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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, 2019 

OR

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 Stock 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 22, 2019 there were 39,734,927 shares of the registrant’s Class A common stock outstanding and 31,900,732 shares of the registrant’s Class B common stock outstanding.

 

  

 

 


ALTAIR ENGINEERING INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2019

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 Income (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

 

32

 

 

 

 

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

49

 

 

 

 

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

50

 

 

 

 

 

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

51

 

 

 

 

 

 

 

 

 

Item 1A.

 

Risk Factors

 

51

 

 

 

 

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

53

 

 

 

 

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

53

 

 

 

 

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

54

 

 

 

 

 

 

 

 

 

Item 5.

 

Other Information

 

54

 

 

 

 

 

 

 

 

 

Item 6.

 

Exhibits

 

55

 

 

 

 

 

 

 

 

SIGNATURES

 

 

 

 

 

56

 

 

 

 


 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

 

ALTAIR ENGINEERING INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

 

June 30, 2019

 

 

December 31, 2018

 

(In thousands)

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

251,828

 

 

$

35,345

 

Accounts receivable, net

 

 

85,758

 

 

 

96,803

 

Income tax receivable

 

 

8,515

 

 

 

4,431

 

Prepaid expenses and other current assets

 

 

18,262

 

 

 

17,455

 

Total current assets

 

 

364,363

 

 

 

154,034

 

Property and equipment, net

 

 

34,050

 

 

 

30,153

 

Operating lease right of use assets

 

 

28,878

 

 

 

 

Goodwill

 

 

212,087

 

 

 

210,532

 

Other intangible assets, net

 

 

64,874

 

 

 

69,836

 

Deferred tax assets

 

 

5,901

 

 

 

5,354

 

Other long-term assets

 

 

19,567

 

 

 

17,288

 

TOTAL ASSETS

 

$

729,720

 

 

$

487,197

 

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

472

 

 

$

331

 

Accounts payable

 

 

6,462

 

 

 

8,357

 

Accrued compensation and benefits

 

 

29,155

 

 

 

31,740

 

Current portion of operating lease liabilities

 

 

9,412

 

 

 

 

Other accrued expenses and current liabilities

 

 

27,979

 

 

 

27,039

 

Deferred revenue

 

 

67,587

 

 

 

59,765

 

Total current liabilities

 

 

141,067

 

 

 

127,232

 

Long-term debt, net of current portion

 

 

173,157

 

 

 

31,417

 

Operating lease liabilities, net of current portion

 

 

20,722

 

 

 

 

Deferred revenue, non-current

 

 

6,219

 

 

 

6,754

 

Other long-term liabilities

 

 

26,362

 

 

 

25,756

 

TOTAL LIABILITIES

 

 

367,527

 

 

 

191,159

 

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 39,672

   and 38,349 shares as of June 30, 2019 and December 31, 2018, respectively

 

 

4

 

 

 

4

 

Class B common stock, authorized 41,203 shares, issued and outstanding 31,901

   and 32,171 shares as of June 30, 2019 and December 31, 2018, respectively

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

433,902

 

 

 

379,832

 

Accumulated deficit

 

 

(64,964

)

 

 

(74,863

)

Accumulated other comprehensive loss

 

 

(9,104

)

 

 

(11,290

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

359,841

 

 

 

293,686

 

TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

 

$

729,720

 

 

$

487,197

 

 

See accompanying notes to consolidated financial statements.

 

 

 

3


 

 

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)

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

License

 

$

56,653

 

 

$

46,700

 

 

$

133,274

 

 

$

113,635

 

Maintenance and other services

 

 

27,755

 

 

 

23,907

 

 

 

54,425

 

 

 

46,641

 

Total software

 

 

84,408

 

 

 

70,607

 

 

 

187,699

 

 

 

160,276

 

Software related services

 

 

7,907

 

 

 

8,707

 

 

 

17,679

 

 

 

18,180

 

Total software and related services

 

 

92,315

 

 

 

79,314

 

 

 

205,378

 

 

 

178,456

 

Client engineering services

 

 

12,412

 

 

 

12,417

 

 

 

24,462

 

 

 

24,497

 

Other

 

 

2,046

 

 

 

1,629

 

 

 

4,792

 

 

 

3,664

 

Total revenue

 

 

106,773

 

 

 

93,360

 

 

 

234,632

 

 

 

206,617

 

Cost of revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

License

 

 

2,954

 

 

 

4,068

 

 

 

8,775

 

 

 

7,798

 

Maintenance and other services

 

 

9,430

 

 

 

7,915

 

 

 

17,961

 

 

 

15,107

 

Total software

 

 

12,384

 

 

 

11,983

 

 

 

26,736

 

 

 

22,905

 

Software related services

 

 

6,612

 

 

 

6,512

 

 

 

13,130

 

 

 

13,221

 

Total software and related services

 

 

18,996

 

 

 

18,495

 

 

 

39,866

 

 

 

36,126

 

Client engineering services

 

 

10,033

 

 

 

9,960

 

 

 

19,833

 

 

 

20,160

 

Other

 

 

1,994

 

 

 

1,001

 

 

 

4,209

 

 

 

2,212

 

Total cost of revenue

 

 

31,023

 

 

 

29,456

 

 

 

63,908

 

 

 

58,498

 

Gross profit

 

 

75,750

 

 

 

63,904

 

 

 

170,724

 

 

 

148,119

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

29,829

 

 

 

24,744

 

 

 

57,345

 

 

 

47,447

 

Sales and marketing

 

 

26,221

 

 

 

19,979

 

 

 

52,672

 

 

 

38,606

 

General and administrative

 

 

19,851

 

 

 

17,412

 

 

 

40,180

 

 

 

34,402

 

Amortization of intangible assets

 

 

3,600

 

 

 

1,986

 

 

 

7,128

 

 

 

3,926

 

Other operating income

 

 

(549

)

 

 

(392

)

 

 

(1,166

)

 

 

(2,583

)

Total operating expenses

 

 

78,952

 

 

 

63,729

 

 

 

156,159

 

 

 

121,798

 

Operating (loss) income

 

 

(3,202

)

 

 

175

 

 

 

14,565

 

 

 

26,321

 

Interest expense

 

 

590

 

 

 

45

 

 

 

860

 

 

 

61

 

Other income, net

 

 

(505

)

 

 

(176

)

 

 

(115

)

 

 

(1,076

)

(Loss) income before income taxes

 

 

(3,287

)

 

 

306

 

 

 

13,820

 

 

 

27,336

 

Income tax (benefit) expense

 

 

(167

)

 

 

1,386

 

 

 

3,921

 

 

 

3,732

 

Net (loss) income

 

$

(3,120

)

 

$

(1,080

)

 

$

9,899

 

 

$

23,604

 

Income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share attributable to common

  stockholders, basic

 

$

(0.04

)

 

$

(0.02

)

 

$

0.14

 

 

$

0.37

 

Net (loss) income per share attributable to common

  stockholders, diluted

 

$

(0.04

)

 

$

(0.02

)

 

$

0.13

 

 

$

0.32

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares used in computing

  net (loss) income per share, basic

 

 

71,373

 

 

 

65,580

 

 

 

71,081

 

 

 

64,614

 

Weighted average number of shares used in computing

  net (loss) income per share, diluted

 

 

71,373

 

 

 

65,580

 

 

 

77,017

 

 

 

72,881

 

 

See accompanying notes to consolidated financial statements.

 

 

4


 

ALTAIR ENGINEERING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(in thousands)

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net (loss) income

 

$

(3,120

)

 

$

(1,080

)

 

$

9,899

 

 

$

23,604

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation (net of tax effect of $0,

$0, $0 and $0, respectively)

 

 

1,605

 

 

 

(4,267

)

 

 

1,942

 

 

 

(3,012

)

Retirement related benefit plans (net of tax effect of $0

$(17), $0 and $(7), respectively)

 

 

16

 

 

 

118

 

 

 

244

 

 

 

106

 

Total other comprehensive income (loss)

 

 

1,621

 

 

 

(4,149

)

 

 

2,186

 

 

 

(2,906

)

Comprehensive (loss) income

 

$

(1,499

)

 

$

(5,229

)

 

$

12,085

 

 

$

20,698

 

 

See accompanying notes to consolidated financial statements.

 

 

 

5


 

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 at January 1, 2019

 

 

38,349

 

 

$

4

 

 

 

32,171

 

 

$

3

 

 

$

379,832

 

 

$

(74,863

)

 

$

(11,290

)

 

$

293,686

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,019

 

 

 

 

 

 

13,019

 

Exercise of stock options

 

 

397

 

 

 

 

 

 

 

 

 

 

 

 

458

 

 

 

 

 

 

 

 

 

458

 

Vesting of restricted stock

 

 

14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

869

 

 

 

 

 

 

 

 

 

869

 

Foreign currency translation, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

337

 

 

 

337

 

Retirement related benefit plans, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

228

 

 

 

228

 

Balance at March 31, 2019

 

 

38,760

 

 

 

4

 

 

 

32,171

 

 

 

3

 

 

 

381,159

 

 

 

(61,844

)

 

 

(10,725

)

 

 

308,597

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,120

)

 

 

 

 

 

(3,120

)

Equity component of convertible senior notes,

   net of issuance costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

50,009

 

 

 

 

 

 

 

 

 

50,009

 

Exercise of stock options