Added: Abdiel Fontanez - Date: 17.02.2022 04:16 - Views: 46364 - Clicks: 5191
Good day, ladies and gentlemen and thank you for standing by. Good afternoon. Welcome and thank you for attending Altair's earnings conference call for the second quarter of ended June 30, After market close today, we issued a press release with details regarding our second quarter performance and guidance for the third quarter and the full yearwhich can be accessed on the Investor Relations section of our website at investor. 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 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 actualplease 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. 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.
Please be advised that we may or may not continue to provide this additional detail in the future. Thank you, Dave, and welcome to everyone on the call. Customers are investing to grow their businesses as we emerge from the pandemic and Altair's products, services, and business models are clearly resonating in market awareness and increasing market share.
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 s. 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 the 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 10 global de firms.
We continue to build our customer base and aligned with the need for performance-based outcomes in 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 6-figure expansion representing almost a 3 times usage increase at an existing client. The automotive sector continues to develop ificant 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 logos 6-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 the food manufacturer leveraging thin film forming simulation. Healthcare saw a 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 and 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 de 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 the core of Altair's success, and we continue to invest heavily in research and development.
During the second quarter, we built upon the broad and deep product releases of with the latest versions of our simulation software solutions. All our existing products added ificant new features in this release, and we introduced some new products as we continue to evolve our portfolio with the combination of sustaining and disruptive innovation.
Altair has invested strategically for several years both organically and by acquisition and 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 healthcare CFD software, we are well-positioned and focus to grow our share in a very large and rapidly growing CFD simulation market. Altair CFD deliver sophisticated technology for fluid and thermal systems modeling, general purpose multi-physics simulation, external aerodynamics, discrete element modeling, and smooth particle hydrodynamics very cost effectively and under a single.
Several of these products have embedded optimization and machine learning algorithms and often work in concert how simulating with other technologies to deliver deep insights and clear de direction for difficult to understand and predict physical behavior. We believe Altair as a leader in manufacturing simulation with a broad portfolio of key products and technologies, many of which have CFD at their core including casting, modelling, extrusion, forming, and additive manufacturing. The consideration and integration of manufacturing simulations with de optimization is critical for customers to make key product decisions in this fast-changing market.
CFD had some outstanding Q2 successes and applications such as sporting goods, building de, and electric vehicles. The building de win is impressive technically on that our customer will simulate tall buildings in excess of meters to a variety of wind load conditions. The possibilities for this customer to shorten de 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 ADC vertical.
Altair's electronic systems de tool set as a new thermal management workflow to enhance the de of electronic devices. In addition to the existing Altair SimLab workflows for structural stress, vibration, and drop-test performance, product engineers can Looking for altr ensure the cooling of printed circuit boards and complete systems prevent overheating, product reliability issues, or expensive late stage redes.
Smart connected devices increasingly need high-speed memory. Altair PollEx has added al 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 of new logos across multiple verticals and regions in electronics and electromagnetics have added a seven-figure revenue to Altair's topline. Applications include electronic systems de, 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 ing, 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 and 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 enters the high-performance or HPC market when HPC shifted from specialized computers to commodity cluster servers in the early s. Inwe acquired run time to focus on the electronics market Looking for altr specialized solutions for high throughput workflows. HPC continues to mature as a business and had a strong second quarter for Altair with seven-figure multi-year -- 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. The Americas and EMEA operations came online earlier making it even more impressive than our APAC organization 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. We are truly one off there and believe we are serving our customers with less locational barriers and ever in our history. Over the last few months, we enhanced our organization by adding two new Board members to our Board of Directors, Jim Anderson and Shekar Ayyar. Jim is currently a Managing Director for Google Cloud and has a passion around scaling enterprise-level businesses and building sales channels.
Shekar was most recently an executive with VMWare and brings a wealth of consulting, strategy and technical expertise solitaire. We believe they both add outstanding depth and breadth to our Board. Welcome Jim and Shekar. Brett is now in a key technology role for Altair while Yan 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 in over the last several years. Q2 was strong and we remain cautiously optimistic for the balance of the year. New variants of COVID, 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 Thank you, Jim, and hello, and welcome to everyone on the call. We're very excited about our second quarterwhich set a record for highest revenue and EBITDA for any second quarter in the company's history. The strong opportunity pipeline and momentum we've seen in the last few quarters carried through to Q2 '21, once again generating above the high end of the range on every metric we guided to for the quarter.
As with last quarter, our software billing strength relative to prior year was driven by solid new and expansion opportunities and high retention on our renewal base. Again, we saw broad success across all three geographic regions and across our product offering.
I continue to be delighted with the diverse usage and range of applications for our solutions. As Jim highlighted, just this quarter, we saw customers acquiring our software across a wide range of verticals for using anything from building de to healthcare to food de to motorsport and aerospace, and further we saw success in all three core competencies, simulation, HPC, and data analytics. As expected, we saw services and other billings stabilize in the second quarter as we've now anniversaried the start of the COVID impact, which began impacting services and other revenue in the second quarter last year.
Also, the strength in billings resulted in software product in total revenue exceeding Looking for altr expectations for the second quarter. As a reminder, a ificant portion of our revenues are built in currencies other than the US dollars and are therefore impacted by changes in FX rates.
Non-GAAP gross margin, which excludes stock-based compensation and restructuring expense was This is in line with our expectations for the quarter as we expected this year rebound in services and other revenue in Q2 compared to Q2 keeping pace with the gains we saw in software product revenue. Over the long term, we continue to expect a general mix shift toward software product revenue as growth there will outpace services and other revenue.
As a reminder, operating expenses in Q2 and Q3 of last year were impacted by COVID as a result of temporary salary reductions and ificantly reduced marketing and travel costs. In Q2we saw increased marketing and travel activities representing some return to normal compared to the prior year, and overall non-GAAP operating expenses were in line with our expectations.
This increase compared to the prior-year quarter as well as relative to our expectations was driven by the increase in revenue in the quarter combined with our disciplined spending. We are executing on our strategy of expanding EBITDA margins by scaling into our topline revenue growth and the second quarter was another positive step in that direction. Turning to our balance sheet. As a reminder, our cash flows throughout the year are seasonal in nature typically with Q1 being our most ificant cash flow quarter followed by Q2. We are very pleased with our cash flow generation in Q2, which was driven by collections on strong Q1 and Q2 billings.
Turning to guidance for Q3 and full-year For Q3 and full-yearwe are looking to continue building on the great momentum from the first half. We continue to expect services and other revenue to be approximately flat in compared to consistent with our guidance. Overall, we're encouraged by our customer demand and pipeline of opportunities we see in the second half. From a cost perspective, we've been successful in our disciplined approach to spending and expect to continue that approach in the second half. That said, we will continue to invest heavily in product development and we expect to increase marketing and sales-related travel expenses in the second half compared to the first half of As a reminder, our cash flow expectations are sensitive to billings and collection patterns, which fluctuate seasonally.
In particular, our historical pattern has shown free cash inflow in the first half of the year primarily from collections on billings from Q4 and Q1, and a smaller free cash outflow in the second half of the year.Looking for altr
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