Altair Engineering Inc. (ALTR) on Q2 2022 Results - Earnings Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the Altair Q2 2022 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. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dave Simon, SVP for Investor Relations. You may begin. Dave Simon: Good afternoon. Welcome, and thank you for attending Altair's earnings conference call for the second quarter of 2022 ended June 30, 2022. 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 closed today, we issued a press release with details regarding our second quarter performance and guidance for the third quarter and full year 2022 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. Today, I will discuss our results for the second quarter of 2022 and exciting product momentum, including the recent acquisitions of Gen3D in concept engineering, some customer successes and other news. Altair has strong second quarter with all our key metrics coming in above our guidance ranges. Total second quarter revenue equaled $132.7 million. Software product revenue for the quarter was $116.9 million, up from $99.6 million in Q2 of 2021, reflecting year-on-year growth of 17% or 23% in constant currency. Adjusted EBITDA for Q2 2022 was $16.4 million compared to $9.5 million in Q2 of 2021, an increase of 73% from the second quarter of 2021. Software product revenue in H1 2022 was $257.8 million, up from $229.1 million in H1 2021, reflecting growth of 12.5%. Adjusted EBITDA for H1 2022 was $63 million versus $46.5 million in H1 2021, reflecting growth of 35.7%. Software product revenue in the first half of 2022 continued a strong positive trend at 88% of total revenue compared to 85% during the first half of 2021. Our recurring software license rate remains high at 93% for the first half of 2022, as compared to 92% for the first half of 2021. Simulation software continue to grow nicely in Q2 2022 across all regions. Data analytics and HBC software had outstanding performance in the quarter and the year-to-date with notable success outside of the Americas, where these businesses are generally less developed. Our software-related services revenue grew modestly for the first six months of 2022 with 6% growth compared to the first six months of 2021. Client engineering services continues to be down significantly in the first six months of 2022 with a 28% reduction as compared to the first six months of 2021, reflecting market trends and our own strategic shift towards higher gross margin activities. We feel tremendous excitement around the pace of our product development as we accelerate towards the next generation of solutions and technology for the hyper connected and converging markets we address. Our design, modeling and visualization products and solutions are moving fast to seamlessly integrate user experiences, share data natively, create easy workflows for difficult problems and operate in the cloud. Our solver technology is maturing rapidly, and we are beginning to look at multi-physics capabilities for SimSolid, which promised game-changing performance in new markets like electronics. Our HPC solutions are working on exascale performance and highly efficient cloud resource management. And our data analytics offerings product cap to deliver best in class action class enterprise-level usability, scalability and performance in public and private clouds. Altair continues to focus on simulation-driven design solutions, rapidly adding new geometry and design features and support for most traditional and additive manufacturing methods. Additive manufacturing has the potential to transform a number of industries, including aerospace, automotive, medical and energy by allowing for fewer components and designs and highly efficient shapes, not feasible with traditional manufacturing. In June, we acquired our Gen3D, a U.K. startup out of the University of Bath and a pioneer of implementing the implicit geometry method for describing highly complex geometries such as lattice structures in additive manufacturing. Its next-generation implicit algorithms and modeling techniques rapidly create complex geometry, not practical with traditional modeling approaches. The powerful ability to support lattice's to achieve optimum designs for fluid and structures and thermal requirements is an important and exciting addition to our simulation-driven design portfolio. The current Gen3D products will be available under Altair units . Gen3D's underlying technology will be integrated into Altair Inspire, our highly differentiated family of simulation-driven design products, giving customers a complete solution environment to rapidly create complex designs, while minimizing the risk of interim failures during the additive manufacturing processes. Another important area of focus for Altair is a convergence of electronics with the mechanical designs and the predictive and prescriptive analysis associated with this. Electronics systems and controls are increasing in importance and semiconductors are evolving towards 3D IC and chiplet technologies to increase speed and design flexibility. New solutions to prevent behavior and optimize designs require deep expertise and cutting-edge technology to solve new problems and pursue innovation. Altair is excited about this shift in the electronics landscape, and we are investing significantly to deliver truly disruptive solutions into this market by leveraging our experience in technology in novel ways. We have also been acquiring important expertise in technology, electronics over the last 10 years to carefully grow our electronics customer base, knowledge and our ability to synthesize new solutions together with our very extensive mechanical experience and simulation technology. In June, we acquired Concept Engineering, the leading provider of electronic system visualization software that accelerates the development, manufacture and service of complex electrical and electronic systems. This technology includes automatic schematic generation tools, as well as electronic circuit and wire harness visualization platforms that provide visual rendering and electronic design solutions. Concept engineering electronic system visualization and semiconductor design verification technology is available as a stand-alone solution and is also highly integrated into more than 40 EDA and CAD tools to provide end users with smart debugging functionality while saving months of engineering time and support for computer-aided development teams. Concept engineering addresses three primary markets, semiconductor design, EDA and capital development and industries with the complex electrical systems. We are excited to integrate the technology into Altair's Electronic Systems design suite. To further capitalize on the acquisition of World Programming, we recently announced the Altair Unlimited Data Analytics Appliance, an all-in-one turnkey solution that gives organizations and users out of the box access to an unprecedented level of data analytics capabilities. Organizations can develop and run multi-language data analytics software solutions, including those written in the SaaS language in an interactive and secure managed production deployment infrastructure. The Altair Unlimited Analytics Appliance is built on Dell PowerEdge R750 servers and designed to foster enterprise-wide data-driven strategies by giving teams the power to use data analytics and AI to drive net level business results. Dell Technologies is a long-time partner, and we are pleased to take the Altair Unlimited data analytics appliance to market with them. We look forward to seeing how users maximize this technology and get the most from their data. Simulation continues to be the core growth engine for Altair's business globally. We are proud to have supported the NASA Jet Propulsion Laboratories successful 15 months of operation of the Mars helicopter ingenuity. Our software was used to stimulate communication over the Martin landscape to help plan flight paths well beyond line of sight from the Rover base station. The process employed RF modeling of the Rover and helicopters using Altairs FICO and WinProp and the parabolic equation full weight method to account simultaneously and accurately per wave of de-fraction, refraction and scattering propagation mechanism. In less than two weeks, they developed and validated this model using 14 flight cases before integrating the telecom predictions into the ops tool. With the 29 successful flight completed in June, operations are set to resume this month after the margins of storms to base Altair is excited to be part of the JPL efforts advancing understanding of our neighboring plant. We continue to build strength in the rail industry for the three year high seven figure expansion agreement from a global leader in rail transport systems. The growth in this account is primarily driven by our solvers for structural and electromagnetics applications. And a second rail system manufacturer, expanded usage of our software with a target of leveraging digital twins and machine learning for real-time monitoring and predictive maintenance. Last year's acquisition of S-FRAME substantially increased our presence in the civil engineering market. The building construction industry has a growing focus on its carbon footprint, resulting in a movement toward the use of engineering web products for sustainable building design. We recently published a case study around the application of our S-TIMBER software by Bush, Bauman and Partners, Canadian structural engineering firm for the British Columbia Institute of Technology to utilize timber and the construction of a new student Plaza, Pedestrian Walkway and Public Transport Gateway. We're excited and see these applications where we are not just optimizing for material use reduction, but also enabling the use of fundamentally sustainable materials. And along these lines, earlier this week, we announced the winners of the 10th Annual Enlighten Award presented in association with the Center of Automotive Research, the Altair Enlighten Award honor our sustainability and lightweighting advancements to successfully reduce carbon footprint, mitigate water and energy consumption and leverage material reuse and recycling efforts. Congratulations to this year's winners, the Ford Motor Company, Nemak, Shiloh Industries, McMaster University, BASF, Toyota and LNL products. As we celebrate our 10th anniversary and have evaluated hundreds of worthy entries, we have seen this award and the automotive industry evolve from showcasing vehicle lightweighting initiatives to companies now fully embracing sustainability and the commitment to building a net zero environment, particularly as the world transitions to electric vehicles. Enlighten Awards has been an outstanding success in highlighting the incredible achievements made over the years, not just by OEMs, but also suppliers and materials companies collectively taking on the challenge of creating a more energy vision for all. The momentum continues to build for the convergence of simulation and AI at customers. In APAC, a major electronics manufacturer is ramping up use of our data analytics software to apply machine learning on CAE results files in an effort to accelerate its product design process. Also an APAC manufacturer of roll metal products is using Altair predictive analytics technology to improve its coil manufacturing business as it competes in the global market. Its goals include reducing scrap rate, optimizing manufacturing operations, reducing downtime due to inspection holes and improving predictive maintenance. In the agricultural equipment sector, a significant global player is using Altair's artificial intelligence and machine learning technologies to substantially reduce simulation time requirements. We announced a memorandum of understanding with LG for collaborative research and development, promote acceleration of product development, digital transformation. This cooperation around AI-based simulation technology is exciting, and we are very appreciative of the opportunity to work so closely with the LG team in this important area. Our customers are doing great work, and I look forward to sharing more of their stories around convergence in the future. At the end of June, we held our Future.AI event. Highlights included the presentations on human-centered AI for the enterprise and taking an AI-first strategy for growth. For the record attendance of both manufacturing and banking and financial services customers and prospects alike, we are delighted with the interactive engagement we have with our global attendees. The remainder of 2022 looks solid even while we're in a period of geopolitical and economic uncertainty with near-term impact of rapidly changing foreign currency exchange rates. Altair's strong culture, customer relationships, excellent recurring revenue and utilization, high-value business model and exceptional technology will help us power through this weak period. Now I will turn the call over to Matt to provide more details on our financial performance and our guidance for the third quarter and full year 2022. Matt? Matt Brown: Thank you, Jim, and hello to everyone on the call. Thank you for joining us. The strength and momentum we saw in 2021 in the first quarter of 2022 continued into our second quarter, marking an impressive first half of 2022. Demand for our products in Q2, particularly our Software Solution was very strong. Despite significant currency headwinds, we delivered year-over-year growth in both our top line and profit, once again generating results above the high end of the range on every metric we guided to for the quarter. Total billings for the quarter were $125.4 million, an increase of 6.5% compared to Q2 2022, including software billings growth of more than 11%. The strength in billings growth was supported by software growth across all geographies and is partially offset by a decrease in services and other billings, primarily as a result of declines in our CES business, which was expected heading into the quarter. In total, the strength in our billings resulted in software products and total revenue, exceeding our expectations for the second quarter 2020. Software product revenue was $115.9 million or an increase of 17.4% compared to Q2 2021. Total revenue, which includes services and other revenue, was $132.7 million or an increase of 10.6% compared to Q2 2021. Our recurring software license rate, which is the percentage of software product billings that are recurring, continue to be strong at approximately 93% for the first half. As a reminder, a significant portion of our revenues are billed in currencies other than the U.S. dollar and are, therefore, impacted by changes in FX rates. This is particularly true over the past six months, as we saw the dollar significantly strengthened against other major currencies. Relative to Q2 2021, our software product revenues and total revenues were unfavorably impacted by changes in FX rates of approximately $6 million and $6.6 million, respectively. Therefore, on a constant currency basis, in the second quarter of 2022, we saw year-over-year software product revenue growth and total revenue growth of 23.4% and 16.1%, respectively. Non-GAAP gross margin, which excludes stock-based compensation and restructuring expense, was 79.3% in the second quarter compared to 74.5% in the prior year, an increase of 480 basis points, as our software revenue mix, which carried higher gross margins increased as a percentage of total revenue. In addition, our non-GAAP gross margin specific to software product revenue continue to improve, as our support costs as a percentage of revenue trended down. Software revenue was 88.1% of total revenue in Q2 2022 compared to 83.0% in the prior year. Over the long term, we continue to expect a general mix shift towards software product revenue, as growth there will help pay services and other revenue. Non-GAAP operating expenses, which exclude stock-based compensation, amortization of intangible assets and restructuring charges were $90.3 million compared to $80.9 million in the year ago period. Adjusted EBITDA in Q2 2022 was $16.4 million or 12.4% of total revenue compared to $9.5 million or 7.9% in the prior year quarter, an increase of 73.1%. This increase compared to the prior year quarter, as well as relative to our expectations was driven by the increase in software revenue, combined with our disciplined spending. We continue to drive higher adjusted EBITDA as we saw a greater percentage of our incremental revenue growth dropping to the bottom line. Turning to our balance sheet. We ended the second quarter with $416.1 million in cash and cash equivalents, an increase of approximately $10.6 million from the prior quarter. The quarter-over-quarter increase is primarily due to free cash flow generated in the quarter. The net cash increase as a result of our new convertible notes and partial repurchases of our convertible notes and was partially offset by cash outflows for the acquisition of Gen3D and Concept Engineering. We were extremely pleased to issue $230 million in new convertible notes with a 1.75% coupon and 30% conversion premium, putting the conversion price at $71.58 per share. At the same time, we retired over 64% of our existing convertible notes that have a conversion price of $46.50 per share, and we're deeply in the money. This is primarily a liability management efforts, which allowed us to enter into a new convert with more favorable terms and extended maturity base, while at the same time adding approximately $30 million of cash to our balance sheet. Turning to guidance for Q3 and full year 2022. We are seeing a significant FX impact relative to prior year and our previous guidance. In just the past several months, the U.S. dollar has strengthened meaningfully against other major currencies, which drive a significant impact on our results in reported currency. With that backdrop, we are expecting software product revenue for Q3 to be in the range of $99 million to $104 million or a year-over-year change of minus 3.2% to plus 1.7%. And are now expecting our full year 2022 software product revenue to be in the range of $487 million to $498 million or year-over-year growth of 7.3% to 9.8%. Compared to prior year, our Q3 expected software product revenue is being negatively impacted by approximately $7 to $9 million or 6.5% of growth due to changes in foreign exchange rates. And on a full year basis compared to prior year, our 2022 expanded software product revenue is being negatively impacted by approximately $23 million or 5% of growth due to changes in foreign exchange rates. We continue to expect services and other revenue to be down in 2022 compared to 2021, consistent with our previous guidance. As a result, we expect total revenue for Q3 2022 in the range of $115 million to $120 million or year-over-year decrease of 5.2% to 1.1%. And we're now expecting our full year 2022 total revenue to be in the range of $555 to $566 million or year-over-year growth of 4.3% to 6.4%. Compared to prior year, our Q3 expected total revenue is being negatively impacted by more than $7 million or 6.5% of growth due to changes in foreign exchange rates and on a full year basis compared to prior year, our 2022 expected total revenue is being negatively impacted by more than $25 million or almost 5% of growth due to changes in foreign exchange rates. For full year 2022 software product and total revenue, our guidance at the midpoint is consistent with the guidance we issued last quarter in constant currency. However, further changes in FX rates have resulted in a reduction in the midpoint in reported currency. From a cost perspective, we're seeing some increases in employee-related costs due to inflation-related pressure, but at the same time, we're seeing some offsetting benefits and expense due to changes in FX rates. For Q3 2022, we expect adjusted EBITDA in the range of zero to $4 million or zero to 3.3% of the total revenue compared to $14.8 million or 12.2% of total revenue in the year ago period. And for full year 2022, we are now expecting adjusted EBITDA to be in the range of $89 million to $99 million or 15.0% to 17.5% of total revenue compared to $85.3 million or 16% of total revenue in 2021. The changes in FX rates and their impact to revenue are having a direct impact on adjusted EBITDA as we're only seeing a partial offset in expense benefits. For the year, FX rates are negatively impacting adjusted EBITDA by more than $6 million. We expect full year 2022 free cash flow in the range of $8 million to $16 million, which includes the $55.9 million payment for the existing litigation judgment against WPL that we assumed as a part of our acquisition and was paid in January. As a reminder, our cash flow expectations are sensitive to billings and collection patterns which fluctuates seasonally. In particular, our historical pattern has shown a free cash inflow in the first half of the year, primarily from collections on billings from Q4 and Q1 and a smaller free cash outflow in the second half of the year. We're expecting that pattern to continue this year. We've provided detailed guidance tables in our earnings release, including reconciliations to comparable GAAP amount, which was issued after the close of market today. While changes in FX rates are having an impact on reporting currency results, we are extremely confident in the ever-expanding competitive strength of Altair and continued demand from our customers. With that, we'd be happy to take your questions. Operator? Operator: And our first question will come from Ahmad Khalil of Oppenheimer. Your line is open. Ken Wong: This is Ken Wong from Oppenheimer. Just a quick question, Matt, just for clarification. It sounded like the full year revenue guide is purely the FX movement, I just want to make sure that is accurate. And then beyond that, any changes in terms of elections or any pressures you're seeing from your customer base in terms of sales cycles? Matt Brown: Yeah, Hey, I appreciate the question. Yes, you so you get that right - especially when you did our revenue line for the full year guide, we saw meaningful FX impact just quarter-over-quarter. And so as a result, when we sort of map that forward, FX had a negative impact of about $12 million or so on our software and product revenue. From the last time we gave guidance for full year and its actually at the midpoint on a constant currency basis, actually guiding up slightly on software product revenue and about just about flat on total revenue with FX having an impact of $13 million to $14 million there on total revenue. So yeah, you got that right. Now with respect to our customers, no, we're not seeing any kind of elongated collection patterns and nothing unusual DSO at all there. Ken Wong: Got it. And then maybe a quick one for you, Jim. I'm just wondering as far as M&A that have gone on a lot recently. I guess, what are you seeing from integration? Is that going smoothly? And then what's the appetite for potentially for more given less valuations in this market or a little more - a little lower than what we’re used to seeing? Jim Scapa: Okay. Thanks, Ahmad. Getting use to this new system that we're using here. I appreciate the question. Now, as far as M&A and integration, we really are usually able to integrate with most of the companies that we acquire in two to three months. So it's a very, very quick thing for us. Obviously, the World Programming is a little bit of a larger bite. But even programming was primarily comprised of development and the announcement in - so it's integrated in Durban ph nicely, the culture is very similar. We really generally do that easily, and we continue to have an appetite for M&A and you are right, valuations have been exceedingly high for a while. And personally I kind of look forward to some of that coming down now. Ken Wong: Thanks a lot, Jim. Jim Scapa: Sure. Operator: Thank you. And our next question will come from Blair Abernethy of Rosenblatt. Your line is open. Blair Abernethy: Hi. Can you hear me? Jim Scapa: Yes, Blair. Blair Abernethy: Hi. Sorry, cutting out a little bit. Quick questions. Just first on the data science business. Just wondering if you can just walk through sort of where you're at now with the adoption of the Altair Units and how is just starting to have an impact in terms of consumption of your broader analytics data science portfolio? Jim Scapa: So we are making progress. The first thing is to sell internally, and I think we're very successful at that now. So the whole sales organization is really, really supportive, very excited about the model. As we continue to have more capabilities and more solutions, the model really starts to make more and more sense and sales force catch it I personally would like it to be going faster, and I'm planning to make some changes actually. When we move to the model for simulation, we were sort of at the same moment, if you will. Everyone got it finally because I have to do the same kind of momentum internally customers are beginning to understand and I want to accelerate it. And we essentially just moved to 100% of the customers to the mall. I am leaning toward doing that here again and doing a couple of things that would accelerate letting that happen. There are a couple of things we need to actually change, looking at the drop or certain products that sort of in and we’re doing some analysis on that. But I expect to dramatically accelerate the adoption of units in the business. Blair Abernethy: Great. And Jim, is the - how is the traction coming on the World Programming business? Jim Scapa: So traction is good. Actually, we’ve had some very, very nice wins of tremendous interest, the pipeline is really grown pretty strongly. I will say that its longer sales cycle. And we're all sort of learning about the process. I think it is going to start to get a lot more of interest in next year because the pipeline is getting full and we're doing some things that are going to make it easier to succeed here. So yes, that's where we are. Outside of my window it's very interesting to do these things from your home, and remain companies, so I apologize if there's… Blair Abernethy: I can't hear them yelling at each other no. Just shift gears for one second. My last question right now is just around the high-performance computing segment. Just wondering what you're seeing there in terms of end markets, still steady demand, any macro disruption impacting this segment at all from - because it's still tied to hardware? Jim Scapa: It's an interesting mix because actually that business is extremely robust, particularly in the technology sector and we've actually been doing some work to basically grow out the quality of the team overseas in that business. And we're seeing a lot of results - a lot of good things coming as a result from that. At the same time, there is – if a customer doesn't take delivery of hardware and there were some delays on some of that, and they don't need the software. But overall, frankly speaking, that business is exceeding expectations right now. So it's just doing great. Thank you. Blair Abernethy: Great. Thanks very much. Operator: And our next question will come from Dylan Becker of William Blair. Your line is open. Unidentified Analyst: Hey. It's Just kind of wanted to touch, I know you mentioned briefly, you're not seeing any macro impacts from your customer conversations. But just looking into the near term how much emphasis are customers kind of placing on your units model and the ability to consolidate on spend across your platform to deliver value versus kind of stitching together multiple vendors that don't integrate as well?\ Jim Scapa: So through the years, as Altair has become more of a strategic enterprise for customers, I think it's really evolved for us. We were more tactical I'll say, in certain accounts. But we're becoming more and more strategic. And the model, especially as things start to get a little tighter becomes more and more interesting to customers and customers tend to see the value of partnering with Altair, all of because we're just a very strong customer engagement organization. We actually know we're talking about technically and the customers value the integrity and expertise. And then the product portfolio is so broad and deep now that they really, really value that and very often will choose us and make decisions not continue in certain other specialized offer. Unidentified Analyst: Okay. Thanks for the color. Jim Scapa: Thank you. Operator: Thank you. I would now like to turn the call back to Jim Scapa for closing remarks. Jim Scapa: Okay. Well, I appreciate everybody's interest in Altair and the support from our investor community. So thank you all. So my team that supported me here as well. So I appreciate it. Thank you. Operator: This concludes today's conference call. Thank you for participating. 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.