Bill.com (NYSE:BILL) Reports Upbeat Q3, Stock Jumps 10.8%

Kayode Omotosho /
2023/05/04 4:25 pm EDT

Payments and billing software maker Bill.com (NYSE:BILL) reported Q3 FY2023 results topping analyst expectations, with revenue up 63.3% year on year to $272.6 million. On top of that, guidance for next quarter's revenue was surprisingly good, being $278.5 million at the midpoint, 4% above what analysts were expecting. Bill.com made a GAAP loss of $31.1 million, improving on its loss of $86.7 million, in the same quarter last year.

Is now the time to buy Bill.com? Access our full analysis of the earnings results here, it's free.

Bill.com (BILL) Q3 FY2023 Highlights:

  • Revenue: $272.6 million vs analyst estimates of $247.2 million (10.3% beat)
  • EPS (non-GAAP): $0.50 vs analyst estimates of $0.24 (111% beat)
  • Revenue guidance for Q4 2023 is $278.5 million at the midpoint, above analyst estimates of $267.8 million
  • Free cash flow of $24 million, down 49.7% from previous quarter
  • Customers: 197,900, up from 182,700 in previous quarter
  • Gross Margin (GAAP): 82.1%, up from 77.7% same quarter last year

“We delivered strong third quarter results and profitable growth as we executed on our strategy to be the essential financial operations platform for SMBs,” said René Lacerte, BILL CEO and Founder.

Started by René Lacerte in 2006 after selling his previous payroll and accounting software company PayCycle to Intuit, Bill.com (NYSE:BILL) is a software as a service platform that aims to make payments and billing processes easier for small and medium-sized businesses.

Finance and accounting software benefits from dual trends around costs savings and ease of use. First is the SaaS-ification of businesses, large and small, who much prefer the flexibility of cloud-based, web-browser delivered software paid for on a subscription basis than the hassle and expense of purchasing and managing on-premise enterprise software. Second is the consumerization of business software, whereby multiple standalone processes like supply chain and tax management are aggregated into a single, easy to use platforms.

Sales Growth

As you can see below, Bill.com's revenue growth has been incredible over the last two years, growing from quarterly revenue of $59.7 million in Q3 FY2021, to $272.6 million.

Bill.com Total Revenue

And while we saw even higher rates of growth previously, the revenue growth was still very strong; up a rather splendid 63.3% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $12.5 million in Q3, compared to $30.1 million in Q2 2023. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates Bill.com is expecting revenue to grow 39.1% year on year to $278.5 million, slowing down from the 156% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 22.1% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Customer Growth

You can see below that Bill.com reported 197,900 customers at the end of the quarter, an increase of 15,200 on last quarter. That is a fair bit better customer growth than last quarter and quite a bit above the typical customer growth we have seen lately, demonstrating that the business itself has good sales momentum. We've no doubt shareholders will take this as an indication that the company's go-to-market strategy is working very well.

Bill.com Customers

Key Takeaways from Bill.com's Q3 Results

With a market capitalization of $8.37 billion Bill.com is among smaller companies, but its more than $2.66 billion in cash and positive free cash flow over the last twelve months give us confidence that Bill.com has the resources it needs to pursue a high growth business strategy.

We were impressed by how strongly Bill.com outperformed analysts’ revenue expectations this quarter. And we were also glad to see the acceleration in customer growth. On the other hand, it was less good to see the pretty significant deterioration in gross margin. Zooming out, we think this was a great quarter and shareholders will likely feel excited about the results. The company is up 10.8% on the results and currently trades at $88.5 per share.

Bill.com may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.