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Altair Announces Second Quarter 2024 Financial Results

TROY, Mich., Aug. 01, 2024 (GLOBE NEWSWIRE) -- Altair (Nasdaq: ALTR), a global leader in computational intelligence, today released its financial results for the second quarter and six months ended June 30, 2024.

“Altair maintained its strong trajectory during the second quarter, with software revenue and total revenue above the high end of guidance,” said James R. Scapa, founder, chairman, and chief executive officer, Altair. “Our Q2 results underscore the robustness of our software product lineup, which continues to empower customers with industry-leading computational intelligence.”

“We are pleased with our execution in the second quarter and first half of the year,” said Matt Brown, chief financial officer, Altair. “Our quarterly revenues exceeded expectations as we continued to deliver software revenue growth, which gives us confidence in our path to meet our financial targets for the year.”

Second Quarter 2024 Financial Highlights

Business Outlook

Based on information available as of today, Altair is issuing the following guidance for the third quarter and full year 2024:

(in millions, except %) Third Quarter 2024  Full Year 2024 
Software Revenue $130 to$133  $590 to$600 
Growth Rate  9.2%  11.7%  7.3%  9.1%
Growth Rate - Constant Currency  11.1%  13.7%  8.9%  10.8%
Total Revenue $145  $148  $648  $658 
Growth Rate  8.2%  10.4%  5.8%  7.4%
Growth Rate - Constant Currency  10.0%  12.3%  7.5%  9.1%
Net (Loss) Income $(14.0) $(11.1) $22.6  $30.3 
Non-GAAP Net Income $13.4  $15.7  $108.4  $114.4 
Adjusted EBITDA $16  $19  $136  $144 
Net Cash Provided by Operating Activities       $133  $141 
Free Cash Flow       $122  $130 

The following table provides a reconciliation of Full Year 2024 guidance to the last guidance provided in May

  (Unaudited) 
  Full Year 2024 
(in millions) Midpoint of
Guidance in
May
  Increase/
(Decrease)
  Currency Fluctuations
from Prior Guidance
  Midpoint of
Guidance in August
 
Software Revenue $595.0  $3.0  $(3.0) $595.0 
Total Revenue $657.0  $  $(4.0) $653.0 
Adjusted EBITDA $142.0  $  $(2.0) $140.0 

Conference Call Information

What: Altair’s Second Quarter 2024 Financial Results Conference Call
When: Thursday, August 1, 2024
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, 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, 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 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, 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 intelligence 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 https://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 2024, our statements regarding our expectations for 2024, 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
Jennifer Ristic
216-849-3109
jristic@altair.com 

Investor Relations
Altair
Stephen Palmtag
669-328-9111
spalmtag@altair.com 

ALTAIR ENGINEERING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
  June 30, 2024  December 31, 2023 
(In thousands) (Unaudited)    
ASSETS      
CURRENT ASSETS:      
Cash and cash equivalents $507,008  $467,459 
Accounts receivable, net  126,560   190,461 
Income tax receivable  17,682   16,650 
Prepaid expenses and other current assets  28,582   26,053 
Total current assets  679,832   700,623 
Property and equipment, net  38,463   39,803 
Operating lease right of use assets  31,816   30,759 
Goodwill  459,070   458,125 
Other intangible assets, net  77,537   83,550 
Deferred tax assets  9,120   9,955 
Other long-term assets  40,119   40,678 
TOTAL ASSETS $1,335,957  $1,363,493 
LIABILITIES AND STOCKHOLDERS’ EQUITY 
CURRENT LIABILITIES:      
Accounts payable $4,002  $8,995 
Accrued compensation and benefits  39,819   45,081 
Current portion of operating lease liabilities  8,057   8,825 
Other accrued expenses and current liabilities  41,508   48,398 
Deferred revenue  123,439   131,356 
Current portion of convertible senior notes, net     81,455 
Total current liabilities  216,825   324,110 
Convertible senior notes, net  226,518   225,929 
Operating lease liabilities, net of current portion  24,568   22,625 
Deferred revenue, non-current  28,745   32,347 
Other long-term liabilities  47,995   47,151 
TOTAL LIABILITIES  544,651   652,162 
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 59,198
and 55,240 shares as of June 30, 2024, and December 31, 2023, respectively
  5   5 
Class B common stock, authorized 41,203 shares, issued and outstanding 25,471
and 26,814 shares as of June 30, 2024, and December 31, 2023, respectively
  3   3 
Additional paid-in capital  939,691   864,135 
Accumulated deficit  (119,103)  (130,503)
Accumulated other comprehensive loss  (29,290)  (22,309)
TOTAL STOCKHOLDERS’ EQUITY  791,306   711,331 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $1,335,957  $1,363,493 


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) 2024  2023  2024  2023 
Revenue            
License $92,699  $87,738  $210,406  $200,147 
Maintenance and other services  42,724   37,583   83,446   74,817 
Total software  135,423   125,321   293,852   274,964 
Engineering services and other  13,372   15,840   27,855   32,231 
Total revenue  148,795   141,161   321,707   307,195 
Cost of revenue            
License  3,152   3,981   7,642   8,805 
Maintenance and other services  16,199   13,639   30,365   28,065 
Total software *  19,351   17,620   38,007   36,870 
Engineering services and other  11,165   13,177   23,402   26,662 
Total cost of revenue  30,516   30,797   61,409   63,532 
Gross profit  118,279   110,364   260,298   243,663 
Operating expenses:            
Research and development *  55,570   55,277   107,903   108,528 
Sales and marketing *  46,475   44,982   90,909   88,474 
General and administrative *  19,294   18,622   37,055   36,573 
Amortization of intangible assets  7,629   7,625   15,067   15,439 
Other operating (income) expense, net  (786)  127   (1,668)  5,732 
Total operating expenses  128,182   126,633   249,266   254,746 
Operating (loss) income  (9,903)  (16,269)  11,032   (11,083)
Interest expense  1,604   1,528   3,180   3,054 
Other income, net  (5,750)  (4,195)  (9,707)  (7,808)
(Loss) income before income taxes  (5,757)  (13,602)  17,559   (6,329)
Income tax (benefit) expense  (610)  8,678   6,159   17,910 
Net (loss) income $(5,147) $(22,280) $11,400  $(24,239)
(Loss) earnings per share, basic            
(Loss) earnings per share $(0.06) $(0.28) $0.14  $(0.30)
Weighted average shares  83,607   79,986   83,097   80,088 
(Loss) earnings per share, diluted            
(Loss) earnings per share $(0.06) $(0.28) $0.13  $(0.30)
Weighted average shares  83,607   79,986   87,397   80,088 

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

  (Unaudited) 
  Three Months Ended
June 30,
  Six Months Ended
June 30,
 
(in thousands) 2024  2023  2024  2023 
Cost of revenue – software $2,097  $2,572  $4,099  $5,324 
Research and development  6,618   9,943   12,978   18,686 
Sales and marketing  4,979   7,581   9,499   15,172 
General and administrative  3,661   3,640   6,778   6,715 
Total stock-based compensation expense $17,355  $23,736  $33,354  $45,897 


ALTAIR ENGINEERING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
 
  Six Months Ended
June 30,
 
(In thousands) 2024  2023 
OPERATING ACTIVITIES:      
Net income (loss) $11,400  $(24,239)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:      
Depreciation and amortization  19,557   19,488 
Stock-based compensation expense  33,354   45,897 
Deferred income taxes  (367)  2,015 
Loss on mark-to-market adjustment of contingent consideration  189   7,987 
Other, net  1,166   1,335 
Changes in assets and liabilities:      
Accounts receivable, net  61,360   45,077 
Prepaid expenses and other current assets  (3,647)  (3,166)
Other long-term assets  164   (2,516)
Accounts payable  (4,382)  (5,529)
Accrued compensation and benefits  (4,071)  (6,591)
Other accrued expenses and current liabilities  (2,834)  4,857 
Deferred revenue  (9,882)  4,614 
Net cash provided by operating activities  102,007   89,229 
INVESTING ACTIVITIES:      
Payments for acquisition of businesses, net of cash acquired  (13,680)  (721)
Capital expenditures  (5,004)  (6,184)
Other investing activities, net  (398)  (1,452)
Net cash used in investing activities  (19,082)  (8,357)
FINANCING ACTIVITIES:      
Settlement of convertible senior notes  (81,729)   
Proceeds from the exercise of common stock options  37,227   23,507 
Proceeds from employee stock purchase plan contributions  4,363   3,797 
Payments for repurchase and retirement of common stock     (6,255)
Other financing activities     (48)
Net cash (used in) provided by financing activities  (40,139)  21,001 
Effect of exchange rate changes on cash, cash equivalents and restricted cash  (3,295)  (44)
Net increase in cash, cash equivalents and restricted cash  39,491   101,829 
Cash, cash equivalents and restricted cash at beginning of year  467,576   316,958 
Cash, cash equivalents and restricted cash at end of period $507,067  $418,787 

Change in Presentation of Revenue and Cost of Revenue

Effective in the first quarter of 2024, the Company changed the presentation of revenue and cost of revenue in its Consolidated Statements of Operations to combine the financial statement line items (“FSLIs”) labeled “Software related services”, “Client engineering services” and “Other” into one FSLI labeled “Engineering services and other”. The change in presentation has been applied retrospectively and does not affect the software revenue, total revenue, software cost of revenue or total cost of revenue amounts previously reported or have any effect on segment reporting.

Financial Results

The following table provides a reconciliation of Non-GAAP net income and Non-GAAP net income per share – diluted, to net (loss) income and net (loss) income 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) 2024  2023  2024  2023 
Net (loss) income $(5,147) $(22,280) $11,400  $(24,239)
Stock-based compensation expense  17,355   23,736   33,354   45,897 
Amortization of intangible assets  7,629   7,625   15,067   15,439 
Non-cash interest expense  422   465   894   930 
Impact of non-GAAP tax rate (1)  (5,548)  4,033   (10,843)  2,100 
Special adjustments and other (2)  104   (361)  1,134   4,870 
Non-GAAP net income $14,815  $13,218  $51,006  $44,997 
             
Net (loss) income per share, diluted $(0.06) $(0.28) $0.13  $(0.30)
Non-GAAP net income per share, diluted $0.16  $0.15  $0.56  $0.51 
             
GAAP diluted shares outstanding  83,607   79,986   87,397   80,088 
Non-GAAP diluted shares outstanding  90,994   88,383   90,606   88,735 


(1) For the three and six months ended June 30, 2024, the Company used a non-GAAP effective tax rate of 25%. For the three and six months ended June 30, 2023, the Company used a non-GAAP effective tax rate of 26%.
   
(2) The three months ended June 30, 2024, includes $0.1 million of currency losses on acquisition-related intercompany loans. The three months ended June 30, 2023, includes a $1.0 million loss from the mark-to-market adjustment of contingent consideration associated with the World Programming acquisition and $1.3 million of currency gains on acquisition-related intercompany loans. The six months ended June 30, 2024, includes $0.9 million of currency losses on acquisition-related intercompany loans, and a $0.2 million loss from the mark-to-market adjustment of contingent consideration associated with the World Programming acquisition. The six months ended June 30, 2023, includes an $8.0 million loss from the 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 Adjusted EBITDA to net (loss) income, the most comparable GAAP financial measure:

  (Unaudited) 
  Three Months Ended
June 30,
  Six Months Ended
June 30,
 
(in thousands) 2024  2023  2024  2023 
Net (loss) income $(5,147) $(22,280) $11,400  $(24,239)
Income tax (benefit) expense  (610)  8,678   6,159   17,910 
Stock-based compensation expense  17,355   23,736   33,354   45,897 
Interest expense  1,604   1,528   3,180   3,054 
Depreciation and amortization  9,938   9,738   19,557   19,488 
Special adjustments, interest income and other (1)  (5,792)  (4,344)  (10,484)  (1,999)
Adjusted EBITDA $17,348  $17,056  $63,166  $60,111 


(1) The three months ended June 30, 2024, primarily includes $5.9 million of interest income. The three months ended June 30, 2023, includes $4.0 million of interest income, $1.3 million of currency gains on acquisition-related intercompany loans, and a $1.0 million loss from the mark-to-market adjustment of contingent consideration associated with the World Programming acquisition. The six months ended June 30, 2024, includes $11.6 million of interest income, $0.9 million of currency losses on acquisition-related intercompany loans, and a $0.2 million loss from the mark-to-market adjustment of contingent consideration associated with the World Programming acquisition. The six months ended June 30, 2023, includes an $8.0 million loss from the 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 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) 2024  2023  2024  2023 
Net cash provided by operating activities $28,557  $30,030  $102,007  $89,229 
Capital expenditures  (2,238)  (4,457)  (5,004)  (6,184)
Free cash flow $26,319  $25,573  $97,003  $83,045 

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) 2024  2023  2024  2023 
Gross profit $118,279  $110,364  $260,298  $243,663 
Stock-based compensation expense  2,097   2,572   4,099   5,324 
Non-GAAP gross profit $120,376  $112,936  $264,397  $248,987 
             
Gross profit margin  79.5%  78.2%  80.9%  79.3%
Non-GAAP gross margin  80.9%  80.0%  82.2%  81.1%

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) 2024  2023  2024  2023 
Total operating expense $128,182  $126,633  $249,266  $254,746 
Stock-based compensation expense  (15,258)  (21,164)  (29,255)  (40,573)
Amortization  (7,629)  (7,625)  (15,067)  (15,439)
Loss on mark-to-market adjustment of contingent consideration  (44)  (981)  (189)  (7,987)
Non-GAAP operating expense $105,251  $96,863  $204,755  $190,747 

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) 2024  2023  2024  2023 
Revenue $148,795  $141,161  $321,707  $307,195 
Ending deferred revenue  152,184   148,547   152,184   148,547 
Beginning deferred revenue  (144,939)  (141,943)  (163,703)  (144,460)
Deferred revenue acquired  (1,572)     (1,572)   
Billings $154,468  $147,765  $308,616  $311,282 

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

  (Unaudited) 
  Three Months Ended
June 30, 2024
  Three Months Ended June 30, 2023  Increase/
(Decrease) %
 
(in thousands) As reported  Currency changes  As adjusted for constant currency  As reported  As reported  As adjusted for constant currency 
Software revenue $135.4  $3.3  $138.7  $125.3   8.1%  10.6%
Total revenue $148.8  $3.4  $152.2  $141.2   5.4%  7.8%
Billings $154.5  $3.7  $158.2  $147.8   4.5%  7.1%
Adjusted EBITDA $17.3  $2.2  $19.5  $17.1   1.7%  14.1%
                   
                   
  (Unaudited) 
  Six Months Ended
June 30, 2024
  Six Months Ended
June 30, 2023
  Increase/
(Decrease) %
 
(in thousands) As reported  Currency changes  As adjusted for constant currency  As reported  As reported  As adjusted for constant currency 
Software revenue $293.9  $4.7  $298.6  $275.0   6.9%  8.6%
Total revenue $321.7  $4.9  $326.6  $307.2   4.7%  6.3%
Billings $308.6  $4.5  $313.1  $311.3   -0.9%  0.6%
Adjusted EBITDA $63.2  $3.4  $66.6  $60.1   5.1%  10.8%

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:

  (Unaudited) 
  Three Months Ending
September 30, 2024
  Year Ending
December 31, 2024
 
(in thousands) Low  High  Low  High 
Net (loss) income $(14,000) $(11,100) $22,600  $30,300 
Stock-based compensation expense  17,800   17,800   68,900   68,900 
Amortization of intangible assets  8,400   8,400   31,500   31,500 
Non-cash interest expense  300   300   1,500   1,500 
Impact of non-GAAP tax rate(1)  900   300   (17,200)  (18,900)
Special adjustments and other(2)        1,100   1,100 
Non-GAAP net income $13,400  $15,700  $108,400  $114,400 


(1) The Company uses a non-GAAP effective tax rate of 25%.
   
(2) The year ending December 31, 2024, includes a $0.2 million loss from the mark-to-market adjustment of contingent consideration associated with the World Programming acquisition, and $0.9 million of currency losses on acquisition-related intercompany loans.

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

  (Unaudited) 
  Three Months Ending
September 30, 2024
  Year Ending
December 31, 2024
 
(in thousands) Low  High  Low  High 
Net (loss) income $(14,000) $(11,100) $22,600  $30,300 
Income tax expense  5,400   5,500   19,000   19,300 
Stock-based compensation expense  17,800   17,800   68,900   68,900 
Interest (income) expense  (3,900)  (3,900)  (16,200)  (16,200)
Depreciation and amortization  10,700   10,700   40,600   40,600 
Special adjustments and other(1)        1,100   1,100 
Adjusted EBITDA $16,000  $19,000  $136,000  $144,000 


(1) The year ending December 31, 2024, includes a $0.2 million loss from the mark-to-market adjustment of contingent consideration associated with the World Programming acquisition, and $0.9 million of currency losses 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, 2024
 
(in thousands) Low  High 
Net cash provided by operating activities $133,000  $141,000 
Capital expenditures  (11,000)  (11,000)
Free cash flow $122,000  $130,000 

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