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As noted previously, BILL.com provides cloud-based back office software for SMBs (e.g., accounts payable). BILL also provides SMBs with various payment services including electronic payments and international payments. It has 3 sources of revenue – subscription and payments (core revenue) and interest on float (small percentage). Its subscription services are sold directly to SMBs, through accounting “partners” and through financial institution “partners”. (See previous posts for more detail).

BILL has had a nice run recently, but had a recent pull back. (-24.95% off high on May 8 but still +31.70% for last month; +87.52% for last 6 months).

BILL filed an 8-K late in the day on Friday, May 22, 2020 (1:54pm EST) which is related to the financial institution “partner” revenue source.

The 8-K states that:

“On May 20th, 2020 Bill.com, LLC, a subsidiary of Bill.com Holdings, Inc. (the ‘Company’), entered into a new statement of work (‘SOW’) to expand an existing agreement with one of the top three small business banks in the United States (the “Bank”).

The SOW calls for the Company to integrate and host a Bank branded version of its Bill.com Connect product for Bank to offer to their small business banking clients. Bank will deploy the new offering developed under this SOW as the default bill pay and receivables solution for all new small business banking customers. Existing small business banking customers will also have the option to enable these services. The SOW has a five-year term from the launch date, which is anticipated in 2021.

Bill.com Holdings, Inc. is not updating its financial guidance for the fourth quarter of the current fiscal year ending June 30, 2020.”

The recent conference call talks about the financial institutions and adding Wells for only their treasury management clients.

The recent Conference Call on May 7, 2020 noted:

“SMBs look to their banking partners for digital solutions that provide end-to-end cash flow management.… Bill.com is currently integrated with several of the largest financial institutions in the United States, including Bank of America, JPMorgan Chase and American Express. [Note: In a previous post, I incorrectly referred to Citi when I meant AXP.]

These partners embed our platform typically on a white-label basis into their online banking solution. We continue to have many great conversations with our existing partners about doing more together, and we continue to see opportunities to partner with additional institutions.

Today, I'm excited to let you know that we've reached agreement with our newest partner, Wells Fargo. Wells Fargo will power a new digital AP and AR solution for its treasury management clients by integrating Bill.com into its Commercial Electronic Office online portal.”

So, I believe JPM and BOA (and AXP) already provided an SMB solution with BILL. I read BILL’s 8-K to say that they greatly expanded their partnership with WFC (who is an “existing customer” with treasury clients) to cover all of their new SMB clients and probably the vast majority of their existing SMBs (who will need to opt in). I read that because other than BOA, JPM and WFC, I’m not sure who was both an existing client and one of the top 3 small business banks in the US. I think they now have all three of them.

In any case, I think it is good long-term news locking up a top US bank’s SMB clients for 5 years. I see there was a sell off very late in the day on May 20, but I would think this news would have had the opposite reaction. It will be interesting to see if it has any impact tomorrow morning and the week to come.

Mike

Long BILL (Top 5: AYX, BILL, SHOP, FSLY, CRWD)
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