The Altium Limited (ASX: ALU) share price is up after the software business gave a trading update.
Altium is a global leader in the electronic PCB software space that recently received a takeover bid.
Altium’s trading update
In the trading update, Altium said FY21 revenue is expected to be at the low end of its guidance range of $US$190 million to US$195 million.
It’s also expected that the underlying EBITDA margin (EBITDA explained) will come at the low end of between 37% to 39%. That excludes one-off acquisition costs and write back of the SolidWorks minimum contractual amount due to termination of the agreement with SolidWorks.
Adoption of the Altium 365 cloud platform has increased and there are now more than 13,100 monthly active users and over 6,300 monthly active accounts.
Management said that momentum has returned to Altium’s business with double digit growth in the second half, however, after a slow first half and the pivot to the cloud, the company will be around the low end of its guidance.
Altium Chief Financial Officer Martin Ive said: “Altium’s renewal business is strong, Octopart is set for a record performance and China is delivering a solid performance. Demand is growing for term based licences (TBLs), which is a positive for future recurring revenue, however, Altium’s perpetual licence sales have underperformed relative to our expectations in the key markets of the US and EMEA as our sales organisation works through its transition of our new sales model.”
Vision and strategy
Altium also gave a presentation to the market about its plans for the future.
It reaffirmed its aspirational 2025 financial goals of US$500 million revenue and 100,000 subscribers, underpinned by the company’s unique position within the global engineering software industry and track record of strategic execution.
Altium CEO Aram Mirkazemi said: “With the strong early adoption of our cloud platform, we are evolving from our PCB design origins are now playing an essential and growing role in the design and making of smart products, that spans manufacturability and productivity, research and influence, and component sourcing.”
The company also said that the cloud transition is shifting traditional maintenance subscription revenue to become SaaS-like revenue as customers adopt Altium 365. The company estimates that by 2025 recurring revenue will rise from around 60% today to 80% or higher. In addition, Altium 365 and Nexar (an ecosystem platform) will provide “unique opportunities” for direct monetisation.
Mr Mirkazemi said: “With our strategy we are pursuing dominance and transformation simultaneously. This will allow us to continue to deliver value to shareholders, while driving electronics industry transformation for the benefit of our customers.”
The company released a strategy presentation if investors want to take a deep dive look at Altium’s plans.
Summary thoughts about Altium and the share price
Altium is a quality business and management seem confident about the future. That’s why the company rejected the takeover offer. It seems to have a good future, but I’m not sure I’d want to buy at this elevated, post-bid price.
There are other ASX growth shares that might be better value idea today.
