Altair Engineering Inc. (ALTR) Q1 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reflects positive financial performance, with strong revenue growth, improved margins, and robust free cash flow. The optimistic guidance for 2024, strategic partnerships, and product development initiatives further enhance the outlook. Despite some concerns over indirect sales channels and integration risks, the overall sentiment remains positive, supported by strong Q1 results and management's confidence in future prospects. The Q&A session did not reveal significant negative trends, and the company's strategic focus on high-margin software and unique solutions in electronics and semiconductors positions it well for continued growth.
Key Financial Performance
Total Revenue $172.9 million, a year-over-year increase of 4.1% in reported currency and 5.1% in constant currency compared to Q1 2023.
Software Revenue $158.4 million, a year-over-year increase of 5.9% in reported currency and 6.9% in constant currency compared to Q1 2023, driven by high retention rates and new and expansion business.
Adjusted EBITDA $45.8 million, an increase of 6.4% year-over-year, representing 26.5% of total revenue compared to 25.9% in Q1 2023, driven by increased software revenue and disciplined spending.
Non-GAAP Gross Margin 83.3%, an increase of 140 basis points from 81.9% in the prior year, due to a shift towards higher-margin software revenue.
Free Cash Flow $70.7 million, an increase of 23.0% compared to $57.5 million in the year ago period.
Cash and Cash Equivalents $557.6 million, an increase of approximately $179.2 million from the prior year.
Total Billings $154.1 million, a year-over-year decrease of 5.7% in reported currency and a decrease of 5.3% in constant currency.
Operating Highlights
New Product Launch: Announced the upcoming release of Altair SimSolid for electronics, which will support structural and thermal analysis for printed circuit boards and ICs.
Acquisition: Acquired Cambridge Semantics, enhancing Altair RapidMiner with knowledge graph, data governance, and data discovery technology. Acquired Research in Flight, integrating FlightStream into Altair's portfolio for enhanced computational fluid dynamics capabilities.
Market Expansion: Signed a seven-figure commitment from a multinational customer in banking, representing over 80% year-on-year expansion. Secured a deal with a new global customer in the energy sector, driven by Altair SimSolid. Expanded subscription renewal with a global leader in energy management, increasing revenue over 80% annually. Secured a seven-figure, three-year commitment from a global leader in power sports vehicles. Signed a six-figure contract with a European automotive OEM focused on ultra-luxury segment.
Operational Efficiency: Adjusted EBITDA for Q1 2024 increased by 6.4% year-over-year to $45.8 million, or 26.5% of revenue. Non-GAAP gross margin increased to 83.3% in Q1 2024 from 81.9% in the prior year.
Strategic Shift: Hired key leaders to drive efforts in healthcare and life sciences and the Federal Department of Defense. Welcomed seven new channel partners to extend the reach of Altair's solutions.
Risk or Challenges
Competitive Pressures: Altair faces competitive pressures in the software market, particularly in the aerospace, defense, and automotive sectors, where they must continuously innovate to maintain market share.
Regulatory Issues: The company operates in various sectors that may be subject to regulatory scrutiny, particularly in the aerospace and defense industries, which could impact operations and compliance costs.
Supply Chain Challenges: There are potential supply chain challenges that could affect the availability of resources and materials necessary for product development and delivery.
Economic Factors: Economic fluctuations and changes in foreign currency exchange rates can significantly impact revenue and profitability, as indicated by the adjustments in guidance due to currency changes.
Customer Retention and Expansion: While Altair has high retention rates, any downturn in customer demand or failure to expand existing contracts could negatively affect future revenue growth.
Acquisition Integration Risks: The recent acquisitions of Cambridge Semantics and Research in Flight may present integration risks, including aligning technologies and cultures, which could affect operational efficiency.
Guidance & Outlook
Acquisitions: In April, Altair announced the acquisition of Cambridge Semantics, enhancing its data analytics capabilities with knowledge graph technology. Additionally, the acquisition of Research in Flight was announced, which will integrate computational fluid dynamics software into Altair's offerings.
New Product Releases: Altair announced the upcoming release of Altair SimSolid for electronics, aimed at improving multiphysics scenario exploration for electronic designs.
Channel Partnerships: Altair welcomed seven new channel partners to expand its indirect sales channel, which is a key priority for the company.
Leadership Hires: Two key leaders were hired to drive efforts in healthcare and life sciences and the Federal Department of Defense, enhancing Altair's focus on high-growth industry segments.
Q2 2024 Software Revenue Guidance: Expected in the range of $131 million to $134 million, a year-over-year increase of 4.5% to 6.9% in reported currency.
Full Year 2024 Software Revenue Guidance: Adjusted to a range of $590 million to $600 million in reported currency, a year-over-year increase of 7.3% to 9.1%.
Q2 2024 Total Revenue Guidance: Expected in the range of $145 million to $148 million, a year-over-year increase of 2.7% to 4.8% in reported currency.
Full Year 2024 Total Revenue Guidance: Adjusted to a range of $652 million to $662 million in reported currency, a year-over-year increase of 6.4% to 8.0%.
Q2 2024 Adjusted EBITDA Guidance: Expected in the range of $15 million to $18 million, or 10.3% to 12.2% of total revenue.
Full Year 2024 Adjusted EBITDA Guidance: Adjusted to a range of $138 million to $146 million, or 21.2% to 22.1% of total revenue.
Full Year 2024 Free Cash Flow Guidance: Expected in the range of $124 million to $132 million.
Shareholder Return Plan
Free Cash Flow: For the full year 2024, we expect free cash flow in the range of $124 million to $132 million.
Convertible Notes: The remainder of our 2024 convertible notes mature on June 1, 2024, which we will settle with approximately $82 million in cash for the principal balance and the premium in shares.
Key Q&A
Earnings Word Cloud
ALTR Transcript
The earnings call summary indicates solid financial performance with increased revenues and cash flow, despite a slight dip in EBITDA margin due to FX. Product development and market strategy are promising, especially with AI integration and vertical market orientation. The Q&A reveals optimism for 2025 and strong customer uptake of new technologies, although some responses lacked clarity. The guidance is positive, and the absence of major negative factors suggests a positive stock price movement over the next two weeks.
The earnings call reflects positive financial performance, with strong revenue growth, improved margins, and robust free cash flow. The optimistic guidance for 2024, strategic partnerships, and product development initiatives further enhance the outlook. Despite some concerns over indirect sales channels and integration risks, the overall sentiment remains positive, supported by strong Q1 results and management's confidence in future prospects. The Q&A session did not reveal significant negative trends, and the company's strategic focus on high-margin software and unique solutions in electronics and semiconductors positions it well for continued growth.
The earnings call highlights strong financial performance with increased EBITDA and software revenue, improved gross margins, and substantial free cash flow. The company is successfully expanding its customer base and diversifying revenue streams. While Q1 guidance is below typical seasonality, the shift is strategic, and management expresses optimism about growth opportunities. Despite some uncertainty in macroeconomic conditions, the overall sentiment is positive, supported by strategic initiatives and strong customer retention.
ALTR Report
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