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Electronic design software company Altium Limited has announced its results for the full year ended 30 June 2020. Altium achieved revenue growth of 10% to US$189 million with solid performances in all core business units and key regions. Profit before tax grew by 12% to US$65 million. The company delivered an EBITDA margin of 40.0% for the full year.
Other highlights include:
- Record growth of 17% in the subscription base to 51,006 subscribers.
- Strong increase of 15% in new Altium Designer seats sold to 9,251.
- A strong cash balance of US$93 million, up 16% on the same period last year.
- Final dividend of AU19 cents (AU39 cents for the year) up 15% on a yearly basis.
Comments from Altium CEO Aram Mirkazemi
“Altium achieved a strong performance in fiscal 2020 having exceeded its 50,000 subscriber target and delivered solid revenue growth. While COVID-19 prevented us from achieving our long-held aspirational goal of US$200 million, it has been a catalyst for our pursuit of market dominance and transformation. We have successfully launched Altium 365, our new cloud platform, which is causing excitement and gaining strong early adoption. This is most heartening and an early validation of our vision and strategy for this new digital platform to transform the electronics industry.”
He continued, “Our performance demonstrates Altium’s strength, its business model adaptability and its organizational 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. “During the fourth quarter, we observed that some of our customers preferred monthly payment terms, as they contended with COVID-19 conditions. While we do not have any long-term plan to offer extended payment terms on perpetual licenses, we have begun to promote term-based pricing for Altium Designer. This optionality will, in time, allow us to increase our recurring revenue beyond our current rate of 60% of total revenue, and complement our high-end products, which are only sold on a term-basis.
“The current conditions and the accelerated roll out of Altium 365 is evolving Altium revenue away from perpetual licensing and maintenance subscriptions towards term-based licensing and SaaS subscriptions. This transition is being planned carefully and is not expected to have a material impact on short-term revenue, as a significant part of Altium’s current revenue is already subscription-based, and prorated on a linear basis.
“Altium remains firmly committed to its long-term targets. We are on track to achieve 100,000 subscribers by 2025, having just passed the half-way mark. Due to COVID-19, however, we may take an additional 6 to 12 months to achieve our 2025 goal of US$500 million in revenue”. “We remain committed to delivering to the Rule of 50 in a post-vaccine environment. During COVID-19 and pre-vaccine, we will strive to meet the Rule of 50, but we will need to contend with the evolving conditions”, concluded Mr Mirkazemi.
Comments from Altium CFO Joe Bedewi
“Altium achieved a solid result exceeding 50,000 subscribers, delivered 10% revenue growth and met the Rule of 50, on a reported EBITDA basis. Altium is in a strong financial position, with profit before tax growing by 12% to US$64.6 million. The release of Altium 365 in May, together with attractive pricing, has underpinned strong growth in new Altium Designer seats sold of 9,251 (up 15%) and delivered 17% growth in the subscription base to achieve 51,006 subscribers. This supports our pursuit of market dominance.
“Our key regions of the US, EMEA and China delivered solid performances for fiscal 2020, given the circumstances. NEXUS performed strongly with 133% revenue growth to US$15.5 million. As a result of our support for our customers with extended payment terms, increased dividends and having moved to a higher tax rate, our operating cash flow was down 18% from the same record period one year earlier. Notwithstanding this, our cash balance grew by 16% to US$93.1 million.
“Altium maintained strong control over its operating costs; we adjusted to the pandemic conditions and operating expense growth was restricted to 8% to US$113.5 million during the fiscal year. Altium achieved a reported EBITDA margin of 40.0% (35.8% excluding the impact of AASB16 Leases and PCB:NG remeasurement of contingent consideration).
“Altium continues to leverage opportunities to increase shareholder value by optimizing our worldwide tax structure.”
The US Tax Cuts and Jobs Act in 2018 required changes that were incorporated in our 2018 tax calculations. The reform also included a deduction in the US related to Foreign Derived Intangible Income (FDII). The deduction reduces the US tax liability for foreign derived income. Altium has not been eligible for this deduction because of the existence of prior tax credits. However, Altium recently completed a restructuring that will allow us to take advantage of the deduction in fiscal 2021. This new tax deduction will decrease our effective tax rate beginning in fiscal 2021 to a run rate between 22% and 25% (down from our previously estimated 27% to 29%). Fiscal 2020 was impacted by a one-time revaluation of the Deferred Tax Assets (DTA), and the deferred tax liabilities which caused an accounting charge of $16.4 million to tax expense.
The positive impact of the FDII will be to reduce the amount of cash taxes paid; it will also have a positive impact on EPS in fiscal 2021 and in future periods due to the lower effective tax rate. Reported Earnings per Share (EPS) are negatively impacted in fiscal 2020 falling to 23.60 cents. Normalized EPS, which have been stated net of the accounting adjustments for the future value of the DTA, continued to increase year over year to 42.45 cents.”