Can PushPay’s (ASX:PPH) acquisition accelerate growth?

Donor management platform provider PushPay (ASX:PPH) today announced the acquisition of Church Community Builder (CCB) in a deal worth US$87.5 million.

Founded in 1999, Church Community Builder sells a Church Management System (ChMS) and has over 4,000 existing customers. The cloud based platform enables churches to more effectively engage with their community and manages a range of administrative functions.

PushPay has a longstanding relationship with CCB, with the company’s payment solution already able to be integrated in CCB’s CHMS. It’s a highly complimentary offering, and is expected to enhance revenue growth and margin improvement once the platforms are further integrated.

It appears around half of CCB’s customers are already with PushPay, with the acquisition expected to boost total customer numbers from around 8,000 to 10,000. That provides a decent cross-sell opportunity, and a more complete offering should also arm the sales team with an improved customer value proposition.

It’s also encouraging that CCB’s founder will be joining PushPay’s board and taking a 2.4% interest in the combined group. Those shares will, however, be acquired directly off PushPay co-founder Chris Heaslip, who has been reducing his stake in the company and will be stepping down from his director duties once the deal is complete.

The financial performance of CCB was not disclosed, and the deal isn’t expected to change PushPay’s results for the current year (ending March 31, 2020) due to the added development spend needed to properly integrate the two offerings. It is expected to be accretive (on a pre-tax operating cash flow basis) in the following year, though, with “material” benefit from FY2022 onwards.

The deal seems to make a good deal of strategic sense, and the market’s reaction has (at the time of writing) been a positive one with shares up ~4% to an 18-month high.

Still, US$87.5 million is a lot of money — roughly 12% of the total market value of PushPay — and is majority funded through debt. Although the deal looks to have good potential, its real worth will depend on exactly how much it can accelerate the company’s growth.

At this stage, that appears difficult to judge.

Nevertheless, there’s no denying PushPay has big potential, with the company previously stating a long-term target of $1 billion in revenue — about eight times the current take. Hopefully, the CCB integration will help PushPay more easily realise its ambitions, but only time will tell.

Ranked #1 on Strawman, PushPay has long been a community favourite and shares remain below the community consensus valuation.

Strawman is Australia’s premier online investment club. Join for free to access independent & actionable recommendations from proven private investors.

Disclaimer– The author may hold positions in the stocks mentioned in this publication, at the time of writing. The information contained in the publication and the links shared are general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. For errors that warrant correction please contact the editor at [email protected].

© 2019 Strawman Pty Ltd. All rights reserved.

| Privacy Policy | Terms of Service | Financial Services Guide |

ACN: 610 908 211

Leave a Reply

Your email address will not be published. Required fields are marked *

Subscribe to our
Capitalize on low hanging fruit to identify a ballpark value.