This Fintech Disruptor Reported an Amazing Fourth Quarter

We recently got a look at Bill.com Holdings' (BILL -3.19%) latest results, and to say they were impressive would be an understatement. The business is growing quickly, and a path to profitability is becoming clearer. In this Fool Live video clip, recorded on Feb. 8, Fool.com contributor Matt Frankel, CFP, and Industry Focus host Jason Moser talk about the latest numbers and what investors should know going forward. 

Jason Moser: Listen, Bill.com, a business that we've talked about of course, we've talked about it a lot on this show, we've talked about it even before on this show where we picked those two stocks. But they did release earnings for the most recent quarter here, and it was a very well-received quarter.

For those who don't remember, who aren't familiar with Bill.com, they provide cloud-based software that ultimately digitizes and automates the back office of financial operations for small and midsize businesses, basically helps them to streamline payment operations, eliminate the paperwork, and bring it all into the digital age here.

Again, much like Lemonade (LMND -1.49%), the key ingredient of Bill.com is, the special sauce as they say, and it's their AI-driven platform. The more data, the smarter it gets. The more customers they bring into the network, it becomes a self-fulfilling prophecy in a sense there.

I think it was really just encouraging, the numbers that they reported here for the most recent quarter revenue was up 38%, subscription revenue was up 33%, transaction revenue was up 98%, payment volume up 40%, total number of transactions were up 11%, customer growth up 27%. But here's the kicker, they were guiding for 32% revenue growth in this current quarter now. Add all of that together, and yes, Bill.com is still not profitable. It's one of those highfliers that has a lot of potential, but it hasn't brought it all down to the bottom line yet. But that's no secret, that's no surprise. I mean, we understand that's where this business is right now.

I definitely am understanding the market's enthusiasm there and those looking through the call and just a couple of additional points. They're capitalizing on the cross-border opportunity, which we've seen across all of the fintech space here lately that talked a cross-border. We'll talk a little bit more about cross-border here when we get to our next story here. But a cross-border opportunity continues to be a tremendous one. Then I thought it was really cool to see that they now have white-label offerings. They're providing the technology for these bigger customers to basically build on, and they've got these white-label offerings now with the top three banks in the U.S.: JPMorgan (JPM -0.09%), Bank of America (BAC -1.76%), and your stock for 2021, Wells Fargo (WFC -0.66%). Wells Fargo is having a pretty good past couple of weeks, too, there.

Matt Frankel: They just launched a new joint venture with Wells Fargo, I believe.

Moser: Yeah.

Frankel: A couple of points that I would add to what you said about Bill. Yes, they're losing money, but they're losing less.

Moser: Yeah.

Frankel: Let's put that in perspective. They lost $2.7 million on an adjusted basis for the quarter. That's about half of what they lost a year ago. They raised a lot of capital this quarter. They raised $1.15 billion. Guess what interest rate they're paying.

Moser: It's got to be next to nothing.

Frankel: It is nothing. It's zero because they did it as convertible debt.

Moser: There you go.

Frankel: It's like the market has a huge appetite for future growth in tech so they're able to raise capital at no interest, which is pretty remarkable.

Moser: Yeah.

Frankel: I said they lost $2.7 million for their quarter, they got $1.7 billion in the bank. They're not really that worried about the $2.7 million loss.

Moser: No, not at all.

Frankel: I took a listen to our show in May when we first talked about Bill.com.

Moser: Yeah.

Frankel: Remember what the IPO price was?

Moser: It's escaping me, but I feel like it was somewhere in the neighborhood of $35 maybe.

Frankel: $22.

Moser: Yeah.

Frankel: So at that time, they had 91,000 customers. They grew that, as you mentioned, by 27% year over year. They have 109,000 customers right now. There are 20 million small and medium-sized businesses in the USA, so that's still a lot of growth runway. It's really just been an impressive run since that time, and that was in May. That wasn't even a year ago. They estimate their addressable market at $30 billion in size. Their last four quarters revenue are still less than $185 million, so they're just scratching the surface here. It's not a cheap stock.

Moser: No, they're not at all.

Frankel: Their market cap is almost $15 billion right now as I'm talking.

Moser: To be fair, I mean, back in August we were saying even, it's not a cheap stock. It's $80-$90.

Frankel: It's not, but they're beating expectations. So now, it's even less of a cheap stock.

Moser: Yeah. That's a difficult one really to square sometimes. I mean, you look at some of these stocks, you say, wow, they look so expensive, but the market is just willing to give some of these businesses a little bit more wiggle room when they prove to really beyond something. I mean, it really does seem like Bill.com is onto something particularly when you see that they're able to form those relationships and provide those white-label services to such big financial institutions.

Frankel: Yeah. I mean, they're disrupting an industry that really wasn't very disrupted. If you remember when we first cover them in May, Bill.com said that 90% of small- and medium-sized businesses in the U.S. still use paper checks in some capacity.

Moser: Yeah, absolutely.

Frankel: Whether it comes to paying bills or paying their employees or whatever, they still use paper checks for some part of their business.

Moser: Sure.

Frankel: It's like Lemonade, where it's like a first disruptor's advantage, and the more data and more network they build, the more that advantage becomes. They're very different companies obviously, but they've had some similar growth tailwinds going on.

Moser: Yeah, and definitely playing in that same AI opportunity as well. I mean, AI being a key driver for the success of these businesses.