![]() ![]() As I have written many times, the actual cost of SBC is dilution rather than the reported number for SBC which is based on a formula and does not reflect actual dilution. The company has projected an outstanding share count of 118.4 million diluted average shares in Q2 and 119.4 million diluted average shares for the fiscal year. The valuation metrics that I present in this article are all based on 121 million outstanding shares outstanding, compared to the company projection of 119.4 average shares outstanding for the current full fiscal year. That said, the outstanding share count which I use to adjust for SBC, rather than the reported figure, rose just 0.5% sequentially last quarter and by 1.1% over the prior 6 months. Last quarter, SBC was 31% of revenues, roughly comparable to the 32% of revenues in the prior year and a little greater than the 29% SBC/revenue ratio of the prior quarter. In addition, it is worth noting that Bill uses a fair amount of SBC. The company has reduced growth expectations substantially, as I will detail later on it is certainly conceivable that its outlook could deteriorate beyond the current guidance, which management stated was based on a mild slowdown in economic activity. Those transactions are obviously correlated to business activity, and business activity has been and seems likely to continue to decline for much of 2023. The company generates much of its revenues from a fee on the transactions processed on its platform. None of its customers is a household name. automates back-office processes for medium and smaller businesses. The question is now whether the combination of the valuation implosion, the growth of the company's business and its transition to profitability are the shares worth considering? I think they are. In some ways, it may have been worse for shareholders because the company has nearly doubled its revenues over the course of the past year, and has reached non-GAAP profitability in that span. ![]() Sadly, that kind of fall has been all too typical for high-growth IT companies. At that price, the shares are down by 69% from their November 2021 high point. As I write this, the shares are trading at around $98/share, reacting significantly to the latest employment and inflation data. And they have fallen sharply since that time despite a couple of rally attempts in the spring and then summer of 2022, with a recent closing low of $99 set in the wake of the company's latest earnings release. 2021 along with the rest of the market for high-growth IT shares. They reached a peak valuation of $334/share in Nov. The shares are actually 18% above the price they were in the summer of 2020 that is quite a bit better than the average performance of cloud-based software companies, with the WCLD ETF down by 36% over the same span.īill.com shares have experienced what has been the more or less standard trajectory for high-growth IT shares. The company was far from profitability or generating cash back at that time it is now non-GAAP profitable and generating free cash. The EV/S was 31X back then, and it is now around 11X. It was a case of liking the company but not being comfortable with the valuation. I wrote about the company for SA back in the summer of 2020. Michael Vi Looking at shares in the context of their valuation implosion and the demand impacts of the macro slowdownīill.com ( NYSE: BILL) is yet another fallen angel from the crop of IPOs of the last few years.
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