Altair Engineering Inc. SEC 10-K Report

Altair Engineering Inc., a global leader in computational science and artificial intelligence (AI), has released its 2024 10-K report, showcasing significant financial growth, strategic acquisitions, and a robust outlook for future operations. The report highlights the company's performance across various business segments, strategic initiatives, and the challenges it faces in the evolving market landscape.

Financial Highlights

• Total Revenue: $665.8 million, reflecting an increase driven by growth in software license revenue, particularly in the aerospace & defense vertical.
• Gross Profit: $541.0 million, representing an increase primarily attributable to the increase in software revenue.
• Operating Income: $17.7 million, showing improvement due to increased software revenue and interest income, despite higher operating expenses.
• Net Income: $14.2 million, compared to a net loss of $8.9 million in the previous year, largely due to increased software revenue and interest income.
• Income (loss) per share, basic: $0.17, indicating a positive turnaround from the previous year's loss per share.

Business Highlights

• Revenue Segments: Altair's software revenue increased by 11% in 2024, driven by strong retention and expansions within existing accounts, particularly in the aerospace & defense vertical.
• Geographical Performance: In 2024, 32% of Altair's software billings were attributed to the Americas, 31% to EMEA, and 37% to APAC, reflecting a balanced global presence.
• New Product Launches: In 2024, Altair expanded its product offerings with the acquisition of Metrics Design Automation Inc., Research in Flight, and the assets of Cambridge Semantics, enhancing its capabilities in semiconductor simulation, computational fluid dynamics, and data analytics.
• Future Outlook: Altair anticipates the completion of its merger with Siemens Industry in the first half of 2025, which is expected to enhance its market position and operational capabilities.
• Sales Units: Altair's unique units-based subscription licensing model continues to drive engagement and revenue, with approximately 60% of new software revenue coming from expansion within existing customers.
• Operational Strategy: Altair's focus on integrating AI and simulation technologies positions it to capitalize on the growing demand for digital twins and smart product development across various industries.

Strategic Initiatives

In 2024, Altair Engineering Inc. pursued several strategic acquisitions to expand its software product portfolio and enhance its capabilities in data analytics and simulation technology. These acquisitions included KSK Analytics, Metrics Design Automation Inc., Research in Flight, and the assets of Cambridge Semantics. The company also entered into a Merger Agreement with Siemens Industry Software Inc., which, if consummated, will result in Altair becoming a wholly owned subsidiary of Siemens Industry.

Altair Engineering Inc. managed its capital through a combination of debt and equity activities. As of December 31, 2024, the company had $561.9 million in cash and cash equivalents and $200 million available on its credit facility. The company settled $81.7 million of its convertible notes and received $65.5 million from the exercise of common stock options. Additionally, Altair issued new shares for acquisitions and employee stock purchase programs, increasing its additional paid-in capital to $1,010.8 million. The company did not declare or pay any dividends, and its 2019 Amended Credit Agreement restricts dividend payments.

Looking ahead, Altair anticipates the completion of the merger with Siemens Industry in the first half of 2025, which will lead to the delisting of its securities from the Nasdaq Global Select Market. The company plans to continue leveraging its cash reserves and credit facility to support operations and potential future acquisitions. Altair also aims to maintain its recurring software license rate and explore strategic opportunities for growth within its software and client engineering services segments.

Challenges and Risks

The company faces significant risks related to the pending merger with Siemens Industry, including potential delays or termination of the transaction, which could lead to a substantial decline in the market price of the company's Class A common stock. Efforts to complete the merger may disrupt ongoing business operations, and the company is restricted from pursuing alternative transactions. Additionally, litigation related to the merger could result in substantial costs.

The sustainability of the company's revenue growth rate is uncertain, with potential impacts from competition, changes in customer spending, and fluctuations in foreign currency exchange rates. The company also faces challenges in expanding its customer base and increasing software usage among existing customers, which could harm business growth.

Operational risks include the potential for defects or errors in software, which could harm the company's reputation and financial results. The company must also adapt to technological changes to remain competitive, and any failure to do so could result in obsolescence.

Regulatory risks are significant, with the company needing to comply with complex regulations across various jurisdictions. Changes in laws, particularly those related to data privacy, export controls, and tax regulations, could adversely affect operations. The company is also exposed to risks related to intellectual property disputes and security breaches, which could result in financial and reputational damage.

Management has identified the need to maintain a culture of innovation and teamwork as critical to success. The company is focusing on long-term growth, which may impact near-term profitability. Strategic investments in research and development are essential, but there is a risk that these efforts may not yield the expected benefits.

The company is exposed to market risks, including fluctuations in foreign currency exchange rates, which could adversely affect financial results. The lack of currency hedging activities increases vulnerability to exchange rate volatility. Additionally, the company's reliance on the automotive industry makes it susceptible to industry-specific downturns, which could impact revenue.

SEC Filing: Altair Engineering Inc. [ ALTR ] - 10-K - Feb. 20, 2025