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Bill.com (NYSE:BILL) Q1: Strong Sales, Stock Jumps 11.1%


Full Report / November 04, 2021
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Payments and billing software maker Bill.com (NYSE:BILL) reported strong growth in the Q1 FY2022 earnings announcement, with revenue up 151% year on year to $116.4 million. Guidance for next quarter's revenue was surprisingly good, being $130.5 million at the midpoint, 11.5% above what analysts were expecting. Bill.com made a GAAP loss of $75.6 million, down on its loss of $12.9 million, in the same quarter last year.

Bill.com (BILL) Q1 FY2022 Highlights:

  • Revenue: $116.4 million vs analyst estimates of $104.5 million (11.2% beat)
  • EPS (non-GAAP): -$0.15 vs analyst estimates of -$0.21
  • Revenue guidance for Q2 2022 is $130.5 million at the midpoint, above analyst estimates of $116.9 million
  • The company lifted revenue guidance for the full year, from $478 million to $539.5 million at the midpoint, a 12.8% increase
  • Free cash flow was negative $25.4 million, down from positive free cash flow of $14.6 million in previous quarter
  • Customers: 126,800, up from 121,200 in previous quarter
  • Gross Margin (GAAP): 74.3%, in line with 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.

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.

The adoption of financial technology software is propelled by an ongoing drive to reduce costs, and as a greater number of small-medium sized businesses digitize their back offices the demand for services like Bill.com is likely to grow.

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 year, growing from quarterly revenue of $46.2 million, to $116.4 million.

Bill.com Total Revenue

This was another standout quarter with the revenue up a splendid 151% year on year. On top of that, revenue increased $38.1 million quarter on quarter, a very strong improvement on the $18.5 million increase in Q4 2021, and a sign of re-acceleration of growth, which is very nice to see indeed.

Analysts covering the company are expecting the revenues to grow 83.9% over the next twelve months, although estimates are likely to change post earnings.

Customer Growth

You can see below that Bill.com reported 126,800 customers at the end of the quarter, an increase of 5,600 on last quarter. That's in line with the customer growth we have seen over the last couple of quarters, suggesting that the company can maintain its current sales momentum.

Bill.com Customers

Profitability

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 is left after paying for servers, licenses, technical support and other necessary running expenses was at 74.3% in Q1.

Bill.com Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.74 left to spend on developing new products, marketing & sales and the general administrative overhead. This is around the average of what we typically see in SaaS businesses, but it is good to see that the gross margin is staying stable which indicates that Bill.com is doing a good job controlling costs and is not under a pressure from competition to lower prices.

Key Takeaways from Bill.com's Q1 Results

Since it has been burning cash over the last twelve months it is worth keeping an eye on Bill.com’s balance sheet, but we note that with a market capitalization of $30 billion and more than $2.83 billion in cash, the company has the capacity to continue to prioritize growth over profitability.

We were impressed by how strongly Bill.com outperformed analysts’ revenue expectations this quarter. And we were also excited to see the really strong revenue growth. Zooming out, we think this was a fantastic quarter that should have shareholders cheering. The company is up 11.1% on the results and currently trades at $325.95 per share.

Is Now The Time?

Bill.com may have had a good quarter, but investors should also consider its valuation and business qualities, when assessing the investment opportunity. There are a number of reasons why we think Bill.com is a great business. For a start, its revenue growth has been exceptional, and analysts believe that sort of growth is sustainable for now. And while its cash burn raises the question if it can sustainably maintain its growth, the good news is its very efficient customer acquisition hints at the potential for strong profitability, and its strong gross margins suggest it can operate profitably and sustainably.

Bill.com's price to sales ratio based on the next twelve months of 52.7x indicates that the market is definitely optimistic about its growth prospects. But looking at the tech landscape today, Bill.com's qualities stand out and we still like it at this price.

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