Pushpay ups 2021 guidance for third time, even as customer growth stalls

Image / Pushpay

Pushpay has reported big profit and revenue gains for the first half of its 2021 financial year, and upped its full-year ebitida guidance for a third time - albeit not by as much as some analysts had been picking, and there was no word of the dividend some had been anticipating. And some investors took fright at a flatline in new customers since March.

Shares fell 8.70 per cent to $8.40 (for a market cap of $2.31 billion) soon after the interim result was released, giving up some of the stock's recent gains. Pushpay is still up 201 per cent for the year.

Craigs Investment Partners' Stephen Ridgewell called it a "very strong result".

The company also announced a 4:1 stock split, which will come into effect on December 1, plus the resignation of director Peter Huljich and his alternate, Christopher Huljich, from its board. In an NZX filing, Pushpay's board said a similar split in 2016 added to liquidity and value.

A Sydney-based analyst told the Herald it was possible some investors were spooked by the lack of customer growth over the past six months. Covid had been very good for the company on one level, as it drove churches to adopt digital solutions, but bad in that it impacted travel and in-person sales efforts.

At 10,896, total customers were up 38 per cent against the first half of FY2020, but customer growth had stalled since March.

The Sydney analyst said some investors could have seen Huljich family's departure from the board as a signal they would sell more shares. It was possible there was simply some profit-taking after the stock's recent big run-up.

The Huljich family - an anchor investor in Pushpay - sold around a quarter of its shares in a $124m block trade in July.

The maker of digital giving and church management software - which is listed on the NZX and headquartered in Auckland but does most of its business with US congregations and reports in US dollars - reported a 107 per cent rise in net profit to US$13m for the six months to December 30.

Revenue increased by 51 per cent to US$86.6m.

Pushpay

Full-year ebitdaf guidance was raised for a third time, this time to between US$54m and US$58m.

Total processing volume from US$2.2b to US$3.2b. But monthly average revenue per customer slipped 1 per cent to US$1272.

The increases have come as use of Pushpay's software has boomed during US lockdowns. Analysts see the pandemic as a catalyst for more churches going digital, and keeping Pushpay's pay-monthly software long-term.

However, Pushpay did not raise the bar quite enough to meet the most bullish analysts.

Going into the report, Forsyth Barr's Jamie Foulkes was picking full-year operating earnings of US$61m.

Craigs' Ridgewell said the first-half result showed Pushpay was beginning to reap the benefits of scale, and its $132m acquisition of congregation management software maker Church Community Builder last year - which gave Pushpay a full range of software for the first time.

Net debt reduced from US$50m as of March 31, 2020 to US$25m.

While the US is now in recession, chief executive Bruce Gordon told a conference call that digital giving was increasing as a proportion of total giving fast enough to offset any decline in total giving.

Headcount increased 23 per cent to 441, split between offices in Auckland, Seattle and Colorado.

On the conference call, chairman Graham Shaw and CEO Bruce Gordon made no mention of a pending dividend.

Jarden analysts Wassim Kisirwani and Wilson Wong earlier picked a profit payout from FY2022, initially at a modest 0.9 per cent yield.

Gordon - a former chairman of the company who was drafted in as CEO after the departure of co-founder Chris Heaslip in mid-2019 - announced his intention to step down at the company's July annual meeting.

The search for his successor is still underway.

Pushpay's first female director, Justine Smyth, resigned for personal reasons just weeks after her appointment was confirmed at the July AGM. Smyth continues as chairwoman of Spark and in other director roles.

Smyth's vacant seat was taken by Lorainne Witten, who also sits on the boards of Rakon and TIL Logistics.

'Aspirational goal' underlined

During today's call, Gordon reiterated Pushpay's "aspirational goal" to capture 50 per cent of large churches, which he says would yield around US$1 billion in annual revenue. Once again, he declined to put a timeline on the target.

Earlier, Craigs' Ridgewell noted that Pushpay has only one company that could be considered close to a direct competitor - Blackbaud.

Yet the two companies also operate more or less in parallel in the faith segment, Ridgewell noted, with Blackbaud's base in Catholic churches and Pushpay doing most of its business with Protestant congregations.

While Gordon has turned Pushpay's back on his predecessor's plan to diversify into non-profits and education, the Nasdaq-listed Blackbaud operates across a number of sectors. It came unstuck earlier this year after a breach that saw alumni and donor data from Auckland and Otago Universities at risk. In July, Blackbaud raised eyebrows with a market filing in which it acknowledged paying an undisclosed sum to a ransomware gang to restore seized files.