Summary
Bill.com reported total revenue of $54.0 million for the quarter ended December 31, 2020, up 38.3% from a year earlier. The mix moved fast. Subscription and transaction fees, which the company calls core revenue, grew 59% year over year, led by a 98% jump in transaction fees as customers adopted more variable-priced payment products. Interest on funds held for customers ran the other way, down 72%. The average rate of return on customer funds fell to 0.35%, a drop of 136 basis points after the Federal Reserve cut rates in March 2020. Volume partly covered the gap. The average daily balance of customer funds held while payments clear rose 37% to about $1.9 billion.
Gross profit rose 36.8% to $40.1 million, but gross margin slipped to 74.1% from 75.0%, a decline of 0.8 percentage points. The mix explains it. Interest on customer funds carries the highest margin, and it shrank as a share of the total. Below the gross line the picture is less comfortable. Operating loss widened to $14.2 million, and operating margin fell to negative 26.2% from negative 20.3%. Net loss widened to $17.2 million. Diluted loss per share was $0.21, narrower than the prior-year quarter because the share count grew sharply after the company's public listing.
Operating costs grew faster than revenue, and management attributed most of the increase to hiring. Research and development expense rose 58% year over year and general and administrative expense rose 54%, while sales and marketing rose 23%. R&D and G&A each took a larger share of revenue than a year ago; sales and marketing took a smaller share as the company adjusted spend to the economic environment. Stock-based compensation is the main reason the non-GAAP figures diverge from GAAP. Non-GAAP loss from operations was $2.7 million, narrower than the $4.5 million non-GAAP loss a year earlier, and non-GAAP net loss was $2.1 million, or $0.03 per share.
Customer and volume metrics held up. The quarter ended with 109,200 customers, up 27% year over year. Total payment volume was $34.8 billion, up 40% year over year and 21% quarter over quarter, across 7.2 million transactions. Remaining performance obligations with financial institutions were $148.7 million, up 221.9%, with $17.8 million to be recognized within a year and $130.9 million later. Deferred revenue, the current portion only, was $5.4 million, up 25.9%. The balance sheet shows $1.7 billion in cash, cash equivalents and short-term investments, plus $2.2 billion of customer funds held in trust, against $1.15 billion of 0% convertible senior notes due in 2025. Management noted that $40.8 million remained available under the credit facility after borrowings and letters of credit.
Cash flow went the wrong way. Operating cash flow was negative $9.2 million for the quarter, and capital expenditures rose to $7.7 million. Free cash flow, the separate measure the company reports alongside operating cash flow, was negative $17.3 million for the quarter against negative $2.9 million a year earlier. Revenue for the six months ended December 31, 2020 was $100.3 million, up 35%, and net loss was $30.1 million. Guidance covers the third quarter of fiscal 2021, which management said it would discuss on the call. The risks the company flags include the COVID-19 pandemic and its effect on SMB customers, a history of operating losses, the large sums of customer funds moved daily and the exposure that brings to loss, errors and fraud, interest rate moves that affect the yield on those funds, and competition for new customers.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2021 | Q1 FY2021 | QoQ | Q2 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $54.0M | $46.2M | +17.0% | $39.1M | +38.3% |
| Gross profit | $40.1M | $34.1M | +17.5% | $29.3M | +36.8% |
| Gross margin | 74.2% | 73.8% | +0.4 pp | 75.0% | -0.8 pp |
| Research & development | $20.5M | $17.8M | +15.2% | $13.0M | +57.7% |
| Sales & marketing | $14.2M | $12.9M | +9.8% | $11.5M | +23.3% |
| General & administrative | $19.6M | $17.2M | +13.9% | $12.7M | +53.6% |
| Total operating expenses | $54.2M | $47.9M | +13.3% | $37.2M | +45.7% |
| Operating income (loss) | -$14.2M | -$13.8M | -2.8% | -$7.9M | -78.5% |
| Operating margin | -26.2% | -29.8% | +3.6 pp | -20.3% | -5.9 pp |
| Net income (loss) | -$17.2M | -$13.0M | -32.6% | -$7.6M | -126.7% |
| Net margin | -31.8% | -28.0% | -3.8 pp | -19.4% | -12.4 pp |
Risks
The COVID-19 pandemic has disrupted customers and operations, and the Federal Reserve rate cut lowered yields on customer funds. Interest earned on customer funds decreased 72% in the quarter ended December 31, 2020 and 68% in the six months ended December 31, 2020, while customers may go out of business, request discounts, or cancel subscriptions.
Revenue from interest on customer funds is correlated to the federal funds rate and fell sharply as rates declined. Continued low rates or faster customer adoption of electronic payments could further reduce this high-margin revenue and pressure gross margin, which decreased to 74.1% in the quarter ended December 31, 2020.
The company verifies customer identities and monitors transactions for fraud, and over 109,000 customers processed approximately $34.8 billion in TPV in the quarter ended December 31, 2020. As platform use grows, exposure to material financial losses from a single customer or a small number of customers increases.
The company is licensed as a money transmitter in all required U.S. states and regulators have previously identified violations and gaps in its anti-money laundering program, leading to fines and penalties. Future noncompliance could result in loss of licenses, additional restrictions, and material harm.
Customer funds held in trust are subject to market, interest rate, foreign exchange, and liquidity risks, and the company must maintain eligible liquid assets equal to at least 100% of customer balances. Failure to manage these funds or related controls could harm reputation, lead to penalties, or result in loss of money transmitter licenses.
The company issued 0% convertible senior notes due December 1, 2025, and may not have funds to cash settle conversions or repurchase notes upon a fundamental change. The conditional conversion feature could require cash settlement or reclassification of principal as a current liability, reducing net working capital.
Accounting firm partners accounted for approximately 51% of total customers and 46% of total revenue as of and during the quarter ended December 31, 2020. The Intuit agreement terminates on June 26, 2023, and Intuit has integrated another third-party bill pay solution into QuickBooks.
Competitors include large ERP providers, accounting software providers such as Intuit, and financial institutions that may bundle competing solutions or develop their own. Competition factors include data asset size and ability to leverage artificial intelligence, and new AI-based services could reduce demand for the platform.
Most contracts with customers and accounting firms are open-ended arrangements that can be terminated by either party without penalty at any time. Renewal and expansion rates may decline or fluctuate due to customer satisfaction, pricing, competition, or economic conditions.
Growth relies on converting risk-free trial customers to paid subscriptions, and many prospective customers never convert. Subscription sales could also be impaired if competitors offer lower-cost or differentiated products, adversely affecting revenue growth and operating results.
Success depends on founder and CEO René Lacerte and other key employees, and the company has no key person insurance. Competition for software developers, compliance, and risk personnel is intense, and immigration restrictions may limit H1-B and other visas.
The company depends on banks including JPMorgan Chase, The Bancorp Bank, and Silicon Valley Bank for ACH and check processing, Cambridge for cross-border wires, Comdata for virtual cards, and AWS for cloud hosting. Termination or service interruption could cause business interruptions and additional expenses.
Recent rapid growth, including 40% TPV growth in the quarter ended December 31, 2020 to approximately $34.8 billion, may not be indicative of future growth. Managing growing payment volume and headcount places significant demands on risk management and internal controls.
SaaS KPIs
All quarters →Number of customers
Summary, forecast, risks and KPIs are extracted from BILL Holdings, Inc.'s SEC filings for Q2 FY2021 (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.