3 quality SaaS ASX shares to buy

In this article are 3 software as a service (SaaS) ASX shares potentially worth buying, including accounting software stock Xero (ASX:XRO).
The post 3 quality SaaS ASX shares to buy appeared first on The Motley Fool Australia. –

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This article is about three software as a service (SaaS) ASX tech shares that could be worth a spot on your watchlist.

Here they are:

Volpara Health Technologies Ltd (ASX: VHT)

According to the ASX, Volpara has a market capitalisation of around $350 million.

Volpara is a digital health company focused on early detection of breast cancer by improving the quality of screening using artificial intelligence (AI).

In its recent FY21 half-year result it reported that its annual recurring revenue (ARR) increased by approximately 27% to NZ$19.9 million with subscription revenue rising by 71% to NZ$8.8 million.

Around 27% of women in the US had one of Volpara’s products applied on their images and data, compared to 25.8% at the end of the prior corresponding period.

In that same result, the SaaS ASX share’s gross profit margin improved from 89% to 92% and its average revenue per user (ARPU) grew 4.5% to US$1.16.

Volpara aims to continue to have a high retention rate, increase ARPU, win new customers, upsell with existing customers and perhaps make acquisitions.

Xero Limited (ASX: XRO)

According to the ASX, Xero has a market capitalisation of $20.3 billion.

Xero is a cloud accounting software company for small and medium business customers. It provides a number of automation and time-saving tools for business owners, bookkeepers, accountants and other professionals. The tools and numbers are provided in a easy-to-understand way.

Xero’s subscribers pay for their subscription every month, giving them access to their numbers anywhere at any time.

The SaaS ASX share’s FY21 interim result showed a 21% increase in the operating revenue, a 19% rise in subscribers, a 15% increase in annualised monthly recurring revenue and an 86% rise of earnings before interest, tax, depreciation and amortisation (EBITDA). The gross profit margin improved by another 0.5 percentage points to 85.7%.

In the UK, total subscribers rose by 19% to 638,000. Australian subscribers went up 21% to 1.01 million. ‘Rest of the world’ subscribers went up by 37% to 136,000. Its subscriber churn was very low during the period at just 1.11%.

Two of the biggest improvements were that its net profit after tax (NPAT) grew by approximately NZ$33 million to NZ$34.5 million and free cashflow jumped NZ$49.5 million to NZ$54.3 million.

Altium Limited (ASX: ALU)

According to the ASX, Altium has a market capitalisation of $4.76 billion.

Altium is an electronic PCB software business that helps engineers design the products, devices and vehicles of the future.

The SaaS ASX share has an array of large, global customers including Tesla, Space X, Amazon, Apple, Google, Disney, Cochlear Limited (ASX: COH), Broadcom, Qualcomm, John Deere and Honeywell.

Altium is pivoting its business towards the cloud with a product called Altium 365 which will allow teams to collaborate easier. Aside from providing a better service for customers, this will also create direct and indirect monetisation opportunities for Altium whether it’s based on transactions (like the Airbnb model) or premium services (such as the Amazon Prime model).

However, according to management, Altium’s move to the cloud is from a position of strength and does not force its customers to change either their licensing model or the way they use Altium’s existing software.

In FY20 Altium reported a 17% increase in Altium Designer subscribers, with revenue rising by 10% to US$189.1 million and EBITDA going up by 13% to US$75.6 million. The EBITDA margin increased to 40%, up from 38.9%.

In FY21 Altium is expecting to grow revenue by 6% to 12% in a range between US$200 million to US$212 million.

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Tristan Harrison owns shares of Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium and VOLPARA FPO NZ. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. and Xero. The Motley Fool Australia has recommended Cochlear Ltd. and VOLPARA FPO NZ. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post 3 quality SaaS ASX shares to buy appeared first on The Motley Fool Australia.

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