The Altium Limited (ASX: ALU) share price will be one to watch on Tuesday.
That's because the electronic design software platform provider has released its FY 2023 results after the market close.
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Altium share price on watch amid strong FY 2023 growth
- Revenue up 19.2% to US$263.3 million
- Operating expenses up 18.7% to US$167.3 million
- Earnings before interest, tax, depreciation, and amortisation (EBITDA) up 20.3% to US$96 million
- EBITDA margin up 0.3 percentage points to 36.5%
- Profit after tax up 19.6% to US$66.3 million
- Full-year dividend up 14.9% to 54 Australian cents per share
What happened in FY 2023?
For the 12 months ended 30 June, Altium reported a sizeable 19.2% increase in revenue to US$263.3 million. This was driven by a 19.9% increase in Design Software revenue to US$203 million and a 17% lift in Cloud Platform revenue to US$60.3 million.
Key drivers of the company's top-line growth were its Americas and EMEA segments, which reported 32.3% and 19.8% increases in Design Software revenue to US$92.1 million and US$74.5 million, respectively. This was supported by a modest increase in Rest of World revenue to US$16.9 million and offset an 8% decline in China revenue to US$19.5 million.
Altium also revealed that a number of key metrics headed in the right direction during the financial year. For example, subscribers grew 7.5% to 61,159 and the average subscription seat value grew by 22.5% to US$2,408.
Another positive was that Altium 365 adoption grew by 54% to over 36,700 monthly active users and by 42% to over 12,500 monthly active accounts.
This ultimately underpinned a small increase in the company's EBITDA margin to 36.5%, which supported a 20.3% increase in EBITDA to US$96 million and a 19.6% lift in profit after tax to US$66.3 million.
In light of this strong profit growth, the Altium board increased its dividend by 14.9% to 54 Australian cents per share.
How does this compare to expectations?
According to a recent note out of Goldman Sachs, its analysts were expecting Altium to report revenue of US$257.3 million, operating expenses of US$164 million, and EBITDA of US$93.6 million in FY 2023.
So, while Altium's operating expenses were higher than expected, it has beaten on both revenue and EBITDA. In fact, it has also beaten consensus estimates for both. This may bode well for the Altium share price on Tuesday.
Management commentary
Altium's CEO, Aram Mirkazemi, was pleased with the company's performance in FY 2023 and particularly its shift to a cloud-first strategy. He commented:
Our Cloud-First Strategy is transforming our product portfolio from stand-alone desktop design software to a connected cloud-based design platform providing mid-market customers with access to enterprise capabilities. We are also gaining increasing traction in the enterprise market, where Altium 365 is proving to be a game-changer for our prospects of succeeding with enterprise customers.
As an example of this, we recently closed a significant multimillion-dollar, multi-year contract with Renesas Electronics Corporation (a global semiconductor provider) who have decided to standardize on Altium design software with the view to streamline their go-to-market and customer engagement leveraging Altium 365.
Altium is now seeking to enhance its offering by connecting its Altium Designer and Octopart search engine businesses. He adds:
We are connecting Octopart to Altium Designer to create a transformative outcome for the industry and as we invest in both make and buy bolt-on capabilities through M&A that will deepen the value proposition and reach of Octopart.
Outlook
More good news for the Altium share price is that management is expecting more of the same in FY 2024. It is guiding to:
- Revenue of US$315 million to US$325 million (20%-23% growth), comprising:
- US$250 million to US$255 million for Design Software (23%-26% growth)
- US$65 million to US$70 million for Cloud Platform (8%-16% growth)
- Underlying EBITDA margin of 35% to 37%
Management has also reiterated its aspirational goal of US$500 million in revenue by FY 2026. Though, its growth will need to go up a gear in FY 2025 and FY 2026 to get there without M&A.
