BILL Holdings, Inc. — FY2023 Form 10-K Summary
Period note: The filing is the annual report for the fiscal year ended June 30, 2023, with comparisons to fiscal 2022 and 2021; it is not a quarterly report for 2022 Q4.
Business context and reporting period
BILL provides cloud-based financial automation, payments, and spend-management software primarily to small and midsize businesses. Its platform includes accounts payable and receivable, Divvy spend management, and Invoice2go. At June 30, 2023, approximately 461,000 businesses used its solutions, and its network had about 5.8 million members. FY2023 total payment volume (TPV) was $266.0 billion.
Financial performance and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Total revenue | $1,058.5 million | $642.0 million |
| Subscription and transaction fees | $944.7 million | $633.4 million |
| Interest on customer funds | $113.8 million | $8.6 million |
| Gross profit / gross margin | $864.5 million / 81.7% | $497.0 million / 77.4% |
| Operating loss | $295.8 million | $316.8 million |
| Net loss | $223.7 million | $326.4 million |
| Net loss per share, diluted | $2.11 | $3.21 |
| Net cash from operating activities | $187.8 million | $(18.1) million |
| Free cash flow (non-GAAP) | $156.6 million | $(33.7) million |
FY2023 revenue rose 65%. Subscription revenue increased 31%, transaction-fee revenue 57%, and customer-fund interest revenue increased sharply as rates rose. Interest on customer funds represented about 11% of total revenue versus 1% in FY2022. Operating expenses totaled $1.16 billion, including $515.9 million in sales and marketing and $313.7 million in stock-based compensation. Sales and marketing included $52.2 million of stock-based compensation related to separation and advisory agreements with the former Chief Revenue Officer.
At June 30, 2023, cash and cash equivalents were $1.62 billion and short-term investments were $1.04 billion. Management said these resources were sufficient for working-capital needs for at least the next 12 months. Separately, $3.36 billion of funds held for customers was matched by an equal customer-fund-deposit liability and was restricted for customer obligations, not general corporate use.
Debt included $1.15 billion of 0% convertible notes due 2025, $575 million of 0% convertible notes due 2027, and $135 million drawn on a $225 million revolving facility, which matures in June 2024 and is secured by Divvy receivables. The notes’ principal totaled $1.725 billion; their net balance-sheet carrying value was $1.705 billion. The revolver had $90 million undrawn at year-end.
Material changes versus the prior comparable period
- Revenue increased from $642.0 million to $1.06 billion, while the net loss narrowed by $102.6 million.
- Gross margin improved to 81.7% from 77.4%, aided by higher customer-fund interest income and a greater mix of variable-priced transaction revenue.
- Operating cash flow and free cash flow turned positive, from outflows in FY2022.
- TPV grew 17% to $266.0 billion; transactions processed rose 35% to 85.1 million. Businesses using solutions increased 15% to 461,000, though the measure includes Divvy and Invoice2go as well as core BILL customers.
- Net dollar-based retention declined to 111% from 131%, which management attributed primarily to customer spending-pattern changes amid macroeconomic pressures.
- Acquired card receivables, net, increased to $458.7 million from $256.4 million; the allowance for credit losses rose to $15.5 million from $5.4 million.
Outlook, risks, contingencies, and unusual items
The filing provides no specific revenue, earnings, or margin guidance. Management reported that customers moderated spending and payment-volume growth, and that net customer additions on the core BILL solution were slightly below recent trends as businesses took longer to decide on software purchases. Management said higher interest rates had increased interest earned on customer funds, but did not expect the recent expansion in that revenue to continue; revenue would also be sensitive to any decline in rates. The company said it would monitor macroeconomic conditions and consider financial or operational actions if its business were adversely affected.
- Principal risks: SMB exposure to economic weakness; continued operating losses; competition, including accounting software providers; Divvy credit losses and dependence on bank and financing partners; fraud and safeguarding customer funds; regulatory and licensing obligations; cybersecurity and data privacy; and interest-rate sensitivity.
- Banking disruption: BILL held company and customer funds at Silicon Valley Bank when it closed in March 2023. The filing says the funds were preserved and pending transactions were rerouted; management noted that future banking instability could still impair access to funds or payment processing.
- Credit and funding: The company bears credit risk on Divvy receivables and relies on funding arrangements to support the card product. It was contractually obligated to purchase $68.6 million of authorized card transactions that had not cleared at year-end; related expected credit losses were not material.
- Controls and audit: A material weakness in quote-to-cash information-system controls as of June 30, 2022 was identified in May 2023 and reported as remediated by June 30, 2023. Management and the auditor concluded internal control over financial reporting was effective at year-end; the auditor issued unqualified opinions on the financial statements and controls.
- Other items: The board authorized up to $300 million in share repurchases. BILL repurchased $87.6 million during FY2023, leaving $212.4 million available. The filing states it was not party to legal proceedings considered material to its business or financial condition.
Important facts for investors to verify
- Whether growth in subscription and transaction revenue can offset slower payment-volume growth and the potential normalization or decline of customer-fund interest revenue.
- Drivers of the retention-rate drop to 111%, and whether SMB spending and customer acquisition trends stabilize.
- Divvy receivables’ credit performance, reserve adequacy, and continued availability and cost of card funding and the revolving facility.
- Whether the prior-year material weakness remains fully remediated and controls remain effective as the business scales.
- The cash-settlement and potential dilution implications of the convertible notes, alongside the June 2024 maturity of the revolver.
- How much reported operating cash flow and free cash flow reflects recurring operations versus working-capital timing and customer-fund movements.