Well, I was starting to think PushPay's suitors were going to walk away -- but according to today's announcement the company has received a revised offer:

What's the offer?

Well the media speculation cited refers to an AFR article:

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Link here if you have a subscription: https://www.afr.com/street-talk/bgh-capital-circles-back-to-pushpay-20221010-p5bol3

I don't know what "well above" means, but a AUD$1.2b is about $1.05 per share.

We'll see what we will see.

Looks like BGH and Sixth Street are making a move on PushPay. Together they now own over 20% of the business.

Details are very scant.. seems like it could be a hostile bid. But not much to go on.

Shares in a trading halt.

Trading Halt_1653351060000.pdf

I missed the call with PushPay this morning due to the meeting with PureProfile, so thanks @mikebrisy and @RobW for your notes.

The forecast drop in EBITDAF for FY23 of around 6% at the midpoint, while at the same time forecasting a 10-15% lift in revenues shows just how much of an increase there is to costs. Whether that's a good thing or not depends on the return they get for that investment. Management, perhaps unsurprisingly, have high hopes: they are calling for 20,000 customers and US$10b in total processing volume within the next 3 year (that's a 30%-odd lift from current levels).

As a (extremely) rough cut, that's probably an EPS of 6cps in FY25 -- if they hit that target. Maybe closer to 5c to account for lower net margins. That compares with about 4.3cps this year (based on FX rate of AUD70c to USD)

Still, that's not terrible at all, especially for a profitable, cash flow positive business with very reliable cash flows -- not terrible at all -- but the days of hyper fast growth are well and truly over, and with it, so too the expectations for higher multiples.

The question is whether the current PE of 27 is justified by 10% growth -- especially in an environment of rising rates.

Finally, I was also encouraged by what appears to be some early traction with the Catholic initiative. And the debt repayment (from the Resi acquisition) was substantial thanks to solid cash flows. The transfer of IP to the US should save quite a bit of cash (about US$7m pa for a few years), which is also noteworthy.

All told, i agree that PushPay is probably somewhere near fair value -- it certainly doesn't feel cheap. While the prospect of a takeover complicates things, I may look to lighten the load a little more. Mainly due to opportunity cost considerations (ie. better opportunities elsewhere).

Quite an enigmatic announcement from PushPay today.

How many third parties are we talking about? Has there been any indication on price?

Obviously great to see shares up 25% (at time of writing), and despite some recent reservations I agree that the market got a little too pessimistic, but I'm also quite mindful of "non-binding and conditional" offers. Whatever happens, the only clear winner at this point is Goldman Sachs who'll get a juicy fee whatever the outcome.

(as an aside, why involve them? I'd have though the board and senior management know the business better than anyone else on the planet -- do you really need to engage these leeches to tell you what your own business is worth? Maybe i'm being too cynical..)

With multiple interested parties there could be some potential for a bidding war...Or not. Do I really want to speculate given I have virtually no detail on what is going on? While there could be some interest when shares were under $1, is that still the case after a 25% pop? If nothing eventuates, and potential suitors walk away after being granted access to all the juicy internal information, it seems quite likely shares would quickly drop back to where they were last week. As such, could this a good opportunity to take a little money off the table?

This is a tough one!

*EDIT* correcting EPS forecast

Pushpay has narrowed its FY22 guidance, from EBITDAFI US$60-65m to US$61.5-63.5m -- representing 6-10% growth. Add another US$1.5m if you want to exclude the Catholic initiative investment.

They have also repaid a big chunk of debt, reducing it from US$90m to US$54m, and will buy back a small handful of shares as they wind down an old share incentive scheme.

We'll get the full picture on the 11th May when they release FY results.

Key questions remain: can they return to stronger growth in the core offering, will we see any traction in the new ParishStaq offering, and can 20% net margins be sustained given the added investment.

Taking things at face value, shares are on an EV/EBITDA of something like 13.5x. I expect EPS for FY22 to be between 4.1-4.5cps, so that's a forward PE of around 22.

PushPay is buying video streaming provider Resi Media for US$150m (AUD~$210m).

It's a big purchase, 70% larger than the Community Church Builder acquisition last year, and will be funded with the issue of $40m worth of new shares($1.66 each for a ~2.5% dilution) as well as cash on hand and a new US$90m loan.

With around $5m in cash and $95m in equity at the last full year, Pushpay will be reasonably geared. Though with strong operating cash flows (~$50m last year) they should be able to reduce their debt reasonably quickly. 

Resi has an exisiting and fast growing foothold in the US faith sector after being founded in only 2016. Revenue and customer growth has been very strong and it currently earns $13m in ARR having roughly doubled that from the last year. Customer growth rate has outpaced revenue growth so it looks as though there's already a good deal of revenue uplift already locked in (as new customers are onboarded and ramp up usuage of their product)

Nevertheless, the price tag is equivalent to 8.8x revenue and as no profit details were disclosed it's also likely still loss making. It's recently increased headcount and the transaction isnt forecast to make any impact on FY22 results -- that's with more than 6 months contribution after the transaction settles.

There's also litigation underway in regard to patent infringement against Resi, but PPH is indemnified against any cost associated with this.

The rationale is that the transaction materially boosts PushPay's offering and will deepen its revelance and integration with customers. There's strong cross-sell opportunities and it also helps PushPay move into sectors outside of faith (although not sure how much weight i'd give this).

I wasnt able to make the investor call (it would be great if anyone has some notes to share), but my initial reaction is one of cautious optimism. It's a very fast growing business with good adoption and strong alignment to PPH's core offering.

I'd want to see more detail on what a combined business looks like, and how much accretive growth this moves affords.

ASX presentation here

Pushpay has reported 39% revenue growth for FY21 (US$181.1m), which almost doubled the net profit (US$31.2m). EBITDAF came in at US$58.9m -- at the top end of their increased guidance for between US$56-60m.

The acquisition of Community Church Builder was a big part of this.

Once again, the operating margin increased, now sitting at 34% (up from 31%) as the business scales.

Operating cash flow saw a 145% improvement, allowing the company to fully repay the debt taken on to acquire Community Church Builder.

For the FY22 year, PushPay said it is expecting an EBITDAF of $US64-69m -- about 12% growth at the midpoint. That's partly subdued due to the US$6-8m investment into the Catholic segment.

That's perhaps a bit lower than the market would have liked, and I think there's also likely to be some concern over the sluggish pace of customer growth -- with customer numbers increasing just 2% (the growth is largely explained by increasing revenue per customer).

On a per share basis, and using a USD/AUD exchange of 78c, Pushpay reported an EPS of 3.62cps, which puts shares on a PE of ~41.

I still think that's relatively good value given they are expecting double digit growth, a strong balance sheet and cash flows and with upside potential into new segments.

Results presentation can be viewed here

NZ's Huljich Family have sold their remaining stake in Pushpay. They sold it to global tech investment firm Sixth Street will own 17.8% of the company. Sixth Street's past investments include AirBNB and Spotify.

It's nice to see a large and experienced like Sixth Street take a significant stake, but it's not great that a lot of the early money has now left (after having made some really attractive returns).

Peter Huljich stepped down as Director late last year, after selling 25% of the family shares in July. (At which time they said they had no intention of selling further).

With Chris Heaslip (the former CEO and director) and Chris Fowler (exec director and founder of acquired Church Community Builder) mostly selling down late last year too, it isn't something that fills you with confidence.

The Huljich family have been invested with PushPay since 2013, when it was a much smaller operation. With their private equity investment operations more focused on earlier stage businesses it's possible they are just recycling the capital into other smaller opportunities. These things aren't always nefarious in nature.

Based on the current sales momentum and recent guidance upgrades, along with the attractive economics and industry standing, I still see PushPay as attractive and it remains one of my largest positions.

Still, I would have preferred not to see the Huljich's sell out entirely...

PushPay is in a trading halt as they do a bookbuild to facilitate a sell down by Chris Heaslip (founder and ex-CEO) and Chris Fowler (founder of Church Community Builder, acquired by PPH last year).

In total almost 55m shares will be sold, of which 42m belong to Chris H and 13m belong to Chris F. After the transaction, Chris Heaslop will hold only 0.2% of PPH. Chris Fowler will retain a 1.2% stake.

The bookbuild floor price is NZ$1.75, which is about AUD$1.64 (compared to the last close of $1.78.

Trade is expected to resume trade tomorrow (16th Dec).

We can't know the true motivations of the sellers, although it seems most people tend to assume the worst. I'm reminded of the saying "insiders sell for many reasons, but buy only for one".

Still, it's a huge sell down -- especially by Chris Heaslip who has been progressively selling for a while and has now essentially fully exited the business. Not what you like to see.

We saw the Huljich family sell down around 14m shares about 5 months ago, at a (adjusted) price of $1.98.

More info here

Pushpay has reported results for the HY ending Sep 30, 2020 -- and once again has delivered exceptional numbers.

• Total revenue up 51% to US$86.6m
• Gross margin increased from 65% to 68%
• NPAT up -- wait for it -- 107% to US$13.4m
• Operating cash flow up 203%
• Cash and equivalanets on hand up 221% to US$23.1m
• total customers up 38%
• Processing volume up 48%
• Average revenue per user down 1% (cant win 'em all! THis is due to the CCB acquisition)

The business is gaining material traction, has a market leading offering and continues to have a long runway for growth.

FY guidance has been increased (again) -- company expecting EBITDAF of US$54-58m, up from US$50-54m. A lift of roughly 7.5%.

You can read the results presentation here for more detail.

For me, the business is of an extremely high quality. I'll revisit my valuation in the coming days.

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 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

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

The latest reults are again quite strong. 

For the 2019 half year,

• revenue was 48% higher from the previous half, in line with guidance
• A significant reduction on net loss, and on track to hit breakeven on a monthly cash flow basis by end of the year
• gross margin steady and expected to improve next half
• targeting ~$100m in revenue for FY19
• Business continues to scale very well -- operating expenses up just 2% in a period where revenue were up almost 50%.
• That operating leverage will see NPAT grow well beyond the pace of sales growth in future periods. indeed, in the reported period, the net loss improved by 65%
• Balance sheet still strong, with no net debt and US$12.5m in cash
• Average revenue per user continues to grow strongly, up 34%
• Revenue retention remains high, >100%
• Continues to have a large addressable market 

Disc. Held

Half Year presentation here

8th May, 2019

PushPay Results Presentation is here

• Revenue up 40% to US$70.2m
• A maiden FY net profit of US$18.8m, compared to a loss of US$23.3m
  • PBT was -US$1.5m. Positive NPAT due to US$20m tax benefit 
  • Now that they are likely to be profitable going forward, they needed to recognise these tax assets. They wont be paying any tax for a few years it seems.
• Average Revenue Per Customer (ARPC) up 33%
  • Month to recover acquisition cost is is still "<18", which suggests that CAC is increasing
• Customer count up by 5%, with 373 customers added over the year
• Cash down to US$13.9m, from US$17.9m
• But positive operating cash flows for the second half -- in fact, they seem very close to accounting profitability ion a statutory basis
• Revenue retention is still >100%
• Staff count up by 11%
  • mainly development and "customer success" (onboarding)
  • Sales costs flat, but headcount up 7%
  • G&A costs down 10%, headcount down 3%
• Gross operating margin improved to 60%
• CEO Chris Heaslip is leaving and being replaced by Bruce Gordon
  • Chris is remaining on the board
  • Comes almost a year after his co-founder Eliot Crowther stepped down
  • Bruce is long known to Chris and PushPay, having served as Chairman and acting as Mentor to Chris and Eliot in the early days of the company
• Acquisitions seem likely, and expect the company to use a bit of debt 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..

3rd quarter results from PushPay were very positive.

Total revenue came in at US$27.7m, a 35% increase over the previous corresponding period. The company expects its gross margin for the full year (ending March 2019) to be over 60%. Previously, they had indicated that this threshold would be passed only for the second half

As hoped, the company was both cash flow positive and EBITDAF positive (earnings before interest, tax, depreciation, amortisation and FX changes) in the December quarter, and expects this to be the case going forward.

The company achieved this strong result with only a 3.8% lift to headcount. Customer numbers were only 5.5% higher, but these are BIG customers and the average revenue per customer rose 25% and processing volume was over 28% stronger.

This will be the last quarterly result. PushPay is moving to half yearly reporting going forward.

A great company, still available at an attractive price.

A SaaS business that provides a payments platform for the faith sector, PushPay has achieved extremely strong topline growth over the past few years. This year it's on track to grow revenue by a further ~25%.

Moreover, the business is now cash flow positive, EBITDAF positive and has ~US$14m of cash in the bank. There is zero debt.

Average revenue per client has been growing (strongly and consistently), they are the dominant player in their space, gross margins are improving, costs have been well contained, revenue retention is >100% and they have consistently met guidance.

PushPay still have a long runway for growth, ultimately targeting 50% of the medium and large church segments, which is a $1 billion annual revenue opportunity.

Importantly, the company has passed the breakeven inflection point, so we should expect to see profit grow at a much greater rate than sales. 

And yet, while most other SaaS companies are trading on extremely high multiple, PushPay is on a trailing PE of ~32 and a forward P/S of 4.6 (at the current price of ~$3/share).

Disc. Held

PushPay has updated its full year guidance today (10th September).

Operating revenue will now come in slightly below previous guidance, between US$121 - $124 million (down about 1.2% from the mid-point of the previopus estimate).

Operating pofit (EBITDAF) is now expected to reach between US$23-$25million, which is a huge 23% higher than previously flagged.

PushPay said customer acquisition had been slower this year than last, but that cost efficiency measures were having an earlier than expected impact.

Overall, it's disappointing to see the top line pace of growth slow, although it's a very small reduction in guidance and PPH should still see revenue grow by >20%.

Encouraging to see the company focsed on costs, and that these measures were already in train.

No change to my outlook

Full announcement here

FY19 1st Quarter Results -- Announcement here

Pushpay recorded very strong revenue growth compared with the previous 1st quarter, US$21.4 million -- within guidance range of US$20.5 - 22m. In fact, most metrics showed a significant improvement from a year ago.

Shares did however fall on the news. That may be to do with the fact that ACMR increased by a lower amount than it did a year ago (this time last year ACMR increased by ~US$35m over the year, while for the latest quarter the annual gain was ~US$25m).

In fact ACMR was essentially flat from the preceeding quarter; US$87.7 vs US$86.4 at March 31. That suggests a slowing of sales, but is partly explained by the seasonality of Christmas and an especially high Dec 31 read. Management expect ACMR to be "significantly higher" at the end of the next quarter.

Still a lot of upside here, but will need to rethink growth assumptions (and valuation) if we don't see a solid September quarter

Video presentation of results here

4th September 2017

Listen here

Morgans Start-up Series

Podcast with Chris Heaslip, CEO

(August 2017)

Listen here