ALTR - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to Altair Engineering Incorporated Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would like to hand the conference over to our Chief Financial Officer, Howard Morof.

Howard Morof

morning. Good you of earnings XXXX. thank the call attending quarter fourth for and conference Altair's for Welcome I'm Altair. Morof, Howard Chief Financial Officer of me on March is call and Brown, on our XX. assumes with who role Chairman Matt CEO; Jim CFO the Founder, and And Scapa, the fourth at the on close our website full of which be we accessed year Investor details yesterday, guidance Relations our and market a press XXXX, performance After with for the section release investor.altair.com. issued regarding quarter QX and can is following call a will of This recorded being replay section call. be and IR the of available this the on our website conclusion

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

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

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

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

James Scapa

Thank year positioned Altair an broad of proud and welcome some personal accomplished business XXXX. deep and COVID-XX year portfolio, the delivering everyone what economic you, In to am the I to solid the our and challenges, on quarter given us financial XXXX, fourth global team Altair especially market had our XXXX. Howard, for in disruptions enhancements challenges uncertainty. and to well brought XXXX remain full of to while has Though pandemic a pandemic, and results. due call. and excellent additions product

our As our of we and with continue data we vision science intelligence, supporting simulation, computing customers high demonstrate around successes and un-paralleled will engineering convergence and technology for expertise. industry-leading artificial the performance

We software have position such regarding our an never offerings. energized in been

across fluids, design also rendering. solutions providing software and of suite encompassing management, embedded system modeling and structures, thermal performance AI optimizes and visualization motion, integrated Our electromagnetics, disciplines, multiple systems, while true-to-live

resources intensive Our solutions workflow AI simulation, maximize complex of compute the utilization applications management of modeling the and visualization. and including and compute tasks HPC streamline for efficient

decisions. preparation, and data solutions and include data scientific Our that products data analytics science fuel and engineering, business AI visualization

We are $XXX.X pleased QX revenue total results to of million. report with

of well of above quarter an were Software guidance All growth the million, million, year-on-year $XXX.X XXXX. EBITDA XX% of for was XX%. product Adjusted quarter $XX.X was revenue reflecting fourth increase our the ranges. on

for softness X%. services. a grew to small of continued $XXX.X an revenue to prior product $XXX.X Total increase million, million recognizing software XXXX, year million million, increase, year, in equals compared $XXX.X revenue $XXX.X from a the For

revenue for Software increased XXXX, XX.X% revenue XX.X% the our product from in revenue software the of In for total to XX.X% period, year XXXX. the product revenue fourth to of total is compared XX.X%. quarter full prior-year

full year license Our was software XXXX. for the rate versus in XX% recurring XXXX XX%

continued come quarter and the with in new healthy. remained as Software significant in expected, customer renewals several activity expansions to

drive A lead of XXXX, effective a with domain is if solution this it be HPC feel on Technical for in defense to photos, can implementation AI performance. visualization I a behavior great selected multi-format quarter's example streaming implementing turn engineering helpful spectrum application convergence customer predictions Their support company Panopticon, this might and was of electromagnetic real-time dashboard and retail key of As including AI satellite the momentum communications includes converge data supports and European visualization, radio with signals, around specializing AI buying a into biometric work by the measures, and work modeling our toward is in audio. simulation, preferences. The in knowledge convergence. data toward video analysis. we stories applications. system focused to customer which agency

manufacturer the traditional and user In large with customer our across Our fashion, predictive and accessing tools them entire broad licensing has single dialogue data user turns them In data similar win-win, Units ago for while multinational industry, completely for has significantly regard users preparation, from deployment data and model the relationship committed analytics a units now required and a around loop a true including real-time more Monarch food units an processing, agricultural well for models improve XX services cost licensed of users it believe work result and closed their suite started around a with goal electromagnetic to organization as reduce to simulation; analytics commitment. has metal in as These science conversations event, archiving named in machinery we named potential M&A to a develop longtime of with all software their data licensing engineering and the data ability Units seeing as been a is telemetry data a the visualization, Altair include AI a enterprise for the been analytics. Altair's testing. company Altair great value engineering the This twins parent substantially the year to of data of enterprises. of maintenance company examples digital AI analytics a visualization. time simulation on automotive A needs. application engineering using The and financial After Altair are deep for science model, of access real-time helping market the restructured Monarch customers system; AI, using on and power a cloud-based capabilities the marketplace. and additional analytics the industry large to data help the of AI AI with than in a users with tools for to of and to acquisition, Altair's predict elements and nice opens to parts financial real-time data in AI and to growth anomalies. licensing data all tools, more Altair's The AI the production preparation data years. has the data leader of many We is Altair bring and wins new using and especially streaming preparation and of global into reduce a European basis. been A of relationship. disruption for of application, increased diagnose, predictive knowledge, a met we will

A for and use an of a larger have case to the lead purchase optimization. cases to derive this analysis. engineering, engineering, in agreement data, last emphatic variety issued Along design aerospace scoring of testing get will and close costs process, business matching around cases, example which internal Germany recurring potential engineering great for intelligence MoU analytics the implementation we we alone, and major The about Their with And collaboratively analytics deals Altair X-figure be calculations our One payroll ability euros. vision number of a to a tools. so sensors reduced on including a artificial customer will with our needed. a engineering expressed the data initial AI as value the to with delighted millions of our Rolls-Royce's their on reconciliation technology vast using across impressive. collaboration data return of of visualization are wide outstanding amounts science out ROI of the inked are use our to AI of XXXX single see and and address converging discussing financial customer data connect The by can month use testing with engines. release, Rolls-Royce to press significantly reduce to applying company

Rolls-Royce be data the Germany, of partner their convergence of products. pioneer daily make AI business a help to technology As choice engineering, better honored and is of and transform Altair decisions driven and the to

to simulations of software, machine and topic GE Aviation. integrated flow, announce the which from Flow have pleased Simulator transfer we to am an Simulator design systems combustion and is mixed Flow enables acquired fidelity heat I On design. acquisition, optimize

are understanding of solutions system increasingly duty defense, simulation modeling, Simulator are complex simulating that including entire organizations needed an to cycles, As encompasses Flow Altair's mobility. and concept make rapid model behavior, and to iteration like will Flow it virtually its industries, system anything and system management. available to Bringing thermal market automotive, set allow energy, in us electro aerospace to capabilities software and renewable the Simulator expand new the including

we the our a future and and Aviation, collaboration strategic longtime acquisition, partnership. the excited modeling customer will a the relationship Altair to of industries. facilitate thrilled GE about establish to MoU new a GE Flow with Aviation signed bring systems have as complex strengthen Simulator, and of higher In to I'm level addition of long-term a to simplification thermal equally

broad. delivery processes customers. evolve changes our Altair's more effective are toward expertise portfolio more believe Infrastructure of customers resulting our geography, example is to We and efficiency, with and allowing technology changes and in knowledge continue these provide to regardless to organization. in technology our organization One to and are operational global as deep expands even technical of support organizational us and expertise

capabilities Altair customers model many transformation. a shifted addition digital internal COVID-XX, leveraging In to remote In roles, a global work facing and and XXXX, with navigating path co-workers. communications we companies for for customer to of continue like

Going changes traditional forward, while expansion, not as affecting role travel. we EBITDA expect a play to external to these and model, believe hybrid scale work and will for a remote We relationships revenue. we our office return

for have we steady years be and privately forward transition as December great to working superb transitioning truly increase for press we a regard, role to to a especially clearly to in profitability. we went March ready the target our decades to Howard for customers, of me release, large scale Howard I been leadership for his an of on in and an to technology of the as doing public has held to that for announced transitioning operational operating In revenue will enthusiasm years focus someone over company guidance are things Howard Matt the a Morof adventures, process with in focused CFO with then since organization. and And him we And our next long-term and next on benefited next involving IPO, sustainable software those CFO, And their has the well we a with given his on that important while take company software in family, Matt company. X revenues was charitable level organizations. I the is many this his remain right work to and of role congratulated Altair. process from Matt officially look Howard the organization choose and straight many both voice for public, to them way an we his as an especially Altair delivering it financial scale is the on Brown. wish from experience. the EBITDA XX. great made company deeply his Altair, expertise, am our and in grateful As growth. grow of of Matt I

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

Howard Morof

while words decade. course Matt Thanks, Jim. will past I QX XXXX. success the contributed cover detail I XXXX to of year for our the Altair delighted have and expectations will appreciate full I'm the and of over kind results, our the and to growth

the We fourth top mentioned, would lines the quarter everyone our guidance our quarter. revenue, typically revenue on Jim to I software by and we excellent perspective remind of with our under proportion heightened bottom of metrics to a driven well expect growth from revenue revenue results product adjusted in into results that the driven quarter treatment and of to by new to delivered for strong driven coupled continued expansion with product excess our We billings includes Since this software other our pattern like revenue going handily we product our of As in controls uncertainties of continue. and and conservative by entered the seasonality in compared COVID-XX. seasonal software XXX associated with expenses. revenue revenue year EBITDA ASC in exceeded arising strong in QX guidance exceeded performance greater the the due given over revenue quarters in in fourth and first recorded operating higher our software a patterns any expectations quarters. QX combination

our on basis. time. or changes Accordingly, We to in changes shorter believe time especially strong are software when to revenue, pronounced aspects cash impact performance over certain carry meaningful our of and QX. occur an we over in previously noted expenses that relatively is delighted have the constant periods, that a more through those when currency generated growth on it see to currency are we measure currencies changes QX can We flows,

For have for billings on on impact of insignificant XXXX, a year. EBITDA in and positive adjusted impact did million $X.X an the currencies revenue

currency currency the compared euro. by benefited primarily QX by quarter due million $X.X in and had the EBITDA. in to to million moves by revenue For adjusted XXXX, nominally QX impact impacted on moves Billings $X.X driven positively positive a

fourth software results for are quarter solid our to attributed continuing expectations. that our exceeded Our demand products

the revenue the and basis. over currency of of from ago, to compared constant XX% not X% million, in QX, year revenue by currency on increase XX% our continued equaled X% to Acquisitions on impact million, the the services to a client meaningful XX.X% related total relative X% prior for software fourth a an the did results to in the prior Software engineering represent about resulting QX, These product of from on and on continuing the which of recovery for impact quarter. reduction have constant growth the almost to revenue representing services. basis, modest a impacted declined and related compared services revenue XXXX a demand reached revenue quarter over year. Reflecting $XXX.X COVID-XX Total these year. from revenue declined software quarter continued improvement while $XXX.X compared be

services the in the quarter, declined prior some our reductions to in by due expected, As engineering CES client consistent by XX% prior with compared year of the post customers, revenue our to quarter.

our Our software products. from XXXX benefited for results demand

million, year revenue total exceeding increase X% product Both from of X.X% last reached representing from $XXX.X revenue of an growth Software guidance million, provided XXXX. almost a quarter. while ago, equaled $XXX.X

compared the related services Software year declined a our by XX.X% in customer headwinds to ago, by base. primarily automotive impacted

remain key mix which revenue strategies from last points the increased trend the driver to without were investment adjustment operating continues and for margins. revenue, XX.X% of an related or This product up year, impacts minimal. higher currency software revenue, and of total favorable software expansion important any acquisition to long-term increasing software mix XX.X% of our growth product of almost margin trend in quarter, the fourth Our Revenue targeted opportunities. product its revenue basis XXX continued

revenue our For product XX.X% year, software revenue of XX.X% prior for the from year. total the to progressed full

software software by recurring and increase a recurring an year is recurring our percentage that the strong product of rate growth to we to year, product were $XXX driven in streams. as growth revenue quarter our of for strong continues is the Our revenue to that Fourth a indicative software increase momentum, license continue with the XX% XX% billings from be emphasize healthy software ago million, business. of

year and software time tend year, results. from periods I in revenue billings offset improved mix. to the billings revenue. a due have client and with in the would Gross in margin increase part over services. year about driven to basis to basis, full points XXX revenue the over to timing of product shift by customer shift balance the a renewals, impact in to engineering business like margin $XXX.X software to view variations growth gross to We fourth related the positive driven On and an in XX.X% XX.X% longer year shift expansions, the arrangements P&L were consistent product prior For gross of by quarter declines quarter-to-quarter. the new software improved margin mix the ago, million, by our compared of by X% can to

the For over an year intangible grew we spoken in or undertaken a last as cost Adjusted amortization in and our along to of year, operating and stock-based operating healthy Univa, exclude which about adjusted arising the million, in our did quarter, have travel revenue, over year, these cost Adjusted of and the at product increase increase did to with compensation, $XX.X over the million related COVID-XX the we restrictions. reduction bottom selling XXXX not on line. later half efforts equaled reduced from under of line top income well inclusions realize XX% from COVID-XX part impact ago, of previously. million Ellexus expenses compared driven operating In QX driven our other either results, The EBITDA actions million, the as in EBITDA million the increase non-GAAP revenue expectations some restoring significantly reductions impact by for certain of for of EBITDA QX, from expenses, to incurred expenses and $XX.X the of software the magnitude in M-Base. XXXX assets year terrific software with the $XX.X of acquisitions along $XX.X second momentum predominantly were acquisitions the a $XX of with XX% earlier of is year. by benefit quarter consistent

adjusted in XXXX to XXXX up XX.X%, margins Our performance in in EBITDA XXXX. pushed X.X% from

activities, typical revolver. U.S. undrawn million in and capacity cash equivalents. fourth the with ended seasonality our cash the collections quarter had our on our and with to million in sheet, We $XXX in consistent Turning we $XXX balance billings

in Just January had year credit $XX.X for we note on We of of million, repaid cash a XXXX. from flow for operations during drawn million $XX.X we the that early the line XXXX. million to $XX XXXX, generated compared

Our in been great function the Matt recently, the entire a cash expenditures with in now the free decade to for more cash flow and due time completely been past discuss Having Jim, team, for spent and $XX.X prior improved would pleasure XXXX. year, be of call Altair the Altair part equipment. have million, million turn reduction $XX.X compared working much a to part Matt the to has property to will with in to transition, to investment over I finance to forward. confident going our the I am like expectations community. that during Matt? hands for It

Matthew Brown

I a X, Howard. call in a you, very responsibilities. of that by want still left better imagined I January He's to And a providing us future. these months. thorough for start started I great to me him, we he's over X for have not seamless handover spot on transition phone. past thanking Howard could the When up pick if need he'll CFO assured the Thank

I Howard, much very appreciate you. it. So, thank

coming COVID-XX a fiscal challenging heard, year a year-over-year. while XXXX contract QX, declines fiscal record you customers We environment. XXXX, services X.X% spend. X.X% our revenue revenue revenue software back year-over-year. as growth, was we're in pulled grew on the and some we Total a their revenue product just in high, software what also product service for offset software successful in full As and the especially year off saw partially in growing that product XXXX revenue and very saw record QX with And

we or of to and As for XXXX the QX momentum year and and for X.X% in we year-over-year at continue range growth the not is And QX in of $XXX total million see million $XXX XXXX, expecting service XX.X%; and fiscal like $XXX revenue believe either, to we $XXX software that expect fiscal the XXXX, to million look revenue of the are XXXX, year XXXX continue carry or XXXX, ahead revenue although are growth we into revenue XXXX, range XXXX year. do likely at as we we end to product we saw to X.X% COVID-XX to to of in year-over-year we expect growth million revenue in a did declines not expecting service our has another In what mixed XX.X%. looking services stabilized. of into for

travel levels to $XXX will part to X.X%. the the and year. almost forecasting we for growth believe of XX%. range As XXXX, in particularly From a growth to reduced costs during the and a of million, to COVID-XX QX later In are reduced recovery, uncertainty. of costs in in by some company or expect the during return we to XXXX, of XXXX succeeded entertainment this year particular, of XX%, fiscal We through we year-over-year year $XXX million increase and range of the of an activity depend in resulting but or costs $XXX perspective, XXXX, X.X% and for guidance XXXX. $XXX cost our the expenditures midst million X.X% year-over-year to the the in total by balanced, limiting million In relative and is prior in result, in QX while revenue of marketing normal, in a particularly XXXX, to tradeshow the year-over-year, revenue QX post-COVID speed X.X%; on

those we travel cuts, as some As anniversary and of cost resumes.

continue our to will be expenditures. in we However, disciplined

in costs, business. services employee as spend we We professional currently reductions targeted looking costs, and contractor within at the are reorganize

half reductions and freeing these the product be up capacity in to of first technology capacity. substantially in sales expect XXXX, for investments our We complete

$X As $X to a adjusted from which first result, between we excluded EBITDA. expect of the to million in reorganization is half incur costs million, cash our

the which EBITDA adjusted of we million adjusted XXXX, or expect expect year-over-year million which to XX.X%, And of growth range $XX $XX for to EBITDA to in XX.X% to adjusted to million XX.X% XX.X% EBITDA XX.X%, X.X% XX.X%. year adjusted QX or of of margin to range fiscal year-over-year million to of the $XX translates growth For margin XX.X%. EBITDA to $XX of we XXXX, translates in

moment of reductions inclusive ago. adjusted investments I on cost expectations mentioned are a the EBITDA Our and

to and increase forecasting in adjusted line range the the are impacted cash the reduction costs for in million year and the be $XX for increase in by free expect will flow to million. cash year EBITDA related $XX fiscal cash We free XXXX flow with of

As release, market a tables yesterday guidance guidance flow includes which on net issued expectations non-GAAP sensitive patterns, after We've collection which reminder, was to in are earnings and our income. seasonally. and provided fluctuate of detailed cash billings our close press

Moving broad provided solving forward, apply in in recovery are view by developments data peers. the But will some our the we to most positioned and net have our income, to and press cautiously continue comparable COVID-XX management's when on supplemental engineers, made problems evolve. a in better rate. business to earnings and been look of will challenging analysts. measuring more tax consistent these Altair non-GAAP to to non-cash applied exclude ahead as we of optimistic never XXXX. scientists, tables been interest the support on has we aid to prior release. customers non-GAAP economic to faced be income a expense comparability These changes reflect changes periods be We've our and consistent with will

Our simulation our the in products improving product earlier adopted are performance reducing process, design costs customers. for and being increasingly

maximize and value Our decisions enabling important enable see quickly. organize happy customers solutions preparation tools questions. be we'd and their data are to leveraging that, our real visualize And providing HPC science to With data to customers our converging compute to Operator? customers. AI and to are products resources. take these your to We make

Operator

from comes Needham. question Valera first with Our Instructions] [Operator Rich you. Thank

please. question, Your

Richard Valera

seen you to concerned And the I mentioned And expectations. relative into during quarter's think on Howard, you. you'd strong that, from guidance, of that to or and kind I COVID the wave, on embedded wondering, your the call? congratulations result wishes quarter a year. came Good with were wondering your on best versus just the just a quarter next Just improvements really which things finish in nice Have where upside And, and about get on that upside quarter the in? to wanted welcome, played coming was about a I'm talk quarter. conservatism how the second last actually you because Thank Matt. out morning your of expectations, chapter

James Scapa

on we're places. So, different Rich,

Howard Morof

Jim, go ahead answer. happy I'm or to

James Scapa

Howard, why Yeah, that, be great? answer you don't that'd

Howard Morof

with the you of year, Sure, the and course nice for sense Richard, obvious pretty obvious entered of frankly, we've, entire been thank so, XXXX, certainly reasons. over reasons, for We a Sure. for conservatism cautious of words. as for the most

We is little proportion of So as know we conservative. typical entered have higher the QX. that expansion new in revenue, our QX we in and quarter a

So very technologies the well quarter warranted. navigated to, say, was and backdrop, and are reflecting quarter saw our the investments, we that in of conservatism customer growth frankly, improve so as to Against in I base, the customers. adoption that growth use continued continued our would strength along, that ever critical

the conservatism, think hope really it was new well, you sort of a that of I So in a as expansion combination and way and would to see.

Richard Valera

to X where what you've and business? going and be, solutions. you you're get thought you done kind towards path that from And maybe you you far, now, your when of creating then, to made in sort Thanks, be, analytics of are And to that that model, just in you great. could the about to want your relative analytics success where converged That's hear of Jim. doing where then, simulation what just maybe, converged it so for of I think for maybe kind further say, you, where to and model were great Jim, years the are acquisition that transition selling sense integration? you

James Scapa

Okay. Thanks, voice. Rich, your hear nice to

this to things well of pretty point. at point the of really So, I this the it's moved that [indiscernible] I transition this year. at think where over and done rest is largely model on We've subscription kind mean, par with

is part done. So that

transformation it's in sort And as happening some analytics, of customers extent. I happening even convergence data products, between are think also and and our the happening it's the for beginning far this within know As don't It's that ways really engineering really to customers recognize very that's happening. who the users a natural it's and opportunity. to

We're So it's convergence. of to that starting cases taking and to really customers. of success that managers we have almost at to cases are has one those engage. point every this we And really advantage account sense, opportunities point use use make this our understand other as have, starting

So AI. X to sort simulation years from going and between of now, a talking difference I don't be we're think about

think to I be basically we're going all it's talking computational that science, about.

Richard Valera

for performance. great. Jim, Thanks congrats again a and nice That's that, on

James Scapa

Thank you.

Operator

comes Ader from Our next Jackson Morgan. with J.P. question

please. question, Your

Jackson Ader

yeah, echo of a Great. guys. And thoughts. lot Good And, Howard, been fun. I'll Matt. Rich's it's welcome, morning,

the to Where making? areas placing force investments from on going be what guess, of bets? are be away sales and of the sales you or, question being First you reorganization, I will shifting types what guys chips

James Scapa

Sure.

Matthew Brown

thanks for a want to stab at me? the then Jackson, question. and pass Yeah, you it to take that Jim,

James Scapa

question. Yeah, that I think yeah, should I answer

Sorry, Matt.

in of swim for continuing continuing where level invest, target So really direct we're account beginning those we our - working managers opportunities are the the for invest managers we're to enterprise more creating opportunities more see customers focus in we and them. these more to with, enterprise direct And account and terms have accounts sense the large create so that We're lanes who in make market. to opportunities.

business in development, market sales down them. combination with working market also more and inside indirect have We and down

sure have. and how the think We're - there. the organizing we're just smarter he's can something we're and capacity leveraging we're we So not Matt, sales you continuing going to we that answer just I'm at resources make investments. getting to… what

Matthew Brown

so over just XX refine X years, is a done high-level And I Yeah, really I - right, I context, acquisitions. from our model. say, and mean, past would or operating continue we've this mean, to the chime in

product We're how to technology so, and would engine forward. invest to our going continue this. that's characterize sales moving in our I And in

characterize the And it. way this a would that is so, is really refocusing I

Jackson Ader

XXXX revenue directly growth in then for the the What's FX And Okay. from guess, follow-up, tailwind a that. guidance? I

Matthew Brown

a It's of points. couple

I FX we're those not you're today's offset. of so in a we as think on but using the year-over-year impact, to we're rates - it's sort comparable anticipating to rates. points FX, the naturally on are the movement guide FX obviously, nothing EBITDA, of line, next within we revenue XXXX, the - the not worth of couple But on

Jackson Ader

Sure. All you. great. Thank right,

Operator

comes next with Blair. Our from Bhavan question William Suri

please. question, Your

Bhavan Suri

intimate had to XXXX, sure really think I'm will And of you around customers, other some what And, you taking they like I doing, we on to at drove for got touch we'll or you in and I'll want maybe as ideas my again, were the development they with you. playing wanted. - best customer couple you naturally, each or It Great. the guide XXXX do think innovation. that But COVID, at little of that about and we also congrats about I the just Matt. services that this great into of et was product intimacy guess, to obviously, understand it, for One think what question quarter. Jim, run one Thanks one echo bit think business my drive is reinvest things customers should things. business about quick help you keep as sort XXXX got in about to least that out? a solutions, Howard, them but help a keep luck. product Jim. of the Welcome, you year and this to their to innovation? in miss with those guys challenges, cetera. but business How

James Scapa

customers, business a level. say, lot additive very, don't all still do or things very on to that of that it's the lost, of down do, I'll of anymore electric the last in that. to commodity actively declined, And years. if getting But closer service the XX X advanced more you projects, if very a super is a advanced we The commodity last still with or are motors, batteries, the very level kinds of side. are we things, simulation, more over you stuff continuum will, will commodity year, of We those manufacturing, - engaged that

recognize So our of it's we're And, relationships. it's Altair. but products technical these still still also advancing superiority advancing with customers still, customers, the engaged very

Bhavan Suri

of guess, look billings I Got it. as over the X% up and then team. COVID. And about And or Howard guidance with there can itself at guidance was not maybe, that more you of in Got that improve, it. x but size maybe improve, of number pipeline for sort constant lands is the choppy. XXXX, expand Again, the in business improve, land closed the customers for of guess, behavior one customer And seeing you choppy, gives a you the the Jim what space confidence? be or that initial rates visibility buying you years and above our about seeing given currency. philosophy that sort engineers? Matt, auto customer still risk haven't you hiring little but had combined I improve, the adoption, you are in Are in think Matt is

table strategic, sort visibility, guidance of how think to to and do bring think about trying understand, for the have you what guidance? you sort about of both Thank terms you. how just to guys about of tactically the I'd you XXXX thought in the in love that So

Matthew Brown

the appreciate I No, yeah. Yeah, question.

kind X being So say revenue; one being of separate at that can the optimistic product cautiously I and are all else, top-line least And sections: other would you the software about we XXXX. right. into

with So year. in all if COVID else, mixed we start a we're still

year, on this not And year of of to that forward As rest is year QX impacted flat basically revenue going expectations QX our some bit you be know, by recovery, other net-net, has. move we and last the year product XXXX. everything as throughout the really COVID, to is but than the software we're expecting

so We're software how about pipeline. a from there. we revenue, We're product our with strongly compete. We that seeing optimistic and our leaves good engagement then and healthy technology pretty customers. feel you seeing And we're very

we're the And optimistic I said, out. how so growth. plays you're to we'll where the have that's cautiously But of seeing course, see there. like And, year

James Scapa

add that. could I If to

our is I by it's over XXXX something you I guys. But in undervalued XX%. think, recurring revenues, sometimes think,

year we So into we XXXX, the in very go even go recurring high pretty with so revenue. very, into the year sturdy and

look But expansion, to might optimism we of we than expect well. gives at there. that And, we new little attrition bit bit we that year on last all we year. win as were the that us prior where expect together, we a be. against, be judge We course, were weaker of weak cautious the When better a how little can

Bhavan Suri

take Thanks helpful, question. it. you. Got Got my Really for Appreciate guys. you.

James Scapa

you. Thank

Operator

you. Thank

Our next question comes from Ken Wong with Guggenheim Securities.

Your question, please.

Kenneth Wong

This just that your Great. quite have it guys, you Thank data that the for you bit one hearing saw of from like you, based looks a little business nicely. we're you based for you space, feel is Southern Jim. In softness, competitor what taking powered on a California forward my question. and

seeing maybe the And seen in guys there? wondering, Just are where you what terms why a some differences some can of seem be weakness? little of of what trends maybe to of bit you're the be resurging they forward

James Scapa

have with of targeting offering guys. prep continues I the and on assume a think guide, of frankly our I us just quite we very, to. speak optimism. our So things the think integrated that of this go solution very And, frankly, bit to But I the data speaking to side forward. us, can't the all is I our But and other strong the broader, a for deeper and rest that you're gives business alluding rest

Kenneth Wong

from moving then a be else leverage Got look it. it's combo. the us versus from more a like guide, It And it. might just pieces be maybe anything you leverage perspective like are some spend year one maybe spend whether Got and reinvestment margin us going that on getting or doesn't it for this side Can on flat to getting walk mix we from keeps Howard EBITDA looks in basis. guys of guess, Matt perspective. discretionary, on I missing the you the a full on rebound through much the the EBITDA? it's

Matthew Brown

that. Yeah, Ken, I'll take sure,

a is perspective. you you that at through QX year. exited bit, move how from forward your may That you think, really as estimating So best spend basis the probably little we look be if under a I

of will so incremental It's carry spend not from the that to And QX we spend. at guide. QX of midpoint the you see much our into guide that's see terms of in year, the can off QX you the run implicit as expected will the then But you rate, a in guide. reduction that look spend forward see you in actually the through

So you're coupled some on expenses. and some sure account. and investment are with There's efficiencies travel and that nice seeing normal we're make returned in taking that marketing headwinds technology sales, to some that from that in into there our

pretty I that with it's think a fair happy And So actually, outcome. pretty I'm guide.

Kenneth Wong

Matt. Great. Thanks that, a lot for

Operator

you. Thank

Our question Essex Brian next from Goldman comes Sachs. with

Your question, please.

Brian Essex

usage of you perhaps Inspire question. for for Maybe, flexibility? meaningful greater of groups platform? number nice you taking and whereas but regard Altair the you, seeing buying multi-physics examples of enable thank significantly with adjacent engineering and unit Hi, Maybe, SimLab, Jim, a of their in applications? the instead question what example, to you adoption mechanical Are enterprises a product of trends for gave within the are morning, other for relationships, several restructuring overall buy prepared your good remarks, customers to

James Scapa

to the and model is, right value appreciate team, my it extra for where price management out So that features, ability willing and sensitive. has Altair more Units yes. on be it, more of the customers customers received to they are It's the are markets, it competitive the well by basically lets very received. answer very, pay us the products, gives account really service because gaining Actually, the been get them well

think for model fair I option sure. So think, for And the we it guys are them. are the seeing seeing well our well, I very customers very, appreciating are actually as

Brian Essex

On access of to businesses emerging model In just certain verticals, group services follow-up of are Great. your talent extend versus to words, bench to to certain have or into services, businesses maybe to limited good some That's a you services hear. or acquisitions? other emerging that Bhavan's perhaps you a question. And applicable for or how the technology? additional technology technology those as continue is incremental

James Scapa

very, IoT you sensors, mean, motor, vehicle, doing the electric electric projects devices. have We skill significantly that shifted in sets we if look electronics, very have, at that we're I

the at basically state-of-the-art are battery design. We

that expertise now. I have surprised think you'd be the we that

Brian Essex

the very you and helpful. That's results. Great. Thank super congrats on much,

James Scapa

you. Thank

Operator

Thank you.

with next comes Matt Our RBC Capital question Markets. from Hedberg

please. question, Your

Matthew Hedberg

And on usage one think it opportunities. of XXXX there. the question units. is, the may How or with forward success about really when working be units. for - you follow thank Hey, congrats guess increasing with you And it's obviously, opens growth new the Matt; And set contemplate? you're differently, Brian's and I top-line had Altair impact I guide, seeing look question. working Altair pervasive you on how well. Obviously, do me question as to up great you, you to and just with a Howard, again. up

as wondering you of conceptually XXXX. that thought contemplated you how the Just outlook for sort about

Matthew Brown

Yeah.

So…

James Scapa

level, I that. model trying that. and not But at to been it that. to personally, that granular thinking of or don't have do trying I I I sort answer about Matt mean, am know Howard

looking strictly us, the we pipeline what For looking like. we're see at

Matthew Brown

can Yeah, Jim. there in to and I chime

good Matt, So, you. to hear from

already So so some of one-third of roughly have context, converted. I helpful far, customers as actually now, our think,

customers So to important of expect And know. completed substantially to think be I that's the those rest year. to next going we're the within

can these year. sense So thinking finding into is, way their The being most In slight price cases, In exactly way finding they increase. as about them that the want. some I'm makes a they're they're it up suite it for where them. that that we'll products they ends other the makes utilize instances, the the convert, see that is customers sense that suite throughout for that

for future, these in us that level. to at it And the get does set so allows way a us particularly meaningful not expecting And up expand think users what I in that, enterprise the to I'm it using. first that allows the really for within year, But the they're impact. suites value the a

So We're converted. not your so the at in far, and in meaningful the impact question. year, we see hopefully our as already of baking and that answers one-third customers

Matthew Hedberg

guys. Thanks, helpful. Super

Operator

with Munda Berenberg Gal from comes question next Capital. Our

Your question, please.

Gal Munda

Hey, taking my for good you morning. questions. Thank

the maybe The the past, of I'm kind helpful. usage especially very has solvers the asking an year just seen a of in throughout end you've be trended, year, about usage just how little have on how XXXX? update you a the of over itself. That'd is general, specifically and about But evolving bit not the us quarter towards the in bit first the little one talked give

James Scapa

you. to Gal, morning all, of good first

of I think solvers usage was, Is evolving? see question the that correct? your we do how

Gal Munda

the an that how you you as remotely? and the evolved see considering What people had kind has was fact just How did Yeah. performance XXXX, of overall No. working in it?

James Scapa

solver The actually. we in for almost to we us, Sorry. every continues have that area share, gain grow suite and think

on. of is a business, years you continue we physics the grow side to of company. ago, our going part and very goes went XX pre-post back significant time to a more business if were really the primarily even So, Today, on as that's

part are solvers of our overall strategy. business ever-increasing an and So

Gal Munda

about in helpful. Thank and invest the channel, from kind little in those That's your trying efforts, and about a or being [did to into Jim. - comments of attract then, way Thanks, really bit And more sales, either sales light of [ph]. indirect you of the you. a enterprise in some XXXX you Okay. that of your level How rebasing the for year Now, mindful channel? far on indirect that come to past side? significantly of you've And foundation? talked would sales kind expect progress ambitions to say in or of on revenue Was color the any other you. you increase to XXXX, contribution Thank from the that? you that]

James Scapa

would and my progress on I as not from much progress, of the would depends Americas. see, But, Sure, geography. the particularly to I some view, as say, made in we've like point it

inside I gotten really business us. of the traction piece sales, for think has the lot a the business of development So,

is I in I more work APAC. indirect frankly. and Europe to have Americas, we and the some getting to think And do, quite more in more the traction think continuing

Gal Munda

very That's Jim. helpful. Thank you,

Operator

you. Thank

from from is Mark question Benchmark. next Our Schappel

question, Your please.

Mark Schappel

for my you thank Hi, taking questions.

going the forward. dig could bit wondering was good you expect part if it Jim, GE to could working we with But, provide we forward. little and you, just your First Howard, from additional acquisition. off, if partnership wondering I best going It's what with for a as a the into strategic of on arrangement question you. some just should details the you deeper

James Scapa

to a grow And thousands. technology large and of coming take now are of excited, software. I There's about long working company, actually a responsibility opportunities, commercial this was been that it partnership taken over to base partnership from couple a We've and directions now, to with having part the all many Partner spin-out software years of XXX%. for this, our for is different very something there's of GE. think, in with GE Alliance, the It Altair GE technology. be this this the of the for we've for leverage with It's very, user responsibility inside us. lot mean, they in I So, of GE, it around a

a about. part that the developed doing And There been excited have And are others, This GE, This I all that we terrific piece actually coming have spin Simulator that of excited of really area a GE. are So a lot can it's to of we're traction out, candid, to Flow the other of be and very to projects machinery the with in technology project. really it's Very the OEMs but independent piece Flow customers case great if with getting internal very and we're lot very, do, often, rotating was inside of Simulator, us. It's have a of they in often grade. for looking not is very commercial it often of often not very here. is and not technology. development it us, they it's competitive. that

of other it So some customers can as it's just is a very for nice partnership with we think GE. with a well. It's we that things great a piece And technology. do model

Mark Schappel

wondering the but very end year that you I could for it's the about. or Great, any two was talk your thank you And a Mold solution. Inspire helpful. was question quarter significant pretty capability you've On still I ago, then, you had if - I here early, wins and was a released here. And additional Mold know of plastics Inspire the industry. that wondering at

James Scapa

in early. of we're But we're And a lot It's lot coherent little wins, the and in that into I nothing a frankly, it. can going traction of my some but way. pretty see see around to product. a pretty speak and We interest hopeful we tricks days have a probably reach about early it's, that bag of

two another make you the in or how more it quarter me sure I'll I'll study Ask next tell before call. to we're doing. and

Mark Schappel

I'll do all to make so. Thank for sure Okay, you. That's great. me.

James Scapa

Thank you.

Operator

Thank session turn for remarks. the back you. our for today. final like CEO, our his Scapa, I to Q&A concludes call would to And this James

James Scapa

Yeah. Thank you.

want department, want for Howard thank XXXX excited years, a for wonderful on to just so for so many our me for me best to as Board for finance then XXXX. so final years, many to just initially So to and transform thanks partner everyone many in coming so us and And to say conclusion with just great everyone partner for the once a go you wonderful the a very helping being thank here, in about for feeling and to support the me public I CFO helping company, again, just wishing challenges, about and and Howard been their else.

long. So

Operator

participation thank you in Ladies program. and for your gentlemen, today's

You may now day. disconnect. Have a wonderful

Altair Engineering (ALTR) 26 Feb 212020 Q4 Earnings call transcript