TROY, Mich., Feb. 27, 2020 (GLOBE NEWSWIRE) -- Altair (Nasdaq:ALTR), a global technology company providing solutions in product development, high-performance computing and data analytics, today released its financial results for the fourth quarter ended December 31, 2019.
“We continue to execute on our vision of transforming product design and customer decision making by leveraging simulation, data analytics and high-performance computing,” said James Scapa, Founder, Chairman and Chief Executive Officer of Altair. “Our core simulation and optimization technologies performed well during the quarter and we remain highly encouraged by strong demand for our SimSolid product, which continues to have one of the fastest new product ramps in our history. As we enter 2020, we continue to see macro headwinds in our automotive end market and given the potential impact of the Coronavirus on our customers we anticipate a more modest start to the year. However, we remain confident that our diversification across multiple verticals and products positions the company well to achieve above market growth over the long-term.”
“Software product revenue exceeded our expectations in the fourth quarter and our year over year growth rate accelerated sequentially to 27%,” said Howard Morof, Chief Financial Officer of Altair.
Fourth Quarter 2019 Financial Highlights
- Software product revenue was $101.2 million, an increase of 27% from $79.9 million for the fourth quarter of 2018.
- Non-GAAP software product revenue was $103.4 million, an increase of 29% from $79.9 million for the fourth quarter of 2018.
- Total revenue was $123.9 million, an increase of 20% from $103.0 million for the fourth quarter of 2018.
- Non-GAAP total revenue was $126.1 million, an increase of 22% from $103.0 million for the fourth quarter of 2018.
- Net loss was $(1.5) million, compared to net loss of $(9.0) million for the fourth quarter of 2018. Diluted net loss per share was $(0.02) based on 72.2 million diluted weighted average common shares outstanding, compared to diluted net loss per share of $(0.13) for the fourth quarter of 2018, based on 70.5 million diluted weighted average common shares outstanding.
- Adjusted EBITDA was $12.7 million, compared to $12.9 million for the fourth quarter of 2018.
- Modified Adjusted EBITDA was $15.0 million, compared to $12.9 million for the fourth quarter of 2018.
- Non-GAAP net income was $6.9 million, compared to non-GAAP net income of $5.6 million for the fourth quarter of 2018. Non-GAAP diluted net income per share was $0.09 based on 78.0 million non-GAAP diluted common shares outstanding, compared to non-GAAP diluted net income per share of $0.07 for the fourth quarter of 2018, based on 77.7 million non-GAAP diluted common shares outstanding.
- Free cash flow was $(0.2) million, compared to $(5.5) million for the fourth quarter of 2018.
Full Year 2019 Financial Highlights
- Software product revenue was $366.7 million, an increase of 20% from $304.4 million for the full year 2018.
- Non-GAAP software product revenue was $375.7 million, an increase of 23% from $304.4 million for the full year 2018.
- Total revenue was $458.9 million, an increase of 16% from $396.4 million for the full year 2018.
- Non-GAAP total revenue was $467.9 million, an increase of 18% from $396.4 million for the full year 2018.
- Net loss was $(7.5) million, compared to net income of $15.5 million for the full year 2018. Diluted net loss per share was $(0.11) based on 71.5 million diluted weighted average common shares outstanding, compared to diluted net income per share of $0.21 for the full year 2018, based on 74.9 million diluted weighted average common shares outstanding.
- Adjusted EBITDA was $39.5 million, compared to $50.2 million for the full year 2018.
- Modified Adjusted EBITDA was $48.5 million, compared to $50.2 million for the full year 2018.
- Non-GAAP net income was $24.8 million, compared to non-GAAP net income of $32.8 million for the full year 2018. Non-GAAP diluted net income per share was $0.32 based on 78.0 million non-GAAP diluted common shares outstanding, compared to non-GAAP diluted net income per share of $0.42 for the full year 2018, based on 77.7 million non-GAAP diluted common shares outstanding.
- Free cash flow was $21.7 million, compared to $29.6 million for the full year 2018.
Business Outlook
Based on information available as of today, Altair is issuing guidance for the first quarter and full year 2020.
| (in millions) | First Quarter 2020 | Full Year 2020 | ||||||||||||||
| Software Product Revenue | $ | 105.0 | to | $ | 107.0 | $ | 395.0 | to | $ | 399.0 | ||||||
| Total Revenue | $ | 129.0 | $ | 131.0 | $ | 491.0 | $ | 495.0 | ||||||||
| Net Income (Loss) | $ | 4.9 | $ | 6.3 | $ | (4.3 | ) | $ | (1.5 | ) | ||||||
| Non-GAAP Net Income | $ | 11.5 | $ | 12.9 | $ | 24.7 | $ | 27.5 | ||||||||
| Adjusted EBITDA | $ | 20.0 | $ | 22.0 | $ | 49.0 | $ | 53.0 | ||||||||
(All figures in millions)
Conference Call Information
| What: | Altair’s Fourth Quarter 2019 Financial Results Conference Call |
| When: | Thursday, February 27, 2020 |
| Time: | 4:30 p.m. ET |
| Live Call: | (866) 754-5204, Domestic |
| (636) 812-6621, International | |
| Replay: | (855) 859-2056, Conference ID 5031498, Domestic |
| (404) 537-3406, Conference ID 5031498, International | |
| Webcast: | http://investor.altair.com (live & replay) |
Non-GAAP Financial Measures
This press release contains the following non-GAAP financial measures: Non-GAAP Software Product Revenue, Non-GAAP Total Revenue, Adjusted EBITDA, Modified Adjusted EBITDA, Non-GAAP Net Income, Non-GAAP Net Income Per Share and Free Cash Flow.
Altair believes that these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to its financial condition and results of operations. The Company’s management uses these non-GAAP measures to compare the Company’s performance to that of prior periods for trend analysis, for purposes of determining executive and senior management incentive compensation and for budgeting and planning purposes. The Company also believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the Company’s financial measures with other software companies, many of which present similar non-GAAP financial measures to investors.
Non-GAAP software product revenue and Non-GAAP total revenue include revenue not recognized under GAAP due to acquisition accounting adjustments associated with the accounting for deferred revenue in significant business combinations.
Adjusted EBITDA represents net income adjusted for income tax expense, interest expense, interest income and other, depreciation and amortization, stock-based compensation expense, restructuring charges, asset impairment charges and other special items as identified by management and described elsewhere in this press release.
Modified Adjusted EBITDA represents Adjusted EBITDA adjusted for revenue not recognized under GAAP due to acquisition accounting adjustments associated with the accounting for deferred revenue in significant business combinations.
Non-GAAP net income excludes stock-based compensation, amortization of intangible assets related to acquisitions, revenue not recognized under GAAP due to acquisition accounting and special items as identified by management and described elsewhere in this press release.
Non-GAAP diluted common shares includes total outstanding shares plus outstanding equity awards under the Altair equity award plans.
Free cash flow consists of cash flow from operations less capital expenditures.
Company management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company’s financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. Altair urges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures, which it includes in press releases announcing quarterly financial results, including this press release, and not to rely on any single financial measure to evaluate the Company’s business.
Reconciliation tables of the most comparable GAAP financial measures to the non-GAAP financial measures used in this press release are included with the financial tables at the end of this release.
About Altair
Altair is a global technology company that provides software and cloud solutions in the areas of product design and development, high-performance computing (HPC) and data analytics. Altair enables organizations across broad industry segments to compete more effectively in a connected world while creating a more sustainable future. To learn more, please visit www.altair.com.
Cautionary Language Concerning Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, our guidance for the first quarter and full year 2020, statements regarding other future periods, anticipated trends and long-term growth, and our reconciliations of projected non-GAAP financial measures. These forward-looking statements are made as of the date of this release and are based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. Words such as “expect,” “anticipate,” “should,” “believe,” “hope,” “target,” “project,” “goals,” “estimate,” “potential,” “predict,” “may,” “will,” “might,” “could,” “intend,” variations of these terms or the negative of these terms and similar expressions are intended to identify these forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond Altair’s control. Altair’s actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, risks detailed in Altair’s quarterly and annual reports filed with the Securities and Exchange Commission as well as other documents that may be filed by the Company from time to time with the Securities and Exchange Commission. Past performance is not necessarily indicative of future results. The forward-looking statements included in this press release represent Altair’s views as of the date of this press release. The Company anticipates that subsequent events and developments will cause its views to change. Altair undertakes no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These forward-looking statements should not be relied upon as representing Altair’s views as of any date subsequent to the date of this press release.
Media Relations
Altair
Dave Simon
248-614-2400 ext. 332
ir@altair.com
Investor Relations
The Blueshirt Group
Monica Gould
212-871-3927
Lindsay Savarese
212-331-8417
ir@altair.com
ALTAIR ENGINEERING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| December 31, | ||||||||
| (in thousands) | 2019 | 2018 | ||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 223,117 | $ | 35,345 | ||||
| Accounts receivable, net | 104,984 | 96,803 | ||||||
| Income tax receivable | 7,264 | 4,431 | ||||||
| Prepaid expenses and other current assets | 17,092 | 17,455 | ||||||
| Total current assets | 352,457 | 154,034 | ||||||
| Property and equipment, net | 36,297 | 30,153 | ||||||
| Operating lease right of use assets | 28,134 | — | ||||||
| Goodwill | 233,683 | 210,532 | ||||||
| Other intangible assets, net | 67,075 | 69,836 | ||||||
| Deferred tax assets | 5,791 | 5,354 | ||||||
| Other long-term assets | 19,708 | 17,288 | ||||||
| TOTAL ASSETS | $ | 743,145 | $ | 487,197 | ||||
| LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Current portion of long-term debt | $ | 430 | $ | 331 | ||||
| Accounts payable | 8,585 | 8,357 | ||||||
| Accrued compensation and benefits | 30,676 | 31,740 | ||||||
| Current portion of operating lease liabilities | 9,141 | — | ||||||
| Other accrued expenses and current liabilities | 28,603 | 27,039 | ||||||
| Deferred revenue | 75,431 | 59,765 | ||||||
| Total current liabilities | 152,866 | 127,232 | ||||||
| Long-term debt, net of current portion | 178,238 | 31,417 | ||||||
| Operating lease liabilities, net of current portion | 20,174 | — | ||||||
| Deferred revenue, non-current | 8,136 | 6,754 | ||||||
| Other long-term liabilities | 26,672 | 25,756 | ||||||
| TOTAL LIABILITIES | 386,086 | 191,159 | ||||||
| Commitments and contingencies | ||||||||
| MEZZANINE EQUITY | 2,352 | 2,352 | ||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock ($0.0001 par value), authorized 45,000 shares, none issued and outstanding | — | — | ||||||
| Common stock ($0.0001 par value) | ||||||||
| Class A common stock, authorized 513,797 shares, issued and outstanding 41,271 and 38,349 shares as of December 31, 2019 and 2018, respectively | 4 | 4 | ||||||
| Class B common stock, authorized 41,203 shares, issued and outstanding 31,131 and 32,171 shares as of December 31, 2019 and 2018, respectively | 3 | 3 | ||||||
| Additional paid-in capital | 446,633 | 379,832 | ||||||
| Accumulated deficit | (82,405 | ) | (74,863 | ) | ||||
| Accumulated other comprehensive loss | (9,528 | ) | (11,290 | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY | 354,707 | 293,686 | ||||||
| TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY | $ | 743,145 | $ | 487,197 | ||||
ALTAIR ENGINEERING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended December 31, | For the Year Ended December 31, | |||||||||||||||
| (in thousands, except per share data) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Revenue | ||||||||||||||||
| License | $ | 64,194 | $ | 52,649 | $ | 244,321 | $ | 207,164 | ||||||||
| Maintenance and other services | 36,993 | 27,254 | 122,381 | 97,197 | ||||||||||||
| Total software | 101,187 | 79,903 | 366,702 | 304,361 | ||||||||||||
| Software related services | 8,941 | 10,073 | 34,576 | 36,945 | ||||||||||||
| Total software and related services | 110,128 | 89,976 | 401,278 | 341,306 | ||||||||||||
| Client engineering services | 11,722 | 11,200 | 48,987 | 47,852 | ||||||||||||
| Other | 2,027 | 1,835 | 8,650 | 7,221 | ||||||||||||
| Total revenue | 123,877 | 103,011 | 458,915 | 396,379 | ||||||||||||
| Cost of revenue | ||||||||||||||||
| License | 8,139 | 5,585 | 21,285 | 16,119 | ||||||||||||
| Maintenance and other services | 10,892 | 7,453 | 38,401 | 29,655 | ||||||||||||
| Total software * | 19,031 | 13,038 | 59,686 | 45,774 | ||||||||||||
| Software related services | 6,497 | 6,842 | 25,640 | 26,415 | ||||||||||||
| Total software and related services | 25,528 | 19,880 | 85,326 | 72,189 | ||||||||||||
| Client engineering services | 9,882 | 9,002 | 39,875 | 38,979 | ||||||||||||
| Other | 1,540 | 1,389 | 7,398 | 4,805 | ||||||||||||
| Total cost of revenue | 36,950 | 30,271 | 132,599 | 115,973 | ||||||||||||
| Gross profit | 86,927 | 72,740 | 326,316 | 280,406 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development * | 30,498 | 25,844 | 117,510 | 97,592 | ||||||||||||
| Sales and marketing * | 27,589 | 22,427 | 106,051 | 80,277 | ||||||||||||
| General and administrative * | 21,292 | 28,114 | 82,178 | 79,751 | ||||||||||||
| Amortization of intangible assets | 3,769 | 2,076 | 14,442 | 7,739 | ||||||||||||
| Other operating income | (370 | ) | (2,164 | ) | (2,072 | ) | (9,597 | ) | ||||||||
| Total operating expenses | 82,778 | 76,297 | 318,109 | 255,762 | ||||||||||||
| Operating income (loss) | 4,149 | (3,557 | ) | 8,207 | 24,644 | |||||||||||
| Interest expense | 2,785 | 108 | 6,371 | 200 | ||||||||||||
| Other income, net | (849 | ) | (534 | ) | (1,552 | ) | (2,580 | ) | ||||||||
| Income (loss) before income taxes | 2,213 | (3,131 | ) | 3,388 | 27,024 | |||||||||||
| Income tax expense | 3,715 | 5,872 | 10,930 | 11,489 | ||||||||||||
| Net (loss) income | $ | (1,502 | ) | $ | (9,003 | ) | $ | (7,542 | ) | $ | 15,535 | |||||
| Income per share: | ||||||||||||||||
| Net (loss) income per share attributable to common stockholders, basic | $ | (0.02 | ) | $ | (0.13 | ) | $ | (0.11 | ) | $ | 0.23 | |||||
| Net (loss) income per share attributable to common stockholders, diluted | $ | (0.02 | ) | $ | (0.13 | ) | $ | (0.11 | ) | $ | 0.21 | |||||
| Weighted average shares outstanding: | ||||||||||||||||
| Weighted average number of shares used in computing net (loss) income per share, basic | 72,227 | 70,548 | 71,544 | 67,468 | ||||||||||||
| Weighted average number of shares used in computing net (loss) income per share, diluted | 72,227 | 70,548 | 71,544 | 74,878 | ||||||||||||
* Amounts include stock-based compensation expense as follows (in thousands):
| (Unaudited) | ||||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Cost of revenue-software | $ | 342 | $ | 7 | $ | 1,069 | $ | 31 | ||||||||
| Research and development | 1,306 | 410 | 2,917 | 740 | ||||||||||||
| Sales and marketing | 688 | 595 | 2,250 | 910 | ||||||||||||
| General and administrative | 608 | 1,114 | 2,292 | 1,658 | ||||||||||||
| Total stock-based compensation expense | $ | 2,944 | $ | 2,126 | $ | 8,528 | $ | 3,339 | ||||||||
ALTAIR ENGINEERING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
| Year Ended December 31, | ||||||||
| (in thousands) | 2019 | 2018 | ||||||
| OPERATING ACTIVITIES: | ||||||||
| Net (loss) income | $ | (7,542 | ) | $ | 15,535 | |||
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 21,522 | 14,734 | ||||||
| Provision for bad debt | 671 | 394 | ||||||
| Amortization of debt discount and issuance costs | 5,663 | 23 | ||||||
| Stock-based compensation expense | 8,528 | 3,339 | ||||||
| Loss (gain) on sale of assets held for sale and other | 6 | (4,503 | ) | |||||
| Impairment of intangible assets | — | 608 | ||||||
| Deferred income taxes | (950 | ) | (1,057 | ) | ||||
| Other, net | — | (206 | ) | |||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | (7,901 | ) | (1,394 | ) | ||||
| Prepaid expenses and other current assets | (2,396 | ) | 204 | |||||
| Other long-term assets | (2,591 | ) | (1,660 | ) | ||||
| Accounts payable | (426 | ) | 1,647 | |||||
| Accrued compensation and benefits | (1,232 | ) | 5,678 | |||||
| Other accrued expenses and current liabilities | 513 | (6,667 | ) | |||||
| Operating lease right of use assets and liabilities, net | 102 | — | ||||||
| Deferred revenue | 17,426 | 9,555 | ||||||
| Net cash provided by operating activities | 31,393 | 36,230 | ||||||
| INVESTING ACTIVITIES: | ||||||||
| Payments for acquisition of businesses, net of cash acquired | (25,720 | ) | (203,438 | ) | ||||
| Capital expenditures | (9,660 | ) | (6,659 | ) | ||||
| Proceeds from sale of assets held for sale and other | — | 6,614 | ||||||
| Payments for acquisition of developed technology | (473 | ) | (2,727 | ) | ||||
| Other investing activities, net | 14 | — | ||||||
| Net cash used in investing activities | (35,839 | ) | (206,210 | ) | ||||
| FINANCING ACTIVITIES: | ||||||||
| Proceeds from issuance of convertible senior notes, net of underwriters' discounts and commissions | 223,101 | — | ||||||
| Proceeds from issuance of Class A common stock in follow-on public offering, net of underwriters' discounts and commissions | — | 135,572 | ||||||
| Borrowings under revolving commitment | 96,992 | 37,041 | ||||||
| Payments on revolving commitment | (127,941 | ) | (6,091 | ) | ||||
| Proceeds from issuance of common stock | 1,510 | 2,077 | ||||||
| Payments for issuance costs of convertible senior notes | (1,233 | ) | — | |||||
| Payments for follow-on public offering and IPO offering costs | — | (556 | ) | |||||
| Principal payments on long-term debt | — | (126 | ) | |||||
| Payments for redemption of common stock | — | (119 | ) | |||||
| Other financing activities | (513 | ) | (268 | ) | ||||
| Net cash provided by financing activities | 191,916 | 167,530 | ||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 342 | (1,443 | ) | |||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 187,812 | (3,893 | ) | |||||
| Cash, cash equivalents and restricted cash at beginning of year | 35,685 | 39,578 | ||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 223,497 | $ | 35,685 | ||||
| Supplemental disclosures of cash flow: | ||||||||
| Interest paid | $ | 664 | $ | 223 | ||||
| Income taxes paid | $ | 7,686 | $ | 6,735 | ||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Issuance of common stock in connection with acquisitions | $ | 7,637 | $ | 8,681 | ||||
| Promissory notes issued and deferred payment obligations for acquisitions | $ | 497 | $ | 1,729 | ||||
| Finance leases | $ | 632 | $ | 895 | ||||
| Property and equipment in accounts payable, other accrued expenses and current liabilities, and other liabilities | $ | 259 | $ | 330 | ||||
Financial Results
The following table provides a reconciliation of Non-GAAP net income and Non-GAAP net income per share - diluted to net (loss) income and net (loss) income per share – diluted, the most comparable GAAP financial measures:
| (Unaudited) | ||||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| (in thousands, except per share amounts) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Net (loss) income | $ | (1,502 | ) | $ | (9,003 | ) | $ | (7,542 | ) | $ | 15,535 | |||||
| Stock-based compensation expense | 2,944 | 2,126 | 8,528 | 3,339 | ||||||||||||
| Amortization of intangible assets | 3,769 | 2,074 | 14,442 | 7,739 | ||||||||||||
| Acquisition related deferred revenue (1) | 2,250 | — | 9,000 | — | ||||||||||||
| Special adjustments (2) | — | 10,627 | 2,038 | 6,837 | ||||||||||||
| Income tax effect of non-GAAP adjustments | (527 | ) | (184 | ) | (1,630 | ) | (652 | ) | ||||||||
| Non-GAAP net income | $ | 6,934 | $ | 5,640 | $ | 24,836 | $ | 32,798 | ||||||||
| Net (loss) income per share - diluted | $ | (0.02 | ) | $ | (0.13 | ) | $ | (0.11 | ) | $ | 0.21 | |||||
| Non-GAAP net income per share - diluted | $ | 0.09 | $ | 0.07 | $ | 0.32 | $ | 0.42 | ||||||||
| GAAP diluted shares outstanding: | 72,227 | 70,548 | 71,544 | 74,878 | ||||||||||||
| Non-GAAP diluted shares outstanding: | 78,000 | 77,700 | 78,000 | 77,700 | ||||||||||||
(1) Represents revenue not recognized under GAAP due to acquisition accounting adjustments associated with the accounting for deferred revenue in significant business combinations.
(2) Includes a) nonrecurring severance expenses of $0.4 million and nonrecurring acquisition related costs of $0.6 million, for the twelve months ended December 31, 2019, and b) an impairment charge for royalty contracts resulting in $1.0 million of expenses for the twelve ended December 31, 2019.
Includes a) nonrecurring costs from the acquisition of Datawatch of $10.4 million for the three and twelve months ended December 31, 2018, b) a gain on the sale of a building of $4.4 million for the twelve months ended December 31, 2018, b) an impairment charge for royalty contracts and trade names resulting in $0.2 million and $2.8 million for the three and twelve months ended December 31, 2018, respectively and c) a non-recurring adjustment for a change in estimated legal expenses resulting in $2.0 million of income for the twelve months ended December 31, 2018.
The following table provides a reconciliation of Adjusted EBITDA and Modified Adjusted EBITDA to net (loss) income, the most comparable GAAP financial measure:
| (Unaudited) | ||||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| (in thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Net (loss) income | $ | (1,502 | ) | $ | (9,003 | ) | $ | (7,542 | ) | $ | 15,535 | |||||
| Income tax expense | 3,715 | 5,872 | 10,930 | 11,489 | ||||||||||||
| Stock-based compensation expense | 2,944 | 2,126 | 8,528 | 3,339 | ||||||||||||
| Interest expense | 2,785 | 108 | 6,371 | 200 | ||||||||||||
| Interest income and other (1) | (893 | ) | 9,986 | (260 | ) | 4,883 | ||||||||||
| Depreciation and amortization | 5,686 | 3,839 | 21,522 | 14,734 | ||||||||||||
| Adjusted EBITDA | 12,735 | 12,928 | 39,549 | 50,180 | ||||||||||||
| Acquisition related deferred revenue (2) | 2,250 | — | 9,000 | — | ||||||||||||
| Modified Adjusted EBITDA | $ | 14,985 | $ | 12,928 | $ | 48,549 | $ | 50,180 | ||||||||
(1) Includes a) nonrecurring severance expenses of $0.4 million and nonrecurring acquisition related costs of $0.6 million, for the twelve months ended December 31, 2019, and b) impairment charges for royalty contracts resulting in $1.0 million of expense for the twelve months ended December 31, 2019.
Includes a) nonrecurring costs from the acquisition of Datawatch of $10.4 million for the three and twelve months ended December 31, 2018, b) a gain on the sale of a building of $4.4 million for the twelve months ended December 31, 2018, b) impairment charges for royalty contracts and trade names resulting in $0.2 million and $2.8 million of expense for the three and twelve months ended December 31, 2018, respectively, and c) a non-recurring adjustment for a change in estimated legal expenses resulting in $2.0 million of income for the twelve months ended December 31, 2018.
(2) Represents revenue not recognized under GAAP due to acquisition accounting adjustments associated with the accounting for deferred revenue in significant business combinations.
The following table provides a reconciliation of Non-GAAP total revenue to total revenue, the most comparable GAAP financial measure:
| (Unaudited) | ||||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| (in thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Total revenue | $ | 123,877 | $ | 103,011 | $ | 458,915 | $ | 396,379 | ||||||||
| Acquisition related deferred revenue (1) | 2,250 | — | 9,000 | — | ||||||||||||
| Non-GAAP total revenue | $ | 126,127 | $ | 103,011 | $ | 467,915 | $ | 396,379 | ||||||||
(1) Adjustment for revenue not recognized under GAAP due to acquisition accounting adjustments associated with the accounting for deferred revenue in significant business combinations.
The following table provides a reconciliation of Non-GAAP total software product revenue to total software product revenue, the most comparable GAAP financial measure:
| (Unaudited) | ||||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| (in thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Total software product revenue | $ | 101,187 | $ | 79,903 | $ | 366,702 | $ | 304,361 | ||||||||
| Acquisition related deferred revenue(1) | 2,250 | — | 9,000 | — | ||||||||||||
| Non-GAAP total software product revenue | $ | 103,437 | $ | 79,903 | $ | 375,702 | $ | 304,361 | ||||||||
(1) Adjustment for revenue not recognized under GAAP due to acquisition accounting adjustments associated with the accounting for deferred revenue in significant business combinations.
The following table provides a recompilation of Free Cash Flow to net cash provided by operating activities, the most comparable GAAP financial measure:
| (Unaudited) | ||||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| (in thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Net cash provided by (used in) operating activities | $ | 1,388 | $ | (4,192 | ) | $ | 31,393 | $ | 36,230 | |||||||
| Capital expenditures | (1,540 | ) | (1,326 | ) | (9,660 | ) | (6,659 | ) | ||||||||
| Free Cash Flow | $ | (152 | ) | $ | (5,518 | ) | $ | 21,733 | $ | 29,571 | ||||||
Effective January 1, 2018, we adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASC 606). The following table sets forth selected quarterly information under ASC 606 for 2018:
| Three months ended | ||||||||||||||||
| ASC 606 | ||||||||||||||||
| (in thousands) | March 31, 2018 | June 30, 2018 | September 30, 2018 | December 31, 2018 | ||||||||||||
| Software product revenue | $ | 89,670 | $ | 70,606 | $ | 64,182 | $ | 79,903 | ||||||||
| Total revenue | $ | 113,257 | $ | 93,360 | $ | 86,751 | $ | 103,011 | ||||||||
| Net income (loss) | $ | 24,684 | $ | (1,080 | ) | $ | 934 | $ | (9,003 | ) | ||||||
| Adjusted EBITDA | $ | 29,550 | $ | 5,303 | $ | 2,399 | $ | 12,928 | ||||||||
Disaggregation of revenue
The Company disaggregates its software revenue by type of performance obligation and timing of revenue recognition as follows (in thousands):
| Year Ended December 31, | ||||||||
| 2019 | 2018 | |||||||
| Software revenue: | ||||||||
| Term licenses | $ | 201,881 | $ | 168,909 | ||||
| Perpetual licenses | 42,440 | 38,255 | ||||||
| Maintenance | 103,699 | 86,150 | ||||||
| Professional services and other | 18,682 | 11,047 | ||||||
| Total software revenue | $ | 366,702 | $ | 304,361 | ||||
Business Outlook
The following table provides a reconciliation of projected Non-GAAP net income to projected net income (loss), the most comparable GAAP financial measure:
| (Unaudited) | ||||||||||||||||
| Three Months ending March 31, 2020 | Year Ending December 31, 2020 | |||||||||||||||
| (in thousands) | Low | High | Low | High | ||||||||||||
| Net income (loss) | $ | 4,900 | $ | 6,300 | $ | (4,300 | ) | $ | (1,500 | ) | ||||||
| Stock-based compensation expense | 3,200 | 3,200 | 15,500 | 15,500 | ||||||||||||
| Amortization of intangible assets | 3,800 | 3,800 | 15,000 | 15,000 | ||||||||||||
| Income tax effect of non-GAAP adjustments | (400 | ) | (400 | ) | (1,500 | ) | (1,500 | ) | ||||||||
| Non-GAAP net income | $ | 11,500 | $ | 12,900 | $ | 24,700 | $ | 27,500 | ||||||||
The following table provides a reconciliation of projected Adjusted EBITDA to projected net income (loss), the most comparable GAAP financial measure:
| (Unaudited) | ||||||||||||||||
| Three Months ending March 31, 2020 | Year Ending December 31, 2020 | |||||||||||||||
| (in thousands) | Low | High | Low | High | ||||||||||||
| Net income (loss) | $ | 4,900 | $ | 6,300 | $ | (4,300 | ) | $ | (1,500 | ) | ||||||
| Income tax expense | 4,200 | 4,800 | 6,700 | 7,900 | ||||||||||||
| Stock-based compensation expense | 3,200 | 3,200 | 15,500 | 15,500 | ||||||||||||
| Interest expense | 2,800 | 2,800 | 11,400 | 11,400 | ||||||||||||
| Depreciation and amortization | 5,700 | 5,700 | 22,700 | 22,700 | ||||||||||||
| Interest income and other non-recurring adjustments | (800 | ) | (800 | ) | (3,000 | ) | (3,000 | ) | ||||||||
| Adjusted EBITDA | $ | 20,000 | $ | 22,000 | $ | 49,000 | $ | 53,000 | ||||||||