Shares of Bill.com Holdings (BILL +2.24%) have gotten shellacked over the past year. The financial automation software leader has lost more than 60% of its value, even though it's growing briskly. The company believes it has a bright future due to the massive opportunity to help small and mid-size businesses (SMBs) automate their financial back-office operations with the help of artificial intelligence (AI). That recently led it to authorize a $300 million share repurchase program.
Here's a closer look at why this AI-powered company believes strongly in its long-term growth opportunity.
NYSE: BILL
Key Data Points
Blistering growth
Bill.com's stock price and revenue have gone in opposite directions. While shares have plunged, the financial automation software company's total revenue surged 66% in its fiscal second quarter to $260 million, and core revenue (subscription and transaction fees) jumped 49% to $231.1 million. Even though the company reported a loss on a generally accepted accounting principles (GAAP) basis, it posted $49.4 million, or $0.42 per share, of non-GAAP net income. That was a massive improvement from the non-GAAP net loss of $0.2 million it posted in the year-ago quarter.
The company expects to continue growing at a rapid pace this fiscal year. Its guidance has it on track to produce about $1 billion in total revenue, up 56% to 57% from last year. Meanwhile, it expects to be solidly profitable on a non-GAAP basis.
Despite all those positives, shares have continued to crater. That's because growth is slowing slightly from its blistering pace due partly to a weakening macroeconomic environment.
The AI-driven opportunity
While Bill.com's SMB customers face some near-term headwinds, the company sees an enormous long-term opportunity. It estimates the total global opportunity for SMB software spending is $239 billion, and the business-to-business payment volume is a whopping $125 trillion. It's currently capturing only a tiny slice of this opportunity.
One strategy it's deploying to seize this opportunity is to utilize AI to enhance the capabilities of its software to save clients more time and money. SMB finance teams spend 23% of their average workdays manually inputting data, such as inputting information from an invoice into accounts payable software. Data entry costs SMBs lots of time and money.
Bill.com turned to AI to help solve this problem. The company launched its new AI suite a few years ago to help SMBs automate tasks like data entry, which is time-consuming and error-prone. One of its AI-powered tools is IVA (Intelligent Virtual Assistant). It captures the relevant information on an invoice to help speed up the bill management process and eliminates costly data entry errors and duplicate payments. The company estimates its AI-powered solutions help cut the time to pay bills in half.
That time- and cost-saving solution is helping drive new customer growth, enhance retention, and expand existing relationships. Bill.com reported that businesses using its solutions grew 17% over the past year to 436,000. Meanwhile, its dollar-based net retention rate was 131%, showcasing its ability to retain customers and expand those relationships.
Investing in itself
Bill.com firmly believes it has a bright future. That led the company to authorize a $300 million share repurchase program, a sizable amount representing about 3% of its current market cap. CFO John Rettig commented on the press release announcing the program: "The share repurchase program demonstrates our confidence in the strength of our business and our ability to capture the large market opportunity ahead of us. With our strong balance sheet and cash flow generation, we are well positioned to invest for our future growth prospects while also returning capital to shareholders and minimizing dilution."
The buyback suggests the company believes its stock is a compelling investment opportunity. It trades at a significantly lower price -- even though the company is growing briskly and continues to have a massive opportunity in front of it that it's in a strong position to capitalize on, thanks to its AI-powered solution. Because of that, investors interested in AI should take a closer look at Bill.com.
