Consensus community valuation
$41.35
Average Intrinsic Value
46.5%
Undervalued by
Active Member Straws
#FY20 Results
Added 5 months ago

Altium has reported a 10% lift in revenue. As forshadowed in June, this was below prior expectations and certainly well below the average top-line rate over the previous 3 years of ~22%.

The group did manage a record EBITDA margin of 40%, which helped net profit grow by 12%, though this too is well below prior year's growth rates.

Altium is targeting (at the midpoint) revenue from existing operations of AUD$596m (at current FX rates), with EBITDA of AUD$253 by 2025 -- which represents annualised growth of 17% and 19% resepctively, and excludes any additions from acquisitions.

That's still very attractive -- especially in the context of their balance sheet strength ($US93m cash / no debt) and their high levels of high margin recurring revenue. 

But then again, all this would seem to be "in the price".

EPS in Aussie dollars (normalised for a one-off tax adjustment) = 0.59c, which puts shares on a PE of 55. Shares are now on a P/S ratio of 16x. However, assuming they can maintain an (outstanding) 30% net margin and hit US$450m in revenue by 2025, the company could be generating an EPS of AUD$1.47 by 2025.

If shares could sustain a PE of 35 at that time, you could consider shares fairly valued. Of course, anything less than these assumptions would undermine shareholder returns.

There's a lot of detail in these results -- which you can dig into here -- but for me I'd like a bigger margin of safety before taking a position.

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#Revenue Drop
Added 4 days ago

Altium has said it expects a 3% decline in first half revenue to US$89.6m due to extreme covid conditions in US, Europe and tough conditions in China.

That being said, the company is maintaining its full year guidance, saying it has seen positive signs in Q2.

Read the full announcemenet here for more detail, but if we dont see a materially stronger second half I'd expect a lot of downside. Shares are on a PE of 72 and very much priced for growth.

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#TASKING divestment
Last edited a month ago

14-Dec-2020:  Altium Divests TASKING for Future Investment in Altium 365

Altium Divests Non-Core TASKING Business to Support and Enable Future Investment in Altium 365

Electronic design software company Altium Limited (ASX:ALU) has entered into a Definitive Agreement with FSN Capital to sell the assets of its TASKING business for US$110 million. The transaction will be settled in cash with US$100 million up front and US$10 million conditional upon achieving revenue targets in Fiscal 2021 post divestment. The transaction is expected to close in the first quarter of calendar 2021, subject to customary closing conditions and regulatory approval.

Altium Chairman Mr Sam Weiss commented, “we are generating real momentum with Altium 365, the world’s first cloud platform for PCB design and realization, and we believe that Altium 365 is critical to enhance long term shareholder value. The divestment of TASKING enables us to singularly focus on our transformative vision and to fast track the building and acquisition of complementary assets.”

Altium CEO Mr Aram Mirkazemi commented, “the strategic divestment of TASKING combined with our recent organizational changes and hard pivot to the cloud marks an inflection point for Altium in its pursuit of industry transformation. While TASKING is a great business, it does not play a central role in our design to realization strategy for the electronics industry, which is being delivered through our new cloud platform Altium 365. The divestment of TASKING will free up organizational capacity and allow Altium leadership to focus on our main game, which is to expand Altium 365 and accelerate its adoption.”

This transaction will have a one-time positive impact on Earnings Per Share (EPS) in Fiscal 2021 reflecting the profit on the sale of the business. First half Fiscal 2021 results will include TASKING as the transaction will close in the second half. Altium’s first half performance remains solid, however, the effect of this transaction combined with ongoing COVID lock-downs in the US, will have a marked impact on our historic first half/second half 45/55 revenue split. Altium remains confident of achieving full year guidance adjusted for the sale of TASKING whose results will not be included in second half revenue and earnings.

FSN Capital is a European private equity firm with a successful track record in software and technology investments. FSN Capital Partner Mr Robin Muerer commented, “TASKING is a market leader in embedded software for the automotive safety space. We are excited to work with TASKING’s management team as we see opportunities to expand TASKING’s product range and continue its strong partnership with Infineon Technologies.”

The full impact of the divestment will be disclosed as part of Altium’s half year results, including the impact on on-going operations.

--- ends ---

About Altium: Altium (ASX:ALU) is a multinational software corporation headquartered in San Diego, California, that focuses on electronics design systems for 3D PCB design and embedded system development. Altium products are found everywhere from world leading electronic design teams to the grassroots electronic design community.

With a unique range of technologies, Altium helps organizations and design communities to innovate, collaborate and create connected products while remaining on time and on budget. Products provided are ACTIVEBOM®, ActiveRoute®, Altium 365® , Altium Concord Pro™, Altium Designer®, Altium NEXUS®, Altium Vault®, Autotrax®, Camtastic®, Ciiva™, CIIVA SMARTPARTS®, CircuitMaker®, CircuitStudio®, Common Parts Library™, Draftsman®, DXP™, Easytrax®, EE Concierge®, NanoBoard®, NATIVE 3D™, OCTOMYZE®, Octopart®, P-CAD®, PCBWORKS®, PDN Analyzer™, Protel®, Situs®, SmartParts™, the TASKING® range of embedded software compilers, Upverter®, X2®, XSignals®, PCB:NG®, and Gumstix®.

Founded in 1985, Altium has offices worldwide, with US locations in San Diego, Boston, Dallas and New York City, European locations in Karlsruhe, Amersfoort, Kiev, St Petersberg, Moscow, Munich, Markelo and Zug, and Asia Pacific locations in Shanghai, Beijing, Shenzhen, Tokyo and Sydney.

For more information, visit www.altium.com. You can also follow and engage with Altium via Facebook, Twitter, LinkedIn and YouTube.

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#ASX Announcements= 12/1/21
Added 5 days ago

A Challenging First Half But Enough Positive Signs to Maintain Full Year Guidance

Sydney, Australia - 12 January 2021 - Electronic design software company Altium Limited (ASX:ALU) updates the market on its unaudited sales and revenue for the half year ended 31 December 2020. Altium experienced a decline in first half revenue for fiscal 2021 of 3% to US $89.6 million due to extreme COVID conditions in the US and Europe and challenging economic conditions, post COVID in China, for licence compliance activities.

View Attachment

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#Bull Case
Added a week ago

A great opportunity to add a quality stock to a long term growth portfolio at a great price.

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#Results
Added 5 months ago

17-Aug-2020:  Full Year Results Announced to 30 June 2020   and   FY20 Full Year Investor Presentation

plus  Preliminary Appendix 4E & Final Audited 2020 Annual Report   and   Appendix 4G   and   2020 Corporate Governance Statement

Altium Announces Financial Results for the Full Year to 30 June 2020

Altium Exceeds 50,000 Subscribers, Delivers Solid Revenue Growth and Successfully Launches Altium 365

Sydney, Australia - 17 August 2020 - Electronic design software company Altium Limited (ASX:ALU) 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.

--- click on links above for more ---

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#Risks
Added 6 months ago

I'm feeling a greater probability of a sp drop following the report on the 17th August. S.P has been stagnant since the financial accouncement and a number of sell recommendations may mean only a Stella report will move the sp significantly higher. As long as no unforseen surprises are reported, I will be adding on any price drop.

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#Results
Added 6 months ago

14-7-2020:  Unaudited Sales and Revenue for the Full Year Ending 30 June

Altium Achieves 10% Revenue Growth and Exceeds 50,000 Subscriber Target

Sydney, Australia - 14 July 2020 - Electronic design software company Altium Limited (ASX:ALU) updates the market on its unaudited sales and revenue for the full year ended 30 June 2020. Altium achieved revenue growth of 10% to US $189 million with solid performances delivered in core business units and key regions during the challenging COVID-19 environment.

Altium delivered record growth in new Altium Designer seats and subscriptions to exceed its 50,000 subscriber target. Other highlights include:

  • Strong increase of 14% in new Altium Designer seats sold.
  • Record growth of 17% in the subscription base to well over 50,000 subscribers.
  • Cash balance of over US $90 million.

Comments from Altium’s CEO Mr Aram Mirkazemi:

Altium CEO, Mr Aram Mirkazemi commented: “Altium’s strategy of providing attractive pricing and extended payment terms to support our customers during COVID-19 and to drive volume to support our pursuit of market dominance has been rewarded. Altium achieved strong growth in new Altium Designer seats and record growth in our subscription base to reach well over 50,000 seats on subscription”.

Mr Mirkazemi further commented: “Altium has not been immune to the uncertainty and the evolving impact of COVID-19, however, as a global high-tech company, geared to work remotely and with a robust and highly adaptable business model, we were able to deliver a strong performance through COVID-19 conditions - maintaining our unbeaten record of eight consecutive years of double digit revenue growth, and extending it to nine straight years”, stated Mr Mirkazemi.

“While COVID-19 prevented us from reaching our long standing aspirational goal of $200 million in revenue, conditions surrounding COVID-19 have dramatically accelerated our movement towards market dominance and the implementation of our transformative agenda for the industry”, said Mr Mirkazemi.

“We accelerated the roll-out of our new cloud platform Altium 365 from 1 May 2020 to help engineers to work from anywhere and connect with anyone. It is pleasing to see that Altium 365 is gaining traction with over 2,500 companies and nearly 5,000 active users on the platform already”, said Mr Mirkazemi.

“We also launched online selling in May to expand reach, and to grow sales capacity to support our climb to 100,000 subscribers by 2025. While early days, our digital sales are gaining traction and in time will allow our transactional sales to fully focus on value-based selling and higher value deals”, commented Mr Mirkazemi.

“At our full year results, we will share more color on the long-term impact of COVID-19 on the acceleration of our strategy of market dominance and industry transformation. We will also share color about our recurring revenue and pricing model post COVID-19 and based on the impact of Altium 365”, said Mr Mirkazemi.

Comments from Altium’s CFO Mr Joe Bedewi:

Altium CFO, Mr Joe Bedewi commented: “Altium’s achievement of 10% revenue growth during COVID-19 is an impressive result. Moreover, Altium achieved strong growth in new Altium Designer seats sold of over 9,100 (up 14%) and delivered 17% growth in the subscription base to well over 50,000. This result places Altium in a strong position to drive further adoption of its new cloud platform Altium 365”.

“Altium also delivered over 3,000 upgrades of Altium Designer, up 47%, demonstrating the attractiveness of Altium 365 to existing customers. Altium 365 is moving our subscription business from being maintenance driven to capability driven”, commented Mr Bedewi.

Altium will release its fiscal 2020 results on Monday 17 August 2020 with an investor call to be hosted by Altium’s CEO and CFO at 9.30am that same day.

Participants can pre-register for the investor call using the following link to receive dial in details:

http://apac.directeventreg.com/registration/event/2362368

--- ends ---

[click on link above for the full announcement] 

[I hold ALU shares]

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#Business Update
Added 7 months ago

22-June-2020:  Altium Announces Business and Market Update

Altium Drives Strong Seat and Revenue Growth But is Likely to be Below Analyst Consensus in COVID Environment

Sydney, Australia - 22 June 2020 - Electronic design software company Altium Limited (ASX:ALU) advises that while its attractive pricing and extended payment terms to support its customers during COVID-19 are driving strong seat growth, its increase in revenue for the full year, while likely to be solid, will be below latest analyst consensus. New lock-downs in Beijing, China and an increase in COVID-19 cases in parts of the US are having some impact on Altium’s final sprint to the close of fiscal 2020.

Business and Market Update

Historically, Altium closes a significant amount of its second half business in the last two weeks of June. This June, Altium’s run-rate has begun to fall behind current analyst consensus and additionally we will be impacted by the recent lock-down in Beijing and increased COVID-19 infection rates in the US. Altium has temporarily closed its Beijing office, while staff continue to close sales from their remote working environments.

Globally, Altium is aggressively closing sales, with larger deals still in the pipeline, and seat growth is up 7% on the same period last year. However, the pricing strategy adopted in response to COVID-19 for Altium Designer is impacting revenue potential for the full year.

Altium CEO, Aram Mirkazemi noted that in response to COVID-19, “our strategy to support our customers and to increase volume under COVID-19 conditions through attractive pricing and extended payment terms is driving strong seat growth and will get us close to or just surpass our key target of 50,000 subscribers. However, we are feeling the revenue impact of this strategy. While we are likely to deliver solid revenue growth this will land marginally behind latest analyst consensus for the full year”.

Mr Mirkazemi further commented, “we see Altium’s approach to COVID-19 pricing and extended payment terms as the right thing to do to support our customers in this challenging environment and to not lose momentum as we enter the next phase of growth. As the world restarts we will assume new pricing effective 1 July 2020 as published on our website. We will return to full Altium Designer pricing with no extended payment terms from 1 September 2020”.

Altium will provide a final market update of its headline sales and revenue results for fiscal 2020 in early July.

--- ends ---

It will be interesting to see how the market responds to this update today.

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#Digital Design Days 2020
Last edited 8 months ago

06-May-2020:  DDD20 Day 1

That presso, which is Day 1 of Digital Design Days 2020 (DDD20, held last week) is not specifically about Altium, but Altium is one of the companies that enable people to design the chips to make all of this tech work.  The intro is pretty amazing and some of the companies presenting on Day 1 include PayPal, Dotlung.com (Mother of Social Media Dragons), LinkedIn, Airbnb & Amazon's Alexa, as well as the founder of DDD and a few journos. 

Magellan (MFG) is one of the companies that invests in these sorts of companies, like eBay - who owns PayPal, Alphabet - who owns Google, Microsoft Corporation - who own LinkedIn, Tencent - who own WeChat and WeChat Pay, Alibaba - who own AliPay and many other businesses, and Facebook - who own WhatsApp and Instagram.

For a LIT that gives you exposure to all of those, Magellan's MGG is one option. You buy/sell units in MGG on the ASX just as you would buy shares in any company, and you have exposure to all of those global IT giants (but not Amazon, because Hamish Douglass regards Amazon as too expensive to buy). 

In the USA, IT (information technology) as a sector represents 25.7% of their entire market (NASDAQ + NYSE) whereas it represents just 3.7% of our Australian market.  IT is the largest sector in the US, followed by Health Care (at 15.4%) and then Communication Services (10.8%).  Our top 3 are Financials (24.4%, thanks mostly to our big 5 banks), Materials (/Mining, 19.1%, thanks mostly to BHP & RIO) and Health Care (12.5%, thanks mostly to CSL, RHC, SHL & COH).  We have our WAAAX stocks, but we don't have the stocks with the global footprints of the FAANGs and the two fast-growing Chinese giants (Alibaba & Tencent). 

I currently hold shares in PAI, WQG, MGG & MHH for that global IT exposure.

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