Altium (ASX:ALU) share price on watch after hitting guidance and upgrading outlook

Altium had a strong second half and expects the positive form to continue in FY 2022…

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The Altium Limited (ASX: ALU) share price will be on watch today.

This follows the release of the electronic design software company’s full year results.

Altium share price on watch after strong second half

  • Revenue (including TASKING) up 1% to US$191.1 million compared to guidance of US$190 million to US$195 million
  • Revenue from continuing operations up 6% to US$180.2 million
  • Operating expenses rose 12% to US$120.2 million
  • Earnings before interest, tax, depreciation and amortisation (EBITDA) from continuing operations down 3% to US$60 million
  • Profit before tax down 7% to US$47.7 million
  • Profit after tax up 79% to US$35.3 million on lower tax rate
  • Full year dividend of 40 Australian cents, up 3% year on year
  • Cash balance of US$191.5 million

What happened in FY 2021 for Altium?

For the 12 months ended 30 June, Altium delivered a 1% increase in revenue to US$191.1 million or a 6% lift to US$180.2 million excluding the divested TASKING business. The latter reflects a 2% increase in its Board and Systems revenue to US$150.9 million, a 42% jump in Octopart revenue to US$27 million, and a 7% decline in Manufacturing revenue to US$2.4 million.

The majority of its growth was achieved in the second half, with continuing business revenue increasing 16% during the half compared to the prior corresponding period. Management believes this bodes well for FY 2022, which itself could bode well for the Altium share price today.

Another positive from the result is that Altium’s recurring revenue continues to increase as a percentage of its overall revenue. At the end of FY 2021, its recurring revenue was 65% of total revenue, up from 59% a year earlier. Management notes that this reflects strong Altium 365 adoption, with almost 13,000 monthly active users and over 6,000 monthly active accounts.

On the bottom line, the company reported a 7% decline in profit before tax to US$47.7 million. This was the result of its operating costs growing quicker than its sales. It profit after tax jumped 79% to US$35.3 million thanks to a lower tax rate.

What did management say?

Altium’s CEO, Aram Mirkazemi, was pleased with the year and particularly the company’s second half performance.

He said: “Altium delivered a strong second half performance to meet its full year revenue guidance. Our Octopart and China businesses both delivered very strong growth and momentum is rebuilding in our core PCB business. The accelerating adoption of our cloud platform Altium 365 is further strengthening our market position.”

“The rapid adoption of Altium 365 is delivering benefits to the Company and our customers on two fronts. First, Altium 365 enhances the value of our maintenance subscription to our customers and delivers SaaS-like subscription benefits to the Company, thereby reducing subscription churn for dominance. Second, the rapid adoption of Altium 365 is catching the attention of the industry and attracting strategic partners that could help us to accelerate our transformative vision to digitally connect electronic design to the broader engineering ecosystem,” added Mr Mirkazemi.

What’s next for Altium?

Possibly giving the Altium share price a lift today is management’s guidance for FY 2022.

Following its strong second half of FY 2021, management has lifted its revenue guidance for FY 2022 to growth of 16% to 20%. This represents revenue of US$209 million to US$217 million.

This is expected to be underpinned by ARR growth of 23% to 27% and achieved with an underlying EBITDA margin of 34% to 36%. The latter compares to FY 2021’s underlying EBITDA margin from continuing operations of 34.1%.

Mr Mirkazemi commented: “Our strong second half performance and our robust ARR growth support a positive outlook. As a result, we are upgrading our revenue expectations to 16-20% growth for fiscal 2022. We are returning back to our strong pre-COVID growth, which is even more significant when considering our business model transition and our move to the cloud.”

The Chief Executive also reiterated its longer term targets and remains confident in achieving it.

He said: “Our focus in fiscal 2022 will be to continue with our cloud adoption and to scale our high-end professional sales through strategic partnerships for significant TAM expansion within the PCB market. With growth coming back earlier than expected, and the rising popularity of Altium 365 driving strategic interest in Altium, our confidence in our US$500 million revenue target is high.”

Altium share price underperformance

The Altium share price has been underperforming in 2021. Since the start of the year, the company’s shares are up just 1%. This compares to a 12% gain by the ASX 200.

Shareholders will be hoping this result is the catalyst to getting the Altium share price heading in the right direction again.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Altium. The Motley Fool Australia owns shares of and has recommended Altium. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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