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Altair Announces Second Quarter 2023 Financial Results

Software Product Revenue and Total Revenue Above the High End of Guidance Range

TROY, Mich., Aug. 03, 2023 (GLOBE NEWSWIRE) — Altair (Nasdaq: ALTR), a global leader in computational science and artificial intelligence, today released its financial results for the second quarter and six months ended June 30, 2023.

“Altair had a solid second quarter of 2023, with software product revenue and total revenue above the high end of guidance,” said James Scapa, founder, chairman and chief executive officer of Altair. “Our Q2 performance aligns well with our guidance for the full year and demonstrates our continued success and strength.”

“We’re pleased with the outperformance we’ve seen in the first half of the year,” said Matt Brown, chief financial officer of Altair. “Our strong first half has been fueled by growth across a number of verticals and particularly in aerospace, defense, technology, and automotive, where demand for our products is robust.”

Second Quarter 2023 Financial Highlights

  • Software product revenue was $125.3 million compared to $116.9 million for the second quarter of 2022, an increase of 7.2% in reported currency and 9.4% in constant currency
  • Total revenue was $141.2 million compared to $132.7 million for the second quarter of 2022, an increase of 6.4% in reported currency and 8.4% in constant currency
  • Net loss was $(22.3) million compared to net loss of $(33.8) million for the second quarter of 2022. Net loss per share, diluted was $(0.28) based on 80.0 million diluted weighted average common shares outstanding, compared to net loss per share, diluted of $(0.43) for the second quarter of 2022, based on 78.9 million diluted weighted average common shares outstanding. Net loss margin was -15.8% compared to net loss margin of  -25.5% for the second quarter of 2022
  • Non-GAAP net income was $13.2 million, compared to non-GAAP net income of $10.9 million for the second quarter of 2022, an increase of 21.6%. Non-GAAP net income per share, diluted was $0.15 based on 88.4 million non-GAAP diluted common shares outstanding, compared to non-GAAP net income per share, diluted of $0.13 for the second quarter of 2022, based on 86.3 million non-GAAP diluted common shares outstanding
  • Adjusted EBITDA was $17.1 million compared to $16.4 million for the second quarter of 2022, an increase of 3.7%. Adjusted EBITDA margin was 12.1% compared to 12.4% for the second quarter of 2022
  • Cash provided by operating activities was $30.0 million, compared to $12.3 million for the second quarter of 2022
  • Free cash flow was $25.6 million, compared to $11.0 million for the second quarter of 2022.

Business Outlook

Based on information available as of today, Altair is issuing the following guidance for the third quarter and full year 2023: 

(in millions, except %)   Third Quarter 2023     Full Year 2023  
Software Product Revenue   $ 111   to $ 113     $ 548   to $ 558  
Growth Rate     7.0 %     8.9 %     8.2 %     10.2 %
Growth Rate – Constant Currency     5.8 %     7.7 %     9.1 %     11.0 %
Total Revenue   $ 126     $ 128     $ 611     $ 621  
Growth Rate     5.6 %     7.2 %     6.8 %     8.5 %
Growth Rate – Constant Currency     4.4 %     6.1 %     7.5 %     9.3 %
Net Loss   $ (22.8 )   $ (20.9 )   $ (15.3 )   $ (5.6 )
Non-GAAP Net Income   $ 2.9     $ 4.4     $ 89.9     $ 97.3  
Adjusted EBITDA   $ 3     $ 5     $ 119     $ 129  
Net Cash Provided by Operating Activities               $ 120     $ 128  
Free Cash Flow               $ 108     $ 116  

The following table provides a reconciliation of Full Year 2023 guidance to the last guidance provided in May:

  (Unaudited)
  Full Year 2023
(in millions) Midpoint of
Guidance in
May
    Increase/
(Decrease)
    Currency
Fluctuations
from Prior
Guidance
    Midpoint of
Guidance in
August
Software Product Revenue $ 556.0     $     $ (3.0 )   $ 553.0
Total Revenue $ 619.0     $     $ (3.0 )   $ 616.0
Adjusted EBITDA $ 125.0     $     $ (1.0 )   $ 124.0

 

Conference Call Information
   
What: Altair’s Second Quarter 2023 Financial Results Conference Call
When: Thursday, August 3, 2023
Time: 5 p.m. ET
Webcast: http://investor.altair.com (live & replay)

Non-GAAP Financial Measures

This press release contains the following non-GAAP financial measures: Non-GAAP Net Income, Non-GAAP Net Income Per Share, Billings, Adjusted EBITDA, Free Cash Flow, Non-GAAP Gross Profit and Non-GAAP Operating Expense.

Altair believes that these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to its financial condition and results of operations. The Company’s management uses these non-GAAP measures to compare the Company’s performance to that of prior periods for trend analysis, for purposes of determining executive and senior management incentive compensation and for budgeting and planning purposes. The Company also believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the Company’s financial measures with other software companies, many of which present similar non-GAAP financial measures to investors.

Non-GAAP net income excludes stock-based compensation, amortization of intangible assets related to acquisitions, restructuring charges, asset impairment charges, non-cash interest expense, other special items as identified by management and described elsewhere in this press release, and the impact of non-GAAP tax rate to income tax expense, which approximates our tax rate excluding discrete items and other specific events that can fluctuate from period to period.

Non-GAAP diluted common shares includes the diluted weighted average shares outstanding per GAAP regardless of whether the Company is in a loss position.

Billings consists of total revenue plus the change in deferred revenue, excluding deferred revenue from acquisitions.

Adjusted EBITDA represents net income adjusted for income tax expense, interest expense, interest income and other, depreciation and amortization, stock-based compensation expense, restructuring charges, asset impairment charges and other special items as identified by management and described elsewhere in this press release.

Free cash flow consists of cash flow from operations less capital expenditures.

Non-GAAP gross profit represents gross profit adjusted for stock-based compensation expense, restructuring expense and other special items as identified by management and described elsewhere in this press release.

Non-GAAP operating expense represents operating expense excluding stock-based compensation expense, amortization, restructuring charges, asset impairment charges and other special items as identified by management and described elsewhere in this press release.

Company management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company’s financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. Altair urges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures, which it includes in press releases announcing quarterly financial results, including this press release, and not to rely on any single financial measure to evaluate the Company’s business.

Reconciliation tables of the most comparable GAAP financial measures to the non-GAAP financial measures used in this press release are included with the financial tables at the end of this release.

About Altair

Altair is a global leader in computational science and artificial intelligence (AI) that provides software and cloud solutions in  simulation, high-performance computing (HPC), data analytics and AI. Altair enables organizations across all industries to compete more effectively and drive smarter decisions in an increasingly connected world – all while creating a greener, more sustainable future. To learn more, please visit www.altair.com.

Cautionary Language Concerning Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, our guidance for the third quarter and full year 2023, our statements regarding our expectations for 2023, and our reconciliations of projected non-GAAP financial measures.  These forward-looking statements are made as of the date of this release and are based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. Words such as “expect,” “anticipate,” “should,” “believe,” “hope,” “target,” “project,” “goals,” “estimate,” “potential,” “predict,” “may,” “will,” “might,” “could,” “intend,” variations of these terms or the negative of these terms and similar expressions are intended to identify these forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond Altair’s control. Altair’s actual results could differ materially from those stated or implied in our forward-looking statements due to a number of factors, including but not limited to, the risks detailed in Altair’s quarterly and annual reports filed with the Securities and Exchange Commission as well as other documents that may be filed by the Company from time to time with the Securities and Exchange Commission. Past performance is not necessarily indicative of future results. The forward-looking statements included in this press release represent Altair’s views as of the date of this press release. The Company anticipates that subsequent events and developments will cause its views to change. Altair undertakes no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These forward-looking statements should not be relied upon as representing Altair’s views as of any date subsequent to the date of this press release.

Media Relations
Altair
Dave Simon
248-614-2400 ext. 332
[email protected]

Investor Relations
The Blueshirt Group
Monica Gould
212-871-3927
[email protected]

ALTAIR ENGINEERING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
           
  June 30, 2023     December 31, 2022  
(In thousands) (Unaudited)        
ASSETS          
CURRENT ASSETS:          
Cash and cash equivalents $ 418,338     $ 316,146  
Accounts receivable, net   124,260       170,279  
Income tax receivable   14,505       11,259  
Prepaid expenses and other current assets   29,678       29,142  
Total current assets   586,781       526,826  
Property and equipment, net   39,107       37,517  
Operating lease right of use assets   30,284       33,601  
Goodwill   453,093       449,048  
Other intangible assets, net   94,642       107,609  
Deferred tax assets   8,183       9,727  
Other long-term assets   43,717       40,410  
TOTAL ASSETS $ 1,255,807     $ 1,204,738  
LIABILITIES AND STOCKHOLDERS’ EQUITY  
CURRENT LIABILITIES:          
Accounts payable $ 4,682     $ 10,434  
Accrued compensation and benefits   35,951       42,456  
Current portion of operating lease liabilities   9,557       10,396  
Other accrued expenses and current liabilities   66,044       56,371  
Deferred revenue   121,853       113,081  
Current portion of convertible senior notes, net   81,161        
Total current liabilities   319,248       232,738  
Convertible senior notes, net   225,320       305,604  
Operating lease liabilities, net of current portion   21,337       24,065  
Deferred revenue, non-current   26,694       31,379  
Other long-term liabilities   42,993       41,216  
TOTAL LIABILITIES   635,592       635,002  
Commitments and contingencies          
STOCKHOLDERS’ EQUITY:          
Preferred stock ($0.0001 par value), authorized 45,000 shares, none issued and outstanding          
Common stock ($0.0001 par value)          
Class A common stock, authorized 513,797 shares, issued and outstanding 53,951 and 52,277 shares as of June 30, 2023, and December 31, 2022, respectively   5       5  
Class B common stock, authorized 41,203 shares, issued and outstanding 27,175 and 27,745 shares as of June 30, 2023, and December 31, 2022   3       3  
Additional paid-in capital   790,184       721,307  
Accumulated deficit   (145,816 )     (121,577 )
Accumulated other comprehensive loss   (24,161 )     (30,002 )
TOTAL STOCKHOLDERS’ EQUITY   620,215       569,736  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,255,807     $ 1,204,738  

ALTAIR ENGINEERING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
           
  Three Months Ended
June 30,
    Six Months Ended
June 30,
 
(in thousands, except per share data) 2023     2022     2023     2022  
Revenue                      
License $ 87,738     $ 82,688     $ 200,147     $ 188,857  
Maintenance and other services   37,583       34,205       74,817       68,933  
Total software   125,321       116,893       274,964       257,790  
Software related services   6,664       7,376       13,764       16,437  
Total software and related services   131,985       124,269       288,728       274,227  
Client engineering services   8,034       7,047       15,810       15,059  
Other   1,142       1,340       2,657       3,151  
Total revenue   141,161       132,656       307,195       292,437  
Cost of revenue                      
License   3,981       4,120       8,805       8,807  
Maintenance and other services   13,639       12,884       28,065       25,603  
Total software *   17,620       17,004       36,870       34,410  
Software related services   5,308       5,464       10,924       11,499  
Total software and related services   22,928       22,468       47,794       45,909  
Client engineering services   6,767       5,914       13,391       12,555  
Other   1,102       1,141       2,347       2,662  
Total cost of revenue   30,797       29,523       63,532       61,126  
Gross profit   110,364       103,133       243,663       231,311  
Operating expenses:                      
Research and development *   55,277       50,437       108,528       97,516  
Sales and marketing *   44,982       41,153       88,474       78,993  
General and administrative *   18,622       18,370       36,573       35,796  
Amortization of intangible assets   7,625       6,208       15,439       12,111  
Other operating expense (income), net   127       (5,767 )     5,732       (6,548 )
Total operating expenses   126,633       110,401       254,746       217,868  
Operating (loss) income   (16,269 )     (7,268 )     (11,083 )     13,443  
Interest expense   1,528       700       3,054       1,285  
Other (income) expense, net   (4,195 )     21,907       (7,808 )     23,975  
Loss before income taxes   (13,602 )     (29,875 )     (6,329 )     (11,817 )
Income tax expense   8,678       3,899       17,910       10,429  
Net loss $ (22,280 )   $ (33,774 )   $ (24,239 )   $ (22,246 )
Loss per share:                      
Net loss per share attributable to common stockholders, basic and diluted $ (0.28 )   $ (0.43 )   $ (0.30 )   $ (0.28 )
Weighted average shares outstanding:                      
Weighted average number of shares used in computing net loss per share, basic and diluted   79,986       78,948       80,088       79,204  

*  Amounts include stock-based compensation expense as follows (in thousands):

  (Unaudited)  
  Three Months Ended
June 30,
    Six Months Ended
June 30,
 
(in thousands) 2023     2022     2023     2022  
Cost of revenue – software $ 2,572     $ 2,030     $ 5,324     $ 3,933  
Research and development   9,943       8,979       18,686       16,337  
Sales and marketing   7,581       7,664       15,172       14,699  
General and administrative   3,640       2,527       6,715       4,845  
Total stock-based compensation expense $ 23,736     $ 21,200     $ 45,897     $ 39,814  

  (Unaudited)  
  Three Months Ended
June 30,
    Six Months Ended
June 30,
 
(in thousands) 2023     2022     2023     2022  
Employee stock-based compensation plans $ 19,189     $ 14,873     $ 37,673     $ 28,132  
Post combination expense in connection with acquisitions   4,547       6,327       8,224       11,682  
Total stock-based compensation expense $ 23,736     $ 21,200     $ 45,897     $ 39,814  

ALTAIR ENGINEERING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
 
  Six Months Ended June 30,  
(In thousands) 2023     2022  
OPERATING ACTIVITIES:          
Net loss $ (24,239 )   $ (22,246 )
Adjustments to reconcile net loss to net cash provided by operating activities:          
Depreciation and amortization   19,488       15,819  
Stock-based compensation expense   45,897       39,814  
Amortization of debt issuance costs   930       829  
Deferred income taxes   2,015       (64 )
Loss (gain) on mark-to-market adjustment of contingent consideration   7,987       (5,304 )
Expense on repurchase of convertible senior notes         16,621  
Other, net   405       229  
Changes in assets and liabilities:          
Accounts receivable, net   45,077       29,270  
Prepaid expenses and other current assets   (3,166 )     2,056  
Other long-term assets   (2,516 )     4,397  
Accounts payable   (5,529 )     (2,070 )
Accrued compensation and benefits   (6,591 )     (9,742 )
Other accrued expenses and current liabilities   4,857       (61,648 )
Deferred revenue   4,614       10,080  
Net cash provided by operating activities   89,229       18,041  
INVESTING ACTIVITIES:          
Capital expenditures   (6,184 )     (3,457 )
Payments for acquisition of businesses, net of cash acquired   (721 )     (37,660 )
Other investing activities, net   (1,452 )     (322 )
Net cash used in investing activities   (8,357 )     (41,439 )
FINANCING ACTIVITIES:          
Proceeds from the exercise of common stock options   23,507       1,689  
Payments for repurchase and retirement of common stock   (6,255 )     (4,387 )
Proceeds from employee stock purchase plan contributions   3,797       4,431  
Proceeds from issuance of convertible senior notes, net of discounts and commissions         224,265  
Repurchase of convertible senior notes         (192,792 )
Payments of debt issuance costs         (1,157 )
Other financing activities   (48 )     (131 )
Net cash provided by financing activities   21,001       31,918  
Effect of exchange rate changes on cash, cash equivalents and restricted cash   (44 )     (6,226 )
Net increase in cash, cash equivalents and restricted cash   101,829       2,294  
Cash, cash equivalents and restricted cash at beginning of year   316,958       414,012  
Cash, cash equivalents and restricted cash at end of period $ 418,787     $ 416,306  

Financial Results

The following table provides a reconciliation of Non-GAAP net income and Non-GAAP net income per share – diluted, to net loss and net loss per share – diluted, the most comparable GAAP financial measures:

  (Unaudited)  
  Three Months Ended
June 30,
    Six Months Ended
June 30,
 
(in thousands, except per share amounts) 2023     2022     2023     2022  
Net loss $ (22,280 )   $ (33,774 )   $ (24,239 )   $ (22,246 )
Stock-based compensation expense   23,736       21,200       45,897       39,814  
Amortization of intangible assets   7,625       6,208       15,439       12,111  
Non-cash interest expense   465       422       930       839  
Impact of non-GAAP tax rate(1)   4,033       79       2,100       (4,957 )
Special adjustments and other(2)   (361 )     16,737       4,870       18,229  
Non-GAAP net income $ 13,218     $ 10,872     $ 44,997     $ 43,790  
                       
Net loss per share, diluted $ (0.28 )   $ (0.43 )   $ (0.30 )   $ (0.28 )
Non-GAAP net income per share, diluted $ 0.15     $ 0.13     $ 0.51     $ 0.51  
                       
GAAP diluted shares outstanding   79,986       78,948       80,088       79,204  
Non-GAAP diluted shares outstanding   88,383       86,281       88,735       86,516  

(1) The Company uses a non-GAAP effective tax rate of 26%.
(2) The three months ended June 30, 2023, includes $1.0 million loss from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition and $1.3 million currency gains on acquisition-related intercompany loans. The three months ended June 30, 2022, includes $16.6 million expense on repurchase of convertible senior notes, $5.4 million currency losses on acquisition-related intercompany loans, and a $5.3 million gain from the mark-to-market adjustment of contingent consideration associated with the World Programming acquisition. The six months ended June 30, 2023, includes $8.0 million loss from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition and $3.1 million currency gains on acquisition-related intercompany loans. The six months ended June 30, 2022, includes $16.6 million expense on repurchase of convertible senior notes, $6.9 million currency losses on acquisition-related intercompany loans and a $5.3 million gain from the mark-to-market adjustment of contingent consideration associated with the World Programming acquisition.

The following table provides a reconciliation of Adjusted EBITDA to net loss, the most comparable GAAP financial measure:

  (Unaudited)  
  Three Months Ended
June 30,
    Six Months Ended
June 30,
 
(in thousands) 2023     2022     2023     2022  
Net loss $ (22,280 )   $ (33,774 )   $ (24,239 )   $ (22,246 )
Income tax expense   8,678       3,899       17,910       10,429  
Stock-based compensation expense   23,736       21,200       45,897       39,814  
Interest expense   1,528       700       3,054       1,285  
Depreciation and amortization   9,738       8,133       19,488       15,819  
Special adjustments, interest income and other(1)   (4,344 )     16,282       (1,999 )     17,929  
Adjusted EBITDA $ 17,056     $ 16,440     $ 60,111     $ 63,030  

(1) The three months ended June 30, 2023, includes $1.0 million loss from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition, $4.0 million of interest income, and $1.3 million currency gains on acquisition-related intercompany loans. The three months ended June 30, 2022, includes $16.6 million expense on repurchase of convertible senior notes, $5.4 million currency losses on acquisition-related intercompany loans, and a $5.3 million gain from the mark-to-market adjustment of contingent consideration associated with the World Programming acquisition. The six months ended June 30, 2023, includes $8.0 million loss from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition, $6.9 million of interest income, and $3.1 million currency gains on acquisition-related intercompany loans. The six months ended June 30, 2022, includes $16.6 million expense on repurchase of convertible senior notes, $6.9 million currency losses on acquisition-related intercompany loans and a $5.3 million gain from the mark-to-market adjustment of contingent consideration associated with the World Programming acquisition.

The following table provides a reconciliation of Free Cash Flow to net cash provided by operating activities, the most comparable GAAP financial measure:

  (Unaudited)  
  Three Months Ended
June 30,
    Six Months Ended
June 30,
 
(in thousands) 2023     2022     2023     2022  
Net cash provided by operating activities(1) $ 30,030     $ 12,255     $ 89,229     $ 18,041  
Capital expenditures   (4,457 )     (1,267 )     (6,184 )     (3,457 )
Free cash flow(1) $ 25,573     $ 10,988     $ 83,045     $ 14,584  

(1)  The six months ended June 30, 2022, includes a $65.9 million payment in January 2022 for a damages judgement assumed as part of an acquisition in December 2021.

The following table provides a reconciliation of Non-GAAP gross profit to gross profit, the most comparable GAAP financial measure, and a comparison of Non-GAAP gross margin (Non-GAAP gross profit as a percentage of total revenue) to gross margin (gross profit as a percentage of total revenue), the most comparable GAAP financial measure:

  (Unaudited)  
  Three Months Ended
June 30,
    Six Months Ended
June 30,
 
(in thousands) 2023     2022     2023     2022  
Gross profit $ 110,364     $ 103,133     $ 243,663     $ 231,311  
Stock-based compensation expense   2,572       2,030       5,324       3,933  
Non-GAAP gross profit $ 112,936     $ 105,163     $ 248,987     $ 235,244  
                       
Gross profit margin   78.2 %     77.7 %     79.3 %     79.1 %
Non-GAAP gross margin   80.0 %     79.3 %     81.1 %     80.4 %

The following table provides a reconciliation of Non-GAAP operating expense to Total operating expense, the most comparable GAAP financial measure:

  (Unaudited)  
  Three Months Ended
June 30,
    Six Months Ended
June 30,
 
(in thousands) 2023     2022     2023     2022  
Total operating expense $ 126,633     $ 110,401     $ 254,746     $ 217,868  
Stock-based compensation expense   (21,164 )     (19,170 )     (40,573 )     (35,881 )
Amortization   (7,625 )     (6,208 )     (15,439 )     (12,111 )
(Loss) gain on mark-to-market adjustment of contingent consideration   (981 )     5,304       (7,987 )     5,304  
Non-GAAP operating expense $ 96,863     $ 90,327     $ 190,747     $ 175,180  

The following table provides a reconciliation of Billings to revenue, the most comparable GAAP financial measure:

  (Unaudited)  
  Three Months Ended June 30,     Six Months Ended June 30,  
(in thousands) 2023     2022     2023     2022  
Revenue $ 141,161     $ 132,656     $ 307,195     $ 292,437  
Ending deferred revenue   148,547       112,926       148,547       112,926  
Beginning deferred revenue   (141,943 )     (118,403 )     (144,460 )     (106,032 )
Deferred revenue acquired         (1,756 )           (2,572 )
Billings $ 147,765     $ 125,423     $ 311,282     $ 296,759  

The following table provides revenue, Billings and Adjusted EBITDA on a constant currency basis:

  (Unaudited)  
  Three Months Ended
June 30, 2023
    Three Months
Ended June 30,
2022
    Increase/
(Decrease) %
 
(in thousands) As reported     Currency
changes
    As adjusted for
constant currency
    As reported     As reported     As adjusted for
constant
currency
 
Software revenue $ 125.3     $ 2.6     $ 127.9     $ 116.9       7.2 %     9.4 %
Total revenue $ 141.2     $ 2.7     $ 143.9     $ 132.7       6.4 %     8.4 %
Billings $ 147.8     $ 2.3     $ 150.1     $ 125.4       17.8 %     19.6 %
Adjusted EBITDA $ 17.1     $ 1.4     $ 18.5     $ 16.4       3.7 %     12.8 %
                                   
                                   
  (Unaudited)  
  Six Months Ended
June 30, 2023
    Six Months
Ended June 30,
2022
    Increase/
(Decrease) %
 
(in thousands) As reported     Currency
changes
    As adjusted for
constant currency
    As reported     As reported     As adjusted for
constant
currency
 
Software revenue $ 275.0     $ 7.9     $ 282.9     $ 257.8       6.7 %     9.7 %
Total revenue $ 307.2     $ 8.5     $ 315.7     $ 292.4       5.0 %     7.9 %
Billings $ 311.3     $ 8.6     $ 319.9     $ 296.8       4.9 %     7.8 %
Adjusted EBITDA $ 60.1     $ 3.8     $ 63.9     $ 63.0       -4.6 %     1.5 %

Change in Classification of Indirect Costs

Beginning in the first quarter of 2023, the Company refined its classification of certain indirect costs to reflect the way management is now reviewing the information in decision making and to improve comparability with peers. These indirect costs include certain IT, facilities, and depreciation expenses that were previously reported primarily in General and administrative expense. These indirect costs have now been reclassified to Research and development, Sales and marketing, and General and administrative expenses based on global headcount. Management believes this refined methodology better reflects the nature of the costs and financial performance of the Company.

As a result, the Company’s consolidated statements of operations have been recast for prior periods presented to reflect the effects of the changes to Research and development, Sales and marketing, and General and administrative expense. There was no net impact to total operating expenses, income from operations, net income or net income per share for any periods presented. The consolidated balance sheets, consolidated statements of comprehensive income, consolidated statements of changes in stockholders’ equity, and the consolidated statements of cash flows were not affected by changes in the presentation of these costs.

Each prior period that will be presented in the forthcoming Form 10-Q and Form 10-K filings will be recast to conform to current period presentation. The following tables provide the relevant financial results as previously reported, as recast for the current period and forthcoming filings, and the associated impacts of the changes. Within these tables, the references to periods such as “FY 2021” and “Q1 2022” refer to the corresponding periods as reported in the applicable Form 10-K, Form 10-Q, or Form 8-K filings.

The following table summarizes the changes made to the consolidated statements of operations (in thousands):

  Previously Reported  
  FY 2021     Q1 2022     Q2 2022     Q3 2022     Q4 2022     FY 2022  
Operating expenses:                                  
Research and development $ 151,049     $ 43,094     $ 46,477     $ 48,781     $ 47,511     $ 185,863  
Sales and marketing   132,750       35,682       39,116       39,244       41,203       155,245  
General and administrative   91,500       23,569       24,367       24,677       24,993       97,606  
Amortization of intangible assets   18,357       5,903       6,208       6,571       8,828       27,510  
Other operating income, net   (3,482 )     (781 )     (5,767 )     (2,835 )     (572 )     (9,955 )
Total operating expenses $ 390,174     $ 107,467     $ 110,401     $ 116,438     $ 121,963     $ 456,269  
                                   
  Recast  
  FY 2021     Q1 2022     Q2 2022     Q3 2022     Q4 2022     FY 2022  
Operating expenses:                                  
Research and development $ 167,341     $ 47,079     $ 50,437     $ 53,092     $ 51,934     $ 202,542  
Sales and marketing   141,484       37,840       41,153       41,352       43,539       163,884  
General and administrative   66,474       17,426       18,370       18,258       18,234       72,288  
Amortization of intangible assets   18,357       5,903       6,208       6,571       8,828       27,510  
Other operating income, net   (3,482 )     (781 )     (5,767 )     (2,835 )     (572 )     (9,955 )
Total operating expenses $ 390,174     $ 107,467     $ 110,401     $ 116,438     $ 121,963     $ 456,269  
                                   
  Change  
  FY 2021     Q1 2022     Q2 2022     Q3 2022     Q4 2022     FY 2022  
Operating expenses:                                  
Research and development $ 16,292     $ 3,985     $ 3,960     $ 4,311     $ 4,423     $ 16,679  
Sales and marketing   8,734       2,158       2,037       2,108       2,336       8,639  
General and administrative   (25,026 )     (6,143 )     (5,997 )     (6,419 )     (6,759 )     (25,318 )
Amortization of intangible assets                                  
Other operating income, net                                  
Total operating expenses $     $     $     $     $     $  

Business Outlook

The following table provides a reconciliation of projected Non-GAAP net income to projected net loss, the most comparable GAAP financial measure:

  (Unaudited)  
  Three Months Ending
September 30, 2023
    Year Ending
December 31, 2023
 
(in thousands) Low     High     Low     High  
Net loss $ (22,800 )   $ (20,900 )   $ (15,300 )   $ (5,600 )
Stock-based compensation expense   18,200       18,200       82,200       82,200  
Amortization of intangible assets   7,600       7,600       30,400       30,400  
Non-cash interest expense   500       500       1,800       1,800  
Impact of non-GAAP tax rate(1)   (600 )     (1,000 )     (14,100 )     (16,400 )
Special adjustments and other(2)               4,900       4,900  
Non-GAAP net income $ 2,900     $ 4,400     $ 89,900     $ 97,300  

(1) The Company uses a non-GAAP effective tax rate of 26%.
(2) The year ending December 31, 2023, includes $8.0 million loss from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition and $3.1 million currency gains on acquisition-related intercompany loans.

The following table provides a reconciliation of projected Adjusted EBITDA to projected net loss, the most comparable GAAP financial measure:

  (Unaudited)  
  Three Months Ending
September 30, 2023
    Year Ending
December 31, 2023
 
(in thousands) Low     High     Low     High  
Net loss $ (22,800 )   $ (20,900 )   $ (15,300 )   $ (5,600 )
Income tax expense   400       500       17,500       17,800  
Stock-based compensation expense   18,200       18,200       82,200       82,200  
Interest (income) expense   (2,500 )     (2,500 )     (9,000 )     (9,000 )
Depreciation and amortization   9,700       9,700       38,700       38,700  
Special adjustments and other(1)               4,900       4,900  
Adjusted EBITDA $ 3,000     $ 5,000     $ 119,000     $ 129,000  

(1) The year ending December 31, 2023, includes $8.0 million loss from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition and $3.1 million currency gains on acquisition-related intercompany loans.

The following table provides a reconciliation of projected Free Cash Flow to projected net cash provided by operating activities, the most comparable GAAP financial measure:

  (Unaudited)  
  Year Ending
December 31, 2023
 
(in thousands) Low     High  
Net cash provided by operating activities $ 120,200     $ 128,200  
Capital expenditures   (12,200 )     (12,200 )
Free cash flow $ 108,000     $ 116,000  

Disclaimer: The above press release comes to you under an arrangement with GlobeNewswire. TheTechOutlook.com takes no editorial responsibility for the same.



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