Bill.com Q4'22 and Full year report

Investment Analysis Clubs Saul’s Investing Discussions
1

i like that the Divvy and Invoice2go acquisitions are contributing to help beat expectations.

Bill.com Reports Fourth Quarter and Fiscal Year 2022 Financial Results
08/18/2022

- Core Revenue Increased 151% Year-Over-Year
- Organic Core Revenue Increased 71% Year-Over-Year
- Transaction Fees Increased 201% Year-Over-Year
- Organic Transaction Fees Increased 90% Year-Over-Year

“We delivered a strong fourth quarter to conclude fiscal 2022, serving 400,000 businesses and crossing $200 million in quarterly revenue,”

said René Lacerte, Bill.com CEO and Founder.

“Fiscal 2022 was a transformative year for Bill.com. We significantly expanded our platform’s solutions and extended our reach to serve customers ranging from sole proprietors to mid-market companies.

We entered new strategic partnerships and began building a global customer base, serving businesses in more than 150 countries. With our platform, ecosystem, and scale, we are well positioned to help millions of businesses transform their financial operations.”

https://investor.bill.com/news/news-details/2022/Bill.com-Re…

*** Bill.com’s reported financial results for the fourth quarter and fiscal year 2022
include the results of Divvy and Invoice2go.

Organic results exclude the impact of Divvy and Invoice2go.

Financial Highlights for the Fourth Quarter of Fiscal 2022:

- Total revenue was $200.2 million, an increase of 156% from the fourth quarter of fiscal 2021.

- Core revenue, which consists of subscription and transaction fees, was $194.8 million, an increase of 151% year-over-year. Organic core revenue was $114.9 million, up 71% year-over-year, and excluded Divvy and Invoice2go revenue of $79.9 million.

* Subscription fees were $55.2 million, up 77% year-over-year. Organic subscription fees were $46.2 million, up 49% year-over-year, and excluded Divvy and Invoice2go fees of approximately $9.0 million.

* Transaction fees were $139.6 million, up 201% year-over year. Organic transaction fees were $68.7 million, up 90% year-over-year, and excluded Divvy and Invoice2go fees of $70.9 million.

“We delivered strong Q4 financial results, with revenue, non-GAAP gross margin, and non-GAAP net loss per share all well ahead of our expectations,”

said John Rettig, Bill.com CFO.

“Looking ahead, we expect to deliver high revenue growth and to transition to being a non-GAAP profitable company in fiscal year 2023. We will continue to invest in our large market opportunity, while maintaining our rigorous operational discipline.”

Financial Highlights for Fiscal Year 2022:

- Total revenue was $642.0 million, an increase of 169% from the prior fiscal year.

- Core revenue, which consists of subscription and transaction fees, was $633.4 million, an increase of 173% from the prior fiscal year. Organic core revenue was $391.7 million, up 77% year-over-year, and excluded Divvy and Invoice2go revenue of $241.7 million.

* Subscription fees were $193.5 million, up 73% year-over-year. Organic subscription fees were $163.7 million, up 47% year-over-year, and excluded Divvy and Invoice2go fees of approximately $29.8 million.

* Transaction fees were $439.9 million, up 265% year-over-year. Organic transaction fees were $228.0 million, up 107% year-over-year, and excluded Divvy and Invoice2go fees of $211.9 million.

Smart Move. They brought in experienced talent with expertise in small and mid-size business to scale global growth.

Bill.com Adds Experienced SMB Leaders to Executive Team, Hiring Irana Wasti as Chief Product Officer and Sofya Pogreb as Chief Operating Officer

https://investor.bill.com/news/news-details/2022/Bill.com-Ad…

August 18, 2022 04:30 PM ET
Bill.com 4Q FY2022 Earnings Conference Call:

https://investor.bill.com/events-and-presentations/event-det…

Grrrreat report. Up significantly after hours.

Significantly expanded platform solutions.
Leading to Increased customer base world wide.
Acquisitions contributing to increased revenues beating expectations.

Word for the day …> significant. ;^)

Best, kevin c
long of Bill.com Holdings, Inc.
please click on my screen name for disclosed holdings

51 Likes
2 
My notes from BILL Q4 FY22 Earnings Call:  Analyst Q/A
8/18/2022 3:30 PM CST

Q  Softness in advertising spend, please break out discretionary spend.  Since turning non gaap profitable, what to think re:  margins?
A  We have a broad base of customers from SMBs to mid-market customers.  They see themselves growing into larger companies with greater spend.  
With current momentum, they’re planning to lay out longer term targets in the future, but have not yet done so.

Q  Outside of advertising, what gives you the rationale for not changing in the future.
A  Great TPB growth and when they look at the macroenvironment, the pandemic pushed need to have back office in the back pocket of their customers, need for digital transformation and finally, the need for companies to be more efficient with the use of [BILL.com](http://BILL.com).

Q  With the combination of the growth, should the flywheel start to kick in?
A  They’re in the beginning stages of this and expect solid growth in the future.

Q  When we think of the guidance, lots of assumptions.  What kind of assumptions have you made between Divvy and [Bill.com](http://Bill.com).  More color on inupts?
A  Large customer base and scale gives them insight to repeat customers.  Spend patterns is the most significant insight they have and with Divvy it’s a slightly larger customer base.  Divvy is s tool to manage expenses, and regardless of the spend, it creates higher visibility for them.  2000 customer adopted Divvy and they’ve been able to cross-sell effectively.  11,200 new adds this quarter and 5,000 new adds excluding the adds from the FI channel.  Looking out they see _____ new adds into the future.

Q  Re:  improved payback period, has this helped/change w/ respect to this variable?  
A  Broad distribution channel has allowed them to drive payback number.  The opportunity w their ecosystem increases their DBNRR numbers allows them to add more customers.  Everything they’ve been building for years has been working for them.

Q  Pace of adoption curve and how to think about this in future.  What factors could steepen the pace of adoption in future years?
A  Continuing to reinvest in their business has driven their growth.  All their growth is because of the investments they’ve made In their business and they plan to continue to do so.

Q  RE:  RPO, it has remained steady.  What do you see into the future re:  minimums?
A  RPO number of 150M reflects minimum contractual commitments, see it as the floor and not the ceiling.  Disclosures spell out the total RPO and what they’ll see into the future.  As they sign new institutions/distributors, it’s not subject to movement q/q.

Q  Any one off variables to consider?
A  There is some seasonality related to payment volumes.  March qtr is typically softer than December quarter.

Q  Automating financial solutions is clearly resonating w/ SMBs.  What gives you confidence to continue to land new customers during these difficult macro conditions?  
A  In 16 yrs they’ve been building their business, landing BOA and other large providers as distributors to sell the [BILL.com](http://BILL.com) platform has been tailwinds to help drive demand among SMBs.

Q  Divvy volumes jumped significantly and what’s driving momentum?
A  Typical client is slightly larger than [BILL.com](http://BILL.com), and seeing increased spend as a result.  Excited about continuing to drive cross sell adoption.   

Q  For core [Bill.com](http://Bill.com) vs. Divvy, what are you seeing re:  projections of core revenue growth?
A  Divvy planning above 50% and for [Bill.com](http://Bill.com), planning above 40%.

Q  Smaller competitors have struggled and your KPIs are strong, is there something you can do to increase this while your customers struggle with this?
A  SMBs are hard to reach and hard to find.  From that perspective, focus on execution and rigor is what has paid off and just being committed and focused on this has really paid off.

Q  Growth drivers in FY23 and how it’s going to be different than FY22.  What about some other drivers that will be different in the future?
A  It’s all about driving executional excellence and re:  Customer acquisition, it’s all about their internal systems executing in an excellent manor.

Q  What are you still focusing on or what may be deferred into the future?
A  Initially focus on a multi-year approach.  Number one priority is in driving integration and an excellent customer experience, go to market and excellent ecosystem.  Having this packaged as a SaaS really has created a tailwind.  They’re early in their development and feel they have a long way to go.

Q  Any further leverage than can drive gross margin in the future?
A  Expect to be above 79-81% growth range.  They have a good mix of product.  Highly profitable and tailwinds w/ rapidly rising float margins helps too.

Q  IS there a point in time where you expect partners/financial institutions to be accretive?
A  RPO will allow them to grow revenue, but long term they’re very bullish about working with their partners to dive adoption w/ their new solutions, etc.

Q  What does the core BILL purchase look like and have you made adjustments and how to look at this going forward.
A  Enhanced go to market and built sales teams w/ other tailwinds driving more demand across the ecosystem.  No changes in the go to market.

Q  Traction you’re seeing w/ the new payments…of the new payment types, which payment methods are seeing the most traction, best take rate and TPV impact?
A  Customers need multiple ways to pay and get paid.  What we’re seeing is continued ad velorem payment types and there are a lot more going forward.  All the things th’y've rolled out going forward, they will continue to drive these priorities.

Q  When should we expect higher prices to hit for direct channel and indirect channels?
A  Announced direct recently and expect by end of 3rd qtr will have made announcements by then.  

Q  Divvy -when do you expect to see the integration of both?
A  It has started and they’ve pulled teams together and are working as fast as possible to bring this together so there’s one unified approach as soon as possible.  

Hope this is helpful information.  Thank you to Saul and board managers for making this board a treasure trove of crowdsourced investing discussions.

sjo
26 Likes
3

All the growth metrics look great and the increase in float will be a tailwind with higher interest rates (their yield was still only 0.68% this quarter and this flows straight to the bottom line).

But, I worry about net loss being significantly higher for the full-year and Q4 (especially when revenue growth is so impressive). Non-Gaap is much lower, need to check if the difference is primarily stock based compensation.

Q4

Revenue: 78M->200M yoy (+122M)

Net loss: 41M->81 yoy (40M higher)

FY22

Revenue: 238->642M (+404M)

Net loss: 144M->326M yoy (182M higher)

4 Likes
4

For better readability, editing the valuable notes from sjo on BILL Q4 FY22 Earnings Call.

Analyst Q/A

Q: Softness in advertising spend, please break out discretionary spend. Since turning non gaap profitable, what to think re: margins?
A: We have a broad base of customers from SMBs to mid-market customers. They see themselves growing into larger companies with greater spend.
With current momentum, they’re planning to lay out longer term targets in the future, but have not yet done so.

Q: Outside of advertising, what gives you the rationale for not changing in the future.
Q: Great TPB growth and when they look at the macroenvironment, the pandemic pushed need to have back office in the back pocket of their customers, need for digital transformation and finally, the need for companies to be more efficient with the use of BILL.com.

Q: With the combination of the growth, should the flywheel start to kick in?
A They’re in the beginning stages of this and expect solid growth in the future.

Q: When we think of the guidance, lots of assumptions. What kind of assumptions have you made between Divvy and Bill.com. More color on inupts?
A Large customer base and scale gives them insight to repeat customers. Spend patterns is the most significant insight they have and with Divvy it’s a slightly larger customer base. Divvy is s tool to manage expenses, and regardless of the spend, it creates higher visibility for them. 2000 customer adopted Divvy and they’ve been able to cross-sell effectively. 11,200 new adds this quarter and 5,000 new adds excluding the adds from the FI channel. Looking out they see _____ new adds into the future.

Q: Re: improved payback period, has this helped/change w/ respect to this variable?
A Broad distribution channel has allowed them to drive payback number. The opportunity w their ecosystem increases their DBNRR numbers allows them to add more customers. Everything they’ve been building for years has been working for them.

Q: Pace of adoption curve and how to think about this in future. What factors could steepen the pace of adoption in future years?
A Continuing to reinvest in their business has driven their growth. All their growth is because of the investments they’ve made In their business and they plan to continue to do so.

Q: RE: RPO, it has remained steady. What do you see into the future re: minimums?
A RPO number of 150M reflects minimum contractual commitments, see it as the floor and not the ceiling. Disclosures spell out the total RPO and what they’ll see into the future. As they sign new institutions/distributors, it’s not subject to movement q/q.

Q: Any one off variables to consider?
A There is some seasonality related to payment volumes. March qtr is typically softer than December quarter.

Q: Automating financial solutions is clearly resonating w/ SMBs. What gives you confidence to continue to land new customers during these difficult macro conditions?
A In 16 yrs they’ve been building their business, landing BOA and other large providers as distributors to sell the BILL.com platform has been tailwinds to help drive demand among SMBs.

Q: Divvy volumes jumped significantly and what’s driving momentum?
A Typical client is slightly larger than BILL.com, and seeing increased spend as a result. Excited about continuing to drive cross sell adoption.

Q: For core Bill.com vs. Divvy, what are you seeing re: projections of core revenue growth?
A Divvy planning above 50% and for Bill.com, planning above 40%.

Q: Smaller competitors have struggled and your KPIs are strong, is there something you can do to increase this while your customers struggle with this?
A SMBs are hard to reach and hard to find. From that perspective, focus on execution and rigor is what has paid off and just being committed and focused on this has really paid off.

Q: Growth drivers in FY23 and how it’s going to be different than FY22. What about some other drivers that will be different in the future?
A It’s all about driving executional excellence and re: Customer acquisition, it’s all about their internal systems executing in an excellent manor.

Q: What are you still focusing on or what may be deferred into the future?
A Initially focus on a multi-year approach. Number one priority is in driving integration and an excellent customer experience, go to market and excellent ecosystem. Having this packaged as a SaaS really has created a tailwind. They’re early in their development and feel they have a long way to go.

Q: Any further leverage than can drive gross margin in the future?
A Expect to be above 79-81% growth range. They have a good mix of product. Highly profitable and tailwinds w/ rapidly rising float margins helps too.

Q: IS there a point in time where you expect partners/financial institutions to be accretive?
A RPO will allow them to grow revenue, but long term they’re very bullish about working with their partners to dive adoption w/ their new solutions, etc.

Q: What does the core BILL purchase look like and have you made adjustments and how to look at this going forward.
A Enhanced go to market and built sales teams w/ other tailwinds driving more demand across the ecosystem. No changes in the go to market.

Q: Traction you’re seeing w/ the new payments…of the new payment types, which payment methods are seeing the most traction, best take rate and TPV impact?
A Customers need multiple ways to pay and get paid. What we’re seeing is continued ad velorem payment types and there are a lot more going forward. All the things th’y’ve rolled out going forward, they will continue to drive these priorities.

Q: When should we expect higher prices to hit for direct channel and indirect channels?
A Announced direct recently and expect by end of 3rd qtr will have made announcements by then.

Q: Divvy -when do you expect to see the integration of both?
A: It has started and they’ve pulled teams together and are working as fast as possible to bring this together so there’s one unified approach as soon as possible.

Hope this is helpful information. Thank you to Saul and board managers for making this board a treasure trove of crowdsourced investing discussions.

sjo

24 Likes
5

This seems like such an easy platform to replicate. I feel like someone could hire a couple engineers from Stanford and create “invoice.com” in less than one year.

What makes them special? What kind of moat can they put up to turn this revenue into future profits?

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6

And at the same time
They should make a website called rainforest.com
Because what moat does Amazon have either? Anyone can sell stuff online!
Sarcasm

19 Likes
7

Re: enterprise billing and payroll systems management, I liked what FlyingCircus had to say about this so much I copied it from here this last February.

“In my career, I’ll say that those systems typically are somewhere in the area of the fifth through seventh circles of IT hell. Absolutely nobody says thank you for getting my bill perfectly right for the nth month in a row, or for getting my paycheck right for the 26th pay period in a row.

They are notoriously complex to develop, configure and administer because of the matrix of business and scheduling rules and regulations affecting the domain.

So if Bill.com unifies and simplifies - reliably that operation for SMBs, especially if it lets owners release their AR staff to go find more “quality of life” work :wink: then they’ll really take off.”

Bert Hochfeld at Tickertarget.com likes Bill and has written about this as well.

Best

Jason

39 Likes
8

Great report!

Two things in particular caught my attention.

They’re in 150 countries. The UN recognizes 196 countries in the world. This puts Bill.com in about 75% of all the countries there are! That’s pretty amazing.

The other thing was the quality of the management they have recruited. I won’t go through it in this note, if you want to see for yourself, go read the CC transcript. But the people running the show at Bill.com have incredible experience and credentials. Very impressive. If there’s a downside, it will be in SBC they’ve agreed to shell out in order to bring these folks on board.

Bill.com is my largest position. I admit, I find this business very difficult to follow. There’s just so many moving parts. Despite that, they just keep turning in stellar performance.

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Fair point, MusiCali. That made me ‘lol’, as the kids say.

Thanks for the replies (including the one in private). I don’t think this is one for me at the current valuation, but maybe bill.com has a decent mouse trap here.

10

This seems like such an easy platform to replicate. I feel like someone could hire a couple engineers from Stanford and create “invoice.com” in less than one year. What makes them special? What kind of moat can they put up to turn this revenue into future profits?

I get your point, I really do. And yet …

What startup never tried to suffer through reliance on Quickbooks? (I have. Ain’t easy.)
Ever tried Quicken? (I’ve done that too, and created my own.)

They were both, in their particular niche, “too big” and “too well established” for anyone to take them on. Otherwise, someone surely would have, right?

Until now. “Too big” and “too well established” do not always equate to “well done.” I haven’t used BILL, but from everything I’ve read, the opinions equate to exactly that: “Well done.” While many think that something that is relatively easy to replicate also means there is no moat, a well thought-out, intuitive program that is also reasonably priced, can create a moat in itself. At least that’s my opinion. And that’s what I see in BILL: “Well done!”

Heck, I think we may even be in the company of excellence here. When was the last time you used software that you would rate excellent? And while they might be boring as heck compared to data manipulation and transfer to and from the cloud, stuff like invoicing and Accounts Receivable are rather crucial to a successful business.

28 Likes
11

After reading the FY 2022 Annual Report and listening to the conference call, I have some thoughts that might be interesting to others. BILL is a medium sized position for me and I was wondering if I should increase my position given their great Q4 results.

Positives
The positives have been covered well here. Management is executing well and the business seems to be immune or even benefiting from macro events.

Negatives?
1) Gross Margin and Obfuscating Divvy Costs
While looking over the 10K I noticed that the S&M and the G&A costs increased a lot more than revenue on a YoY basis. That got me to looking more closely. What I found is that they are including all the cash back/rewards for the Divvy card in S&M. That was $90M for the year. They are including all the losses and right-offs for the Divvy card in G&A. That was $24M for the year. I don’t like this at all. I think they should both be included in the cost of revenue, which would lower their gross margin quite a bit. As it is now, these items are lowering their operating margin quite a bit. The bottom line is the same, but it seems to me they are obfuscating the operation of the Divvy business this way. If you count these 2 items in gross margin for Divvy:

FY2022 Divvy + Invoice2Go revenue = $241M (There is no separate number for just Divvy)
FY2022 Divvy rewards + losses = $114M
FY2022 Divvy gross margin ~50%

If you add that $114M to cost of revenue for all of BILL, then BILL’s true FY2022 gross margin was 66.7%.

2) Management is not willing to give targets on long term margins
I know targets or guidance should be taken with a huge grain of salt, but I think it is worse when management won’t even give a number based on their planned business model at scale.

3) They have 1.7B in convertible notes
These are debt that can be converted into shares. Without getting into details, they will either need to pay 1.7B from cash or issue about 7M new shares to cover this debt. It will likely be a combination of the two, but it is still a lot of debt compared to most of the companies we hold.

Given these concerns I am going to keep BILL as a medium sized position and keep my eyes on these three things.

Thanks,
Justin

48 Likes