false000170173200017017322023-08-032023-08-03

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 03, 2023

 

 

Altair Engineering Inc.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware			001-38263	38-2591828
(State or Other Jurisdiction of Incorporation)			(Commission File Number)	(IRS Employer Identification No.)
1820 E. Big Beaver Road
Troy, Michigan				48083
(Address of Principal Executive Offices)				(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (248) 614-2400

 

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Class A Common Stock $0.0001 par value per share		ALTR		The Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

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Item 2.02. Results of Operations and Financial Condition.

 

On August 3, 2023, Altair Engineering Inc. issued a press release disclosing its financial information and operating metrics for its second quarter and six months ended June 30, 2023. A copy of the press release is being furnished as Exhibit 99.1 to this Report on Form 8-K.

 

The information in this Report on Form 8-K and Exhibit 99.1 attached hereto is intended to be furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

 

Item 9.01. Financial Statements and Exhibits.

 

Exhibit 99.1		Press Release issued by Altair Engineering Inc. dated August 3, 2023, furnished hereto.
Exhibit 104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 

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SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ALTAIR ENGINEERING INC.
Date: August 3, 2023	By:	/s/ Matthew Brown
		Matthew Brown
		Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

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Exhibit 99.1

Altair Announces Second Quarter 2023 Financial Results

Software Product Revenue and Total Revenue Above the High End of Guidance Range

TROY, Mich. – August 3, 2023 – Altair (Nasdaq: ALTR), a global leader in computational science and artificial intelligence, today released its financial results for the second quarter and six months ended June 30, 2023.

“Altair had a solid second quarter of 2023, with software product revenue and total revenue above the high end of guidance,” said James Scapa, founder, chairman and chief executive officer of Altair. “Our Q2 performance aligns well with our guidance for the full year and demonstrates our continued success and strength.”

“We’re pleased with the outperformance we’ve seen in the first half of the year,” said Matt Brown, chief financial officer of Altair. “Our strong first half has been fueled by growth across a number of verticals and particularly in aerospace, defense, technology, and automotive, where demand for our products is robust.”

Second Quarter 2023 Financial Highlights

 

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Business Outlook

Based on information available as of today, Altair is issuing the following guidance for the third quarter and full year 2023:

 

(in millions, except %)		Third Quarter 2023								Full Year 2023
Software Product Revenue		$	111		to	$	113			$	548		to	$	558
Growth Rate			7.0	%			8.9	%			8.2	%			10.2	%
Growth Rate - Constant Currency			5.8	%			7.7	%			9.1	%			11.0	%
Total Revenue		$	126			$	128			$	611			$	621
Growth Rate			5.6	%			7.2	%			6.8	%			8.5	%
Growth Rate - Constant Currency			4.4	%			6.1	%			7.5	%			9.3	%
Net Loss		$	(22.8	)		$	(20.9	)		$	(15.3	)		$	(5.6	)
Non-GAAP Net Income		$	2.9			$	4.4			$	89.9			$	97.3
Adjusted EBITDA		$	3			$	5			$	119			$	129
Net Cash Provided by Operating Activities										$	120			$	128
Free Cash Flow										$	108			$	116

The following table provides a reconciliation of Full Year 2023 guidance to the last guidance provided in May:

 

		(Unaudited)
		Full Year 2023
(in millions)		Midpoint of Guidance in May				Increase/ (Decrease)				Currency Fluctuations from Prior Guidance				Midpoint of Guidance in August
Software Product Revenue		$	556.0			$	—			$	(3.0	)		$	553.0
Total Revenue		$	619.0			$	—			$	(3.0	)		$	616.0
Adjusted EBITDA		$	125.0			$	—			$	(1.0	)		$	124.0

Conference Call Information

 

What: Altair’s Second Quarter 2023 Financial Results Conference Call
When: Thursday, August 3, 2023

Time: 5 p.m. ET
Webcast: http://investor.altair.com (live & replay)

***

 

Non-GAAP Financial Measures

 

This press release contains the following non-GAAP financial measures: Non-GAAP Net Income, Non-GAAP Net Income Per Share, Billings, Adjusted EBITDA, Free Cash Flow, Non-GAAP Gross Profit and Non-GAAP Operating Expense.

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.

Non-GAAP net income excludes stock-based compensation, amortization of intangible assets related to acquisitions, restructuring charges, asset impairment charges, non-cash interest expense, other special items as identified by management and described elsewhere in this press release, and the impact of non-GAAP tax rate to income tax expense, which approximates our tax rate excluding discrete items and other specific events that can fluctuate from period to period.

 

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Non-GAAP diluted common shares includes the diluted weighted average shares outstanding per GAAP regardless of whether the Company is in a loss position.

Billings consists of total revenue plus the change in deferred revenue, excluding deferred revenue from acquisitions.

Adjusted EBITDA represents net 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 identified by management and described elsewhere in this press release.

Free cash flow consists of cash flow from operations less capital expenditures.

Non-GAAP gross profit represents gross profit adjusted for stock-based compensation expense, restructuring expense and other special items as identified by management and described elsewhere in this press release.

Non-GAAP operating expense represents operating expense excluding stock-based compensation expense, amortization, restructuring charges, asset impairment charges and other special items as identified by management and described elsewhere in this press release.

 

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 is a global leader in computational science and artificial intelligence (AI) that provides software and cloud solutions in simulation, high-performance computing (HPC), data analytics and AI. Altair enables organizations across all industries to compete more effectively and drive smarter decisions in an increasingly connected world – all while creating a greener, more sustainable future. 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, our guidance for the third quarter and full year 2023, our statements regarding our expectations for 2023, 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 our forward-looking statements due to a number of factors, including but not limited to, the 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.

 

 

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Media Relations

Altair

Dave Simon

248-614-2400 ext. 332

dls@altair.com

 

Investor Relations

The Blueshirt Group

Monica Gould

212-871-3927

ir@altair.com

 

 

 

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ALTAIR ENGINERING INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

		June 30, 2023				December 31, 2022
(In thousands)		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	418,338			$	316,146
Accounts receivable, net			124,260				170,279
Income tax receivable			14,505				11,259
Prepaid expenses and other current assets			29,678				29,142
Total current assets			586,781				526,826
Property and equipment, net			39,107				37,517
Operating lease right of use assets			30,284				33,601
Goodwill			453,093				449,048
Other intangible assets, net			94,642				107,609
Deferred tax assets			8,183				9,727
Other long-term assets			43,717				40,410
TOTAL ASSETS		$	1,255,807			$	1,204,738
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	4,682			$	10,434
Accrued compensation and benefits			35,951				42,456
Current portion of operating lease liabilities			9,557				10,396
Other accrued expenses and current liabilities			66,044				56,371
Deferred revenue			121,853				113,081
Current portion of convertible senior notes, net			81,161				—
Total current liabilities			319,248				232,738
Convertible senior notes, net			225,320				305,604
Operating lease liabilities, net of current portion			21,337				24,065
Deferred revenue, non-current			26,694				31,379
Other long-term liabilities			42,993				41,216
TOTAL LIABILITIES			635,592				635,002
Commitments and contingencies
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 53,951    and 52,277 shares as of June 30, 2023, and December 31, 2022, respectively			5				5
Class B common stock, authorized 41,203 shares, issued and outstanding 27,175    and 27,745 shares as of June 30, 2023, and December 31, 2022			3				3
Additional paid-in capital			790,184				721,307
Accumulated deficit			(145,816	)			(121,577	)
Accumulated other comprehensive loss			(24,161	)			(30,002	)
TOTAL STOCKHOLDERS’ EQUITY			620,215				569,736
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	1,255,807			$	1,204,738

 

 

 

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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)		2023				2022				2023				2022
Revenue
License		$	87,738			$	82,688			$	200,147			$	188,857
Maintenance and other services			37,583				34,205				74,817				68,933
Total software			125,321				116,893				274,964				257,790
Software related services			6,664				7,376				13,764				16,437
Total software and related services			131,985				124,269				288,728				274,227
Client engineering services			8,034				7,047				15,810				15,059
Other			1,142				1,340				2,657				3,151
Total revenue			141,161				132,656				307,195				292,437
Cost of revenue
License			3,981				4,120				8,805				8,807
Maintenance and other services			13,639				12,884				28,065				25,603
Total software *			17,620				17,004				36,870				34,410
Software related services			5,308				5,464				10,924				11,499
Total software and related services			22,928				22,468				47,794				45,909
Client engineering services			6,767				5,914				13,391				12,555
Other			1,102				1,141				2,347				2,662
Total cost of revenue			30,797				29,523				63,532				61,126
Gross profit			110,364				103,133				243,663				231,311
Operating expenses:
Research and development *			55,277				50,437				108,528				97,516
Sales and marketing *			44,982				41,153				88,474				78,993
General and administrative *			18,622				18,370				36,573				35,796
Amortization of intangible assets			7,625				6,208				15,439				12,111
Other operating expense (income), net			127				(5,767	)			5,732				(6,548	)
Total operating expenses			126,633				110,401				254,746				217,868
Operating (loss) income			(16,269	)			(7,268	)			(11,083	)			13,443
Interest expense			1,528				700				3,054				1,285
Other (income) expense, net			(4,195	)			21,907				(7,808	)			23,975
Loss before income taxes			(13,602	)			(29,875	)			(6,329	)			(11,817	)
Income tax expense			8,678				3,899				17,910				10,429
Net loss		$	(22,280	)		$	(33,774	)		$	(24,239	)		$	(22,246	)
Loss per share:
Net loss per share attributable to common   stockholders, basic and diluted		$	(0.28	)		$	(0.43	)		$	(0.30	)		$	(0.28	)
Weighted average shares outstanding:
Weighted average number of shares used in computing   net loss per share, basic and diluted			79,986				78,948				80,088				79,204

 

 

 

 

 

 

 

 

 

* Amounts include stock-based compensation expense as follows (in thousands):

 

 

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		(Unaudited)
		Three Months Ended  June 30,								Six Months Ended June 30,
(in thousands)		2023				2022				2023				2022
Cost of revenue – software		$	2,572			$	2,030			$	5,324			$	3,933
Research and development			9,943				8,979				18,686				16,337
Sales and marketing			7,581				7,664				15,172				14,699
General and administrative			3,640				2,527				6,715				4,845
Total stock-based compensation expense		$	23,736			$	21,200			$	45,897			$	39,814

 

 

		(Unaudited)
		Three Months Ended  June 30,								Six Months Ended June 30,
(in thousands)		2023				2022				2023				2022
Employee stock-based compensation plans		$	19,189			$	14,873			$	37,673			$	28,132
Post combination expense in connection with acquisitions			4,547				6,327				8,224				11,682
Total stock-based compensation expense		$	23,736			$	21,200			$	45,897			$	39,814

 

 

 

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ALTAIR ENGINEERING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

 

		Six Months Ended June 30,
(In thousands)		2023				2022
OPERATING ACTIVITIES:
Net loss		$	(24,239	)		$	(22,246	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			19,488				15,819
Stock-based compensation expense			45,897				39,814
Amortization of debt issuance costs			930				829
Deferred income taxes			2,015				(64	)
Loss (gain) on mark-to-market adjustment of contingent consideration			7,987				(5,304	)
Expense on repurchase of convertible senior notes			—				16,621
Other, net			405				229
Changes in assets and liabilities:
Accounts receivable, net			45,077				29,270
Prepaid expenses and other current assets			(3,166	)			2,056
Other long-term assets			(2,516	)			4,397
Accounts payable			(5,529	)			(2,070	)
Accrued compensation and benefits			(6,591	)			(9,742	)
Other accrued expenses and current liabilities			4,857				(61,648	)
Deferred revenue			4,614				10,080
Net cash provided by operating activities			89,229				18,041
INVESTING ACTIVITIES:
Capital expenditures			(6,184	)			(3,457	)
Payments for acquisition of businesses, net of cash acquired			(721	)			(37,660	)
Other investing activities, net			(1,452	)			(322	)
Net cash used in investing activities			(8,357	)			(41,439	)
FINANCING ACTIVITIES:
Proceeds from the exercise of common stock options			23,507				1,689
Payments for repurchase and retirement of common stock			(6,255	)			(4,387	)
Proceeds from employee stock purchase plan contributions			3,797				4,431
Proceeds from issuance of convertible senior notes,    net of discounts and commissions			—				224,265
Repurchase of convertible senior notes			—				(192,792	)
Payments of debt issuance costs			—				(1,157	)
Other financing activities			(48	)			(131	)
Net cash provided by financing activities			21,001				31,918
Effect of exchange rate changes on cash, cash equivalents and restricted cash			(44	)			(6,226	)
Net increase in cash, cash equivalents and restricted cash			101,829				2,294
Cash, cash equivalents and restricted cash at beginning of year			316,958				414,012
Cash, cash equivalents and restricted cash at end of period		$	418,787			$	416,306

 

 

 

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Financial Results

 

The following table provides a reconciliation of Non-GAAP net income and Non-GAAP net income per share – diluted, to net loss and net loss per share – diluted, the most comparable GAAP financial measures:

 

		(Unaudited)
		Three Months Ended  June 30,								Six Months Ended June 30,
(in thousands, except per share amounts)		2023				2022				2023				2022
Net loss		$	(22,280	)		$	(33,774	)		$	(24,239	)		$	(22,246	)
Stock-based compensation expense			23,736				21,200				45,897				39,814
Amortization of intangible assets			7,625				6,208				15,439				12,111
Non-cash interest expense			465				422				930				839
Impact of non-GAAP tax rate (1)			4,033				79				2,100				(4,957	)
Special adjustments and other (2)			(361	)			16,737				4,870				18,229
Non-GAAP net income		$	13,218			$	10,872			$	44,997			$	43,790
Net loss per share, diluted		$	(0.28	)		$	(0.43	)		$	(0.30	)		$	(0.28	)
Non-GAAP net income per share, diluted		$	0.15			$	0.13			$	0.51			$	0.51
GAAP diluted shares outstanding			79,986				78,948				80,088				79,204
Non-GAAP diluted shares outstanding			88,383				86,281				88,735				86,516

The following table provides a reconciliation of Adjusted EBITDA to net loss, the most comparable GAAP financial measure:

 

		(Unaudited)
		Three Months Ended  June 30,								Six Months Ended June 30,
(in thousands)		2023				2022				2023				2022
Net loss		$	(22,280	)		$	(33,774	)		$	(24,239	)		$	(22,246	)
Income tax expense			8,678				3,899				17,910				10,429
Stock-based compensation expense			23,736				21,200				45,897				39,814
Interest expense			1,528				700				3,054				1,285
Depreciation and amortization			9,738				8,133				19,488				15,819
Special adjustments, interest income and other (1)			(4,344	)			16,282				(1,999	)			17,929
Adjusted EBITDA		$	17,056			$	16,440			$	60,111			$	63,030

 

 

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The following table provides a reconciliation of Free Cash Flow to net cash provided by operating activities, the most comparable GAAP financial measure:

		(Unaudited)
		Three Months Ended  June 30,								Six Months Ended June 30,
(in thousands)		2023				2022				2023				2022
Net cash provided by operating activities (1)		$	30,030			$	12,255			$	89,229			$	18,041
Capital expenditures			(4,457	)			(1,267	)			(6,184	)			(3,457	)
Free cash flow (1)		$	25,573			$	10,988			$	83,045			$	14,584

 

The following table provides a reconciliation of Non-GAAP gross profit to gross profit, the most comparable GAAP financial measure, and a comparison of Non-GAAP gross margin (Non-GAAP gross profit as a percentage of total revenue) to gross margin (gross profit as a percentage of total revenue), the most comparable GAAP financial measure:

 

		(Unaudited)
		Three Months Ended  June 30,								Six Months Ended June 30,
(in thousands)		2023				2022				2023				2022
Gross profit		$	110,364			$	103,133			$	243,663			$	231,311
Stock-based compensation expense			2,572				2,030				5,324				3,933
Non-GAAP gross profit		$	112,936			$	105,163			$	248,987			$	235,244
Gross profit margin			78.2	%			77.7	%			79.3	%			79.1	%
Non-GAAP gross margin			80.0	%			79.3	%			81.1	%			80.4	%

The following table provides a reconciliation of Non-GAAP operating expense to Total operating expense, the most comparable GAAP financial measure:

 

		(Unaudited)
		Three Months Ended  June 30,								Six Months Ended June 30,
(in thousands)		2023				2022				2023				2022
Total operating expense		$	126,633			$	110,401			$	254,746			$	217,868
Stock-based compensation expense			(21,164	)			(19,170	)			(40,573	)			(35,881	)
Amortization			(7,625	)			(6,208	)			(15,439	)			(12,111	)
(Loss) gain on mark-to-market adjustment of    contingent consideration			(981	)			5,304				(7,987	)			5,304
Non-GAAP operating expense		$	96,863			$	90,327			$	190,747			$	175,180

The following table provides a reconciliation of Billings to revenue, the most comparable GAAP financial measure:

		(Unaudited)
		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)		2023				2022				2023				2022
Revenue		$	141,161			$	132,656			$	307,195			$	292,437
Ending deferred revenue			148,547				112,926				148,547				112,926
Beginning deferred revenue			(141,943	)			(118,403	)			(144,460	)			(106,032	)
Deferred revenue acquired			—				(1,756	)			—				(2,572	)
Billings		$	147,765			$	125,423			$	311,282			$	296,759

 

 

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The following table provides revenue, Billings and Adjusted EBITDA on a constant currency basis:

		(Unaudited)
		Three Months Ended June 30, 2023												Three Months Ended June 30, 2022				Increase/ (Decrease) %
(in thousands)		As reported				Currency changes				As adjusted for constant currency				As reported				As reported				As adjusted for constant currency
Software revenue		$	125.3			$	2.6			$	127.9			$	116.9				7.2	%			9.4	%
Total revenue		$	141.2			$	2.7			$	143.9			$	132.7				6.4	%			8.4	%
Billings		$	147.8			$	2.3			$	150.1			$	125.4				17.8	%			19.6	%
Adjusted EBITDA		$	17.1			$	1.4			$	18.5			$	16.4				3.7	%			12.8	%
		(Unaudited)
		Six Months Ended June 30, 2023												Six Months Ended June 30, 2022				Increase/ (Decrease) %
(in thousands)		As reported				Currency changes				As adjusted for constant currency				As reported				As reported				As adjusted for constant currency
Software revenue		$	275.0			$	7.9			$	282.9			$	257.8				6.7	%			9.7	%
Total revenue		$	307.2			$	8.5			$	315.7			$	292.4				5.0	%			7.9	%
Billings		$	311.3			$	8.6			$	319.9			$	296.8				4.9	%			7.8	%
Adjusted EBITDA		$	60.1			$	3.8			$	63.9			$	63.0				-4.6	%			1.5	%

 

 

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Change in Classification of Indirect Costs

Beginning in the first quarter of 2023, the Company refined its classification of certain indirect costs to reflect the way management is now reviewing the information in decision making and to improve comparability with peers. These indirect costs include certain IT, facilities, and depreciation expenses that were previously reported primarily in General and administrative expense. These indirect costs have now been reclassified to Research and development, Sales and marketing, and General and administrative expenses based on global headcount. Management believes this refined methodology better reflects the nature of the costs and financial performance of the Company.

As a result, the Company’s consolidated statements of operations have been recast for prior periods presented to reflect the effects of the changes to Research and development, Sales and marketing, and General and administrative expense. There was no net impact to total operating expenses, income from operations, net income or net income per share for any periods presented. The consolidated balance sheets, consolidated statements of comprehensive income, consolidated statements of changes in stockholders’ equity, and the consolidated statements of cash flows were not affected by changes in the presentation of these costs.

Each prior period that will be presented in the forthcoming Form 10-Q and Form 10-K filings will be recast to conform to current period presentation. The following tables provide the relevant financial results as previously reported, as recast for the current period and forthcoming filings, and the associated impacts of the changes. Within these tables, the references to periods such as “FY 2021” and “Q1 2022” refer to the corresponding periods as reported in the applicable Form 10-K, Form 10-Q, or Form 8-K filings.

The following table summarizes the changes made to the consolidated statements of operations (in thousands):

 

		Previously Reported
		FY 2021				Q1 2022				Q2 2022				Q3 2022				Q4 2022				FY 2022
Operating expenses:
Research and development		$	151,049			$	43,094			$	46,477			$	48,781			$	47,511			$	185,863
Sales and marketing			132,750				35,682				39,116				39,244				41,203				155,245
General and administrative			91,500				23,569				24,367				24,677				24,993				97,606
Amortization of intangible assets			18,357				5,903				6,208				6,571				8,828				27,510
Other operating income, net			(3,482	)			(781	)			(5,767	)			(2,835	)			(572	)			(9,955	)
Total operating expenses		$	390,174			$	107,467			$	110,401			$	116,438			$	121,963			$	456,269
		Recast
		FY 2021				Q1 2022				Q2 2022				Q3 2022				Q4 2022				FY 2022
Operating expenses:
Research and development		$	167,341			$	47,079			$	50,437			$	53,092			$	51,934			$	202,542
Sales and marketing			141,484				37,840				41,153				41,352				43,539				163,884
General and administrative			66,474				17,426				18,370				18,258				18,234				72,288
Amortization of intangible assets			18,357				5,903				6,208				6,571				8,828				27,510
Other operating income, net			(3,482	)			(781	)			(5,767	)			(2,835	)			(572	)			(9,955	)
Total operating expenses		$	390,174			$	107,467			$	110,401			$	116,438			$	121,963			$	456,269
		Change
		FY 2021				Q1 2022				Q2 2022				Q3 2022				Q4 2022				FY 2022
Operating expenses:
Research and development		$	16,292			$	3,985			$	3,960			$	4,311			$	4,423			$	16,679
Sales and marketing			8,734				2,158				2,037				2,108				2,336				8,639
General and administrative			(25,026	)			(6,143	)			(5,997	)			(6,419	)			(6,759	)			(25,318	)
Amortization of intangible assets			—				—				—				—				—				—
Other operating income, net			—				—				—				—				—				—
Total operating expenses		$	—			$	—			$	—			$	—			$	—			$	—

 

 

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Business Outlook

The following table provides a reconciliation of projected Non-GAAP net income to projected net loss, the most comparable GAAP financial measure:

 

		(Unaudited)
		Three Months Ending September 30, 2023								Year Ending  December 31, 2023
(in thousands)		Low				High				Low				High
Net loss		$	(22,800	)		$	(20,900	)		$	(15,300	)		$	(5,600	)
Stock-based compensation expense			18,200				18,200				82,200				82,200
Amortization of intangible assets			7,600				7,600				30,400				30,400
Non-cash interest expense			500				500				1,800				1,800
Impact of non-GAAP tax rate(1)			(600	)			(1,000	)			(14,100	)			(16,400	)
Special adjustments and other(2)			—				—				4,900				4,900
Non-GAAP net income		$	2,900			$	4,400			$	89,900			$	97,300

 

The following table provides a reconciliation of projected Adjusted EBITDA to projected net loss, the most comparable GAAP financial measure:

 

		(Unaudited)
		Three Months Ending September 30, 2023								Year Ending  December 31, 2023
(in thousands)		Low				High				Low				High
Net loss		$	(22,800	)		$	(20,900	)		$	(15,300	)		$	(5,600	)
Income tax expense			400				500				17,500				17,800
Stock-based compensation expense			18,200				18,200				82,200				82,200
Interest (income) expense			(2,500	)			(2,500	)			(9,000	)			(9,000	)
Depreciation and amortization			9,700				9,700				38,700				38,700
Special adjustments and other(1)			—				—				4,900				4,900
Adjusted EBITDA		$	3,000			$	5,000			$	119,000			$	129,000

 

The following table provides a reconciliation of projected Free Cash Flow to projected net cash provided by operating activities, the most comparable GAAP financial measure:

 

						(Unaudited)
						Year Ending  December 31, 2023
(in thousands)						Low				High
Net cash provided by operating activities						$	120,200			$	128,200
Capital expenditures							(12,200	)			(12,200	)
Free cash flow						$	108,000			$	116,000

 

 

 

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