Bill.com (NYSE:BILL) Exceeds Q2 Expectations, Stock Jumps 16.1%

Full Report / February 08, 2024

Payments and billing software maker Bill.com (NYSE:BILL) beat analysts' expectations in Q2 FY2024, with revenue up 22.5% year on year to $318.5 million. The company expects next quarter's revenue to be around $304 million, in line with analysts' estimates. It made a non-GAAP profit of $0.63 per share, improving from its profit of $0.42 per share in the same quarter last year.

Bill.com (BILL) Q2 FY2024 Highlights:

  • Revenue: $318.5 million vs analyst estimates of $298.3 million (6.8% beat)
  • EPS (non-GAAP): $0.63 vs analyst estimates of $0.40 (57.2% beat)
  • Revenue Guidance for Q3 2024 is $304 million at the midpoint, roughly in line with what analysts were expecting
  • The company lifted its revenue guidance for the full year from $1.23 billion to $1.24 billion at the midpoint, a 1.1% increase
  • Free Cash Flow of $74.21 million, up 55.9% from the previous quarter
  • Gross Margin (GAAP): 81.7%, down from 85.8% in the same quarter last year
  • Market Capitalization: $8.00 billion

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.

The software offers a central cloud repository for invoices and provides an interface where its users can issue, process, approve and pay invoices in an easy to use environment. By automating a lot of previously laborious manual work, Bill.com brings down the cost of running the accounts receivable/payable department. The company charges its customers software subscription and also processing fees on the payments they make through the platform.

Finance and Accounting Software

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.

Today, Bill.com is mainly competing with legacy manual processes and software companies like SAP (NYSE:SAP) that primarily focus on large enterprises.

Sales Growth

As you can see below, Bill.com's revenue growth has been incredible over the last two years, growing from $156.5 million in Q2 FY2022 to $318.5 million this quarter.

Bill.com Total Revenue

This quarter, Bill.com's quarterly revenue was once again up a very solid 22.5% year on year. On top of that, its revenue increased $13.51 million quarter on quarter, a very strong improvement from the $9.00 million increase in Q1 2024. This is a sign of acceleration of growth and great to see.

Next quarter's guidance suggests that Bill.com is expecting revenue to grow 11.5% year on year to $304 million, slowing down from the 63.3% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 9.9% over the next 12 months before the earnings results announcement.


What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Bill.com's gross profit margin, an important metric measuring how much money there's left after paying for servers, licenses, technical support, and other necessary running expenses, was 81.7% in Q2.

Bill.com Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.82 left to spend on developing new products, sales and marketing, and general administrative overhead. Despite its recent drop, Bill.com still has an excellent gross margin that allows it to fund large investments in product and sales during periods of rapid growth and achieve profitability when reaching maturity.

Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Bill.com's free cash flow came in at $74.21 million in Q2, up 55.6% year on year.

Bill.com Free Cash Flow

Bill.com has generated $218.7 million in free cash flow over the last 12 months, a solid 18.1% of revenue. This strong FCF margin stems from its asset-lite business model, giving it optionality and plenty of cash to reinvest in its business.

Key Takeaways from Bill.com's Q2 Results

We enjoyed seeing Bill.com exceed analysts' revenue expectations this quarter. We were also glad its full-year revenue guidance came in higher than Wall Street's estimates and free cash flow was strong. Overall, this quarter's results seemed fairly positive and shareholders should feel optimistic. The stock is up 16.1% after reporting and currently trades at $87.92 per share.

Is Now The Time?

When considering an investment in Bill.com, investors should take into account its valuation and business qualities as well as what's happened in the latest quarter.

Although we have other favorites, we understand the arguments that Bill.com isn't a bad business. We'd expect growth rates to moderate from here, but its . On top of that, its impressive gross margins indicate excellent business economics.

The market is certainly expecting long-term growth from Bill.com given its price-to-sales ratio based on the next 12 months is 6.1x. There are things to like about Bill.com and there's no doubt it's a bit of a market darling, at least for some. But we are wondering whether there might be better opportunities elsewhere right now.

Wall Street analysts covering the company had a one-year price target of $85.46 per share right before these results (compared to the current share price of $87.92).

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