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Altair Announces First Quarter 2018 Financial Results

May 14, 2018 4:05 PM

TROY, Mich., May 14, 2018 (GLOBE NEWSWIRE) -- Altair (Nasdaq: ALTR) released its financial results for the first quarter ended March 31, 2018.

“Altair started 2018 with a strong financial performance highlighted by software product revenue growth of 26% and profitability that exceeded expectations,” said James Scapa, Founder, Chairman and CEO. “Our performance in the first quarter reflects good execution, improving market dynamics and the positive impact of the investments we have made to strengthen our product portfolio and go-to-market team.”

Scapa continued, “We have further enhanced our solution set with the recent acquisitions of CANDI, which extends our capabilities around edge gateway computing and the Internet of Things, and FluiDyna, a developer of GPU-based fluid dynamics and numerical simulation technologies. These are exciting technologies that increase the value Altair can deliver for customers and exemplify our expanding number of opportunities for future growth.”

First Quarter 2018 Financial Highlights

Business Outlook

Based on information available as of today, Altair is issuing forward-looking statements on guidance for the second quarter and full year 2018 as indicated below.

Second Quarter 2018Full Year 2018
Software Product Revenue$69.0to$70.0$276.0to$280.0
Total Revenue$91.0 $92.0$369.0 $373.0
GAAP Net Income$0.5 $1.0$11.0 $13.0
Adjusted EBITDA$5.0 $5.5$33.0 $35.0
Non-GAAP Net Income$2.5 $3.0$19.0 $21.0

(All figures in millions)

Conference Call Information

What: Altair First Quarter 2018 Financial Results Conference Call
When: Monday, May 14, 2018
Time: 4:30 p.m. EDT
Live Call: (866) 754-5204, domestic
(636) 812-6621, international
Replay: (855) 859-2056, passcode 2474564, domestic
(404) 537-3406, passcode 2474564, 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, 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 transforms design and decision making by applying simulation, machine learning and optimization throughout product lifecycles. Our broad portfolio of simulation technology and patented units-based software licensing model enable Simulation-Driven Innovation for our customers. With more than 2,000 employees, Altair is headquartered in Troy, Michigan, USA and operates 71 offices throughout 24 countries. Altair serves more than 5,000 customers across broad industry segments. 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, statements regarding our business outlook, potential growth, market positioning and future investments, 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 RelationsBrian DenyeauICR248-614-2400 ext. 346[email protected]

Media RelationsDave SimonAltair248-614-2400 ext. 332[email protected]

Altair Engineering Inc. and subsidiaries
Consolidated balance sheets
March 31, 2018 December 31, 2017
(In thousands) (Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $63,196 $39,213
Accounts receivable, net 83,350 86,635
Inventory, net 1,051 1,980
Income tax receivable 6,898 6,054
Prepaid expenses and other current assets 13,148 10,006
Total current assets 167,643 143,888
Property and equipment, net 30,501 31,446
Goodwill 63,771 62,706
Other intangible assets, net 22,813 24,461
Deferred tax assets 8,824 8,351
Other long-term assets 17,270 17,019
TOTAL ASSETS $310,822 $287,871
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $294 $232
Accounts payable 5,650 4,880
Accrued compensation and benefits 25,360 26,560
Obligations for acquisition of businesses 13,226 13,925
Other accrued expenses and current liabilities 21,486 21,744
Deferred revenue 152,663 130,122
Total current liabilities 218,679 197,463
Long-term debt, net of current portion 526 178
Deferred revenue, non-current 9,961 9,640
Other long-term liabilities 14,179 17,647
TOTAL LIABILITIES 243,345 224,928
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 27,357 and 26,725 shares as of March 31, 2018 and December 31, 2017, respectively 3 2
Class B common stock, authorized 41,203 shares, issued and outstanding 36,508 shares as of March 31, 2018 and December 31, 2017 4 4
Additional paid-in capital 232,576 232,156
Accumulated deficit (162,579) (166,499)
Accumulated other comprehensive loss (4,879) (5,072)
TOTAL STOCKHOLDERS’ EQUITY 65,125 60,591
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY $310,822 $287,871

Altair Engineering Inc. and subsidiaries
Consolidated statements of operations
(Unaudited)
Three months ended March 31,
(in thousands, except per share data) 2018 2017
Revenue
Software $68,143 $54,097
Software related services 9,473 8,971
Total software 77,616 63,068
Client engineering services 12,080 12,229
Other 2,035 1,585
Total revenue 91,731 76,882
Cost of revenue
Software* 10,922 8,904
Software related services 6,709 6,659
Total software 17,631 15,563
Client engineering services 10,200 10,141
Other 1,211 1,050
Total cost of revenue 29,042 26,754
Gross profit 62,689 50,128
Operating expenses:
Research and development* 22,703 18,770
Sales and marketing* 18,977 16,910
General and administrative* 16,990 16,089
Amortization of intangible assets 1,940 943
Other operating income (2,191) (594)
Total operating expenses 58,419 52,118
Operating income (loss) 4,270 (1,990)
Interest expense 16 611
Other (income) expense, net (900) 359
Income (loss) before income taxes 5,154 (2,960)
Income tax expense (benefit) 1,234 (772)
Net income (loss) $3,920 $(2,188)
Income (loss) per share:
Net income (loss) per share attributable to common stockholders, basic $0.06 $(0.04)
Net income (loss) per share attributable to common stockholders, diluted $0.05 $(0.04)
Weighted average shares outstanding:
Weighted average number of shares used in computing net income (loss) per share, basic 63,638 50,132
Weighted average number of shares used in computing net income (loss) per share, diluted 72,390 50,132

*Amounts include stock-based compensation expense as follows (in thousands):
Three months ended March 31,
2018 2017
Cost of revenue – software $8 $5
Research and development 47 775
Sales and marketing 41 431
General and administrative 120 1,658
Total stock-based compensation expense $216 $2,869

Altair Engineering Inc. and subsidiaries
Consolidated statements of cash flows
(Unaudited)
Three months ended March 31,
(In thousands) 2018 2017
OPERATING ACTIVITIES:
Net income (loss) $3,920 $(2,188)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 3,543 2,461
Provision for bad debt 65 91
Stock-based compensation expense 216 2,869
Deferred income taxes (432) 182
Other, net (7) 18
Changes in assets and liabilities:
Accounts receivable 4,492 8,153
Prepaid expenses and other current assets (715) (4,058)
Other long-term assets 119 (1,523)
Accounts payable 510 (186)
Accrued compensation and benefits (1,560) (2,478)
Other accrued expenses and current liabilities (3,967) (632)
Deferred revenue 20,505 16,493
Net cash provided by operating activities 26,689 19,202
INVESTING ACTIVITIES:
Capital expenditures (1,684) (969)
Payments for acquisition of businesses (1,199) (1,099)
Payments for acquisition of developed technology (353) (120)
Other investing activities, net 23 (44)
Net cash used in investing activities (3,213) (2,232)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 302 115
Payments of initial public offering costs (186) (81)
Payments for redemption of common stock (60) (305)
Principal payments on long-term debt (51) (2,688)
Payments on revolving commitment — (32,061)
Borrowings under revolving commitment — 17,271
Other financing activities — (16)
Net cash provided by (used in) financing activities 5 (17,765)
Effect of exchange rate changes on cash, cash equivalents and restricted cash 495 490
Net increase (decrease) in cash, cash equivalents and restricted cash 23,976 (305)
Cash, cash equivalents and restricted cash at beginning of year 39,578 17,139
Cash, cash equivalents and restricted cash at end of period $63,554 $16,834
Supplemental disclosure of cash flow:
Interest paid $10 $634
Income taxes paid $2,143 $1,641
Supplemental disclosure of non-cash investing and financing activities:
Initial public offering costs in other long-term assets $— $1,625
Property and equipment in accounts payable and other accrued expenses and current liabilities $736 $64
Capital leases $565 $—

The following table provides a reconciliation of Adjusted EBITDA to net income (loss), the most comparable GAAP financial measure (in thousands):
(Unaudited)
Three months ended March 31,
2018 2017
Net income (loss) $3,920 $(2,188)
Income tax expense (benefit) 1,234 (772)
Stock-based compensation expense 216 2,869
Interest expense 16 611
Interest income and other(1) (1,255) (85)
Depreciation and amortization 3,543 2,474
Adjusted EBITDA $7,674 $2,909
(1) Includes a non-recurring adjustment for a change in estimated legal expenses resulting in $2.0 million of income and a non-recurring adjustment for royalty contracts resulting in $0.9 million of expense for the three months ended March 31, 2018.

The following table provides a reconciliation of Non-GAAP net income and Non-GAAP diluted earnings per share to net income (loss) and earnings (loss) per share - diluted, the most comparable GAAP financial measures (in thousands):
(Unaudited)
Three months ended March 31,
2018 2017
Net income (loss) $3,920 $(2,188)
Stock-based compensation expense 216 2,869
Amortization of intangible assets 1,940 943
Non-GAAP net income $6,076 $1,624
Earnings (loss) per share - diluted $0.05 $(0.04)
Non-GAAP earnings per share - diluted $0.08 $0.03
GAAP diluted shares outstanding:
Weighted average number of shares used in computing net income (loss) per share, diluted 72,390 50,132
Non-GAAP diluted shares outstanding:
Weighted average number of shares used in computing net income per share, diluted 72,800 61,200

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,
2018 2017
Net cash provided by operating activities $26,689 $19,202
Capital expenditures (1,684) (969)
Free cash flow $25,005 $18,233

The following table provides a reconciliation of projected net income to projected Non-GAAP net income, the most comparable GAAP financial measure (in thousands):
(Unaudited)
Three months ending Year ending
June 30, 2018 December 31, 2018
low high low high
Net income$ 500 $ 1,000 $ 11,000 $ 13,000
Stock-based compensation expense 500 500 2,000 2,000
Amortization of intangible assets 1,500 1,500 6,000 6,000
Non-GAAP net income$ 2,500 $ 3,000 $ 19,000 $ 21,000

The following table provides a reconciliation of projected Adjusted EBITDA to projected net income, the most comparable GAAP financial measure (in thousands):
(Unaudited)
Three months ending Year ending
June 30, 2018 December 31, 2018
low high low high
Net income$500 $1,000 $11,000 $13,000
Income tax expense 600 600 4,200 4,200
Stock-based compensation expense 500 500 2,000 2,000
Interest expense - - - -
Interest income and other - - - -
Depreciation and amortization 3,400 3,400 13,500 13,500
Other non-recurring charges(1) - - 2,300 2,300
Adjusted EBITDA$5,000 $5,500 $33,000 $35,000
(1) Represents projected non-recurring costs related to accelerated compliance-related costs or impairment charges.

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Source: Altair Engineering Inc.

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