Pushpay Holdings Ltd (ASX: PPH) has just reported its FY21 half-year result. I think the Pushpay share price looks like a buy after the report.
Pushpay’s large HY21 growth
The electronic donation business’ largest client base is the large and medium US church sector. More people are donating electronically because of COVID-19 impacts.
Pushpay reported that for the six months to 30 September 2020, its operating revenue increased by 53% to US$85.6 million and total revenue rose 51% to US$86.6 million.
Total processing volume went up 48% to US$3.2 billion. It’s expecting more volume as it wins more churches and more people adopt Pushpay’s technology.
Management said it expects to see continued revenue growth as the business executes on its strategy, achieves increased efficiencies and gains further market share in the US faith sector.
Due to its software nature, Pushpay reported further strengthening of its margins. The gross margin improved from 65% to 68%. The company expects the gross margin to stabilise around the current levels over the remainder of the rest of FY21 despite the second half typically being weaker.
Expenses only grew by 16% (compared to revenue growth of more than 50%). This meant that total operating expenses as a percentage of operating revenue improved by 12% from 50% to 38%. That shows how scalable the business is. Management believe that significant operating leverage can still be achieved.
One of the company’s main profitability metrics is EBITDAF (click here to learn what EBITDA means – the F stands for foreign currency). Pushpay reported that its EBITDAF grew by 177% to US$26.7 million. As a percentage of operating revenue, the EBITDAF margin grew from 17% to 31%.
Net profit before tax grew 121% to US$18.8 million and net profit after tax (NPAT) went up by 107% to US$13.4 million. The NPAT margin improved from 12% to 16%.
Operating cashflow, which some investors think is even more important, grew by 203% to US$27 million. Management said that it continues to assess other potential acquisitions to broaden its services and add value.
The company also announced there will be a four-for-one split of Pushpay shares to increase liquidity and attract more shareholders.
Churchstaq
Churchstaq is a combined offering from Pushpay and Church Community Builder, a business it acquired in late 2019. Sales from Churchstaq has outperformed internal expectations which reinforces management’s theory that a majority of customers prefer an integrated end-to-end solution.
Profit guidance improvement
Pushpay has increased its EBITDAF guidance again, by US$4 million. The new guidance is for full-year EBITDAF to be between US$54 million to US$58 million, up from US$50 million to US$54 million.
Why I think Pushpay’s share price is a buy
Pushpay is demonstrating that it’s extremely scalable. The fact that the EBITDAF margin improved by 14 percentage points in just one year is a huge improvement. I think it’s a great business.
It could make very large profits if its revenue can get close to its US$1 billion annual revenue goal.
Revenue alone is growing at a strong pace. If margins keep rising then the EBITDAF and net profit can rise even faster for a long time, which is largely why I’m attracted to Pushpay. But I also like that it could expand to other countries, other religions or even just other ‘donation sectors’ like poverty, education or anything else.
In my opinion, Pushpay is one of the best ASX growth shares around and I would want to have it in my portfolio at today’s Pushpay share price.
