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Altair Announces First Quarter 2018 Financial Results
[May 14, 2018]

Altair Announces First Quarter 2018 Financial Results


TROY, Mich., May 14, 2018 (GLOBE NEWSWIRE) -- Altair (Nasdaq:ALTR) released its financial results for the first quarter ended March 31, 2018.

“Altair started 2018 with a strong financial performance highlighted by software product revenue growth of 26% and profitability that exceeded expectations,” said James Scapa, Founder, Chairman and CEO.  “Our performance in the first quarter reflects good execution, improving market dynamics and the positive impact of the investments we have made to strengthen our product portfolio and go-to-market team.”

Scapa continued, “We have further enhanced our solution set with the recent acquisitions of CANDI, which extends our capabilities around edge gateway computing and the Internet of Things, and FluiDyna, a developer of GPU-based fluid dynamics and numerical simulation technologies.  These are exciting technologies that increase the value Altair can deliver for customers and exemplify our expanding number of opportunities for future growth.”

First Quarter 2018 Financial Highlights

  • Software product revenue was $68.1 million, an increase of 26% from $54.1 million for the first quarter of 2017.
  • Total revenue was $91.7 million, an increase of 19% compared to $76.9 million for the first quarter of 2017.
  • Net income was $3.9 million, compared to net loss of $(2.2) million for the first quarter of 2017. Diluted net income per share was $0.05, based on 72.4 million diluted weighted average common shares outstanding, compared to diluted net loss per share of $(0.04) for the first quarter of 2017, based on 50.1 million diluted weighted average common shares outstanding.
  • Adjusted EBITDA was $7.7 million, compared to $2.9 million for the first quarter of 2017. Adjusted EBITDA represents net income (loss) 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 determined by management.
  • Non-GAAP net income was $6.1 million, compared to $1.6 million for the first quarter of 2017. Non-GAAP net income per share was $0.08, based on 72.8 million diluted weighted average common shares outstanding, compared to $0.03 for the first quarter of 2017, based on 61.2 million diluted weighted average common shares outstanding. Non-GAAP net income excludes stock-based compensation, amortization of intangible assets related to acquisitions and certain tax adjustments.
  • Cash flow from operations was $26.7 million, compared to $19.2 million for the first quarter of 2017.
  • Free cash flow, which consists of cash flow from operations less capital expenditures, was $25.0 million compared to $18.2 million for the first quarter of 2017.  

Business Outlook

Based on information available as of today, Altair is issuing forward-looking statements on guidance for the second quarter and full year 2018 as indicated below.

   
 Second Quarter 2018Full Year 2018
Software Product Revenue$69.0to$70.0$276.0to$280.0
Total Revenue$91.0 $92.0$369.0 $373.0
GAAP Net Income$0.5 $1.0$11.0 $13.0
Adjusted EBITDA$5.0 $5.5$33.0 $35.0
Non-GAAP Net Income$2.5 $3.0$19.0 $21.0
       

(All figures in millions)

Conference Call Information

   
What: Altair First Quarter 2018 Financial Results Conference Call
When: Monday, May 14, 2018
Time: 4:30 p.m. EDT
Live Call: (866) 754-5204, domestic
  (636) 812-6621, international
Replay: (855) 859-2056, passcode 2474564, domestic
  (404) 537-3406, passcode 2474564, 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.

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 transforms design and decision making by applying simulation, machine learning and optimization throughout product lifecycles. Our broad portfolio of simulation technology and patented units-based software licensing model enable Simulation-Driven Innovation for our customers. With more than 2,000 employees, Altair is headquartered in Troy, Michigan, USA and operates 71 offices throughout 24 countries. Altair serves more than 5,000 customers across broad industry segments. 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, statements regarding our business outlook, potential growth, market positioning and future investments, 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 Relations
Brian Denyeau
ICR
248-614-2400 ext. 346
ir@altair.com

Media Relations
Dave Simon
Altair
248-614-2400 ext. 332
pr@altair.com

 
Altair Engineering Inc. and subsidiaries
Consolidated balance sheets 
     
     
  March 31, 2018 December 31,
2017
(In thousands) (Unaudited)  
ASSETS    
CURRENT ASSETS:    
Cash and cash equivalents $63,196  $39,213 
Accounts receivable, net  83,350   86,635 
Inventory, net  1,051   1,980 
Income tax receivable  6,898   6,054 
Prepaid expenses and other current assets  13,148   10,006 
Total current assets  167,643   143,888 
Property and equipment, net  30,501   31,446 
Goodwill  63,771   62,706 
Other intangible assets, net  22,813   24,461 
Deferred tax assets  8,824   8,351 
Other long-term assets  17,270   17,019 
TOTAL ASSETS $310,822  $287,871 
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:    
Current portion of long-term debt $294  $232 
Accounts payable  5,650   4,880 
Accrued compensation and benefits  25,360   26,560 
Obligations for acquisition of businesses  13,226   13,925 
Other accrued expenses and current liabilities  21,486   21,744 
Deferred revenue  152,663   130,122 
Total current liabilities  218,679   197,463 
Long-term debt, net of current portion  526   178 
Deferred revenue, non-current  9,961   9,640 
Other long-term liabilities  14,179   17,647 
TOTAL LIABILITIES  243,345   224,928 
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 27,357 and 26,725 shares as of March 31, 2018 and December 31, 2017, respectively  3   2 
Class B common stock, authorized 41,203 shares, issued and outstanding 36,508 shares as of March 31, 2018 and December 31, 2017  4   4 
Additional paid-in capital  232,576   232,156 
Accumulated deficit  (162,579)  (166,499)
Accumulated other comprehensive loss  (4,879)  (5,072)
TOTAL STOCKHOLDERS’ EQUITY  65,125   60,591 
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY $310,822  $287,871 
     


 
Altair Engineering Inc. and subsidiaries
Consolidated statements of operations
(Unaudited)
     
  Three months ended March 31,
(in thousands, except per share data) 2018 2017
Revenue    
Software $68,143  $54,097 
Software related services  9,473   8,971 
Total software  77,616   63,068 
Client engineering services  12,080   12,229 
Other  2,035   1,585 
Total revenue  91,731   76,882 
Cost of revenue    
Software*  10,922   8,904 
Software related services  6,709   6,659 
Total software  17,631   15,563 
Client engineering services  10,200   10,141 
Other  1,211   1,050 
Total cost of revenue  29,042   26,754 
Gross profit  62,689   50,128 
Operating expenses:    
Research and development*  22,703   18,770 
Sales and marketing*  18,977   16,910 
General and administrative*  16,990   16,089 
Amortization of intangible assets  1,940   943 
Other operating income  (2,191)  (594)
Total operating expenses  58,419   52,118 
Operating income (loss)  4,270   (1,990)
Interest expense  16   611 
Other (income) expense, net  (900)  359 
Income (loss) before income taxes  5,154   (2,960)
Income tax expense (benefit)  1,234   (772)
Net income (loss) $3,920  $(2,188)
Income (loss) per share:    
Net income (loss) per share attributable to common stockholders, basic $0.06  $(0.04)
Net income (loss) per share attributable to common stockholders, diluted $0.05  $(0.04)
Weighted average shares outstanding:    
Weighted average number of shares used in computing net income (loss) per share, basic  63,638   50,132 
Weighted average number of shares used in computing net income (loss) per share, diluted  72,390   50,132 
         


   
*Amounts include stock-based compensation expense as follows (in thousands):  
     
  Three months ended March 31,
  2018 2017
Cost of revenue – software $8 $5
Research and development  47  775
Sales and marketing  41  431
General and administrative  120  1,658
Total stock-based compensation expense $216 $2,869
     


 
Altair Engineering Inc. and subsidiaries
Consolidated statements of cash flows
(Unaudited)
     
  Three months ended March 31,
(In thousands) 2018 2017
OPERATING ACTIVITIES:    
Net income (loss) $3,920  $(2,188)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Depreciation and amortization  3,543   2,461 
Provision for bad debt  65   91 
Stock-based compensation expense  216   2,869 
Deferred income taxes  (432)  182 
Other, net  (7)  18 
Changes in assets and liabilities:    
Accounts receivable  4,492   8,153 
Prepaid expenses and other current assets  (715)  (4,058)
Other long-term assets  119   (1,523)
Accounts payable  510   (186)
Accrued compensation and benefits  (1,560)  (2,478)
Other accrued expenses and current liabilities  (3,967)  (632)
Deferred revenue  20,505   16,493 
Net cash provided by operating activities  26,689   19,202 
INVESTING ACTIVITIES:    
Capital expenditures  (1,684)  (969)
Payments for acquisition of businesses  (1,199)  (1,099)
Payments for acquisition of developed technology  (353)  (120)
Other investing activities, net  23   (44)
Net cash used in investing activities  (3,213)  (2,232)
FINANCING ACTIVITIES:    
Proceeds from issuance of common stock  302   115 
Payments of initial public offering costs  (186)  (81)
Payments for redemption of common stock  (60)  (305)
Principal payments on long-term debt  (51)  (2,688)
Payments on revolving commitment     (32,061)
Borrowings under revolving commitment     17,271 
Other financing activities     (16)
Net cash provided by (used in) financing activities  5   (17,765)
Effect of exchange rate changes on cash, cash equivalents and restricted cash  495   490 
Net increase (decrease) in cash, cash equivalents and restricted cash  23,976   (305)
Cash, cash equivalents and restricted cash at beginning of year  39,578   17,139 
Cash, cash equivalents and restricted cash at end of period $63,554  $16,834 
Supplemental disclosure of cash flow:    
Interest paid $10  $634 
Income taxes paid $2,143  $1,641 
Supplemental disclosure of non-cash investing and financing activities:    
Initial public offering costs in other long-term assets $  $1,625 
Property and equipment in accounts payable and other accrued expenses and current liabilities $736  $64 
Capital leases $565  $ 
     


 
The following table provides a reconciliation of Adjusted EBITDA to net income (loss), the most comparable GAAP financial measure (in thousands):
   (Unaudited)
   Three months ended March 31,
   2018 2017
Net income (loss) $3,920  $(2,188)
Income tax expense (benefit)  1,234   (772)
Stock-based compensation expense  216   2,869 
Interest expense  16   611 
Interest income and other(1)  (1,255)  (85)
Depreciation and amortization  3,543   2,474 
Adjusted EBITDA $7,674  $2,909 
      
(1) Includes a non-recurring adjustment for a change in estimated legal expenses resulting in $2.0 million of income and a non-recurring adjustment for royalty contracts resulting in $0.9 million of expense for the three months ended March 31, 2018.
  
  


 
The following table provides a reconciliation of Non-GAAP net income and Non-GAAP diluted earnings per share to net income (loss) and earnings (loss) per share - diluted, the most comparable GAAP financial measures (in thousands):
       
    (Unaudited)
    Three months ended March 31,
    2018 2017
Net income (loss) $3,920 $(2,188)
Stock-based compensation expense  216  2,869 
Amortization of intangible assets  1,940  943 
  Non-GAAP net income $6,076 $1,624 
       
       
Earnings (loss) per share - diluted $0.05 $(0.04)
Non-GAAP earnings per share - diluted $0.08 $0.03 
       
       
GAAP diluted shares outstanding:    
 Weighted average number of shares used in computing net income (loss) per share, diluted  72,390  50,132 
       
Non-GAAP diluted shares outstanding:    
 Weighted average number of shares used in computing net income per share, diluted  72,800  61,200 
         


 
The following table provides a reconciliation of Free Cash Flow to net cash provided by operating activities, the most comparable GAAP financial measure (in thousands):
     
  (Unaudited)
  Three months ended March 31,
  2018 2017
Net cash provided by operating activities $26,689  $19,202 
Capital expenditures  (1,684)  (969)
Free cash flow $25,005  $18,233 
     


 
The following table provides a reconciliation of projected net income to projected Non-GAAP net income, the most comparable GAAP financial measure (in thousands):
          
   (Unaudited)
   Three months ending Year ending
   June 30, 2018 December 31, 2018
   low high low high
Net income$  500 $  1,000 $  11,000 $  13,000
Stock-based compensation expense   500    500    2,000    2,000
Amortization of intangible assets   1,500    1,500    6,000    6,000
  Non-GAAP net income$  2,500 $  3,000 $  19,000 $  21,000
          


 
The following table provides a reconciliation of projected Adjusted EBITDA to projected net income, the most comparable GAAP financial measure (in thousands):
  (Unaudited)
  Three months ending Year ending
  June 30, 2018 December 31, 2018
  low high low high
Net income$500 $1,000 $11,000 $13,000
Income tax expense 600  600  4,200  4,200
Stock-based compensation expense 500  500  2,000  2,000
Interest expense -  -  -  -
Interest income and other -  -  -  -
Depreciation and amortization 3,400  3,400  13,500  13,500
Other non-recurring charges(1) -  -  2,300  2,300
 Adjusted EBITDA$5,000 $5,500 $33,000 $35,000
         
(1) Represents projected non-recurring costs related to accelerated compliance-related costs or impairment charges.
         

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