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Cloud Stocks: Bill.com Sees Strong Demand

Posted on Monday, Sep 14th 2020

Bill.com (NYSE:BILL) recently reported a strong fourth quarter that beat analyst estimates. Remote work conditions have accelerated demand for its cloud-based financial software. As a result, its stock has soared over 300% since its IPO in December last year.

Bill.com’s Financials

Fourth quarter revenue grew 33% to $42.1 million, significantly ahead of estimates of $38.03 million. GAAP net loss was $9.5 million, compared to net loss of $4.5 million a year ago. Non-GAAP net loss was $1.8 million, or $0.02 per share, ahead of the analyst estimates of a loss of $0.11 per share. Cash balance was $697.6 million at June 30, 2020.

By segment, subscription and transaction revenues grew 54% to $38.8 million. Interest on funds held for customers, referred to as float revenue, fell 49% to $3.3 million.

Among key metrics, it reported a customer growth of 28% or 6,700 net new customers to reach over 98,000. At the end of the fourth quarter, Bill.com had over 2.5 million network members, an increase of 39%.

The growth in net new customers was driven by strong demand across all channels due to the need to manage financial operations remotely as part of work-from-home orders. It also added 1,000 customers through its 90-day free subscription offer from late March. It processed 5.6 million transactions in the quarter and 23.9 million transactions in the fiscal year.

For the full fiscal year, revenue grew 45% to $157.6 million. GAAP net loss was $31.1 million, compared to net loss of $7.3 million a year ago. Subscription and transaction revenues grew 59% to $136.4 million. Bill.com ended fiscal 2020 with 80 of the top-100 accounting firms in the US as its clients, up from 70 a year ago. Bill.com caters to about 5,000 accounting firms, up from 4,000 last year.

For the first quarter of fiscal 2021, total revenue is expected to be in the range of $41 million to $42 million, made up of core subscription revenue in the range of $39.2 million to $40 million, and float revenue in the range of $1.8 million to $2 million. non-GAAP net loss in the range of $6.5 million to $5.5 million and a non-GAAP EPS loss of $0.08 to $0.07 per share

For existing customers facing COVID-related financial hardship, Bill.com was providing subscription fee waivers. These fee waivers amounted to less than $100,000 and a vast majority of customers who received waivers are now paying regular subscription rates. Rather than have a formal hardship program, the company is now working with customers on a case-by-case basis.

Bill.com’s New Offerings

Bill.com recently announced that it has joined forces with KeyBank to introduce Key CashFlow, an online banking solution. It streamlines payment workflow for KeyBank’s small business and commercial customers, enabling them to scale their use of the platform as they grow. Customers can easily manage their cash flow and end-to-end payments powered by Bill.com’s AI technology. KeyBank is currently rolling out Key CashFlow on a pilot basis and is expected to be generally available in late calendar 2020.

During the quarter, Bill.com processed $25.4 billion in total payment volume (TPV) on its platform, growing 26% over the year. The strong early growth in TPV is attributed to its success in marketing the cross-border service to its installed customer base. It had launched its cross-border payments offering in late 2018. In fiscal 2020, it disbursed over $2.3 billion to international suppliers on behalf of its US customers, up 300% from approximately $570 million in fiscal 2019.

Today, approximately 75% of its cross-border payments are made in US dollars. Moving more of this volume to local currency allows it to generate more FX revenue. To reach this goal, it recently piloted a new product functionality for international suppliers to choose to receive local currency even if their invoices were issued in US dollars. It is also investing in expanding its virtual card offering to convert not just checks, but also ACH (Automated Clearing House) transactions to virtual cards.

Bill.com’s Partnerships

Bill.com has partnerships with the leading accounting software providers for SMBs. Earlier this month, it extended its partnership with Intuit to support QuickBooks Online Advanced. QuickBooks Online Advanced customers’ ARPU is seven times higher and their attrition rate is much lower than its simple bill pay customers. Intuit estimates that 1.5 million mid-size businesses could benefit from the combined solutions.

Bill.com has recently expanded an existing agreement with one of the top three small-business banks in the US to cater to the SMB segment.

Bill.com has also announced that the top three banks in the US as well as five other financial institutions will be using its platform as the go-to market solution for the commercial customer segment. Bill.com will be integrating its platform with the banks’ online experience.

Its stock is trading at $89.71 with a market cap of about $7.2 billion. It hit a 52-week high of $107.41 following its fourth quarter earnings announcement. It had fallen to a low of $23.61 in March this year. Bill.com had listed on the NYSE in December last year when it raised $216 million at an IPO price of $22 apiece and a valuation of $1.6 billion.

This segment is a part in the series : Cloud Stocks


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