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Altair Announces Third Quarter 2021 Financial Results

November 4, 2021 4:06 PM

Exceeds Expectations for Third Quarter 2021, Raises Outlook for the Year

TROY, Mich., Nov. 04, 2021 (GLOBE NEWSWIRE) -- Altair (Nasdaq: ALTR), a global technology company providing software and cloud solutions in the areas of simulation, high-performance computing, data analytics and artificial intelligence today released its financial results for the third quarter ended September 30, 2021.

“Altair continued its across-the-board momentum with an excellent third quarter 2021, highlighted by year-on-year software product revenue growth of 16.5%,” said James Scapa, Founder, Chairman and Chief Executive Officer of Altair. “Our products, services, and business models are clearly providing value and we continue to increase our market share as customers invest for growth.”

“Our third quarter 2021 was another impressive quarter, with revenue and profit exceeding expectations and allowing us to raise our outlook for the full year,” said Matt Brown, Chief Financial Officer of Altair. “I’m extremely pleased with our financial results and our ability to continue expanding our margins while significantly growing revenue.”

Third Quarter 2021 Financial Highlights

Business Outlook

Based on information available as of today, Altair is issuing the following guidance for the fourth quarter and full year 2021:

(in millions)Fourth Quarter 2021 Full Year 2021
Software Product Revenue $106.0 to$109.0 $437.0 to$440.0
Total Revenue $124.0 $127.0 $515.0 $518.0
Net Loss $(13.1) $(10.2) $(20.8) $(17.9)
Non-GAAP Net Income $6.8 $9.0 $47.7 $49.9
Adjusted EBITDA $11.0 $14.0 $72.0 $75.0
Net Cash Provided by Operating Activities $49.6 $52.6
Free Cash Flow $41.0 $44.0


Conference Call Information
What: Altair’s Third Quarter 2021 Financial Results Conference Call
When: Thursday, November 4, 2021
Time: 5:00 p.m. ET
Live Call: (866) 754-5204, Domestic
(636) 812-6621, International
Replay: (855) 859-2056, Conference ID 7966437, Domestic
(404) 537-3406, Conference ID 7966437, 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.

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, 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 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 providing software and cloud solutions in the areas of simulation, high-performance computing, and artificial 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 fourth quarter and full year 2021, our statements regarding our expectation for 2021, 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
[email protected]

Investor Relations
The Blueshirt Group
Monica Gould
212-871-3927
[email protected]

Lindsay Savarese
212-331-8417
[email protected]

ALTAIR ENGINEERING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

September 30, 2021 December 31, 2020
(In thousands) (Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $455,858 $241,221
Accounts receivable, net 88,701 117,878
Income tax receivable 8,929 6,736
Prepaid expenses and other current assets 26,017 21,100
Total current assets 579,505 386,935
Property and equipment, net 38,711 36,332
Operating lease right of use assets 30,916 33,526
Goodwill 268,888 264,481
Other intangible assets, net 61,540 76,114
Deferred tax assets 8,221 7,125
Other long-term assets 26,702 25,389
TOTAL ASSETS $1,014,483 $829,902
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $— $29,962
Accounts payable 4,900 8,594
Accrued compensation and benefits 35,999 34,772
Current portion of operating lease liabilities 10,342 10,331
Other accrued expenses and current liabilities 24,721 31,404
Deferred revenue 75,138 85,691
Convertible senior notes, net 196,796 —
Total current liabilities 347,896 200,754
Convertible senior notes, net — 188,300
Operating lease liabilities, net of current portion 21,610 24,323
Deferred revenue, non-current 9,290 9,388
Other long-term liabilities 32,641 27,767
TOTAL LIABILITIES 411,437 450,532
Commitments and contingencies
MEZZANINE EQUITY 784 784
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 50,558
and 44,216 shares as of September 30, 2021, and December 31, 2020, respectively		 5 4
Class B common stock, authorized 41,203 shares, issued and outstanding 28,206
and 30,111 shares as of September 30, 2021, and December 31, 2020, respectively		 3 3
Additional paid-in capital 711,082 474,669
Accumulated deficit (100,690) (93,293)
Accumulated other comprehensive loss (8,138) (2,797)
TOTAL STOCKHOLDERS’ EQUITY 602,262 378,586
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY $1,014,483 $829,902

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

Three Months Ended
September 30,		 Nine Months Ended
September 30,
(in thousands, except per share data) 2021 2020 2021 2020
Revenue
License $67,603 $55,023 $230,630 $183,584
Maintenance and other services 34,686 32,787 100,758 94,502
Total software 102,289 87,810 331,388 278,086
Software related services 7,650 6,170 23,229 18,548
Total software and related services 109,939 93,980 354,617 296,634
Client engineering services 10,060 10,868 31,005 34,386
Other 1,308 1,608 5,760 5,460
Total revenue 121,307 106,456 391,382 336,480
Cost of revenue
License 4,694 4,477 13,706 12,851
Maintenance and other services 11,770 9,626 35,368 28,583
Total software * 16,464 14,103 49,074 41,434
Software related services 5,707 4,996 17,560 15,141
Total software and related services 22,171 19,099 66,634 56,575
Client engineering services 7,982 8,510 25,163 27,617
Other 1,348 1,427 5,072 4,422
Total cost of revenue 31,501 29,036 96,869 88,614
Gross profit 89,806 77,420 294,513 247,866
Operating expenses:
Research and development * 35,839 30,678 112,872 91,115
Sales and marketing * 30,589 26,998 94,568 80,903
General and administrative * 22,196 20,905 67,983 63,499
Amortization of intangible assets 4,432 3,858 13,924 11,390
Other operating income, net (1,324) (1,596) (2,526) (3,431)
Total operating expenses 91,732 80,843 286,821 243,476
Operating (loss) income (1,926) (3,423) 7,692 4,390
Interest expense 3,037 2,934 8,998 8,590
Other expense (income), net 124 (782) 1,667 (1,852)
Loss before income taxes (5,087) (5,575) (2,973) (2,348)
Income tax expense 3,022 2,930 4,424 10,350
Net loss $(8,109) $(8,505) $(7,397) $(12,698)
Loss per share:
Net loss per share attributable to common
stockholders, basic		 $(0.11) $(0.12) $(0.10) $(0.17)
Net loss per share attributable to common
stockholders, diluted		 $(0.11) $(0.12) $(0.10) $(0.17)
Weighted average shares outstanding:
Weighted average number of shares used in computing
net loss per share, basic		 75,750 73,311 75,226 72,979
Weighted average number of shares used in computing
net loss per share, diluted		 75,750 73,311 75,226 72,979

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

(Unaudited)
Three Months Ended
September 30,		 Nine Months Ended
September 30,
2021 2020 2021 2020
Cost of revenue – maintenance and other services $1,411 $684 $3,791 $1,602
Research and development 3,894 2,428 11,223 5,686
Sales and marketing 3,673 1,949 10,800 3,949
General and administrative 1,955 1,173 5,415 2,702
Total stock-based compensation expense $10,933 $6,234 $31,229 $13,939

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

Nine Months Ended September 30,
(In thousands) 2021 2020
OPERATING ACTIVITIES:
Net loss $(7,397) $(12,698)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 19,355 16,916
Provision for credit loss 330 930
Amortization of debt discount and issuance costs 8,513 8,067
Stock-based compensation expense 31,229 13,939
Deferred income taxes (510) (5,441)
Other, net 40 13
Changes in assets and liabilities:
Accounts receivable 26,770 16,213
Prepaid expenses and other current assets (7,612) (1,055)
Other long-term assets (5,018) 867
Accounts payable (2,432) (3,321)
Accrued compensation and benefits 481 1,274
Other accrued expenses and current liabilities 483 (5,873)
Deferred revenue (8,638) (2,452)
Net cash provided by operating activities 55,594 27,379
INVESTING ACTIVITIES:
Capital expenditures (6,811) (4,006)
Payments for acquisition of businesses, net of cash acquired (5,472) (32,279)
Payments for acquisition of developed technology (344) (433)
Other investing activities, net (284) 152
Net cash used in investing activities (12,911) (36,566)
FINANCING ACTIVITIES:
Proceeds from private placement of common stock 200,000 —
Payments on revolving commitment (30,000) —
Proceeds from employee stock purchase plan contributions 2,110 —
Proceeds from the exercise of common stock options 2,059 1,094
Borrowings under revolving commitment — 30,000
Other financing activities (434) (401)
Net cash provided by financing activities 173,735 30,693
Effect of exchange rate changes on cash, cash equivalents and restricted cash (1,951) 676
Net increase in cash, cash equivalents and restricted cash 214,467 22,182
Cash, cash equivalents and restricted cash at beginning of year 241,547 223,497
Cash, cash equivalents and restricted cash at end of period $456,014 $245,679
Supplemental disclosure of cash flow:
Interest paid $344 $320
Income taxes paid $8,077 $12,142
Supplemental disclosure of non-cash investing and financing activities:
Finance leases $— $117
Property and equipment in accounts payable, other current liabilities
and other liabilities		 $480 $208

Financial Results

The following table provides a reconciliation of Adjusted EBITDA, Non-GAAP net income and Non-GAAP net income per share – diluted, to net income and net income per share – diluted, the most comparable GAAP financial measures:

(Unaudited)
Three Months Ended
September 30,		 Nine Months Ended
September 30,
(in thousands, except per share amounts) 2021 2020 2021 2020
Net loss $(8,109) $(8,505) $(7,397) $(12,698)
Stock-based compensation expense 10,933 6,234 31,229 13,939
Amortization of intangible assets 4,432 3,858 13,924 11,390
Non-cash interest expense 2,876 2,725 8,513 8,062
Restructuring expense (124) — 4,954 —
Impact of non-GAAP tax rate (366) 1,294 (10,044) 2,375
Special adjustments and other (1) — (950) — (372)
Non-GAAP net income 9,642 4,656 41,179 22,696
Depreciation expense 1,743 1,765 5,431 5,526
Cash interest expense (income) 59 118 210 (601)
Income tax expense, net of non-GAAP impact 3,388 1,636 14,468 7,975
Adjusted EBITDA $14,832 $8,175 $61,288 $35,596
Net loss per share - diluted $(0.11) $(0.12) $(0.10) $(0.17)
Non-GAAP net income per share - diluted $0.11 $0.06 $0.48 $0.28
GAAP diluted shares outstanding: 75,750 73,311 75,226 72,979
Non-GAAP diluted shares outstanding: 86,300 80,700 86,300 80,700

(1) Included in 2020 are a) $1.0 million of proceeds from settlements related to a historical acquisition for both the three and nine months ended September 30, 2020, and b) $0.6 million of severance expense for the nine months ended September 30, 2020.

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
September 30,		 Nine Months Ended
September 30,
(in thousands) 2021 2020 2021 2020
Net cash provided by (used in) operating activities $872 $(6,022) $55,594 $27,379
Capital expenditures (1,420) (1,476) (6,811) (4,006)
Free cash flow $(548) $(7,498) $48,783 $23,373

Business Outlook

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

(Unaudited)
Three Months Ending
December 31, 2021		 Year Ending
December 31, 2021
(in thousands) Low High Low High
Net loss $(13,100) $(10,200) $(20,800) $(17,900)
Stock-based compensation expense 11,500 11,500 42,700 42,700
Amortization of intangible assets 4,200 4,200 18,100 18,100
Non-cash interest expense 2,900 2,900 11,400 11,400
Restructuring expense — — 5,000 5,000
Impact of non-GAAP tax rate 1,300 600 (8,700) (9,400)
Non-GAAP net income 6,800 9,000 47,700 49,900
Depreciation expense 1,700 1,700 7,200 7,200
Cash interest expense, net 100 100 300 300
Income tax expense, net of non-GAAP impact 2,400 3,200 16,800 17,600
Adjusted EBITDA $11,000 $14,000 $72,000 $75,000

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, 2021
(in thousands) Low High
Net cash provided by operating activities $49,600 $52,600
Capital expenditures (8,600) (8,600)
Free cash flow $41,000 $44,000



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