Investor Relations

2020 Second Quarter Revenue Exceeds Guidance
Increases Full Year 2020 Outlook

TROY, Mich., Aug. 06, 2020 (GLOBE NEWSWIRE) -- Altair (Nasdaq: ALTR), a global technology company that provides software and cloud solutions in the areas of product development, high performance computing (HPC) and data analytics, today released its financial results for the second quarter ended June 30, 2020.

“We are very pleased with our second quarter performance, which exceeded our expectations. I am proud to lead an organization which has remained so dedicated and intensely focused on developing great software and helping customers succeed despite the personal hardships brought on by COVID-19,” said James Scapa, Founder, Chairman and Chief Executive Officer of Altair.

“Our software product revenue increased to 83% of total revenue, which drove a 400 basis point year over year improvement in gross margins, while our recurring license rate rose to an all-time high of 93%,” said Howard Morof, Chief Financial Officer of Altair. “Moreover, the proactive steps we took to control costs in light of COVID-19 had an immediate positive impact on our operating expenses. Our ongoing digital transformation efforts continue, and as we implement robust processes, we believe the positive impact of these significant investments will drive measurable benefits for the business and support our long-term goals.”

Second Quarter 2020 Financial Highlights

• Software product revenue was $81.8 million compared to $84.4 million for the second quarter of 2019.
• Total revenue was $98.6 million compared to $106.8 million for the second quarter of 2019.
• Net loss was $10.2 million compared to net loss of $3.1 million for the second quarter of 2019. Diluted net loss per share was $0.14 based on 73.0 million diluted weighted average common shares outstanding, compared to diluted net loss per share of $0.04 for the second quarter of 2019, based on 71.4 million diluted weighted average common shares outstanding.
• Adjusted EBITDA was $5.7 million, compared to $5.2 million for the second quarter of 2019. 
• Non-GAAP net loss was $1.7 million, compared to non-GAAP net income of $3.2 million for the second quarter of 2019. Non-GAAP diluted net loss per share was $0.02 based on 80.7 million non-GAAP diluted common shares outstanding, compared to non-GAAP diluted net income per share of $0.04 for the second quarter of 2019, based on 77.7 million non-GAAP diluted common shares outstanding.
• Free cash flow was $4.5 million for both the second quarters of 2020 and 2019.

Business Outlook

Based on information available as of today, Altair is issuing guidance for the third quarter and full year 2020. 

(in millions)	Third Quarter 2020								Full Year 2020
Software Product Revenue		$	80.0		to	$	82.0			$	368.0		to	$	380.0
Total Revenue		$	96.0			$	100.0			$	443.0			$	455.0
Net Loss		$	(20.3	)		$	(18.3	)		$	(36.0	)		$	(31.0	)
Non-GAAP Net (Loss) Income		$	(9.0	)		$	(7.0	)		$	2.2			$	7.2
Adjusted EBITDA		$	(2.0	)		$	0.0			$	33.0			$	38.0

Conference Call Information

What:	Altair’s Second Quarter 2020 Financial Results Conference Call
When:	Friday, August 7, 2020
Time:	8:30 a.m. ET
Live Call:	(866) 754-5204, Domestic
	(636) 812-6621, International
Replay:	(855) 859-2056, Conference ID 5072406, Domestic
	(404) 537-3406, Conference ID 5072406, International
Webcast:	http://investor.altair.com  (live & replay)

***

Non-GAAP Financial Measures
This press release contains the following non-GAAP financial measures: Adjusted EBITDA, Non-GAAP Net Income (Loss), Non-GAAP Net Income (Loss) Per Share and Free Cash Flow.

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.

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.

Non-GAAP net income excludes stock-based compensation, amortization of intangible assets related to acquisitions, and special items as identified by management and described elsewhere in this press release.

Non-GAAP diluted common shares includes total outstanding shares plus outstanding equity awards under the Company’s equity award plans.

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

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 technology company that provides software and cloud solutions in the areas of product development, high performance computing (HPC) and data analytics. Altair enables organizations across broad industry segments to compete more effectively in a connected world while creating a 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 2020, our statements regarding COVID-19, our statements regarding our digital transformation efforts, 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.

Media Relations
Altair
Dave Simon
248-614-2400 ext. 332
ir@altair.com

Investor Relations
The Blueshirt Group
Monica Gould
212-871-3927
Lindsay Savarese
212-331-8417
ir@altair.com

 

ALTAIR ENGINERING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

		June 30, 2020				December 31, 2019
(In thousands)		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	250,540			$	223,117
Accounts receivable, net			79,185				104,984
Income tax receivable			5,760				7,264
Prepaid expenses and other current assets			16,469				17,092
Total current assets			351,954				352,457
Property and equipment, net			34,456				36,297
Operating lease right of use assets			32,598				28,134
Goodwill			233,486				233,683
Other intangible assets, net			58,177				67,075
Deferred tax assets			5,661				5,791
Other long-term assets			20,514				19,708
TOTAL ASSETS		$	736,846			$	743,145
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt		$	456			$	430
Accounts payable			4,780				8,585
Accrued compensation and benefits			30,997				30,676
Current portion of operating lease liabilities			9,369				9,141
Other accrued expenses and current liabilities			27,411				28,603
Deferred revenue			73,061				75,431
Total current liabilities			146,074				152,866
Long-term debt, net of current portion			183,409				178,238
Operating lease liabilities, net of current portion			24,352				20,174
Deferred revenue, non-current			7,287				8,136
Other long-term liabilities			19,990				26,672
TOTAL LIABILITIES			381,112				386,086
Commitments and contingencies
MEZZANINE EQUITY			784				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 42,108   and 41,271 shares as of June 30, 2020 and December 31, 2019, respectively			4				4
Class B common stock, authorized 41,203 shares, issued and outstanding 30,971   and 31,131 shares as of June 30, 2020 and December 31, 2019, respectively			3				3
Additional paid-in capital			456,307				446,633
Accumulated deficit			(86,986	)			(82,405	)
Accumulated other comprehensive loss			(14,378	)			(9,528	)
TOTAL STOCKHOLDERS’ EQUITY			354,950				354,707
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY		$	736,846			$	743,145

 

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)		2020				2019				2020				2019
Revenue
License		$	51,018			$	56,653			$	128,561			$	133,274
Maintenance and other services			30,815				27,755				61,715				54,425
Total software			81,833				84,408				190,276				187,699
Software related services			5,444				7,907				12,378				17,679
Total software and related services			87,277				92,315				202,654				205,378
Client engineering services			9,640				12,412				23,518				24,462
Other			1,644				2,046				3,852				4,792
Total revenue			98,561				106,773				230,024				234,632
Cost of revenue
License			2,851				2,954				8,374				8,775
Maintenance and other services			8,502				9,430				18,957				17,961
Total software *			11,353				12,384				27,331				26,736
Software related services			4,656				6,612				10,145				13,130
Total software and related services			16,009				18,996				37,476				39,866
Client engineering services			7,789				10,033				19,107				19,833
Other			1,283				1,994				2,995				4,209
Total cost of revenue			25,081				31,023				59,578				63,908
Gross profit			73,480				75,750				170,446				170,724
Operating expenses:
Research and development *			28,970				29,829				60,437				57,345
Sales and marketing *			25,806				26,221				53,905				52,672
General and administrative *			20,248				19,851				42,594				40,180
Amortization of intangible assets			3,692				3,600				7,532				7,128
Other operating income, net			(944	)			(549	)			(1,835	)			(1,166	)
Total operating expenses			77,772				78,952				162,633				156,159
Operating (loss) income			(4,292	)			(3,202	)			7,813				14,565
Interest expense			2,843				590				5,656				860
Other expense (income), net			320				(505	)			(1,070	)			(115	)
(Loss) income before income taxes			(7,455	)			(3,287	)			3,227				13,820
Income tax expense (benefit)			2,768				(167	)			7,420				3,921
Net (loss) income		$	(10,223	)		$	(3,120	)		$	(4,193	)		$	9,899
(Loss) income per share:
Net (loss) income per share attributable to common   stockholders, basic		$	(0.14	)		$	(0.04	)		$	(0.06	)		$	0.14
Net (loss) income per share attributable to common   stockholders, diluted		$	(0.14	)		$	(0.04	)		$	(0.06	)		$	0.13
Weighted average shares outstanding:
Weighted average number of shares used in computing   net (loss) income per share, basic			72,999				71,373				72,811				71,081
Weighted average number of shares used in computing   net (loss) income per share, diluted			72,999				71,373				72,811				77,017

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

		(Unaudited)
		Three Months Ended June 30,								Six Months Ended June 30,
		2020				2019				2020				2019
Cost of revenue – software		$	552			$	279			$	918			$	343
Research and development			1,830				579				3,258				937
Sales and marketing			1,273				475				2,000				937
General and administrative			879				747				1,529				1,075
Total stock-based compensation expense		$	4,534			$	2,080			$	7,705			$	3,292

 

ALTAIR ENGINEERING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)

		Six Months Ended June 30,
(In thousands)		2020				2019
OPERATING ACTIVITIES:
Net (loss) income		$	(4,193	)		$	9,899
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			11,293				10,468
Provision for credit loss			589				134
Amortization of debt discount and issuance costs			5,342				459
Stock-based compensation expense			7,705				3,292
Deferred income taxes			(5,961	)			(703	)
Other, net			3				(17	)
Changes in assets and liabilities:
Accounts receivable			23,264				10,406
Prepaid expenses and other current assets			1,817				(4,952	)
Other long-term assets			(960	)			(2,300	)
Accounts payable			(3,841	)			(2,187	)
Accrued compensation and benefits			497				(2,455	)
Other accrued expenses and current liabilities			131				1,887
Operating lease right-of-use assets and liabilities, net			30				197
Deferred revenue			(2,315	)			7,740
Net cash provided by operating activities			33,401				31,868
INVESTING ACTIVITIES:
Capital expenditures			(2,530	)			(6,667	)
Payments for acquisition of businesses, net of cash acquired			(2,270	)			(709	)
Payments for acquisition of developed technology			(433	)			(344	)
Other investing activities, net			142				16
Net cash used in investing activities			(5,091	)			(7,704	)
FINANCING ACTIVITIES:
Proceeds from the exercise of stock options			477				1,270
Proceeds from issuance of convertible senior notes, net of underwriters'   discount and commissions			—				223,101
Payments on revolving commitment			—				(127,941	)
Borrowings under revolving commitment			—				96,991
Payments for issuance costs of convertible senior notes			—				(1,018	)
Other financing activities			(210	)			(259	)
Net cash provided by financing activities			267				192,144
Effect of exchange rate changes on cash, cash equivalents and restricted cash			(1,148	)			187
Net increase in cash, cash equivalents and restricted cash			27,429				216,495
Cash, cash equivalents and restricted cash at beginning of year			223,497				35,685
Cash, cash equivalents and restricted cash at end of period		$	250,926			$	252,180
Supplemental disclosure of cash flow:
Interest paid		$	306			$	362
Income taxes paid		$	9,491			$	4,054
Supplemental disclosure of non-cash investing and financing activities:
Finance leases		$	100			$	566
Property and equipment in accounts payable, other current liabilities   and other liabilities		$	343			$	417
Convertible senior notes issuance costs in accounts payable			—			$	216

Financial Results

The following table provides a reconciliation of Non-GAAP net (loss) income and Non-GAAP net (loss) income per share - diluted to net (loss) income and net (loss) income 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)		2020				2019				2020				2019
Net (loss) income		$	(10,223	)		$	(3,120	)		$	(4,193	)		$	9,899
Stock-based compensation expense			4,534				2,080				7,705				3,292
Amortization of intangible assets			3,692				3,600				7,532				7,128
Special adjustments (1)			578				776				578				1,004
Income tax effect of non-GAAP adjustments			(280	)			(175	)			(662	)			(415	)
Non-GAAP net (loss) income		$	(1,699	)		$	3,161			$	10,960			$	20,908
Net (loss) income per share - diluted		$	(0.14	)		$	(0.04	)		$	(0.06	)		$	0.13
Non-GAAP net (loss) income per share - diluted		$	(0.02	)		$	0.04			$	0.14			$	0.27
GAAP diluted shares outstanding:			72,999				71,373				72,811				77,017
Non-GAAP diluted shares outstanding:			80,700				77,700				80,700				77,700

(1) Includes $0.6 million of severance expense for the three and six months ended June 30, 2020. Includes $0.8 million and $1.0 million of impairment charges for royalty contracts for the three and six months ended June 30, 2019, respectively.

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

		(Unaudited)
		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)		2020				2019				2020				2019
Net (loss) income		$	(10,223	)		$	(3,120	)		$	(4,193	)		$	9,899
Income tax expense (benefit)			2,768				(167	)			7,420				3,921
Stock-based compensation expense			4,534				2,080				7,705				3,292
Interest expense			2,843				590				5,656				860
Interest income and other (1)			194				508				(460	)			709
Depreciation and amortization			5,633				5,274				11,293				10,468
Adjusted EBITDA		$	5,749			$	5,165			$	27,421			$	29,149

(1) Includes $0.6 million of severance expense for the three and six months ended June 30, 2020. Includes $0.8 million and $1.0 million of impairment charges for royalty contracts for the three and six months ended June 30, 2019, respectively. 

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)		2020				2019				2020				2019
Net cash provided by operating activities		$	5,365			$	6,553			$	33,401			$	31,868
Capital expenditures			(886	)			(2,084	)			(2,530	)			(6,667	)
Free cash flow		$	4,479			$	4,469			$	30,871			$	25,201

Business Outlook

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

		(Unaudited)
		Three Months Ending September 30, 2020								Year Ending December 31, 2020
(in thousands)		Low				High				Low				High
Net loss		$	(20,300	)		$	(18,300	)		$	(36,000	)		$	(31,000	)
Stock-based compensation expense			7,900				7,900				24,000				24,000
Amortization of intangible assets			3,800				3,800				15,000				15,000
Special adjustments			—				—				600				600
Income tax effect of non-GAAP adjustments			(400	)			(400	)			(1,400	)			(1,400	)
Non-GAAP net (loss) income		$	(9,000	)		$	(7,000	)		$	2,200			$	7,200

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, 2020								Year Ending December 31, 2020
(in thousands)		Low				High				Low				High
Net loss		$	(20,300	)		$	(18,300	)		$	(36,000	)		$	(31,000	)
Income tax expense			2,100				2,100				12,000				12,000
Stock-based compensation expense			7,900				7,900				24,000				24,000
Interest expense			2,900				2,900				11,400				11,400
Depreciation and amortization			5,700				5,700				22,700				22,700
Interest income and other special adjustments			(300	)			(300	)			(1,100	)			(1,100	)
Adjusted EBITDA		$	(2,000	)		$	—			$	33,000			$	38,000

 

 

Source: Altair Engineering Inc.