Shares of Bill Holdings Inc. experienced a rollercoaster ride in after-hours trading on Thursday. The company’s strong quarterly results were overshadowed by concerns regarding its business-assistance software platform’s profitability, especially after significant cuts just two months ago. This worry stems from the continued caution on spending among Bill’s small-business customers.
Initially, shares surged 15% following the closing bell, but they later dropped by 3.6% after hours. Over the past 12 months, shares of Bill have plummeted by 24.2%.
In terms of its full-year performance, ending on June 30, Bill expects sales to range between $1.23 billion and $1.25 billion. The midpoint of this forecast slightly surpasses FactSet’s expectations of $1.23 billion.
Bill, known for its automation software that aids small and medium-sized businesses manage their payments and expenses, also predicts adjusted earnings per share ranging from $2.09 to $2.31, surpassing the expected $1.88. The company foresees adjusted net income to be between $245 million and $270 million.
Although this outlook appears more promising than the November forecast, it may not have satisfied all investors, especially considering Bill’s announcement in December of a 15% reduction in its workforce and the closure of its Sydney office.
Wells Fargo analysts expressed their expectation for more substantial results from these cuts than what the company has predicted so far. They remarked, “While Bill posted sound results, we highlight that the majority of the beat was not passed through to the FY24 guidance raise and continue to see the task of dispelling the bear case as a multi-quarter endeavor.”
After-Hours Movement Reflects Small Business Caution
The latest after-hours rally followed by a selloff highlights the cautious approach of small businesses towards borrowing money and expanding operations. Last year, higher interest rates and stricter credit standards proved to be more threatening to small businesses than their larger corporate counterparts.
Bill’s Fiscal Second Quarter Performance
Bill reported a net loss of $40.4 million, or 38 cents per share, for its fiscal second quarter. This is compared to a net loss of $95.1 million, or 90 cents per share, in the same quarter of the prior fiscal year.
Adjusted for items such as stock-based compensation, restructuring, depreciation, and amortization, Bill’s earnings per share for the quarter stood at 63 cents. This exceeded expectations of 40 cents. Moreover, sales witnessed a significant surge of 22% to reach $318.5 million, surpassing expectations of $299 million.
Outlook for the Third Quarter
For the third quarter, Bill anticipates sales ranging between $299 million and $309 million. The midpoint of this range exceeds FactSet estimates of $302 million. Additionally, the company expects adjusted earnings per share for the quarter to be in the range of 48 cents to 57 cents, compared to estimates of 43 cents.
Challenging Environment for Small and Medium-sized Businesses
While some analysts speculate that potential rate cuts from the Federal Reserve could ease the debt burden on small firms, Bill’s Chief Executive René Lacerte maintains that the overall landscape for small and medium-sized businesses remains challenging. Lacerte notes that these businesses continue to carefully manage their spend amidst these conditions.
