Altair Engineering Inc. Investor Relations

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38263

ALTAIR ENGINEERING INC.

(Exact name of registrant as specified in its charter)


Delaware		38-2591828
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1820 East Big Beaver Road, Troy, Michigan		48083
(Address of principal executive offices)		(Zip Code)

(248) 614-2400

(Registrant’s telephone number, including area code)

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


Title of each class	Trading Symbol	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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		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 ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

On July 17, 2023, there were 54,072,791 shares of the registrant’s Class A common stock outstanding and 27,164,574 shares of the registrant’s Class B common stock outstanding.

ALTAIR ENGINEERING INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2023

INDEX


				Page

PART I.	FINANCIAL INFORMATION

	Item 1.	Financial Statements – Unaudited		3

		a)	Consolidated Balance Sheets	3

		b)	Consolidated Statements of Operations	4

		c)	Consolidated Statements of Comprehensive Loss	5

		d)	Consolidated Statements of Changes in Stockholders’ Equity	6

		e)	Consolidated Statements of Cash Flows	8

		f)	Notes to Consolidated Financial Statements	9

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		20

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		35

	Item 4.	Controls and Procedures		36

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings		37

	Item 1A.	Risk Factors		37

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		38

	Item 3.	Defaults Upon Senior Securities		38

	Item 4.	Mine Safety Disclosures		38

	Item 5.	Other Information		38

	Item 6.	Exhibits		39

SIGNATURES				40

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ALTAIR ENGINEERING 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

See accompanying notes to consolidated financial statements.

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

See accompanying notes to consolidated financial statements.

ALTAIR ENGINEERING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(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	)
Other comprehensive (loss) income, net of tax:
Foreign currency translation (net of tax effect of $0 for all periods)		(1,340	)		(15,949	)		5,892			(20,112	)
Retirement related benefit plans (net of tax effect of $(79), $7, $(79) and $7, respectively)		(70	)		177			(51	)		282
Total other comprehensive (loss) income		(1,410	)		(15,772	)		5,841			(19,830	)
Comprehensive loss	$	(23,690	)	$	(49,546	)	$	(18,398	)	$	(42,076	)

See accompanying notes to consolidated financial statements.

ALTAIR ENGINEERING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)



																Accumulated
	Common stock									Additional						other			Total
	Class A					Class B				paid-in			Accumulated			comprehensive			stockholders’
(in thousands)	Shares			Amount		Shares		Amount		capital			deficit			loss			equity
Balance as of December 31, 2022		52,277		$	5		27,745	$	3	$	721,307		$	(121,577	)	$	(30,002	)	$	569,736
Net loss		—			—		—		—		—			(1,959	)		—			(1,959	)
Issuance of common stock for acquisitions		34			—		—		—		—			—			—			—
Repurchase and retirement of common stock		(91	)		—		—		—		(4,256	)		—			—			(4,256	)
Issuance of common stock for employee stock purchase program		92			—		—		—		3,648			—			—			3,648
Exercise of stock options		265			—		—		—		10,324			—			—			10,324
Vesting of restricted stock		336			—