BILL - 8-K New Financial Institution Partner

As noted previously, provides cloud-based back office software for SMBs (e.g., accounts payable). BILL also provides SMBs with various payment services including electronic payments and international payments. It has 3 sources of revenue – subscription and payments (core revenue) and interest on float (small percentage). Its subscription services are sold directly to SMBs, through accounting “partners” and through financial institution “partners”. (See previous posts for more detail).

BILL has had a nice run recently, but had a recent pull back. (-24.95% off high on May 8 but still +31.70% for last month; +87.52% for last 6 months).

BILL filed an 8-K late in the day on Friday, May 22, 2020 (1:54pm EST) which is related to the financial institution “partner” revenue source.

The 8-K states that:

“On May 20th, 2020, LLC, a subsidiary of Holdings, Inc. (the ‘Company’), entered into a new statement of work (‘SOW’) to expand an existing agreement with one of the top three small business banks in the United States (the “Bank”).

The SOW calls for the Company to integrate and host a Bank branded version of its Connect product for Bank to offer to their small business banking clients. Bank will deploy the new offering developed under this SOW as the default bill pay and receivables solution for all new small business banking customers. Existing small business banking customers will also have the option to enable these services. The SOW has a five-year term from the launch date, which is anticipated in 2021. Holdings, Inc. is not updating its financial guidance for the fourth quarter of the current fiscal year ending June 30, 2020.”

The recent conference call talks about the financial institutions and adding Wells for only their treasury management clients.

The recent Conference Call on May 7, 2020 noted:

“SMBs look to their banking partners for digital solutions that provide end-to-end cash flow management.… is currently integrated with several of the largest financial institutions in the United States, including Bank of America, JPMorgan Chase and American Express. [Note: In a previous post, I incorrectly referred to Citi when I meant AXP.]

These partners embed our platform typically on a white-label basis into their online banking solution. We continue to have many great conversations with our existing partners about doing more together, and we continue to see opportunities to partner with additional institutions.

Today, I’m excited to let you know that we’ve reached agreement with our newest partner, Wells Fargo. Wells Fargo will power a new digital AP and AR solution for its treasury management clients by integrating into its Commercial Electronic Office online portal.”

So, I believe JPM and BOA (and AXP) already provided an SMB solution with BILL. I read BILL’s 8-K to say that they greatly expanded their partnership with WFC (who is an “existing customer” with treasury clients) to cover all of their new SMB clients and probably the vast majority of their existing SMBs (who will need to opt in). I read that because other than BOA, JPM and WFC, I’m not sure who was both an existing client and one of the top 3 small business banks in the US. I think they now have all three of them.

In any case, I think it is good long-term news locking up a top US bank’s SMB clients for 5 years. I see there was a sell off very late in the day on May 20, but I would think this news would have had the opposite reaction. It will be interesting to see if it has any impact tomorrow morning and the week to come.




I don’t know BILL very well, so this could be a dumb question. The SOW is to build out a bank-branded version of their services, right? Do they rake off the same money with the branded version as they do with their own business services? Or is this a one-time “build me a robot” contract, where the recurring revenue is just operations and maintenance?

You asked, I don’t know BILL very well, so this could be a dumb question. The SOW is to build out a bank-branded version of their services, right? Do they rake off the same money with the branded version as they do with their own business services? Or is this a one-time “build me a robot” contract, where the recurring revenue is just operations and maintenance?

As they stated in their previous conference calls talking about financial institutions and specifically JPM, BOA and AXP using their SaaS services, these partners embed our platform typically on a white-label basis into their online banking solution.

In other words, BILL works with the banks platform to integrate BILL’s software so it functions with and looks like the bank’s platform/software. So, BILL will get subscription revenue based on an enterprise custom pricing arrangement.

Implementation by January 2021 to integrate back office software and especially the bill pay/transaction features is actually pretty quick for a Bank like WFC to validate the integration and to insure their customers data and money is safe. BILL has done this already with other banks though which is good.

From their S-1:

SMB and Accounting firm partner revenue (unlike Banks): “Our contracts with SMB and accounting firm customers primarily consist of cancelable contracts that can be terminated by either party without penalty at any time… We recognize subscription revenue for cancelable contracts on a daily basis and transaction revenue on the date we process the transactions. Some of our contracts are non-cancelable annual or monthly contracts. We recognize revenue for non-cancelable annual and monthly contracts as a series of distinct services satisfied over time.”

Financial institution revenue: “We enter into multi-year contracts with financial institution customers that typically include fees for initial implementation services that are paid during the period. Fees for subscription and transaction processing services are subject to guaranteed monthly minimum fees that are paid over the contract term. These contracts enable the financial institutions to provide their clients with access to online bill pay services through the financial institution’s online platform. Implementation services are required up-front to establish an infrastructure that allows the financial institution’s online platform to communicate with our platform. The financial institution’s clients cannot access online bill pay services until implementation is complete and the financial institution has provided acceptance of the implementation services. The fees we earn through these contracts vary based on the number of users and transactions processed. We have determined these contracts meet the variable consideration allocation exception and therefore we recognize guaranteed monthly payments and any overages as revenue in the month they are earned. We recognize implementation fees based on the proportion of transactions processed to the total estimated transactions to be processed over the contract period.”

So, my take is this is the same model already being used with JPM, BOA and AXP. They just added WFC for all of WFC new and (optional) old SMB customers - a five year deal. (Again, I am guessing this is WFC by parsing their statements - "existing customer, top 3 SMB US bank, etc.). Ballpark adding a top 3 SMB bank probably just added a new bank revenue stream equal to at least 33% of that stream.

I think this is a big deal.

(Long BILL)

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I don’t know if it will answer your question, but this TMF podcast reviews and includes a discussion of how they make money:…

Financials: A Closer Look at Soaring Fintech

Business payments solution company (NASDAQ: BILL) has been one of the best-performing financial stocks during the COVID-19 pandemic. In this episode of Industry Focus: Financials, host Jason Moser and contributor Matt Frankel, CFP take an in-depth look at the company and what investors need to know


The Podcast is a good intro. Some additional points on what they said:

  1. They mentioned 90% of SMBs still write out paper checks, and that BILL does electronic payments. Partly true, BILL doesn’t always do electronic checks. That is where they want to get to. They want to convert their clients and vendors to electronic payments, but they still do quite a bit of paper checks for their customers. As they increase this, margins will improve.

  2. They talked about the SaaS revenue and the float revenue. They didn’t mention 1/3 of their revenue comes from transaction fees (which is high margin and grew 106% yoy). SaaS revenue $22.3 million (44% yoy growth), transaction revenue $13.8 million (106% yoy growth), and float revenue $5.1 million (-16% yoy growth). Keep in mind, these numbers reflected covid 19 and historically low interest rates.

  3. They spoke about competition, but most of the “competitors” are actually customers (e.g., JPM). I don’t know of anyone with a similar platform.

  4. Competitive advantage - They talked about developing a network effect (like venmo). BILL talks about this with over 91,000 customers that they have over a million users (vendors etc). I agree that when this gets bigger it will be a huge competitive advantage, but right now their platform and licensing in all 50 states (for bill payments) is a competitive advantage too. They spoke about BILL’s AI in their platform as well. This is a competitive advantage.

  5. COVID impact - good discussion here about some churn, but some adds and other positives. Importantly, BILL did not pull its guidance for the rest of the year. They gave a narrow range.

  6. CEO/Funder - did this before with Paycycle which was sold to Intuit. (Note, BILL software works, or is integrated, with quickbooks).

  7. Spoke about Square comparing the SMB underserved market and huge potential. Agree on those themes. Would have loved to by Square 4 years ago.

(Long BILL)
(apologies on my “bolding” issue in previous post - not closing it out)


Nube question - is there some trick to being able to type in BOLD and italics on this board? I see other people can do it, but on my computer it will not allow any text formatting.

For bold and italic, surround the desired text with < b > and < /b > or < i > and < /i > (without the spaces).

Styling Your Post
Yes, you too can now use bold and italic (even bold italic if you are really clever!) type in your board posts! Fancy!

For those of you who know HTML, just use the standard opening and closing HTML tags when you write your post. The rest of us will need that explained. At the beginning of the text you want to enhance, type for bold, and for italic. At the end of the enhanced text, type for bold, or for italic, whichever you used (using both tags creates bold and italic text, of course).

Inserting a hyperlink is even simpler. Just type or paste it in. The post page will automatically change anything that starts with “www.” or “http://” into a link. You don’t have to do any fancy HTML formatting.

PRE tags are also supported for table data or ASCII art. Just use


surrounding the text. For word sentences within those tags, you will need to enter your own line breaks, or the post will be too wide to fit on the screen.

Wow. Primitive. Bold Test

Way too much work. But thanks for the explanation. I’ll probably not be using that though.

Mike, many thanks for write up about the BILL.

I like the company and I think that they are either already have or building a moat. The main detriment for me for starting a position is valuation. They r growing at around 50% and valued at more than 20x sales for 2021. Compare with LVGO, growing at plus/minus double that and valued at 10x for 2021.

These dynamics for both companies can change, e.g. Bill could accelerate growth to 70/80% then such valuation would make more sense for me. Whatever, I could be wrong here, but for me it’s too expensive at the moment.

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Understood on valuation (although off 30% of highs). Also for those looking for a possible entry point, keep in mind that BILL’s lock-up expires in early June. (If you want to predict its impact on price).

(Long BILL)