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Evercore ISI has adjusted its outlook on Bill.com Holdings Inc. (NYSE: NYSE:BILL), reducing the price target from $70.00 to $60.00 while maintaining an In-Line rating.
The adjustment follows Bill.com's fourth-quarter financial results, which surpassed expectations with revenue of $343.7 million, a 16.1% year-over-year increase, exceeding the anticipated $328.9 million. Transaction revenues grew by 22.3% year-over-year, and the total payment volume (TPV) rose by 10% to $75.9 billion, with 28 million transactions processed, marking a 20% increase from the previous year.
The company's management offered remarks similar to the previous quarter, continuing to observe signs of stabilization in transaction volume per customer. Management also indicated that for fiscal year 2025, they are neither expecting a rapid economic rebound nor a significant drop in B2B spending among their core small and midsize business (SMB) customers.
The guidance for FY25 suggests an 11% growth with core revenue growth projected at 14.7%. However, the reported operating margins at the mid-point were 12.4%, which is 300 basis points below the consensus, impacted by incremental growth investments totaling $45 million.
These investments are aimed at improving and expanding Bill.com's offerings, including virtual cards, international payments, supplier experience, and broader go-to-market strategies to increase the adoption of their financial suite.
A key point from the earnings call was the management's target for a 20% core revenue growth in FY26, which is contingent upon the success of their new growth investments and an expected rebound in net revenue retention in the second half of the fiscal year, assuming it reaches its lowest point in the second quarter.
Additionally, the company provided an update on its partnership with Bank of America, extending the contract by an additional three years, totaling four years. However, this extension does not bring any additional revenue, as the contractual minimum is now spread over the extended period, resulting in a smaller annual revenue contribution. Despite the commitment to use certain components of Bill.com's technology, the financial impact remains unchanged.
In other recent news, Bill.com Holdings Inc. exceeded Q4 earnings expectations with revenue rising 16% year-over-year to $343.7 million, outperforming the projected $328.06 million. The company reported adjusted earnings per share of $0.57, surpassing the analyst consensus of $0.46. Despite exceeding expectations, BTIG maintained a neutral stance on the company.
Bill.com's revenue growth was primarily driven by a strong performance in the Core revenue and Spend & Expense segment, which saw a 16.1% and 26% year-over-year increase, respectively. The company's operating margin also stood at 17.5%, up 320 basis points from the previous year.
In terms of future plans, Bill.com aims to expand its Research & Development and Go-To-Market teams as part of a multi-year growth strategy. The company also announced a new $300 million share repurchase program, indicating confidence in its future growth strategy.
For Q1, the company provided revenue guidance between $346-351 million, surpassing the analyst consensus of $337 million. However, their Q1 EPS guidance of $0.48-$0.51 fell short of the $0.51 estimate.
InvestingPro Insights
In light of Evercore ISI's recent analysis of Bill.com Holdings Inc. (NYSE: BILL), additional insights from InvestingPro can provide a broader perspective on the company's financial health and market position. According to InvestingPro Data, Bill.com boasts an impressive gross profit margin of 85.76% for the last twelve months as of Q3 2024, which underscores the company's strong ability to manage its cost of goods sold and maintain profitability on its services. Despite not being profitable over the last twelve months, analysts predict the company will be profitable this year, aligning with management's positive outlook and aggressive investment strategy.
InvestingPro Tips highlight two critical aspects: Firstly, the company holds more cash than debt on its balance sheet, which can be a sign of financial stability and resilience in the face of economic uncertainty. Secondly, Bill.com's stock price movements have been quite volatile, with a 1-month price total return of -5.74% and a 1-year price total return of -53.71%, reflecting significant market sentiment shifts. This volatility should be a key consideration for investors looking for both growth potential and stability.
For those seeking to delve deeper, there are additional InvestingPro Tips available, which can be found at https://www.investing.com/pro/BILL. These tips may offer further guidance on the company's share buyback strategy, shareholder yield, and other valuable metrics that could influence investment decisions.
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