ALTR - Earnings call 3 2023 | Altair Engineering Inc.

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Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Altair's Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note that today's conference is being recorded.I will now hand the conference over to your speaker host for today, Dave Simon, Senior Vice President of Investor Relations. Please go ahead.

David Simon

afternoon. Good you XXXX, earnings ended thank the call attending quarter third September for and conference Altair's for Welcome, XX, XXXX. Altair's Relations call Founder, a press Simon, me Officer.After market Matt Dave SVP we Relations, Financial Investor I'm website issued today, and Brown, can release regarding quarter third the investor.altair.com. our with on on be Chief the and for year accessed are and Chairman Scapa, our quarter full XXXX fourth section the Investor close details at Jim XXXX, CEO; and performance which for with of and guidance This a website under our may be on following available securities being make today's call our of business the that laws. conclusion will is to call.During this recorded replay will federal related forward-looking the of considered call, and IR section we be statements reflect statements any of date. should not our considered today of and as views our subsequent as be These views of representative only outlook. update We to disclaim any obligation statements any or forward-looking a and These expectations. subject of to materially from uncertainties actual cause statements results to that our could differ are variety risks we These that the summarized earlier today. in press release risks are issued

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

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

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

James Scapa

to everyone on and the call. Dave, you, welcome Thank

of was and for product above guidance. our excellent revenue, XXXX quarter third end Altair total software revenue, all EBITDA high adjusted of The with the

the demonstrates doubled AI vision performance industries than engineering, convergence discovery, XXXX QX our more to QX and million. and for including and $XX.X science scientific of EBITDA verticals, year-over-year power and of across veracity business.Adjusted the Our for computational

revenue product the to in XX.X% quarter as a revenue total Software XXXX. the third for to percentage quarter of compared of grew third XX.X%

XX.X% percentage product of the total XXXX.The months for to X from revenue first of X XXXX. X first rate increased first the of the software XXXX XX%, a recurring period to XXXX as through an was months for in revenue Software XX.X% months as in increase of the compared license same XX%

compared Software XXXX basis quarter broad-based are product across third many by of verticals.We a are next-generation seamless between portfolio, third powerful releases modern releasing landmark tightened high-performance the delivered years. set user our across and computing, of solutions access experiences, we most the of quarter XX.X% first same to speeds. important in of growth to technologies, computation Included to period with integrations in many for X geographies, have representing entire to on the software grew and products, currency XXXX. a Altair's months compared XXXX, some constant the and XX.X% increased the and updates product these continues in revenue APIs, be

accelerate technologies apply scale their our efforts. to digital has their artificial customers our by our with focusing products, organization as and on cross-pollinating our use verticals, data the improve expertise parts twin science traditional transformation analytics created compute growth the simulation and them design faster, and teams.This as convergence of new to well helping power opportunities data year, shift have all Over a embraced past with digital from go-to-market intelligence employees to

products our transformative capabilities Altair as cloud user unified and Altair an platform the these what RapidMiner, modern APIs we users best-in-class effort, of platform, our part this ways design of and simulation all we our by new, and major our optimization CFD pushing across platform, from engineers as solutions streamlining a are create solutions, platforms. development. pre- HyperWorks, design analytics the As HyperWorks its by solution integrated throughout workflows. was AI, python with the AI product EDA and leveraging design providing environment.SimLab our unmatched upgraded well HyperMesh AI within a to software XXXX integrating post-processing developers through is design user-centric and has Altair entire and experience while power HPC, harness advancing gateway.Altair HyperWorks empower cloud that computational our portfolio.HyperMesh truly technology automation, Altair boundaries and workflows data design and unified of user-friendliness innovation in with for power electronic HPCworks, of multiphysic platform, comprehensive possible enhancing and X CFD high-performance suite computing complements empowers a of and tools next-gen know science, and One, Altair capabilities and simulation expanded the as electronic capabilities

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Notably, strong agreement HPC, of Altair's vertical field acquisition In founded we to customers AI our its in have extended the giant company software This structural optimization. simulation, Altair sector to is optimization particularly technology many advanced long-time signed used in added with with our designs. of by optimization optimization aerospace product portfolio, addition complete the and quarter. Its additional Vanderplaats, the enhances structural develop efficient The with Airbus software solutions. We Gary Altair to for analysis to exciting Airbus a believe further a automotive OmniQuest. allows this these analytics, the in releases, agreement. third multi-year us new lightweight, late portfolio market the acquisition recently data access the including was leadership.The collaboration structural and Professor was by

learning transformation deployment X-figure X-figure product Airbus's anomalies core data for addition, An using increase as committed aircraft analytics game-changing to agreement it and verification interference. for Additionally, spend signed engine with major RapidMiner aerospace its to digital accelerate aerospace license its services. on system double-digit simulation SimSolid, technology.In detect an and regarded manufacturer to annual Altair engineering, to a will a Altair machine electromagnetic its with supplier our focused related Altair A renewed of development processes. meshless simulation data-driven manufacturing, and company drive aftermarket a technology tools on

applications, automotive use double-digit forward. a sales automaker compared and contributed sourced An to representing optimization.Finally, going its global for dynamics.In Formula great a innovative efficiency, work real European targeted we monitoring leveraging mainly expansion to equipment including electrification, a us an manufacturer, a a portfolio annual supply Altair improved a applications with multi-year software X-figure Monitor, a and driven digital seven-figure over to X-figure an by to a its vehicle had company expanded spend focused supplier team commitment RapidMiner third-quarter longer-term we specific vertical, tear Finally, structural deal for and at to The large used XXXX and by growth. time worked X EV APAC data-driven to aerospace improve heavy performance. software XX%, year-on-year management around our NVH example with expansion AI X-figure A also the Altair's several chain of relationship with system. vertical, This licensing, overall automaker twin, enterprise goals strategies. address of is portion want without

programs.We a for We playing of macro Newsweek role to XXXX named technology culture, from we recognition again Magazine's to supplier relatively closing also customers U.S. computing.Regarding are the growing Loved in year, X in new Fortune excited U.S. in We about XXXX succeed.In and vertical, solid the we company with helping a added appreciate of a technology by were XX despite the one its Alter and to list related one won This high-performance Most look workplaces products Europe highly technology. awards of our in these X-figure in named this the workplace expansion to magazine's U.K. Workplaces award and semiconductor forward forward challenging being look applications major a continued out respected environment. best a

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

Matthew Brown

a across in for for QX was to you, the thank positioned Hello XXXX achieve Jim. are our we software us. of to high impressive goals call quarter positive for on continues guided once progress Altair exceeding every quarter, end to again year. everyone metric results an the and to by with you verticals.Fiscal the for well we financial revenue the fueled for our financial and the Thank strength range joining in a way, number of

in million, review the may rates foreign dive financial details and be constant I in remarks, in impacted are increase changes growth significantly currency. quarter remember of my into results, results reported Total our As reported in currencies than for dollar, and therefore exchange by throughout constant $X.X our year-over-year some in the of make were the both and of transacted $XXX.X reported other in revenues U.S. our the rates.To our and expenses currency bills will to million results, X.X% I reference of a currency. aid

in including XXXX strong. in vertical we growth within across renewal the XX.X% perspective, $XXX.X our sell revenue automotive, into our products that product was support and use continue customers, of ago. data view to drive applications technology a reported for and AI decision-making.From base, see analytics demand the where our our aerospace, QX, currency expansions constant to XX.X% designs customers saw cross portfolio as in currency to encouraging increase million, and strength meaningful are we few a in better in These expanding and revenue, Jim in in QX product was and million, Software year-over-year engineering QX In of includes our XXXX. of XX.X% revenue solution a reported traditional wins XXXX. XX.X% QX mentioned is in and a particular other to compared year-over-year Total of are currency, constant QX compared minutes services and currency which $XXX.X increase XXXX,

software recurring first approximately quarters to an at XXXX.Non-GAAP points. product which was prior software XXX license through of third quarter, basis the strong of is in XX% Our margin, rate, XX.X% compensation, the to continues year, that compared recurring, XX.X% X percentage which are increase the be stock-based excludes the in gross billings of

an and product increase. software margin our mix Software gross in this increase drove product

XX.X% revenue, XXXX, compared software gross product total prior revenue the of to which Our was carries in margins, higher QX in XX.X% year.

or in term, operating non-GAAP continue software expect to continue in was and continue in the growth we of maintaining year-over-year there research XXXX long compensation decreases XXXX. impact in $X.X modestly general of administrative an compared to as makeshift by outpace since just to and while compared period, disciplined smallest was the million X.X%. margin near and offset services increase our acquisition a $XX.X sales partially And which QX we capacity, operating costs. and increase by change increase in In revenue, million percentage of amortization COVID $XX.X result, our driven development exclude the product in revenue. pandemic expenses the the revenue total in to QX will towards term.Non-GAAP costs, increases to RapidMiner. expenses, a of we as quarterly was represents or intangible a Over to in expect EBITDA other revenue the celebrated stock-based million in X.X% million $XX.X increase XX.X% gross general were approach by The year-over-year driven anniversary increase September, and assets, the of year-over-year This X-year and year-ago XXXX.Adjusted to

balance our approximately ahead quarter. to Altair We our increase sheet. exciting In cost equivalents, new $XXX.X from expectations.Turning the about addition $XX.X release, realized the in quarter and cash also increase with we've million spoke an synergies cash the that driven GAAP to our to of RapidMiner million operating in tables we QX prior This product year earnings of primarily was capabilities and by Jim XXXX our cash X provided to the from $XX.X including ahead cash XXXX, guidance quarters generation. comparable pleased be release, of in through activities, amounts. cash full to for XXXX detailed guidance flow Free million.Looking we've was reconciliations with and first flow continue press ended

to product increase we range $XXX rates on last our expect provide X.X% to reported in a changed the million impact software $XXX and to to as expectations, FX both in throughout in the we've to FX to X.X% provided exchange revenue year. in To our X.X% X.X% XXXX, We see currency currency growth guidance year-over-year more are continuing relative clarity of of foreign reported and an QX, rates constant currency. million, tables.For in currency constant impact

to million, in for changes range slightly reported product midpoint of currency. currency constant due our in For rate software in full XX.X% previous and X.X% outlook our increase are $XXX currency constant outlook X.X% in to a year reported a XXXX, revenue X.X% at million the exchange foreign $XXX currency maintaining to of decreasing year-over-year to we to in and

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

and decreasing $XXX in For of constant in currency the to our currency full slightly of constant the X.X% year our EBITDA. foreign rates maintaining to XXXX, $XXX reported X.X% changes midpoint we in in in outlook reported to range year-over-year previous adjusted due increase a and for total million, currency a outlook to million to X.X% revenue currency.Moving are X.X% exchange to at

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

For decreasing our of constant year to currency XXXX, currency are to adjusted in our XX.X% the and currency of full due to finally, maintaining flow, from midpoint of to or our previous EBITDA revenue for or a last million slightly outlook in year $XXX free range rates at year-over-year. in $XXX quarter total of XX.X% million, outlook increase $XXX we and and for we are exchange full maintaining foreign substantial a to outlook compared range million $XXX to to reported total million revenue be XXXX.And for XX.X% million XXXX, in which the we $XXX.X represents the expect cash changes

year. the in first the to are collections pattern which and on smaller cash of that from cash larger year company. shown in proud As our team expecting the year.I'm this primarily pattern far in historical a very of flow many patterns, cash QX fluctuate and this collections areas the half billings sensitive second to the made particular, our the free inflow continue execution steady In has and half from We're seasonally. so inflow year, our has billings QX, a reminder, free across expectations a so of

gives our to goals X financial confidence the we'd for Our on meet performance we're your through Operator? year.With us first happy track to questions. take quarters the that, be

Operator

Instructions] of & coming with Company the [ from first Chelsea And line ]. our [Operator question Needham

Unknown Analyst

good to and was little I looks kind but maybe didn't to with relative constant QX guided balance, on you at change QX, seems ago, to to of QX a your amount start upside bit to downside So of which be quarter a result guidance, there your what you least on want a the QX, outlook. like currency basis, but there really it

So and first take across timing you my a just are revenue, those I wonder, question. are really issue the just something X this else? of those put That's quarters, or seeing

Matthew Brown

Yes, for can question. that. take the thank I you

of outlook been very XX%. of growth things one what product of year this the we've just that our against and viewed steady just showing So proud midpoint the at revenue we as software the execution is

So that and a to recall, to emphasize as whole. we half been we're really quarter we that as the each probably reaffirm sort a outlook tried as year, Last the of able we really looking at had half to you as quarter, we've start go. just the second fact that second

were constant intact. consistent helps currency. in like in QX really we you total, good and de-risk in QX. performed, view still some that And news the second so feel is above half expecting, is got see when look what remains view we our and And we how And we that benefit

that it's So about. happy we're pretty something

Unknown Analyst

maybe softening, maybe Jim, regarding of strikes, strikes, the to UAW side, looks industry, I question, EV demand more cost so positive mean, mean, there for it pressure think headlines it the maybe that automotive been on I I maybe related on but put not also the some good of So amount a quite has can the like our some Jim. next automakers.

business? your cause do do terms for of the question issues some some areas for probably of for I with Altair's some think affecting next is, you the in going plan the the customers see in budget when of year's that's they relevant automotive? Or the macro see to strikes vertical you

James Scapa

we Thank In I do that, much Charles. you. really quite work don't general, frankly. any see by just that is affected being Sure, the of

more I are think and doing innovate. frankly, these for things and They because continuing and recognize path to companies science is they to faster. embrace more, simulation less to need actually cost that continuing this the data are to

way frankly And better I that, that to so companies And have past. the the quite not a we're think the used you that managed might I their bit think anticipate. just affected speaking, auto finances they in in than

And that don't so us you. see I at kind strain of affecting all. just Thank

Operator

William next line Becker question of from the And Dylan coming Blair. with our

James Scapa

the the to missing I we question? should next question. Maybe Am go

Operator

Our of Blair next question coming Rosenblatt Securities. from the from line Abernethy

Blair Abernethy

can Jim. this of little on just how you Just that, and to big things how how color a cross-selling quarter. manufacturing, you. just year? off RapidMiner science now I drill sense that in little data Can on did the of that had kind that on, wanted a I guess accretive a for more give a the Great you to color pull to that really couple a you want in were you've on to able opportunity us is be more of get

James Scapa

applying others dismissing are what projects. of these it's were kind told now. our experience I is be we're really to technology, coming of our we're for look best-in-class, Yes, amount seeing digital in but in we we it's it's great huge, starting very, know, earlier, just it's just physics everywhere really fruition. a interest great well to and it. example, invest is think you, just now. I seeing, continue to being technology, twin very wanting technology, ROM We're And technology honest And with to AI implementations. just expertise, an We're right think the that really area that we're positioned lot a and incipient And with frankly competition. outpace huge you maybe to of AI and And

huge, it's think I huge. absolutely

Blair Abernethy

you expected as And in is the have role to? Altair units would this a it playing

James Scapa

plays there, watching and because, their a singles know, of are companies for we last seeing as and pretty to like quickly over us everyone's starting that We're It play. small year, expenses see this as you very to trying We're here, plays well and RapidMiner we that's really enterprise. look really, role POCs closely boil know, opportunities, they're do as especially, not take across projects, they and high-value And everywhere, you because implementations kind and and into big doubles, a are much the right ocean. doing of the lots solution the turning those benefits. the company to bigger do

So, things yes, feel really embraced right about good we really now. And our everything. team has

you at XX% around year area. traffic, discussion data If a in inside look traffic ago, you you Altair, much communication the the if looked of as science saw opportunities the

So it's hold. really taken

Blair Abernethy

how market. ask in I you like the would take Obviously, seen lots there. your other business gears, Shifting commentary China, on we've about your of doing is to

big of sense, to maybe remind is us you want this a of a for kind how Just or market too guys?

James Scapa

of last basically us. space. Commerce very, really don't that Yes, a other of our out know, break think the it's I but least don't to very the percentage, from break the mean, at the we I out, beginning. Quite day the players over far relatively that just right in announcements Department as came as familiar of we small I some that the with don't as affect surprise following requirements, know, you We've frankly, compared you're been

pretty affected of over been to continue banned have revenues list. Our because companies they to years, the add simply last couple the more significantly

maybe coming And the and making finally stuck aggressive sure more that vigilant been in. in it's have rules. companies other less perhaps they think to I

Operator

Becker question next Dylan William from with And Blair. our

James Scapa

move you right, on. Dylan there? to All got

Operator

Our line next from Mark Schappel Capital with question the Markets. of coming Loop

Mark Schappel

was you quarter foreseeing in announced advantage basically of like a the take stronger firm if looks you the to looks were XXXX. year starting big wondering like somewhat positioned the this quarter that. you, Jim, to releases are And that of kind view. set it with last transition of a strong last in product I year kind environment still of part up that hold just demand of you as were the, a it

James Scapa

the in confident really remain I product. Yes,

that and I And we a to innovation, about that you customer perfectly see all For the that macro model is the I honest culture, know, me, with Obviously, relative continuing competition. you, trumps of the But company, know, think do. to us factor. engagement products it's business you sort everything. the be of have, big rise, to we

challenges the China think I next Obviously, still Things the competition. on we're is is excited I'm war going I But that in you twist. set in of our very continue think it. about about And, this a I'm the continue just and releases new Europe super is optimistic with year Israel continue next phenomenal. business know, spoken of all some going got and outpace to and that grow to balance, to earlier. about to year.

Mark Schappel

data any or uptake more in, than And wondering so question. I commentary regarding was one say, others. of appreciate geographies you're into certain just Great. then industries design particular I the your more if provide seeing the color you'd customers. cross-selling analytics some additional whether around that,

James Scapa

see at of analytics just some going grow pretty lot selling broad-based, very, chasing HPC of in substantially. it's we're continue but that science. an have in the it that in fore, impact. everyone bringing But starting And the electronic to think is didn't stuff of interested I earlier. very applying obviously, the we we're data to that we the seeing are bunch to to super was a and wins our technology is a in of It's of here been HPC customers direction. company data years are think accounts work this I interesting we I Others at that I seeing now, actually. for moving the some looking you me, whole we're, there's playing know, rising done. and We're before, actually the that's simulation leading many And to we point, weren't where have, in think

Operator

line Markets. And Hedberg our the RBC next of Matthew coming question with from Capital

Matthew Hedberg

and is you actually there to just the future? guys have mentioned for to I follow on there a investing your you in think HPC been more that. capabilities Jim, generative longer-term for years, Do wanted and you AI opportunity, even business, you up leverage

James Scapa

I is yes. answer mean, the

seeing to started simulation data more that this made amount that's you more supercomputing by I've conference think of and HPC and starting you science. on I see was the leaps growing before all being, being absolutely investing because I supercomputing, I just from I done to started the know, science about bounds. growing, move comment know, the side data is

hybrid a course, and as that. moving this that think want moving lot of and great cloud And lot is I need. run you manage of of And to effectively, companies to technology edge effectively. we're A really manage it And you we're is basically They're in or when very very a well. licenses lets all to, the the Of infrastructures spot. where what building cost that's complexity. by all challenged all costs software very it

Matthew Hedberg

fantastic. a or to of investments Just sort or of in commentary certain you on Matt. for I trajectory of That's think spending either grow, increase you. think to maybe you a said, then expect either get sense continue do calendar 'XX investing about of I next How well. in And trying the guess, some for areas? to front Do you to year, Jim, you cycle? you margin gave expect as

James Scapa

But open we critical of to really to into the although think for Yes, do are invest held grow this needed. continuing I to we're to up to where going pretty we on we next mean, areas continue going that tight balance, margins in. year, invest and and we're see couple as us to and I continue in year, try similarly still coming

if our moving do have capable, need He getting add to wants think, to more I at as does. Matt you resources we're invest to be. probably continue to where more know don't well. we something them But there. So I and

Matthew Brown

that the thing increase agree said, in seeing we're proud one I'd year-on-year we're my what percentage everything it I Yes, is addition, in remarks, the things super just, just number now now. mentioned year-on-year add of increase I of but I of in quarterly mean, prepared we've OpEx. with Jim our the that only is the but is in smallest seen a years

digest been of as made we've this very disciplined some starting we last late we So, the were year that to year. acquisitions

anticipated QX And had and so, we play to in a that out in QX. way starting that's

and but where invest be to of So, necessary. that we're we're happy spend then about to going and course continue disciplined,

lots our really XXXX So, mind got in outlook a approach well. and to but places disciplined different we've continue good as be in have for of there,

Matthew Hedberg

Got it. on results, guys. the Congrats

Operator

line our the And from Research. with of next Tilton Wolfe coming Josh question

Arsenije Matovic

Josh. it's outlook, maybe the $XX for think or is Is down-market? have sales, better for looking we not to cross-opportunities that down-market just sentiment million realizing it strength channel on the were Arsenije fair in indirect channel is at the This I think When roughly macro in current quarter. continued materially the despite changed purchases

James Scapa

Matt, if to want me, you You that, want. can about talk or I start

Matthew Brown

our think of partners. do, to work the recognize importance want of to a the it's certain We that. direction. We in years. percentage indirect mean, Sure, and more, but channels direction. you with business. think get it just still go it's And the right really or it getting last we're I working start. X more the and investing we've yes, more the I going over to at I And and and in right ahead investing know, been X I better we're going have We think in

Arsenije Matovic

Then if may. a follow-up, I Great. just brief

In deals in large support decent amount next quarters. what a to were it backlog strong decent I'm signed kind like pretty or at the terms couple of of outlook in of there least into renewals that seeing seems were QX,

the how on backlog same thinking more in that sentiment amount on on you base of expand the of hesitant kind of maintain kind Just about viewing of outlook. renewal based terms you're can and macro what this whether you're

James Scapa

all balance, maybe of almost are them I'll answer it, part wants of are and our to rock but Matt mean, I growing. renewals the answer solid

feel we for know secure us you very, you to what and I and for seem don't the and us. very very, very Matt. them to, come in renewals about in go expansion add want right direction to all that, of know, you the the know, So, confident continuing

Matthew Brown

add just deferred very would I is and and to grow continued Yes, our outlook. and revenue backlog our plus has supports strong

It that numbers. and something it's confidence pleased good So visibility we're gives the us with. into

Operator

And question of Oppenheimer. coming the line our from Khalil from next Ahmad

Ahmad Khalil

I if customer for update was It's could trending. give wondering color you guys renewal wins in book. on Ahmad on for and deals new the on Ken Wong. net new are the how us an Thanks the strength

James Scapa

that, want --? you answer to Do or Matt,

Matthew Brown

Yes. Sure.

as net coming So, new is well. along nicely

enthusiasm about, seeing couple has You opportunities a know, ago, the our the pipeline, mentioned out just we're Jim we been seeing our it and also that not really is super traffic of that expansion internal for you -- that we're are excited ago. did look know, the new that and just when across we entire never just but products higher. something opportunities minutes at opportunities renewals, that our only cross-sell portfolio within not year see a brand we're exist

guidance about And again, year. for pleased supports our the underlying So, we're it about happy We're just it. that.

about very if Jim, don't that. I more there. you color know had So, happy

James Scapa

I No, fine. think that's

Operator

And time. any participating. at gentlemen. showing you, conference. thank in not conclude And does I'm this you and This further today's Q&A ladies the And questions queue thank for

may now disconnect. You

You may now disconnect.

Altair Engineering (ALTR) 2 Nov 232023 Q3 Earnings call transcript