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CST: 22/05/2019 10:57:34   

Altair Announces First Quarter 2019 Financial Results

12 Days ago

2019 First Quarter Software Product Revenue Increased 15% year-over-year

TROY, Mich., May 09, 2019 (GLOBE NEWSWIRE) -- Altair (Nasdaq:ALTR), a global technology company providing solutions in product development, high-performance computing and data intelligence, today released its financial results for the first quarter ended March 31, 2019.

“Altair delivered an excellent first quarter, with financial results above guidance,” said James Scapa, founder, chairman and chief executive officer.  “We look forward to continued success throughout 2019 as we expand our footprint within our user base, industries and geographies.  Our simulation-centric portfolio for design, data, cloud and AI is uniquely positioned for growth as these technologies converge.”

First Quarter 2019 Financial Highlights

  • Software product revenue was $103.3 million.
  • Non-GAAP software product revenue was $105.5 million.  Non-GAAP software product revenue includes revenue not recognized under GAAP due to acquisition accounting adjustments associated with the accounting for deferred revenue in significant business combinations.
  • Total revenue was $127.9 million.
  • Non-GAAP total revenue was $130.1 million.  Non-GAAP total revenue includes revenue not recognized under GAAP due to acquisition accounting adjustments associated with the accounting for deferred revenue in significant business combinations.
  • Net income was $13.0 million. Diluted net income per share was $0.17 based on 76.7 million diluted weighted average common shares outstanding.
  • Adjusted EBITDA was $24.0 million.  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 determined by management.
  • Modified Adjusted EBITDA was $26.2 million.  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 was $20.2 million. Non-GAAP diluted net income per share was $0.26 based on 77.7 million non-GAAP diluted common shares outstanding. Non-GAAP net income excludes stock-based compensation, amortization of intangible assets related to acquisitions, non-recurring adjustments, revenue not recognized under GAAP due to acquisition accounting and certain tax adjustments.
  • Free cash flow, which consists of cash flow from operations less capital expenditures, was $20.7 million. 

Business Outlook

Based on information available as of today, Altair is issuing guidance for the second quarter and full year 2019. 

  Second Quarter 2019 Full Year 2019
Software Product Revenue  $ 83.0     to $ 85.0   $ 373.0   to $ 377.0
Non-GAAP Software Product Revenue  $ 85.2     $ 87.2   $ 382.0   $ 386.0
Total Revenue  $ 106.0     $ 108.0   $ 470.0   $ 474.0
Non-GAAP Total Revenue  $ 108.2     $ 110.2   $ 479.0   $ 483.0
Net (Loss) Income  $ (2.9 )   $ (0.9 ) $ 14.6   $ 18.6
Non-GAAP Net Income  $ 5.6     $ 7.6   $ 47.8   $ 51.8
Adjusted EBITDA  $ 3.8     $ 5.8   $ 53.0   $ 57.0
Modified Adjusted EBITDA  $ 6.0     $ 8.0   $ 62.0   $ 66.0

 (All figures in millions)

Conference Call Information

What: Altair’s First Quarter 2019 Financial Results Conference Call
When: Thursday, May 9, 2019
Time: 4:30 p.m. ET
Live Call: (866) 754-5204, Domestic
(636) 812-6621, International
Replay: (855) 859-2056, Conference ID 6894064, Domestic
(404) 537-3406, Conference ID 6894064, 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.

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 intelligence. 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 second quarter and full year 2019, statements regarding our anticipated success, expected expansion of our footprint, positioning for growth and convergence of technologies, 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.

Investor and Media Relations
Dave Simon
Altair
248-614-2400 ext. 332
pr@altair.com


Altair Engineering Inc. and Subsidiaries  
Consolidated Balance Sheets    
(unaudited)  
           
    March 31,
2019
  December 31,
2018
 
(In thousands)          
ASSETS          
CURRENT ASSETS:          
Cash and cash equivalents   $   39,771     $   35,345    
Accounts receivable, net       88,358         96,803    
Inventory, net       3,389         1,964    
Income tax receivable       8,137         4,431    
Prepaid expenses and other current assets       15,976         15,491    
Total current assets       155,631         154,034    
Property and equipment, net       33,524         30,153    
Operating lease right of use assets       29,892         -    
Goodwill       210,714         210,532    
Other intangible assets, net       68,469         69,836    
Deferred tax assets       1,978         1,373    
Other long-term assets       18,658         17,288    
TOTAL ASSETS   $   518,866     $   483,216    
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY  
CURRENT LIABILITIES:          
Current portion of long-term debt   $   453     $   331    
Accounts payable       6,569         8,357    
Accrued compensation and benefits       28,643         31,740    
Current portion of operating lease liabilities       9,464         -    
Other accrued expenses and current liabilities       31,910         27,565    
Deferred revenue       66,030         59,765    
Total current liabilities       143,069         127,758    
Long-term debt, net of current portion       15,686         31,417    
Operating lease liabilities, net of current portion       21,744         -    
Deferred revenue, non-current       6,511         6,754    
Other long-term liabilities       27,811         28,153    
TOTAL LIABILITIES       214,821         194,082    
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
38,760 and 38,349 shares as of March 31, 2019 and December 31, 2018,
respectively
      4         4    
Class B common stock, authorized 41,203 shares, issued and outstanding
32,171 and 32,171 shares as of March 31, 2019 and December 31, 2018,
respectively
      3         3    
Additional paid-in capital       381,159         379,832    
Accumulated deficit       (68,986 )       (82,005 )  
Accumulated other comprehensive loss       (10,487 )       (11,052 )  
TOTAL STOCKHOLDERS’ EQUITY       301,693         286,782    
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY   $   518,866     $   483,216    
           

 

Altair Engineering Inc. and Subsidiaries  
Consolidated Statements of Operations  
(Unaudited)  
             
    Three Months Ended
March 31,
   
(in thousands, except per share data)     2019       2018      
Revenue            
License   $   76,621     $   66,935      
Maintenance and other services       26,670         22,734      
Total software       103,291         89,669      
Software related services       9,772         9,473      
Total software and related services       113,063         99,142      
Client engineering services       12,050         12,080      
Other       2,746         2,035      
Total revenue       127,859         113,257      
Cost of revenue            
License *       5,821         3,730      
Maintenance and other services *       8,531         7,192      
Total software       14,352         10,922      
Software related services       6,518         6,709      
Total software and related services       20,870         17,631      
Client engineering services       9,800         10,200      
Other       2,215         1,211      
Total cost of revenue       32,885         29,042      
Gross profit       94,974         84,215      
Operating expenses:            
Research and development*       27,516         22,703      
Sales and marketing*       26,451         18,627      
General and administrative*       20,329         16,990      
Amortization of intangible assets       3,528         1,940      
Other operating income       (617 )       (2,191 )    
Total operating expenses       77,207         58,069      
Operating income        17,767         26,146      
Interest expense       270         16      
Other expense (income), net       390         (900 )    
Income before income taxes       17,107         27,030      
Income tax expense       4,088         2,346      
Net income   $   13,019     $   24,684      
Income per share:            
Net income per share attributable to common stockholders, basic   $   0.18     $   0.39      
Net income per share attributable to common stockholders, diluted   $   0.17     $   0.34      
Weighted average shares outstanding:            
Weighted average number of shares used in computing net income per share,
basic
      70,786         63,638      
Weighted average number of shares used in computing net income per share,
diluted
      76,720         72,390      
             


*Amounts include stock-based compensation expense as follows (in thousands):     
         
    (Unaudited)
    Three Months Ended
March 31,
      2019     2018
Cost of revenue – software   $   64   $   8
Research and development       358       47
Sales and marketing       462       41
General and administrative       328       120
Total stock-based compensation expense   $   1,212   $   216
         


Altair Engineering Inc. and Subsidiaries  
Consolidated Statements of Cash Flows  
(Unaudited)  
           
    Three Months Ended
March 31,
 
(In thousands)     2019       2018    
OPERATING ACTIVITIES:          
Net income   $   13,019     $   24,684    
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization       5,194         3,543    
Provision for bad debt       120         65    
Stock-based compensation expense       1,212         216    
Deferred income taxes       (654 )       271    
Other, net       4         (7 )  
Changes in assets and liabilities:          
Accounts receivable       7,678         4,492    
Prepaid expenses and other current assets       (5,755 )       (1,091 )  
Other long-term assets       (1,516 )       116    
Accounts payable       (1,792 )       510    
Accrued compensation and benefits       (2,815 )       (1,560 )  
Other accrued expenses and current liabilities       4,093         (3,545 )  
Operating lease right-of-use assets and liabilities, net       286         -    
Deferred revenue       6,241         (1,005 )  
    Net cash provided by operating activities       25,315         26,689    
INVESTING ACTIVITIES:          
Capital expenditures       (4,583 )       (1,684 )  
Payments for acquisition of developed technology       (344 )       (353 )  
Payments for acquisition of businesses, net of cash acquired       —         (1,199 )  
Other investing activities, net       2         23    
    Net cash used in investing activities       (4,925 )       (3,213 )  
FINANCING ACTIVITIES:          
Payments on revolving commitment       (68,395 )       —    
Borrowings under revolving commitment       52,289         —    
Proceeds from the exercise of stock options       458         302    
Payments for initial public offering costs       —         (186 )  
Other financing activities       (119 )       (111 )  
    Net cash (used in) provided by financing activities       (15,767 )       5    
Effect of exchange rate changes on cash, cash equivalents and restricted cash       (176 )       495    
Net increase in cash, cash equivalents and restricted cash       4,447         23,976    
Cash, cash equivalents and restricted cash at beginning of year       35,685         39,578    
Cash, cash equivalents and restricted cash at end of period   $   40,132     $   63,554    
Supplemental disclosure of cash flow:          
Interest paid   $   225     $   10    
Income taxes paid   $   2,327     $   2,143    
Supplemental disclosure of non-cash investing and financing activities:          
Finance leases   $   488     $   565    
Property and equipment in accounts payable   $   295     $   736    
           

Financial Results 

The following table provides a reconciliation of Non-GAAP net income and Non-GAAP diluted income per share to net income and income per share - diluted, the most comparable GAAP financial measures (in thousands, except per share amounts):    
             
      (Unaudited)  
      Three Months Ended
March 31,
 
        2019       2018    
Net income    $   13,019     $   24,684    
Stock-based compensation expense       1,212         216    
Amortization of intangible assets       3,528         1,940    
Acquisition related deferred revenue (1)       2,250         -    
Special adjustments (2)       228         (1,152 )    
Income tax effect of non-GAAP adjustments (3)       (54 )       -    
  Non-GAAP net income   $   20,183     $   25,688    
             
             
Income per share - diluted   $   0.17     $   0.34    
Non-GAAP income per share - diluted   $   0.26     $   0.35    
             
GAAP diluted shares outstanding:       76,720         72,390    
             
Non-GAAP diluted shares outstanding:       77,700         72,800    
             
(1 ) Represents revenue not recognized under GAAP due to acquisition accounting adjustment associated with the accounting for deferred revenue in significant business combinations.

 
(2 ) Includes an impairment charge for royalty contracts resulting in $0.2 million and $0.9 million of expense for the three months ended March 31, 2019 and 2018, respectively. Includes a non-recurring adjustment for a change in estimated legal expenses resulting in $2.0 million of income for the three months ended March 31, 2018.

 
(3 ) The income tax effect of non-GAAP adjustments for 2018 is affected by the U.S. valuation allowance.  

 

The following table provides a reconciliation of Adjusted EBITDA and Modified Adjusted EBITDA to net income, the most comparable GAAP financial measure (in thousands):   
               
      (Unaudited)  
      Three Months Ended
March 31,
 
        2019     2018      
Net income    $   13,019   $   24,684      
Income tax expense       4,088       2,346      
Stock-based compensation expense       1,212       216      
Interest expense       270       16      
Interest income and other(1)       201       (1,255 )    
Depreciation and amortization       5,194       3,543      
Adjusted EBITDA   $   23,984   $   29,550      
               
Acquisition related deferred revenue (2)   $   2,250   $   -      
Modified Adjusted EBITDA   $   26,234   $   29,550      
               
(1 ) Includes an impairment charge for royalty contracts resulting in $0.2 million and $0.9 million of expense for the three months ended March 31, 2019 and 2018, respectively. Includes a non-recurring adjustment for a change in estimated legal expenses resulting in $2.0 million of income for the three months ended March 31, 2018.  
   
(2 ) Represents revenue not recognized under GAAP due to acquisition accounting adjustment associated with the accounting for deferred revenue in significant business combinations.  
               


The following table provides a reconciliation of Free Cash Flow to net cash provided by operating activities, the most comparable GAAP financial measure (in thousands): 
           
    (Unaudited)
    Three Months Ended
March 31,
 
      2019       2018    
Net cash provided by operating activities   $   25,315     $   26,689    
Capital expenditures       (4,583 )       (1,684 )  
Free cash flow   $   20,732     $   25,005    
           

Business Outlook

The following table provides a reconciliation of projected Non-GAAP net income to projected net (loss) income, the most comparable GAAP financial measure (in thousands):
                 
    (Unaudited)
    Three months ending   Year ending
    June 30, 2019   December 31, 2019
    low   high   low   high
Net (loss) income $   (2,900 )   $   (900 )   $   14,600   $   18,600
Stock-based compensation expense     2,000         2,000         7,000       7,000
Amortization of intangible assets     3,800         3,800         15,200       15,200
Software licenses deferred revenue fair value adjustment (1)     2,200         2,200         9,000       9,000
Non-recurring adjustments     500         500         2,000       2,000
                 
  Non-GAAP net income $   5,600     $   7,600     $   47,800   $   51,800
                 
(1) Adjustments for revenue not recognized under GAAP due to acquisition accounting adjustment associated with the accounting for deferred revenue in significant business combinations.
                 
The following table provides a reconciliation of projected Adjusted EBITDA to projected net (loss) income, the most comparable GAAP financial measure (in thousands): 
                 
    (Unaudited)
    Three months ending   Year ending
    June 30, 2019   December 31, 2019
    low   high   low   high
Net (loss) income $   (2,900 )   $   (900 )   $   14,600   $   18,600
Income tax expense     (1,000 )       (1,000 )       7,200       7,200
Stock-based compensation expense     2,000         2,000         7,000       7,000
Interest expense     -         -         -       -
Depreciation and amortization     5,200         5,200         22,200       22,200
Interest income and other non-recurring adjustments     500         500         2,000       2,000
  Adjusted EBITDA $   3,800     $   5,800     $   53,000   $   57,000
                 
Software licenses deferred revenue fair value adjustment (1)     2,200         2,200         9,000       9,000
  Modified Adjusted EBITDA $   6,000     $   8,000     $   62,000   $   66,000
                 
(1) Adjustments for revenue not recognized under GAAP due to acquisition accounting adjustment 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 (in millions): 
    (Unaudited)
    Three months ending   Year ending
    June 30, 2019   December 31, 2019
    low   high   low   high
Total Revenue (GAAP) $   106.0     $   108.0     $   470.0   $   474.0
Software licenses deferred revenue fair value adjustment (1)     2.2         2.2         9.0       9.0
Non-GAAP Total Revenue $   108.2     $   110.2     $   479.0   $   483.0
                 
(1) Adjustments for revenue not recognized under GAAP due to acquisition accounting adjustment associated with the accounting for deferred revenue in significant business combinations.
                 
The following table provides a reconciliation of Non-GAAP Software Product Revenue to Total Software Product Revenue, the most comparable GAAP financial measure (in millions): 
                 
    (Unaudited)
    Three months ending   Year ending
    June 30, 2019   December 31, 2019
    low   high   low   high
Total Software Product Revenue (GAAP) $   83.0     $   85.0     $   373.0   $   377.0
Software licenses deferred revenue fair value adjustment (1)     2.2         2.2         9.0       9.0
Non-GAAP Total Software Product Revenue $   85.2     $   87.2     $   382.0   $   386.0
                 
(1) Adjustments for revenue not recognized under GAAP due to acquisition accounting adjustment associated with the accounting for deferred revenue in significant business combinations.


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