The BNPL sector is becoming an increasingly crowded space as banks, online payment behemoths and competitors scramble for market share. One could argue that the likes of Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) may have already priced in recent geographic expansions, and additional capital raisings might be needed to fund further growth initiatives. While BNPL shares could continue to grow, here is one ASX tech share in the payments space that often goes by unnoticed.
Pushpay Holdings Ltd (ASX: PPH)
Pushpay has been a quiet overachieving ASX tech share in light of BNPL stocks that tend to take the limelight. The company provides a donor management system including donor tools, finance tools and a custom community app to the faith sector, non-profit organisations and education providers in the US, Canada, Australia and New Zealand.
Pushpay delivered solid revenue growth with expanding operating margins and operating cash flow improvements in FY20. The company completed the strategic acquisition of Church Community Builder, a US-based, leading provider of church management systems for a total cash consideration of US$87.5 million. It achieved or exceeded all guidance provided to the market over the year, including operation revenue, gross margin and total processing volumes.
The company is making a significant step towards profitability with operating cash flow increasing 953% to US$23.5 million up from negative US$2.8 million. Likewise, its net profit after tax significantly increased to US$16 million from a loss of US$1.4 million in FY19. Its previous financial year included a one-time benefit arising from previously unrecognised tax losses and deferred research expenditure of US$20.9 million which contributed to the net profit of US$18.8 million in FY19. Excluding the benefit would result in the loss of US$1.4 million in FY19.
COVID-19 has served as a tailwind for the digital business as client services move online. The company provided an earnings before interest, tax, depreciation, amortisation and fair value adjustments (EBITDAF) of between US$50.0 million and US$54.0 million. This would represent an increase of more than 100% on the prior corresponding period.
Why Pushpay could be a leading ASX tech share
The shift to digital apps within the faith sector, non-profit organisation and education space has seen an uplift in demand for Pushpay services. The company has already provided an outlook that EBITDAF would more than double against the prior corresponding period and has already transitioned into a profitable business. This is arguably a step ahead of many ASX tech shares, especially the likes of BNPL shares that could be years away from being cash flow positive businesses.