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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 March 31, 2020 

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 April 20, 2020, there were 41,816,035 shares of the registrant’s Class A common stock outstanding and 31,050,732 shares of the registrant’s Class B common stock outstanding.

 

  

 

 


ALTAIR ENGINEERING INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2020

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

 

25

 

 

 

 

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

38

 

 

 

 

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

39

 

 

 

 

 

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

40

 

 

 

 

 

 

 

 

 

Item 1A.

 

Risk Factors

 

40

 

 

 

 

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

40

 

 

 

 

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

41

 

 

 

 

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

41

 

 

 

 

 

 

 

 

 

Item 5.

 

Other Information

 

41

 

 

 

 

 

 

 

 

 

Item 6.

 

Exhibits

 

42

 

 

 

 

 

 

 

 

SIGNATURES

 

 

 

 

 

43

 

 

 

 


 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

 

ALTAIR ENGINEERING INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

 

March 31, 2020

 

 

December 31, 2019

 

(In thousands)

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

247,145

 

 

$

223,117

 

Accounts receivable, net

 

 

87,665

 

 

 

104,984

 

Income tax receivable

 

 

5,884

 

 

 

7,264

 

Prepaid expenses and other current assets

 

 

16,777

 

 

 

17,092

 

Total current assets

 

 

357,471

 

 

 

352,457

 

Property and equipment, net

 

 

35,449

 

 

 

36,297

 

Operating lease right of use assets

 

 

25,321

 

 

 

28,134

 

Goodwill

 

 

229,795

 

 

 

233,683

 

Other intangible assets, net

 

 

61,358

 

 

 

67,075

 

Deferred tax assets

 

 

5,620

 

 

 

5,791

 

Other long-term assets

 

 

19,640

 

 

 

19,708

 

TOTAL ASSETS

 

$

734,654

 

 

$

743,145

 

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

430

 

 

$

430

 

Accounts payable

 

 

5,625

 

 

 

8,585

 

Accrued compensation and benefits

 

 

27,623

 

 

 

30,676

 

Current portion of operating lease liabilities

 

 

8,635

 

 

 

9,141

 

Other accrued expenses and current liabilities

 

 

35,760

 

 

 

28,603

 

Deferred revenue

 

 

72,567

 

 

 

75,431

 

Total current liabilities

 

 

150,640

 

 

 

152,866

 

Long-term debt, net of current portion

 

 

180,777

 

 

 

178,238

 

Operating lease liabilities, net of current portion

 

 

17,796

 

 

 

20,174

 

Deferred revenue, non-current

 

 

7,472

 

 

 

8,136

 

Other long-term liabilities

 

 

19,472

 

 

 

26,672

 

TOTAL LIABILITIES

 

 

376,157

 

 

 

386,086

 

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 41,779

   and 41,271 shares as of March 31, 2020 and December 31, 2019, respectively

 

 

4

 

 

 

4

 

Class B common stock, authorized 41,203 shares, issued and outstanding 31,051

   and 31,131 shares as of March 31, 2020 and December 31, 2019, respectively

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

449,870

 

 

 

446,633

 

Accumulated deficit

 

 

(76,763

)

 

 

(82,405

)

Accumulated other comprehensive loss

 

 

(16,969

)

 

 

(9,528

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

356,145

 

 

 

354,707

 

TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

 

$

734,654

 

 

$

743,145

 

 

See accompanying notes to consolidated financial statements.

 

 

 

3


 

 

ALTAIR ENGINEERING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended March 31,

 

(in thousands, except per share data)

 

2020

 

 

2019

 

Revenue

 

 

 

 

 

 

 

 

License

 

$

77,543

 

 

$

76,621

 

Maintenance and other services

 

 

30,900

 

 

 

26,670

 

Total software

 

 

108,443

 

 

 

103,291

 

Software related services

 

 

6,934

 

 

 

9,772

 

Total software and related services

 

 

115,377

 

 

 

113,063

 

Client engineering services

 

 

13,878

 

 

 

12,050

 

Other

 

 

2,208

 

 

 

2,746

 

Total revenue

 

 

131,463

 

 

 

127,859

 

Cost of revenue

 

 

 

 

 

 

 

 

License

 

 

5,523

 

 

 

5,821

 

Maintenance and other services

 

 

10,455

 

 

 

8,531

 

Total software

 

 

15,978

 

 

 

14,352

 

Software related services

 

 

5,489

 

 

 

6,518

 

Total software and related services

 

 

21,467

 

 

 

20,870

 

Client engineering services

 

 

11,318

 

 

 

9,800

 

Other

 

 

1,712

 

 

 

2,215

 

Total cost of revenue

 

 

34,497

 

 

 

32,885

 

Gross profit

 

 

96,966

 

 

 

94,974

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

31,467

 

 

 

27,516

 

Sales and marketing

 

 

28,099

 

 

 

26,451

 

General and administrative

 

 

22,346

 

 

 

20,329

 

Amortization of intangible assets

 

 

3,840

 

 

 

3,528

 

Other operating income, net

 

 

(891

)

 

 

(617

)

Total operating expenses

 

 

84,861

 

 

 

77,207

 

Operating income

 

 

12,105

 

 

 

17,767

 

Interest expense

 

 

2,813

 

 

 

270

 

Other (income) expense, net

 

 

(1,390

)

 

 

390

 

Income before income taxes

 

 

10,682

 

 

 

17,107

 

Income tax expense

 

 

4,652

 

 

 

4,088

 

Net income

 

$

6,030

 

 

$

13,019

 

Income per share:

 

 

 

 

 

 

 

 

Net income per share attributable to common

  stockholders, basic

 

$

0.08

 

 

$

0.18

 

Net income per share attributable to common

  stockholders, diluted

 

$

0.08

 

 

$

0.17

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Weighted average number of shares used in computing

  net income per share, basic

 

 

72,623

 

 

 

70,786

 

Weighted average number of shares used in computing

  net income per share, diluted

 

 

77,004

 

 

 

76,720

 

 

See accompanying notes to consolidated financial statements.

 

 

4


 

ALTAIR ENGINEERING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

(in thousands)

 

2020

 

 

2019

 

Net income

 

$

6,030

 

 

$

13,019

 

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

 

 

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

   all periods)

 

 

(7,578

)

 

 

337

 

Retirement related benefit plans (net of tax effect of $13 and $0,

   respectively)

 

 

137

 

 

 

228

 

Total other comprehensive (loss) income

 

 

(7,441

)

 

 

565

 

Comprehensive (loss) income

 

$

(1,411

)

 

$

13,584

 

 

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, 2020

 

 

41,271

 

 

$

4

 

 

 

31,131

 

 

$

3

 

 

$

446,633

 

 

$

(82,405

)

 

$

(9,528

)

 

$

354,707

 

Cumulative effect of an accounting change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(388

)

 

 

 

 

 

(388

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,030

 

 

 

 

 

 

6,030

 

Exercise of stock options

 

 

285

 

 

 

 

 

 

 

 

 

 

 

 

194

 

 

 

 

 

 

 

 

 

194

 

Vesting of restricted stock

 

 

143

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion from Class B to Class A common stock

 

 

80

 

 

 

 

 

 

(80

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,043

 

 

 

 

 

 

 

 

 

3,043

 

Foreign currency translation, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,578

)

 

 

(7,578

)

Retirement related benefit plans, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

137

 

 

 

137

 

Balance at March 31, 2020

 

 

41,779

 

 

$

4

 

 

 

31,051

 

 

$

3

 

 

$

449,870

 

 

$

(76,763

)

 

$

(16,969

)

 

$

356,145

 

 

 

 

 

See accompanying notes to consolidated financial statements.


6


 

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

 

 

 

See accompanying notes to consolidated financial statements.

 

 

7


 

ALTAIR ENGINEERING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Three Months Ended March 31,

 

(In thousands)

 

2020

 

 

2019

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income

 

$

6,030

 

 

$

13,019

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

5,660

 

 

 

5,194

 

Provision for credit loss

 

 

338

 

 

 

120

 

Amortization of debt discount and issuance costs

 

 

2,653

 

 

 

4

 

Stock-based compensation expense

 

 

3,171

 

 

 

1,212

 

Deferred income taxes

 

 

(6,001

)

 

 

(654

)

Other, net

 

 

7

 

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

14,463

 

 

 

7,678

 

Prepaid expenses and other current assets

 

 

1,184

 

 

 

(5,755

)

Other long-term assets

 

 

(321

)

 

 

(1,516

)

Accounts payable

 

 

(3,001

)

 

 

(1,792

)

Accrued compensation and benefits

 

 

(2,581

)

 

 

(2,815

)

Other accrued expenses and current liabilities

 

 

8,580

 

 

 

4,093

 

Operating lease right-of-use assets and liabilities, net

 

 

(17

)

 

 

286

 

Deferred revenue

 

 

(2,129

)

 

 

6,241

 

Net cash provided by operating activities

 

 

28,036

 

 

 

25,315

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(1,644

)

 

 

(4,583

)

Payments for acquisition of developed technology

 

 

(433

)

 

 

(344

)

Other investing activities, net

 

 

62