Altair Engineering Inc. Investor Relations

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altr-10q_20190930.htm

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 September 30, 2019

☐	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 October 21, 2019 there were 40,473,100 shares of the registrant’s Class A common stock outstanding and 31,300,732 shares of the registrant’s Class B common stock outstanding.

ALTAIR ENGINEERING INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 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		33

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		51

	Item 4.	Controls and Procedures		52

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings		53

	Item 1A.	Risk Factors		53

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		56

	Item 3.	Defaults Upon Senior Securities		56

	Item 4.	Mine Safety Disclosures		56

	Item 5.	Other Information		56

	Item 6.	Exhibits		57

SIGNATURES				58

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ALTAIR ENGINEERING INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	September 30, 2019			December 31, 2018
(In thousands)	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	246,937		$	35,345
Accounts receivable, net		84,062			96,803
Income tax receivable		11,551			4,431
Prepaid expenses and other current assets		18,398			17,455
Total current assets		360,948			154,034
Property and equipment, net		33,720			30,153
Operating lease right of use assets		26,507			—
Goodwill		210,500			210,532
Other intangible assets, net		60,956			69,836
Deferred tax assets		5,870			5,354
Other long-term assets		18,199			17,288
TOTAL ASSETS	$	716,700		$	487,197
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt	$	437		$	331
Accounts payable		8,286			8,357
Accrued compensation and benefits		28,839			31,740
Current portion of operating lease liabilities		8,891			—
Other accrued expenses and current liabilities		27,426			27,039
Deferred revenue		69,377			59,765
Total current liabilities		143,256			127,232
Long-term debt, net of current portion		175,624			31,417
Operating lease liabilities, net of current portion		18,831			—
Deferred revenue, non-current		7,666			6,754
Other long-term liabilities		25,630			25,756
TOTAL LIABILITIES		371,007			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 40,354 and 38,349 shares as of September 30, 2019 and December 31, 2018, respectively		4			4
Class B common stock, authorized 41,203 shares, issued and outstanding 31,391 and 32,171 shares as of September 30, 2019 and December 31, 2018, respectively		3			3
Additional paid-in capital		436,197			379,832
Accumulated deficit		(80,903	)		(74,863	)
Accumulated other comprehensive loss		(11,960	)		(11,290	)
TOTAL STOCKHOLDERS’ EQUITY		343,341			293,686
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY	$	716,700		$	487,197

See accompanying notes to consolidated financial statements.

ALTAIR ENGINEERING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except per share data)	2019			2018			2019			2018
Revenue
License	$	46,853		$	40,880		$	180,127		$	154,515
Maintenance and other services		30,963			23,302			85,388			69,943
Total software		77,816			64,182			265,515			224,458
Software related services		7,956			8,692			25,635			26,872
Total software and related services		85,772			72,874			291,150			251,330
Client engineering services		12,803			12,155			37,265			36,652
Other		1,831			1,722			6,623			5,386
Total revenue		100,406			86,751			335,038			293,368
Cost of revenue
License		4,371			2,736			13,146			10,534
Maintenance and other services		9,548			7,095			27,509			22,202
Total software		13,919			9,831			40,655			32,736
Software related services		6,013			6,352			19,143			19,573
Total software and related services		19,932			16,183			59,798			52,309
Client engineering services		10,160			9,817			29,993			29,977
Other		1,649			1,204			5,858			3,416
Total cost of revenue		31,741			27,204			95,649			85,702
Gross profit		68,665			59,547			239,389			207,666
Operating expenses:
Research and development		29,667			24,301			87,012			71,748
Sales and marketing		25,790			19,243			78,462			57,849
General and administrative		20,706			17,234			60,886			51,636
Amortization of intangible assets		3,545			1,739			10,673			5,665
Other operating income, net		(536	)		(4,850	)		(1,702	)		(7,433	)
Total operating expenses		79,172			57,667			235,331			179,465
Operating (loss) income		(10,507	)		1,880			4,058			28,201
Interest expense		2,726			31			3,586			92
Other income, net		(588	)		(970	)		(703	)		(2,046	)
(Loss) income before income taxes		(12,645	)		2,819			1,175			30,155
Income tax expense		3,294			1,885			7,215			5,617
Net (loss) income	$	(15,939	)	$	934		$	(6,040	)	$	24,538
Income per share:
Net (loss) income per share attributable to common stockholders, basic	$	(0.22	)	$	0.01		$	(0.08	)	$	0.37
Net (loss) income per share attributable to common stockholders, diluted	$	(0.22	)	$	0.01		$	(0.08	)	$	0.33
Weighted average shares outstanding:
Weighted average number of shares used in computing net (loss) income per share, basic		71,770			70,001			71,313			66,429
Weighted average number of shares used in computing net (loss) income per share, diluted		71,770			76,709			71,313			74,182

See accompanying notes to consolidated financial statements.

ALTAIR ENGINEERING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2019			2018			2019			2018
Net (loss) income	$	(15,939	)	$	934		$	(6,040	)	$	24,538
Other comprehensive (loss) income, net of tax:
Foreign currency translation (net of tax effect of $0 for all periods)		(2,988	)		(1,149	)		(1,046	)		(4,161	)
Retirement related benefit plans (net of tax effect of $0 $(9), $0 and $(16), respectively)		132			36			376			142
Total other comprehensive loss		(2,856	)		(1,113	)		(670	)		(4,019	)
Comprehensive (loss) income	$	(18,795	)	$	(179	)	$	(6,710	)	$	20,519

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 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		—		—		—		—		—