Investor Relations News Releases

Image

Altair Announces Fourth Quarter and Full Year 2017 Financial Results

March 21, 2018 at 4:05 PM EDT
Fourth Quarter Software Product Revenue Increased 11% Year-over-Year

TROY, Mich., March 21, 2018 (GLOBE NEWSWIRE) -- Altair Engineering Inc. (NASDAQ:ALTR) today announced its financial results for the fourth quarter and full year ended December 31, 2017.

“Altair delivered strong fourth quarter and full year results highlighted by revenue that exceeded guidance,” said James Scapa, Founder, Chairman and CEO.  “We are also seeing a positive margin impact as a growing portion of revenue comes from higher margin software.”

“We enter 2018 with the strongest product portfolio we’ve ever had, including our recent acquisition of Runtime.  With ongoing investments in R&D, we continue to innovate to increase the value our simulation-driven design, high performance computing, IoT and Analytics solutions can deliver to our customers. Our strong billings growth in Q4, and 2017 as a whole, support our optimism for further growth in 2018, which coupled with continued investments, will help further elevate our leadership position in the multi-billion dollar markets we serve.”

Fourth Quarter 2017 Financial Highlights

  • Software product revenue was $67.9 million, an increase of 11% from $61.1 million for the fourth quarter of 2016.
  • Total revenue was $89.9 million, an increase of 8% compared to $82.8 million for the fourth quarter of 2016.
  • Net loss was $(60.3) million, compared to net income of $5.9 million for the fourth quarter of 2016. The fourth quarter of 2017 included the impact of $8.0 million in non-cash stock-based compensation expenses as well as $56.6 million in tax expenses, substantially due to the recording of a valuation allowance on the U.S. deferred tax assets from the exercise and expected exercise of a significant number of non-qualified stock options, and to a lesser degree as a result of recent tax reform. Diluted net loss per share was $(1.03), based on 58.7 million diluted weighted average common shares outstanding, compared to diluted net income per share of $0.10 for the fourth quarter of 2016, based on 58.8 million diluted weighted average common shares outstanding.
  • Adjusted EBITDA was $8.4 million, compared to $10.6 million for the fourth quarter of 2016. Adjusted EBITDA represents net (loss) income adjusted for income tax expense, interest expense, interest income and other, depreciation and amortization, stock-based compensation expense, restructuring charges, asset impairment charges and other special items as determined by management.
  • Non-GAAP net income was $12.6 million, compared to $6.9 million for the fourth quarter of 2016. Non-GAAP net income per share was $0.18, based on 68.2 million diluted weighted average common shares outstanding, compared to $0.12 for the fourth quarter of 2016, based on 58.8 million diluted weighted average common shares outstanding. Non-GAAP net income excludes stock-based compensation, amortization of intangible assets related to acquisitions and certain tax adjustments.
  • Cash flow from operations was an outflow of $(1.4) million, compared to an inflow of $23 thousand for the fourth quarter of 2016.
  • Free cash flow, which consists of cash flow from operations less capital expenditures, was $(4.5) million compared to $(4.7) million for the fourth quarter of 2016.  

Full Year 2017 Financial Highlights

  • Software product revenue was $244.8 million, an increase of 9% from $223.8 million for 2016.
  • Total revenue was $333.3 million, an increase of 6% compared to $313.2 million for 2016.
  • Net loss was $(99.4) million, compared to net income of $10.2 million for 2016.  2017 included the impact of $47.3 million in non-cash stock-based compensation expenses as well as $63.0 million in tax expenses, substantially due to the recording of a valuation allowance on the U.S. deferred tax assets from the exercise and expected exercise of a significant number of non-qualified stock options, and to a lesser degree, as a result of recent tax reform. Diluted net loss per share was $(1.89), based on 52.5 million diluted weighted average common shares outstanding, compared to diluted net income per share of $0.18 for 2016, based on 57.9 million diluted weighted average common shares outstanding.
  • Adjusted EBITDA was $22.5 million, compared to $30.8 million for 2016.
  • Non-GAAP net income was $16.1 million, compared to $18.6 million for 2016. Non-GAAP net income per share was $0.26, based on 62.6 million diluted weighted average common shares outstanding, compared to $0.32 for 2016, based on 57.9 million diluted weighted average common shares outstanding.
  • Cash flow from operations was $16.1 million, compared to $21.4 million for 2016.
  • Free cash flow was $8.6 million compared to $11.9 million for 2016. 

Business Outlook

Based on information available as of today, Altair is issuing forward-looking statements on guidance for the first quarter and full year 2018 as indicated below.

  First Quarter 2018 Full Year 2018
Software Product Revenue  $ 64.5 to $ 65.0 $ 269.0 to $ 273.0
Total Revenue  $ 86.5   $ 87.5 $ 362.0   $ 366.0
GAAP Net Income  $ 0.0   $ 0.5 $ 10.0   $ 12.0
Adjusted EBITDA  $ 3.8   $ 4.3 $ 32.0   $ 34.0
Non-GAAP Net Income  $ 1.8   $ 2.3 $ 18.0   $ 20.0
                     

 (All figures in millions)

 

 
Conference Call Information
     
What:   Altair Fourth Quarter and Full Year 2017 Financial Results Conference Call
When:   Wednesday, March 21, 2018
Time:   4:30 p.m. ET
Live Call:   (866) 754-5204, domestic
    (636) 812-6621, international
Replay:   (855) 859-2056, passcode 4684517, domestic
    (404) 537-3406, passcode 4684517, international
Webcast:   http://investor.altair.com (live & replay)
     

Non-GAAP Financial Measures 
This press release contains the following non-GAAP financial measures: Adjusted EBITDA, Non-GAAP Net Income and Free Cash Flow.

Altair believes that these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to its financial condition and results of operations. The Company’s management uses these non-GAAP measures to compare the Company’s performance to that of prior periods for trend analysis, for purposes of determining executive and senior management incentive compensation and for budgeting and planning purposes. The Company also believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the Company’s financial measures with other software companies, many of which present similar non-GAAP financial measures to investors.

Management of the Company does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company’s financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. Altair urges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures, which it includes in press releases announcing quarterly financial results, including this press release, and not to rely on any single financial measure to evaluate the Company’s business.

Reconciliation tables of the most comparable GAAP financial measures to the non-GAAP financial measures used in this press release are included with the financial tables at the end of this release.

About Altair
Altair is focused on the development and broad application of simulation technology to synthesize and optimize designs, processes and decisions for improved business performance. With more than 2,000 employees, Altair is headquartered in Troy, Michigan, USA and operates 69 offices throughout 24 countries. Today, Altair serves approximately 5,000 customers across broad industry segments. To learn more, please visit www.altair.com

Cautionary Language Concerning Forward-Looking Statements 

This press release contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our business outlook, potential growth, market positioning and future investments, and our reconciliations of projected non-GAAP financial measures. These forward-looking statements are made as of the date of this release and are based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. Words such as “expect,” “anticipate,” “should,” “believe,” “hope,” “target,” “project,” “goals,” “estimate,” “potential,” “predict,” “may,” “will,” “might,” “could,” “intend,” variations of these terms or the negative of these terms and similar expressions are intended to identify these forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond Altair’s control. Altair’s actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, risks detailed in Altair’s quarterly and annual reports filed with the Securities and Exchange Commission as well as other documents that may be filed by the Company from time to time with the Securities and Exchange Commission. Past performance is not necessarily indicative of future results. The forward-looking statements included in this press release represent Altair’s views as of the date of this press release. The Company anticipates that subsequent events and developments will cause its views to change. Altair undertakes no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These forward-looking statements should not be relied upon as representing Altair’s views as of any date subsequent to the date of this press release.

 

Investor Relations
Garo Toomajanian
ICR
248-614-2400 ext. 346
ir@altair.com

Media Relations
Dave Simon
Altair
248-614-2400 ext. 332
pr@altair.com

 
 
Altair Engineering Inc. and subsidiaries
Consolidated balance sheets 
     
  December 31,  
  2017     2016  
(In thousands)              
ASSETS              
CURRENT ASSETS:              
Cash and cash equivalents $ 39,213     $ 16,874  
Accounts receivable, net   86,635       70,498  
Inventory, net   1,980       1,227  
Income tax receivable   6,054       9,069  
Prepaid expenses and other current assets   10,006       7,435  
Total current assets   143,888       105,103  
               
Property and equipment, net   31,446       29,708  
Goodwill   62,706       36,625  
Other intangible assets, net   24,461       11,168  
Deferred tax assets   8,351       62,896  
Other long-term assets   17,019       5,276  
TOTAL ASSETS $ 287,871     $ 250,776  
               
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY (DEFICIT)              
CURRENT LIABILITIES:              
Current portion of long-term debt $ 232     $ 10,435  
Accounts payable   4,880       5,009  
Accrued compensation and benefits   26,560       22,955  
Obligations for acquisition of businesses   13,925       2,649  
Other accrued expenses and current liabilities   21,744       16,296  
Deferred revenue   130,122       100,661  
 Total current liabilities   197,463       158,005  
               
Long-term debt, net of current portion   178       74,806  
Deferred revenue, non-current   9,640       13,268  
Stock-based compensation awards         22,236  
Other long-term liabilities   17,647       17,114  
TOTAL LIABILITIES   224,928       285,429  
               
Commitments and contingencies              
               
MEZZANINE EQUITY   2,352        
               
STOCKHOLDERS' EQUITY (DEFICIT):              
Preferred stock ($0.0001 par value), authorized 45,000 shares, none issued and
outstanding as of December 31, 2017; none authorized, issued or outstanding as
of December 31, 2016
         
Common stock ($0.0001 par value)              
Class A common stock, authorized 513,797 shares, issued and outstanding
26,725 as of December 31, 2017; authorized 76,000 shares, issued and
outstanding 8,900 as of December 31, 2016
  2       1  
Class B common stock, authorized 41,203 shares, issued and outstanding
36,508 as of December 31, 2017; authorized 44,000 shares, issued and
outstanding 41,204 as of December 31, 2016
  4       4  
Additional paid-in capital   232,156       39,688  
Accumulated deficit   (166,499 )     (67,092 )
Accumulated other comprehensive loss   (5,072 )     (7,264 )
Total Altair Engineering Inc. stockholders' equity (deficit)   60,591       (34,663 )
Noncontrolling interest         10  
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)   60,591       (34,653 )
               
TOTAL LIABILITIES, MEZZANINE EQUITY AND              
STOCKHOLDERS' EQUITY (DEFICIT) $ 287,871     $ 250,776  
               
               

 

Altair Engineering Inc. and subsidiaries
Consolidated statements of operations
 
  Three months ended    Year ended
  December 31,   December 31,
  2017   2016   2017   2016
(in thousands, except per share data) (Unaudited)        
Revenue                              
Software $ 67,912     $ 61,085     $ 244,817     $ 223,818  
Software related services   9,648       9,304       35,397       35,770  
Total software   77,560       70,389       280,214       259,588  
Client engineering services   10,439       11,267       46,510       47,702  
Other   1,868       1,192       6,609       5,950  
Total revenue   89,867       82,848       333,333       313,240  
                               
Cost of revenue                              
Software*   9,561       8,462       36,360       31,962  
Software related services   6,658       7,288       26,888       27,653  
Total software   16,219       15,750       63,248       59,615  
Client engineering services   8,931       9,320       38,131       38,106  
Other   1,467       1,151       5,212       4,879  
Total cost of revenue   26,617       26,221       106,591       102,600  
                               
Gross profit   63,250       56,627       226,742       210,640  
Operating expenses:                              
Research and development*   24,036       17,912       93,234       71,325  
Sales and marketing*   21,275       17,032       79,958       66,086  
General and administrative*   21,514       13,527       87,979       57,202  
Amortization of intangible assets   2,161       970       5,448       3,322  
Other operating income   (2,555 )     (790 )     (6,620 )     (2,742 )
Total operating expenses   66,431       48,651       259,999       195,193  
Operating (loss) income   (3,181 )     7,976       (33,257 )     15,447  
                               
Interest expense   367       511       2,160       2,265  
Other expense (income), net   156       (16 )     994       (520 )
(Loss) income before taxes   (3,704 )     7,481       (36,411 )     13,702  
                               
Income tax expense   56,643       1,585       62,996       3,539  
Net (loss) income $ (60,347 )   $ 5,896     $ (99,407 )   $ 10,163  
(Loss) income per share:                              
Net (loss) income per share attributable                              
to common stockholders, basic $ (1.03 )   $ 0.12     $ (1.89 )   $ 0.21  
Net (loss) income per share attributable                              
to common stockholders, diluted $ (1.03 )   $ 0.10     $ (1.89 )   $ 0.18  
                               
Weighted average shares outstanding:                              
Weighted average number of shares                              
used in computing net (loss) income                              
per share, basic   58,674       49,837       52,466       48,852  

Weighted average number of shares
                             
used in computing net (loss) income                              
per share, diluted   58,674       58,848       52,466       57,856  
                               
                               

 

*Amounts include stock-based compensation expense as follows (in thousands):     
               
  Three months ended   Year ended
   December 31,    December 31,
    2017     2016     2017     2016
Cost of revenue – software $ 8   $ 7   $ 350   $ 22
Research and development   2,045     9     12,540     1,370
Sales and marketing   1,533     12     7,693     775
General and administrative   4,393     54     26,698     2,965
Total stock-based compensation expense $ 7,979   $ 82   $ 47,281   $ 5,132
               
               

 

Altair Engineering Inc. and subsidiaries
Consolidated statements of cash flows
 
             
        Year ended
        December 31,
(In thousands)    2017       2016  
OPERATING ACTIVITIES:              
  Net (loss) income $   (99,407 )   $   10,163  
  Adjustments to reconcile net (loss) income to net cash provided by              
    operating activities:              
    Depreciation and amortization      11,747         9,980  
    Provision for bad debt      610         291  
    Write-down of inventory to net realizable value     270         179  
    Stock-based compensation expense      47,281         5,132  
    Deferred income taxes      52,571         (6,076 )
    Other, net      28         86  
  Changes in assets and liabilities:              
    Accounts receivable      (10,397 )       (4,397 )
    Prepaid expenses and other current assets      1,559         (2,337 )
    Other long-term assets      (11,288 )       (930 )
    Accounts payable      (1,087 )       (1,321 )
    Accrued compensation and benefits      2,060         2,366  
    Other accrued expenses and current liabilities      6,207         (1,173 )
    Deferred revenue      15,937         9,422  
      Net cash provided by operating activities     16,091         21,385  
                     
INVESTING ACTIVITIES:              
  Payments for acquisition of businesses      (15,582 )       (6,499 )
  Capital expenditures     (7,522 )       (9,444 )
  Payments for acquisition of developed technology     (2,120 )       (154 )
  Other investing activities, net     373         64  
      Net cash used in investing activities     (24,851 )       (16,033 )
                     
FINANCING ACTIVITIES:              
  Payments on revolving commitment     (154,187 )       (136,087 )
  Borrowings under revolving commitment     126,832         151,928  
  Proceeds from issuance of Class A common stock in initial public               
    offering, net of underwriting commissions     119,268         —   
  Principal payments on long-term debt     (59,869 )       (16,232 )
  Payments of IPO offering costs     (4,644 )       —   
  Proceeds from issuance of common stock     1,792         456  
  Proceeds from issuance of debt     1,541         2,030  
  Payments for redemption of common stock      (1,045 )       (3,049 )
  Payment for return of capital      —          (725 )
  Other financing activities     (130 )       (185 )
      Net cash provided by (used in) financing activities     29,558         (1,864 )
                     
Effect of exchange rate changes on cash, cash equivalents and restricted cash     1,641         (362 )
Net increase in cash, cash equivalents and restricted cash     22,439         3,126  
Cash, cash equivalents and restricted cash at beginning of year     17,139         14,013  
                     
Cash, cash equivalents and restricted cash at end of period $   39,578     $   17,139  
                     
Supplemental disclosure of cash flow:              
  Interest paid $   2,092     $   2,190  
  Income taxes paid $   5,893     $   5,909  
Supplemental disclosure of non-cash investing and financing activities:              
  Promissory notes issued and deferred payment obligations for acquisitions $   12,352     $   4,182  
  Issuance of common stock in connection with acquisitions $   8,712     $   —   
  Issuance of common stock with put rights $   2,352     $   —   
  Property and equipment and developed technology in accounts payable,              
    other accrued expenses and current liabilities, and other liabilities $   582     $   1,777  
  Initial public offering costs in accounts payable $   186     $   —   
  Capital leases $   124     $   129  
  Notes issued for stock redemptions $   —      $   807  

 

The following table provides a reconciliation of Adjusted EBITDA to net (loss) income, the most comparable GAAP financial measure (in thousands):
                 
    Three months ended   Year ended
    December 31,   December 31,
      2017       2016       2017       2016  
Net (loss) income $ (60,347 )   $ 5,896     $ (99,407 )   $ 10,163  
Income tax expense   56,643       1,585       62,996       3,539  
Stock-based compensation expense   7,979       82       47,281       5,132  
Interest expense   367       511       2,160       2,265  
Interest income and other(1)   (76 )     (168 )     (2,260 )     (249 )
Depreciation and amortization   3,852       2,680       11,747       9,980  
  Adjusted EBITDA $ 8,418     $ 10,586     $ 22,517     $ 30,830  
                 
(1) Includes a non-recurring adjustment for a change in estimated legal expenses resulting in $2.0 million of income for the year ended December 31, 2017.

 

The following table provides a reconciliation of Non-GAAP net income and Non-GAAP diluted earnings per share to net (loss) income and (loss) earnings per share - diluted, the most comparable GAAP financial measures (in thousands):
                   
      (Unaudited)
      Three months ended   Year ended
      December 31,   December 31,
        2017       2016     2017       2016
Net (loss) income $ (60,347 )   $ 5,896   $ (99,407 )   $ 10,163
Stock-based compensation expense   7,979       82     47,281       5,132
Amortization of intangible assets   2,161       970     5,448       3,322
Change in tax valuation allowance   47,429       -     47,429       -
Tax law changes   15,366       -     15,366       -
    Non-GAAP net income $ 12,588     $ 6,948   $ 16,117     $ 18,617
                               
                               
(Loss) earnings per share - diluted $ (1.03 )   $ 0.10   $ (1.89 )   $ 0.18
Non-GAAP earnings per share - diluted $ 0.18     $ 0.12   $ 0.26     $ 0.32
                               
                               
GAAP diluted shares outstanding:                          
  Weighted average number of shares                           
    used in computing net (loss) income                           
    per share, diluted   58,674       58,848     52,466       57,856
                               
Non-GAAP diluted shares outstanding:                          
  Weighted average number of shares                           
    used in computing net income                           
    per share, diluted     68,156         58,848       62,632         57,856
                               
                               

 

The following table provides a reconciliation of Free Cash Flow to net cash (used in) provided by operating activities, the most comparable GAAP financial measure (in thousands): 
                 
    Three months ended   Year ended
    December 31,   December 31,
      2017       2016       2017       2016  
Net cash (used in) provided by operating activities $ (1,364 )   $ 23     $ 16,091     $ 21,385  
Capital expenditures   (3,155 )     (4,722 )     (7,522 )     (9,444 )
  Free cash flow $ (4,519 )   $ (4,699 )   $ 8,569     $ 11,941  
                 
                 

 

The following table provides a reconciliation of projected Adjusted EBITDA to projected net income, the most comparable GAAP financial measure (in thousands):   
    (Unaudited)  
    Three months ending   Year ending  
    March 31, 2018   December 31, 2018  
    low   high   low   high  
Net income $   -   $   500   $   10,000   $   12,000  
Income tax expense     100       100       4,200       4,200  
Stock-based compensation expense     300       300       2,000       2,000  
Interest expense     -       -       -       -  
Interest income and other     -       -       -       -  
Depreciation and amortization     3,400       3,400       13,500       13,500  
Other non-recurring charges(1)     -       -       2,300       2,300  
  Adjusted EBITDA $   3,800   $   4,300   $   32,000   $   34,000  
                   
(1) - represents projected accelerated compliance-related costs.          
           
           

 

The following table provides a reconciliation of projected net income to projected Non-GAAP net income, the most comparable GAAP financial measure (in thousands):  
                     
      (Unaudited)  
      Three months ending   Year ending  
      March 31, 2018   December 31, 2018  
      low   high   low   high  
Net income $ -   $ 500   $ 10,000   $ 12,000  
Stock-based compensation expense   300     300     2,000     2,000  
Amortization of intangible assets   1,500     1,500     6,000     6,000  
    Non-GAAP net income $ 1,800   $ 2,300   $ 18,000   $ 20,000  
                     

Primary Logo

 

Source: Altair Engineering Inc.

 

Be the first to know

Subscribe to our email alerts to learn more about stock, news, financials, and more!