The Altium Limited (ASX: ALU) share price is on the slide on Tuesday.
In morning trade, the electronic design software company's shares are down 6% to $37.43.
Why is the Altium share price sinking?
Investors have been selling down the Altium share price today following the release of the company's half year results after the market close on Monday.
In case you missed it, Altium reported a 17% increase in revenue to US$119.5 million and a 30% jump in net profit after tax to US$29.6 million.
The company's top line growth was driven largely by a 16% increase in Design Software revenue to US$91.6 million and a 22% increase in Octopart revenue to US$27 million.
Whereas its bottom line growth reflects the benefits of operating leverage, which boosted its EBITDA margin up 2.1 percentage points to 36.2%.
This allowed Altium to declare an interim dividend of 25 Australian cents per share, which is up 19% on the prior corresponding period.
Finally, the company has reaffirmed its full year guidance for total revenue of US$255 million to US$265 million, which represents 15% to 20% annual growth. Altium also continues to expect an underlying EBITDA margin of 35% to 37%.
Broker reaction
The team at Bell Potter was relatively pleased with Altium's result. However, it notes that the company missed on the top line but beat on the bottom line.
The broker commented:
1HFY23 revenue grew 17% to US$119.5m but was 2% below our forecast of US$121.6m. The miss was driven by a mix of currency and lower than expected revenue in Russia and China.
EBITDA grew 24% to US$43.3m and was 4% ahead of our forecast of US$41.7m. The beat was driven by lower expenses than forecast (US$77.3m vs BPe US$80.4m) which resulted in a higher than forecast EBITDA margin (36.2% vs BPe 34.3%). Cash flow was strong with operating cash flow exceeding NPAT and this was despite a hike in tax paid (US$9.6m vs US$3.4m in the pcp). The interim dividend increased 19% to A25.0c 40% franked which was ahead of our forecast of A23.0c unfranked.
In response to the result, Bell Potter has retained its hold rating with an improved price target of $42.50.
Over at Goldman Sachs, its analysts echoed Bell Potter's view. It commented:
ALU reported 1H23 Sales/EBITDA that was -1%/+1% vs. GSe, with weaker Octopart and License revenues offset by solid B&S pricing and cost control.
The broker also notes that "subscriber performance was marginally weaker than expected," which could be what is putting a bit of pressure on the Altium share price today.
Goldman has retained its neutral rating and $42.00 price target.
