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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 September 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 October 19, 2020, there were 43,242,211 shares of the registrant’s Class A common stock outstanding and 30,415,116 shares of the registrant’s Class B common stock outstanding.

 

  

 

 


ALTAIR ENGINEERING INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 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

 

29

 

 

 

 

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

48

 

 

 

 

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

49

 

 

 

 

 

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

50

 

 

 

 

 

 

 

 

 

Item 1A.

 

Risk Factors

 

50

 

 

 

 

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

51

 

 

 

 

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

51

 

 

 

 

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

51

 

 

 

 

 

 

 

 

 

Item 5.

 

Other Information

 

51

 

 

 

 

 

 

 

 

 

Item 6.

 

Exhibits

 

52

 

 

 

 

 

 

 

 

SIGNATURES

 

 

 

 

 

53

 

 

 

 


 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

 

ALTAIR ENGINEERING INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

 

September 30, 2020

 

 

December 31, 2019

 

(In thousands)

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

245,364

 

 

$

223,117

 

Accounts receivable, net

 

 

88,514

 

 

 

104,984

 

Income tax receivable

 

 

7,091

 

 

 

7,264

 

Prepaid expenses and other current assets

 

 

18,834

 

 

 

17,092

 

Total current assets

 

 

359,803

 

 

 

352,457

 

Property and equipment, net

 

 

34,401

 

 

 

36,297

 

Operating lease right of use assets

 

 

33,302

 

 

 

28,134

 

Goodwill

 

 

270,651

 

 

 

233,683

 

Other intangible assets, net

 

 

56,741

 

 

 

67,075

 

Deferred tax assets

 

 

5,631

 

 

 

5,791

 

Other long-term assets

 

 

19,174

 

 

 

19,708

 

TOTAL ASSETS

 

$

779,703

 

 

$

743,145

 

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

430

 

 

$

430

 

Accounts payable

 

 

5,413

 

 

 

8,585

 

Accrued compensation and benefits

 

 

33,932

 

 

 

30,676

 

Current portion of operating lease liabilities

 

 

10,062

 

 

 

9,141

 

Other accrued expenses and current liabilities

 

 

25,606

 

 

 

28,603

 

Deferred revenue

 

 

74,045

 

 

 

75,431

 

Total current liabilities

 

 

149,488

 

 

 

152,866

 

Long-term debt, net of current portion

 

 

215,945

 

 

 

178,238

 

Operating lease liabilities, net of current portion

 

 

24,395

 

 

 

20,174

 

Deferred revenue, non-current

 

 

8,513

 

 

 

8,136

 

Other long-term liabilities

 

 

21,123

 

 

 

26,672

 

TOTAL LIABILITIES

 

 

419,464

 

 

 

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 42,870

   and 41,271 shares as of September 30, 2020 and December 31, 2019, respectively

 

 

4

 

 

 

4

 

Class B common stock, authorized 41,203 shares, issued and outstanding 30,591

   and 31,131 shares as of September 30, 2020 and December 31, 2019, respectively

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

464,803

 

 

 

446,633

 

Accumulated deficit

 

 

(95,491

)

 

 

(82,405

)

Accumulated other comprehensive loss

 

 

(9,864

)

 

 

(9,528

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

359,455

 

 

 

354,707

 

TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

 

$

779,703

 

 

$

743,145

 

 

See accompanying notes to consolidated financial statements.

 

 

 

3


 

 

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)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

License

 

$

55,023

 

 

$

46,853

 

 

$

183,584

 

 

$

180,127

 

Maintenance and other services

 

 

32,787

 

 

 

30,963

 

 

 

94,502

 

 

 

85,388

 

Total software

 

 

87,810

 

 

 

77,816

 

 

 

278,086

 

 

 

265,515

 

Software related services

 

 

6,170

 

 

 

7,956

 

 

 

18,548

 

 

 

25,635

 

Total software and related services

 

 

93,980

 

 

 

85,772

 

 

 

296,634

 

 

 

291,150

 

Client engineering services

 

 

10,868

 

 

 

12,803

 

 

 

34,386

 

 

 

37,265

 

Other

 

 

1,608

 

 

 

1,831

 

 

 

5,460

 

 

 

6,623

 

Total revenue

 

 

106,456

 

 

 

100,406

 

 

 

336,480

 

 

 

335,038

 

Cost of revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

License

 

 

4,477

 

 

 

4,371

 

 

 

12,851

 

 

 

13,146

 

Maintenance and other services

 

 

9,626

 

 

 

9,548

 

 

 

28,583

 

 

 

27,509

 

Total software

 

 

14,103

 

 

 

13,919

 

 

 

41,434

 

 

 

40,655

 

Software related services

 

 

4,996

 

 

 

6,013

 

 

 

15,141

 

 

 

19,143

 

Total software and related services

 

 

19,099

 

 

 

19,932

 

 

 

56,575

 

 

 

59,798

 

Client engineering services

 

 

8,510

 

 

 

10,160

 

 

 

27,617

 

 

 

29,993

 

Other

 

 

1,427

 

 

 

1,649

 

 

 

4,422

 

 

 

5,858

 

Total cost of revenue

 

 

29,036

 

 

 

31,741

 

 

 

88,614

 

 

 

95,649

 

Gross profit

 

 

77,420

 

 

 

68,665

 

 

 

247,866

 

 

 

239,389

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

30,678

 

 

 

29,667

 

 

 

91,115

 

 

 

87,012

 

Sales and marketing

 

 

26,998

 

 

 

25,790

 

 

 

80,903

 

 

 

78,462

 

General and administrative

 

 

20,905

 

 

 

20,706

 

 

 

63,499

 

 

 

60,886

 

Amortization of intangible assets

 

 

3,858

 

 

 

3,545

 

 

 

11,390

 

 

 

10,673

 

Other operating income, net

 

 

(1,596

)

 

 

(536

)

 

 

(3,431

)

 

 

(1,702

)

Total operating expenses

 

 

80,843

 

 

 

79,172

 

 

 

243,476

 

 

 

235,331

 

Operating (loss) income

 

 

(3,423

)

 

 

(10,507

)

 

 

4,390

 

 

 

4,058

 

Interest expense

 

 

2,934

 

 

 

2,726

 

 

 

8,590

 

 

 

3,586

 

Other income, net

 

 

(782

)

 

 

(588

)

 

 

(1,852

)

 

 

(703

)

(Loss) income before income taxes

 

 

(5,575

)

 

 

(12,645

)

 

 

(2,348

)

 

 

1,175

 

Income tax expense

 

 

2,930

 

 

 

3,294

 

 

 

10,350

 

 

 

7,215

 

Net loss

 

$

(8,505

)

 

$

(15,939

)

 

$

(12,698

)

 

$

(6,040

)

Loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share attributable to common

  stockholders, basic and diluted

 

$

(0.12

)

 

$

(0.22

)

 

$

(0.17

)

 

$

(0.08

)

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares used in computing

  net loss per share, basic and diluted

 

 

73,311

 

 

 

71,770

 

 

 

72,979

 

 

 

71,313

 

 

See accompanying notes to consolidated financial statements.

 

 

4


 

ALTAIR ENGINEERING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

(in thousands)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net loss

 

$

(8,505

)

 

$

(15,939

)

 

$

(12,698

)

 

$

(6,040

)

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

   all periods)

 

 

4,572

 

 

 

(2,988

)

 

 

(446

)

 

 

(1,046

)

Retirement related benefit plans (net of tax effect of $0 for

   all periods)

 

 

(58

)

 

 

132

 

 

 

110

 

 

 

376

 

Total other comprehensive income (loss)

 

 

4,514

 

 

 

(2,856

)

 

 

(336

)

 

 

(670

)

Comprehensive loss

 

$

(3,991

)

 

$

(18,795

)

 

$

(13,034

)

 

$

(6,710

)

 

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

)