Ann: Pushpay 2019 Annual Results Announcement, page-9

The big positive for me is the improved gross margin to above 63% and particularly that this improvement is not driven by any one-off gain. Interestingly, the header in part 1 of the report reads...

Sustainable Growth
Expanding Operational Leverage

The distinction of that in BOLD, IMO says it all. The Company has achieved the scale to essentially reach break-even. Believe that Profit and Cash generation now share centre stage, driven by the desire to supplement organic growth with growth through acquisition/s. So, I don’t read too much into any signs on growth slowing. I would argue that Revenue growth will accelerate over the next 24 months.

Looking at the guidance, as provided, does look soft. If you look at the run-rate exiting the last FY, the Revenue is USD 108 m. Add the ‘unearned income’ reflected in the balance sheet of USD 7.1 m and we enter the new FY a mere USD 8.9 m short of the midpoint of the guidance.

Company often ‘proudly’ makes reference to a track record of always delivering/or exceeding guidance. When you consider the uncertainty of signings, medium -large mix plus churn on small, cannot be easy to accurately predict Financial outcomes with such accuracy. In light of the run-rate / unearned Income, would expect a lift in guidance at the half year.

For those that may be interested, I calculated the run-rate for the key components of the income statement and this exercise again highlights the power of operational leverage and what this could mean for us investors in terms of eps.

Revenue .... USD 108.2 m ( vs USD 98.4 m)
Third Party Costs .... USD 39.2 m ( vs USD 37.9 m)
Gross Margin ...... USD 67.2 m ( vs USD 58 m)
GP Margin % ..... 63 % ( vs 60%)
Operating Expenses ..... USD 63.6 m ( vs USD 62.5 m)
EBITDAF ....... USD 9.4 m ( vs USD 1.6 m) Note: Disregarded the one-off Tax gain
NPAT ....... USD 8 m ( vs a LOSS of USD 1.4 m)
EPS ........ 4.2 AU cents per share ( vs Zero cents per share )

To summarise, a wonderful platform to execute off during FY 2020. Revenue increasing with Costs being contained / relatively Flat.

Given their comments on cost containment, if you exclude the Tax component, for every additional USD 10 m of Revenue, they add an Approx 3 cents per share to EPS.

Arriving at a multiple for PER makes for an interesting debate. Remains high conviction for me.

Please DYOR

Rokewa