The Altium Limited (ASX: ALU) share price is under the spotlight after announcing strong profit growth in its FY23 half-year result.
Altium is one of the main software companies that is enabling the design of increasingly complex vehicles and devices – its customers include Space X, NASA, Apple, Microsoft
and Alphabet (Google).
HY23 result highlights
Here are some of the highlights from the result:
- Revenue grew by 17% to US$119.5 million
- EBITDA (EBITDA explained) margin improved from 34.1% to 36.2%
- Recurring revenue was 79% of total revenue, up from 74%
- Net profit after tax (NPAT) grew by 30% to US$29.6 million
- Interim dividend up 19% to AU$0.25
Altium revealed that its cloud platform called Altium 365 continues to see rapid adoption, with 33,500 monthly active users (up 36% from August 2022). Monthly active accounts increased 29% to over 12,000.
The ASX tech share saw its subscription numbers grow to 58,030, up from 55,978 a year ago. It’s on target to “exceed 60,000 subscribers for the full year”. The average subscription seat value increased by $237 – the main drivers of this were the mainstream adoption of Pro and Enterprise capabilities and growing sales of term-based licenses.
Octopart revenue jumped 22% to US$27 million, while average revenue per click increased to $1.96, up from $1.55 a year ago.
Management comments
The Altium interim chief financial officer (CFO) Richard Leon said:
The strength of our EBITDA margin is evidence of a return to traditionally strong operating leverage following a period of restructuring for Altium. The cash-generative nature of our business is underpinned by growing recurring revenues and a value discipline approach to investments and cost management. Our transition to a business model focused on both design software and cloud platform continues to progress well with solid revenue growth driving bottom-line profitability.
Outlook
Altium reaffirmed its guidance for FY23.
Total revenue is expected to be between US$255 million to US$265 million, which would be growth of 15% to 20%.
The design software business is expected to be between US$195 million to US$200 million, which would be 15% to 18% growth.
Altium’s cloud platform business revenue is expected to be between US$60 million to US$65 million, representing growth of between 20% to 30%.
The underlying EBITDA margin is expected to be between 35% to 37%.
Final thoughts on the Altium share price
I think Altium is one of the most promising businesses on the ASX, but it has a valuation that takes a lot of that potential into account.
With how rapidly interest rates have gone up, I’m not sure if Altium is good value at the current price. If it were to go through a dip, it could be worth picking up shares.
