Altium warns of more pandemic pain ahead

Electronics software maker Altium flags an additional revenue hit in May and June due to virus restrictions in the US and Europe.

ASX-listed electronics software maker Altium has warned of more headwinds caused by the COVID-19 pandemic, with the company flagging an additional revenue hit across May and June due to government restrictions in the US and Western Europe.

In February, Sydney-based Altium issued a profit warning due to the coronavirus, just hours after its shares hit an all-time high, and the company on Tuesday said it was unlikely to hit its annual sales revenue target, after observing distress among start-ups and smaller companies in April.

“While engineers are actively doing prototype designs, and the electronics industry is holding up relatively well, the cash preservation priorities of small to medium size businesses are likely to affect the timing of closing sales in our typically strongest months of the year being May and especially June,” chief executive Aram Mirkazemi said in a note to investors.

He added that the printed circuit board company had “launched attractive pricing and extended payment terms to drive volume in challenging market conditions”.

“We also have accelerated the introduction of our new digital online sales capability, as part of the execution of our man-out-of-the-loop strategy to bolster our transactional sales capacity.

“Altium’s digital sales model will take some time to fully ramp up but will be important to support our climb to the 100,000 subscriber target by 2025,” he said.

Altium’s shares closed down 3.9 per cent on Tuesday, at $35.34 each.

That is down from an all-time high in February of $42.63, but up around 6 per cent in calendar 2020.

Altium chief executive Aram Mirkazemi

Chief financial officer Joe Bedewi on Tuesday said there was now a low probability of the company meeting its $US200m ($308m) sales target in fiscal 2020.

Some analysts had previously suggested Altium could still make the lower end of its withdrawn guidance for revenue of $US205m to $US215m and an earnings margin of 39 per cent to 40 per cent.

Mr Bedewi said “while we continue to actively close sales, in April we began to see some signs of start-ups and smaller companies in distress”.

“Business with new accounts has become more challenging, as customers preserve cash during the pandemic. This is extending the timing of our sales conversions.

“That said, we have the right products, at the right price, with the right value proposition and we are working hard to engage new and existing customers. Our renewal business has performed solidly and we are committed to achieving our 50,000 subscriber target for the full year.”

He added the company remained committed to the “Rule of 50” – the principle that if the percentage of annual revenue growth plus earnings before interest, taxes, depreciation and amortisation (EBITDA) as a percentage of revenue are equal to 50 or greater, the company is performing at an elite level.