Bill Holdings (BILL 3.21%) delivers a suite of unique software tools to small and mid-size businesses that are designed to help streamline their payments, bookkeeping, and budgeting. Its stock came public in 2019, and within two years, it soared by 1,521% to an all-time high of $334.70. The company was delivering exceptional growth, but it was sacrificing profitability to do so.
The economic winds have shifted, and tech companies are now cutting costs and settling for slower, more sustainable revenue growth to progress toward profitability. Bill.com is doing a great job managing the transition, although its stock has plunged 81% from its all-time high as investors reconsider its valuation based on the company's moderating expansion rate.
That might be a great opportunity for investors to buy Bill.com stock now and hold for the long term. Here's why.
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Bill.com is increasingly essential to small businesses
Small business owners wear many hats. They are often the operator, salesperson, bookkeeper, and product expert, and that leaves little time for monotonous tasks like managing invoices and payments. Bill.com offers three software tools to help automate accounts payable, accounts receivable, and internal expense management.
In the past, businesses would get bogged down in endless paperwork, which made it very difficult to keep track of paid invoices. Bill.com's flagship product is a digital inbox designed to receive incoming invoices from multiple sources in multiple formats so they are aggregated in one place. From there, the business can pay them with one click, and each transaction is automatically logged in the business's bookkeeping software.
Bill.com also owns Invoice2go, which handles the other side of the equation. Businesses can use it to create invoices and track incoming payments from customers. Divvy is another platform acquired by Bill.com, and it helps managers create budgets and track expenses from employees who might have a corporate credit card, for example.
Across all platforms, Bill.com serves an impressive 473,500 small and mid-size businesses. The company is partnered with over 7,000 accounting firms that recommend Bill.com's software to their clients, because it makes the entire accounting process far easier to manage, which is a win-win for all parties. That's a powerful customer acquisition network for the company, and it should continue to attract new business.
Bill.com's revenue growth is slowing, but its bottom line is rapidly improving
Bill.com just reported its financial results for the fiscal 2024 second quarter (ended Dec. 31), and it delivered a record-high $318.5 million in revenue. That was up 22% year over year, which is a respectable growth rate, but it's far slower than what investors had become accustomed to.
For example, in the same period of fiscal 2023, Bill.com's revenue was up 66% year over year. In Q2 of fiscal 2022, it was up a whopping 160%. Decelerating revenue growth has become a clear trend.
It's slowing because Bill.com is carefully managing costs. It spent 28% less money on marketing in Q2, and its operating expenses were flat overall. Given revenue grew by 22%, that allowed more money to flow to the bottom line. As a result, the company's GAAP net loss was only $40.4 million, which was down by more than half from the year-ago period.
On a non-GAAP basis, which strips out one-off and non-cash expenses like restructuring charges and stock-based compensation, Bill.com delivered net income of $73.2 million. That brought its total non-GAAP profit to $137.1 million for the first six months of fiscal 2024, which was an impressive 106% increase from the same period a year ago.
Why Bill.com stock is a buy now
Despite Bill.com's slowing growth, it has an enormous addressable market in front of it. As I touched on earlier, the company serves 473,500 businesses, but it believes there are more than 70 million potential customers around the world who could benefit from its software.
Most of Bill.com's revenue comes from fees each time a business makes a transaction using its platforms. It processed $75 billion worth of transactions in Q2 alone, but that's a drop in the bucket compared to the $125 trillion in payments small and mid-size businesses make each year globally. This company has barely scratched the surface of its opportunity.
That's why Bill.com stock is such an appealing long-term investment, especially given the steep discount from its all-time high. Once the company achieves consistent GAAP profitability, it could gradually ramp up its marketing spending once again to drive a reacceleration in its revenue growth. Its global opportunity is so vast that it can afford to be patient during this period of turbulence in the broader economy caused by high interest rates.
Investors who buy Bill.com stock today might be glad they did when they look back on this moment a few years from now.
