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FY20 result: Altium (ASX:ALU) announces mixed report

Altium Limited (ASX: ALU) has announced a mixed FY20 result to ASX investors. The Altium share price will be under scrutiny today.

Altium’s FY20 result

Altium revealed that revenue rose by 10% to US$189.1 million and reported expenses only increased by 8% to US$113.5 million.

Its subscription base rose by 17% to 51,006 subscribers. Altium Designer seats sold rose by 15% to 9,251. The release of Altium 365 – its cloud offering – helped growth this year.

The different segments had varying performance. Board and systems revenue rose 4% to US$133.3 million, Nexus revenue jumped 133% to US$15.5 million, Tasking revenue was flat at US$19.8 million, Octopart revenue rose 6% to US$19 million and ‘Manufacturing’ revenue increased 328% to US$2.5 million.

The revenue growth led to EBITDA (click here to learn what EBITDA means) rising by 13% to US$75.6 million. The reported EBITDA margin improved by 1.1% (110 basis points) to 40%. However, the underlying EBITDA margin fell by 0.8% (80 basis points) to 35.8%.

Profit before income tax increased by 12% to US$64.6 million. Profit after tax fell 42% to US$30.9 million and reported profit/earnings per share (EPS) also dropped 42% to 23.6 cents.

However, the normalised EPS rose by 5% to 42.45 cents. Altium explained that FY20 included a one-time accounting charge of US$16.4 million for the deferred tax asset revaluation based on US tax optimisation which will decrease the effective tax rate in FY21 to between 22% to 25% (down from the previously stated 27% to 29%). Altium recently completed a restructuring that will allow it to take advantage of a reduction of US tax liability for foreign derived income.

Balance sheet, cashflow and dividend

Altium said that its operating cashflow fell 18% to US$56.5 million. The company gave clients extended payment terms near the end of the year due to COVID-19 conditions.

The company’s cash pile rose by 16% to US$93 million over the year.

Altium’s board decided to declare a final dividend of AU19 cents per share, up 6% compared to last year. That brought the full year dividend to AU39 cents, up 15%.

Missing goals?

Altium didn’t manage to achieve its long term aspirational goal of US$200 million revenue by FY20. And management also said that its US$500 million revenue goal may take an extra six to 12 months to achieve. However, Altium management said the company is on track to achieve its goal of 100,000 subscribers by 2025.

Management comments

Altium CEO Aram Mirkazemi said: “Our performance demonstrates Altium’s strength, its business model adaptability and its organisational versatility to execute successfully across multiple fronts and in varying conditions. Our strategy to drive volume through attractive pricing to support our customers was rewarded and has allowed us to maintain momentum to successfully launch our digital sales platform and Altium 365.”

Summary

Altium 365’s launch was perfectly timed to help Altium and its customers through this period. It informed investors that it’s looking for acquisition opportunities. Using the normalised EPS figure, the current Altium share price is valued at almost 80 times FY20 earnings. That’s a hefty price tag.

The growth into manufacturing and the potential for acquisitions seem like good steps. I think Altium will continue to do well. However, in the current conditions I think I’d want to wait for a share price under $30 to buy shares. There are other tech ASX growth shares I’d buy first like Pushpay Holdings Ltd (ASX: PPH).

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At the time of publishing, Jaz owns shares of Altium.

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