ALTR
$38.55
Altair Engineering Inc Cl A
($.14)
(.36%)
Earnings Details
1st Quarter March 2020
Thursday, May 7, 2020 4:05:00 PM
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Summary

Altair Lowers Guidance Below Estimates

Altair Engineering Inc Cl A (ALTR) reported 1st Quarter March 2020 earnings of $0.13 per share on revenue of $131.5 million. The consensus earnings estimate was $0.09 per share on revenue of $127.3 million. Revenue grew 2.8% on a year-over-year basis.

The company said it expects second quarter revenue of $91.0 million to $96.0 million. The current consensus revenue estimate is $112.9 million for the quarter ending June 30, 2020. The company also said it expects 2020 revenue of $440.0 million to $460.0 million. The company's previous guidance was revenue of $491.0 million to $495.0 million and the current consensus estimate is revenue of $479.3 million for the year ending December 31, 2020.

Altera Corp designs and sells programmable logic devices, HardCopy application-specific integrated circuit devices, power system-on-chip devices, pre-defined design building blocks known as intellectual property cores, and associated development tools.

Results
Reported Earnings
$0.13
Earnings Whisper
-
Consensus Estimate
$0.09
Reported Revenue
$131.5 Mil
Revenue Estimate
$127.3 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Altair Announces First Quarter 2020 Financial Results

TROY, Mich., May 07, 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 first quarter ended March 31, 2020.

“We are pleased to report a strong first quarter with revenue above our guidance range and financial performance at the high end of our expectations, despite challenging market conditions as a result of COVID-19,” said James Scapa, Founder, Chairman and Chief Executive Officer of Altair. “We transitioned quickly to a remote work environment and are supporting our customers through innovative solutions such as hosted units, temporary licenses and online training and webinars. Moreover, we introduced two new product releases in the quarter and added 20% more customers than in the same period a year ago.”  Scapa added, “Having been in business for over 35 years, we have been through multiple economic cycles. Not only have we performed well during those difficult times, but we have emerged with a stronger market position due to the value we bring to our customers.”

“While our software renewals are coming in as expected and we see many new and expansion opportunities as well as growing interest for our products, we are experiencing elongated sales cycles, particularly in the automotive and aerospace end markets, as well as currency headwinds as a result of COVID-19,” said Howard Morof, Chief Financial Officer of Altair. “In light of these factors and increasing uncertainty related to the economic impact of the pandemic, we believe it is prudent to temper our expectations for the year and are reducing our guidance for 2020.  We maintain a strong balance sheet with a solid cash position and believe we are well positioned to resume above market growth when economic conditions normalize.”  

First Quarter 2020 Financial Highlights

  • Software product revenue was $108.4 million, an increase of 5% from $103.3 million for the first quarter of 2019.
  • Total revenue was $131.5 million, an increase of 3% from $127.9 million for the first quarter of 2019.
  • Net income was $6.0 million, compared to net income of $13.0 million for the first quarter of 2019. Diluted net income per share was $0.08 based on 77.0 million diluted weighted average common shares outstanding, compared to diluted net income per share of $0.17 for the first quarter of 2019, based on 76.7 million diluted weighted average common shares outstanding.
  • Adjusted EBITDA was $21.7 million, compared to $24.0 million for the first quarter of 2019. 
  • Non-GAAP net income was $12.7 million, compared to non-GAAP net income of $17.7 million for the first quarter of 2019. Non-GAAP diluted net income per share was $0.16 based on 78.4 million non-GAAP diluted common shares outstanding, compared to non-GAAP diluted net income per share of $0.23 for the first quarter of 2019, based on 77.0 million non-GAAP diluted common shares outstanding.
  • Free cash flow was $26.4 million, compared to $20.7 million for the first quarter of 2019.

Business Outlook

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

 (in millions)Second Quarter 2020 Full Year 2020 
Software Product Revenue $76.0 to$80.0  $365.0 to$380.0 
Total Revenue $91.0  $96.0  $440.0  $460.0 
Net Loss $(9.3) $(7.2) $(18.3) $(14.8)
Non-GAAP Net (Loss) Income $(1.8) $0.3  $10.8  $14.3 
Adjusted EBITDA $1.0  $4.0  $30.0  $35.0 


Conference Call Information 
What: Altair’s First Quarter 2020 Financial Results Conference Call
When:  Friday, May 8, 2020
Time: 8:30 a.m. ET
Live Call: (866) 754-5204, Domestic
(636) 812-6621, International
Replay: (855) 859-2056, Conference ID 4162917, Domestic
(404) 537-3406, Conference ID 4162917, 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, 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 second quarter and full year 2020, our statements regarding COVID-19, our statement regarding our confidence in the future, 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

  March 31, 2020  December 31, 2019 
(In thousands) (Unaudited)     
ASSETS        
CURRENT ASSETS:        
Cash and cash equivalents $247,145  $223,117 
Accounts receivable, net  87,665   104,984 
Income tax receivable  5,884   7,264 
Prepaid expenses and other current assets  16,777   17,092 
Total current assets  357,471   352,457 
Property and equipment, net  35,449   36,297 
Operating lease right of use assets  25,321   28,134 
Goodwill  229,795   233,683 
Other intangible assets, net  61,358   67,075 
Deferred tax assets  5,620   5,791 
Other long-term assets  19,640   19,708 
TOTAL ASSETS $734,654  $743,145 
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY 
CURRENT LIABILITIES:        
Current portion of long-term debt $430  $430 
Accounts payable  5,625   8,585 
Accrued compensation and benefits  27,623   30,676 
Current portion of operating lease liabilities  8,635   9,141 
Other accrued expenses and current liabilities  35,760   28,603 
Deferred revenue  72,567   75,431 
Total current liabilities  150,640   152,866 
Long-term debt, net of current portion  180,777   178,238 
Operating lease liabilities, net of current portion  17,796   20,174 
Deferred revenue, non-current  7,472   8,136 
Other long-term liabilities  19,472   26,672 
TOTAL LIABILITIES  376,157   386,086 
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 41,779
  and 41,271 shares as of March 31, 2020 and December 31, 2019, respectively
  4   4 
Class B common stock, authorized 41,203 shares, issued and outstanding 31,051
  and 31,131 shares as of March 31, 2020 and December 31, 2019, respectively
  3   3 
Additional paid-in capital  449,870   446,633 
Accumulated deficit  (76,763)  (82,405)
Accumulated other comprehensive loss  (16,969)  (9,528)
TOTAL STOCKHOLDERS’ EQUITY  356,145   354,707 
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY $734,654  $743,145 


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

  Three Months Ended March 31, 
(in thousands, except per share data) 2020  2019 
Revenue        
License $77,543  $76,621 
Maintenance and other services  30,900   26,670 
Total software  108,443   103,291 
Software related services  6,934   9,772 
Total software and related services  115,377   113,063 
Client engineering services  13,878   12,050 
Other  2,208   2,746 
Total revenue  131,463   127,859 
Cost of revenue        
License  5,523   5,821 
Maintenance and other services  10,455   8,531 
Total software *  15,978   14,352 
Software related services  5,489   6,518 
Total software and related services  21,467   20,870 
Client engineering services  11,318   9,800 
Other  1,712   2,215 
Total cost of revenue  34,497   32,885 
Gross profit  96,966   94,974 
Operating expenses:        
Research and development *  31,467   27,516 
Sales and marketing *  28,099   26,451 
General and administrative *  22,346   20,329 
Amortization of intangible assets  3,840   3,528 
Other operating income  (891)  (617)
Total operating expenses  84,861   77,207 
Operating income  12,105   17,767 
Interest expense  2,813   270 
Other (income) expense, net  (1,390)  390 
Income before income taxes  10,682   17,107 
Income tax expense  4,652   4,088 
Net income $6,030  $13,019 
Income per share:        
Net income per share attributable to common
  stockholders, basic
 $0.08  $0.18 
Net income per share attributable to common
  stockholders, diluted
 $0.08  $0.17 
Weighted average shares outstanding:        
Weighted average number of shares used in computing
  net income per share, basic
  72,623   70,786 
Weighted average number of shares used in computing
  net income per share, diluted
  77,004   76,720 

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

  (Unaudited) 
  Three Months Ended March 31, 
  2020  2019 
Cost of revenue – software $366  $64 
Research and development  1,428   358 
Sales and marketing  727   462 
General and administrative  650   328 
Total stock-based compensation expense $3,171  $1,212 


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

  Three Months Ended March 31, 
(In thousands) 2020  2019 
OPERATING ACTIVITIES:        
Net income $6,030  $13,019 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  5,660   5,194 
Provision for credit loss  338   120 
Amortization of debt discount and issuance costs  2,653   4 
Stock-based compensation expense  3,171   1,212 
Deferred income taxes  (6,001)  (654)
Other, net  7    
Changes in assets and liabilities:        
Accounts receivable  14,463   7,678 
Prepaid expenses and other current assets  1,184   (5,755)
Other long-term assets  (321)  (1,516)
Accounts payable  (3,001)  (1,792)
Accrued compensation and benefits  (2,581)  (2,815)
Other accrued expenses and current liabilities  8,580   4,093 
Operating lease right-of-use assets and liabilities, net  (17)  286 
Deferred revenue  (2,129)  6,241 
Net cash provided by operating activities  28,036   25,315 
INVESTING ACTIVITIES:        
Capital expenditures  (1,644)  (4,583)
Payments for acquisition of developed technology  (433)  (344)
Other investing activities, net  62   2 
Net cash used in investing activities  (2,015)  (4,925)
FINANCING ACTIVITIES:        
Payments on revolving commitment     (68,395)
Borrowings under revolving commitment     52,289 
Proceeds from the exercise of stock options  194   458 
Other financing activities  (118)  (119)
Net cash provided by (used in) financing activities  76   (15,767)
Effect of exchange rate changes on cash, cash equivalents and restricted cash  (2,113)  (176)
Net increase in cash, cash equivalents and restricted cash  23,984   4,447 
Cash, cash equivalents and restricted cash at beginning of year  223,497   35,685 
Cash, cash equivalents and restricted cash at end of period $247,481  $40,132 
Supplemental disclosure of cash flow:        
Interest paid $15  $225 
Income taxes paid $1,831  $2,327 
Supplemental disclosure of non-cash investing and financing activities:        
Finance leases $29  $488 
Property and equipment in accounts payable, other current liabilities
  and other liabilities
 $382  $295 


Financial Results

The following table provides a reconciliation of 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 March 31, 
(in thousands, except per share amounts) 2020  2019 
Net income $6,030  $13,019 
Stock-based compensation expense  3,171   1,212 
Amortization of intangible assets  3,840   3,528 
Special adjustments (1)     228 
Income tax effect of non-GAAP adjustments  (382)  (240)
Non-GAAP net income $12,659  $17,747 
         
Net income per share - diluted $0.08  $0.17 
Non-GAAP net income per share - diluted $0.16  $0.23 
         
GAAP diluted shares outstanding:  77,004   76,720 
Non-GAAP diluted shares outstanding:  78,400   77,000 

(1)     Includes $0.2 million impairment charge for royalty contracts for the three ended March 31, 2019.


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

  (Unaudited) 
  Three Months Ended March 31, 
(in thousands) 2020  2019 
Net income $6,030  $13,019 
Income tax expense  4,652   4,088 
Stock-based compensation expense  3,171   1,212 
Interest expense  2,813   270 
Interest income and other (1)  (654)  201 
Depreciation and amortization  5,660   5,194 
Adjusted EBITDA $21,672  $23,984 

(1)     Includes $0.2 million impairment charge for royalty contracts for the three months ended March 31, 2019


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

  (Unaudited) 
  Three Months Ended March 31, 
(in thousands) 2020  2019 
Net cash provided by operating activities $28,036  $25,315 
Capital expenditures  (1,644)  (4,583)
Free Cash Flow $26,392  $20,732 


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
June 30, 2020
  Year Ending
December 31, 2020
 
(in thousands) Low  High  Low  High 
Net loss $(9,300) $(7,200) $(18,300) $(14,800)
Stock-based compensation expense  4,100   4,100   15,500   15,500 
Amortization of intangible assets  3,800   3,800   15,100   15,100 
Income tax effect of non-GAAP adjustments  (400)  (400)  (1,500)  (1,500)
Non-GAAP net (loss) income $(1,800) $300  $10,800  $14,300 


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

  (Unaudited) 
  Three Months Ending
June 30, 2020
  Year Ending
December 31, 2020
 
(in thousands) Low  High  Low  High 
Net loss $(9,300) $(7,200) $(18,300) $(14,800)
Income tax (benefit) expense  (1,800)  (900)  800   2,300 
Stock-based compensation expense  4,100   4,100   15,500   15,500 
Interest expense  2,800   2,800   11,400   11,400 
Depreciation and amortization  5,600   5,600   22,400   22,400 
Interest income and other non-recurring adjustments  (400)  (400)  (1,800)  (1,800)
Adjusted EBITDA $1,000  $4,000  $30,000  $35,000 

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Source: Altair Engineering Inc.