Why the Altium (ASX:ALU) share price is inching lower

The Altium (ASX: ALU) share price is slipping today after the release of its FY21 half-year results. Here’s what you need to know.

| More on:
falling asx share price represented by woman making sad face

Image source: Getty Images

The Altium Limited (ASX: ALU) share price is inching lower today after the release of its half-year results for 2021.

At the time of writing, shares in the electronic design software company are down 0.18% to $30.60.

How did Altium perform in H1 FY21?

The Altium share price is losing ground this morning after announcing losses across its key metrics.

In today’s release, Altium delivered a subdued performance for the first half of FY21 as COVID-19 heavily affected trading conditions.

For the period ending 31 December, the company reported group revenue of US$80 million (not including its divested Tasking business). This reflected a fall of 4% when compared to the prior corresponding period (pcp).

Altium revealed that after 8 consecutive years of double-digit growth, its United States and European operations were impacted by COVID-19. In addition, the global economic slowdown has caused a challenging environment for licence compliance activities, as witnessed post-COVID in China.

Earnings before interest, tax, depreciation and amortisation (EBITDA) sank to US$27 million, a decline of 15% over the H1 FY20 period. The company advised that a drop in revenue coupled with continued investment in its cloud business led its EBITDA to retreat.

Net profit after tax (NPAT) also plummeted to US$16.6 million, slipping 12% from the prior comparable period.

Group operating cash flow reduced to US$18.7 million, shedding 10% as a result of an increase in corporate tax payments of US$6.2 million.

Altium stated it had a healthy balance of US$88.3 million in cash, up 9% on the pcp. The company also noted that it continues to remain debt-free.

The board declared an unfranked interim dividend of 19 cents per share to be paid to shareholders on 23 March. This is a 5% decrease on H1 FY20 interim dividend, which was 20 cents per share.

Management commentary

Commenting on the company’s H1 FY21 performance, Altium CEO Aram Mirkazemi said:

Altium experienced a challenging first-half with extreme COVID conditions in the US and Europe and our pivot to the cloud involving a number of significant organisational changes that we have referred to as our Netflix Moment.

These changes included 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). We also opportunistically divested our TASKING business to concentrate our focus on accelerating the adoption of our cloud platform Altium 365 for dominance and industry transformation.

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 and, with our Netflix organisational changes behind us, I am confident of a much stronger second half. Early signs are positive for this.

Outlook

Looking ahead, Altium believes that fiscal 2021 will be viewed as a pre-vaccine year. It said that while the macro environment remains challenging, a second more robust half result is expected.

The company reaffirmed its long-standing target to reach US$500 million in revenue and 100,000 subscribers by 2025. At the end of 2020, its subscriber base stood at 52,157, a 12% lift over the first-half=FY20.

Furthermore, Altium reinforced its updated guidance range for the full-year of US$190 million to US$195 million in revenue.

Altium share price snapshot

Over the last 12 months, the company’s shares are down more than 30%, reflecting weak investor sentiment. Its shares hit a multi-year low of $23.11 in March before gradually moving higher. 

Based on the current Altium share price, the company commands a market capitalisation of just over $4 billion.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

Aaron Teboneras has no position in any of the stocks mentioned. 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 Market News