happy Easter everyone, or as A colleague irreverently said "happy Jesus weekend"
ive copy and pasted an article from the Economist, the implications of which should be reasonably positive for PPH More online services at the bigger churches driving more online giving through PPH
God has had a good lockdown. Attendance, like Jesus, is risen. When the Archbishop of Canterbury preaches his Easter sermon this Sunday, Canterbury Cathedral will be almost empty, but his online reach will be vast: he is expected to win a combined audience, online, on radio and on television, of more than 5m people. That is around 2,500 times the usual Easter audience, around a thousand times more than watched Jesus performing the miracle of the loaves and fishes and about the same as watched Elton John performing “Rocket Man” in an online concert this winter.
Since lockdown began, churches have started to attract the sort of online numbers more commonly associated with rock stars. The Church of England’s national weekly broadcast—a slick affair featuring such celebrity warm-up acts as Prince William—has so far been seen 40m times. Other denominations are enjoying similar rises. Last Easter the Vatican’s news website, which offers services to Catholics in England and worldwide, saw visitors quadruple compared with the same period last year. On Twitter, @Pontifex’s followers passed 50m (the pope tweets in several languages, including English and Latin: #VirusCoronarium).
But omnipresence, as St Augustine and Spotify have demonstrated, is a problem. Simply because a service can be watched by almost anyone in the world does not mean that it will be. Many are streamed; few are chosen, at least in any great numbers. The Church of England website AChurchNearYou now lists around 20,000 services and online events, but in a market freed from the constraints of geography, more famous churches—like more famous artists on Spotify—get the big audiences.
This, says Laurence Iannaccone, a specialist in the economics of religion at Chapman University in California, is not a great surprise. People, he explains, “are drawn inevitably toward the congregations—we’ll call them the suppliers…that are able to use this technology. You get a sort of superstars phenomenon.” As Dr Iannaccone puts it, if you are going to be watching religion online, “Why not go with the very best?”
Church services seem to be as susceptible to this effect as sports stars and singers. Trendy Holy Trinity Brompton, the London church that created the Alpha Course, pulls in thousands of views for its weekly YouTube broadcasts; a clip with the celebrity Bear Grylls clocked up over 250,000. Elsewhere, the Dean of Canterbury became an unlikely internet star when his cat hid in his cassock during online morning prayers, evidence not only of the power of rock-star economics but also of that other law of internet engagement, namely: people really like cat videos.
To him who has, then, more will be given. But the gospels of both economists and God agree that from him who has not, even what he has will be taken away. The congregation of St Aidan, a tiny windswept church in Thockrington, Northumberland has never quite recovered from a cholera outbreak in the 1840s. This Easter, its priest, the Reverend Sarah Lunn, is expecting an online audience of about 120 folk. But some of her congregation lack the computers or the broadband to watch online. Many who could, don’t want to: “There are a few of the older ones who’ve said ‘Oh, well, I don’t want to use it because people might be spying on me’.”
Disruptive technologies disrupt all aspects of formerly stable markets. In the 16th century that other disruptive technology, the printing press (God’s greatest gift, as Luther called it) helped to break the Catholic Church’s monopoly on salvation and usher in the Reformation. The result was a newly crowded religious market and lots of competition, causing the price of heaven to go down: fewer indulgences, cheaper salvation.
In lockdown, modern religious markets have shown unaccustomed vitality. Churches are tailoring services into shorter chunks than the usual hour a church allows. Companies selling communion wafers and wine have been doing a brisk trade to worshippers stuck at home. On Eden, an online church-supplies store, the “fellowship cup box” which provides communicants with neatly packed sachets of wine and wafers (“Enjoy a no mess no fuss approach to communion and focus your eyes on the King”) is a popular option.
Other market entrants have done less well. Bishop Climate Wiseman, from the Kingdom Church in London, was selling coronavirus kits that comprised “plague protection oil” and red yarn for £91. Bishop Wiseman’s blog promised: “It is by faith you can be saved from the virus.” The church was promptly investigated by the Charity Commission.
And not everything can be achieved online. God, like many an ageing chief executive, does not work as well over Zoom. The ineffable is lost. Transubstantiation, it is widely agreed, is not possible over the internet. Other benefits of religion cannot be done with a mere click. Ms Lunn has spent the winter driving hundreds of miles to deliver food, help and human contact to her parishioners. “I’ve one elderly lady, she’s 90 later this year. We know she can’t be left a whole weekend not seeing anyone.” So Ms Lunn drives to see her “just to make sure she’s alright”. Others in her parish have been helping out too. “There’s lots of others keeping an eye on folk.”
This reformation is in its early days. No one, says Dr Iannaccone, can guess how it will end. Many think a hybrid model of worship—on earth and in the ether—may become normal. What is clear is that increased competition is probably here to stay. This is not, says Mr Iannaccone, necessarily a bad thing. “The hand of God and the invisible hand sometimes seem to work wonderfully well together.”
Founders sell out and the stock price jumps 8%. Mr Market is funny sometimes.
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...
No longer founder led
Sixth Street now largest shareholder.
Just a correction to my previous post. The two Substantial Shareholder announcements (Mawer) issued three days apart only constitute one aggregated shareholding of 5+ %.
Subsequent to that, we have now received an Announcement that Credit Suisse have joined the Register as a 'new' substantial holder.
Suspect more such announcements to follow, but regardless, the Register will look very different come 11 May.
With a mere 4 weeks to PushPay's Full Year Financial close and a further 6 weeks to the release of the Results, worth reflecting on the many 'comparable' Company results just released during the Australian Reporting Season and then draw some comparisons versus what we are likely to see from PushPay.
An obvious distinction for the many Companies who have just provided their HY results is those that have benefitted from Covid-19 versus those that have seen a fall in Revenues and profitability. PushPay have clearly benefitted with the move to Digital, this already evident in May 2020 when they provided the market guidance on EBITDAf, this at a time when many others were withdrawing guidance. PushPay have subsequently increased the guidance on EBITDAf on no less than three occasions. Some may have considered strange that Guidance was provided on a Result, but no guidance provided on the primary drivers of the result, these being TPV and Revenue.
It is the well established ratios, trajectories and subsequent Company narrative that now allows us the opportunity to write the script for the 11 May release. Here is a look at likely headlines.
Operating Revenue.......USD 190 m .... 49 % growth versus FY2020
3rd Party Costs.............USD 60.6 m .....35.3% increase in Cost vs FY2020
Gross Profit ...................USD 129.4 m ......56.5% increase vs FY2020
Operating Expenses ......USD 68.7 m ........a modest 4.6% increase in Spend vs FY2020
EBITDAf ..........................USD 60.7 m ........118.3% increase vs FY2020
Comments in support :
* Working back from the EBITDAf number, applying the well documented ratios,the Operating Revenue becomes a calculated result. Ties with the historical fact that H2 Revenue is approx. 22 % higher than H1
* Gross Margin set at 68% as reported at the HY. Accompanied by narrative .. " whilst typically weaker over the 2nd half, expect gross margin to stabilise at current levels over the remainder of the current FY"
* Operating Leverage : ..." Opex as a percentage of Oper. Revenue improved from 50% to 38%. PushPay expect significant operational leverage to accrue as Revenue increases and Opex remains low.
The above should constitute a 'WOW' result on stand-alone basis and then particularly when compared to those reports received through reporting season.
Why is the share price labouring ? Some comments ...
* Customer count not growing ! ......" The Company's primary focus is on increasing Revenue by attracting a larger number of medium and large Customers AND cross selling products to existing customers, whilst expanding ARPC and increasing retention" ENTER
- 2716 new customers via CCB acquisition ( remember PPH have onboarded no more than 500 customers a year nett of small church churn )
- Churchstaq ! In House TAM becomes near on 11000 churches. Subscription Revenue set to increase as a % of Total Revenue? CCB were achieved 90+% Gross Margin
* Relentless Insider Selling !
Firstly, Founders are now out. Yes, the Founder Investors (Huljich Father & Son) have sold shares and still sit on a 15 % holding each. Their resignation from the Board means they are no longer considered under Inside Ownership. Believe this sets the Company up to be included on the ASX 200. They motivated the share split on the basis ...." the BOD believes the share-split is likely to enhance liquidity in the market and attract further shareholders".
Refer the most recent Substantial Holding announcements ...Harbour Asset Mgt and Mawer (x2)....both new to the Register. Trading Volumes over the ASX and NZX have increased significantly and narrow-band trading supports Transfer of Ownership. Register will look vastly different come May.
Confident that the Float Adjusted Market Cap or Free Float as often referred to will no longer present a hurdle. Market Cap not a problem and IMO will re-rate in the coming weeks.
Enough for now. Digital giving here to stay and I never doubt PushPay when it comes to execution. Confident with my valuation at $ 2.65.
PS Dont forget to convert above numbers to AUD
forsyth barr have a negative view on PPH
their thesis is that expansion rate into evangelical churches will be low (they already have a majority of the major churches) and so the steep part of the "S curve" is done.
I was quite bullish on the announcement of that PPH are going to launch into the Catholic giving space. Reading their report gave me considerable pause for thought.
I felt I should not reproduce their report here as I am not paid subscriber, and neither are you!
But. Their main thrust is:
1) The catholic church is shrinking (in the US)
2) the church attendants are elderly and do not adopt tech
3) catholics do not tithe (unlike evangelicals/pentecostals)
4) they tend to donate less
5) the estimated ARR is only $45m
6) PPH will have to acquire a separate business to gain any traction
To counter this, I would suggest this theory is applicable only to the US. I would imagine that any and all of PPH verticals can be applied to other geographies. This may be naive.
Worldwide the Catholic church is growing rapidly. https://en.wikipedia.org/wiki/Christian_population_growth
If PPH can transpose their model into another vertical (big IF) then the TAM becomes enormous, which is what all us LT PPH holders have hoped for.
Having said that, the valuation of PPH is undemanding currently but that really is predicated on it being a "growth" stock. If it has reached the plateau phase then it no longer deserves a position as one of the rapidly expanding SaaS companies that demand a high multiple.
Once again, execution in a new vertical will be interesting to observe. I continue to hold and represents 6% of portfolio.
Along with the profit upgrade announced today, Pushpay announced the appointment of their new CEO, with Bruce Gordon stepping down as the interim CEO after 18 months.
This is significant news for the business, and I like the fact they have promoted someone from inside the business. CEO, Molly Matthews was the Chief Customer Officer, and has had a rapid rise in her 4 years at Pushpay. To rise so rapidly within a business, she is learly a high performer, and she will know the business culture far better than an outsider. Given her current role, I would say Molly understands Pushpay's customers better than anyone else.
Capital allocation skills, strategy, execution are unknowns, but I would prefer an insider, who knows the business and it's customers, is appointed, particularly in the faith sector.
The other significant announcement is Pushpay's pivot towards the US Catholic sector. This has the potential to significantly increase Pushpay's TAM, however, it remaisn to be seen how successful their offering will be, given the older demographic, and centralised decisionmaking. Sales cycles will be quite long, and a lot of implementation support will be required. Catholic faith sector is a completely different to evangelical christians, as the Catholic sector has traditions that are centuries old, with decisionmaking usually made at a diocian level, rather than parish level.......I am a little sceptical of it succeeding.
Pushpay provides operational update and guidance upgrade
Pushpay Holdings Limited (NZSX:PPH, ASX:PPH, ‘Pushpay’ or ‘the Company’) is pleased to advise that its performance for the month ended 31 December 2020 exceeded internal expectations.
Previous guidance for the year ending 31 March 2021
• EBITDAF of between US$54.0 million and US$58.0 million Updated guidance for the year ending 31 March 2021
• EBITDAF of between US$56.0 million and US$60.0 million
Pushpay have provide futher guidence to expected full year earnings. Due to a better than expected December month they expect full year EBITDA to be between $56-60M. This is the 3rd time they have upgraded guidence this year.
Full announcement here
They have also announced Molly Matthews to be taking over the role of CEO from interim CEO Bruce Gordon. Molly has had senior roles at PPH for 4 years most recently as CCO. Im happy they have appointed someone from within the company that has a much more deeper understanding of the business than an external recruitment.
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
Opinions on PPH in the link here from Adam Dawes, Julia Lee and Michael Gable.
Pushpay has reported results for the HY ending Sep 30, 2020 -- and once again has delivered exceptional numbers.
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.
Analyst update around 18:30 mark
New Product Launch Video
PushPay announced a number of product developments this week, the most notable being a new, fully-integrated platform called ‘ChurchStaq’, which seems to combine all their tech into one seamless product.
Difficult to say what effect, if any, this will have on the current financial year, but it looks to me like a decent long-term strategy to streamline further acquisitions and integrations into the one solution moving forward, whilst making the value proposition easier for customers to understand. Without a doubt, the dev teams have been busy over the last 8 months!
I see that they are also advertising some data migration positions for CCB, which makes me think there are a number of existing CCB customers who want to ‘upgrade’ to the new platform and access giving and engagement tools. Looks encouraging for upsell numbers, and could be evidence of the acquisition going well, though admittedly I’m drawing a long bow here.
Finally, a friendly reminder that PushPay upgraded their EBITDAF guidance by $5m on the 20th September last year… Just sayn'! ;)
Is there a way to sort these straws newest to oldest? pretty annoying to scrol up and down to make sense of things
Froxy. Thanks for the reply. Perfect response. That was why I was confused by the call. This seems to happen a fair bit. Where by pundit/s seem to display an over confidence in their knowledge of a business.
In response to Foolednomore (not sure how to respond to your straw) they reference in the report they are targeting 50% of the med-large church market which represents $1bil revenue.
I thought I'd seen previously they had only been around 5-10% of target market. As such, with gross margins/operating leverage there still seems a runway for growth before having to fish in the smaller lower margin small church pond.
Scott from motley fool and Tim from teaminvest are very cautious on PPH. They seem to think they have saturated the mega church market and are having to refocus on small and medium churches. Is this correct as it could seriously affect profit margins going forward? More risk to the downside?
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 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 :)
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
In the AGM today, PPH have upgraded FY2021 forecast profit by 4%, and is experiencing increasing demand of their mobile platform.
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.
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.
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.
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.
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
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......
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 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
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.............
Glassdoor reviews have been rising steadily over the last year or so. This is likely due in large part to the improving feedback from employees post the small-segment purge. It's a good indicator that things are ticking along nicely behind the scenes.
As a reference point, the overall rating is better than Appen, Altium, Xero, EML Payments, Nearmap, Dicker Data, Hansen, iSignthis, Computershare and many others with a similar MCap on the ASX.
Interestingly, Wisetech is one of the few that are better. Make of that what you will!
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..