Altair(US:ALTR)2024-08-02 01:51Financial Data and Key Metrics Changes - Total quarterly revenue for Q2 2024 was $148.8 million, with software revenue accounting for $135.4 million, both exceeding the high end of guidance [4] - Adjusted EBITDA was $17.3 million, above the midpoint of the guided range [4] - Software revenue grew 10.6% year-over-year on a constant currency basis, while total revenue increased by 5.4% in reported currency [12][14] - Non-GAAP gross margin was 80.9%, up from 80% in the prior year, driven by a shift towards higher-margin software revenue [14] Business Line Data and Key Metrics Changes - Software revenue represented 91% of total revenue in Q2 2024, compared to 88.8% in Q2 2023, indicating a strong focus on software solutions [14] - The aerospace and defense vertical showed notable strength, with significant contracts signed, including an eight-figure deal with a multinational aerospace company [10][12] Market Data and Key Metrics Changes - Calculated total billings were $154.5 million, a year-over-year increase of 4.5% in reported currency and 7.1% in constant currency [12] - Strong performance was noted across the Americas, EMEA, and APAC regions, with growth in software revenue [12][14] Company Strategy and Development Direction - The company is focusing on vertical market orientation for strategic accounts, particularly in aerospace and defense, to enhance customer engagement and sales effectiveness [18] - Recent acquisitions, such as Metrics Design Automation, aim to enhance capabilities in semiconductor design and verification, indicating a strategic push into the EDA market [6][31] - The launch of Altair HyperWorks 2024, featuring advancements in AI, positions the company as a leader in simulation-driven innovation [5][6] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth, citing the importance of innovation even amid macroeconomic challenges [28] - The company anticipates continued strong demand for its products, particularly in aerospace and defense, and expects software revenue growth to outpace engineering services [12][28] Other Important Information - Free cash flow for the first half of 2024 was $97 million, an increase of 16.8% from the prior year [15] - The company is raising its full-year guidance for software revenue, reflecting confidence in its product offerings and market position [16] Q&A Session Summary Question: Discussion on the interconnectedness of traditional products and newer data-focused products - Management highlighted the successful integration of traditional engineering products with newer offerings like RapidMiner, enhancing sales force capabilities [17][18] Question: Emphasis on channel partnerships and their impact on revenue - Management confirmed a strategic emphasis on indirect sales channels to reach small and medium accounts, particularly in data analytics [23][24] Question: Initial thoughts on the macroeconomic environment and its impact on business - Management expressed confidence that innovation will drive demand for their solutions, even in challenging economic conditions [27][28] Question: Insights on the Metrics Design Automation acquisition and its business model - Management noted that the acquisition's cloud-based business model allows for scalable simulations, which is expected to disrupt the EDA market [31][38] Question: Uptake rate of physicsAI tools among customers - Management reported a high uptake rate of physicsAI tools, indicating strong customer interest and integration into workflows [39] Question: Additional functionality in HyperWorks 24 and its impact on business - Management described significant enhancements in user experience and performance in HyperWorks 24, which are expected to drive increased adoption [41][42]