altr-ex991

Record Fourth Quarter and Full Year 2020 Software Product and Total Revenue, Exceeding Expectations

TROY, Mich. – February 25, 2021 – 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 fourth quarter and full year ended December 31, 2020.

“Altair had an excellent fourth quarter and full year 2020,” said James Scapa, Founder, Chairman and Chief Executive Officer of Altair. “In a year of business disruptions and personal challenges, Altair brought to market broad and deep additions and enhancements to our product portfolio while delivering solid financial performance. I am proud of our global team, and excited about 2021 as we will continue delivering industry-leading technology and expertise aligned with our vision for the convergence of simulation, high-performance computing, and artificial intelligence.”

“Software product revenue increased over 12% from the fourth quarter of 2019 to 85% of total revenue, which drove year over year improvement in gross margin of over 500 basis points for the quarter, while our recurring software license rate rose to 92% for the year,” said Howard Morof, Chief Financial Officer of Altair. “The top line performance coupled with continued discipline managing operating expenses had a very positive impact on our profitability in the quarter.”

Based on information available as of today, Altair is issuing guidance for the first quarter and full year 2021.

What: Altair’s Fourth Quarter and Full Year 2020 Financial Results Conference CallWhen:Friday, February 26, 2021
Time:8:30 a.m. ETLive Call:(866) 754-5204, Domestic(636) 812-6621, International
Replay:(855) 859-2056, Conference ID 3056322, Domestic(404) 537-3406, Conference ID 3056322, InternationalWebcast: http://investor.altair.com (live & replay)

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 – as defined through 2020 results excludes stock-based compensation, amortization of intangible assets related to acquisitions, and special items as identified by management and described elsewhere in this press release.

Non-GAAP net income – as defined starting with 2021 guidance and going forward excludes stock-based compensation, amortization of intangible assets related to acquisitions, non-cash interest expense, 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 form period to period, and special items as identified by management and described elsewhere in this press release.

Non-GAAP diluted common shares includes total outstanding shares plus outstanding equity awards under the Company’s equity award plans.

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.

Altair is a global technology company that provides software and cloud solutions in the areas of simulation, high-performance computing, data analytics 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.

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 first 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.

	December 31,
(in thousands)	2020			2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	241,221		$	223,117
Accounts receivable, net		117,878			104,984
Income tax receivable		6,736			7,264
Prepaid expenses and other current assets		21,100			17,092
Total current assets		386,935			352,457
Property and equipment, net		36,332			36,297
Operating lease right of use assets		33,526			28,134
Goodwill		264,481			233,683
Other intangible assets, net		76,114			67,075
Deferred tax assets		7,125			5,791
Other long-term assets		25,389			19,708
TOTAL ASSETS	$	829,902		$	743,145
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Current portion of long-term debt	$	30,384		$	430
Accounts payable		8,594			8,585
Accrued compensation and benefits		34,772			30,676
Current portion of operating lease liabilities		10,331			9,141
Other accrued expenses and current liabilities		30,982			28,603
Deferred revenue		85,691			75,431
Total current liabilities		200,754			152,866
Long-term debt, net of current portion		188,653			178,238
Operating lease liabilities, net of current portion		24,323			20,174
Deferred revenue, non-current		9,388			8,136
Other long-term liabilities		27,414			26,672
TOTAL LIABILITIES		450,532			386,086
Commitments and contingencies
MEZZANINE EQUITY		784			2,352
STOCKHOLDERS’ EQUITY
Preferred stock ($0.0001 par value), authorized 45,000 shares, none issued or outstanding		—			—
Common stock ($0.0001 par value)
Class A common stock, authorized 513,797 shares, issued and outstanding 44,216 and 41,271 shares as of December 31, 2020 and 2019, respectively		4			4
Class B common stock, authorized 41,203 shares, issued and outstanding 30,111 and 31,131 shares as of December 31, 2020 and 2019, respectively		3			3
Additional paid-in capital		474,669			446,633
Accumulated deficit		(93,293	)		(82,405	)
Accumulated other comprehensive loss		(2,797	)		(9,528	)
TOTAL STOCKHOLDERS’ EQUITY		378,586			354,707
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY	$	829,902		$	743,145

	For the Three Months Ended December 31,						For the Year Ended December 31,
(in thousands, except per share data)	2020			2019			2020			2019
Revenue
License	$	76,381		$	64,194		$	259,965		$	244,321
Maintenance and other services		37,244			36,993			131,746			122,381
Total software		113,625			101,187			391,711			366,702
Software related services		7,906			8,941			26,454			34,576
Total software and related services		121,531			110,128			418,165			401,278
Client engineering services		9,934			11,722			44,320			48,987
Other		1,976			2,027			7,436			8,650
Total revenue		133,441			123,877			469,921			458,915
Cost of revenue
License		6,786			8,139			19,637			21,285
Maintenance and other services		10,105			10,892			38,688			38,401
Total software *		16,891			19,031			58,325			59,686
Software related services		6,102			6,497			21,243			25,640
Total software and related services		22,993			25,528			79,568			85,326
Client engineering services		8,067			9,882			35,684			39,875
Other		1,631			1,540			6,053			7,398
Total cost of revenue		32,691			36,950			121,305			132,599
Gross profit		100,750			86,927			348,616			326,316
Operating expenses:
Research and development *		34,966			30,498			126,081			117,510
Sales and marketing *		30,537			27,589			111,440			106,051
General and administrative *		22,933			21,292			86,432			82,178
Amortization of intangible assets		4,986			3,769			16,376			14,442
Other operating loss (income), net		5			(370	)		(3,426	)		(2,072	)
Total operating expenses		93,427			82,778			336,903			318,109
Operating income		7,323			4,149			11,713			8,207
Interest expense		3,008			2,785			11,598			6,371
Other income, net		(65	)		(849	)		(1,917	)		(1,552	)
Income before income taxes		4,380			2,213			2,032			3,388
Income tax expense		2,182			3,715			12,532			10,930
Net income (loss)	$	2,198		$	(1,502	)	$	(10,500	)	$	(7,542	)
Income per share:
Net income (loss) per share attributable to common stockholders, basic	$	0.03		$	(0.02	)	$	(0.14	)	$	(0.11	)
Net income (loss) per share attributable to common stockholders, diluted	$	0.03		$	(0.02	)	$	(0.14	)	$	(0.11	)
Weighted average shares outstanding:
Weighted average number of shares used in computing net income (loss) per share, basic		74,020			72,227			73,241			71,544
Weighted average number of shares used in computing net income (loss) per share, diluted		78,484			72,227			73,241			71,544

	Year Ended December 31,
(in thousands)	2020			2019
OPERATING ACTIVITIES:
Net loss	$	(10,500	)	$	(7,542	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		23,806			21,522
Provision for credit loss		1,259			671
Amortization of debt discount and issuance costs		10,829			5,663
Stock-based compensation expense		21,355			8,528
Deferred income taxes		(10,350	)		(950	)
Other, net		118			6
Changes in assets and liabilities:
Accounts receivable		(11,032	)		(7,901	)
Prepaid expenses and other current assets		(2,131	)		(2,396	)
Other long-term assets		(4,527	)		(2,591	)
Accounts payable		(1,839	)		(426	)
Accrued compensation and benefits		1,985			(1,232	)
Other accrued expenses and current liabilities		5,771			513
Operating lease right of use assets and liabilities, net		(142	)		102
Deferred revenue		8,280			17,426
Net cash provided by operating activities		32,882			31,393
INVESTING ACTIVITIES:
Payments for acquisition of businesses, net of cash acquired		(41,028	)		(25,720	)
Capital expenditures		(6,093	)		(9,660	)
Payments for acquisition of developed technology		(2,133	)		(473	)
Other investing activities, net		162			14
Net cash used in investing activities		(49,092	)		(35,839	)
FINANCING ACTIVITIES:
Borrowings under revolving commitment		30,000			96,992
Proceeds from the exercise of stock options		1,710			1,510
Proceeds from issuance of convertible senior notes, net of underwriters' discounts and commissions		—			223,101
Payments on revolving commitment		—			(127,941	)
Payments for issuance costs of convertible senior notes		—			(1,233	)
Other financing activities		(460	)		(513	)
Net cash provided by financing activities		31,250			191,916
Effect of exchange rate changes on cash, cash equivalents and restricted cash		3,010			342
Net increase in cash, cash equivalents and restricted cash		18,050			187,812
Cash, cash equivalents and restricted cash at beginning of year		223,497			35,685
Cash, cash equivalents and restricted cash at end of period	$	241,547		$	223,497
Supplemental disclosures of cash flow:
Interest paid	$	731		$	664
Income taxes paid	$	12,666		$	7,686
Supplemental disclosure of non-cash investing and financing activities:
Issuance of common stock in connection with acquisitions	$	3,504		$	7,637
Promissory notes issued and deferred payment obligations for acquisitions	$	1,266		$	497
Finance leases	$	118		$	632
Property and equipment in accounts payable and other current liabilities	$	1,671		$	259

The following table provides a reconciliation of Non-GAAP net income and Non-GAAP net income per share – diluted, to net income (loss) and net income (loss) per share – diluted, the most comparable GAAP financial measures:

	(Unaudited)
	Three Months Ended December 31,						Twelve Months Ended December 31,
(in thousands, except per share amounts)	2020			2019			2020			2019
Net income (loss)	$	2,198		$	(1,502	)	$	(10,500	)	$	(7,542	)
Stock-based compensation expense		7,416			2,944			21,355			8,528
Amortization of intangible assets		4,986			3,769			16,376			14,442
Special adjustments⁽¹⁾		—			7			(372	)		2,038
Income tax effect of non-GAAP adjustments		(451	)		34			(1,380	)		(1,069	)
Non-GAAP net income	$	14,149		$	5,252		$	25,479		$	16,397

Net income (loss) per share - diluted	$	0.03		$	(0.02	)	$	(0.14	)	$	(0.11	)
Non-GAAP net income per share - diluted	$	0.17		$	0.07		$	0.31		$	0.21

GAAP diluted shares outstanding:		78,484			72,227			73,241			71,544
Non-GAAP diluted shares outstanding:		83,000			78,000			83,000			78,000

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

	(Unaudited)
	Three Months Ended December 31,						Twelve Months Ended December 31,
(in thousands)	2020			2019			2020			2019
Net income (loss)	$	2,198		$	(1,502	)	$	(10,500	)	$	(7,542	)
Income tax expense		2,182			3,715			12,532			10,930
Stock-based compensation expense		7,416			2,944			21,355			8,528
Interest expense		3,008			2,785			11,598			6,371
Depreciation and amortization		6,890			5,686			23,806			21,522
Special adjustments, interest income and other⁽¹⁾		(2	)		(893	)		(1,503	)		(260	)
Adjusted EBITDA	$	21,692		$	12,735		$	57,288		$	39,549

The following table provides a reconciliation of Free Cash Flow to net cash provided by operating activities, the most comparable GAAP financial measure:

Starting with the 2021 guidance presented in this press release (including the reconciliations provided below) and going forward, our definition of Non-GAAP net income now excludes non-cash interest expense and assumes a non-GAAP income tax rate, which approximates our tax rate excluding discrete items and other specific events that can fluctuate from period to period. There are no other changes from our prior definition. We’ve made these changes to reflect how management reviews results of the business and to be more consistent with our peers.

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

	(Unaudited)
	Three Months Ending March 31, 2021						Year Ending December 31, 2021
(in thousands)	Low			High			Low			High
Net loss	$	(5,400	)	$	(4,500	)	$	(44,000	)	$	(38,300	)
Stock-based compensation expense		11,900			11,900			44,500			44,500
Amortization of intangible assets		4,400			4,400			17,800			17,800
Non-cash interest expense		2,800			2,800			11,400			11,400
Special adjustments and other		4,000			5,000			5,000			7,000
Impact of non-GAAP tax rate		(1,400	)		(1,800	)		2,200			400
Non-GAAP net income	$	16,300		$	17,800		$	36,900		$	42,800

For comparability purposes, the following table provides a reconciliation of the Quarterly Non-GAAP net income results for 2020 to GAAP net income (loss) for 2020, reflecting the 2021 definition:

	(Unaudited)
	Three Months Ended
(in thousands)	March 31, 2020			June 30, 2020			Sept 30, 2020			December 31, 2020
Net income (loss)	$	6,030		$	(10,223	)	$	(8,505	)	$	2,198
Stock-based compensation expense		3,171			4,534			6,234			7,416
Amortization of intangible assets		3,840			3,692			3,858			4,986
Non-cash interest expense		2,648			2,689			2,725			2,762
Special adjustments and other		—			578			(950	)		—
Impact of non-GAAP tax rate		(637	)		1,718			1,294			(2,900	)
Non-GAAP net income	$	15,052		$	2,988		$	4,656		$	14,462

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

	(Unaudited)
	Three Months Ending March 31, 2021						Year Ending December 31, 2021
(in thousands)	Low			High			Low			High
Net loss	$	(5,400	)	$	(4,500	)	$	(44,000	)	$	(38,300	)
Income tax expense		4,300			4,400			15,200			15,500
Stock-based compensation expense		11,900			11,900			44,500			44,500
Interest expense		2,900			2,900			12,000			12,000
Depreciation and amortization		6,300			6,300			25,400			25,400
Special adjustments, interest income and other		4,000			5,000			4,900			6,900
Adjusted EBITDA	$	24,000		$	26,000		$	58,000		$	66,000


(in millions)	First Quarter 2021							Full Year 2021
Software Product Revenue	$	118.0		to	$	120.0		$	423.0		to	$	431.0
Total Revenue	$	138.0			$	140.0		$	502.0			$	510.0
Net Loss	$	(5.4	)		$	(4.5	)	$	(44.0	)		$	(38.3	)
Non-GAAP Net Income	$	16.3			$	17.8		$	36.9			$	42.8
Adjusted EBITDA	$	24.0			$	26.0		$	58.0			$	66.0