The Altium Limited (ASX: ALU) share price will be one to watch on Tuesday following the release of the electronic design software company's stunning half year results after the market close.
During the six months ended December 31, Altium posted revenue of US$78 million, EBITDA of US$28.4 million, profit after tax of $23.4 million, and earnings per share of 18 U.S. cents. On the top line revenue was up 26% and on the bottom line net profit after tax grew an impressive 58% on the prior corresponding period.
What were the drivers of the result?
During the half Altium Designer new seats grew by 34% and the overall subscription pool increased by 9% to reach 39,179.
This ultimately led to Board and Systems revenue increasing 17% to US$58.4 million, Octopart revenue jumping 80% to US$8.9 million, TASKING revenue lifting 35% to US$8.4 million, and NEXUS revenue rising 20% to US$2.4 million.
And thanks to the company's EBITDA margin expanding to 36.3% from 30% in the prior corresponding period, profits grew at an even quicker pace during the half.
How will the market to this result?
Altium isn't the most widely covered share on the Australian share market, so it can be hard to gauge what the market is expecting.
But a note out of Goldman Sachs in December shows that its analysts are expecting the company to achieve full year revenue growth of 22% to US$171.4 million in FY 2019.
This is expected to comprise revenue of US$126.9 million from its Board and Systems segment, US$19.2 million from the Octopart segment, US$16.7 million from the Tasking segment, and US$8.6 million from the Nexus segment.
On the bottom line Goldman has forecast full year net profit after tax of US$51 million, up 37% on FY 2018's result.
Based on Altium's half year result, I think the company is on course to smash these forecasts. In light of this, I suspect there's a good chance that its shares could push higher when the market opens on Tuesday.
Should you invest?
With management continuing to expect the proliferation of electronics through the rise of smart connected devices to drive growth for Altium in the foreseeable future, its long-term growth prospects certainly look positive.
In fact, management is not only confident that it will achieve revenue of US$200 million by the end of FY 2020, it has set itself an aspirational revenue target of US$500 million by 2025.
In addition to this, it has committed to the achievement of 100,000 Altium Designer subscribers before 2025 in order to attain market dominance. Given the quality of the product and the increasing demand for this type of software, I believe it has a great chance of achieving this.
Overall, I think this result demonstrates why Altium could be a fantastic long term investment along with the likes of Appen Ltd (ASX: APX) and Xero Limited (ASX: XRO).
