The PayGroup (ASX:PYG) share price jumps 6% on record FY21 results

Today’s announcement is bringing life back to the depressed PayGroup share price. Here’s why.

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A happy woman raises her face in celebration, indicating positive share price movement on the ASX

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The PayGroup Ltd (ASX: PYG) share price has bounced strongly off record all-time lows, reaching an intraday high of 48.5 cents this morning. The company announced a record set of FY21 results after market close on Monday.

At the time of writing, the PayGroup share price is trading at 46.5 cents, up 5.68%.

PayGroup provides payroll and cloud-based Software as a Service (SaaS) human resource solutions. The company has a turnover of more than 6 million payslips and transactions per year for clients in more than 40 countries.

Why the PayGroup share price is bouncing off record-lows

PayGroup achieved its maiden full year of positive earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $1.6 million compared to its $0.6 million loss in FY20. Factors including improved operating leverage attributable to higher revenue, strong sales momentum and disciplined management of operating costs helped drive its financial performance.

In FY21, PayGroup achieved a record exit annualised recurring revenue of $27.2 million, a 53% increase on FY20 figures. This translated to a $16 million in revenue, representing 47% growth on FY20. Its increasing top-line growth was driven by an increase in payslips processed, combined with organic growth across its human capital management modules.

The company’s strong financial performance was underpinned by record new contract wins during FY21, worth $13.7 million, representing a 149% increase on FY20 contract wins. The strong growth not only contributes to the company’s record financial performance but also reflects the growing demand for its solutions and broader demand for the digitisation of human resource functions.

The company successfully completed 4 acquisitions in FY20, significantly expanding its market opportunity and capabilities. The announcement highlighted an expansion in its human resource management offering, with 11 new high margin modules and the addition of a highly specalised franchise payroll vertical.

Despite the company’s market capitalisation of just ~$50 million, it remains “well capitalised” with $12.2 million of cash at 28 May 2021.

The PayGroup share price has taken a beating in recent months, from highs of 75 cents in January to a close of 44 cents on Monday. It’s a positive to see an upbeat FY21 performance bringing life back to its share price on Tuesday.

Management commentary

PayGroup managing director and founder Mark Samlal commented on the results, saying:

We are extremely proud of the record results we have achieved in FY21. Despite the significant disruption to economies and markets as result of the global pandemic, PayGroup has delivered its first full year of positive EBITDA alongside strong ARR and statutory revenue growth.

We are excited by the opportunities ahead in FY22 underpinned by the strong momentum of FY21 and the significant digitisation tailwinds we have observed over the past year. The scale we continued to achieve across the business provides a strong foundation for sustainable long-term growth

Outlook

Another potential driver for the PayGroup share price today is the strong momentum its carrying through to FY22.

The results highlight continued industry tailwinds that the company anticipates will present further opportunities to growth revenues, as businesses increasingly look to digitise their human resources activities.

Paygroup expects its investment into its sales team in FY21 to continue to pay dividends. Alongside plans to further drive its operating leverage through the continued monetisation of activities which is expected to improve margins.

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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