Altair Announces Second Quarter 2023 Financial Results
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Altair Announces Second Quarter 2023 Financial Results

TROY, Mich., Aug. 03, 2023 (GLOBE NEWSWIRE) -- Altair (Nasdaq: ALTR), a global leader in computational science and artificial intelligence, today released its financial results for the second quarter and six months ended June 30, 2023.

“Altair had a solid second quarter of 2023, with software product revenue and total revenue above the high end of guidance,” said James Scapa, founder, chairman and chief executive officer of Altair. “Our Q2 performance aligns well with our guidance for the full year and demonstrates our continued success and strength.”

“We’re pleased with the outperformance we’ve seen in the first half of the year,” said Matt Brown, chief financial officer of Altair. “Our strong first half has been fueled by growth across a number of verticals and particularly in aerospace, defense, technology, and automotive, where demand for our products is robust.”

Second Quarter 2023 Financial Highlights

Business Outlook

Based on information available as of today, Altair is issuing the following guidance for the third quarter and full year 2023: 

(in millions, except %) Third Quarter 2023  Full Year 2023 
Software Product Revenue $111 to$113  $548 to$558 
Growth Rate  7.0%  8.9%  8.2%  10.2%
Growth Rate - Constant Currency  5.8%  7.7%  9.1%  11.0%
Total Revenue $126  $128  $611  $621 
Growth Rate  5.6%  7.2%  6.8%  8.5%
Growth Rate - Constant Currency  4.4%  6.1%  7.5%  9.3%
Net Loss $(22.8) $(20.9) $(15.3) $(5.6)
Non-GAAP Net Income $2.9  $4.4  $89.9  $97.3 
Adjusted EBITDA $3  $5  $119  $129 
Net Cash Provided by Operating Activities       $120  $128 
Free Cash Flow       $108  $116 

The following table provides a reconciliation of Full Year 2023 guidance to the last guidance provided in May:

 (Unaudited)
 Full Year 2023
(in millions)Midpoint of
Guidance in
May		  Increase/
(Decrease)		  Currency
Fluctuations
from Prior
Guidance		  Midpoint of
Guidance in
August
Software Product Revenue$556.0  $—  $(3.0) $553.0
Total Revenue$619.0  $—  $(3.0) $616.0
Adjusted EBITDA$125.0  $—  $(1.0) $124.0

 

Conference Call Information
  
What:Altair’s Second Quarter 2023 Financial Results Conference Call
When:Thursday, August 3, 2023
Time:5 p.m. ET
Webcast: http://investor.altair.com (live & replay)

Non-GAAP Financial Measures

This press release contains the following non-GAAP financial measures: Non-GAAP Net Income, Non-GAAP Net Income Per Share, Billings, Adjusted EBITDA, Free Cash Flow, Non-GAAP Gross Profit and Non-GAAP Operating Expense.

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 net income excludes stock-based compensation, amortization of intangible assets related to acquisitions, restructuring charges, asset impairment charges, non-cash interest expense, other special items as identified by management and described elsewhere in this press release, and the impact of non-GAAP tax rate to income tax expense, which approximates our tax rate excluding discrete items and other specific events that can fluctuate from period to period.

Non-GAAP diluted common shares includes the diluted weighted average shares outstanding per GAAP regardless of whether the Company is in a loss position.

Billings consists of total revenue plus the change in deferred revenue, excluding deferred revenue from acquisitions.

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.

Free cash flow consists of cash flow from operations less capital expenditures.

Non-GAAP gross profit represents gross profit adjusted for stock-based compensation expense, restructuring expense and other special items as identified by management and described elsewhere in this press release.

Non-GAAP operating expense represents operating expense excluding stock-based compensation expense, amortization, restructuring charges, asset impairment charges and other special items as identified by management and described elsewhere in this press release.

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 leader in computational science and artificial intelligence (AI) that provides software and cloud solutions in  simulation, high-performance computing (HPC), data analytics and AI. Altair enables organizations across all industries to compete more effectively and drive smarter decisions in an increasingly connected world – all while creating a greener, 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 2023, our statements regarding our expectations for 2023, 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
dls@altair.com

Investor Relations
The Blueshirt Group
Monica Gould
212-871-3927
ir@altair.com

ALTAIR ENGINEERING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
      
 June 30, 2023  December 31, 2022 
(In thousands)(Unaudited)    
ASSETS     
CURRENT ASSETS:     
Cash and cash equivalents$418,338  $316,146 
Accounts receivable, net 124,260   170,279 
Income tax receivable 14,505   11,259 
Prepaid expenses and other current assets 29,678   29,142 
Total current assets 586,781   526,826 
Property and equipment, net 39,107   37,517 
Operating lease right of use assets 30,284   33,601 
Goodwill 453,093   449,048 
Other intangible assets, net 94,642   107,609 
Deferred tax assets 8,183   9,727 
Other long-term assets 43,717   40,410 
TOTAL ASSETS$1,255,807  $1,204,738 
LIABILITIES AND STOCKHOLDERS’ EQUITY 
CURRENT LIABILITIES:     
Accounts payable$4,682  $10,434 
Accrued compensation and benefits 35,951   42,456 
Current portion of operating lease liabilities 9,557   10,396 
Other accrued expenses and current liabilities 66,044   56,371 
Deferred revenue 121,853   113,081 
Current portion of convertible senior notes, net 81,161   — 
Total current liabilities 319,248   232,738 
Convertible senior notes, net 225,320   305,604 
Operating lease liabilities, net of current portion 21,337   24,065 
Deferred revenue, non-current 26,694   31,379 
Other long-term liabilities 42,993   41,216 
TOTAL LIABILITIES 635,592   635,002 
Commitments and contingencies     
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 53,951 and 52,277 shares as of June 30, 2023, and December 31, 2022, respectively 5   5 
Class B common stock, authorized 41,203 shares, issued and outstanding 27,175 and 27,745 shares as of June 30, 2023, and December 31, 2022 3   3 
Additional paid-in capital 790,184   721,307 
Accumulated deficit (145,816)  (121,577)
Accumulated other comprehensive loss (24,161)  (30,002)
TOTAL STOCKHOLDERS’ EQUITY 620,215   569,736 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$1,255,807  $1,204,738 


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)2023  2022  2023  2022 
Revenue           
License$87,738  $82,688  $200,147  $188,857 
Maintenance and other services 37,583   34,205   74,817   68,933 
Total software 125,321   116,893   274,964   257,790 
Software related services 6,664   7,376   13,764   16,437 
Total software and related services 131,985   124,269   288,728   274,227 
Client engineering services 8,034   7,047   15,810   15,059 
Other 1,142   1,340   2,657   3,151 
Total revenue 141,161   132,656   307,195   292,437 
Cost of revenue           
License 3,981   4,120   8,805   8,807 
Maintenance and other services 13,639   12,884   28,065   25,603 
Total software * 17,620   17,004   36,870   34,410 
Software related services 5,308   5,464   10,924   11,499 
Total software and related services 22,928   22,468   47,794   45,909 
Client engineering services 6,767   5,914   13,391   12,555 
Other 1,102   1,141   2,347   2,662 
Total cost of revenue 30,797   29,523   63,532   61,126 
Gross profit 110,364   103,133   243,663   231,311 
Operating expenses:           
Research and development * 55,277   50,437   108,528   97,516 
Sales and marketing * 44,982   41,153   88,474   78,993 
General and administrative * 18,622   18,370   36,573   35,796 
Amortization of intangible assets 7,625   6,208   15,439   12,111 
Other operating expense (income), net 127   (5,767)  5,732   (6,548)
Total operating expenses 126,633   110,401   254,746   217,868 
Operating (loss) income (16,269)  (7,268)  (11,083)  13,443 
Interest expense 1,528   700   3,054   1,285 
Other (income) expense, net (4,195)  21,907   (7,808)  23,975 
Loss before income taxes (13,602)  (29,875)  (6,329)  (11,817)
Income tax expense 8,678   3,899   17,910   10,429 
Net loss$(22,280) $(33,774) $(24,239) $(22,246)
Loss per share:           
Net loss per share attributable to common stockholders, basic and diluted$(0.28) $(0.43) $(0.30) $(0.28)
Weighted average shares outstanding:           
Weighted average number of shares used in computing net loss per share, basic and diluted 79,986   78,948   80,088   79,204 

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

 (Unaudited) 
 Three Months Ended
June 30,		  Six Months Ended
June 30,		 
(in thousands)2023  2022  2023  2022 
Cost of revenue – software$2,572  $2,030  $5,324  $3,933 
Research and development 9,943   8,979   18,686   16,337 
Sales and marketing 7,581   7,664   15,172   14,699 
General and administrative 3,640   2,527   6,715   4,845 
Total stock-based compensation expense$23,736  $21,200  $45,897  $39,814 


 (Unaudited) 
 Three Months Ended
June 30,		  Six Months Ended
June 30,		 
(in thousands)2023  2022  2023  2022 
Employee stock-based compensation plans$19,189  $14,873  $37,673  $28,132 
Post combination expense in connection with acquisitions 4,547   6,327   8,224   11,682 
Total stock-based compensation expense$23,736  $21,200  $45,897  $39,814 


ALTAIR ENGINEERING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
 
 Six Months Ended June 30, 
(In thousands)2023  2022 
OPERATING ACTIVITIES:     
Net loss$(24,239) $(22,246)
Adjustments to reconcile net loss to net cash provided by operating activities:     
Depreciation and amortization 19,488   15,819 
Stock-based compensation expense 45,897   39,814 
Amortization of debt issuance costs 930   829 
Deferred income taxes 2,015   (64)
Loss (gain) on mark-to-market adjustment of contingent consideration 7,987   (5,304)
Expense on repurchase of convertible senior notes —   16,621 
Other, net 405   229 
Changes in assets and liabilities:     
Accounts receivable, net 45,077   29,270 
Prepaid expenses and other current assets (3,166)  2,056 
Other long-term assets (2,516)  4,397 
Accounts payable (5,529)  (2,070)
Accrued compensation and benefits (6,591)  (9,742)
Other accrued expenses and current liabilities 4,857   (61,648)
Deferred revenue 4,614   10,080 
Net cash provided by operating activities 89,229   18,041 
INVESTING ACTIVITIES:     
Capital expenditures (6,184)  (3,457)
Payments for acquisition of businesses, net of cash acquired (721)  (37,660)
Other investing activities, net (1,452)  (322)
Net cash used in investing activities (8,357)  (41,439)
FINANCING ACTIVITIES:     
Proceeds from the exercise of common stock options 23,507   1,689 
Payments for repurchase and retirement of common stock (6,255)  (4,387)
Proceeds from employee stock purchase plan contributions 3,797   4,431 
Proceeds from issuance of convertible senior notes, net of discounts and commissions —   224,265 
Repurchase of convertible senior notes —   (192,792)
Payments of debt issuance costs —   (1,157)
Other financing activities (48)  (131)
Net cash provided by financing activities 21,001   31,918 
Effect of exchange rate changes on cash, cash equivalents and restricted cash (44)  (6,226)
Net increase in cash, cash equivalents and restricted cash 101,829   2,294 
Cash, cash equivalents and restricted cash at beginning of year 316,958   414,012 
Cash, cash equivalents and restricted cash at end of period$418,787  $416,306 

Financial Results

The following table provides a reconciliation of Non-GAAP net income and Non-GAAP net income per share – diluted, to net loss and net loss 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)2023  2022  2023  2022 
Net loss$(22,280) $(33,774) $(24,239) $(22,246)
Stock-based compensation expense 23,736   21,200   45,897   39,814 
Amortization of intangible assets 7,625   6,208   15,439   12,111 
Non-cash interest expense 465   422   930   839 
Impact of non-GAAP tax rate(1) 4,033   79   2,100   (4,957)
Special adjustments and other(2) (361)  16,737   4,870   18,229 
Non-GAAP net income$13,218  $10,872  $44,997  $43,790 
            
Net loss per share, diluted$(0.28) $(0.43) $(0.30) $(0.28)
Non-GAAP net income per share, diluted$0.15  $0.13  $0.51  $0.51 
            
GAAP diluted shares outstanding 79,986   78,948   80,088   79,204 
Non-GAAP diluted shares outstanding 88,383   86,281   88,735   86,516 


(1)The Company uses a non-GAAP effective tax rate of 26%.
(2)The three months ended June 30, 2023, includes $1.0 million loss from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition and $1.3 million currency gains on acquisition-related intercompany loans. The three months ended June 30, 2022, includes $16.6 million expense on repurchase of convertible senior notes, $5.4 million currency losses on acquisition-related intercompany loans, and a $5.3 million gain from the mark-to-market adjustment of contingent consideration associated with the World Programming acquisition. The six months ended June 30, 2023, includes $8.0 million loss from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition and $3.1 million currency gains on acquisition-related intercompany loans. The six months ended June 30, 2022, includes $16.6 million expense on repurchase of convertible senior notes, $6.9 million currency losses on acquisition-related intercompany loans and a $5.3 million gain from the mark-to-market adjustment of contingent consideration associated with the World Programming acquisition.

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

 (Unaudited) 
 Three Months Ended
June 30,		  Six Months Ended
June 30,		 
(in thousands)2023  2022  2023  2022 
Net loss$(22,280) $(33,774) $(24,239) $(22,246)
Income tax expense 8,678   3,899   17,910   10,429 
Stock-based compensation expense 23,736   21,200   45,897   39,814 
Interest expense 1,528   700   3,054   1,285 
Depreciation and amortization 9,738   8,133   19,488   15,819 
Special adjustments, interest income and other(1) (4,344)  16,282   (1,999)  17,929 
Adjusted EBITDA$17,056  $16,440  $60,111  $63,030 


(1)The three months ended June 30, 2023, includes $1.0 million loss from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition, $4.0 million of interest income, and $1.3 million currency gains on acquisition-related intercompany loans. The three months ended June 30, 2022, includes $16.6 million expense on repurchase of convertible senior notes, $5.4 million currency losses on acquisition-related intercompany loans, and a $5.3 million gain from the mark-to-market adjustment of contingent consideration associated with the World Programming acquisition. The six months ended June 30, 2023, includes $8.0 million loss from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition, $6.9 million of interest income, and $3.1 million currency gains on acquisition-related intercompany loans. The six months ended June 30, 2022, includes $16.6 million expense on repurchase of convertible senior notes, $6.9 million currency losses on acquisition-related intercompany loans and a $5.3 million gain from the mark-to-market adjustment of contingent consideration associated with the World Programming acquisition.

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)2023  2022  2023  2022 
Net cash provided by operating activities(1)$30,030  $12,255  $89,229  $18,041 
Capital expenditures (4,457)  (1,267)  (6,184)  (3,457)
Free cash flow(1)$25,573  $10,988  $83,045  $14,584 


(1) The six months ended June 30, 2022, includes a $65.9 million payment in January 2022 for a damages judgement assumed as part of an acquisition in December 2021.

The following table provides a reconciliation of Non-GAAP gross profit to gross profit, the most comparable GAAP financial measure, and a comparison of Non-GAAP gross margin (Non-GAAP gross profit as a percentage of total revenue) to gross margin (gross profit as a percentage of total revenue), the most comparable GAAP financial measure:

 (Unaudited) 
 Three Months Ended
June 30,		  Six Months Ended
June 30,		 
(in thousands)2023  2022  2023  2022 
Gross profit$110,364  $103,133  $243,663  $231,311 
Stock-based compensation expense 2,572   2,030   5,324   3,933 
Non-GAAP gross profit$112,936  $105,163  $248,987  $235,244 
            
Gross profit margin 78.2%  77.7%  79.3%  79.1%
Non-GAAP gross margin 80.0%  79.3%  81.1%  80.4%

The following table provides a reconciliation of Non-GAAP operating expense to Total operating expense, the most comparable GAAP financial measure:

 (Unaudited) 
 Three Months Ended
June 30,		  Six Months Ended
June 30,		 
(in thousands)2023  2022  2023  2022 
Total operating expense$126,633  $110,401  $254,746  $217,868 
Stock-based compensation expense (21,164)  (19,170)  (40,573)  (35,881)
Amortization (7,625)  (6,208)  (15,439)  (12,111)
(Loss) gain on mark-to-market adjustment of contingent consideration (981)  5,304   (7,987)  5,304 
Non-GAAP operating expense$96,863  $90,327  $190,747  $175,180 

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

 (Unaudited) 
 Three Months Ended June 30,  Six Months Ended June 30, 
(in thousands)2023  2022  2023  2022 
Revenue$141,161  $132,656  $307,195  $292,437 
Ending deferred revenue 148,547   112,926   148,547   112,926 
Beginning deferred revenue (141,943)  (118,403)  (144,460)  (106,032)
Deferred revenue acquired —   (1,756)  —   (2,572)
Billings$147,765  $125,423  $311,282  $296,759 

The following table provides revenue, Billings and Adjusted EBITDA on a constant currency basis:

 (Unaudited) 
 Three Months Ended
June 30, 2023		  Three Months
Ended June 30,
2022		  Increase/
(Decrease) %		 
(in thousands)As reported  Currency
changes		  As adjusted for
constant currency		  As reported  As reported  As adjusted for
constant
currency		 
Software revenue$125.3  $2.6  $127.9  $116.9   7.2%  9.4%
Total revenue$141.2  $2.7  $143.9  $132.7   6.4%  8.4%
Billings$147.8  $2.3  $150.1  $125.4   17.8%  19.6%
Adjusted EBITDA$17.1  $1.4  $18.5  $16.4   3.7%  12.8%
                  
                  
 (Unaudited) 
 Six Months Ended
June 30, 2023		  Six Months
Ended June 30,
2022		  Increase/
(Decrease) %		 
(in thousands)As reported  Currency
changes		  As adjusted for
constant currency		  As reported  As reported  As adjusted for
constant
currency		 
Software revenue$275.0  $7.9  $282.9  $257.8   6.7%  9.7%
Total revenue$307.2  $8.5  $315.7  $292.4   5.0%  7.9%
Billings$311.3  $8.6  $319.9  $296.8   4.9%  7.8%
Adjusted EBITDA$60.1  $3.8  $63.9  $63.0   -4.6%  1.5%

Change in Classification of Indirect Costs

Beginning in the first quarter of 2023, the Company refined its classification of certain indirect costs to reflect the way management is now reviewing the information in decision making and to improve comparability with peers. These indirect costs include certain IT, facilities, and depreciation expenses that were previously reported primarily in General and administrative expense. These indirect costs have now been reclassified to Research and development, Sales and marketing, and General and administrative expenses based on global headcount. Management believes this refined methodology better reflects the nature of the costs and financial performance of the Company.

As a result, the Company’s consolidated statements of operations have been recast for prior periods presented to reflect the effects of the changes to Research and development, Sales and marketing, and General and administrative expense. There was no net impact to total operating expenses, income from operations, net income or net income per share for any periods presented. The consolidated balance sheets, consolidated statements of comprehensive income, consolidated statements of changes in stockholders’ equity, and the consolidated statements of cash flows were not affected by changes in the presentation of these costs.

Each prior period that will be presented in the forthcoming Form 10-Q and Form 10-K filings will be recast to conform to current period presentation. The following tables provide the relevant financial results as previously reported, as recast for the current period and forthcoming filings, and the associated impacts of the changes. Within these tables, the references to periods such as “FY 2021” and “Q1 2022” refer to the corresponding periods as reported in the applicable Form 10-K, Form 10-Q, or Form 8-K filings.

The following table summarizes the changes made to the consolidated statements of operations (in thousands):

 Previously Reported 
 FY 2021  Q1 2022  Q2 2022  Q3 2022  Q4 2022  FY 2022 
Operating expenses:                 
Research and development$151,049  $43,094  $46,477  $48,781  $47,511  $185,863 
Sales and marketing 132,750   35,682   39,116   39,244   41,203   155,245 
General and administrative 91,500   23,569   24,367   24,677   24,993   97,606 
Amortization of intangible assets 18,357   5,903   6,208   6,571   8,828   27,510 
Other operating income, net (3,482)  (781)  (5,767)  (2,835)  (572)  (9,955)
Total operating expenses$390,174  $107,467  $110,401  $116,438  $121,963  $456,269 
                  
 Recast 
 FY 2021  Q1 2022  Q2 2022  Q3 2022  Q4 2022  FY 2022 
Operating expenses:                 
Research and development$167,341  $47,079  $50,437  $53,092  $51,934  $202,542 
Sales and marketing 141,484   37,840   41,153   41,352   43,539   163,884 
General and administrative 66,474   17,426   18,370   18,258   18,234   72,288 
Amortization of intangible assets 18,357   5,903   6,208   6,571   8,828   27,510 
Other operating income, net (3,482)  (781)  (5,767)  (2,835)  (572)  (9,955)
Total operating expenses$390,174  $107,467  $110,401  $116,438  $121,963  $456,269 
                  
 Change 
 FY 2021  Q1 2022  Q2 2022  Q3 2022  Q4 2022  FY 2022 
Operating expenses:                 
Research and development$16,292  $3,985  $3,960  $4,311  $4,423  $16,679 
Sales and marketing 8,734   2,158   2,037   2,108   2,336   8,639 
General and administrative (25,026)  (6,143)  (5,997)  (6,419)  (6,759)  (25,318)
Amortization of intangible assets —   —   —   —   —   — 
Other operating income, net —   —   —   —   —   — 
Total operating expenses$—  $—  $—  $—  $—  $— 

Business Outlook

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

 (Unaudited) 
 Three Months Ending
September 30, 2023		  Year Ending
December 31, 2023		 
(in thousands)Low  High  Low  High 
Net loss$(22,800) $(20,900) $(15,300) $(5,600)
Stock-based compensation expense 18,200   18,200   82,200   82,200 
Amortization of intangible assets 7,600   7,600   30,400   30,400 
Non-cash interest expense 500   500   1,800   1,800 
Impact of non-GAAP tax rate(1) (600)  (1,000)  (14,100)  (16,400)
Special adjustments and other(2) —   —   4,900   4,900 
Non-GAAP net income$2,900  $4,400  $89,900  $97,300 


(1)The Company uses a non-GAAP effective tax rate of 26%.
(2)The year ending December 31, 2023, includes $8.0 million loss from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition and $3.1 million currency gains on acquisition-related intercompany loans.

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, 2023		  Year Ending
December 31, 2023		 
(in thousands)Low  High  Low  High 
Net loss$(22,800) $(20,900) $(15,300) $(5,600)
Income tax expense 400   500   17,500   17,800 
Stock-based compensation expense 18,200   18,200   82,200   82,200 
Interest (income) expense (2,500)  (2,500)  (9,000)  (9,000)
Depreciation and amortization 9,700   9,700   38,700   38,700 
Special adjustments and other(1) —   —   4,900   4,900 
Adjusted EBITDA$3,000  $5,000  $119,000  $129,000 


(1)The year ending December 31, 2023, includes $8.0 million loss from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition and $3.1 million currency gains on acquisition-related intercompany loans.

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

 (Unaudited) 
 Year Ending
December 31, 2023		 
(in thousands)Low  High 
Net cash provided by operating activities$120,200  $128,200 
Capital expenditures (12,200)  (12,200)
Free cash flow$108,000  $116,000 

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