Altair Announces Third Quarter 2021 Financial Results

Rhea-AI Summary

Altair (Nasdaq: ALTR) reported strong financial results for Q3 2021, with software product revenue rising by 16.5% to $102.3 million from $87.8 million in Q3 2020. Total revenue increased 14.0% to $121.3 million. The company's net loss improved to $8.1 million from $8.5 million year-over-year, with a diluted net loss per share of $0.11. Adjusted EBITDA grew 81.4% to $14.8 million, and non-GAAP net income surged 107.1% to $9.6 million. Altair raised its guidance for Q4 and full year 2021, projecting software product revenue of $437-440 million.

Positive

• Software product revenue up by 16.5% to $102.3 million.
• Total revenue increased by 14.0% to $121.3 million.
• Adjusted EBITDA rose by 81.4% to $14.8 million.
• Non-GAAP net income increased by 107.1% to $9.6 million.
• Raised Q4 and full year revenue guidance.

Negative

• Net loss was $8.1 million, although it improved year-over-year.
• Free cash flow was negative at $(0.5) million.

Exceeds Expectations for Third Quarter 2021, Raises Outlook for the Year

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

 

FAQ

What were Altair's Q3 2021 financial results?

Altair reported Q3 2021 total revenue of $121.3 million, a 14.0% increase year-over-year.

What is the guidance for Altair's fourth quarter 2021?

Altair projects Q4 2021 software product revenue between $106.0 million and $109.0 million.

How did Altair's non-GAAP net income change in Q3 2021?

Non-GAAP net income for Q3 2021 was $9.6 million, up 107.1% from the previous year.

What was Altair's adjusted EBITDA for Q3 2021?

Adjusted EBITDA for Q3 2021 was $14.8 million, representing an 81.4% increase year-over-year.

What were the highlights of Altair's Q3 2021 performance?

Key highlights include a 16.5% rise in software product revenue and improved profitability metrics.