BILL Holdings, Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended December 31, 2021. BILL provides cloud-based accounts payable, accounts receivable, payments, and spend-management software for small and midsize businesses. Unless stated otherwise, dollar figures below are in U.S. dollars and rounded to millions.
Financial performance
| Metric | Three months ended Dec. 31, 2021 | Three months ended Dec. 31, 2020 | Six months ended Dec. 31, 2021 | Six months ended Dec. 31, 2020 |
|---|---|---|---|---|
| Revenue | $156.5 | $54.0 | $274.8 | $100.3 |
| Gross profit | $122.1 | $40.1 | $210.6 | $74.2 |
| Gross margin | 78% | 74% | 77% | 74% |
| Operating loss | $(76.1) | $(14.2) | $(150.3) | $(28.0) |
| Net loss | $(80.4) | $(17.2) | $(154.7) | $(30.1) |
| Net loss per share, diluted | $(0.78) | $(0.21) | $(1.56) | $(0.37) |
- Quarterly revenue rose 190% year over year; six-month revenue rose 174%. Growth reflected higher subscription and transaction fees, acquisitions, increased customer activity, and a shift toward variable-priced transaction products.
- Quarterly operating expenses were $198.2 million, up from $54.2 million. Sales and marketing increased substantially, including Divvy rewards costs and acquired-intangible amortization. Stock-based compensation was $49.7 million for the quarter and $87.6 million for the six-month period.
- Operating cash flow was $(12.9) million and free cash flow was $(16.1) million for the quarter. For the six months, operating cash flow was $(34.1) million and free cash flow was $(41.6) million.
- At December 31, cash and cash equivalents were $1.672 billion and short-term investments were $1.117 billion. Funds held for customers of $3.380 billion were matched by customer fund deposit liabilities and are not equivalent to corporate liquidity. Total assets were $9.511 billion and stockholders’ equity was $4.093 billion.
- Debt principal totaled $1.803 billion: $1.150 billion of 2025 convertible notes, $575 million of 2027 convertible notes, and $77.5 million drawn on credit facilities. The 2025 notes’ conversion condition was met, so their $1.134 billion net carrying amount was classified as current. Both note issues carry a 0% stated interest rate.
- Customer growth and activity: BILL’s reported customer count was 135,000, up 24%; payment volume excluding Divvy and Invoice2go was $56.4 billion for the quarter, up 62%; transactions processed on that basis were 9.802 million, up 35%.
Changes, acquisitions, and unusual items
- Revenue and expenses include Divvy from its June 1, 2021 acquisition and Invoice2go from September 1, 2021. Invoice2go contributed $9.7 million of quarterly revenue and approximately $11.0 million of quarterly net loss.
- Invoice2go was acquired for $674.3 million, including $164.1 million cash and equity consideration; the preliminary allocation included $585.4 million of goodwill. BILL also raised approximately $1.3 billion net from a September 2021 share offering and $560.1 million net from issuing the 2027 notes.
- The six-month net loss widened to $154.7 million from $30.1 million. Cost growth included acquisition-related amortization, increased staffing and compensation, Divvy rewards, marketing, and card and fraud loss provisions. The filing attributes improved gross margin primarily to a higher mix of variable-priced transaction revenue.
- Adoption of accounting standards affected reported results: early adoption of ASU 2021-08 increased revenue by $3.8 million in the quarter and $5.8 million in the six-month period; ASU 2020-06 changed convertible-note accounting and reduced the opening accumulated deficit by $29.0 million.
Outlook, risks, and contingencies
- No specific revenue, earnings, or cash-flow guidance is provided. Management expects operating costs to rise as it invests in product development, sales and marketing, customer support, risk management, and growth. It expects available corporate cash, short-term investments, and credit capacity to meet working-capital requirements for at least 12 months.
- Key risks include continued losses and uncertain path to profitability; integration and performance of Divvy and Invoice2go; credit, fraud, and rewards costs in the spend-management business; regulation and funding access; cybersecurity and service reliability; customer-fund liquidity and investment risks; and COVID-19 impacts.
- The 2025 notes were eligible for holder conversion during the quarter after December 31, 2021. BILL stated its current intent to settle conversions through cash for principal and shares for any excess conversion value. Cash settlement could affect liquidity.
- Credit facilities had $155.0 million of total commitments, of which $77.5 million was drawn; covenants were met at quarter-end. BILL reported $18.8 million of authorized card transactions not yet cleared and not recorded as liabilities, and contractual repurchase obligations for certain sold card receivables.
- Management reported a material weakness in internal control over financial reporting, identified in connection with Divvy acquisition accounting, that remained unremediated at December 31, 2021. Disclosure controls were therefore not effective; management stated the financial statements were fairly presented after additional procedures. Invoice2go was excluded from the quarter-end controls assessment while integration proceeds.
- Management said no pending legal proceeding was expected to have a material adverse effect; the litigation reserve was immaterial. The company cautions that actual results may differ materially from forward-looking statements.
Most important facts for investors to verify
- How much reported growth reflects acquired businesses versus organic customer and transaction growth.
- Whether revenue growth can outpace operating expenses, rewards, stock-based compensation, and acquisition-related amortization, and what progress is being made toward profitability and positive free cash flow.
- The cash requirements and potential dilution from 2025 and 2027 note conversions, including the current classification of the 2025 notes.
- Credit performance, loss provisions, receivable-sale arrangements, and continued availability and terms of funding facilities for Divvy.
- Remediation of the material weakness and any subsequent control, reporting, or acquisition-accounting developments.
- Liquidity available for corporate use, kept distinct from customer funds held in trust and corresponding customer obligations.