Pushpay shares fall on lower guidance as cost pressures eat into earnings

New Pushpay CEO Molly Matthews. Photo / Supplied

Pushpay shares fell after the company downgraded its full-year earnings guidance because of higher labour costs here and in the US and costs associated with its market acquisition strategy.

The stock slid 13c, or 7 per cent, to $1.72 after the announcement.

The NZX-listed, Seattle-based maker of digital giving and church management software released its interim result this morning showing net profit increased by US$5.7 million to US$19.1m, for the six months to September 30, a gain of 43 per cent on the prior same period.

Earnings before interest, tax, depreciation, amortisation, forex and impairments (Ebitdafi) was US$26.9m, up 1 per cent from $26.1m. Underlying earnings, excluding acquisition related costs, increased by US$3.1 million to US$29.6 million, an increase of 12 per cent.

Pushpay said while the results for the first half were broadly positive, it had felt the impacts of rising wage pressures and tight labour market like other businesses in the IT space.

As a result the company has downgraded its full-year earnings guidance from US$64-69m to US$60-65m. The lower outlook also reflects about US$2-4m of costs associated with a push into the Catholic market segment.

During the reporting period Pushpay completed its acquisition of Resi Media for US$150 million in cash and Pushpay shares. Resi Media is a US-based, high growth SaaS company serving customers predominantly in the faith sector.

Chief executive Molly Matthews said Pushpay continued to deliver growth in its main financial metrics, while maintaining sustainable margins and underlying operating metrics.

"We increased the number of products purchased and welcomed new customers, while continuing to successfully realise strategic product bundling opportunities within the customer base," Matthews said.

Pushpay's goal is to become the preferred provider of mission-critical software to the US faith sector.

"During the first quarter of this financial year, we experienced lower total processing volume growth than expected, with the second quarter improving with double digit growth compared to the same period last year.

"The level of digital penetration within our customer base has remained consistent. We have also seen ongoing impacts from the Covid-19 environment, with consolidation of some churches, particularly in the small segment, and slower decision making on new subscriptions, particularly over the US summer holiday period. We have plans in place to address this and expect to see this improve."

In terms of cost pressures, Matthews said rising wage pressures of the competitive hiring and retention environment in both the US and New Zealand markets, particularly in the IT sector were being felt.

"As we remain committed to attracting and retaining high-quality talent, staff costs have increased higher than originally anticipated, as we respond to the competitive environment."