Four ASX shares that are climbing more than most today are listed below. Here's why they are pushing higher:

Australia and New Zealand Banking Group Ltd (ASX: ANZ)

The ANZ share price is up 1.5% to $22.15. Investors have been buying this banking giant's shares amid rumours that it could be making a major acquisition. ANZ is understood to be running the rule over a multi-billion-dollar purchase of accounting software company MYOB. The bank is believed to be interested in building a one-stop platform for small businesses.

Block Inc (ASX: SQ2)

The Block share price is up 3% to $87.49. This is despite the payments giant's US listed shares having an average night on Wall Street. However, when adjusting for current foreign exchange rates, this gain brings Block's ASX listed shares largely in line with the value of their US counterparts.

Bubs Australia Ltd (ASX: BUB)

The Bubs share price is up 3% to 64 cents. This follows the release of yet another announcement relating to its US infant formula shipments. Today's update, the sixth in the space of a month, reveals that two planes have been sourced for its next shipments. No changes have been made to Bubs' overall plan to ship 1.25 million tins to the US to help with shortages.

PayGroup Ltd (ASX: PYG)

The PayGroup share price is rocketing 157% higher to 94 cents. The catalyst for this impressive gain has been a takeover approach for the human capital management (HCM) solutions company. According to the release, Deel has offered $1 per share in cash, which equates to a total consideration of $119.3 million.

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Since then, shares in the human capital management (HCM) solution company have slightly retraced to 92.5 cents, up 153.43%.

Let's take a look below at what the company updated the market on.

Deel advances acquisition of PayGroup

In its release, PayGroup announced it has entered into a Scheme Implementation Agreement with Deel, Inc. and Deel Australia.

Established in 2019, Deel helps businesses hire independent contractors and full-time employees by using a tech-enabled self-serve process. The company has a presence in over 150 countries and services more than 8,000 customers.

By way of a scheme of arrangement, Deel is seeking to acquire 100% of the ordinary shares in PayGroup.

Under the terms of the deal, PayGroup shareholders will receive cash consideration of $1 for each PayGroup share held. This represents a 174% premium when compared to yesterday's closing price of 36.5 cents.

The consideration implies a total value of around $119.3 million, subject to certain customary conditions.

The PayGroup Board noted that it unanimously recommends that all shareholders vote in favour of the Scheme.

If approved along with the court order, the deal is expected to be complete in October 2022.

With investors digesting the company's latest news today, the PayGroup share price has soared into uncharted territory.

PayGroup managing director, Mark Samlal commented:

We are delighted by this proposed transaction with Deel.

The value offered is testament to the strength of the PayGroup business we have grown over the last 4 years since listing on the ASX in 2018.

We have built a high-quality business with strong, recurring revenues from blue-chip customers across Asia-Pacific and beyond.

We are immensely proud of the achievements of the PayGroup team and we look forward to continuing to build this together as part of Deel, one of the world's fastest growing and leading global compliance and payroll solution companies.

About the PayGroup share price

Adding to today's euphoric gains, the PayGroup share price has accelerated by 172% since the start of 2022.

When looking at the past 12 months, the company's shares are up 101%.

Based on today's price, PayGroup commands a market capitalisation of around $43.19 million.

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PayGroup shares may be getting impacted by the wider Omicron variant led market selloff, which is seeing the All Ordinaries Index (ASX: XAO) down 0.6% at time of writing.

Below, we take a look at the Software as a Service (SaaS) company's half year results for the 6 months ended 30 September (1HFY22).

What half year results were reported?

The PayGroup share price is wobbling despite the company reporting an 83% increase in statutory revenue of $12.8 million.

New contracts signed reached a record $9.6 million, up 78% on the prior corresponding period.

Normalised earnings before interest, taxes, depreciation and amortisation (EBITDA) of $1.5 million, excluding one-off expenses and acquisition costs, slipped from $1.8 million in 1HFY21. PayGroup said that this figure incorporates continued investment in its platform capabilities for future growth.

The company said that it is currently servicing more than 2,500 enterprise customers.

Commenting on the half year results, PayGroup's managing director Mark Samlal said:

Our strong operational performance and continued investment in our platform underpins our ability to scale the payroll business, expand margins and execute on key monetisation opportunities going forward.

We have made significant progress to date and are excited by the organic opportunities in FY22 and beyond. This is reflected in the growth of our current pipeline, which is 6 times larger than 12 months ago. We are highly confident that we have the right foundations in place and remain focused on delivering on key organic opportunities to drive sustainable long-term growth.

Samlal also reaffirmed the company's guidance. "We have affirmed FY22 ARR [annual recurring revenue] guidance of at least $37 million and provided FY22 statutory revenue guidance of $26 million, which represents more than 95% of the exit ARR announced at FY21," he said.

PayGroup share price snapshot

The PayGroup share price has struggled in 2021, down 28%. That compares to 10% year-to-date gain posted by the All Ords.

Over the past month, PayGroup shares are down 16%.

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At the time of writing, PayGroup shares are nearing their 3-month high. They are trading for 53 cents apiece, up 6% for the day.

How did PayGroup perform for the September quarter?

In its release, PayGroup reported a robust 3 months of trading for the period ending 30 September 2021.

The company signed a record $5 million in new contracts, which represents a 7% improvement on the previous quarter's record. This brings the total sales value for the first half of FY22 to $9.6 million, up 78% compared against H1 FY21.

The 3-year contracts included a number of well-known companies such as Hudson RPO, Dexus, and Canaccord Genuity.

In a further possible boost to the PayGroup share price, the company continues to see significant momentum in the number of payslips processed. The expansion of the Laser Clinics International franchise network has led to PayGroup now providing payroll solutions for the company.

Laser Clinics International operates in North America, Australia, New Zealand, Asia, and Europe.

At an annualised rate, payslips processed stands at 7.5 million, reflecting 25% organic growth over FY21.

The Global Partner Program (GPP) sales channel has delivered PayGroup a significant stream of referrals and new contracts.

During Q2 FY22, PayGroup expanded its geographic reach and sales opportunities with new GPP agreements covering Canada and Africa. This brought the total number of countries PayGroup can service from 41 to 75 countries.

At the end of the quarter, the company held a cash balance of $7.6 million, and maintained its debt-free position.

Guidance upgrade

As a result of the robust trading conditions, PayGroup announced it has upgraded its outlook for FY22.

For the financial year, annualised recurring revenue is projected to be at least $37 million, up 36% on FY21. This is being underpinned by increasing demand for the company's core payroll solutions.

Commenting on the news possibly fuelling the PayGroup share price, founder and managing director Mark Samlal said:

We are delighted to report the strong growth of the core payroll business across 1H FY22, and provide upgraded guidance underpinned by the significant sales momentum we are experiencing.

PayGroup continues to benefit from the investment in our sales team, with our pipeline of opportunities now 5x bigger than this time last year. We remain focused on scaling our core payroll business, which provides a large and growing number of end users to drive ongoing monetisation opportunities.

PayGroup share price summary

Despite today's jump, the PayGroup share price is down roughly 5% for the year, and 10% in 2021.

The company has a market capitalisation of around $60.95 million and has approximately 115 million shares on its books.

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The S&P/ASX 200 Index (ASX: XJO) is also having a pretty decent day today, up 0.7% so far today to 7,360 points. But PayGroup is certainly delivering some very impressive outperformance today. So why is this company hitting its stride so enthusiastically?

Well, it's almost certainly due to the market update the company released to investors this morning.

This was a quarterly business update, as well as revised guidance for the 2022 financial year (FY2022). Let's dive in.

Quarterly results, guidance update

So PayGroup reported that the quarter ending 30 June 2021 saw PayGroup record $4.6 million in new contracts, a 53% increase over the prior corresponding period. 28% of these new contracts came from PayGroup's Global Partner Program, which is a "significant increase" on previous quarters". Additionally, the company saw a 12% increase in annualised payslips from 6 million at the start of the quarter to 6.7 million by the end.

PayGroup also reported that as of 30 June, the company's cash balance stood at $12.5 million, with no debts. According to PayGroup, this makes the company "well positioned to capitalise on growth initiatives".

But let's talk about PayGroup's FY2022 guidance. So PyaGroup expects to receive between $35 million and $37 million in annualised recurring revenue (ARR) for FY2022. This is an increase of 29-36% from the company's ARR of $27.2 million that it recorded at the conclusion of FY21.

Here's some of what Mark Samlal, founder and managing director of PayGroup, had to say in today's announcement:

FY22 will be a significant year for PayGroup. The guidance we announce today highlights the exciting
growth profile of the business and our ability to consistently execute on our proven strategy. With the
platform now in place and our technology roadmap underway, we are focused on extracting the significant
embedded value across the Group in the interest of long-term shareholder value creation.

About the PayGroup share price

Although PayGroup shares are up more than 8% today, PayGroup is still down around 14.5% year to date in 2021 so far, and down more than 29% over the past 12 months. It also remains down 30.3% since its IPO back in 2018.

At the current share price, PayGroup has a market capitalisation of $56.35 million.

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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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At close of trade today, the PayGroup share price was at 62.5 cents – 0.79% lower. For comparison the S&P/ASX All Ordinaries Index (ASX: XAO) finished the day up 0.68%.

What did PayGroup announce to the ASX today?

In a statement to the ASX, the business software gave several announcements regarding its business. These were:

• An upgraded earnings guidance for FY21.
• A strategic acquisition.
• Confirmation of commitments to raise $15 million via an institutional placement, and
• A share purchase plan offer to eligible shareholders to raise $1 million.

FY21 earnings guidance

PayGroup has announced a further revision of its earnings guidance for FY21, just over two weeks from its first guidance update for FY21. In today's announcement, the company said it expects annualised recurring revenue (ARR) for the financial year to equal $21.5 million. That's $1 million above the last guidance.

Furthermore, the company said it expects the value of new contracts signed this financial year to total $13 million. This is $3 million above the last guidance.

Strategic acquisition

In its second announcement today, the company advised it would purchase 100% of Integrated Workforce Solutions (IWS).

IWS is a workforce management software platform "specialising in solutions for the franchise sector in Australia and New Zealand." IWS already has 1,000 customers and processes 400,000 payslips a year. PayGroup says the platform has a customer retention rate of 94%.

The total cost of the purchase to PayGroup is $15.3 million. The payment compromises a $12.75 million initial consideration ($8.4 million of which is payable in cash and the rest in PayGroup equity). The company will pay the remainder of the fee if key revenue and profit targets are met during FY22 and FY23.

PayGroup expects the acquisition to make "a material contribution" to the company's growth going forward due to increased ARR and gross margins. This should bode well for the PayGroup share price.

$15 million institutional placement

PayGroup claims in today's statement it has "secured firm commitments from new and existing investors" to raise $15 million before costs. 26.8 million shares will be issued at price of 56 cents each, which represents an 11.1% discount on the previous trading day's close.

$1 million share purchase plan

Existing, eligible shareholders in the company will be able to purchase up to $30,000 worth of new shares each under a plan to raise approximately $1 million. To be an eligible shareholder, an investor must reside in Australia or New Zealand and have held shares in the company as of 7:00pm on 30 March 2021.

The new shares will be sold at a price of 56 cents each.

PayGroup share price snapshot

Over the last 12 months, the PayGroup share price has increased a modest 7.76%. In June 2020, the PayGroup share price hit a 52-week record of 90.5 cents. Since then, the value of the company has dropped by 30.94%.

At today's market price, PayGroup has a market capitalisation of $51.6 million.

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By comparison, the All Ordinaries Index (ASX: XAO) is up by only 0.11% for the day so far.

Let's take a closer at what PayGroup announced regarding its earnings guidance.

What did PayGroup announce?

The PayGroup share price received a boost today after the company declared it expects annualised recurring revenue (ARR) for FY21 to be 15% greater than in FY20. The group estimates ARR for FY21 to total $20.5 million. This is despite the effects COVID-19 has had on the business.

In further news pumping up the PayGroup share price, the company revealed it expects to complete approximately $10 million worth of new contracts during the period. That's an 81.8% increase on FY20. The number of payslips and transactions processed is expected to grow from 4.7 million in FY20 to 5.5 million in FY21.

Full results for FY21 (12 months ending 31 March) will be published in May 2021.

Words from the managing director

Mark Samlal, PayGroup managing director, said the following with today's update:

FY21 continues to be a landmark year for PayGroup as the business continues to achieve significant growth since our IPO in 2018. The FY21 guidance we have released today highlights the accelerating traction of our multi-country payroll solutions, underpinned by our local regulatory and compliance expertise across [the Asia-Pacific region].

The large customer base of multinational enterprises provides significant organic growth potential as we introduce more customers to the broader HCM product suite. Growth remains the key focus, as we continue to leverage our leading sales capabilities to scale the business in order to maximise shareholder value.

PayGroup share price snapshot

Near the end of March last year, the PayGroup share price reached its 52-week low of 43.5 cents. Since then, the company's value has increased by more than 50%. Yet, only three months after bottoming out, the company's shares peaked at 90.5 cents – around 108% higher than their current value.

Based on the current PayGroup share price, the company has a market capitalisation of $50 million.

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The human capital management (HCM) solutions provider noted some record numbers for the business for FY21. Let's take a look at them.

What's driving the PayGroup share price up?

Sales growth

For the 9 months to 31 December 2020, PayGroup experienced significant sales growth. More specifically, the company reported signing a total contract value (TCV) of $8.2 million for FY21 period to date.

This indicates a 200% increase in TCV compared to the prior corresponding period. Similarly, this represents an increase of 149% on FY20 total combined sales.

PayGroup noted that 34% of the total $8.2 million TCV was signed during the most recent quarter. Management puts this milestone down to overall success across all business divisions of the group. Reportedly all contracts signed during this time are for a secured minimum 3-year term.

The new contract sales have also added 115 new client entities to the group, 37 of which are derived from PayGroup's Australian subsidiary AstuteOne.

Acquisition performance

In addition to the sales update, PayGroup also provided details on the performance of the recent acquisitions of TalentOz and Payroll HQ. Stating that these acquisitions have further cemented the group's payroll and HCM capabilities across Australia, Malaysia, and New Zealand.

Reportedly, both acquisitions have provided sales growth to the group through their continued integration. The group intends to seek out further growth opportunities for TalentOz and Payroll HQ heading into FY22.

The PayGroup share price has increased by 21.6% since it announced the completion of its TalentOz acquisition.

Looking ahead

PayGroup managing director Mark Samlal welcomed the results, saying:

We continue to break the group's sales records quarter on quarter. It is most pleasing that the contribution comes from all parts of the PayGroup network and business divisions – including our Global Partner Program and recent strategic acquisitions, both which continue to deliver strong results.

PayGroup is committed to expanding our global sales channels to sustain the momentum generated in FY21, and our strong sales is a direct indication of our top line growth ambitions – with recent contract signings impacting not just FY21, but our forward planning for FY22 and beyond.

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Let's take a closer look and see how the human capital management (HCM) solution company performed last month.

What's driving the PayGroup share price higher?

The PayGroup share price was on a tear today after the company reported trading conditions for its subsidy, AstuteOne, have rebounded strongly from the impacts of COVID-19.

The company said that AstuteOne delivered a 43% increase in timesheets throughout November for both Australia and New Zealand. This was compared with the June period, during which the business was most heavily impacted by COVID-19 restrictions.

PayGroup highlighted that AstuteOne's clients, which primarily comprise workforce management companies, provide a leading indicator of employment trends. Further to this, the company believes that the increase in labour hire indicates an employment recovery.

In addition to the sound result, PayGroup's Treasury Services partner recorded a 60% monthly revenue increase over the same timeframe.

Astute pleasingly signed on 37 new clients during the first half of 2021, representing total contract value of $1.1 million. The prime minister's business stimulus package for apprentices has seen strong uptake by government training organisations transitioning to the AstuteOne software-as-a-service platform.

Payroll HQ acquisition update

On 14 December, PayGroup completed its acquisition of Payroll HQ. The company predicts the takeover will lead to strong sales of TalentOz in both Australia and New Zealand.

TalentOz, which uses PayGroup's full suite of products, is being offered across 41 countries.

What did the management say?

PayGroup managing director Mr Mark Samlal commented on the trading conditions for AstuteOne, saying:

Increased activity for our clients in the workforce management sector is a leading indicator of economic recovery. It's very pleasing to see the increased business confidence in Australia and New Zealand, reflecting more buoyant employment conditions following the easing of lock down restrictions. This is having a positive impact on volumes for our AstuteOne business and the acquisition of new clients.

Our revenues will continue to grow in FY21 as new clients increase their hiring, and as existing clients increase their volumes as demand increases. Our new GTO clients have hiring volumes that are directly linked to apprentices being hired in greater numbers. These GTOs are seeing a greater need to digitise their pay-to-bill workflows. 

PayGroup is scheduled to release its updated sales data for FY21 in the first week of the new calendar year. 

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In early trade, PayGroup shares rose 3.49% to 60 cents, before pulling back and losing ground to be in the red by lunch. The company's current market capitalisation is close to $43 million.

About PayGroup

PayGroup is a specialist provider of payroll and human capital management solutions, and is a holding company for brands such as PayAsia, TalentOz, and Astute One.

PayAsia provides software-with-a-service (SwaS) and payroll solutions. It enhances its offer to the market by using a cloud-based human capital management platform called TalentOz. Clients are multinational.

Astute One delivers workforce management solutions for complex businesses, with clients predominantly based in Australia and New Zealand.

PayGroup itself now has staff in 11 countries and services almost 1,000 clients.

Financial reports

In today's report, PayGroup reported revenue for the first half of FY21 of $6.8 million, up a staggering 100% on the second half of FY20. The company stated that this growth was largely driven by organic growth and acquisitions.

PayGroup also reported earnings before interest, tax, depreciation and amortisation (EBITDA) of $1.6 million, compared to a loss of $1 million in the prior corresponding period. 

Net profit after tax also represents a healthy turnaround for the company, going from a loss of $1.4 million in the prior corresponding period to a profit of $444,000.

Conditions and growth

Although PayGroup noted strong revenue growth and cost efficiencies as key drivers for the financial outcomes, other factors were also at play. It highlighted that JobKeeper also helped ease the burden in Australia, and other government incentives were noted to help in the Asia market.

The company also noted that during the time of the coronavirus pandemic, it continued to drive strong investment in both technology and staff. 

Following a successful capital raise of $3.5 million in September 2020, PayGroup now has a cash balance of $5.2 million. The goal is to use these funds for further company expansion. 

PayGroup has said that the outlook for the second half of FY21 is strong. It is currently completing another acquisition of Payroll HQ, with plans to capitalise on the strongly re-bounding Asia Pacific economies following COVID-19. 

What did management have to say?

In the announcement, PayGroup's managing director Mark Samlal commented on the company's performance:

We have now transitioned our business to become a full-service provider of Human Capital Management and payroll services. This is opening up a significant number of new customer opportunities.

I am very pleased with the financial performance of PayGroup this half as we have reported a profitable period, supported by a strong and growing base of contract revenues. We expect continued growth in contracted sales and earnings as we see the full contribution from our acquisitions and the benefits from our enlarged customer base and addressable markets.

The PayGroup share price

The PayGroup share price recovered well following the March market crash, rebounding from lows of 43 cents to heights of 90 cents in just a few months. However, in the current financial year, the share price has been less than favourable for investors, falling more than 30% in less than 6 months.

Today, PayGroup shares rose immediately on the opening bell, however failed to keep their footing throughout morning trade. The PayGroup share price is currently trading at 58 cents, down 0.86%.

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Headquartered in Melbourne, PayGroup provides payroll and human capital management solutions. The company has operations in 11 countries, with more than 995 clients, and processes more than 5 million payslips per annum.

For the first quarter of FY21, PayGroup announced record contract growth of $5.4 million in contract wins. This was up 93% on the prior corresponding period, and 98% of its entire FY20 total contract value.

What's moving the PayGroup share price?

Payroll HQ offers Software-with-a-Service (SwaS) payroll outsourcing services based in Sydney. At the time of sale, it has 100 corporate clients in Australia and New Zealand. All contracts have 3 year recurring revenue terms with automated renewals in place and a client retention of >95%.

The acquisition is worth the equivalent of $2.535 million, payable through the issue of 4,122,694 PayGroup shares at $0.615. A further earnout of circa $1.28M is expected to be achieved based on the FY21 forecast revenue.

The acquisition immediately adds 100 clients with significant cross-sell opportunities. Moreover, PayGroup plans to appoint the experienced Australian-based sales team to help drive PayGroup's growth strategy. The company expects the acquisition will add $2.25 million in revenues. 

What did management say?

PayGroup managing director Mark Samlal said the Payroll acquisition would "significantly transform" PayGroup's SwaS payroll presence and increase sales capabilities in Australia.

Payroll HQ has an excellent client base and sales pipeline, and is led by a group of experienced and high-performing industry experts. In this current environment, when payroll is so critical to the livelihood of workers, and cost efficiency and agility is a crucial element for all businesses in a post-lockdown economy, we see significant opportunity to grow this business and we welcome the Payroll HQ team on-board.

Payroll HQ Chief Executive Officer Ross Heron also welcomed the move, saying:

We see real benefits of integrating our business with PayGroup and have already identified many of their product lines – such as Treasury Services and HCM SaaS modules – as being highly attractive to our client base…We believe that working together with PayGroup will put us in the best position to capitalise on post-pandemic business opportunities.

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Let's take a deeper look and see how the human capital management (HCM) solution company performed for Q2 FY21.

Q2 result

For the period ending 30 September, PayGroup reported substantial growth, most notably from its software-as-a-service (SaaS) offering.

Operating cash flow for the three months achieved a surplus of $1.1 million, up 10% on the prior quarter. This was represented by volume increases of its Astute SaaS timesheets due to improved business confidence. Further support of growth in this segment is forecasted as a result of government budget initiatives.

TalentOz, which was acquired by PayGroup in July this year, has made progress offering 11 new complementary HCM modules, taking the total number offered by PayGroup to 27 modules.

The company won $5.4 million in contracts for the first half of the year, equivalent to 98% of total contract value in FY20. Last week, PayGroup secured a contract win with Volvo Group Singapore, valued at $120,000. This also has the possibility of further opening up a new addressable market within the automotive industry. 

Costs associated with running the business were broadly in line with Q1 FY21. PayGroup said it will continue to execute its cost efficiency plan, with expected savings of $1.5 million for FY21. This will be realised in areas such as hosting technology and corporate costs.

PayGroup closed the quarter with a cash balance of $5.3 million, supported by a successful capital raise that was undertaken in September.

Outlook

PayGroup advised it is on track to continue its momentum in H2 FY21. The creation of its 'hire-to-retire' HCM module is seeing a significant number of new customer signings across the Asia Pacific region.

PayGroup Managing Director, Mr Mark Samal, commented on the company's performance and ongoing opportunities, stating: 

Our recent contract wins, with high quality customers such as Volvo Group Singapore, are testament to our expansion strategy and goal of offering our customers a full-service solution. Not only does this increase our addressable market but gives us significant scope to increase revenue opportunities from existing clients. We are also seeing Asian and Middle Eastern economies rebound strongly and expect continued growth momentum in H2 FY21.

PayGroup share price summary

The PayGroup share price has been on a rollercoaster ride for shareholders this year. The company's shares were averaging around the 70 cent price mark from late last year until COVID-19 took effect.

Reaching an all-time low of 43.5 cents in March, its shares quickly recovered. In the months following, the PayGroup share price hit a 52-week high of 90.5 cents, before gradually falling again to 56 cents at the time of writing.

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The human capital management (HCM) solutions company saw its share price reach as high as 59 cents at market open. However, at the time of writing, the Paygroup share price has dropped to back 56 cents, up 1.83%.

Let's take a look at PayGroup's new deal.

New contract

PayGroup signed a new three-year agreement with Volvo Group Singapore, with a total contract value of $120,000.

The contract will see PayGroup provide Volvo with a number of software as a service (SaaS) human capital management modules. This includes Core HR, E Leave, E Claims, and E Time, including a GPS-enabled clock in and out. In addition, to sweeten the deal for Volvo, PayGroup will supply its software-with-a-service (SwaS) payroll as part of the contract. The combined product service suite is the company's first collective offering.

PayGroup said the contract win demonstrated the rapid progress it had achieved to date. In particular, the integration of recently acquired TalentOz's HCM technology with PayGroup's SwaS products.

What did management say?

Commenting on the deal, PayGroup managing director Mark Samlal said:

This is an important H2 contract win for PayGroup, particularly following our acquisition of TalentOz in July 2020 – which provided PayGroup with a full service HCM product suite that covers the entire 'hire to retire' lifecycle.

The contract with Volvo highlights the opportunities being opened up by our enhanced suite of HCM products. In conjunction with our market leading payroll services, our addressable markets and customer targets are being increased across many regions.

Mr Samlal said sales of new contracts in H1 FY20 were $5.4 million, 98% of the total new contract wins in FY20.

We expect this strong sales momentum to continue into H2 FY20 and we are highly confident of the growth we can deliver.

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The update sent the PayGroup share price storming up to a 60 cent high in opening trade, before dropping to settle at 56 cents, up 3.7% at the time of writing. In comparison, the All Ordinaries Index (ASX: XAO) is up 0.9% to 6,294 points.

Let's take a look at PayGroup and its performance for the first-half of the financial year.

What does PayGroup do?

Headquartered in Melbourne, PayGroup provides payroll and human capital management solutions. The company operates in 11 countries, servicing more than 995 client entities and processing more than 5 million payslips per annum.

For the period ending September 30, PayGroup announced that it had achieved record contract growth for H1 FY21. The result was $5.4 million in contract wins, up 93% on the prior corresponding period, and 98% of its entire FY20 total contract value.

The company advised that COVID-19 has provided structural tailwinds, drawing new businesses to help digitise their payroll systems. PayGroup added 80 new contracts which included existing client upsells and new customers.

Growth areas

PayGroup's treasury services segment continued its strong growth trajectory since product launch in Q2 FY20. For the period, total treasury services rose by 279% for the first-half of the year.

In H2 FY21, the company plans to launch its 'Accessing Wages Earned' module. The new platform will allow employees to access their accrued wages before payday, and will join PayGroup's financial wellness program. The addition is anticipated to further drive revenue momentum, particularly in the current climate.

The company's global partner program expanded during H1 FY21, servicing more than 39 countries. PayGroup's increased presence seeks to capitalise on the addressable market to cross-sell its human capital management and payroll services.

Company outlook

PayGroup managing director Mark Samlal welcomed the result, saying:

We're very pleased with the performance that we have achieved in the last six months, despite the challenging environment. We are continuing to follow the government protocols in each of our regions with respect to operating and re-opening safely, with employee welfare and client service satisfaction as our key priority. Our service standards have not been compromised during this period.

Mr Samlal said the new contract wins achieved this half year were a significant increase on the previous half. They reflected "strong underlying demand" for the company's mission-critical SaaS and SwaS products across Asia Pacific and the Middle East.

We are well positioned to weather the current business environment and are increasingly seeing clients seeking to outsource HR and payroll functions to drive greater business efficiencies. Our successful capital raise in September 2020 will allow us to more rapidly capture these growing business opportunities.

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Details on PayGroup's capital raise

PayGroup announced today that the company had successfully raised $3.5 million via institutional placement.

The payroll provider said new and existing investors supported the placement, in which 6 million new shares would be issued at 58 cents per share. That's a 14.5% discount from the company's last closing price.

PayGroup will use the capital raise to integrate its latest acquisition, TalentOz. The capital will also allow the company to pursue growth initiatives and working capital for its payroll platform, Astute One Limited.

In addition, PayGroup management said the placement would enable the company to capitalise on immediate growth opportunities, including possible further acquisitions. It noted PayGroup's strong sales pipeline gave the company a positive outlook in FY21.

What does PayGroup do?

PayGroup is an Australian-based company that provides payroll and human capital management solutions to medium and large enterprises. The company services more than 915 client entities, representing more than 5 million payslips per annum.

In July, the company acquired Malaysian-based payroll provider TalentOz for $1.2 million. The new purchase follows PayGroup's 2019 acquisition of the human capital management company, Asute One.

For the first quarter of FY21, PayGroup reported an operating cash flow surplus of $1 million. In addition, the company received $4.5 million in receipts over the period, as well as $3 million in new contract wins. PayGroup ended the first quarter of  FY21 with $2.1 million cash on hand and additional access to around $260,000 in unused finance facilities.

Securities in PayGroup were placed in a trading halt yesterday pending the release of today's announcement. At the time of writing, the PayGroup share price has rallied slightly to 61 cents after tanking more than 11.5% earlier to an intra-day low of 60 cents.

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Based on today's closing price of 69.5 cents, PayGroup's market capitalisation stands at only $48 million. So it's important to note that we're very much at the smaller end of the ASX spectrum here.

PayGroup is a specialist human capital management software and services provider, tasked with performing payroll, pay to bill, human resources, and treasury services on behalf of clients. It has 2 businesses, PayAsia and Astute, the latter of which was acquired in late 2019.

The company operates primarily in the Asia Pacific region for multinational companies and has 875 clients throughout 33 countries.

Why did the PayGroup share price race higher today?

Well, this afternoon, PayGroup released its preliminary final report for the year ended 31 March 2020.

The company delivered FY20 annual recurring revenue of $17.8 million, exceeding guidance of $17.5 million. Meanwhile, revenue came in at $10.9 million, up 110% on the prior corresponding period, including a $2.9 million contribution from Astute.

Astute provides workforce management solutions, automating placement through to payroll and invoicing. The acquisition was completed on 1 November 2019 and its 5-month contribution to FY20 results have reportedly exceeded forecasts. During this period, Astute has been profitable and cash flow positive.

Overall, PayGroup reported growth across all segments in FY20, including 26.5% growth in PayAsia payslips. This was supported by strong sales momentum and new contract wins from the fourth quarter of FY19 and throughout FY20.

Additionally, PayGroup launched its Treasury Services offering in the second quarter of FY20. Live treasury transactions processed increased from 155 per month at the end of 1H20 to 3,653 per month at the end of 2H20. Given strong initial customer demand in the first year of its launch, PayGroup expects this offering to make a growing financial contribution in FY21.

The company's new contract wins in FY20 amounted to $5.5 million, representing an increase of 12% on FY19. Meanwhile, new contract wins in FY21 to date (being 1 April 2020 to 25 May 2020) total $2.7 million.

Looking to cash flow, the company saw an improvement in its operating cash flow from negative $4.8 million in FY19 to negative $0.1 million in the current period. Cash flow momentum was particularly strong in the second half of FY20 on the back of continued new sales uplift and the Astute acquisition.

The company's cash balance as at 31 March 2020 stood at $2 million, supported by a $3 million capital raising in November 2019.

COVID-19 update and outlook

As previously announced last month, PayGroup's business has been able to adapt to a remote working environment with limited impact.

The company notes that COVID-19 stimulus packages have added to payroll complexity, which increases opportunities for both its Astute and PayAsia businesses. Against this backdrop, its sales pipeline continues to strengthen.

PayGroup expects to continue to deliver improved operating cash flows and the pathway to positive statutory earnings in FY21, driven by cost efficiencies, continued sales momentum and the positive contribution from Astute.

Commenting on the full-year results, managing director and CEO Mark Samlal said:

"We are only 2-months into our FY21 year and we expect that our businesses will continue to perform well, even if various lock down provisions continue to exist globally. In Australia we see that businesses are hiring, particularly contractors, which will positively improve Astute's metrics. Our key markets in Asia are very resilient with many countries back to work."

"We enter FY2021 in a good position, with a strong book of recurring revenue, 95% client retention, a cost efficiency plan and strong industry fundamentals in spite of the current COVID-19 headwinds," he added.

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