Altair Engineering (ALTR) 2 May 242024 Q1 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Altair Engineering, Inc. Q1 2024 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker, Stephen Palmtag, Head of Investor Relations. Please go ahead.

afternoon. Good you of earnings XXXX thank the call attending quarter first ended for and conference Altair's for Welcome, March XX. Altair's Palmtag, Stephen Head Relations. Investor I'm of And Founder, Jim Matt with call Chief and Brown, CEO; and me Scapa, Officer. Financial the on Chairman are investor.altair.com. we and the our market performance which release with quarter for can year Investor XXXX, the of second be a details After issued at press on our Relations regarding section website today, first full accessed closed guidance XXXX quarter and call and of available website this This recorded, on the following of be being replay will is a conclusion IR our call. section the

During should forward-looking or related to under not differ any of to our results be that earlier today's to as of reflect to update we a our considered laws. make securities any in only be are statements considered issued our subsequent These the representative may press of today. call, disclaim summarized we as date. forward-looking could We risks federal our views variety will subject release obligation These and uncertainties that business materially any These expectations. today statements and statements statements views risks that of are actual from cause outlook.

we with important filed discussion the material further and contained SEC filed those of time. results, well may For have a please to or time reports to could risks as factors other and the affect other that refer actual file quarterly that documents our in annual from as our

is our release. the certain non-GAAP reconciliation refer GAAP non-GAAP in to of financial press we measures A call, of will During measures. to course today's included

offer his that, Jim? may call for we that we to over the our advised incremental to to greater usual the prepared that With Jim our future. our remarks. provide or detail responses continue into be Finally, at to may or times are our me Please in results. to metrics of turn or let this additional insight those provide business presentation questions, dynamics not comments may in quarterly the prepared

everyone, XXXX, positive exceeding end the QX million, $XXX.X continue In quarterly and welcome, the range you, of of revenue strength to on to call. continued first our its for and of revenue software quarter. EBITDA quarter million $XX.X the Thank $XXX.X million, Stephen, our portfolio adjusted computational high our first of momentum, the with of total the and intelligence guidance results of all software product customers. Altair's bringing demonstrate Altair

in our of of in global grew to portfolio of to revenue currency in industry compared geographies grow first technologies. continues for across quarter its Software software revenue X.X% XX.X% QX increased compared XX.X% XX.X% quarter for year-over-year the QX payment the Monarch, This by or our a XX% $XX.X in multinational signed vertical, by and services the was services X.X% data Altair card to year-on-year self-service commitments, of specializing compared in by RapidMiner expansion to to solution million Altair first and grew a success multiple Altair X-figure driven customer XX.X% quarter a EBITDA XXXX. insurance first XXXX banking, a broad over as a XXXX. preparation representing expansion platform. on total of Adjusted within In constant verticals revenue percentage the basis, basis financial revenue a year-over-year on XXXX. to

SimSolid, driven global by solutions. The that industry-leading our Altair commitment and provides for potential which deal and expansion distributed was a new subsea to a signed Altair energy sector, environments. mainframe in the will utilizing structural SAS a the vertical. focus our committed SLC, major In firm our and evidencing on simulation surface meaningful customer accounting European compiler, energy Additionally, both with language we

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complex in XXXX surrounding available sectors. eVTOL network and needs energy, bridges at and in FlightStream demands moving and of Altair iterations data air well specialized, NASA is platform computational exceptionally large to This tools centers with the user will Flight, it these software and more powerful award mobility honored invaluable software United It for in footprint applications. the and robust of between marine, and and automotive compressible of sector we is industries, where low early-stage solvers approved computational Altair's effects in that Now for science our aerodynamic of efficient into including flow to be computational U.S. and HyperWorks industries them Air recent machinery solver, aerospace has the a Altair is is engineers with Year and and coupled in hardware the applications. the the were of further and unique is customers Google and fast organization Last footprint, Army. to presence interface global and the is demonstrates user-friendly complex research meet to in for handling modern an the from with Ames surface FlightStream, into simulation fidelity, aerospace, Research North integration porticity used we enhances growing the a computational gap and diversity, design method growth design acquisition be capture a of supersonic aerodynamic It's in also via able inclusion. a come the solver Langley best-in-class fluid modern solutions. simulations make Force high science. win FlightStream to with an offering of CFD and a solver America flow leader increasingly will dynamic including Award our and first. Yesterday, the and as defense urban people as that a maker subsonic leverages rapid portfolio turbo to Altair Cloud provide accelerated States equity techniques The enhance and and fast tool announced defense It yet flows, capability. the a studies a by a always our Partner Units. aerospace strengths years month, integrated the through capable of the designers. defense phenomenon. rocket panel speeds FlightStream and aerodynamic in-depth intelligence FlightStream streamlined that

events global Our XX Altair's More spoken represented executives make hosting Board growth, ] up bias by employees. Technology and empower XX% numbers personal to of than QX and the Black are [ U.S. combating Network, standout speak than of was Women and averages. in more further year, are over XX languages than Resource employee And workforce educate on beginning focusing and higher our X,XXX nationalities XX themselves. Directors, each both of all for than groups, XXXX. Altair resource more. Employee a and more strong Women employees within Altair X significantly

excited take a well growth. that positioned and optimistic gradually advantage are We remain improving future of environment is to macro about our Altair

our on will our to I call turn financial to details and Now second the over full XXXX. Matt the quarter year more Matt? guidance and performance provide for

to Thank call, you, and you joining on Jim. Hello everyone us. for thank the

opportunity in-person Investor want financial midterm we market targets. I our updates, into discuss everyone we held provided Before March quarter, in updated Santa the the where meaningful results on Day exciting for I XX, to get financial an and remind product showcased Clara

able Go weren't can If the watch it you you investorday.altair.com. to out. replay at check attend,

our for into financial the quarter. Jumping results Okay.

solve strong be and with of record $XXX.X are continues proud total $XXX.X exceeding million, record business a start year. in with design, adjusted end that engineering those our We addressing driving focus intelligence to software challenges. very products pleased revenue to with the continued guidance execute first of the range. revenue challenges. critical high increasingly Altair's We've force to million, million EBITDA our of are $XX.X I'm being all customers' And quarter to Computational high of leveraged most our and high

changes our by reported of in currency. expenses in will transacted remarks, currency throughout and may reference my in As than in our reported the and exchange U.S. constant significantly therefore, To dollar, rates. the foreign be other I rates currencies a some impacted and aid results growth results, review our reminder, are both of revenues

quarter, the million, $XXX.X X.X% first constant total in X.X% and billings currency. in For a calculated decrease decrease of were a reported currency year-over-year of

in year-over-year revenue million, increase compared XXX quarter, QX X.X% in of are our and in Non-GAAP with was to X.X% software strength year QX, million, services the in retention rates X.X% in revenue, as prior where compensation, software due year-over-year to reported currency XXXX. QX was margin The well currency of year-over-year The defense basis in verticals. in business currency increase in to in our expectations non-GAAP engineering a increase was in and compared XX.X% particular and expected. to in margins and gross as which new increase and XXXX. revenue excludes QX was and compared Total $XXX.X revenue sooner of revenue combination quarter QX some closing in originally revenue increase to XX.X% due gross first high in other of year-over-year X.X% and Software constant automotive other reported includes software software stock-based The gross increase a currency was deals by driven a in margin, margins increase was expansion than to relative than constant engineering and services an which revenue aerospace $XXX.X the points. shift the towards mix an stand-alone higher margins. partially

expectations total the engineering long revenue as assets, $XX.X run, to amortization compared XX.X% an as in stock-based to driven total the increase was expenses, prior in to period. EBITDA its revenue, a to year increase growth disciplined in of million excludes were anticipate year. Adjusted ago our software revenue and Software This operating XX.X% compared compared revenue gradual as prior In or to the million with that a $XX.X million of the to revenue was in in compared in as the approach and was of continued we prior QX other revenue. QX XX.X% XX.X% the year, spending. in shift well compensation services Non-GAAP $XX.X software relative million combined the quarter mix of or year $XX.X intangible X.X%. increase surpasses by which towards

flow million to was our cash an Turning in in year-end. $XX.X year flow. in million million to prior year of from increase with free the ability XX.X% and We Free QX cash significant sheet. demonstrates generate quarter ago $XXX.X and period, cash our the ended approximately compared to from balance cash increase $XX.X and $XXX.X million of an million $XX.X equivalents, the

with and June premium of the will a the cash which on our us XXXX, in balance leaving just settle of cash healthy convertible $XXX X, million a with balance for notes $XX under approximately As principal in shares, we remainder XXXX the reminder, mature million.

growth our to and currency reported we've turn the year reconciliations both rates in guidance provided constant provided To expectations, in clarity Let's earnings full to guidance detailed We've including GAAP our our comparable press for impacts in FX XXXX. QX amounts. tables. to guidance currency release, tables and provide on

of we X.X% currency. $XXX to reported X.X% range million year-over-year in to in to X.X% X.X% increase currency million, QX, in of expect a For software the constant revenue $XXX and

in As which an some expectations. offsetting mentioned, closed QX deals QX earlier, has I on impact

are our software revenue. For full outlook currency maintaining we for in XXXX, previous year constant

in currency X.X% changes outlook over adjusting to year range to currency. in full increase constant to in our a past to due the in quarter, XX.X% foreign However, reported and currency rates million are to X.X% a exchange $XXX we reported million, X.X% $XXX of of currency year-over-year

range to a in and in million We X.X% X.X% total X.X% currency. increase of X.X% reported which revenue expect the QX million, constant engineering services other revenue, to to $XXX includes and $XXX year-over-year of currency in

full currency revenue. for our also previous year total maintaining XXXX, For outlook we are in constant

due range increase the foreign However, full are currency constant to we to and rates year our of to outlook currency currency. X.X% X.X% quarter, year-over-year $XXX adjusting million past of to in in over X.X% exchange again, changes reported in in a million, currency reported X.X% a to $XXX

expect range compared $XX of For QX or in XXXX. total of to XX.X% revenue $XX.X total QX, we in adjusted to million $XX million or EBITDA XX.X% XX.X% to revenue the million of

year has by rates the flow foreign in adjusted EBITDA been has to for XXXX, range line of revenue EBITDA. adjusted exchange have foreign $XXX year we full million, in therefore, finally, million adjusting $XXX million And million of full cash exchange change XX.X% a total in to of currency our XX.X% range $XXX we total in impacted or with For free also XXXX. therefore, impacted in adjusted outlook which $XXX the full to changes million and XXXX, $XXX.X to year the rates in changes And are of currency expect our revenue or to also compared guidance. the XX.X% been

collection a are cash the fluctuates continue our free which seasonally, over been which XX% and expectations flow has reminder, and patterns past as of sensitive to at with sits approximately pleased billings percentage a adjusted the high EBITDA, to but be several flow we years. cash increasing steadily As

We questions. profitability opportunities for the QX With to the year. that, take the our your happy goals, we'd that be of have half are high and to revenue exceeded us and our remains enthusiasm happy in await Operator? back

Dylan And which Blair. coming Instructions] for from of William moment is question, our one [Operator first Becker

you how nice of had the out are Matt, comments earlier about deals were really I progressing wonder, thinking think called outlook? landscape? you you're and environment. you just of kind But you momentum wondering could kind made forward improving said a how kind some here. to revised start I QX guys if informs seeing that the about some in the bit. Jim, gradually of year business you what Matt, a there color give on additional pulled Jim,

and can add can Dylan, Matt Sure. a I take in. shot then

things We are there things only feeling recognize are X.X%. the and for like us. are improving layoffs economy some other that grew and We

Here continuing lots the and going time was beginning us, year, the we're which and hold to took to the up are to we generate for really some pipeline recent see last lots verticals grow announcement. new get taking But in that -- opportunities. set of

of the Matt, there? have is to but starting really a promising bit future. into little anything you Some very look longer want it sales cycles, them to add

first as forward back year and shaping half happy now to, we're looking sort am of how very is would feel characterize a I of half textbook Yes, to Altair the up. quarter overachieved good the just and almost about the we where I positive, this

So to year. front feel good in and the about continue other of just pleased one pretty putting the we're foot

early, noise. there. kind hearing or the opportunity in of quite to well or or additional helpful. feedback I electronics SimSolid that Jim, you're That's And receptivity seeing the but some early Great. for really opportunities still on of just feedback is Maybe drive early? kind as kind any Okay. maybe starting But to enthusiasm of then, some here? there's know yet competitive still any seeing you're

haven't little actually it's And right just think released. early I a now. we bit

of week first think customers those for the A I thermal. I are to familiar pretty lot X, structures in is the But the customers. be next or going think us. version not that's with it on with interesting

going to knock they're socks start looking and testing. I But to to so have it's going And off. people's think

And be Chase of will Company. our & question next from JPMorgan coming Stephen Tusa

pulled to reconcile be little the this Just was think trying where quarter. anything there the So in trying constructive bit that second comments had that I'm a consensus model, should we into of? It's just we I -- on is kind our quarter to with reconcile aware and the there below of macro.

take can that Sure. Yes, Steve, I one.

So but in early on bit a going as other there's closed things well. couple of a little QX,

currency sort you are play in in the So combination on a the midpoint first factoring you'll in of QX of $X I half. of look largely on when role. QX, or had currency FX of when million about We QX. we impact half, But of first how at expectations slightly so and for does balance, is what in did our ahead the guide line think find QX, we

feel half how looking is up net-net, the the good So shaping half. second forward first and real to about

like is just in your view, normal that seasonality deal flow the happens? And way of the kind

Well, yes.

we seen billings quarters smallest and historically, a QX have being revenue our and So from perspective. QX

expecting that the QX. half that's just as first expect same It's the year were second into as going happy to with yes, within for again, see well, is this acceleration we'll QX. up. where typical. shaping We it's And the we half, how But even be

will Shi Charles question next of from Our Needham & come Company.

you on I recent that want guys your results, when the the this this the I at to quarter strong reported Congrats last who last question continue -- quarter. look see again. good especially in first I most question. in year-on-year to but ask want quarter, largest but to just asked ask growth competitor I

of light now which quarters covers kind looks historically, of is more revenues, XX%-ish just are [ shed usual current result, little covers maybe that a you the a it behavior some bit your than like number, the of on X X that Maybe One ways revenue. there about -- a next ] changed only higher But RPO Because to it's are that. current X months' bookings Your level, in to your ] [ this? RPO is being to , RPO if revenue or like right? your bit roughly guidance XX-K, conservative next the your interpret you your to XX%. XX resettling little

maybe bit something booking So a you're term. shorter little

color. So some which one is it? Please provide

thanks. speak . that. Charles, to can I Yes,

little So of both. bit it's a

also we're pleased amount obviously, with ensuring are those So as we're some go deals longer for the is of that duration our possible, up be being we though signing capacity the means and coverage and contracts as RPO. of on providing we're that built that sales that have which not focusing also their making and even into nonetheless, into efficient may most But front, necessarily RPO commitments a therefore, deals backlog us.

So focus there's RPO, obviously, both on, we're sales and little that team. particularly more growth bit in our something pleased But as of we going that's we're there. the more get with to efficient continuing on a with and

SimSolid this but is to Maybe electronics, analysis, this those attack both launched are design, you -- get thesis [ Jim. like more into level areas, field on looks to field. the to product your EDA Obviously, their Maybe at -- the system the level for this a I mean, for on trying system also follow-up. into you're ] companies get

semiconductor differentiate great. any be electronics design, overall think how you would a and a there's to about the want system design I bit broader of can designs. context light here maybe stuff, your understand in convergence but the of you So And little larger strategy of bit in emerging terms

have on semiconductor by you of other see a are to a where conference, And in day you towards just be the to it's like And market unique actually is much and Good it said. to world very what it more [indiscernible]. is evolving. the what in the systems build There's terms the technology. differentiated, lot as doing resolution way. and you more you you and Sure. of as And There the very, on design it nothing to solutions trying whole meshing we're approximations we're lot becomes side, problem. where the that the more of in chiplets Okay. more in Charles, SimSolid happening a complexity how going absolute of XD get electronics traditional is moves typically change calling design require don't a that at GSA world and as opposed in the

simulation. we think perfect electromagnetics fit multidisciplinary have electronics, the particularly in to So it's going and when a be working get you full we

we're yes, working very excited good to And hard for develop about solutions that. just we're So customers.

be from next Wong question & will our coming of And Ken Oppenheimer Company.

This is guys Ken. have been are a -- [indiscernible] know I thinking overall hiring we about on in I I in the should for you think X. you about tepid have little guess last your the or and investments you on been verticals. vertical how now? hiring year guys guess hiring sales know making in how I channel and marketing?

careful think a that also reorgans we indirect. be. making more the the we where have and to we where verticals. as and of we're think of gain would in to a bring ourselves needs I complete we're clarity mean, certain and of And hires business around lot more I parts I verticals, the course, a with to we're we are more in say lot of potential regionally team, So we think efficiencies up sort And [ into think move of we expertise ] with are sales there's I we the need very higher, carefully trying trying both as having to well. very, But to lot

we hiring. It's as we're careful, with combination, we're And not though hiring people. not think but I whole so that are

go typically insightful that the among peers. market is of guess lot to secondly, -- deals competitive? Or guys in competition response. after, the you deals? for your a be deals those type then you That's there's just I as any more public a tuck-in those of far types smaller are change there very noticing been at as least And heightened activity, M&A your

no. general, In

those of are think probably with acquisitions a competitive it general. But types I been rather in larger competitors they've busy market that more is recently. making

a in really Cambridge think We're of X and the the both the piece obviously know, are We to great announced technology, running. And software. ground time Semantics X excited fantastic out with of Both both the teams. we and them. the seek week now We don't take market about all understand last, I of well just going FlightStream for to and a fantastic are to or products, customers hit the pieces technology. these so of opportunities

but we So focused competitors. differently I it's a bit little those landscape, than mean, are a competitive probably

And Tilton coming be from Joshua next Research. Wolfe our will question of

Great. Okay.

quick ones from Just me. X

related, XQ stronger relative billings the kind The to like it first felt was you just too, billings quarter growth an this what for on is is for but light but on usually easier guys, the one, expectations in quarter. a our to of FX Maybe pretty compare. growth

you and assume some you just you growth given the think billings how what So since And of on would the the of also just that in could you growth maybe a kind then through mentioned early maybe year? of about of of rest I bit call, things. unpack then renewed higher the kind kind context be little

the what's us growth. walk through going on, maybe one billings -- just on So

happy Yes, to, Josh. Yes.

their on calculated So a is numbers is our reported first billings one billings thing ] to keep are calculated ] changing in it revenue. [ plus mind [ if

little there. in a So of you get do bit FX

this is is though, thing, number. change and total in total a deferred revenue other The

by services impacted which year-on-year, is it we So which revenues, was down other expected. and actually

other expect I that year. of and something that everybody the billings where QX we So that's more quarter. that and said, quarters a first going of impact line in on billings or with into sort your for It less seasonal expecting highlighted is That last were the to more touched quarter of was in number. all somewhat shift to out we total did during the -- going was

So expectations. in slightly with really pretty of expectations actually over much revenue, line the

out. that -- really way so And with the we're the happy overall, we quarter turned

Makes sense. follow-up And quick me. a then maybe for just

I last some think point really a call. again, at be year, to the anyone shouldn't on and shocker this

what lackluster. you a kind to into the year. does And a year still demand new you the guys how lackluster? what demand Like XXXX. better? getting you what obviously guys the bit last call compare from perspective environment referred change months environment was it more today? You of out few a Is to there tough it saw last in as Would a year, do Any demand of maybe We're little year? see from it

don't the do improving environment think the environment micro [ ], I a it's know for other demand for if or stronger. we just getting but a macro demand do us. is improvement see I

conservative So we're positive but We're about feeling that. positive.

And our coming from Abernethy be Securities. will next of question Blair Rosenblatt

you just could of wondering now, on more comment or, us coming largest changing customers term duration like? the at what's your all seasoned remind if your it your go their you back I'm to average sort Is let's back just Matt, wondering this you of as environment? looking contract to they're say, RPO. if in

then contract. So in generally that a makes have do duration to longer up lot for frees for we signing that number gotten some makes because in a of speaking, always we it But cases, up or we deals licensing sales signed occasionally multiyear on annually. up are to which But transactions. in longer capacity duration but up annual annually, And other a embedded cases has that either go importantly, in are upfront billing work subscriptions. for it duration have some lease generally sense that's still sense that to sign somewhat RPO customer

end a revenue you up recognition. so And more and smoother predictable with

perspective licensing you're annually. So a because a not transaction multiyear recognizing in other we're from words, revenue upfront still

around little don't we that but a number, specifics So in bit duration. duration disclose of there's

disclose You can XX see in next just we of percentage of months XX-Q. our sort that do

back talked Investor just mid-March, Day to sales you're your about shifting tell of And that? into us Can new verticals. Got just where some it. approach you expanding at with the you then over go-to-market focused at team in the sort

of this And industry life Americas couple the in healthcare side in and somebody electronics shifted and we the defense a ran consumer verticals, on the heavy to aerospace someone science. Well, new who do of brought and added over we Sure. half defense, year, technology. and we

heavy along, industry continuing life the in in just consumer seeing up healthcare, we're and these lot to bring electronics So example, a in and are we science, space. of and for traction

taking aerospace probably also seeing for very, older now, kind strong I a you effect, that activity think and but So us very good there right focus hold. will, it that in if is we're of now. putting and verticals, macro We're is defense, the it's that

think yes, it's well. quite I So working

RBC Hedberg of Markets. Capital our And from be Matthew coming will next question

you Jim, we're continues change think your And haven't wonder progress. you that so? quarter, improve said could really I do opportunity months deal the a curious, I anything if into to seen of more even I'm how mean, seen couple as last Synopsys-Ansys I selling you've deal. there anything. think And you that

there's probably comment the that, Matt. all going. distraction, And that companies general, think, of compete. other are some bit about to I related a uncertain and to that's And mean, I maybe think of little where me do it's think I'm it. customers It's hard for But me really, really sure in I I also advantageous on might for

best that of can So to advantage we the take we're opportunities we just see. that doing

to you're I that And and space about guess the the then other of in are higher hear. call, they're some going in talked growth you on? one great in to the are And that what things these key doing verticals? That's new on initiatives leaders, one federal. X some focused of healthcare there be

that there verticals? with we're just growth very the I we're in things higher you. be to active, Are mean honest doing very,

to just get and all out much we're we more as be customers we're of executive getting with can, trying and we customers, as having So to reception good very, front connect seem very a customers. key from the in

to I remarks. the to back for Jim hand would closing like And now call

joining look you for Altair, the conferences. appreciate we of I as to I in meeting investor and you. thank everyone your travel go forward and many Well, interest and to call

So thanks, everyone.

you call. Thank concludes participating. this conference And for today's

disconnect. now may You