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Altair Announces First Quarter 2019 Financial Results

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

Business Outlook

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

 Second Quarter 2019Full 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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