Altair Engineering Inc. Investor Relations

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altr-10q_20200630.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 June 30, 2020

☐	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.

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.

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.

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