Bill’s Big Q3 Beat with raised guidance

A quick comparison before we look at Bill Q3’23 results.

i read that analysts project a 93% upside for Bill (Market cap $8.5B)
Bill Holdings, Inc. provides cloud-based software solutions that simplify, digitize, and automate complex back-office financial operations for small and midsize businesses.
After Paycom (market cap $16.9B) posted great results yesterday, analysts project a 30% upside for Paycom.
Paycom Software sells a suite of cloud-based HR software that helps companies hire, manage, train, and pay their employees.

Bill focuses more on small and medium size businesses and like Paycom, is expanding internationally.

BILL Reports Third Quarter Fiscal Year 2023 Financial Results

  • Q3 Core Revenue is up 45% YoY
  • Q3 Total Revenue up 63% YoY

“We delivered strong third quarter results and profitable growth as we executed on our strategy to be the essential financial operations platform for SMBs,”

said René Lacerte, BILL CEO and Founder.

“As champions of SMBs, we are proud that more than 450,000 businesses use our solutions to automate their financial operations and gain more visibility and control of their finances.”

Financial Highlights for the Q3’23

Below BILL standalone measures exclude the results of Divvy, Invoice2go, and newly acqired Finmark.

  • Total revenue was $272.6 million, an increase of 63% YoY.
  • Core revenue, which consists of subscription and transaction fees, was $239.5 million, an increase of 45% YoY.
    • Subscription fees were $66.7M, up 28% year-over-year.
    • Transaction fees were $172.8M, up 52% year-over-year.
  • Float revenue, which consists of interest on funds held for customers, was $33.1M. (Float rev as a percent of revenue was up to 12% from 1% last quarter)

“In Q3, we delivered revenue growth of 63% year-over-year, record non-GAAP gross margin, and expansion of non-GAAP net income margin,”

said John Rettig, BILL CFO.

“Our performance highlights the strength of our business model and our commitment to deliver balanced growth and profitability.”

  • Gross profit was $223.7 million, representing an 82.1% gross margin, compared to $129.6 million, or a 77.6% gross margin, in the third quarter of fiscal 2022.
  • Non-GAAP gross profit was $237.2 million, representing an 87.0% non-GAAP gross margin, compared to $141.1 million, or a 84.6% non-GAAP gross margin, in the third quarter of fiscal 2022.
  • Non-GAAP net income was $58.7 million, or $0.50 per diluted share, compared to non-GAAP net loss of 8.7 million, or ($0.08) per share, basic and diluted, in the third quarter of fiscal 2022.



Total revenue of $272.6M an increase of 63% YoY beat both analyst projections by $25.3M and Bill’s guidance ( Bill guided for 47%-49% increase) while Non-GAAP EPS of $0.50 per diluted share was 2x’s analyst projections and Double Bill’s guidance of $0.22 - $0.25.


Business Highlights and Recent Developments

  • Dollar-based net retention rate is 131% for this Q3’23.

  • Served 455,300 businesses by the end of Q2’23.
    197,900 BILL standalone customers
    27,100 spending businesses that used Divvy
    230,300 subscribers that used Invoice2go.

  • Processed $64.7B in total payment volume in Q3, up 13% YoY.

  • Processed 21.4 million transactions during Q3, up 36% YoY.

  • Repurchased approximately 359,000 shares of its stock for a total cost of approximately $27 million.

  • Experienced tech leader, Ken Moss, is the new Chief Technology Officer.


  • Q4 FY23 Outlook: Total revenue $277 - $280M, Non-GAAP EPS $0.39 - $0.41.

They also raised Guidance for FY23:
Total revenues to $1,039.5 - $1,042.5M from $999 - $1,007M
Year-over-year total revenue growth to 62% from 56%-57%
Non-GAAP net income to $170.4 - $173.4M up from $117.5 - $125.5M.
Non-GAAP net income per diluted share of $1.46 - $1.48 from $0.99 - $1.05


Wow, pretty good report, eh.
Da’ Bulls would note a stable Dollar Based Retention Rate, strong business model able to maintain income from Float Revenue, increasing customer base, increased FY23 guidance.

Da’ Bears could focus on a modest decline in YoY revenue increase, macro headwinds for SMB’s.

Fool ommmm, kevin c
long of Bill Holdings, Inc.
long of Paycom


Thanks for the great summary! :slight_smile:

Regarding the highlights, I would add some more. Fortunately, this quarter was a positive surprise. Despite facing many headwinds at once (reduced spending pressures, TPV, macro uncertainty, banking crises, seasonally soft quarter, etc.), I thought Bill would be more exposed. Instead, Bill delivered a very exciting quarter, beating revenue guidance, raising full-year guidance, and beating profitability metrics.

In terms of revenue, I really like that they are not only benefiting from float revenue, which is revenue they don’t “create” and that is not value-driven, but also from a strong uptick in subscription revenue as well as better-than-expected TPV growth.

This really speaks to Bill’s execution, continuous effort to invest in long-term upside, and carefully navigating a challenging environment.

So, here are some additional highlights from my POV:

#1: Customer Traction

I really like the customer traction, especially looking at it sequentially:

  • Bill standalone customers past 3 quarters: 9.0% > 6.2% > 8.3%. While this is seasonally consistent, it is coming off a strong base in Q1 (9% QoQ). They also had a record net add in this cohort.
  • Divvy customers past 3 quarters: 10.1% > 8.3% > 9.7%. We have less history for Divvy, but I like the uptick and overall quite strong QoQ growth here.
  • FI customers past 3 quarters: 24.9% > 16.0% > 21.8%. Pretty explosive growth here, but keep in mind that these customers only account for 5% of total revenue and this is more of a long-term game.

—> The overall customer growth outgrows all “relevant” revenue streams sequentially, except for subscription revenue, which had a strong uptick to 8.5% QoQ and is another strong highlight to me (I’ll ignore float revenue here because it is not value-adding revenue). What this implies for me is that revenue growth (especially driven from payments) is lagging behind customer growth A LOT, and leaves quite some embedded growth for the future.

#2: Divvy as a Strong “High-Growth” Driver is Holding Up

  • Divvy has no subscription revenue, so it depends on payments.
  • Divvy’s TPV is growing at 3% QoQ, while core TPV and standalone TPV are declining QoQ (-4.2% and -4.3%, respectively). A similar trend shows in the sequential numbers of transactions. While it is not great (albeit understandable) that TPV is compressing sequentially, it is good to see that Divvy, which needs TPV more than standalone and invoice2go (those also have subscription revenue), is holding up stronger.

#3 Product Adoption Holding Up

In tough times like these, I look - especially - at customers. How they grow, what they do, and how they adopt the product, because this relates directly to the value they get out of it. That can be the adoption of new modules (e.g. for DDOG or CRWD), but in terms of the bill, it is, for instance, the number of transactions, which is remaining consistent.

—> Customers are paying smaller amounts via the bill due to macro (therefore, lower TPV and transaction revenue), but the number of transactions remains on track, so once macro subsides and payment volumes tick back up again, there is also embedded growth here. ****

#4 Strong Ecosystem and Diverse Go-to-Market:

This is not new, but I am a huge fan of Bill’s ecosystem because it allows them to meet customers where they are. That can be through an accountant, a bank, a direct channel, through a vendor/supplier network, or through a simple subscription on their website. This makes their channels very diverse and more resilient and really helps create a flywheel to funnel in customers from many sides.

#5 Product Execution & Traction:

No update from me without some product comments :smiley: I really missed some update on the Divvy X standalone integration last quarter, but we got it this time. I think it is really important to properly connect these products and create an all-in-one suite so customers can manage all their spending in one place and have streamlined real-time insights into all their financial operations. So far, Bill has unified the data lake and the UI. Next up will be the functionality integration, which I believe is more tricky. But Bill is determined to get it done this year, and I am very excited about that. They also noted that customers using both products have higher spending, and not to forget the cross-selling potential. So far, there is also positive customer feedback around the integration efforts that happened already.

Additionally, the ad valorem payments are enjoying great traction and also contributed to a strong take-rate this quarter.

All in all, I feel very good about Bill in general and about the latest quarter, too.

But also, I think with companies like Bill, it’s important to remember that they are also very exposed to things outside of their own control, and Bill is also pretty tough to follow and thoroughly understand. So while I am bullish on the company (especially mid- to long-term), I also don’t feel like outsizing this position beyond anything like 10-15%, just because of potential uncertainties and unknowns that come with being in the financial space, and the fact that it is so hard to follow (I am never 100% sure that I am not missing anything with Bill).

All in all, Bill checked my hopes and expectations I had pre-earnings (for reference below, if you are interested), and I am glad to be on board.

Thanks for reading and I hope this was helpful.

Have an awesome Saturday!

Cheers: LisaOnCloud9
(Twitter: @LisaOnCloouud9)

Expectations & pre-earnings thoughts for Fiscal Q3 2023

  • I expect several headwinds for Bill:
    • SVB impact in March, prudent SMB spending pressuring transaction volume + layoff headwind for seat-based subscription part of the business, seasonally soft spending in March quarter.
  • One of Bill’s tailwinds is others’ headwinds: Rising interest rates push float revenue.
  • I expect bill to at least achieve, better beat its revenue guidance (I expect roughly $255M+, assuming a 3% guide), since this was quite a weak guide I hope they will make it and not need to revise it downwards.
  • Embedded growth - mid-term:
    • Spend volume of “older” and new customer adds picking up should drive TPV (in a brighter future, at least).
    • bill’s strong partner ecosystem (consisting of banks, accounting firms, vendors, and more) only drives 3% of total revenue so far, so I expect more leverage from this powerful network in the future.
    • FI channel only accounts for 4% of revenue currently, so there is more revenue potential in the long term. However, the most interesting long-term upside apparently lies in the network effects of these customers.
  • Gross margin (87%) was (and hopefully will be again) a real highlight!
  • I’d like to see Bill continue riding its non-GAAP profitability train and beat its non-GAAP net income outlook of $29.5M.
  • Divvy TPV vs. Bill TPV: As it relates to BILL versus Divvy, the BILL core customer base is slightly smaller in size and perhaps more sensitive to the economic conditions that are prevailing right now. The Divvy customer base is slightly larger and it’s a newer customer base where the growth profile is obviously earlier, at an earlier stage than BILL and obviously much stronger growth. —> More pressure on Divvy metrics to hold up
  • The number of transactions remains strong which indicates product engagement and value, even if it doesn’t pull the main leverage on Bills transaction revenue.
  • Divvy competition: no new situation, Sales is mostly about raising awareness since the niche “spend management” is still quite new and early in its traction cycle.
  • The main high-growth traction for Bill comes from Divvy, so I hope to see Divvy metrics holding up (Divvy revenue, the customer adds, TPV).

Preach, @LisaOnCloud9!