One Technology Stock for Long-term Growth

As the market players are aware, the outbreak of the COVID-19 pandemic impacted the global economy. In order to limit the spread of COVID-19, lockdowns were imposed. The impact was felt on several companies. However, now some companies are in a position to navigate the tough conditions. This company has recently posted decent results for Q1 FY 2022. This company has recently made an acquisition which could help the company in the long-term. The stock price of this company witnessed a rise of ~10.3% in 1 month and ~8.47% in 3 months.

PaySauce Limited

Summary

  • PYS has launched Rosters as well as BNZ PayNow in FY 2021.
  • In FY 2021, the company witnessed 36% increase in the active customers as well as 59% rise in the revenue from the processing fees.
  • PYS has acquired the business as well as assets of SmoothPay in Q1 FY 2022.

PaySauce Limited (NZX: PYS) is engaged in enabling employers to pay as well as manage their teams accurately and efficiently utilising the web, iOS as well as Android applications. PaySauce happens to be the software at work for people and it provides employment solutions to small as well as medium-sized businesses.

Healthy Results Performance in FY21 (For the Period Ended 31 March 2021)

The company posted strong growth in revenue in FY21 and total recurring revenue increased by 44% YoY to $2.1 million as higher customer numbers and rise in the average processing fees per customer compensated the impact of the decline in interest income. Recurring revenue from processing fees reported solid growth of 59% YoY during the period to $1.93 million.

However, the reduction in interest income was due to the fall in interest rates. Additionally, its gross margin improved to 68% in FY21 from 62% in FY20 due to the benefits of higher efficiency gains.

Notably, processing fees represents the revenue garnered from the customers that are utilising the PaySauce payroll product, paying the processing fees each pay run, based on the flat rate plus the amount which is variable based on the number of payslips in that pay run.

Financial Snapshot (Source: Company Reports)

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Acquisition of SmoothPay To Augment its Market Presence

Notably, the company has acquired the business and assets of SmoothPay during Q1FY22. The company is presently in the process of transitioning the business of SmoothPay. The acquisition delivers on the company’s objective of accelerating the customer growth. Notably, over 1500 SmoothPay subscribers would be joining PaySauce. This would bring the total customer base to more than 5000 subscribers.

The company mentioned that the 2 businesses are well paired to complement the each other’s strengths as well as eliminate any sort of product gaps. The purchase price for SmoothPay is fully payable via the issuance of 1,416,164 ordinary shares in PaySauce as well as implies ~1.5 times annual revenue of SmoothPay for FY 2021. 

Solid Performance Demonstrated in Q1FY22

PYS showcased a robust performance in Q1FY22 with enhanced customer and revenue growth. Processing fees during the quarter witnessed a significant growth of 44% YoY compared to the growth of 42% YoY reported in the quarter to March.

The growth in the processing fees was because of both the 39% rise in the customer numbers as well as a 51% YoY rise in the value of payroll processed via PaySauce platform as compared to the June 2020 quarter.

Notably, total recurring revenue surged by 36% YoY. However, interest income registered a decline of 33% YoY due to the impact of a sustained low-interest rate environment.

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Stock Information

Overall, employees paid through the PaySauce rose substantially by 44% to 20,159 in Q1FY22 and the number of payroll business customers increased by 39% to 3,933. The acceleration in the employees validates the transformation of the company from the provider of agri-focused payroll to an industry agnostic fintech.

PYS will continue to leverage its vital partnerships, both long-standing as well as new. The company would continue to work on the transition from the payroll app to the fintech. Additionally, it will continue to chase opportunities to fast-track its growth in new and existing markets.

The inclusion of business and assets of SmoothPay has resulted in augmenting its customers base as well as assisted the company to expand into several international territories and diversify its geographic presence in Australia and several Pacific Island nations. The company has also stated that the big objectives including the desire to enter the Irish market remains unchanged. It was further added that, until there is greater certainty of travelling safely overseas, it would continue to focus towards the NZ market.

With the introduction of the innovations such as earned wage access, the company is expanding not only its own product, but also the options which are available to the people of New Zealand.

The stock of the company ended the session at NZ$0.320 per share, down by 3.03% on 9th July 2021.

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