Many Americans dream of owning their own business. Being the one calling all the shots sounds empowering. But running a business is no walk in the park. It often involves high stress and very long hours. Studies have indicated that just 57% of small business owners take vacations, and the overwhelming majority of them still check work at least once a day while they're away.
Why am I telling you this? Well, financial technology specialist Bill.com (BILL +0.71%) is focused on giving hundreds of thousands of business owners some of their time back by offering a portfolio of software platforms that handle many everyday duties related to running a business.
The company has grown like a weed over the last few years. But based on the size of its addressable market, it has barely scratched the surface of its global opportunity. Bill.com stock is down 71% from its all-time high, meaning now might be a great time to buy on the dip. Here's why.
NYSE: BILL
Key Data Points
Bill.com is the ultimate time saver
Each year, more businesses are migrating their operations into the cloud, moving more tasks and reaching more customers online. This digital transformation drives efficiency, and by sprinkling some automation into the mix, it can save business owners several hours of work per week.
Through its own development combined with a few savvy acquisitions, Bill.com has built a four-pronged empire that covers the entire financial operations workflow for small to medium-sized enterprises. Its software platforms streamline accounts receivable, accounts payable, spend management, and payments -- basically, many of the behind-the-scenes, menial tasks that business owners dread.
The flagship Bill.com digital inbox is the accounts payable piece. It's designed to neatly aggregate all incoming invoices into one online location to eliminate messy paper trails. From there, a business owner can make payments with a single click, and each transaction is automatically logged in their choice of bookkeeping software. A workflow that once required multiple steps can now be completed with the touch of a button.
Bill.com serves 435,800 business customers directly across its platforms, but there are more than 4.7 million within its network that have sent or received funds.
The company's revenue is soaring
Bill.com just reported its financial results for the fiscal second quarter of 2023 (ended Dec. 31). Its stock plunged by 26% the following trading day because its revenue "only" increased by 66% year over year. Investors had become accustomed to triple-digit growth rates, but like many companies, Bill.com is feeling the effects of the slowing U.S. economy.
Management cited high inflation and rising interest rates as key factors for its slowdown. Naturally, businesses are acting cautiously when it comes to spending money on new technologies right now, even if they do drive efficiency. There's just too much uncertainty to make new commitments when costs are rising across the board, and demand from customers is falling at the same time.
But weak economies don't last forever. That's why it's important for investors to zoom out and observe the big picture. Bill.com has told investors it expects to generate up to $1 billion in revenue during fiscal 2023, and if it hits the mark, it would represent a 15-fold increase from fiscal 2018.
Bill.com has foregone profitability to this point in order to invest heavily in customer acquisition, and with a net retention rate of 131%, that strategy makes perfect sense. It means existing customers are spending 31% more money with each passing year, so focusing on getting more of them in the door should be a top priority.
Still, the company is making some effort to stabilize its net losses. In the first two quarters of fiscal 2023, it lost $176 million, equaling 36% of revenue, which was a drastic improvement over the same period in fiscal 2022, when its net loss was 56% of revenue.
Bill.com it trying to balance growth with its profitability aspirations going forward. It will be helped in these efforts by a fortress-like balance sheet with over $2.6 billion in cash, equivalents, and short-term investments. That gives it plenty of runway to execute on its plans.
Bill.com is chasing a mammoth-sized opportunity
The majority (65%) of Bill.com's revenue is generated through payments. Every time a business completes a financial transaction, Bill.com takes a small fee based on its dollar volume. The company is now processing $250 billion in payments annually, but that's a fraction of its addressable opportunity. Bill.com is fighting for a slice of $25 trillion in payment volume in the U.S. alone each year from 30 million small to medium-sized businesses (SMBs).
But globally, there are more than 70 million SMBs making $125 trillion in payments annually. Considering the efficiency Bill.com's tools provide, it's clear to see why the company has grown its revenue so quickly, and why it's a candidate for absorbing more market share in the coming years.
There are some clear signs that the worst of the recent economic headwinds, like inflation, might have peaked. If that holds true, buying the 71% dip in Bill.com stock now could look like a genius decision in a few years' time.
