Bill.com Shares Try To Stabilize After Sharp Drop On Cautious Guide

Bill stock earlier this month tumbled 26% in one session.

UPDATE—March 24, 2023: Bill (BILL, $69.22) shares today hit a low of $68.54, testing the new 52-week low of $68.30 reached on March 13. The market cap is down to $7.38 billion.

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Shares of Bill.com (BILL, $93.30), a provider of cloud-based solutions that help SMBs digitize their financial operations, are trying to hold above the 52-week low of $89.87 reached last May.

The stock in early February tumbled 26% in one session after the company issued a cautious outlook as part of its FQ2 (Dec.) earnings report. Bill shares, which traded as high as $132.13 just ahead of the FQ2 report, are now down 14% YTD.

In the current macro environment, almost everything associated with the SMB channel is under pressure, as smaller companies have been reining in spending. In FQ2, Bill’s core revenue of $231.1 million (made up of subscription revenue and usage-based transaction fees) advanced 49%, decelerating from FQ1 growth of 83%.

TPV of $67.3 billion rose just 15%, a sharp deceleration from 34% growth in the previous quarter. Bill’s standalone net new customer additions in FQ2 totaled 10,700 (including 7,200 from the increasingly important financial institution channel), down from 14,200 adds in the previous quarter.

For FQ3 (March), Bill expects its standalone TPV growth to be flat year over year, decelerating from 13% growth in the December quarter. Revenue guidance of $245 million to $248 million  (growth of 47% to 49%) fell short of the consensus of $250.8 million.

Bill’s standalone paying customer base now totals 182,700, up 35% from the year-ago level. Despite the macro headwinds, small business owners continue to see the long-term benefits of the Bill platform, which automates accounts payable, increases cash flow visibility and delivers operational efficiencies. Organizations can reduce time spent managing the financial back office by up to 75%. Instead of going through bills, small business owners can refocus on growth.

In 2021, Bill made two acquisitions —Divvy and Invoice2go—that significantly expanded the company’s product portfolio, extended its customer reach and added new growth vectors. The Divvy spend management unit now has 24,700 customers, up 59% from the year-ago level. In FQ2, Divvy’s transaction fees rose 78% to $86.6 million, accounting for a third of Bill’s total revenue. Invoice2go, a mobile-first accounts receivable solution aimed at SMBs worldwide, now has more than 228,500 subscribers.

Divvy alone has plenty of growth runway. The solution automates expense controls and improves overall spend management. In periods of economic uncertainty, small businesses need to be able to account for every dollar of spend. With Divvy, real-time expense tracking makes sure that everyone in an organization is staying on budget. More than half of all Bill customers are candidates for Divvy.

Bill in November acquired startup Finmark, a provider of cloud-based software that simplifies financial planning and offers cash flow insights for SMBs. Finmark’s intuitive financial planning solution makes it easy for SMBs to analyze their businesses and forecast more accurately. Accounting firms also use Finmark’s software to automate many of the processes involved in providing clients with strategic advisory services.

Finmark’s software provides businesses with automated tools that are used to build financial forecasts based on integrated data pulled in from systems such as payroll, sales and accounting. Users can build budgets, forecast future earnings and gain real-time insights via easily customizable dashboards. When combined with Bill’s platform, customers will be better able to manage cash flows and improve overall financial operations.

A few years ago, Bill started to increase payment monetization on the platform. The company introduced virtual cards and cross-border payments. Monetization is up 4x over the past three years or so, according to Bill CFO John Rettig. The vast majority of volume today is still ACH and check payments, which means the company is still in the early innings when it comes to being able to drive adoption of new payment offerings and expand monetization.

For FY’23 (June), Bill’s latest revenue outlook of $999 million to $1.007 billion represents growth of 56% to 57%. The FY’24 (June) consensus revenue estimate of $1.26 billion indicates growth will slow to 25.6%. At recent prices, Bill’s enterprise value is 7.2x the FY’24 consensus.