Pushpay CEO Molly Matthews. Photo / Supplied
One of New Zealand's most iconic tech companies is on the block.
Pushpay shares surged 24.3 per cent to $1.28 on Tuesday (for a market cap of $1.46b) as the maker of donor and church management software confirmed it had fielded "multiple" takeover offers and had appointed Goldman Sachs to assess them.
Despite the jump, shares were still well off their pandemic high of $2.35 in 2020 (for a $2.35b market cap) as lockdowns sent congregations online, fuelling demand for the Auckland-founded, NZX-listed company's software in its core US market.
Pushpay also confirmed its lowered full-year operating earnings guidance of US$61.5-US$63.5m ($92.7-$95.7m).
The firm narrowed its operating earnings guidance in November from the previous $60.0m-US$65.0m.
As restrictions started to ease in North America, some analysts fretted that Pushpay had blown its pandemic opportunity, with Forsyth Barr's Jamie Foulkes noting it had lost ground to an emerging, lower-cost, faster-growing competitor called Tithe.ly.
But Craigs analyst Stephen Ridgewell saw the Tithe.ly meme as over-egged, and also saw potential for Pushpay as it embarked on a drive to win new business from Catholic churches, where it faces an incumbent - the Nasdaq-listed Blackbaud (market cap: US$2.29b). Today, most of Pushpay's revenue comes from large Protestant congregations.
Following Pushpay's stock swoon, the firm could appeal to a private equity buyer. Blackbaud could also be in the frame.
Jarden analyst Guy Hooper said in a note issued this morning that while data was scarce in the sector, recent transactions - including a November deal that saw New York-based investment firm Reverence Capital Partners take a majority investment in church management software provider Ministry Brands - had occurred at an average multiple of 6.2x sales, implying that Pushpay could be valued at up to $2b in a takeover - or roughly a half-billion premium on its current market cap.
Even if no deal goes ahead, Jarden anticipates Pushpay success in the Catholic market, and forecasts that will add 60 cents per share in value.
RBC Capital Markets - which has a $1.75 target - said in a note to clients overnight that "We believe both strategic and private equity would find Pushpay attractive given: 1) strong market position 2) positive free cash flow 3) profitability 4) high returns i.e. +25 per cent return on equity/return on invested capital 5) materially higher consensus growth versus trading multiples and trading at materially depressed multiples versus historical average.''
In a February research note, Clare Capital noted that while Pushpay had smaller trailing 12-month revenue than Blackbaud ($270m to $1.4b), the Kiwi-founded company had a much higher ebitda margin (31 per cent to Blackbaud's 12 per cent) and much lower debt.
Pushpay declined questions. Director Lovina McMurchy said, "As a public company, we cannot provide any additional information than what we have disclosed publicly. The Pushpay Board is committed to acting in the best interest of, and maximising value for, Pushpay shareholders."
If a buyout does go ahead, it will be a reversal for a company that's previously been the acquirer.
Pushpay, which has a small office in Auckland but most of its staff in the US, has bought a series of US companies including Colorado-based Church Community builder for US$87.5m in 2019 and Texas-based Resi Media, which offered a streaming platform for church services, for US$150m late last year.
Pushpay was founded in Auckland in 2011 by Eliot Crowther (who left in 2018) and Chris Heaslip (who departed the following year). The pair initially struggled until they received an anchor investment from the Huljich family, which sold its stake to US private equity interests over two block trades in 2020 (when it offloaded stock worth $124m) and 2021 ($320m). Founders Crowther and Heaslip sold their holdings as they exited the company.
Today, a clutch of US private equity firms are the largest shareholders in Pushpay, but there are a number of New Zealand parties with small holdings including ACC's investment arm (3.5 per cent), Harbour Asset Management (2.9 per cent), Fisher Funds (1.3 per cent) and Mint Asset Management (1.2 per cent).