Exhibit 99.1

Altair Announces Third Quarter 2017 Financial Results

Software Product Revenue Increased 13% Year-over-Year to Record Level

TROY, Mich. – November 30, 2017 – Altair Engineering Inc. (NASDAQ: ALTR) today announced its financial results for the third quarter ended September 30, 2017.

“We delivered a strong performance in the third quarter with software product revenue increasing 13% from a year ago to $63.2 million and total revenue increasing 9% to $84.9 million,” said James Scapa, Founder, Chairman, and CEO. “Equally important, we continue to shift our revenue mix toward software products where we achieve our highest gross margins, ultimately driving higher operating margins for the overall enterprise.

“During the third quarter we expanded our relationships with existing customers and broadened our reach with enhanced and new technology, including technologies from our acquisition of Runtime on September 28, which expands our market opportunity in the dynamic high-performance computing market.

“We reached another milestone for the company with the completion of our initial public offering. By further strengthening our balance sheet and providing additional resources to pursue our growth strategy, we believe we are well positioned to capture share and enhance our leadership in simulation-driven design, while further driving new opportunities in high-performance computing, as well as IoT and analytics. We believe this combination positions us to continue executing on our long-term goal of further scaling our software revenue while leveraging our business model to increase profitability in the years ahead.”

Third Quarter 2017 Financial Highlights

 

    Software product revenue was $63.2 million, an increase of 13% from $55.8 million for the third quarter of 2016.

 

    Total revenue was $84.9 million, an increase of 9% compared to $78.1 million for the third quarter of 2016.

 

    Including the impact of $25.3 million in non-cash stock-based compensation expenses in the third quarter of 2017, GAAP net loss was $29.6 million, compared to GAAP net income of $0.3 million for the third quarter of 2016. GAAP net loss per share was $(0.59), based on 50.6 million basic and diluted weighted average common shares outstanding, compared to $0.01 for the third quarter of 2016, based on 59.3 million diluted weighted average common shares outstanding.

 

    Adjusted EBITDA was $7.0 million, compared to $7.3 million for the third quarter of 2016. Adjusted EBITDA represents net income (loss) adjusted for income tax expense (benefit), 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.

 

1


    Cash flow from operations was an outflow of $(8.7) million, compared to an outflow of $(0.6) million for the third quarter of 2016. For the first nine months of 2017, cash flow from operations was $17.5 million, compared to $21.4 million for the same period in 2016. This change in cash flow for the quarter relates to the recognition of tax expense for income generated outside of the U.S. without a corresponding benefit for the losses in the U.S. resulting from stock compensation charges in the quarter.

 

    Free cash flow, which consists of cash flow from operations less capital expenditures, was $(10.7) million compared to $(1.7) million for the third quarter of 2016. For the first nine months of 2017, free cash flow was $11.1 million, compared to $16.7 million for the first nine months of 2016 with the difference reflecting changes in operating cash flow and $2.0 million in cash used to acquire MODELiiS in the second quarter.

Business Outlook

Based on information available as of today, Altair is issuing forward-looking statements on guidance for the fourth quarter and full year 2017 as indicated below.

 

       Fourth Quarter 2017        Full Year 2017  

Software Product Revenue

     $ 66.5          to      $ 67.5        $ 243.4          to      $ 244.4  

Total Revenue

     $ 86.8           $ 88.4        $ 330.3           $ 331.9  

Adjusted EBITDA*

     $ 7.4           $ 9.0        $ 21.5           $ 23.1  

 

* Adjusted EBITDA includes impact of Runtime acquisition which is expected to reduce Adjusted EBITDA by $1.4 million.

(All figures in millions)

Conference Call Information

 

What: Altair Third Quarter 2017 Financial Results Conference Call

 

When: Thursday, November 30, 2017

 

Time: 5:00 p.m. ET

 

Live Call: (866) 754-5204, domestic

 

     (636) 812-6621, international

 

Replay: (855) 859-2056, passcode 8985778, domestic

 

     (404) 537-3406, passcode 8985778, international

 

Webcast (live & replay): https://ir.Altair.com

 

2


Non-GAAP Financial Measures

This press release contains the following non-GAAP financial measures: Adjusted EBITDA and Free Cash Flow. Altair believes that providing a reconciliation of Adjusted EBITDA guidance to the comparable GAAP measure of Net Income would require unreasonable efforts as the Company cannot reasonably estimate income tax expense in the fourth quarter. Fourth quarter income tax expense will be significantly impacted by the expected valuation allowance and by the year-end results of our global organization. Altair expects fourth quarter stock-based compensation to be approximately $7.6 million and depreciation and amortization to be $2.8 million to $3.0 million.

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.

Management of the Company 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 focused on the development and broad application of simulation technology to synthesize and optimize designs, processes and decisions for improved business performance. With more than 2,000 employees, Altair is headquartered in Troy, Michigan, USA and operates 69 offices throughout 24 countries. Today, Altair serves approximately 5,000 customers across broad industry segments.

 

3


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 financial outlook, market positioning and future investments. 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 prospectus 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

Garo Toomajanian

ICR

248-614-2400 x346

ir@altair.com

Media Relations

Dave Simon

Altair

248-614-2400 ext. 332

pr@altair.com

 

4


Altair Engineering Inc. and subsidiaries

Consolidated balance sheets

 

     September 30,
2017
    December 31,
2016
 
     (unaudited)        

(In thousands)

    

ASSETS

    

CURRENT ASSETS:

    

Cash and cash equivalents

   $ 16,667     $ 16,874  

Accounts receivable - net

     63,530       70,498  

Inventory - net

     1,797       1,227  

Income tax receivable

     6,868       9,069  

Prepaid expenses and other current assets

     10,492       7,435  
  

 

 

   

 

 

 

Total current assets

     99,354       105,103  

Property and equipment - net

     29,892       29,708  

Goodwill

     68,891       36,625  

Other intangible assets - net

     15,379       11,168  

Deferred tax assets

     69,135       62,896  

Other long-term assets

     18,843       5,276  
  

 

 

   

 

 

 

TOTAL ASSETS

   $ 301,494     $ 250,776  
  

 

 

   

 

 

 

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' DEFICIT

    

CURRENT LIABILITIES:

    

Current portion of long-term debt

   $ 10,147     $ 10,435  

Accounts payable

     3,987       5,009  

Accrued compensation and benefits

     23,946       22,955  

Other accrued expenses and current liabilities

     35,737       18,945  

Deferred revenue

     117,969       100,661  
  

 

 

   

 

 

 

Total current liabilities

     191,786       158,005  

Long-term debt, net of current portion

     81,939       74,806  

Deferred revenue - non-current

     12,495       13,268  

Stock-based compensation awards

     59,076       22,236  

Other long-term liabilities

     16,402       17,114  
  

 

 

   

 

 

 

TOTAL LIABILITIES

     361,698       285,429  
  

 

 

   

 

 

 

Commitments and contingencies

    

MEZZANINE EQUITY

     2,352       —    

STOCKHOLDERS' DEFICIT:

    

Common stock ($0.0001 par value)

    

Class A common stock, authorized 76,000 shares; issued and outstanding 10,096 and 8,900 as of September 30, 2017 and December 31, 2016, respectively

     1       1  

Class B common stock, authorized 44,000 shares; issued and outstanding 41,204 and 41,204 as of September 30, 2017 and December 31, 2016, respectively

     4       4  

Additional paid-in capital

     49,347       39,688  

Accumulated deficit

     (106,152     (67,092

Accumulated other comprehensive loss

     (5,756     (7,264
  

 

 

   

 

 

 

Total Altair Engineering Inc. stockholders' deficit

     (62,556     (34,663

Noncontrolling interest

     —         10  
  

 

 

   

 

 

 

TOTAL STOCKHOLDERS' DEFICIT

     (62,556     (34,653
  

 

 

   

 

 

 

TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' DEFICIT

   $ 301,494     $ 250,776  
  

 

 

   

 

 

 

 

5


Altair Engineering Inc. and subsidiaries

Consolidated statements of operations

(Unaudited)

 

     Three months ended
September 30,
    Nine months ended
September 30,
 
     2017     2016     2017     2016  

(in thousands, except per share data)

        

Revenue

        

Software

   $ 63,208     $ 55,804     $ 176,905     $ 162,733  

Software related services

     8,574       8,676       25,749       26,466  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total software

     71,782       64,480       202,654       189,199  

Client engineering services

     11,477       12,146       36,071       36,435  

Other

     1,679       1,426       4,741       4,758  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     84,938       78,052       243,466       230,392  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenue

        

Software*

     9,166       8,479       26,799       23,500  

Software related services

     6,457       6,527       20,230       20,365  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total software

     15,623       15,006       47,029       43,865  

Client engineering services

     9,231       9,579       29,200       28,786  

Other

     1,448       1,036       3,745       3,728  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenue

     26,302       25,621       79,974       76,379  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     58,636       52,431       163,492       154,013  

Operating expenses:

        

Research and development*

     27,590       19,401       69,198       53,413  

Sales and marketing*

     22,345       16,961       58,683       49,054  

General and administrative*

     29,175       15,793       66,465       43,675  

Amortization of intangible assets

     1,189       875       3,287       2,352  

Other operating income

     (735     (823     (4,065     (1,952
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     79,564       52,207       193,568       146,542  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating (loss) income

     (20,928     224       (30,076     7,471  

Interest expense

     634       507       1,793       1,754  

Other expense (income), net

     52       148       838       (504
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before taxes

     (21,614     (431     (32,707     6,221  

Income tax expense (benefit)

     8,012       (745     6,353       1,954  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

   $ (29,626   $ 314     $ (39,060   $ 4,267  
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income per share:

        

Net (loss) income per share attributable to common stockholders, basic

   $ (0.59   $ 0.01     $ (0.78   $ 0.09  

Net (loss) income per share attributable to common stockholders, diluted

   $ (0.59   $ 0.01     $ (0.78   $ 0.07  

Weighted average shares outstanding:

        

Weighted average number of shares used in computing net (loss) income per share, basic

     50,606       49,761       50,374       48,521  

Weighted average number of shares used in computing net (loss) income per share, diluted

     50,606       59,326       50,374       58,086  

 

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

 

   

     Three months ended
September 30,
    Nine months ended
September 30,
 
     2017     2016     2017     2016  

Cost of revenue - software

   $ 326     $ 1     $ 342     $ 15  

Research and development

     6,711       1,320       10,495       1,361  

Sales and marketing

     4,045       728       6,160       763  

General and administrative

     14,183       2,826       22,305       2,911  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total stock-based compensation expense

   $ 25,265     $ 4,875     $ 39,302     $ 5,050  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

6


Altair Engineering Inc. and subsidiaries

Consolidated statements of cash flows

(Unaudited)

 

     Nine months ended
September 30,
 

(In thousands)

     2017       2016  

OPERATING ACTIVITIES:

    

Net (loss) income

   $ (39,060   $ 4,267  

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

    

Depreciation and amortization

     7,895       7,300  

Provision for bad debt

     517       354  

Stock-based compensation expense

     39,302       5,050  

Deferred income taxes

     (4,793     (2,170

Other, net

     149       —    

Changes in assets and liabilities:

    

Accounts receivable

     12,016       11,483  

Prepaid expenses and other current assets

     431       (3,243

Other long-term assets

     (11,024     (719

Accounts payable

     (1,583     (871

Accrued compensation and benefits

     (211     736  

Other accrued expenses and current liabilities

     6,122       (6,102

Deferred revenue

     7,694       5,277  
  

 

 

   

 

 

 

Net cash provided by operating activities

     17,455       21,362  

INVESTING ACTIVITIES:

    

Payments for acquisition of businesses

     (15,582     (6,499

Capital expenditures

     (6,367     (4,722

Purchase of noncontrolling interests

     (29     —    

Other investing activities, net

     (100     (61
  

 

 

   

 

 

 

Net cash used in investing activities

     (22,078     (11,282

FINANCING ACTIVITIES:

    

Borrowings under revolving commitment

     86,270       126,203  

Payments on revolving commitment

     (71,676     (117,919

Principal payments on long-term debt

     (8,392     (13,628

Payments of deferred offering costs

     (2,595     —    

Payments for redemption of common stock

     (918     (1,828

Proceeds from issuance of common stock

     476       302  

Principal payments on capital leases

     (31     (10

Payment for return of capital

     —         (724

Proceeds from issuance of debt

     —         2,030  
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     3,134       (5,574

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

     1,301       841  
  

 

 

   

 

 

 

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

     (188     5,347  

Cash, cash equivalents and restricted cash at beginning of year

     17,139       14,013  
  

 

 

   

 

 

 

Cash, cash equivalents and restricted cash at end of period

   $ 16,951     $ 19,360  
  

 

 

   

 

 

 

Supplemental disclosure of cash flow:

    

Interest paid

   $ 1,722     $ 1,547  

Income taxes paid

   $ 4,154     $ 2,103  

Supplemental disclosure of non-cash investing and financing activities:

    

Promissory notes issued and deferred payment obligations for acquisitions

   $ 12,440     $ 4,171  

Issuance of common stock in connection with acquisitions

   $ 8,712     $ —    

Issuance of common stock with put rights

   $ 2,352     $ —    

Deferred offering costs in other long-term assets

   $ 866     $ —    

Property and equipment in accounts payable, other accrued expenses and current liabilities, and other liabilities

   $ 144     $ 1,918  

Notes issued for stock redemptions

   $ —       $ 577  

 

7


Altair Engineering Inc. and subsidiaries

Reconciliation of GAAP to Non-GAAP Financial Measures

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

 

     Three months ended
September 30,
    Nine months ended
September 30,
 
     2017     2016     2017     2016  

Net (loss) income

   $ (29,626   $ 314     $ (39,060   $ 4,267  

Income tax expense (benefit)

     8,012       (745     6,353       1,954  

Stock-based compensation expense

     25,265       4,875       39,302       5,050  

Interest expense

     634       507       1,793       1,754  

Interest income and other

     (53     (93     (2,184     (81

Depreciation and amortization

     2,811       2,453       7,895       7,300  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 7,043     $ 7,311     $ 14,099     $ 20,244  
  

 

 

   

 

 

   

 

 

   

 

 

 

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):

 

     Three months ended
September 30,
    Nine months ended
September 30,
 
     2017     2016     2017     2016  

Net cash provided by operating activities

   $ (8,622   $ (644   $ 17,455     $ 21,362  

Capital expenditures

     (2,032     (53     (6,367     (4,722
  

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flow

   $ (10,654   $ (697   $ 11,088     $ 16,640  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

8

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