(BILL) Rises 15% On Narrower Loss, 'Transformative' Divvy Acquisition

May 7, 2021 11:39 AM EDT
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Price: $157.34 +0.90%

Rating Summary:
    9 Buy, 6 Hold, 0 Sell

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    Up: 12 | Down: 7 | New: 31
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Shares of (NYSE: BILL) are up 13.6% in today’s trading session after the company reported a narrower loss for its fiscal third quarter, as well as announced the acquisition of Divvy for $2.5 billion which analysts said "appears transformative."

BILL posted a $26.7 million loss in the quarter or $0.02 on an adjusted basis to top the $0.07 expected from analysts. Business sales for the quarter were reported at $59.7 million, which marks a 45% jump year-over-year, and again higher than the $54.6 million consensus.

For its fiscal Q4, the company sees revenue between $60.9 million and $61.9 million, as well as an adjusted loss between $0.05 $0.04.

Separately, the company announced it reached an agreement to buy expense-management software Divvy for $2.5 billion. Following the latest funding round of the startup company, Divvy was valued at $1.6 billion. The transaction includes $625 million in cash, with the rest coming through shares.

“Customers have been asking us to help them with their spend management, and I am excited that together with Divvy, we can deliver on that ask, furthering our vision to transform SMB financial operations. Our expanded platform will provide more automation and real-time information to SMBs, enabling them to make more informed decisions,” said René Lacerte, CEO and Founder.

Piper Sandler analyst Brent Bracelin sees the Divvy acquisition as a “meaningful accelerant toward multi-billion dollar revenue potential for” The deal has the potential to more than double transactional revenue for BILL on day one.

“We believe is on track to become the leading cloud-based FinOps platform to digitize and automate back-office processes for millions of SMBs,” Bracelin says in a note sent to clients.

“Based on a $100M ARR model generated across 7,500 active SMB customers and just $4B of GMV, we see 10x expansion potential for Divvy to exceed $1B of ARR over the next 4-6 years given untapped cross-sell potential into a large installed base of 115K+ customers with $125B GMV.”

The acquisition has likely “ overshadowed a really strong quarter” says Bracelin, who comments on the FQ3 results:

“Triple-digit growth in transactional revenue contributed to a $5M revenue beat with total revenue growth reaccelerating to 45% y/y (vs. 38% last quarter) driven by the mix shift to B2B payments that exceeded subscription revenue for the first time.”

He reiterated an “Overweight” rating on BILL and raised the price target to $180.00 per share from $170.00.

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