Altair Engineering Inc. (ALTR) on Q3 2023 Results - Earnings Call Transcript

Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to Altair's Third Quarter 2023 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please note that today’s conference will be 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. Dave Simon: Good afternoon. Welcome, and thank you for attending Altair's earnings conference call for the third quarter 2023, ended September 30, 2023. I'm Dave Simon, Altair's SVP for Investor Relations, and with me on the call are Jim Scapa, Founder, Chairman and CEO; and Matt Brown, Chief Financial Officer. After market close today, we issued a press release with details regarding our third quarter 2023 performance and guidance for the fourth quarter and full year 2023, which can be accessed on the Investor Relations section of our website at investor.altair.com. This call is being recorded and a replay will be available on the IR section of our website following the conclusion of this call. During today's call, we will make statements related to our business that may be considered forward-looking under federal securities laws. These statements reflect our views only as of today and should not be considered representative of our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from our expectations. These risks are summarized in the press release that we issued earlier today. For a further discussion of the material risks and other important factors that could affect our actual results, please refer to those contained in our quarterly and annual reports filed with the SEC, as well as other documents that we have filed or may file from time to time. During the course of today's call, we will refer to certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our press release. Finally, at times in our prepared comments or responses to your questions, we may offer metrics that are incremental to our usual presentation to provide greater insight into the dynamics of our business or our quarterly results. Please be advised that we may or may not continue to provide this additional detail in the future. With that, let me turn the call over to Jim for his prepared remarks. Jim. Jim Scapa: Thank you, Dave, and welcome to everyone on the call. The third quarter of 2023 was excellent for Altair with software product revenue, total revenue, and adjusted EBITDA all above the high end of our guidance. Our Q3 performance demonstrates the power and veracity of our vision for the convergence of computational science and AI across industries and verticals, including engineering, scientific discovery, and business. Adjusted EBITDA for Q3 2023 more than doubled year-over-year to $15.5 million. Software product revenue as a percentage of total revenue for the third quarter grew to 88.9% compared to 86.9% in the third quarter of 2022. Software product revenue as a percentage of total revenue for the first nine months of 2023 increased to 89.3% as compared to 87.8% in the first nine months of 2022. The recurring software license rate for the first nine months of 2023 was 94%, an increase from 93% through the same period in 2022. Software product revenue on a constant currency basis grew by 14.5% in the third quarter compared to the third quarter of 2022, and 11.1% for the first nine months of 2023 compared to the same period in 2022. Altair's growth continues to be broad-based across many geographies, technologies, and verticals. We are releasing a landmark set of product solutions across our entire portfolio, representing some of the most important and powerful software updates we have delivered in many years. Included with these releases are next-generation user experiences, modern APIs, tightened integrations between products, seamless access to high-performance computing, and increased computation speeds. Over the past year, our employees from all parts of the organization have embraced a shift to focusing on verticals, as well as cross-pollinating our data science expertise with our traditional simulation and design go-to-market teams. This convergence has created new growth opportunities with our customers by helping them apply digital twin technologies to improve their products, scale compute power faster, and use data analytics and artificial intelligence to accelerate their digital transformation efforts. As part of this effort, we are pushing the boundaries of what we know is possible by integrating our products in truly transformative ways across all three of our major software platforms. Altair HyperWorks, our design and simulation platform, Altair RapidMiner, our data analytics and AI platform, and Altair HPCworks, our high-performance computing and cloud platform, as well as Altair One, our cloud innovation gateway. Altair HyperWorks 2023 empowers engineers with a comprehensive suite of design and simulation solutions that harness the power of computational science, HPC, and AI, its new, modern user experience and python APIs throughout the platform empower developers and users to create unified best-in-class solutions, leveraging technology from the entire Altair HyperWorks portfolio. HyperMesh was upgraded with a user-centric design providing unmatched pre- and post-processing capabilities through AI power tools and next-gen design and optimization workflows. HyperMesh CFD complements these capabilities by streamlining CFD workflows within a unified environment. SimLab has expanded capabilities as an integrated multiphysic solution for electronic design automation, enhancing user-friendliness while advancing electronic and EDA product development. Our new product introduction of simulation data management is an exciting and timely solution for customers looking to leverage AI-driven simulation, where historical simulation runs become key sources of valuable data. We see significant momentum among all customers to implement digital twins for both design and in-service applications. Twin Activate, the foundation of Altair's digital twin solution, continues to evolve as a differentiated solution, especially with our strong ROM AI capabilities. In addition, the integration of OmniV, recently acquired for requirements management, gives our platform a strong and complete digital twin offering for customers. SimSolid continues to gain market share in all our established and many new accounts as the technology rapidly matures and adds new functionality. This release enhances SimSolid's ability to automatically set parameters, leveraging machine learning, which is key for the design community. Inspire's release beautifully integrates implicit modeling for optimizing lightweight lattice structures, building on technology from our 2022 acquisition of Gen3D. This software is further enriched by a new cutting-edge visualization and rendering graphics engine, which will also be released in future versions of HyperMesh and SimLab. Altair RapidMiner 2023 now delivers generative AI capabilities for domain experts and data scientists and deeper support for coding data scientists. The platform also continues to integrate advanced automated functionality, including decision trees, auto-clustering, auto-machine learning, auto-feature engineering, and auto-forecasting. Customers can build and use rich real-time dashboards more intuitively than ever with a new streamlined user interface, and those with intellectual property in the SAS language will be able to write, test, and run SAS code directly from their Python development environment. Furthermore, Alta RapidMiner with generative AI enables non-programmers to create large-language models and refine models for new or proprietary use cases, all without needing to write code. Users can access all 300,000-plus hugging-face models with one click and fine-tune models with billions of parameters, competing with some of the biggest models on the market. Generative AI in Altair RapidMiner also simplifies and accelerates workflow design. Users simply state the desired data transformations, and the platform will suggest and configure the appropriate workflow. Altair HPC Works 2023 has undergone one of the biggest technology changes in decades. Through the adoption of web-scale distributed technologies, we give HPC centers around the world the scale and adaptability demanded by modern distributed workflows. Furthermore, we are improving our dynamic cloud scalability based on real-time demand by implementing a unified interface for monitoring cloud-deployed nodes. This ensures efficient cloud spending by enabling global cost controls and providing enhanced visibility from your preferred Altair workload manager. By targeting specific workloads with cloud resources, we ensure expenditure matches business needs. Altair One 2023 lets customers easily configure, build, and deconstruct their HPC infrastructure on demand with any of the popular cloud providers, avoiding vendor lock-in and uncontrolled cost. Altair Material Data Center and our simulation data management are built on the Altair One platform for consistency, traceability, and collaborative decision-making across the enterprise. On Altair One, users can interact with Altair support, access our new enhanced AI-powered and manage their software licenses and users. In addition to these exciting product releases, we have added additional technology to our structural optimization portfolio with the acquisition of OmniQuest. The Company was founded by the late Professor Gary Vanderplaats, a giant in the field of structural optimization. Its advanced structural analysis and optimization software is used by many customers in the automotive sector to develop lightweight, efficient designs. We believe this acquisition further enhances Altair's optimization market leadership. The aerospace vertical was particularly strong for us in the third quarter. Notably, Altair extended its long-time collaboration with Airbus with a recently signed new multi-year agreement. This agreement allows Airbus to access the complete Altair portfolio, including our simulation, HPC, data analytics, and AI software solutions. Additionally, it will accelerate Airbus's deployment of Altair SimSolid, our game-changing meshless simulation technology. In addition, an aircraft engine manufacturer signed a six-figure license agreement focused on data analytics and machine learning to detect anomalies related to electromagnetic interference. An aerospace system supplier committed to using Altair RapidMiner to drive its data-driven digital transformation for engineering, manufacturing, and aftermarket services. A major aerospace company renewed with a double-digit increase on its annual seven-figure spend with Altair simulation tools regarded as a core technology for its product development and verification processes. Finally, an aerospace supplier sourced a six-figure deal specific to Altair Monitor, a real time software licensing, monitoring and management system. The automotive vertical, driven by several innovative applications, contributed to our third-quarter software sales growth. A European automaker worked with us to use AI for improved NVH performance. An APAC automaker used RapidMiner to improve its supply chain efficiency, and a Formula 1 team expanded its six-figure annual spend without tear by over 30%, with applications mainly focused around structural optimization. Finally, we had a six-figure expansion with an EV manufacturer, including work targeted at vehicle dynamics. In the heavy equipment vertical, we want a multi-year seven-figure commitment representing double-digit year-on-year expansion compared to 2022 and also going forward. This relationship is a great example of a global company leveraging a large portion of Altair's portfolio to address longer-term goals for electrification, digital twin, and overall data-driven enterprise strategies. We are excited about its products and look forward to playing a continued role in helping this company succeed. In the technology vertical, we won two new semiconductor customers in Europe and a seven-figure expansion with a major U.S. technology supplier for applications related to high-performance computing. Regarding workplace culture, Alter added to our growing list of 2023 awards by again being named one of Newsweek magazine's Most Loved Workplaces in the U.S. and in the U.K. This year, we were also named one of Fortune Magazine's 40 best workplaces in technology. We appreciate the recognition from these highly respected award programs. We look forward to closing out a solid 2023 despite a relatively challenging macro environment. Now I will turn the call over to Matt to provide more details on our financial performance and our guidance for the fourth quarter and full year 2023. Matt? Matt Brown: Thank you, Jim. Hello to everyone on the call and thank you for joining us. Q3 was an impressive quarter for Altair with our financial results exceeding the high end of the range for every metric we guided to for the quarter, once again fueled by strength in software revenue across a number of verticals. Fiscal 2023 continues to progress in a positive way, and we are well positioned to achieve our financial goals for the year. As I dive into the details of our financial results, remember some of our revenues and expenses are transacted in currencies other than the U.S. dollar, and therefore our reported results may be significantly impacted by changes in foreign exchange rates. To aid in the review of our results, throughout my remarks, I will make reference to growth rates in both reported and constant currency. Total bills for the quarter were $124.4 million, a year-over-year increase of 1.2% in reported currency and $0.1 million in constant currency. Software product revenue in Q3 2023 was $119.1 million, a year-over-year increase of 14.8% in reported currency and 14.5% in constant currency compared to Q3 2022. In Q3, we saw particular strength in expansions within our renewal base, including the cross sell of our data analytics and AI solution into traditional engineering customers, as Jim mentioned a few minutes ago. These wins are encouraging and support our view that customers are expanding the use of applications across our product portfolio to drive better designs and decision-making. From a vertical perspective, we continue to see meaningful growth in automotive, aerospace, and technology where demand for our products is strong. Total revenue in Q3 2023, which includes services and other revenue, was $134.0 million, a year-over-year increase of 12.3% in reported currency, and 11.9% in constant currency compared to Q3 2022. Our recurring software license rate, which is the percentage of software product billings that are recurring, continues to be strong at approximately 94% through the first three quarters of 2023. Non-GAAP gross margin, which excludes stock-based compensation, was 80.1% in the third quarter, compared to 78.6% in the prior year, an increase of 150 basis points. Software product mix and an increase in our software product gross margin drove this increase. Our software product revenue, which carries higher gross margins, was 88.9% of total revenue in Q3 2023, compared to 86.9% in the prior year. Over the long term, we continue to expect a general makeshift towards software product revenue, as growth there will continue to outpace services and other revenue. And as a result, we expect our non-GAAP gross margin to continue to increase modestly in the near term. Non-GAAP operating expenses, which exclude stock-based compensation and amortization of intangible assets, were $93.9 million compared to $91.7 million in the year-ago period, an increase of just 2.4%. This year-over-year change was driven by increases in research and development and sales capacity, partially offset by decreases in general and administrative costs, and represents the smallest year-over-year quarterly percentage increase in operating expenses since the COVID pandemic impact in 2020. Adjusted EBITDA in Q3 2023 was $15.5 million or 11.5% of total revenue compared to $6.8 million or 5.7% in Q3 2022. The year-over-year increase was driven by the increase in revenue while maintaining a disciplined approach to costs. In September, we celebrated the one-year anniversary of our acquisition of RapidMiner. In addition to the exciting new product capabilities that Jim spoke about in our Altair RapidMiner 2023 release, we've also realized cost synergies ahead of expectations. Turning to our balance sheet. We ended the quarter with $431.2 million in cash and cash equivalents, an increase of approximately $12.9 million from the prior quarter. This increase was driven primarily by cash from operating activities, and we continue to be pleased with our cash flow generation. Free cash flow through the first three quarters of 2023 was $97.8 million. Looking ahead to guidance for Q4 and full year 2023, we've provided detailed guidance tables in our earnings press release, including reconciliations to comparable GAAP amounts. We are continuing to see an FX impact relative to 2022, as foreign exchange rates changed throughout last year. To provide more clarity on the FX impact to our expectations, we've provided growth rates in both reported currency and constant currency in our guidance tables. For Q4, we expect software product revenue in the range of $153 million to $159 million, a year-over-year increase of 5.6% to 9.7% in reported currency and 5.1% to 9.3% in constant currency. For full year 2023, we are maintaining our previous outlook for software product revenue in constant currency at the midpoint and slightly decreasing our outlook in reported currency due to changes in foreign exchange rate to a range of $547 million to $553 million, a year-over-year increase of 8.0% to 9.2% in reported currency and 9.4% to 10.6% in constant currency. For Q4, we expect total revenue, which includes services and other revenue, to be in the range of $169 million to $175 million, a year-over-year increase of 5.3% to 9.1% in reported currency and 4.9% to 8.6% in constant currency. For the full year 2023, we are maintaining our previous outlook for total revenue in constant currency at the midpoint and slightly decreasing our outlook in reported currency due to changes in foreign exchange rates to a range of $610 million to $616 million, a year-over-year increase of 6.6% to 7.7% in reported currency and 7.9% to 9.0% in constant currency. Moving to adjusted EBITDA. For Q4 2023, we expect adjusted EBITDA in the range of $44 million to $50 million or 26.0% to 28.6% of total revenue, compared to $38.7 million, or 24.1% of total revenue in Q4 2022. For full year 2023, we are maintaining our previous outlook for adjusted EBITDA and constant currency at the midpoint and slightly decreasing our outlook in reported currency due to changes in foreign currency exchange rates to a range of $120 million to $126 million or 19.7% to 20.5% of total revenue compared to $108.6 million or 19.0% of total revenue in 2022. And finally, for the full year 2023, we are maintaining our outlook from last quarter for free cash flow, which we expect to be in the range of $108 million to $116 million, and represents a substantial increase year-over-year. As a reminder, our cash flow expectations are sensitive to billings and collections patterns, which fluctuate seasonally. In particular, our historical pattern has shown a larger free cash inflow in the first half of the year, primarily from collections on billings from Q4 and Q1, and a smaller free cash inflow in the second half of the year. We're expecting that pattern to continue this year. I'm very proud of the steady execution our team has made so far this year in so many areas across the Company. Our performance through the first three quarters gives us confidence we're on track to meet our financial goals for the year. With that, we'd be happy to take your questions. Operator? Operator: [Operator Instructions] And our first question coming from the line of Charles Shi with Needham & Company. Charles Shi: So maybe I want to start with your Q3 result and the Q4 guidance, which kind of relative to what you guided a quarter ago, there was a good amount of upside to Q3, but there seems to be a little bit downside to Q4, but on balance, it looks like at least on constant currency basis, you didn't really change your outlook. So I really just wonder, this put and take across those two quarters, are those just a timing issue of the revenue, or you are seeing something else? That's my first question. Matt Brown: Yes, thank you for the question. I can take that. So one of the things that we've just been very proud of this year is just the steady execution against what we viewed as our outlook and software product revenue at the midpoint showing growth of 10%. So we had that outlook to start the year, and we've been able to just sort of reaffirm that each quarter as we go. Last quarter, as you probably recall, we really tried to emphasize the fact that we're looking at the second half really as a second half as a whole. And so when you look and see how we performed, that view is still intact. And we feel like the really good news is we got some benefit in Q3 above what we were expecting, and that helps de-risk Q4. And in total, our second half view remains consistent in constant currency. So it's something that we're pretty happy about. Charles Shi: So maybe our next question, maybe for Jim. Jim, I think there has been quite a good amount of not so positive headlines related to the automotive industry, I mean, regarding maybe some of the demand softening, maybe more on the EV side, but also that the strikes, UAW strikes, I mean, it looks like it can put some cost pressure on automakers. I think the question is, do you see some of the macro affecting vertical in automotive? Or do you see some of the strikes probably going to cause some issues with your customers in terms of when they plan for the next year's budget for the areas that's relevant for Altair's business? Jim Scapa: Sure, Charles. Thank you. In general, I just don't see the work that we do is really being affected much by any of that, quite frankly. I think these companies are continuing to need to innovate. They are continuing to embrace simulation and data science more and more, frankly, because they recognize that this is the path to actually doing things for less cost and faster. And so we're just not affected in the way that you might anticipate. And I think that, frankly speaking, I think that the auto companies have managed their finances quite a bit better than they used to in the past. And so I just don't see that kind of strain affecting us at all. Thank you. Operator: And our next question coming from the line of Dylan Becker with William Blair. Jim Scapa: Am I missing the question? Maybe we should go to the next question. Operator: Our next question coming from the line of Blair Abernethy from Rosenblatt Securities. Blair Abernethy: Great quarter. I guess a couple of things I wanted to drill in on, Jim. Can you just give us a little more color on this cross-selling that you were able to pull off on the data science in the manufacturing, and just kind of a little more color on how you did that, how big is that opportunity now that you've really had RapidMiner for a year? Just want to get a sense of how accretive that can be to you. Jim Scapa: Yes, I think it's really huge, to be honest with you, and it's really just incipient right now. We're just seeing, you know, a huge amount of interest in applying our physics AI technology, for example, ROM AI technology, wanting to digital twin implementations. And we're frankly very, very well positioned with great technology, great expertise, and a lot of experience now. We're just seeing everywhere we look are these kind of projects. And what we're being told is that our technology is best-in-class, and we continue to invest in it. And I just think we're starting to outpace the competition. And it's an area that maybe others were dismissing earlier, but it's really coming to fruition. I think it's huge, absolutely huge. Blair Abernethy: And is the Altair units playing a role in this as you would have expected it to? Jim Scapa: It plays a really, really big role because, you know, especially, you know, everyone's watching their expenses pretty closely over this last year, and that plays well for us because we look like a very high-value play. And as they do implementations and as we do projects, small POCs here, there, and everywhere, they're quickly seeing benefits. We're not the kind of company that's trying to boil the ocean. We're doing lots of singles and doubles, and those are turning into much bigger opportunities, and companies are starting to see RapidMiner as the right solution to take across the enterprise. So, yes, we feel really good about things right now. And our team has really embraced everything. If you look a year ago, if you looked at the traffic, the communication traffic inside of Altair, you saw 10% as much discussion around opportunities in the data science area. So it's really taken hold. Blair Abernethy: Shifting gears, I would like to ask you about your take on China, how your business is doing there. Obviously, we've seen lots of other commentary in the market. Just kind of want a sense, or maybe remind us too to how big of a market this is for you guys? Jim Scapa: Yes, I mean, we don't break out, you know, at least as far as I know, we don't break that out as a percentage, but it's relatively small compared to some of the other players that you're familiar with in our space. Quite frankly, I think the surprise announcements that came over the last day really just don't affect us. We've been basically following the requirements, of the Department of Commerce right from the very, very beginning. Our revenues have been affected pretty significantly over the last couple of years, simply because they continue to add more companies to the banned list. I think perhaps other companies have been more aggressive and maybe less vigilant in making sure that they stuck to the rules. And it's finally coming in. Operator: And our next question from Dylan Becker with William Blair. Jim Scapa: Dylan you there? All right, got to move on. Operator: Our next question coming from the line of Mark Schappel with Loop Capital Markets. Mark Schappel: Jim, starting with you, last quarter you positioned this year as somewhat of a transition year basically to set the firm up to take advantage of a stronger demand environment you were kind of foreseeing in 2024. I was wondering if you still hold that view. And it looks like the, it looks like kind of the strong product releases that were just announced in the last quarter are a big part of that. Jim Scapa: Yes, I remain really confident in the product. For me, it's all about products and innovation, the business model that we have, the culture, you know, of the Company, the customer engagement that we do. And I think that sort of trumps everything. Obviously, macro is a big factor. But I see us continuing to rise, you know, to be perfectly honest with you, relative to competition. I think this set of releases is just phenomenal. I'm super excited about it. And, you know, I'm still very optimistic about next year. Obviously, the war in Israel is a new twist. Things in Europe continue and some of the challenges with China and all that that got spoken about earlier. But on balance, I think our business is going to continue to grow next year and we're going to continue to outpace the competition. Mark Schappel: Great. And then one more question. I appreciate your commentary regarding the cross-selling of data analytics into the design customers. I was wondering if you'd just provide some additional color around that, whether you're seeing any particular uptake in, say, certain industries or geographies more so than others. Jim Scapa: It's super broad-based, actually. I was just looking at a whole bunch of the wins that we have, and it's interesting for me, you know, we're seeing the data analytics technology playing in some of our HPC customers that we weren't selling simulation to before, and I think that's going to continue to grow pretty substantially. We're seeing HPC actually rising in some of the accounts where we didn't see it earlier. And obviously, a lot of the electronic stuff that we're bringing to the fore, I think is starting to have an impact. But everyone is very, very interested in applying data science. And I think we're, at this point, we are the leading company in moving in that direction. Others are chasing now, but there's been many years of work here done. Operator: And our next question coming from the line of Matthew Hedberg with RBC Capital Markets. Matthew Hedberg: Jim, you just mentioned your HPC business, and I actually wanted to follow up on that. Do you think there is a longer-term opportunity, and you guys have been investing there for years, for you to leverage even more generative AI capabilities in the future? Jim Scapa: I mean, the answer is yes. I think I've made this comment before that I started investing on the data science side because I started seeing supercomputing, you know, the supercomputing conference was starting to move from just being, you know, all about simulation to more and more data science. I absolutely see growing, the amount of HPC that's being done is growing by leaps and bounds. Of course, a lot of it is moving to cloud or hybrid infrastructures and all that. A lot of it is moving to the edge as well. And we're building technology that lets you basically run where and when you want to, manage costs very effectively, manage the cost of software licenses very effectively. And that's what companies need. They're all very challenged by all this complexity. And I think we're in a really great spot. Matthew Hedberg: That's fantastic. And then for either you or Matt. Jim, you said, I think you gave some commentary on next year, expect to continue to grow, I guess, for either of you. How do you think about spending or investing in front of a calendar '24 cycle? Do you expect to sort of increase investments in certain areas? Just trying to get a sense maybe of the margin trajectory as well. Jim Scapa: Yes, I mean, we held pretty tight this year, and I think we're going to do similarly coming into next year, although we are going to open up in couple of areas that we see as really critical for us to continue to invest in. But on balance, we're still continuing to try and grow the margins and continue to invest where needed. So we're getting more and more capable, I think, at moving our resources where we need them to be. But you do have to continue to invest as well. I don't know if Matt wants to add something there. He probably does. Matt Brown: Yes, I mean, the only thing I'd add is just, I agree with everything Jim just said, but in addition, one of the things that we're super proud of is the year-on-year increase now in our OpEx. I mentioned it in my prepared remarks, but what we're seeing is the smallest year-on-year quarterly percentage increase that we've seen in a number of years now. So, we've been very disciplined this year as we were starting to digest some of the acquisitions that we made late last year. And so, that's starting to play out in a way that we had anticipated in Q3 and Q4. So, we're happy about that and we're going to continue to be disciplined, but then of course spend and invest where necessary. So, we've got lots of different places in mind there, but continue to be disciplined in our approach and have a really good outlook for 2024 as well. Matthew Hedberg: Got it. Congrats on the results, guys. Operator: And our next question coming from the line of Josh Tilton with Wolfe Research. Arsenije Matovic: This is Arsenije on for Josh. When we were looking at the continued strength in channel sales, I think it's roughly $20 million in the quarter. Is it fair to think that down-market sentiment for purchases have not changed materially despite the current macro outlook, or is the indirect channel just realizing maybe better cross-opportunities down-market? Jim Scapa: You want to talk about that, Matt, or me, I can start if you want. Matt Brown: Sure, yes, go ahead and start. I mean, we've been investing in the indirect channels more and more, you know, over the last really four or five years. And I think we're just getting better at it and we're investing more and working with partners. We recognize the importance of that. We want to get it to a certain percentage of our business. And I think it's going in the right direction. We still have work to do, but I think it's going in the right direction. Arsenije Matovic: Great. Then just a brief follow-up, if I may. In terms of what I'm seeing in strong backlog in Q3, it seems like there were at least a pretty decent amount of large deals or renewals that were signed to support kind of decent outlook into the next couple quarters. Just kind of expand on how you're thinking about what you're viewing in terms of the renewal base and whether you can kind of maintain this amount of backlog based on that same more hesitant sentiment on the macro outlook. Jim Scapa: I'll answer part of it, maybe Matt wants to answer the balance, but I mean, our renewals are rock solid and almost all of them are growing. So, you know, we feel very, very confident about the renewals and the expansion continuing to, you know, go in the right direction for us and come in and all of them seem very, very secure for us. I don't know what you want to add to that, Matt. Matt Brown: Yes, and I would just add our deferred revenue plus backlog is very strong and has continued to grow and supports our outlook. So it's something that we're pleased with. It gives us good confidence and visibility into the numbers. Operator: And our next question coming from the line of Ahmad Khalil from Oppenheimer. Ahmad Khalil: It's Ahmad on for Ken Wong. Thanks for the color on the strength in the renewal book. I was wondering if you guys could give us an update on how net new deals and new customer wins are trending. Jim Scapa: Do you want to answer that, Matt, or --? Matt Brown: Sure. Yes. So, net new is coming along nicely as well. You know, when we look out at our pipeline, you know, the opportunities that we're seeing are -- and the enthusiasm that we're seeing for our products has really never been higher. Jim mentioned it a couple of minutes ago, the internal traffic that we see across our entire portfolio is something that we're just super excited about, cross-sell opportunities and not only just expansion within renewals, but also brand new opportunities that just did not exist a year ago. So, we're happy about that. We're pleased about it. And again, it just supports our underlying guidance for the year. So, very happy about that. Jim, I don't know if you had more color there. Jim Scapa: No, I think that's fine. Operator: And I'm not showing any further questions in the Q&A queue at this time. And thank you, ladies and gentlemen. This does conclude today's conference. And thank you for participating. You may now disconnect. You may now disconnect.
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Altair Engineering's Financial Performance and Market Position

  • Altair Engineering (NASDAQ:ALTR) surpasses Zacks Consensus Estimate with third-quarter earnings per share of $0.24.
  • The stock price of ALTR reflects a decrease, currently at $108.63, amidst market volatility.
  • Despite a downgrade by William Blair, Altair's strong financial health and growth potential may continue to attract investors.

Altair Engineering (NASDAQ:ALTR) is a global technology company that provides software and cloud solutions in the areas of product development, high-performance computing, and data analytics. The company competes with other tech firms like ANSYS and Dassault Systèmes. On October 30, 2024, William Blair downgraded ALTR from "Buy" to "Market Perform," with the stock priced at $108.63.

Despite the downgrade, Altair Engineering has shown strong financial performance. The company reported third-quarter earnings per share of $0.24, surpassing the Zacks Consensus Estimate of $0.16. This is a significant improvement from the $0.14 per share reported in the same quarter last year, indicating robust financial health and growth.

The stock price of ALTR is currently $108.63, reflecting a decrease of 1.84% or $2.04. Today, the stock has fluctuated between $107.87 and $110.60. Over the past year, ALTR has seen a high of $113.12 and a low of $57.59, showing considerable volatility in its stock price.

Altair Engineering's market capitalization stands at approximately $9.22 billion, indicating its substantial size in the tech industry. The trading volume for ALTR today is 860,457 shares, suggesting active investor interest. Despite the recent downgrade, the company's strong earnings performance may continue to attract investors.

JPMorgan Bullish on Altair Stock

JPMorgan started its coverage of Altair (NASDAQ:ALTR) with an Overweight rating and a price target of $86 per share, as indicated in a recent client note on Friday. The firm's positive stance is based on Altair's robust free cash flow and its growth potential.

The analysts highlighted Altair's strong position in the stable and growing field of simulation and analysis. They project a significant growth in free cash flow (FCF) for the company, anticipating an increase of around 20% in the coming years. This growth is expected to be fueled by higher-than-average revenue increases, driven by Altair's expanding market share in simulation and analysis, leveraging its unique capabilities in high-performance computing (HPC) and data analytics/artificial intelligence.

Additionally, JPMorgan pointed out Altair's notably high operating leverage. While the firm anticipates a contraction in ALTR's market multiple as margins align more closely with those of its peers, the overall outlook remains positive. JPMorgan forecasts an attractive potential upside of approximately 15% for Altair, positioning it for relative outperformance in the market.

Altair Engineering Acquires World Programming

Altair Engineering Inc. (NASDAQ:ALTR) made an announcement on Wednesday, according to which it has acquired the UK-based World Programming (WP).

The acquisition will significantly expand the company’s portfolio in the data analytics space and provide material cross-selling opportunity for the Altair Knowledge Works suite of products.

Analysts at Berenberg Bank believe that SAS-heavy legacy workloads are being slowly transitioned into other programming languages (such as R and Python) and WP’s World Programming System (WPS) software is a big enabler of the migration to the modern and hybrid data environments. The acquisition is material and the analysts believe it has potential to be accretive to Altair’s growth and margin profile.