Before I post my notes below (which are very bullish in general - it was undoubtedly a very strong quarter), I do want to mention that there is a lockup period ending in June that people should be wary of.
CC notes below:
Key Details
Core revenue grew 63% yoy
Gross Margins improved yoy from 76% to 78.8%
Non gaap operating loss was 4.3mm vs 1.1mm in year ago quarter
Non gaap net loss was 2.9mm or $0.04 per share
Balance sheet is very healthy – 382mm in cash
From the CFO himself: To date, we have seen no material impact from covid 19.
Vinegar101: Might even be benefitting from covid – see details later
DBNER 118%
Regarding Covid 19
Many smb’s still use physical paper finance - crisis could accelerate move to digital financial operations.
Vinegar101 here: We were concerned that SMB’s would not be paying their bills, or would be deferring decision to buy bill.com software. But actually, from the CFO, we were told that the company is offering to waive fees to businesses impacted by coronavirus. However, less than 2% of bill.com customers have taken them up on this offer, which led to a reduction in revenue of under $100k – not a material impact!!
That said, there were business impacts that I will discuss in more detail later.
a) Whole work force is remote
b) Tech stack is completely cloud based
c) Waived subscriptions fees for 3 months for new customers financially impacted by covid 19
d) Existing customers in distress – short term suspensions
e) Extended customer support hours to help people balancing work life environments
f) Federal funds rate reduction adversely impacted float revenue
g) Majority of opex spend is related to headcount. Have paused new hiring for the quarter except in critical positions
Vinegar101 here – I don’t like that they paused hiring…
h) Payment risk mgmt. policies have been altered to mitigate potential increases in credit losses associated with payment flows on our platform
i) Processing, approving, and depositing payments electronically is necessary in world where you can’t go to bank or meet with client or retrieve snail mail
j) 82% of customers as of april 2019 were still customers as of apr 30 2020, consistent with retention rate reported at end of fiscal 2019
Key financial metrics:
Core revenue – (subscriptions + transactions) rev grew by 63% yoy to 36.1 million
total rev – grew by 46% yoy to 41.2 million
strong non gaap gross margins of 78.8%
91k customers, representing 28% yoy growth
1.8 mm network members
6mm payment transactions, increase of 23% over year ago period
24.2 billion in total payment vol, increase of 33% yoy
-The product enables to stretch out accounts payable, speed up accounts receivable
On Business Durability
biz model is durable for following reasons: demand generation is not reliant on in person events.
-Market directly to smb’s through online digital marketing referral programs and strategic partnerships
-half of customers used their platform because they used it at prior company or heard through colleague
-go to market model is not reliant on people going direct on the street. Direct sales are 100% inside sales
-short sales cycle of less than 30 days . risk free trial makes it easy for customers to get on platform quickly
–use platform anywhere anytime from any device . no time consuming implementation,
–subscriptions start at $39 per month
–382 mm in cash on balance sheet
–There has been covid related churn. But on the flip side, there have also been customers joining because they are looking for business continuity solutions that would be afforded by using bill.com
Showcase how bill.com is helping accounting partners
Accounting firms can serve more clients more profitably
Increased traction in this channel
Bookminders (an accounting firm) says our clients believe bill.com is a necessity in this new environment.
Businesses look to banking partners, who in turn go to bill.com for services
Bill.com already integrates with boa, jpmc, amex, etc . new wells fargo solution
Non gaap financial metrics
–new trial sign ups in mar and apr – enabling continuity for financial operations in remote environments
–bill.com offering 90 day free subscriptions and fee waivers for existing customers
–less than 2% had portion of subscriptions fees waived. So reduction in subscription revenue of less than 100k through april
–regarding support for prospective customers – 1k trial customers joined under new free trial. Introduced on mar 30. Can assess conversation rate at end of next quarter
–majority of customers auto pay prescription in arrears
–$24.2 billion in total payment volume. Over 6mm payment transactions, 23% yoy growth. Both were down slightly vs typical seasonal pattern
–during 2nd half of march , number of transactions went down starting march and continued in april. Down 14% from march.
–Net db retention rate. Through mar, it was 120%, an increase from last recorded number of 110% from june 2019. In april, rev retention went down to 118% reflecting transaction trends mentioned earlier
Increased attrition starting in april from existing customers. Monthly attrition rate went up 15% from March to April . Mainly from industry segments materially impacted by quarantine, such as restaurants.
Vinegar101: what would revenue have been if there hadn’t been customer attrition???
–82% of customers as of april 2019 were still customers as of apr 30 2020, consistent with retention rate reported at end of fiscal 2019
total rev – 41.2mm. 46% from q3 19. Driven by core rev (subscription and transaction and excludes float rev),
63% yoy core rev to 37mm. increase in customers they serve and growth in rev from existing customers
subscription rev – 22.3mm up from 15.3 mm, 44% increase yoy
driven by increase in customers on platform and average subscription rev per customer
transaction rev – 13.8 mm, increase of 106% yoy. Driven by adoption of new product offerings and increasing number of transactions processed
float rev – decreased from 6.1mm to 5.1 mm yoy, 16%. Annualized rate of return on customer funds held was ~1.5%, dipping 74basis points from prior year. This was due to the Fed’s action to significantly cut the federal funds rate. This ultimately hurt non gaap gross margin
non gaap gross margin: 78.8%, versus 76% in prior year. Higher due to adoption of new product offerings and partially offset by the decline in float rev. Note that this is as high as non gaap gm’s should get, due to negative impact on float due to the fed funds rate being so low for likely an extended period of time.
Operating expenses
R&D was 31% of revenue, up from 29% in prior year. Due to hiring engineering/product talent. Still adding new features and functoniality for growing customer base
S&M were 28% of revenue, up from 26% in prior year
G&A were 30% of revenue, up from 25% - due to first full quarter of public company expenses
Non gaap operating loss was 4.3mm vs 1.1mm in year ago quarter
Non gaap net loss was 2.9mm or $0.04 per share based on 72.4mm shares outstanding.
Balance sheet
Cash/cash equivalents of 382.4mm, down from 383mm at the end of previous quarter.
1.35bb in customer funds on balance sheet, down slightly from prior quarter due to lower total payment volume in march.
Assumption going forward is that trends seen in april continue, without material deterioration.
Next quarter: total revenue expected to be 37.4mm to 38.4mm, comprised of core rev between 34.8mm and 35.6mm and float rev between 2.6mm and 2.8mm.
Expect a non gaap net loss from 9mm to 8mm and non gaap eps loss of .12 to .11 per share with 72.6mm shares outstanding.
From CEO/Founder Rene Lacerte: going after 6mm businesses. Currently only have 91k customers