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FY21 result: Why the Pushpay (ASX:PPH) share price is on watch

The Pushpay Holdings Ltd (ASX: PPH) share price is on watch today after delivering a lot of growth in its FY21 result.

FY21 report numbers

Pushpay is a church management systems and donation business. A very large part of its earnings comes from the amount of money that is processed by its systems. During FY21, the processing volume increased by 39% to US$6.9 billion after a strong first half.

Operating revenue increased by 40% to US$179.1 million. This was partly driven by a 2% increase in total customers to 11,100, as well as a 12% increase in average revenue per customer per month to US$1,475.

The company has been experiencing continuing profitability growth. The gross profit margin improved from 65% to 68% over the year.

Pushpay’s nature as a software business allows its revenue to grow much faster than its expenses because there isn’t much expense in rolling out its services to one more church or giver – the infrastructure is already there. Total operating expenses only grew by 9%. That meant that as a percentage of revenue, operating expenses improved from 47% to 36%.

This low level of expense growth saw EBITDAF (EBITDA explained, the F stands for foreign currency) grow by 133% to US$58.9 million. The EBITDAF margin improved to 34%, up from 22% in FY20.

The business saw net profit after tax (NPAT) grow by 95% to US$31.2 million and operating cashflow grew 145% to US$57.6 million.

Pushpay said that its strong operating cashflow enabled Pushpay to fully repay its bank debt, which was taken on to facilitate the acquisition of Church Community Builder. It also said that the positive cashflow provides flexibility for more acquisitions that broaden the current proposition and add value.

Comments on COVID-19 impacts

In-person gatherings were restricted because of COVID-19. But Pushpay said that whilst this did boost processing volume, it is seeing that the market has gone through a transformative shift as churches re-open. Digital solutions play a crucial role in the future of the church.

Pushpay has not seen a meaningful proportion of digital giving revert to non-digital means. That suggests that the digital giving trend may be here to stay.

Growth plans

Churchstaq – the combined offering between Pushpay and Church Community Builder – has seen sales continue to increase across all customer segments. This has proven that customers want a fully integrated, end to end solution. It also saw cross-selling of its donor management system and church management system.

Pushpay is investing into expanding in the Catholic segment, which represents around 17,000 individual parishes. During the year, it entered into a pilot with the Archdiocese of Chicago and welcomed a number of new Catholic parishes and dioceses to the Pushpay platform.

It’s going to invest to expand in the Catholic segment, between US$6 million to US$8 million. This should result in growth in the following years.

Outlook and my thoughts on the Pushpay share price

Pushpay expects continuing strong revenue growth, stronger operating margins and high efficiencies.

The company is expecting EBITDAFI (EBITDAF and impairments) to be in a range of between US$64 million to US$69 million. Excluding the Catholic investment, EBITDAFI guidance is US$66 million to US$71 million. The inclusion of ‘I’ is interesting.

Pushpay is one of the promising ASX growth shares that I’ve got my eyes on. Considering Pushpay is guiding more profit growth in FY22 after a huge FY21, that’s a good sign. The company often beats its guidance as well. The fact it’s not seeing donating go back to cash is a great sign.

Whether the Pushpay share price goes up or down today, I think the company is taking the right steps to keep growing whilst also improving its profitability. I’d be happy to buy Pushpay shares for the long term.

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