Altair Engineering Inc.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Altair Engineering Incorporated Second Quarter 2021 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star then 1 on your telephone keypad. If you require any further assistance, please press star then 0. At this time, I would like to turn the conference over to Mr. Dave Simon. Sir, please begin.

Good afternoon, welcome, and thank you for attending Altair's earnings conference call for the second quarter of 2021, ended June 30th, 2021. I'm Dave Simon, Chief Administrative Officer of Altair, and with me on the call are Jim Scappa, Founder, Chairman, and CEO, and Matt Brown, Chief Financial Officer. After market closed today, we issued a press release with details regarding our second quarter performance and guidance for the third quarter and the full year 2021, which can be accessed on the investor relations section of our website at investor.altair.com. This call is being recorded and a replay will be available on the IR section of our website following the conclusion of this call. During today's call, we will make statements related to our business that may be considered forward-looking under federal securities laws. These statements reflect our views only as of today. and should not be considered representative of our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. These statements are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. These risks are summarized in the press release that we issued earlier today. For a further discussion of the material risks and other important factors that could affect our actual results, Please refer to those contained in our quarterly annual reports filed with the SEC, as well as other documents that we have filed or may file from time to time. During the course of today's call, we will refer to certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our press release. Finally, at times in our prepared comments or responses to your questions, we may offer metrics that are incremental to our usual presentation to provide greater insight into the dynamics of our business or our quarterly results. Please be advised that we may or may not continue to provide this additional detail in the future. With that, let me turn the call over to Jim for his prepared remarks. Jim?

Thank you, Dave, and welcome to everyone on the call. Altair had a strong second quarter of 2021 with across-the-board success in multiple verticals, regions, and products. reflecting year-on-year software product revenue growth of 22%. Customers are investing to grow their businesses as we emerge from the pandemic, and Altair's products, services, and business models are clearly resonating, gaining market awareness and increasing market share. We are pleased to report Q2 results with total revenue of $119.9 million, Software product revenue for the quarter was $99.6 million versus $81.8 million in Q2 of 2020. Adjusted EBITDA was $9.5 million compared to $5.7 million in Q2 of 2020, an increase of more than 65 percent from the second quarter of 2020. All were well above our guidance ranges. The updated Altair Units business model continues to roll out as a win-win for our customers and Altair, including in data analytics accounts. Approximately 75% of our simulation customers have thus far converted to the new software bundle choices in line with our expectations. Software product revenue for the first half of 2021 continued a strong positive trend at 85 percent of total revenue compared to 83 percent during the first half of 2020. Our recurring software license rate remained high at 90 percent for the second quarter of 2021 and 92 percent year-to-date. We held an investor day on May 27, and many of the questions were framed around understanding Altair's growth drivers and opportunities for expansion. This is, in fact, combination of verticals, technologies, and regional success, and I would like to spend some time talking about wins from the second quarter related to each. In architecture, engineering, and construction, or the AEC vertical, our second quarter wins included the addition of a new customer logo listed as one of the top ten global design firms. We continue to build our customer base and align with the need for performance-based outcomes and sustainable infrastructure development. Our new logos and expansion in aerospace for the quarter included the addition of a newly spun-out airplane manufacturer and a six-figure expansion representing almost a 3x usage increase at an existing client. The automotive sector continues to develop significant opportunities, especially related to electrification, communications, analytics, and computing. The banking, financial services, and insurance, or BFSI, vertical continues to show strong performance, including a steady stream of data analytics customers embracing units-based licensing. Our second quarter wins included new logo six-figure deals under units-based licensing and some key direct wins against data analytics software competitors. In consumer products, one recent and interesting application involved a food manufacturer leveraging thin film forming simulation. Healthcare saw a number of wins in the second quarter, including a new logo win based on developing prosthetics using 3D printing technology. and an expansion from an existing medical products customer specifically targeted at data analytics for their engineering applications. In motorsports, we have several expansions and new customers, including one agreement to improve safety and performance, leveraging our data science technology and expertise. This aligns with our robust pipeline growth in engineering analytics, and is consistent with our vision for the convergence of simulation, HPC, and AI. And finally, SimSolid is disrupting the energy market by dramatically reducing design cycle times and displacing traditional simulation performed with competitors' products. Our expectations for SimSolid are coming to fruition across many verticals as this product is being adopted broadly across our customer base. Products and technology are at the core of Altair's success, and we continue to invest heavily in research and development. During the second quarter, we build upon the broad and deep product releases of 2020 with the latest versions of our simulation software solutions. All our existing products added significant new features in this release. and we introduce some new products as we continue to evolve our portfolio with a combination of sustaining and disruptive innovation. Altair has invested strategically for several years, both organically and by acquisition, to build out what we believe is the broadest and deepest portfolio of computational fluid dynamics solutions, covering a wide array of applications. With the latest announcements of our Altair CFD software, we are well-positioned and focused to grow our share in the very large and rapidly growing CFD simulation market. Altair CFD delivers sophisticated technology for fluid and thermal systems modeling, general-purpose multiphysics simulation, external aerodynamics, discrete element modeling, and smooth particle hydrodynamics. very cost-effectively, and under a single license. Several of these products have embedded optimization and machine learning algorithms and often work in concert, co-simulating with other technologies to deliver deep insights and clear design direction for difficult-to-understand and predict physical behavior. We believe Altair is a leader in manufacturing simulation with a broad portfolio of key products and technologies many of which have CFD at their core, including casting, molding, extrusion, foaming, forming, and additive manufacturing. The consideration and integration of manufacturing simulations with design optimization is critical for customers to make key product decisions in this fast-changing market. CFD had some outstanding Q2 successes in applications such as sporting goods, building design, and electric vehicles. The building design win is impressive technically in that our customer will simulate tall buildings in excess of 100 meters through a variety of wind load conditions. The possibilities for this customer to shorten design cycles, eliminate expensive wind tunnel testing, and improve building safety while making efficient use of materials to improve sustainability are all consistent with the positive trends we see in the AEC vertical. Altair's electronic systems design toolset has a new thermal management workflow to enhance the design of electronic devices. In addition to the existing Altair SimLab workflows for structural stress, vibration, and drop test performance, product engineers can now ensure the cooling of printed circuit boards and complete systems prevent overheating, product reliability issues, or expensive late stage redesigns. Smart connected devices increasingly need high speed memory. Altair Pollux has added signal integrity automation for double data rate memory interfaces, enhancing optimization of double data rate timing, transmission lines, topology, and terminations. Other improvements include additional power integrity simulation and the capability to export PCB layers for thermal management analysis. Recent additions and new logos across multiple verticals and regions in electronics and electromagnetics have added seven-figure revenue to Altair's top line. Applications include electronic systems design, circuit board simulation, antenna placement, radar cross-section, autonomous driving connectivity, and electric drive system development. Altair One is a cloud portal for Altair's products, accessible anywhere via standard workstations, PCs, laptops, and mobile devices. Users can launch applications in the cloud from a single interface with easy access to resources that are on-premises or in the cloud. product teams can increase collaboration by securely uploading, accessing, storing, and managing data using the Altair One drive. Altair One does not require additional capital expenditures on complex IT and can scale immediately in response to peaks in workload. It also empowers users to provision turnkey, scalable appliance clusters across all major cloud providers. including AWS, Azure, Oracle Cloud Infrastructure, and Google Cloud Platform. And finally, Altair entered the high-performance or HPC market when HPC shifted from specialized computers to commodity cluster servers in the early 2000s. In 2003, we spun the PBS team out of NASA. In 2017, we acquired Runtime, focus on the electronics market with specialized solutions for high-throughput workflows. In 2020, we acquired Alexis to bring in technology for I.O. and storage profiling, develop storage-aware scheduling, and we acquired GridEngine with its strong position in life science and its top-tier technical team. HPC continues to mature as a business, and had a strong second quarter for Altair, with a seven-figure multi-year agreement inked with one of the world's largest cloud technology companies. Altair's position in HPC has become increasingly powerful, reflected in the growing confidence of our sales team and the robust pipeline of opportunities we see. The strength of Altair has always been our robust regional diversification. Our revenues and people have been distributed very evenly across the Americas, EMEA, and APAC, as well as between countries in these super regions. This is an especially important year in APAC, as this is the 20-year anniversary of our founding in Altair China and Altair Korea, and the 25th anniversary of Altair Japan's formation. The Americas and EMEA operations came online earlier, making it even more impressive that our APAC organization is driving one-third of our software product billings and usage. We invest to support our people and customers globally, and especially as world events are sometimes disruptive, we appreciate the focus and teamwork of our colleagues and the collaboration with customers across every time zone. As we look at success stories from the second quarter, the degree of geographic diversity is amazing. Eastern Europe, Southeast Asia, and South America all rang in as strong players within the larger regions of EMEA, APAC, and the Americas. We are truly one Altair and believe we are serving our customers with less locational barriers than ever in our history. Over the last two months, we enhanced our organization by adding two new board members to our board of directors, Jim Anderson and Shekhar Iyer. Jim is currently a managing director for Google Cloud and has a passion around scaling enterprise-level businesses and building sales channels. Shekhar was most recently an executive with VMware and brings a wealth of consulting, strategy, and technical expertise to Altair. We believe they both add outstanding depth and breadth to our board. Welcome, Jim and Shekhar. I am deeply appreciative of Jan Kowal, Richard Hart, and Brett Chouinard for their time on Altair's board. Brett is now in a key technology role for Altair while Jan is fully retired, and Richard is focused on other professional endeavors. The three of them were magnificent sources of support and inspiration through our IPO process and over the last several years. Q2 was strong, and we remain cautiously optimistic for the balance of the year. New variants of COVID-19, disappointing vaccination rates in some locations, and a generally long process to fully shake off the pandemic globally. have the potential of curbing what should otherwise be a vibrant economic environment. However, as our customers invest to drive more innovation into their products and services, we are confident in our ability to be a differentiating asset for them. Now I will turn the call over to Matt to provide more details on our financial performance and our guidance for the third quarter and remainder of 2021. Matt?