Pandemic drove more small businesses to try digital billing tools, a trend the company hopes will persist beyond the crisis
Bill.com Holdings Inc. Chief Executive René Lacerte is optimistic that the COVID-19 crisis will drive a longer-term shift toward remote work that increases demand for digital accounting tools.
The company already saw signs of those trends in its recently ended fiscal fourth quarter, as it added 6,700 net new customers, gains it attributed in part to a greater need to manage billing operations remotely during the pandemic. Bill.com
targets small- and medium-sized businesses through software products meant to replace the many manual processes involved in traditional corporate accounting.
Lacerte expects that working from home “is here to stay” and that the dynamics pushing small-business customers to try Bill.com’s offerings because their back-office teams can’t make it into the workplace during the pandemic will persist even after the crisis is over.
“We are seeing that COVID has been an accelerant to how people think about their work,” he told MarketWatch.
Lacerte said that challenges with the U.S. Postal Service might also be something that businesses are thinking about, noting that he grew up in an entrepreneurial family and knows that those running businesses “worry about paying suppliers on time.” Cost cuts at the Postal Service have led to mail delays.
Though Bill.com topped revenue and earnings expectations for its latest quarter, shares were off about 4% in after-hours trading.
The company reported fiscal fourth-quarter revenue of $42.1 million, up from $31.7 million a year earlier and ahead of the FactSet consensus, which called for $38 million.
Bill.com posted a net loss of $9.5 million, or 13 cents a share, compared with a loss of $4.5 million, or 56 cents a share, in the year-earlier quarter. On an adjusted basis, Bill.com lost 2 cents a share, compared with a loss of 2 cents a share a year prior. Analysts surveyed by FactSet were modeling an adjusted loss of 11 cents a share.
Jefferies analyst Samad Samana was most struck by the company’s disclosure of $152 million in remaining performance obligations with financial institutions to be recognized as revenue. This was up from $44 million in the March quarter, and while most of the increase in performance obligations are expected to be recognized more than a year out, Samana said in a note to clients that the traction here is “representative of the new and recent expansions with major [financial institutions].”
Bill.com highlighted in its earnings release an expanded agreement with one of the top three small-business banks in the U.S. “For them to say this is going to be the default solution for payments, for them to make this commitment to us is significant,” Lacerte told MarketWatch.
He said that the increase in performance obligations “is a testament to the platform we have build and the confidence partners have in the ability to digitally transform their lives.”
Samana also highlighted the company’s annual customer retention rate of 82%, in line with the company’s March rate. “This impressive result quelled fears of higher churn and demonstrates the stickiness of Bill.com’s solutions with end customers,” he wrote, while maintaining a hold rating but boosting his price target to $110 from $98.
Shares have gained 65% over the past three months as the S&P 500
has risen 15%.