Altair Announces Second Quarter 2022 Financial Results

Second Quarter Results Exceed Expectations

Troy, Michigan, UNITED STATES


TROY, Mich., Aug. 04, 2022 (GLOBE NEWSWIRE) --  Altair (Nasdaq: ALTR), a global leader in computational science and artificial intelligence (AI) that provides software and cloud solutions in simulation, high-performance computing (HPC), data analytics and AI, today released its financial results for the second quarter ended June 30, 2022.

“Altair had a strong second quarter, driven by high double-digit software revenue growth, with all our key metrics coming in above our guidance ranges,” said James Scapa, founder, chairman and chief executive officer of Altair. “While we are in a period of geopolitical and economic uncertainty, I am confident Altair's culture, customer relationships, high recurring revenue and utilization, high-value business model, and exceptional technology leaves us well-positioned for the remainder of the year.”

“The second quarter was another big success, achieving revenue and profit ahead of expectations,” said Matt Brown, chief financial officer of Altair. “Led by our year-over-year software product revenue growth of over 17% in the second quarter, we continued to deliver on our commitment to software product revenue growth and margin expansion. While we are encouraged by our strong first half of 2022, we are reducing our full year guidance ranges for revenue and profit due to the impact foreign exchange rates are having on our results in reported currency.”

Second Quarter 2022 Financial Highlights

  • Software product revenue was $116.9 million compared to $99.6 million for the second quarter of 2021, an increase of 17.4%
  • Total revenue was $132.7 million compared to $119.9 million for the second quarter of 2021, an increase of 10.6%
  • Net loss was $(33.8) million compared to $(13.6) million for the second quarter of 2021. Diluted net loss per share was $(0.43) based on 78.9 million diluted weighted average common shares outstanding, compared to diluted net loss per share of $(0.18) for the second quarter of 2021, based on 75.3 million diluted weighted average common shares outstanding. Net loss margin was (25.5%) compared to (11.4%) for the second quarter of 2021
  • Non-GAAP net income was $10.9 million, compared to non-GAAP net income of $5.6 million for the second quarter of 2021, an increase of 94.7%. Non-GAAP diluted net income per share was $0.13 based on 86.3 million non-GAAP diluted common shares outstanding, compared to non-GAAP diluted net income per share of $0.07 for the second quarter of 2021, based on 80.3 million non-GAAP diluted common shares outstanding
  • Adjusted EBITDA was $16.4 million compared to $9.5 million for the second quarter of 2021, an increase of 73.1%. Adjusted EBITDA margin was 12.4% compared to 7.9% for the second quarter of 2021
  • Cash provided by operating activities was 12.3 million, compared to 18.2 million for the second quarter of 2021
  • Free cash flow was $11.0 million, compared to $15.8 million for the second quarter of 2021.

Business Outlook

Based on information available as of today, Altair is issuing the following guidance for the third quarter and full year 2022:

(in millions)Third Quarter 2022 Full Year 2022 
Software Product Revenue $99.0 to$104.0  $487.0 to$498.0 
Total Revenue $115.0  $120.0  $555.0  $566.0 
Net Loss $(34.9) $(31.0) $(66.1) $(56.5)
Non-GAAP Net Income $(1.2) $1.8  $60.6  $68.0 
Adjusted EBITDA $0.0  $4.0  $89.0  $99.0 
Net Cash Provided by Operating Activities       $15.1  $23.1 
Free Cash Flow       $8.0  $16.0 

Conference Call Information
What: Altair’s Second Quarter 2022 Financial Results Conference Call
When: Thursday, August 4, 2022
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, 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, 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 as defined starting with Q1 2022, includes the diluted weighted average shares outstanding per GAAP regardless of whether the Company is in a loss position. All periods presented will be adjusted to align with this new definition.

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.

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, restructuring 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, restructuring charges, 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 science and artificial intelligence (AI) 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 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 2022, our statements regarding our expectations for 2022, 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


ALTAIR ENGINERING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

  June 30, 2022  December 31, 2021 
(In thousands) (Unaudited)    
ASSETS      
CURRENT ASSETS:      
Cash and cash equivalents $416,137  $413,743 
Accounts receivable, net  103,483   137,561 
Income tax receivable  11,412   9,388 
Prepaid expenses and other current assets  23,282   27,529 
Total current assets  554,314   588,221 
Property and equipment, net  39,370   40,478 
Operating lease right of use assets  24,977   28,494 
Goodwill  385,989   370,178 
Other intangible assets, net  90,327   99,057 
Deferred tax assets  7,943   8,495 
Other long-term assets  25,588   28,352 
TOTAL ASSETS $1,128,508  $1,163,275 
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY 
CURRENT LIABILITIES:      
Accounts payable $4,962  $6,647 
Accrued compensation and benefits  31,084   42,307 
Current portion of operating lease liabilities  9,433   9,933 
Other accrued expenses and current liabilities  49,444   122,226 
Deferred revenue  92,141   93,160 
Convertible senior notes, net     199,705 
Total current liabilities  187,064   473,978 
Operating lease liabilities, net of current portion  16,340   19,550 
Deferred revenue, non-current  20,785   12,872 
Convertible senior notes, net  304,676    
Other long-term liabilities  41,471   42,894 
TOTAL LIABILITIES  570,336   549,294 
Commitments and contingencies      
MEZZANINE EQUITY     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 52,191
and 51,524 shares as of June 30, 2022, and December 31, 2021, respectively
  5   5 
Class B common stock, authorized 41,203 shares, issued and outstanding 27,745
shares as of June 30, 2022, and December 31, 2021
  3   3 
Additional paid-in capital  687,338   724,226 
Accumulated deficit  (100,394)  (102,087)
Accumulated other comprehensive loss  (28,780)  (8,950)
TOTAL STOCKHOLDERS’ EQUITY  558,172   613,197 
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY $1,128,508  $1,163,275 



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) 2022  2021  2022  2021 
Revenue            
License $82,688  $66,632  $188,857  $163,027 
Maintenance and other services  34,205   32,926   68,933   66,072 
Total software  116,893   99,558   257,790   229,099 
Software related services  7,376   7,481   16,437   15,579 
Total software and related services  124,269   107,039   274,227   244,678 
Client engineering services  7,047   10,268   15,059   20,945 
Other  1,340   2,605   3,151   4,452 
Total revenue  132,656   119,912   292,437   270,075 
Cost of revenue            
License  4,120   3,617   8,807   9,012 
Maintenance and other services  12,884   12,043   25,603   23,598 
Total software *  17,004   15,660   34,410   32,610 
Software related services  5,464   5,731   11,499   11,853 
Total software and related services  22,468   21,391   45,909   44,463 
Client engineering services  5,914   8,293   12,555   17,181 
Other  1,141   2,262   2,662   3,724 
Total cost of revenue  29,523   31,946   61,126   65,368 
Gross profit  103,133   87,966   231,311   204,707 
Operating expenses:            
Research and development *  46,477   38,757   89,571   77,033 
Sales and marketing *  39,116   31,909   74,798   63,979 
General and administrative *  24,367   21,861   47,936   45,787 
Amortization of intangible assets  6,208   4,615   12,111   9,492 
Other operating income, net  (5,767)  (585)  (6,548)  (1,202)
Total operating expenses  110,401   96,557   217,868   195,089 
Operating (loss) income  (7,268)  (8,591)  13,443   9,618 
Interest expense  700   2,988   1,285   5,961 
Other expense, net  21,907   708   23,975   1,543 
(Loss) income before income taxes  (29,875)  (12,287)  (11,817)  2,114 
Income tax expense  3,899   1,361   10,429   1,402 
Net (loss) income $(33,774) $(13,648) $(22,246) $712 
(Loss) income per share:            
Net (loss) income per share attributable to common
stockholders, basic
 $(0.43) $(0.18) $(0.28) $0.01 
Net (loss) income per share attributable to common
stockholders, diluted
 $(0.43) $(0.18) $(0.28) $0.01 
Weighted average shares outstanding:            
Weighted average number of shares used in computing
net (loss) income per share, basic
  78,948   75,263   79,204   74,959 
Weighted average number of shares used in computing
net (loss) income per share, diluted
  78,948   75,263   79,204   79,851 

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

  (Unaudited) 
  Three Months Ended
June 30,
  Six Months Ended
June 30,
 
(in thousands) 2022  2021  2022  2021 
Cost of revenue – software $2,030  $1,222  $3,933  $2,380 
Research and development  8,979   4,143   16,337   7,329 
Sales and marketing  7,664   3,659   14,699   7,127 
General and administrative  2,527   1,624   4,845   3,460 
Total stock-based compensation expense $21,200  $10,648  $39,814  $20,296 



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

  Six Months Ended June 30, 
(In thousands) 2022  2021 
OPERATING ACTIVITIES:      
Net (loss) income $(22,246) $712 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:      
Depreciation and amortization  15,819   13,180 
Provision for credit loss  114   205 
Amortization of debt discount and issuance costs  829   5,631 
Stock-based compensation expense  39,814   20,296 
Deferred income taxes  (64)  (1)
Gain on mark-to-market adjustment of contingent consideration  (5,304)   
Expense on repurchase of convertible senior notes  16,621    
Other, net  115   34 
Changes in assets and liabilities:      
Accounts receivable  29,270   24,852 
Prepaid expenses and other current assets  2,056   (3,367)
Other long-term assets  4,397   (5,067)
Accounts payable  (2,070)  (967)
Accrued compensation and benefits  (9,742)  1,548 
Other accrued expenses and current liabilities  (61,648)  2,999 
Deferred revenue  10,080   (5,333)
Net cash provided by operating activities  18,041   54,722 
INVESTING ACTIVITIES:      
Payments for acquisition of businesses, net of cash acquired  (37,660)   
Capital expenditures  (3,457)  (5,391)
Other investing activities, net  (322)  (389)
Net cash used in investing activities  (41,439)  (5,780)
FINANCING ACTIVITIES:      
Proceeds from issuance of convertible senior notes,
net of discounts and commissions
  224,265    
Repurchase of convertible senior notes  (192,792)   
Proceeds from employee stock purchase plan contributions  4,431    
Repurchase and retirement of common stock  (4,387)   
Proceeds from the exercise of common stock options  1,689   885 
Payments of debt issuance costs  (1,157)   
Payments on revolving commitment     (30,000)
Other financing activities  (131)  (206)
Net cash provided by (used in) financing activities  31,918   (29,321)
Effect of exchange rate changes on cash, cash equivalents and restricted cash  (6,226)  (847)
Net increase in cash, cash equivalents and restricted cash  2,294   18,774 
Cash, cash equivalents and restricted cash at beginning of year  414,012   241,547 
Cash, cash equivalents and restricted cash at end of period $416,306  $260,321 
Supplemental disclosure of cash flow:      
Interest paid $289  $339 
Income taxes paid $4,891  $3,744 
Supplemental disclosure of non-cash investing and financing activities:      
Property and equipment in accounts payable, other current liabilities
and other liabilities
 $1,530  $631 


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) 2022  2021  2022  2021 
Net (loss) income $(33,774) $(13,648) $(22,246) $712 
Stock-based compensation expense  21,200   10,648   39,814   20,296 
Amortization of intangible assets  6,208   4,615   12,111   9,492 
Non-cash interest expense  422   2,837   839   5,637 
Restructuring expense     1,732      5,078 
Impact of non-GAAP tax rate (1)  79   (601)  (4,957)  (9,678)
Special adjustments and other (2)  16,737      18,229    
Non-GAAP net income $10,872  $5,583  $43,790  $31,537 
             
Net (loss) income per share, diluted $(0.43) $(0.18) $(0.28) $0.01 
Non-GAAP net income per share, diluted $0.13  $0.07  $0.51  $0.39 
             
GAAP diluted shares outstanding  78,948   75,263   79,204   79,851 
Non-GAAP diluted shares outstanding (3)  86,281   80,303   86,516   79,851 
  1. The Company uses a non-GAAP effective tax rate of 26%.
  2. The three months ended June 30, 2022, includes $16.6 million expense on the repurchase of convertible senior notes, $5.4 million currency losses on acquisition-related intercompany loans and a $5.3 million gain from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition. The six months ended June 30, 2022, includes $16.6 million expense on the repurchase of convertible senior notes, $6.9 million currency losses on acquisition-related intercompany loans and a $5.3 million gain from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition.
  3. The Non-GAAP diluted shares outstanding for the three and six months ended June 30, 2021, has been changed to align with the current definition.

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

  (Unaudited) 
  Three Months Ended
June 30,
  Six Months Ended
June 30,
 
(in thousands) 2022  2021  2022  2021 
Net (loss) income $(33,774) $(13,648) $(22,246) $712 
Income tax expense  3,899   1,361   10,429   1,402 
Stock-based compensation expense  21,200   10,648   39,814   20,296 
Interest expense  700   2,988   1,285   5,961 
Depreciation and amortization  8,133   6,494   15,819   13,180 
Restructuring expense     1,732      5,078 
Special adjustments, interest income and other (1)  16,282   (79)  17,929   (173)
Adjusted EBITDA $16,440  $9,496  $63,030  $46,456 

(1) The three months ended June 30, 2022, includes $16.6 million expense on the repurchase of convertible senior notes, $5.4 million currency losses on acquisition-related intercompany loans and a $5.3 million gain from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition. The six months ended June 30, 2022, includes $16.6 million expense on the repurchase of convertible senior notes, $6.9 million currency losses on acquisition-related intercompany loans and a $5.3 million gain from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition.


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) 2022  2021  2022  2021 
Net cash provided by operating activities (1) $12,255  $18,151  $18,041  $54,722 
Capital expenditures  (1,267)  (2,352)  (3,457)  (5,391)
Free cash flow (1) $10,988  $15,799  $14,584  $49,331 

(1) The six months ended June 30, 2022, includes a $65.9 million payment in January 2022 for a legal judgement acquired in December 2021.

The following table provides a reconciliation of Non-GAAP gross profit to gross profit, the most comparable GAAP financial measure:

  (Unaudited) 
  Three Months Ended
June 30,
  Six Months Ended
June 30,
 
(in thousands) 2022  2021  2022  2021 
Gross profit $103,133  $87,966  $231,311  $204,707 
Stock-based compensation expense  2,030   1,222   3,933   2,380 
Restructuring expense     161      936 
Non-GAAP gross profit $105,163  $89,349  $235,244  $208,023 
Non-GAAP gross margin  79.3%  74.5%  80.4%  77.0%

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) 2022  2021  2022  2021 
Total operating expense $110,401  $96,557  $217,868  $195,089 
Stock-based compensation expense  (19,170)  (9,426)  (35,881)  (17,916)
Amortization  (6,208)  (4,615)  (12,111)  (9,492)
Gain on mark-to-market adjustment of
contingent consideration
  5,304      5,304    
Restructuring expense     (1,571)     (4,142)
Non-GAAP operating expense $90,327  $80,945  $175,180  $163,539 



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

  (Unaudited) 
  Three Months Ending
September 30, 2022
  Year Ending
December 31, 2022
 
(in thousands) Low  High  Low  High 
Net loss $(34,900) $(31,000) $(66,100) $(56,500)
Stock-based compensation expense  23,700   23,700   86,400   86,400 
Amortization of intangible assets  6,100   6,100   24,400   24,400 
Non-cash interest expense  500   500   1,800   1,800 
Impact of non-GAAP tax rate  3,400   2,500   (4,100)  (6,300)
Special adjustments and other(1)        18,200   18,200 
Non-GAAP net (loss) income $(1,200) $1,800  $60,600  $68,000 

(1) Year ending December 31, 2022, includes $16.6 million expense on the repurchase of convertible senior notes, $6.9 million currency losses on acquisition-related intercompany loans and $5.3 million gain from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition.

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

  (Unaudited) 
  Three Months Ending
September 30, 2022
  Year Ending
December 31, 2022
 
(in thousands) Low  High  Low  High 
Net loss $(34,900) $(31,000) $(66,100) $(56,500)
Income tax expense  3,000   3,100   17,200   17,600 
Stock-based compensation expense  23,700   23,700   86,400   86,400 
Interest expense  200   200   1,300   1,300 
Depreciation and amortization  8,000   8,000   32,000   32,000 
Special adjustments and other(1)        18,200   18,200 
Adjusted EBITDA $  $4,000  $89,000  $99,000 

(1) Year ending December 31, 2022, includes $16.6 million expense on the repurchase of convertible senior notes, $6.9 million currency losses on acquisition-related intercompany loans and $5.3 million gain from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition.

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, 2022
 
(in thousands)     Low  High 
Net cash provided by operating activities (1)     $15,100  $23,100 
Capital expenditures      (7,100)  (7,100)
Free cash flow (1)     $8,000  $16,000 

(1) Includes $65.9 million payment in January 2022 for legal judgement acquired in December 2021.