PushPay's major shareholder the Huljich family have sold 14.4 million shares -- around 5.4% of the company -- for $NZ8.40 a share (A$7.92). That's around $120m in total.
In total, the family still retain 43.2m shares, or about 16% of PushPay.
Peter Huljich, a non-exec director, said the family had no intention to sell further shares, although committed only until the groups FY21 results (May next year).
The Huljich family became cornerstone investors in PushPay way back in 2013, with an initial $2 million investment and a further $17m-odd up to the company's 2016 listing. I havent gone through all transactions, but it's safe to say they have scored an insane return on that early seed round!
I know a lot of people get upset when directors sell, and I agree it's not what shareholders would prefer to see. There's certainly many examples of such sell downs being a red flag.
But we also tend to forget a lot of 'silent evidence' where the sell down wasnt a portent of something negative. I'm sure someone, somewhere has done research on this, but my bet would be that more often and than not, in isolation, it's a poor signal.
As they saying goes, insiders sell for many reasons, but they buy only for one.
Frankly, if i had close to half a billion in one company, i'd probably look to sell down a little too. In fact, i recently sold a few PPH in my Strawman portfolio due to weighting considerations (but it is still my largest holding).
ASX announcement here
Pushpay has updated shareholders on the impact of the coronavirus and actually INCREASED guidance.
The cessation of church gatherings has created an increase in demand for their offering.
EBITDAF now expected to be roughly 8% higher at between US$25-27m for the year ending March 31.
ASX announcement here
Given Pushpay's market capitalisation is well above $1B, it ranks around 130 in terms of market capitalisation. Assuming liquidity hurdles are achieved, Pushpay should enter the ASX 200 index in the June quarterly rebalance, and become an investible business for a number of passive and active funds.
Hot off the heels of the Huljich family sell down, Independent Director, Justine Smyth, has resigned from her role with PPH.
We'll have to keep our ear to the ground to learn more about this over time. I recall Chairman Shaw making note of Justine's experience in M&A when she was first appointed in Aug 2019. Perhaps it was always the plan to bring her in specifically for the Church Community Builder acquisition. If so, transparency could be better. If not, there could be something bigger at play.
It's always fraught with danger when trying to guess the underlying reasons behind a resignation or share sell down. Justine, for example, has an athletically gifted daughter who is pushing for a Winter Olympics spot. Alternatively, she is a passionate advocate of women's rights. Without further commentary, we could use this resignation to make intelligent arguments to paint PPH both in a positive or negative light.
I didn't think an announcement relating to a new hiring was going to be the next event that got me more excited about PPH, yet here we are.
When everyone else is laying people off, PPH have secured the services of Lovina McMurchy. Lovina has significant experience with tech-orientated business over the last 20 years. Most recently, she worked on the Alexa team to build out voice-based shopping services. Prior to that, she pioneered Amazon's move into the subscription economy by building a technology platform to allow both Amazon teams and external teams to rapidly launch and sell subscription products on Amazon. She has also worked with Microsoft, Starbucks and Movac, a kiwi venture capital firm.
As PPH seek to flesh out their newly acquired ChMS this is a great hire.
In the same announcement, PPH completed the last step in founder Chris Heaslip's departure with him formally standing down from any formal PPH position. I am sure in the future we will discover if Chris left or was pushed. As for now, I am excited to see the fruit of their most recent hire.
Original announcement here.
Here is a comparison of PPH adj. cashflow against other software businesses
Note: Figures exclude Capture capitalisation (NEA), Stock based compensation (US), and software capitalisation.
I am not 100% confident in the accuracy of my figures, but I think it is fairly accurate picture.............
At the time of the release, most holders would have been ecstatic with the result and may still be pondering over the mouth-watering guidance provided for FY2021. Simply wow, particularly as this comes in the midst of a historical pandemic, with economic uncertainty prevailing across the macro, at a sector level and of course, for individual companies. I suggested prior to the release of the FY results @31 March, that due to timing, the impact of Covid-19 would likely be minimal. Nice to lock in solid results when others are withdrawing guidance and priming investors for a period of under performance.
More importantly, I think we can now confidently say that PushPay appear not only to be weathering the storm better than most, they are one of the few Companies which have seen increased adoption of their Digital products and services, a gain which is likely to sustain.
Having completed a full review of the results, can share some interesting observations. The investment case for PushPay is IMO now stronger than it was a year ago. This investment was always about operational leverage, where scaling and cost containment would drive enhanced profitability. To assess this, I chose to exclude the financial impact of the CCB acquisition from the results so as to assess the Run Rate entering FY2021 ( on the original PushPay business).
Note : Run Rate calculated using the financial results for the second half of FY2020
Key metrics as follows :
Operating Revenue ......................USD 134 m
less Third Party Direct Costs ....... USD 48 m
equates Gross Profit .....................USD 86 m
Gross Margin ................ 64 %
less Operating Expenses ...............USD 54 m
yielding EBITDAf............................. USD 31.5 m
Interesting the Company provided FY2021 guidance for EBITDAf only at USD 48m to USD 50m. Illogical when you consider TPV and Revenue feed into this result. Can understand that TPV will be subject to the economic stresses felt within congregations, yielding uncertainties in terms of the impact on the extent of giving.
So where do PPH get the confidence to guide on EBITDAf ?
The Run Rate provided says they are already well on their way to achieving this result, particularly when you consider :
1) The FY2020 shows unearned Revenue of USD 14.3 m ( historically a USD 7 m carry)
2) The metric above excludes USD 16 m of historic CCB Revenue and the impact of CCB’s higher Gross Margin plus any further post acquisition cost savings. Company has really impressed via financial disciplines, so step change in costs anticipated.
3) Excludes any cross selling opportunities and the financial benefits associated with the launch of new fully integrated software including Church Management.
Gut says the FY2021 guidance on EBITDAf is already in ‘Beat’ territory. Look forward to the AGM on the 18th June. Sure they will provide more detail or at least further context at that time.
PPH have announced this morning that performance for the year ending 31 Mar 2020 is not expected to be adversely impacted by Corona virus. (no comment on any period beyond that)
Gordon mentions that the Pushpay platform is helping churches communicate with their congregations despite many churches closing their doors (i.e. doing its job).
Despite many Americans already self-isolating, donations through the pushpay platform last weekend exceeded pre-COVID expectations. This may be an anomaly or part of my short-term thesis playing out. I expect tithing to decrease in the short term, however part, or all, of that processing volume to be offset by one-off offerings. For those unfamiliar with church givings there are two components; tithes and offerings. Tithes are the 10% that is biblically expected each week. An offering is what occurs above and beyond that and are a way of church attendees to assist in the face of catastrophe. I expect offerings to reduce the short-term processing volume impact of self-isolation.
In the same announcement, PPH reiterated or increased guidance as follows;
Original announcement here.
PushPay upped its guidance for FY21 for EBITDAF (operating earnings) between US$50-54m (up 4% from US$48-52m).
That's double what they did in FY20 (year end March 31).
AGM presentation here
Attended the webinar conducted by Exponential this morning (2.30 pm US ET) aimed at providing an update on the impact of Covid-19. Their Survey Report (soon to be issued) captures findings from a sample size of 767 respondents (Churches) with the survey conducted between the 1st and 12th June. The analysis provides first hand feedback on challenges, impacts and evolving progress for the months of April & May.
So a reasonable sample size spanning small, medium and large churches in the USA and importantly, a ‘current’ snapshot. With PushPay’s AGM due to be held tomorrow, thought some may find it useful to get an overview which can either confirm or add context to whatever we hear tomorrow.
Herewith my interpretation of that shared in the Webinar.
* The gradual re-opening of churches in the USA is presenting a wide array of approaches, strategy, experimentation, rate of progress and resultant outcomes. The points of difference are to an extent governed by different things that can or cannot happen in different places. This situation is amplified with split opinion from congregants as to whether Churches should or should not open
The Survey has revealed that 80 % of the congregation at large churches are not attending. Attendance at smaller churches is much higher. Most churches who have the potential to gather at a determined level of capacity are yet to reinstate gatherings.
* The respondents surveyed fall into one of two categories, these being ‘early adopters’ and ‘late adopters’.
Early adopters are being challenged by continuous testing of traffic patterns (vs restriction guidelines’, staffing availability and the need to run with a dual system covering ‘in building’ and ‘on-line’ services. After several weeks, the nett result is that more than 50% of pre Covid-19 congregants are not returning. Some early adopters are advising others not to start in-building services until the standard is equal to or better than the on-line standards. Examples include in- building attendance of 11%, congregation and Church choirs singing in masks, the divided political opinion on wearing masks (a level of boycotting), the necessary cleaning cycles, fogging and the list of challenges goes on.
The late adopters are very much in experimentation mode. 50 % of the churches surveyed plan to re-open in June, many with the understanding that, given the continued spread of Covid-19, they may need to re-close.
* So uncertainty abounds at a time when congregation care is a priority. Said that 20% of New Yorkers know someone who has died of Covid-19. You can add to this the woes of the unemployed, the fall-out for families, the pressure on food banks and the new impact of the ‘black lives matter’ protests. So the need has never been greater.
All said, the responses indicated optimism currently outweighs uncertainty.
* What of funding ? Whilst the survey material does not dimension any drop in the extent of giving, some comparisons of Mar/ Apr 2020 versus Mar / Apr 2019 show that the funding inflow probability matrix reveals little change. They break the funding inflow into CERTAIN, UNCERTAIN and UNKNOWN.
* Churches have found a new rhythm on remote staffing (on-line). With the Faith sector being considered as ESSENTIAL SERVICES, giving the change in exposure risk, Churches have lost some of the older volunteers and now replacing with younger volunteers. Some are leveraging this for extending the on-line engagement with congregants, expanding over the historic in building congregation size.
Most Churches plan to remain on-line, creating multiple Zoom rooms all aimed at accelerating the drive into communities.
We know that PushPay has seen higher adoption through this period. The above points to the move to Digital Services / Engagement Tools sustaining. Maybe this new found ability to leverage the power of on-line will see the mission of the Church rebound from the declines witnessed over the last 10 to 15 years.
Hopefully this will provide some context when we hear from PPH in the morning.
PushPay FY20 Results.
Wow. An amazing result in some very challenging times.
Headlines were all excellent, with EBITDAF hitting right at the top of their revised guidance in March, coming in at US$25.1m. Operating revenue was up to US$127.5m (total US$129.8m), gross margins improved to 65% (up from 60%), PBT was up to US$21.7m (from US-$1.4m), and operating cash flows were up to US$23.5m (from US-$2.8m).
The business is scaling beautifully, and is thriving on the back of a rapidly increased adoption curve from the impact of COVID-19.
Expenses increased a little more than I had forecast for the full year on the back of 4 months of additional expenditure from the CCB integration, although sales and marketing expenses declined by about US$1.5m.
NPAT was slightly down on last year, due wholly to tax losses being brought forward last year, so the more revealing figure is PBT, which saw a impressive % increase from last year. PushPay has well and truly tipped into profitability now, and will look to aggressively use excess cash flows to fuel further growth via M&A, incremental product improvements and increased engagement with their existing customers.
Looking ahead, one of the key highlights of the investor call was that the last 6 weeks have seen an outperformance in terms of revenue gain, fulled no doubt by the expedited new need to give digitally. Though management don't expect this to carry on, they were cautiously optimistic about FY21, and provided stunning guidance of between US$48-52m in EBITDAF (a near 100% increase!). However, if revenue outperformance were to continue unabated – even for an extra month or so – that guidance will be smashed. The half year report will be very interesting indeed.
CCB contributed about ~$4m in revenue from Dec 1, so a rough annualised guess is that we'll see an additional $16m contribution from the acquisition this year. Commentary so far was that they are happy with how the integration is progressing, and that FY22 is where they expect to see the full benefits of the partnership play out financially.
All in all, one of the more exceptional results on the ASX so far this year . Even with the spike in price today, there still looks to be value buying at the current levels if that guidance is met. Well done to all holders!
Outstanding results. Key takeaways:
1) COVID-19 is driving churches towards digital giving.
2) Revenue (ex. CCB) grew 28% on constant currency basis.
3) Gross margins (ex. CCB) grew from 60% to 64%.
4) Expenses (ex. CCB acquisition) decreased 8%.
5) Outlook -
a) EBITDA to double next FY.
b) "strong" revenue growth to continue.
c) Looking for further strategic acquisitions to broaden platform.
d) Long term - targeting 50% of medium / large church segment, which represents $1 billion in potential revenue.
6) ARPC ex. CCB, at $1614 per month, up from $1315. Thats 22% growth. Nice.
7) no. of customers grew 43%. partly due to CCB acquisition.
"Due to the restrictions around in-person gatherings, Customers have been emphasising....digital giving...through their apps for continued engagement with their communities.....Pushpay’s processing volume over the month of March was higher than...expected.." Although, it is antiicpated demand for digital payments may moderate as restrictions are eased.
Many improvements to the platform, improving engagemnt and value to customers.
Interesting trend in Pushpay app downloads over the past few months. It seems to tie in with management reporting churches are encouraging church goers to use electronic payments for tything......
Attached is a comparison of PPH vs local and Us software businesses. PPH remains relatively inexpensive to other "stonks"
I see the selldown as a great buying opportunity, having seen Pushpay grow their Free Cashflow exponentially. They can start to expand across USA without hurting bottom-line. I missed out on getting in this during the March sell-off. Now, I am bolstering my portfolio by adding it.
Plenty of research done by Andrew, Matt and others on this company. It was in my watchlist, along with Appen, Zip and Xero. The other 3 are priced for long-term future growth. Awaiting a pull back on them to add it to my portfolio.
Much easier doing a DCF on Pushpay with a proven track record. Watch this space :)
In the AGM today, PPH have upgraded FY2021 forecast profit by 4%, and is experiencing increasing demand of their mobile platform.
FY2020 has seen PPH execute on their plan, delivering impressive operational leverage and prospects for accelerated growth with a first acquisition. When they report their FY2020 results on the 6th of May, expect EBITDA to be north of AUD 35 million. The Church Builder acquisition appears to have gone well and their efforts towards integration and expanding their platform to the 'one stop shop' concept should present significant growth opportunities during CY 2021. The Company did indicate that the Church Builder acquisition will be earnings accretive in FY2021.
The fall-out from Covid-19 should yield approx. a 20% decline in Total Processing Volumes, offset by the addition of many new Church Groups. Watching BlackBaud as their most significant competitor. This USA listed Company is a well established business who has undergone a major transformation over the past 24 months. Dominant in the Catholic Church space, which provides for some market divide. As the combined revenue of PPH and Blackbaud, generated from the faith sector yields a market share of less than 10%, plenty of scope for these two Companies to extend their footprint during the Covid-19 disruption. That said, suspect many of the smaller players will be capitalising on the opportunities during this period.
PushPay's achievements to date have been measured. Interesting to see how they have coped with a need-driven surge in demand over the past 8 weeks.
Revise my valuation to AUD 5.88 for FY2021
14-Apr-2020: FSI Shareholders' Quarterly Report - March 2020
"INVESTMENT ACTIVITY: During the quarter, we removed Pushpay Holdings (ASX: PPH) due to concerns regarding their competitive environment and an uncertain future regarding profitable growth."
--- click on link above for more ---
8th May, 2019
PushPay Results Presentation is here
At current price ($3.60), shares on a P/S of 10x, and a PE of 37x (including tax benefit)
Overall, these results were solid, and in line with expectations.
With the top line growing at ~40%, a large addressable market, high retention, rising ARPC and operating costs well contained, we should expect some very solid profit growth in the coming years.
Happy with my existing valuation for now, but lean towards increasing this..