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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, 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 July 17, 2020, there were 42,243,589 shares of the registrant’s Class A common stock outstanding and 30,870,732 shares of the registrant’s Class B common stock outstanding.

 

  

 

 


ALTAIR ENGINEERING INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 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

 

28

 

 

 

 

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

46

 

 

 

 

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

47

 

 

 

 

 

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

48

 

 

 

 

 

 

 

 

 

Item 1A.

 

Risk Factors

 

48

 

 

 

 

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

48

 

 

 

 

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

49

 

 

 

 

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

49

 

 

 

 

 

 

 

 

 

Item 5.

 

Other Information

 

49

 

 

 

 

 

 

 

 

 

Item 6.

 

Exhibits

 

50

 

 

 

 

 

 

 

 

SIGNATURES

 

 

 

 

 

51

 

 

 

 


 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

 

ALTAIR ENGINEERING 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

 

 

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)

 

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

 

 

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)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net (loss) income

 

$

(10,223

)

 

$

(3,120

)

 

$

(4,193

)

 

$

9,899

 

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

   all periods)

 

 

2,560

 

 

 

1,605

 

 

 

(5,018

)

 

 

1,942

 

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

   $0 and $0, respectively)

 

 

31

 

 

 

16

 

 

 

168

 

 

 

244

 

Total other comprehensive (loss) income

 

 

2,591

 

 

 

1,621

 

 

 

(4,850

)

 

 

2,186

 

Comprehensive (loss) income

 

$

(7,632

)

 

$

(1,499

)

 

$

(9,043

)

 

$

12,085

 

 

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

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,223

)

 

 

 

 

 

(10,223

)

Exercise of stock options

 

 

197