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Should you buy this fintech star after its explosive first half sales growth?

In morning trade the Pushpay Holdings Ltd (ASX: PPH) share price has dropped lower following the release of its half year results.

At the time of writing the payment solutions company’s shares are down 3% to $3.39.

Here is a quick summary of how Pushpay performed in the first half in comparison to the prior corresponding period:

  • Half year revenue up 48% to US$44 million.
  • Total customers increased 4.2% to 7,420.
  • 55% of top 100 U.S. churches on board.
  • Average revenue per customer up 34.2% to US$1.060 per month.
  • Months to recover cost of acquisition stable at 18 months.
  • Half year net loss of US$4.4 million, down from a loss of US$12.5 million.
  • Cash and available funding of US$12.5 million, down from US$25.5 million.

I thought this was a strong half from Pushpay and largely in line with the market’s lofty expectations.

The company’s half-year revenue of US$44 million was driven through the targeted implementation of its strategy, growing team capabilities and expertise, and responsible investment into product design and development.

Management advised that its narrowing net loss reflects its continued investment in growing the business, while working towards being breakeven on a monthly cash flow basis by the end of December.

It also pointed to its adoption of best in class software tools and scalable processes early in its development as a key factor in its improved performance. Combined with strong financial discipline, it believes those investments allow significant operating leverage to be achieved as its revenue grows.

One slight concern that investors may have is that the level of customer growth has been slowing over the last 12 months. It is worth noting that this is due to its strategy of targeting medium to large customers. The success of this strategy has been the driver of the strong increase in average revenue per customer metric.

Outlook.

Management remains confident that it will achieve its target of being breakeven on a monthly cash flow basis prior to the end of calendar year 2018. Once this has been achieved it expects to have positive cash flows on an ongoing basis.

In the long-term management is targeting over 50% of the medium and large church segments, which is an opportunity representing over US$1 billion in annual revenue.

In the short term, it has provided revenue guidance of between US$97.5 million and US$100.5 million for the full year.

Should you invest?

While Pushpay’s shares are a little on the expensive side, I think its leading position in this niche market has positioned it perfectly to deliver strong growth over the long-term.

Overall, I think this makes it a fintech share to consider along with the likes of Afterpay Touch Group Ltd (ASX: APT) and Bravura Solutions Ltd (ASX: BVS).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO, Bravura Solutions Ltd, and PUSHPAY FPO NZX. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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