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OFFON

BILL.COM HOLDINGS, INC.

(BILL)
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BILL COM : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

05/07/2021 | 04:06pm EDT
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. 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.

                                    Overview

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). By transforming how SMBs manage their cash inflows and
outflows, we create efficiencies and free our customers to run their businesses.

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 and receive payments, reconcile their books, and
manage their cash. We have built sophisticated integrations with popular
accounting software solutions, banks, and payment processors, enabling our
customers to access these mission-critical services through a single connection.
In essence, we sit at the center of an SMB's accounts 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
March 31, 2021, our partners included some of the most trusted brands in the
financial services business, including more than 80 of the top 100 accounting
firms and several of the largest financial institutions in the United States
(U.S.), including Bank of America, JPMorgan Chase, and American Express. As we
add customers and partners, we expect our network to continue to grow
organically.

We have grown rapidly and scaled our business operations in recent periods. Our
total revenue was $59.7 million and $41.2 million during the three months ended
March 31, 2021 and 2020, respectively, an increase of 45%, and $160.0 million
and $115.5 million during the nine months ended March 31, 2021 and 2020,
respectively, an increase of 39%. We generated net losses of $26.7 million and
$8.3 million during the three months ended March 31, 2021 and 2020,
respectively, and $56.9 million and $21.6 million during the nine months ended
March 31, 2021 and 2020, respectively.

                         Proposed Acquisition of Divvy

On May 6, 2021, we entered into a Merger Agreement with Divvy, a Delaware
corporation that provides a cloud-based financial platform for businesses in the
U.S. Pursuant to the terms of, and subject to the conditions set forth in, the
Merger Agreement, including customary purchase price adjustments, we will pay an
aggregate consideration of approximately $2.5 billion in exchange for all of the
outstanding equity interests of Divvy, with approximately $625 million payable
in cash, subject to adjustment, and the remainder issuable in shares of our
common stock, RSUs and/or options to acquire our common stock (Share
Consideration). The Share Consideration will be calculated based on a fixed
value of $157.2697 per share, which represents the average daily volume-weighted
average price per share of our common stock for each of the twenty consecutive
trading days ended on and including May 3, 2021.

Upon the consummation of the transactions contemplated by the Merger Agreement,
Divvy will become our wholly owned subsidiary. The closing of the merger is
subject to customary closing conditions such as (i) the adoption of the Merger
Agreement and approval of the merger in accordance with Delaware law and (ii)
the expiration or termination of the applicable waiting period under the
Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, among other
things.

                               Impact of COVID-19

The full impact of the 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

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schools, restaurants, and shopping malls, have restricted their operations or
closed due to restrictions imposed by the government. Our customers have been,
and may continue to be, negatively impacted by the shelter-in-place and other
similar state and local orders, the closure of manufacturing sites and country
borders, and the increase in unemployment. These conditions will 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
cancelation of their subscription to our platform. Any of these actions will
have a negative impact on our future results of operations, liquidity, and
financial condition.

Our business continues to operate despite the disruption of many business
operations in the U.S. due to the COVID-19 pandemic. However, we continue to
require our employees to work from remote locations because of certain
government restrictions due to the COVID-19 pandemic. Although we have not
experienced significant business disruptions thus far from the COVID-19
pandemic, 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 pandemic, the
actions that may be taken by government authorities across the U.S., the timing
and efficacy of vaccinations, the impact to our customers, strategic partners,
and suppliers, and other factors described in the section titled "Risk Factors"
in Part II, Item 1A of this Quarterly Report on Form 10-Q.

                               Our Revenue Model

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


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 transaction. Transactions
primarily include check issuance, ACH origination, cross-border payments,
virtual card issuance, and creation of invoices. Much of our revenue comes from
repeat transactions, which are an important contributor to our recurring
revenue.

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 through our bank accounts and we have a balance of
funds held for customers that is a function of the volume and the type of
payments processed. Interest is earned from interest-bearing deposit accounts,
certificates of deposit, money market funds, commercial paper, and U.S. Treasury
securities. We hold these funds from the day they are withdrawn 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.

                     Key Factors Affecting Our Performance

Acquiring New Customers


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 well as the impact caused by the COVID-19 pandemic. As of March
31, 2021, we had over 115,000 customers across a wide variety of industries and
geographies in the U.S.

Expanding Our Relationship with Existing Customers


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 when we introduce new products and services that are
adopted by our customers.

Our ability to monetize our payments-related services is an important part of
our business model. Today, we charge fixed and variable transaction fees for
payment transactions initiated, and our revenue and payment volume generally
grow as customers process more transactions on our platform. Our ability to
influence customers to process more transactions on our platform will have a
direct impact on our transaction fee revenue. As payment volume grows, we
experience growth in the level of funds held for customers and we also earn
interest revenue on these funds while

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payment transactions are clearing. Our interest earned on customer funds is
positively correlated with our interest earnings rate and with customer fund
balances. Our interest earnings rate is a function of the market interest rate
environment and the mix of our investments across interest bearing accounts,
government money market funds, and highly liquid, investment-grade fixed income
marketable securities. The fund balances are a function of the amount of money
transmitted by our customers and the mix of payment types, with some payment
types averaging more days in transit than others.

Investing in Sales and Marketing


We will continue to drive awareness and generate demand to acquire new customers
and develop new accounting firm and strategic partner relationships; however, we
will adjust our sales and marketing spend level as needed in response to changes
in the economic environment. We will continue to expand efforts to market our
platform directly to businesses through online digital marketing, referral
programs, and other programs. Our investment in supporting accounting firms and
strategic partners has been significant. We support these accounting firms and
strategic partners through education and training initiatives like hosting
webinars and developing sell-sheet case studies.

Investing in Our Platform


We intend to increase our investment in our platform to maintain our position as
a leading provider of SMB back-office financial software. To drive adoption and
increase penetration within our base, we will continue to introduce new products
and features. We believe that investment in research and development will
contribute to our long-term growth but may also negatively impact our short-term
profitability. We will continue to leverage emerging technologies and invest in
the development of more features that meet and anticipate SMB needs. These
efforts will require us to invest significant financial and other resources. As
a result, we expect our expenses related to research and development to
increase.

                              Key Business Metrics

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.



                                                                                      As of March 31,
                                                                                   2021             2020          % Growth
Number of customers                                                                 115,600           91,300              27 %

                                   Three months ended                                Nine months ended
                                        March 31,                                        March 31,
                                  2021            2020          % Growth           2021             2020          % Growth
Total Payment Volume
  (amounts in millions)        $    34,971     $    24,233              44 %   $     98,573     $     71,047              39 %

                                   Three months ended                                Nine months ended
                                        March 31,                                        March 31,
                                  2021            2020          % Growth           2021             2020          % Growth
Transactions processed           7,182,000       6,047,000              19
%     20,951,000       18,239,000              15 %


Number of Customers

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 during a trial period are not counted as new customers during that period. If an organization has multiple entities billed

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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 fiscal quarter.

Total Payment Volume


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 likely
they are to process more transactions 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) 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 during the three and nine months
ended March 31, 2021 and 2020.

Transactions Processed

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



                      Components of Results of Operations

Revenue

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


Subscription fees are fixed monthly or annually and charged to our customers for
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.

Interest on funds held for customers consists of the interest that we earn from
customer funds while payment transactions are clearing. Interest is earned from
interest-bearing deposit accounts, certificates of deposit, money market funds,
commercial paper, and U.S. Treasury securities, until those payments are cleared
and credited to the intended recipient.

Our contracts with SMB and accounting firm customers primarily consist of
cancelable contracts that can be terminated at the end of the monthly
subscription period in which the last transaction is processed. 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.

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Cost of Revenue and Expenses


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 that delivering new functionality is critical to attract
new customers and expand our relationship with existing customers. We expect to
continue to make investments in and expand our offerings to enhance our
customers' experience and satisfaction, and to attract new customers. We expect
our research and development expenses to increase in absolute dollars, but they
may fluctuate as a percentage of total revenue from period to period as we
expand our research and development team to develop new products and product
enhancements.

Sales and Marketing - Sales and marketing expenses consist primarily of
personnel-related expenses, including stock-based compensation expenses, sales
commissions, marketing program expenses, travel-related expenses, and costs to
market and promote our platform through advertisements, marketing events,
partnership arrangements, direct customer acquisition, and allocated overhead
costs. Sales commissions that are incremental to obtaining new customer
contracts are deferred and amortized ratably over the estimated period of our
relationship with new customers.

We focus our sales and marketing efforts on generating awareness of our company,
platform, and products, creating sales leads, and establishing and promoting our
brand. We plan to continue investing in sales and marketing efforts by driving
our go-to-market strategies, building our brand awareness, and sponsoring
additional marketing events; however, we will adjust our sales and marketing
spend level as needed, and it may fluctuate from period to period, in response
to changes in the economic environment.

General and administrative - General and administrative expenses consist
primarily of personnel-related expenses, including stock-based compensation
expenses, for finance, risk management, legal and compliance, human resources,
and information technology, costs incurred for external professional services,
losses from fraud and credit exposure, and allocated overhead costs. We have
incurred 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 Securities and Exchange Commission, 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 (expense) income, net - Other (expense) income, net consists primarily of
the accretion of debt discount and amortization of debt offering costs in
connection with our issuance of the 2025 Notes, interest expense on our bank
borrowings, and losses on the revaluation of redeemable convertible preferred
stock warrant liabilities, partially offset by interest income on corporate
funds invested in money market instruments and highly liquid, investment-grade
fixed income marketable securities.

(Benefit from) provision for income taxes - (Benefit from) provision for income
taxes consists of the income tax benefit from the issuance of the 2025 Notes and
state income taxes.

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Results of Operations


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



                                            Three months ended             Nine months ended
                                                March 31,                      March 31,
                                           2021            2020           2021           2020
Revenue
Subscription and transaction fees       $    58,622     $   36,092     $  154,743     $   97,604
Interest on funds held for customers          1,116          5,138          5,249         17,886
Total revenue                                59,738         41,230        159,992        115,490
Cost of revenue (1)                          15,434         10,110         41,513         29,044
Gross profit                                 44,304         31,120        118,479         86,446
Operating expenses
Research and development (1)                 22,286         13,969         60,558         38,476
Sales and marketing (1)                      15,190         11,802         42,272         33,560
General and administrative (1)               22,124         15,064         58,897         38,347
Total operating expenses                     59,600         40,835        161,727        110,383
Loss from operations                        (15,296 )       (9,715 )      (43,248 )      (23,937 )
Other (expense) income, net                 (11,432 )        1,397        (13,943 )        2,396
Loss before (benefit from) provision
for income
  taxes                                     (26,728 )       (8,318 )      (57,191 )      (21,541 )
(Benefit from) provision for income
taxes                                             -              1           (333 )           52
Net loss                                $   (26,728 )   $   (8,319 )   $  (56,858 )   $  (21,593 )



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



                               Three months ended          Nine months ended
                                    March 31,                  March 31,
                                2021          2020         2021          2020
Cost of revenue              $       728     $   422     $   1,971     $    781
Research and development           3,638       1,466         9,953        3,221
Sales and marketing                1,711         767         5,086        1,643
General and administrative         4,603       2,430        14,253        4,791
Total                        $    10,680     $ 5,085     $  31,263     $ 10,436




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



                                              Three months ended                   Nine months ended
                                                   March 31,                           March 31,
                                           2021                2020             2021                2020
Revenue
Subscription and transaction fees                98 %                88 %             97 %               85 %
Interest on funds held for customers              2 %                12 %              3 %               15 %
Total revenue                                   100 %               100 %            100 %              100 %
Cost of revenue                                  26 %                25 %             26 %               25 %
Gross margin                                     74 %                75 %             74 %               75 %
Operating expenses
Research and development                         37 %                34 %             38 %               33 %
Sales and marketing                              25 %                29 %             26 %               29 %
General and administrative                       38 %                36 %             37 %               34 %
Total operating expenses                        100 %                99 %            101 %               96 %
Loss from operations                            (26 )%              (24 )%           (27 )%             (21 )%
Other (expense) income, net                     (19 )%                4 %             (9 )%               2 %
Loss before (benefit from) provision
for income
  taxes                                         (45 )%              (20 )%           (36 )%             (19 )%
(Benefit from) provision for income
taxes                                             -                   -                -                  -
Net loss                                        (45 )%              (20 )%           (36 )%             (19 )%



Comparison of the three months ended March 31, 2021 and 2020

Revenue

The components of our revenue during the three months ended March 31, 2021 and 2020 were as follows (amounts in thousands):




                                         Three months ended
                                              March 31,                  Change
                                          2021          2020        Amount        %

Subscription and transaction fees $ 58,622 $ 36,092 $ 22,530

        62 %
Interest on funds held for customers        1,116        5,138       (4,022 )     (78 )%
Total revenue                          $   59,738     $ 41,230     $ 18,508        45 %




Subscription and transaction fees increased to $58.6 million during the three
months ended March 31, 2021 from $36.1 million during the three months ended
March 31, 2020, an increase of $22.5 million or 62%. Subscription fees increased
to $29.3 million during the three months ended March 31, 2021 from $22.3 million
during the three months ended March 31, 2020, an increase of $7.0 million or
32%, driven primarily by the increase in customers and average subscription
revenue per customer. Transaction fees increased to $29.3 million during the
three months ended March 31, 2021 from $13.8 million during the three months
ended March 31, 2020, an increase of $15.5 million or 112%, due primarily to
increased adoption of new product offerings and the mix of transaction revenues
shifting to variable-priced products. Our total customers increased to over
115,000 as of March 31, 2021 compared to over 91,000 as of March 31, 2020, or an
increase of approximately 27%. Our average subscription revenue and transaction
fees per customer increased by 4% and 67%, respectively, during the three months
ended March 31, 2021, driven primarily by the increase in customers' usage of
our platform and payment activities.

Interest on funds held for customers decreased to $1.1 million during the three
months ended March 31, 2021 from $5.1 million during the three months ended
March 31, 2020, a decrease of $4.0 million or 78%. The decrease was due to the
decline in the yield we earned from investing customer funds, partially offset
by the increase in the balance of customer funds held while payment transactions
clear. The average rate of return earned on customer funds held was 0.23% during
the three months ended March 31, 2021, a decrease of 127 basis points from the
same period in fiscal

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2020. The decrease in yield was due primarily to the U.S. Federal Reserve's
action to cut the federal funds rate in March 2020 in response to the COVID-19
pandemic. The average daily effective federal funds rate decreased by 116 basis
points during the three months ended March 31, 2021 from the same period in
fiscal 2020. The average daily balance of customer funds held while payment
transactions clear increased to approximately $1.9 billion during the three
months ended March 31, 2021 from approximately $1.4 billion during the same
period in fiscal 2020, an increase of 41%. Fund balances increased due to growth
in TPV. Our TPV increased to approximately $35.0 billion during the three months
ended March 31, 2021 from approximately $24.2 billion during the same period in
fiscal 2020, an increase of 44%.

Cost of Revenue, Gross Profit, and Gross Margin

Cost of revenue, gross profit, and gross margin during the three months ended March 31, 2021 and 2020 were as follows (amounts in thousands):



                    Three months ended
                         March 31,                 Change
                     2021          2020        Amount       %
Cost of revenue   $   15,434     $ 10,110     $  5,324       53 %
Gross profit          44,304       31,120       13,184       42 %
Gross margin              74 %         75 %




Cost of revenue increased to $15.4 million during the three months ended March
31, 2021 from $10.1 million during the three months ended March 31, 2020, an
increase of $5.3 million or 53%. The increase was due primarily to a $2.1
million increase in direct costs associated with the processing of our
customers' payment transactions, use of software applications and equipment as
we expanded our data processing capacity, 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 $2.1 million increase in personnel-related costs, including stock-based
compensation expense and amortization of deferred service costs, and a $1.1
million increase in consulting-related and other costs due to the hiring of
additional personnel and outside services who were directly engaged in providing
implementation and support services to our customers. Our average headcount of
such personnel during the three months ended March 31, 2021 increased by 43%
compared to the same period in fiscal 2020.

Gross margin was 74% during the three months ended March 31, 2021, which slightly decreased compared to the 75% gross margin during the three months ended March 31, 2020 due primarily to the decrease in high-margin interest on funds held for customers.

Research and Development Expenses

Research and development expenses during the three months ended March 31, 2021 and 2020 were as follows (amounts in thousands):



                                      Three months ended
                                           March 31,                 Change
                                       2021          2020       Amount       %

Research and development expenses $ 22,286 $ 13,969 $ 8,317

  60 %
Percentage of revenue                       37 %         34 %




Research and development expenses increased to $22.3 million during the three
months ended March 31, 2021 from $14.0 million during the three months ended
March 31, 2020, an increase of $8.3 million or 60%. The increase was due
primarily to a $6.5 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 costs for engaging consultants and temporary contractors who
provided product development services, and a $0.8 million increase in shared
overhead and other costs. Our average research and development headcount during
the three months ended March 31, 2021 increased by 33% compared to the same
period in fiscal 2020.

As a percentage of total revenue, research and development expenses increased to 37% during the three months ended March 31, 2021 from 34% during the three months ended March 31, 2020 due primarily to the increase in stock-based compensation expense relative to the increase in our revenue.

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Sales and Marketing Expenses

Sales and marketing expenses during the three months ended March 31, 2021 and 2020 were as follows (amounts in thousands):



                                 Three months ended
                                      March 31,                 Change
                                  2021          2020       Amount       %

Sales and marketing expenses $ 15,190 $ 11,802 $ 3,388 29 % Percentage of revenue

                  25 %         29 %




Sales and marketing expenses increased to $15.2 million during the three months
ended March 31, 2021 from $11.8 million during the three months ended March 31,
2020, an increase of $3.4 million or 29%. The increase was due primarily to a
$2.3 million increase in personnel-related costs, 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 $0.8 million increase in marketing initiatives and digital
advertising spend as we continued to promote our products and services. Our
average sales and marketing headcount during the three months ended March 31,
2021 increased by 6% compared to the same period in fiscal 2020.

As a percentage of total revenue, sales and marketing expenses decreased to 25%
during the three months ended March 31, 2021 from 29% during the three months
ended March 31, 2020 as we adjusted our sales and marketing costs in response to
the changing economic environment.

General and Administrative Expenses

General and administrative expenses during the three months ended March 31, 2021 and 2020 were as follows (amounts in thousands):



                                        Three months ended
                                             March 31,                 Change
                                         2021          2020       Amount       %

General and administrative expenses $ 22,124 $ 15,064 $ 7,060

    47 %
Percentage of revenue                         38 %         36 %




General and administrative expenses increased to $22.1 million during the three
months ended March 31, 2021 from $15.1 million during the three months ended
March 31, 2020, an increase of $7.0 million or 47%. The increase was due
primarily to a $4.5 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 March 31, 2021 increased
by 21% compared to the same period in fiscal 2020. The increase was also due to
a $2.9 million increase in professional and consulting fees as we obtained
additional external assistance to support certain corporate initiatives and a
$0.3 million increase in corporate insurance costs (mainly pertaining to costs
associated with the insurance policies for our directors and officers),
partially offset by a $0.8 million decrease in sales and use tax reserves.

As a percentage of total revenue, general and administrative expenses increased
to 38% during the three months ended March 31, 2021 from 36% during the three
months ended March 31, 2020 due primarily to the increase in stock-based
compensation expense relative to the increase in our revenue.

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Other (Expense) Income, Net

Other (expense) income, net during the three months ended March 31, 2021 and 2020 was as follows (amounts in thousands):



                                Three months ended
                                     March 31,                   Change
                                 2021          2020        Amount         %

Other (expense) income, net $ (11,432 ) $ 1,397 $ (12,829 ) (918 )% Percentage of revenue

                (19 )%         4 %




The $12.8 million change in other (expense) income, net during the three months
ended March 31, 2021 compared to the same period in fiscal 2020 was due
primarily to an $11.9 million increase in interest expense related to the
amortization of debt discount and issuance costs of our 2025 Notes and a $0.9
million decrease in interest income due to the decrease in interest rates.

Benefit from Income Taxes

Benefit from income taxes during the three months ended March 31, 2021 and 2020 was as follows (amounts in thousands):



                              Three months ended
                                   March 31,                  Change
                             2021            2020       Amount        %

Benefit from income taxes $ - $ 1 $ (1 ) (100 )%

Comparison of the nine months ended March 31, 2021 and 2020

Revenue

The components of our revenue during the nine months ended March 31, 2021 and 2020 were as follows (amounts in thousands):



                                          Nine months ended
                                              March 31,                  Change
                                         2021          2020         Amount         %
Subscription and transaction fees      $ 154,743     $  97,604     $  57,139        59 %
Interest on funds held for customers       5,249        17,886       (12,637 )     (71 )%
Total revenue                          $ 159,992     $ 115,490     $  44,502        39 %






Subscription and transaction fees increased to $154.7 million during the nine
months ended March 31, 2021 from $97.6 million during the nine months ended
March 31, 2020, an increase of $57.1 million or 59%. Subscription fees increased
to $80.4 million during the nine months ended March 31, 2021 from $60.2 million
during the nine months ended March 31, 2020, an increase of $20.2 million or
34%, driven primarily by the increase in customers and average subscription
revenue per customer. Transaction fees increased to $74.3 million during the
nine months ended March 31, 2021 from $37.4 million during the nine months ended
March 31, 2020, an increase of $36.9 million or 99%, due primarily to increased
adoption of new product offerings and the mix of transaction revenues shifting
to variable-priced products. Our total customers increased to over 115,000 as of
March 31, 2021 compared to over 91,000 as of March 31, 2020, or an increase of
approximately 27%. Our average subscription revenue and transaction fees per
customer increased by 5% and 56%, respectively, during the nine months ended
March 31, 2021, driven primarily by the increase in customers' usage of our
platform and payment activities.

Interest on funds held for customers decreased to $5.2 million during the nine
months ended March 31, 2021 from $17.9 million during the nine months ended
March 31, 2020, a decrease of $12.7 million or 71%. The decrease was due to a
decline in the yield we earned from investing customer funds, partially offset
by an increase in the balance of

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customer funds held while payment transactions clear. The average rate of return
earned on customer funds held was 0.39% during the nine months ended March 31,
2021, a decrease of 137 basis points from the same period in fiscal 2020. The
decrease in yield was due primarily to the U.S. Federal Reserve's action to cut
the federal funds rate in March 2020 in response to the COVID-19 pandemic. The
average daily effective federal funds rate decreased by 161 basis points during
the nine months ended March 31, 2021 from the same period in fiscal 2020. The
average daily balance of customer funds held while payment transactions clear
increased to approximately $1.8 billion during the nine months ended March 31,
2021 from approximately $1.3 billion during the same period in fiscal 2020, an
increase of 34%. Fund balances increased due to growth in TPV. Our TPV increased
to approximately $98.6 billion during the nine months ended March 31, 2021 from
approximately $71.0 billion during the same period in fiscal 2020, an increase
of 39%.

Cost of Revenue, Gross Profit, and Gross Margin

Cost of revenue, gross profit, and gross margin during the nine months ended March 31, 2021 and 2020 were as follows (amounts in thousands):



                    Nine months ended
                        March 31,                 Change
                    2021          2020        Amount       %
Cost of revenue   $  41,513     $ 29,044     $ 12,469       43 %
Gross profit        118,479       86,446       32,033       37 %
Gross margin             74 %         75 %






Cost of revenue increased to $41.5 million during the nine months ended March
31, 2021 from $29.0 million during the nine months ended March 31, 2020, an
increase of $12.5 million or 43%. The increase was due primarily to a $5.9
million increase in direct costs associated with the processing of our
customers' payment transactions, use of software applications and equipment as
we expanded our data processing capacity, and data hosting services, which were
driven by increases in the number of customers, adoption of new product
offerings, and volume of transactions. The increase was also due to a $4.5
million increase in personnel-related costs, including stock-based compensation
expense and amortization of deferred service costs, a $1.1 million increase in
consulting-related costs due to the hiring of additional personnel and outside
services who were directly engaged in providing implementation and support
services to our customers, and a $0.9 million increase in shared overhead and
other costs. Our average headcount of such personnel during the nine months
ended March 31, 2021 increased by 27% compared to the same period in fiscal
2020.

Gross margin was 74% during the nine months ended March 31, 2021, which
decreased slightly compared to the 75% gross margin during the nine months ended
March 31, 2020 due primarily to a decrease in high-margin interest on funds held
for customers.

Research and Development Expenses

Research and development expenses during the nine months ended March 31, 2021 and 2020 were as follows (amounts in thousands):



                                      Nine months ended
                                          March 31,                 Change
                                      2021          2020        Amount       %

Research and development expenses $ 60,558 $ 38,476 $ 22,082

  57 %
Percentage of revenue                      38 %         33 %






Research and development expenses increased to $60.6 million during the nine
months ended March 31, 2021 from $38.5 million during the nine months ended
March 31, 2020, an increase of $22.1 million or 57%. The increase was due
primarily to a $16.2 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 $3.1
million increase in costs for engaging consultants and temporary contractors who
provided product development services, and a

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$2.3 million increase in shared overhead and other costs. Our average research
and development headcount during the nine months ended March 31, 2021 increased
by 24% compared to the same period in fiscal 2020.

As a percentage of total revenue, research and development expenses increased to
38% during the nine months ended March 31, 2021 from 33% during the nine months
ended March 31, 2020, due primarily to the increase in stock-based compensation
expense relative to the increase in our revenue.

Sales and Marketing Expenses

Sales and marketing expenses during the nine months ended March 31, 2021 and 2020 were as follows (amounts in thousands):



                                 Nine months ended
                                     March 31,                 Change
                                 2021          2020       Amount       %

Sales and marketing expenses $ 42,272 $ 33,560 $ 8,712 26 % Percentage of revenue

                 26 %         29 %
Sales and marketing expenses increased to $42.3 million during the nine months
ended March 31, 2021 from $33.6 million during the nine months ended March 31,
2020, an increase of $8.7 million or 26%. The increase was due primarily to a
$6.4 million increase in personnel-related costs (net of increase in capitalized
sales commissions of $0.8 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, a $1.5 million
increase in marketing initiatives and digital advertising spend as we continued
to promote our products and services, and a $0.8 million increase in shared
overhead and other costs. Our average sales and marketing headcount during the
nine months ended March 31, 2021 increased by 8% compared to the same period in
fiscal 2020.

As a percentage of total revenue, sales and marketing expenses decreased to 26%
during the nine months ended March 31, 2021 from 29% during the nine months
ended March 31, 2020 as we adjusted our sales and marketing costs in response to
the changing economic environment.

General and Administrative Expenses

General and administrative expenses during the nine months ended March 31, 2021 and 2020 were as follows (amounts in thousands):



                                        Nine months ended
                                            March 31,                 Change
                                        2021          2020        Amount       %

General and administrative expenses $ 58,897 $ 38,347 $ 20,550

    54 %
Percentage of revenue                        37 %         34 %






General and administrative expenses increased to $58.9 million during the nine
months ended March 31, 2021 from $38.3 million during the nine months ended
March 31, 2020, an increase of $20.6 million or 54%. The increase was due
primarily to a $14.5 million increase in personnel-related costs, including
stock-based compensation expense, resulting from the hiring of additional
executive employees and administrative personnel, and a $1.2 million increase in
shared overhead and other costs. Our average general and administrative
headcount during the nine months ended March 31, 2021 increased by 18% compared
to the same period in fiscal 2020. The increase was also due to a $5.1 million
increase in professional and consulting fees as we obtained additional external
assistance to support certain corporate initiatives and a $2.2 million increase
in corporate insurance costs (mainly pertaining to costs associated with
insurance policies for our directors and officers), partially offset by a $2.5
million decrease in sales and use tax reserves.

As a percentage of total revenue, general and administrative expenses increased to 37% during the nine months ended March 31, 2021 from 34% during the nine months ended March 31, 2020, due primarily to the increase in stock-based compensation expense relative to the increase in our revenue.

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Other (Expense) Income, Net

Other (expense) income, net during the nine months ended March 31, 2021 and 2020 was as follows (amounts in thousands):



                                Nine months ended
                                    March 31,                   Change
                                2021          2020        Amount         %
Other (expense) income, net   $ (13,943 )    $ 2,396     $ (16,339 )     (682 )%
Percentage of revenue                (9 )%         2 %






The $16.3 million change in other (expense) income, net during the nine months
ended March 31, 2021 compared to the same period in fiscal 2020 was due
primarily to a $15.6 million increase in interest expense related to the
amortization of debt discount and issuance costs of our 2025 Notes and a $1.4
million decrease in interest income due to the decrease in interest rates,
offset by a $0.7 million loss on revaluation of redeemable convertible preferred
stock warrant liabilities that was reported during the nine months ended March
31, 2020 but none during the nine months ended March 31, 2021.

(Benefit from) Provision for Income Taxes

(Benefit from) provision for income taxes during the nine months ended March 31, 2021 and 2020 was as follows (amounts in thousands):



                                              Nine months ended
                                                  March 31,                  Change
                                               2021          2020     

Amount % (Benefit from) provision for income taxes $ (333 ) $ 52 $ (385 ) (740) %

The benefit from income taxes during the nine months ended March 31, 2021
pertained to a partial reversal of net deferred income tax liability that was
established in connection with our issuance of the 2025 Notes. The provision for
income taxes during the nine months ended March 31, 2020 pertained to state
income taxes.



                          Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements, which are
prepared and presented in accordance with U.S. generally accepted accounting
principles (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.





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Non-GAAP Gross Profit and Non-GAAP Gross Margin


We define non-GAAP gross profit and non-GAAP gross margin as gross profit and
gross margin, respectively, excluding stock-based compensation expense,
depreciation and amortization expense, and payroll taxes related to stock-based
compensation expense. We believe non-GAAP gross profit and non-GAAP gross margin
provide our management and investors' consistency and comparability with our
past financial performance and facilitate period-to-period comparisons of
operations. The following table presents a reconciliation of our non-GAAP gross
profit and non-GAAP gross margin to our gross profit and gross margin for the
periods presented (amounts in thousands):



                                            Three months ended             Nine months ended
                                                March 31,                      March 31,
                                           2021            2020           2021           2020
Total revenue                           $    59,738     $   41,230     $  159,992     $  115,490
Gross profit                                 44,304         31,120        118,479         86,446
Add:
Stock-based compensation expense                728            422          1,971            781
Payroll taxes related to stock-based
compensation
  expense                                       119              -            263              -
Depreciation and amortization expense           800            514          1,868          1,575
Non-GAAP gross profit                   $    45,951     $   32,056     $  122,581     $   88,802
Gross margin                                   74.2 %         75.5 %         74.1 %         74.9 %
Non-GAAP gross margin                          76.9 %         77.7 %         76.6 %         76.9 %




Free Cash Flow

Free cash flow is defined as net cash provided by (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. One limitation of free cash flow is that it does not reflect our
future contractual commitments. Additionally, free cash flow does not represent
the total increase or decrease in our cash balance for a given period. 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):



                                                  Three months ended           Nine months ended
                                                       March 31,                   March 31,
                                                   2021          2020         2021          2020
Net cash used in operating activities           $   (1,580 )   $    822     $ (13,163 )   $  (3,327 )
Purchases of property and equipment                 (3,426 )     (2,764 )     (17,062 )      (5,736 )
Capitalization of internal-use software costs         (378 )       (149 )      (1,038 )        (489 )
Free cash flow                                  $   (5,384 )   $ (2,091 )   $ (31,263 )   $  (9,552 )






                        Liquidity and Capital Resources

As of March 31, 2021, our principal sources of liquidity were our cash and cash
equivalents of $1.2 billion, our available-for-sale short-term investments of
$512.5 million, and funds available under our Senior Facilities Agreement (as
defined and described below). 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, asset-backed securities, and
U.S. treasury securities with original maturities of more than three months. Our
Senior Facilities Agreement, which expires on June 28, 2022, allows us to borrow
up to $50.0 million. Available funds under our Senior Facilities Agreement,
after deducting our letter of credit utilization totaling $6.9 million, was
$43.1 million as of March 31, 2021.

We believe that our cash, cash equivalents, available-for sale short-term
investments, and funds available under our Senior Facilities Agreement will be
sufficient to meet our working capital requirements for at least the next 12
months. In

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the future, we may attempt to raise additional capital through the sale of
equity securities or through equity-linked or debt financing arrangements. 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 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 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.

On November 30, 2020, we issued $1.15 billion in aggregate principal amount of
our 0% convertible senior notes (2025 Notes) due on December 1, 2025. The 2025
Notes, which are further described below, are senior, unsecured obligations, and
will not accrue interest unless we determine that special interest obligations
are deemed necessary. The 2025 Notes rank senior in right of payment to any of
our indebtedness that is expressly subordinated to the 2025 Notes and rank equal
in right of payment to any of our unsecured indebtedness that is not so
subordinated. In addition, the 2025 Notes are subordinated to any of our secured
indebtedness and to all indebtedness and other liabilities of our subsidiaries.

Cash Flows


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



                                                         Nine months ended
                                                             March 31,
                                                        2021          2020 (1)
Net cash provided by (used in):
Operating activities                                 $   (13,163 )   $   (3,327 )
Investing activities                                    (563,192 )     (221,872 )
Financing activities                                   1,356,043        253,829

Net increase in cash, cash equivalents,

restricted cash, and restricted cash equivalents $ 779,688 $ 28,630

(1) Amounts have been adjusted to reflect the adoption of ASU No. 2016-18,

    Statement of Cash Flows (Topic 230): Restricted Cash. See Note 1 to the
    condensed consolidated financial statements included elsewhere in this
    Quarterly Report on Form 10-Q for a summary of the adjustments.



Net Cash Used in Operating Activities


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 $13.2 million during the nine
months ended March 31, 2021 from $3.3 million during the nine months ended March
31, 2020, due primarily to the increase in cash paid for our cost of services
and operating expenses, primarily employee salary and related costs due to the
increase in headcount and administrative costs; offset by the increase in cash
received from subscription and transaction fees revenue.

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Net Cash Used in Investing Activities

Cash provided by our investing activities consists primarily of proceeds from the maturities and sale of corporate and customer fund available-for-sale investments. Cash used in our investing activities consists primarily of purchases of corporate and customer fund available-for-sale investments, purchases of property and equipment, and capitalization of internal-use software.


Net cash used in investing activities increased to $563.2 million during the
nine months ended March 31, 2021 from $221.9 million during the nine months
ended March 31, 2020 due primarily to the increase in purchases of corporate and
customer fund short-term investments and the increased purchases of property and
equipment, partially offset by the increase in proceeds from the maturities and
sales of corporate and customer fund available-for-sale investments.

Net Cash Provided by Financing Activities


Cash provided by our financing activities consists primarily of proceeds from
the issuance of the 2025 Notes, issuance of common stock upon the completion of
our initial public offering (IPO), issuance of common stock upon the exercises
of stock options, and purchases of common stock under our employee stock
purchase plan (ESPP). Cash used in our financing activities consists primarily
of payments of costs related to the issuance of debt and common stock, and
payments for the purchase of the Capped Calls (as defined and described below).
Additionally, changes in customer fund deposits liability could either increase
or decrease our net cash from financing activities.

Net cash provided by financing activities increased to $1.4 billion during the
nine months ended March 31, 2021 from $253.8 million during the nine months
ended March 31, 2020 due primarily to the proceeds from the issuance of the 2025
Notes, the increase in proceeds from the issuance of common stock in connection
with the exercise of stock options, and purchases of common stock under our
ESPP, and the increase in customer funds liability, partially offset by the
purchase of the Capped Calls in connection with the issuance of the 2025 Notes.
During the nine months ended March 31, 2020, our cash from financing activities
included the proceeds from the issuance of common stock upon the completion of
our IPO, net of underwriting discounts and other offering costs.

2025 Notes


As of March 31, 2021, we had outstanding 2025 Notes with aggregate principal
amount of $1.15 billion. 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 have an initial
conversion rate of 6.2159 shares of common stock per $1,000 principal, subject
to customary adjustments for certain corporate events. Upon conversion, we have
an option to pay or deliver, as the case may be, cash, shares of our common
stock, or a combination of cash and shares of our common stock. Our current
intent is to settle conversions of the 2025 Notes through a combination
settlement, which involves a repayment of the principal portion in cash with any
excess of the conversion value over the principal amount settled in shares of
common stock.

In conjunction with the issuance of the 2025 Notes, we entered into capped call
transactions with certain counterparties (Capped Calls). 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 cap.

Credit Facilities


On June 28, 2019, we entered into a Senior Secured Credit Facilities Credit
Agreement (as amended, Senior Facilities Agreement) with Silicon Valley Bank for
a revolving credit facility of up to $50.0 million (Total Commitment), which
amount may be increased by up to $25.0 million upon request and subject to
conditions. Under the Senior Facilities Agreement, Bill.com, LLC is the borrower
and Bill.com Holdings, Inc. is the guarantor. The Senior Facilities Agreement
expires on June 28, 2022 and is secured by substantially all of our assets.

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Borrowings under the Senior Facilities Agreement are subject to interest,
determined as follows: (a) Eurodollar loans shall bear interest at a rate per
annum equal to the Eurodollar rate plus the applicable margin of 1.75% or 2.75%,
depending on company cash balances (Eurodollar rate is calculated based on the
ratio of Eurodollar Base Rate, which is determined by reference to ICE Benchmark
Administration London Interbank Offered Rate (LIBOR), but not less than 0%) or
(b) Alternate Base Rate (ABR) loans shall bear interest at a rate per annum
equal to the ABR minus the applicable margin of 0.25% or 1.25% depending on
company cash balances (ABR is equal to the highest of (i) the prime rate, (ii)
the Federal Funds Effective Rate plus 0.50%, and (iii) the Eurodollar rate plus
1.25%).

The Senior Facilities Agreement requires us to comply with certain restrictive covenants. As of March 31, 2021, we were in compliance with the loan covenants.

Available funds under our Senior Facilities Agreement, after deducting letter of credit utilization totaling $6.9 million, was $43.1 million as of March 31, 2021.

Contractual Obligations and Other Commitments


In November 2020, we issued $1.15 billion in aggregate principal amount of the
2025 Notes. The 2025 Notes are senior, unsecured obligations, and will not
accrue 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. For additional discussion about the 2025 Notes,
refer to Note 7 to our condensed consolidated financial statements included
elsewhere in this Quarterly Report on Form 10-Q.

In November 2020, we renewed our agreement with a vendor to purchase software
licenses and support for a total cost of $9.3 million and payable in annual
installments through March 2024. In August 2020, we expanded our agreement with
a vendor, which requires us to purchase services for a total minimum commitment
of $11.0 million over three years beginning September 1, 2020.

Other than the 2025 Notes and the agreements that we entered with certain
vendors referred to above, there were no material changes in our contractual
obligations and other commitments from those disclosed in our Annual Report on
Form 10-K for the fiscal year ended June 30, 2020.

Off-Balance Sheet Arrangements

As of March 31, 2021, we had no 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.

Critical Accounting Estimates


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.

Except for the accounting estimates used to measure our 2025 Notes as described
below, there have been no material changes to our critical accounting estimates
as compared to the critical accounting estimates described in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" set
forth in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

Convertible Senior Notes - We accounted for the 2025 Notes by separating the
principal amount into liability and equity components. The carrying amount of
the liability component was calculated by measuring the fair value of a similar
liability that does not have an associated convertible feature. The carrying
amount of the equity component, which represents the conversion option, was
determined by deducting the fair value of the liability component from the par
value of the 2025 Notes as a whole. The difference between the principal amount
of the 2025 Notes and the liability component was initially recorded as a debt
discount and is amortized as interest expense using the effective interest
method over the

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term of the 2025 Notes. The equity component of the 2025 Notes, which is
included in additional paid-in capital, will not be remeasured as long as it
continues to meet the conditions for equity classification. The debt issuance
costs were allocated between the liability and equity components based on the
respective values of the liability and equity components. The debt issuance
costs allocated to the liability component are being amortized as interest
expense over the term of the 2025 Notes using the effective interest method. The
debt issuance costs allocated to the equity component are presented as a
reduction of additional paid-in capital.

Recent Accounting Pronouncements


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.

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07/14BILL COM : BTIG Adjusts Price Target on Bill.com Holdings to $220 From $180, Rei..
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06/30BILL COM : TravelPerk partners with Divvy to bring best in class travel and expe..
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06/25BILL COM : Susquehanna Adjusts Price Target on Bill.com Holdings to $176 From $1..
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