Bill.com's (NYSE:BILL) Q4 Sales Top Estimates But Full-Year Guidance Underwhelms

Full Report / August 17, 2023

Payments and billing software maker Bill.com (NYSE:BILL) announced better-than-expected results in Q4 FY2023, with revenue up 47.8% year on year to $296 million. However, next quarter's revenue guidance of $297 million was less impressive, coming in 1.06% below analysts' estimates. Bill.com made a GAAP loss of $15.9 million, improving from its loss of $84.9 million in the same quarter last year.

Bill.com (BILL) Q4 FY2023 Highlights:

  • Revenue: $296 million vs analyst estimates of $282.6 million (4.75% beat)
  • EPS (non-GAAP): $0.59 vs analyst estimates of $0.41 (43.9% beat)
  • Revenue Guidance for Q1 2024 is $297 million at the midpoint, below analyst estimates of $300.2 million
  • Management's revenue guidance for the upcoming financial year 2024 is $1.3 billion at the midpoint, missing analyst estimates by 0.51% and implying 22.6% growth (vs 67.9% in FY2023)
  • Free Cash Flow of $72.9 million, up from $24 million in the previous quarter
  • Customers: 201,000, up from 197,900 in the previous quarter
  • Gross Margin (GAAP): 82.2%, down from 98.1% in the same quarter last year

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.

Bill's 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 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 $78.3 million in Q4 FY2021 to $296 million this quarter.

Bill.com Total Revenue

Unsurprisingly, this was another great quarter for Bill.com with revenue up 47.8% year on year. On top of that, its revenue increased $23.4 million quarter on quarter, a very strong improvement from the $12.5 million increase in Q3 2023. 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 29.2% year on year to $297 million, slowing down from the 94.3% year-on-year increase it recorded in the same quarter last year. For the upcoming financial year, management expects revenue to be $1.3 billion at the midpoint, growing 22.6% year on year compared to the 64.9% increase in FY2023.

Customer Growth

Bill.com reported 201,000 customers at the end of the quarter, an increase of 3,100 from the previous quarter. That's a little slower customer growth than what we've observed in past quarters, suggesting that the company's customer acquisition momentum is slowing.

Bill.com Customers


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 82.2% in Q4.

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 decline over the last year, Bill.com's excellent gross margin 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 $72.9 million in Q4, turning positive over the last year.

Bill.com Free Cash Flow

Bill.com has generated $156.6 million in free cash flow over the last 12 months, a solid 14.2% 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 Q4 Results

With a market capitalization of $11.2 billion, a $2.66 billion cash balance, and positive free cash flow over the last 12 months, we're confident that Bill.com has the resources needed to pursue a high-growth business strategy. 

It was good to see Bill.com beat analysts' revenue expectations this quarter, driven by higher transaction fees. That really stood out as a positive in these results. On the other hand, its revenue guidance for next year suggests a significant slowdown in demand. Overall, the results could have been better, but this was a milestone year for Bill.com as its transacted payment volume accounted for approximately 1% of U.S. GDP. The company is down 2.58% on the results and currently trades at $98.99 per share.

Is Now The Time?

Bill.com may have had a bad quarter, but investors should also consider its valuation and business qualities when assessing the investment opportunity. We think Bill.com is a good business. We'd expect growth rates to moderate from here, but its revenue growth has been exceptional over the last two years. On top of that, its impressive gross margins indicate excellent business economics and its strong free cash flow generation gives it re-investment options.

The market is certainly expecting long-term growth from Bill.com given its price to sales ratio based on the next 12 months is 8.3x. There's definitely a lot of things to like about Bill.com and looking at the tech landscape right now, it seems that it doesn't trade at an unreasonable price point.

Wall Street analysts covering the company had a one year price target of $132.7 per share right before these results, implying that they saw upside in buying Bill.com even in the short term.

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