Altair Announces Fourth Quarter 2019 Financial Results
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Altair Announces Fourth Quarter 2019 Financial Results

TROY, Mich., Feb. 27, 2020 (GLOBE NEWSWIRE) -- Altair (Nasdaq:ALTR), a global technology company providing solutions in product development, high-performance computing and data analytics, today released its financial results for the fourth quarter ended December 31, 2019.

“We continue to execute on our vision of transforming product design and customer decision making by leveraging simulation, data analytics and high-performance computing,” said James Scapa, Founder, Chairman and Chief Executive Officer of Altair.  “Our core simulation and optimization technologies performed well during the quarter and we remain highly encouraged by strong demand for our SimSolid product, which continues to have one of the fastest new product ramps in our history.  As we enter 2020, we continue to see macro headwinds in our automotive end market and given the potential impact of the Coronavirus on our customers we anticipate a more modest start to the year.  However, we remain confident that our diversification across multiple verticals and products positions the company well to achieve above market growth over the long-term.”

“Software product revenue exceeded our expectations in the fourth quarter and our year over year growth rate accelerated sequentially to 27%,” said Howard Morof, Chief Financial Officer of Altair.

Fourth Quarter 2019 Financial Highlights

Full Year 2019 Financial Highlights

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

   
(in millions) First Quarter 2020  Full Year 2020 
Software Product Revenue $105.0 to$107.0  $395.0 to$399.0 
Total Revenue $129.0  $131.0  $491.0  $495.0 
Net Income (Loss) $4.9  $6.3  $(4.3) $(1.5)
Non-GAAP Net Income $11.5  $12.9  $24.7  $27.5 
Adjusted EBITDA $20.0  $22.0  $49.0  $53.0 

 (All figures in millions)

Conference Call Information

What:Altair’s Fourth Quarter 2019 Financial Results Conference Call
When: Thursday, February 27, 2020
Time:4:30 p.m. ET
Live Call: (866) 754-5204, Domestic
 (636) 812-6621, International
Replay:(855) 859-2056, Conference ID 5031498, Domestic
 (404) 537-3406, Conference ID 5031498, International
Webcast: http://investor.altair.com  (live & replay)

Non-GAAP Financial Measures
This press release contains the following non-GAAP financial measures: Non-GAAP Software Product Revenue, Non-GAAP Total Revenue, Adjusted EBITDA, Modified Adjusted EBITDA, Non-GAAP Net Income, Non-GAAP Net Income 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.

Non-GAAP software product revenue and Non-GAAP total revenue include revenue not recognized under GAAP due to acquisition accounting adjustments associated with the accounting for deferred revenue in significant business combinations.

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.

Modified Adjusted EBITDA represents Adjusted EBITDA adjusted for revenue not recognized under GAAP due to acquisition accounting adjustments associated with the accounting for deferred revenue in significant business combinations.

Non-GAAP net income excludes stock-based compensation, amortization of intangible assets related to acquisitions, revenue not recognized under GAAP due to acquisition accounting 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 Altair 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 design and 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 first quarter and full year 2020, statements regarding other future periods, anticipated trends and long-term growth, 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 forward-looking statements due to a number of factors, including but not limited to, 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 ENGINEERING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)

  December 31, 
(in thousands) 2019  2018 
ASSETS        
CURRENT ASSETS        
Cash and cash equivalents $223,117  $35,345 
Accounts receivable, net  104,984   96,803 
Income tax receivable  7,264   4,431 
Prepaid expenses and other current assets  17,092   17,455 
Total current assets  352,457   154,034 
Property and equipment, net  36,297   30,153 
Operating lease right of use assets  28,134    
Goodwill  233,683   210,532 
Other intangible assets, net  67,075   69,836 
Deferred tax assets  5,791   5,354 
Other long-term assets  19,708   17,288 
TOTAL ASSETS $743,145  $487,197 
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY        
CURRENT LIABILITIES        
Current portion of long-term debt $430  $331 
Accounts payable  8,585   8,357 
Accrued compensation and benefits  30,676   31,740 
Current portion of operating lease liabilities  9,141    
Other accrued expenses and current liabilities  28,603   27,039 
Deferred revenue  75,431   59,765 
Total current liabilities  152,866   127,232 
Long-term debt, net of current portion  178,238   31,417 
Operating lease liabilities, net of current portion  20,174    
Deferred revenue, non-current  8,136   6,754 
Other long-term liabilities  26,672   25,756 
TOTAL LIABILITIES  386,086   191,159 
Commitments and contingencies        
MEZZANINE EQUITY  2,352   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 41,271 and 38,349 shares as of December 31, 2019 and 2018, respectively  4   4 
Class B common stock, authorized 41,203 shares, issued and outstanding 31,131 and 32,171 shares as of December 31, 2019 and 2018, respectively  3   3 
Additional paid-in capital  446,633   379,832 
Accumulated deficit  (82,405)  (74,863)
Accumulated other comprehensive loss  (9,528)  (11,290)
TOTAL STOCKHOLDERS’ EQUITY  354,707   293,686 
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY $743,145  $487,197 
         


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

  For the Three Months Ended
December 31,
  For the Year Ended
December 31,
 
(in thousands, except per share data) 2019  2018  2019  2018 
Revenue                
License $64,194  $52,649  $244,321  $207,164 
Maintenance and other services  36,993   27,254   122,381   97,197 
Total software  101,187   79,903   366,702   304,361 
Software related services  8,941   10,073   34,576   36,945 
Total software and related services  110,128   89,976   401,278   341,306 
Client engineering services  11,722   11,200   48,987   47,852 
Other  2,027   1,835   8,650   7,221 
Total revenue  123,877   103,011   458,915   396,379 
Cost of revenue                
License  8,139   5,585   21,285   16,119 
Maintenance and other services  10,892   7,453   38,401   29,655 
Total software *  19,031   13,038   59,686   45,774 
Software related services  6,497   6,842   25,640   26,415 
Total software and related services  25,528   19,880   85,326   72,189 
Client engineering services  9,882   9,002   39,875   38,979 
Other  1,540   1,389   7,398   4,805 
Total cost of revenue  36,950   30,271   132,599   115,973 
Gross profit  86,927   72,740   326,316   280,406 
Operating expenses:                
Research and development *  30,498   25,844   117,510   97,592 
Sales and marketing *  27,589   22,427   106,051   80,277 
General and administrative *  21,292   28,114   82,178   79,751 
Amortization of intangible assets  3,769   2,076   14,442   7,739 
Other operating income  (370)  (2,164)  (2,072)  (9,597)
Total operating expenses  82,778   76,297   318,109   255,762 
Operating income (loss)  4,149   (3,557)  8,207   24,644 
Interest expense  2,785   108   6,371   200 
Other income, net  (849)  (534)  (1,552)  (2,580)
Income (loss) before income taxes  2,213   (3,131)  3,388   27,024 
Income tax expense  3,715   5,872   10,930   11,489 
Net (loss) income $(1,502) $(9,003) $(7,542) $15,535 
Income per share:                
Net (loss) income per share attributable to common stockholders, basic $(0.02) $(0.13) $(0.11) $0.23 
Net (loss) income per share attributable to common stockholders, diluted $(0.02) $(0.13) $(0.11) $0.21 
Weighted average shares outstanding:                
Weighted average number of shares used in computing net (loss) income per share, basic  72,227   70,548   71,544   67,468 
Weighted average number of shares used in computing net (loss) income per share, diluted  72,227   70,548   71,544   74,878 

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

  (Unaudited) 
  Three Months Ended
December 31,
  Twelve Months Ended
December 31,
 
  2019  2018  2019  2018 
Cost of revenue-software $342  $7  $1,069  $31 
Research and development  1,306   410   2,917   740 
Sales and marketing  688   595   2,250   910 
General and administrative  608   1,114   2,292   1,658 
Total stock-based compensation expense $2,944  $2,126  $8,528  $3,339 
                 


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

  Year Ended December 31,
 
(in thousands) 2019  2018 
OPERATING ACTIVITIES:        
Net (loss) income $(7,542) $15,535 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:        
Depreciation and amortization  21,522   14,734 
Provision for bad debt  671   394 
Amortization of debt discount and issuance costs  5,663   23 
Stock-based compensation expense  8,528   3,339 
Loss (gain) on sale of assets held for sale and other  6   (4,503)
Impairment of intangible assets     608 
Deferred income taxes  (950)  (1,057)
Other, net     (206)
Changes in assets and liabilities:        
Accounts receivable  (7,901)  (1,394)
Prepaid expenses and other current assets  (2,396)  204 
Other long-term assets  (2,591)  (1,660)
Accounts payable  (426)  1,647 
Accrued compensation and benefits  (1,232)  5,678 
Other accrued expenses and current liabilities  513   (6,667)
Operating lease right of use assets and liabilities, net  102    
Deferred revenue  17,426   9,555 
Net cash provided by operating activities  31,393   36,230 
INVESTING ACTIVITIES:        
Payments for acquisition of businesses, net of cash acquired  (25,720)  (203,438)
Capital expenditures  (9,660)  (6,659)
Proceeds from sale of assets held for sale and other     6,614 
Payments for acquisition of developed technology  (473)  (2,727)
Other investing activities, net  14    
Net cash used in investing activities  (35,839)  (206,210)
FINANCING ACTIVITIES:        
Proceeds from issuance of convertible senior notes, net of underwriters' discounts and commissions  223,101    
Proceeds from issuance of Class A common stock in follow-on public offering, net of underwriters' discounts and commissions     135,572 
Borrowings under revolving commitment  96,992   37,041 
Payments on revolving commitment  (127,941)  (6,091)
Proceeds from issuance of common stock  1,510   2,077 
Payments for issuance costs of convertible senior notes  (1,233)   
Payments for follow-on public offering and IPO offering costs     (556)
Principal payments on long-term debt     (126)
Payments for redemption of common stock     (119)
Other financing activities  (513)  (268)
Net cash provided by financing activities  191,916   167,530 
Effect of exchange rate changes on cash, cash equivalents and restricted cash  342   (1,443)
Net increase (decrease) in cash, cash equivalents and restricted cash  187,812   (3,893)
Cash, cash equivalents and restricted cash at beginning of year  35,685   39,578 
Cash, cash equivalents and restricted cash at end of period $223,497  $35,685 
Supplemental disclosures of cash flow:        
Interest paid $664  $223 
Income taxes paid $7,686  $6,735 
Supplemental disclosure of non-cash investing and financing activities:        
Issuance of common stock in connection with acquisitions $7,637  $8,681 
Promissory notes issued and deferred payment obligations for acquisitions $497  $1,729 
Finance leases $632  $895 
Property and equipment in accounts payable, other accrued expenses and current liabilities, and other liabilities $259  $330 

Financial Results

The following table provides a reconciliation of Non-GAAP net income and Non-GAAP net 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
December 31,
  Twelve Months Ended
December 31,
 
(in thousands, except per share amounts) 2019  2018  2019  2018 
Net (loss) income $(1,502) $(9,003) $(7,542) $15,535 
Stock-based compensation expense  2,944   2,126   8,528   3,339 
Amortization of intangible assets  3,769   2,074   14,442   7,739 
Acquisition related deferred revenue (1)  2,250      9,000    
Special adjustments (2)     10,627   2,038   6,837 
Income tax effect of non-GAAP adjustments  (527)  (184)  (1,630)  (652)
Non-GAAP net income $6,934  $5,640  $24,836  $32,798 
                 
Net (loss) income per share - diluted $(0.02) $(0.13) $(0.11) $0.21 
Non-GAAP net income per share - diluted $0.09  $0.07  $0.32  $0.42 
                 
GAAP diluted shares outstanding:  72,227   70,548   71,544   74,878 
Non-GAAP diluted shares outstanding:  78,000   77,700   78,000   77,700 

(1) Represents revenue not recognized under GAAP due to acquisition accounting adjustments associated with the accounting for deferred revenue in significant business combinations.
(2) Includes a) nonrecurring severance expenses of $0.4 million and nonrecurring acquisition related costs of $0.6 million, for the twelve months ended December 31, 2019, and b) an impairment charge for royalty contracts resulting in $1.0 million of expenses for the twelve ended December 31, 2019.
Includes a) nonrecurring costs from the acquisition of Datawatch of $10.4 million for the three and twelve months ended December 31, 2018, b) a gain on the sale of a building of $4.4 million for the twelve months ended December 31, 2018, b) an impairment charge for royalty contracts and trade names resulting in $0.2 million and $2.8 million for the three and twelve months ended December 31, 2018, respectively and c) a non-recurring adjustment for a change in estimated legal expenses resulting in $2.0 million of income for the twelve months ended December 31, 2018.

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

  (Unaudited) 
  Three Months Ended
December 31,
  Twelve Months Ended
December 31,
 
(in thousands) 2019  2018  2019  2018 
Net (loss) income $(1,502) $(9,003) $(7,542) $15,535 
Income tax expense  3,715   5,872   10,930   11,489 
Stock-based compensation expense  2,944   2,126   8,528   3,339 
Interest expense  2,785   108   6,371   200 
Interest income and other (1)  (893)  9,986   (260)  4,883 
Depreciation and amortization  5,686   3,839   21,522   14,734 
Adjusted EBITDA  12,735   12,928   39,549   50,180 
Acquisition related deferred revenue (2)  2,250      9,000    
Modified Adjusted EBITDA $14,985  $12,928  $48,549  $50,180 
                 

(1) Includes a) nonrecurring severance expenses of $0.4 million and nonrecurring acquisition related costs of $0.6 million, for the twelve months ended December 31, 2019, and b) impairment charges for royalty contracts resulting in $1.0 million of expense for the twelve months ended December 31, 2019. 
Includes a) nonrecurring costs from the acquisition of Datawatch of $10.4 million for the three and twelve months ended December 31, 2018, b) a gain on the sale of a building of $4.4 million for the twelve months ended December 31, 2018, b) impairment charges for royalty contracts and trade names resulting in $0.2 million and $2.8 million of expense for the three and twelve months ended December 31, 2018, respectively, and c) a non-recurring adjustment for a change in estimated legal expenses resulting in $2.0 million of income for the twelve months ended December 31, 2018.
(2) Represents revenue not recognized under GAAP due to acquisition accounting adjustments associated with the accounting for deferred revenue in significant business combinations.

The following table provides a reconciliation of Non-GAAP total revenue to total revenue, the most comparable GAAP financial measure:

  (Unaudited) 
  Three Months Ended
December 31,
  Twelve Months Ended
December 31,
 
(in thousands) 2019  2018  2019  2018 
Total revenue $123,877  $103,011  $458,915  $396,379 
Acquisition related deferred revenue (1)  2,250      9,000    
Non-GAAP total revenue $126,127  $103,011  $467,915  $396,379 
                 

(1) Adjustment for revenue not recognized under GAAP due to acquisition accounting adjustments associated with the accounting for deferred revenue in significant business combinations.

The following table provides a reconciliation of Non-GAAP total software product revenue to total software product revenue, the most comparable GAAP financial measure:

  (Unaudited) 
  Three Months Ended
December 31,
  Twelve Months Ended
December 31,
 
(in thousands) 2019  2018  2019  2018 
Total software product revenue $101,187  $79,903  $366,702  $304,361 
Acquisition related deferred revenue(1)  2,250      9,000    
Non-GAAP total software product revenue $103,437  $79,903  $375,702  $304,361 
                 

(1) Adjustment for revenue not recognized under GAAP due to acquisition accounting adjustments associated with the accounting for deferred revenue in significant business combinations.

The following table provides a recompilation of Free Cash Flow to net cash provided by operating activities, the most comparable GAAP financial measure:

  (Unaudited) 
  Three Months Ended
December 31,
  Twelve Months Ended
December 31,
 
(in thousands) 2019  2018  2019  2018 
Net cash provided by (used in) operating activities $1,388  $(4,192) $31,393  $36,230 
Capital expenditures  (1,540)  (1,326)  (9,660)  (6,659)
Free Cash Flow $(152) $(5,518) $21,733  $29,571 
                 

Effective January 1, 2018, we adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASC 606). The following table sets forth selected quarterly information under ASC 606 for 2018:

  Three months ended 
  ASC 606 
(in thousands) March 31,
2018
  June 30,
2018
  September 30,
2018
  December 31,
2018
 
Software product revenue $89,670  $70,606  $64,182  $79,903 
Total revenue $113,257  $93,360  $86,751  $103,011 
Net income (loss) $24,684  $(1,080) $934  $(9,003)
Adjusted EBITDA $29,550  $5,303  $2,399  $12,928 

Disaggregation of revenue

The Company disaggregates its software revenue by type of performance obligation and timing of revenue recognition as follows (in thousands):

  Year Ended December 31, 
  2019  2018 
Software revenue:        
Term licenses $201,881  $168,909 
Perpetual licenses  42,440   38,255 
Maintenance  103,699   86,150 
Professional services and other  18,682   11,047 
Total software revenue $366,702  $304,361 
         

Business Outlook

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

  (Unaudited) 
  Three Months ending
March 31, 2020
  Year Ending
December 31, 2020
 
(in thousands) Low  High  Low  High 
Net income (loss) $4,900  $6,300  $(4,300) $(1,500)
Stock-based compensation expense  3,200   3,200   15,500   15,500 
Amortization of intangible assets  3,800   3,800   15,000   15,000 
Income tax effect of non-GAAP adjustments  (400)  (400)  (1,500)  (1,500)
Non-GAAP net income $11,500  $12,900  $24,700  $27,500 
                 

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

  (Unaudited) 
  Three Months ending
March 31, 2020
  Year Ending
December 31, 2020
 
(in thousands) Low  High  Low  High 
Net income (loss) $4,900  $6,300  $(4,300) $(1,500)
Income tax expense  4,200   4,800   6,700   7,900 
Stock-based compensation expense  3,200   3,200   15,500   15,500 
Interest expense  2,800   2,800   11,400   11,400 
Depreciation and amortization  5,700   5,700   22,700   22,700 
Interest income and other non-recurring adjustments  (800)  (800)  (3,000)  (3,000)
Adjusted EBITDA $20,000  $22,000  $49,000  $53,000 
                 

 

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