Bill.com Great Performance...At a Price

Investment Analysis Clubs Saul’s Investing Discussions
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There are a few people on the board who have positions in Bill.com (Nasdaq: BILL). They make cloud based back office software for small businesses to handle accounting functions–streamlining the accounts payable and receivable functions.

There was a recent write-up on the Fool here:
https://www.fool.com/investing/2021/09/07/this-fintech-repor…

The stock has been soaring–even by the standards of this board–for two years. And there is a reason:

Revenue:


          Q1     Q2     Q3     Q4     FY
2019          $19.7  $20.3  $21.5
2020   $27.2  $30.5  $32.5  $33.1 $123.3
2021   $35.6  $41.8  $46.0  $78.3 $238.3*
Growth   31%    37%    42%    __86%*__

*the math doesn’t work out with all the numbers because BILL.com bought Divvy so 2021 includes Bill.com plus Divvy revenue, but some numbers posted are from the earnings reports pre-acquisition. Non-Divvy revenue for Bill.com was still up 73%. In short, both the core business and Divvy acquisition are growing.

Meanwhile, customer growth has been relatively steady at about 25% per quarter.

Higher growth rates are coming from higher ARPU (average revenue per user):


          Q1     Q2     Q3     Q4
2021    $446   $494   $516   $646

In short, Bill.com has been knocking it out of the park.

My only hesitation on this company is the price. Market cap is $28 billion on annual revenue of $238 million.

That is an EV/Sales ratio of 118!

I wouldn’t be selling if I already owned it because they are doing great, but I am not fearless enough to enter at that level.

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There’re things many people missed by looking at the surface.
BILL has two major revenue sources: subscription and transaction. Core revenue is the combination of the two.

Subscription revenue is growing at around 35% but transaction revenue is growing at above 100% per year.

Transacfion fee/Core revenue ratio has increased from 30% to 60% in little less than 3 years. I see similar parttern to Shopify. Shopify merchant revenue has increased consistently over the years vs subscription revenue.

The market is pricing in the hyper growth in transaction revenue and large addressable market in SMB back office financial products.

I thought buying at $199 was expensive and didn’t expect much upside more than 50% per year. It’s up 40% after 1 month. I think BILL can be a long term holding like shopify.

Long BILL 8%. Avg Cost: $199.


Quarter Core(m) YOY Subscription(m)    YoY Transaction(m) YoY   Transacfion rev/Core rev
Q4-2021	$67.20	73%	$31.10         32%	$36.10	137%	54%
Q3-2021	$58.60	62%	$29.30	       32%	$29.30	112%	50%
Q2-2021	$52.30	59%	$26.60	       33%	$25.70	98%	49%
Q1-2021	$43.80	53%	$24.60	       36%	$19.20	83%	44%
Q4-2020	$38.80	54%	$23.60	       40%	$15.20	81%	39%
Q3-2020	$36.10	63%	$22.30         44%	$13.80	106%	38%
Q2-2020	$33.00	61%	$19.90	       39%	$13.10	114%	40%
Q1-2020	$28.63		$18.10		        $10.50		37%
Q4-2019	$25.20		$16.86		         $8.40		33%
Q3-2019	$22.15		$15.50		         $6.70		30%
Q2-2019	$20.50		$14.40		         $6.00		29%
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I am a rank amateur investor. I have been watching BILL as well but have not taken a position yet because I am concerned about insider trading. Insiders did not purchase any share over the last year … there has however been a significant history of selling. This may be just savvy profit taking but is one of the many metrics I check.

https://www.nasdaq.com/articles/this-insider-has-just-sold-s…

Thanks to all on this board for the graduate-level course in investing.
Captain Bob

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I am concerned about insider trading. Insiders did not purchase any share over the last year … there has however been a significant history of selling. This may be just savvy profit taking but is one of the many metrics I check.

Two very important things to keep in mind. “Insider trading” is a phrase that has a special meaning, because it’s illegal: it’s “the illegal practice of trading on the stock exchange to one’s own advantage through having access to confidential information.” Company officers might be insiders, but their buys and sells of employer stock are reported, and it’s difficult for them to get away with actual insider trading.

Second, officers compensated with stock and/or options, who are usually those called ‘insiders’ in this context, sell those shares all the time. In almost NO circumstances around a small and growing company should such sales be construed as anything but compensation liquidation. It could be diversification, or maybe they want to donate money, or tax reasons, or maybe they want to buy a yacht or a 3rd home or a sports team. If you’re looking for a signal from them, it’s only the buys that matter, because that can basically ONLY be an individual investment decision on the part of that officer.

Don’t let the publication of stock sales information on otherwise-reputable websites (like nasdaq.com) cloud what really matters. Whoever wrote that column about insider selling being any kind of flag might not be “all wet”, but they’re decidedly damp. Focus on the company and its performance.

-n8 (just one of multiple things I learned in 20 or so years as a Fool)

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