What happened
Shares of Bill.com Holdings (BILL +2.63%), the payments specialist for small and medium-sized businesses (SMBs), were taking a dive today after the company posted strong results in its fiscal second quarter but offered disappointing guidance for the current period.
As a result, the stock was down 25.6% as of 11:59 a.m. ET.
NYSE: BILL
Key Data Points
So what
Bill.com, which is a software-as-a-service company that helps SMBs handle payments and back-office accounting, said core revenue rose 49% in the quarter, and total revenue jumped 66% to $260 million, which beat estimates at $243.5 million. Core revenue was $231.1 million. This excludes "float revenue," which is money the company earns from funds held before it disburses them.
Gross margin improved from 78% to 81.7%, and the company reported adjusted earnings per share of $0.42 in the quarter, up from breakeven in the quarter a year ago and ahead of estimates at $0.13 per share. On a GAAP basis, the company is still significantly unprofitable.
CEO Rene Lacerte said, "We delivered strong second-quarter results and achieved another quarter of non-GAAP profitable growth as we executed on our strategy to be the essential financial operations platform for SMBs."
The company also announced a $300 million share repurchase authorization program, a move that seems designed to counteract its share-based compensation, which reached $119 million in the second quarter.
Now what
Bill.com's management expects third-quarter revenue growth to slow to 47% to 49%, reaching $245 million to $248 million, which compares to estimates of $250.8 million. Despite the strong results, Wall Street was clearly disappointed by this guidance.
On the bottom line, it sees adjusted earnings per share of $0.22 to $0.25, which was worse than the second-quarter result but better than the analyst consensus of $0.12.
Bill's dependence on SMBs could put it at risk of a recession because those businesses tend to get hit harder during economic downturns. The long-term opportunity for the company remains promising, but given its price-to-sales ratio above 10, investors should expect the share-price volatility to continue.
