Altair Engineering Inc.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Altair's third quarter 2023 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 1 1 on your telephone. You will then hear an automatic message advising your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host for today, Dave Simon, Senior Vice President of Investor Relations. Please go ahead.

Good afternoon. Welcome. And thank you for attending Altair's earnings conference call for the third quarter of 2023, ended September 30th, 2023. I'm Dave Simon, Altair's SVP for Investor Relations. 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 third quarter 2023 performance and guidance for the fourth quarter and full year 2023, 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 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 and 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. 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 for 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. The third quarter of 2023 was excellent for Altair, with software product revenue, total revenue, and adjusted EBITDA all above the high end of our guidance. Our Q3 performance demonstrates the power and veracity of our vision for the convergence of computational science and AI across industries and verticals, including engineering, scientific discovery, and business. Adjusted EBITDA for Q3 2023 more than doubled year over year to $15.5 million. Software product revenue as a percentage of total revenue for the third quarter grew to 88.9% compared to 86.9% in the third quarter of 2022. Software product revenue as a percentage of total revenue for the first nine months of 2023 increased to 89.3% as compared to 87.8% in the first nine months of 2022. The recurring software license rate for the first nine months of 2023 was 94%, an increase from 93% through the same period in 2022. Software product revenue on a constant currency basis grew by 14.5% in the third quarter compared to the third quarter of 2022, and 11.1% for the first nine months of 2023 compared to the same period in 2022. Altair's growth continues to be broad-based across many geographies, technologies, and verticals. We are releasing a landmark set of product solutions across our entire portfolio, representing some of the most important and powerful software updates we have delivered in many years. Included with these releases are next generation user experiences, modern APIs, tightened integrations between products, seamless access to high performance computing, and increased computation speeds. Over the past year, our employees from all parts of the organization have embraced a shift to focusing on verticals as well as cross-pollinating our data science expertise with our traditional simulation and design go-to-market teams. This convergence has created new growth opportunities with our customers by helping them apply digital twin technologies to improve their products scale compute power faster, and use data analytics and artificial intelligence to accelerate their digital transformation efforts. As part of this effort, we are pushing the boundaries of what we know is possible by integrating our products in truly transformative ways across all three of our major software platforms. Altair Hyperworks, our design and simulation platform, Altair RapidMiner, our data analytics and AI platform, and Altair HPC Works, our high-performance computing and cloud platform, as well as Altair One, our cloud innovation gateway. Altair HyperWorks 2023 empowers engineers with a comprehensive suite of design and simulation solutions that harness the power of computational science, HPC, and AI, Its new, modern user experience and Python APIs throughout the platform empower developers and users to create unified, best-in-class solutions, leveraging technology from the entire Altair Hyperworks portfolio. HyperMesh was upgraded with a user-centric design, providing unmatched pre- and post-processing capabilities through AI power tools, and next-gen design and optimization workflows. HyperMesh CFD complements these capabilities by streamlining CFD workflows within a unified environment. SimLab has expanded capabilities as an integrated multi-physics solution for electronic design automation, enhancing user-friendliness while advancing electronic and EDA product development. Our new product introduction of simulation data management is an exciting and timely solution for customers looking to leverage AI-driven simulation where historical simulation runs become key sources of valuable data. We see significant momentum among all customers to implement digital twins for both design and in-service applications. TwinActivate, the foundation of Altair's digital twin solution, continues to evolve as a differentiated solution, especially with our strong ROM AI capabilities. In addition, the integration of OmniV, recently acquired for requirements management, gives our platform a strong and complete digital twin offering for customers. SimSolid continues to gain market share in all our established and many new accounts as the technology rapidly matures and adds new functionality. This release enhances SimSolid's ability to automatically set parameters, leveraging machine learning, which is key for the design community. Inspire's release beautifully integrates implicit modeling optimizing lightweight lattice structures, building on technology from our 2022 acquisition of Gen3D. This software is further enriched by a new cutting-edge visualization and rendering graphics engine, which will also be released in future versions of HyperMesh and SimLab. Altair RapidMiner 2023 now delivers generative AI capabilities for domain experts and data scientists, and deeper support for coding data scientists. The platform also continues to integrate advanced automated functionality, including decision trees, auto clustering, auto machine learning, auto feature engineering, and auto forecasting. Customers can build and use rich real-time dashboards more intuitively than ever. with a new streamlined user interface, and those with intellectual property in the SAS language will be able to write, test, and run SAS code directly from their Python development environment. Furthermore, Altair RapidMiner with generative AI enables non-programmers to create large language models and refine models for new or proprietary use cases all without needing to write code. Users can access all 300,000 plus Hugging Face models with one click and fine tune models with billions of parameters, competing with some of the biggest models on the market. Generative AI in Altair RapidMiner also simplifies and accelerates workflow design. Users simply state the desired data transformations and the platform will suggest and configure the appropriate workflow. Altair HPC Works 2023 has undergone one of the biggest technology changes in decades. Through the adoption of web-scale distributed technologies, we give HPC centers around the world the scale and adaptability demanded by modern distributed workflows. Furthermore, we are improving our dynamic cloud scalability based on real-time demand by implementing a unified interface for monitoring cloud deployed nodes. This ensures efficient cloud spending by enabling global cost controls and providing enhanced visibility from your preferred Altair workload manager. By targeting specific workloads with cloud resources, we ensure expenditure matches business needs. Altair One 2023 lets customers easily configure, build, and deconstruct their HPC infrastructure on demand with any of the popular cloud providers, avoiding vendor lock-in and uncontrolled cost. Altair Material Data Center and our simulation data management are built on the Altair One platform, for consistency, traceability, and collaborative decision-making across the enterprise. On Altair One, users can interact with Altair support, access our new enhanced AI-powered support documentation, and manage their software licenses and users. In addition to these exciting product releases, We have added additional technology to our structural optimization portfolio with the acquisition of OmniQuest. The company was founded by the late Professor Gary von der Plotz, a giant in the field of structural optimization. Its advanced structural analysis and optimization software is used by many customers in the automotive sector to develop lightweight, efficient designs. We believe this acquisition further enhances Altair's optimization market leadership. The aerospace vertical was particularly strong for us in the third quarter. Notably, Altair extended its longtime collaboration with Airbus with a recently signed new multi-year agreement. This agreement allows Airbus to access the complete Altair portfolio, including our simulation, HPC, data analytics, and AI software solutions. Additionally, it will accelerate Airbus' deployment of Altair SimSolid, our game-changing meshless simulation technology. In addition, an aircraft engine manufacturer signed a six-figure license agreement focused on data analytics and machine learning to detect anomalies related to electromagnetic interference. An aerospace systems supplier committed to using Altair Rapid Miner to drive its data-driven digital transformation for engineering, manufacturing, and aftermarket services. a major aerospace company renewed with a double-digit increase on its annual seven-figure spend with Altair simulation tools regarded as a core technology for its product development and verification processes. Finally, an aerospace supplier sourced a six-figure deal specific to Altair Monitor, a real-time software licensing, monitoring, and management system The automotive vertical, driven by several innovative applications, contributed to our third quarter software sales growth. A European automaker worked with us to use AI for improved NBH performance. An APAC automaker used RapidMiner to improve its supply chain efficiency, and a Formula One team expanded its six-figure annual spend with Altair by over 30%. with applications mainly focused around structural optimization. Finally, we had a six-figure expansion with an EV manufacturer, including work targeted at vehicle dynamics. In the heavy equipment vertical, we want a multi-year seven-figure commitment representing double-digit year-on-year expansion compared to 2022 and also going forward. This relationship is a great example of a global company leveraging a large portion of Altair's portfolio to address longer term goals for electrification, digital twin, and overall data-driven enterprise strategies. We are excited about its products and look forward to playing a continued role in helping this company succeed. In the technology vertical, we won two new semiconductor customers in Europe and a seven-figure expansion with a major U.S. technology supplier for applications related to high-performance computing. Regarding workplace culture, Altair added to our growing list of 2023 awards. by again being named one of Newsweek Magazine's Most Loved Workplaces in the US and in the UK. This year, we were also named one of Fortune Magazine's 40 Best Workplaces in Technology. We appreciate the recognition from these highly respected award programs. We look forward to closing out a solid 2023 despite a relatively challenging macro environment. Now I will turn the call over to Matt to provide more details on our financial performance and our guidance for the fourth quarter and full year of 2023.