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Altair Announces Third Quarter 2021 Financial Results


TROY, Mich., Nov. 04, 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 third quarter ended September 30, 2021.

“Altair continued its across-the-board momentum with an excellent third quarter 2021, highlighted by year-on-year software product revenue growth of 16.5%,” said James Scapa, Founder, Chairman and Chief Executive Officer of Altair. “Our products, services, and business models are clearly providing value and we continue to increase our market share as customers invest for growth.”

“Our third quarter 2021 was another impressive quarter, with revenue and profit exceeding expectations and allowing us to raise our outlook for the full year,” said Matt Brown, Chief Financial Officer of Altair. “I’m extremely pleased with our financial results and our ability to continue expanding our margins while significantly growing revenue.”

Third Quarter 2021 Financial Highlights

  • Software product revenue was $102.3 million compared to $87.8 million for the third quarter of 2020, an increase of 16.5%
  • Total revenue was $121.3 million compared to $106.5 million for the third quarter of 2020, an increase of 14.0%
  • Net loss was $8.1 million compared to a net loss of $8.5 million for the third quarter of 2020. Diluted net loss per share was $0.11 based on 75.8 million diluted weighted average common shares outstanding, compared to diluted net loss per share of $0.12 for the third quarter of 2020, based on 73.3 million diluted weighted average common shares outstanding
  • Adjusted EBITDA was $14.8 million compared to $8.2 million for the third quarter of 2020, an increase of 81.4%. Adjusted EBITDA margin was 12.2% compared to 7.7% for the third quarter of 2020
  • Non-GAAP net income was $9.6 million, compared to Non-GAAP net income of $4.7 million for the third quarter of 2020, an increase of 107.1%. Non-GAAP diluted net income per share was $0.11 based on 86.3 million non-GAAP diluted common shares outstanding, compared to Non-GAAP diluted net income per share of $0.06 for the third quarter of 2020, based on 80.7 million non-GAAP diluted common shares outstanding
  • Free cash flow was $(0.5) million, compared to $(7.5) million for the third quarter of 2020

Business Outlook

Based on information available as of today, Altair is issuing the following guidance for the fourth quarter and full year 2021:  

(in millions) Fourth Quarter 2021   Full Year 2021  
Software Product Revenue   $ 106.0   to $ 109.0     $ 437.0   to $ 440.0  
Total Revenue   $ 124.0     $ 127.0     $ 515.0     $ 518.0  
Net Loss   $ (13.1 )   $ (10.2 )   $ (20.8 )   $ (17.9 )
Non-GAAP Net Income   $ 6.8     $ 9.0     $ 47.7     $ 49.9  
Adjusted EBITDA   $ 11.0     $ 14.0     $ 72.0     $ 75.0  
Net Cash Provided by Operating Activities                   $ 49.6     $ 52.6  
Free Cash Flow                   $ 41.0     $ 44.0  
Conference Call Information    
What:   Altair’s Third Quarter 2021 Financial Results Conference Call
When:   Thursday, November 4, 2021
Time:   5:00 p.m. ET
Live Call:   (866) 754-5204, Domestic
    (636) 812-6621, International
Replay:   (855) 859-2056, Conference ID 7966437, Domestic
    (404) 537-3406, Conference ID 7966437, 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 providing software and cloud solutions in the areas of simulation, high-performance computing, 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 fourth 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 ENGINEERING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

    September 30, 2021     December 31, 2020  
(In thousands)   (Unaudited)          
ASSETS                
CURRENT ASSETS:                
Cash and cash equivalents   $ 455,858     $ 241,221  
Accounts receivable, net     88,701       117,878  
Income tax receivable     8,929       6,736  
Prepaid expenses and other current assets     26,017       21,100  
Total current assets     579,505       386,935  
Property and equipment, net     38,711       36,332  
Operating lease right of use assets     30,916       33,526  
Goodwill     268,888       264,481  
Other intangible assets, net     61,540       76,114  
Deferred tax assets     8,221       7,125  
Other long-term assets     26,702       25,389  
TOTAL ASSETS   $ 1,014,483     $ 829,902  
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY                
CURRENT LIABILITIES:                
Current portion of long-term debt   $     $ 29,962  
Accounts payable     4,900       8,594  
Accrued compensation and benefits     35,999       34,772  
Current portion of operating lease liabilities     10,342       10,331  
Other accrued expenses and current liabilities     24,721       31,404  
Deferred revenue     75,138       85,691  
Convertible senior notes, net     196,796        
Total current liabilities     347,896       200,754  
Convertible senior notes, net           188,300  
Operating lease liabilities, net of current portion     21,610       24,323  
Deferred revenue, non-current     9,290       9,388  
Other long-term liabilities     32,641       27,767  
TOTAL LIABILITIES     411,437       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 50,558
and 44,216 shares as of September 30, 2021, and December 31, 2020, respectively
    5       4  
Class B common stock, authorized 41,203 shares, issued and outstanding 28,206
and 30,111 shares as of September 30, 2021, and December 31, 2020, respectively
    3       3  
Additional paid-in capital     711,082       474,669  
Accumulated deficit     (100,690 )     (93,293 )
Accumulated other comprehensive loss     (8,138 )     (2,797 )
TOTAL STOCKHOLDERS’ EQUITY     602,262       378,586  
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY   $ 1,014,483     $ 829,902  
                 

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

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
(in thousands, except per share data)   2021     2020     2021     2020  
Revenue                                
License   $ 67,603     $ 55,023     $ 230,630     $ 183,584  
Maintenance and other services     34,686       32,787       100,758       94,502  
Total software     102,289       87,810       331,388       278,086  
Software related services     7,650       6,170       23,229       18,548  
Total software and related services     109,939       93,980       354,617       296,634  
Client engineering services     10,060       10,868       31,005       34,386  
Other     1,308       1,608       5,760       5,460  
Total revenue     121,307       106,456       391,382       336,480  
Cost of revenue                                
License     4,694       4,477       13,706       12,851  
Maintenance and other services     11,770       9,626       35,368       28,583  
Total software *     16,464       14,103       49,074       41,434  
Software related services     5,707       4,996       17,560       15,141  
Total software and related services     22,171       19,099       66,634       56,575  
Client engineering services     7,982       8,510       25,163       27,617  
Other     1,348       1,427       5,072       4,422  
Total cost of revenue     31,501       29,036       96,869       88,614  
Gross profit     89,806       77,420       294,513       247,866  
Operating expenses:                                
Research and development *     35,839       30,678       112,872       91,115  
Sales and marketing *     30,589       26,998       94,568       80,903  
General and administrative *     22,196       20,905       67,983       63,499  
Amortization of intangible assets     4,432       3,858       13,924       11,390  
Other operating income, net     (1,324 )     (1,596 )     (2,526 )     (3,431 )
Total operating expenses     91,732       80,843       286,821       243,476  
Operating (loss) income     (1,926 )     (3,423 )     7,692       4,390  
Interest expense     3,037       2,934       8,998       8,590  
Other expense (income), net     124       (782 )     1,667       (1,852 )
Loss before income taxes     (5,087 )     (5,575 )     (2,973 )     (2,348 )
Income tax expense     3,022       2,930       4,424       10,350  
Net loss   $ (8,109 )   $ (8,505 )   $ (7,397 )   $ (12,698 )
Loss per share:                                
Net loss per share attributable to common
stockholders, basic
  $ (0.11 )   $ (0.12 )   $ (0.10 )   $ (0.17 )
Net loss per share attributable to common
stockholders, diluted
  $ (0.11 )   $ (0.12 )   $ (0.10 )   $ (0.17 )
Weighted average shares outstanding:                                
Weighted average number of shares used in computing
net loss per share, basic
    75,750       73,311       75,226       72,979  
Weighted average number of shares used in computing
net loss per share, diluted
    75,750       73,311       75,226       72,979  

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

    (Unaudited)  
    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2021     2020     2021     2020  
Cost of revenue – maintenance and other services   $ 1,411     $ 684     $ 3,791     $ 1,602  
Research and development     3,894       2,428       11,223       5,686  
Sales and marketing     3,673       1,949       10,800       3,949  
General and administrative     1,955       1,173       5,415       2,702  
Total stock-based compensation expense   $ 10,933     $ 6,234     $ 31,229     $ 13,939  
                                 

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

    Nine Months Ended September 30,  
(In thousands)   2021     2020  
OPERATING ACTIVITIES:                
Net loss   $ (7,397 )   $ (12,698 )
Adjustments to reconcile net loss to net cash provided by operating activities:                
Depreciation and amortization     19,355       16,916  
Provision for credit loss     330       930  
Amortization of debt discount and issuance costs     8,513       8,067  
Stock-based compensation expense     31,229       13,939  
Deferred income taxes     (510 )     (5,441 )
Other, net     40       13  
Changes in assets and liabilities:                
Accounts receivable     26,770       16,213  
Prepaid expenses and other current assets     (7,612 )     (1,055 )
Other long-term assets     (5,018 )     867  
Accounts payable     (2,432 )     (3,321 )
Accrued compensation and benefits     481       1,274  
Other accrued expenses and current liabilities     483       (5,873 )
Deferred revenue     (8,638 )     (2,452 )
Net cash provided by operating activities     55,594       27,379  
INVESTING ACTIVITIES:                
Capital expenditures     (6,811 )     (4,006 )
Payments for acquisition of businesses, net of cash acquired     (5,472 )     (32,279 )
Payments for acquisition of developed technology     (344 )     (433 )
Other investing activities, net     (284 )     152  
Net cash used in investing activities     (12,911 )     (36,566 )
FINANCING ACTIVITIES:                
Proceeds from private placement of common stock     200,000        
Payments on revolving commitment     (30,000 )      
Proceeds from employee stock purchase plan contributions     2,110        
Proceeds from the exercise of common stock options     2,059       1,094  
Borrowings under revolving commitment           30,000  
Other financing activities     (434 )     (401 )
Net cash provided by financing activities     173,735       30,693  
Effect of exchange rate changes on cash, cash equivalents and restricted cash     (1,951 )     676  
Net increase in cash, cash equivalents and restricted cash     214,467       22,182  
Cash, cash equivalents and restricted cash at beginning of year     241,547       223,497  
Cash, cash equivalents and restricted cash at end of period   $ 456,014     $ 245,679  
Supplemental disclosure of cash flow:                
Interest paid   $ 344     $ 320  
Income taxes paid   $ 8,077     $ 12,142  
Supplemental disclosure of non-cash investing and financing activities:                
Finance leases   $     $ 117  
Property and equipment in accounts payable, other current liabilities
and other liabilities
  $ 480     $ 208  

Financial Results

The following table provides a reconciliation of Adjusted EBITDA, 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
September 30,
    Nine Months Ended
September 30,
 
(in thousands, except per share amounts)   2021     2020     2021     2020  
Net loss   $ (8,109 )   $ (8,505 )   $ (7,397 )   $ (12,698 )
Stock-based compensation expense     10,933       6,234       31,229       13,939  
Amortization of intangible assets     4,432       3,858       13,924       11,390  
Non-cash interest expense     2,876       2,725       8,513       8,062  
Restructuring expense     (124 )           4,954        
Impact of non-GAAP tax rate     (366 )     1,294       (10,044 )     2,375  
Special adjustments and other (1)           (950 )           (372 )
Non-GAAP net income     9,642       4,656       41,179       22,696  
Depreciation expense     1,743       1,765       5,431       5,526  
Cash interest expense (income)     59       118       210       (601 )
Income tax expense, net of non-GAAP impact     3,388       1,636       14,468       7,975  
Adjusted EBITDA   $ 14,832     $ 8,175     $ 61,288     $ 35,596  
                                 
Net loss per share – diluted   $ (0.11 )   $ (0.12 )   $ (0.10 )   $ (0.17 )
Non-GAAP net income per share – diluted   $ 0.11     $ 0.06     $ 0.48     $ 0.28  
                                 
GAAP diluted shares outstanding:     75,750       73,311       75,226       72,979  
Non-GAAP diluted shares outstanding:     86,300       80,700       86,300       80,700  

     (1)  Included in 2020 are a) $1.0 million of proceeds from settlements related to a historical acquisition for both the three and nine months ended September 30, 2020, and b) $0.6 million of severance expense for the nine months ended September 30, 2020.

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
September 30,
    Nine Months Ended
September 30,
 
(in thousands)   2021     2020     2021     2020  
Net cash provided by (used in) operating activities   $ 872     $ (6,022 )   $ 55,594     $ 27,379  
Capital expenditures     (1,420 )     (1,476 )     (6,811 )     (4,006 )
Free cash flow   $ (548 )   $ (7,498 )   $ 48,783     $ 23,373  
                                 

Business Outlook

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

    (Unaudited)  
    Three Months Ending
December 31, 2021
    Year Ending
December 31, 2021
 
(in thousands)   Low     High     Low     High  
Net loss   $ (13,100 )   $ (10,200 )   $ (20,800 )   $ (17,900 )
Stock-based compensation expense     11,500       11,500       42,700       42,700  
Amortization of intangible assets     4,200       4,200       18,100       18,100  
Non-cash interest expense     2,900       2,900       11,400       11,400  
Restructuring expense                 5,000       5,000  
Impact of non-GAAP tax rate     1,300       600       (8,700 )     (9,400 )
Non-GAAP net income     6,800       9,000       47,700       49,900  
Depreciation expense     1,700       1,700       7,200       7,200  
Cash interest expense, net     100       100       300       300  
Income tax expense, net of non-GAAP impact     2,400       3,200       16,800       17,600  
Adjusted EBITDA   $ 11,000     $ 14,000     $ 72,000     $ 75,000  
                                 

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, 2021
 
(in thousands)           Low     High  
Net cash provided by operating activities           $ 49,600     $ 52,600  
Capital expenditures             (8,600 )     (8,600 )
Free cash flow           $ 41,000     $ 44,000  
                         

 

Altair Engineering Inc



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