Pushpay (ASX: PPH) shares have been pushed even higher after increasing guidance at its AGM.
What is Pushpay?
Pushpay is a New Zealand based donation systems and software business for religious, not-for-profits and education providers in the US, Canada, Australia and New Zealand. Pushpay is used by over 7000 churches worldwide. The average gift is $192. Pushpay makes money by charging a subscription fee for its app but also from clipping the ticket on processing donations.
Why are Pushpay shares rising?
The Pushpay share price is up another 10% after increasing its guidance for the current financial year.
Pushpay was previously guiding that EBTIDAF (click here to learn what EBITDAF means, the F stands for foreign currency) in FY21 would be between US$48 million to US$52 million. Pushpay is now guiding that EBITDAF will be between US$50 million and US$54 million.
The donation business achieved EBITDAF of US$25.1 million in FY20, up from US$1.6 million in FY19. That means Pushpay is expecting to add around 100% to its EBITDAF in FY21, and add more in dollar terms than what it added in FY20.
Operating cashflow also looks like it’s going to keep going up strongly. In FY20 Pushpay grew operating cashflow by 953% from negative US$2.8 million to US$23.5 million.
Pushpay is expecting further margin improvements in FY21. In FY20 the company increased its gross margin from 60% to 65%. While Pushpay increased operating revenue by 33% to US$127.5 million over the FY20 year, total operating expenses increased by only 5%. That’s why, as a percentage of operating revenue, total operating expenses improved by 13% from 65% to 52%.
The Church Community Builder acquisition also seems like a smart buy as it’s described as the industry leader in church management software, it provides key data to the church on congregants’ engagement.
Pushpay seems like one of the most promising growth shares on the ASX these days. It is continually increasing its guidance and beating expectations. The combination of rising revenue and growing margins is a great mix. I think it’s one to watch, though the strong share price movements means investors should be a little more cautious than a few weeks ago.
I’d be willing to buy Pushpay shares today for the long term.
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Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned.
