Q1 2024 Altair Engineering Inc Earnings Call
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Operator: Good day, and thank you for standing by. Welcome to the Altair Engineering Inc. Q1 2024 Earnings Conference Call. At this time, all participants are in 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 automated message advising that your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Stephen Palmtag, Head of Investor Relations. Please go ahead.
Good day and thank you for standing by welcome to the Altair Engineering, Inc. Q1, 2024 earnings Conference call. At this time all participants are in 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 one on your telephone you will then hear an automated.
Operator: Message at Boston at your hand is raised to withdraw your question. Please press star one one again please be advised that today's conference is being recorded I would now like to hand, the conference over to your Speaker, Steven Palm Tech head of Investor Relations. Please go ahead.
Stephen Palmtag: Good afternoon, welcome, and thank you for attending Altair's earnings conference call for the first quarter of 2024, ended March 31. I'm Stephen Palmteg, Altair's Head of Investor Relations, and with me on the call are Jim Scapa, Founder, Chairman, and CEO, and Matt Brown, Chief Financial Officer. After the market closed today, we issued a press release with details regarding our first quarter 2024 performance and guidance for the second quarter and full year 2024, 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.
Stephen Palmtag: Good afternoon, welcome and thank you for attending <unk> earnings Conference call for the first quarter of 2024 and at March 31.
Stephen Palmtag: 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.
Stephen Palmtag: I'm Stephen contact altered as head of Investor Relations and with me on the call are Jim Scapa, founder, Chairman and CEO, and Matt Brown, Chief Financial Officer.
Stephen Palmtag: 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.
Stephen Palmtag: After market closed today, we issued a press release with details regarding our first quarter 2020 for performance and guidance for the second quarter and full year 2024, which can be accessed on the Investor Relations section of our website at Investor Dot Altera Dot com.
Stephen Palmtag: 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.
Stephen Palmtag: 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.
Stephen Palmtag: We disclaim any obligation to update any forward looking statements or outlook.
Stephen Palmtag: 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.
Stephen Palmtag: 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.
Stephen Palmtag: 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 those questions, we may offer metrics that are incremental to our usual presentation to provide greater insight into the dynamics of our business or our quarterly results. Please be advised that we may or may not continue to provide this additional detail in the future. With that, let me turn the call over to Jim for his prepared remarks. Jim.
Stephen Palmtag: 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.
Stephen Palmtag: Finally at times in our prepared comments or responses to those questions. We may offer metrics that are incremental to our usual presentation to provide greater insight into the dynamics of <unk>.
Stephen Palmtag: Our business or our quarterly results. Please be advised that we may or may not continue to provide this additional detail in the future.
Stephen Palmtag: With that let me turn the call over to Jim for his prepared remarks, Jim.
James R. Scapa: Thank you, Stephen, and welcome everyone on the call. In the first quarter of 2024, Altair continued its positive momentum with total quarterly revenue of $172.9 million, software revenue of $158.4 million, and adjusted EBITDA of $45.8 million, all exceeding the high end of our guidance range for the first quarter. Altair's Q1 results continue to demonstrate the strength of our software product portfolio in bringing computational intelligence to our customers. Software revenue on a constant currency basis grew by 6.9% in the first quarter on a year-over-year basis.
Jim: Thank you Steven and welcome everyone on the call in the first quarter of 2020 for Altair continued its positive momentum with total quarterly revenue of $172 9 million software revenue of $158 4 million and adjusted EBITDA.
James R. Scapa: A $45 8 million.
James R. Scapa: All exceeding the high end of our guidance range for the first quarter.
James R. Scapa: <unk> Q1 results continue to demonstrate the strength of our software product portfolio, and bringing computational intelligence to our customers.
James R. Scapa: Software revenue on a constant currency basis grew by six 9% in the first quarter on a year over year basis software revenue as a percentage of total revenue for the first quarter grew to 91, 6% compared to 91% in the first quarter of 2023.
James R. Scapa: Software revenue as a percentage of total revenue for the first quarter grew to 91.6% compared to 90.1% in the first quarter of 2023. Altair continues to grow with success in multiple industry verticals, across global geographies, and a broad portfolio of technologies. Suggested EBITDA for Q1 2024 increased by 6.4% year-over-year to $45.8 million, or 26.5% of revenue, compared to 25.
James R. Scapa: Altair continues to grow with success in multiple industry verticals across global geographies and a broad portfolio of technologies.
James R. Scapa: Adjusted EBITDA for Q1, 2024 increased by six 4% year over year to $45 8 million or 26.5% of revenue compared to 25, 9% in Q1 of 2023.
James R. Scapa: In our Banking, Financial Services, and Insurance vertical, a multinational customer specializing in payment card services signed a seven-figure commitment representing over 80% year-on-year expansion compared to 2023. This expansion was driven by Altair Monarch, our self-service data preparation solution within the Altair RapidMiner platform. Additionally, a major European accounting firm committed to utilizing Altair SLC, our SAS language compiler, which will focus on both mainframe and distributed environments. In the energy sector, we signed a deal with a new global customer that provides subsea and surface solutions.
James R. Scapa: In our banking financial services and insurance vertical.
James R. Scapa: A multinational customers specializing in payment card services signed a seven figure commitments representing over 80% year on year expansion compared to 2023.
James R. Scapa: This expansion was driven by Altair monarch self service data preparation solution within the Altair rapid minor platform. Additionally.
James R. Scapa: Additionally, a major European accounting firm committed to utilizing Altair as I'll say, our SaaS language compiler, which will focus on both mainframe and distributed environments.
James R. Scapa: In the energy sector, we signed a deal with a new global customer that provide subsea and surface solutions the.
James R. Scapa: The commitment was driven by Altair SimSolid, evidencing our industry-leading structural simulation and the potential for meaningful expansion in our energy vertical. Additionally, a global leader in energy management and automation expanded its subscription renewal, driving an increase in revenue over 80% annually compared to 2023. The expansion was driven by Altair Pollux, a solution that seamlessly integrates with all major ECAD tools and accelerates the development of today's smart, connected, and tightly packaged electronic packaged products. The heavy equipment truck and rail vertical secured a seven-figure, three-year commitment from a global leader in power sports vehicles and propulsion systems.
James R. Scapa: The commitment was driven by Altair, some solid evidence thing our industry, leading structural simulation and the potential for meaningful expansion in our energy vertical.
James R. Scapa: Additionally, a global leader in the energy management and automation expanded its subscription renewal driving an increase in revenue over 80% annually compared to 2023.
James R. Scapa: The expansion was driven by Altair pollex solution that seamlessly integrates with all major ecad tools and accelerates the development of today's smart connected and tightly packaged electronic packaged products.
James R. Scapa: The heavy equipment truck and rail vertical secured a seven figure three year commitment from a global leader in power sports vehicles and propulsion systems.
James R. Scapa: The deal expands our footprint to more departments across more applications, including structural design, kinematics, highly nonlinear events, and data analytics. The automotive vertical continued to highlight our best-in-class technology. Q1, a European automotive OEM focused on the ultra-luxury segment, signed a six-figure contract to use a broad range of our simulation, data analytics, and AI offerings.
James R. Scapa: The deal expands our footprint to more departments across more applications, including structural design kinematics highly nonlinear rebounds and data analytics.
James R. Scapa: The automotive vertical will continue to highlight our best in class technology.
James R. Scapa: In Q1, our European automotive OEM focused on the ultra luxury segment signed a six figure contract to use a broad range of our simulation data analytics and AI offerings.
James R. Scapa: They will use Altair SimSolid and ROMAI for structural simulation, providing fast and precise whole-engine simulation, and leverage Altair RapidMiner for data mining and predictive modeling across their engineering and operations. At our Investor Day, we announced the upcoming release of Altair SimSolid for electronics, bringing game-changing, fast, easy, and precise multi-physics scenario exploration for electronics from chips, printed circuit boards, and integrated circuits to full system design. Since Solid is already growing its presence rapidly across traditional manufacturing verticals,
James R. Scapa: We'll use altair, some solid and ROM AI for structural stimulation, providing fast and precise whole engine simulation and leverage Altair rapid miner for data mining and predictive modeling across their engineering and operations.
James R. Scapa: At our Investor Day, we announced the upcoming release of Altair, some solid for electronics, bringing game changing fast easy and precise multi physics scenario exploration for electronics from chips printed circuit boards and integrated circuits to full system.
James R. Scapa: Design.
James R. Scapa: Some solid is already growing its presence rapidly across traditional manufacturing verticals.
James R. Scapa: Automotive, Aerospace, and Heavy Equipment, and is now poised to play significantly in the electronics market as the industry transforms from 2D designs to 3D systems and chiplets. However, the journey from computer-aided design to simulation has historically been strewn with the obstacles of mesh generation, a necessary but time-intensive step that delays insights and stretches project timelines.
James R. Scapa: <unk> automotive aerospace and heavy equipment and is now poised to play significantly in the electronics market as the industry transforms from <unk> designs to <unk> systems and chip floods.
James R. Scapa: The journey from computer aided design to simulation has historically been strengthened with the obstacles of mass generation unnecessary, but time intensive step that delays insights and stretches project timelines.
James R. Scapa: Solutions' eCAD simulation workflow will empower users to surpass conventional boundaries and seamlessly scale from meters to nanometers. This translates into faster time to results and the ability to solve even more complex multidisciplinary problems. Powering Engineers to Achieve Superior Design Outcomes. The first release will support structural and thermal analysis for printed circuit boards and ICs, with full-wave electromagnetics analysis coming in a future release. As Altair SimSolid advances towards the inclusion of full-wave electromagnetic, it showcases Altair's vision of a comprehensive, multidisciplinary simulation environment. This evolution not only sets a new standard against traditional mesh-reliant systems, but it also promises a future where thermal, structural, and electromagnetic challenges are addressed within a unified, meshless platform for rapid and precise design iteration.
James R. Scapa: The solutions Ecad, the simulation workflow will empower users to surpass conventional boundaries and seamlessly scale for meters to nanometers.
James R. Scapa: This translates to faster time to results and the ability to solve even more complex multi disciplinary problems empowering engineers to achieve superior design outcomes.
James R. Scapa: The first release will support structural and thermal analysis for printed circuit boards and Ics with full wave electromagnetics analysis coming in a future release.
James R. Scapa: As Altair, some solid advances towards the inclusion of a full wave electromagnetics. It showcases <unk> vision of a comprehensive multi disciplinary simulation environment.
James R. Scapa: This evolution not only sets a new standard against traditional mesh reliant systems, but it also promises of future where thermal structural and electromagnetic challenges are addressed within a unified <unk> platform for rapid and precise design iterations.
James R. Scapa: Our indirect sales channel continues to represent a significant percentage of our overall revenue and is a key priority going forward. This is evidenced by welcoming seven new channel partners to the Altair sales team in the first quarter. EDA Expert in France and Brand Engineering in Switzerland will offer the full suite of Altair's electronic design solutions. Additionally, we will extend the reach of Altair's cutting-edge data analytics and AI portfolio through Relational FS in Greece, Analytium in the United Kingdom and Ireland, Integral Solutions in Poland, Arius Info-Communication in Hungary, and Analytical Information Management Solutions in Turkey. To further demonstrate our commitment to verticals, we hired two key leaders who will drive our efforts in healthcare and life sciences and the Federal Department of Defense, which is part of our aerospace and defense vertical.
James R. Scapa: Our indirect sales channel continues to represent a significant percentage of our overall revenue and is a key priority going forward.
James R. Scapa: This is evidenced by welcoming seven new channel partners to the Altair sales team in the first quarter.
James R. Scapa: EMEA expert in France, and brands engineering in Switzerland will offer the full suite of Altair is electronic design solutions we.
James R. Scapa: We will extend the reach of Altair is cutting edge data analytics, and AI portfolio through relational Fas in Greece, and a lithium and the United Kingdom, and Ireland integral solutions in Poland.
James R. Scapa: And if our communication in Hungary, and analytical information management solutions in Turkey.
James R. Scapa: To further demonstrate our commitment to verticals, we hired two key leaders, who will drive our efforts in healthcare and life Sciences, and the Federal Department of Defense, which is part of our aerospace and defense vertical.
James R. Scapa: Both individuals bring decades of valuable experience that will further propel Altair's industry efforts and will bolster our focus on high-growth industry segments, helping us expand Altair's market share in segments where we have best-in-class technology, a strong track record of success, and a unique blend of talent within HLS. We also signed our first major pharmaceutical customer that will leverage Altair's data analytics and AI across its drug manufacturing site. In April, we announced the acquisition of Cambridge Semantic, a modern data fabric technology company.
James R. Scapa: Both individuals bring decades of valuable experience that will further propel <unk> industry efforts will bolster our focus on high growth industry segments, helping us expand <unk> market share in segments, where we have best in class technology, our strong track record of success.
James R. Scapa: And a unique blend of talent.
James R. Scapa: Within HOS, we also signed our first major pharmaceutical customer that will leverage Altair is data analytics and AI across its drug manufacturing sites.
James R. Scapa: In April we announced the acquisition of Cambridge, Symantec's, a modern data fabric technology company.
James R. Scapa: We believe Cambridge Semantics brings the fastest and most scalable analytical graph database to organizations that have significant data volumes and deep questions. Knowledge graphs are key pieces of data fabrics and critical for successful generative AI applications as they provide the business context necessary to ground generative AI models, eliminate hallucinations, and dramatically improve response quality.
James R. Scapa: We believe Cambridge, Symantec Springs, the fastest and most scalable analytical graph database to organizations that have significant data volumes and deep questions.
James R. Scapa: Knowledge graphs are key pieces of data fabrics and critical for successful generative AI applications as they provide the business context necessary to ground generative AI models eliminate hallucinations and dramatically improve response quality.
James R. Scapa: Cambridge Semantics Technologies will be integrated into Altair RapidMiner, adding knowledge graph, data governance, data virtualization, and data discovery technology to the platform's existing data science and data analytics tools. Bringing together Cambridge Semantics' transformational knowledge graph technology with Altair's leading tools for data analytics and data science will offer our customers a solid foundation for building advanced analytics ecosystems that inject AI into day-to-day business operations. This acquisition also adds deep data warehousing expertise to our already strong analytics and data science team, creating an enhanced core group of engineers that understand the entire data lifecycle, from creation to impact.
James R. Scapa: Cambridge, Symantec's technologies will be integrated into Altair rapid minor, adding knowledge graph data governance data virtualization and data discovery technology to the platforms existing data science and data analytics tools.
James R. Scapa: Bringing together, Cambridge, Symantec's transformational knowledge graph technology.
James R. Scapa: With Altair is leading tools for data analytics and data science will offer our customers a solid foundation for building advanced analytics ecosystems, which inject AI into day to day business operations.
James R. Scapa: This acquisition also adds deep data warehousing expertise to our already strong analytics and data science team.
James R. Scapa: Getting an enhanced core group of engineers that understand the entire data lifecycle from creation to impact.
James R. Scapa: Now moving from data science to rocket science. Yesterday, we announced the acquisition of Research in Flight, the maker of FlightStream. Computational Fluid Dynamics Software with a Large Footprint in the Aerospace and Defense Sector and a growing presence in marine energy, turbo machinery, and automotive applications. FlightStream is a user-friendly yet powerful flow solver that bridges the gap between high-fidelity CFD simulations and the needs of engineers and designers. Its exceptionally fast computational speeds and low hardware footprint, coupled with a streamlined user interface and a robust aerodynamic solver, make it an invaluable tool for early-stage rapid design iterations and in-depth aerodynamic studies for aerospace and defense applications.
James R. Scapa: Now moving from data science to rocket Science yesterday, we announced the acquisition of research in flight the maker of flight stream, a computational fluid dynamics software with a large footprint in the aerospace and defense sector.
James R. Scapa: And a growing presence in marine energy turbo machinery and automotive applications.
James R. Scapa: Flightstream is able to capture subsonic to supersonic flows, including compressible effects and a unique surface vorticity capability. It leverages the strengths of panel method flow solvers and enhances them with modern computational techniques to provide a solver that is fast and capable of handling complex aerodynamic phenomena.
James R. Scapa: Altair's growth in the aerospace, defense, and related industries has accelerated in recent years through our best-in-class computational intelligence solutions. The integration of FlightStream into our portfolio will enhance our offering with more specialized, modern, and efficient tools to meet the increasingly complex demands of customers in these industries, including the urban air mobility and eVTOL sectors. FlightStream is United States Air Force network-approved software and is also used at NASA Ames and Langley Research Centers, as well as by the U.S. Army.
James R. Scapa: It will be integrated into the Altair HyperWorks design and simulation platform and be available via Altair Unit. Last month, we were honored to win the 2024 Google Cloud North America Partner of the Year Award for Diversity, Equity, and Inclusion. This award further demonstrates that Altair is a global leader in an organization where people always come first. Our numbers speak for themselves. More than 75 languages are spoken, and more than 50 nationalities are represented within Altair's global workforce of over 3,000 employees.
James R. Scapa: Women make up 43% of our executives and board of directors, both significantly higher than U.S. averages, and two standout employee resource groups, Women in Technology and the Altair Black Employee Resource Network, further educate and empower all Altair employees by hosting more than 30 events each year, focusing on personal growth, combating bias, and more. Q1 was a strong beginning to 2024. We are optimistic that Altair is well positioned to take advantage of a gradually improving macroenvironment and remain excited about our future growth. Now, I will turn the call over to Matt to provide more details on our financial performance and our guidance for the second quarter and full year 2024. Matt.
James R. Scapa: Women make up 43% of our executives and board of directors, both significantly higher than U S averages.
James R. Scapa: <unk>.
Matthew Charles Brown: Jim, hello to everyone on the call, and thank you for joining us. Before I get into the financial results for the quarter, I want to remind everyone we held an in-person Investor Day in Santa Clara on March 20, where we showcased meaningful product updates, discussed our exciting market opportunity, and provided updated midterm financial targets. If you weren't able to attend... You can watch the replay at InvestorDay. Altair.com. Go check it out.
Matt: Thank you Jim.
Matthew Charles Brown: Okay, jumping into our financial results for the quarter. We are very pleased with our strong start to the year. Computational intelligence continues to be a driving force in addressing our customers' most critical design, engineering, and business challenges.
Matthew Charles Brown: And I'm proud that Altair's products are being increasingly leveraged to solve those challenges. We've continued to execute with focus, with a record high first quarter total revenue of $172.9 million. Record high software revenue of $158.4 million and Adjusted EBITDA of $45.8 million, all exceeding the high end of our guidance range. As a reminder, some of our revenues and expenses are transacted in currencies other than the U.S. dollar, and therefore, our reported results may be significantly impacted by changes in foreign currency exchange rates. To aid in the review of our results, throughout my remarks, I will reference growth rates in both reported and constant current.
Matthew Charles Brown: For the first quarter, calculated total billings were $154.1 million, a year-over-year decrease of 5.7% in reported currency and a decrease of 5.3% in constant currency. Software revenue in Q1 was $158.4 million, a year-over-year increase of 5.9% in reported currency and 6.9% in constant currency compared to Q1 2023. The year-over-year increase in software revenue was driven by high retention rates and New and Expansion Business, with particular strength in the aerospace and defense and automotive verticals. The increase in software revenue relative to expectations was partially due to some deals closing sooner than originally expected. Total revenue in Q1, which includes engineering services and other revenue, was $172.9 million.
Matthew Charles Brown: A year-over-year increase of 4.1% in reported currency and 5.1% in constant currency compared to Q1 2023, non-GAAP gross margin, which excludes stock-based compensation, was 83.3% in the first quarter, compared to 81.9% in the prior year quarter, an increase of 140 basis points. The year-over-year increase in non-GAAP gross margin in Q1 was due to a combination of a mixed shift towards software revenue, where gross margins are higher than our engineering services and other revenue margins, as well as an increase in our standalone software margins.
Matthew Charles Brown: Software revenue was 91.6% of total revenue in Q1, compared to 90.1% in the prior year. In the long run, we anticipate a continued gradual shift in the revenue mix towards software, as its growth surpasses that of Engineering Services and other revenues. Non-GAAP operating expenses, which exclude stock-based compensation and amortization of intangible assets.
Matthew Charles Brown: We are 99.5 million, compared to 93.9 million in the year-ago period. Adjusted EBITDA in Q1 was $45.8 million, or 26.5% of total revenue, compared to 43.1 million or 25.9% in the prior year, an increase of 6.4%. This increase compared to the prior year quarter, as well as relative to our expectations, was driven by the increase in software revenue combined with a disciplined approach to spending. Turning to our balance sheet, we ended the quarter with $557.6 million in cash and cash equivalents.
Matthew Charles Brown: An increase of approximately $179.2 million from the prior year and $90.1 million from year end. Free cash flow was $70.7 million in Q1, compared to $57.5 million in the year-ago period, an increase of 23.0%, and demonstrates our ability to generate significant free cash flow. As a reminder, the remainder of our 2024 convertible notes mature on June 1st, 2024, which we will settle with approximately $82 million in cash for the principal balance and the premium in shares, leaving us with a healthy cash balance of just under $500 million. Now, let's turn to guidance for Q2 and full year 2024. We've provided detailed guidance tables in our earnings press release, including reconciliations to comparable GAAP amounts, to provide clarity on the impact of changes to our expectations.
Matthew Charles Brown: Leaving us with a healthy cash balance of just under $500 million.
Matthew Charles Brown: We've provided growth rates in both reported currency and constant currency in our guidance tables. For Q2, we expect software revenue in the range of $131 to $134 million, a year over year increase of 4.5% to 6.9% in reported currency and 6.7% to 9.2% in constant currency. As I mentioned, some deals in Q1 closed earlier, which has an offsetting impact on Q2 expectations for full year 2024.
Matthew Charles Brown: Let's turn to guidance for Q2 and full year 2024.
Matthew Charles Brown: We've provided detailed guidance tables in our earnings press release, including reconciliation to comparable gap amount.
Matthew Charles Brown: To provide clarity on the ethics impacts to our expectations, we've provided growth rates in both reported currency and constant currency in our guidance cables.
Matthew Charles Brown: Four Q2, we expect software revenue in the range of $131 million to $134 million.
Matthew Charles Brown: A year over year increase of 4.5% to 6.9% and reported currency.
Matthew Charles Brown: For full year 2024.
Matthew Charles Brown: We are maintaining our previous outlook in constant currency for software revenue. However, due to changes in foreign currency exchange rates over the past quarter, we are adjusting our full year outlook and reported currency to a range of $590 to $600 million, a year over year increase of 7.3% to 9.1% in reported currency and 8.3% to 10.1% in constant currency. We expect Q2 total revenue, which includes engineering services and other revenue, in the range of 145 to 148 million.
Matthew Charles Brown: We are maintaining our previous outlook in constant currency for software revenue.
Matthew Charles Brown: However, due to changes in foreign currency exchange rate over the past quarter, we are adjusting our full year outlook and reported currency to arrange a 590 to 600 million.
Matthew Charles Brown: A year of her ear increase of 7.3% to 9.1% and reported currency.
Matthew Charles Brown: And 8.3% to 10.1% in constant currency.
Matthew Charles Brown: We expect Q2 total revenue, which includes engineering services and other revenue.
Matthew Charles Brown: In the range of 145 to 148 million.
Matthew Charles Brown: A year-over-year increase of 2.7% to 4.8% in reported currency and 4.7% to 6.8% in constant currency. For full year 2024, we are also maintaining our previous outlook in constant currency for total revenue. However, again, due to changes in foreign currency exchange rates over the past quarter, we are adjusting our full-year outlook and reported currency to a range of $652.00 to $662 million, a year over year increase of 6.4% to 8.0% in reported currency and 7.5% to 9.1% in constant current.
Matthew Charles Brown: A year over year increase of 2.7%.
Matthew Charles Brown: To 4.8% and reported currency.
Matthew Charles Brown: We are adjusting our full year outlook and reported currency to arrange a 652 to.
Matthew Charles Brown: For Q2, we expect adjusted EBITDA in the range of $15 to $18 million, or 10.3% to 12.2% of total revenue, compared to $17.1 million, or 12.1% of total revenue, in Q2 2023. Changes in foreign currency exchange rates have also impacted adjusted EBITDA. And therefore, we are adjusting our outlook to a range of 138 to 146 million, or 21.2% to 22.1% of total revenue, compared to $129.1 million, or 21.1% of total revenue, in 2023.
Matthew Charles Brown: And finally, for the full year 2024, we expect free cash flow in the range of $124 to $132 million, which has also been impacted by changes in foreign currency exchange rates and therefore has been adjusted in line with the change in our full year adjusted EBITDA guidance. As a reminder, our cash flow expectations are sensitive to billings and collection patterns, which fluctuate seasonally. But we continue to be pleased with the high free cash flow as a percentage of adjusted EBITDA, which sits at approximately 90% and has been steadily increasing over the past several years.
Matthew Charles Brown: We are happy to have exceeded our Q1 revenue and profitability goals, and our enthusiasm remains high for the opportunities that await us in the back half of the year. With that, we'd be happy to take your questions. Operator.
Operator: Operator. Certainly.
Operator: As a reminder, to ask a question, please press star one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. And one moment for our first question, which is coming from Dylan Becker of William Blair. Your line is open.
Dylan Tyler Becker: Hey Jimmy and Matt, really nice start to the year here. I wonder, Jimmy, you made some comments, but how you're thinking about the kind of business momentum progressing and how Q1 informs that revised outlook. I think you called out a gradually improving environment. Matt, you said there were some earlier deals pulled forward a bit, but I was wondering if you could give additional color on kind of what you guys are seeing in the landscape.
Dylan Tyler Becker: Hey, Jamie Mat really I start to the year here I Wonder Jimmy I've made some comments, but Ah you're thinking about kind of business momentum progressing and how can a Q Q1 informs that revised outlook I think you called out of gradually improving environment. Matt you said there were some earlier deals.
Dylan Tyler Becker: Pulled forward a bit but just wondering if you could give additional color and kind of what you guys are seen in the landscape.
James R. Scapa: Sure. Hi Dylan. I can take a shot, and then Matt can add in.
Speaker Change: Sure could I <unk> I can take a shot and then <unk> can add and we are we are feeling like things are improving for us we recognize that.
James R. Scapa: We are feeling like things are improving for us. We recognize that, you know, there are some layoffs and other things, and the economy only grew by 1.6%. Here was the recent announcement. But for us, we're continuing to see the pipeline grow, and the verticals that we set up last year, which took some time to get going, really are taking hold and beginning to generate lots and lots of new opportunities. Some of them have a little bit longer sales cycles, but it is really starting to look very promising for the future. Matt, anything you want to add there? Yeah, I'm happy.
James R. Scapa: There was some lay offs and other things in the economy grew 1.6%.
Matt: Here was the recent announcement, but for US we're we're continuing to see the pipeline grow and the vertical is that we you know that we set up last year, which took some time to get going really.
Matt: Really are taking hold them and beginning to generate lots and lots of new opportunities. Some some of them have a little bit longer sales cycles, but but it is really starting to look look very promising into the future.
Matt: <unk> and you Wanna add there yeah, I'm happy to high doing yeah, I would characterize this is just a very positive.
Matthew Charles Brown: I'm happy to. Hi Dylan. Yeah, I would characterize this as just a very positive, almost a textbook Altair quarter where we overachieved, and we're looking forward now to the back half of the year and feel good about how the first half is shaping up. So we're pleased to just continue putting one foot in front of the other and feel pretty good about the year.
Matthew Charles Brown: Almost sort of textbook all per quarter, where we we over cheese.
Matthew Charles Brown: And we're looking forward now to the to the back half of the year and feel good about how the first half of shaping up. So we're please just can can you put one foot in front of the other and and feel pretty good about the ear.
Dylan Tyler Becker: Okay, great. That's really helpful. And then, Jim, as well, maybe early, but the kind of receptivity or kind of any early feedback you're seeing and hearing on SimSolid for the electronics opportunity there. I know there's still some competitive noise, but is that starting to drive any additional opportunities quite yet or still early? Maybe just kind of some enthusiasm or feedback you're seeing and hearing. Thanks.
Dylan: Okay, Great. That's really helpful in a gym as well too maybe early but the kind of receptive receptivity are kind of any early feedback you're seeing and hearing on him solid for the electronics opportunity. There I know, they're still seeing competitive noise, but it that's starting to drive any additional opportunities quite yet are still early maybe just.
Jim: Some some enthusiasm or feedback you're seeing and hearing the banks.
James R. Scapa: I think it's just a little bit early right now, and, uh... We haven't actually released, I think that's in the next week or two, the first version with the structures on thermal. Unknown Speaker But I think it is going to be pretty interesting for customers. A lot of those customers are not familiar with us, and so they're going to have to start looking and testing. But I think it's going to knock people's socks off.
Jim: I think it's just a little bit early right now and and.
James R. Scapa: We haven't actually released I think that's in the next week or two the first version with with the structures and thermal.
James R. Scapa:
James R. Scapa: But I think it is gonna, it's gonna be pretty interesting for for our customers a lot of those customers are not familiar with us.
James R. Scapa: And so they're gonna have to have to start looking and testing, but I I think it's gonna, it's gonna knock people's socks off.
Speaker Change: Great. Thanks, guys Yep.
Operator: Thank you, and one moment for our next question. And our next question will be coming from Stephen Tusa of JPMorgan Chase & Company. Your line is open.
Speaker Change: Thank you and one moment for our next question.
Stephen Tusa: And our next question will be coming from Steven too Sir.
Stephen Tusa: J P. Morgan Chase accompany your lines.
Stephen Tusa: Hey guys, good afternoon. Hey Stephen!
Stephen Tusa: Hey, Steven.
Stephen Tusa: So I'm just trying to reconcile the second quarter; it sits a little bit below where we had in our model, and I think consensus is there. Was there anything kind of pulled into this quarter that we should be aware of? Just trying to reconcile that with the constructive comments on the macro.
Stephen Tusa:
Stephen Tusa: So I'm just trying to reconcile the the second quarter, it's it's a little bit below where where we add in our model and I think consensus is there was there anything kind of pulled into this quarter that we should be aware of just trying to reconcile that with the constructive comments on the macro.
Matthew Charles Brown: Sure, yeah, Steve, I could take that one. So, a little bit closed early in Q1, but there's a couple of other things going on as well. So, currency does play a role. We had about $4 million of currency impact in the first half, the combination of Q1, Q2. But on balance, when you look at sort of how we did in Q1 and the midpoint of our guide for Q2, I think you'll find we are largely in line or slightly ahead of expectations when factoring in FX on the first half. So, net-net, I feel really good about how the first half is shaping up and looking forward to the second half.
Speaker Change: Sure, Yes, <unk> I could take that one.
Matthew Charles Brown: So a little bit closed early in Q1, but there's a couple of other things going on as well. So currency does play a role we had about $4 million or a currency impact in the first half the combination of Q1 Q2.
Matthew Charles Brown: But on balance when you look at it you know sort of how how we did in the in Q1 and mid point of our guide for Q2 I think what you'll find is is we are largely in line or slightly ahead of expectations when factoring in F X on the first half.
Matthew Charles Brown: So net net feel feel real good about how the first half of shaping up and I'm looking forward to the second half.
Matthew Charles Brown: And is that kind of normal seasonality in your view, like just the way the deal flow happens?
Speaker Change: And is that kind of normal seasonality in your view like just the way the the deal flow happens well.
Matthew Charles Brown: Well, yeah, historically, we have seen Q2 and Q3 being our smallest quarters from a billings and revenue perspective. We expect that that's going to be the same this year as well, where even within the second half, we'll see acceleration into Q4. But yeah, it's typical. It's as we were expecting for Q2. And again, just happy with how the first half is shaping up.
Speaker Change: Well, yeah. So so historically, we have seen Q2 and Q3 been our our smallest quarters from Ah Ah billings and revenue perspective, we expect that that's gonna be the same this year as well.
Matthew Charles Brown: Where in this even within the second half will see acceleration in the queue for but but yeah. It's it's typical it's it's <unk> as we were expecting for queue to.
Matthew Charles Brown: And again, just just happy with how how how the first half was shaping up.
Stephen Tusa: Okay, great. Thanks a lot.
Speaker Change: Okay, great. Thanks, a lot.
Operator: And one moment for our next question. Our next question will come from Charles Shi of Needham & Company. Your line is open.
Speaker Change: Okay, just one moment for our next questions.
Charles Shi: Our next question will come from Charles <unk>.
Charles Shi: <unk> I'm needing my company your line is open.
Charles Shi: Hey, good afternoon, Jim, Matt. Congratulations on the strong first quarter results, especially when I look at your largest competitor, who just reported. Good to see you guys continue that year-on-year growth in the most recent quarter. I want to ask you this question.
Charles Shi: Yeah. Good afternoon <unk> congrats on the strong first quarter results, especially when I looked at <unk> largest competitor with just reported good to see you guys continue <unk> in the last I wish that most recent quarter.
Charles Shi:
Charles Shi: I asked this question in the last quarter, but I want to ask it again. Your current RPO number, which is in your 10K, kind of covers a little bit more than usual for the next three to four quarters of revenues. Historically, your current RPO only covers like 20%-ish of the next 12-month revenue, but now it looks like it's resettling to a higher level. Mind if you shed some light on this, because there are two ways to interpret the result, right?
Charles Shi: I want to ask this question I ask this question in the last quarter, but I Wanna ask again your <unk>. Your <unk> number would just need your 10-K kind of covers let them more than usual that the next three to four quarters up the the the revenue.
Charles Shi: <unk>.
Charles Shi: <unk>, you'll you'll <unk>, you'll only covers my 20 per cent ish.
Charles Shi: Of the next talking about the revenue, but but now it looks like <unk>, it's reset link to a higher level roughly 25% might.
Charles Shi: One possibility is maybe you're just being conservative about your revenue guidance, or your booking behavior has changed a little bit. So you may be booking something that's a little bit shorter term. So which one is it? Please provide some color, thanks. Yeah, Heathrow, thanks.
Speaker Change: <unk>, please put by some color effects yeah.
Matthew Charles Brown: Yeah, hey Charles, thanks, I can speak to that. So it's a little bit of both. So obviously, we're pleased with the amount of coverage that RPO is providing for us. But we're also focusing on ensuring that we're making the most of our sales capacity and being as efficient as possible, which means we are also signing some deals and contracts that have a longer duration. Even though those deals may not necessarily be billed up front, they are commitments nonetheless, and then therefore go into the backlog into RPO.
Matthew Charles Brown: So it's a little bit of both so obviously, we're pleased with the amount of coverage that <unk> providing for.
Matthew Charles Brown: But we're also focusing on on ensuring that were making the most of our sales capacity convenient suspicion as possible, which means we are also signing some deals and contracts that have a longer duration, even though those deals may not necessarily be billed upfront their commitments. Nonetheless.
Matthew Charles Brown: Therefore go into backlog into our P O. So.
Matthew Charles Brown: So, there's a little bit of both going on there. But obviously, we're pleased with the growth in RPO. And, and that's something that we're continuing to focus on, particularly as we get more and more efficient with our sales.
Speaker Change: There's there's a little bit of both going on there, but obviously, we're we're pleased with with the growth in our P O and.
Matthew Charles Brown: And that's something that we're continuing to focus on particularly as we get more and more efficient with our with our sales team.
Charles Shi: Thanks. Maybe a follow-up: maybe this is for Jim.
Speaker Change: Thanks, maybe a a follow up maybe it is a full gym. Obviously the you you you launch that this seem solid definitely electronics with this product that looks like a both E. D. A company so I'm trying to attack that that.
Charles Shi: Obviously, you launched SimSolid for electronics, this product that looks like both EDA companies are trying to attack, to get into your field, more at the system level, design, analysis, those areas, but you're also on the, I mean, offensive to get into their field. So I want to understand a bit about your strategy here in terms of how you think you can differentiate in the broader context of maybe there's a little bit of an emerging convergence of semiconductor design, electronics design, and the overall larger system designs, and any light would be great. Thanks. Okay.
Charles Shi: That the system <unk> getting do you all feel that that that will at the system level design analysis. Those those areas about that you'll also on the I mean on the offensive to getting to their field. So I wanted to understand a bit your strategy here.
Charles Shi: In terms of the how you think about you can't differentiate in the broader context up but maybe there is a little bit they emerge in convergence of semi conductor design electronics design and that the overall largest system designs and any any like.
James R. Scapa: Okay, sure. Thank you.
Speaker Change: Good to see how the other day at the GSA confidence Charles price away.
Operator: Good to see you the other day at the GSA conference, Charles, by the way. There is a lot of change happening in the semiconductor design world, and actually, in the whole electronics world, in terms of how it's evolving, and as it moves more and more towards chiplets and more, and more complexity on the system side, it becomes much more of a 3D problem. And, and, you know, we're trying to build solutions that are going to be differentiated, as you said.
Speaker Change: You know there is there's a lot of change happening and in the semiconductor design world M actually and the whole electronics world.
Operator: In terms of how it's it's evolving.
Operator: It becomes much more of a three D problem and <unk>.
Operator: And SimSolid is, is, is a very, very unique technology. There's, there's just nothing like it in the market, where you don't require meshing and where you get what we're calling absolute resolution on what the design is, as opposed to doing a lot of approximations that you typically have in traditional finite element analysis. So, we think it's going to be a perfect fit in electronics, particularly when we get the electromagnetics working and you have full multidisciplinary simulation. So, yeah, we're very excited about that. We're just working hard to develop good solutions for customers.
Operator: We're trying to build solutions that are are gonna be differentiated as you said.
Operator: And some solid is is is a very very unique technology. There's there's just nothing like it in the market.
Operator: Where you don't require measuring and where you get what we're calling absolute resolution on on on what the design is.
Operator: As opposed to doing a lot of approximations.
Operator: That you typically have been traditional funded ullman analysis.
Operator: So we think it's gonna be a perfect fit in electronics, particularly when we got the electromagnetics working and you have full multidisciplinary simulation.
Operator: So yeah, we're very excited about that and we're just working hard to develop good solutions for customers.
Ken Wong: And one moment for our next question, and our next question will be coming from Ken Wong of Oppenheimer & Company. Your line is open.
Ahmad Mohammad Khalil: [inaudible]
Ken Wong: And our next question will be coming from Ken Wong Oppenheimer Company.
Ahmad Mohammad Khalil: Hey, this is Ahmad Khalilan for Ken. Thanks for taking my question. I know you guys have been a little tepid on hiring the last year or two, I guess. How are you thinking about hiring now? I know you guys have been making a Unknown Speaker, Unknown Attendee, Unknown Speaker, Unknown Speaker,
Ahmad Mohammad Khalil: Okay.
Ahmad Mohammad Khalil: I know you guys have been a little type it on hiring the last year or two I guess, how are you thinking about hiring now I know you guys have been making investments and the channel and and the vertical and your vertical as I guess, you know I guess, how how should we think about overall hiring.
Ahmad Mohammad Khalil: Sales and marketing.
James R. Scapa: So, I mean, I think we are carefully hiring, I would say, as we, you know, sort of complete the reorg into the verticals, we have a lot more clarity around where we have needs both regionally and with expertise in certain verticals, and we're making very, very careful hires to, you know, bring ourselves up to where we think we need to be. But we're also trying to gain a lot of efficiency in the sales team.
Speaker Change: So I mean, I think we are carefully higher <unk> as we sort of complete the the re oregon's into the verticals. We are having a lot more clarity around where we have needs, both regionally and and with expertise in certain verticals.
James R. Scapa: And we're making very very careful hires.
James R. Scapa: You know bring ourselves up to where we think we need to be.
James R. Scapa: But we're also trying to gain a lot of efficiencies in the sales team and.
James R. Scapa: We think there's a lot of potential with that as well. And, of course, we're trying to move parts of the business more and more indirectly. And so with that whole combination, I think we're careful, but we are hiring. It's not as though we're not not
James R. Scapa: We think there's a lot of potential with that as well and of course, we're trying to move.
James R. Scapa: Parts of the business more and more indirect and so what would that whole combination I think we're we're careful but we are hiring it's it's not as though we're not not hiring people.
Ahmad Mohammad Khalil: Thanks, that's a very insightful response. And then just secondly, you know, there's been a lot of heightened M&A activity, at least among your public market peers. I guess, as far as your smaller token type deals that you guys typically go after, are you noticing those deals be more competitive? Or, you know, is there any change in the competition for those types of deals, in general.
Speaker Change: Thanks, That's very insightful response, and then just secondly, you know there's been a lot of heightened M&A activity at least among your public market here is I guess, you know as far as your.
Ahmad Mohammad Khalil: Smaller Tucker and type deals that you guys. Typically go after are you noticing those fields be more competitive or you know is there any change in in the.
Ahmad Mohammad Khalil: Competition for those types of <unk>.
James R. Scapa: In general, no. I think those competitors are rather busy with probably larger types of acquisitions that they've been making more recently. But, you know, it is a competitive market in general. And so, obviously, we take the time to understand the market well and to seek out opportunities for just really fantastic pieces of technology. We announced the two in the last, I don't know, week or two, Cambridge Semantics and now, you know, the Flightstream software.
Ahmad Mohammad Khalil: In general no [laughter], I think I think those competitors or or in a rather busy with probably larger types of acquisitions that they've been making more recently.
James R. Scapa: But you know it is it is a competitive market in general.
James R. Scapa: To seek out you know opportunities for.
James R. Scapa: Both are fantastic pieces of technology, great teams. We're going to hit the ground running, you know, we think with both of these products and, you know, customers are all excited about both of them. So, I mean, it's a competitive landscape, but we probably are a little bit differently focused than those competitors.
James R. Scapa: We're gonna hit the ground running you know, we think with with both of these products and you know the customers are all excited about both of them.
James R. Scapa: So I.
James R. Scapa: <unk> I mean, it's a competitive landscape, but but we.
James R. Scapa: We probably are a little bit differently focused on those competitors.
Speaker Change: Thank you.
Operator: Thank you, and one moment for our next question. And our next question will be coming from Joshua Tilton of Wolf Research. Your line is open.
Speaker Change: Thank you and one moment for our next question.
Operator: And our next question will be coming from Joshua Tilton helpful. Free search your line is open.
Joshua Alexander Tilton: Hey guys, I think you called me. Hey, John. You broke up for a second. Okay, great. Just two quick ones from me.
Joshua Alexander Tilton: Hey, guys I think you called me.
Joshua Alexander Tilton: The first one just on billing's growth in the quarter, maybe this is FX related too, but 1Q is usually a pretty stronger quarter for billing's growth for you guys. But it was kind of light relative to our expectations on what felt like an easier comparison. So maybe you could just kind of unpack that and then how you kind of think about billing's growth through the rest of the year. And then also, maybe just in the context of, you know, given what you mentioned on the call, I'd kind of assume growth would be a little bit higher since you early renewed some things. So just maybe walk us through what's going on in one billing's growth. Yeah.
Joshua Alexander Tilton: Hey, John you broke up for a second okay. Great just two quick ones from me.
Joshua Alexander Tilton: The first one just on the billings growth in the corporate or maybe this was F X related to but.
Joshua Alexander Tilton: <unk> is usually pretty stronger quarter for buildings Grope are you guys, but it was kind of light relative our expectations on what felt like an easier compare so maybe you could just kind of unpack that and then how you kind of think about billings growth through the rest of the year and then also maybe just in the context of.
Joshua Alexander Tilton: Given what you make sure on the call I'd kind of assumed growth would be a little bit higher since you early renewed some things. So just maybe walk us through what's going on on the one <unk>.
Matthew Charles Brown: Yeah, yeah, happy to, Josh. So one thing to keep in mind on our reported calculated billing is it is a calculated billing number, so change deferred plus revenue. So you do get a little bit of FX in there. The other thing, though, is this is total revenue and total change in deferred numbers. So it is impacted by services and other revenues, which are actually down year on year, which we expected. So all of that is going to impact your total billing.
Speaker Change: Yeah, Yeah happy to Josh Uhm.
Matthew Charles Brown: So one thing to keep in mind in our on our <unk> reported calculated billing is it is it is it calculated billing numbers of changing the first first revenue. So you do get a little bit of F X in there.
Matthew Charles Brown: That said, billings was more or less in line with where we were expecting in the first quarter. It was something that I touched on last quarter and sort of highlighted for everybody that we did expect a seasonal shift out of Q1 somewhat and more into the other quarters during the year. Really pretty much in line with expectations, revenue actually slightly above expectations. And so we're, overall, really happy with the way that the quarter... It turned out.
Speaker Change: That said billings was more or less in line with where we were expecting in the first quarter. It was something that I touched on last quarter and sort of highlighted for everybody that we did expect a seasonal shift out of Q1 somewhat and more into the other quarters during the year. So.
Matthew Charles Brown: Really pretty much in line with expectations revenue actually slightly with expectations.
Matthew Charles Brown: And so we're overall, we're we're real happy with the way that the quarter turned out.
Joshua Alexander Tilton: Make sense, and then maybe just a quick follow up for me. I think at some point last year, and again, this shouldn't really be a shocker to anyone on the call. You guys kind of referred to the demand environment as lackluster. Um, we're a few months into the new year 2024. Any change in the demand environment from what you saw last year? Last year, would you still call it lackluster? Is it is getting better?
Joshua Alexander Tilton: We're a few months into the to the new year 2024 any change in the demand environment from what you saw last year would you still call. It lackluster or is it is it getting better like what do you. What do you guys see out there from a demand perspective today and how does it compare to what was you know obviously a little bit more of a top of your last year.
Joshua Alexander Tilton: Like, what do you guys see out there from a demand perspective today? And maybe how does it compare to what was, you know, obviously a little bit more of a tough year last year? I do.
James R. Scapa: I do think the demand environment is improving for us. I don't know if it's, you know, a macro improvement or just, you know, a micro improvement for Altair, but we do see the demand environment getting stronger. So we're feeling positive about that. We're conservative, but positive.
Speaker Change: I do think the demand environment is improving for us I don't know if it's you know a macro improvement or just you know micro for out there, but but we did receive your demand environment getting stronger. So we're we're feeling positive about that where.
Joshua Alexander Tilton: We like that. It's super helpful.
Speaker Change: We liked that's super helpful.
Operator: One moment for our next question, and our next question will be coming from Blair Abernethy of Rosenblatt Securities. Your line is open.
Speaker Change: One moment for our next question.
Blair Harold Abernethy: And our next question will be coming from Blair Abernathy Rosenblatt Securities. Your line is open.
Blair Harold Abernethy: Thanks very much. Matt, I just wonder if you go back to the duration comment on your RPO, just to clarify.
Blair Harold Abernethy: Alright. Thank you very much nah just wondering if you go back to the duration comment on your <unk> I'm just wondering if you could.
Blair Harold Abernethy: Remind us all your your largest or let's say you're more seasoned customers as they're coming back to you know what what's the what's their you know average contract term looking like is it changing at all in this environment.
Matthew Charles Brown: So, generally speaking, we are still signing up for annual lease subscriptions. But we do occasionally have deals in which it makes sense to sign up for a longer duration contract, and the duration has gotten somewhat longer. That's embedded in that RPO number because, in some cases, it makes a lot of sense to have that customer signed up for a multi-year duration that frees up sales capacity then to go work on other transactions. But importantly, we are generally... Billing that either up front or, in some cases, annually, but always licensing annually. And so, yeah,
Blair Harold Abernethy: So generally speaking we are still signing up for annual lease subscription.
Matthew Charles Brown: But we do occasionally have deals in which it makes sense to sign up for a longer duration contract.
Matthew Charles Brown: And induration has has gotten somewhat longer and <unk> that's embedded in in that R. P. A number because in some cases it makes a lotta sense to.
Matthew Charles Brown: To have that customer signed up for a for a multi year duration uhm. It frees up sales capacity than to go work on other transactions, but importantly, we are generally.
Matthew Charles Brown: Billing that either upfront or or in some cases annually, but always licensing annually and so you end up with a with a more predictable and smoother revenue recognition. So so in other words, you're not recognizing a multiyear transaction from a revenue perspective upfront because we're still licensee.
Matthew Charles Brown: Annually, so there's a little bit of duration and that number but we don't disclose specifics around duration you could just see sort of percentage of the next 12 months that we do disclose and are not thank you.
Blair Harold Abernethy: Got it. Got it. Thank you. And then just shifting over to the go-to-market, at your investor day back in mid March, you talked about sort of expanding the focused sales team approach into some new verticals. Can you just tell us where you're at with that?
Speaker Change: Got it got it. Thank you and then just shifting over to the go to market at your Investor Day back in mid March he talked about.
Blair Harold Abernethy: You talked about a sort of expanding the cycle focused sales team approach into some new vertical scheme gonna just tell us where you're at with that.
James R. Scapa: Who are, well, this year we added a couple new verticals, the heavy industry and healthcare life science. And we brought somebody in on the defense side in aerospace and defense. And we shifted someone who ran half of the Americas over to do consumer electronics and technology. So we're just continuing to, you know, bring these up and along, and we are seeing a lot of traction. In healthcare life science, for example, in heavy industry, and in the consumer electronics space, so it is really taking hold.
Speaker Change: Sure well this year we added.
James R. Scapa: A couple of new verticals, the the heavy heavy industry and health care life Science, and we we brought somebody in on the defense side in aerospace and defense and we shifted someone who ran half of the Americas over to do consumer electronics and technology. So we're just continuing to.
James R. Scapa: To you know bring.
James R. Scapa: Bring these up in a long and we are seeing a lot of traction.
James R. Scapa: And health care Life Science for example in heavy industry.
James R. Scapa: And in the consumer electronics space. So it. It is it is taking hold we're seeing good good activity and and the older vertical if you will aerospace and defense very very strong for us alright, now and that probably has a macro.
James R. Scapa: We're seeing good, good activity in the older verticals, If you will, aerospace and defense, are very, very strong for us right now, and that probably is a macro effect, but I think it's also that we're putting that kind of focus there now. So yeah, I think it's working quite well.
James R. Scapa: Effect, but but I think it's also.
James R. Scapa: The that we're putting that kind of focus there now.
James R. Scapa: So yeah, I think it's it's working quite well.
Speaker Change: Great. Thank you.
Operator: In one moment for our next question, and our next question will be coming from Matthew Hedberg of RBC Capital Markets. Your line is open.
James R. Scapa: Sure.
Speaker Change: And one moment for our next question.
Operator: And our next question will be coming from Matthew Hedberg RBC capital markets. Your line is open.
Matthew George Hedberg: Great. Hey guys, thanks for my questions.
Matthew George Hedberg: <unk>, Hey, guys. Thanks for my questions.
Matthew George Hedberg: You know, Jim, we're a couple months into the Synopsys-ANSYS deal. And I'm curious, I think last quarter, you said no, you haven't really seen anything. I'm wondering if you've seen anything change there as that deal continues to progress. And I mean, how do you think that could improve your selling opportunity even more?
Matthew George Hedberg: Yeah, Jim or a couple of months into the synopsis answers deal and I'm I'm curious I think last 40, you said no you haven't seen anything I'm wondering if you've seen anything <unk>.
Matthew George Hedberg: Change their that deal continues to progress and and I mean, how do you think that could improve your your selling opportunity even more so.
James R. Scapa: It's really, really hard for me to comment on that, Matt. But I mean, I think, you know, there's a little bit of distraction, I'm sure, related to it. And I think customers are also uncertain about where that's all going. And I do think, in general, it's probably advantageous for me and maybe some of the other companies that might compete. So we're just doing the best that we can to take advantage of opportunities that we see. That's great.
Matthew George Hedberg: It's really really hard for me to to comment on on that meant but but I mean I I think you know, there's a little bit of distraction I'm sure related to it and and I think.
James R. Scapa: You know customers are also uncertain about where that's all going I do think in in general it it's it's probably <unk>.
James R. Scapa: <unk> for for me and maybe some of the other companies that might compete.
James R. Scapa: So we're just doing the best that we can to to take advantage of of opportunities that we say.
Matthew George Hedberg: That's great to hear. And then, in the call, you talked about two new leaders, one in the healthcare space and one in federal. I guess, you know, what are some of the key initiatives that they're going to be focused on, you know, and are there other things that you're doing in some of these higher growth verticals?
Matt: That's great to hear and then I'm Gonna call you talked about <unk> wanted me to help her space in one it's federal I guess, what are some of the key initiatives that they're going to be focused on you know and are there other things that you're doing and some of these higher growth verticals.
James R. Scapa: Are there things that we're doing in higher growth verticals? I mean, we're just very, very active, to be honest with you. So we're just getting out in front of customers as much as we can. And, and we seem to be having a very, very good reception from customers. We're trying to get, you know, more executive connections with all the key customers.
Matthew George Hedberg: Are there things that we're doing the hunter growth protocols I mean, we're we're just very very active to be honest with Ya. So we're just getting out in front of customers as much as we can and and we seem to be having a very very good reception from customers and we're trying.
James R. Scapa: To get more executive connect with with all the key customers.
Matthew George Hedberg: Got it. Thanks a lot, guys.
Speaker Change: Got it thanks, a lot guys.
Matthew George Hedberg: Sure.
James R. Scapa: And I would now like to hand the call back to Jim for his closing remarks.
Jim: And I would now like to hand, the call back to gym for closing remarks.
James R. Scapa: Well, thank you. I appreciate everyone joining the call and for your interest in Altair and look forward to meeting many of you as we travel and go to the Investor Conference. Thanks, everyone.
Jim: Well. Thank you I appreciate everyone joining the call and for your interest and I'll tear.
Jim: And look forward to meeting many of you as we travel and go to Investor conferences. So thanks, everyone.
Operator: And this concludes today's conference call. Thank you for participating. You may now disconnect.
Speaker Change: And this concludes today's conference call. Thank you for participating you may now disconnect.
Operator: Mmm Mmm [music].