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Pushpay (ASX:PPH) share price on watch after FY21 profit update

The Pushpay Holdings Ltd (ASX: PPH) share price will be on watch this morning after giving another FY21 profit update.

Pushpay is a rapidly growing digital giving business. The bulk of its donation processing volume relates to large and medium US churches.

Pushpay’s FY21 profit update

The company said that its performance for the month ended 31 December 2020 exceeded external expectations.

Pushpay’s processing volume for December 2020 was slightly higher than the internal forecast made on 4 November 2020 when the guidance was most recently updated.

December donation volumes are usually a lot higher than other months, partially partially driven by tax year-end giving in the US, though the level of the increase can be different year to year.

The strong processing volume achieved in December 2020, combined with operating leverage improvements, supports a guidance update.

Investments

Pushpay said that it has allocated an initial investment of resources into developing and enhancing the customer proposition for the Catholic segment of the US faith sector. Management said that focused investment into the Catholic segment represents a significant milestone as Pushpay continues to execute on its strategy to become the preferred provider of mission critical software to the US faith sector.

Guidance

The company has regularly upgraded its guidance over the last year. The previous upgraded guidance was for EBITDAF (EBITDA explained – the F stands for foreign currency) to be in a range of US$54 million to US$58 million.

Pushpay now expects EBITDAF for FY21 to be in the range of US$56 million to US$60 million.

However, Pushpay re-iterated that there are still uncertainties and impacts relating to COVID-19, and the broader US economic environment.

Pushpay said it expects operating leverage to continue to accrue to the business over the remainder of the current financial year.

New CEO

Pushpay also announced that Molly Matthews will be promoted from Chief Customer Officer to CEO from 1 March 2021.

Summary thoughts

If you read my articles regularly, you’ll know that Pushpay is one of my highest conviction ideas, perhaps the highest, out of many ASX growth shares.

It seems to me that Pushpay has very strong operating leverage as it grows, it has a strong and growing market proposition, the market share keeps rising and it may have pretty defensive revenue. I also believe that it has plenty of ways to expand geographically and into different categories in the distant future.

Finally, Pushpay’s valuation looks very good value to me. Using the earnings projections on CommSec, the Pushpay share price is priced at just 27 times the estimated earnings for the 2022 financial year. I’d be very happy to buy some shares at the pre-open price of $1.50 for the long term.

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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