The Pushpay Holdings Ltd (ASX: PPH) share price is down 17% in early reaction to the company’s FY22 half-year result.
Pushpay is a business that processes digital donations for various organisations.
Pushpay’s HY22 result
The business reported continuing growth of its business in the six months to 30 September 2021.
It said that total processing volume increased by 9% to US$3.5 billion. It said that it saw a softer start to the half, the second quarter was stronger than the first quarter. The level of digital penetration within its customer base remained consistent.
Pushpay is expecting continuing growth in total processing volume driven by the number of donor management products being used by customers, further development on its product set resulting in higher adoption and usage, and increased adoption of digital giving in its customer base.
The operating revenue also increased by 9%, to US$93.5 million. Excluding Resi Media, operating revenue went up 7%. However, the average revenue per customer (ARPC) per month was down 8% to US$1,166.
Its gross profit margin continued to improve, with an increase from 68% to 69% for the six month period.
Underlying EBITDAFI (EBITDA explained, the F stands for foreign currency and this profit measure also excludes acquisition-related costs) increased 12% to US$29.6 million. The underlying EBITDAFI margin increased from 31% to 32%.
Pushpay’s net profit after tax (NPAT) went up by 43% to US$19.1 million. Operating cashflow increased 14% to US$30.8 million.
Reduction of underlying EBITDAFI guidance
Pushpay has changed its guidance for underlying EBITDAFI for FY22 to be in a range of US$60 million to US$65 million. This guidance was previously US$64 million to US$69 million. The guidance has been reduced by US$4 million.
Excluding the costs associated with the investment in the Catholic initiative, underlying EBITDAFI is now expected to be between US$62 million to US$67 million. This guidance was previously US$66 million to US$71 million. Again, this has been reduced by US$4 million.
Resi Media acquisition
Pushpay also made an acquisition a few months ago called Resi Media, which was covered by the Rask Media team at the time.
It has a number of services including live streaming services to the internet, social media, mobile apps and other locations, and multisite streaming which delivers video to remote locations.
Pushpay said that the addition of Resi Media broadens its core product offering and strengthens its digital technology strategy.
Outlook for Pushpay and the share price
Pushpay said it’s expecting to keep focusing on investing for sustainable growth, by “refining the strategies” that will allow the company to realise its potential, while maintaining “prudent financial discipline”.
The company’s expansion into the Catholic segment has started and is a medium-to-longer-term initiative.
Its product for the Catholic segment is called ParishStaq, which is being adopted by Catholic customers. This shows that the full-suite product is gaining interest.
Pushpay explained that its Catholic investment in this period is currently lower than originally anticipated because of the recruitment process in a tight labour market being slightly slower than expected.
It’s expecting the Catholic growth to be felt over the following years. It’s still looking to win more than 25% of the Catholic church management system and donor management system market over the next five years.
Overall, Pushpay is expecting continuing revenue growth as it expands its product offering and increases market share. However, staff costs are increasing, as it looks to hire and retain high-quality people.
The Pushpay share price has been punished heavily. Whilst this result had a couple of negatives, particularly a downgraded guidance, I think it showed a number of positives including increasing margins, strong profit growth, a growing market share and proof of adoption of customers.
Businesses on a growth journey are likely to see volatility sometimes, so I think (hopefully) shorter-term declines can be opportunities. I’d be happy to buy a parcel of shares today for the long-term.
