There are quite a few different reasons why the Pushpay Holdings Ltd (ASX: PPH) share price might be attractive to investors.
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What is Pushpay?
Pushpay is a technology business that enables US churches to manage their church, connect with their community and process electronic donations.
It also has a business that it acquired called Church Community Builder which offers increased functionality for churches.
Here are three key reasons why Pushpay could be a business to consider:
In-demand service
The world is going increasingly digital. Pushpay is a key business that is helping US churches to go electronic.
At 31 March 2021, Pushpay had over 11,000 customers. Some of them are using the donor management system, some are using the church management system and some use both.
ChurchStaq is the combined offering of both the Pushpay services and Church Community Builder where everything can be accessed through the single service.
With its giving and donor management service it can engage new donors, increase recurring giving, remove barriers to generosity and it offers various forms of donation including web, mobile, text and cash/check.
The 'My Church App' allows increased participation, access to church media, targeted communication, groups and calendar and "pre-check".
ChurchStaq's church management system is "comprehensive", it also allows for groups, events, check-in, service planning and prices. There are also giving dashboards and analytics.
Having a strong offering allows Pushpay to attract and retain clients. It has plans to search for other acquisitions that may broaden its current proposition and add significant value to the current business at a quicker pace than what could be achieved organically.
Operating leverage
There are a number of financial measures that show that Pushpay is achieving operating leverage.
In FY21, Pushpay's operating revenue went up by 40% to US$179.1 million. It reported that its gross profit margin increased by three percentage points for FY21 from 65% to 68%.
Total operating expenses only increased by 9%. As a percentage of operating revenue, total operating expenses improved by 11 percentage points from 47% to 36%.
Pushpay explains that it adopted "best-in-class" software tools and scalable process early in its development. Combined with "strong financial discipline", these investments will allow significant operating leverage to be achieved as revenue grows.
Net profit in FY21 increased by 95% to US$31.2 million and operating cashflow went up 145% to US$57.6 million.
Pushpay says it expects significant operating leverage to accrue as operating revenue continues to increase, while growth in total operating expenses remains low.
Growth plans
Pushpay has embarked on serving the Catholic segment. It's focused on establishing relationships and increasing engagement with key stakeholders. In FY22, Pushpay is expecting to invest between US$6 million to US$8 million.
The company expects the benefits from the Catholic segment to be realised over the course of the next financial years.
It has set of goal of market share of more than 25% of the Catholic church management system and donor management system over the next five years.
Pushpay pointed out that the Catholic church is closely associated with many education providers and non-profit organisations, which presents further opportunities within the US and other international jurisdictions.
The company has previously stated that international growth to regions like South America and South East Asia.
What is the Pushpay share price valuation?
According to Commsec, Pushpay shares are valued at 30x FY22's estimated earnings.
