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Pushpay delivers explosive growth and expects even more in FY 2021

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The Pushpay Holdings Ltd (ASX: PPH) share price will be on watch on Wednesday after the release of its full year results.

How did Pushpay perform in FY 2020?

This morning the donor management system provider revealed that it achieved its guidance in FY 2020.

For the 12 months ended March 31, Pushpay delivered a 39% increase in total processing volume to US$5 billion and a 33% increase in operating revenue to US$127.5 million.

This was driven by the targeted implementation of its strategy, growing team capabilities and expertise, and responsible investment into product design and development.

Its top line was also given a small boost by the acquisition of Church Community Builder. Excluding this acquisition, Pushpay’s operating revenue would have been up 28% on the prior corresponding period.

Pleasingly, management expects to see its revenue growth continue as it executes on its strategy, achieves increased efficiencies, and gains further market share in the US faith sector.

Another positive was the company’s gross margin, which has expanded by 5 percentage points from 60% to 65% in FY 2020. Management expects margin improvement initiatives and the Church Community Builder acquisition to lead to further gross margin expansion in FY 2021.

Operating leverage achieved.

Pushpay’s operating leverage was on display for all to see in FY 2020. Although its operating revenue increased 33%, its operating expenses only lifted by 5%. This means that as a percentage of operating revenue, its operating expenses reduced from 65% to 52%.

This led to a massive increase in its EBITDAF during the year. Pushpay reported EBITDAF of US$25.1 million, up 1,506% from US$1.6 million in FY 2019. Excluding one-off acquisition costs, EBITDAF would have been US$27.8 million.

This compares to its original guidance of US$17.5 million and most recently updated guidance of US$25 million to US$27 million.

On the bottom line the company posted a net profit after tax of US$16 million. While this was down 15% year on year, the previous year included a one-time benefit of US$20.9 million from unrecognised tax losses and deferred R&D expenditure.

Finally, operating cash flow improved by US$26.3 million from negative operating cash flows of US$2.8 million to positive operating cash flows of US$23.5 million.

Outlook.

While a number of organisations have temporarily closed their doors in response to COVID-19, Pushpay has seen a clear shift to digital. It notes that customers are utilising its mobile first technology solutions to communicate with their congregations.

In light of this, management expects further strong revenue growth in FY 2021.

It expects this to lead to FY 2021 EBITDAF of between US$48 million and US$52 million. This will be a 91.2% and 107% increase, respectively, year on year.

Looking further ahead, Pushpay is aiming to grow its share of the medium and large church segments to 50%. This is an opportunity representing over US$1 billion in annual revenue. Which goes to show just how long a runway for growth the company still has.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia has recommended 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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