BILL Holdings, Inc. — Form 10-Q Summary
Reporting period: Fiscal first quarter ended September 30, 2023 (three months; compared with the quarter ended September 30, 2022). The filing describes BILL’s cloud-based financial automation, payments, and spend-management business. BILL reports as one operating segment.
Key financial results
| Metric | Quarter ended Sep. 30, 2023 | Comparable 2022 period / change |
|---|---|---|
| Revenue | $305.0 million | $229.9 million; up 33% |
| Subscription and transaction fees | $265.1 million | $214.6 million; up 24% |
| Interest revenue on customer funds | $39.8 million | $15.3 million; up 160% |
| Gross profit / gross margin | $249.0 million / 81.6% | $184.8 million / 80.4% |
| Operating loss | $56.6 million | $87.7 million |
| Net loss / diluted loss per share | $27.9 million / $0.26 | $81.6 million / $0.78 |
| Operating cash flow / free cash flow | $53.7 million / $47.6 million | $18.2 million / $12.0 million |
| Cash and cash equivalents | $1.527 billion | $1.617 billion at June 30, 2023 |
| Short-term investments | $1.119 billion | $1.043 billion at June 30, 2023 |
| Debt and borrowings | $1.842 billion carrying value | $1.840 billion at June 30, 2023 |
Cash and short-term investments totaled approximately $2.647 billion at quarter-end. Funds held for customers of $3.264 billion were matched by customer-fund deposit liabilities and should not be treated as unrestricted corporate liquidity. The company reported $90 million of undrawn capacity under its $225 million revolving facility.
Business trends and changes
- Subscription revenue rose 7%, attributed to customer growth and higher subscription revenue per customer. Transaction-fee revenue increased 30%, reflecting higher payment volume and a shift toward variable-priced products.
- Interest revenue from customer funds grew as investment yields increased. The annualized yield on corporate and customer-fund investments was 4.99%, versus 1.84% a year earlier.
- Businesses using BILL’s solutions increased 12% to 471,200; total payment volume rose 8% to $70.2 billion; transactions processed increased 26% to 24.8 million.
- Gross margin expanded by 1.2 percentage points. Operating expenses increased 12% year over year, below revenue growth. Research and development rose 19%, general and administrative expense rose 28%, while sales and marketing was approximately flat.
- Other income, net increased to $29.3 million from $5.9 million, principally because corporate interest income rose with market rates. The company said it ceased selling acquired card receivables in August 2022.
- Acquired card receivables, net, were $552.8 million at quarter-end, up from $458.7 million at June 30. The allowance for credit losses increased to $18.5 million from $15.5 million.
Liquidity, debt, outlook, and risks
- Management said available cash, cash equivalents, and short-term investments should meet working-capital needs for at least the next 12 months. Operating cash flow was positive; investing cash flow was positive $301.8 million, largely reflecting net investment maturities, while financing cash flow was negative $111.9 million.
- The company had $1.15 billion of 0% convertible notes due December 2025 and $575 million of 0% convertible notes due April 2027. Their conversion conditions were not triggered at quarter-end. Management’s stated intention is generally to settle principal in cash and any conversion value above principal in shares.
- The $225 million revolving credit facility had $135 million drawn, bears a floating rate, and matures in June 2024. Its effective rate was 8.34% at September 30; BILL reported compliance with its covenants. Borrowings are secured by acquired card receivables.
- No quantified financial guidance was provided in the supplied filing text. Management said macroeconomic pressures had led customers to moderate expenditures and, in some cases, use lower-cost payment methods, weighing on payment-volume and transaction-fee growth; it expected these effects to persist in the near term. Management also cautioned that elevated customer-fund interest revenue may not continue to expand and could fall if rates decline.
- Key exposures include SMB sensitivity to economic weakness, card-receivable credit losses and fraud, continued access to card-funding arrangements, banking-partner concentration or disruption, interest-rate changes, regulatory requirements, and cybersecurity or service interruptions. The company reported that its and its customers’ funds at Silicon Valley Bank were preserved and payment flows were rerouted after the bank’s 2023 closure.
- The company reported no material change in contractual obligations or litigation from its prior annual filing and no legal proceeding it believed would have a material adverse effect. Disclosure controls were judged effective at a reasonable-assurance level; a previously disclosed material weakness had been remediated as of June 30, 2023.
Important facts for investors to verify
- How revenue and margins perform if customer-fund yields decline, and whether transaction growth remains affected by customer spending moderation.
- Credit quality, delinquencies, charge-offs, and reserve adequacy as acquired card receivables and card volume grow.
- Plans to refinance, repay, or replace the revolving facility before its June 2024 maturity, and liquidity needs related to the 2025 notes.
- The extent to which reported cash and investments are available for corporate use, separately from assets backing customer-fund obligations.
- Whether operating costs, stock-based compensation, rewards expense, and investments in growth allow progress toward sustained profitability.