PushPay’s (ASX:PPH) Outstanding First Half Results

Pushpay (ASX:PPH), a developer of a payments platform for the faith sector, has delivered an impressive result for half year ending September 2019. Let us count the ways.

Revenue increased 30% to US$57.4 million, underpinned by 6.5% rise in customer numbers, a 45% lift in processing volume and a 20% increase in average spend per customer. Although the pace of revenue growth is slowing as the business increases in size (it’s far easier to grow off a small base!), Pushpay has carved out an enviable track record of top-line growth.

With the business having now pivoted passed break-even, the improvement to the bottom line is especially noteworthy.

Net profit after tax came in US$10.9 million higher at US$6.5 million for the half year. Importantly, that was aided by an increase in the group’s gross margin (from 57% to 65%) and a 2% decrease in operating expense.

This is how you scale.

For the six months through to the end of September, Pushpay reported US$8.9 million dollars in operating cash flows. With US$22.9 million of cash and term deposits and zero debt, the balance sheet is in rude good health — especially given revenue retention remains above 100%. This also gives Pushpay a good degree of optionality in terms of investment and acquisition potential.

For the full year, Pushpay has reiterated guidance for a ~25% lift in operating revenue to between US$121 – US$124 million. After already raising its forecast for operating profit (EBITDAF) twice in the past six months, the company has reiterated guidance for between US$23 – US$25 million in EBITDAF. That compares to just US$1.6 million in FY19, and gives another reminder of the operating leverage potential.

Based on this guidance, shares in Pushpay are presently trading on a forward price to sales ratio of ~4.7. The forward PE is likely ~38 times. For a business that is exhibiting such strong growth, and has a long term revenue target of US$1 billion, that current price seems undemanding — especially when viewed in the context of other ASX-listed tech companies.

It is perhaps a slowdown in customer acquisition that has dampened market enthusiasm in recent times. Nevertheless, according to the Strawman community, the value proposition remains compelling and shares remain below the consensus valuation.

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