ALTR - Earnings call transcript Q4 2017

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Operator

Good day, ladies and gentlemen, and thank you for your patience.

You’ve joined the Altair Engineering Fourth Quarter and Full-Year 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference may be recorded. to call like host, to now Mr. would turn over the your I Financial Morof, Officer. Howard Chief may you Sir, begin.

Howard Morof

the and release Howard with is can Welcome, market details CEO. regarding attending Relations Altair. quarter is call quarter Jim website fourth Altair’s our which afternoon. And closed on a earnings XXXX. Good being and the replay call Founder, conference today, press for our be thank with me will on Scapa, the performance, we call Officer our Chief After Financial at accessed Morof, the you following be the a website conclusion Investor and on for This call. of full-year section of available issued investor.altair.com. IR I’m today of our fourth and Chairman recorded

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

on our other with risks which factors SEC. refer perspectives, our material For could the those results, and important to final a discussion file in further of is the please actual that contained affect

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

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

James Scapa

thank and call Howard, our you, all, you, joining for Thank today.

year X% us We capped Our of of with an was of important We $X.X million, produced in a increase guidance which upper-end range. EBITDA ago. exceeded fourth $XX.X year total of an our Altair continued quarter from for revenue and our success. adjusted for revenue guidance million, the positions

of product driver above main Our the XX% revenue a our $XX.X compared in to XXXX. grew software quarter and also fourth XX% growth guidance total million, was XX% to range revenue, represent of

was XX% grew also total fourth XX% of quarter which XXXX. the Our business in reflected the billings, quarter in and strengthened in all

are to visibility our XX% with in subscription-based for in and versus customers easy Software XXXX our and model, which of design XXXX. product momentum we’re grew licensing growth the their providing more investing even the revenue us for leverage simulation-driven XX% our customer it to demonstrate deploy success in customers healthy usage. results markets. seeing plus products, year, Together makes quarter with the more an strong same impressive period in revenue the change in deferred for These fourth entering

way Our under available to we them licensing unique a is customers the licensing this to our model system. broad solutions make of powerful to encourages and best-in-class products array try very expose

many as partners Altair ecosystem included. as own Our products well from Partner the are solutions Alliance in called Altair’s

through generally this our the approach friction globally, and this strong XX products. program. added training offer Coupled products into expanded with we support we to XXXX, new During use partner platform our translates of low

our software player the optimization. implementation expansion fourth are quarter by in several of workflows. model-based wins customer for of driven quarter into the aerospace we and We XXXX, revenue broad structural positive notable We the tools for and standard leading have the increased design design, momentum In wins, in fourth significant simulation-driven of electromagnetics. design industry, many had

at the received and additional in XXX significant the was expansion modeling XXXX, large engineers example, Altair primarily design an of in order major software manufacturer, and increase products we magnitude For during growth enabled over quarter. our aerospace for a visualization This trained we during where one the increase and tools of use in order usage technology our electromagnetic placement. by a antenna of fourth

years see expansion customer for to further continue this We opportunities ahead. meaningful of in the

an software leading a and simulation model-based design doubled is This process Europe, simulation. large coupling their example measure and Another fluid in driven analysis, structural subscription. optimization than multiphysics manufacturing manufacturer and by more increase in was computational dynamics electronics in

of adoption and expanded software to promote SMB existing our our our the increase unit indirect growth deliver customer new network to continue by XXXX, IPO, developed within on ahead our organically product products and and penetration nurturing leveraging which Looking the resellers direct our will acquisition, model sales includes space to and market, our organization, focusing base. expanding capabilities strategy during outlined we growing to new we in licensing innovation usage software product and

We ourselves with will continue from learning, to Based positive trends XXXX to consistent we and revenue to focus increase technologies solvers, to opportunities faster our vision. of growth. we on the see related opportunities specific as optimization. across our share, grow and market strongly several see the to and drive position investments market include we electronics our simulation of business intend Internet manufacturing in invest Areas machine to our Things,

products, more recent deploy add resources to and areas our in will R&D portfolio to acquisitions. add resources incremental emerging features We expand product into to existing

growth We and continue our have strategy. of M&A, use part of to will supports which we R&D acquisitions as a organic history growth, our and

relevant two acquired For technologies software Design. example, recently we for exciting Electronic

modeling very performance electromagnetics, in sensors the and SPICE includes to model for system first IoT. simulator circuit EDA, high and used The a

extending is our thermal from printed dynamics cooling simulation The capabilities to second computational to electronic boards. feature circuit solutions solve fluid full components

the financial over these new near-term acquired the talent from for and While opportunities is acquisitions important material, impact we create the not technology us long-term.

in expansion almost customers XX% in accelerating increase versus more aggressively number see. by our including existing coverage XXXX, and opportunities On hiring XXXX, promoting new XXXX In growing market capacity to customers. existing of sales adding an sales license the development capitalize our software organization expand we we front, in we products on to and product saw business the success are with

direct better adding to managers, more focus and for as resources our resellers. channel support provide marketing managers as well some sales more account and We’re

software believe We’re and time gross confident scale these investments our will XXXX, impact with about will and summary, our had outlook. positively mix growth we and optimistic over From of able quarter be increase revenue. scalable our will shift we profile operating to meaningful strong business fourth are long-term further and expect profitability targets. our time. margins our expand software consistent In perspective, over We model leverage Altair’s growing mix towards deliver revenue continued a a

billings increasing reflects our value Our billings that technology. realizing through in particular, are and customers growth software the in

As reach, our further we to as we’re record track our portfolio markets continue and penetrate we multibillion we enhance address. market can our continue of invest in the expand product optimistic broadening and success we dollar

call will Howard I quarter our our on the turn Now details during XXXX. fourth financial to for of the Howard? performance over and outlook for XXXX

Howard Morof

Jim. our total product quarter both software ranges. had above guidance with Thanks, a fourth revenue revenue and We strong

and million, and the compares quarter, year total Software million our a X% quarter year XXXX. fourth EBITDA XX% is $XX.X increase guidance a an Adjusted of ago. product was of which within from of $XX.X for ago to growth million, revenue the representing was million revenue was $XX.X from $X.X

Software in the product from XX% same XXXX revenue QX XX% quarter of year. to grew total revenue last in

XX% which to QX revenue, grew year. last segment of compared client services to software-related from and Software revenue total includes XXXX, products was engineering as million. in software services XX% $XX.X of Revenue

indicator $XX.X decrease in revenue solid the lighting year of Other with as ahead our expectations. slightly fourth a increased our for to business. a As innovation or from toggled expected, trends growth ago. million quarter $X.X that solutions was viewed be Billings our this of a can sales XX% million LED in was activities leading

believe valuable growth primarily primarily from performance billings a quarter, prior billings were quarter-to-quarter in renewals, metric supported the from are and software our $XX.X basis. to which also all from change which further recent ago, growth fluctuate believe adoption, a a year customers million, of of software longer-term deferred by related new is on In Runtime reflecting basis, for As customer year to This revenue a revenue such, billings calculated was we it’s deferred adding can XX% and momentum. continued evaluating by strong fourth calculated calculated existing were is at XX% period. increased revenue evaluate acquisition. driven by we to on revenue, deferred Because important our ago increase in a the an billings our and

to chain ago, to year was costs XX.X% our on provided ago, the continued will XX.X% was in XX% was relative I software full-year increase rates quarter XX.X%, GAAP margin software software gross increase largely points of compensation metrics reconciliation the earlier gross a X.X% from to Non-GAAP product to been calculated are P&L. XX.X%, basis. the improved non-GAAP the to of supply in release higher an ago, in we momentum. of margin year resulting percentage to the X margin an revenue. some million, discussing our efficiencies an of margin issued billings Non-GAAP and income gross due higher largely from XX.X%, product sales a of strong to growth a earnings were fourth a $XXX increase gross ago. toggled statement a be like turn would evidence from of A billing was CES due year has year non-GAAP to to For primarily a a our Innovation from customers. of today. which measures of year ago, mix compared providing I compared XX.X%, rest XXXX, of products.

likely before, to margins on As total quarter-to-quarter gross we have basis. are a said vary

fourth to stock-based comes to part expense the ago compensation accelerated the amortization support sales to The primarily scale $X.XX compared million The and expenses basis, were of expenses net income, deferred General long-term by in stock-based quarter, $XX expense of investments operating of net of from excluding incentive from planned million a from year adjusted GAAP due as tax compared ago. including Non-GAAP per increase The costs, to XX.X% increase adjusted accounting for the plans, greater. million growing at expense of to related a million EBITDA was to for employment $X software to ago. revenue million For was lower Operating a acquisitions, year $X from technology-related diluted in This to of share non-qualified the well which as million, assets, $X.XX liability the portion quarter, administrative decrease compared intangible With well a a income as $X.X or even leverage equity EBITDA tax to of Adjusted to ongoing assets $X.X intangible compensation primarily is as compared $X margin million million, continue conversion our is increases expenses, leverage assets we to X.X% and EBITDA growth. options stock valuation year continuing deductions total to on Adjusted to The year EBITDA quarter due was related of that in exercise $XX.X million R&D million, was to impact to earlier, acquisition was with to $XX.X operating a of a primarily income invest the tax a headcount the in target a ago a income. of anticipated fourth indicated from excluding and facilities $XX.X $X.X compared long-term inherent for of and growth. increase to model, year accounting decline year compensation adjusted revenue due revenue and margin expenses the loss was was $XX.X business impact amortization per $XX.X revenue or increasing increase $X.X conjunction income in XX% as with activities. in our in our in in leverage our capacity operating ago included primarily and tax establishment million, share, year IPO. million of expense ago. income year tax allowance a On EBITDA stock-based $XX.X of compared investments ago. due quarter million, a business, ago. equity million, as and we or and ago. $XX.X we growth. net from million larger diluted a a related the margin U.S. quarter in as the investments quarter to year driven associated operating be the targeted

basis, the range. In revenue the liabilities as to of addition, and also million a full-year was recently assets $XX.X we Act. net had increase On enacted million, part Tax tax of a above guidance due remeasurement $XXX.X deferred our total

for increase was ago. million from year Software of product revenue $XXX.X the an X% year, a

product shares was in million was based on impact meaningful to XX.X% common outstanding. continues $XX.X Non-GAAP software consistent impacts, prior average software to not on XXXX to common for with the the the X.X%, X.X% average compared an diluted EBITDA license in reflecting $XX.X Software XXXX recurring weighted for $XX.X was operations, upper-end to products. income the were Adjusted revenue at million from diluted our net grew guidance support quarter percentage to almost XX% million given both income planned revenue, ago, year range, of diversity that based XXXX. full-year especially a year investments of X our for million, $X.XX the for of XX.X% in compared XXXX. XXXX. per footprint Non-GAAP to XXXX, EBITDA Currency Adjusted at growth $XX.X share fourth and year our margin year. geographic points net our million weighted strong revenue, the was million and shares outstanding, the compared in increase of Currency the $XX.X fluctuations is in longer-term of to revenue recurring XXXX our for software our of rate be $XX.X results global however, total is of can objectives. that percentage and $X.XX, compared

in increase offering, the benefit Turning million ended public includes million balance and and previously. the end current the year cash cash long-term in to mentioned equivalents. offset million the sheet. We with $XX.X $XX.X an of net deferred a from ago, of I of proceeds fourth retirement year quarter, the $XXX.X revenue This XX% million debt. Total our our of by at $XXX.X as in initial from was

We’re very though growth billings I fourth due quarter-to-quarter reflects the revenue pleased changes in that again business resulting quarter out strong can strong to in with our activity vary calculated timing this and factors. our deferred growth will that in point

meaningful our always directionally long-term. a indicator do changes in may in revenue deferred perspective, the not a from it While relevant is we believe be of business underlying short-term the momentum over

inflow the for compared million, flow cash an fourth flow was Cash of of operations outflow statement. $XX,XXX Looking QX from at quarter in $X.X our to XXXX. an

of of expenditures, flow cash For million from $XX.X outflow less the flow million was Free fourth an from compared for an quarter $X.X from cash to capital for $XX.X quarter, of million, XXXX. improvement XXXX. operations year, outflow in flow, cash was an million of which operations, the $X.X consists fourth

costs region. of MODELiiS acquisition was quarter, where compared For cost APAC included. cash million, statement In the previously year, free was separates out the CapEx in that relocate Also note cash to $XX.X $X.X flow fourth the flow million year-end of XXXX. our cash it elevated was by our offices one in CapEx, to our

outlook we in our expect to XXXX, for momentum continue. positive to revenue billings Turning our

and increase by We expect software to product total digits. low revenue double both revenue

EBITDA to over We’re gross as shift particularly total as this revenue time. revenue revenue a and enthusiastic our growth scale margins adjusted strong profitability accelerating product us perspective, this year. as software and mix expand we momentum continued growth, growing deliver expect will From towards positions software well

we sales growth investments order As to marketing capitalize increase the market extend Jim significant product as see XXXX in further opportunities in well our portfolio coverage mentioned, market. on to we and in as will R&D, the and our in

deliver targets. us consistent over with meaningful impact confident, and are the leverage operating established We will positively these our business to long-term our position investments

plans IPO. company we flow compliance status, required XXXX, public originally If does longer to the ASC we a incur XXXX, defined Revenue in be our XXX to exceeds longer as If as share will no adoption as new qualify to Act, the XXX. we becoming than earlier transition Recognition accounting appreciation accelerated one-time EGC we Sarbanes-Oxley Standard accelerate price due related standards, We June an no addition, to as expenses Jobs $XXX our growth since large XX, In the as our EGC of on an for filer it Section including would qualify expect to earlier EGC. we anticipated. and today, lose may or million known by our emerging

invest in cash free in increases As several such, in we G&A are to drive able expect a we to now continue incur to meaningful of expense as to million filer. accelerated and additional where in adjusted Even capacity, sales EBITDA XXXX dollars compliant and flow. large R&D a heavily become period, we

preliminary expect tax updated tax approximately estimates XX% on as we estimate XXXX. recent evaluations, effective the of will our of This based impact progresses to the from Finally, our changes. analysis ongoing law rate XX% for initial in an be

$XXX full-year from growth XXXX, product expect million, to we revenue For representing the to XXXX. million software between be of $XXX XX% XX% and

We We to growth $XX million, expect to between and net $XXX to representing of XX% million be be X% anticipate total million GAAP from revenue XXXX. between million. $XXX income and $XX

We million XXXX. million, of in EBITDA and $XX over a between notable adjusted an adjusted $XX are EBITDA margin anticipating representing improvement

and be non-GAAP $XX to million. We expect net million income between $XX

weighted average expect We share diluted million. to approximately $XX.X count be fully

flow million $XX year. the and for be free between to $XX million expect We cash

revenue growth quarter of first from to quarter For million, the XX% be we software $XX of first million XXXX. the XX% XXXX, to and between of expect product $XX.X representing

break-even first between We XX% $XX.X adjusted $X.X $X.X and We and to million, of million. anticipate expect of and from an million representing XX% between be income We EBITDA total GAAP the million XXXX. quarter to between $X.X anticipate revenue $XX.X growth to be million. net of

$X.X income expect $X.X between to million non-GAAP million. net and be We

optimistic ability count average continued leverage to share in momentum enthusiastic we’re stronger operating revenue about we’re our long-term. growth. ability We and growth XXXX, the our the and increased our expect same based drive about million. to market be ongoing $XX.X to over weighted In on our faster, approximately summary, improving and investments profitability fully diluted time, At drive

that growing continue we to questions? open call we significant the room can to believe and XXXX beyond. also markets we have now and the up We operator, that, larger in penetrating With serve

Operator

first of sir. line Richard the Canaccord. from of Instructions] question [Operator Davis Our Yes, comes

question please. Your

Richard Davis

much. very thanks Hey, question. Quick

been would expect So but a it, companies doing for share of hard kind and one, investors. of Thank like the that. reasonable I is probably much. Exxon very you or whatever us maybe from guess. I guys from of kind of of, the To – sometimes from kind But chipping – get to when that you’re have coming growth MSC even Greenfield? you like acquired away a extent there’s that stuff question what That’s replacements it at is start versus

James Scapa

Thanks, Richard. Jim is This Scapa.

think, actually about this growth mix. talked think, from the coming is I I conversion. I some is is coming really growing overall generally a that growing well. a the So before, bit fact, The in we’ve very is, market faster, faster bit Altair think, But from growth and

So This investing for is simulation. just good there’s actually coming growth simulation more all companies of the really in growth many Greenfield hot of are us. electronics, happening Greenfield especially a electromagnetic deal with sort because of

some competitors and now. of doing because And We’re model-based right some design. against of seeing particularly growth we’re simulation-driven design solver technology displacements

So I if I’m hopefully that but your don’t know, does. question, answering

Richard Davis

a [Multiple I fair but XX.X, exact XX.X, percentages that’s just Speakers] want the

James Scapa

Sorry.

Richard Davis

it. Thanks appreciate anyway, I

James Scapa

Richard. Thanks,

Operator

you. Thank

Sterling from comes Our the JPMorgan. of Auty next of question line

is open. line Your

Sterling Auty

Yes, thanks, guys.

guidance like in new looks So investment of for rate, in XXXX for calling the et when is cetera. OpEx $XX what expecting, tax new million previously factor the about we’re we relative to incremental it

us investment how that about go to to of terms increased could is right is and some your idea magnitude marketing? of maybe And of into investment. of want R&D you if much to the sales order confirm, versus that going the Just give the think in

James Scapa

and Go add. Howard ahead, you want wherever to, I go ahead can

Howard Morof

in can on well Sterling, side in R&D as of of And sales of the side and – of sure, hiring into sales the in off, say, to going Thank as talking certainly year. last chunk will, pursuit the think year you. is about as into if I investment. order this finishing we’re the that’s order aggressive drive side that well we Howard. incremental we’re, into Yes, growth a we and fair that into you approximately would you part, because this were as magnitude

So, to. you Jim, if want

James Scapa

in I point, you than think, and Sterling, we’re be We there’s sales – at if the pretty on seeing side, it’s some this R&D with a good of will, market. the the actually marketing more side but response, to both. honest you

really year if working sort of up. – and finding so this able we’re and at some last for you aggressive really that been end guys we’re hire far We’ve the We’re of been it we’ve us, will. stepping to year, and seeing good

bit. we’re accelerating that a probably So

some We’re there on also after we’ve indirect – around doing some focus some well, as and little marketing more put we restructuring around how that resources our a more indirect that as go added and well.

of expecting. it think, heavily on were – than there’s it’s both, side I So more what business we but the little some probably a

Sterling Auty

with investment, And Richard’s perhaps of solutions looking to are you This the thought how of coming take it, product is the it just from market then play just traction increased than better? investment just that the particular increased of again, of off it investment? while is, is more to total portfolio, question. underlying advantage the marketing, it and versus your you much gaining do hey, requires advantage it take have little originally have how at a increase the investments made so maybe We much may a of bit of

James Scapa

We’re that. feeling traction, we actually – really seeing and about of a lot so we’re great

so of sun it’s is bit little making while a hay shining. And the

jump recognizing we’re we’re we it on and should that that’s that so a bit doing. what And

Sterling Auty

Thank Got it. you.

James Scapa

Sure. Thank you.

Operator

you. Thank

Bhavan of William Suri next from Blair. comes of Our line question the

is Your open. line

Bhavan Suri

even Dynamics congrats. bit on look to I touch have solid, I you you billings if know because But little basically that compete guys market seen in Hey, sort Computational job seems a sort guys, at of there, commercialize other either guess, of I just and just was to so environment want of at that through universities it. really, for hard. sort really space there. it in any look sense touched Richard starting of, a others nice space, first, Fluid who newcomers number sort of The the you and of competitive just that’s

what terms and there in Just see competition if wondering it’s you of changed?

James Scapa

not made wins, with be so we aware some – we’ve a that I’ll you. before. general we’ve that solutions honest space, into own to of coming I’m especially we’re interesting I We been of hard on seeing than competition exciting the new progress on And very working product. the solution our lot last, in for purpose and any starting see or don’t know, more quarter safety were

see We seen really traction a we joining Germany the interest also, I key basically that, strong think, that But on in we’re revenues you XXXX. we and and in as getting we have solver startup many investment interesting a see a meaningful of mature out of came that we’re that. from hired a probably made to a to very this in guy be will because around side, our many, Exxon But the not beginning starting pretty might model and lot he’s team some customers.

start We’re lot and around seeing happening. things that of going to a good pilots

company exciting. there’s there’s I’m GPU-based are me in both seeing have about. we two players. not tell that Germany If new aware, little again, codes saying something far super nothing you’re as want you those as that that that are out codes. I’m any maybe to So of And But

fast. One used So they for actually lubrication. is are blazingly

performance most example, traditional don’t problem. of to codes the boxes, where gear in So have solve for that just the

body, code around competes lot So and external some seeing traction is code of for car we’re that. fluid with around Exxon And others an in for the aerodynamics a example. fact, flow other a for that,

Bhavan Suri

sales investment the primarily I offline. really that planning to And add had can now cool. a increased productivity, thinking of was about this certain investment. no then year talk just then couple then [ph] and about sort of we’re that automotive of you’re to investing trying a heard number through year No, is last and German just but things, Kanty you We heads that Yes. in

you is year ones then your existing the do of sales So what two of exit quick at enterprise How terms for me. mid-market the sales? for in on tracking headcount sort side? heads, and you both And productivity of number think

James Scapa

to I don’t the I when a were is number ago, of months on ago, It’s starting it’s eight we’re grown to know, don’t months and an from where know nine basis actually months slowing I XX percentage basis going heads even considerably be. even not ago, talk, and what absolute you maybe or actually down. longer

So a these ramp. for think we – it that absorb grow guys I lot this capacity, time can we takes year to can and

the seeing to to much market. got And But sales in to little so, more staying from were you us that a relatively the an the get think average the more what of productivity guys we about for allows the model. we’re before up on seeing same just basis, really capacity

Bhavan Suri

it. I the as I it. nice on Thank you, job guys. number. billings Congrats. said, appreciate it. helpful. That’s Got Got And

James Scapa

Thank you.

Operator

Thank you.

the Our Amladi of next question comes line of Nandan Deutsche from Bank.

please. question Your

Nandan Amladi

my question. Thanks Hi, taking afternoon. good for

you’ve applications the is then of the your has gross gone that what And made difference? the public, platform. you Jim, you’re of profile own? – third-party third-party So, mention apps since on side, any of that there Can trajectory been you if versus discuss plugging new margin financial your into

James Scapa

So I it gone really up since long. don’t been that probably we’ve stepped think it’s hasn’t

them good and bringing job. there’s successful. as join really and other this I try we do a We that that and think, process efficient lot team making do that interest just We up really partnership. have through them vetting on have of make want companies, Many Alliance. it basically a I think don’t And around from a very And third-party to Partner of actually. a great applications

store to. second second the necessarily partners really question? What partnering the catch drive On and side, but try of whatever, part have they that didn’t I don’t for we app was or they success an those your question.

Nandan Amladi

get gross to there’s for [Multiple a sense – share margins, obviously the trying just revenue the Speakers]. was have margin profile I because you

James Scapa

the third-party stuff? on Oh,

Nandan Amladi

Yes.

James Scapa

talk Yes, We don’t just frankly release that. that. speaking, we really about don’t

Sorry.

Nandan Amladi

Thank you. right. All

Operator

Thank you.

is line comes of from Our Berenberg next line Your open. Gal the question of Munda

Gal Munda

guys, I have thanks Hi, a taking for few. just questions. my

you just the check technical – the impact, cost the the year Howard, EGC just in guidance? adjusted yet First, included for excluded not purposes for on that’s the can for the from that’s quickly EBITDA

Howard Morof

is answer yes. The

We have excluded this we EGC we cost, think that the acceleration year. will outside of those costs incremental incur that

Gal Munda

the And seeing understand market, G&A significantly. have you sales ramping G&A expectation the I Is of mean, you the up comment, relevant level how of been can of right you perspective? one kind then and on level? maybe G&A a that? run how of now, that guys you in to investment are the about is marketing, the confident I just the and because There post IPO, following are and maybe R&D we think might bit two-year to actually And the stepping and seeing how kind it rate down where wider

Howard Morof

the categories. laid headcount a due I there’s a included it’s can obviously G&A which you increases So that way across inflation out fair pretty doesn’t think, there. in Gal, some cost there, look is mean to it, some But pretty at that increases perspective. the run from will minor it’s the of And that that, void fully rate and and various

G&A significant expecting profile. cost in not we’re or real the material any change shift So

Gal Munda

perfect. Okay, the basis… In absolute

James Scapa

that… that think to can if I add

Howard Morof

as leverage have we We go forward.

James Scapa

EGC improvement in actually the little the as total. of of something There’s G&A But are really that percent a incremental… bit a costs

Howard Morof

yes… Incremental,

James Scapa

of team. on …because couldn’t that with handle accelerated schedule we really our sort existing we’re a very

we will – the better we general, in on recognize leap big and basically in it’s – because that and there. it is it’s G&A have to support a to But So there side. dive we

Gal Munda

deals stage. the similar I see a be thinking of potentially a if the just bit on more are more fire to brought we should Okay, a on also where expect in for perfect. the the power the stage, So deals I M&A of willingness end it the M&A and or this for – customers we we ones? customers, touch bit technology could kind And at at maybe about, think, And transformative future? a

James Scapa

customers in lot before the which the us. workload new new scheduling shortly market, computing deal and in and the us was space, EDA in the did high-performance management for actually, the IPO a So and space that interesting for of Runtime all September market added a new of very first we really

– really us our this of SPICE with track. the to in mix, terms dissolved EDA and thermal on It’s a lot simulator code that and around For But circuit we more TES, with performance need boards. that SPICE technology a lot it’s We are, made of brings more companies sense mix. of not really us, a electronics thermal important you acqui-hires. for is Those and if expertise But we’re type is accretive us think talked about as do compete will, printed talked a for we a is in. right? we we a IP It’s lot products clear code we high is well have not And complete our opportunities plan, at of and which and vision looking right for a a to different and and types that deals. what technology, about now of right different now. go are mix, a trying that it’s simulation as

Gal Munda

Okay, with moves I at a performing some you’re examples to channel the that of said the the the can us wrap about, way give see what it. channel the and doing up helpful. you’re thinking it’s the you’re restructuring channel, evolving Thanks. you doing indirect in future? of moment? you kind just more how Can on just Is bit relative If you

James Scapa

think So have very, very we we most the partners strong set of part. actually a for

have potential we sure expensive the most seeing And in and on a making on from mind add getting will, that into side the point, and that focusing certain think putting that’s long see. bit them. and reflected. I’m a if successful we a a we for us share those you I should to guys past we get run, deliver once But are, going more the what more want a the and more we they’re think us, are lot for what you’re – be up. think that can bit bit to resources We partners not the them

operating aligned organization. of our internally, all. better direct how we it’s and handle enough at than done indirect own In externally internal we hasn’t business that – terms the that But changed make the within more restructuring, else anything we’re we’ve some the internal how things

before. direction. the changes same small everyone didn’t We is are of outside. in the boat that I that think, fairly notice you So good as subtle the in rowing These and though sort have same would alignment, on an

Gal Munda

you. Thank perfect. Okay,

James Scapa

you. Thank

Operator

Thank you.

Markets. Our RBC Hedberg of next Capital Matt question comes from of the line

Your question please.

Matthew Sorenson

the But Thanks. This is you actually talked the days roadmap for have of a customers it’s in IoT product? maybe market? of little can Matt you Sorenson percentage customers IoT know, maybe to I reaction early on a maybe for generally little your investing your Matt. talk Then Jim, starting for bit are about market. Carriots. kind more the to what more a about plan

James Scapa

the for thanks question, Matt. So

connected thinking a that more that? So learning as customers also different thinking I that? model? services-oriented models There do in for of different to well the do opportunities customer the what around existing their of are a go think, are And actually us business great they do we’re are in bit direction seeing to interesting some products, shift that business a we’re many about our IoT How about with they of customers opportunities forward deal than that from. that many,

we’re So is days relatively high-level think, it’s – with I are there. actually for meetings still discussions it where a happening. very early lot But what customers, of those having happens

progressing, the I’m be them, to it’s we’ll play. think, middle that longer do. a right – investments But I think, maybe but But love frankly able I’d earnings of to are things I about in the things so And right it’s can’t in few to. more. a a really on talk these next little There’s now. say bit quite the call, I

Matthew Sorenson

little kind forward a moving and look this kind to there bit the to Howard, we right. went year I All of that know And about We’ll side a think to forward? as expected. update. of down the relation guidance the then, way Is in CES business of

Howard Morof

little – expect The actually bit there. see their growth business to a of Sure. we

thought terms We for in hired year of place CES As bit a challenging be would their at people to customers. – demands. candidates meet find to customers our placements we our a enough had our by indicated little year before, this we of being to able

thing. bad thing find not add in. replacements that’s to if That’s you and a good can a especially So actually

positive becomes it certainly be it challenges in expect So challenge. their as business, It’s recruiting really we much the at generates talent business But EBITDA to that XX% great solid is a anything. cash flow.

So continues in our view regard. that

Matthew Sorenson

guys. for Thanks time, right. the All

Operator

you. Thank

Auty Our next question the JPMorgan. Sterling from comes of of line

line Your open.

Sterling Auty

guys, one Hey, one Howard. housekeeping follow-up you for just quick

When so specifically the XXX. talked and you about in company status – the Sarbanes-Oxley. growth XXX So emerging

threshold, timeline work doing preparation XXX kind depending quarter, I’m September to in the trigger? to or that with that the now are If you to needed, adoption crush of just you be understand in the live go want on if of

Howard Morof

We’re is still We midyear great adoption XXX. still it’s adoption a not adoption, question. year-end discussing the on a that, a Sterling, believe

Sterling Auty

Thank you. good. Okay,

Operator

time, Chairman call At over to Jim you. Thank back for this Founder, to closing I’d like and remarks. any Scapa, CEO, Sir? the turn Mr.

James Scapa

very you Thank Okay. much.

in So strong for the a Altair capped that results very fourth closing, delivered year quarter great company.

value believe the significant drive opportunities increasing growth ahead, we’re growth generate and Thank in shareholders. Look leadership faster in all adjacent forward speaking you. you, the to for well-positioned to of profitability seeing should and strong years We’re which We again. with markets, CAE to increasing future. in deliver and position to our investing we’re extend

Operator

does and program. a have wonderful gentlemen, and your day. for And that participation, concludes your ladies you Thank

Altair Engineering (ALTR) 21 Mar 182017 Q4 Earnings call transcript