BILL is my #2 position for good reasons. I don’t buy blindly and hope for the best.
The growth of BILL.com really comes from transaction fee, specifically, from their customers’ organic transaction growth.
Customer growth is not a significant contributor to revenue growth at around 20% to 30% per year. It’s steady but not hyper growth.
Organic transaction fee has been very consistently around 20% QoQ excluding 2 COVID quarters for the past 3 years averaging 22.65%. 2 Years ago, transaction fee was only 30% of BILL total revenue. Now it’s around 70% of total revenue. So total revenue will be closer to transaction revenue growth rate. For next week report, I expect total revenue QoQ of 20% to 25% growth.
Where my expectation of 20% to 25% QoQ revene growth comes from:
-Fee per ransaction increased from $2.1 to $4.86 last quarter, CAGR of 50% per year.
-Customer growth 25% per year.
- Transaction volume growth of 63% YoY last quarter.
Total: 135% growth per year or 24% per quarter.
This growth rate won’t last forever and we’ll see when it’ll start to slow down.
Note how long Shopify was able to growth the merchant revenue.
Guidance and beat:
Company guided 11.68% QoQ growth next week. Historicaly, company beats quarterly by 12% on average including two COVID quarters. This excluded the crazy 28% beat 2 quarters ago. So it shows management really know their business.
11.68%+ 12% = 24% QoQ. So I expect 20% to 25% QoQ.
And I don’t think it’s good comparison to compare Bill.com TO LSPD. LSPD is in a no growth/low growth of resturant/retail B2C business. The customers of BILL are SMB and their transactions are B2B. Their transactions are very sticky. Transaction fee increased 6.47% ,10.20% during 2 COVID quarters. That was impressive giving that economy was almost shutdown.
“According to a report issued by the Small Business Administration (SBA) in 2019, small businesses account for 44 percent of economic activity in the United States. Small businesses create two-thirds of new jobs and deliver 43.5 percent of the United States’ gross domestic product (GDP).”
Digital transformation has no sign of stopping:
Last ER: “We continue to believe we are in the early innings of a global digital transformation that is disrupting the legacy methods of managing the financial back-office. These trends show no signs of slowing as small businesses are increasingly embracing the need to evolve from analog, paper-based processes to digital solutions that simplify and automate their operations.”
BILL.com will have years of tailwinds of digital transformation from analog financial operations. Think about our bills, credit card, bank statemetns. I haven’t receive a physical one for years and I don’t want to go back.