BILL Holdings (NYSE:BILL) a provider of financial automation software for small and midsize businesses (SMBs), has experienced a significant stock price decline since its peak in late 2021. However, recent insider buying by the CEO and CFO, coupled with the company's achievement of profitability on an GAAP earnings as well as owner earnings basis, suggests a potential turning point. BILL's SaaS platform is used by over 480,000 businesses, processing nearly 85 billion in payments volume across 30 million transactions.
While revenue and free cash flow growth remains strong, the company needs to manage stock-based compensation (SBC) expenses carefully. Recent Q2 earnings caused the stock to plunge due to concerns about slowing take rates, however the market reaction may be an overreaction given contining revenue growth and thus creating a buying opportunity.
I last looked at BILL Holdings in November but the stock price shot up from around $60 to almost $100 in the space of 2 months. However recently the stock price has come down quickly into the low 60's as market participants were somewhat disappointed with latest results.
Company Overview:BILL Holdings develops Software as a Service (SaaS) platform that automate accounts payable and receivable, and manage payments and expenses for SMBs. The company went public in December 2019 at $22 per share, experiencing a successful IPO with the stock price reaching over $325 by November 2021.
Recent Developments and AnalysisBILL Holdings Inc. derives its revenue from a variety of sources, including core subscription and transaction fees, which totaled $320 million in Q2 2025, marking a 16% year-over-year increase. The Bill AP/AR segment contributed $167 million, up 13% from the previous year, while the Spend-and-Expense segment generated $134 million, demonstrating a 21% year-over-year growth. Additionally, BILL earned $43 million in float revenue during the same period, with a yield on FBO funds of 443 basis points. The company's platform facilitates nearly $85 billion in payments across 30 million transactions, catering to over 480,000 businesses. BILL is also focused on expanding its product offerings, particularly in card solutions, with card adoption among AR customers more than tripling over the past two years.
* Stock Performance: After peaking in 2021, BILL's stock price has fallen significantly. However, a recent post Q2 earnings drop looks like an over-reaction to transient weakness.
* Insider Buying: Recent substantial purchases of BILL stock by insiders including the CEO and CFO indicate their belief that the stock is undervalued.
| Insider Position | Date | Buy/Sell | Shares | Shares Owned | Trade Price($) | Trade Percentage(%) | Cost($1000) | Price change since trade(%) | Filing Date | ||
| BILL | Brian Jacobs | Director | 2024-08-28 | Buy | 25,000 | 224,524 | 53.540 | 11.130 | 1338.500 | +4.26 | 2024-08-28 |
| BILL | Rene A. Lacerte | CEO | 2024-08-26 | Buy | 42,248 | 2,667,030 | 49.600 | 1.580 | 2095.500 | +12.54 | 2024-08-26 |
| BILL | John R. Rettig | CFO | 2024-08-26 | Buy | 21,124 | 135,374 | 49.400 | 15.600 | 1043.530 | +13.00 |
The company has recently bought back stock with a one year buyback yield of 6.22%.
* Profitability: The company has become profitable on an owner earnings basis and EPS (without NRI) basis, which is a positive sign for the trajectory of the business.
* Revenue Growth: BILL has demonstrated rapid revenue growth since its IPO, with a 5-year revenue per share CAGR of >30%. Although revenue per share growth has slowed to 15% year-over-year more recently, it remains at a high level.
* Financial Strength: BILL's balance sheet is in decent shape, with a debt-to-equity ratio of 0.47 and the company has more cash than total debt.
* Market Opportunity (SO:FTCE11B): The company has a large total addressable market (TAM) of 70 million SMB customers globally, with 34 million in the US.
* Network Effect: BILL benefits from a network effect, as the platform becomes more attractive to new customers as more SMBs and their suppliers join the network.
* Q2 Earnings: Despite a beat in revenue, the stock plunged following Q2 earnings as the market reacted negatively to shrinking take rates (revenue as a percentage of total payments processed). The company attributed this to a mix of payment types (seasonal) and losses on foreign exchange (FX).
Valuation:* The company has a forward PE Ratio of 35. EPS grew by 22% from last year on a TTM basis.
* A price-to-sales (PS) ratio of around 5 appears reasonable compared to its SaaS software peers. BILL is trading at a very appealing ~4x forward revenue multiple, which is a rare value find in today's expensive stock
market.
Growth Opportunities and Risks:
Opportunities:
* Large and growing TAM in the SMB market.* Network effects that enhance the platform's value.
* Expansion into international markets and foreign currency payments.
Risks:
* High Stock-based compensation (SBC) could dilute outside shareholders if not managed carefully.
BILL Data by GuruFocus
* Potential continued headwinds as the U.S. dollar continues to rise as interest rate differentials between the U.S. and foreign counterparts widen
* Potential increased slowdown in payroll payments processing activity due to headcount optimizations and workforce reductions
Key InitiativesBILL Holdings Inc. is pursuing several key initiatives to drive growth and enhance its platform.
The company is expanding its product portfolio, with a strong focus on card offerings, which has led to a tripling of card adoption among AR customers over the past two years. BILL is also enabling customers to use their BILL Divvy cards for AP payments, leveraging existing vendor relationships to increase card acceptance. The company is venturing into working capital solutions, utilizing AI-powered underwriting capabilities to provide businesses with timely access to liquidity. Additionally, BILL is strengthening its ecosystem by partnering with top banks, accounting firms, and software companies, while also enhancing its proprietary member network. The company has introduced new functionalities such as multi-entity tools, bulk actions, purchase orders, and streamlined 1099 processing to better serve mid-market customers and accountants. BILL is also focusing on improving the platform experience for suppliers and building direct relationships with large suppliers to expand its network.
Conclusion:The insider buying activity as well as stock buybacks suggests that key insiders believe BILL's stock is undervalued. The company's recent profitability and strong revenue growth are also positive indicators. While SBC expenses need to be monitored, BILL has a significant market opportunity and a network effect that can drive future growth. BILL's valuation decline may be unjustified and signal a strong buy opportunity.
This content was originally published on Gurufocus.com
