Altair Engineering Inc. (ALTR) Q2 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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.
Key Financial Performance
Total Revenue $148.8 million, a year-over-year increase of 5.4% in reported currency and 7.8% in constant currency.
Software Revenue $135.4 million, a year-over-year increase of 8.1% in reported currency and 10.6% in constant currency.
Adjusted EBITDA $17.3 million, or 11.7% of total revenue, compared to $17.1 million or 12.1% in the prior year.
Non-GAAP Gross Margin 80.9%, an increase of 90 basis points from 80% in the prior year.
Total Billings $154.5 million, a year-over-year increase of 4.5% in reported currency and 7.1% in constant currency.
Cash and Cash Equivalents $507 million, an increase of approximately $88.7 million from the prior year period.
Free Cash Flow $97 million for the six months ended June 30th, an increase of 16.8% from $83 million in the prior year period.
GAAP Operating Expenses $128.2 million, reflecting growth of 1.2% from $126.6 million in the prior year.
Non-GAAP Operating Expenses $105.3 million, compared to $96.9 million in the prior year period.
Operating Highlights
New Product Enhancements: Released Altair HyperWorks 2024 with advancements in AI, improving engineering and design capabilities.
Acquisition: Acquired Metrics Design Automation, enhancing simulation-as-a-service for semiconductor design verification.
Market Positioning: Named leader in Gartner Magic Quadrant for data science and machine learning platforms with Altair RapidMiner.
New Customer Acquisition: Welcomed a major U.S. property and casualty insurance company as a new customer.
Expansion in Aerospace and Defense: Signed an eight-figure three-year contract with a multinational aerospace company, the largest deal ever.
Operational Efficiency: Software revenue grew to 91% of total revenue, indicating a shift towards higher-margin products.
Free Cash Flow: Generated $97 million in free cash flow for the first half of 2024, a 16.8% increase year-over-year.
Strategic Partnerships: Partnered with Hewlett Packard to enhance the Altair Material Data Center for 3D printing applications.
New Vertical Establishment: Established a healthcare and life sciences vertical, winning new data analytics deals.
Risk or Challenges
Competitive Pressures: Altair faces competitive pressures in the data analytics and machine learning sectors, as highlighted by their recognition in the Gartner Magic Quadrant, which indicates a highly competitive landscape.
Regulatory Issues: The company mentions potential risks related to regulatory compliance, particularly in the context of their software offerings and data handling practices.
Supply Chain Challenges: There are concerns regarding supply chain challenges, especially in the semiconductor industry, which could impact the delivery and integration of their new acquisition, Metrics Design Automation.
Economic Factors: Economic fluctuations and changes in foreign exchange rates are noted as risks that could affect revenue and profitability, particularly since some transactions occur in currencies other than the US dollar.
Customer Retention: While Altair has high retention rates, any decline in customer loyalty or satisfaction could pose a risk to future revenue growth.
Investment Risks: The planned investments in product development and sales capacity may not yield the expected returns, posing a risk to financial performance.
Guidance & Outlook
Product Enhancements: Released Altair HyperWorks 2024 with advancements in AI, enhancing simulation-driven innovation.
Acquisition: Acquired Metrics Design Automation to enhance simulation-as-a-service capabilities in semiconductor design.
Partnerships: Partnered with Hewlett Packard to enrich Altair Material Data Center with HP's material information for 3D printing.
New Vertical: Established a healthcare and life sciences vertical, expanding data analytics capabilities.
Channel Expansion: Added three new channel partners to enhance distribution of data analytics and AI solutions.
Q3 Software Revenue Guidance: Expected in the range of $130 million to $133 million, a year-over-year increase of 9.2% to 11.7%.
Full Year 2024 Software Revenue Guidance: Raised to a range of $590 million to $600 million, a year-over-year increase of 7.3% to 9.1%.
Q3 Total Revenue Guidance: Expected in the range of $145 million to $148 million, a year-over-year increase of 8.2% to 10.4%.
Full Year 2024 Total Revenue Guidance: Adjusted to a range of $648 million to $658 million, a year-over-year increase of 5.8% to 7.4%.
Q3 Adjusted EBITDA Guidance: Expected in the range of $16 million to $19 million, or 11% to 12.8% of total revenue.
Full Year 2024 Adjusted EBITDA Guidance: Adjusted to a range of $136 million to $144 million, or 21% to 21.9% of total revenue.
Full Year 2024 Free Cash Flow Guidance: Expected in the range of $122 million to $130 million.
Shareholder Return Plan
Free Cash Flow: For the full year 2024, we expect free cash flow in the range of $122 million to $130 million.
Cash and Cash Equivalents: We ended the quarter with $507 million in cash and cash equivalents, an increase of approximately $88.7 million from the prior year period.
Convertible Notes Settlement: We paid $81.7 million for the settlement of our 2024 convertible notes in the second quarter.
Shareholder Value Focus: We will continue to allocate capital with focus and discipline to drive long term shareholder value.
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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