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Altium (ASX:ALU) share price in focus on strong FY22 result

The Altium Limited (ASX: ALU) share price is under the spotlight after the electronics software business announced its FY22 report.

Altium offers a number of different software offerings including electronic PCB software design called Altium Desinger, as well as a search engine for electrical parts called Octopart. It also has a cloud platform called Altium 365.

Altium’s FY22 result

Here are some of the highlights from the company’s result

  • Revenue growth of 23% to US$220.8 million
  • Recurring revenue was 75% of total revenue, with annualised recurring revenue growth of 31%
  • Octopart revenue rose 75% to US$50 million, Altium PCB revenue rose 12% to US$169.3 million
  • Underlying EBITDA (EBITDA explained) margin improved from 34.3% to 36.7%
  • EBITDA grew 33% to US$79.8 million
  • Net profit after tax (NPAT) grew by 57% to US$55.5 million
  • Operating cashflow improved 30% to US$72.5 million
  • Full year dividend up 18% to 47 cents per share

Management pointed to strong Altium 365 adoption, with almost 24,700 monthly active users at the year end, up from 19,700 in February 2022.

Altium’s President Sergey Kostinsky said that Altium 365 is well ahead of competitors with its strong adoption. It now has 23% of Altium Designer subscribers who have fully adopted Altium 365 and 30% more in the process of adopting it. Kostinsky also said:

We are accelerating our transformative agenda for the global electronics industry where we aim to bring the business of engineering onto Altium 365 from design to supply chain and manufacturing

Our business model transition from perpetual to term-based licenses is progressing well, 33% of new seats sold were term-based licenses. This, combined with the uptake of higher value seats that include pro and enterprise level capabilities, is driving up subscription revenue. This positive trend has accelerated our annual recurring revenue run rate and supports our drive toward our aspirational goal of US$500 million.

FY23 guidance

Altium said it was “committed” to revenue growth and a sold profit margin.

Total revenue is expected to be between US$255 million to US$265 million. This would be growth of between 15% to 20%.

That represents revenue of between US$195 million to US$200 million for its electronic design software business. This would be growth of between 15% to 18%.

It also said that its engineering cloud platform business will generate revenue of between US$60 million to US$65 million, which would be growth of between 20% to 30%.

The underlying EBITDA margin is expected to be between 35% to 37%.

My thoughts on this result

Altium was bullish with its comments about higher software prices as it moves away from promotional discounting, which is a good sign. Digitalisation of its transactional sales processes will deliver “greater efficiencies and reduce the cost of transactional sales”.

The company also said that Octopart is becoming the dominant search engine for electric parts with strong pricing power and monetisation opportunities.

Altium did note that there is inflation with its wages and increased professional fees.

I think that Altium is well positioned to drive the electronics world, with a wide range of blue chip clients.

In my opinion, Altium is one of the most promising ASX shares and I think it’s a decent price to buy shares at around $30. It’s certainly not cheap, but the growth has returned and margins are rising compared to the COVID times. I think a growing dividend is also attractive.

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