Earlier this week, Xero Limited (ASX: XRO) reported results, which I covered here: Xero FY21 half year result.
I think Xero showed more strong growth and rising profit margins. However, Xero isn’t the only tech business that’s displaying a lot of admirable qualities. Here are three others doing really well:
1. Pushpay Holdings Ltd (ASX: PPH)
Pushpay is an ASX technology share that facilities electronic donations to organisations like large and medium US churches.
The COVID-19 conditions are causing the adoption of digital giving to go through the roof, but I don’t necessarily think that the introduction of a vaccine would see everyone go back to donating in cash. Pushpay’s technology has a number of tools useful for the church to connect with its congregation, particularly with the combined offering called Churchstaq.
Pushpay’s FY21 half-year result also showed good economies of scale. The gross margin improved from 65% to 68% and the EBITDAF (the F stands for foreign currency) margin, as a percentage of operating revenue, grew from 17% to 31%.
There could be a lot more growth to come as the company is aiming for US$1 billion of annual revenue.
2. Redbubble Ltd (ASX: RBL)
Redbubble is an artist-driven e-commerce business where thousands of artists sell things such as clothes, phone cases, masks, and so on.
The FY21 first quarter showed continuing strong growth. It revealed that marketplace revenue soared 116% to $147.5 million. Gross profit grew even faster, rising by 149% to $64.5 million. It generated $22.1 million of EBIT (EBIT explained) in the first quarter, up from an EBIT loss of $1.5 million last year. Operating cash flow rose by 166% to $27.1 million, up from $10.2 million in the prior year.
The Redbubble share price is down 12% since the news of the potential COVID-19 vaccine broke. But the business continues to benefit from scale, so I think it’s worth watching.
3. Kogan.com Ltd (ASX: KGN)
Kogan.com is an online retail business that also benefited from the shift to online shopping. Again, there may be a bit of a return to physical store shopping, but online sales growth was occurring before COVID-19 came along.
One of the main positives of Kogan.com, for me, is that it has a growing number of Kogan subscribers that may decide to take up some of the other services that Kogan offers like Kogan Mobile, insurance, superannuation, and so on.
Whilst the second half of FY20 was very impressive, Kogan.com actually continued to report strong monthly growth. In Kogan’s August 2020 update it said that gross sales rise by more than 117% year on year, which helped gross profit go up by more than 165% year on year. Adjusted EBITDA grew by more than 466% year on year.
My takeaway
All of these ASX technology shares have promising long-term outlooks. COVID-19 has certainly accelerated the growth of these businesses and I don’t think that’s going to unwind from a COVID-19 vaccine. If I had to pick one today it would be Pushpay – I think more donations are going to go digital over time, regardless of the path of the pandemic. There are other scalable ASX growth shares in the tech space I like such as Temple & Webster Group Ltd (ASX: TPW).
