BILL Holdings, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended June 30, 2022, filed August 22, 2022. Although the request metadata says “2021 Q4,” this filing reports fiscal 2022 and includes comparisons with fiscal 2021 and 2020.
Business context
BILL provides cloud-based financial workflow, payments, accounts payable and receivable, and spend-management software for small and midsize businesses. At year-end it reported 157,800 Bill.com customers, 4.7 million network members, and $219.1 billion of Bill.com payment volume for the year; these core metrics exclude Divvy and Invoice2go activity. Fiscal 2022 included Divvy for the full year and Invoice2go from its September 2021 acquisition.
Financial performance
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $642.0 million | $238.3 million |
| Gross profit / margin | $497.0 million / 77% | $176.5 million / 74% |
| Operating loss | $316.8 million | $114.0 million |
| Net loss | $326.4 million | $98.7 million |
| Operating cash flow | $(18.1) million | $4.6 million |
| Free cash flow | $(33.7) million | $(16.6) million |
Revenue rose 169% year over year. Subscription revenue increased 73% and transaction-fee revenue increased 265%; management attributed transaction growth to broader product adoption and a shift toward variable-priced products. Customer funds interest revenue was $8.6 million, versus $6.0 million in FY2021. Gross margin improved mainly from a higher mix of variable-priced transaction revenue.
Operating costs expanded substantially: sales and marketing rose 352% to $307.2 million, including $95.2 million of card rewards expense versus $4.5 million in FY2021. Stock-based compensation expense was $197.2 million. The company remained loss-making, with an accumulated deficit of $544.8 million.
Liquidity, debt, and balance sheet
At June 30, 2022, corporate cash and cash equivalents were $1.60 billion and short-term investments were $1.11 billion. Management said these resources should cover working-capital needs for at least 12 months. Separately, $3.14 billion of funds held for customers was matched by an equal customer-fund-deposit liability and was restricted for customer obligations, not available for general business use.
Debt included $1.725 billion principal of 0% convertible senior notes ($1.15 billion due 2025 and $575 million due 2027) and $75 million drawn on a revolving credit facility, which matures in June 2023. The revolver’s stated rate was 4.35% at year-end and it was secured by acquired card receivables. Notes may require cash settlement of principal on conversion or repurchase in specified circumstances.
Material changes and unusual items
- Acquired Divvy in June 2021 for approximately $2.32 billion and Invoice2go in September 2021 for approximately $674 million. Acquisitions expanded the product portfolio but also contributed to higher expenses, amortization, and integration demands.
- Issued $1.3 billion net proceeds from a common-stock offering and $560 million net proceeds from the 2027 Notes in September 2021.
- FY2022 investing cash outflow was $1.13 billion, while financing cash inflow was $2.88 billion, largely reflecting investment activity, customer-fund movements, and capital raised.
- Card-receivable credit-loss provision was $19.6 million in FY2022; the reported Divvy card fraud and credit loss rate was approximately 37 basis points of card volume. Bill.com payment-service fraud and credit losses were each below one basis point of TPV.
- The company early-adopted convertible-debt accounting guidance, reducing reported interest expense associated with the 2025 Notes. Short-term investment portfolios recorded unrealized losses as interest rates rose; management did not consider them other-than-temporary impairments.
Outlook, risks, and contingencies
The filing provides no specific numerical revenue or earnings guidance. Management expects investment in product development, sales and marketing, compliance, risk management, international expansion, and staffing to continue; it cautions that expenses may rise and profitability is uncertain. The company reported no legal proceedings it believed material as of the filing date.
Key risks include persistent operating losses; SMB exposure to economic downturns, inflation, and recession; competition and customer retention; Divvy credit losses and reliance on bank and warehouse funding partners; fraud, cybersecurity, service outages, and the safeguarding and liquidity of customer funds; evolving payments and privacy regulation; acquisition integration; and potential cash requirements under convertible notes. The company reported $55.2 million of authorized but uncleared card transactions subject to purchase obligations, with expected credit losses described as immaterial.
Management and the auditor concluded internal control over financial reporting was effective, and the financial-statement audit opinion was unqualified. However, the control assessment excluded Invoice2go, which represented 5% of assets and 5% of revenue; the auditor’s control opinion also excluded it. A material weakness in accounting for the Divvy acquisition identified in FY2021 was reported remediated.
Important facts for investors to verify
- Separate organic growth from the effects of Divvy and Invoice2go; the filing’s core customer and TPV metrics exclude those businesses.
- Track whether transaction growth, customer retention, and the 131% net dollar-based retention rate can persist as the company scales.
- Assess the path to profitability, particularly sales and marketing spending, card rewards costs, stock-based compensation, and credit-loss trends.
- Review liquidity available for corporate use separately from restricted customer funds, and monitor cash burn and the 2023 revolver maturity.
- Examine convertible-note conversion, cash-settlement, and repurchase terms, and the availability and cost of Divvy funding arrangements.
- Confirm Invoice2go’s integration and internal-control coverage in subsequent filings, and monitor regulatory, cybersecurity, customer-fund, and credit risks.