February might be the month of love, but for investors, it falls in the thick of an important earnings season. It has been a rollercoaster so far, exacerbated by the fact the market is in the midst of a powerful sell-off, with the tech sector leading the decline.
But it's not all bad, because some companies have managed to post incredibly strong financial results, highlighting great long-term opportunities for investors. Bill.com (BILL 0.24%) is one of them, crushing all expectations in the second quarter of its fiscal 2022.
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Serving small businesses
Bill.com is a cloud-based payment platform, focused on streamlining accounts payable management. It solves a critical problem for time-poor business operators by offering a digital inbox that aggregates their incoming invoices to a central location.
When a business receives a high volume of invoices, it can often lose track of payments, as the paper trail tends to get messy. And even after bills do get paid, the operator needs to log the transaction into the businesses' bookkeeping system manually. This whole process is time-consuming and extremely inefficient.
Bill.com's digital inbox allows users to pay invoices with a single click, and its integration with most leading accounting software providers means it automatically records the transactions in the books. It cuts several steps out of the typical process, and the company estimates it saves business owners 50% of the time normally spent on managing their accounts payable.
But through two key acquisitions in 2021, the company has expanded into new verticals. It now owns Divvy, a cloud-based expense management and budgeting platform for businesses, and Invoice2go, an invoice-generating tool that helps businesses manage incoming payments. Both of these additions have already made solid contributions to Bill.com's results.
Bill.com's growth is soaring
The company has two core revenue sources: 68% of revenue is generated through transactions, based on the volume of payments Bill.com processes, and 31% comes from subscriptions that businesses pay for using the company's platforms.
Bill.com grew its transaction fees by 313% year over year in the second quarter of fiscal 2022, and its subscription fees by 85%. Together, they combined to deliver significant total revenue growth for the company.
|
Metric |
Fiscal Q2 2021 |
Fiscal Q2 2022 |
Growth |
|---|---|---|---|
|
Total revenue |
$54 million |
$156 million |
190% |
Data source: Bill.com.
Bill.com also added 26,000 customers to its core platform in the quarter, taking its total to 135,000. That's in addition to 223,000 subscribers using Invoice2go and 15,500 paying businesses on the Divvy platform.
The company's rapid growth prompted it to revise its guidance to investors, now estimating it will generate up to $600 million in revenue for the full fiscal 2022 (which ends June 30), up from the $541 million it was expecting just three months ago in its Q1 report.
A major long-term opportunity
Bill.com is chasing a truly enormous total addressable market. It estimates its opportunity in the U.S. alone could be 6 million business customers, with $25 trillion in yearly payment volume. And globally, it could serve up to 20 million business customers, generating $125 trillion in payment volume.
While the company isn't profitable yet, its big Q2 result led to a reduction in its forecasted full-year net loss to $0.43 per share, down from $0.77 in the previous quarter. And it actually generated a break-even result in Q2 on an adjusted basis, further highlighting that the company is heading in the right direction.
To top things off, Wall Street is extremely bullish on Bill.com. Of the 17 analysts covering its stock, 15 have a buy rating, with two recommending a hold -- but none advise selling it. Their consensus price target is $309 per share, representing 27% upside at Tuesday morning's prices. But one firm, Piper Sandler, thinks it could soar to $380, or 56% higher than where it trades today.
The short term looks bright for this company, but patient investors with a long-term view could reap far more significant rewards.
