The Altium Limited (ASX: ALU) share price will be on watch on Tuesday morning following the release of the printed circuit board (PCB) design software provider's half year results after the market close.
For the six months ended December 31, Altium reported half year revenue (excluding interest) of US$92.85 million and EBITDA of US$36.8 million. This was a 19% and 22% increase, respectively, over the prior corresponding period. It also means that Altium's EBITDA margin has increased from 38.8% to 39.7%.
On the bottom line, the company reported a 2% decline in net profit after tax to US$23.1 million. This was the result on the company moving to the full effective tax rate of 27% during the first half. Earnings per share also came in 2% lower at 17.65 U.S. cents (26.23 Australian cents). Pre-tax earnings per share grew 23% over the prior corresponding period.
The decline in earnings didn't stop the Altium board from increasing its dividend. It declared an interim dividend of 20 Australian cents per share, which was an increase of 25% on last year's interim payout.
What were the drivers of the result?
The main driver of its top line growth in the first half was its key Altium Designer product. It recorded a 19% increase in new Altium Designer seats and a 16% lift in subscription base to 46,693 subscribers. This puts the company in a strong position to achieve its target of 50,000 subscribers in FY 2020.
This underpinned a 12% increase in revenue in the Board and Systems segment. Geographically, the China region was the fastest growing part of the segment. It delivered a 12% lift in sales to US$12.5 million. This was supported by an 11% lift in sales in the Americas to US$25.8 million, a 12% jump in sales in the EMEA region to €19.3 million, and a 4% rise in Rest of the World sales to US$5.65 million.
Supporting its growth were the NEXUS and TASKING businesses. NEXUS was the standout with a 197% jump in revenue to US$7 million. The TASKING business had a robust half, delivering a 15% increase in revenue to US$9.7 million.
One disappointment was the fledgling Octopart business, which only managed a 2% lift in revenue to US$9 million. Management advised that Octopart was negatively impacted by the reduced volume in the parts distribution industry due to excess inventory. This resulted in lower cost per click and lower traffic to distributors. It was also temporarily impacted by changes to the Google search algorithm, which have now been rectified.
Management commentary.
Altium's CEO, Aram Mirkazemi, appeared to be very pleased with the half.
He said: "Altium has delivered a strong performance for the first half, particularly in comparison with an outstanding first half performance in fiscal 2019. Revenue growth of 19% and an EBITDA margin of 37%, excluding the positive impact of the new leasing standard, for the half mark over eight years of successive periods of double-digit revenue growth and expanding margin."
"There is no doubt that Altium has growing momentum toward market dominance and our 2025 targets. Our increase in new Altium Designer seats of 19% and record growth of 16% in our subscription base to 46,693 subscribers puts us well into our climb to reach 100,000 subscribers by 2025. I am confident that we will achieve our target of 50,000 subscribers by full year," he concluded.
Outlook and Coronavirus update.
Altium has followed the lead of countless other companies such as Cochlear Limited (ASX: COH) and Treasury Wine Estates Ltd (ASX: TWE) to warn that the coronavirus outbreak could impact its performance.
According to the release, the company is likely to land at the lower end of its full year guidance range. This is due to the emerging uncertainty about the impact of the coronavirus in China and the slower start to Octopart in the first half.
The company has previously guided to revenues of US$205 million to US$215 million at an EBITDA margin of 37% to 38% in FY 2020. The latter margin guidance has now been revised to account for the impact of AASB16 Leases. It now expects an EBITDA margin in the range of 39% to 41% on a reported basis.
Positively, management believes the company is moving confidently towards its 2025 targets for market dominance of US$500 million in revenue and 100,000 subscribers. It expects to reach the half way mark of 50,000 subscribers by end of FY 2020.
