What happened

Shares of Bill.com (NYSE:BILL) were climbing today after the digital payments technology company said it has extended its contract with Intuit (NASDAQ:INTU) through 2023.

Shares were up 6.5% as of 3:01 p.m. EDT.

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Image source: Getty Images.

So what

Bill.com, which provides cloud-based payments technology for small and medium-sized business to use for back-office operations, said the extended agreement with Intuit will enable the company to continue supporting the Simple Bill Pay service in Quickbooks. 

The company also said that it would, along with Intuit, jointly market its stand-alone products for customers of Quickbooks Online Advanced.

Bill.com had disclosed in its prospectus last November that its business depends, in part, on its relationship with Intuit, as its products are integrated with Quickbooks. So the contract extension is clearly a positive for a software-as-a-service (SaaS) company. Millions of small and medium-sized businesses depend on Quickbooks, so the relationship is a crucial one.

Separately, management reaffirmed its guidance for the fourth quarter, which called for $37.4 million to $38.4 million in revenue, just 19.5% growth at the midpoint of its guidance, and an adjusted loss per share of $0.11 to $0.12.

Now what

Bill.com's guidance may turn out to be conservative, as the company said earlier that it had not experienced any effects from the pandemic in its third quarter, which ended March 31. Still, as a company that serves small and medium-sized businesses, Bill.com may see some attrition, as the crisis is expected to be harder on small businesses than on large corporations. It also expects to generate less revenue from its float, or the interest it gains on funds held for customers, after the Federal Reserve cut its benchmark interest rate to near zero.

Still, the news of the contract extension with Intuit is unquestionably a good thing for Bill.com and explains why the stock is gaining today. The stock is up a whopping 114% year to date, as it exploded after its December IPO and recovered strongly from the March sell-off, showing investors are bullish on one of the newest cloud stocks.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.