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Altium Limited Financial Report CONTENTS 1. Corporate Directory 2 2. Directors’ Report 3 Remuneration report 23 3. Environmental, Social and Governance Report 43 4. Auditor’s Independence Declaration 62 5. Financial Report 63 Consolidated statement of profit or loss and other comprehensive income 64 Consolidated statement of financial position 65 Consolidated statement of changes in equity 66 Consolidated statement of cash flows 67 6. Notes to the consolidated financial statements 68 7. Directors’ declaration 119 8. Independent auditors report to the members of Altium Limited 120 9. Information for shareholders 127 1 30 June 2020 Altium Limited Corporate Directory Corporate Directory NON-EXECUTIVE CHAIRMAN CHIEF EXECUTIVE OFFICER EXECUTIVE DIRECTOR Samuel Aram Sergiy Weiss Mirkazemi Kostynsky NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR Raelene Lynn Murphy Mickleburgh Annual Company secretaries general meeting Natasha Davidson (BA LLB (HONS) LLM FGIA MAICD) - Appointed 10 June 2021 Thursday, 18 November 2021 Alison Raffin (BBus, AGIA ACG) 9.30am AEDT Kim Besharati (BEc) - Resigned 10 June 2021 Fully Virtual Registered office Share register Suite 3, Level 6 Computershare Investor Services Pty Limited Tower B, The Zenith Level 3, 60 Carrington Street, Sydney NSW 2000 821 Pacific Highway Australia 1 300 850 505, Overseas +61 3 9415 4000 Chatswood NSW 2067 Australia Auditor Stock exchange listing PricewaterhouseCoopers Altium Limited shares are listed on the One International Towers Sydney Australian Securities Exchange Watermans Quay (ASX code: ALU) Barangaroo NSW 2000 +61 2 8266 0000 www.altium.com 2 30 30 June 2021 Altium Limited Directors’ report The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the ‘Group’) consisting of Altium Limited (referred to hereafter as the ‘company’ or ‘parent entity’) and the entities it controlled at the end of, or during, the year ended 30 June 2021. PRINCIPAL ACTIVITIES During the financial year the principal activities of the Group consisted of the development and sales of computer software for the design of electronic products. Dividends Dividends paid during the financial year were as follows: Final dividend for the year ended Interim dividend for the half year 30 June 2020 of AU 19 cents ended 31 December 2020 of AU (2019: AU 18 cents) 19 cents (2019: AU 20 cents) 2021 2020 2021 2020 18,351 US$’000 16,050 US$’000 19,206 US$’000 17,584 US$’000 14% 9% The Directors have declared a partially franked (15%) final dividend of AU21 cents per share for the year ended 30 June 2021. The dividend will be paid on 28 September 2021 based on a record date of 7 September 2021. This amounts to a total dividend of US$20.1 million based on the number of shares outstanding. 3 30 June 2021 Altium Limited Directors’ report Review of operations This update of our operational performance in Financial year 2021 will cover the following sections: Overview Financial Business Products Performance Operations and Technology Strategy Key Risks Outlook Overview $200m $180m $160m $140m $120m $100m $80m TASKING Revenue $60m Continuing Revenue $40m $20m Continuing EBITDA / EBITDA Margin (prior years revised for comparative purposes to exclude TASKING) $0m FY16 FY17 FY18 FY19 FY20 FY21 4 3030 June 2021 Altium Limited Directors’ report Altium achieved full year revenue of US$191.1 million, including the contribution from TASKING prior to its divestment in February 2021. Altium achieved full year revenue Octopart and China delivered of US$191.1 million, including the outstanding performances for the fiscal contribution from TASKING prior year, growing revenue by 42% and 11% to its divestment in February 2021. respectively. Momentum is returning 6% Continuing revenue of US$180.2 to Altium’s core PCB business and CONTINUING million (growth of 6%) for the the adoption of the Group’s cloud REVENUE year included a strong second half platform Altium 365 has accelerated revenue increase of 16%. Earnings with almost 13,000 monthly active before interest, tax, depreciation and users and over 6,000 monthly active amortisation (EBITDA) was US$60.0 accounts. This use has created strong million on a reported basis for the interest in our recently launched Nexar continuing business, a 33% margin. platform, our ecosystem for industry After significant investment in product partners to access Altium 365. development and cloud infrastructure, Altium annual recurring revenue (ARR) Altium achieved an underlying EBITDA grew by a record 29% as the transition margin of 36.1% compared to the prior of our business model from perpetual year of 38.5%. to term-based and from on-premise to cloud gains momentum. Recurring revenue is 65%, and as Altium 365 reduces churn in subscribers, the Group is on track to achieve its target of 95% recurring revenue, ex-China and developing countries. 5 30 June 2021 Altium Limited Directors’ report Financial REVENUE OPERATING CASH FLOW $61.7m Performance 6 % $180.2m Altium is the fastest growing CONTINUING UNDERLYING RECURRING EBITDA EDA company in the world with 8 REVENUE MARGIN consecutive years of double-digit 65% 36% growth (prior to COVID-19) and expanding margins. DIVIDEND CASH PAT AU40C $191.5m $35.2m Altium SEATS TOTAL DOMINANCE IN ON SUBSCRIPTION China Designer Dominance TWICE YEARLY DIRECT 54,394 SOFTWARE PRESENCE IN Altium Designer is the most UPDATES MOST MARKETS 7% widespread professional PCB design tool used by over 100,000 engineers worldwide. NUMBER OF YEARS OF R&D COMPANIES USING ALTIUM DESIGNER Over 30 Over 30,000 6 3030 June 2021 Altium Limited Directors’ report Altium 365 ACTIVE ACTIVE Adoption USERS ACCOUNTS The world’s first digital platform for design and realization of 12,846 6,054 electronics hardware gaining strong early adoption. Launched 1 May 2020 *At 1 August 2021 Financial Performance Key Financial Results - CONSOLIDATED Continuing Operations 1 Underlying EBITDA margin underlying (including 30 JUNE 2021 30 JUNE 2020 CHANGE TASKING) includes: US$’000 US$’000 % - the results from the TASKING business for the Total revenue 191,103 189,124 1% period prior to divestment and excludes the pre-tax gain on sale of TASKING of $99.7 million Underlying EBITDA margin 36.1% 38.5% - the impact of one-off costs associated with (including TASKING)1 M&A of US$2.3 million Continuing2 - the write-back of SolidWorks annual minimum contract payment of US$1.4 million Revenue 180,223 169,309 6% - the re-measurement of contingent consideration US$2.5 million Operating expenses (excluding 120,244 107,569 12% - restructuring costs of US$0.5 million. depreciation, amortisation and interest) EBITDA 59,979 61,740 (3%) 2 Results for the divested entity, TASKING, have been excluded and prior year comparatives restated. EBITDA margin 33.3% 36.5% 3 Underlying EBITDA margin includes the results of Underlying EBITDA margin3 34.3% 34.8% the continuing business for the year and excludes: - the impact of one-off costs associated with Profit before income tax 47,662 50,958 (7%) M&A of US$2.3 million Income tax expense 12,390 31,232 (60%) - the write-back of SolidWorks annual minimum contract payment of US$1.4 million Profit after income tax 35,272 19,726 79% - the re-measurement of contingent consideration US$2.5 million EPS cents 26.89 15.08 78% - restructuring costs of US$0.5 million. 7 30 June 2021 Altium Limited Directors’ report Revenue - Regional View CONSOLIDATED and 2nd Half Momentum 30 JUNE 30 JUNE SECOND HALF SECOND HALF 2021 2020 CHANGE TO 30 JUNE 2021 TO 30 JUNE 2020 CHANGE US$’000 US$’000 % US$’000 US$’000 % Board and Systems (Altium Designer, 150,890 147,787 2% 82,730 75,378 10% CircuitStudio, SolidWorks PCB & Nexus) Americas1 49,970 53,741 (7%) 26,680 27,940 (5%) EMEA 48,722 45,611 7% 26,893 24,172 11% China 23,589 21,282 11% 12,951 8,786 47% Rest of World 13,899 11,662 19% 7,545 6,015 25% NEXUS 14,710 15,491 (5%) 8,662 8,464 2% Octopart 26,963 18,973 42% 16,163 9,928 63% Manufacturing 2,370 2,549 (7%) 1,359 874 55% Revenue - continuing operations 180,223 169,309 6% 100,252 86,180 16% TASKING - discontinued operation 10,880 19,815 (45%) 1,262 10,098 (88%) 1 Americas revenue includes contribution from SolidWorks which declined from US$2.0 million in the year ended 30 June 2020 to US$0.3 million in the year ended 30 June 2021. Revenue Growth in Octopart was underpinned by Altium subscription business was resilient increased search activity for integrated during fiscal 2021, with subscriptions up circuits caused by shortages in the 7% over a twelve-month period to reach semiconductor industry and resulted over 54,394 subscriptions. in a record setting 16 million clicks, an Nexus had a challenging year, down by 5% 54,394 increase of 41% year on year. Additionally, for the full year to US$14.7 million, mainly Octopart’s API revenue grew by over SUBSCRIBERS UP 7% due to the effect of COVID in the first 100% year on year, with new enterprise half. Nexus returned to positive growth in customers including SpaceX, Tesla, the second half and closed a significant Amazon and Arduino. Growth in the deal of US$1.8 million with Balluff. Most Octopart API, to be rebranded as Nexar significantly, Nexus now has the capability API, bodes well for future monetization to also be hosted on Altium’s cloud opportunities for our Cloud platform. platform which will support Altium’s China recovered strongly in the second “land and expand” strategy to make self- half to deliver 48% revenue growth after a discovery, self-start and self-pay a reality poor first half performance, as its license to scale Nexus.