BILL Holdings Embraces Cost Control: Analyst Foresees Improved Profitability Following Workforce Reduction

Needham analyst Scott Berg reiterated a Buy rating on BILL Holdings, Inc BILL with a price target of $100.

Yesterday, BILL announced a reduction in force of ~15% and plans to close their Sydney, Australia office as they use the resources to focus on key priorities and improve core business profitability.

According to the analyst, many of the RiF'd employees joined BILL from the acquired Invoice2go, which was co-headquartered in Sydney. 

Berg says this signals a more "committed push for profitability" from BILL as they look to control costs as transactional revenues face continued macro-related headwinds. 

The company expects to incur $29 million-$35 million in charges related to the restructuring, with the majority coming in 2QF24 and substantially all the charges incurred by 4QF24. 

The analyst sees 300bps of upside to the FY24 operating margin and raised the estimate to 13% from 10%.

Bill.com offers investors access to the fast-growing electronic B2B payment space with the first and only company possessing the critical mass and scale to meet the demands of this underserved customer segment, the analyst writes.

Also, the analyst looks for favorable unit economics and high retention rates to drive model leverage as growth decelerates. 

For FY24, the analyst expects the company to report earnings of $2.11, compared with the prior estimate of $1.81.

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Price Action: BILL shares are trading higher by 1.00% to $69.91 on the last check Wednesday.