Pushpay shares spiked more than 5 per cent as the digital-giving company reported strong numbers - and new chief executive Bruce Gordon talked up M&A as a possible tool to accelerate a drive to US$1 billion annual revenue, and talked down a possible challenge from rival Blackbaud.
Earlier today, the company reported a net profit of US$6.5 million for the first half of its 2020 financial year (ending September 30) versus a net loss of US$4.4m for the year-ago period.
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Pushpay has its head office in Auckland but most of its staff in Seattle. Large US churches provide the lion's share of revenue from its app, which manages collections and messaging to a congregation.
Earnings before interest, tax, amortisation and fair value adjustments (ebitdaf) were US$9.6m against the year-ago US$3.1m loss.
Pushpay raised its full-year ebitdaf guidance twice during the half. This morning, it reiterated its latest forecast for full-year 2020 ebitdaf of between US$23m and $25m (no net profit guidance has been given. In 2019, Pushpay made a maiden first-year profit of US$18.8m as it pushed strongly into the black in the second half - chiefly because US$20.24m income tax benefit).
Revenue increased 30 per cent to US$57.4m as customer numbers rose 7 per cent to just under 8000. The company said earlier that although its growth had slowed in terms of the number of customers, it is now signing more medium to large churches that collect more money. To wit, total processing volume jumped 45 per cent in the first half to US$2.2 billion.
Gross profit margin increased from 57 per cent to 65 per cent over the half.
Cashflow improved from -US$5.1m in the first half of FY2019 to US$8.9m.
Average revenue per customer per month (ARPC) increased from the year-ago US$1060 to US$1272, after spiking to US$1548 over Christmas.
Year of transition
Pushpay has been going through a year of transition, with founders Eliot Crowther and Chris Heaslip both quitting their executive roles and selling large amounts of shares.
Crowther's departure coincided with his marriage breakup.
Heaslip said he was no longer the right fit to lead the company as it moves from its startup phase to being a global corporation more about "process and systems."
He and co-founder Crowther created Pushpay as a two-man startup in a Glenfield garage.
Now it has 360 staff and 7905 customers.
Gordon - a one-time mentor of the co-founders who was serving as chairman - replaced Heaslip as CEO (Heaslip remains as a non-executive director).
Gordon said on a conference call that customer gains had been "lighter" the first half, but said several initiatives were underway to turn that around.
And in what could prove a related note, he also said that an acquisition was possible.
"As we continue to execute on our strategy, we are also actively evaluating potential strategic acquisitions that broaden Pushpay's current proposition and add significant value to the current business," Gordon said.
Where Heaslip hinted Pushpay could expand into charities and the education sector, Gordon earlier told the Herald that the faith sector would remain the company's key point of focus for the immediate future.
Strong result, but competition in wings
Craigs analyst Stephen Ridgewell saw Pushpay's result as "very strong" overall but on the conference call did raise that Blackbaud was adding a payment module to its software.
Gordon responded that Blackbauds software was mainly used by Catholic churches, whereas "We tend to be predominantly Protestant today."
He added, "My personal view is that having two strong brands educating what is a reasonably conservative market place is a positive. We're confident in the head start we have and the moat we've built around our product. We're not unduly concerned [about Blackbaud]."
Pushpay saw the Catholic sector as a future area for growth, the CEO said.
Ridgewell also noted market chatter that churn (customers who don't renew) had increased. Gordon said churn had actually lowered slightly.
Gordon also underlined Pushpay's goal to reach 50 per cent of medium to large churches in the US, representing US$1b in annual revenue. M&A could help accelerate the drive to that target, he said.
On the conference call, analysts tried to push the CEO for a timeframe, but he declined to give one for the "aspirational" US$1b target.
No longer all blokes
Late last year, Pushpay was one of a number of tech companies called out by AUT Public Policy Director Judy McGregor for having an all-male board, and in June it updated it was having trouble recruiting a female director. However, on August 26, Pushpay announced it has secured Spark chair and Auckland Airport director Justine Smyth for its board.
Gordon said Pushpay wanted to add another new director. Diversity would again be one of the recruitment criteria.
Shares surged from $1.48 to $4.17 over 2017, but have tailed off in recent times.
Pushpay closed Tuesday at $3.17 for a market cap of $873m. Technical difficulties meant the NZX was offline on Wednesday morning.
When the exchange finally opened early afternoon, Pushpay shares jumped nearly 9 per cent to $3.45 before settling back to $3.35 in late trading.
Craigs' Ridgewell had a 'buy' rating on Pushpay and a 12-month target price of $4.25 ahead of today's result.
He will release a revised target on Thursday. His bullish comments today indicate it will be on the upside.