BILL Holdings, Inc. — FY2021 Form 10-K
Reporting-period note: The filing covers the fiscal year ended June 30, 2021, not 2020 Q4 as indicated in the request metadata. FY2021 includes Divvy’s results only from its June 1, 2021 acquisition date.
Business context
BILL provides cloud-based accounts payable, accounts receivable, payments, and spend-management software for small and midsize businesses. At fiscal year-end it reported 121,200 customers, approximately 3.2 million network members, and $140.3 billion of total payment volume (TPV). It acquired Divvy for approximately $2.324 billion in June 2021, expanding into spend management and corporate cards.
Key financial metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $238.3 million | $157.6 million |
| Subscription and transaction revenue | $232.3 million | $136.4 million |
| Interest revenue on customer funds | $6.0 million | $21.2 million |
| Gross profit / gross margin | $176.5 million / 74.1% | $118.5 million / 75.2% |
| Operating loss | $114.0 million | $34.2 million |
| Net loss | $98.7 million | $31.1 million |
| Net cash from operating activities | $4.6 million | $(4.4) million |
| Free cash flow | $(16.6) million | $(16.5) million |
Revenue grew 51%; subscription and transaction revenue rose 70%, while interest revenue fell 72%, primarily reflecting lower yields. TPV grew 45%, customer count 24%, and net dollar-based retention increased to 124% from 121%. GAAP gross margin edged down about one percentage point. The company remained loss-making; it reported no forward financial guidance in the supplied filing text.
Liquidity, debt, and capital
- At June 30, 2021, cash and cash equivalents were $509.6 million and short-term investments were $655.3 million. Management said these, together with available credit lines, were expected to cover working-capital needs for at least 12 months.
- Funds held for customers were $2.209 billion, matched by an equal customer-fund-deposit liability; these restricted funds are not available for general corporate use.
- Debt included $1.15 billion of 0% convertible senior notes due December 2025 and $77.5 million drawn under Divvy-assumed credit facilities, with $77.5 million of stated remaining commitment subject to eligible receivables and facility terms. The notes’ GAAP liability carrying value was $909.8 million after discount and issuance costs; discount accretion contributed substantial reported interest expense.
- FY2021 cash flows included $1.427 billion used in investing and $1.640 billion provided by financing. Investing outflows included the Divvy acquisition, investments, and growth in acquired card receivables.
Material changes and unusual items
- Divvy contributed $10.3 million of revenue and $11.4 million of net loss for the month after acquisition. The acquisition generated $1.772 billion of goodwill and $423 million of preliminary identifiable intangible assets; purchase accounting remained subject to a measurement period.
- FY2021 general and administrative expense rose 139% to $128.8 million, including higher personnel and stock-based compensation, professional fees, and acquisition-related costs. The company recorded $15.5 million of Divvy acquisition-related expenses.
- Other expense was $25.4 million, principally reflecting $27.7 million of convertible-note discount and issuance-cost amortization. A $40.6 million income-tax benefit largely reflected acquisition-related deferred tax accounting and valuation-allowance changes.
- After year-end, BILL agreed to acquire Invoice2go for approximately $625 million in cash and stock, subject to customary closing conditions. This was a proposed transaction, not completed at the filing date.
Outlook, risks, and contingencies
Management described continued investment in product development, sales and marketing, infrastructure, compliance, risk management, and expansion, while cautioning that costs may rise and profitability is not assured. It cited uncertainty from COVID-19, including possible customer and payment-volume impacts and persistently low interest rates. Other significant risks include fraud and payment-processing errors; credit losses and funding access for Divvy card receivables; reliance on banking, accounting, and technology partners; regulatory and data-security obligations; and acquisition integration.
A material weakness was identified in controls over Divvy business-combination accounting, including review precision and documentation. Management concluded internal control over financial reporting and disclosure controls were ineffective as of June 30, 2021; the auditor issued an adverse opinion on internal control, while giving an unqualified opinion on the financial statements. Management proposed remediation, but did not estimate when it would be complete. The filing reported no legal proceedings considered material and an immaterial litigation reserve.
Investor verification priorities
- Confirm the remediation and testing of the acquisition-accounting material weakness, including the auditor’s subsequent internal-control assessment.
- Review Divvy’s purchase-price allocation, goodwill and intangible-asset valuations, integration progress, card credit losses, and funding-facility terms.
- Track the conversion, cash-settlement, and dilution implications of the $1.15 billion 2025 Notes, along with debt-service capacity.
- Assess whether core revenue and TPV growth can offset operating-expense growth and the continuing decline in interest revenue.
- Verify the completion, consideration, and integration effects of the pending Invoice2go acquisition, if consummated.