Summary
BILL closed FY2023 Q1 with revenue of $229.9 million, up 94% from $118.3 million in the prior-year quarter. Core revenue, made up of subscription and transaction fees, reached $214.6 million, an 83% increase. Subscription fees of $58.1 million rose 57%, and transaction fees of $156.5 million rose 94%, helped by $78.0 million of Divvy spend management transaction fees, up 113%. Total payment volume hit $64.9 billion in the quarter, up 34% from $48.4 billion, while 19.6 million transactions were processed, up 45%. The company served 419,800 businesses as of September 30, 2022, including 172,000 BILL standalone customers, 22,800 Divvy spending businesses and 225,100 Invoice2go subscribers.
Profitability remains the soft spot. Gross profit was $184.8 million, up 109% from $88.5 million, and gross margin improved to 80.4% from 74.8%, which management tied to a richer mix of variable-priced transaction revenue. The operating loss still widened to $87.7 million from $74.2 million, and the net loss widened to $81.6 million from $74.3 million. Diluted EPS was flat at a loss of $0.78. The gap between GAAP and adjusted results is wide: non-GAAP income from operations was $9.1 million against a non-GAAP loss from operations of $9.2 million a year earlier, and non-GAAP net income was $16.9 million, or $0.14 per diluted share, versus a non-GAAP net loss of $12.1 million, or $0.13 per share. Stock-based compensation of $72.6 million, up 92%, is the biggest swing factor.
Sales and marketing is the line to watch. The expense category grew 121%, to $118.6 million from $53.6 million, and rose to 52% of revenue from 45%. Rewards expense added $23.4 million as transaction volume and reward rates climbed, advertising and marketing spend added $6.1 million, and personnel costs added $35.0 million. Research and development rose 79%, to $75.1 million, while general and administrative rose just 16%, to $66.7 million and fell to 29% of revenue from 49%. Cash generation turned positive: operating cash flow was $18.2 million, up from a use of $21.1 million a year earlier, and free cash flow was $12.0 million against a use of $25.5 million. Capital expenditures were $1.4 million, down slightly from $1.4 million. Deferred revenue of $30.4 million rose 42.5% from $21.3 million, but remaining performance obligations fell 6.3% to $143.1 million from $152.8 million.
Guidance points to continued growth with modest adjusted profit. The fiscal second quarter ending December 31, 2022 carries a range of $241.5 million to $244.5 million, up 54% to 56% year over year, with non-GAAP net income of $14.5 million to $17.0 million and non-GAAP net income per diluted share of $0.12 to $0.14. For the full fiscal year ending June 30, 2023, the range is $994.0 million to $1,007.0 million, up 55% to 57%, with non-GAAP net income of $57.5 million to $70.0 million and non-GAAP net income per diluted share of $0.48 to $0.59. The company said it has not reconciled these non-GAAP guidance measures to comparable GAAP measures because certain excluded items cannot be reasonably predicted.
Several risks sit over the story. BILL carries a history of operating losses and transfers large sums of customer funds, exposing it to loss, errors and fraud. Management flagged interest rate, inflation and possible recession conditions as pressures on SMBs that could lead to closures, discount requests or extended payment terms. The company added Google Cloud CMO Alison Wagonfeld to its board and named Loren Padelford as its first Chief Commercial Officer, and it signed a definitive agreement to acquire Finmark, a financial planning and cash flow insights software company. Liquidity looks ample, with cash and cash equivalents of $1.6 billion and short-term investments of $1.0 billion as of September 30, 2022, plus an undrawn credit line after the facility capacity was raised to $225.0 million, on which $75.0 million was drawn.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2023 | Q4 FY2022 | QoQ | Q1 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $229.9M | $200.2M | +14.8% | $116.4M | +97.5% |
| Gross profit | $184.8M | $156.8M | +17.9% | $86.6M | +113.5% |
| Gross margin | 80.4% | 78.3% | +2.1 pp | 74.4% | +6.0 pp |
| Research & development | $75.1M | $65.2M | +15.3% | $42.5M | +76.9% |
| Sales & marketing | $118.6M | $72.0M | +64.9% | $62.3M | +90.4% |
| General & administrative | $66.7M | $57.4M | +16.3% | $57.9M | +15.2% |
| Total operating expenses | $272.5M | $240.1M | +13.5% | $162.7M | +67.5% |
| Operating income (loss) | -$87.7M | -$83.4M | -5.2% | -$76.2M | -15.2% |
| Operating margin | -38.1% | -41.6% | +3.5 pp | -65.4% | +27.3 pp |
| Net income (loss) | -$81.6M | -$84.9M | +3.9% | -$75.7M | -7.9% |
| Net margin | -35.5% | -42.4% | +6.9 pp | -65.0% | +29.5 pp |
| Diluted EPS | -$0.78 | -$0.83 | +$0.05 | — | — |
Risks
A significant portion of BILL revenue comes from SMBs, which have fewer financial resources and may be disproportionately harmed by recession, inflation, and high interest rates. MD&A states that ongoing interest rate increases and persistent inflation may increase recession risk and that certain SMBs may cease operations in a recession.
BILL bears the entire credit risk on participation interests in Divvy card receivables for a substantial majority of extensions of credit and does not file UCC liens on card balances, so defaults or inaccurate risk models can cause charge-offs. Other products that advance funds, such as Instant Transfer, also expose BILL to credit losses.
Divvy depends on warehouse facilities and purchase arrangements with finance partners, and an inability to renew or replace them could force BILL to use corporate cash or limit card credit. MD&A notes obligations to purchase card receivables and that $75.0 million was drawn under the Revolving Credit Facility as of September 30, 2022.
Payments and money transmission regulations are material to BILL, and failure to comply could lead to fines, loss of licenses, or forced business changes. The Divvy program relies on Issuing Banks Cross River Bank and WEX Bank, and true lender challenges or regulatory actions against those banks could disrupt card offerings.
BILL's risk management efforts may not prevent fraudulent activity by customers, spending businesses, or counterparties, which could cause material financial losses and liability. MD&A reports that general and administrative expenses increased partly from a $3.0 million increase in provision for card and fraud losses during the three months ended September 30, 2022.
Accounting firm relationships accounted for approximately 19% of total customers as of September 30, 2022 and approximately 26% of consolidated revenue during fiscal 2022, making BILL dependent on these firms for distribution. A weakened reputation in the accounting industry or failure to grow firm partnerships could harm growth prospects.
Customer fund assets are subject to market, interest rate, credit, foreign exchange, and liquidity risks, and any loss or inability to access these funds could harm liquidity and operations. MD&A reports interest on funds held for customers increased by $14.5 million, or 1,835%, during the three months ended September 30, 2022 versus the prior year period, mainly from higher yields as interest rates increased.
The market is competitive, and larger software providers and financial institutions may bundle competing solutions or develop AI-based services that reduce demand for BILL. Risk factors specifically cite new platforms that are easier to use or more advanced, especially related to artificial intelligence-based services.
As of September 30, 2022, BILL had $1.15 billion principal amount of 2025 Notes and $575.0 million principal amount of 2027 Notes outstanding, plus $75.0 million drawn under its Revolving Credit Facility, creating refinancing and cash settlement risks. The 2025 Notes conversion condition was not triggered as of September 30, 2022, but had been triggered in several prior quarters.
BILL offers card rewards whose redemption creates significant expenses, and it may need to increase rewards or offer other incentives to grow. MD&A reports sales and marketing expenses increased by $65.0 million during the three months ended September 30, 2022 versus the prior year period, including a $23.4 million increase in rewards expense from increased transaction volume and higher rewards rates.
SaaS KPIs
All quarters →Free Cash Flow
Non-GAAP Gross Margin
Businesses using our solutions
Total Payment Volume
Transactions Processed
Invoice2go subscribers
Core Revenue
Divvy Spending Businesses
BILL standalone customers
Non-GAAP Income from Operations
Divvy Card Payment Volume
Non-GAAP Net Income
Summary, forecast, risks and KPIs are extracted from BILL Holdings, Inc.'s SEC filings for Q1 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.