EX-99.1 2 altr-ex99_1.htm EX-99.1 EX-99.1

 

Exhibit 99.1

Altair Announces Third Quarter 2023 Financial Results

Quarterly Software Product Revenue Increased more than 14% Year-Over-Year

TROY, Mich. – November 2, 2023 – Altair (Nasdaq: ALTR), a global leader in computational science and artificial intelligence, today released its financial results for the third quarter and nine months ended September 30, 2023.

"The third quarter of 2023 was excellent for Altair, with software product revenue and total revenue again above the high end of guidance," said James Scapa, founder, chairman and chief executive officer of Altair. "Our Q3 performance demonstrates the power and veracity of our vision for the convergence of computational science and AI across industries and verticals including engineering, scientific discovery, and business."

"Fiscal 2023 continues to progress in a positive way," said Matt Brown, chief financial officer of Altair. "Our performance through the first nine months of 2023 gives us confidence we're on track to meet our financial goals for the year."

Third Quarter 2023 Financial Highlights

Software product revenue was $119.1 million compared to $103.8 million for the third quarter of 2022, an increase of 14.8% in reported currency and 14.5% in constant currency
Total revenue was $134.0 million compared to $119.4 million for the third quarter of 2022, an increase of 12.3% in reported currency and 11.9% in constant currency
Net loss was $(4.4) million compared to net loss of $(33.2) million for the third quarter of 2022. Net loss per share, diluted was $(0.05) based on 80.4 million diluted weighted average common shares outstanding, compared to net loss per share, diluted of $(0.42) for the third quarter of 2022, based on 79.2 million diluted weighted average common shares outstanding. Net loss margin was -3.3% compared to net loss margin of -27.9% for the third quarter of 2022
Non-GAAP net income was $12.7 million, compared to non-GAAP net income of $4.3 million for the third quarter of 2022, an increase of 197.0%. Non-GAAP net income per share, diluted was $0.14 based on 88.6 million non-GAAP diluted common shares outstanding, compared to non-GAAP net income per share, diluted of $0.05 for the third quarter of 2022, based on 88.1 million non-GAAP diluted common shares outstanding
Adjusted EBITDA was $15.5 million compared to $6.8 million for the third quarter of 2022, an increase of 126.3%. Adjusted EBITDA margin was 11.5% compared to 5.7% for the third quarter of 2022
Cash provided by operating activities was $16.4 million, compared to $8.5 million for the third quarter of 2022
Free cash flow was $14.7 million, compared to $5.2 million for the third quarter of 2022.

 


 

Business Outlook

Based on information available as of today, Altair is issuing the following guidance for the fourth quarter and full year 2023:

 

(in millions, except %)

 

Fourth Quarter 2023

 

 

Full Year 2023

 

Software Product Revenue

 

$

153

 

to

$

159

 

 

$

547

 

to

$

553

 

Growth Rate

 

 

5.6

%

 

 

9.7

%

 

 

8.0

%

 

 

9.2

%

Growth Rate - Constant Currency

 

 

5.1

%

 

 

9.3

%

 

 

9.4

%

 

 

10.6

%

Total Revenue

 

$

169

 

 

$

175

 

 

$

610

 

 

$

616

 

Growth Rate

 

 

5.3

%

 

 

9.1

%

 

 

6.6

%

 

 

7.7

%

Growth Rate - Constant Currency

 

 

4.9

%

 

 

8.6

%

 

 

7.9

%

 

 

9.0

%

Net Income (Loss)

 

$

15.5

 

 

$

21.3

 

 

$

(12.6

)

 

$

(6.8

)

Non-GAAP Net Income

 

$

33.6

 

 

$

38.0

 

 

$

91.6

 

 

$

96.1

 

Adjusted EBITDA

 

$

44

 

 

$

50

 

 

$

120

 

 

$

126

 

Net Cash Provided by Operating Activities

 

 

 

 

 

 

 

$

118

 

 

$

126

 

Free Cash Flow

 

 

 

 

 

 

 

$

108

 

 

$

116

 

The following table provides a reconciliation of Full Year 2023 guidance to the last guidance provided in August:

 

 

 

(Unaudited)

 

 

 

Full Year 2023

 

(in millions)

 

Midpoint of Guidance in August

 

 

Increase/
(Decrease)

 

 

Currency Fluctuations from Prior Guidance

 

 

Midpoint of Guidance in November

 

Software Product Revenue

 

$

553.0

 

 

$

 

 

$

(3.0

)

 

$

550.0

 

Total Revenue

 

$

616.0

 

 

$

 

 

$

(3.0

)

 

$

613.0

 

Adjusted EBITDA

 

$

124.0

 

 

$

 

 

$

(1.0

)

 

$

123.0

 

Conference Call Information

 

What: Altair’s Third Quarter 2023 Financial Results Conference Call
When: Thursday, November 2, 2023

Time: 5 p.m. ET
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, Billings, 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 includes the diluted weighted average shares outstanding per GAAP regardless of whether the Company is in a loss position.

Billings consists of total revenue plus the change in deferred revenue, excluding deferred revenue from acquisitions.

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 fourth quarter and full year 2023, our statements regarding our expectations for 2023, 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

dls@altair.com

 

Investor Relations

The Blueshirt Group

Monica Gould

212-871-3927

ir@altair.com

 

 

 


 

ALTAIR ENGINEERING INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

 

 

September 30, 2023

 

 

December 31, 2022

 

(In thousands)

 

(Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

431,188

 

 

$

316,146

 

Accounts receivable, net

 

 

121,855

 

 

 

170,279

 

Income tax receivable

 

 

12,402

 

 

 

11,259

 

Prepaid expenses and other current assets

 

 

26,561

 

 

 

29,142

 

Total current assets

 

 

592,006

 

 

 

526,826

 

Property and equipment, net

 

 

38,167

 

 

 

37,517

 

Operating lease right of use assets

 

 

32,132

 

 

 

33,601

 

Goodwill

 

 

452,822

 

 

 

449,048

 

Other intangible assets, net

 

 

86,491

 

 

 

107,609

 

Deferred tax assets

 

 

8,046

 

 

 

9,727

 

Other long-term assets

 

 

42,327

 

 

 

40,410

 

TOTAL ASSETS

 

$

1,251,991

 

 

$

1,204,738

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable

 

$

5,159

 

 

$

10,434

 

Accrued compensation and benefits

 

 

39,468

 

 

 

42,456

 

Current portion of operating lease liabilities

 

 

9,209

 

 

 

10,396

 

Other accrued expenses and current liabilities

 

 

50,917

 

 

 

56,371

 

Deferred revenue

 

 

110,843

 

 

 

113,081

 

Current portion of convertible senior notes, net

 

 

81,319

 

 

 

 

Total current liabilities

 

 

296,915

 

 

 

232,738

 

Convertible senior notes, net

 

 

225,635

 

 

 

305,604

 

Operating lease liabilities, net of current portion

 

 

23,373

 

 

 

24,065

 

Deferred revenue, non-current

 

 

28,090

 

 

 

31,379

 

Other long-term liabilities

 

 

43,860

 

 

 

41,216

 

TOTAL LIABILITIES

 

 

617,873

 

 

 

635,002

 

Commitments and contingencies

 

 

 

 

 

 

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 54,351
   and 52,277 shares as of September 30, 2023, and December 31, 2022, respectively

 

 

5

 

 

 

5

 

Class B common stock, authorized 41,203 shares, issued and outstanding 27,045
   and 27,745 shares as of September 30, 2023, and December 31, 2022, respectively

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

816,551

 

 

 

721,307

 

Accumulated deficit

 

 

(150,178

)

 

 

(121,577

)

Accumulated other comprehensive loss

 

 

(32,263

)

 

 

(30,002

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

634,118

 

 

 

569,736

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

1,251,991

 

 

$

1,204,738

 

 

 

 


 

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)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

License

 

$

79,825

 

 

$

67,245

 

 

$

279,972

 

 

$

256,102

 

Maintenance and other services

 

 

39,252

 

 

 

36,520

 

 

 

114,069

 

 

 

105,453

 

Total software

 

 

119,077

 

 

 

103,765

 

 

 

394,041

 

 

 

361,555

 

Software related services

 

 

6,517

 

 

 

6,706

 

 

 

20,281

 

 

 

23,143

 

Total software and related services

 

 

125,594

 

 

 

110,471

 

 

 

414,322

 

 

 

384,698

 

Client engineering services

 

 

7,126

 

 

 

7,355

 

 

 

22,936

 

 

 

22,414

 

Other

 

 

1,283

 

 

 

1,525

 

 

 

3,940

 

 

 

4,676

 

Total revenue

 

 

134,003

 

 

 

119,351

 

 

 

441,198

 

 

 

411,788

 

Cost of revenue

 

 

 

 

 

 

 

 

 

 

 

 

License

 

 

3,083

 

 

 

2,579

 

 

 

11,888

 

 

 

11,386

 

Maintenance and other services

 

 

13,689

 

 

 

13,025

 

 

 

41,754

 

 

 

38,628

 

Total software *

 

 

16,772

 

 

 

15,604

 

 

 

53,642

 

 

 

50,014

 

Software related services

 

 

5,251

 

 

 

5,240

 

 

 

16,175

 

 

 

16,739

 

Total software and related services

 

 

22,023

 

 

 

20,844

 

 

 

69,817

 

 

 

66,753

 

Client engineering services

 

 

5,930

 

 

 

5,835

 

 

 

19,321

 

 

 

18,390

 

Other

 

 

1,133

 

 

 

1,230

 

 

 

3,480

 

 

 

3,892

 

Total cost of revenue

 

 

29,086

 

 

 

27,909

 

 

 

92,618

 

 

 

89,035

 

Gross profit

 

 

104,917

 

 

 

91,442

 

 

 

348,580

 

 

 

322,753

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development *

 

 

51,598

 

 

 

53,092

 

 

 

160,126

 

 

 

150,608

 

Sales and marketing *

 

 

44,069

 

 

 

41,352

 

 

 

132,543

 

 

 

120,345

 

General and administrative *

 

 

17,218

 

 

 

18,258

 

 

 

53,791

 

 

 

54,054

 

Amortization of intangible assets

 

 

7,704

 

 

 

6,571

 

 

 

23,143

 

 

 

18,682

 

Other operating (income) expense, net

 

 

(4,408

)

 

 

(2,835

)

 

 

1,324

 

 

 

(9,383

)

Total operating expenses

 

 

116,181

 

 

 

116,438

 

 

 

370,927

 

 

 

334,306

 

Operating loss

 

 

(11,264

)

 

 

(24,996

)

 

 

(22,347

)

 

 

(11,553

)

Interest expense

 

 

1,529

 

 

 

1,566

 

 

 

4,583

 

 

 

2,851

 

Other (income) expense, net

 

 

(1,890

)

 

 

2,107

 

 

 

(9,698

)

 

 

26,082

 

Loss before income taxes

 

 

(10,903

)

 

 

(28,669

)

 

 

(17,232

)

 

 

(40,486

)

Income tax (benefit) expense

 

 

(6,541

)

 

 

4,579

 

 

 

11,369

 

 

 

15,008

 

Net loss

 

$

(4,362

)

 

$

(33,248

)

 

$

(28,601

)

 

$

(55,494

)

Loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share attributable to common
  stockholders, basic and diluted

 

$

(0.05

)

 

$

(0.42

)

 

$

(0.36

)

 

$

(0.70

)

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares used in computing
  net loss per share, basic and diluted

 

 

80,431

 

 

 

79,207

 

 

 

80,204

 

 

 

79,205

 

 

 

 

 

 

 

 

 

 

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

 

 


 

 

 

(Unaudited)

 

 

 

Three Months Ended
 September 30,

 

 

Nine Months Ended
September 30,

 

(in thousands)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Cost of revenue – software

 

$

2,468

 

 

$

2,332

 

 

$

7,792

 

 

$

6,265

 

Research and development

 

 

7,824

 

 

 

10,243

 

 

 

26,510

 

 

 

26,580

 

Sales and marketing

 

 

6,933

 

 

 

7,806

 

 

 

22,105

 

 

 

22,505

 

General and administrative

 

 

3,301

 

 

 

2,329

 

 

 

10,016

 

 

 

7,174

 

Total stock-based compensation expense

 

$

20,526

 

 

$

22,710

 

 

$

66,423

 

 

$

62,524

 

 

 

 

 

(Unaudited)

 

 

 

Three Months Ended
 September 30,

 

 

Nine Months Ended
September 30,

 

(in thousands)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Employee stock-based compensation plans

 

$

19,187

 

 

$

15,490

 

 

$

56,860

 

 

$

43,622

 

Post combination expense in connection with acquisitions

 

 

1,339

 

 

 

7,220

 

 

 

9,563

 

 

 

18,902

 

Total stock-based compensation expense

 

$

20,526

 

 

$

22,710

 

 

$

66,423

 

 

$

62,524

 

 

 

 


 

ALTAIR ENGINEERING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

(In thousands)

 

2023

 

 

2022

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss

 

$

(28,601

)

 

$

(55,494

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

29,271

 

 

 

24,092

 

Stock-based compensation expense

 

 

66,423

 

 

 

62,524

 

Amortization of debt issuance costs

 

 

1,399

 

 

 

1,330

 

Deferred income taxes

 

 

2,178

 

 

 

4

 

Loss (gain) on mark-to-market adjustment of contingent consideration

 

 

4,494

 

 

 

(7,482

)

Expense on repurchase of convertible senior notes

 

 

 

 

 

16,621

 

Other, net

 

 

(14

)

 

 

336

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable, net

 

 

47,226

 

 

 

13,859

 

Prepaid expenses and other current assets

 

 

959

 

 

 

1,906

 

Other long-term assets

 

 

(1,491

)

 

 

3,134

 

Accounts payable

 

 

(5,494

)

 

 

(270

)

Accrued compensation and benefits

 

 

(2,726

)

 

 

(3,639

)

Other accrued expenses and current liabilities

 

 

(4,526

)

 

 

(48,698

)

Deferred revenue

 

 

(3,442

)

 

 

18,311

 

Net cash provided by operating activities

 

 

105,656

 

 

 

26,534

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

Capital expenditures

 

 

(7,882

)

 

 

(6,721

)

Payments for acquisition of businesses, net of cash acquired

 

 

(3,235

)

 

 

(134,130

)

Other investing activities, net

 

 

(2,452

)

 

 

(10,322

)

Net cash used in investing activities

 

 

(13,569

)

 

 

(151,173

)

FINANCING ACTIVITIES:

 

 

 

 

 

 

Proceeds from the exercise of common stock options

 

 

25,526

 

 

 

2,840

 

Payments for repurchase and retirement of common stock

 

 

(6,255

)

 

 

(4,387

)

Proceeds from employee stock purchase plan contributions

 

 

5,772

 

 

 

6,549

 

Proceeds from issuance of convertible senior notes,
   net of discounts and commissions

 

 

 

 

 

224,265

 

Repurchase of convertible senior notes

 

 

 

 

 

(192,422

)

Payments of debt issuance costs

 

 

 

 

 

(1,523

)

Other financing activities

 

 

(73

)

 

 

(170

)

Net cash provided by financing activities

 

 

24,970

 

 

 

35,152

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(2,599

)

 

 

(12,142

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

114,458

 

 

 

(101,629

)

Cash, cash equivalents and restricted cash at beginning of year

 

 

316,958

 

 

 

414,012

 

Cash, cash equivalents and restricted cash at end of period

 

$

431,416

 

 

$

312,383

 

 

 

 


 

Financial Results

 

The following table provides a reconciliation of Non-GAAP net income and Non-GAAP net income per share – diluted, to net loss and net loss 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)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net loss

 

$

(4,362

)

 

$

(33,248

)

 

$

(28,601

)

 

$

(55,494

)

Stock-based compensation expense

 

 

20,526

 

 

 

22,710

 

 

 

66,423

 

 

 

62,524

 

Amortization of intangible assets

 

 

7,704

 

 

 

6,571

 

 

 

23,143

 

 

 

18,682

 

Non-cash interest expense

 

 

469

 

 

 

501

 

 

 

1,399

 

 

 

1,339

 

Impact of non-GAAP tax rate (1)

 

 

(10,997

)

 

 

3,079

 

 

 

(8,897

)

 

 

(1,878

)

Special adjustments and other (2)

 

 

(658

)

 

 

4,657

 

 

 

4,212

 

 

 

22,886

 

Non-GAAP net income

 

$

12,682

 

 

$

4,270

 

 

$

57,679

 

 

$

48,059

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share, diluted

 

$

(0.05

)

 

$

(0.42

)

 

$

(0.36

)

 

$

(0.70

)

Non-GAAP net income per share, diluted

 

$

0.14

 

 

$

0.05

 

 

$

0.65

 

 

$

0.55

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted shares outstanding

 

 

80,431

 

 

 

79,207

 

 

 

80,204

 

 

 

79,205

 

Non-GAAP diluted shares outstanding

 

 

88,556

 

 

 

88,100

 

 

 

88,066

 

 

 

86,708

 

(1)
The Company uses a non-GAAP effective tax rate of 26%.
(2)
The three months ended September 30, 2023, includes a $3.5 million gain from the mark-to-market adjustment of contingent consideration associated with the World Programming acquisition and $2.8 million of currency losses on acquisition-related intercompany loans. The three months ended September 30, 2022, includes $6.8 million of currency losses on acquisition-related intercompany loans, and a $2.2 million gain from the mark-to-market adjustment of contingent consideration associated with the World Programming acquisition. The nine months ended September 30, 2023, includes a $4.5 million loss from the mark-to-market adjustment of contingent consideration associated with the World Programming acquisition and $0.3 million of currency gains on acquisition-related intercompany loans. The nine months ended September 30, 2022, includes $16.6 million expense on repurchase of convertible senior notes, $13.7 million currency losses on acquisition-related intercompany loans and a $7.5 million gain from the mark-to-market adjustment of contingent consideration associated with the World Programming acquisition.

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

 

 

 

(Unaudited)

 

 

 

Three Months Ended
 September 30,

 

 

Nine Months Ended
September 30,

 

(in thousands)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net loss

 

$

(4,362

)

 

$

(33,248

)

 

$

(28,601

)

 

$

(55,494

)

Income tax (benefit) expense

 

 

(6,541

)

 

 

4,579

 

 

 

11,369

 

 

 

15,008

 

Stock-based compensation expense

 

 

20,526

 

 

 

22,710

 

 

 

66,423

 

 

 

62,524

 

Interest expense

 

 

1,529

 

 

 

1,566

 

 

 

4,583

 

 

 

2,851

 

Depreciation and amortization

 

 

9,783

 

 

 

8,273

 

 

 

29,271

 

 

 

24,092

 

Special adjustments, interest income and other (1)

 

 

(5,481

)

 

 

2,949

 

 

 

(7,480

)

 

 

20,878

 

Adjusted EBITDA

 

$

15,454

 

 

$

6,829

 

 

$

75,565

 

 

$

69,859

 

 

(1)
The three months ended September 30, 2023, includes $4.8 million of interest income, a $3.5 million gain from the mark-to-market adjustment of contingent consideration associated with the World Programming acquisition, and $2.8 million currency losses on acquisition-related intercompany loans. The three months ended September 30, 2022, includes $6.8 million currency losses on acquisition-related intercompany loans, a $2.2 million gain from the mark-to-market adjustment of contingent consideration associated with the World Programming acquisition, and $1.7 million of interest income. The nine months ended September 30, 2023, includes $11.7 million of interest income, a $4.5 million loss from the mark-to-market adjustment of contingent consideration associated with the World Programming acquisition, and $0.3 million currency gains on acquisition-related intercompany loans. The nine months ended September 30, 2022, includes $16.6 million expense on repurchase of convertible senior notes, $13.7 million currency losses on acquisition-related intercompany loans, a $7.5 million gain from the mark-to-market adjustment of contingent consideration associated with the World Programming acquisition, and $2.0 million of interest income.

 


 

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)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net cash provided by operating activities (1)

 

$

16,427

 

 

$

8,493

 

 

$

105,656

 

 

$

26,534

 

Capital expenditures

 

 

(1,698

)

 

 

(3,264

)

 

 

(7,882

)

 

 

(6,721

)

Free cash flow (1)

 

$

14,729

 

 

$

5,229

 

 

$

97,774

 

 

$

19,813

 

 

(1)
The nine months ended September 30, 2022, includes a $65.9 million payment in January 2022 for a damages judgement assumed as part of an acquisition in December 2021.

The following table provides a reconciliation of Non-GAAP gross profit to gross profit, the most comparable GAAP financial measure, and a comparison of Non-GAAP gross margin (Non-GAAP gross profit as a percentage of total revenue) to gross margin (gross profit as a percentage of total revenue), the most comparable GAAP financial measure:

 

 

 

(Unaudited)

 

 

 

Three Months Ended
 September 30,

 

 

Nine Months Ended
September 30,

 

(in thousands)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Gross profit

 

$

104,917

 

 

$

91,442

 

 

$

348,580

 

 

$

322,753

 

Stock-based compensation expense

 

 

2,468

 

 

 

2,332

 

 

 

7,792

 

 

 

6,265

 

Non-GAAP gross profit

 

$

107,385

 

 

$

93,774

 

 

$

356,372

 

 

$

329,018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit margin

 

 

78.3

%

 

 

76.6

%

 

 

79.0

%

 

 

78.4

%

Non-GAAP gross margin

 

 

80.1

%

 

 

78.6

%

 

 

80.8

%

 

 

79.9

%

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
 September 30,

 

 

Nine Months Ended
September 30,

 

(in thousands)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Total operating expense

 

$

116,181

 

 

$

116,438

 

 

$

370,927

 

 

$

334,306

 

Stock-based compensation expense

 

 

(18,058

)

 

 

(20,378

)

 

 

(58,631

)

 

 

(56,259

)

Amortization

 

 

(7,704

)

 

 

(6,571

)

 

 

(23,143

)

 

 

(18,682

)

Gain (loss) on mark-to-market adjustment of
   contingent consideration

 

 

3,493

 

 

 

2,178

 

 

 

(4,494

)

 

 

7,482

 

Non-GAAP operating expense

 

$

93,912

 

 

$

91,667

 

 

$

284,659

 

 

$

266,847

 

The following table provides a reconciliation of Billings to revenue, the most comparable GAAP financial measure:

 

 

(Unaudited)

 

 

 

Three Months Ended
 September 30,

 

 

Nine Months Ended
September 30,

 

(in thousands)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue

 

$

134,003

 

 

$

119,351

 

 

$

441,198

 

 

$

411,788

 

Ending deferred revenue

 

 

138,933

 

 

 

116,540

 

 

 

138,933

 

 

 

116,540

 

Beginning deferred revenue

 

 

(148,547

)

 

 

(112,926

)

 

 

(144,460

)

 

 

(106,032

)

Deferred revenue acquired

 

 

 

 

 

(26

)

 

 

 

 

 

(2,598

)

Billings

 

$

124,389

 

 

$

122,939

 

 

$

435,671

 

 

$

419,698

 

 

 


 

The following table provides revenue, Billings and Adjusted EBITDA on a constant currency basis:

 

 

(Unaudited)

 

 

 

Three Months Ended
September 30, 2023

 

 

Three Months Ended September 30, 2022

 

 

Increase/
(Decrease) %

 

(in thousands)

 

As reported

 

 

Currency changes

 

 

As adjusted for constant currency

 

 

As reported

 

 

As reported

 

 

As adjusted for constant currency

 

Software revenue

 

$

119.1

 

 

$

(0.3

)

 

$

118.8

 

 

$

103.8

 

 

 

14.8

%

 

 

14.5

%

Total revenue

 

$

134.0

 

 

$

(0.4

)

 

$

133.6

 

 

$

119.4

 

 

 

12.3

%

 

 

11.9

%

Billings

 

$

124.4

 

 

$

(1.3

)

 

$

123.1

 

 

$

122.9

 

 

 

1.2

%

 

 

0.1

%

Adjusted EBITDA

 

$

15.5

 

 

$

1.0

 

 

$

16.5

 

 

$

6.8

 

 

 

126.3

%

 

 

142.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

 

Nine Months Ended
September 30, 2023

 

 

Nine Months Ended September 30, 2022

 

 

Increase/
(Decrease) %

 

(in thousands)

 

As reported

 

 

Currency changes

 

 

As adjusted for constant currency

 

 

As reported

 

 

As reported

 

 

As adjusted for constant currency

 

Software revenue

 

$

394.0

 

 

$

7.7

 

 

$

401.7

 

 

$

361.6

 

 

 

9.0

%

 

 

11.1

%

Total revenue

 

$

441.2

 

 

$

8.0

 

 

$

449.2

 

 

$

411.8

 

 

 

7.1

%

 

 

9.1

%

Billings

 

$

435.7

 

 

$

6.5

 

 

$

442.2

 

 

$

419.7

 

 

 

3.8

%

 

 

5.4

%

Adjusted EBITDA

 

$

75.6

 

 

$

4.9

 

 

$

80.5

 

 

$

69.9

 

 

 

8.2

%

 

 

15.2

%

 

 


 

Change in Classification of Indirect Costs

Beginning in the first quarter of 2023, the Company refined its classification of certain indirect costs to reflect the way management is now reviewing the information in decision making and to improve comparability with peers. These indirect costs include certain IT, facilities, and depreciation expenses that were previously reported primarily in General and administrative expense. These indirect costs have now been reclassified to Research and development, Sales and marketing, and General and administrative expenses based on global headcount. Management believes this refined methodology better reflects the nature of the costs and financial performance of the Company.

As a result, the Company’s consolidated statements of operations have been recast for prior periods presented to reflect the effects of the changes to Research and development, Sales and marketing, and General and administrative expense. There was no net impact to total operating expenses, income from operations, net income or net income per share for any periods presented. The consolidated balance sheets, consolidated statements of comprehensive income, consolidated statements of changes in stockholders’ equity, and the consolidated statements of cash flows were not affected by changes in the presentation of these costs.

Each prior period that will be presented in the forthcoming Form 10-Q and Form 10-K filings will be recast to conform to current period presentation. The following tables provide the relevant financial results as previously reported, as recast for the current period and forthcoming filings, and the associated impacts of the changes. Within these tables, the references to periods such as “FY 2021” and “Q1 2022” refer to the corresponding periods as reported in the applicable Form 10-K, Form 10-Q, or Form 8-K filings.

The following table summarizes the changes made to the consolidated statements of operations (in thousands):

 

 

 

Previously Reported

 

 

 

FY 2021

 

 

Q1 2022

 

 

Q2 2022

 

 

Q3 2022

 

 

Q4 2022

 

 

FY 2022

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

151,049

 

 

$

43,094

 

 

$

46,477

 

 

$

48,781

 

 

$

47,511

 

 

$

185,863

 

Sales and marketing

 

 

132,750

 

 

 

35,682

 

 

 

39,116

 

 

 

39,244

 

 

 

41,203

 

 

 

155,245

 

General and administrative

 

 

91,500

 

 

 

23,569

 

 

 

24,367

 

 

 

24,677

 

 

 

24,993

 

 

 

97,606

 

Amortization of intangible assets

 

 

18,357

 

 

 

5,903

 

 

 

6,208

 

 

 

6,571

 

 

 

8,828

 

 

 

27,510

 

Other operating income, net

 

 

(3,482

)

 

 

(781

)

 

 

(5,767

)

 

 

(2,835

)

 

 

(572

)

 

 

(9,955

)

Total operating expenses

 

$

390,174

 

 

$

107,467

 

 

$

110,401

 

 

$

116,438

 

 

$

121,963

 

 

$

456,269

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recast

 

 

 

FY 2021

 

 

Q1 2022

 

 

Q2 2022

 

 

Q3 2022

 

 

Q4 2022

 

 

FY 2022

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

167,341

 

 

$

47,079

 

 

$

50,437

 

 

$

53,092

 

 

$

51,934

 

 

$

202,542

 

Sales and marketing

 

 

141,484

 

 

 

37,840

 

 

 

41,153

 

 

 

41,352

 

 

 

43,539

 

 

 

163,884

 

General and administrative

 

 

66,474

 

 

 

17,426

 

 

 

18,370

 

 

 

18,258

 

 

 

18,234

 

 

 

72,288

 

Amortization of intangible assets

 

 

18,357

 

 

 

5,903

 

 

 

6,208

 

 

 

6,571

 

 

 

8,828

 

 

 

27,510

 

Other operating income, net

 

 

(3,482

)

 

 

(781

)

 

 

(5,767

)

 

 

(2,835

)

 

 

(572

)

 

 

(9,955

)

Total operating expenses

 

$

390,174

 

 

$

107,467

 

 

$

110,401

 

 

$

116,438

 

 

$

121,963

 

 

$

456,269

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change

 

 

 

FY 2021

 

 

Q1 2022

 

 

Q2 2022

 

 

Q3 2022

 

 

Q4 2022

 

 

FY 2022

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

16,292

 

 

$

3,985

 

 

$

3,960

 

 

$

4,311

 

 

$

4,423

 

 

$

16,679

 

Sales and marketing

 

 

8,734

 

 

 

2,158

 

 

 

2,037

 

 

 

2,108

 

 

 

2,336

 

 

 

8,639

 

General and administrative

 

 

(25,026

)

 

 

(6,143

)

 

 

(5,997

)

 

 

(6,419

)

 

 

(6,759

)

 

 

(25,318

)

Amortization of intangible assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other operating income, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

 


 

Business Outlook

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

 

 

 

(Unaudited)

 

 

 

Three Months Ending
December 31, 2023

 

 

Year Ending
 December 31, 2023

 

(in thousands)

 

Low

 

 

High

 

 

Low

 

 

High

 

Net income (loss)

 

$

15,500

 

 

$

21,300

 

 

$

(12,600

)

 

$

(6,800

)

Stock-based compensation expense

 

 

17,100

 

 

 

17,100

 

 

 

83,500

 

 

 

83,500

 

Amortization of intangible assets

 

 

7,400

 

 

 

7,400

 

 

 

30,500

 

 

 

30,500

 

Non-cash interest expense

 

 

500

 

 

 

500

 

 

 

1,900

 

 

 

1,900

 

Impact of non-GAAP tax rate(1)

 

 

(6,900

)

 

 

(8,300

)

 

 

(15,900

)

 

 

(17,200

)

Special adjustments and other(2)

 

 

 

 

 

 

 

 

4,200

 

 

 

4,200

 

Non-GAAP net income

 

$

33,600

 

 

$

38,000

 

 

$

91,600

 

 

$

96,100

 

(1)
The Company uses a non-GAAP effective tax rate of 26%.
(2)
The year ending December 31, 2023, includes $4.5 million loss from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition and $0.3 million currency gains on acquisition-related intercompany loans.

 

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

 

 

 

(Unaudited)

 

 

 

Three Months Ending
December 31, 2023

 

 

Year Ending
 December 31, 2023

 

(in thousands)

 

Low

 

 

High

 

 

Low

 

 

High

 

Net income (loss)

 

$

15,500

 

 

$

21,300

 

 

$

(12,600

)

 

$

(6,800

)

Income tax expense

 

 

4,900

 

 

 

5,100

 

 

 

16,300

 

 

 

16,500

 

Stock-based compensation expense

 

 

17,100

 

 

 

17,100

 

 

 

83,500

 

 

 

83,500

 

Interest (income) expense

 

 

(3,000

)

 

 

(3,000

)

 

 

(10,100

)

 

 

(10,100

)

Depreciation and amortization

 

 

9,500

 

 

 

9,500

 

 

 

38,700

 

 

 

38,700

 

Special adjustments and other(1)

 

 

 

 

 

 

 

 

4,200

 

 

 

4,200

 

Adjusted EBITDA

 

$

44,000

 

 

$

50,000

 

 

$

120,000

 

 

$

126,000

 

(1)
The year ending December 31, 2023, includes $4.5 million loss from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition and $0.3 million currency gains on acquisition-related intercompany loans.

 

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, 2023

 

(in thousands)

 

 

 

 

 

Low

 

 

High

 

Net cash provided by operating activities

 

 

 

 

 

$

118,400

 

 

$

126,400

 

Capital expenditures

 

 

 

 

 

 

(10,400

)

 

 

(10,400

)

Free cash flow

 

 

 

 

 

$

108,000

 

 

$

116,000