Pushpay profit doubles as churchgoers favour cashless tithing during Covid-19

Wednesday, 4 November 2020

Helping churchgoers make safe, digital donations during the Covid-19 pandemic has proved a boon for Kiwi company Pushpay, which doubled its first-half profit.

After-tax profit jumped to US$13.4 million (NZ$19.6m) in the six months ended September 30, up from US$6.5m last year, while revenue rose 51 per cent to US$86.6m.

Founded in Auckland by Christians Chris Heaslip and Eliot Crowther, who felt awkward when they did not have any cash to make a donation in church one day, the digital payment platform for religious services is now the market leader in the United States, counting more than half of the top 100 churches among its customers.

It turned the corner in 2019, when it posted its first profit, although it continues to reinvest its cash for growth rather than pay dividends.

* Need a job? Tech firm on hiring spree amid Covid-19 disruption

Pushpay chief executive Bruce Gordon has lifted his expectations for the full-year profit.

The company raises money through monthly subscription and transaction fees. Due to Covid-19, cash donations either have not been possible due to church closures or have been discouraged to avoid spreading the virus. Pushpay has benefited from increased use of digital payments, with new donors joining the platform and existing donors using it more.

“While a number of organisations have temporarily closed their physical premises in response to Covid-19, Pushpay has seen a clear shift to digital whereby customers are utilising its mobile-first technology solutions to communicate with their congregations,” said chief executive Bruce Gordon.

“Due to the restrictions around in-person gatherings, customers have continued to emphasise live-streaming, digital giving and driving connection through their apps for continued engagement with their communities.”

Pushpay now has 10,896 customers, up 38 per cent from last year, and it processed US$3.2 billion of payments in the first half, an increase of 48 per cent.

The increase in digital giving is expected to outweigh any potential fall in total giving to the US faith sector, Gordon said.

Emerging data showed that even after churches reopened, congregants were continuing to make digital rather than physical donations, he said.

“What we are experiencing is a very strong stickiness of the digital giving uptick,” Gordon said.

Pushpay has benefited from a shift to digital church services during Covid-19.

“As the churches are reopening, people that are using digital giving are continuing to use digital giving.”

Pushpay lifted its expectations for its full-year pre-tax profit to between US$54m and US$58m, up from its previous forecasts in June and May. Last year, it posted a pre-tax profit of US$25.1m.

The company halved its net debt over the first half, bringing it down to US$25m as at September 30, from US$50m at March 31, and made a further voluntary repayment of US$12m to Bank of New Zealand on October 30.

Its cash position also improved, with its accounts showing it held US$23.1m of cash at the end of September, three times more than the US$7.2m it held in March and more than double the US$9.9m held in September last year.

Pushpay acquired rival US service Church Community Builder in December last year and Gordon said more customers than expected were using the combined product offering.

He signalled Pushpay was on the hunt for more acquisitions as it eyed future growth.

The company “continues to evaluate additional potential strategic acquisitions that broaden the current proposition and add significant value to the current business”, he said.

Pushpay wanted to expand into event management and analytics on congregants which would enable churches to better connect and serve them, he said.

“Churches want those features in their church,” he said.

The company has about 130 product development staff and could build the software organically, although it would be faster to acquire existing operators, he said.

Still, there was a limited number of scale and quality faith-based software providers in the US, and they tended to be privately owned and run by their founders, he said.

“We are in active dialogue with a number of parties,” Gordon said. “We are in a very strong position to be able to make acquisitions of various sizes.”

In the long-term, Pushpay was targeting more than 50 per cent of the medium and large church segments, an opportunity representing more than US$1 billion in annual revenue, he said.

The company’s gross profit margin improved to 68 per cent from 65 per cent and is expected to stay around that level for the remainder of the year, a change from the usual weakness in the second half of the year.

Pushpay’s board on Wednesday announced a plan to split the company’s shares to improve liquidity and attract further shareholders. Each share owned as of 5pm on November 27 will be split into four.

The shares fell 13 per cent to $7.97 in afternoon trading on Wednesday. They had risen strongly ahead of the profit announcement and are almost double their $4.02 value at the start of the year.