of credit facilitated through our platform, we purchase from our issuing banks interests in the receivables generated when Divvy spending businesses make purchases using our cards and we bear the entire credit risk in the event that the spending businesses fail to pay card balances. Like other businesses with significant 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, worsening economic conditions, such as a recession or government austerity programs and high unemployment rates. Spending businesses who miss payments may fail to repay their outstanding statement balances, and spending businesses who file for protection under the bankruptcy laws generally do not repay their outstanding balances. Any such losses or failures of our risk models could harm our business, operating results, and financial condition. Non-performance, or even significant underperformance, of the receivables that we own could have an adverse effect on our business.

Additionally, our funding model relies on a variety of funding arrangements, including warehouse facilities and purchase arrangements, with a variety of funding sources. Any significant underperformance of the Receivables we own may adversely impact our relationship with such funding sources and result 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 material adverse effect on our business, results of operations, financial condition, and future prospects.

The Invoice2go business presents many risks, we may face challenges integrating the Invoice2go business and we may not realize the strategic and financial benefits contemplated at the time of the acquisition of Invoice2go.

Risks we may face in connection with the Invoice2go business and integration of Invoice2go include:

In addition to our relationship with financial institutions, we ~~rely on our strategic~~have a business relationship with Intuit Inc., a leading provider of financial, accounting, and tax preparation ~~software, to further expand our business.~~software. Our platform is integrated into Intuit’s QuickBooks ~~product, which millions of SMBs rely on for accounting services.~~product. Achieving this integration required extensive coordination and commitment of time and resources, and has led to thousands of additional customers for us. Our agreement with Intuit will terminate on June 26, 2023, unless earlier terminated in accordance with the agreement. The agreement enables 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’s customers, however, our growth prospects may be adversely affected. Additionally, if Intuit reconfigures its platform in a manner that no longer supports our integration ~~or if Intuit terminates this relationship or replaces our platform~~ with ~~that of another provider,~~QuickBooks, we would lose customers and our business would be adversely affected. ~~Finally,~~Intuit has integrated another third-party bill pay solution into its QuickBooks product. Further, Intuit may seek to develop a solution of its own, acquire a solution to compete with ours, ~~thereby~~ or decide to partner with ~~a competitor and build a new product,~~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.

The markets in which we participate are competitive, and if we do not compete effectively, our operating results could be harmed.

The market for financial back-office 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 management, and/or electronic bill presentment and payment. 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. 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.

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ease of ~~Contents~~

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~~ease of integration with leading accounting and banking technology infrastructures;~~

integration with leading accounting and banking technology infrastructures;

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ability to automate processes;

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cloud-based delivery architecture;

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advanced security and control features;

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regulatory compliance leadership, as evidenced by money transmitter licenses in all required USU.S. jurisdictions;

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brand recognition; and

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pricing and total cost of ownership.

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Our competitors vary in size, breadth, and scope of the products and services offered. Many of our competitors and potential competitors have greater name recognition, longer operating histories, more established customer relationships, larger marketing budgets, and greater resources than us. Our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, and customer requirements. For example, an existing competitor or new entrant could introduce new technology that reduces demand for our platform.

In addition, the market for our products and services is competitive, and we expect the market to attract increased competition, which could make it difficult for us to succeed. We currently face competition for our offerings from a range of companies that continue to develop additional products and to become more sophisticated and effective. Many of our competitors have greater name recognition, longer operating histories and greater resources than we do. As a result, our competitors might be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements. Certain competitors have long-standing exclusive, or nearly exclusive, relationships with financial services provider partners to accept payment cards and other services that compete with what we offer. Competing services tied to established brands may engender greater confidence in the safety and efficacy of their services. If we are unable to differentiate ourselves from and successfully compete with our competitors, our business will be materially and adversely affected.

For these reasons, we may not be able to compete successfully against our current or future competitors, and this competition could result in the failure of our platform to continue to achieve or maintain market acceptance, any of which would harm our business, operating results, and financial condition.

If we do not or cannot maintain the compatibility 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, and Microsoft Dynamics 365, through application program interfaces (APIs) made available by these software providers. We automatically synchronize customers, suppliers, clients, invoices, and payment transactions between our platform and these systems. This two-way sync eliminates duplicate data entry and provides the basis for managing ~~cash- flow~~cash-flow through an integrated solution for accounts ~~payables,~~payable, accounts receivable, and payments.

If any of the accounting software providers change the features of their APIs, discontinue their support of such APIs, restrict our access to their APIs, or alter the terms governing their use in a manner that is adverse to our business, we will not be able to provide synchronization capabilities, which could significantly diminish the value of our platform and harm our business, operating results, and financial condition.

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 any of our agreements with our processing providers are terminated, we could experience service interruptions.

We depend on banks, including JPMorgan Chase, ~~The Bancorp Bank,~~ and 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~~agreements with ~~Cambridge Mercantile Corp.,~~Cambridge. and Citibank’s WorldLink, under which ~~Cambridge provides~~these firms provide us with cross-border ~~wire~~funds transfer capabilities. ~~This arrangement has~~These arrangements have enabled us to offer our ~~cross-border payments~~International 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.

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In addition, we have agreements with WEX Bank, as issuing bank and payment processor for Divvy card transactions on the MasterCard network, and with Cross River Bank and Marqeta, as issuing bank and payment processor, respectively, for Divvy card transactions on the Visa network.

If any of our banking agreements related to ACH transactions or checks, or our agreements with Cambridge, Citibank’s WorldLink, Comdata, WEX Bank, Cross River Bank or ~~Comdata~~Marqeta are terminated, we may experience business interruptions and delays, and be forced to incur additional expenses, potentially interfering with our existing customer and spending business relationships or making us less attractive to potential new ~~customers.~~customers and spending businesses.

Interruptions or delays in the services provided by AWS or other third-party data centers or internet service providers could impair the delivery of our platform and our business could suffer.

We host our platform using third-party cloud infrastructure services, including co-location facilities at Coresite, Equinix, and Iron ~~Mountain, and Digital West.~~Mountain. We also use public cloud hosting with Amazon Web Services (AWS). All 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 experience interruptions 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 available to our customers, we may not be able 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 access to our platform or impede our ability 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 services

Moreover, 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 data from our servers to AWS’ servers, we may experience some duplication 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.

Our business and operations have and may continue to be affected by the global outbreak of the COVID-19 pandemic.

Our business and operations have and may continue to be affected by the global outbreak of the COVID-19 pandemic. In response to the COVID-19 pandemic, governments, companies and other authorities have implemented restrictions or policies, such as travel restrictions, quarantines, shelter-in-place or stay-at-home orders, school closures, mandatory shut-downs, social-distancing and other operating requirements applicable to business establishments.These

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restrictions have forced many businesses in the U.S. and other jurisdictions, including certain of our strategic partners, vendors, accounting firm partners and customers, to reduce or suspend their operations, lay-off employees, and in some cases shut down operations. In certain cases, this has led us to take mitigating actions to ensure business continuity; for example, we added a second source for several vendor services necessary to enable our business in light of risks to our vendors’ business resulting from the pandemic. Many of these measures continue to remain in place, and may continue to remain in place for a significant period of time. For so long as the COVID-19 pandemic persists and containment measures and related restrictions remain in place, these conditions will continue to have negative implications on business and consumer spending, the supply chain, production of goods and transportation, the labor market, global capital markets and the global economy, and could result in a prolonged economic downturn. To the extent that supply chain disruptions, inventory shortages or labor shortages adversely impact our customers or the pandemic otherwise continues to adversely impact the operations and business of our customers, it may have a material adverse impact on our customer growth, payment and transaction volumes, revenues and financial condition. The COVID-19 pandemic has caused us to impose restrictions on certain of our business practices (including limitations on employee travel and physical participation in meetings, events, and conferences). In addition, a significant portion of our employees are currently working remotely. This direct impact of the virus, and the disruption on our employees and operations, may negatively impact our productivity, our ability to meet customer demand and our revenue and profit margins. 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. Moreover, due to the emergency interventions of the U.S. Federal Reserve to stabilize the U.S. economy, interest rates have fallen sharply, which has adversely impacted our revenue from interest earned on funds held from customers and, to the extent interest rates remain at historical lows, we will continue to experience this adverse impact in the future. The extent to which the pandemic continues to impact our business, results of operations, and financial condition will depend on developments that continue to be highly uncertain and difficult to predict, including, but not limited to, the duration and spread of the pandemic, its severity, the success of measures to contain the virus and treat its impact, the timing and efficacy of vaccinations, and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 pandemic has subsided, we may experience material and adverse impacts to our business as a result of any resulting economic downturns, including bankruptcies or insolvencies of customers. 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.

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~~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.

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Payments 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~~spending business data. ~~We do not directly collect~~In addition, Divvy is required to maintain loan brokering or ~~store payment~~servicing licenses in a number of states in which it conducts business and is contractually obligated to comply with Federal Deposit Insurance Corporation (FDIC) federal banking regulations, as well as Visa and MasterCard network rules as a card ~~information; instead, we rely on a third-party payment processor to do so.~~program manager. These laws, rules,

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regulations, licensing schemes, and standards are enforced by multiple authorities and governing bodies in the ~~United States,~~U.S., including the Department of the Treasury, the ~~Federal Deposit Insurance Corporation,~~FDIC, the SEC, self-regulatory organizations, and numerous state and local agencies. AsThe regulations applicable to our activity in Canada are enforced by FINTRAC and Quebec’s Autorite Des Marches Financiers (Financial Markets Authority).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,~~U.S., in the District of Columbia, the Commonwealth of Puerto Rico, and, to the best of our knowledge, in all the states where such licensure or registration is required for our business. 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. There can be no assurance that we will be able 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 on 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:

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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;

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impose additional customer and spending business identification and customer or spending business due diligence requirements;

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impose additional reporting or recordkeeping requirements, or require enhanced transaction monitoring;

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limit the types of entities capable of providing money transmission services, or impose additional licensing or registration requirements;

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impose minimum capital or other financial requirements;

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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;

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~~require enhanced disclosures to our money transmission customers;~~

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require enhanced disclosures to our money transmission customers;

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require the principal amount of money transmission originated in a country to be invested in that country or held in trust until paid;

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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

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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.

If we lose our founder 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, as well as the continued development of our products, our 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. In addition, we may face challenges retaining senior management of acquired businesses. Our senior management and key employees are employed on an at-will basis. We currently do not have “key person” insurance onfor 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 ~~will be~~are publicly tradable now that we are a public company. The loss of our founder, or one or more of our senior management, key members of senior management of acquired companies or other key employees 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.

In addition, to execute our business strategy, we must attract and retain highly-qualified personnel. Competition for software developers, compliance and risk management personnel and other key employees in our industry and locations 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. In addition, the current regulatory environment related to immigration is uncertain, including with respect to 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.

Future acquisitions, strategic investments, partnerships, collaborations, or alliances could be difficult to identify and integrate, divert the attention of management, disrupt our business, dilute stockholder value, and adversely affect our operating results and financial condition.

We have in the past and may in the future seek to acquire or invest in businesses, products, or technologies that we believe could complement or expand our platform, enhance our technical capabilities, or otherwise offer growth opportunities. However, we have limited experience in acquiring other businesses, and we may not successfully identify desirable acquisition targets. Moreover, an acquisition, investment, or business relationship 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.

In addition, the technology and information security systems and infrastructure of businesses we acquire may be underdeveloped or subject to vulnerabilities, subjecting us to additional liabilities. We could incur significant costs related to the implementation of enhancements to information security systems and infrastructure of acquired businesses and related to the remediation of any related security breaches. If security, data protection and information security measures in place at businesses we acquire are inadequate or breached, or are subject to cybersecurity attacks, or if any of the foregoing is reported or perceived to have occurred, our reputation and business could be damaged and we could be subject to regulatory scrutiny, investigations, proceedings, and penalties. We may also acquire businesses whose operations may not be fully compliant with all applicable regulation, including governmental laws and requirements regarding economic and trade sanctions, anti-money laundering, and counter-terror financing and privacy law, subjecting us to potential liabilities and requiring us to spend considerable time, effort, and resources to become compliant.

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Given the complexity of our platform and the deep and seamless integration that we offer to our accounting firm customers and strategic partners, it may be critical that certain businesses or technologies that we acquire be successfully and fully integrated into our platform. In addition, some acquisitions may require us to spend considerable time, effort, and resources to integrate employees from the acquired business into our teams, and acquisitions of companies in lines of business in which we lack expertise may require considerable management time, oversight, and research before we see the desired benefit of such acquisitions. 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 recently-acquired Divvy and Invoice2go businesses.

Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, as well as unfavorable accounting treatment and exposure to claims and disputes by third parties, including intellectual property claims. We also may not generate sufficient financial returns to offset the costs and expenses related to any acquisitions. In addition, if an acquired business fails to meet our expectations, our business, operating results, and financial condition may suffer.

If we fail to offer high-quality customer support, or if our support is more expensive than anticipated, our business and reputation could suffer.

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.

If 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. In addition, the market for our Divvy spend management solution and corporate cards is new and fragmented, and it is uncertain whether we will achieve and sustain high levels of demand and market adoption.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, our business, operating results, and financial condition would be adversely affected.

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 or spending business dissatisfaction and adversely affect our business.

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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

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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~~.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.

Any 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.

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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. WeAlthough 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.

In addition, our ability to broaden the spending business base for our Divvy spend management offerings and achieve broader market acceptance of this platform will depend to a significant extent on the ability of our sales and marketing organizations to work together to drive our sales pipeline and cultivate spending business and partner relationships to drive revenue growth. If we are unable to recruit, hire, develop, and retain talented sales or marketing personnel, if our new sales or marketing personnel and partners are unable to achieve desired productivity levels in a reasonable period of time, or if our sales and marketing programs are not effective, our ability to broaden our spending business base and achieve broader market acceptance of our platform could be harmed.Moreover, our Divvy business relies on our reputation and recommendations from key spending businesses in order to promote our offering to potential

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spending businesses. Our marketing efforts depend significantly on our ability to call on our current spending businesses to provide positive references to new, potential spending business customers. Given our limited number of long-term spending businesses, the loss or dissatisfaction of any spending business could substantially harm our brand and reputation, inhibit the market adoption of our offering and impair our ability to attract new spending businesses and maintain existing spending businesses.

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.

We 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,~~U.S., 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 (CCPA), 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. Additionally, a new privacy law, the California Privacy Rights Act (CPRA), recently was approved by California voters in the November 2020 election. The CPRA will significantly modify the CCPA, and may create new obligations for us beginning on January 1, 2022, with implementing regulations expected on or before July 1, 2022, and enforcement commencing July 1, 2023. Many aspects of the ~~California Consumer Privacy Act~~CCPA, the CPRA, and ~~its~~their interpretation remain unclear, and ~~its~~their full impact on our business and operations remains uncertain. The laws and regulations relating to privacy, data protection, and ~~data~~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 (EU), 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.~~U.S. 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 payments and corporate card products and services that we currently offer do not subject us to such laws or regulations in foreign jurisdictions, other than the Canadian Personal Information Protection and Electronic Documents Act in respect of our Canadian Basic Receivables product. However, Invoice2go’s international subscriber base does subject us to such laws or regulations in many foreign jurisdictions, including the GDPR and Australian privacy laws. 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,~~EU, 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

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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

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controllers, customers, and data subjects. While we believe that the payments and corporate card products and services that we currently offer do not subject us to the GDPR, Invoice2go’s international subscriber base does subject us to 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~~GDPR. In addition, modifications or enhancements that we make to our ~~products~~payment and corporate card product offerings may subject us to GDPR orwith respect to those products, in which case 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 maywill need to take steps to cause our processes to be compliant with applicable portions of the ~~GDPR, but we~~GDPR. We cannot assure you that we will be able to implement changes in a timely manner or without significant disruption to our business, that such processes will be effective, or that ~~such steps~~processes currently in place at Invoice2go will be effective, and we may face the risk of liability under the GDPR.

The 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, ~~and~~ 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 ~~data~~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 information security,~~ 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.

We, our 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.

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We, our 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 trusted brand, in the handling and protection of this data, and these risks will increase as our business continues to expand to include new products and technologies.

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Cybersecurity incidents and malicious internet-based activity continue to increase generally, and providers of cloud-based services have frequently been targeted by such attacks. These cybersecurity challenges, including threats to our own IT infrastructure or those of our customers or third-party providers, may take a variety of forms ranging from stolen bank accounts, business email compromise, customer employee fraud, account takeover, check fraud, or cybersecurity attacks, to “mega breaches” targeted against cloud-based services and other hosted software, which could be initiated by individual or groups of hackers or sophisticated cyber criminals. A cybersecurity incident or breach could result in disclosure of confidential information and intellectual property, or cause production downtimes and compromised data. We have in the past experienced cybersecurity incidents of limited scale. We may be unable to anticipate or prevent techniques used in the future to obtain unauthorized access or to sabotage systems because they change frequently and often are not detected until after an incident has occurred. As we increase our customer base and our brand becomes more widely known and recognized, third parties may increasingly seek to compromise our security controls or gain unauthorized access to our sensitive corporate information or our customers’ data.

We have administrative, technical, and physical security measures in place, and we have policies and procedures in place to contractually require service providers to whom we disclose data to implement and maintain reasonable privacy, data protection, and information security measures. However, if our privacy protection, data protection, or information security measures or those of the previously mentioned third parties are inadequate or are breached as a result of third-party action, employee or contractor error, malfeasance, malware, phishing, hacking attacks, system error, software bugs, or defects in our products, trickery, process failure, or otherwise, and, as a result, there is improper disclosure of, or someone obtains unauthorized access to or exfiltrates funds or sensitive information, including personally identifiable information, on our systems or our partners’ systems, or if we suffer a ransomware or advanced persistent threat attack, or if any of the foregoing is reported or perceived to have occurred, our reputation and business could be damaged. Recent high-profile security breaches and related disclosures of sensitive data by large institutions suggest that the risk of such events is significant, even if privacy data protection, and information security measures are implemented and enforced. If sensitive information is lost or improperly disclosed or threatened to be disclosed, we could incur significant costs associated with remediation and the implementation of additional security measures, and may incur significant liability and financial loss, and be subject to regulatory scrutiny, investigations, proceedings, and penalties.

In addition, our financial institution 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 strategic 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.

While we maintain cybersecurity insurance, our insurance may be insufficient or may not cover all liabilities incurred by such attacks. We also cannot be certain that our insurance coverage will be adequate for data handling or data security liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies,

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including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results, and reputation.

We currently handle cross-border payments and plan to expand our ~~offering~~payments offerings to new customers and to make payments to new countries, creating a variety of operational challenges.

A component of our growth strategy involves our cross-border payments product and, ultimately, expanding our payments operations internationally. Although we do not currently ~~serve~~offer our payments products to customers outside the ~~United States,~~U.S., starting in 2018 we introduced cross-border payments through our relationship with Cambridge, ~~Mercantile,~~ and now offer our ~~United States-based~~U.S.-based customers the ability to disburse funds to over 130 ~~countries.~~countries with both Cambridge and Citibank’s WorldLink. 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.

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Our cross-border payments product and international operations strategy involve a variety of risks, including:



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~~information protection, and data security, and the authorized use of, or access to, commercial and personal information;



potential changes in trade relations, regulations, or laws;

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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.

If we invest substantial time and resources to further expand our cross-border payments offering and are unable to do so successfully and in a timely manner, our business and operating results may suffer.

~~Future acquisitions, strategic investments, partnerships, collaborations,~~Our card payment products generate interchange revenues which exposes us to potential variability in income and other risks.

Our Divvy card product generates revenues primarily from interchange paid by the supplier accepting cards on a transactional basis, which involve a variety of risks, including:



interchange income fluctuations due to the variability of card acceptance practices at supplier locations, and the resulting effect on our revenue;



changes in card network interchange rates or ~~alliances~~rules which could ~~be difficult~~dissuade new and existing card-accepting suppliers from continuing to ~~identify and integrate, divert the attention of management, disrupt our business, dilute stockholder value, and adversely affect our operating results and financial condition.~~

~~We may~~accept card payments;



declines in the ~~future seek~~number of active card-accepting suppliers due to ~~acquire~~concerns about cost or ~~invest~~operational complexity; and



unexpected changes in ~~businesses, products,~~card acceptance or ~~technologies that we believe could complement or expand~~card issuing rules which may impact our ~~platform, enhance our technical capabilities, or otherwise~~ability to offer growth opportunities. 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. this payment product.

In addition, we have no experience in acquiring other businesses, and we may not successfully identify desirable acquisition targets, or if we acquire additional businesses, we may not be able to integrate them effectively following the acquisition.

~~Acquisitions could also result in dilutive issuances~~a component of equity securities or the incurrence of debt, as well as unfavorable accounting treatment and exposure to claims and disputes by third parties, including intellectual property claims. We also may not generate sufficient financial returns to offset the costs and expenses related to any acquisitions.our growth strategy involves our virtual card payments products. In addition ~~if an acquired business fails~~ to ~~meet~~ our ~~expectations,~~Divvy card offerings, through our ~~business, operating results,~~relationship with Comdata, we offer Bill.com customers the ability to pay their vendors with a virtual credit card. We generate revenues from virtual card payments primarily from interchange, which also subjects us to

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many of the risks described above. We are continuing to develop strategies to convert both check and ~~financial condition may suffer.~~ACH vendor payments to virtual card payments. There is no guarantee that such efforts will be successful.

We use open source software in our products, which could subject us to litigation or other actions.

We use open source software in our products. From time to time, there have been claims challenging the ownership of open source software against companies that incorporate it into their products. As a result, we could be subject to lawsuits by parties claiming ownership of what we believe to be open source software. Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition, or require us to devote additional research and development resources to change our products. In addition, if we were to combine our proprietary software products with open source software in a certain manner under certain open source licenses, we could be required to release the source code of our proprietary software products. If we inappropriately use or incorporate open source software subject to certain types of open source licenses that challenge the proprietary nature of our products, we may be required to re-engineer such products, discontinue the sale of such products, or take other remedial actions.

If we fail to maintain and enhance our ~~brand,~~brands, our ability to expand our customer base will be impaired and our business, operating results, and financial condition may suffer.

We believe that maintaining and enhancing the Bill.com, ~~brand is~~Divvy and Invoice2go 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 ~~platform~~platforms 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 ~~brand~~brands 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.

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If we fail to adequately protect our proprietary rights, our competitive position could be impaired and we may lose valuable assets, generate less revenue and incur costly litigation to protect our rights.

Our success is dependent, in part, upon protecting our proprietary technology. We rely on a combination of patents, copyrights, trademarks, service marks, trade secret laws, and contractual provisions to establish and protect our proprietary rights. However, the steps we take to protect our intellectual property may be inadequate. While we have been issued patents in the ~~United States~~U.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.

We have been in the past, and may in the future be, subject to intellectual property disputes, which are costly and may subject us to significant liability and increased costs of doing business.

We have been in the past and may in the future become subject to intellectual property disputes. Lawsuits are time-consuming and expensive to resolve and they divert management’s time and attention. Although we carry insurance, our insurance may not cover potential claims of this type or may not be adequate to indemnify us for all liability that may be imposed. We cannot predict the outcome of lawsuits and cannot assure you that the results of any such actions will not have an adverse effect on our business, operating results, or financial condition.

The software industry is characterized by the existence of many patents, copyrights, trademarks, trade secrets, and other intellectual and proprietary rights. Companies in the software industry are often required to defend against litigation claims based on allegations of infringement or other violations of intellectual property rights. Our technologies may not be able to withstand any third-party claims against their use. In addition, many companies have the capability to dedicate

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substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them. Any litigation may also involve patent holding companies or other adverse patent owners that have no relevant product revenue, and therefore, our patents may provide little or no deterrence as we would not be able to assert them against such entities or individuals. If a third party is able to obtain an injunction preventing us from accessing such third-party intellectual property rights, or if we cannot license or develop alternative technology for any infringing aspect of our business, we would be forced to limit or stop sales of our software or cease business activities related to such intellectual property. Any inability to license third-party technology in the future would have an adverse effect on our business or operating results and would adversely affect our ability to compete. We may also be contractually obligated to indemnify our customers in the event of infringement of a third party’s intellectual property rights. Responding to such claims, regardless of their merit, can be time consuming, costly to defend, and damaging to our reputation and brand.

Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement, data protection, and other losses.

Our agreements with strategic 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-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.

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Changes to payment card networks ~~fees~~rules or ~~rules~~fees could harm our business.

We are required to comply with Mastercard, American Express, and Visa payment card network operating rules in connection with ~~our~~Bill.com’s virtual card payments service and our subscription billing engine. We have agreed to reimburse our 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 additional operating rules. As a result of any violations of rules, new rules being implemented, or increased fees, we could lose our ability to make payments using ~~virtual~~ cards, or such payments could become prohibitively expensive for us or for our customers. If we are unable to make customer payments to vendors using virtual cards, our business would be adversely affected. In addition, Divvy is contractually obligated to comply 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, Divvy could lose its ability to act as a card program manager.

Our business is subject to extensive government regulation and oversight. Our failure to comply with extensive, complex, overlapping, and frequently changing rules, regulations, and legal interpretations could materially harm our business.

Our success and increased visibility may result in increased regulatory oversight and enforcement and more restrictive rules and regulations that apply to our business. We are subject to a wide variety of local, state, federal, and international laws, rules, regulations, licensing schemes, and industry standards in the ~~United States~~U.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 ~~changes~~change 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

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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.

Although we have a compliance program focused on the laws, rules, regulations, licensing schemes, and industry standards that we have assessed as applicable to our business and we are continually investing more in this program, there can be no assurance that our employees or contractors will not violate such laws, rules, regulations, licensing schemes, and industry standards. Any failure or perceived failure to comply with existing or new laws, rules, regulations, licensing schemes, industry standards, or orders of any governmental authority (including changes to or expansion of the interpretation of those laws, regulations, standards or orders), may:



subject us to significant fines, penalties, criminal and civil lawsuits, license suspension or revocation, forfeiture of significant assets, audits, inquiries, whistleblower complaints, adverse media coverage, investigations, and enforcement actions in one or more jurisdictions levied by federal, state, local or foreign regulators, state attorneys general, and private plaintiffs who may be acting as private attorneys general pursuant to various applicable federal, state, and local laws;



result in additional compliance and licensure requirements;



increase regulatory scrutiny of our business; and



restrict our operations and force us to change our business practices or compliance program, make product or operational changes, or delay planned product launches or improvements.

The complexity of U.S. federal and state regulatory and enforcement regimes, coupled with the scope of our international operations and the evolving regulatory environment, could result in a single event giving rise to many overlapping investigations and legal and regulatory proceedings by multiple government authorities in different jurisdictions.

Any of the foregoing could, individually or in the aggregate, harm our reputation as a trusted provider, damage our brands and business, cause us to lose existing customers, prevent us from obtaining new customers, require us to expend significant funds to remedy problems caused by breaches and to avert further breaches, expose us to legal risk and potential liability, and adversely affect our results of operations and financial condition.

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We may require additional capital to support the growth of our business, and this capital might not be available on acceptable terms, if at all.

We have funded our operations since inception primarily through equity and debt financings, sales of subscriptions to our products, and usage-based transaction fees. We cannot be certain when or if our operations will generate sufficient cash to fully fund our ongoing operations or the growth of our business. We intend to continue to make investments to support our business, which may require us to engage in equity or debt financings to secure additional funds. Additional financing may not be available on terms favorable to us, if at all. If adequate funds are not available on acceptable terms, we may be unable to invest in future growth opportunities, which could harm our business, operating results, and financial condition. If we incur additional debt, the debt holders would have rights senior to holders of common stock to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock. Furthermore, if we issue additional equity securities, including in connection with merger and acquisition transactions, stockholders will experience ~~dilution, and the~~dilution. In addition, new equity securities could have rights senior to those of our common stock. 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, depression or other sustained adverse market event resulting from the COVID-19 pandemic 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.

Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.

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As of June 30, ~~2019,~~2021, we had ~~U.S. federal~~ net operating loss (NOL) carryforwards of approximately ~~$104.2~~$867.6 million and ~~state net operating loss carryforwards of approximately $71.3 million. The~~$599.5 million for federal and ~~material~~ state ~~net operating loss~~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, ~~2019,~~2021, approximately $761.9 million of the federal NOL carryforwards do not expire and will carry forward indefinitely until utilized. As of June 30, 2021, we had ~~U.S. federal~~ research and development tax credit carryforwards of approximately ~~$4.7~~$23.6 million and $15.8 million for federal and state ~~research~~tax purposes, respectively. If not utilized, the federal tax credits will expire at various dates beginning in 2028. The state tax credits do not expire and ~~development tax credit carryforwards of approximately $4.3 million.~~will carry forward indefinitely until utilized. In general, under Sections 382 and 383 of the ~~United States~~U.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.~~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 ~~this offering or~~ 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.

~~The Tax Cuts and Jobs Act (Tax Act) was enacted on December 22, 2017 and significantly reforms the Code. The Tax Act, among other things, includes~~ In addition, any future changes ~~to U.S. federal tax rates and the rules governing net operating loss carryforwards. For federal NOLs arising~~ in tax ~~years beginning after December 31, 2017, the Tax Act limits a taxpayer’s~~laws could impact our ability to utilize ~~NOL carryforwards to 80% of taxable income. In addition, federal~~ NOLs ~~arising~~ in future years and may result in greater tax years ending after December 31, 2017 can be carried forward indefinitely, but carryback is generally prohibited. NOLs generated in tax years beginning before January 1, 2018 will not be subject to the taxable income limitation,liabilities than we would otherwise incur and ~~NOLs generated in tax years ending before January 1, 2018 will continue to have a two-year carryback~~adversely affect our cash flows and twenty-year carryforward period. Deferred tax assets for NOLs will need to be measured at the applicable tax rate in effect when the NOL is expected to be utilized. The changes in the carryforward/ carryback periods as well as the new limitation on use of NOLs may significantly impact our valuation allowance assessments for NOLs generated after December 31, 2017.financial position.

We could be required to collect additional sales taxes or be subject to other tax liabilities that may increase the costs our customers would have to pay for our offering and adversely affect our operating results.

The vast majority of states have considered or adopted laws that impose tax collection obligations on out-of-state companies. States where we have nexus may require us to calculate, collect, and remit taxes on sales in their jurisdiction. Additionally, the Supreme Court of the ~~United States~~U.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 ~~tax~~taxes in states ~~in which~~where 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 ~~effect~~affect our business and operating results.

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Changes in our effective tax rate or tax liability may adversely ~~effect~~affect our operating results.

Our effective tax rate could increase due to several factors, including:



changes in the relative amounts of income before taxes in the various U.S. and international jurisdictions in which we operate due to differing statutory tax rates in various jurisdictions;



changes in tax laws, tax treaties, and regulations or the interpretation of them, including the 2017 Tax Act as modified by the CARES Act;



changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies, and the economic and political environments in which we do business;



the outcome of current and future tax audits, examinations, or administrative appeals; and



limitations or adverse findings regarding our ability to do business in some jurisdictions.

Any of these developments could adversely affect our operating results.

Natural catastrophic events, pandemics, and man-made problems such as power-disruptions, computer viruses, data security breaches, and terrorism may disrupt our business.

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Natural disasters, pandemics such as COVID-19, or other catastrophic events 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 ~~Palo Alto,~~the San Francisco Bay Area in California and in Draper, Utah and a smaller presence in Houston, Texas and Sydney, Australia, and our data centers are located in California and Arizona. The west coast of the ~~United States~~U.S. contains active earthquake zones and the Houston area frequently experiences significant hurricanes. 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.

Additionally, as computer malware, viruses, and computer hacking, fraudulent use attempts, and phishing attacks have become more prevalent, we, and third parties upon which we rely, face increased risk in maintaining the performance, reliability, security, and availability of our solutions and related services and technical infrastructure to the satisfaction of our customers. Any computer malware, viruses, computer hacking, fraudulent use attempts, phishing attacks, or other data security breaches related to our network infrastructure or information technology systems or to computer hardware we lease from third parties, could, among other things, harm our reputation and our ability to retain existing customers and attract new customers.

In addition, the insurance we maintain may be insufficient to cover our losses resulting from disasters, cyber-attacks, or other business interruptions, and any incidents may result in loss of, or increased costs of, such insurance.

~~We are obligated to develop and maintain proper and effective internal control over financial reporting, and if~~If we fail to develop and maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (Exchange Act), the Sarbanes-Oxley Act, ~~of 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, our remediation efforts

We are ~~still ongoing and there can be no assurance that we will not experience additional material weaknesses in the future.~~

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~~We will also be~~ 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.

This assessment will need 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 that~~reporting. Because we are no longer an “emerging growth company” as of June 30, 2021, 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 to be filed~~commencing with the ~~SEC following the later of the date we are deemed~~fiscal year ended June 30, 2021, which has, and will continue 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 ~~incur~~restate our financial statements, which could cause investors to lose confidence in our reported financial information, have a negative effect on the ~~expense~~trading price of ~~remediation.~~our common stock, and result in additional costs to remediate such material weaknesses. We will be required to disclose changes made in our internal control and procedures on a

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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.

We 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.

If we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm ~~is unable to express~~issues 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.

We have identified a material weakness in our internal control over financial reporting, and if our remediation of such material weakness is not effective, or if we fail to develop and maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.

In the course of preparing our financial statements for fiscal 2021, we identified a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness identified pertains to the accounting for our business combination with Divvy, including 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 design and operating effectiveness of select management review controls.

To address our material weakness, we will re-evaluate the scope, level of precision and the personnel assigned for conducting the reviews over our analyses supporting the accounting for business combinations. We also plan to adopt policies on retaining documentation that supports the design and operating effectiveness of key management review controls relating to future business combinations. We will not be able to fully remediate this material weakness until these steps have been completed and have been operating effectively for a sufficient period of time. See Part II, Item 9A “Controls and Procedures” of our Annual Report on Form 10-K for fiscal 2021 for additional information about this material weakness and our remediation efforts.

If we are unable to further implement and maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements and adversely impact our stock price. If we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be adversely affected and we could become subject to litigation or investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.

Furthermore, we cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the control deficiencies that led to our material weaknesses in our internal control over financial reporting or that they will prevent or avoid potential future material weaknesses. Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business, including as a result of our recent acquisition of Divvy and Invoice2go. Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods.

Any failure to implement and maintain effective internal control over financial reporting could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we are required to include in our periodic reports that are filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely

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have a negative effect on the trading price of our common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the NYSE.

Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the ~~United States.~~U.S.

U.S. generally accepted accounting principles (GAAP) is subject to interpretation by the Financial Accounting Standards Board (FASB), the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported operating results and financial condition and could affect the reporting of transactions already completed before the announcement of a change.

If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our operating results could be adversely affected.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the ~~condensed~~ consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Operating Results—Critical Accounting Policies and Estimates.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant estimates and judgments involve the identification of performance obligations in revenue recognition, ~~the~~ valuation of ~~the stock- based awards, including the determination~~assets acquired and liabilities assumed in a business combination, estimation of fair value of ~~common~~a 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.

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Any future litigation against us could be costly and time-consuming to defend.

In addition to intellectual property litigation, we have in the past and may in the future become subject to legal proceedings and claims that arise in the ordinary course of business, such as claims brought by our customers in connection with commercial disputes, employment claims made by our current or former employees, or claims for reimbursement following misappropriation of customer data. Litigation might result in substantial costs and may divert management’s attention and resources, which might seriously harm our business, overall financial condition, and operating results. Insurance might not cover such claims, might not provide sufficient payments to cover all the costs to resolve one or more such claims, and might not continue to be available on terms acceptable to us. A claim brought against us that is uninsured or underinsured 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.

Our 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, ~~included in the Prospectus or this Quarterly Report on Form 10-Q,~~ 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~~the markets in which we operate depend on a number of factors, including the cost, performance, and perceived value associated with our ~~platform~~platforms and those of our competitors. Even if the ~~market~~markets in which we compete ~~meets~~meet the size estimates and growth forecasted, ~~in the Prospectus,~~ 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.

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We are subject to governmental laws and requirements regarding economic and trade sanctions, anti-money laundering, and counter-terror financing that could impair our ability to compete in international markets or subject us to criminal or civil liability if we violate them.

Although we currently only ~~operate~~offer our payment and corporate card products to customers in the ~~United States,~~U.S., Invoice2go has international subscribers in ~~the future~~approximately 150 countries, including Australia and several EU countries. As we ~~will seek~~continue to expand internationally ~~and~~we 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. As part of our compliance efforts, we scan our customers against OFAC and other ~~watchlists. While we offer services only to customers domiciled in the United States, our application could be accessed from anywhere in the world.~~watch lists. If our ~~service is~~services 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 around the world that prohibit, among other things, our involvement in transferring the proceeds of criminal activities. In the United States, most of our services are subject to anti-money laundering laws and regulations, including the Bank Secrecy Act, as amended (BSA), and similar laws and regulations. The BSA, among other things, requires money transmitters 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 and globally 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. 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.

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We are subject to anti-corruption, anti-bribery, and similar laws, and non-compliance with such laws can subject us to criminal or civil liability and harm our business.

We are subject to the FCPA, U.S. domestic bribery laws, and other anti-corruption laws, including Australia’s anti-bribery laws. ~~Anti- corruption~~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 operations~~offer our payment and corporate card products to customers in the ~~United States, as~~U.S., Invoice2go has international subscribers in approximately 150 countries, including Australia and several EU countries. 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. In 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.

We cannot assure you that all of our employees and agents will not take actions in violation of our policies and applicable law, for which we may be ultimately held responsible. As we increase our international business, our risks under these laws may increase.

Detecting, investigating, and resolving actual or alleged violations of anti-corruption laws can require a significant diversion of time, resources, and attention from senior management. In addition, noncompliance with anti-corruption or anti-bribery laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, enforcement actions, fines, damages, other civil or criminal penalties, injunctions, suspension or debarment from contracting with certain persons, reputational harm, adverse media coverage, and other collateral consequences. If any subpoenas are received or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal proceeding, our business, operating results, and financial condition could be materially harmed. In addition, responding to any action will likely result in a materially significant diversion of management’s attention and resources and significant defense costs and other professional fees.

Our Senior Secured Credit Facilities Credit Agreement provides our lender 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 lender 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 lender 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.

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If we cannot maintain our company culture as we grow, our success and our business may be harmed.

We believe our culture has been a key contributor to our success to date and that the critical nature of the platform that we provide promotes a sense of greater purpose and fulfillment in our employees. Inorganic growth through mergers and acquisitions may pose significant challenges to assimilating the company cultures of acquired companies. Any failure to preserve our culture could negatively affect our ability to retain and recruit personnel, which is critical to our growth, and to effectively focus on and pursue our corporate objectives. As we grow and develop the infrastructure of a public company, we may find it difficult to maintain these important aspects of our culture. If we fail to maintain our company culture, our business and competitive position may be adversely affected.

~~We expect fluctuations in~~Risks Related to the 2027 Notes and 2025 Notes

Our debt service obligations, including the Notes, may adversely affect our financial condition and results ~~making it difficult~~of operations.

As of September 30, 2021, we had $1.15 billion aggregate principal amount of the 2025 Notes outstanding due on December 1, 2025 and $575.0 million aggregate principal amount of the 2027 Notes outstanding due on April 1, 2027, as described in Note 9 to ~~project~~the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Our ability to make payments of the principal of, to pay interest on or to refinance our indebtedness, including the 2027 Notes and 2025 Notes (collectively, the Notes), depends on our future ~~results,~~performance, which is subject to economic, financial, competitive, and ~~if we fail to meet the expectations of securities analysts or investors with respect to~~other factors beyond our ~~operating results, our stock price and the value of your investment could decline.~~

control. Our ~~operating results have fluctuated in the past and are expected to fluctuate~~business may not generate cash flow from operations in the future ~~due~~sufficient to ~~a variety of factors, many of which~~service our debt and make necessary capital expenditures. If we are ~~outside of~~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 ~~control. As a result, our past results~~financial condition at such time. We may not be ~~indicative~~able 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.

In addition, our indebtedness, combined with our other financial obligations and contractual commitments, could have other important consequences. For example, it could:



make us more vulnerable to adverse changes in general U.S. and worldwide economic, industry, and competitive conditions and adverse changes in government regulation;

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limit our flexibility in planning for, or reacting to, changes in our business and our industry;

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place us at a disadvantage compared to our competitors who have less debt;

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limit our ability to borrow additional amounts to fund acquisitions, for working capital, and for other general corporate purposes; and

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make an acquisition of our company less attractive or more difficult.

Any of these factors could harm our business, results of operations, and financial condition. In addition, if we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase. We are also required to comply with the covenants set forth in the Indentures governing the Notes. Our ability to comply with these covenants may be affected by events beyond our control. If we breach any of the covenants and do not obtain a waiver from the note holders or lenders, then, subject to applicable cure periods, any outstanding indebtedness may be declared immediately due and payable. In addition, changes by any rating agency to our credit rating may negatively impact the value and liquidity of our securities. Downgrades in our credit ratings could restrict our ability to obtain additional financing in the future and could affect the terms of any such financing.

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We may not have the ability to raise the funds necessary for cash settlement upon conversion of the Notes or to repurchase the Notes for cash upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion of the Notes or to repurchase the Notes.

Holders of the Notes have the right to require us to repurchase their notes upon the occurrence of a fundamental change (as defined in the Indentures for the 2025 Notes and 2027 Notes, respectively) at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plusaccrued and unpaid special interest, if any. In addition, upon conversion of the Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Notes being converted. However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of the Notes surrendered therefor or the Notes being converted. In addition, our ability to repurchase the Notes or to pay cash upon conversions of the Notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness.

In addition to the Notes, we and our subsidiaries may incur substantial additional debt in the future, subject to the restrictions contained in our current and future debt instruments, some of which may be secured debt. We are not restricted under the terms of the Indentures governing the Notes from incurring additional debt, securing existing or future debt, recapitalizing our debt or taking a number of other ~~risks described herein, factors~~actions that ~~may affect our operating results include~~could have the ~~following:~~

~~fluctuations in demand for or pricing~~effect of ~~our platform;~~

diminishing our ability to ~~attract new customers;~~make payments on the Notes when due.

~~our ability~~Our failure to ~~retain and grow engagement with~~repurchase the Notes at a time when the repurchase is required by the applicable Indenture or to pay any cash payable on future conversions of the Notes as required by such Indenture would constitute a default under that Indenture. A default under the Indenture or the fundamental change itself could also lead to a default under agreements governing our existing ~~customers;~~or future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes or make cash payments upon conversions thereof.

The conditional conversion feature of the Notes, when triggered, may adversely affect our ~~ability to expand our relationships with our accounting firm partners,~~ financial ~~institution partners,~~condition and ~~accounting software partners, or identify and attract new partners;~~operating results.

~~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~~Prior to the ~~application~~close of ~~artificial intelligence-based services;~~

~~our failure~~business on the business day immediately preceding September 1, 2025 and January 1, 2027, the holders of the 2025 Notes and 2027 Notes, respectively, may elect to ~~adapt to new forms of payment that become widely accepted, including cryptocurrency;~~

convert their notes during any calendar quarter (and only during such calendar quarter) if 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;~~

~~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;~~

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~~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 due to the increased costs of operating as a public company. If our quarterly operating results fall below the expectations of investors and securities analysts who follow our stock, thelast 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 triggered as of September 30, 2021. 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.

The Capped Calls may affect the value of our Notes and our common stock.

In connection with the sale of each of the 2025 Notes and the 2027 Notes, we entered into privately negotiated Capped Call transactions (collectively, the Capped Calls) with certain financial institutions (option counterparties). The Capped Call transactions are expected generally to reduce the potential dilution upon conversion of the Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap.

The option counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the 2025 Notes and the 2027 Notes, respectively (and are likely to do so following any conversion, repurchase, or redemption of the Notes, to the extent we exercise the relevant election under the Capped Calls). This activity could also cause or avoid an increase or a decrease in the market price of our common stock or the Notes, which could affect note holders’ ability to convert the Notes and, to

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the extent the activity occurs during any observation period related to a conversion of the Notes, it could affect the number of shares and value of the consideration that note holders will receive upon conversion of the Notes.

We do not make any representation or prediction as to the direction or magnitude of any potential effect that the transactions described above may have on the price of the Notes or our common stock. In addition, we do not make any representation that the option counterparties will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

We are subject to counterparty risk with respect to the Capped Calls.

The option counterparties are financial institutions, and we ~~could face costly lawsuits, including securities class action suits.~~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.

Risks Related to Ownership of Our Common Stock

The stock price of our common stock has been, and will likely continue to be volatile, and you may lose part or all of your investment.

The market for our common stock has been, and will likely continue to be, volatile. In addition to the factors discussed in this ~~Quarterly Report on Form 10-Q,~~report, the market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:



overall performance of the equity markets;



actual or anticipated fluctuations in our revenue and other operating results;



changes in the financial projections we may provide to the public or our failure to meet these projections;



failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;



recruitment or departure of key personnel;

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the economy as a whole and market conditions in our industry;

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the global macroeconomic impact of the COVID-19 pandemic;

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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;

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acquisitions, strategic partnerships, joint ventures, or capital commitments;



new laws or regulations or new interpretations of existing laws or regulations applicable to our business;

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

lawsuits threatened or filed against us, litigation involving our industry, or both;

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developments or disputes concerning our or other parties’ products, services or intellectual property rights;



changes in accounting standards, policies, guidelines, interpretations, or principles;

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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;

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other events or factors, including those resulting from war, incidents of terrorism, or responses to these events;



the expiration of contractual lock-up ~~or market stand-off~~ agreements; and



sales of shares of our common stock by us or our stockholders.

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In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies, and technology companies in particular, have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.

~~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 December 31, 2019, our executive officers, directors, and current beneficial owners of 5% or more of our common stock, in the aggregate, beneficially own approximately 61% 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.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and affect the market price of our common stock.

Provisions in our restated certificate of incorporation and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management. Our restated certificate of incorporation and restated bylaws include provisions that:



authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our common stock;



require that any action to be taken by our stockholders be affected at a duly called annual or special meeting and not by written consent;



specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, or our chief executive officer;



establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors;

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establish that our board of directors is divided into three classes, with each class serving ~~three- year~~three-year staggered terms;

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prohibit cumulative voting in the election of directors;

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provide that our directors may be removed for cause only upon the vote of sixty-six and two-thirds percent (66 2/3%) of our outstanding shares of common stock;



provide that vacancies on our board of directors may be filled only by a majority vote of directors then in office, even though less than a quorum; and

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

require the approval of our board of directors or the holders of at least sixty-six and two-thirds percent (66 2/3%) of our outstanding shares of common stock to amend our bylaws and certain provisions of our certificate of incorporation.

In addition, our restated certificate of incorporation provides that the Court of Chancery of the State of Delaware, to the fullest extent permitted by law, will be the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law (DGCL), our restated certificate of incorporation, or our restated bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees. This exclusive forum provision will not apply to claims that are vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery of the State of Delaware, or for which the Court of Chancery of the State of Delaware does not have subject matter jurisdiction. For instance, the provision would not preclude the filing of claims brought to enforce any liability or duty created by the ~~Securities~~ Exchange Act ~~of 1934, as amended,~~ or ~~the~~ Securities Act ~~of 1933, as amended (Securities Act)~~ or the rules and regulations thereunder in federal court.

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Moreover, Section 203 of the DGCL may discourage, delay, or prevent a change in control of our company. Section 203 imposes certain restrictions on mergers, business combinations, and other transactions between us and holders of 15% or more of our common stock.

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. As a result, our condensed 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 this offering, (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.

We 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.

We have incurred and will continue to incur increased costs as a result of operating as a public company, and our management is required to devote substantial time to compliance with our public company responsibilities and corporate governance practices.

As a public company, we will incur significant legal, accounting, and other expenses that we did not incur as a private company, which we expect to further ~~increase 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.

Our management team has limited experience managing a public company.

Our management team has limited experience managing a publicly traded company, interacting with public company investors and securities analysts, and complying with the increasingly complex laws pertaining to public companies. These new obligations and constituents require significant attention from our management team and could divert their attention away from the day-to-day management of our business, which could harm our business, operating results, and financial condition.

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We do not intend to pay dividends for the foreseeable ~~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.~~future.

We have never declared or paid any cash dividends on our capital stock, and we do not intend to pay any cash dividends in the foreseeable future. ~~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.

If securities or industry analysts do not publish research or publish unfavorable or inaccurate research about our business, our stock price and trading volume could decline.

Our stock price and trading volume is heavily influenced by the way analysts and investors interpret our financial information and other disclosures. If securities or industry analysts do not publish research or reports about our business, downgrade our common stock, or publish negative reports about our business, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our stock price to decline and could decrease the trading volume of our common stock.

~~Future sales~~84

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Sales of substantial amounts of our common stock in the public ~~market~~markets, 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.~~decline and may make it more difficult for you to sell your common stock at a time and price that you deem appropriate.

~~Sales~~The market price of our common stock could decline as a result of sales of a ~~substantial~~large number of shares of our common stock in the ~~public or the~~market. The perception that these sales might occur ~~could depress~~may also cause the market price of our common stock ~~and could impair our ability~~ to ~~raise capital through the sale~~decline. We had a total of ~~additional equity securities. We are unable to predict the effect that such sales may have on the prevailing market price~~102,438,944 shares of our common ~~stock.~~

stock outstanding as of September 30, 2021. All shares of our ~~directors~~common stock are freely tradable, generally without restrictions or further registration under the Securities Act, subject to certain exceptions for shares held by our “affiliates” as defined in Rule 144 under the Securities Act and ~~officers and the holders of substantially all of our capital stock and securities convertible into our capital stock~~certain shares that are subject to lock-up agreements ~~that restrict their ability to transfer shares of~~in connection with our capital stock for 180 days from the date of the Prospectus. These lock-up agreements limit the number of shares of capital stock that may be sold immediately following this offering. Subject to certain limitations, approximately 60,730,863 shares of common stock will become eligible for sale upon expiration of the 180-day lock-up period. Goldman Sachs & Co. LLC may, in their sole discretion, permit our stockholders who are subject to these lock-up agreements to sell shares prior to the expiration of the lock-up agreements.recent acquisitions.

In addition, there were ~~12,126,114~~8,656,831 shares of common stock issuable upon the exercise of options outstanding and vesting of RSUs as of ~~December 31, 2019.~~September 30, 2021. 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 statement 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.

~~Based on shares outstanding as of December 31, 2019,~~Moreover, certain holders ~~of up to approximately 52,560,875 shares, or 74%,~~ 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.

WeIn addition, we have in the past, and may in the future, issue our shares of common stock or securities convertible into our common stock from time to time in connection with financings, acquisitions, investments, or otherwise. We also expect to grant additional equity awards to employees and directors under our 2019 Equity Incentive Plan and rights to purchase our common stock under our 2019 Employee Stock Purchase Plan. Any such ~~issuance~~issuances could result in substantial dilution to our existing stockholders and cause the trading price of our common stock to decline.

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Item 2: Unregistered Sales of ~~Equi~~tyEquity Securities and Use of Proceeds

Recent Sales of Unregistered Equity Securities

~~From October 1, 2019 through December 12, 2019 (the date~~On September 9, 2021, we issued a total of ~~the filing~~1,788,372 shares 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~~unregistered common stock ~~upon~~to stockholders of Invoice2go in connection with the ~~exercise~~acquisition of ~~options under our 2006 Equity Incentive Plan (2006 Plan)~~Invoice2go. The issuance 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~~sale of the securities ~~described above~~ were ~~deemed to be~~ exempt from registration under the Securities Act ~~in reliance on~~of 1933, as amended (the “Act”) pursuant to Regulation S, Section ~~4(2)~~4(a)(2) of the ~~Securities~~ Act orand Rule 506 of 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.thereunder.

~~Use of Proceeds~~

On 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) (Prospectus)~~. 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.

~~There has been no material change in the planned use of proceeds from our IPO as described in the Prospectus.~~

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

6885

Table of Contents

Item 6: ~~Exhibi~~tsExhibits

Incorporated by Reference

Exhibit

Number

Description

Form

File No.

Exhibit

Filing Date

Filed

Herewith

Description

Form

File No.

Exhibit

Number

Filing Date

Filed

Herewith

2.1

Agreement and Plan of Merger, dated July 16, 2021, between the Registrant and Invoice2go, Inc.

S-3ASR

333-259419

2.1

09/09/2021

3.1

Restated Certificate of Incorporation

Amended and Restated Bylaws

8-K

001-39149

3.1

09/30/2020

3.2

Restated Bylaws

4.1

Indenture, dated as of September 24, 2021, between the Registrant and Wells Fargo Bank, National Association

8-K

001-39149

4.1

09/24/2021

10.1

Form of Indemnification Agreement by and between Bill.com and each of its directors and executive officers

S-1

333-234730

10.1

November 15, 2019

10.1†

DivvyPay, Inc. 2016 Equity Incentive Plan

S-8

333-259178

99.3

08/30/2021

10.2

Bill.com, Inc. 2006 Equity Incentive Plan, including form of equity agreements thereunder

S-1

333-234730

10.2

November 15, 2019

10.3

Bill.com Holdings, Inc. 2016 Equity Incentive Plan, including form of equity agreements thereunder

S-1

333-234730

10.3

November 15, 2019

10.4

Bill.com Holdings, Inc. 2019 Equity Incentive Plan, including form of equity agreements thereunder

S-1/A

333-234730

10.4

December 2, 2019

10.5

Bill.com Holdings, Inc. 2019 Employee Stock Purchase Plan, and forms of subscription agreement thereunder

S-1/A

333-234730

10.5

December 2, 2019

10.6

Office Lease Between US ER America Center 4, LLC (as Landlord) and Bill.com LLC (as Tenant)

10.2†

Invoice2go, Inc. 2014 Stock Plan

S-8

333-259420

99.1

09/09/2021

31.1

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

XBRL Instance Document

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.

101.SCH

XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q 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.

† Indicates management contract or compensatory plan.

†	~~Registrant is requesting or has previously been granted confidential treatment with respect to certain portions of this Exhibit.~~

* The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q 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.

Table of Contents

~~SIGNATURES~~SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


November 5, 2021	By:	/s/ René Lacerte
~~February 11, 2020~~(Date)	~~By:~~	~~/s/~~ René Lacerte
~~(Date)~~		~~René Lacerte~~Chief Executive Officer
		~~Chief~~(Principal Executive ~~Officer~~Officer)
		~~(Principal Executive Officer)~~

~~February 11, 2020~~November 5, 2021	By:	/s/ John Rettig
(Date)		John Rettig
		Chief Financial Officer and Executive Vice President, Finance and Operations
		(Principal Financial and Accounting Officer)

7087


Delaware		83-2661725

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

~~1810 Embarcadero Road,~~ ~~Palo Alto,~~ 6220 America Center Drive, Suite 100, San Jose, CA		~~94303~~95002

(Address of principal executive offices)		(Zip Code)


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


Large accelerated filer	☐☒	Accelerated filer	☐

Non-accelerated filer	☒☐	Smaller reporting company	☐

Emerging growth company	☒☐


		Page
Special Note Regarding Forward-Looking Statements		1

Part 1. FINANCIAL INFORMATION		3
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets ~~as of December 31, 2019 and June 30, 2019~~	3
	Condensed Consolidated Statements of Operations ~~for the Three and Six Months Ended December 31, 2019 and 2018~~	4
	Condensed Consolidated Statements of Comprehensive ~~Income (Loss) for the Three and Six Months Ended December 31, 2019 and 2018~~Loss	5
	Condensed Consolidated Statements of ~~Redeemable Convertible Preferred Stock and~~ Stockholders' Equity ~~(Deficit) for the Three and Six Months Ended December 31, 2019 and 2018~~	6
	Condensed Consolidated Statements of Cash Flows ~~for the Six Months Ended December 31, 2019 and 2018~~	87
	Notes to Condensed Consolidated Financial Statements	98
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2231
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3845
Item 4.	Controls and Procedures	3947

Part II. OTHER INFORMATION		49
Item 1.	Legal Proceedings	4149
Item 1A.	Risk Factors	4149
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6885
Item 3.	Defaults Upon Senior Securities	6885
Item 4.	Mine Safety Disclosures	6885
Item 5.	Other Information	6885
Item 6.	Exhibits	6986
	Signatures	7087


	December 31,			June 30,			September 30,			June 30,
	2019			2019			2021			2021
ASSETS
Current assets:
Cash and cash equivalents	$	314,894		$	90,306		$	2,013,433		$	509,615
Short-term investments		68,135			71,969			821,554			655,314
Accounts receivable, net		4,791			4,398			19,815			18,222
Unbilled revenue		5,909			4,795
Acquired card receivables, net								174,338			147,093
Prepaid expenses and other current assets		15,768			12,326			71,551			67,195
Funds held for customers		1,491,763			1,329,306			2,432,521			2,208,598
Total current assets		1,901,260			1,513,100			5,533,212			3,606,037
Non-current assets:
Operating lease right-of-use assets, net								78,930			71,925
Property and equipment, net		7,511			6,557			51,142			48,902
Intangible assets, net								491,888			417,341
Goodwill								2,354,812			1,772,043
Other assets		6,353			6,641			54,221			52,925
Total assets	$	1,915,124		$	1,526,298		$	8,564,205		$	5,969,173

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:						��
Accounts payable	$	6,018		$	5,063		$	13,142		$	11,904
Accrued compensation and benefits		6,379			4,333			18,176			20,287
Other accrued and current liabilities		9,872			6,556
Redeemable convertible preferred stock warrant liabilities	—				688
Deferred revenue		4,274			3,469			21,328			12,848
Other accruals and current liabilities								79,296			72,022
Convertible senior notes, net								1,132,793			—
Customer fund deposits		1,491,763			1,329,306			2,432,521			2,208,598
Total current liabilities		1,518,306			1,349,415			3,697,256			2,325,659
Deferred revenue, non-current		2,091			1,786
Non-current liabilities:
Deferred revenue								2,640			2,926
Operating lease liabilities								85,722			86,639
Borrowing from credit facilities, net								79,014			79,534
Convertible senior notes, net								560,113			909,847
Deferred income tax liability								3,877			9,090
Other long-term liabilities		1,375			1,447			26,372			25,888
Total liabilities		1,521,772			1,352,648			4,454,994			3,439,583
Commitments and contingencies (Note 11)
Redeemable convertible preferred stock: none authorized, issued and outstanding at December 31, 2019; 106,090 shares authorized, and 52,435 shares issued and outstanding at June 30, 2019	—				276,307
Stockholders' equity (deficit):
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 and 169,300 shares authorized; 72,267 and 8,154 shares issued and outstanding at December 31, 2019 and June 30, 2019, respectively		2			1
Commitments and contingencies (Notes 13 and 14)
Stockholders' equity:
Common stock								2			2
Additional paid-in capital		524,260			14,672			4,403,500			2,777,155
Accumulated other comprehensive income		20			326
Accumulated other comprehensive loss								(139	)		(100	)
Accumulated deficit		(130,930	)		(117,656	)		(294,152	)		(247,467	)
Total stockholders' equity (deficit)		393,352			(102,657	)
Total liabilities, redeemable convertible preferred stock and stockholders' equity (deficit)	$	1,915,124		$	1,526,298
Total stockholders' equity								4,109,211			2,529,590
Total liabilities and stockholders' equity							$	8,564,205		$	5,969,173


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


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


	Three months ended December 31,						Six months ended December 31,						Three months ended September 30,
	2019			2018			2019			2018			2021			2020
Revenue													$	116,403		$	46,209
Subscription and transaction fees	$	32,964		$	20,444		$	61,512		$	38,614
Interest on funds held for customers		6,116			5,555			12,748			9,809
Total revenue		39,080			25,999			74,260			48,423
Cost of revenue		9,787			7,175			18,934			13,516			29,835			12,106
Gross profit		29,293			18,824			55,326			34,907			86,568			34,103
Operating expenses
Research and development		12,992			6,154			24,507			11,578			42,472			17,786
Sales and marketing		11,491			6,856			21,758			12,800			62,312			12,908
General and administrative		12,748			6,404			23,283			12,341			57,935			17,190
Total operating expenses		37,231			19,414			69,548			36,719			162,719			47,884
Loss from operations		(7,938	)		(590	)		(14,222	)		(1,812	)		(76,151	)		(13,781	)
Other income, net		360			686			999			1,003
(Loss) income before (benefit from) provision for income taxes		(7,578	)		96			(13,223	)		(809	)
(Benefit from) provision for income taxes		—			(6	)		51			(27	)
Net (loss) income	$	(7,578	)	$	102		$	(13,274	)	$	(782	)
Other (expense) income, net														(3,475	)		830
Loss before benefit from income taxes														(79,626	)		(12,951	)
Benefit from income taxes														(3,941	)		—
Net loss													$	(75,685	)	$	(12,951	)

Net (loss) income per share attributable to common stockholders:
Net loss per share attributable to common stockholders:
Basic and diluted	$	(0.34	)	$	—		$	(0.87	)	$	(0.10	)	$	(0.79	)	$	(0.16	)
Weighted-average number of common shares used to compute net income (loss) per share attributable to common stockholders:
Weighted-average number of common shares used to compute net loss per share attributable to common stockholders:
Basic and diluted		22,306			7,739			15,268			7,581			95,892			80,216

	Three months ended December 31, 2019
	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 September 30, 2019		52,435		$	276,307			8,296	$	1	$	17,242	$	128		$	(123,352	)	$	(105,981	)
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
Exercise of stock options		—			—			174		—		607		—			—			607
Exercise of stock warrants		—			—			65		—		144		—			—			144
Employee stock-based compensation		—			—			—		—		3,075		—			—			3,075
Other comprehensive loss, net of tax		—			—			—		—		—		(108	)		—			(108	)
Net loss		—			—			—		—		—		—			(7,578	)		(7,578	)
Balance at December 31, 2019		—		$	—			72,267	$	2	$	524,260	$	20		$	(130,930	)	$	393,352


	Six months ended December 31, 2019
	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, 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
Exercise of stock options		—			—			316		—		901		—			—			901
Exercise of stock warrants		—			—			65		—		144		—			—			144
Employee stock-based compensation		—			—			—		—		5,351		—			—			5,351
Other comprehensive loss, net of tax		—			—			—		—		—		(306	)		—			(306	)
Net loss		—			—			—		—		—		—			(13,274	)		(13,274	)
Balance at December 31, 2019		—		$	—			72,267	$	2	$	524,260	$	20		$	(130,930	)	$	393,352


	Three months ended September 30, 2021
								Accumulated
					Additional			other						Total
	Common stock				paid-in			comprehensive			Accumulated			stockholders'
	Shares		Amount		capital			loss			deficit			equity
Balance at June 30, 2021		94,504	$	2	$	2,777,155		$	(100	)	$	(247,467	)		2,529,590
Cumulative effect of the accounting change upon the adoption of ASU 2020-06		—		—		(245,066	)		—			29,000			(216,066	)
Issuance of common stock upon public offering, net of underwriting discounts and other offering costs		5,074		—		1,341,122			—			—			1,341,122
Issuance of common stock as consideration for an acquisition, net of issuance costs		1,788		—		488,263			—			—			488,263
Fair value of replacement awards		—		—		26,710			—			—			26,710
Issuance of common stock upon exercise of stock options and release of restricted stock units		1,033		—		8,644			—			—			8,644
Issuance of common stock under the employee stock purchase plan		40		—		5,726			—			—			5,726
Purchase of capped calls		—		—		(37,893	)		—			—			(37,893	)
Stock-based compensation		—		—		38,839			—			—			38,839
Other comprehensive loss		—		—		—			(39	)		—			(39	)
Net loss		—		—		—			—			(75,685	)		(75,685	)
Balance at September 30, 2021		102,439	$	2	$	4,403,500		$	(139	)	$	(294,152	)	$	4,109,211


	Three months ended September 30, 2020
							Accumulated
					Additional		other						Total
	Common stock				paid-in		comprehensive			Accumulated			stockholders'
	Shares		Amount		capital		income			deficit			deficit
Balance at June 30, 2020		79,635	$	2	$	857,044	$	2,420		$	(148,747	)	$	710,719
Issuance of common stock upon exercise of stock options and release of restricted stock units		1,164		—		8,081		—			—			8,081
Issuance of common stock under the employee stock purchase plan		226		—		4,327		—			—			4,327
Stock-based compensation		—		—		9,894		—			—			9,894
Other comprehensive loss		—		—		—		(1,302	)		—			(1,302	)
Net loss		—		—		—		—			(12,951	)		(12,951	)
Balance at September 30, 2020		81,025	$	2	$	879,346	$	1,118		$	(161,698	)	$	718,768

	Three months ended December 31, 2018
	Redeemable										Accumulated
	convertible								Additional		other						Total
	preferred stock				Common stock				paid-in		comprehensive			Accumulated			stockholders'
	Shares		Amount		Shares		Amount		capital		loss			deficit			deficit
Balance at September 30, 2018		47,131	$	191,147		7,645	$	1	$	9,731	$	(72	)	$	(111,226	)	$	(101,566	)
Issuance of Series H redeemable convertible preferred stock, net of issuance costs		4,214		67,101		—		—		—		—			—			—
Exercise of stock options		—		—		234		—		491		—			—			491
Employee stock-based compensation		—		—		—		—		594		—			—			594
Other comprehensive income, net of tax		—		—		—		—		—		21			—			21
Net income		—		—		—		—		—		—			102			102
Balance at December 31, 2018		51,345	$	258,248		7,879	$	1	$	10,816	$	(51	)	$	(111,124	)	$	(100,358	)


	Six months ended December 31, 2018
	Redeemable										Accumulated
	convertible								Additional		other						Total
	preferred stock				Common stock				paid-in		comprehensive			Accumulated			stockholders'
	Shares		Amount		Shares		Amount		capital		loss			deficit			deficit
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		4,214		67,101		—		—		—		—			—			—
Exercise of stock options		—		—		534		—		949		—			—			949
Employee stock-based compensation		—		—		—		—		1,201		—			—			1,201
Issuance of stock warrants		—		—		—		—		52		—			—			52
Other comprehensive income, net of tax		—		—		—		—		—		126			—			126
Net loss		—		—		—		—		—		—			(782	)		(782	)
Balance at December 31, 2018		51,345	$	258,248		7,879	$	1	$	10,816	$	(51	)	$	(111,124	)	$	(100,358	)


				ASU 2020-06 adjustments
	As previously reported, June 30, 2021			Account for the 2025 Notes as a single liability			Cumulative effect adjustments			As adjusted, July 1, 2021
Convertible senior notes, net (2025 Notes)	$	909,847		$	247,231		$	(25,316	)	$	1,131,762
Deferred income tax liability (1)		9,090			(2,165	)		(3,684	)		3,241
Additional paid-in capital		2,777,155			(245,066	)		—			2,532,089
Accumulated deficit		(247,467	)		—			29,000			(218,467	)


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 value		Weighted 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

~~Expected term (in years)~~	~~0.57~~
~~Expected volatility~~		~~51.0~~	%
~~Risk-free interest rate~~		~~2.0~~	%
~~Expected dividend yield~~		0	%


	Three months ended September 30,
	2021 (1)			2020 (2)
Total revenue	$	124,867		$	50,023
Net loss	$	(74,999	)	$	(39,969	)

	December 31, 2019
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Money market funds	$	136,873	$	—	$	—	$	136,873
Corporate bonds		—		—		—		—
		136,873		—		—		136,873
Short-term investments:
U.S. treasury securities		42,686		—		—		42,686
Corporate bonds		—		17,382		—		17,382
Asset-backed securities		—		8,067		—		8,067
		42,686		25,449		—		68,135
Funds held for customers:
Restricted cash equivalents		405,186		72,428		—		477,614
Corporate bonds		—		303,773		—		303,773
Certificates of deposit		—		106,011		—		106,011
U.S. treasury securities		19,191		—		—		19,191
		424,377		482,212		—		906,589
Total assets measured at fair value	$	603,936	$	507,661	$	—	$	1,111,597

	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

	December 31, 2019
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value		September 30, 2021
										Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Corporate bonds										$	580,451	$	99	$	(65	)	$	580,485
U.S. treasury securities	$	42,648	$	38	$	—		$	42,686		198,459		24		(2	)		198,481
Corporate bonds		17,378		7		(3	)		17,382
Asset-backed securities		8,069		1		(3	)		8,067		32,016		6		(3	)		32,019
	$	68,095	$	46	$	(6	)	$	68,135
Certificates of deposit											10,569		0		0			10,569
Total										$	821,495	$	129	$	(70	)	$	821,554


	September 30, 2021
	Fair value		Unrealized losses
Corporate bonds	$	189,301	$	(65	)
U.S. treasury securities		45,190		(2	)
Asset backed securities		17,928		(3	)
Total	$	252,419	$	(70	)


Purchase price	$	3,855
Allowance for credit losses		2,082
Less: discount attributable to other factors		(79	)
Par value	$	5,858


	Gross amount						Accumulated amortization									Net carrying amount				Weighted- average remaining useful life (in years)
	June 30, 2021		Additions		September 30, 2021		June 30, 2021			Amortization expense			September 30, 2021			June 30, 2021		September 30, 2021
Customer relationships	$	198,000	$	61,269	$	259,269	$	(2,062	)	$	(5,049	)	$	(7,111	)	$	195,938	$	252,158	9.7
Developed technology		191,000		15,908		206,908		(2,653	)		(8,401	)		(11,054	)		188,347		195,854	5.5
Trade name		34,000		14,042		48,042		(944	)		(3,222	)		(4,166	)		33,056		43,876	2.8
Total	$	423,000	$	91,219	$	514,219	$	(5,659	)	$	(16,672	)	$	(22,331	)	$	417,341	$	491,888	7.4


Fiscal years ending June 30:	Amount
2022	$	59,306
2023		79,075
2024		78,147
2025		59,425
2026		57,763
Thereafter		158,172
Total	$	491,888


	September 30, 2021			June 30, 2021
Convertible senior notes:
2027 Notes, principal	$	575,000		$	—
2025 Notes, principal		1,150,000			1,150,000
Total principal amount of convertible senior notes		1,725,000			1,150,000
Credit facilities:
2021 revolving credit agreement (Class A)		37,500			37,500
2021 revolving credit agreement (Class B)		10,000			10,000
2019 credit agreement		30,000			30,000
Total principal borrowings from credit facilities		77,500			77,500
Total principal amount of debt and borrowings		1,802,500			1,227,500
Less: unamortized debt discount and issuance costs		(30,580	)		(238,119	)
Net carrying value of debt and borrowings	$	1,771,920		$	989,381

Net carrying value of debt and borrowings consisted of:
2025 Notes, net	$	1,132,793		$	909,847
2027 Notes, net		560,113			—
Borrowings from credit facilities (including unamortized debt premium)		79,014			79,534
Total	$	1,771,920		$	989,381


	September 30, 2021						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		(14,887	)		(17,207	)		(240,153	)
Net carrying amount	$	560,113		$	1,132,793		$	909,847

Amount allocated to equity component, net of issuance costs and tax	$	—		$	—		$	245,066


Fiscal years ending June 30:	Amount
Remainder of 2022	$	10,310
2023		13,469
2024		12,934
2025		12,679
2026		12,516
2027		12,865
Thereafter		47,950
Gross lease payments		122,723
Less - present value adjustments		(24,928	)
Total operating lease liabilities, net	$	97,795

Fiscal years ending June 30:	Amount
Remainder of 2020	$	1,491
2021		1,633
2022		6,768
2023		6,973
2024		7,179
Thereafter		50,547
Total	$	74,591

								As of December 31,
								2019		2018		% Growth
Number of customers⁽¹⁾									85,900		71,600		20	%

	Three months ended December 31,							Six months ended December 31,
	2019		2018		% Growth			2019		2018		% Growth
Total Payment Volume (amounts in millions)	$	24,832	$	17,637		41	%	$	46,814	$	33,151		41	%

	Three months ended December 31,							Six months ended December 31,
	2019		2018		% Growth			2019		2018		% Growth
Transactions processed		6,257,000		4,867,000		29	%		12,192,000		9,359,000		30	%


	As of September 30,
	2021		2020		% Growth
Number of customers (1)		126,800		103,600		22	%

	Three months ended September 30,
	2021		2020		% Growth
Total Payment Volume (amounts in millions) (2)	$	46,875	$	28,822		63	%

	Three months ended September 30,
	2021		2020		% Growth
Transactions processed (3)		8,789,000		6,526,000		35	%


	Three months ended September 30,
	2021 (2)			2020
Revenue	$	116,403		$	46,209
Cost of revenue (1)		29,835			12,106
Gross profit		86,568			34,103
Operating expenses
Research and development (1)		42,472			17,786
Sales and marketing (1)		62,312			12,908
General and administrative (1)		57,935			17,190
Total operating expenses		162,719			47,884
Loss from operations		(76,151	)		(13,781	)
Other (expense) income, net		(3,475	)		830
Loss before benefit from income taxes		(79,626	)		(12,951	)
Benefit from income taxes		(3,941	)		—
Net loss	$	(75,685	)	$	(12,951	)


	Three months ended
	September 30,				Change
	2021 (1)		2020		Amount		%
Revenue	$	116,403	$	46,209	$	70,194		152	%

Three months ended
September 30, 2020 (1)

Total revenue