The Altium Limited (ASX: ALU) share price rose by 20%, marking yet another reporting season where the electronics PCB software business impressed investors.
Some of the (US dollar) numbers that Altium reported were really good. Revenue increased by 24% to $78.1 million, but the reported expenses only increased by 12%. This improvement in operating leverage saw the earnings before interest, tax, depreciation and amortisation (EBITDA) increase by 49%.
The EBITDA margin improved from 30% a year ago to 36.3% at 31 December 2018. Management said that as the business grows to 2025 it could achieve an (underlying) EBITDA margin of 40% (or even higher) – although there may be the occasional bumpiness due to acquisitions or other one-offs along the way.
Profit before income tax increased by 56%, profit after income tax grew by 58% to $23.44 million and earnings per share (EPS) increased by 57% to 18 cents. However, management did say that the effective tax rate will grow to perhaps around 25% over time.
The Altium half-year dividend was increased by 23% to 16 Australian cents. For long-term shareholders, Altium is proving to be an impressive dividend share.
Management are now very confident of hitting the US$200 million revenue target in 2020 and has set a new aspirational goal of US$500 million in 2025 to go along with its 100,000 Altium Designer subscribers goal. These figures should see Altium achieve market dominance.
The China part of the business was particularly successful during the six months. Chinese revenue grew by 49% and Altium added 551 Chinese Altium Designer seats over the year to reach 1,283.
Altium's balance sheet continues to look very sound with US$58 million of cash at December 2018, up from $52.5 million at June 2018. There was no debt on the Altium balance sheet.
Foolish takeaway
Altium is currently trading at around 48x FY20's estimated earnings, so it is trading expensively when looking back its historical earnings. But, Altium might not be that expensive if it actually performs (or beats) the high expectations built into the share price.
Whilst I wish I owned more Altium shares before today, I'm not going to buy any whilst investors are so excited. There may be another reduction of the share price like we saw in October and December, but I would like to increase my holdings at the right price.
