Summary
Bill.com paired rapid top-line growth with a deeper loss in the three months ended March 31, 2021. Revenue was $59.7 million, up 44.9% from $41.2 million in the prior-year quarter. Revenue for the nine months ended March 31, 2021 was $160.0 million, up 38.5% from $115.5 million. The customer base grew to 115,600 at March 31, 2021 from 91,300 a year earlier, a 27% increase. Total payment volume processed in the quarter reached $34,971 million, up 44% from $24,233 million, and transactions processed rose 19% to 7,182,000 from 6,047,000.
Subscription and transaction fees did the heavy lifting, rising 62% from the prior-year quarter. Subscription fees increased 32% and transaction fees jumped 112%, helped by adoption of newer products and a mix shift toward variable-priced transactions. Interest on funds held for customers fell 78%, a direct hit from low short-term rates. The average rate of return earned on customer funds was 0.23%, down 127 basis points from the prior-year quarter following the Federal Reserve's March 2020 rate cut. Average daily customer fund balances rose 41% to approximately $1.9 billion from approximately $1.4 billion, so higher payment volume only partly offset the yield decline.
Gross profit was $44.3 million, up 42.4% from $31.1 million, while gross margin of 74.2% was down 1.3 percentage points from 75.5%. Management attributed the compression mainly to the loss of high-margin interest revenue. Operating expenses grew faster than revenue. Cost of revenue rose 53%, research and development 60%, sales and marketing 29% and general and administrative 47%, with headcount up across every function, including a 33% increase in average research and development headcount. That produced an operating loss of $15.3 million, wider than the $9.7 million loss a year earlier, and an operating margin of negative 25.6% versus negative 23.6%. Net loss widened to $26.7 million from $8.3 million, and diluted loss per share was $0.32 against $0.11. The swing below the operating line reflects other expense, net moving from income to a large expense, mostly interest expense on the convertible notes issued in November 2020.
Cash generation slipped. Operating cash flow was negative $1.58 million in the quarter, down from positive $0.82 million a year earlier, and negative $13.16 million for the nine months versus negative $3.33 million. Free cash flow, a non-GAAP measure the company reconciles from net cash used in operating activities, was negative $5.4 million for the quarter. Capital expenditures were $3.43 million, up 24.0% from $2.76 million, as the company expanded data processing capacity and capitalized internal-use software. Deferred revenue of $8.37 million rose 37.2% from $6.10 million, and remaining performance obligations climbed 237.5% to $147.5 million from $43.7 million, which points to a much larger contracted backlog than a year ago.
The biggest strategic move came after the quarter closed. On May 6, 2021, the company agreed to acquire Divvy for approximately $2.5 billion, with about $625 million payable in cash and the remainder in stock, RSUs and options priced at a fixed value of $157.2697 per share. The deal needs Divvy stockholder approval and clearance under the Hart-Scott-Rodino Act, and it adds integration and execution risk while the core business is still unprofitable on a GAAP basis.
Other risks sit with the rate cycle and the customer base. Management notes that customers hurt by COVID-19 may go out of business, request discounts or extended payment terms, or cancel subscriptions. A 100 basis point change in interest rates would move quarterly interest on customer funds by about $4.8 million and corporate investment income by about $4.3 million, so a low-rate environment keeps pressure on revenue. The company also takes credit risk when it remits customer funds before collection clears, carries foreign exchange risk on cross-border payments, and depends on partners that include more than 80 of the top 100 accounting firms as well as Bank of America, JPMorgan Chase and American Express.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $59.7M | $54.0M | +10.5% | $41.2M | +44.9% |
| Gross profit | $44.3M | $40.1M | +10.6% | $31.1M | +42.4% |
| Gross margin | 74.2% | 74.2% | +0.0 pp | 75.5% | -1.3 pp |
| Research & development | $22.3M | $20.5M | +8.8% | $14.0M | +59.5% |
| Sales & marketing | $15.2M | $14.2M | +7.2% | $11.8M | +28.7% |
| General & administrative | $22.1M | $19.6M | +13.0% | $15.1M | +46.9% |
| Total operating expenses | $59.6M | $54.2M | +9.9% | $40.8M | +46.0% |
| Operating income (loss) | -$15.3M | -$14.2M | -7.9% | -$9.7M | -57.4% |
| Operating margin | -25.6% | -26.2% | +0.6 pp | -23.6% | -2.1 pp |
| Net income (loss) | -$26.7M | -$17.2M | -55.6% | -$8.3M | -221.3% |
| Net margin | -44.7% | -31.8% | -13.0 pp | -20.2% | -24.6 pp |
Risks
History of operating losses: net loss widened to $26.7 million in FY2021 Q3 from $8.3 million in FY2020 Q3, and to $56.9 million year to date from $21.6 million, with an accumulated deficit of $205.6 million as of March 31, 2021. Operating margin decreased to -25.6% in FY2021 Q3 from -23.6% and to -27.0% year to date from -20.7%.
COVID-19 pandemic continues to disrupt customers, partners, vendors, and employees, with remote work and economic restrictions. Customers may go out of business, request discounts, extend payment terms, or cancel subscriptions, which would harm future results.
Interest on funds held for customers decreased 78% to $1.1 million in FY2021 Q3 from $5.1 million, and decreased 71% to $5.2 million year to date from $17.9 million, due to lower yields after federal funds rate cuts. Faster adoption of electronic payments and real-time rails could shorten fund holding periods and further reduce this revenue.
Risk management may not prevent fraudulent activity by customers or counterparties, exposing the company to material financial losses, liability, and regulatory sanctions. The automated platform and evolving fraud techniques increase the potential for significant theft.
Customer funds held in trust are subject to market, interest rate, foreign exchange, and liquidity risks, and the company must hold eligible liquid assets equal to at least 100% of customer balances. Failure to manage these funds or maintain controls could lead to reputational harm, penalties, and loss of state money transmitter licenses.
Most customer and accounting firm contracts are open-ended and can be terminated without penalty, so retention and expansion are not assured. Failure to attract new customers, convert trials, or sell additional functionality would adversely affect revenue growth and gross margins.
Accounting firm partners account for approximately 50% of total customers and 45% of total revenue as of and during the three months ended March 31, 2021. The company also depends on a partnership with CPA.com to enroll accounting firm customers.
The Intuit agreement terminates on June 26, 2023, and Intuit has integrated another third-party bill pay solution into QuickBooks. Intuit may also develop, acquire, or partner with competing applications, which could harm growth prospects.
Pending Divvy acquisition involves approximately $2.5 billion in aggregate consideration, including about $625 million payable in cash, and may not realize strategic or financial goals. Risks include closing delays, integration difficulties, undiscovered liabilities, and Divvy not having public-company internal controls.
Payments and money transmission laws are material, and the company has faced past fines, penalties, and AML program gaps. New rules could restrict interest revenue, impose capital or licensing requirements, or limit transaction processing.
As of March 31, 2021, $1.15 billion aggregate principal amount of 2025 Notes was outstanding due December 1, 2025, and the company may lack funds to settle conversions or repurchase notes upon a fundamental change. Capped Call counterparties also present credit risk.
Recent rapid growth may not be indicative of future growth and may be difficult to manage. Revenue rose 44.9% to $59.7 million in FY2021 Q3 from $41.2 million, and TPV was $35.0 billion versus $24.2 billion, while the company expects its growth rate to decline as scale increases.
Financial institution strategic partnerships involve long sales cycles, multiple approvals, integration costs, and deployment delays, with revenue possibly lagging expenditures. One former financial institution partner chose not to renew in late 2018, causing the loss of approximately 5,000 customers.
Market for financial back-office solutions is fragmented and competitive, with larger competitors able to bundle competing solutions at lower or no additional cost. Intuit, financial institutions, and new entrants may develop or acquire competing products, and competition includes data asset size and AI leverage.
Success depends on founder and CEO René Lacerte and other key employees, and the company has no key person insurance. Many key employees have fully vested stock options or long-term incentives that may reduce retention incentive.
Executive officers, directors, and 5% beneficial owners collectively beneficially owned approximately 44.0% of outstanding common stock as of March 31, 2021, allowing them to influence significant corporate decisions. Interests may not coincide with other stockholders.
SaaS KPIs
All quarters →Free Cash Flow
Non-GAAP Gross Margin
Total Payment Volume
Transactions Processed
Number of customers
Non-GAAP Gross Profit
Summary, forecast, risks and KPIs are extracted from BILL Holdings, Inc.'s SEC filings for Q3 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.