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Last edited one year ago
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5.2% pa
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#Bear Case
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Added 2 years ago

Just a quick note after a cursory glance through the results. Strong NPAT performance out from PPH today, but it looks like they have actually downgraded their guidance from between US $64–69m in 'EBITDAFI' in May down to US$60-65m.

From May:

e088f759e03a34ce06f4edb44bf513d3d0c16c.png

Today:

5348ab1630d6b272750adf31403768f88c1044.png

#Bear Case
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Added 3 years ago

Bear case

After much reflection, I think there’s a strong argument to be made that Pushpay’s foray into the Catholic sector will be difficult, expensive, and less profitable than the Pentecostal sector, if it even succeeds at all.

Having some insight into the way Catholic-based schools, churches and charities operate, I cannot stress strongly enough just how different the cultures are between Pentecostal and Catholic mindsets. Catholic institutions find it uncomfortable to talk about finances and growth in the same way, and have little interest in procedural efficiencies or larger donations if there’s even the slightest slight risk of alienating their older congregants with tech. That is an insurmountable challenge for Pushpay with their current offering as it stands.

Without a differentiated product and brand – even the name ‘Push’Pay was enough to put off a high ranking Australian Vicar General I spoke to about this – I just can’t see any rapid adoption or customer love for their product, despite the obvious benefits it would bring. Granted, investments are being made here this year, but anything other than a totally different product and brand seems destined to fail based on the enquiries I’ve made so far.

Putting all that aside though, It’s becoming increasingly harder to ignore recent Glassdoor reviews by former employees who make claims about Pushpay’s toxic culture and discrimination practises.

A picture is emerging that the succession of leadership changes in recent months together with the acquisition of CCB have resulted in a messy and fractured culture, whereby employees are losing confidence in the direction of the business. Talk of employee churn being high is particularly discouraging.

Beyond that, there are some serious allegations made about discrimination against pro LGBT+ congregations, which if true reveal not just terrible ethical practices, but that the larger, more conservative churches potentially hold too much power in the customer/supplier relationship. A power imbalance like this doesn’t bode well for future pricing power to my mind.

I doubt that PushPay will go backwards in the next 5 years, given how strong their FCF is, but it strikes me that we’re in the plateau phase at the top of their ’S curve’ of growth. The Catholic sector is being touted as the next vertical, but given my points above I don’t have the confidence that they can execute this vision by building a solution internally.

An external acquisition would potentially change my mind, so long as there’s a clear intention to silo that team and add additional resources, but this seems wildly risky too, since it would be difficult to find any synergies or efficiencies doing it this way. If they switched strategies and looked at acquiring another ticketing or event management business that complemented the ChMS, that would also get me interested again, but unfortunately I just see too much execution risk in the Catholic space.

#ChurchStaq
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Added 4 years ago

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. 

https://pushpay.com/churchstaq/

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'! ;)

#FY20 Results
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Last edited 4 years ago

06/05/2020

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!

#Glassdoor
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Last edited 4 years ago

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!