Summary
BILL reported fiscal 2023 second-quarter total revenue of $260.0 million, up 66.2% from the prior-year quarter. Core revenue, a supplemental metric that combines subscription and transaction fees, was $231.1 million, up 49%. The company said the increase reflected growth in customers and average subscription revenue per customer, adoption of new product offerings, a shift toward variable-priced transaction revenue, and higher interest on funds held for customers. Gross profit was $212.5 million, up 74.1%, and gross margin was 81.7%, up 3.7 percentage points. Non-GAAP gross profit was $225.4 million, an 86.7% non-GAAP gross margin, compared with 85.3% in the prior-year quarter.
GAAP profitability remained negative. Operating loss widened to $112.5 million, and operating margin was -43.3%, up 5.4 percentage points from the prior-year quarter. Net loss widened to $95.1 million, or -$0.90 per diluted share. The gap between GAAP and non-GAAP results stayed wide. Non-GAAP income from operations was $30.8 million, compared with $3.4 million. Non-GAAP net income was $49.4 million, or $0.42 per diluted share, compared with a non-GAAP net loss of $0.2 million, or ($0.00) per share. Management described the quarter as one of non-GAAP profitable growth and record non-GAAP gross margin, non-GAAP net income, and free cash flow. The GAAP loss included costs tied to separation and advisory agreements with the former Chief Revenue Officer, which the company discussed in its sales and marketing commentary.
Cash generation swung positive. Operating cash flow was $55.2 million, up 527.1% from the prior-year quarter. Free cash flow was $47.7 million, compared with negative $16.1 million a year earlier. Capital expenditures were $1.8 million, up 67.9%. For the first six months, operating cash flow was $73.4 million, up 315.4%. Deferred revenue, current portion, was $30.4 million, flat year over year. Remaining performance obligations were $133.5 million, down 13.9% from the prior-year quarter.
BILL served 435,800 businesses as of December 31, 2022. That included 182,700 BILL standalone customers, 24,700 Divvy spending businesses, and 228,500 Invoice2go subscribers. Total payment volume was $67.3 billion in the quarter, up 15%. Transactions processed were 20.8 million, up 34%. BILL standalone total payment volume was $63.7 billion, up 13%, while Divvy card payment volume was $3.3 billion, up 76%. The company completed the acquisition of Finmark, a financial planning and cash flow insights software company. Management noted that BILL standalone customers and Divvy spending businesses moderated their expenditures, leading to lower payment volume growth and lower transaction fee growth than historical trends. Net customer adds on BILL standalone were slightly lower than recent trends, likely because businesses took longer to make software decisions in the current macro environment.
Guidance for the fiscal third quarter ending March 31, 2023 calls for total revenue growth of 47% to 49% year-over-year. Non-GAAP net income is guided to $26.5 million to $29.5 million, and non-GAAP net income per share is guided to $0.22 to $0.25. For the full fiscal year ending June 30, 2023, revenue growth is guided to 56% to 57%. Full-year non-GAAP net income is guided to $117.5 million to $125.5 million, and non-GAAP net income per share is guided to $0.99 to $1.05. The board approved a share repurchase program authorizing up to $300 million of common stock, with a 12-month term that may be suspended or discontinued at any time. The company said it has not provided a reconciliation of non-GAAP net income or non-GAAP net income per share guidance to the most directly comparable GAAP measures because some excluded items cannot be reasonably calculated or predicted at this time.
The outlook comes with clear macro risks. Interest rate increases, persistent inflation, and the risk of recession in the U.S. and other markets could weigh on SMBs, which are particularly susceptible to changes in economic and financial conditions. The pandemic and its variants remain uncertain factors. Foreign exchange fluctuations, instability from the war in Ukraine, competition, and the company's history of operating losses also appear in the risk list. The MD&A notes risks tied to integrating Divvy and Invoice2go, accounting for their results, holding large sums of customer funds, fraud, and changes in staffing levels. Guidance is forward-looking, and actual results may differ materially.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $260.0M | $229.9M | +13.1% | $156.5M | +66.2% |
| Gross profit | $212.5M | $184.8M | +15.0% | $122.1M | +74.1% |
| Gross margin | 81.7% | 80.4% | +1.4 pp | 78.0% | +3.7 pp |
| Research & development | $78.9M | $75.1M | +5.0% | $52.0M | +51.9% |
| Sales & marketing | $164.7M | $118.6M | +38.8% | $80.8M | +103.8% |
| General & administrative | $69.4M | $66.7M | +4.0% | $65.4M | +6.1% |
| Total operating expenses | $325.0M | $272.5M | +19.3% | $198.2M | +64.0% |
| Operating income (loss) | -$112.5M | -$87.7M | -28.2% | -$76.1M | -47.8% |
| Operating margin | -43.3% | -38.1% | -5.1 pp | -48.6% | +5.4 pp |
| Net income (loss) | -$95.1M | -$81.6M | -16.5% | -$80.4M | -18.2% |
| Net margin | -36.6% | -35.5% | -1.1 pp | -51.4% | +14.8 pp |
| Diluted EPS | -$0.90 | -$0.78 | -$0.12 | — | — |
Risks
MD&A states ongoing interest rate increases and persistent inflation in the U.S. and other markets have increased recession risk; the macroeconomic environment caused BILL standalone customers and Divvy spending businesses to moderate expenditures, resulting in lower payment volume growth than historical trends and lower transaction fee growth than historical trends.
Risk Factors state a significant portion of revenue comes from SMBs, which may have fewer financial resources and be disproportionately harmed by recession, inflation, high interest rates, or supply-chain issues; MD&A also says the SMBs BILL serves may be particularly susceptible to changes in overall economic and financial conditions.
Risk Factors state that for a substantial majority of Divvy credit extensions, BILL purchases participation interests from Issuing Banks and bears entire credit risk if spending businesses fail to pay; BILL does not file UCC liens on Divvy card balances, reducing collectability in bankruptcy, and non-payment risk may increase in a recession or high inflation environment.
Risk Factors state BILL is targeted by stolen identities, account takeover, employee or insider fraud, false applications, check fraud, and stolen cards; risk management may not prevent fraud, and the automated platform could enable significant theft. MD&A reports provision for card and fraud losses increased $4.4 million in the quarter and $7.4 million year to date.
Risk Factors state Divvy funding relies on warehouse facilities and purchase arrangements; if finance partners terminate or interrupt financing or offer unacceptable terms, BILL may have to use corporate cash, which is limited, and could be forced to limit or cease card credit. MD&A states $112.5 million was drawn under the $225.0 million Revolving Credit Facility as of December 31, 2022, secured by Divvy receivables.
MD&A says net customer adds on BILL standalone were slightly lower than recent trends, likely caused in part by businesses taking longer to make decisions about implementing new software in the current macro environment; reported RPO was down 13.9% to $133.5 million in FY2023 Q2 versus the prior-year quarter and deferred revenue was flat at $30.36 million.
Risk Factors state relationships with more than 6,000 accounting firm partners accounted for approximately 19% of total customers as of December 31, 2022 and approximately 26% of consolidated revenue during the three months ended December 31, 2022. Weakening accounting firm or financial institution partnerships could harm growth prospects and operating results.
Risk Factors state payments and financial services regulations are material; BILL is licensed as a money transmitter in required U.S. jurisdictions, registered as a Money Services Business with FinCEN, and subject to BSA/AML, OFAC, and FDIC oversight through its Issuing Banks. Failure to comply could lead to fines, loss of licenses, or termination of bank relationships.
Risk Factors note competitors may introduce new platforms or services that are easier to use or more advanced, especially related to artificial intelligence-based services, and competition factors include data asset size and ability to leverage artificial intelligence. This could reduce demand for BILL's platform.
As of December 31, 2022, BILL had $1.15 billion aggregate principal amount of 0% convertible notes due 2025, $575.0 million aggregate principal amount of 0% convertible notes due 2027, and had drawn $112.5 million under its Revolving Credit Facility. Risk Factors state debt service obligations may adversely affect financial condition and that BILL may not have funds to settle conversions or repurchases.
Risk Factors state rewards redemptions are significant expenses and BILL may need to increase rewards to grow. MD&A reports sales and marketing expenses increased $94.8 million in the quarter and $159.8 million year to date, including a $22.0 million and $45.4 million increase in rewards expense due to 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
Remaining performance obligations (Total)
Divvy Spending Businesses
BILL standalone customers
Non-GAAP Income from Operations
Non-GAAP Net Income
Summary, forecast, risks and KPIs are extracted from BILL Holdings, Inc.'s SEC filings for Q2 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.