Delivering Industry-Leading Performance & Growing Momentum to Market Leadership
ALTIUM FULL YEAR INVESTOR PRESENTATION
Aram Mirkazemi CEO 24-26 August 2016 Joe Bedewi CFO Sydney & Melbourne For personal use only use personal For Kim Besharati VP IR Disclaimer
Future performance - Forward looking statements, opinions and estimates provided This presentation has been prepared by Altium Limited (ACN 009 568 772) in this presentation are based on assumptions and contingencies which are subject and is for information purposes only. It does not constitute financial product or investment advice or a recommendation to acquire Altium to change without notice, as are statements about market and industry trends, shares and has been prepared without taking into account the objectives, which are based on interpretations of current market conditions. Forward looking financial situation or needs of individuals. Before making an investment statements including projections, guidance on future earnings and estimates are decision prospective investors should consider the appropriateness of the provided as a general guide only and should not be relied upon as an indication or information having regard to their own objectives, financial situation and guarantee of future performance. An investment in Altium shares is subject to needs and seek legal and taxation advice appropriate to their jurisdiction. investment and other known and unknown risks, some of which are beyond the Altium is not licensed to provide financial product advice in respect of control of Altium Limited. No representation or warranty, express or implied, is Altium shares. made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. To the maximum extent Altium, Altium Designer, Altium Vault, Ciiva, Circuitmaker, Circuistudio, permitted by law, none of Altium employees, its directors, employees or agents, nor Octopart, PCBWorks, Protel and Tasking, and their respective logos, are any other person accepts any liability, including, without limitation, any liability trademarks or registered trademarks of Altium Limited, or its subsidiaries. arising out of fault or negligence, for any loss arising from the use of the information All other registered or unregistered trademarks mentioned in this presentation are the property of their respective owners, and no contained in this presentation. In particular, no representation or warranty, express trademark rights to the same are claimed or implied is given as to the accuracy, completeness or correctness, likelihood of achievement or reasonableness of any forecasts, prospects or returns contained in this Presentation nor is any obligation assumed to update such information. Such
forecasts, prospects or returns are by their nature subject to significant uncertainties For personal use only use personal For Financial data and contingencies. Before making an investment decision, you should consider, with All dollar values are in US dollars (US$) unless as otherwise or without the assistance of a financial adviser, whether an investment is presented. appropriate in light of your particular investment needs, objectives and financial circumstances. 2 Agenda
1 Company Highlights & Significant Achievements
2 2016 Financial Performance & Metrics
3 Market Trends & Driving Forces
4 Pursuing PCB Market Leadership & EDA Transformation
5 Appendix: Company Overview For personal use only use personal For Altium’s FY16 Performance Highlights
$100M 17%
$90M 13%
$80M 15%
$70M 12% • Revenue growth of 17% $93,597 14% • 29.3% - EBITDA Margin $60M $80,216 7% • Reached $100M sales and on-track to $50M $70,964 exceed $100M revenue in FY17 $40M $61,908 • 20% increase in number of new AD $30M 29.3% $55,072 28.3% 25.9% licenses sold $20M $48,342 • 11% increase in subscribed seats to 31,134 9.5% $10M
For personal use only use personal For 0.5% -0.5% $0M
2011 2012 2013 2014 2015 2016
Revenue EBITDA Revenue growth 4 Driving Performance from a Position of Strength
Altium’s FY16 Financial Metrics
$38.1M A20c $100.4M Sales 17.89c Dividend Cash (Up by 22%) EPS (Up by 25%) 31,134 (Up by 43%*) Subscribers 29.3% $93.6M Revenue (Up by 11%) A$1B Market Cap EBITDA Margin (Up by 17%) (Up from 28.3%)
$27.4M All R&D Debt Recurring Revenue 5,181 53% Costs Are Free (Up from 51% in FY2015) Licenses Sold EBITDA
(Up by 20%) (Up by 21%) Expensed For personal use only use personal For
* Normalised EPS
5 Industry-Leading Performance
20%
Rate 15% (17%, 29.3%)
10% (12%, 28.1%)
(29.3%, 7%) 5% (5.6%, 21.6%)
(3.1%, 7%)
(3%, 19.9%) For personal use only use personal For
(NM, 21.3%,) (2.1%, 49.2%) Last Twelve Months (LTM) Growth Revenue(LTM) Twelve Months Last 10% 20% 30% 40% 50%
Last Twelve Months (LTM) EBITDA Margin 6 FY16 Significant Achievements
Delivered major upgrade to Altium’s flagship product, Altium Designer 16. (Starting from 2013 Altium has successfully produced a major upgrade every year).
OEM partnership with Dassault Systemes SolidWorks and the delivery of a new electronic / mechanical CAD product (SolidWorks PCB released 1 July 2016).
OEM partnership with Computer Simulation Technology (CST) to deliver first level simulation capability for Altium Designer users (PDN Analyser released April 2016).
Successful acquisition, and integration of, Octopart and Ciiva. (Octopart positively impacted revenue and profit margin growth in FY2016).
Acquisition of Perception Software to spearhead Altium’s go-to-market strategy for its high-end enterprise
For personal use only use personal For product focused on data and process management.
Build up of Altium’s European HQ in Munich and expansion of Altium’s direct reach in Europe.
7 Achieving Market Leadership by 2020
2020 Target Revenue Breakdown
Acquisitions
Octopart 10-15%
5-7.5% TASKING
7.5-10% $200M Altium Designer 2025 In Total Revenue 55-65% 2020
5-10% $150M In Pure PCB 2017
2015 ATINA 5-10%
3-5%
For personal use only use personal For Strong Strategy, OEM $100 + Million PCB Market Global Leader in Leading Technology Revenue & Expansion Leadership & Systems Design & Revenue of Market Emerging Leader Momentum Data Opportunity in Systems Design Management 8 Agenda
1 Company Highlights & Significant Achievements
2 2016 Financial Performance & Metrics
3 PCB Market Trends & Driving Forces
4 Pursuing PCB Market Leadership & EDA Transformation
5 Appendix: Company Overview For personal use only use personal For Revenue by Region
Americas CAGR: 19% China CAGR: 14% 44, 605
9,585 9,557 34,243 8,760
7,569 25,747 23,890 5,913 20,714 19,041 5,053 5 YEAR CAGR 14% Across All Regions
Altium Licenses
Altium Subscriptions
Tasking (Licenses and Maintenance) EMEA CAGR: 11% (EUR: 16%) APAC CAGR: 5% Octopart 33,224 30,930 6,181 Other 30,432 5,917 5,913 5,729 5,484
23,542 4,798 22,480
19,447 For personal use only use personal For
10 Altium’s Revenue Sources
0.3% Other Recurring ($0.3M) Vault Subscription and Term Based Licenses 1.6% ($1.5M) Transactional Tasking Term Based Licenses 1.8% ($1.7M) Revenue
2.4% 47.0% ($2.2M) ($44.0M) Altium Designer Term Based Licenses 3.6% ($3.4M)
4.8% Tasking Maintenance ($4.5M) Altium Designer 36.0% Perpetual Licenses ($33.7M)
Octopart Search
Altium Designer Subscriptions 38.5% 4.6% ($36.0M) ($4.3M) Services 2.0% 4.4%
($1.9M) ($4.1M) For personal use only use personal For
Tasking Licenses 53.0% ($49.6M) Recurring Revenue Other Transactional 11 Revenue – Board and Systems
BSD - Americas Revenue CAGR: 16% BSD - EMEA USD Revenue CAGR: 13% (EUR: 18%) Recurring CAGR: 17% Recurring CAGR: 17% (EUR: 22%)
Revenue CAGR 13.2% Across All Regions
Revenue CAGR: 9% BSD – Rest of World BSD – Total Recurring CAGR: 12% Revenue CAGR: 13% Revenue Recurring CAGR: 16%
Recurring For personal use only use personal For
12 Revenue – TASKING and Octopart
MES (TASKING) Revenue CAGR: 11% Octopart Search Revenue CAGR: 41% Recurring CAGR: 5% All recurring revenue
Revenue
Recurring For personal use only use personal For
13 Board and Systems – Underlying Metrics
Altium Designer Seat Count Subscription Pool
31,134 28,006 (+3,128) 26,083 (+1,923) 6,211 (+692) (+1,040) 1,918 (+ 342) 25,043 11,471 (+1,268)
1,586 (+ 251)
13,452 (+1,168)
1,677 (+ 270) For personal use only use personal For Americas EMEA Rest of World Americas EMEA Rest of World
14 Altium’s Subscription Pool
Lapse Rate (LR) +5,841 Non-renewals +2,747 (Up from 5,062) 5,460 (Up from 2,502) (Down from 5,641)
New Subscriptions (NS) Re-join (RJ) Attached to New License Sales Lapsed Subscribers Re-joining and Upgrades
Growth pool = ~86% of Constant pool = ~14% of subscription pool subscription pool FY16 renewal rate of 86.6% FY16 renewal rate of 30.3% up from 83.9% down from 30.7% Subscription Pool (SP) FY16: 31,134
For personal use only use personal For (up from 28,006)
Growth Equation = NS + RJ - (LR x SP) 15 Operating expenses
G&A Breakout
$18,746
$15,137 $11,174 $29,056
$29,520 $28,610
$13,081 Base Upskilling/Bonus Acquisition Move FX Impact $13,734 $11,915
$5,121 R&D spend is holding constant, augmented by capability driven
Acquisitions For personal use only use personal For Acquisition spend represents acquired operating expense
Sales and Marketing gaining efficiency
Acquisitions R&D Sales & Marketing G&A G&A increases due to One-Time Charges and Key Hiring 16 Operating expenses
Operating Expenses as a Percent of Revenue
15.7% 18.9% 20.0% What Drives Altium’s Unique Operating Leverage?
41.6% 35.7% 31.1% No Waste Culture – Every Dollar Counts
We support a Value-Based Market but, we service this market with a commodity selling model
17.1% 14.1% R&D is driven by a high product release rate 16.8%
5.5% For personal use only use personal For
Acquisitions R&D Sales G&A 17 Altium’s Cash Balance
Jun-16 Jun-15 Var
$ '000 $ '000 $ '000 %
Cash and cash equivalents 38,139 61,906 (23,767) -38% Trade and other receivables 30,406 20,704 9,702 47% Other current assets 1,548 1,955 (407) -21% Total current assets 70,093 84,565 (14,472) -17%
Trade and other receivables 5,379 1,499 3,880 259% Property, plant and equipment 5,091 3,886 1,205 31% Intangible assets 33,508 0 33,508 100% Other non-current assets 82,301 81,622 679 1% Total non-current assets 126,279 87,007 39,272 45%
Total assets 196,372 171,572 24,800 14%
Trade and other payables 7,137 5,988 1,149 19% Borrowings 51 60 (9) -15% Tax liabilities 2,713 4,989 (2,276) -46% Provisions 3,568 1,908 1,660 87% Deferred revenue 32,234 28,773 3,461 12% Total current liabilities 45,703 41,718 4,054 10%
Borrowings 20 53 (33) -62% Deferred Tax 4,793 0 4,793 100% Provisions 4,230 1,202 3,028 252% Deferred revenue 9,038 6,091 2,947 48% Other liabilities 1,793 906 887 98% Total non-current liabilities 19,874 8,252 11,622 141%
For personal use only use personal For Total liabilities 65,577 49,970 15,607 31%
Net assets 130,795 121,602 9,193 8%
Contributed equity and reserves 135,571 131,767 3,804 3% Accumulated losses (4,776) (10,165) 5,389 -53% Total equity 130,795 121,602 9,193 31% 18 Cash Flow
FY16 FY15 Var Dividends paid/declared $ '000 $ '000 $ '000 % Cash flows from operating activities Receipts from customers 92,121 81,517 10,604 13% Payments to suppliers and employees (71,461) (60,692) (10,769) 18% Payments for expenses relating to acquisitions (1,143) - (1,143) 100% Net Interest paid (53) 305 (357) -117% Net income taxes paid (5,383) (732) (4,651) 635%
Operating Cash Flow 14,082 20,398 (6,316) -31%
Capital Expenditure Payments for property, plant and (2,720) (2,354) (366) 16% equipment Payments for intangibles (250) - (250) 100% Proceeds on sale of assets - 16 (16) -100%
Free Cash Flow 11,112 18,060 (6,948) -38%
Cash flows from investing activities Payments for purchase of subsidiary, net of cash acquired (17,039) - (17,039) 100%
Cash flows from financing activities Proceeds from issue of shares - 39,966 (39,966) -100% Dividends paid (17,631) (15,886) (1,745) 11%
Repayment of borrowings (43) (66) 23 -35% For personal use only use personal For
Final Subtotal (23,601) 42,074 (65,675) -156% Interim Effects of exchange rate changes (166) (2,217) 2,051 -93% Increase in cash and cash equivalents (23,767) 39,857 (63,624) -160%
19 Full Year Results Key Metrics
Change Change USD millions FY16 FY15 FY16 FY15 % %
Revenue (excl. interest) 93.6 80.2 17% EPS 17.89 74.84
Reported expenses 66.2 57.5 15% Dividends (AU cents) 20 16 25%
• Existing business expenses 61.0 57.5 6% Key Margin Analysis EBITDA Margin 29.3% 28.3% • Acquired business expenses 5.1 - N/A Net profit before tax margin 26% 27% Net profit after tax margin 25% 115% EBITDA 27.4 22.7 21% Return on equity 18.2% 143% Effective tax rate 6.5% N/A Depreciation and amortization 2.7 1.3 207% Balance Sheet (USD millions) EBIT 24.7 21.4 15% Cash and equivalents 38.1 61.9 -38% Net assets 130.8 121.6 8% Net interest (0.1) 0.2 Operating cash flows 14.1 20.4 -31%
Profit before income tax 24.6 21.6 14%
Income tax expense 1.6 (70.8) For personal use only use personal For
Profit after income tax 23.0 92.4
20 Agenda
1 Company Highlights & Significant Achievements
2 2016 Financial Performance & Metrics
3 Market Trends & Driving Forces
4 Pursuing PCB Market Leadership & EDA Transformation
5 Appendix: Company Overview For personal use only use personal For
Rise of Smart Connected Devices For personal use only use personal For
22 At the Heart of All Intelligent Systems is Electronics
For personal use only use personal For Printed Circuit Boards Central to Electronics
23 PCB Design Software Market Current Trends, Segmentation & Size
Product Differentiation Total PCB Market Size: $1 Billion
Product Reliability Currently Addressable: $600 Million High-End Tools 57% of market value - Top-down Direct Shorter Time-to-Market Enterprise Sales Model. Large engineering teams designing complex products. Lower Cost Products
Design Complexity Mainstream Tools Robust Data Management 36% of market value - Bottom-up direct / indirect sales model. Moderate to Shorter Cycle Time high design complexity, carried out by small teams of specialist engineers. Multi-disciplinary Tools
Systematic Design Reuse Low-End Tools 7% of market value - Indirect Collaborative Mindset Sales through partners. Simple designs carried out by multi-
For personal use only use personal For Lack of Formal Training skilled engineers. No Sustainable Economy
24 Source: Gary Smith EDA Current Market Share for the ‘Big Four’ PCB Software Companies
Revenue Share - Pure PCB Excluding Wire Harness, IC Packing and Services
Altium 16% Mentor Graphics 37% Zuken 18%
Cadence
29% For personal use only use personal For
This chart depicts market share based on the most recent financial reports for the ‘Big Four’ PCB software companies (Mentor Graphics, 25 Cadence Design Systems, Zuken and Altium) and the breakdown of the addressable market based on Gary Smith’s PCB Market Trends Report. The Future is Multi-disciplinary…
Cloud System Engineering Cloud application development and Infrastructure management
Embedded System Engineering Development of Control Systems in Electromechanical devices
Electronics Engineering Creation of high-performance electronic hardware with complex form factor
Mechanical Engineering Designing complex objects with sophisticated
electromechanical behaviour For personal use only use personal For
Electrical Engineering Development of wire harness and electrical systems in Electromechanical devices
26 Product Complexity is Rapidly Increasing...
Creating System Product Design Challenges Complexity Systems of Connected Systems
Software Product as a System Electronic Product as 3D Mechanical a Service Electrical 2D Mechanical Smart Connected Products Smart Early Products
For personal use only use personal For Products
1980 2000 2020 Time
27
IoT Will Transform the EDA Industry... For personal use only use personal For
28 Global Engineering Software Market revenue, 2014 and 2022
Revenue Segments CAGR 60 Electronic Design Automation (EDA) Computer Aided 50 4.6 Design (CAD) 6.34 11.8% 13.9% 40 4.52
30 13.26 1.9 20 2.81 Architecture 10.6% 2.37 Engineering & Construction (AEC) 13.0% 21.63 Total Revenue (Billions) Revenue Total 10 5.09 8.3% Computer Aided 7.82 Engineering (CAE)
For personal use only use personal For 0 2014 2022 Computer Aided CAD CAE CAM AEC EDA Manufacturing (CAM) 29 Source: Transparency Market Research Agenda
1 Company Highlights & Significant Achievements
2 2016 Financial Performance & Metrics
3 Market Trends & Driving Forces
4 Pursuing PCB Market Leadership & EDA Transformation
5 Appendix: Company Overview For personal use only use personal For Altium’s Strategy for PCB Market Leadership
Altium’s Multi-Product, 1 Multi-Channel Strategy is Delivering the Next Generation at the Heart of Altium’s Agile Enterprise Solution bid for Market Leadership 2
A Well-Executed M&A and 7 Partnership Strategy is 3 Closing Advanced Capability Gaps in Critical to Success High-end PCB Design & Going Beyond
Maintaining Leadership in 4 Mainstream PCB Market
Online Collaboration &
Smart Workflow 6 For personal use only use personal For Smart Content Strategy - Monetization 5 Through Smart Delivery of Content
31 A Unique PCB Design Solution for Every Market Segment
X2 Platform OEM Partner Product
Mainstream PCB Design Tool
Design Realization CIIVA
(online Service) For personal use only use personal For
Community PCB Design Tool Streamlined PCB Design Tool Electronic Part-Pedia (Free / Unlimited) (Professional / Entry Level) (Wikipedia of Electronic Parts)
32 ATINA - Altium’s High-End PCB Design Tool
ATINA • Multi-board System Design Capability • Advanced Routing Capability • Constraint-Driven Design • Handling Large Boards with Ease
X2 Platform • Next Generation - 3D Graphics Engine • State-of-the-art User
For personal use only use personal For Interface/Experience • 64-bit Computing architecture 33 Octopart & Ciiva Acquisition - Executing on Content Strategy
Connecting Design Space to Supply Chain
Transforming Intent into Realisable Design
Successful standardization, aggregation & unification of CAD content & supply chain data is a component
For personal use only use personal For of Altium’s bid for market leadership in PCB design
34 Successful M&A Execution - ANSYS Example
Delivering Market-Leadership through Focus, Fiscal Discipline and Well-Executed M&A
• High calibre team delivering on a singular business focus. • Innovative business model to capture opportunities that evolve within the industry. • Strong and very consistent fiscal management to drive organic growth. • Acquisition of complementary technology businesses. • Achieving EBITDA margin of
48% at 1BN revenue. For personal use only use personal For
35 Agenda
1 Company Highlights & Significant Achievements
2 2016 Financial Performance & Metrics
3 Market Trends & Driving Forces
4 Pursuing PCB Market Leadership & EDA Transformation
5 Appendix: Company Overview For personal use only use personal For Altium's Journey - a Long History and a Promising Future
The company was founded by creating the first version of Altium Designer, Protel PCB
1985 Altium partners with Dassault Altium acquires Octopart, Systemes SOLIDWORKS to the #1 electronic parts Altium Launches Protel for Deliver a specialized version of search engine in the world Windows - World's first its PCB Design Software for Microsoft Windows-based SolidWorks users Altium acquires Ciiva a cloud 1991 PCB design system based electronic components Altium launches Altium management system Designer 6, the world’s first Native 3D PCB design software Capital Raising of 44M on ASX Altium relocated its HQ to 1999 California USA Successful
2006
Altium Successfully completes an IPO on 2010 Australian Stock Exchange For personal use only use personal For Now 2014 2015 Altium launches Altium Designer 13 introducing DXP 2.0, its next generation integration platform opening up Altium Designer to third-party developers 37 Printed Circuit Board Design and Manufacturing Process
Circuit Diagram Layout Film Bare Board Assembled Board For personal use only use personal For
Design Capture Layout Fabrication Assembly
38
Altium Products For personal use only use personal For
39
Diversity of Application For personal use only use personal For
40 High Profile Customers
Automotive Aerospace & Defence Life Sciences Mobile Devices Consumer- Electronics
Electronics & High-Tech Research & Education Industrial Controls Computers Semiconductors For personal use only use personal For
41
Global Reach For personal use only use personal For
42 Competition and Industry Landscape
1960’s & 1970’s 1980’s 1990’s 2000’s 2010’s 2020 Growth Cadnetix (LTM) Daisy Veribest (Intergraph) Mentor (Expedition)
Mentor Graphics 3% end (Board Station) - Zuken (CR-5000, CR-8000) Zuken High (CR-2000) CR-5000/8000 Zuken 3% Cadence (Allegro) Racal-Redac ECAD 7% (Cadence Allegro) Cooper & Chan Mentor (PADS) Workstation Based PADS PCAD Altium (Designer) 17% OrCAD (Cadence)
OrCAD Mainstream PC Based CADStar (Zuken) CADStar Altium (Protel) For personal use only use personal For Browser-based PCB Tools Accel Technology (Tango) Eagle
CADSoft (Eagle) end - National Instruments Electronic Workbench (Electronic Workbench) Low Pulsonix 43 The Altium Advantage
Transformational Leadership For personal use only use personal For
Established Global Business User-Centric DNA
44
Altium’s Leveraged Sales Strategy For personal use only use personal For
45
Altium’s High-Level Strategy For personal use only use personal For
46 Altium’s Long-Term Outlook
The proliferation of electronics through the rise of smart connected devices is driver of growth for our business for the foreseeable future
Altium will continue to drive top line growth while expanding operating margin to enter and maintain 30% plus
Altium expects to see continuing growth in revenue (licences & subscription)
Altium is confident that achieving market leadership in PCB design software by 2020 is well within its reach
Altium’s aspirational goal is to achieve $150 million in For personal use only use personal For pure PCB revenue and $200 million in total by FY2020