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In a mixed year for initial public offerings, software names have been a bright spot, and Bill.com Holdings Inc. kept the streak alive Thursday.
Shares of the cloud-based platform for business payments surged 60% in Thursday trading after making their debut on the New York Stock Exchange. The company priced its IPO at $22, above an already-raised range of $19 to $21, and raised $215.6 million through the deal after increasing the number of shares on offer.
Bill.com caters to small- and medium-sized businesses and sees considerable market opportunity in migrating these companies to software that can replace time-consuming, manual processes for handling things like invoicing and accounts payable. Chief Executive Rene Lacerte said that some 90% of these businesses use checks to manage their back offices, even though few people use checks often in their personal lives, indicating an opportunity to deliver a better experience for businesses.
“As you move into the broader market, simplicity is something that’s required,” Lacerte said, drawing a contrast to the earliest adopters, who are more likely to try out new technology regardless of whether the user experience is perfect. Reaching businesses more broadly requires companies to deliver a product that’s “on par with the consumer experience” that business owners know from their personal lives, he added. Bill.com is focused on areas like easy onboarding to help save time for its customers.
For its fiscal year ended in June, Bill.com generated $108.4 million in revenue, up from $64.9 million in the prior year. The company remains unprofitable, posting a $7.3 million net loss in the latest fiscal year, roughly flat with a year earlier.
The company claims relationships with more than 4,000 accounting firms, accounting for 54% of total customers and 45% of revenue. The company also points to referral relationships with Oracle Corp. ORCL, -0.11%, NetSuite, and others, as well as partnerships with Mastercard Inc. MA, +0.21% and American Express Co. AXP, +1.22% on the payments side.
Lacerte said that the company would continue to make investments that help it tackle its large addressable market. Recent initiatives have centered on international payments, virtual cards, and purchase orders. “There are lots of opportunities for us to continue to invest,” Lacerte said.
Prior to the IPO, there was some speculation that Bill.com could be a takeover target after hitting the public market.
“While we think it is unlikely that the company would receive an acquisition offer prior to its IPO, we believe Bill.com is an attractive acquisition candidate for a wide range of companies with ambitions to provide self-service enterprise software tools to SMBs,” MKM Partners analyst Rohit Kulkarni wrote in a pre-IPO note to clients.
Bill.com’s offering comes as the Renaissance IPO ETF IPO, -0.48% has risen 30% on the year and as the S&P 500 SPX, +0.58% has increased 26% in that span.
