Altium Limited (ASX: ALU) has delivered another strong half-year earnings result today, reporting a 102% increase in net profit after tax (NPAT) to US$6.8 million, which came on the back of a 17% lift in first-half revenues to US$37.8 million.
Investors were certainly impressed, bidding the stock up more than 21% higher early in the session.
So What: Altium provides software for designing printed circuit boards (PCBs) which help power everyday electronic devices, such as toasters, TVs and cars (to name just a few). The company has an attractive business structure which is ideal for long-term investors in that it is capital light (as is the case with most software companies), meaning that there is very little cost involved when new customers are added.
This was certainly evident during the six-months ended 31 December 2014, with the company reporting an 84% lift in EBIT (earnings before interest and tax) to US$9.6 million, while its EBIT margin soared from 16% to 26%. Richard Leon, the company's Chief Financial Officer, said he expects margins to improve again for the full year.
Here are some of the other highlights from Altium's report today:
- Subscription renewal rates at 84%, up from 81%
- Sales up 9% to US$33.7 million
- All major regions delivered double-digit revenue growth. Sales in the Americas regaining full strength
- Cash balance at 31 December 2014: US$59.1 million
- Earnings Per Share of US 5.63 cents, up 81%
- 8 cent per share interim dividend, up 100% on the year-ago period
- Three new products (CircuitStudio, PCBWorks, CircuitMaker) expected to drive future profitability from the 2016 financial year onwards
Now What: Given that Altium sells its software all over the world, it warned that it faced some currency headwinds earlier in the year which was enough to spook investors. However, given that the company reports its earnings in US dollars, Australian investors will actually benefit from the stronger US currency.
Altium operates in a fast-growing industry and, although the shares are trading at an all-time high, there could be plenty of room left to run over the coming years.
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