Altair Engineering Inc. Investor Relations

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altr-10q_20200930.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 September 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 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.

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.

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.

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	)		—