what i liked in bill's numbers

Q222 just came out, and it has jumped +29% ah.

Note that Q2 had a really hard comp (esp from the tx rev jumping +33.9% QoQ in Q221), yet accelerated off of the already excellent prior Q.

Organic revenue growth YoY (since pandemic low point):
+32.9% → +31.4% → +38.3% → +44.9% → +61.4% → +72.1% → +81.5% !!

ESPECIALLY like how organic Sub Rev growth YoY has accelerated last few Qs (new customers are flocking onto the platform, and so into the payments flywheel):
+35.9% → +33.7% → +31.4% → +32.2% → +42.3% → +51.5% !!

Organic Tx rev YoY appears to be starting to taper:
+81.0% → +82.9% → +96.6% → +112.3% → +136.8% → +127.6% → +121.0%
however the QoQ is accelerating, as the last few Qs had hard YoY comps against the incredible spurt in Q1-Q221 (+26.3% and +33.9%) …
+10.1% → +26.3% → +33.9% → +14.0% → +22.9% → +21.4% → +30.0% !!

  • Adj Gross Margin went from low of 76.2% to now 85.3%. Acquisitions and scale have really bumped it.
  • Adj Op Margins swung positive for first time (after 2Qs going backwards due to acquisitions).
  • CFO/FCF Margins are moving the right direction again.
  • All time high number of cust net adds +8200 (2nd highest QoQ jump).
  • TPV jumped +20.3% QoQ, Divvy even faster at +26.7% QoQ.
  • Organic Rev per Tx gone from 3.57 → 5.80 over past year

I haven’t listened to the CC yet. One spotted change in KPIs - they switched Current RPO to be 2 years instead of 1 year. Scanned the transcript for a mention of a reason, and see none.

Be aware, next Q is their seasonally weakest (QoQ) on TPV and Num Tx.

  • muji
    long BILL
60 Likes

Muji, I’m getting somewhat different numbers on organic core rev growth YoY (bolded the differences below)

               Q4-20  Q1-21  Q2-21  Q3-21  Q4-21  Q1-22  Q2-22
Org core YoY   32.9%  31.3   38.3   44.9   **73.2   77.5**   85.5  
Org sub YoY    40%    36.7   33.7   31.4   **31.8   38.6**   51.5 

In any case, I want to highlight some other signs of their exploding accelerating growth everywhere:

               Q4-20  Q1-21  Q2-21  Q3-21  Q4-21  Q1-22  Q2-22
Bill ARPU     $396    423    479    507    554    613    719
QoQ           -0.2%   6.7    13.4   5.8    9.33   10.5   17.4
YoY                          24.9%  27.8   40     45     50

Divvy ARPU                                 962    2807   3774 
QoQ                                               192%   34.4

Bill TPV/cust  $259K  278K   319k   303K   344K   370K   418K
Div CPV/cust                               41K    111K   126K

Bill takerate  0.06%  0.067  0.074  0.084  0.087  0.093  0.10
Div takerate                               2.33%  2.46   2.60              

ARPU continued to accelerate on Bill.com’s platform! Divvy ARPU per divvy business increased.
Bill.com TPV per customer still growing!! Divvy card payment volume also increased.
And most importantly, the take rate continues to climb for both Bill.com platform and Divvy spend!
They are grabbing higher yielding customers and customers that continue to expand their transactions on the platform.

Conference call highlights:
1.) There is uncertainty regarding the impact of Omicron, inflation and supply chain constraints being experienced by businesses. While we don’t see an impact on our overall SMB base at the moment, we continue to monitor the situation closely.

This was why I had kept my Bill allocation at the lower end for my portfolio. Well, this quarter has allayed much of my macroecon effects fears - clearly these kinds of payments in SMB world is more resilient and more reliable than the concentrated consumer facing businesses that LSPD dealt with, or other companies that heavily depend upon consumers (Compare, for example, UPST’s March COVID quarter’s plummet in revenue which was 80% drop QoQ, while Bill.com still managed to grow a little QoQ).

2.) In prior earnings calls, we discussed being selected to design a new payables and receivable solution for one of the top three small business banks in the U.S. Today, I’m excited to share that the bank is Bank of America. This new partnership came together as a result of our success serving Bank of America’s commercial customers and extends our reach to support all of the small businesses, including sole proprietors that Bank of America serves. The new solution was launched in several markets in Q2, and the nationwide rollout will continue throughout calendar year 2022.

This is going to fuel more customer additions in the coming quarters.

3.) Bill.com organic subscription revenue growth…accelerated…driven mainly by the impact of a slightly larger average customer size and the new Bank of America revenue.

In fact, the BoA partnership is already growing the top line!

4.) G&A expenses increased $3 million from Q1, reflecting a full quarter of Invoice2go and increased fraud and credit losses associated with the growth in TPV and card spend with estimated loss rates being consistent with historical trends.
Something to keep an eye on. Losses not getting out of bounds so far.

5.) The slight decline in net new customers added at Divvy and Invoice2go as expected as we applied Bill.com’s more robust underwriting and onboarding criteria to their new customer sign-up flows. We believe this application of our proprietary risk logic will yield higher-value customers going forward.

Something else to watch.

6.) …when they first subscribed to the Bill.com platform, they tend to have many more check payments versus electronic payments. They tend to have some of their suppliers on the network but not all…over the course of several quarters, as they get further engaged with the platform, we see the electronic payments go up. And as a result of that, we see higher adoption of some of the newer ad valorem products that we have that has the effect of increasing our overall transaction monetization.

LAND and EXPAND at work here.

7.) For fiscal Q3, we expect our total revenue to be in the range of $157 million to $158 million. Note that sequential revenue growth in Q3 will be influenced by seasonality as well as the step-up in revenue recognized in Q2 that I referenced earlier for Invoice2go and Bank of America subscription fees.

Explanation of the guide for next Q.

8.) We have focused for years about the future. And when we think of the future, we think in terms of years and decades, not months and quarters. And our focus on the success of the business is predicated on our ability to drive penetration into the market that we have. This is a massive opportunity in front of us. We’ve got just over 2% of the SMBs in this country that have employees that are on our core Bill.com platform…we’re super excited when we have a revenue beat like we just did that drives kind of the numbers that we just had.

Enough said…the market opportunity is immense. And not just in the US but their growth internationally, with Invoice2Go to help cross sell

35 Likes

I too kept my BILL allocation quite small for a number of reasons. As it turned out, I was wrong. I will be building this position as it now seems quite obvious that BILL will continue to grow at a blistering pace.

There is one thing that still gives me pause however. It’s not a substantial, tangible thing, but CEO Rene Lacerte has an annoying manner of saying a lot without ever actually answering the questions posed to him. Here’s just one example from the conference call, but I could cite several others:

We now go to Will Nance from Goldman Sachs. Will, please go ahead.

William Nance

Hey guys. Thanks for taking the questions. I’ll echo the others’ congrats on a nice quarter. I wanted to follow-up on the partnership with Bank of America. I’m wondering if you could help put that into context, how meaningful that could be for customer acquisition, once fully ramped and maybe in the context of what the FI channel today, contributes in terms of net adds on a quarterly basis?

following is Rene’s 252 word response wherein he never actually provides an answer to the question.

Rene Lacerte

Thank you, Will. Bank of America is obviously one of the top three banks in the country. And so from an opportunity to reach SMBs, we’re super excited about the reach they have, the scale they have, the opportunity for us to support their businesses as they’re growing, expanding their business. And so for us, this opportunity just is reflective of our overall bank strategy. And the FI strategy that we’ve chosen is to make sure that we can support our FI partners, and that’s the white-labeled experience. It’s having an ability to kind of understand what their needs are.

And then as we understand those needs, it’s an opportunity to kind of cross-sell other services and products we have. And Bank of America is a perfect example of that. It started off as a commercial relationship focused on the largest businesses that they have. And based on our success there and our ability to serve those customers, got some interest and discussion around their smallest businesses.

And so for us, when we look at the overall opportunity, it really is around supporting FIs, businesses, trust, financial institutions. They have an opportunity to serve and do something for their customers that they’ve never had before, which is to really leverage the software to automate the financial operations that then drive the payments that they all want to be a part of. So we are super excited about the opportunity with Bank of America and what that leads to in our FI practice.

A lot of glowing words about their FI strategy and opportunity and cross-selling and blah, blah, blah, but absolutely nothing specific about customer acquisition and net adds on a quarterly basis which was the question Mr. Nance asked about.

It just makes me a little uncomfortable when the CEO responds with arm-waving and cheer-leading. One can only hope that he’s more direct in his leadership role when providing guidance to his immediate subordinates.

11 Likes

Old article but worth sharing, the author despises the company but actually lays out the bull case demonstrating how sticky the service is and it’s network effects:

https://www.notboring.co/p/bill-a-bear/

1 Like