Pushpay (ASX:PPH) share price crashes 20% on results and guidance downgrade

Pushpay’s shares are deep in the red on Wednesday…

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The Pushpay Holdings Ltd (ASX: PPH) share price is under pressure on Wednesday morning following the release of its half year results.

At the time of writing, the donor management focused payments company’s shares are down 20% to $1.43.

This leaves the Pushpay share price trading within a whisker of its 52-week low.

Pushpay share price crashes after half year results

  • Total Processing Volume increased 9% to US$3.5 billion
  • Operating revenue up 9% to US$93.5 million (7% excluding Resi Media acquisition)
  • Annual revenue retention of 110%
  • Gross margin widened from 68% to 69%
  • Underlying EBITDAFI (operating earnings) increased 12% to US$29.6 million
  • Net profit after tax up 43% to US$19.1 million
  • Total customers up 29% to 14,095
  • Total lifetime value (LTV) of customer base increased 20% to US$4.5 billion

What happened in the first half?

Management notes that after a softer than expected first quarter, processing volumes bounced back strongly during the second quarter. This led to Pushpay delivering a 9% increase in both total processing volume and operating revenue during the first half.

This was underpinned by an increase in customers and a 7% lift in average revenue per customer to US$1,348 per month excluding the Resi Media acquisition.

Positively, the company expects further growth in total processing value. This is expected to be driven by continued growth in the number of donor management system products utilised by customers, further development of its product set resulting in higher adoption and usage, and increased adoption of digital giving in its customer base.

However, as you might have guessed from the Pushpay share price performance today, this growth isn’t expected to be strong enough for the company to achieve its earnings guidance in FY 2022.

During the first half, Pushpay delivered underlying EBITDAFI growth of 12% to US$29.6 million. This meant it would require a big second half to achieve its previous FY 2022 EBITDAFI guidance of US$66 million and US$71 million.

And management doesn’t appear to believe that will be the case. As such it has downgraded its underlying EBITDAFI guidance to between US$62 million and US$67 million. This is up from US$58.9 million in FY 2021.

Management commentary

Pushpay’s CEO, Molly Matthews, was pleased with the company’s performance during the half.

She commented: “We are pleased to deliver our results for the first six months of the 2022 financial year. Pushpay continued to deliver revenue growth, Total Processing Volume growth, net profit growth and EBITDAFI growth over the period, whilst maintaining sustainable margins and underlying operating metrics.”

“Over the period, Pushpay further set the foundation for future growth. We increased the number of Products purchased and welcomed new Customers, while continuing to successfully realise strategic product bundling opportunities within the Customer base. We completed the strategic acquisition of Resi Media and made significant enhancements to our existing product suite.”

“Our performance represents the value that our Customers attribute to Pushpay’s differentiated solutions and the meaningful progress achieved as we continue to execute against our strategic goal of being the preferred provider of mission-critical software to the US faith sector,” she added.

Catholic expansion

Pushpay provided the market with an update on its previously announced expansion into the Catholic church market.

The release explains that Pushpay’s Catholic product brand for the Pushpay suite of solutions, ParishStaq, was introduced to a targeted group of priests, parishes and dioceses at the 2021 International Catholic Stewardship Conference.

As Pushpay increases its presence within the Catholic segment, it notes that it is seeing the majority of Catholic customers adopt the ParishStaq platform. Management feels this further validates the market hypothesis around the efficacy of a full product solution for both Protestant and Catholic churches.

Pushpay is currently focused on engagement and ramping go-to-market resources for the Catholic initiative. It expects the benefits from the Catholic segment to be realised incrementally over the course of the following years.

Outlook

As mentioned above, the reason the Pushpay share price is falling today is its outlook commentary.

Instead of EBITDAFI of US$66 million to US$71 million in FY 2022, management now expects it to be in the range of US$62 million and US$67 million. This represents year on year growth of 5.3% to 13.8%.

Management commented: “During the first quarter of this financial year, we experienced lower Total Processing Volume growth than expected, with the second quarter improving with double digit growth compared to the same period last year. The level of digital penetration within our Customer base has remained consistent. We have also seen ongoing impacts from the COVID-19 environment, with consolidation of some churches, particularly in the small segment, and slower decision making on new subscriptions, particularly over the US summer holiday period. We have plans in place to address this and expect to see this improve.”

Pushpay also revealed that rising wages are impacting its financial performance.

“Like other organisations, Pushpay has felt the impacts of rising wage pressures of the competitive hiring and retention environment in both the US and New Zealand markets, particularly in the IT sector. As we remain committed to attracting and retaining high-quality talent, staff costs have increased higher than originally anticipated, as we respond to the competitive environment.”

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Motley Fool contributor 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 and has recommended PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. 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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