The Pushpay Holdings Ltd (ASX: PPH) share price is on watch after the electronic donation company announced the acquisition of Resi Media.
Pushpay to buy Resi Media
The ASX digital donation stock is going to buy 100% of Resi Media for US$150 million in cash and Pushpay shares. This represents 8.8 times FY21 revenue. It will be US$110 million cash and US$40 million of Pushpay shares.
What’s Resi Media? It’s based in the US. Pushpay described it as a high-growth software as a service (SaaS) company with a market leading streaming platform serving over 3,900 customers, mostly in the faith sector.
Some of those customers include more than 70% of the Outreach 100 largest churches in the US.
The offering includes live streaming services to web, social media, mobile apps and other locations and multisite streaming. Pushpay said its resilient streaming protocol protects against audio and video quality loss during transmission, regardless of network interruptions.
What makes this transaction compelling?
In other words, why could this help Pushpay’s share price and prospects over the long-term?
Pushpay said that the streaming platform would broaden its core product offering and enhance the company’s value proposition to customers, strengthening its digital technology strategy maintaining its position at the forefront of innovation in the faith sector.
The company also said it would add a further stream of high growth, high margin SaaS revenue.
Pushpay pointed out that Resi Media has a large total addressable market across all church segments, not-for-profit organisations and other verticals.
Management believe that there are material synergy opportunities through product cross-sell and integration with Pushpay’s sales and marketing engine.
Resi’s executive team will continue leading the business, with Paul Martel remaining as the CEO. Mr Martel has eight years of software product management. Collin Jones will remain President of Resi. Brad Reitmeyer will continue as the chief technology officer. It’s a good sign that Pushpay want the management to stick around, and that the management want to stay rather than just cashing in.
Summary thoughts on the Pushpay share price and the deal
This seems like a really good deal by Pushpay. Digital and video streaming seems to be the way the world is going, so Pushpay needs to make sure it’s at the forefront of technological advancement in the sector.
We’ll have to see over time if Pushpay paid a good price for it or not. But, owning another business that is growing quickly, with a high margin SaaS model, seems attractive to me. The more Pushpay can offer its clients, the more profit it can make from each client (increasing their value) and the more sticky churches are likely to be as clients. The Pushpay business is already growing nicely.
Before this acquisition, CommSec numbers showed that the Pushpay share price was at 27 times the estimated earnings for the 2023 financial year.
