On Tuesday, KeyBanc maintained a Sector Weight rating for Bill.com Holdings Inc. (NYSE: NYSE:BILL), indicating a neutral stance on the stock's future performance. The decision follows the company's reported third-quarter financial results, which exceeded expectations due to strong revenue in core/spend & expense and, to a lesser extent, float revenue.
Bill.com's operating margin outperformance was attributed to the revenue upside in core/spend & expense. Additionally, the company benefited from a one-time payment network incentive, which contributed approximately 200 basis points, and float revenue, which was around $6 million higher than the guidance provided. The total payment volume (TPV) trends showed positive signs, with management's key metrics indicating stability in per customer TPV.
The analyst noted an improvement in the take rate during the quarter, influenced by accounts receivable volume moving to another processor. This benefit is expected to be diluted by other volume soon. Excluding this temporary tailwind, the take rate expansion was still present, and the guidance for future performance was reaffirmed at or better than first-quarter levels.
Customer growth was another highlight, with net additions across core accounts payable and Divvy, although there was a churn of inactive accounts by a financial institution partner, which was presumed to be immaterial to revenue. No further details were provided regarding the upcoming changes in the relationship between Bill.com and Bank of America (NYSE:BAC).
The analyst's outlook for the fiscal years 2024 and 2025 has improved, with higher expectations for revenue and operating margin based on the third-quarter results, customer growth, and greater macroeconomic stability. Despite the more constructive view on the macro trends and potential early success in go-to-market (GTM) strategy changes, KeyBanc awaits additional data points on the success of GTM efforts, the magnitude of underlying take rate improvement, and clarity on the situation with Bank of America before altering their rating.
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