Altium LLC (ALU) Earnings Call Transcript & Summary

Good morning, fellow shareholders, ladies and gentlemen, and welcome to the 2020 Annual General Meeting of Altium Limited, our first virtual AGM. My name is Sam Weiss. And for those of you I have not met, I am the Chairman of Altium. I'd like to advise you that today's meeting will be recorded, and it will be available shortly after the meeting on our website. I'm pleased to advise that all of the Altium Limited Directors are able to join us today, along with some of our most senior executives. In California and the United States, we are joined by Lynn Mickleburgh. Lynn is a nonexecutive Director of the company and Chair of the Human Resources Committee and a member of our Audit Committee. From Melbourne in Victoria in Australia, we are joined by Raelene Murphy. Raelene is a nonexecutive Director of the company, the Chair of our Audit Committee and a member of our Human Resources Committee. From our offices in La Jolla in San Diego, California in the United States, we are joined by our Chief Executive and Executive Director, Mr. Aram Mirkazemi; and our President, Chief Technology Officer and Executive Director, Sergey Kostinsky. Welcome to you, my colleagues on the Altium Board. Also in La Jolla today, we have Kim Besharati, Chief of Staff and Head of Investor Relations and Joint Company Secretary. Joe Bedewi, Executive Vice President of Corporate Development and External Affairs. From Alabama in the United States, Mr. Henry Potts, who is our Chief Sales Officer. And in Chatswood in Sydney, Australia, I'm joined on my right by Mr. Martin Ive, our Chief Financial Officer; and Alison Raffin, who is Joint Company Secretary; and Susan Stack, the Executive Office Manager. Alison and Susan are in a room next to us, managing today's broadband. We're also joined here in Chatswood by Eliza Penny, who is the audit partner for Altium from PricewaterhouseCoopers. Eliza has just completed her 5-year term, and at the end of the meeting, will retire by rotation. She will be succeeded by Louise King, who is dialing in by audio. Our lawyers from King & Wood Mallesons, David Friedlander and Will Heath, are joining us by video from Melbourne. Computershare representatives Catherine [indiscernible] and David Squires, our Returning Officer, are monitoring the meeting online, and ensuring that we are accurate, both in our attendance and in voting. And finally, I'm very pleased that we're being assisted today by our hosts from Lumi, Mr. Tim Redman and Christopher Crea. And I welcome the many guests who are joining us as well as Altium executives and staff members from around the world who have dialed into today's meeting. Before I commence with the meeting, it's important to outline some procedural matters. The meeting is being held online on the Lumi platform. This allows shareholders, proxies and guests to attend the meeting virtually. All attendees can watch a live webcast of the meeting. And in addition, shareholders and proxies are able to ask questions and to submit their voting online. Questions can be submitted at any time. [Operator Instructions] Earlier today, we released to the ASX, a number of questions that were submitted in advance of the meeting and our responses to those questions. This was done in order to ensure that we have enough time to get to new questions today. A copy of this Q&A document is available on the Lumi platform under the Documents tab. Voting today will be conducted by poll on all items of business. In order to provide you with enough time to vote, I declare voting open on all questions -- on all resolutions. If you are eligible to vote, a new polling icon will appear on your screen that looks like a bar chart. If you select this icon, it will bring up the meeting resolutions and present you with voting options. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button as the vote is recorded automatically. And you have the ability to change your vote at any time until the voting is declared closed at the end of the meeting. We will give you a warning a couple of minutes before voting is closed. Now turning to the formal business of the meeting. We received an apology from audit partner, Louise King, who is ill and is not able to be here in person. But as I mentioned earlier, it has joined us by audio. The company secretary has advised me that a quorum of members is present and I hereby call the meeting to order. Proxies have been received, validated and processed by our share registry Computershare. The notice of meeting was announced to the ASX on the 16th of October of this year and sent to all members by either mail or email. A copy is also available today through the Lumi portal by clicking the Document icon. We will, therefore, take the notice of meeting -- the notice convening this meeting as read. I have reviewed the minutes from the 2019 AGM, which I have on the stand in front of me. They have been released to the ASX. And immediately after the meeting, I will sign them as a true record of last year's meeting. A copy of the minutes is available by clicking on the Document icon. You may also request a copy of the minutes if you contact our company secretary, at investor.relations@altium.com. I would now like to make some remarks about the financial year that ended in June 2020. After my address, our Chief Executive, Aram Mirkazemi will speak, and then we will attend to the items of business to be put to shareholders. Good afternoon, and good morning. Ladies and gentlemen and fellow shareholders, it's a great pleasure for me to be with you at our first Annual General Meeting held on Zoom. Today, we will review the results of the 2020 financial year, share details about our progress since the year ended and talk about our future plans to dominate and to transform the global electronics industry. Financial year 2020 was marked by the impact of the coronavirus and the subsequent global pandemic. But as many of you know, it was also a milestone year and a year of transition for your company, Altium. We achieved our goal of market leadership after many years of rapid growth, and we have begun a new phase to become the dominant market leader of the PCB design tool industry and from that position of dominance to transform the way in which printed circuit boards are manufactured. While COVID-19 prevented us from reaching our long-standing aspirational goal of $200 million in revenue during the financial year 2020, it has been a catalyst for the rapid acceleration of our plans for market dominance and for industry transformation. In May, we launched our new cloud platform, Altium 365, ahead of schedule and to considerable acclaim from our subscribers. This is an early validation of our vision, and our strategy for our digital platform to transform the global electronics industry. Now I'm proud to say that despite the challenging conditions brought on by the coronavirus pandemic, Altium continues to deliver industry-leading results, both in technology and engineering as well as in financial returns for our shareholders. Our performance sets us apart from our global competitors. And Altium is increasingly recognized as a leader in the broader electronics industry. Today, Altium is among the fastest-growing Electronic Design Automation, or EDA companies with 9 consecutive years of double-digit revenue growth, and an expanding EBITDA margin. Altium Designer is the most widespread professional PCB design tool used by over 100,000 engineers around the world. Altium 365, the world's first digital platform for the design and realization of electronics hardware, has more than 7,000 active users and nearly 4,000 active accounts as of the 15th of November. Both of these measures have increased by more than 40% since the end of July. As we accelerate on our progress toward our 2025 goals for dominance and transformation, we are focused on the following things: the reinvention of our transactional sales team to utilize a digital platform; the scaling up of our enterprise sales team for a major offensive into the high-end PCD market; the rapid development and adoption of Altium 365; the integration of our search engine Octopart and Altium 365; the integration of Altium 365 in China; and to bring smart manufacturing to Altium 365 and to democratize the use of electronics with our Geppetto software. Before I speak further about these strategic initiatives and our new organization structure to support them, I would like to reflect upon the achievements of our management team in financial year 2020. During the year ended June 30, our revenue increased by 10% to $189 million. And I know I have no need to remind you that all of our reporting is done in U.S. dollars. We exceeded our subscriber target of 50,000 and met the Rule of 50 on a reported EBITDA basis. We increased our dividend to shareholders by 15% for the financial year. These results are the hallmark of a financially strong company, a market leader that is operationally robust. Our strategy to drive volume through attractive pricing to support our customers who themselves have been impacted by the coronavirus during the second half of the financial year was rewarded. And it allowed the company to maintain momentum and to launch Altium 365. Highlights from financial year 2020 included: record growth of 17% in our subscription base to more than 51,000 subscribers; an increase of 15% in new Altium Designer seats sold to over 9,000; a cash balance at year-end of $93 million, which was up 16% on the prior period; an increase in profit before tax of 12% to $64 million; and our reported EBITDA margin of 40%, which would have been just under 36% when one excludes the impact of the new leasing standard and the remeasurement of our contingent consideration for the acquisition of PCB:NG. The Altium strategy for industry transformation is based on the achievement of market dominance. We want to dominate the market for PCB design tools to encourage secondary industry stakeholders, such as parts makers, distributors and board manufacturers to adopt the Altium 365 digital platform so that the entire value chain for the manufacturer of printed circuit boards can be realized in one place. A successful cloud-based platform for design, part sourcing and manufacturing of printed circuit boards is central to our vision to transform the global electronics industry. This is why Altium is committed to have 100,000 subscribers and $500 million in revenue by 2025. We want the majority of the 100,000 subscribers to be on our cloud platform, Altium 365, to make this transformation of the electronics industry possible. Over the last 12 months, we have made significant progress toward our goal of 100,000 subscribers. We passed the halfway mark at the end of June. In May, we launched and laid the foundation for our digital sales platform to bring our transactional sales approach to all potential customers in all markets. In most cases, through a digital store that is localized for domestic markets. Local digital stores, whether they are in the United States, Australia, Japan or Sweden, to name a few, will enable us to tailor our value proposition to different classes of customers or to a different country or a specific region when this digital store platform is fully implemented. Our cloud platform, Altium 365, will in future, connect electronic design to electronic parts and to PCB manufacturing seamlessly in a way that will speed up innovation and is particularly relevant for prototyping. The integration of the design stage with the production stage on the Altium 365 platform will reduce cycle times, reduce the number of design prototypes required for approval and reduce the risk of error in the production of boards and electronics. For Altium 365 to be truly ubiquitous in the global electronics market, Altium needs to be dominant in all 3 domains: electronic design, electronic part search and the fabrication of printed circuit boards. And finally, on the subject of Altium 365, I would like to highlight what we are doing in China. Altium 365 China will be built from the ground up, specifically for the China market using local infrastructure, in particular, Ali Cloud. It will be integrated with WeChat and AliPay and will be directly connected to domestic components and manufacturing suppliers with a stronger emphasis placed on supply chain management than manufacturing. It is now in the very late stages of preparation for launch. We recently announced a new organizational structure to support the company on its journey of dominance and transformation and to drive the high performance required to be successful. Internally, we refer to this as our Netflix moment, which is used commonly in the technology industry as a -- using another buzzword, hard pivot to the cloud. This organization structure will assist the company in its dominance and transformation goals. The separation of our cloud business from our software business and the appointment of Sergey Kostinsky, our Chief Technology Officer and Executive Director of the Board, as President of Altium, will enable us to pick up a gear in our ability to execute our plans. Sergey and his leadership team will focus specifically on the development of the Altium 365 cloud platform and will also be responsible to deliver high-performance results in revenue and earnings in our traditional software business, most notably Altium Designer. I believe that we have placed our strongest players in the best positions to have maximum impact for the next phase of Altium's journey. As we're all too well aware, the world is contending with the second wave of the coronavirus across Europe. And in the United States, the U.S. is recording its highest levels of infections since the virus appeared earlier this year. And this is happening even as there is ongoing uncertainty associated with the presidential election in the United States. In short, our macro environment remains challenging, and the challenges will remain with us for some time. In the current financial year, which ends June of 2021, we experienced a slow first quarter, which we believe is a direct consequence of the coronavirus conditions. We've picked up some momentum in the second quarter, which we're in the middle of now. And next month, we release Altium Designer 21. The positive signs that we have seen in the last 2 months and our growing confidence in our second half, which historically is stronger than our first half, leads us to reaffirm the guidance that we delivered in August for full fiscal year 2021. And this is in the face of the accelerated spread of the coronavirus pandemic, which is likely to be with us for the whole of this financial year. And to remind you, the guidance for financial year 2021 is revenue of at least $200 million and up to $212 million or a 6% to 12% growth over financial year 2020. And EBITDA of between $76 million and $89 million or 38% to 42% of revenue. During the course of a year, I tried to visit as many of our offices around the world as possible and to meet with the people of Altium on a regular basis. This year, of course, this has not been possible. But I'd like to conclude my remarks by extending my personal gratitude and that of my colleagues on the Board of Altium Limited to each of the more than 800 of our team members who have found new ways to work and new ways to connect with each other and with our customers, dealing not only with the challenges of working from home, but also with the challenges of uncertainty and the very real fear of the unknown. Each of you brings something special, something important and something unique to Altium. And it's your collective energy, enthusiasm and passion that make Altium the company that it is. Yet, no matter how hard we work or how much enthusiasm we bring, nothing is possible for Altium without the support of our customers and our users. Every time a user turns on a computer and opens up Altium Designer or Altium 365 or Octopart or any one of our other products or services, you are sharing your commitment to our mission to provide the best possible tools for you to make the most compelling and best products in the most innovative way. On behalf of the Board, we are most grateful to you for your endorsement of Altium. This past year has been an interesting one, and I say that in the context of the old expression from China, that we live in interesting times. It's been an interesting year for the -- for Boards of directors in general, and especially for your Board. We are 5 individuals, each of whom speaks English with a different accent. We live on 2 continents in 4 cities. Historically, we have made the effort to meet as a group every month or so, even though that meant that some of us had to travel long distances. This year, we haven't met as a group since early February, but we have met nearly every week using the same Zoom technology that we are using today for this Annual General Meeting. I can share with you that each member of the Altium Board is possessed of a strong intellect, an equally strong will and the compelling ability to express his or her views, often with very strong language. This independence of mind and willingness to express an opinion has never been more valuable than in 2020 during the time of the coronavirus. And I am grateful every day to my colleagues around the Altium Board room table for their commitment to the company and their knowledge and understanding that out a difference comes strength. As a group, we have a common bond to create value for our customers and potential customers, for our people and for our shareholders. Shareholders hold a special place in the night sky of Altium. You are the guiding star that helps us to set our course and provide us with the courage and determination to embark on the pursuit of a strategic vision that will be as difficult to achieve as it will be rewarding. On behalf of the entire Board, I would like to express my deepest gratitude to you for your commitment to Altium. We deeply value your belief in us and we'll do everything in our power to continue to deserve that confidence. Thank you very much. As we are not holding a Technology Day this year, Aram Mirkazemi, our Chief Executive, will take the opportunity to address the meeting. So we will now cross to Aram in our offices in San Diego, California.

Good morning, everyone. It is a great pleasure to speak with you today and to share my excitement about Altium and how it's poised to dominate and transform the electronics industry. We are indeed in a most fortunate position to be pursuing a journey of transformation through dominance, that our strong software business can combine with our innovative new platform, Altium 365, to deliver exceptional value for our stakeholders. Far from the typical examples of software companies going to the cloud, Altium embracing the cloud is all positive with no negative. In the next few minutes, I would like to share with you why I believe this to be the case so that you may better appreciate what differentiates Altium from its peers. The most important thing to appreciate about Altium is its unique strategy of transformation through dominance. In particular, this strategy derisks Altium's move to the cloud by extending our current value proposition to our customers. And at the same time, this strategy raises the bar and reinforces Altium's position of absolute market dominance in PCB design. In my opinion, this combination will set a resonance that has the potential to bring about industry transformation. While dominance and transformation are part of one journey, this strategy sets up 2 separate engines of growth for value creation. Our strong software business drives our dominance engine. And our new cloud platform, Altium 365, is the basis of our transformation engine. From a business perspective, these 2 engines provide independent drive and at the same time, are complementary and reinforce each other. What is important to note is that our move to the cloud is forming a new business. It is not the evolution nor is it altering the course of our existing software business. Our software business is regarded as world-class and is well underway to achieving worldwide dominance, which will essentially give us a position of absolute market dominance, similar to what has been achieved by Adobe and Microsoft within our industry. Absolute market governance, in software business is a greater market position than either achieved through SaaS or term-based licensing. As such, we are not changing our winning formula or forcing our customers to move from perpetual to term-based licensing, or moving the design process onto the cloud. While benefiting from the cloud, our software business will continue to power on its pursuit of market dominance and strongly form our dominance engine. Our cloud platform is the basis for our second engine, and its goal is to bring about industry transformation. It assists and at the same time, is assisted by our dominance pursuit but remains independent. Let me explain this further. To appreciate the complementary nature of these 2 engines, it is important to recognize that customers of Altium do largely 2 things: first, they design electronics using our software tools; and second, they engage and collaborate with the supply chain and manufacturers to realize their electronic hardware. Our first engine of growth is related to the process of design and our second engine of growth is related to the process of realization. Our dominance comes from the design domain and transformation is in the realization domain. Further, what is important to note is that we are not taking our design software to the cloud but only encouraging our customers to move their data to the cloud for collaboration purposes. This will enable seamless collaboration in real-time for the realization of electronic hardware, something that until now has been very labor-intensive and quite frankly, archaic. Engineers have had to contend with e-mails, phone calls and in-person meetings to collaborate on their designs. With Altium 365, this is all done at the platform level in the cloud. I hope that this demonstrates clearly the shortcomings of growing parallels between Altium's move to the cloud with companies such as SAP. Altium's flagship software stays on the desktop and will not be going to the cloud nor will Altium be forcing its customers from perpetual to term-based licensing. This means that parallels with companies such as Autodesk are also not relevant. Altium 365 impacts our revenue in 2 distinct ways. One is through what we refer to as indirect monetization and the other is through direct monetization. What is important to note is that the indirect monetization only enhances our existing revenue and avoids the negatives that are usually associated with software companies moving to the cloud. The direct monetization, on the other hand, is the main return for all of our hard work. We have not started any activities in this direction as it is critical to first secure a significant volume of users on the platform. This means that our indirect monetization not only will enhance our existing revenue but would also pave the way for our direct monetization. Let me explain in detail how indirect monetization enhances our existing revenue. Our existing software business drive is revenue, primarily through the sale of software licenses and annual recurring fees for maintenance. Our current rate of recurring revenue is 60% of our total revenue, and we expect that this will grow significantly over the next few years. The introduction of Altium 365 impacts our existing revenue indirectly by bringing about a change to the nature of our revenue without a need to change our existing software licensing model. Unlike other companies that move to the cloud, Altium is not requiring any change to its existing software licensing model. All that Altium requires from its customers is to remain on a valid software maintenance subscription to be able to access this cloud platform for collaboration purposes. This is expected to significantly increase renewal rates for maintenance subscription and reduce churn, which should have the most dramatic impact on our revenue and our climb to 100,000 subscribers by 2025. Altium 365 will also allow us to increase the rate of utilization per customer and drive our software license sales. Altium 365 membership is on a named user basis and through in-app engagement where we can see how our engineers use the software and the platform, we can market directly to those needs and ensure that customers hold the appropriate number of licenses. This will drive a gradual transition from perpetual licenses to term-based licenses as our customers will want to add capacity. The implication of all of this is that the adoption of Altium 365 will increasingly change the nature of Altium's revenue from being old world perpetual and maintenance base to the new world of term-based and SaaS. This means as far as Altium's existing software revenue is concerned, Altium may very well be able to accomplish a Sun Tzu move, in winning a war without fighting a battle. Although we have not yet started, I would like to say a few words that will give you a feel for our direct monetization plans. Altium 365 is designed as a platform for users beyond the designer community to include professionals from manufacturing and supply chain to compliance and third-party service providers. The standard membership for Altium 365 is free for all users. This will drive the network effect and make the platform attractive for collaboration across all segments of the industry. Altium does not intend to charge the standard users of the platform in the same way that Amazon, Uber or Airbnb do not charge users to sign up to their platforms. There are 2 pathways to directly monetize the users and the activities on our cloud platform. One is through offering premium services, similar to Amazon Prime, whereby professional users experience is enhanced and made more productive. The other is by charging a transaction fee associated with supply chain or manufacturing services. It is crucial that Altium firmly establishes the value of this platform has secures a significant volume of users without relying on premium services for advanced manufacturing and supply chain capabilities. Users may otherwise erroneously perceive the platform as a bait and switch tactic by Altium, which is clearly not the case. The early signs are extremely positive. Customers are embracing the power and the potential of Altium 365 for collaboration that is truly different to anything that they have seen before in this industry. In May, we launched our new cloud platform, Altium 365, as the world's first digital platform for electronics design and realization. As of 15th of November, we have 7,486 active users and 3,739 active accounts on Altium 365. Both measures are up over 40% since the end of July, when I last shared progress with the market. This is encouraging and bodes well for our transformative agenda. We are definitely off to a good start, and the feedback confirms that customers are seeing the value of this new platform. What's worth mentioning is that the spread and the adoption of Altium 365 so far has been based on word of mouth and through a network effect rather than our traditional marketing and advertising. In fact, we have done very little on this front, and it has all been driven by users' excitement and appreciation for the value that this platform is delivering to them. Finally, this brings me to sharing my thinking as to how I'm seeing the short-term progress in the full year folding for Altium. As you are all aware, we shared a detailed flight path to 2025 at our full year results on the basis that we see financial year '21 as a pre-vaccine year, financial '22 as a transitional year, and financial '23 and beyond as back to a normal environment. While I must admit that I'm as hopeful as all of you that we can come out of COVID quicker than anticipated, particularly as we hear positive news about potential vaccines, however, given the record infections in the U.S. and second wave in Europe, I think it is prudent to continue to view the remainder of financial year '21 as pre-vaccine environment. Like many businesses, we have felt the impact of the ongoing worldwide pandemic. The second wave of COVID and more recently, close to home, the U.S. elections. We have also leaned into our opportunity to lay the foundation for further acceleration of our transformative agenda by implementing an organizational restructure and bifurcating our sales teams. We are continuing to be impacted by COVID. This is at a business level and at an employee and human capital level as we all feel the strain of our environment. This said, I believe that our hard pivot to the cloud and our sales bifurcation would help to pick up momentum in the second half. We are already seeing early signs of this. While our first half is expected to be still affected by COVID, we are seeing positive signs in the last 2 months and gaining confidence about the strength of our second half. This means that based on our historic 45-55 revenue split between the halves, and with the momentum that I just spoke to, we can reaffirm Altium's guided range for the full year fiscal 2021, revenue of USD 200 million to USD 212 million and an EBITDA of USD 76 million to USD 89 million. Traditionally, our first half EBITDA margin is always lower than our second half as a stronger second half revenue positively impacts our EBITDA. I expect this to be exaggerated this year by COVID, but confident that full year EBITDA margin will remain well within the range. In closing, it is my ongoing honor and privilege to serve as the CEO of Altium. This is something that I'm most passionate about and take great joy and pride in working with the team, that is wholeheartedly committed to our journey. While we have achieved so much together, we recognize that we have an even greater mountain to climb. However, I'm confident that we'll get there with your support and belief and the support and belief of our people and our customers. Thank you. I'll now pass on back to Sam in Sydney.

Thank you, Aram. We will now move to the formal general business of the meeting. There are 3 items of business to be put to the meeting. I'll present all 3 of them first, and the proxy results will be displayed on the screen where applicable. And then we'll open the floor to questions. The first item are the financial statements and report and auditor's report for financial year ended June 30, 2020. And please send any questions that you have in regard to this through the Lumi platform. All of the questions for each of the items will be responded to during the Q&A session, which will be held shortly. All items will be voted on by poll. And I remind shareholders, if you have not already voted, please click on the polling item to vote on these items of business. Once the meeting has been declared voting closed, our share registry Computershare will confirm and collate the votes, and the meeting results will be released to the Australian Securities Exchange later today. Item 2 is to receive, consider and adopt the remuneration report of the company for the financial year ended June 30, 2020. It forms part of the Director's report. Please note that the vote on the remuneration report is advisory only and does not bind the directors nor the company. This item is subject to a voting exclusion of the key management personnel and their closely related parties. However, as stated in the notice of meeting as the chair, I'm able to vote undirected proxies and as specified in the notice of meeting, I intend to vote these undirected proxies in favor of item 2. The proxy results should be visible now on your screen. We will now move on to the reelection of Lynn Mickleburgh as a Director. The item is to consider, and if thought fit to pass the following resolution as an ordinary resolution. Lynn Mickleburgh, a Director retiring from office in accordance with Article 7.2 to 7.4 of the constitution of the company, is reelected a Director of the company. The Board is unanimous in its support of the reappointment of Lynn. She has contributed significantly to the company and to the Board, especially as we accelerate the development of our Altium 365 cloud platform. And over the past year to our remuneration practices and policies. The proxy results should be visible to you on your screen. We will now address all shareholder questions. If you haven't already sent through your questions either prior to or during the meeting, I invite you to do so now.

[Operator Instructions] So both before the meeting and during the meeting, we've had a number of questions about a dividend reinvestment plan. One shareholder said I would much prefer to reinvest in Altium than get cash dividends. Could you please explain why you have chosen not to implement a DRP at this time? Clearly, there is interest from shareholders. And sir, you are correct. There has been clear interest from shareholders. At our most recent Board discussion, we agreed that this is something that we should reconsider, and it will go on the agenda some time in the period before February, which is typically when we next pay the dividend. Now we've then had a question about virtual meeting technology, which a shareholder has said this has been an excellent interim solution during the coronavirus and the need to have physical distancing. And it's also allowed shareholders who are not geographically close to wherever the AGM is held, to be able to attend. And the question is, does the company plan to have virtual AGMs in the future? Well, one of the things I was going to ask you prior to closing today was to send in your comments about the things that we did well today and the things we didn't do so well and what your views are in general about virtual AGMs. So in Sydney, where we have held our Annual General Meetings for the last 20 years, one has to book a room well in advance. So immediately, or in a month or 2 immediately after this meeting, we will have a good discussion about whether we should continue with the virtual meeting, return to a face-to-face meeting or conduct a hybrid meeting. I must say that the cost of doing a virtual meeting is about the same as doing a face-to-face meeting. So presumably, if we do a hybrid one, we'll have to double our cost. And as you know, we are extremely cost conscious. But I can assure you that we'll have vigorous debate about this and come up with what we believe is the best solution for all of our shareholders and other interested parties. Now the next question is a bit more complicated, and I'm going to ask our Chief Financial Officer to respond to it. But I'll read it out so that everybody can hear it. And this shareholder states that Altium completed a restructure in June of 2020 and made it eligible for the foreign-derived intangible income tax deduction in the United States, otherwise known as FDII. The FDII deduction is 37.5% for the eligible portion of foreign-derived income tax in the United States. Altium has advised that it expects in future periods that the effective tax rate will be in the 22% to 25% range, a reduction from 27% to 29%. And the question is: How does the reduction in the tax rate lead to a 41% downward adjustment in reported EPS from $0.40 to $0.235? So in his maiden appearance as the Chief Financial Officer of Altium Limited, I cross over to Martin Ive.

Thank you very much, Sam. The impact in FY '20 of the FDII was twofold. First of all, the impact of the FDII is that it provides us with additional tax deductions in future periods. And this is what drives down the effective tax rate in future years to that 22% to 25% range. Another impact of the reduction in the effective tax rate is how we end up valuing our deferred tax asset, which is measured using the effective tax rates. The remeasurement was done in June 30, and it can be seen in Note 5 of the financial statements that there was a reduction in the carrying value of the deferred tax asset of around $16.4 million. And this is a one-off tax adjustment associated with the introduction of FDII and therefore, had an associated impact on both the tax expense for the current year and also for the EPS. But this would be a one-off tax adjustment that we wouldn't see flow through into future years.

Thank you, Martin. There are 3 questions on my screen. I'm going to give advance notice to Aram that the first one is, are there any plans to develop Altium Designer for the cloud? So it will cross to you, Aram, after I've dealt with the third question. But you also may want to comment on the second question, which -- or perhaps Martin, I think you'd be best to handle the second question. So we'll -- I'll deal with a question first, then Martin and then Aram. And the question for Martin is: In your quest to get to 100,000 customers, how many new customers did you get in the 2020 financial year and in the first 4 months of the '21 financial year? And have margins had to decline to get to these customers? So Martin will come to that in a minute. The last question is from the Australian Shareholders' Association, which noted that ahead of the meeting it looked like 10% of the vote was against the remuneration report. And could I shed any light on that? Well, we don't know specifically with all of the shareholders who voted against it. But I had a letter from a shareholder -- institutional shareholder in London, which I am going to respond to personally. And that shareholder said that they are uncomfortable with the fact that we deferred the award of our 2020 LTI. And in the report, we explained why. We have worked really single-mindedly over the last 5 years to get to $200 million in revenue for the 2020 financial year. It was a goal shared across the entire organization. We weren't bashful about it. We set it out -- we communicated it to shareholders, analysts, potential shareholders. And really up until late in the year, we thought we had some chance of achieving it. Clearly, as the coronavirus took hold, it was a lot harder. And in the end, we felt, as a Board, that it was important to signal to the participants of our LTI plan, all of whom are in a plan that goes over 5 years, that rather than losing it entirely, that we would defer it to a future date so that if we get back on track to the very clear goal that we have for '25, which we absolutely expect we will, that there will be a chance to earn that award. But a couple of shareholders disagreed with that approach, and as is their right, they voted against the remuneration report. And then as an associated comment to that was, did we receive any negative comments about the remuneration report? Well, in addition to that deferral, there was a comment, not directly associated with the remuneration report, but this came through from a proxy adviser that because we paid almost as much in fees to Pricewaterhouse for tax advisory work as we did for audit work, that perhaps Pricewaterhouse is compromised. And Eliza, I won't put you on the spot because we certainly don't believe that Pricewaterhouse is compromised, and we greatly value the tax advice that we receive from Pricewaterhouse. But in any event, ISS said that we should therefore -- or the shareholders should consider whether to reelect directors who are sitting on the audit committee who clearly approved of those payments to Pricewaterhouse. So that was another somewhat negative comment with an indirect impact on the remuneration report. So for the -- then there's a question, will we run a virtual version of the Technology Day? Well, we've debated this considerably, and we believe that we should. However, we didn't think that we could do 2 big virtual meetings at the same time. So we're currently thinking about a virtual Technology Day sometime after we deliver the first half results in February. Now then the next question is the one I foreshadowed earlier for Martin Ive. Martin, you may not know, before he became Chief Financial Officer, spent about 2 years in between being the Corporate Controller -- he went from Corporate Controller to Senior Executive role within our PCB business unit, which is, by far, our biggest business unit. So he's uniquely well positioned to explain what's happened with customers and margins. So the question was, how many new customers did you get in 2020 and in the first 4 months of 2021, and did margins decline to get these customers? Thank you, Martin.