Here's why the Altium (ASX:ALU) share price is down 4%

The Altium Limited (ASX:ALU) share price is down almost 4%. The technology business released its FY21 half year result to the market.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Altium Limited (ASX: ALU) share price is down by 4% at the time of writing.

Altium has just reported its FY21 half-year result to the market for the six months to 31 December 2020.

Highlights of the Altium FY21 half-year report

Altium disclosed that its Altium 365 product, which is the cloud platform service for engineer clients, has seen its active monthly users rise to 9,300 and monthly active accounts increased to 4,400. This represented growth of 83% and 69% respectively, since July.

Another segment that saw growth was Octopart, its revenue grew by 19% to US$10.8 million. Management said that electronic manufacturing rebounded during the half.

The company also said that Altium's subscription business grew by 12% year on year to reach 52,157 subscribers. Altium also said that term-based license revenue more than doubled over the half. It has a goal of 80% recurring revenue by 2025.

Turning to the overall financial statistics reported by Altium, continuing revenue (which excludes TASKING) fell 4% to US$80 million. However, continuing reported expenses still increased by 3% to US$53 million.

This combination of lower income and higher expenses led to continuing earnings before interest, tax, depreciation and amortisation (EBITDA) falling 15% to US$27 million. The underlying EBITDA margin declined from 35.9% to 30.6%.

Continuing profit before income tax dropped 23% to US$20.7 million and continuing profit after tax went down 12% to US$16.6 million.

The Altium dividend was cut by 5% to A$0.19 per share.

In terms of the cash and cashflow, Altium said its operating cashflow fell 10% to US$18.7 million and it ended with US$88.3 million of cash on the balance sheet.

The TASKING business, which Altium has decided to sell, made a profit after tax of US$3.1 million – this was down 26%. The Altium share price has fallen 18% since the announcement of the sale of TASKING. 

Why did revenue decline in this result?

Altium's management explained that it experienced a challenging first half with extreme COVID-19 conditions in the US and Europe. It also attributed some of the decline to the ongoing shift of the business to the cloud involving a number of significant organisational changes that the company has referred to as the 'Netflix moment' when a company pivots to cloud operations.

Altium CEO Aram Mirkazemi said: "These changes include the separation of our CAD software from our cloud business and the bifurcation of our sales into high volume (digital sales channel) and high touch (professional sales channel)."

Altium 365 focus

The cloud offering of Altium 365 is a key focus of the business. Mr Mirkazemi explained: "Altium 365 is key to our future success through indirect monetisation from our CAD software tools and, in time, direct monetisation from the broader ecosystem. I am most heartened by the strong adoption of Altium 365."

Second half and FY21 expectations

Whilst Altium is positive about the fact that COVID-19 vaccines are being deployed, it still views FY21 as a pre-vaccine year in relation to its goals for 2025. 

The company is expecting stronger execution momentum in the second half, but there are still macroeconomic uncertainties, so its full year revenue guidance is at the lower end of the range. FY21 revenue is now expected to be in the range of US$190 million to US$195 million (excluding TASKING) and the EBITDA margin is expected to be in the range of 37% to 39%.

Tristan Harrison owns shares of Altium. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Altium. The Motley Fool Australia owns shares of Altium. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Fallers

a man weraing a suit sits nervously at his laptop computer biting into his clenched hand with nerves, and perhaps fear.
Share Fallers

Why 4DMedical, Amaero, Clarity Pharmaceuticals, and Treasury Wine shares are falling today

These shares are having a poor session. What's going on?

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why EOS, Humm, Pantoro Gold, and Robex shares are dropping today

These shares are having a tough time on hump day. But why?

Read more »

Disappointed man with his head on his hand looking at a falling share price his a laptop.
Share Fallers

Why Endeavour, GQG Partners, Kingsgate, and Super Retail shares are dropping today

These shares are having a poor session on Tuesday. But why?

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why 4DMedical, DroneShield, Super Retail, and Tamboran shares are falling today

These shares are having a tough start to the week. But why?

Read more »

a business man in a suit holds his hand over his eyes as he bows his head in a defeated post suggesting regret and remorse.
Share Fallers

Why Core Lithium, Paladin Energy, Pro Medicus, and Rio Tinto shares are dropping today

These shares are ending the week in the red. But why?

Read more »

Bored man sitting at his desk with his laptop.
Share Fallers

Why Ansell, Elsight, Ramelius, and SGH shares are falling today

These shares are missing out on the market's move higher on Thursday.

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Bellevue Gold, Harvey Norman, Karoon Energy, and Westpac shares are falling today

These shares are having a tough time on hump day. But why?

Read more »

A worried man holds his head and look at his computer.
Share Fallers

Why Andean Silver, CBA, Life360, and Silex shares are dropping today

These shares are out of form on Tuesday. But why?

Read more »