In morning trade the Altium Limited (ASX: ALU) share price has come under pressure after the release of a trading update.
At the time of writing the electronic design software company’s shares are down 7% to $33.70.
What did Altium announce?
In May, Altium released an update and warned that its performance in the fourth quarter of FY 2020 was being impacted by the pandemic.
It was optimistic that the launch of attractive pricing and extended payment terms would drive volume in challenging market conditions.
However, while these initiatives are driving strong seat growth, management advised that the increase in revenue for FY 2020 will be short of consensus estimates.
This is the result of new lockdowns in China and an increase in COVID-19 cases in parts of the US, which are having an impact on Altium’s final sprint to the close of the financial year.
Management notes that historically, the company closes a significant amount of its second half business in the last two weeks of June. But this year, sales run rates in June are falling short of what would be required to achieve the market’s expectations.
Altium CEO, Aram Mirkazemi, commented: “Our strategy to support our customers and to increase volume under COVID-19 conditions through attractive pricing and extended payment terms is driving strong seat growth and will get us close to or just surpass our key target of 50,000 subscribers.”
“However, we are feeling the revenue impact of this strategy. While we are likely to deliver solid revenue growth, this will land marginally behind latest analyst consensus for the full year,” he added.
Commenting on the pricing and payments strategy, Mr Mirkazemi believes Altium has made the right move.
He explained: “We see Altium’s approach to COVID-19 pricing and extended payment terms as the right thing to do to support our customers in this challenging environment and to not lose momentum as we enter the next phase of growth.”
But these initiatives won’t be around for much longer, with the company increasing its prices again from 1 July. An Altium Designer one-year subscription will be $9,945 in July, compared to $7,185 at present. It will also remove the extended payment terms from 1 September 2020.
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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Altium. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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