Altair Announces Second Quarter 2020 Financial Results
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Altair Announces Second Quarter 2020 Financial Results

2020 Second Quarter Revenue Exceeds Guidance
Increases Full Year 2020 Outlook

TROY, Mich., Aug. 06, 2020 (GLOBE NEWSWIRE) -- Altair (Nasdaq: ALTR), a global technology company that provides software and cloud solutions in the areas of product development, high performance computing (HPC) and data analytics, today released its financial results for the second quarter ended June 30, 2020.

“We are very pleased with our second quarter performance, which exceeded our expectations. I am proud to lead an organization which has remained so dedicated and intensely focused on developing great software and helping customers succeed despite the personal hardships brought on by COVID-19,” said James Scapa, Founder, Chairman and Chief Executive Officer of Altair.

“Our software product revenue increased to 83% of total revenue, which drove a 400 basis point year over year improvement in gross margins, while our recurring license rate rose to an all-time high of 93%,” said Howard Morof, Chief Financial Officer of Altair. “Moreover, the proactive steps we took to control costs in light of COVID-19 had an immediate positive impact on our operating expenses. Our ongoing digital transformation efforts continue, and as we implement robust processes, we believe the positive impact of these significant investments will drive measurable benefits for the business and support our long-term goals.”

Second Quarter 2020 Financial Highlights

Business Outlook

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

 (in millions)Third Quarter 2020 Full Year 2020 
Software Product Revenue $80.0 to$82.0  $368.0 to$380.0 
Total Revenue $96.0  $100.0  $443.0  $455.0 
Net Loss $(20.3) $(18.3) $(36.0) $(31.0)
Non-GAAP Net (Loss) Income $(9.0) $(7.0) $2.2  $7.2 
Adjusted EBITDA $(2.0) $0.0  $33.0  $38.0 
                 

Conference Call Information

What: Altair’s Second Quarter 2020 Financial Results Conference Call
When: Friday, August 7, 2020
Time: 8:30 a.m. ET
Live Call:(866) 754-5204, Domestic
 (636) 812-6621, International
Replay: (855) 859-2056, Conference ID 5072406, Domestic
 (404) 537-3406, Conference ID 5072406, International
Webcast:  http://investor.altair.com  (live & replay)

***

Non-GAAP Financial Measures
This press release contains the following non-GAAP financial measures: Adjusted EBITDA, Non-GAAP Net Income (Loss), Non-GAAP Net Income (Loss) 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.

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.

Non-GAAP net income excludes stock-based compensation, amortization of intangible assets related to acquisitions, 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 Company’s 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 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 third quarter and full year 2020, our statements regarding COVID-19, our statements regarding our digital transformation efforts, 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 our forward-looking statements due to a number of factors, including but not limited to, the 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 ENGINERING 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 
         


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 
                 

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

  (Unaudited) 
  Three Months Ended June 30,  Six Months Ended June 30, 
  2020  2019  2020  2019 
Cost of revenue – software $552  $279  $918  $343 
Research and development  1,830   579   3,258   937 
Sales and marketing  1,273   475   2,000   937 
General and administrative  879   747   1,529   1,075 
Total stock-based compensation expense $4,534  $2,080  $7,705  $3,292 
                 


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

  Six Months Ended June 30, 
(In thousands) 2020  2019 
OPERATING ACTIVITIES:        
Net (loss) income $(4,193) $9,899 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  11,293   10,468 
Provision for credit loss  589   134 
Amortization of debt discount and issuance costs  5,342   459 
Stock-based compensation expense  7,705   3,292 
Deferred income taxes  (5,961)  (703)
Other, net  3   (17)
Changes in assets and liabilities:        
Accounts receivable  23,264   10,406 
Prepaid expenses and other current assets  1,817   (4,952)
Other long-term assets  (960)  (2,300)
Accounts payable  (3,841)  (2,187)
Accrued compensation and benefits  497   (2,455)
Other accrued expenses and current liabilities  131   1,887 
Operating lease right-of-use assets and liabilities, net  30   197 
Deferred revenue  (2,315)  7,740 
Net cash provided by operating activities  33,401   31,868 
INVESTING ACTIVITIES:        
Capital expenditures  (2,530)  (6,667)
Payments for acquisition of businesses, net of cash acquired  (2,270)  (709)
Payments for acquisition of developed technology  (433)  (344)
Other investing activities, net  142   16 
Net cash used in investing activities  (5,091)  (7,704)
FINANCING ACTIVITIES:        
Proceeds from the exercise of stock options  477   1,270 
Proceeds from issuance of convertible senior notes, net of underwriters'
  discount and commissions		  —   223,101 
Payments on revolving commitment  —   (127,941)
Borrowings under revolving commitment  —   96,991 
Payments for issuance costs of convertible senior notes  —   (1,018)
Other financing activities  (210)  (259)
Net cash provided by financing activities  267   192,144 
Effect of exchange rate changes on cash, cash equivalents and restricted cash  (1,148)  187 
Net increase in cash, cash equivalents and restricted cash  27,429   216,495 
Cash, cash equivalents and restricted cash at beginning of year  223,497   35,685 
Cash, cash equivalents and restricted cash at end of period $250,926  $252,180 
Supplemental disclosure of cash flow:        
Interest paid $306  $362 
Income taxes paid $9,491  $4,054 
Supplemental disclosure of non-cash investing and financing activities:        
Finance leases $100  $566 
Property and equipment in accounts payable, other current liabilities
  and other liabilities		 $343  $417 
Convertible senior notes issuance costs in accounts payable  —  $216 
         

Financial Results

The following table provides a reconciliation of Non-GAAP net (loss) income and Non-GAAP net (loss) 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 June 30,  Six Months Ended June 30, 
(in thousands, except per share amounts) 2020  2019  2020  2019 
Net (loss) income $(10,223) $(3,120) $(4,193) $9,899 
Stock-based compensation expense  4,534   2,080   7,705   3,292 
Amortization of intangible assets  3,692   3,600   7,532   7,128 
Special adjustments (1)  578   776   578   1,004 
Income tax effect of non-GAAP adjustments  (280)  (175)  (662)  (415)
Non-GAAP net (loss) income $(1,699) $3,161  $10,960  $20,908 
                 
Net (loss) income per share - diluted $(0.14) $(0.04) $(0.06) $0.13 
Non-GAAP net (loss) income per share - diluted $(0.02) $0.04  $0.14  $0.27 
                 
GAAP diluted shares outstanding:  72,999   71,373   72,811   77,017 
Non-GAAP diluted shares outstanding:  80,700   77,700   80,700   77,700 

(1) Includes $0.6 million of severance expense for the three and six months ended June 30, 2020. Includes $0.8 million and $1.0 million of impairment charges for royalty contracts for the three and six months ended June 30, 2019, respectively.

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

  (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 
Income tax expense (benefit)  2,768   (167)  7,420   3,921 
Stock-based compensation expense  4,534   2,080   7,705   3,292 
Interest expense  2,843   590   5,656   860 
Interest income and other (1)  194   508   (460)  709 
Depreciation and amortization  5,633   5,274   11,293   10,468 
Adjusted EBITDA $5,749  $5,165  $27,421  $29,149 

(1) Includes $0.6 million of severance expense for the three and six months ended June 30, 2020. Includes $0.8 million and $1.0 million of impairment charges for royalty contracts for the three and six months ended June 30, 2019, respectively. 

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

  (Unaudited) 
  Three Months Ended June 30,  Six Months Ended June 30, 
(in thousands) 2020  2019  2020  2019 
Net cash provided by operating activities $5,365  $6,553  $33,401  $31,868 
Capital expenditures  (886)  (2,084)  (2,530)  (6,667)
Free cash flow $4,479  $4,469  $30,871  $25,201 
                 

Business Outlook

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

  (Unaudited) 
  Three Months Ending
September 30, 2020		  Year Ending
December 31, 2020		 
(in thousands) Low  High  Low  High 
Net loss $(20,300) $(18,300) $(36,000) $(31,000)
Stock-based compensation expense  7,900   7,900   24,000   24,000 
Amortization of intangible assets  3,800   3,800   15,000   15,000 
Special adjustments  —   —   600   600 
Income tax effect of non-GAAP adjustments  (400)  (400)  (1,400)  (1,400)
Non-GAAP net (loss) income $(9,000) $(7,000) $2,200  $7,200 
                 

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

  (Unaudited) 
  Three Months Ending
September 30, 2020		  Year Ending
December 31, 2020		 
(in thousands) Low  High  Low  High 
Net loss $(20,300) $(18,300) $(36,000) $(31,000)
Income tax expense  2,100   2,100   12,000   12,000 
Stock-based compensation expense  7,900   7,900   24,000   24,000 
Interest expense  2,900   2,900   11,400   11,400 
Depreciation and amortization  5,700   5,700   22,700   22,700 
Interest income and other special adjustments  (300)  (300)  (1,100)  (1,100)
Adjusted EBITDA $(2,000) $—  $33,000  $38,000 

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