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In a time where most of the companies are severely impacted by the rising coronavirus cases and the uncertainty surrounding COVID-19, few companies have managed to position themselves well during this period. In this article, we would be looking at one such company from the Information Technology (IT) sector, Altium Limited.
The IT sector, which was amongst the top-performing sectors during 2019, has delivered a negative YTD return of 21.70% in 2020. The Australian markets have suffered because of the global pandemic, which has affected a significant number of individuals.
As on 8 April 2020, at 6:00 AM AEST, the Australian Government has reported a total of 5,956 confirmed COVID-19 cases and 45 reported deaths. The maximum cases were reported from the New South Wales region.
Altium Limited (ASX:ALU)
Altium Limited is the leading supplier of PCB design software and components, as well as data management software. It is the host of AltiumLive, which is the fastest-growing conference in the industry for the PCB designers. The company is based in La Jolla, California, the US and was founded in the year 1985.
Just for information, PCB stands for printed circuit board which is an electronic circuit utilised in devices to offer mechanical support as well as connect to its electronic components.
On 8 April 2020, Altium confirmed that it has a strong operational and market position in the present COVID-19 situation. However, seeing the rising cases of the coronavirus and the uncertainty surrounding the infectious disease, the company has decided to withdraw its FY2020 guidance.
Let’s know more in detail:
Operational and COVID-19 Update
Altium confirmed that even in the prevailing situation, it has managed to position itself nicely in both operational as well as commercial sense. The company anticipates that the electronic design would be relatively resilient to the existing & unfolding market situations. However, it also stated that this would depend on the period and extent of the cases of COVID-19 coupled with evolving broader business, industry, economic and social impacts.
Mr Aram Mirkazemi, the CEO of Altium, stated that ALU is a high-tech company and its global team is geared to work digitally. Since the past two months, the company has increased its focus on driving productivity in this new operating environment. Mr Mirkazemi confirmed that the company’s operating model is robust and is highly adaptable to the latest global conditions. ALU’s marketing & direct selling are conducted through the Internet and via telephone. Other than this, ALU is well diversified across industry segments and regions globally.
At the industry level, ALU’s electronic design is holding up well in the new environment. This is because the engineers use extra time & capacity from the slowdown in manufacturing & supply chain to revert to prototype designs.
Mr Mirkazemi confirmed that the company is accelerating the rollout of its cloud platform, Altium 365 because of the rising demand for cloud-based collaborative tools across all sectors and all regions. Altium 365 is appropriate to the conditions that are unfolding under COVID-19. This is because Altium 365 allows engineers to operate from any location and connect with anybody. Apart from this, the company is also rolling out its online/high volume selling approach, which would help extend the inside sales capacity of ALU, to support the drive through the fourth quarter and beyond.
Withdrawal of FY2020 Earnings Guidance
Mr Joe Bedewi, the CFO of Altium, stated that because of the rising cases of COVID-19 and the uncertainty related to the duration, the company has considered it wise to withdraw its earnings guidance for FY2020.
Recent Achievements:
In a recent press release dated 3 April 2020, Altium announced that TASKING, Altium’s embedded software division unveiled its new multi-core development environment for 3rd generation AURIX™ microcontrollers from the semiconductor manufacturer, Infineon. With this, the customers of TASKING, as well as Infineon automotive, would be able to optimise performance for multi-core architecture for safety-critical applications.
Infineon and TASKING have an established alliance in the growth of software development tools for the microcontrollers. TASKING offers an advanced one-stop shop solution to its clients. The coming URIX™ group of microcontrollers would be made ready for automotive applications like future gateways, domain & zone controllers, electro-mobility, engine management as well as improved driver assistance systems. Further, it would also provide safety features, throughput, and power-efficient performance that is required to meet rising Artificial Intelligence computational needs.
The TASKING development environment is under development as per the Automotive SPICE® specifications and aims for TÜV certification as per ISO 26262.
A Glance at 1H FY2020 Results as compared to the Previous Corresponding Period:
- ALU reported a growth of 19% in the new Altium Designer seats during 1H FY2020 (period ended 31 December 2019).
- Record growth of 16% in the subscription base to reach 46,693 subscribers.
- Notable revenue increase of 27% in China.
- NEXUS attained a revenue growth of US$7 million, up 197%.
- US & EMEA delivered strong performances and generated double-digit revenue growth.
- TASKING provided an impressive growth in revenue of 15%.
- Able to attain strong EBITDA margin growth while investing in major growth initiatives.
- Announced an interim dividend of 20 cents, up 25%. The payment date of the dividend was 25 March 2020.
The profit before tax of the company increased by 23% to US$31.8 million. However, because of the increase in the effective tax rate to 27%, the company’s profit after tax declined by 2% to US$23.083 million.
Balance Sheet of the company remained robust, with a net cash balance of US$80.7 million, increasing by 39% compared to the previous corresponding period.
The operating cash flow during the period declined by 22% to US$20.8 million due to extended terms for long-term NEXUS contracts, payables timing as well as increased tax payments.
Stock Information:
Altium shares closed the day’s trade at $30.230 on 8 April 2020, down 0.722% from its previous close. ALU has delivered a negative YTD return of 11.33%. However, in the last one month, the company has generated a return of 9.38%. ALU has a market cap of $3.99 billion, an annual dividend yield of 1.25%, ~130.97 million outstanding shares and a PE ratio of 52.92x.
