Q4 2022 Altair Engineering Inc Earnings Call

February 23, 2023

The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.

[music].

Yeah.

Good afternoon, welcome and thank you for attending <unk> earnings conference call for the fourth quarter and full year 2022.

The December 31 2022.

Great Simon all periods.

For Investor Relations.

With me on the call are Jim Scapa, founder Chairman and CEO .

Brown Chief Financial Officer.

After market close today, we issued a press release with details regarding our fourth quarter and full year 2020 through performance.

Guidance for the first quarter and full year 2023.

Which can be accessed in the Investor Relations section of our website at Investor Altair Dot com.

This call is being recorded and a replay will be available on the IR section of our web site. 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.

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.

Issued earlier today.

Further discussion of the material risks and other important factors that could affect our actual results. Please.

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.

Finally at times in our prepared comments or responses to your questions. We may offer metrics that are incremental to our usual presentation.

Greater insight into.

And to 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 an outstanding fourth quarter, achieving record high software revenue and showing exceptional momentum for the full year.

Software product revenue in the fourth quarter, where my more than 25% year over year on a constant currency basis contributing to full year software product revenue growth on a constant currency basis of 17, 6%.

The strength in the fourth quarter Billings was led by software across all geographies.

And particular strength in our technology automotive and aerospace verticals.

Software product revenue as a percentage of total revenue for 2022 continued a strong positive trends at 89% compared to 85% in 2021.

And our recurring software license rate remains high at 92% for the year.

Even in a year in which exchange rates had a material negative effect on revenue and profitability Altair continues to significantly expand our margins and cash flow.

Adjusted EBITDA margin for the fourth quarter was more than 24% versus 17% in the prior year.

Adjusted EBITDA grew 27% in 2022 to $108 6 million or 19% of revenue.

Versus $85 3 million or 16% of revenue in 2021.

This performance is clearly well above expectations.

I am extremely proud of vouchers global team for their exceptional achievements.

The full year results demonstrate continuing trend of increasing mix shift towards software revenue and higher gross margins.

Matt will speak about this in other areas, we are focusing on to drive our increasing margin profile.

Altair continues to evolve its product to position as the leader in computational science and artificial intelligence.

Our vision for convergence and the technologies, we brought together over the last 20 years and stimulation high performance distributed computing data analytics, and AI are maturing into a powerful and integrated offering.

Our tier one are cloud innovation gateway is rapidly gaining traction with over 150000 users signed up and already using the application marketplace.

Self service support and documentation.

Our tier one capabilities will include tracking user activity through a digital thread.

Interactive applications in the browser data anywhere and on demand compute.

The single pane of glass approach allows customers to efficiently leverage the elastic on demand multi cloud architectures to avoid vendor lock in and use Altair units for both software and hardware.

Altair rapid liner or data analytics, and AI platform is integrating all capabilities, including data preparation data science deployment monitoring code free and code friendly development and multi language support including SaaS language.

We also support multi or single tenant cloud instances and installation on premises.

Alterra Hyperworks, our design and simulation platform is built around our unity framework user experience with components of all three products <unk>, Some lab and inspire moving to a common data model and shareable components to build solutions tailored for specific.

Terrific markets and ultimately to run natively in the cloud.

Our solver teams are integrating as well and focused on multi disciplinary stimulation and optimization and we are excited about our implementation of physics based AI, which is releasing shortly.

Alterra HBC works, our HP <unk> cloud platform.

<unk> being component sized to deliver market focused solutions more efficiently.

Clothing workflow dependency management software license costs, and allocation management and storage costs and management.

The automotive vertical have some notable fourth quarter wins, including exceptional performance specific to electric vehicles at.

At one electric vehicle manufacturer the number of users more than doubled through 2022.

This led to an 88% expansion in revenue.

Hundreds of users at the company are now using Altair as tools for many applications, including noise and vibration chassis design.

Vehicle systems structures manufacturing style design and energy systems development.

<unk> had a sack and electric vehicle manufacturer, we saw seven figure expansion, representing 50% year on year growth driven by a broad range of Altair stimulation high performance computing and data analytics tools.

And the automotive racing sector, we received a seven figure commitment for our software technology.

Focus areas of a team include both combustion and electric drivetrain development.

We're especially pleased to be core to efforts are driving electric vehicle performance as the carryover effects from racing will help move broader electrification forward.

The aerospace vertical, including commercial aircraft defense and space systems had a very strong fourth quarter for Altair.

After extensive evaluation of major European Aerospace company selected some solid as its desktop solution for stress engineers to greatly accelerate the evaluation of designs by performing structural analysis and fully featured CAD assemblies without the need for <unk>.

I'm consuming CAD cleanup and messaging.

Solids incredible speed accuracy and rapidly expanding solution types is why it was selected by this and other major engineering organizations to enable simulation driven design.

Some of our other wins in the quarter included the following.

A major aerospace company awarded Altair, a seven figure agreement for stimulation and data analytics, representing 30% year on year growth on that account.

Our government Aerospace agency committed to out there is data analytics tools to help develop avionics subsystems.

<unk> and space contractor signed a seven figure deal that represented 86% revenue increase.

In EMEA, our aerospace company committed in the quarter to an increase which brings its annual altair billings to more than a million euros and finally, our space systems supplier awarded Alastair a seven figure contract representing significant expansion.

Third on using Altair unlimited appliance for a broad range of activities, including the development and production of satellites based transportation systems and defensive systems with a heavy focus on electromagnetic simulation.

Furthering our aerospace industry relationships, we recently announced that Alistair has become a partner of the companion Aerospace district, one of Italy's Europe's most important aerospace districts.

The AC was established in 2012 with the objective of stimulating collaboration between research centers universities and companies and companion to.

To create business and growth opportunities.

The Altair partnership aims to bring reliable cutting edge technology solutions, and digital twin and data analytics to support and empower the aerospace industry.

And around the world.

In the BFS side vertical our growth path continues to progress rapidly.

We signed a new logo one of the top five insurance multinationals in EMEA.

So a significant purchase order to effectively leverage its existing SaaS language tools with Altair is modern and cost effective rapid minor platform.

Cost reduction and key business strategies included migrating data and analytics platforms to a third party cloud provider, providing an on premise capability in parallel to accommodate transition to cloud.

And delivering democratization of data and analytics business users with increased.

Which increased the value and efficiencies of self service.

Another seven figure <unk> data analytics deal in BFS Si convert in an existing financial services customer from a named user licensing structure to Alterra units.

This allowed for a significant broadening of portfolio applications and in enterprise wide standardization direction for alturas tools.

We believe that as we continue converting data analytics customers to units based licensing we will see a common theme of application expansion and user base growth.

Our HPLC business had some notable wins in EMEA in the fourth quarter, including two seven figure deals one with a major semiconductor company and another with a major material supplier.

And we were excited to announce the U S Department of energy Argonne National Lab.

Claude Altair HBC works fast track scientific discoveries on our supercomputing systems.

Argon is utilizing technology to help scientists find ways to slash greenhouse gas emissions.

Through research into fusion energy, better Biofuels and safer more reliable next generation nuclear fission reactors.

Alpha has often been well ahead of market technology trends.

This has consistently been true when HBC computer hardware innovations drive next generation computational science software.

We recently announced a $10 million investment and escape photonics.

<unk> University startup led by three of the leading researchers in the field of Photonics and advanced semiconductor design.

Escape is focused on commercializing innovative photonic technology for ultra high bandwidth connections and high performance computing systems.

The emphasis in HBC over the last 25 years has been on increasing compute performance.

We believe significantly increasing data transmission speed and throughput is now essential as application scale exponentially, especially in data science and AI.

The traditional electronic method of moving vast amounts of data requires significant space and power and produces substantial heat leading to performance challenges.

Escape novel approach uses photronics chip technology to drastically reduce power consumption and key while increasing speed.

As part of our ongoing effort to strengthen our ties with educational institutions. We were pleased to announce that Altair and <unk> signed a campus wide license agreements.

Do you doubt.

The Netherlands oldest and largest public technical University with 30000 students.

This new agreement with <unk> del.

Underscores our commitment to top level research and high quality education.

Prepare future engineers data scientists and developers for success.

We are excited that the America's Cup sailing competition team, New York Yacht Club American Magic recently announced a major partnership with Altair to leverage our <unk> technology for computational science and AI.

Our work with them includes a predictive data analytics system to analyze and understand sailing vessel performance.

And a custom made AI bot to enable the control and monitoring of sell both simulations.

The 2023 Enlighten award honors the greatest sustainability in light weighting advancements that reduced carbon footprint mitigate water and energy consumption and leverage material reuse and recycling efforts.

This year, we established a new award category for responsible AI to recognize exemplary use of data analytics and AI that delivers substantial sustainability benefits through the automotive value chain.

2022 was a year of extra ordinary achievement for Altair as we navigated continued global uncertainty and foreign currency exchange rate headwinds.

We entered 2023 with significant optimism for continued progress and a sincere belief that our work helps the world the healthier and more sustainable for everyone.

Now I will turn the call over to Matt to provide more details on our financial performance and our guidance for the first quarter and full year of 2023, Matt.

Thank you Jim Hello to everyone on the call and thank you for joining us.

We are very pleased with our strong fourth quarter results, which capped off what was one of the most successful years in our long history.

And for our products continued to be strong and despite significant.

Currency headwinds, we ended 2022 with record high annual revenue and adjusted EBITDA.

Since our revenues and expenses are transacted in currencies other than the U S. Dollar our reported results may be significantly impacted by changes in foreign exchange rates.

Therefore throughout my remarks, I will make reference to growth rates in both reported and constant currency.

Starting with Q4 numbers calculated total billings for the quarter were $187 9 million a year over year increase of 18, 1% in reported currency and 23, 2% in constant currency.

The strength in billings was led by software across all geographies and with significant customer wins, and our technology automotive and aerospace verticals, all leading to software product and total revenue above the high end of our guidance range for the fourth quarter.

Software product revenue in Q4, 22 was 145.0 million a year over year increase of 18, 5% in reported currency and 25, 5% in constant currency compared to Q4 2021.

Software product revenue growth was led by expansion in stimulation and new customer acquisition and high performance computing, while renewals continued to be strong across all product lines.

Total revenue in Q4, 'twenty Q, which include services and other revenue with.

With $164 million a year over year increase of 13, 9% in reported currency and 26% in constant currency compared to Q4 2021.

Our recurring software license rate, which is the percentage of software product billings that are recurring continues to be strong at approximately 92% for the year.

non-GAAP gross margin, which excludes stock based compensation and restructuring expense was 82% in the fourth quarter compared to 78, 1% in the prior year, an increase of 210 basis points.

Software product mix helped to drive this increase as our software revenue, which carries higher gross margin increased as a percentage of total revenue.

Software revenue was 94% of total revenue in Q4 2022.

Compared to 86, 9% in the prior year.

Over the long term, we continue to expect a general mix shifts towards software product revenue as growth there will outpace services and other revenue.

non-GAAP operating expenses, which excludes stock based compensation amortization of intangible assets and restructuring charges were $92 6 million compared to 87 4 million in the year ago period.

Adjusted EBITDA in Q4 of 2020, Q with $38 7 million or 24, 1% of total revenue.

Compared to $24 1 million or 17.0% in Q4 2021, an increase of 61, 7%.

This increase compared to the prior year quarter as well as relative to our expectations.

Driven by the increase in software revenue in the quarter combined with a disciplined approach to spending.

Now looking at the full year 2022 was one of the most successful years in our history and we made considerable progress towards our goal of 20% adjusted EBITDA exiting 2023.

Calculated billings for the year were 607 6 million.

Year over year increase of 12, 5% in reported currency or 18, 5% in constant currency.

Software product revenue for the year with $506 5 million a.

A year over year increase of 11, 6% in reported currency and an impressive 17, 6% in constant currency.

And total revenue for the year with $572 2 million a year over year increase of seven 5% in reported currency and 13, 1% in constant currency.

This strength in software revenue helped to drive our non-GAAP gross margins for the year to 80.0%.

<unk> to 76, 9% in 2021 of three.

310 basis point increase and marking the first time, our non-GAAP gross margins have reached 80% in any fiscal year.

Turning to operating expenses, we invested in areas for growth focusing on expanding our sales capacity by more than 10% year over year and.

And driving product development, both organically and through strategic acquisition.

At the same time, we're continuing to reduce costs and select other areas.

This helped to drive adjusted EBIT for the year to $108 6 million or 19.0% of revenue compared to $85 3 million or 16.0% in.

In 2021.

Our year over year increase of 27, 4%.

We set out a vision almost two years ago of achieving 20% adjusted EBITDA margin exiting 2023.

Driving software revenue growth and adding 200 to 300 basis points of margin each year.

I am proud to say, we are well on our path to achieving that goal and beyond.

Turning to the balance sheet, we ended the year with $316 1 million in cash and cash equivalents.

A decrease of approximately $97 6 million from the prior year.

Some of the larger impact to our cash balanced in 2020 to include approximately 145 million paid for acquisition.

Ah 66 million payment for the existing litigation judgment against World programming that we assumed as part of our acquisition.

And $20 million in share repurchases, which were partially offset by a net increase of $32 million as a result of new convertible notes and partial retirement of old converts.

Strong cash flow during the year.

Free cash flow for the year was $29 9 million, which included the $66 million world programming judgment.

When excluding this acquired judgement free cash flow with almost $96 million, an increase of 78% year over year.

We're very pleased with our increase in profitability and our ability to generate significant free cash flow in 2022.

Let's turn to guidance for Q1 and full year 2023.

We've provided detailed guidance tables in our earnings press release, including reconciliations to comparable GAAP amounts.

We're continuing to see an FX impact relative to 2022 as foreign exchange rates change throughout last year.

To provide more clarity on the FX impact to our expectations. We have provided growth rates in both reported currency and current constant currency and our guidance table.

For Q1, we expect software product revenue in the range of $139 million to $142 million.

A year over year change of negative one 3% to positive <unk>, 8% in reported currency.

And an increase of $3 seven to five 9% in constant currency.

For full year 2023, we expect software product revenue in the range of $550 million to $560 million.

Our year over year increase of eight six to 10, 6% in reported currency.

And nine five to 11, 4% in constant currency.

Beginning in January 2023, we discontinued reselling, a non strategic lower margin product lines, resulting from a prior acquisition, which contributed approximately $7 million of software product revenue in 2022, and therefore, the discontinuance impacts 2020.

Three growth rate.

Slightly more than one percentage point.

We expect services and other revenue to stabilize in 2023 compared to the sharp decline we saw in 2022.

It's still slightly down year over year, particularly in the first half of the year.

As a result, we expect total revenue for Q1 2023 in the range of $155 million to $158 million a year over year decrease of 3.0 to one 1% in reported currency.

And an increase of 2.0 to three 9% in constant currency.

For the full year 2023, we expect total revenue in the range of $613 million to $623 million.

The year over year increase of seven one to eight 9% in reported currency.

<unk> 8.0 to nine 7% in constant currency.

From a cost perspective, we've been successful in our disciplined approach to spending and expect to carry that approach into 2023.

For Q1, 2023, we expect adjusted EBITDA in the range of $34 million to $36 million or $21 nine to 22, 8% of total revenue.

Compared to $46 6 million or 29, 2% of total revenue in Q1 2022.

For the full year 2023, we expect adjusted EBITDA in the range of 120 to 130 million or $19, 6% to 29% of total revenue.

Compared to $108 6 million or 19.0% of total revenue in 2022.

And finally for the full year 2023, we expect free cash flow in the range of $108 million to $116 million, which.

Which represents a substantial increase year over year.

As a reminder, our cash flow expectations are sensitive to billings and collection patterns, which fluctuates seasonally.

In particular, our historical pattern has shown a larger free cash inflow in the first half of the year, primarily from collections on billings from Q4 and Q1.

And a smaller free cash inflow in the second half of the year.

We are expecting that pattern to continue this year.

With that we'd be happy to take your questions operator.

Thank you.

As a reminder to ask a question you will need to press star one one on your telephone to withdraw your question. Please press star one again, please wait for your name to be announced please standby, while we compile the Q&A roster.

One moment for your first question.

And our first question comes from the line of Ken Wong with Oppenheimer. Your line is now open.

Great Fantastic.

Good quarter guys, maybe the first one for you I just wanted to maybe check on whether or not you saw any abnormal pull forward into Q4. It was such a strong print and given the lighter Q1, just wanted to check if anything we should be aware of.

Yes, Thanks, Ken for your question.

We didn't see a significant amount of pull forward.

So we try not to look at one quarter in isolation right. So.

We step back for the year.

Thinking about acute and guide relative to the full year, sometimes due to the seasonal nature of our quarters. We can you can get into a situation, where we're looking at one quarter at a time, okay can look a little bit strange.

But when we look at full year last year.

We were Super happy with where our software revenue ended up coming in at 17, 6% year over year growth in constant currency. So, yes, very strong and when we look at full year 2023 were also feeling very confident so hence the guide there in constant currency at nine 5% to 11, 4% of growth.

So again, you can get sort of.

Some strange year over year results on a particular quarter, we actually saw that a little bit in Q3 last year.

But that was again under.

Within a year, where we saw really really nice growth. So.

I would just say we don't always.

You can't always perfectly predict when deals are going to close in one quarter or the next but we feel really really good about both our 2020 results and our guide for 2023.

Got it I appreciate it.

Go ahead, please hi, Kim Jim obviously.

We just have we don't have a habit of trying to pull deals forward.

Because that tends to go along with giving bigger discounts.

But I mean, if deals are closing.

The pipeline is clearing out a bit.

We just ended up with a very very strong quarter no question about it.

And a lot of momentum really coming into this year.

Nothing.

Nothing unusual that would come there.

Got it perfect really appreciate the color there and then Jim just a follow up good to hear some solid customer traction on the data business in your remarks.

One of the things you highlighted was just as you get more onto the unit model do you expect that kind of utilization to drive more growth how far along would you say we are in kind of converting that installed base. I know you guys were making that push with sort of equal pricing to kind of drive drive people over would love to get an update there.

Yes, I think among the.

More significant customers, we're pretty we're really making good progress so over 50%, but with some of the smaller customers.

It's probably down.

Under 40% or something.

So it's a mix, but we're feeling very positive the entire sales force is completely bought into the model.

Which which took US a couple of years now they're completely all in and we're just seeing it there.

Every deal every new deal certainly is going with units.

And.

We can see the potential now is where we.

We're harvesting we have thousands of customers.

Many of which are really substantial I mean really big name companies that.

Spend let's say 50 to 150000 with us on one other data products and as we move into units.

Our portfolio has really expanded.

The SLC product a lot of customers have a lot of SaaS.

<unk>.

SaaS technology running there's a lot more interest in.

And exploring what the opportunities there are there's a lot of interest coming from the system integrators as well.

To start working with us.

And how how they can move it forward. So just just a lot of us.

Got it great. Thanks, guys.

Thank you.

One moment for our next question.

Our next question comes from the line of Matt Hedberg with RBC capital markets. Your line is open.

Yes. Thank you I appreciate it this is Matt.

I'll add my congratulations on the strong quarter.

Jim You just mentioned the system integrators, and Thats, where were seeing the channel kind of start to ramp in the last couple of years can you talk about a little bit about that strategy and maybe are there anymore.

Okay.

And sort of efforts in 2023 to build out that line of business.

Yes.

For sure.

And the data analytics business, particularly.

As we as we sort of take it to that next step now.

System integrators, and resellers are really fundamental to the whole business.

Have domain expertise they have the scale to really drive a major implementations and so we are very very focused we have a number of smaller system integrators, but we've now signed some of the larger system integrators I don't remember what's been announced.

Out of India for example, and we have a lot of really good ongoing discussions.

With some some fairly important names. So it is an absolute focus for us we think that the combination of all of those solutions that we have rapid minor technology and how that's really evolving now.

Bringing the <unk> technology inside of rapid minor from Smart works and the SLC technology really gives us a very very differentiated position that is very appealing to system integrators and we're just seeing we're seeing the interest all new level now so it's important thank you.

Yes, that's really helpful.

I think maybe this goes hand in hand, with the system integrators, but when we think about expanding data analytics like all the successes you've had out to more verticals is that more about product advancements or is it more about go to market <unk> customers.

It's both but I think most important is actually the go to market to be honest with you.

Our our mantra this year is to execute to achieve.

We feel pretty good about the product portfolio and now we have to we have to really execute well to.

To make things happen I think we're very very well situated to do that.

Alright, I appreciate the time sure.

Thank you.

And our next question comes from the line of Donlin Becker with William Blair. Your line is now open.

Hey, gentlemen, congrats on a terrific year and great to hear about kind of the broad based strength in demand commentary Jim I was maybe wondering how should we think about the pipeline mix and interest you guys are seeing maybe more so from the core kind of expansion of that course emulation base versus incremental adoption of tools kind of.

Inspire some solid et cetera, thats targeting that less technical design area, maybe addressing net new call of users and introducing them to your tools.

Yes.

I think we're making really good progress there the some solid product is.

As really core there in my estimation, it's a very very unique position.

And a product that a lot of customers are beginning to finally.

See the potential that they can actually displace a lot of what they've been doing traditionally, especially in the midmarket upper mid market.

<unk>.

Where there were the design slash stimulation is sort of one guy that does everything.

So I think I think that's very very important the inspire product we've been pouring investment into it to add more and more geometry capabilities. There's a lot of new stuff coming this year that I think is going to surprise people.

And also on the simulation side and of course manufacturing.

Simulation capability all built in so that product I think continues to get tremendous traction along with some solid.

And.

Our sales team is really learning to sell the entire portfolio.

And that's very very fundamental for us because historically they may have been a little more selling point solutions, but theres really been.

A transformation happening and that includes by the way the data products.

Don't think of meeting is happening anymore.

Our sales guys, who traditionally we are selling.

Engineering solutions are talking and selling the data the data analytics.

Products and.

I think rapid minor has coming into the fold is really and the team that came along with that has really made an impact for us. So.

It's interesting transformation.

Yeah, that's super helpful. I appreciate the color there and maybe kind of a culmination of that convergence that we've talked about around kind of stimulation and data.

There's been a lot of emphasis on kind of what the digital twin opportunity can look like maybe I'm wondering if you can elaborate a bit on some of the early use cases and adoption areas youre seeing here.

How youre thinking about the prevalence of digital twins kind of serving as a springboard for.

For those broader data analytics efforts due to the streaming needs of those types of solutions as well.

Yes, I think I think we we built out the perfect.

Portfolio.

Starting from a system modeling.

Sign of the phones, where you can do these very detailed system models.

With what sort of different levels of fidelity.

And then integrate together with machine learning models as part of it but bring sort of data into the whole mix.

And everyone on the customer is actually interested in.

Employing digital twin technology. The other place that I think may surprise people is we have some really interesting digital twin technology for electronics, because most of the products, whether it's an automobile or an aircraft or.

Machine.

That move equipment around or boxes around in a warehouse.

Theyre just filled with very very complex wire harnesses and electronics going every which way and we have technology that is.

Essentially built a digital twin of all that electronics, and then left to auto generate for example service drawings.

Lets you actually explore where you may have problems in there and really test.

In our test of design and different approaches and then also you.

Is it once its in service so we have.

Basically a solution that's kind of going across.

Really all of these multi physics domains that.

There is just starting to gain traction and get interest from the customer base.

I'm not sure I answered your question perfectly I Hope I hope you got something out of that.

Yes, no very helpful. Jim appreciate it guys and congrats again I'll, let success okay. Thank you.

Thank you.

One moment for our next question.

And our next question comes from Andrew <unk> with Bahrenburg. Your line is open.

Yes, thanks for.

Thanks for taking my question I guess, the first one in terms of.

The rapid minor wins that you had in terms of also just generally the expansion success you've had with your existing customers is it a function of just having more product now I think you said that last quarter and that people are finally able to use their units is that.

Is that really what's driving a lot of expansion opportunity right now and then maybe.

Just in terms of the AI and data analytics, I mean, clearly you're mentioning them more and more on these in these earnings calls I'm just wondering if that's like a big big.

A big driver right now for you.

You said youre going forward.

Yes.

So all of this stuff sort of comes together.

So there is we've had a lot of effort over the last five years.

Essentially using machine learning models, and we've been experimenting significantly over the last five years and we think that we have some really unique technology that will start releasing here later this year built into our hypermasculine Hyperworks solutions.

To do physics physics based AI so.

We see it really tightly integrated into our into our.

Engineering and simulation solutions, not sort of the standalone off to the side.

The thing that you're going to run.

It's going to be a very natural.

Part of what an engineer is now capable of doing.

Similar to the way, we put the design of explorer.

Inside of these tools as well.

All of this is sort of coming together.

<unk>.

I'm not I'm not sure if I completely and then tell me what else you want me to answer there and let me see if I can give you a better a better view here.

No I was just more of a question is youre, giving you youre mentioning rapid minor for example, what's your only a month ago and.

You are ready you are ready.

Driving a lot of sales with that tells me that there's been kind of an inflection point I guess when it comes through.

Adding a product very quickly into the market. So it is the product because I think the product is extremely strong.

But it's also the use cases.

This team came in with very strong manufacturing experience.

And so that really crossed over nicely with our historical manufacturing base of business.

And just the experience that they have as well and so it's really connected well with our historical go to market team and our technical teams.

But it's also.

All the work we have been doing I'll say at a more sophisticated level is also coming together now.

And so and the customers are really interested and excited.

To try and leverage this kind of technology and kind of make an impact for what theyre doing so product for sure experience use cases.

No.

Great case studies that we can use from one customer to the next.

And we're learning as well because the deployment is really chan.

Challenging on these projects so I had a call with.

Pretty major rapid minor customer.

Two months ago.

And they're already I think they've already built something like 1500 machine learning models that they are deploying and the challenges the deployment.

Being able to do they want to get to five or 6000 and they have every department in their company. This is a pretty major.

Rapid minor installation.

And actually all of our HPLC expertise and technology is going to play very significantly I can see it and so when we talk about that convergence I think.

Some people see it as market thing, but it's actually real.

When you say, what the altar one stuff that we're doing now with our digital thread technology that's coming.

These technologies are really truly converging and I think altera is uniquely positioned because of our strength in all of them.

Very helpful. Thanks, Jim.

Sure.

Thank you.

One moment for our next question.

It comes from Charles <unk> with Needham <unk> Company. Your line is open.

Alright. Thank you for taking my question I have.

Q4 2022 Altair Engineering Inc Earnings Call

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