Accounting software has been around nearly as long as personal computers, but even the most accurate and user-friendly locally-hosted platforms have a problem. It’s the same problem that plagues all locally-hosted software: staying up-to-date. In addition to the up-front costs and the storage required, traditional offline accounting software requires regular manual updates to stay current with regulatory changes, new features, and similar.
Cloud computing made Software as a Service (SaaS) possible. Instead of installing and maintaining locally-hosted software, individuals and businesses can simply connect to the internet and access the tools they need. SaaS has transformed the software landscape, prompting new solutions for everything from productivity software to data analysis and visualization tools. Soon, accounting SaaS made traditional platforms obsolete.
A Brief History of Bill.com
In 2006, Bill.com founders saw an opportunity to bring bookkeeping for small- and medium-sized companies into the 21st century. Using an SaaS model, Bill.com makes it possible to handle billing and payment processing easily, accurately, and affordably.
In many cases, routine tasks can be automated through the AI-assisted software, saving time and related expenses. That’s great news for small business owners with limited staff – and limited time to focus on back-office work. Bill.com boasts that it facilitates the movement of more than $100 billion in payments per year, and it is the platform of choice for 80 percent of the top 100 accounting firms in the United States.
Bill.com held its IPO in December 2019, and investors that bought in right away have seen share values increase significantly. As of early September 2021, Bill.com stock is up more than 630 percent since the first day of trading. In 2020 alone, Bill.com stock gained 171 percent, and 2021 has seen even more impressive increases.
The company’s success has attracted attention from some of Wall Street’s biggest investors, including Cathie Wood of ARK Invest. Wood added Bill.com stock to her Fintech Innovation ETF (ARKF) in February 2021, then increased the fund’s position twice more within three months before selling a small portion of the fund’s Bill.com holdings in late June. Today, Bill.com makes up 1.2 percent of the fund’s total portfolio.
Bill.com: By The Numbers
On August 26, 2021, Bill.com announced its fiscal fourth-quarter 2021 results. Though revenue continues to increase rapidly, earnings went down. Instead of the non-GAAP $0.04 per share loss that analysts expected, Bill.com’s non-GAAP loss was at $0.07 per share.
When evaluated under GAAP, the loss was quite a bit higher. For the quarter ending June 30, 2021, Bill.com had a loss of $0.48 per share. Full-year fiscal 2021 losses totaled $1.19 per share. Year-over-year, that is a decline of 70 percent.
On the revenue side, Bill.com reached $78.3 million for the quarter – an increase of 86 percent. That exceeded analysts’ expectations, which came in at $62.1 million. For the full fiscal year 2021, sales went up by 51 percent for a total of $283.3 million.
What’s Next for Bill.com?
Management didn’t have good news to share as far as earnings expectations for fiscal 2022. The company indicated that first-quarter losses will be worse than expected, between $0.20 and $0.21 per share for fiscal first-quarter 2022, and that trend will carry through the rest of the year. For now, the company is predicting total losses of $0.88 to $0.92 per share for the year.
Though it is not profitable and evidently won’t be over the next 12 months, Bill.com investors do have something to look forward to. Leadership indicated that sales are likely to double in the next quarter, totaling as much as $103.7 million. That trend is also expected to carry through the rest of the year. Fiscal 2022 sales are projected at $478 million.
Will Bill.com Stock Go Up?
An interesting thing happened after Bill.com’s fiscal fourth-quarter earnings report. Despite the dismal losses, the company’s stock price went up – by a lot.
Within the first hour of trading on August 27th, it increased by more than 20 percent – a sure sign that investors are more focused on projected sales than they are on the likelihood of losses.
At first glance, the increased share prices don’t seem logical. However, a deeper dive into Bill.com’s strategy adds clarity. Bill.com is already in an industry leadership position, and it is focused on reinvesting in its business above all else. That means developing its own solutions, as well as acquiring complementary features and technology through mergers and acquisitions.
For example, in June 2021, Bill.com acquired Divvy, a company that specializes in spend management. With the addition of Divvy software, Bill.com customers will have greater ability to automatically manage their accounts payable and accounts receivable, as well as corporate spend. The platform gives real-time visibility into B2B spending, which makes it easier to manage and control cash flow.
Bill.com Founder and CEO René Lacerte made this comment about the acquisition of Divvy:
With the elegant spend management solution that the Divvy team brings, their dedication to serving SMBs, and their passion for driving innovation, together we can accelerate our vision to help SMBs transform, grow, and thrive by automating their financial operations.
Just a few months later, in September 2021, Bill.com acquired Invoice2go – an accounts receivable company that has advanced mobile capabilities. That means increased convenience and flexibility for Bill.com customers, which will allow stronger, more robust relationships.
Lacerte made this comment about the integration of Invoice2go capabilities into Bill.com’s existing service:
With the accounts receivable expertise and international footprint that the Invoice2go team brings, we will accelerate our vision to be the one-stop solution for businesses to transform their financial operations.
In short, it is clear to investors that those losses aren’t the result of an unworkable business model. Instead, they signal the company’s willingness to focus on growth above all else – a strategy that is ultimately likely to deliver strong returns. With that in mind, many analysts believe Bill.com stock will go up.
Is Bill.com Stock A Good Investment? The Bottom Line
An overwhelming number of the analysts rating Bill.com say Bill.com stock is a buy. Of the 14, 11 said buy, with just three giving a hold rating.
Note that these ratings do not consider the sudden increase in share prices that followed the company’s earnings call, so it might be smart to wait for the excitement to settle down before adding Bill.com stock to your portfolio.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.