Summary
BILL reported fiscal second quarter results for the period ended December 31, 2023. Total revenue was $318.5 million, up 22% year over year. Core revenue, which is subscription and transaction fees, was $275.0 million, up 19%. Gross profit was $260.1 million, and gross margin was 81.7%, flat versus the prior-year quarter. The company still posted a loss from operations of $67.7 million, but that loss narrowed from the prior-year quarter. Net loss was $40.4 million, or ($0.38) per diluted share, also a narrowed loss. On a non-GAAP basis, net income was $73.2 million, or $0.63 per diluted share, up 48% year over year and equal to a 23% margin.
The platform served 473,500 businesses at the end of the quarter, up 9% from a year earlier. Total payment volume reached $74.9 billion in the quarter, up 11%, and transactions processed rose 23% to 25.6 million. Management also announced a reduction-in-force in December 2023 that affected about 15% of the global workforce and included the closure of the Sydney office. The company repurchased roughly 2.7 million shares for about $197 million during the quarter.
Cash generation improved. Operating cash flow was $79.7 million, up 44.3% from the prior-year quarter. Capital expenditures were $0.35 million, down 80.3% from the prior-year quarter. Free cash flow, a non-GAAP measure, was $74.2 million. Deferred revenue, current portion only, was $17.3 million, down 42.9% from the prior-year quarter. Remaining performance obligations were $110.0 million, down 17.6%. Both measures declined from the prior-year quarter.
Management issued guidance for the fiscal third quarter ending March 31, 2024 and the full fiscal year ending June 30, 2024. For the fiscal third quarter, total revenue guidance is $299 million to $309 million, or 10% to 13% year-over-year growth. For the full fiscal year, total revenue guidance is $1,226 million to $1,251 million, or 16% to 18% growth. Non-GAAP net income guidance is $56 million to $66 million for the fiscal third quarter and $245 million to $270 million for the full fiscal year. Non-GAAP net income per diluted share guidance is $0.48 to $0.57 for the fiscal third quarter and $2.09 to $2.31 for the full fiscal year. The company did not provide a reconciliation of these non-GAAP guidance measures to the closest GAAP measures.
Risks remain tied to the macro environment and SMB health. Management said recent interest rate increases and persistent inflation have made SMBs cautious, causing BILL standalone customers and spending businesses using BILL Spend and Expense to moderate expenditures and, in some cases, shift to lower-cost payment methods. That pressure has held back payment volume growth and transaction fee growth relative to historical trends. Other named risks include the company's history of operating losses, credit risk tied to BILL Divvy Corporate Cards, fraud and loss risk on large sums of customer funds, competition, and potential impacts from acquisitions. The March 2023 instability in the U.S. banking system, including the closure of Silicon Valley Bank, is another reminder of the operational and concentration risks in the payments model. Management expects the restructuring to be substantially completed by June 30, 2024.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2024 | Q1 FY2024 | QoQ | Q2 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $318.5M | $305.0M | +4.4% | $260.0M | +22.5% |
| Gross profit | $260.1M | $249.0M | +4.5% | $212.5M | +22.4% |
| Gross margin | 81.7% | 81.6% | +0.0 pp | 81.7% | -0.1 pp |
| Research & development | $86.5M | $89.1M | -2.9% | $78.9M | +9.6% |
| Sales & marketing | $118.3M | $118.4M | -0.1% | $164.7M | -28.2% |
| General & administrative | $85.6M | $85.3M | +0.3% | $69.4M | +23.4% |
| Total operating expenses | $327.8M | $305.6M | +7.3% | $325.0M | +0.9% |
| Operating income (loss) | -$67.7M | -$56.6M | -19.5% | -$112.5M | +39.8% |
| Operating margin | -21.3% | -18.6% | -2.7 pp | -43.3% | +22.0 pp |
| Net income (loss) | -$40.4M | -$27.9M | -45.1% | -$95.1M | +57.5% |
| Net margin | -12.7% | -9.1% | -3.5 pp | -36.6% | +23.9 pp |
| Diluted EPS | -$0.38 | -$0.26 | -$0.12 | -$0.90 | +$0.52 |
Risks
A significant portion of revenue comes from SMBs, which have limited financial resources and are more susceptible to economic downturns. The company observed SMBs tightening budgets and selecting lower-cost payment methods, which adversely impacted operating results and led to lower payment volume and transaction fee growth than historical trends.
Interest on funds held for customers was $43.5 million, or 14% of total revenue, in the quarter ended December 31, 2023, and $83.3 million, or 13%, for the six months ended December 31, 2023. Interest rate increases have ceased and rates may decline, which would reduce this revenue, and migration to instant transfer or BILL Divvy Corporate Card could also lower customer fund balances.
The BILL Divvy Corporate Card exposes the company to credit risk because it purchases participation interests in card receivables and bears the entire credit risk if spending businesses fail to pay. It does not file UCC liens on card balances, reducing collection ability in bankruptcy, and its risk models may inaccurately predict creditworthiness.
The BILL Divvy Corporate Card funding model relies on warehouse facilities and purchase arrangements with finance partners. If these are not renewed or replaced, the company may have to fund participation purchases with corporate cash, which it has limited ability to do; the Revolving Credit Facility matures in June 2024 and had $135.0 million drawn as of December 31, 2023.
Competition is intense, and in October 2023 Intuit launched a native bill payment solution integrated with QuickBooks. Competitors may offer AI-based services or more advanced platforms, and accounting software providers or financial institutions may bundle competing solutions at lower prices.
Extensions of credit through Cross River Bank and WEX Bank face legal and regulatory uncertainty, including true lender challenges and FDIC oversight. If the bank partnership structure were successfully challenged or an Issuing Bank suspended or terminated operations, the company would need alternative bank relationships or modify business practices.
In December 2023 the company announced a reduction in force impacting approximately 15% of its global workforce and closure of the Sydney office, incurring $25.1 million of restructuring expense in the quarter ended December 31, 2023. The RIF may cause unintended attrition, loss of institutional knowledge particularly for Invoice2Go, and failure to meet operational targets.
The company verifies customer identities and monitors transactions for fraud, and has been targeted by financial fraud using stolen identities, compromised business email, account takeover, check fraud, and stolen cards. New products or functionality may create unidentified risks, and the automated platform could enable significant theft.
More than 7,000 accounting firm partners contribute a significant portion of consolidated revenue, and the company has an exclusive partnership with CPA.com. If its reputation in the accounting industry suffers or it cannot grow these relationships, growth prospects would weaken.
Most customer and accounting firm contracts are open-ended and can be terminated without penalty at any time, and customers have no obligation to renew. Renewal and expansion rates may decline due to spending levels, pricing changes, competition, or general economic conditions.
As of December 31, 2023 the company had $1.15 billion principal of 0% convertible notes due 2025, $575.0 million principal of 0% convertible notes due 2027, and $135.0 million drawn under its Revolving Credit Facility. It may lack cash to settle conversions or repurchase notes upon a fundamental change, and covenants or defaults could harm financial condition.
The company holds significant customer funds and corporate cash at financial institutions, and the March 2023 SVB closure illustrated risk of loss or inability to access funds. Deposit insurance limits may not cover corporate or customer funds, and another bank failure could impair payment processing.
SaaS KPIs
All quarters →Free Cash Flow
Non-GAAP Gross Margin
Businesses using our solutions
Invoice2go subscribers
BILL standalone customers
Non-GAAP Income from Operations
Non-GAAP Net Income
Spending businesses using BILL Spend and Expense
Summary, forecast, risks and KPIs are extracted from BILL Holdings, Inc.'s SEC filings for Q2 FY2024 (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.