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Why Stock Gained 35% Last Month

By Jeremy Bowman - Mar 3, 2021 at 12:32PM

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Shares of the back-office software company jumped on a strong earnings report.

What happened

Shares of (BILL 3.68%) were climbing last month after the back-office billing and payments specialist posted a strong second-quarter earnings report early in the month, topping estimates on the top and bottom lines. According to data from S&P Global Market Intelligence, the stock finished February up 35%. 

As you can see from the chart below, the stock jumped on the Feb. 5 report, and then gave back some of those gains at the end of the month on a broader sell-off in tech stocks. 

BILL Chart

BILL data by YCharts

So what shares jumped 32% on Feb. 5 as the company said core revenue, which includes subscription and transaction fees, rose 59%. Overall revenue, which also includes interest on funds held for customers, was up 38% to $54 million, well ahead of estimates at $47.1 million. Interest on funds declined as interest rates fell over the last year, though that isn't reflective of the strength of the underlying business.

A woman working on her computer with a stack of bills.

Image source: Getty Images.

Customers increased 27% to 109,200 as the company continued to make inroads with the small and medium-sized businesses that make up its core customer base. Margins in the quarter also improved as its adjusted operating loss narrowed from $4.5 million to $2.7 million. On the bottom line, the company posted an adjusted per-share loss of $0.03, better than $0.06 in the quarter a year ago, and topped the analyst consensus at $0.08.

CEO Rene Lacerte said, "We delivered strong financial results and record payment volume growth driven by robust demand for our platform and its expanded payment offerings." A chorus of analysts cheered the earnings report, raising their price targets on the results.

Now what

Like other SaaS stocks (software-as-a-service), has benefited from the digital transformation many companies are undergoing during the pandemic as remote work has put a premium on work-related software.

Looking ahead to the third quarter, management said it's entering the period with momentum, and the company sees total revenue of $53.7 million to $54.7 million, representing 32% growth from a year ago, and core revenue of $52.8 million to $53.8 million, up 48% at the midpoint, indicating solid growth.

As a digital payments company that's disrupting back-office paperwork, should have a long growth path ahead of it, and investors should expect to see steady gains in core revenue.

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