Delivering Sustainable Return While Positioning for Future Growth
Altium Investor Presentation 27 August 2014 Aram Mirkazemi - CEO Sydney Richard Leon - CFO Disclaimer
This presentation has been prepared by Altium Limited (ACN 009 568 772) and is for information purposes only. It does not constitute financial product or investment advice or a recommendation to acquire Altium shares and has been prepared without taking into account the objectives, financial situation or needs of individuals. Before making an investment decision prospective investors should consider the appropriateness of the information having regard to their own objectives, financial situation and needs and seek legal and taxation advice appropriate to their jurisdiction. Altium is not licensed to provide financial product advice in respect of Altium shares.
Financial data All dollar values are in US dollars (US$) unless as otherwise presented.
Future performance Forward looking statements, opinions and estimates provided in this presentation are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. Forward looking statements including projections, guidance on future earnings and estimates are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. An investment in Altium shares is subject to investment and other known and unknown risks, some of which are beyond the control of Altium Limited. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. To the maximum extent permitted by law, none of Altium employees, its directors, employees or agents, nor any other person accepts any liability, including, without limitation, any liability arising out of fault or negligence, for any loss arising from the use of the information contained in this presentation. In particular, no representation or warranty, express 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 and contingencies. Before making an investment decision, you should consider, with or without the assistance of a financial adviser, whether an investment is appropriate in light of your particular investment needs, objectives and financial circumstances.
Past performance Past performance information given in this presentation is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance.
fksbpqlR=mRbpbkq^qflk= O= Altium’s Financial Snapshot
$80M 10% Altium’s FY14 Financial Metrics Sales 13% $70M Revenue 15% $22.0M $11.2M EBIT 21% Net Cash NPAT $60M $17.1M 11% (up 49%) (up 717%) 26,000 (up 354%) 9% 12% $50M Subscribers 7% $71.1M (47% of Revenue) $18.3M EBITDA $40M Revenue (up 15%) Subscription Revenue $30M $290M $18.5M 403 12% Underlying Market Profit Employees CAGR Op Cash Flow $20M CAP (up 50%) EBIT 10.3 $10M Debt $76.1M Sales 12.0 Div Operating Free (up 9%) EPS Cash Flow (up 10%) (up from 1.3) $0M
2010 2011 2012 2013 2014 fksbpqlR=mRbpbkq^qflk= P= Agenda
1 Company & Industry Overview
2 FY14 Results & Altium’s Fundamentals
3 Mega Trends & Market Opportunity
4 Growth Strategy & Successful Execution
5 Outlook – FY15 and Beyond Altium History
Nick Martin founds the company Altium Launches Altium Acquires Tasking Altium Acquires Morfik Altium Launches AD14 by creating the first version of Protel 98 Complete a leading provider of embedded to bolster its drive towards Introducing Advanced Altium Designer, Protel PCB 32-bit design suite system compiler technology building a platform for IoT Design and 3D Capabilities
1985 1998 2002 2010 2014
Over 25 Years of Continuous R&D in Printed Circuit Board Design Software
1988 1991 1999 2006 2011 Altium Launches AutoTrax Altium Launches Protel for Altium Successfully Altium Launches Altium Launches AD10 Introducing Offering autorouting and Windows - World's first completes an IPO on World’s first 3D PCB its Next Generation Design Tools photo plotting Microsoft Windows-based Australian Stock Exchange with Vault Technology PCB design system
R= What is a Printed Circuit Board?
Circuit Diagram Layout Film Bare Board Assembled Board
Design Capture Layout Fabrication Assembly
fksbpqlR=mRbpbkq^qflk= S= Altium Products
Altium Designer 3D Printed Circuit Board Altium Vault Design Software Tasking Design Data Management & Embedded Software Collaboration Software Development Tools
Electronic Design Embedded Design Capture & Software FPGA Printed Circuit Concept Prototype Board Layout Manufacturing Verification Development
fksbpqlR=mRbpbkq^qflk= T= Diversity of Applications
Automotive Aerospace & Life Sciences Mobile Devices & Consumer- Defence Communications Electronics
Electronics & Research & Industrial Controls Computers Semiconductors High-Tech Education Automation fksbpqlR=mRbpbkq^qflk= U= High Profile Customers
Automotive Aerospace & Defence Life Sciences Mobile Devices Consumer- Electronics
Semiconductors Electronics & High-Tech Research & Education Industrial Controls Computers
fksbpqlR=mRbpbkq^qflk= V= Global Reach
Sales and Support Centres Research & Development Centres San Diego, Boston, Karlsruhe, Shanghai, Sydney San Diego, Ukraine, Netherlands, Shanghai
Regional HQ Global HQ Karlsruhe San Diego Regional HQ Shanghai
Corporate & Registered Office ASX Listing Sydney
Network of channel partners, with over Main Operations Centres 50 authorized Value-Added-Resellers San Diego, Karlsruhe, Shanghai
fksbpqlR=mRbpbkq^qflk= NM= PCB Design Software Market Segmentation & Size
High-end Total Market size: $800M 57% of market Value Currently Addressable: $500M Large engineering teams CAGR: 5-6% designing complex products
High-end 20k+ Price Range Mainstream 36% of market value
Moderate to high design complexity, carried out by Low-end small teams of specialist 7% of market engineers value. Simple designs carried out by multi- skilled engineers Low-end Less than 2k Price Range
fksbpqlR=mRbpbkq^qflk= NN= Source: PCB Market Trends 2013 – Gary Smith EDA Industry Consolidation & Competitive Landscape
1960’s & 1970’s 1980’s 1990’s 2000’s 2010’s
Cadnetix Daisy Veribest (Intergraph) Expedition Mentor Graphics (Board Station) Mentor Graphics
High-end Racal-Redac CR-5000/8000 Zuken (CR-2000) Zuken
ECAD (Cadence Allegro) Allegro Cadence Cooper & Chan
Altium Designer PCAD Altium PADs PADs (Mentor Graphics) OrCAD OrCAD (Cadence) Mainstream CADStar CADStar (Zuken) Altium (Protel)
Accel Technology (Tango)
CADSoft (Eagle) Eagle National Instruments Low-end Electronic Workbench (Electronic Workbench) Pulsonix NO= PCB Design Software - Global Market Share
Printed Circuit Board Estimated Market Share (by Revenue)
Cadence Mentor 28% Graphics 35%
5% Other 10% 22% Altium Zuken
fksbpqlR=mRbpbkq^qflk= NP= Source: PCB Market Trends 2013 – Gary Smith EDA Altium’s Enduring Competitive Advantage
Established Brand in Most Sophisticated Software with Countries in the World Millions of lines of code Active user community in virtually Developed over 25 years, every country in the world virtually impossible to rewrite, reproduce or copy
Transactional Sales
Value-based Sales with Strong Operating Leverage The only ‘Pure Play’ PCB company in the World fksbpqlR=mRbpbkq^qflk= NQ= Agenda
1 Company & Industry Overview
2 FY14 Results & Altium’s Fundamentals
3 Mega Trends & Market Opportunity
4 Growth Strategy & Successful Execution
5 Outlook – FY15 and Beyond Altium’s Key Financial Metrics
Sales $80M 10% Revenue 13% $70M Cash Flow Underlying Profit 15% Revenue Growth 15% (Sales 10%) 21% EBIT Revenue $71.1M (Sales $76.1M) $60M 11%
9% 12% $50M 7% EBIT $17.1M (Margin 23%) $40M Underlying Profit $22.9M $30M
$20M Operating Cash Flow $18.5M
Dividend $10M Net Cash $22.0M (49% Growth) 12.0 AU CPS Full Year $0M
2010 2011 2012 2013 2014 fksbpqlR=mRbpbkq^qflk= NS= Altium’s Revenue Sources
Subscriptions Attachment to New License Sales
Lapsed Subscriptions Re-joining 10% ($7M) Altium Software 3% (New Licenses) ($2.1M) 36% 47% ($25.3M) Tasking Software (New License & Altium 34% Maintenance) ($24.4M) Subscription (Recurring Revenue) 10% ($7M) 7% Other Subscription ($5.3M) (Services & Hardware) Renewals
The percentage breakdown for sales sources relate to FY14 fksbpqlR=mRbpbkq^qflk= NT= Altium’s Subscription Pool
Subscription Pool Characteristic Curves Churn Rate (CR) Subscribed seats Non-renewals 40,000 New Subscriptions (NS) 10% Churn Rate Re-join (RJ) Attached to New License or Lapsed Subscribers Upgrade Sales Re-joining 36,000 15% Churn Rate
32,000 18% Churn Rate 20% Churn Rate 28,000
25% Churn Rate
24,000 Years 1 2 3 4 5 Growth Equation = NS + RJ – (CR x SP) Note: The above characteristic curves assume fixed number of annual new licenses and re-joins
fksbpqlR=mRbpbkq^qflk= NU= Altium’s Recurring Revenue
Deferred Revenue to Annual Revenue
$40 $80
$35 $70
$60 $30 $50 $ $25
$40 Annual Revenue Millions
Deferred Revenue Millions $20 $30 $15 $20 Focus Area – Reduction in Churn Rate $10 $10
$5 $0 FY10 FY11 FY12 FY13 FY14
Within 1 year A er 1 year Total Revenue Total Sales
fksbpqlR=mRbpbkq^qflk= NV= Altium’s Revenue Contribution by Region
Americas EMEA
$35 $35 $30 $30 Millions $25 Millions $25 Compound Growth 9% Compound Growth 15% $20 $20 $15 $15 $10 $10 $5 $5 CAGR 12% $0 $0 Across All FY10 FY11 FY12 FY13 FY14 FY10 FY11 FY12 FY13 FY14 Regions Greater China Asia Pacific
$35 $35 $30 $30
Millions $25 Millions $25 Other $20 $20 Tasking (Licenses & $15 $15 Maintenance)
$10 Compound Growth 20% $10 Compound Growth 4% Altium Licenses $5 $5 Altium Subscription $0 $0 FY10 FY11 FY12 FY13 FY14 FY10 FY11 FY12 FY13 FY14 fksbpqlR=mRbpbkq^qflk= OM= Altium’s Operating Costs
FY14 - Old Metric FY14 - New Metric $60
$50 $7.1 Millions $12.1 $7.1 $10.5 $40 $7.0 $8.3 $10.4
$30 New Metric Old Metric $20.0 $17.3 $21.3 $22.6 $22.5 Cost of Depreciation $22.1 Good Sold Cost of $20 Research & Good Sold Development Research & Customer Development Success $10 $18.3 $19.3 Sales & $15.7 $15.5 Sales & Marketing $14.3 $11.6 Marketing General, Admin & General & Overheads $- $- Admin FY10 FY11 FY12 FY13 FY14 FY14
FY14 fksbpqlR=mRbpbkq^qflk= ON= Altium’s Operating Costs (FY14)
Research & Development 13.3% Software 21.9% General & Maintenance Admin 19% 12.3%12% Customer Success 5.9% Technical Support Sales & User Education 45.3% Marketing 1.3%
fksbpqlR=mRbpbkq^qflk= OO= Margin Growth
§ Focus on core competency $80M
§ Discipline in product $75M development Revenue $70M § Increasing sales capacity to extend growth into $65M addressable market 24% 6% $17.1M Operating Margin § Value discipline – growth $60M $3.5M only pursued if financial and strategic principles as $55M well as return criteria are Reported Expenses satisfied $50M Operating $45M Expenses
$40M 2010 2011 2012 2013 2014
fksbpqlR=mRbpbkq^qflk= OP= Altium’s Balance Sheet
FY14 FY13 Var $ '000 $ '000 $ '000 % • Strong Balance Sheet Cash and cash equivalents 22,049 14,756 7,293 49% Trade and other receivables 22,429 16,193 6,236 39% Other current assets 1,582 1,590 (8) -1% • Cash & Cash Equivalents up 49% Current assets 46,060 32,539 13,521 42%
Trade and other receivables 1,136 2,201 (1,065) -48% • Minimal borrowings. Debt/Equity less than 2% Property, plant and equipment 1,908 1,565 343 22% Intangible assets - 263 (263) -100% • Net Assets increase 50% Other non-current assets 4,898 9,859 (4,961) -50% Non-current assets 7,942 13,888 (5,946) -43%
Total Assets 54,002 46,427 7,575 16%
Cash and Equivalents Trade and other payables 5,499 4,595 904 20% Borrowings 60 156 (96) -62% $25 Tax liabilities 338 264 74 28% Provisions 1,773 2,846 (1,073) -38% Deferred revenue 29,727 24,279 5,448 22% $20 Total current liabilities 37,397 32,140 5,257 16% Millions Borrowings 88 35 53 151% $15 Provisions 2,829 3,700 (871) -24% Deferred revenue 5,981 5,345 636 12% Other liabilities 116 137 (21) -15% $10 Total non-current liabilities 9,014 9,217 (203) -2% Total Liabilities 46,411 41,357 5,054 12%
$5 Net Assets 7,591 5,070 2,521 50%
Issued Capital and Reserves 94,268 90,105 4,163 5% $0 Accumulated losses (86,677) (85,035) (1,642) 2% FY10 FY11 FY12 FY13 FY14 Equity 7,591 5,070 2,521 50%
fksbpqlR=mRbpbkq^qflk= OQ= Altium’s Cash Flow
• Operating Cash Flow up 50% to $18.4m FY14 FY13 Var $ '000 $ '000 $ '000 % Cash flows from opera ng ac vi es • Continue to return dividend to shareholders. Receipts from customers 75,689 69,579 6,490 9% Payments to suppliers and employees (55,708) (55,620) (651) 0% • Increase dividend year on year working within Net Interest paid 138 78 60 77% Net income taxes paid (1,667) (1,719) 109 -3% the constraints of the net assets test. Opera ng Cash Flow 18,452 12,318 6,008 50%
Capital Expenditure Payments for property, plant and equipment (1,296) (678) (492) 91% Dividends paid/declared Free Cash Flow 17,156 11,640 5,516 47%
10.00 Cash flows from financing ac vi es Proceeds from exercise of op ons 2,943 17 2,926 17212% Dividends paid (12,808) (9,091) (3,717) 41%
AU cents Repayment of borrowings (157) (265) 108 -41% 5.00 Subtotal 7,134 2,301 4,833 210% Effects of exchange rate changes 159 (791) 950 -120% Increase in cash and cash equivalents 7,293 1,510 5,783 383% 0.00 FY12 FY13 FY14 Interim Final fksbpqlR=mRbpbkq^qflk= OR= Full Year Results Key Metrics
USD millions FY14 FY13 Change % FY14 FY13 Change % 10.26 1.33 > 100% Total Revenue 71.1 62.1 15% EPS (AU cents) 12.00 11.00 9% Reported Expenses (excl. D&A & Dividends (AU cents) Int.) 52.8 56.1 -6%
Key Margin Analysis EBITDA 18.3 5.9 210% EBIT Margin 24% 6% Deprecia on 1.0 1.0 0% EBITDA Margin 26% 10% Amor sa on 0.3 1.2 -78% Net Profit Before Tax Margin 24% 6% EBIT 17.1 3.8 354% Net Profit A er Tax Margin 16% 2% Net Interest 0.0 0.3 -105% Income tax expense 6.0 2.1 180% Return on Equity 176% 20% NPAT 11.2 1.4 717% Debt/Equity 1.9% 3.8%
Balance Sheet (USD ‘000) Cash & Cash Equivalents 22,049 14,756 49% Net Assets 7,591 5,070 50%
Opera ng cash flows 18,452 12,318 50%
fksbpqlR=mRbpbkq^qflk= OS= Agenda
1 Company & Industry Overview
2 FY14 Results & Altium’s Fundamentals
3 Mega Trends & Market Opportunity
4 Growth Strategy & Successful Execution
5 Outlook – FY15 and Beyond Mega Trends
Electronics Puts Internet into Things!
Web 2.0 Web 1.0 Internet of Search & Social Discovery Things Networking (Web 3.0) 1990’s 2000’s 2010’s Increasing demand in electronics industry is the main driver for growth fksbpqlR=mRbpbkq^qflk= OU= Printed Circuit Boards Central to Electronics
At the Heart of All Intelligent Systems Are Electronics and Printed Circuit Boards
fksbpqlR=mRbpbkq^qflk= OV= Increasing Use of Electronics in Modern Cars
Airbag GPS
Parking Aid Alarm & Immobilizer
Automatic Transmission
Engine Management Climate Control Unit ABS fksbpqlR=mRbpbkq^qflk= PM= Use of Smart Electronics in Everyday Things
Outdated Thermostat
The Nest thermostat learns the temps you like, turns itself down when you're away, and has remote control through Wi-Fi Complex Electromechanical Design with Multiple Printed Circuit Boards
fksbpqlR=mRbpbkq^qflk= PN= Complex Multi-disciplinary Engineering
Cloud System Engineering Cloud application development and infrastructure management Cloud Software Engineering Computing Development of compelling User interface for Mobile devices
Embedded System Engineering Development of Control Systems in Electromechanical devices
Hardware Engineering Creation of high-performance electronic hardware with complex form factor
Mechanical Engineering Designing complex objects with sophisticated electromechanical behaviour fksbpqlR=mRbpbkq^qflk= PO=
PO= Agenda
1 Company & Industry Overview
2 FY14 Results & Altium’s Fundamentals
3 Mega Trends & Market Opportunity
4 Growth Strategy & Successful Execution
5 Outlook – FY15 and Beyond Altium’s Growth Drivers
Lower Total Cost of Ownership
More Design Capabilities
fksbpqlR=mRbpbkq^qflk= PQ= Altium’s Product Strategy
A New Version of Altium Designer Closing Capability Gaps with High-end Design Tools Altium Designer - Altium’s Flagship Product for Mainstream Design High-end Engineers
A New Version of Altium Designer with Modern & Simplified Design Flow for the Makers Community
Low-end
fksbpqlR=mRbpbkq^qflk= PR= Altium’s Sales Strategy
New Account Acquisition Account Management Grow Customer Base Reduce Subscription Churn
High-end Transaction Transaction Size Sales Model (Hunting)
Mainstream Sales Model (Fishing) LeveragedSales Lower Mainstream (Farming) Volume Volume Transaction Transaction
Prospecting Nurturing Closing Customer Subscriber Repeatfksbpql RSubscriber=mRbpbkq^qflk= PS= Altium’s Sales Strategy Cont’d
Expanding addressable market by extending reach through strategic partnership
Product Life-cycle Management (PLM) Partners
Mechanical CAD (MCAD) Partners
Large Electronic Parts Suppliers
fksbpqlR=mRbpbkq^qflk= PT= Altium’s North America Sales Transformation
- Developing World-class sales channel - Partnership to deliver an ECAD/MCAD through partnership with MCAD resellers product through partner channels
- Sales model based on - Aggressive team of “hunters”
competitive advantage Leveraged for new account acquisition Sales Sales
Partners Altium MCAD Part Suppliers ECAD Leveraged Leveraged Sales Sales
Market Convergence Market Convergence
fksbpqlR=mRbpbkq^qflk= PU= FY14 Highlights
Expanded leadership team Relocation of HQ delivering & PCB Division increased to USA to organisational Significant sales capacity transformation in support “Closing USA (Channel the Capability” Release of strategy Altium Designer Partners & Strategic Sales) Worldwide sales 2014 & Vault 2.0 & revenue delivered a third year of double- digit growth
fksbpqlR=mRbpbkq^qflk= PV= Agenda
1 Company & Industry Overview
2 FY14 Results & Altium’s Fundamentals
3 Mega Trends & Market Opportunity
4 Growth Strategy & Successful Execution
5 Outlook – FY15 and Beyond Looking Ahead
Our focus for FY15 is…..
• Driving new account acquisition
• Increasing our subscription rates
• Completing the transformation of US sales organization
• Leveraging our channel partners worldwide
• Launching an expanded product range from the low-end to the high-end
• Developing strategic partnerships to meet converging market demands & needs of our customers
fksbpqlR=mRbpbkq^qflk= QN= Outlook
FY15 profit growth to continue
• The world PCB market remains robust
• We expect to see continuing growth in revenue (licences & subscription)
• We will maintain or improve operating leverage
• We will focus on supporting continued momentum from EMEA while driving the US business forward from our HQ in San Diego
• The impact of Altium’s higher-end product release in FY15 is anticipated be felt during FY16 and beyond
fksbpqlR=mRbpbkq^qflk= QO= Questions and Answers