Altair(ALTR) - 2020 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q4 2020 was $133.4 million, reflecting an increase of almost 8% from Q4 2019, and over 5% on a constant currency basis [10][24] - Software product revenue for Q4 was$ 113.6 million, representing year-on-year growth of 12.3% and over 9% on a constant currency basis [10][24] - Adjusted EBITDA for Q4 was $21.7 million, a significant increase of over 70% from the previous year [31] - For the full year 2020, total revenue was$ 469.9 million, a growth of 2.4% from 2019, while software product revenue grew to $391.7 million, an increase of almost 7% [10][27] Business Line Data and Key Metrics Changes - Software product revenue constituted 85.2% of total revenue in Q4 2020, up from 81.7% in the prior-year period [10][28] - Recurring software license rate increased to 92% for the full year 2020, compared to 87% in 2019 [11][29] - Software-related services revenue declined by 23.5% compared to the previous year, primarily due to challenges in the automotive customer base [28] Market Data and Key Metrics Changes - Billings for Q4 2020 were$ 146 million, an increase of 12% from the previous year, driven by strong software momentum [29] - For the full year, billings were $480.4 million, reflecting a growth of about 1% from the previous year [29] Company Strategy and Development Direction - The company is focused on the convergence of simulation, high-performance computing (HPC), and artificial intelligence (AI) to enhance customer support and technology offerings [8][9] - The acquisition of Flow Simulator from GE Aviation aims to expand capabilities in the aerospace market and other industries [17][18] - The company is transitioning to a hybrid work model post-COVID-19, which is expected to contribute to EBITDA expansion as revenue scales [20] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding a broad economic recovery in 2021, despite ongoing uncertainties related to COVID-19 [39] - The company anticipates software product revenue for Q1 2021 to be in the range of$ 118 million to $120 million, representing year-over-year growth of 8.8% to 10.7% [35] - Total revenue for 2021 is forecasted to be between$ 502 million and $510 million, indicating year-over-year growth of 6.8% to 8.5% [36] Other Important Information - The company has made significant reductions in marketing and travel costs during 2020, which are expected to return to normal levels in 2021 [36] - Free cash flow for fiscal year 2021 is projected to be in the range of$ 26 million to $34 million [38] Q&A Session Summary Question: How did the quarter play out versus expectations? - Management entered the quarter with conservatism due to COVID-19 but saw improvements as the quarter progressed, reflecting growth investments and strong customer demand [42] Question: What is the status of the convergence model? - The transition to a converged model is largely complete, with significant integration of engineering and data analytics occurring naturally within products [45] Question: What areas of the sales force will see investments? - The company is focusing on enterprise-level customers and refining its sales organization to better leverage resources [47][50] Question: What is the expected FX impact on revenue growth guidance? - FX is expected to contribute a couple of points to revenue growth guidance, with minimal impact on EBITDA [51] Question: How does the company plan to maintain customer intimacy in services? - The company remains actively engaged with customers on advanced projects, despite the decline in service revenue [54] Question: What are the trends in the data space compared to competitors? - The company has a strong solution in data preparation and continues to see growth, differentiating itself from competitors [60][62] Question: What is the outlook for the indirect sales channel? - Progress has been made in the indirect sales channel, particularly in Europe and APAC, but more work is needed in the Americas [79]