Dive Brief:

• Business payments software provider Bill isn’t in the market for “transformational” acquisitions, the company’s president, John Rettig, said on Friday, pouring more cold water on a prior news report the company is acquiring business-to-business payments company Melio.
• Bloomberg reported Nov. 8 that San Jose, California-based Bill was in “advance talks” to purchase Melio for $1.95 billion. In a rare move, Bill issued a press release Nov. 9 to refute what it deemed a “rumor” and said the company “is not pursuing any such acquisition at this time.”
• “We are very aware of our current situation and the stock price,” Rettig told Autonomous Research Analyst Ken Suchoski during a Friday webcast of a virtual investor conference. “We would not do a $2 billion or whatever deal at our current valuation,” said Rettig, who is also the company’s chief financial officer. “That’s not how we think about capital allocation.”

Dive Insight:

In response to questions during the webcast, Rettig pointed to Bill’s Nov. 9 news release and declined to comment further on the transaction rumor. Generally, the company is focused on scaling the business and improving margins while also assessing merger and acquisition opportunities, Rettig said.

“Present circumstances, we’d be focused more on tuck-in technology type things that help us bring products to market faster,” he said, adding that the company would focus on “minimizing dilution” with a potential acquisition. Bill’s stock price has dropped about 45% over the past year; at close of business Tuesday, its shares were priced at $62.85. 

For the company’s fiscal first quarter ended Sept. 30, revenue jumped 33% over the year-earlier period to $305 million, according to a quarterly earnings release. For the same quarter, Bill’s loss narrowed to $27.9 million. 

“Our balance sheet is obviously built in order to do acquisitions, but even on a cash basis, we want to see quick payback and strong (return on investment), and ultimately drive accretive results sooner than later,” Rettig said. 

He noted Bill’s history of M&A, pointing to its 2021 purchase of Divvy for about $2.5 billion, but said “those aren’t the kinds of transactions that we’d be interested in doing in this environment.” 

“We’re not preoccupied with M&A,” Rettig said. 

As of the end of its fiscal first quarter, Bill counted 471,200 businesses as customers, according to the earnings release. Rettig noted the average payment volume per Bill customer is more than $1.5 million per year.

Where Bill serves larger small business customers, Melio serves the middle market in the small business payments space, Suchoski noted during the webcast. The analyst asked whether such an acquisition would represent a change in strategy for Bill. 

Rettig again stressed that there’s no deal in the works, but removing that element, he said the company is considering how it will reach more small businesses as it aspires to serve millions of business customers.

Currently, Bill brings larger SMBs directly onto its platform and partners with accounting firms and banks to reach smaller businesses, and “we think that ultimately will be the methodology that we use to reach the smaller end of the SMB market,” he said.