Bill.com (NYSE:BILL) Surprises With Q2 Sales But Stock Drops 19.4%

Radek Strnad /
2023/02/02 4:20 pm EST

Payments and billing software maker Bill.com (NYSE:BILL) reported Q2 FY2023 results topping analyst expectations, with revenue up 66.1% year on year to $260 million. Guidance for the full year also exceeded estimates, however the guidance for the next quarter was less impressive, coming in at $246.5 million, 1.68% below analyst estimates. Bill.com made a GAAP loss of $95 million, down on its loss of $80.4 million, in the same quarter last year.

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Bill.com (BILL) Q2 FY2023 Highlights:

  • Revenue: $260 million vs analyst estimates of $243 million (6.99% beat)
  • EPS (non-GAAP): $0.42 vs analyst estimates of $0.14 ($0.28 beat)
  • Revenue guidance for Q3 2023 is $246.5 million at the midpoint, below analyst estimates of $250.7 million
  • The company reconfirmed revenue guidance for the full year, at $1 billion at the midpoint
  • Free cash flow of $47.6 million, up from $12 million in previous quarter
  • Customers: 182,700, up from 172,000 in previous quarter
  • Gross Margin (GAAP): 81.7%, up from 78% same quarter last year

“We delivered strong second quarter results and achieved another quarter of non-GAAP 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 $54 million in Q2 FY2021, to $260 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 66.1% year on year. Quarter on quarter the revenue increased by $30 million in Q2, which was roughly in line with the Q1 2023 increase. This steady quarter-on-quarter growth shows the company is able to maintain a strong growth trajectory.

Guidance for the next quarter indicates Bill.com is expecting revenue to grow 47.6% year on year to $246.5 million, slowing down from the 179% 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 33.6% 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 182,700 customers at the end of the quarter, an increase of 10,700 on last quarter. That is a fair bit slower customer growth than last quarter but still in line with what we are used to seeing lately, suggesting that the company still has decent sales momentum.

Bill.com Customers

Key Takeaways from Bill.com's Q2 Results

Sporting a market capitalization of $12.5 billion, more than $2.68 billion in cash and with positive free cash flow over the last twelve months, we're confident that Bill.com has the resources it needs to pursue a high growth business strategy.

We were impressed by the exceptional revenue growth Bill.com delivered this quarter. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations and gross margin deteriorated. Overall, it seems to us that this was a complicated quarter for Bill.com. The company is down 19.4% on the results and currently trades at $103.95 per share.

Should you invest in Bill.com 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.

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