Coronavirus and China trade war slow Altium's growth

“The trade war with China resulted in most companies in the supply chain stocking up on parts… [and] Octopart is negatively impacted by reduced volume in the parts distribution industry.

“Early in the second half, Octopart is seeing positive momentum return to the market.”

The $5.5 billion business reported a 19 per cent jump in revenue to $US92.8 million for the first six months of the finanical year, but its net profit took a whack from the higher effective tax rate of 27 per cent, slipping 2 per cent to $23.1 million – below analyst consensus estimates. On a before tax basis, its profit was up 23 per cent to $31.8 million.

Prior to the results being released after market on Monday, the company hit a new share price high of $42.76, before edging lower to close at $42.63. The company’s shartes are up 24 per cent in the calendar year-to-date.

It has now had eight years of successive periods of double-digit revenue growth.

Even if the business comes in at the low end of its 2020 full year range, Altium chief executive Aram Mirkzemi remains confident that the business is on track to hits its ambitious 2025 goals of $US500 million in revenue and 100,000 subscribers.

“Our increase in new Altium Designer seats of 19 per cent and record growth of 16 per cent in our subscription base to 46,693 subscribers puts us well into our climb to reach 100,000 subscribers by 2025,” he said.

“I am confident that we will achieve our target of 50,000 subscribers by full year.”

Advertisement

Altium chief financial officer Jo Bedewi said it was too early to tell how significant the impact of the coronavirus would be, but it was employing mitigating strategies, like running online training sessions for customers, to try and limit it.

“Depending on how long it lasts, we could recover, but there’s a whole lot of vectors for how this could go,” he said.

The company has been scaling up its operations in China in recent years and the region was a standout performer in the first half, with the highest revenue growth by geography of 27 per cent.

Of its products, Altium’s core software systems (Altium Designer, Circuit Studio and SolidWorks PCB) had solid revenue growth of 12 per cent to $US65.4 million, but its new designer collaboration software platform, Nexus, was the starlet, growing 197 per cent to $7 million.

Of concern to analysts on the investor call on Monday was the status of Altium’s ongoing  negotations with Dassault Systèmes over a potentially partnership to bring to market a joint product.

Mr Mirkazemi likened the establishment of the commercial partnership to climbing Everest, saying the companies had made it through the ascent, but the greatest chance of death came on the descent.

He said the companies were a long way from walking away from a deal, but he was conscious of wanting to ensure Altium made enough revenue from the partnership.

“Working as one while being two separate comapnies is a formidable challenge. Having reached the summit, we’re well into the descent… [and] the descent is about business and contract negotiations,” he said.

Powered by WPeMatico