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Altair Announces Second Quarter 2018 Financial Results

August 9, 2018 at 4:05 PM EDT
Second Quarter Software Product Revenue Increased 22% Year-over-Year

 

TROY, Mich., Aug. 09, 2018 (GLOBE NEWSWIRE) -- Altair (Nasdaq:ALTR) released its financial results for the second quarter ended June 30, 2018.

“Altair’s strong second quarter results exceeded our revenue and profitability expectations and reflect continued business momentum,” said James Scapa, Founder, Chairman and CEO.  “Our performance is benefitting from growing market demand for CAE solutions that greatly enhance product design across a growing number of industries.”

Scapa continued, “We are seeing the positive impact our organic and inorganic investments are having across the business.  As we move into the second half of 2018 and beyond, we are confident Altair is well positioned to generate a compelling combination of strong revenue growth and expanding profitability.”

Second Quarter 2018 Financial Highlights

  • Software product revenue was $72.8 million, an increase of 22% from $59.6 million for the second quarter of 2017.
  • Total revenue was $95.6 million, an increase of 17% compared to $81.6 million for the second quarter of 2017.
  • GAAP net income was $1.5 million, compared to net loss of $(7.2) million for the second quarter of 2017. Diluted net income per share was $0.02, based on 73.4 million diluted weighted average common shares outstanding, compared to diluted net loss per share of $(0.14) for the second quarter of 2017, based on 50.4 million diluted weighted average common shares outstanding.
  • Adjusted EBITDA was $7.3 million, compared to $4.1 million for the second quarter of 2017. Adjusted EBITDA represents net income (loss) 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 $3.9 million, compared to $5.1 million for the second quarter of 2017. Non-GAAP net income per share was $0.05, based on 77.0 million non-GAAP diluted common shares outstanding, compared to $0.08 for the second quarter of 2017, based on 62.1 million non-GAAP diluted 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 $10.6 million, compared to $6.9 million for the second quarter of 2017.
  • Free cash flow, which consists of cash flow from operations less capital expenditures, was $9.2 million compared to $5.5 million for the second quarter of 2017.              

Business Outlook

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

  Third Quarter 2018 Full Year 2018
Software Product Revenue $72.5 to $73.5 $288.0 to $290.0
Total Revenue $95.0   $96.0 $380.0   $382.0
GAAP Net Income $2.0   $2.5 $11.5   $13.0
Adjusted EBITDA $8.0   $8.5 $34.0   $35.5
Non-GAAP Net Income $4.6   $5.1 $21.2   $22.7

 (All figures in millions)

 
Conference Call Information
 
What:   Altair Second Quarter 2018 Financial Results Conference Call
When:   Thursday, August 9, 2018
Time:   4:30 p.m. EDT
Live Call:   (866) 754-5204, domestic
    (636) 812-6621, international
 Replay:    (855) 859-2056, passcode 1776298, domestic
    (404) 537-3406, passcode 1776298, 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, Non-GAAP Net Income Per Share 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.

Company management 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 transforms design and decision making by applying simulation, machine learning and optimization throughout product lifecycles. Our broad portfolio of simulation technology and patented units-based software licensing model enable Simulation-Driven Innovation for our customers. With more than 2,000 employees, Altair is headquartered in Troy, Michigan, USA and operates 71 offices throughout 24 countries. Altair serves more than 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
Brian Denyeau
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   
           
           
    June 30,
 2018
  December 31, 
2017
 
(In thousands, except per share data)   (Unaudited)      
ASSETS          
CURRENT ASSETS:          
Cash and cash equivalents   $ 199,230     $ 39,213    
Accounts receivable, net     73,793       86,635    
Inventory, net     1,786       1,980    
Income tax receivable     7,260       6,054    
Prepaid expenses and other current assets     13,290       10,006    
Total current assets     295,359       143,888    
Property and equipment, net     30,112       31,446    
Goodwill     63,263       62,706    
Other intangible assets, net     24,846       24,461    
Deferred tax assets     8,113       8,351    
Other long-term assets     16,077       17,019    
TOTAL ASSETS   $ 437,770     $ 287,871    
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY  
CURRENT LIABILITIES:          
Current portion of long-term debt   $ 390     $ 232    
Accounts payable     5,957       4,880    
Accrued compensation and benefits     26,393       26,560    
Obligations for acquisition of businesses     9,842       13,925    
Other accrued expenses and current liabilities     20,443       21,744    
Deferred revenue     147,261       130,122    
Total current liabilities     210,286       197,463    
Long-term debt, net of current portion     690       178    
Deferred revenue, non-current     9,256       9,640    
Other long-term liabilities     13,474       17,647    
TOTAL LIABILITIES     233,706       224,928    
Commitments and contingencies          
MEZZANINE EQUITY     2,352       2,352    
STOCKHOLDERS’ EQUITY:          
Preferred stock ($0.0001 par value), authorized 45,000 shares, none issued and outstanding              
Common stock ($0.0001 par value)          
Class A common stock, authorized 513,797 shares, issued and outstanding 36,518 and 26,725 shares as of June 30,  2018 and December 31, 2017, respectively     4       2    
Class B common stock, authorized 41,203 shares, issued and outstanding 33,171 and 36,508 shares as of June 30, 2018 and December 31, 2017, respectively     3       4    
Additional paid-in capital     369,579       232,156    
Accumulated deficit     (161,066 )     (166,499 )  
Accumulated other comprehensive loss     (6,808 )     (5,072 )  
TOTAL STOCKHOLDERS’ EQUITY     201,712       60,591    
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY   $ 437,770     $ 287,871    
           
           
Altair Engineering Inc. and subsidiaries
Consolidated statements of operations
(Unaudited)
                 
    Three months ended June 30,   Six months ended June 30,
(in thousands, except per share data)   2018   2017   2018   2017
Revenue                
Software   $ 72,813     $ 59,600     $ 140,956     $ 113,697  
Software related services     8,707       8,204       18,180       17,175  
Total software     81,520       67,804       159,136       130,872  
Client engineering services     12,417       12,365       24,497       24,594  
Other     1,629       1,477       3,664       3,062  
Total revenue     95,566       81,646       187,297       158,528  
Cost of revenue                
Software*     11,983       8,729       22,905       17,633  
Software related services     6,512       7,114       13,221       13,773  
Total software     18,495       15,843       36,126       31,406  
Client engineering services     9,960       9,828       20,160       19,969  
Other     1,001       1,247       2,212       2,297  
Total cost of revenue     29,456       26,918       58,498       53,672  
Gross profit     66,110       54,728       128,799       104,856  
Operating expenses:                
Research and development*     24,744       22,838       47,447       41,608  
Sales and marketing*     20,183       19,428       39,160       36,338  
General and administrative*     17,412       21,201       34,402       37,290  
Amortization of intangible assets     1,986       1,155       3,926       2,098  
Other operating income     (392 )     (2,736 )     (2,583 )     (3,330 )
Total operating expenses     63,933       61,886       122,352       114,004  
Operating income (loss)     2,177       (7,158 )     6,447       (9,148 )
Interest expense     45       548       61       1,159  
Other (income) expense, net     (176 )     427       (1,076 )     786  
Income (loss) before income taxes     2,308       (8,133 )     7,462       (11,093 )
Income tax expense (benefit)     795       (887 )     2,029       (1,659 )
Net income (loss)   $ 1,513     $ (7,246 )   $ 5,433     $ (9,434 )
Income (loss) per share:                
Net income (loss) per share attributable to common stockholders, basic   $ 0.02     $ (0.14 )   $ 0.08     $ (0.19 )
Net income (loss) per share attributable to common stockholders, diluted   $ 0.02     $ (0.14 )   $ 0.07     $ (0.19 )
Weighted average shares outstanding:                
Weighted average number of shares used in computing net income (loss) per share, basic     65,580       50,374       64,614       50,255  
Weighted average number of shares used in computing net income (loss) per share, diluted     73,391       50,374       72,881       50,255  
                                 
                                 
*Amounts include stock-based compensation expense as follows (in thousands):            
                 
    (Unaudited)
    Three months ended June 30,   Six months ended June 30,
     2018    2017    2018    2017
Cost of revenue – software   $ 8   $ 11   $ 16   $ 16
Research and development     108     3,009     155     3,784
Sales and marketing     134     1,684     175     2,115
General and administrative     184     6,464     304     8,122
Total stock-based compensation expense   $ 434   $ 11,168   $ 650   $ 14,037
                 
                 
Altair Engineering Inc. and subsidiaries
Consolidated statements of cash flows
(Unaudited)
         
    Six months ended June 30,
(In thousands)   2018   2017
OPERATING ACTIVITIES:        
Net income (loss)   $ 5,433     $ (9,434 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                
Depreciation and amortization     7,525       5,084  
Provision for bad debt     269       116  
Stock-based compensation expense     650       14,037  
Deferred income taxes     (283 )     (3,679 )
Other, net     (154 )     34  
Changes in assets and liabilities:                
Accounts receivable     11,743       11,412  
Prepaid expenses and other current assets     (2,927 )     (3,850 )
Other long-term assets     (278 )     (2,567 )
Accounts payable     335       955  
Accrued compensation and benefits     73       (1,531 )
Other accrued expenses and current liabilities     (4,496 )     (2,331 )
Deferred revenue     19,423       17,871  
Net cash provided by operating activities     37,313       26,117  
INVESTING ACTIVITIES:                
Payments for acquisition of businesses, net of cash acquired     (7,028 )     (6,437 )
Capital expenditures     (3,130 )     (2,335 )
Payments for acquisition of developed technology     (2,738 )     (2,120 )
Other investing activities, net     38       (28 )
Net cash used in investing activities     (12,858 )     (10,920 )
FINANCING ACTIVITIES:                
Proceeds from issuance of Class A common stock in follow-on public offering,
  net of underwriters' discounts and commissions
    135,572        
Proceeds from the exercise of stock options     1,668       476  
Payments for follow-on public offering and initial public offering costs     (468 )     (869 )
Payments for redemption of common stock     (119 )     (611 )
Principal payments on long-term debt     (76 )     (5,248 )
Payments on revolving commitment           (53,564 )
Borrowings under revolving commitment           44,227  
Other financing activities     (147 )     (20 )
Net cash provided by (used in) financing activities     136,430       (15,609 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash     (877 )     962  
Net increase in cash, cash equivalents and restricted cash     160,008       550  
Cash, cash equivalents and restricted cash at beginning of year     39,578       17,139  
Cash, cash equivalents and restricted cash at end of period   $ 199,586     $ 17,689  
Supplemental disclosure of cash flow:                
Interest paid   $ 41     $ 1,163  
Income taxes paid   $ 3,660     $ 2,352  
Supplemental disclosure of non-cash investing and financing activities:                
Capital leases   $ 1,010     $  
Property and equipment in accounts payable and other accrued expenses
 and current liabilities
  $ 935     $ 155  
Follow-on public offering costs in accounts payable   $ 88     $  
Promissory notes issued and deferred payment obligations for acquisitions   $ 278     $ 2,728  
Issuance of common stock with put rights   $     $ 2,345  
Initial public offering costs in other long-term assets   $     $ 1,522  
Issuance of common stock in connection with acquisitions   $     $ 415  
                 
                 
The following table provides a reconciliation of Non-GAAP net income and Non-GAAP diluted earnings per share to net income (loss) and earnings (loss) per share - diluted, the most comparable GAAP financial measures (in thousands):
                     
        (Unaudited)
        Three months ended June 30,   Six months ended June 30,
        2018   2017   2018   2017
Net income (loss)   $ 1,513   $ (7,246 )   $ 5,433   $ (9,434 )
Stock-based compensation expense     434     11,168       650     14,037  
Amortization of intangible assets     1,986     1,155       3,926     2,098  
    Non-GAAP net income   $ 3,933   $ 5,077     $ 10,009   $ 6,701  
                                 
                                 
Earnings (loss) per share - diluted   $ 0.02   $ (0.14 )   $ 0.07   $ (0.19 )
Non-GAAP earnings per share - diluted   $ 0.05   $ 0.08     $ 0.13   $ 0.11  
                                 
                                 
GAAP diluted shares outstanding:                            
  Weighted average number of shares used in computing net income (loss) per share, diluted     73,391     50,374       72,881     50,255  
                                 
Non-GAAP diluted shares outstanding:                            
  Number of shares used in computing net income per share, diluted     77,000     62,100       77,000     62,100  
                               
                               
The following table provides a reconciliation of Adjusted EBITDA to net income (loss), the most comparable GAAP financial measure (in thousands): 
      (Unaudited)
      Three months ended June 30,   Six months ended June 30,
        2018     2017       2018       2017  
Net income (loss)   $   1,513   $   (7,246 )   $   5,433     $   (9,434 )
Income tax expense (benefit)       795       (887 )       2,029         (1,659 )
Stock-based compensation expense       434       11,168         650         14,037  
Interest expense       45       548         61         1,159  
Interest income and other(1)       536       (2,046 )       (719 )       (2,131 )
Depreciation and amortization       3,982       2,610         7,525         5,084  
Adjusted EBITDA   $   7,305   $   4,147     $   14,979     $   7,056  
   
(1) Includes an impairment charge for royalty contracts resulting in $0.9 million and $1.8 million of expense for the three and six months ended June 30, 2018, respectively. Includes a non-recurring adjustment for a change in estimated legal expenses resulting in $2.0 million of income for the six months ended June 30, 2018, and three and six months ended June 30, 2017. 
   
The following table provides a reconciliation of Free Cash Flow to net cash provided by operating activities, the most comparable GAAP financial measure (in thousands): 
                 
    (Unaudited)
    Three months ended June 30,   Six months ended June 30,
      2018       2017       2018       2017  
Net cash provided by operating activities   $   10,624     $   6,915     $   37,313     $   26,117  
Capital expenditures       (1,446 )       (1,366 )       (3,130 )       (2,335 )
Free cash flow   $   9,178     $   5,549     $   34,183     $   23,782  
                 
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  
      September 30, 2018   December 31, 2018  
      low   high   low   high  
Net income $ 2,000   $ 2,500   $ 11,500   $ 13,000  
Stock-based compensation expense   600     600     1,700     1,700  
Amortization of intangible assets   2,000     2,000     8,000     8,000  
Non-GAAP net income $ 4,600   $ 5,100   $ 21,200   $ 22,700  
                     
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  
    September 30, 2018   December 31, 2018  
    low   high   low   high  
Net income $ 2,000   $ 2,500   $ 11,500 ) $ 13,000  
Income tax expense   1,200     1,200     6,000     6,000  
Stock-based compensation expense   600     600     1,700     1,700  
Interest expense   -     -     -     -  
Interest income and other   -     -     -     -  
Depreciation and amortization   4,000     4,000     14,600     14,600  
Other non-recurring charges(1)   200     200     200     200  
Adjusted EBITDA $ 8,000   $ 8,500   $ 34,000   $ 35,500  
                   
(1)  Represents projected non-recurring costs related to impairment charges.        
                   

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Source: Altair Engineering Inc.

 

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