Company Overview: Pushpay Holdings Limited is engaged in the provision of a platform for mobile commerce and electronic payments, and tools for merchants to engage with consumers. The Company focuses on the development and deployment of mobile payment solutions. The Company's solutions include Event Registration, 3D Touch, echurch Apps, Pushpay Fastpay and Virtual Terminal/Envelope Giving. The Company caters to various markets, such as the faith sector, non-profit organization's and enterprises both small medium enterprises and corporate organizations. The Company's subsidiaries include eChurch Inc, eChurch Inc, Pushpay IP Limited, Pushpay Pty Limited, Pushpay Trustees Limited, Pushpay NZ Limited and ZipZap Processing Inc.

PPH Details

FY20 Guidance Revised due to Improved Cost Efficiencies: Pushpay Holdings Limited is primarily engaged in the provision of donor management system, comprising, donor tools, finance tools and a custom community app, to the faith sector, NPOs and education providers in Australia, New Zealand, Canada and the US. In FY19, the company reported a 40% growth in revenue over the previous year, supported by prudent investment into product design and development, enhanced team capabilities and targeted implementation of its strategy. The period was also characterised by margin improvements along with judicial maintenance of costs. The company is progressing well on its strategy of signing in new customers with a focus on increasing the number of new medium and large customers, that was clearly depicted by 5% growth in customer base during FY19. The proportion of medium and large customers particularly increased from 51% in FY18 to 56% in FY19.

Over the period covering FY15 to FY19, the company witnessed a top-line CAGR growth of 170.4% with FY15 and FY19 revenue amounting to US$1.84 million and US$98.37 million, respectively. Annualised processing volume (APV) for the year ended 31 March 2019 stood at US$4.2 billion, up 40% on prior corresponding period volume of US$3.0 billion. APV represents the annualised four-week average payment transaction volume through the company’s platform, where revenue is derived from. The volume increased substantially on the previous year as the company delivered on its strategy to increase the number of medium and large customers on its platform. Moving forward, the company is eyeing further growth in the APV through a larger proportion of such customers, product development, increased adoption of digital giving in the US faith sector and increased giving to religion in the US.

Going forward, the company is aiming to drive revenue growth through continuously delivering on its strategy to grab further market share in the medium-term while maintaining a proper balance through the expansion of operating margin. The company intends to boost its revenue while simultaneously maintaining cost discipline throughout the operations and is also evaluating potential strategic acquisitions to add further value to the business.


Annualised Processing Volume (Source: Company Reports)

Financial Highlights: During the year ended 31 March 2019, the company generated total revenue amounting to US$98.4 million, up 40% in comparison to prior corresponding period revenue of US$70.2 million. Revenue growth during the year was supported by continued delivery on the company’s growth strategy and product enhancement. Operating revenue for the period stood at US$95.9 million, up 42% on FY18 operating revenue of US$67.7 million. Earnings before interest, tax, depreciation, amortisation and foreign currency gains/losses (EBITDAF) amounted US$1.6 million, rising 108% in comparison to prior corresponding period loss of US$18.6 million. As a percentage of operating revenue, EBITDAF improved by 30 percentage points from -28% to 2%. NPAT for the period stood at US$18.8 million, representing an increase of 181% on previous year loss of US$23.3 million.

Changes in Customer Base: During the year, the company reported an increase of 5% in its customer base, from 7,276 customers in FY18 to 7,649 customers in FY19. The proportion of medium and large customers on the company’s platform increased from 51% to 56%, representing good progress on the strategy to drive growth through the addition of new medium and large customers. Over the remainder of FY20, the proportion is expected to grow further and will help boost growth in the years to come. As at 31 March 2019, 98% of Pushpay’s customers were from the US and Canada, with the remainder belonging to New Zealand and Australia. Total receipts from customers amounted to US$58.2 million, up 50% on $38.8 million in FY18.

As a result of the addition of new customers and a larger proportion of medium and large customers, the company witnessed an increase in the subscription fees received that, in turn, led to a rise in the average revenue per customer (ARPC). ARPC for FY19 stood at US$1,315 per month, up 33% in comparison to prior corresponding year’s ARPC of US$989 per month.

Customer Revenue Cohort: The business has a strong foundation in the form of consistent revenue received from customer cohorts on its platform. Over the period covering FY15 to FY19, cumulative revenue generated from customer cohorts has seen a continuous upward movement with substantial uplift during each year. In FY19, revenue from customer cohorts was reported at US$95.9 million as compared to US$67.7 million in the previous year.


Customer Cohort Revenue (Source: Company Reports)

Margin and Operating Leverage: During the year, the company improved its gross margin from 55% in FY18 to 60% in FY19 and is eyeing further margin growth in the future. Total operating expenses during the period remained stable, depicting an improvement of 28 percentage points in comparison to operating revenue. As compared to FY18, operating revenue increased at a rate of 42% and is expected to increase further. Thus, the company is looking forward to improve operating leverage by maintaining proper cost discipline, taking control over operating expenses while simultaneously increasing operating revenue.
 
In FY19, the company witnessed strong revenue growth and delivered the first positive EBITDAF result on the back of continued investment in product development and implementation of business strategy. Going forward, it will refine its existing strategies to deliver consistent revenue growth, achieve increased efficiencies and gain further market share in the US faith sector. Investments made in the best in class software tools and scalable processes along with strong financial discipline are expected to offer increased operating leverage in the near future.
 
Recent Updates: As per a recent announcement to the exchange, the company notified that the interim results Investor Briefing for the six months ended 30 September 2019, will be held on 06 November 2019. Financial results for the period will be released to the exchange prior to the call.
 
Top 10 Shareholders:The top 10 shareholders have been highlighted in the table which together form around 40.83% of the total shareholding. Christopher & Banks Private Equity Limited is the entity holding maximum shares in the company at 19.09%. DDS Trustee Services Ltd. is the second largest shareholder, representing a holding of 7.44% in the company.
 

Top Ten Shareholders (Source: Thomson Reuters)

Key Metrics: During the year ended 31 March 2019, the company had a gross margin of 60.5%, up on prior corresponding period margin of 55.3%. Current ratio for the company also improved from 2.06x in FY18 to 2.10x in FY19, representing an enhanced financial ability to meet short-term obligations.


 Key Metrics (Source: Thomson Reuters)
 
What to Expect: The company expects operating revenue for the year ended 31 March 2020 to be in the range of US$121.0 million – US$124.0 million. The guidance was revised from the previously stated range of US$122.5 million – US$125.5 million to incorporate the impact of lesser new customer acquisitions over the start of the financial year as compared to the previous year. EBITDAF for the year is now anticipated to be between US$23.0 million – US$25.0 million against the previous guidance range of US$18.5 million – US$20.5 million. The above changes came in as a result of lower cost generation expected in the second half of FY20. The cost efficiencies in conjunction with the accounting impacts of IFRS 16 are expected to result in lower expenses yoy. There was no change in the guidance for total processing volume which is expected to be in the range of US$4.8 billion – US$5.0 billion. Gross margin guidance also remained the same at 63%.


 Key Valuation Metrics (Source: Thomson Reuters)

Stock Recommendation: The stock of the company generated negative returns of 3.23% and 5.96% over a period of 1 month and 3 months, respectively. In FY19, the company delivered on its revenue and EBITDAF guidance along with improving operating leverage through strong financial discipline. Growth came on the back of successful implementation of the company’s strategy which will be refined further to promote growth over the long-term. The strategy will be directed towards achieving further market share in the medium-term which is believed to be a key catalyst in maximising shareholders’ value. In addition, the company is also eyeing for potential strategic acquisitions to add significant value to the current business. Addition of new customers into the business will remain a key target. The company increased its customer base in FY19 and is looking to expand it further with a continued focus on increasing the number of medium and large customers to escalate revenue growth. Recently, the company also revised the financial guidance for FY20 by increasing the EBITDAF forecast on the back of improved cost efficiencies. The revised guidance is a testimony to the fact that the company is progressing well towards its strategy to attain the increased operating leverage through maintenance of cost discipline. With the above scenario in place, Pushpay Holdings seems well positioned to add another year in its record of delivering on its guidance. Considering the above factors, we give a “Buy” recommendation on the stock at the current market price of $2.92, down 2.667% on 11 October 2019.
 
 
PPH Daily Technical Chart (Source: Thomson Reuters)

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