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Altair Announces First Quarter 2021 Financial Results

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TROY, Mich., May 06, 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 first quarter ended March 31, 2021.

"Altair had an excellent first quarter 2021, due in large measure to the strength of our constantly evolving software portfolio," said James Scapa, Founder, Chairman and Chief Executive Officer of Altair. "Our vision of the convergence of simulation, HPC, and AI driving enterprise decisions is emerging as a clear imperative embraced by customers. This technical direction, which we identified early on and have invested in significantly, is important and manifest in all the markets we serve. We look forward to sharing our longer-term vision and strategy for the company at our virtual Investor Day on May 27."

"I'm pleased to report our second consecutive quarter of record software revenue and total revenue, which far exceeded our expectations, led by strong renewal business and expansion in software," said Matt Brown, Chief Financial Officer of Altair. "We're executing on our mission to transform enterprise decision making, while driving top line revenue growth and maintaining a disciplined approach to spending to expand our profitability."

First Quarter 2021 Financial Highlights

  • Software product revenue was $129.5 million compared to $108.4 million for the first quarter of 2020, an increase of 19.5%
  • Total revenue was $150.2 million compared to $131.5 million for the first quarter of 2020, an increase of 14.2%
  • Net income was $14.4 million compared to $6.0 million for the first quarter of 2020, an increase of 138%. Diluted net income per share was $0.18 based on 79.3 million diluted weighted average common shares outstanding, compared to diluted net income per share of $0.08 for the first quarter of 2020, based on 77.0 million diluted weighted average common shares outstanding
  • Adjusted EBITDA was $37.0 million compared to $21.7 million for the first quarter of 2020, an increase of 70.5%. Adjusted EBITDA margin was 24.6% compared to 16.5% for the first quarter of 2020.
  • Non-GAAP net income was $26.0 million, compared to Non-GAAP net income of $15.1 million for the first quarter of 2020, an increase of 72.4%. Non-GAAP diluted net income per share was $0.31 based on 83.4 million non-GAAP diluted common shares outstanding, compared to Non-GAAP diluted net income per share of $0.19 for the first quarter of 2020, based on 78.4 million non-GAAP diluted common shares outstanding
  • Free cash flow was $33.5 million, compared to $26.4 million for the first quarter of 2020, an increase of 27.1%

Business Outlook

Based on information available as of today, Altair is issuing guidance for the second quarter and full year 2021.

(in millions) Second Quarter 2021   Full Year 2021  
Software Product Revenue   $ 92.0   to $ 95.0     $ 425.0   to $ 433.0  
Total Revenue   $ 111.0     $ 114.0     $ 504.0     $ 512.0  
Net Loss   $ (23.7 )   $ (21.8 )   $ (37.6 )   $ (29.8 )
Non-GAAP Net Income   $ 0.1     $ 1.6     $ 38.0     $ 44.0  
Adjusted EBITDA   $ 2.0     $ 4.0     $ 59.0     $ 67.0  


Conference Call Information  
What: Altair's First Quarter 2021 Financial Results Conference Call
When: Thursday, May 6, 2021
Time: 5:00 p.m. ET
Live Call: (866) 754-5204, Domestic
  (636) 812-6621, International
Replay: (855) 859-2056, Conference ID 5262418, Domestic
  (404) 537-3406, Conference ID 5262418, 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 that provides software and cloud solutions in the areas of simulation, high-performance computing, data analytics 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 second 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
ir@altair.com

Investor Relations
The Blueshirt Group
Monica Gould
212-871-3927
ir@altair.com

Lindsay Savarese
212-331-8417
ir@altair.com

ALTAIR ENGINERING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

    March 31, 2021     December 31, 2020  
(In thousands)   (Unaudited)          
ASSETS                
CURRENT ASSETS:                
Cash and cash equivalents   $ 243,364     $ 241,221  
Accounts receivable, net     107,112       117,878  
Income tax receivable     5,985       6,736  
Prepaid expenses and other current assets     22,295       21,100  
Total current assets     378,756       386,935  
Property and equipment, net     39,143       36,332  
Operating lease right of use assets     33,568       33,526  
Goodwill     262,090       264,481  
Other intangible assets, net     70,912       76,114  
Deferred tax assets     8,476       7,125  
Other long-term assets     24,968       25,389  
TOTAL ASSETS   $ 817,913     $ 829,902  
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY  
CURRENT LIABILITIES:                
Current portion of long-term debt   $ 394     $ 30,384  
Accounts payable     6,671       8,594  
Accrued compensation and benefits     36,785       34,772  
Current portion of operating lease liabilities     10,471       10,331  
Other accrued expenses and current liabilities     32,238       30,982  
Deferred revenue     81,737       85,691  
Convertible senior notes, net     191,094        
Total current liabilities     359,390       200,754  
Long-term debt, net of current portion     258       353  
Convertible senior notes, net           188,300  
Operating lease liabilities, net of current portion     24,319       24,323  
Deferred revenue, non-current     8,992       9,388  
Other long-term liabilities     25,141       27,414  
TOTAL LIABILITIES     418,100       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 45,494
 and 44,216 shares as of March 31, 2021, and December 31, 2020, respectively
    4       4  
Class B common stock, authorized 41,203 shares, issued and outstanding 29,601
 and 30,111 shares as of March 31, 2021, and December 31, 2020, respectively
    3       3  
Additional paid-in capital     484,584       474,669  
Accumulated deficit     (78,933 )     (93,293 )
Accumulated other comprehensive loss     (6,629 )     (2,797 )
TOTAL STOCKHOLDERS' EQUITY     399,029       378,586  
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY   $ 817,913     $ 829,902  


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

    Three Months Ended
March 31,
 
(in thousands, except per share data)   2021     2020  
Revenue                
License   $ 96,395     $ 77,543  
Maintenance and other services     33,146       30,900  
Total software     129,541       108,443  
Software related services     8,098       6,934  
Total software and related services     137,639       115,377  
Client engineering services     10,677       13,878  
Other     1,847       2,208  
Total revenue     150,163       131,463  
Cost of revenue                
License     5,395       5,523  
Maintenance and other services     11,555       10,455  
Total software *     16,950       15,978  
Software related services     6,122       5,489  
Total software and related services     23,072       21,467  
Client engineering services     8,888       11,318  
Other     1,462       1,712  
Total cost of revenue     33,422       34,497  
Gross profit     116,741       96,966  
Operating expenses:                
Research and development *     38,276       31,467  
Sales and marketing *     32,070       28,099  
General and administrative *     23,926       22,346  
Amortization of intangible assets     4,877       3,840  
Other operating income, net     (617 )     (891 )
Total operating expenses     98,532       84,861  
Operating income     18,209       12,105  
Interest expense     2,973       2,813  
Other expense (income), net     835       (1,390 )
Income before income taxes     14,401       10,682  
Income tax expense     41       4,652  
Net income   $ 14,360     $ 6,030  
Income per share:                
Net income per share attributable to common
 stockholders, basic
  $ 0.19     $ 0.08  
Net income per share attributable to common
 stockholders, diluted
  $ 0.18     $ 0.08  
Weighted average shares outstanding:                
Weighted average number of shares used in computing
 net income per share, basic
    74,651       72,623  
Weighted average number of shares used in computing
 net income per share, diluted
    79,295       77,004  

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

    (Unaudited)  
    Three Months Ended
March 31,
 
    2021     2020  
Cost of revenue – software   $ 1,158     $ 366  
Research and development     3,186       1,428  
Sales and marketing     3,468       727  
General and administrative     1,836       650  
Total stock-based compensation expense   $ 9,648     $ 3,171  


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

    Three Months Ended March 31,  
(In thousands)   2021     2020  
OPERATING ACTIVITIES:                
Net income   $ 14,360     $ 6,030  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization     6,686       5,660  
Provision for credit loss     89       338  
Amortization of debt discount and issuance costs     2,800       2,653  
Stock-based compensation expense     9,648       3,171  
Deferred income taxes     (687 )     (6,001 )
Other, net     (18 )     7  
Changes in assets and liabilities:                
Accounts receivable     8,768       14,463  
Prepaid expenses and other current assets     (805 )     1,184  
Other long-term assets     (3,628 )     (321 )
Accounts payable     (767 )     (3,001 )
Accrued compensation and benefits     2,626       (2,581 )
Other accrued expenses and current liabilities     183       8,580  
Operating lease right-of-use assets and liabilities, net     126       (17 )
Deferred revenue     (2,810 )     (2,129 )
Net cash provided by operating activities     36,571       28,036  
INVESTING ACTIVITIES:                
Capital expenditures     (3,039 )     (1,644 )
Payments for acquisition of developed technology     (344 )     (433 )
Other investing activities, net     (68 )     62  
Net cash used in investing activities     (3,451 )     (2,015 )
FINANCING ACTIVITIES:                
Payments on revolving commitment     (30,000 )      
Proceeds from the exercise of stock options     271       194  
Other financing activities     (107 )     (118 )
Net cash (used in) provided by financing activities     (29,836 )     76  
Effect of exchange rate changes on cash, cash equivalents and restricted cash     (1,331 )     (2,113 )
Net increase in cash, cash equivalents and restricted cash     1,953       23,984  
Cash, cash equivalents and restricted cash at beginning of year     241,547       223,497  
Cash, cash equivalents and restricted cash at end of period   $ 243,500     $ 247,481  
Supplemental disclosure of cash flow:                
Interest paid   $ 47     $ 15  
Income taxes paid   $ 2,381     $ 1,831  
Supplemental disclosure of non-cash investing and financing activities:                
Finance leases   $     $ 29  
Property and equipment in accounts payable, other current liabilities
 and other liabilities
  $ 619     $ 382  


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)   2021     2020  
Net income   $ 14,360     $ 6,030  
Stock-based compensation expense     9,648       3,171  
Amortization of intangible assets     4,877       3,840  
Non-cash interest expense     2,800       2,648  
Restructuring expense     3,346        
Impact of non-GAAP tax rate     (9,077 )     (637 )
Non-GAAP net income   $ 25,954     $ 15,052  
                 
Net income per share - diluted   $ 0.18     $ 0.08  
Non-GAAP net income per share - diluted   $ 0.31     $ 0.19  
                 
GAAP diluted shares outstanding:     79,295       77,004  
Non-GAAP diluted shares outstanding:     83,400       78,400  

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)   2021     2020  
Net income   $ 14,360     $ 6,030  
Income tax expense     41       4,652  
Stock-based compensation expense     9,648       3,171  
Interest expense     2,973       2,813  
Depreciation and amortization     6,686       5,660  
Restructuring expense     3,346        
Special adjustments, interest income and other     (94 )     (654 )
Adjusted EBITDA   $ 36,960     $ 21,672  

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
March 31,
 
(in thousands)   2021     2020  
Net cash provided by operating activities   $ 36,571     $ 28,036  
Capital expenditures     (3,039 )     (1,644 )
Free cash flow   $ 33,532     $ 26,392  

Business Outlook

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

    (Unaudited)  
    Three Months Ending
June 30, 2021
    Year Ending
December 31, 2021
 
(in thousands)   Low     High     Low     High  
Net loss   $ (23,700 )   $ (21,800 )   $ (37,600 )   $ (29,800 )
Stock-based compensation expense     11,100       11,100       44,200       44,200  
Amortization of intangible assets     4,700       4,700       17,700       17,700  
Non-cash interest expense     2,800       2,800       11,400       11,400  
Restructuring expense     2,000       2,000       5,300       5,300  
Impact of non-GAAP tax rate     3,200       2,800       (3,000 )     (4,800 )
Non-GAAP net income   $ 100     $ 1,600     $ 38,000     $ 44,000  

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, 2021
    Year Ending
December 31, 2021
 
(in thousands)   Low     High     Low     High  
Net loss   $ (23,700 )   $ (21,800 )   $ (37,600 )   $ (29,800 )
Income tax expense     3,200       3,300       10,400       10,600  
Stock-based compensation expense     11,100       11,100       44,200       44,200  
Interest expense     3,000       3,000       12,000       12,000  
Depreciation and amortization     6,500       6,500       24,900       24,900  
Restructuring expense     2,000       2,000       5,300       5,300  
Special adjustments, interest income and other     (100 )     (100 )     (200 )     (200 )
Adjusted EBITDA   $ 2,000     $ 4,000     $ 59,000     $ 67,000  


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