Altair Announces Second Quarter 2019 Financial Results
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Altair Announces Second Quarter 2019 Financial Results

TROY, Mich., Aug. 08, 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 second quarter ended June 30, 2019.

“We had a very strong second quarter and remain excited about the future of our industry and company.” said James Scapa, founder, chairman and chief executive officer. 

Second Quarter 2019 Financial Highlights

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

 (Unaudited)
(in millions)Third Quarter 2019Full Year 2019
Software Product Revenue$79.0to$81.0$366.0to$370.0
Non-GAAP Software Product Revenue$81.2 $83.2$375.0 $379.0
Total Revenue$103.0 $105.0$460.0 $464.0
Non-GAAP Total Revenue$105.2 $107.2$469.0 $473.0
Net (Loss) Income$(6.8) $(5.5)$10.5 $13.1
Non-GAAP Net Income$3.4 $4.7$45.2 $47.8
Adjusted EBITDA$0.8 $2.8$53.0 $57.0
Modified Adjusted EBITDA$3.0 $5.0$62.0 $66.0
           
(All figures in millions)          


Conference Call Information
What:Altair’s Second Quarter 2019 Financial Results Conference Call
When:Thursday, August 8, 2019
Time:4:30 p.m. ET
Live Call:(866) 754-5204, Domestic
 (636) 812-6621, International
Replay:(855) 859-2056, Conference ID 4996438, Domestic
 (404) 537-3406, Conference ID 4996438, 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 third 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
ir@altair.com

  
  
ALTAIR ENGINEERING INC. AND SUBSIDIARIES 
CONSOLIDATED BALANCE SHEETS 
  
  June 30, 2019  December 31, 2018 
(In thousands) (Unaudited)     
ASSETS        
CURRENT ASSETS:        
Cash and cash equivalents $251,828  $35,345 
Accounts receivable, net  85,758   96,803 
Income tax receivable  8,515   4,431 
Prepaid expenses and other current assets  18,262   17,455 
Total current assets  364,363   154,034 
Property and equipment, net  34,050   30,153 
Operating lease right of use assets  28,878   — 
Goodwill  212,087   210,532 
Other intangible assets, net  64,874   69,836 
Deferred tax assets  5,901   5,354 
Other long-term assets  19,567   17,288 
TOTAL ASSETS $729,720  $487,197 
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY 
CURRENT LIABILITIES:        
Current portion of long-term debt $472  $331 
Accounts payable  6,462   8,357 
Accrued compensation and benefits  29,155   31,740 
Current portion of operating lease liabilities  9,412   — 
Other accrued expenses and current liabilities  27,979   27,039 
Deferred revenue  67,587   59,765 
Total current liabilities  141,067   127,232 
Long-term debt, net of current portion  173,157   31,417 
Operating lease liabilities, net of current portion  20,722   — 
Deferred revenue, non-current  6,219   6,754 
Other long-term liabilities  26,362   25,756 
TOTAL LIABILITIES  367,527   191,159 
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 39,672
  and 38,349 shares as of June 30, 2019 and December 31, 2018, respectively		  4   4 
Class B common stock, authorized 41,203 shares, issued and outstanding 31,901
  and 32,171 shares as of June 30, 2019 and December 31, 2018, respectively		  3   3 
Additional paid-in capital  433,902   379,832 
Accumulated deficit  (64,964)  (74,863)
Accumulated other comprehensive loss  (9,104)  (11,290)
TOTAL STOCKHOLDERS’ EQUITY  359,841   293,686 
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY $729,720  $487,197 
         


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) 2019  2018  2019  2018 
Revenue                
License $56,653  $46,700  $133,274  $113,635 
Maintenance and other services  27,755   23,907   54,425   46,641 
Total software  84,408   70,607   187,699   160,276 
Software related services  7,907   8,707   17,679   18,180 
Total software and related services  92,315   79,314   205,378   178,456 
Client engineering services  12,412   12,417   24,462   24,497 
Other  2,046   1,629   4,792   3,664 
Total revenue  106,773   93,360   234,632   206,617 
Cost of revenue                
License *  2,954   4,068   8,775   7,798 
Maintenance and other services *  9,430   7,915   17,961   15,107 
Total software  12,384   11,983   26,736   22,905 
Software related services  6,612   6,512   13,130   13,221 
Total software and related services  18,996   18,495   39,866   36,126 
Client engineering services  10,033   9,960   19,833   20,160 
Other  1,994   1,001   4,209   2,212 
Total cost of revenue  31,023   29,456   63,908   58,498 
Gross profit  75,750   63,904   170,724   148,119 
Operating expenses:                
Research and development *  29,829   24,744   57,345   47,447 
Sales and marketing *  26,221   19,979   52,672   38,606 
General and administrative *  19,851   17,412   40,180   34,402 
Amortization of intangible assets  3,600   1,986   7,128   3,926 
Other operating income  (549)  (392)  (1,166)  (2,583)
Total operating expenses  78,952   63,729   156,159   121,798 
Operating (loss) income  (3,202)  175   14,565   26,321 
Interest expense  590   45   860   61 
Other income, net  (505)  (176)  (115)  (1,076)
(Loss) income before income taxes  (3,287)  306   13,820   27,336 
Income tax (benefit) expense  (167)  1,386   3,921   3,732 
Net (loss) income $(3,120) $(1,080) $9,899  $23,604 
Income per share:                
Net (loss) income per share attributable to common                
stockholders, basic $(0.04) $(0.02) $0.14  $0.37 
Net (loss) income per share attributable to common                
stockholders, diluted $(0.04) $(0.02) $0.13  $0.32 
Weighted average shares outstanding:                
Weighted average number of shares used in computing                
net (loss) income per share, basic  71,373   65,580   71,081   64,614 
Weighted average number of shares used in computing                
net (loss) income per share, diluted  71,373   65,580   77,017   72,881 
_________________
*   Amounts include stock-based compensation expense as follows (in thousands) (unaudited):		                
                 


     
  Three Months Ended June 30, Six Months Ended June 30,
  2019 2018 2019 2018
Cost of revenue – software $279 $8 $343 $16
Research and development  579  108  937  155
Sales and marketing  475  134  937  175
General and administrative  747  184  1,075  304
Total stock-based compensation expense $2,080 $434 $3,292 $650
             


ALTAIR ENGINEERING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
 
  Six Months Ended June 30, 
(In thousands) 2019  2018 
OPERATING ACTIVITIES:        
Net income $9,899  $23,604 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  10,468   7,525 
Provision for bad debt  134   269 
Amortization of debt discount and issuance costs  459   12 
Stock-based compensation expense  3,292   650 
Deferred income taxes  (703)  1,312 
Other, net  (17)  (166)
Changes in assets and liabilities:        
Accounts receivable  10,406   11,743 
Prepaid expenses and other current assets  (4,952)  (3,454)
Other long-term assets  (2,300)  (276)
Accounts payable  (2,187)  335 
Accrued compensation and benefits  (2,455)  73 
Other accrued expenses and current liabilities  1,887   (4,511)
Operating lease right-of-use assets and liabilities, net  197   — 
Deferred revenue  7,740   197 
Net cash provided by operating activities  31,868   37,313 
INVESTING ACTIVITIES:        
Capital expenditures  (6,667)  (3,130)
Payments for acquisition of developed technology  (344)  (2,738)
Payments for acquisition of businesses, net of cash acquired  (709)  (7,028)
Other investing activities, net  16   38 
Net cash used in investing activities  (7,704)  (12,858)
FINANCING ACTIVITIES:        
Proceeds from issuance of convertible senior notes, net of underwriters'
  discount and commissions		  223,101   — 
Payments on revolving commitment  (127,941)  — 
Borrowings under revolving commitment  96,991   — 
Proceeds from the exercise of stock options  1,270   1,668 
Payments for issuance costs of convertible senior notes  (1,018)  — 
Payments for follow-on public offering and initial public offering costs  —   (468)
Proceeds from issuance of Class A common stock in follow-on public offering,
  net of underwriters' discounts and commissions		  —   135,572 
Other financing activities  (259)  (342)
Net cash provided by financing activities  192,144   136,430 
Effect of exchange rate changes on cash, cash equivalents and restricted cash  187   (877)
Net increase in cash, cash equivalents and restricted cash  216,495   160,008 
Cash, cash equivalents and restricted cash at beginning of year  35,685   39,578 
Cash, cash equivalents and restricted cash at end of period $252,180  $199,586 
Supplemental disclosure of cash flow:        
Interest paid $362  $41 
Income taxes paid $4,054  $3,660 
Supplemental disclosure of non-cash investing and financing activities:        
Finance leases $566  $1,010 
Property and equipment in accounts payable $417  $935 
Convertible senior notes issuance costs in accounts payable $216  $— 
Follow-on public offering costs in accounts payable $—  $88 
Promissory notes issued and deferred payment obligations for acquisitions $—  $278 
         

Financial Results

The following table provides a reconciliation of Non-GAAP net income and Non-GAAP diluted income per share to net (loss) income and (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) 2019  2018  2019  2018 
Net (loss) income $(3,120) $(1,080) $9,899  $23,604 
Stock-based compensation expense  2,080   434   3,292   650 
Amortization of intangible assets  3,600   1,986   7,128   3,926 
Acquisition related deferred revenue (1)  2,250   —   4,500   — 
Special adjustments (2)  776   929   1,004   (223)
Income tax effect of non-GAAP adjustments  (1,057)  (124)  (1,827)  (199)
Non-GAAP net income $4,529  $2,145  $23,996  $27,758 
                 
(Loss) income per share - diluted $(0.04) $(0.02) $0.13  $0.32 
Non-GAAP income per share - diluted $0.06  $0.03  $0.31  $0.36 
                 
GAAP diluted shares outstanding:  71,373   65,580   77,017   72,881 
Non-GAAP diluted shares outstanding:  77,700   77,000   77,700   77,000 

(1)  Represents revenue not recognized under GAAP due to acquisition accounting adjustments associated with the accounting for deferred revenue in significant business combinations.
(2)  Includes an impairment charge for royalty contracts resulting in $0.8 million and $0.9 million of expense for the three months ended June 30, 2019 and 2018, respectively, and $1.0 million and $1.8 million of expense for the six months ended June 30, 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 six months ended June 30, 2018.

 
The following table provides a reconciliation of Adjusted EBITDA and Modified 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) 2019  2018  2019  2018 
Net (loss) income $(3,120) $(1,080) $9,899  $23,604 
Income tax (benefit) expense  (167)  1,386   3,921   3,732 
Stock-based compensation expense  2,080   434   3,292   650 
Interest expense  590   45   860   61 
Interest income and other (1)  508   536   709   (719)
Depreciation and amortization  5,274   3,982   10,468   7,525 
Adjusted EBITDA  5,165   5,303   29,149   34,853 
Acquisition related deferred revenue (2)  2,250   —   4,500   — 
Modified Adjusted EBITDA $7,415  $5,303  $33,649  $34,853 

(1) Includes an impairment charge for royalty contracts resulting in $0.8 million and $0.9 million of expense for the three months ended June 30, 2019 and 2018, respectively, and $1.0 million and $1.8 million of expense for the six months ended June 30, 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 six months ended June 30, 2018.
(2) Represents revenue not recognized under GAAP due to acquisition accounting adjustments 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:
 
  (Unaudited)
  Three Months Ended June 30,  Six Months Ended June 30,
(in thousands) 2019  2018  2019  2018
Total revenue $106,773  $93,360  $234,632  $206,617
Acquisition related deferred revenue(1)  2,250   —   4,500   —
Non-GAAP total revenue $109,023  $93,360  $239,132  $206,617

(1) Adjustment for revenue not recognized under GAAP due to acquisition accounting adjustments associated with the accounting for deferred revenue in significant business combinations.

 
The following table provides a reconciliation of Non-GAAP total software product revenue to total software product revenue, the most comparable GAAP financial measure:
 
  (Unaudited)
  Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2019 2018 2019 2018
Total software product revenue $84,408 $70,607 $187,699 $160,276
Acquisition related deferred revenue(1)  2,250  —  4,500  —
Non-GAAP total software product revenue $86,658 $70,607 $192,199 $160,276

(1) Adjustment for revenue not recognized under GAAP due to acquisition accounting adjustments associated with the accounting for deferred revenue in significant business combinations.

  
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 June 30,  Six Months Ended June 30, 
(in thousands) 2019  2018  2019  2018 
Net cash provided by operating activities $6,553  $10,624  $31,868  $37,313 
Capital expenditures  (2,084)  (1,446)  (6,667)  (3,130)
Free cash flow $4,469  $9,178  $25,201  $34,183 
                 

Effective January 1, 2018, we adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASC 606). The following table sets forth selected quarterly information under ASC 606 for 2018:

  (Unaudited) 
  Three months ended 
  ASC 606 
(in thousands) March 31,
2018		  June 30,
2018		  September 30,
2018		  December 31,
2018		 
Software product revenue $89,670  $70,606  $64,182  $79,903 
Total revenue  113,257   93,360   86,751   103,011 
Net income (loss)  24,684   (1,080)  934   (9,003)
Adjusted EBITDA  29,550   5,303   2,399   12,928 
                 

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, 2019		  Year Ending
December 31, 2019		 
(in thousands) Low  High  Low  High 
Net (loss) income $(6,750) $(5,450) $10,500  $13,100 
Stock-based compensation expense  2,100   2,100   7,500   7,500 
Amortization of intangible assets  3,800   3,800   15,200   15,200 
Acquisition related deferred revenue(1)  2,250   2,250   9,000   9,000 
Non-recurring adjustments  2,000   2,000   3,000   3,000 
Non-GAAP net income $3,400  $4,700  $45,200  $47,800 

(1) Adjustment for revenue not recognized under GAAP due to acquisition accounting adjustments associated with the accounting for deferred revenue in significant business combinations.

 
The following table provides a reconciliation of projected Adjusted EBITDA and Modified Adjusted EBITDA to projected net (loss) income, the most comparable GAAP financial measure:
 
  (Unaudited)
  Three Months ending
September 30, 2019		  Year Ending
December 31, 2019
(in thousands) Low  High  Low High
Net (loss) income $(6,750) $(5,450) $10,500 $13,100
Income tax (benefit) expense  (3,600)  (2,900)  5,700  7,100
Stock-based compensation expense  2,100   2,100   7,500  7,500
Interest expense  2,700   2,700   6,400  6,400
Depreciation and amortization  5,300   5,300   22,000  22,000
Interest income and other non-recurring adjustments  1,000   1,000   900  900
Adjusted EBITDA  750   2,750   53,000  57,000
Acquisition related deferred revenue(1)  2,250   2,250   9,000  9,000
Modified Adjusted EBITDA $3,000  $5,000  $62,000 $66,000

(1)  Adjustment for revenue not recognized under GAAP due to acquisition accounting adjustments associated with the accounting for deferred revenue in significant business combinations.

 
The following table provides a reconciliation of projected Non-GAAP total revenue to projected total revenue, the most comparable GAAP financial measure:
 
  (Unaudited)
  Three Months ending
September 30, 2019		 Year Ending
December 31, 2019
(in millions) Low High Low High
Total revenue $103.0 $105.0 $460.0 $464.0
Acquisition related deferred revenue(1)  2.2  2.2  9.0  9.0
Non-GAAP total revenue $105.2 $107.2 $469.0 $473.0

(1)  Adjustment for revenue not recognized under GAAP due to acquisition accounting adjustments associated with the accounting for deferred revenue in significant business combinations.

 
The following table provides a reconciliation of projected Non-GAAP total software product revenue to projected total software product revenue, the most comparable GAAP financial measure:
 
  (Unaudited) 
  Three Months ending
September 30, 2019		  Year Ending
December 31, 2019		 
(in millions) Low  High  Low  High 
Total software product revenue $79.0  $81.0  $366.0  $370.0 
Acquisition related deferred revenue(1)  2.2   2.2   9.0   9.0 
Non-GAAP total software product revenue $81.2  $83.2  $375.0  $379.0 

(1)  Adjustment for revenue not recognized under GAAP due to acquisition accounting adjustments associated with the accounting for deferred revenue in significant business combinations.

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