Pushpay Holdings Limited (OTCPK:PHPYF) Q2 2023 Results Conference Call November 8, 2022 5:00 PM ET
Company Participants
Graham Shaw – Chairman
Jason Rupert – Chief Growth Officer
Gabrielle Wilson – Head of Investor Relations
Molly Matthews – Chief Executive Officer
Richard Keys – Interim Chief Financial Officer
Conference Call Participants
Guy Hooper – Jarden
Garry Sherriff – RBC
Phil Campbell – UBS
Tom Deacon – Macquarie
Tim O’Loan – Nikko Asset Management
Operator
Thank you for standing by, and welcome to the Pushpay Holdings Limited Interim Results Investor Briefing. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions]
I would now like to hand the conference over to Gabrielle Wilson, Head of Investor Relations. Please go ahead.
Gabrielle Wilson
Thank you, Travis. Welcome to the Pushpay Holdings Limited Interim Results Investor Briefing for the six months ended 30 September 2022. Our interim report and interim results investor briefing presentation have been released to the NZX and ASX. Please visit our website, pushpay.com/investors/announcements, if you do not have a copy.
Before we begin, please note that all information in this presentation is subject to the disclaimer on Slide 2 of the presentation. All currency amounts are in U.S. dollars unless stated otherwise.
Turning to Slide 3. Today, you’ll be hearing from our Board Chairman, Graham Shaw; CEO, Molly Matthews; Chief Growth Officer, Jason Rupert; and Interim CFO, Richard Keys. Following the presentation, all speakers will be available for questions.
During the presentation, you’ll be in a listen-only mode. Once the presentation has concluded we will open the call to questions. We ask that questions come from analysts and investors only. Members of the press are able to organize interviews with Molly following this briefing. Please get in touch with me by e-mailing investors@pushpay.com, and I will arrange this.
Thank you for your attention, and I will now hand it over to Pushpay’s CEO, Molly Matthews.
Molly Matthews
Thank you, Gabby. Good morning and good afternoon, everyone, and thank you for joining us for Pushpay’s investor briefing for the six months ended 30 September 2022. I’d like to welcome any new shareholders who have joined the call and take this opportunity to thank all of the shareholders for their continued support.
Today, I will be reporting to you in more detail on Pushpay’s performance over the six-month period. As previously advised, the 2023 financial year represents an investment year for Pushpay. We have made a deliberate and conscious decision to invest further into the business and have taken significant steps to position Pushpay for growth, which I will share in more detail today.
The key highlight of mind during the six months was welcoming the U.S. Army Chaplain Corps as well as the Archdiocese of Seattle as Pushpay customers. These customers represent our strategy in action and the ability for Pushpay to support millions of people and organizations across the globe with our digital software solutions. I would like to take a moment to recognize our Pushpay team who continue to deliver exceptional service and world-class products to help our customers and their communities across the globe despite the other changing macroeconomic conditions and challenges that our market faces.
Now on to Slide 5. Looking at our key metrics over the first six months, we saw year-on-year growth in all of our key operational metrics although at a slower rate than we anticipated. This is a result of our investment into the business as well as the go-to-market reset, which affected net new customer growth. This, combined with an uncertain economic backdrop due to rising interest rates, inflation and labor costs, has led to churches to reevaluating their purchasing decisions, resulting in lower new customer adds than expected. In many cases, this has caused churches to delay purchasing new software.
While the rate of growth has been slower in the first half of ’23 than anticipated, encouraging signs are being seen from the work to date. We will cover these results in more details on later slides. But in summary, compared to the prior comparative period, we grew total customer numbers at 4%, increased the total number of products utilized by customers by 7% and increased processing volumes by 2%.
Pushpay has maintained an average annual revenue retention rate of over 100% on average for the last five years, including the last six-month period. During the six months, 18.2 million transactions were processed through our platform, 2.3 million unique donors made a payment and the average transaction value processed increased to $198 per transaction. These metrics are something that I’m personally proud of as they represent a significant amount of social good being done in our customers’ communities and making real impacts on people all around the world.
Turning to Slide 6. We delivered a 10% increase in revenue over the half year period to $103 million, which primarily reflects the full benefit from the acquisition of Resi Media in August of 2021. Net new customer growth has been slower than anticipated as the majority of the go-to-market reset was completed and this has affected the rate of revenue and processing volume growth. We will go into more detail on this later in the presentation.
Our gross margin remained stable at 69% and we saw a softer period in our other financial metrics. As previously signaled and in line with Pushpay’s investment in innovation and growth, underlying EBITDA decreased by 10% from $29.6 million in the first half to $26.8 million in the first half of ’23.
Operating cash flow of $16.9 million was down on the prior first half year. The cash flow includes $9.9 million of income tax paid as Pushpay has utilized all New Zealand tax losses and is now in an income tax paying position.
Moving now to Slide 7. We’ll look more closely at our total processing volume, which increased by 2% to $3.6 billion. Processing volume growth was affected by a slower net new customer growth due to the go-to-market reset, which is expected to improve in the second half of FY ’23, combined with delayed processing volumes as new customers are onboarded along with fewer new donors attending existing churches.
We also saw an increased number of unique donors and an increased average transaction value with flat total transactions processed as well as increased recurring giving as a percentage of total processing volume.
Now on to Slide 8 for an update on our customers. Our total customer base increased year-on-year by 4% to 14,602 customers. We welcomed 507 net new customers between 30 September 2021 and 30 September 2022. This growth was softer than expected due to the go-to-market strategy reset and an uncertain economic backdrop impacting customers’ purchasing behavior.
We welcomed 94 net new customer additions in the first half of ’23 and 48 of these were large customers driven by Resi Media, Catholic and nonprofit strategies with a small decrease in net new product customers. The first half is traditionally a slower period than the second half due to the U.S. summer holiday period.
As I mentioned earlier, we welcomed the Archdiocese of Seattle in July, which added 134 parishes to the Pushpay platform as customers. In late September, we welcomed the U.S. Army Chaplain Corps, which added 51 public service organizations called garrisons across the world. Overall churn rates increased from 4% in the first half of ’22 to 5% in the opening customer count in the first half of ’23. The medium and large segments remain our core focus as we continue to execute on our growth strategy.
Moving to Slide 9. I will now hand it over to Pushpay’s Board Chairman, Graham Shaw, for an update on the Scheme Implementation Agreement.
Graham Shaw
Thanks, Molly, and good morning and afternoon to everyone on the call. On the 28th of October 2022, Pushpay announced that it has entered into a scheme implementation agreement, under which Sixth Street and BGH Capital Consortium via Pegasus Bidco Limited will acquire all of Pushpay’s shares at a price of NZD 1.34 per share in cash by means of the scheme of arrangement.
The Board being for this purpose, all of the non-conflicted directors, unanimously recommends that shareholders vote in favor of the scheme subject to the scheme price being within or above the independent adviser’s valuation range for Pushpay shares and in the absence of a superior proposal.
The Board has concluded that the Sixth Street/BGH consortium scheme proposal currently represents the most compelling value for shareholders. Although we remain confident in the future of Pushpay, the transaction will accelerate the capital return to shareholders and mitigate the risks that would otherwise be involved in delivering the opportunities from executing Pushpay’s strategic plan over time.
Moving on to Slide 11. I’d like to take a moment to highlight the Board process and rationale for the scheme recommendation in more detail. The Board, consisting of non-conflicted directors, has been involved in the process of evaluating potential interest in acquiring Pushpay for the last six months. The Board undertook a comprehensive process to consider options to enhance shareholder value with support from external advisers. This included the possibility of continuing to implement the Company’s growth strategy as a public-listed company.
After receiving a number of unsolicited expressions of interest, an outreach program was undertaken to solicit interest from other parties with multiple parties expressing interest. Interested parties were then shortlisted down to a selected number to undertake due diligence. In parallel, the Board reassessed the range of outcomes from our current business plan are balancing the opportunities and execution risks we consider in the current environment. We requested and reviewed valuation assessments from our financial advisers and an independent valuation firm.
These valuations were performed on a discounted cash flow analysis based on reasonable expectations of the future business cash flows and benchmarked to implied premiums and comparable trading and transaction multiples. The advice supported the Board’s view that the scheme prices within the Board’s assessed value range based on our most reasonable expectations of the business plan and reflecting current cost of capital and exchange rate.
While Pushpay has a strong long-term strategy, the full benefits of this will not be seen for several years and carries execution risk. A recent trading and 2023 financial year guidance update have highlighted some of the challenges that the Company is facing and hopefully largely post COVID world. After consideration, the Board believes the scheme presents certainty, accelerated value recognition without execution risk and, therefore, merited presentation to shareholders.
Further information on this scheme, including the independent adviser’s report, will be provided to shareholders prior to this special meeting of shareholders currently expected to be held by the end of March 2023.
I will now hand back to Molly for the business update.
Molly Matthews
Thank you for the update, Graham. Moving on to the next section and a look at the operating environment. Our response to market conditions in key business events for the year. Broader macroeconomic trends are affecting organizations across a range of industries. Tight labor markets and wage inflation are creating challenges for both our customers and our own business. And slowing U.S. economic growth is also putting pressure on new donor numbers within churches.
Competition has also increased, although we have seen consolidation in the market commence. As I mentioned earlier, the first half was a soft period with net new customers and sales and marketing performance lower than our internal expectations. To address this, we implemented a number of initiatives over the last six months to respond to market conditions and drive growth. And particularly, we completed the majority of our comprehensive review of our sales and marketing organizations to ensure we are aligned and optimized.
This work began in the second half of FY ’22 and has continued into FY ’23 as we focus on driving these initiatives to address the market and position the business for future growth and success. While the majority is now complete, the initiatives involved with the go-to-market strategy reset will take some time to be fully seen. We have strengthened our leadership in sales and marketing and have strategies to further address the operating conditions.
We are starting to see early signs of improvement from the reset with the recruitment of our new and experienced sales and marketing team. Like many businesses, we have felt the challenges in recruiting and retaining staff in the current market. One of my main priorities as CEO of Pushpay is ensuring we attract and retain top talent and that we have a strong company culture that is upheld across all of our teams.
With our strategic initiatives in place, pleasingly, recruitment and staff turnover have stabilized. We have also received a record high favorable engagement score on our employee survey completed in the last six months with the score increasing by 32% since March of 2021.
I would now like to hand it over to Jason Rupert, Chief Growth Officer, who will share more detail on our go-to-market strategy reset.
Jason Rupert
Thanks, Molly. Good morning and afternoon to everyone on the call. Turning to Slide 14. I would like to highlight some of the activities completed under the go-to-market strategy reset initiative as this was a significant piece of work that was completed over the last six months and it has a direct benefit to our future success.
I joined Pushpay in February of this year as Chief Growth Officer. As the market has continued to evolve, we recognize the need to adapt and strengthen our go-to-market functions. In response, we deeply reviewed our go-to-market processes and implemented initiatives to ensure our sales and marketing strategy is focused and efficiently addressing — effectively addressing our target market and segments.
As a result, the evaluation of the existing sales and marketing team prompted several resource and organizational changes. Our sales enablement and training organizations have been aligned to focus on SaaS, software best practice training. Demand generation strategies were also reviewed, which has resulted in an increased number of marketing qualified leads at the top of the sales pipeline while also improving the segment mix.
We also transformed the presales team to improve employee retention and focus on mid-market prospects and restructured our product marketing team. With the majority of the review now complete with actions in place, the reset has resulted in positive momentum across the business and is expected to optimize future performance and success.
I will now turn it back over to Molly.
Molly Matthews
Thank you, Jason. On to Slide 16. As we communicated earlier in the year, Pushpay has a clear strategic pathway focused on four long-term drivers of growth: growing customer numbers, increasing the number of products utilized, expanding and enhancing Pushpay’s suite of products and increasing our share of wallet, which is the amount of churches giving that is processed through our platform.
The 2023 financial year is an investment year for Pushpay. And while the rate of growth has been slower in the first half, we are seeing encouraging signs from the work that we have done to date. We will now look at each of these growth drivers in turn and key initiatives for each of them.
On Slide 17, we look at our strategic progress with growing customer numbers. We welcome the Archdiocese of Seattle as a customer following a multi-month sales process. As of 30 September 2022, 134 parishes were added under the Archdiocese.
We also welcomed the U.S. Army Chaplain Corps, adding 51 garrisons as software customers. As Jason shared earlier, we are now optimized to target the mid-market segment. With our go-to-market strategy reset, we have continued focus on growing the number of medium and large customers, which have lower acquisition and support costs as a percentage of revenue.
On to Slide 18. We have a clear three-year road map for entry into the Catholic market. We’ve commenced our second year of this strategy. And on this slide, you can see the summary of the actions and the results that we have delivered on our Catholic growth strategy, which I will cover in more detail on the next slide.
Moving to Slide 19. During the last six months, we expanded our product development and sales teams to support the further enhancement of our Parishstaq offering. We launched comprehensive sacrament tracking with multi-language capabilities and increased functionality for parish administrators. Today, Pushpay is on the approved vendor list for 49 diocese, up from 45 at year-end.
These diocese are a very important part of our sales model. As the diocese approved vendors for their area, which enables individual parishes within those diocese to adopt the product, representing anywhere from 200 to 300 parishes. So our teams are focused on being added to approved vendor list for each diocese and then marketing our products and solutions to each individual parish.
After a very short time of having a product in the market for eight months now, we have 326 parish customers and we expect this to accelerate over the next few years as we continue to invest and market our offer. We are on track for expected investment and expenses of between $5 million to $7 million and expect to achieve breakeven underlying EBITDA for this fiscal year ’23.
On Slide 20, you can see the mix of products utilized by our customers and the growing numbers of each new product used as they are integrated into our suite. We saw growth in all three product groups over the six months with total products utilized growing by 7% to 19,438 products year-on-year.
While Donor Management is the group’s core product. New donor management product additions were softer over the half year period. We have processes in place to lead with this product to increase new sales conversions with prospective customers and to increase the speed of value from this product.
On to Slide 21. This slide shows the number of customers using one, two or three products. As I mentioned earlier, our goal is to have customers using all of our products through an integrated solution. Customers who subscribe to multiple products deliver significantly higher revenue than a one product customer and using multiple products also helps with customer retention.
The average number of products per customer increased from 26% in September of 2021 to 29% in September of 2022, which shows the growth opportunity ahead of us in cross-referral and bundling.
On Slide 22. Again, we have a clear three-year road map to leverage the value from the acquisition of Resi Media. In August, we crossed the one-year mark for Resi being a part of the Pushpay Group. Throughout fiscal year ’23, we are continuing to integrate streaming services into our sales and marketing engine and will be focused on the significant cross-sell opportunities within our customer base as well as attracting new customers.
In the last six months, we consolidated our IT teams and systems and launched enhancements to the Resi Media content storage and video library. While annualized subscription is expected to grow by approximately 20%, hardware revenue has been softer than expected as both fewer existing and new customers are currently buying or updating hardware. Breakeven at underlying EBITDA remains on track.
On to Slide 23. One of Pushpay’s continuing strength is our ability to deliver seamless quality products and features and make it easier for our customers to increase participation, engagement and build stronger relationships within their communities. A few of the features we have launched in the last six months include Comprehensive Sacrament Tracking functionality for our Catholic parishes as well as Spanish language translation in our Church Management System and LEAD App, which is our app for volunteer management.
A big focus was also on continuing to enhance our Donor Management System. We improved conversion rates for all donation types as well as delivering improvements for back-office reporting, error handling, check handling, refunds and cancellations. With the continued strategic focus on the Catholic segment, the Donor Management System has been further enhanced to support new payment frequencies, organizational and data structures to better support the unique needs of our Catholic customers ranging from stand-alone parishes to archdiocese and their wide-reaching communities.
On to Slide 24. Our fourth growth driver is to increase our share of wallet. This is the amount of a customer’s total giving that is digital and processed through the Pushpay platform. We saw a transformational shift to digital giving due to COVID-19. And we have seen digital giving remain consistent following 31 March at approximately 55%.
Over time, it is expected that adoption and digital giving will continue to increase. And we are working with customers on initiatives to both enhance giving and to increase digital adoption.
Moving now to Slide 26. I wanted to highlight our Pushpay Cares program and the great work that our teams do to make an impact on the lives of people in our local communities. Partnering with some of our customers and key philanthropic organizations, associates across our New Zealand and U.S. offices came together to volunteer with local organizations to give back to the community.
With that, I’ll now hand it over to Richard Keys, our interim CFO, for a financial update.
Richard Keys
Thanks, Molly. Good morning, good afternoon, everyone. We start with the snapshot of the income statement on Slide 27. The results for the six months ended 30 September reflect the full benefit from the acquisition of Resi Media in August 2021 with only one month of contribution in the prior comparable period. Operating revenue grew by 10% year-on-year with operating expenses up 37% largely due to the inclusion of six months of Resi Media.
EBITDA was impacted by the investment year and employed a number of nonrecurring items, including costs related to the intercompany transfer of intellectual property, the expression of interest process, the New Zealand IFRS accounting requirements relating to the Resi Media acquisition. Excluding these one-off costs in the IFRS accounting relating to acquisitions, underlying EBITDA was $26.8 million, 10% down on the prior comparative period.
Net profit after tax decreased by 54% when compared to prior comparative period due to lower EBITDA, along with high interest and amortization costs associated with the purchase of Resi Media as well as noncash net foreign exchange losses compared to a $2.2 million gain in the prior period. More detailed information can be found in the management commentary section of our interim report.
Taking our revenue in more detail on Slide 28. The 10% increase in operating revenue was largely driven by six months of subscription revenue from Resi Media as well as growth in products and customers. Subscription revenue grew 28% year-on-year with processing revenue growing by 1%.
Other operating revenues are mainly hardware sales for Resi Media. Excluding the $10.5 million in revenue contributed by Resi Media, Pushpay increased operating revenue by 1% compared to the prior comparable period.
When looking at gross margin on Slide 29. Gross margin as a percentage of operating revenue remained stable at 69%, which we view as a sustainable level going forward.
Slide 30 highlights the operating expenses, which increased by 37% over the period primarily due to the inclusion of six months of operating expenses from Resi Media, payroll increases as well as nonrecurring costs. These costs include the impact of vendor restricted shares on employee benefits issued as part of the Resi Media acquisition and transaction costs associated with the intercompany transfer of intellectual property and the expression of interest process.
Excluding the Resi Media expenses and nonrecurring costs, operating expenses increased by 8%, which were largely payroll costs relating to a 7% increase in headcount and the financial year ’22 remuneration review.
As can be seen on Slide 31, underlying EBITDA as a percentage of operating revenue has decreased by 26%, reflecting the investment in Catholic growth strategy and the inclusion of Resi Media, both of which contribute revenue and are expected to breakeven in EBITDA at the end of this financial year.
Slide 32 shows our statement of financial position. The Company generated positive operating cash flow of $16.9 million for the six-month period. This was after the payment of income tax of $9.9 million given Pushpay’s utilized all its New Zealand tax losses in the last financial year and is now in an income tax paying position.
Bank debt significantly reduced from $54 million at 31 March 2022, down to $40 million with net debt being $35.1 million as at 30 September 2022.
On Slide 33, we reiterated in May that we announced our intention to do an internal restructuring transaction of the intellectual property developed during the initial years of Pushpay’s business. The transfer of intellectual property would be from a New Zealand Pushpay subsidiary to a U.S. Pushpay subsidiary.
While we’ve now received the binding ruling from the New Zealand Inland Revenue Department along with banking approval, the transfer is on hold pending the outcome of the scheme implementation agreement.
And with that, I’ll hand back over to Molly for the outlook.
Molly Matthews
Thank you, Richard, for that update. Turning now to Slide 35 for an update on guidance. Looking ahead, FY ’23 remains an investment year for Pushpay with early benefits expected to start being seen in the second half of FY ’23 onwards. We believe in our strategic growth plan and are continuing to execute on the opportunities ahead of us albeit in a more challenging macroeconomic environment.
While our go-to-market strategy reset has taken longer than anticipated and affected our growth rate in the short term to medium term, we are in a good position to move forward. As advised on 28th of October 2022 for the FY ’23 financial year, Pushpay expects to be at a lower end — at the lower end of its previous FY ’23 underlying EBITDA guidance of between $56 million and $61 million.
The Company revised its guidance range for underlying EBITDA to be between $54 million and $58 million. Pushpay continues to forecast positive operating revenue growth, has lowered our expectations to be between 4% and 8% for FY ’23. Previous guidance was 10% to 15%.
Turning to Slide 36. As we look to the medium term, Pushpay’s FY ’25 goals of more than $10 billion in total processing volume and greater than 20,000 customers have not changed. However, due to the go-to-market reset taking longer than anticipated, the more challenging trading environment and macroeconomic outlook, this has extended our expected time line to achieve our goals by 12 to 18 months on the basis that the current trends improve.
We expect the benefits from this year’s investment into talent, resources and capabilities balanced with continued cost management discipline to be seen from FY ’24 onwards with underlying EBITDA expected to grow faster than revenue. In the short to medium term, Pushpay remains focused on further integrating Resi Media into the portfolio of products, growing the number of products utilized by customers and growing its share of customers within its target market.
Pushpay’s medium to long-term focus is to continue expansion into the Catholic segment as well as nonprofit or public service organizations, which offers a new opportunity for the group. Pushpay success would not be possible without the direction from our Board of Directors, execution from management and the hard work of our dedicated colleagues. I would like to extend my thanks to all of the Pushpay team for their efforts and support over the last year.
Thank you for your attention. And with that, I’ll now hand it over to the operator to open the call for questions.
Question-and-Answer Session
Operator
[Operator Instructions] The first question today comes from Guy Hooper from Jarden.
Guy Hooper
I guess to start off, the reset of the go-to-market strategy, I mean that was flagged at the last result and as you say was underway in second half ’22. What do we — what about that reset, I guess, versus prior expectations has impacted the customer growth?
And then I guess secondly, along the same vein. I mean the delay in the medium-term targets or current trends. Can you give us a little bit of update what trends are impacting the customer growth and sort of how that compared to your expectations six months ago?
Molly Matthews
Perfect. Thank you for your question, Guy. I’ll start and then I’ll pass to Jason to get his perspective.
So one of the things that took a bit longer than anticipated was hiring the key leadership roles for our go-to-market team. Jason joined us in February of this year. We also added a new Head of Marketing as well as a VP of Sales across the spring and summer months. So that did take a bit longer than anticipated.
Jason, would you like to speak to progress and also the different economic trends you’re seeing facing churches and how that’s impacting our sales team?
Jason Rupert
Yes, you bet. I think adding on with what Molly said, part of what we tried to do this year, we identified certainly some areas from really doing a deep dive analysis into all of our processes and realized we had to stabilize MQLs and so our marketing qualified leads. And so really started that playbook of generating more marketing leads.
We’ve hired a new Senior Director of Demand Gen, which is really — she’s very experienced in the SaaS space. And so really looking at running that playbook to not only increase MQLs but also make sure they align with our corporate objectives and strategy in the right segment and mix. And so that is continuing. We’re progressing and we see some really good leading indicators of how that will drive success in the second half.
The other thing Molly kind of touched on is we really had to reset our leadership team across the go-to-market functions. And we really brought in some experience that’s been through this process several times. And that’s starting to really pay off stabilizing the team. We’ve really seen turnover really become nonexistent in the software sales organization.
So we’ve stabilized the team. We’ve upped the sales enablement to really make sure that the team is getting the consistent training and best practices to how to go win. And then layering on top of that, a little bit about what Molly talked about was the economic conditions. We are finding that with these uncertain economic conditions, rising interest rates, inflation and labor cost, it is leading some churches to reevaluate kind of the timing of the purchase decisions.
And what that does is that has resulted in a little bit more — that new customer adds than we expected. The good thing in that is they’re definitely looking at technology to help solve their problem, which is driving higher engagement in their community and growing their church.
And so while they’re still very engaged in the sales process, it is elongating the sales process somewhat. And what they’re doing is they’re delaying their purchasing a new software. And we believe that definitely had an impact on adding customers or new adds kind of through the first half.
Guy Hooper
Yes. Jason, so look, I guess takeaway from that is sales lead times get extended in the difficult times. I mean how does the pipeline been compare to — or how many I guess SRPs you’re competing for at the moment? How does that compare to where you would have expected to be?
Jason Rupert
Yes. I think all of that we just talked about certainly was a little bit slower first half than we all would have liked. But I’d say what we’re seeing is a really nice growth in our pipeline. I think as we, again, reestablished and made those detailed plans from a go-to-market and the marketing, our new marketing programs that we’ve launched and really just kind of refocusing on our marketing strategy is really driving the top of the funnel, which is driving stronger pipeline.
And also on the Catholic side, we’re seeing stronger pipeline working with several diocese out there to kind of drive the pipeline. So I think seeing a stronger pipeline. And I would say — I would also classify that as a much more qualified pipeline than potentially maybe what we’ve seen in the past.
So as we changed our go-to-market, we also changed on how we score leads coming in. So therefore, it’s really driving a higher-quality lead, which is what we want on top of driving higher pipeline, which, again, we believe will really lead to the second half success.
Guy Hooper
Great. Just, I guess, one last one for me then I’ll go to back queue. Just any trends in product pricing? I mean part of the optimization of the go-to-market strategy, you talked about targeting mid-market. Have you had to make any pricing concessions in order to when or to target those mid-market customers?
Molly Matthews
Thanks for the question, Guy. We’ve definitely seen some pricing pressure on the smaller side. So smaller customers, I think what we call SME or small and middle market. Our pricing has actually remained very durable in our enterprise or large segment as well as in our Catholic segment.
So some pricing pressures that we’re handling with promotion and testing a few things from a pricing perspective. But again, that’s been in the down-market segment. Our pricing has remained very durable in enterprise and Catholic.
Operator
The next question comes from Garry Sherriff from RBC.
Garry Sherriff
So just a couple of questions. One in relation to — have you had any discussions as yet on the results with the bidding parties? And if so, interested in their reaction or thoughts particularly in relation to the timing delays on those longer-term targets?
Richard Keys
Sure, Garry. The answer to that is, yes, the bidding party was aware of our results prior to the market being released obviously under NDA. So they are aware of these results.
Garry Sherriff
And they were also aware of those pushing out of the longer-term targets given they typically have a longer-term time frame?
Richard Keys
Yes. They, of course, will have taken their own view on the future but they were supplied our views.
Garry Sherriff
Is there — again, I’m not an expert of New Zealand M&A law. But under the current offer, can the bidders revise their offer lower given those changes to the long-term targets?
Richard Keys
So firstly, they already had those before they signed the Scheme Implementation Agreement. So I think that’s the first point. In regards to varying the price, no, I don’t believe they’re able to vary it downwards.
Garry Sherriff
Okay. Last question — sorry, keep going.
Richard Keys
Just to confirm, they had all this information prior to signing the Scheme Implementation Agreement.
Garry Sherriff
Okay. Yes. No, that’s clear. Last two questions. One in relation to your revenue growth guide for FY ’23 implies about $8 million to $16 million incremental revenue. Where is the bulk of that growth coming from? Is that Resi Media or the core business?
Richard Keys
It’s a combination of both of those because remember, the Resi Media for the first six months, we were not comping like-for-like whereas the second six months, we are. So it’s coming from both Resi Media and the core business.
Garry Sherriff
Okay. Last question on — you talked about recruiting a new sales and marketing team. Can you maybe just give us a sense of how many of your sales team have departed or maybe been advised to depart? And how many need to be recruited or have been recruited but still have more go? Sorry. So first question. One, how many are departing? And two, how many need to be recruited? And of those that need to be recruited, how many have you actually recruited to date?
Molly Matthews
So I’ll answer this high level. Jason had mentioned that we’ve really seen a very drastic improvement in the retention of our sales team. We did at the beginning of the year evaluate each SaaS member to ensure that we had a healthy sales kind of SaaS-experienced sales team who also understood our vertical in seat that’s already been completed. And at this point in time, the additions that are needed are already budgeted and incremental to the headcount that we have today.
So we aren’t looking down the path of needing to add a tremendous amount of headcount in order to hit our goals. We’re just in a place where if someone were to organically leave the business or be managed out for performance that we would backfill them. The only exception to that is as per plan, we do plan to add a few additional sales people to the team to focus on the Catholic initiative.
Operator
[Operator Instructions] The next question comes from Phil Campbell from UBS.
Philip Campbell
Just a question for Molly. Just I noticed that the churn went up in the — largely in the medium-sized churches. I think you lost about 85 medium churches. Can you just give us a bit of color on what was causing that? Was it consolidation of churches? Or was it actually — was it a price-based decision? Or is it some other reason why they were churning?
Molly Matthews
That’s great question. Thank you, Phil, and you’re correct. That increase in churn is primarily in the middle market segment. I will say that there are kind of two factors at play. One is pricing pressure but when we think about pricing pressure, I think it’s easy to go to our software price point. What I mean when I say pricing pressure is as Jason and I both mentioned, the economic pressures are on churches in the U.S. right now are the same that businesses are facing.
So they’re facing increased labor cost, inflation in all of the core items that they need to run their organization. So many churches are having to make difficult decisions around software or reducing expenses across the board. So we’re definitely seeing that more heavily in the middle market segment today. We are working quite intentionally to improve in different areas of our customer service organization to ensure that we’re adding value as frequently as we possibly can to customers in that segment and beyond.
Philip Campbell
What was the second reason, Molly?
Molly Matthews
So the pricing pressure is definitely but then also — I think you had asked if this is due to consolidation. We don’t see consolidation or churches kind of falling away or emerging in the middle market segment as much as we do in the small church space. So again, that’s churches that are under size 200. So in that mid-market segment, it’s pressure on budget. And then the second is just pricing of us compared to our competitors.
Philip Campbell
And is there any plans to kind of, in terms of the pricing, maybe increase the bundled discount or try and come out with some sort of ChurchStaq light product or anything like that?
Molly Matthews
We are trialing some different price points for smaller churches. The other piece that we’re really leaning into is leading with Donor Management. So the price point for entry at Donor Management obviously is lower than for the entirety of ChurchStaq.
So in the current state of our customer base today, we feel that that’s the best opportunity for us to get in to win business, add value quickly, both to the church but also to our business and then to expand with additional products across time. So we do feel like that is one core strategy that we’ve already begun to implement leading with Donor Management, which has a lower price point for entry and speed to value is seen much quicker, implementation is much quicker.
Operator
The next question comes from Tom Deacon from Macquarie.
Tom Deacon
Just a follow-on on the churn there. Wondering if you could give us an indication in terms of the churn profiled by the sort of product holding groups. Has that been mostly in the Donor Management product? Or has it been across Church Management as well?
Molly Matthews
That’s when we may need to get back to you on the breakdown. I will just say we are definitely seeing it primarily in the middle market segment. And the products that we’re seeing, we did have a little bit more of an impact in Donor Management than we anticipated. But we’re seeing it pretty consistently across the board.
Tom Deacon
I appreciate that. If I could just throw in a quick follow-up as well. Just the transaction volumes, which were flat versus the PCP, what do you guys think that is a reflection of? Is it economic conditions? Or is it just the sort of going back to a normal cadence post COVID?
Molly Matthews
It’s a very interesting thing to unpack. What we’re seeing from our data is that we’re — there are a lower number of brand-new donors coming into the church ecosystem across the entirety of the U.S. state space. So we have access to data from other sources outside of just Pushpay data set. What we’re seeing others are seeing as well, which again is a lower number of new donors coming into the church ecosystem as well as for us, it was a lower number of new customers onboarding across the last several years.
And then the third piece that’s impacting is the fact that for the last several years, we’ve grown our small church number more significantly than our large church or medium church number, which means a lower number of donors represented in those wins.
Tom Deacon
Understood, Molly. That’s helpful. And so you’re not seeing like an average transaction per donor decrease or anything like that?
Molly Matthews
That’s correct. So we’re actually seeing the opposite. The average transaction size has increased a bit. The other thing that I’ll just say that we’re also seeing is the recurring donor base across all Pushpay customers is increasing. So those that were a recurring donor at the beginning of the year are giving more than they were at the beginning of the year today. And that’s been a very, very resilient important piece of our software offering.
Operator
The next question comes from Tim O’Loan from Nikko Asset Management.
Tim O’Loan
Graham, just one for you. Did the Board consult with any shareholders before recommending on the cost or the structure of the Scheme given the relatively [indiscernible] or on the Brexit?
Graham Shaw
No, we did not communicate with any shareholders prior to entering into the Scheme Arrangement.
Tim O’Loan
Was there any thinking behind that? Did you consider it or not?
Graham Shaw
We gave it some thought. We also thought that shareholders would have differing views. And I think our experience post the announcement just highlights that. So you’re going to get a range of views and there was a question as to who do you talk to and who do you follow.
Tim O’Loan
Okay. Sure. Just one more quick one. Just from sort of hearing the commentary correctly, it sort of seems like the issues that may be going on a temporary nature and not dividend maybe pushing out on time frames. So how do you weigh that in terms of your comments saying that the Board thinks the scheme should be accepted to mitigate risk factors on the strategic plan versus, I suppose, the risk of leaving value on the table over time?
Graham Shaw
Yes. That’s always going to be a $64,000 or perhaps that’s a $1.5 billion question. As we’ve signaled, we have sort of pushed out our expectation around delivery of what we had previously thought. There is uncertainty particularly in the U.S. market around how the macroeconomic situation will impact on churches and that, in turn, will impact on us or Pushpay.
So the view was — and I’m going a little bit beyond your question. But the view was if we get an offer within the range of values that we’ve been given, we felt obliged to present that to shareholders.
Operator
At this time, we’re showing no further questions. I’ll hand back to Molly Matthews for any closing remarks.
Molly Matthews
Wonderful. Thank you, Travis. Thank you again for your time and questions. I’d particularly like to thank our shareholders for your continued support and confidence, our teams in the U.S. and New Zealand for their hard work and all of our customers around the world for their loyalty and excitement as these results are ultimately thanks to their support.
I’ll now hand it back over to Gabby.
Gabrielle Wilson
Thank you, Molly. If there are any additional questions or for press, please contact me by e-mail at investors@pushpay.com. Playback of today’s investor briefing will be available within the next 24 hours for 30 days. The playback can be accessed by dialing 0 (800) 886-078 in New Zealand. And for all other international locations, please dial +64-9-929-3905. The playback pin number is 10025287.
We would like to thank you again for your time. Have a great day.
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